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Sabath v. Mansfield





APPEAL from the Circuit Court of Cook County; the Hon. GEORGE FIEDLER, Judge, presiding.


The issues in this case are (1) whether a plaintiff suing for the fraudulent concealment of a breach of contract which allegedly caused serious injury to the plaintiff, can also bring suit in tort six years after the misrepresentation was discovered when any activity by the defendant which might have caused the plaintiff to delay bringing suit ceased long before the five year statute of limitations had run; (2) whether, if the plaintiff is limited to its contractual cause of action, it can recover punitive damages; and (3) whether in a case where the parties to a contract were a corporate lessee and a construction contractor, the sole stockholder of the corporation who later exercised the corporation's right to purchase the property from the lessor is a third party beneficiary of the contract and may sue for his own damages caused by the breach and its allegedly fraudulent concealment. We hold that the corporation is barred from pursuing any claim in tort and therefore cannot recover any punitive damages and that the sole stockholder — later owner of the property — likewise is barred from pursuing a tort claim and was not a third party beneficiary of the contract.

The material facts in this case are undisputed. On December 7, 1951, plaintiff Century Provision Company (Century), a corporation engaged in meat processing, leased certain property. The lease provided that the lessee should provide for liability insurance, could make alterations and, indeed, was required to spend a minimum of $30,000 on remodeling within two years from the date of the lease; that all alterations should remain for the benefit of the lessor; that the lessee at the termination of the lease could remove trade fixtures unless the lessor should elect to purchase them; that the lessee could assign the lease to a successor or subsidiary of the lessee or some other person engaged in a similar line of business; and that if the lessor offered the premises for sale, the lessee had the right of first refusal. On April 25, 1953, the same parties signed an amended lease which deleted the requirement that Century remodel the premises, although Century still retained the right to do so. In June 1953, the defendant, Morris Handler Co. (Handler), contracted to do certain construction and remodeling work for Century. The contract provided that the work was to be done pursuant to certain plans and specifications, which included the construction of a certain loading dock and driveway on the leased premises; that Handler obtain and pay for all permits required by the work, and that it notify the owner of any conflict with existing laws and regulations. The work was completed in August 1955. Included among the additional charges submitted by Handler in May 1954 was "the sum of $500 which was paid for driveway permits."

In September 1954, plaintiff Sabath, having purchased the stock of the other stockholder, became the sole stockholder of Century. He also was a major creditor of Century, having loaned it money for the construction work and later for other purposes. On March 1, 1956, Sabath, through a nominee, exercised Century's right to purchase the property, Century itself not having the money to do so. A month later that land, along with some other land, was conveyed to a land trust, Sabath retaining the entire beneficial interest. The land trust provided that Sabath had the right to manage and control the premises and that the trustee had no duty therein or in respect to litigation.

Sabath and Century continued to use the driveway without interruption until about July 1961 when they learned for the first time that Handler had not, in fact, obtained the driveway permit as required by its contract and as it had indicated by its additional charge had been done. In either August or September of 1961, the plaintiff notified Handler of their discovery in this respect, and Handler immediately took steps to obtain the necessary permit. These steps included an attempt to obtain the permit from the city of Chicago; the filing of a lawsuit against the city upon its refusal to issue such permit, and the obtaining of an order in such proceeding which permitted the continued use of the driveway during the pendency of that lawsuit; the successful prosecution of the suit in the trial court wherein an order was entered directing that a permit issue; the defense of the case on appeal to the appellate court by the city of Chicago; and the attempt to have the matter heard by the supreme court upon the reversal of the trial court by the appellate court. (Sabath v. City of Chicago (1965), 56 Ill. App.2d 307, 206 N.E.2d 286.) On October 13, 1965, the supreme court denied Handler's petition for leave to appeal, and the plaintiffs were finally denied the use of the driveway.

It was not until June 13, 1967, that the plaintiffs finally filed suit against Handler and certain of its officers and directors for breach of contract, negligence and willful and wanton conduct in failing to obtain the permit and for fraud. The defendants first successfully moved to have the suit dismissed as barred by the statute of limitations. That determination was reversed by this court in 1968 in Sabath v. Morris Handler Co. (1968), 102 Ill. App.2d 218, 243 N.E.2d 723, which ruled that it was at the very least a question of fact whether the defendants were barred by their actions from relying on that defense, since it was not reasonable to expect the plaintiff to bring suit during the period from 1961-1965 when "the defendants, by their conduct, recognized their duty and obligation to the plaintiffs and were doing the very things which the plaintiffs desired and requested." (102 Ill. App.2d 218, 223, 243 N.E.2d 723, 726.) This court, on the other hand, did not, in the 1968 decision determine that the defendants, as a matter of law, were estopped from raising the defense.

