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02/25/87 Thomas Bernstein, v. Lind-Waldock & Company

February 25, 1987

THOMAS BERNSTEIN, PLAINTIFF-APPELLEE

v.

LIND-WALDOCK & COMPANY, DEFENDANT-APPELLANT (GLENN W. CAAN ET AL., DEFENDANTS)



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, THIRD DIVISION

505 N.E.2d 1114, 153 Ill. App. 3d 108, 106 Ill. Dec. 323 1987.IL.231

Appeal from the Circuit Court of Cook County; the Hon. Albert Green, Judge, presiding.

APPELLATE Judges:

Presiding Justice McNamara delivered the opinion of the court. Rizzi and White, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE MCNAMARA

Defendant Lind-Waldock & Company appeals from an order of the trial court dismissing its counterclaim against plaintiff Thomas Bernstein pursuant to section 2-615 of the Code of Civil Procedure for failure to state a cause of action sounding either in contract or in tort. Ill. Rev. Stat. 1985, ch. 110, par. 2-615.

Plaintiff was a voluntary member of the International Monetary Market Division of the Chicago Mercantile Exchange. Upon acceptance of membership in 1974, he agreed to abide by the Exchange's rules and regulations. In 1979, plaintiff leased his membership to defendant Glenn W. Caan, who is not a party to this appeal. Plaintiff remained subject to the relevant rules of the Exchange.

Defendant, as a clearing member of the Exchange, guaranteed Caan's trades to the Exchange. In 1980, Caan suffered losses in the course of his futures transactions. At defendant's request, the Exchange sold plaintiff's membership, for which Caan was the transferee, and the proceeds were applied in partial satisfaction of Caan's indebtedness to defendant.

Plaintiff brought this action seeking to defeat the award defendant received from the Exchange. In 1985, defendant filed a counterclaim, which was initially dismissed and subsequently amended to include three counts. Count I was based on defendant's rights as an alleged third-party beneficiary to plaintiff's agreement with the Exchange to abide by its rules, including an alleged rule not to institute litigation. Count II alleged a breach of contract, and count III alleged fraud. Defendant sought $100,000 in damages, plus costs and attorney fees. The trial court granted plaintiff's motion to dismiss all three counts for failure to state a cause of action and denied defendant's request for leave to file a second amended counterclaim. Defendant appeals.

Defendant contends that the trial court abused its discretion in striking and dismissing the amended counterclaim. A counterclaim will not be dismissed under section 2-615 of the Code of Civil Procedure for failure to state a cause of action unless no set of facts could be proved which would entitle the pleader to relief. Ill. Rev. Stat. 1985, ch. 110, pars. 2-615, 2-608; Jackson v. Burlington Northern, Inc. (1980), 84 Ill. App. 3d 967, 405 N.E.2d 805.

Defendant maintains that count I of the amended counterclaim sufficiently states that defendant is a third-party beneficiary of plaintiff's agreement to abide by the rules of the Exchange. The trial court dismissed the count, finding it legally deficient because defendant failed to show that it was a third-party beneficiary.

If a contract is entered into for the direct benefit of a third person who is not a party to the agreement, the third person may sue for a breach of the contract. (Carson Pirie Scott & Co. v. Parrett (1931), 346 Ill. 252, 178 N.E. 498.) The test is whether the benefit to the third person is direct or is but an incidental benefit to him arising from the contract. (346 Ill. 252, 178 N.E. 498.) The intention of the parties to the contract determines what benefit is meant to be conferred on the third person. (People ex rel. Resnik v. Curtis & Davis, Architects & Planners, Inc. (1980), 78 Ill. 2d 381, 400 N.E.2d 918.) The intent is to be gleaned from a consideration of the contract and the circumstances surrounding the parties at the time of its execution. Bates & Rogers Construction Corp. v. Greeley & Hansen (1985), 109 Ill. 2d 225, 486 N.E.2d 902.

In the present case, defendant alleges that plaintiff's application for membership in the International Monetary Market of the Exchange functioned as a contract for the direct benefit of defendant, a clearing member of the Exchange. We hold, however, that plaintiff's 1974 agreement to be bound by the Exchange's rule did not evidence any intent by the parties to that agreement to directly benefit defendant, which guaranteed Caan's trades to the Exchange in 1979.

Defendant argues that the trial court, in finding no direct benefit to defendant was intended, erred in applying "older narrow cases" instead of "current Illinois law" which consisted of "more recent cases with broader holdings." The trial court's reliance on Resnik and Carson Pirie Scott & Co. was proper, since those cases state the law regarding third-party beneficiaries as it currently stands. (See Bates & Rogers Construction Corp. v. Greeley & Hansen (1985), 109 Ill. 2d 225, 486 N.E.2d 902; Smith v. Clark Equipment Co. (1985), 136 Ill. App. 3d 800, 483 N.E.2d 1006.) The cases cited by defendant hold that a third-party beneficiary need not be identified or identifiable at the time the agreement is made. It is sufficient if the third party is identified at the time performance is due as a member of the class intended to be benefitted. (Avco Delta Corp. Canada Ltd. v. United States (7th Cir. 1973), 484 F.2d 692 (citing Carson Pirie Scott & Co. v. Parrett (1931), 346 Ill. 252, 178 N.E. 498), cert. denied (1974), 415 U.S. 931, 39 L. Ed. 2d 490, 94 S. Ct. 1444; Organization of Minority Vendors, Inc. v. Illinois Central Gulf R.R. (N.D. Ill. 1983), 579 F. Supp. 574, citing Carson Pirie Scott & Co. v. Parrett (1931), 346 Ill. 252, 178 N.E. 498, and People ex rel. Resnik v. Curtis & Davis, Architects & Planners, Inc. (1980), 78 Ill. 2d 381, 400 N.E.2d 918; Altevogt v. Brinkoetter (1981), 85 Ill. 2d 44, 421 N.E.2d 182, citing Carson Pirie Scott & Co. v. Parrett (1931), 346 Ill. 252, 178 N.E. 498, and People ex rel. Resnik v. Curtis & Davis, Architects & Planners, Inc. (1980), 78 Ill. 2d 381, 400 N.E.2d 918.) These holdings, however, do not alter the long-standing rule that whether the parties to an agreement intended third persons to be directly benefitted must be ...


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