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Kaufman & Broad Homes v. Allied Homes





APPEAL from the Circuit Court of Will County; the Hon. THOMAS J. VINSON, Judge, presiding.


This appeal arises from a decision rendered in a bench trial by the circuit court of Will County. We are urged by the appellant to find numerous errors in the proceedings below.

The controversy here at issue arises between the plaintiff, Kaufman & Broad Homes, Inc., and the defendant, Allied Homes, Inc., both parties being in the business of developing real estate properties in Will County and both parties being co-venturers in a project to build a sewage transmission facility in the same county. In a written agreement entered into on September 13, 1972, the plaintiff and defendant jointly undertook to construct the aforementioned facility to provide sewage disposal services for contiguous properties which the parties were developing individually near Bolingbrook, Illinois. According to the agreement, the facility was to be constructed for acceptance by the local public utility, Citizens Utility Company, Inc., and upon acceptance the facility would be transferred to and operated by Citizens.

The terms of the agreement provided that costs would be shared on an unequal basis, with Allied responsible for 30 percent of the total and Kaufman & Broad for the remaining 70 percent. Citizens desired a facility with capacity in excess of the capacity necessary for the real estate owned by the joint venturers, and the utility's commitment to pay for this "oversizing" was likewise part of the agreement. Kaufman & Broad was named venture manager with general supervisory and management responsibilities for construction of the facility. Appended to the agreement of September 13 were exhibits which set forth preliminary specifications for construction of the facility and which contained cost estimates for the project.

Ten days after executing the venture agreement and approving the preliminary specifications and cost estimates appended thereto, each party was to deliver to the venture manager a letter of credit for its pro rata share of the estimated development cost as a guarantee of its full performance. These letters of credit were to be renewable annually and to be adjusted in amount upon bids being awarded. Actual costs of the project were to be paid by the venture manager as incurred and due with Allied tendering reimbursement for its pro rata share within 20 days.

Apparently Allied never delivered its letter of credit for 30 percent of the estimated project costs, but the joint venture did not begin to become unraveled until Kaufman & Broad sent Allied a letter dated February 27, 1973. At that time the managing venturer reported to its co-venturer that negotiations for necessary easements had been finalized and that bids on the project had been received. The lowest bid exceeded the estimated project cost by 37 percent, and pursuant to the agreement, Kaufman & Broad requested the now tardy letter of credit, but in an amount adjusted by the bid actually received. That February 27 letter triggered a response from Allied expressing disapproval of the low bid and demanding a meeting between the joint venturers and Citizens.

Such a meeting was held on May 24, 1973, with representatives of both joint venturers present. Following that meeting, Kaufman & Broad's attorney, who had been present, set forth in a letter to Allied his understanding of the agreements reached. That understanding was that the bids would be again reviewed, but if no reduction could be negotiated, the cost was acceptable to both the venturers. Although at trial the representatives of Allied offered a different recollection of the May 24 meeting, there was from Allied no contrary response to the attorney's letter.

The review and renegotiation was conducted as agreed. Kaufman & Broad reported on June 8, 1973, that the "cost remains the same" and requested a now very tardy letter of credit. The letter of credit from Allied, guaranteeing full and faithful performance, was again requested in written correspondence from the venture manager to Allied on August 8, 1973, and January 4, 1974. Those requests were not honored and on March 11, 1974, this action was filed requesting in count I damages from Allied for its proportionate cost of the project plus interest. Also sought in count II were the costs and expenses in acquiring property rights and easements which Allied was to have made available for the venture project. After a lengthy trial, the circuit court awarded $219,000 to the plaintiff Kaufman & Broad for the claim made in count I and $29,000 for the claim in count II. On appeal from the order, Allied raises several grounds of alleged error.

• 1 Allied first contends that Kaufman & Broad breached a fiduciary duty to its co-venturer such that the agreement was rendered null and void. For the proposition that the relationship between joint venturers is that of fiduciaries our attention is directed to Ditis v. Ahlvin Construction Co. (1951), 408 Ill. 416, 97 N.E.2d 244, and Carroll v. Caldwell (1957), 12 Ill.2d 487, 147 N.E.2d 69. Accepting for our purposes the statement of law urged on us by Allied, we are reminded that "[f]acts constituting any affirmative defense, such as * * * that an instrument or transaction is void or voidable in point of law * * * must be plainly set forth in the answer or reply." (Ill. Rev. Stat. 1977, ch. 110, par. 43.) While the brief of Allied on appeal makes much of the purported avoidance effect of a breach of fiduciary duty, its amended answer as set forth in the record contains no affirmative defense but only a general denial of allegations therein contained. A general denial is ordinarily not sufficient to preserve for review matters which should have been specially pleaded or raised by motion. (Lein v. Pietruszewski (1974), 24 Ill. App.3d 784, 321 N.E.2d 442.) The rationale for such a rule is to insure that the reviewing courts> are not asked to pass on questions which were not raised and argued below. Lein v. Pietruszewski.

In an often-cited opinion, the appellate court has held that:

"The theory upon which a case is tried cannot be changed upon review. City of Chicago v. James E. Mulligan Enterprises, 27 Ill. App.2d 481, 170 N.E.2d 13. This rule applies to both the successful and the unsuccessful parties to the suit. Continental Ill. Nat. Bank & Trust Co. of Chicago v. National Casket Co., 27 Ill. App.2d 447, 169 N.E.2d 853. It is also a rule that a party will not be permitted to argue on appeal a defense not interposed by his answer. Bittner v. Field, 354 Ill. 215, 188 N.E. 342; Dempster v. New York Cent. R. Co., 2 Ill. App.2d 47, 188 N.E.2d 56; Chicago Title & Trust Co. v. Hoffberg, 293 Ill. App. 290, 12 N.E.2d 230; Graf v. Perlman, 209 Ill. App. 172. The fact that certain evidence lends support to the defense does not mitigate the force of this rule (Hill v. Siffermann, 230 Ill. 19, 82 N.E. 338; Chicago R.I. & P.R. Co. v. The People, 222 Ill. 427, 78 NE 790) and asserting a new defense in final argument does not do so. While an appellee is not as limited in the scope of review as is an appellant, nevertheless, the review cannot go beyond the issues appearing in the record. In re Estate of Leichtenberg, 7 Ill.2d 545, 131 N.E.2d 487. The issues are determined from the pleadings and the evidence. To have evidence without pleading an issue is just as fatal as pleading an issue and not supporting it with evidence. Both are essential and each must conform to the other. Burke v. Burke, 12 Ill.2d 483, 147 N.E.2d 373; Neitzke v. Neitzke, 15 Ill. App.2d 473, 146 N.E.2d 708." (Consoer, Townsend & Associates v. Addis (1962), 37 Ill. App.2d 105, 109-10, 185 N.E.2d 97, 99.)

We believe the policies supporting this rule warrant our continued adherence to its strictures. In any action before the trial court,

"[t]he proof presented is determined largely by the pleadings, the issues, and the theories there made. To permit a recovery upon a theory which was neither pleaded nor presented below, would preclude the adverse party from presenting evidence in rebuttal thereof and from offering other further or attendant theories predicated thereon. Such procedure would violate the concept of fundamental fairness embraced in our Civil Practice Act, wherein the Legislature sought to liberalize the framework within which disputes are presented to the end that they may be determined on their merits upon a specification of the real issues involved." (Broberg v. Mann (1965), 66 Ill. App.2d 134, 213 N.E.2d 89, 91.)

In the instant case, the alleged breach of fiduciary duty is a defense which was not affirmatively ...

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