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Dempsey v. Sternik





Appeal from the Circuit Court of Will County; the Hon. Herman S. Haase, Judge, presiding.


This action was brought as a third-party complaint to recover damages for an alleged conspiracy to destroy counterplaintiff's business and for inducement of breach of contract. The initial action was instituted on October 18, 1983, when Mary Ann and William Hoagland filed a complaint against Gemco Cleaning Services, Inc. (Gemco), and Kevin Dempsey (Dempsey) to dissolve Gemco. Appellee Dempsey subsequently filed a third-party complaint against defendant-appellant James Sternik, which is the subject of review on appeal.

In August of 1982, Kevin Dempsey purchased a 50% interest in the Gemco cleaning business from William and Mary Ann Hoagland. Since the major asset of the business was goodwill, the agreement provided as security a two-year non-competition clause.

Shortly after Gemco was reorganized with Dempsey as president and equal partner, business prospered. By comparison, in 1981 Gemco had a gross income of $139,556.76 and $64,891 for the first half of 1982, whereas receipts for fiscal year beginning August 1, 1982, totaled $204,220.90.

On October 17, 1983, James Sternik, as counsel for plaintiffs William and Mary Ann Hoagland, filed a two-count complaint against Gemco and Dempsey seeking dissolution of Gemco. In count I plaintiffs charged that, subsequent to the filing of the articles of incorporation, differences erupted between the parties over the parties' respective roles, compensations, control of the corporate activities, computation of profits, and other differences, causing total inability of the parties to enter into agreed bylaws. Further, that Dempsey failed to properly perform his duties as president causing injury to the goodwill of the corporation and the loss of residential cleaning accounts. In count II, plaintiffs charged that the contract between the parties was totally vague and unworkable without the voluntary cooperation of the parties and, therefore, could not create a working corporation within the State of Illinois.

On January 9, 1984, Sternik entered into an agreement with William R. Hoagland (Billy) regarding the reorganization of a business to be known as Roberts Cleaning Services (Roberts). Billy was the 19-year-old son of William and Mary Ann Hoagland. The agreement provided generally that Sternik was to provide $2,000 for start-up capital and to provide loans to Roberts from time to time to finance the business during the first seven weeks. Billy was to be the active manager of the business and from time to time consult with Sternik as to any matter which may materially affect the business. Billy's duties as manager were to be based upon duties of managers in similar existing businesses or one that has recently ceased doing business. The agreement also provided that Billy was to be a general partner and Sternik was to be a limited partner in the business.

Defendant Dempsey filed a counterclaim on January 27, 1984, alleging that the Hoaglands breached their fiduciary duty to Gemco and Dempsey by operating a competing cleaning services business. The counterclaim was amended to include defendant Sternik and alleged facts supporting the proposition that Sternik was involved with the Hoaglands in a conspiracy to solicit Gemco customers to do business with Roberts. The amended counterclaim also alleged that Sternik, by aiding the Hoaglands in organizing Roberts, induced William Hoagland to breach his contract with Dempsey, causing the financial demise of Gemco.

The case was set for trial on June 17, 1985. On June 15, 1985, Kevin Hermanik (Hermanik), counsel for Sternik, moved the court to continue the trial on the basis that Sternik, an attorney, was scheduled to appear in court as counsel in a criminal matter. The motion was denied. On June 17, 1985, just prior to trial, Hermanik moved the court to withdraw as counsel for Sternik or, alternatively, to continue the trial. The basis of the motion was that counsel for Dempsey had previously agreed to a continuance, and based upon that agreement, Hermanik was inadequately prepared to represent the interests of Sternik. Sternik additionally supplied an affidavit in support of the motion which indicated that William and Mary Ann Hoagland were out of State and unavailable for trial on June 17, 1985. This motion was also denied.

Shortly after the commencement of the bench trial, a settlement was reached between Dempsey, Mary Ann Hoagland, William Hoagland and Gemco whereby the Hoaglands paid Dempsey $14,500. The trial then proceeded with Dempsey's action against Sternik.

The circuit court of Will County entered a judgment order on July 8, 1985, against Sternik in the amount of $49,000 as actual damages and in the sum of $5,000 as punitive damages. Specifically, the court found that Sternik had conspired with the Hoaglands to put Gemco out of business. Further, that Roberts Cleaning Service, the partnership between Sternik and Billy, was nothing more than the alter ego of William and Mary Ann Hoagland. Additionally, the court found that Sternik induced a breach of contract by assisting the Hoaglands while aware of the contract and pending lawsuit between the Hoaglands and Dempsey.

The appeal presents three grounds for reversal. First, that the trial court's findings that appellant conspired to put Dempsey out of business and induced a breach of contract between the Hoaglands and Dempsey were against the manifest weight of the evidence. Second, that the damages set by the trial court were without basis and unsupported in the record. Third, appellant argues that he was so ineffectively represented by counsel that he was deprived of fundamental rights of due process.

• 1 As to appellant Sternik's first argument, there is adequate evidence in the record to support the trial court's finding of conspiracy between the Hoaglands and Sternik. A conspiracy is an agreement or combination of two or more people to do an unlawful act or to do a lawful act by unlawful means. Once established, the acts of one co-conspirator are admissible against all conspirators whose involvement has been proved. (ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc. (1980), 90 Ill. App.3d 817, 413 N.E.2d 1299.) The evidence shows that Sternik was more than an unsuspecting limited partner in Roberts Cleaning Service. Paragraph 5(a) of the agreement between Billy and Sternik states that Sternik "shall have neither an obligation nor a right to perform any services for Roberts, compromise claims or other-wise handle the affairs of the business." The record clearly shows, however, that Sternik assumed certain managerial duties of Roberts. Most notably, Sternik was in charge of signing checks and obtaining insurance for the business. Both of these duties indicate that Sternik was aware of whom Roberts was doing business with and whom Roberts had in its employ. Sternik was not a limited partner but in fact an active participant in the daily operation of Roberts Cleaning Service.

Moreover, Sternik, as the former attorney for the Hoaglands, was aware of who were the former clients and employees of Gemco. Sternik, however, claims that although he was aware that he had former Gemco employees on his payroll and was obtaining insurance certificates on former Gemco clients, he was not a part of a conspiracy to run Gemco out of business. It is true, as Sternik asserts, that his actions would be entirely legal since he was not bound by the non-competition clause of the Hoagland-Dempsey agreement. However, it is not the legality of Sternik's actions that are in question, but the underlying means by which these actions were carried out. The evidence shows that William and Mary Hoagland had been to Sternik's office and, according to Sternik's secretary, had delivered information concerning Roberts to Sternik. Further, William Hoagland informed Sternik that Roberts was using Gemco supplies and equipment, to which Sternik replied by saying "he didn't want to hear about it."

Sternik's attorney admitted at trial that the Hoaglands had devised a "scheme" to get rid of Dempsey and that in doing so had breached their fiduciary duty with Gemco. Sternik, however, maintains that he had no part in this "scheme." Moreover, that once Sternik found out that Roberts was doing business with former Gemco clients, he shortly thereafter terminated his relationship with Roberts. The record reveals, however, that Sternik was aware that Roberts was doing business with a former substantial client of Gemco on January 18 or 19, yet he did not terminate his relationship with Roberts until sometime after April 1. In ...

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