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Metro East San. Dist. v. Village of Sauget





Appeal from the Circuit Court of St. Clair County; the Hon. Stephen M. Kernan, Judge, presiding.


Plaintiffs, the Metro East Sanitary District, the village of Cahokia, the Commonfields of Cahokia Public Water District, and John R. Sprague, Sr., filed this complaint against the village of Sauget for breach of contract, in the circuit court of St. Clair County. All of the parties except Sprague are municipal corporations. The circuit court awarded summary judgment against the village of Sauget as follows: In favor of the Metro East Sanitary District and Sprague, $168,000; in favor of the village of Cahokia and Sprague, $168,000; and in favor of the Commonfields of Cahokia Public Water District and Sprague, $168,000; prejudgment interest was awarded as to all of these amounts. The village of Sauget appeals.

From the pleadings, and numerous exhibits and affidavits on file, we glean the following undisputed facts: After extended negotiations, by September 6, 1977, letter to each of the corporate plaintiffs, the village of Sauget extended an offer concerning a proposed sewage treatment system for the region. According to this letter, which the parties refer to as "the Regional Agreement," said offer superseded all previous offers on that subject. The Regional Agreement spans 20 printed pages and 63 numbered paragraphs. Paragraph 24 of the Regional Agreement states in pertinent part:

"The regional revenue bonds issued by Sauget shall include sufficient funds to reimburse East St. Louis, Cahokia, Water District and Sanitary District for fees which such party has paid or become contractually obligated to pay to its attorney or attorneys on or after December 1, 1972 as the direct and proximate result of the regional treatment proposition, the negotiations which resulted in this agreement and the issuance of the regional revenue bonds.

The reimbursable amount due to any one of said parties shall not exceed four-tenths of one percent (0.4%) of the initial amount of regional revenue bonds issued by Sauget."

Between September 7 and 12, 1977, each of the corporate plaintiffs passed a resolution authorizing the hiring of Sprague as attorney representing each of the corporate plaintiffs in matters relating to the subject matter included in the Regional Agreement. Each of the corporate plaintiffs also executed a written contract employing Sprague at a flat rate of 0.4% of the revenue bonds issued by the village of Sauget. Said contracts are essentially identical. Each provides that Sprague be paid directly by the village of Sauget from the proceeds of the bonds when sold, and that Sprague would receive no fees or compensation in the event that the proposed sewage treatment plant was not completed or the bonds not sold.

During January 1983 each of the plaintiff corporations passed a resolution stating that the revenue bonds had been issued and delivered and that Sprague was not entitled to receive his fees pursuant to the contracts between Sprague and the respective plaintiff corporations. By letter to village of Sauget Mayor Paul Sauget, dated February 21, 1983, village of Cahokia Mayor Michael King stated that he did not feel it was necessary that an accounting of hours spent or detail of work performed by Sprague be furnished in view of paragraph 24 of the Regional Agreement and the "contingent attorney fee contract" thereafter entered into by the village of Cahokia and Sprague. In said letter, Mayor King praised Sprague's efforts since 1972 on the sewage treatment system project and requested that Sprague's fee be paid.

The complaint stated that bonds in the amount of $42,000,000 had been sold. Each of the plaintiffs requested damages in the amount of Sprague's fees. The village of Sauget answered, asking that the complaint be dismissed and raising the "affirmative defenses" that (1) the village of Sauget was not a party to any agreement between any of the corporate plaintiffs and Sprague, and hence not liable thereunder, and that (2) each of the corporate plaintiffs had breached its "implied duty of good faith under the Regional Agreement" and thereby relieved the village of Sauget of its duty of performance thereunder. The village of Sauget also filed interrogatories directed to Sprague, in which the village of Sauget, inter alia, requested that Sprague set forth the nature of the legal services rendered in connection with the matter in question, the number of hours expended, and other details of the work performed. Plaintiffs moved to strike the village of Sauget's answer, objected to said interrogatories, and moved for an extension of time in which to answer said interrogatories.

At the January 5, 1984, hearing on plaintiffs' motion for summary judgment, the village of Sauget objected to summary judgment's being considered prior to discovery. Counsel for the village of Sauget admitted at this hearing that some attorney fees were due and owing, but urged that the amount thereof could not be determined absent Sprague's statement of hours and detail of work.

The circuit court granted summary judgment for each of the corporate plaintiffs and Sprague in the amount of $168,000 as to each corporate plaintiff (i.e., 0.004 x $42,000,000) plus prejudgment interest.

