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Blivas & Page, Inc. v. Klein

APRIL 27, 1972.




APPEAL from the Circuit Court of Winnebago County; the Hon. WILLIAM R. NASH, Judge, presiding.


This appeal is from judgment entered on a jury verdict of $30,000 actual damages and $15,000 punitive damages against both defendants Klein and Kay. The action was in two counts, but the jury's verdict was based on Count II only, which alleged breach of an oral agreement by defendant Klein to retain plaintiffs' architectural firm on a certain housing project in Rockford, wrongful inducement of that breach by defendant Kay, and conspiracy between defendants to accomplish those aims.

The project in question was one of the Federal Housing Administration's "221-D-3" projects for providing low rent housing by private developers. Plaintiffs are a former architectural partnership, incorporated in 1966. They had been involved in various FHA projects since 1957, and prior to, and during the period in which the instant project was constructed, had provided the architectural services on six other "221-D-3" projects, all successfully completed. Of the parties to this lawsuit, they were the first to become involved in the instant project, in 1963. At that time, it was under the tentative sponsorship of Harlemco, Inc., a New York developer. Plaintiffs were recommended to Harlemco by the general contractor, Suarez Brothers of Rockford. As architects for Harlemco, plaintiffs submitted the detailed drawings and specifications required by the FHA prior to its grant of loans. They also successfully petitioned the City of Rockford to annex and zone the property in question. In January, 1966, however, Harlemco's formal application for sponsorship, FHA Form 2013, which requires great architectural detail and financial information, was rejected by the FHA. With Harlemco out, Blivas sought a new sponsor. Within a few weeks of Harlemco's rejection, he proposed the idea to Klein, a former client. Klein was interested. He and Blivas approached the owner of the property to acquire an option thereon.

On this appeal, defendants do not question that during these discussions, Klein promised Blivas to retain plaintiffs as architects on the project provided that he was successfully approved as sponsor on his Form 2013 application therefor. Following this agreement, however, Klein let in additional sponsors under circumstances not entirely clear. Defendant Kay was one such additional sponsor and was the general contractor selected by Klein. The two others were business associates of Klein. Klein testified that he brought them in because the FHA told him over the phone that he lacked the "financing wherewithal" to be sole sponsor. Blivas was aware, at some time in mid-1966 that new financial backers had been added when he attended a meeting with them, though Kay was not present, at which time the name of the project was changed. However, according the Blivas, a Mr. Stevens, the FHA official concerned, still referred to Klein as "sponsor" and as late as November 3, 1966, a communication from the FHA referred to "trust to be formed, Raymond L. Klein, Beneficiary." It thus appears to us that Blivas's characterization of these new parties was correct when he said that they simply "bought out" part of Klein's interest rather than having, at the time relevant herein, an official status as prospective sponsors. What the interest was of the two parties other than defendants does not appear in the record. Kay began with a mere 1% to comply with FHA regulations that he have an "identity of interest" in the project. Later, his construction company acquired 16%, so that as joint owner of the company with another party, he had an 8% total interest in the project.

In any event, under the new regime, dominated by Kay and Klein, Blivas and Page were rejected as architects, and a new architect, Mr. Fishman, was retained in January or February, 1967. Blivas's account of his ouster was that Kay attempted to interest him in a kickback scheme. According to Blivas, Kay stated an intention to certify to the FHA the full architect's fee, which would have been in the neighborhood of $55,000-$65,000, but demanded that plaintiffs work for only $10,000-$15,000. Blivas added that later, Kay increased the offer to $25,000.

Defendants' version was that Kay, having already worked on a project where Blivas and Page were the architects, opposed them from the start as poor and costly architects. Kay claimed that on this previous project, plaintiffs' drawings of windows lacked sufficient detail. Other than that, Kay knew little of plaintiffs or their workmanship. Klein testified that "Kay would not be the general contractor if he had to work with Blivas." He stated that partly because of Kay's opposition, and partly on his own, he decided to reject plaintiffs as architects. At no time during the trial, however, did either Klein or Kay produce any witness or other objective basis for their claims that plaintiffs were poor architects, or that their construction projects could be done more cheaply by other architects. Nor did they state that they had offered plaintiffs opportunity to cure any objections which they might have had.

