Appeal from the Circuit Court of Cook County; the Hon. DONALD
J. O'BRIEN, Judge, presiding. Judgment reversed and cause
remanded with directions.
MR. JUSTICE BURKE DELIVERED THE OPINION OF THE COURT.
Ruth Cook Norris filed an action for an accounting and the recovery of commissions which Drake Associates, Inc., an employment agency, allegedly owed to her for placements she made while in Drake's employ as an employment placement counselor. Drake counterclaimed, requesting an injunction and damages against Norris, Cook Associates and Marvin Fenchel on the ground of an alleged combination to steal Drake's business records, clients and employees. Norris, Cook Associates and Fenchel thereafter filed claims under section 41 of the Civil Practice Act for recovery of their reasonable expenses and attorneys' fees incurred by reason of Drake's alleged untrue pleadings, made without reasonable cause and not in good faith.
The matter was referred to a master in chancery who heard extensive evidence and received numerous exhibits. The master's report recommended a money judgment for Norris on her complaint, a judgment against Drake on its counterclaims, and a judgment taxing Drake with the master's fees. The master also found that Drake's pleadings were untrue and made without reasonable cause and not in good faith, concluded that Norris, Cook Associates and Fenchel were entitled to recover their reasonable expenses and attorneys' fees, and recommended that proofs thereof be taken by the chancellor.
Judgment was entered by the chancellor in favor of Norris on her complaint and against Drake on its counterclaims. Drake appealed that judgment to this Court. (General Number 52,500.) A subsequent judgment was entered by the chancellor taxing the master's fees against Drake and denying the section 41 relief requested by Norris, Cook Associates and Fenchel. Drake appealed from that part of the second judgment taxing the master's fees, and Norris, Cook Associates and Fenchel cross-appealed from the denial of the section 41 relief. (General Number 52,526.) Both appeals, General Numbers 52,500 and 52,526, were consolidated for consideration in this Court. This Court on June 12, 1968, dismissed both appeals taken by Drake and ordered the parties to proceed upon the cross-appeal in General Number 52,526 alone.
The sole issue raised here is the propriety of the chancellor's determination that Norris, Cook Associates and Fenchel (plaintiff and counterdefendants) were not entitled to relief under section 41 of the Civil Practice Act. Section 41 gives a party the right to recover reasonable expenses and attorneys' fees from an offending party incurred by reason of the untrue pleadings, made without reasonable cause and not in good faith, filed by the offending party.
The original complaint, filed in September 1964, alleged that on and prior to July 26, 1962, Norris was employed by Drake as an employment counselor pursuant to an oral contract. It was alleged she was to receive as compensation an amount equal to 35% of all commissions received by Drake on placements made through her efforts and 5% of all commissions received by Drake on placements made by the other Drake employment counselors. The complaint alleged that Drake was indebted to Norris for unpaid compensation in an amount which could be determined only by an examination of Drake's books and records, and that Drake refused Norris access to the books and records.
Drake's answer, verified by Drake Vice-President John F. Schmidt, admitted that plaintiff was in Drake's employ on and prior to July 26, 1962, and denied the balance of the allegations contained in the complaint.
Together with its verified answer, Drake filed a counterclaim against Norris. The counterclaim alleged that Norris had been employed by Drake, that it was agreed between the parties that Norris was to receive 35% of all commissions received by Drake on placements made by Norris, and that on July 28, 1962, Drake and Norris stated an account as to the amount due Norris, which Drake in fact paid to her. It was further alleged that Norris, when she terminated her employment with Drake, took with her certain records belonging to Drake, that she organized her own employment agency and that she had solicited Drake's employees and clients to deal with her agency. The counterclaim was also verified by Schmidt.
On September 21, 1964, notice was served upon Drake that a deposition was to be taken of its President, Lon Barton; the notice further directed that Drake produce all placement invoices for the period of January 1962, through September 1962. At his November 2, 1964, deposition, Barton testified that Drake had copies of the previously requested invoices, but he refused to produce them on advice of counsel. A notice of deposition to be taken of Vice-President Schmidt and Era Moore, Drake's controller, which was dated November 16, 1964, further directed that the said invoices be produced. A court order of December 1, 1964, also directed the production of these documents. At his later deposition on January 5, 1965, Barton testified that he did not have the said invoices and that "we do not keep those." Moore testified at his deposition on January 12, 1965, that the said invoices had been destroyed on his order in late December 1964 or early January 1965. On February 15, 1965 the cause was referred by the chancellor to the master in chancery who began taking proofs.
Ruth Cook Norris testified that she had experience in employment placement and counseling prior to 1951 and that from 1951 to 1953 she held a position in an employment agency owned by Drake's President, Barton. Between 1953 and July 26, 1962, she was employed by Drake, first as a placement counselor, then as a supervisor, and finally as manager of Drake's operations. She testified that, as manager, she received as compensation 35% of all commissions received by Drake on placements made by her and 5% of the commissions received on placements made by the rest of the Drake employment counselors. She further testified that after a client was placed in a position, a fee invoice was sent to the employer; the time when payment of the commission was made by the employer varied with each account.
Norris testified that at the time she left Drake she had no agreement with Drake to forego any commissions to which she was then entitled for placements which had been made, nor did she enter an account stated with Drake in this regard. On July 28, 1962, two days after she terminated her association with Drake, Norris furnished Drake with a statement of all pending accounts, and denied that she ever furnished Drake with an account of the monies due her.
Norris testified that she opened an employment counseling agency, Cook Associates, Inc., (counterdefendant) sometime after Labor Day in 1962 with the aid of an attorney, counterdefendant Marvin Fenchel. Several persons previously connected with Drake later joined Cook Associates, and to the best of Norris' knowledge none of them brought with them any documents pertaining to Drake's operations. Norris further testified that she did not take any matters belonging to Drake with her when she left Drake, and that she at no time saw any matters belonging to Drake in Cook Associates' offices.
Richard Morgan testified for Drake and stated that he had been in the employ of Cook Associates between October 1964 and May 1965. Prior to his employment at Cook, he had been employed as a counselor by Drake. He testified that he saw Drake Exhibits 1-4 in the Cook offices in late April or early May 1965. The exhibits consisted of two Drake placement resume cards for Clifford Thompson and for H.B. Ely, and two Cook invoice notices for their respective placements. He testified that in mid-April 1965 he observed a subpoena duces tecum tacked to the bulletin board at Cook Associates, and that Norris told him that if he had anything on his desk which did not belong to Cook he should dispose of it. He testified that this occurred about a week before he received Exhibits 1-4 from Norris when she threw them on his desk. He stated that he did not know why Norris gave the cards to him and that she did not instruct him what to do with them.
In early May 1965, Morgan contacted Barton and was promised $3,000 and certain legal services in return for Exhibits 1-4. A few days later Morgan and Barton met again, with Barton's attorney, and the exhibits were turned over to Barton. Morgan was asked by Barton whether he knew of any other materials at Cook Associates which belonged to Drake and Morgan replied in the negative. Prior to leaving Cook Associates, Morgan had received $1,100 from Barton and expected that he would receive the balance of the $3,000 at the conclusion of this litigation. Morgan testified that ...