On January 15, 1971, a summary judgment dismissing the claim against the individual defendants was entered by the trial court, the order containing a finding of finality and appealability under Illinois Supreme Court Rule 304(a). However, no appeal was taken from that order until the rest of the case was resolved in July 1974. The trial court in January 1974 denied an attempt by the plaintiffs to amend the complaint by adding a count against the individual defendants who had been dismissed. The claims in this count were the same as those on which summary judgment had been entered. The trial court also denied a motion to join the trustee of the land trust as a party.

At the trial, the trial court directed a verdict for Century against Handler on the question of liability and only sent to the jury the issue of damages. However, it refused to give plaintiff Century's Instruction 12 which would have permitted the jury to consider the amount of money spent by plaintiff in the improvement of the premises, the amount of money paid for permit fees, and driveway permit, and the amount of the net rental income lost during the remaining life of the building. Instead the court limited the recovery of compensatory damages to the amount of money paid for permit fees and the driveway permit which was not obtained. In addition, the trial court refused to allow Sabath to introduce evidence of his damages, allegedly amounting to more than $700,000 and granted defendant's motion for a directed verdict against Sabath.

The jury returned a verdict for Century for $1,465.10 in compensatory damages and $75,000 in punitive damages. The plaintiffs have appealed the dismissal of the claims against the individual defendants, the refusal to give Plaintiff's Instruction 12 and the refusal to allow evidence of the damages suffered by Sabath. The defendant does not object to the award of compensatory damages but has appealed from the award for punitive damages.


• 1 Before oral argument this court granted the defendants' motion to dismiss the appeal as to the individual defendants. Supreme Court Rule 304(a) provides that the time for filing the notice of appeal runs from the time of the entry of the court's finding that there is no just reason for delaying enforcement or appeal. The plaintiffs having failed to appeal the trial court's order in 1971, the present appeal is not timely and this court is without jurisdiction to hear the case. (Johnson v. Coleman (1977), 47 Ill. App.3d 671, 365 N.E.2d 102, appeal denied (1977), 66 Ill.2d 630; Rone v. Boncar Construction Co. (1976), 45 Ill. App.3d 1, 358 N.E.2d 1315, appeal denied (1977), 66 Ill.2d 628; Weber v. Northern Illinois Gas Co. (1973), 10 Ill. App.3d 625, 295 N.E.2d 41.)

The plaintiffs' contention that the Rule 304(a) finding was inappropriately entered because a single claim was alleged against all the parties is without merit. Supreme Court Rule 304(a) does not provide that if multiple claims are alleged against multiple parties, the trial court on ruling upon one of the claims against one of the parties may enter an order finding that there is no just reason to delay appeal. Supreme Court Rule 304(a) provides rather that if there are multiple claims or multiple parties such a finding may be entered. Since here the plaintiffs had filed claims against multiple parties and the trial court had entered a final order determining that the plaintiffs could not recover from the individual defendants, the trial court's finding under Supreme Court Rule 304(a) was effective and the plaintiffs were required to appeal within thirty days from the entry of that finding. (Ill. Ann. Stat., ch. 110A, par. 304, Historical and Practice Notes, at 586, 587 (Smith-Hurd 1968).) *fn1 This they did not do. Accordingly, they are barred from pursuing any claim against the individual defendants which was adjudicated in that January 15, 1971 judgment. Since they are so barred, the trial court correctly refused to allow them to attempt to revive the claim by means of amending the complaint.


• 2 The plaintiffs in this case brought suit in both contract and tort against the defendant Handler. There is, of course, nothing wrong in pursuing a claim for both where the defendant in breaching the contract has also negligently, willfully or fraudulently violated some duty owed the plaintiff and arising out of the contract. Accordingly, in considering the merits of defendant's cross appeal, the issue before this court is not whether Century could have brought an action against ...

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