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People Ex Rel Fahner v. Comm. Hosp.





Appeal from the Circuit Court of Cook County; the Hon. Harold A. Siegan, Judge, presiding.


Rehearing denied October 7, 1982.

These consolidated appeals stem from the appointment of a receiver for defendant Community Hospital of Evanston (Community) and the entry of a preliminary injunction by the trial court, pursuant to a complaint brought by the Attorney General. Community and intervening defendant Morgan, Whiteside, Block and Company, Inc. (Morgan), appeal.

Community raises the following issues: (1) whether the court properly denied Community's motion to dismiss the complaint; (2) whether the entry of the preliminary injunction and the appointment of the receiver and other relief granted by the trial court were an abuse of discretion; (3) whether the orders of the court subsequent to the entry of the preliminary injunction denied Community due process of law; and (4) whether Morgan is barred as a matter of law from enforcing its finder's fees in Illinois courts>.

Morgan also raises a number of issues: (1) whether the complaint states a cause of action relative to Morgan and adequately supports the injunction prohibiting payment of Morgan's fees; (2) whether the court properly ordered that the $150,000 held in escrow pass to the receiver; (3) whether Morgan is entitled to damages and attorney fees pursuant to section 12 of the Injunction Act (Ill. Rev. Stat. 1979, ch. 69, par. 12), because of the preliminary injunction; (4) whether Morgan is entitled to damages and attorney fees pursuant to section 1 of "An Act concerning the appointment and discharge of receivers" (Ill. Rev. Stat. 1979, ch. 110, par. 407), because of the receiver's appointed control over the $150,000 in escrow; and (5) whether the trial court should have entered judgment for Morgan in the amount of $150,000 rather than $100,000.

In August 1980 Gilbert Bailey, chairman of the board of Community, sent a letter to Leo F. Block, Morgan's chairman, agreeing to retain Morgan to identify on a nonexclusive basis a viable purchaser of Community. By the terms of the agreement Morgan's fee, payable upon closing, was "* * * five (5%) percent of the first $1,000,000 and ten (10%) percent over $1,000,000." Block contacted Bernard Lachner, president of Evanston Hospital, to see if Evanston would be interested in purchasing Community. After Evanston's board rejected the structure of the acquisition proposal suggested by Block in Community's behalf, an "Acquisition Agreement" between the parties was reached which called for Evanston to purchase substantially all of Community's assets for $2,000,000. According to the terms of the escrow agreement also concluded at this time, the purchase price and the documents necessary for closing were to be deposited into an escrow account with Chicago Title and Trust as escrowee. On the closing date the escrowee was directed to pay from the escrow funds on deposit certain costs and fees incurred in conjunction with the sale; to pay Morgan's commission of $150,000; to transfer $500,000 to another bank for deposit into "Evanston Hospital Pavilion Special Fund," an account established by Evanston for the benefit of any health care facility operated by Evanston on the real estate; and to pay the balance of the remaining funds to Community.

On December 10, 1980, the Attorney General filed a seven-count complaint against Community, its directors, and Chicago Title and Trust Company, as escrowee, alleging violations of "An Act to regulate solicitation and collection of funds for charitable purposes * * *" (Ill. Rev. Stat. 1979, ch. 23, par. 5101 et seq.) (hereinafter Charitable Solicitations Act) and the General Not for Profit Corporation Act (Ill. Rev. Stat. 1979, ch. 32, par. 163a et seq.) (hereinafter the Not for Profit Corporation Act), the Trusts and Trustees Act (Ill. Rev. Stat. 1979, ch. 148, par. 101 et seq.), as well as fraud, ultra vires, self-dealing and conversion. The complaint sought an accounting, the appointment of a receiver, liquidation of Community's assets, dissolution of the corporation, and injunctive and other relief. Pursuant to plaintiff's motion, the court entered a temporary restraining order on December 12, 1980, enjoining Chicago Title and Trust Company from distributing any of the funds held in escrow pursuant to its agreement with Community and Evanston and from paying any fee to Morgan. Morgan was given leave to intervene. On January 26, 1981, Community filed a motion to dismiss the action which was denied by the court. A hearing was held on the Attorney General's motion for a preliminary injunction order enjoining the escrowee from disbursing any funds and from paying Morgan. An order was entered which authorized the escrowee to invest the escrow funds in U.S. Treasury Bills. Community was restrained from disbursing any of its funds or assets without court order. A receiver was appointed to handle and control all the assets and liabilities of Community and directed that custody of Community's books and records be given to the receiver. On February 3, 1981, Community appealed this order. On February 11, 1981, the court amended its preliminary injunction order to specifically provide that the $150,000 held in escrow for payment of Morgan's fee was included as an asset of Community to pass to the receiver. Morgan appealed this order.