In January, 1967, a letter signed by both defendants was sent to Blivas and Page offering them a $5000 finder's fee for the project, which was rejected by plaintiffs. Following this, the new architect Fishman, was hired. The date on which Fishman was hired is interesting in this case, as will appear. Klein testified that he was hired "after the holidays" (Christmas) of 1966 or in January of 1967. Kay testified that Fishman was hired in January or February. Inasmuch as the FHA Form 2013, which included detailed architectural drawings and specifications, supposedly produced by Fishman, was submitted by the new consortium on February 10, 1967, there may be some substance in plaintiffs' claim, at trial, that their work was pirated for the "new" project. In view of our decisions, infra, that plaintiffs were entitled, under the circumstances, to receive the benefit of their contract, whether their work product was wrongfully appropriated becomes irrelevant. We thus mention it only to indicate the underlying situation.

To complete the basic facts in this case, Klein's FHA Form 2013, submitted on February 10, 1967, was approved some six or eight months later. The total amount actually borrowed under the FHA authorization to complete the project was roughly $2,400,000 according to Kay. This compares with the $2,562,000 maximum estimated cost set by the FHA in its letter of November 3 to defendant Klein, so that plaintiffs' project was quite similar in scope to that actually completed in December, 1968, without them.

The plaintiffs herein filed a motion to strike point I of defendant's argument on appeal that the evidence does not establish a contract subject to performance. We have taken this motion with the case. In view of our decision herein the motion is denied.

Subsequent to the above motion the defendants filed a motion for leave to file an answer to the second amended complaint and plaintiffs have objected thereto. This motion, likewise, was taken with the case. The trial court held that the answer to the amended complaint would stand as the answer to the second amended complaint filed after the conclusion of the proofs herein. Likewise, in view of our decision herein, the denial or allowing of this motion becomes moot.

• 1, 2 We first consider the defense that under the oral agreement between Klein and Blivas, that Klein would not be bound to retain plaintiffs as architects unless, as a condition precedent, Klein became the one and only sponsor on the project. It may be noted that this defense, if successful, might exculpate both defendants from liability for actual, not to mention punitive damages. However, such defense was not specifically raised in defendants' post trial motion, which merely asserted that the verdict was contrary to the law, the evidence, and the law and the evidence in finding breach of contract. This is not the specificity required under the Supreme Court Rules SHA 110A, 366 (2) (iii), successor statute to the Civil Practice Provision 68.1 (2). For a fuller treatment of these provisions see our opinion, Danielson v. Elgin Salvage and Supply Company, Inc. and Moses Johnson (1972), 4 Ill. App.3d 445. In any event, the defense is at best a weak one here where Klein brought the new backers in himself and was therefore instrumental in defeating such alleged condition precedent. (See Standard Asbestos v. Kaiser (1942), 316 Ill. App. 441, 45 N.E.2d 75.) Conceding that plaintiffs would appear to have known of these additions to the group, in any case, Klein has not sought to argue that his contract was frustrated, or impossible to perform due to dissensions between plaintiffs and Kay, and moreover, he made no good faith attempts to retain plaintiffs so such a defense would be difficult to maintain if he had made it. In light of the foregoing, we find no basis for reversing the verdict and judgment on either the defense of condition precedent or other defenses mentioned with respect to Klein.

Defendant Kay next contends that he committed no actionable wrong in persuading Klein to breach the agreement with the plaintiff. In support of this contention he cites Doremus v. Hennessy (1898), 176 Ill. 608, 52 N.E. 924 and states that "malice" is still an essential element of the tort.

• 3 The first case dealing with this question is found in Lumley v. Gye (1853), 2 Ell. & Bl. 216. As pointed out in Supreme Savings and Loan Association v. Lewis (1970), 130 Ill. App.2d 16, 264 N.E.2d 857 the court stated:

"* * * The principle of law which has evolved from Lumley is now established in Illinois and a defendant will be held liable if he intentionally and without justification induces another ...

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