The village of Sauget appeals, seeking that this court reverse the summary judgment of the circuit court and remand for further proceedings. Summary judgment should be rendered if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Ill. Rev. Stat. 1983, ch. 110, par. 2-1005(c).

• 1, 2 The village of Sauget argues that Sprague was not intended to be a direct beneficiary of the Regional Agreement and thus cannot sue on the contract in the status of third-party beneficiary. If a contract be entered into for a direct benefit of a third person not a party thereto, such third person may sue for breach thereof. The test is whether the benefit to the third person is direct to him or is but an incidental benefit to him arising from the contract. If direct, he may sue on the contract; if incidental, he has no right of recovery thereon. Each case must depend on the intention of the parties as gleaned from a consideration of all of the contract and the circumstances surrounding the parties at the time of its execution. The right of the third party benefited by a contract to sue thereon rests upon the liability of the promisor, and this liability must appear from the language of the instrument when properly interpreted and construed. The liability so appearing cannot be extended or enlarged on the ground, alone, that the situation and circumstances of the parties justify or demand further or other liability. (People ex rel. Resnik v. Curtis & Davis, Architects & Planners, Inc. (1980), 78 Ill.2d 381, 400 N.E.2d 918, 919.) As people usually stipulate for themselves, and not for third persons, a strong presumption obtains in any given case that such was their intention, and that the implication to overcome that presumption must be so strong as to amount practically to an express declaration. (17 Am.Jur.2d Contracts sec. 304, at 730; Waterford Condominium Association v. Dunbar Corp. (1982), 104 Ill. App.3d 371, 373-74, 432 N.E.2d 1009, 1011.) We think that paragraph 24 of the Regional Agreement plainly demonstrates that the attorney or attorneys were intended to benefit from the contract, and said attorneys are sufficiently identified therein. If the attorney or attorneys were not intended direct beneficiaries, why does the Regional Agreement, the subject of which was a sewage treatment system, expressly refer to attorney fees? Such mention, having little to do with the project itself, goes far in rebutting any presumption that the parties intended to stipulate only for themselves. Moreover, this mention was made in a context which shows that the parties anticipated that attorney services would be provided on credit and desired to make express arrangement for payment thereof. (See Carson Pirie Scott & Co. v. Parrett (1931), 346 Ill. 252, 178 N.E. 498.) Since the 1977 Regional Agreement refers to reimbursement of fees for services rendered since 1972, and since the Regional Agreement was by its own terms the result of negotiations between the parties thereto, it seems natural to conclude that when the Regional Agreement was executed the village of Sauget was well aware of Sprague's status as counsel for the corporate plaintiffs. We conclude that Sprague is a proper party plaintiff in this case.

• 3 Next, the village of Sauget argues that paragraph 24 of the Regional Agreement relating to reimbursement of attorney fees is ambiguous. While the trial court evidently viewed paragraph 24 as permitting an attorney fee up to 0.4% of the bonds issued, the village of Sauget argues that a reasonable alternative interpretation of paragraph 24 is "that reimbursement on the basis of contingent percentage or fixed amount attorneys' fee arrangements, where the arrangements provided for payment of the maximum amount allowed under the Regional Agreement, was excluded." We find this a strained interpretation, not a reasonable one. Any particular interpretation that only one of the parties may have envisioned at the time the contract was executed is immaterial. (Smith v. Vernon (1972), 6 Ill. App.3d 434, 286 N.E.2d 99.) The instant contract should not be read as prohibiting that which by its express terms it appears to permit.

• 4 The village of Sauget argues that plaintiffs' complaint was insufficient to support summary judgment in plaintiffs' favor. The village of Sauget contends that plaintiffs failed to allege in their complaint or show in submitted affidavits that the corporate plaintiffs had in fact paid or become contractually obligated to pay attorney fees, since under Sprague's contracts with the respective corporate plaintiffs, the latter were not obligated to pay Sprague's fees directly. We disagree with the village of Sauget's interpretation. Plaintiffs' complaint alleged that as a result of issuance of the bonds, Sprague's fees were due and owing. The Regional Agreement provided that the village of Sauget would issue sufficient bonds to reimburse the corporate plaintiffs for fees which each had paid or should become "contractually obligated to pay." Each of Sprague's fee contracts with the respective corporate plaintiffs provided that as soon as the village of Sauget had received the proceeds of the bonds issued, Sprague's fees would be due and payable. Issuance and sale of the bonds is not in dispute. Taken together, these matters sufficiently showed that the corporate plaintiffs had become contractually obligated ...

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