On July 9, 1981, the receiver petitioned the court to settle Morgan's claim against Community. The petition recited that on June 16, 1981, the receiver, his attorney, plaintiff's counsel and Morgan's counsel, met in an effort to settle Morgan's claim. As a result of the conference, the parties agreed that Morgan was to be paid $100,000 in full satisfaction of its claim against Community and that Morgan would execute a release to Community. Community objected to the receiver's petition to settle Morgan's claim and also to other claims submitted by the receiver to the court. On July 13, 1981, the court entered an order authorizing the receiver to pay certain claims against Community and directed the escrowee to deliver to the receiver any of the funds or obligations of the United States it held in escrow. Community was granted an extension of time to file its amended motion to modify the preliminary injunction and the hearing on the petition to pay Morgan's claim was continued. Community appealed from the payment of the claims totaling $118,854.78 and from the modification of the injunction order. On July 23, 1981, Community filed an amended motion to modify the preliminary injunction which sought vacation of the receivership and of the appointment of the receiver's attorney; return of its books, records and documents and release of a sum of money from the escrowee for the purpose of preparing its defense. On August 12, 1981, the court denied Community's foregoing motion. Community appealed the August 12, 1981, order. After a hearing held on Morgan's claim the court entered judgment in Morgan's favor against Community for $100,000 on August 21, 1981. Both Community and Morgan appeal from the August 21, 1981, order.


• 1 Community first asserts that the complaint failed to state a cause of action and hence its motion to dismiss the complaint was improperly denied. Community argues that the denial of its motion is subject to interlocutory appeal pursuant to Supreme Court Rule 307 which allows an appeal from an order granting, modifying or refusing an injunction or an order appointing or refusing to appoint a receiver. (Ill. Rev. Stat. 1979, ch. 110A, pars. 307(a)(1), 307(a)(2).) We disagree. The denial of a motion to strike or dismiss of itself is not an appealable order under Rule 307, but merely an interlocutory order which is not a final disposition of the proceedings sufficient to confer jurisdiction on the appellate court. (Cahokia Sportservice, Inc. v. Illinois Liquor Control Com. (1975), 32 Ill. App.3d 801, 336 N.E.2d 276.) Therefore, we decline to review the court's order denying Community's motion to dismiss.

Community next contends that the entry of the preliminary injunction was improper. The substance of Community's argument in support of this contention is that the evidence introduced at the hearing to determine if an injunction should issue was totally insufficient to support the allegations of the complaint, and that plaintiff made no showing that his remedy at law was inadequate.

• 2 Section 55 of the Not for Profit Corporation Act (Ill. Rev. Stat. 1979, ch. 32, par. 163a54) provides that in proceedings to liquidate the assets and affairs of a not-for-profit corporation the court shall have all ordinary powers of a court of equity to issue injunctions. To support a request for a preliminary injunction the plaintiff must establish the liklihood of success on the merits. (Kable Printing Co. v. Mount Morris Bookbinders Union Local 65-B Graphic Arts International Union (1976), 63 Ill.2d 514, 349 N.E.2d 36.) In order to show likelihood of success on the merits, a party is not required to make out a case which in all events will warrant relief in the final hearing. (Wessel Co. v. Busa (1975), 28 Ill. App.3d 686, 329 N.E.2d 414.) All that is necessary is that the petitioning party raise a fair question as to the existence of the right claimed, lead the court to believe that he will be entitled to the relief prayed for if the proof should sustain his allegations, and make it appear advisable that the positions of the parties should remain as they are until the court has had an opportunity to consider the case on the merits. (Wessel.) On appeal, the reviewing court should confine itself to a determination of whether the trial court has properly exercised its broad discretionary powers, and each substantive issue should be considered only insofar as necessary to determine whether there has been an abuse of discretion. Booth v. Greber (1977), 48 Ill. App.3d 213, 363 N.E.2d 6.

The preliminary injunction entered by the court enjoined the escrowee from distributing to Community any funds held by it in connection with the sale of Community's assets or from paying Morgan a broker's commission of $150,000. The escrowee was directed to invest the funds in U.S. Treasury Bills. Community was restrained from disbursing any funds or assets it currently possessed or from disposing of or transferring any of its records or documents.

The evidence adduced at the hearing held to determine whether a preliminary injunction should issue and whether a receiver should be appointed showed that no financial data for the year 1979 was submitted by Community to the Attorney General in compliance with the Charitable Solicitations Act (Ill. Rev. Stat. 1979, ch. 23, par. 5104); that Community had used an allegedly restricted gift of $500,000 to its Endowment Fund to reduce its general obligations, and that an audit conducted by the Department of Public Aid disallowed $102,000 of $800,000 in claimed expenses; that in the same audit $4,000 in credit card expenses were disallowed because ...

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