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Kessler, Merci, & Lochner, Inc. v. Pioneer Bk.

OPINION FILED OCTOBER 30, 1981.

KESSLER, MERCI, AND LOCHNER, INC., PLAINTIFF-APPELLEE,

v.

PIONEER BANK & TRUST COMPANY, ET AL., DEFENDANTS-APPELLANTS.



APPEAL from the Circuit Court of Cook County; the Hon. JAMES C. MURRAY, Judge, presiding. MR. JUSTICE WILSON DELIVERED THE OPINION OF THE COURT:

This is an appeal from an order of the trial court requiring the defendant beneficiaries (Beneficiaries) of a land trust to submit to arbitration. Consolidated with this appeal is an appeal from an order dismissing plaintiff and third-party defendant (Kessler) from a third-party complaint brought by six third-party plaintiffs, including Beneficiaries (Developers). On appeal the Beneficiaries and Developers contend that (1) the trial court erred in ruling that the trustee was an agent of the Beneficiaries for purposes of this contract on behalf of the land trust, and (2) the trial court erred in ruling that the Beneficiaries of the land trust were bound by the contract signed by the trustee. The Beneficiaries further assert that it was error to enter a judgment in favor of Kessler without an evidentiary hearing, and the Developers argue that the trial court erred in sustaining Kessler's motion for dismissal, unverified and unsupported by affidavit. The pertinent facts follow.

On June 2, 1978, Kessler filed an unverified complaint for declaratory relief against Pioneer Bank and Trust Company (Pioneer), as trustee, and Armand S. Donian. Donian was one of the beneficiaries of a land trust established at the Pioneer Bank and also the developer with the largest interest in the land trust property. Phillip C. Goldstick, Vera Donian Bezazian and Dorothy Donian Avedisian were the other beneficiaries of the land trust property. Donian and Goldstick negotiated the agreement for architectural services in contemplation of the erection of condominium units on the trust property. This contract was signed on October 2, 1973, and contained an arbitration clause. The complaint was later amended to include all the beneficiaries of the trust. The contract attached to the complaint contained the following provision:

"All claims, disputes and other matters in question arising out of, or relating to this Agreement or the breach thereof shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then obtaining unless the parties mutually agree otherwise. This Agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law."

This article was initially crossed out by Donian; however, a typewritten insert on the side of this provision stated that "This article to be included in Agreement" and was initialed by HEK (presumably Howard E. Kessler, president of Kessler). The contract was returned to Goldstick who transmitted it in this form to Pioneer Bank. Pioneer Bank executed the contract with the arbitration clause reinserted pursuant to the letter of direction. The contract contained the following stamped representation:

"All representations of Pioneer Trust and Savings Bank, as trustee, are those of the trustee's beneficiary only."

Further, at page three of the document, is another stamp which, as read in the record, states that:

"This document is made by the Pioneer Trust and Savings Bank as trustee and accepted upon the express understanding that the Pioneer Trust and Savings Bank * * * [illegible material] waived, nor shall the Pioneer Trust and Savings Bank be held personally liable concerning or in consequence of any of the covenants of this document, either expressed or implied."

Pioneer moved for and was granted dismissal from the proceedings, admitting that the agreement did require it to arbitrate. Donian's motion to dismiss, alleging that the agreement did not contain his signature, and under Illinois law such a letter of direction could not make a beneficiary personally liable, was denied.

Kessler filed a second amended complaint alleging an agency relationship between the Beneficiaries and Pioneer. The Beneficiaries' answer contended that under Illinois law there was no agency relationship between the trustee, acting pursuant to a letter of direction, and the Beneficiaries. Their motion to dismiss the amended complaint was denied.

The trial court predicated its findings and rulings of law upon the pleadings admitted in the record. The pertinent findings indicated that:

(1) the arbitration provision was included in the contract when the Beneficiaries' attorney submitted it to Pioneer;

(2) Pioneer signed the contract as an agent at the direction of three of the Beneficiaries of the land trust; and

(3) the Beneficiaries accepted the benefits of the architectural services ...


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