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12/03/87 the Bank of Waukegan, As v. the Epilepsy Foundation of

December 3, 1987

THE BANK OF WAUKEGAN, AS TRUSTEE, ET AL., PLAINTIFFS-APPELLEES AND CROSS-APPELLANTS

v.

THE EPILEPSY FOUNDATION OF AMERICA, DEFENDANT-APPELLANT AND CROSS-APPELLEE



APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

516 N.E.2d 1337, 163 Ill. App. 3d 901, 114 Ill. Dec. 943 1987.IL.1779

Appeal from the Circuit Court of Lake County; the Hon. John R. Goshgarian, Judge, presiding.

APPELLATE Judges:

JUSTICE UNVERZAGT delivered the opinion of the court. REINHARD and DUNN, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE UNVERZAGT

This case arises from the breach of an office lease. Plaintiffs are the Bank of Waukegan, which holds legal title to the subject property, and W.D.G. Limited, the property's beneficial owner. For simplicity, we will refer to the Bank and W.D.G. in the singular "plaintiff." W.D.G.'s agent, John Simcic, negotiated the lease with Charles Shanhouse, who was then the executive director of the Epilepsy Foundation of America, North Shore/Lake County Chapter, an Illinois not-for-profit corporation (Chapter). The lease was to extend from January 1, 1981, through December 31, 1985. On September 1, 1983, however, the Chapter moved out of the building, claiming that the office was without air conditioning or adequate ventilation and therefore uninhabitable.

Plaintiff filed a breach of contract action against the Chapter in September 1984 to recover the overdue rent and other amounts payable under the terms of the lease. The trial date was postponed several times, to allow the parties to conduct discovery, and again in August 1985, when plaintiff sought leave to file an amended complaint adding a party. The amended complaint, filed on August 2, 1985, named the Epilepsy Foundation of America (Foundation), a Delaware not-for-profit corporation and an affiliate of the Chapter, as the sole defendant. The trial court subsequently postponed trial several more times at the Foundation's request and set March 10, 1986, as the "final, final" trial date. In the meantime, plaintiff filed a second amended complaint, this time naming both the Chapter and the Foundation as defendants, apparently on the alternative theories that either Shanhouse had executed the lease as an agent of the Chapter or the Chapter (through Shanhouse) had executed the lease as an agent for the Foundation. It is the Foundation's position that Shanhouse did not execute the lease on its behalf and that neither Shanhouse nor the Chapter had authority to act for it.

On March 10, 1986, the scheduled trial date, the Foundation filed motions for a continuance and for summary judgment. The court granted a continuance over plaintiff's objection, scheduled arguments on the Foundation's summary judgment motion, and, sua sponte, ordered the Foundation to pay plaintiff $400 in attorney fees as "costs." It denied the Foundation's subsequent motion for reconsideration of the award.

In May 1986, after hearing arguments on the issue, the court granted the Foundation's motion for summary judgment. On August 13, 1986, it denied the Foundation's subsequent petition for attorney fees pursuant to section 2-611 of the Illinois Code of Civil Procedure. (Ill. Rev. Stat. 1985, ch. 110, sec. 2-611.) The Foundation filed separate appeals from the March 10, 1986, order awarding attorney fees to plaintiff and the August 13, 1986, order denying the Foundation's petition for fees. Those appeals have been consolidated here. Plaintiff has cross-appealed the court's entry of summary judgment for the Foundation. The Chapter has settled with plaintiff and is not a party to this appeal. I

We will first address plaintiff's contention that the court erred in entering summary judgment for the Foundation. Plaintiff argues that, by failing to file an answer prior to filing its summary judgment motion, the Foundation has admitted all well-pleaded facts contained in the complaint, including plaintiff's allegation that the Foundation executed the lease. Illinois law, however, permits a defendant to file a motion for summary judgment at any time (Ill. Rev. Stat. 1985, ch. 110, par. 2-1005(b)), even before filing an answer. (Florsheim v. Travelers Indemnity Co. (1979), 75 Ill. App. 3d 298, 308-09; Metropolitan Sanitary District v. Pontarelli & Sons, Inc. (1972), 7 Ill. App. 3d 829, 838-39.) And by filing a summary judgment motion before filing an answer, a defendant does not admit all well-pleaded facts contained in the complaint, but only those facts which it leaves uncontradicted. (Metropolitan Sanitary District, 7 Ill. App. 3d at 838-39, citing Moore v. Pinkert (1960), 28 Ill. App. 2d 320, 324-25.) Without detailing here the allegations of the complaint and of the motion, we note that every factual allegation of consequence contained in plaintiff's complaint has been contradicted specifically or in substance in the Foundation's motion and the depositions attached to it as exhibits.

Plaintiff next contends that there remain genuine issues of material fact which should have precluded the entry of summary judgment. The Foundation attached to its motion the deposition testimony of John Simcic, Charles Shanhouse and Margery Ashley, who had replaced Shanhouse as executive director of the Chapter during the lease term. In opposition to the motion, plaintiff relied on Simcic's deposition, the lease itself (which was attached to the complaint), and the affiliation agreement between the Foundation and the Chapter, portions of which were attached to plaintiff's response to the Foundation's motion. Plaintiff argues that those documents establish as fact or raise genuine issues with regard to the following: (1) Shanhouse signed a rider to the lease on a signature line designating him as the executive director of the "EPILEPSY FOUNDATION OF AMERICA"; (2) the Foundation, through the affiliation agreement, required the Chapter to use that designation; (3) Shanhouse told Simcic that he needed approval for the lease from the "home office"; (4) when negotiating the lease, Simcic met with Shanhouse and two other men that Shanhouse introduced as being from the "home office"; and (5) the Foundation accepted the benefits of having a local office in plaintiff's building.

Plaintiff argues that the Chapter had actual or apparent authority to bind the Foundation on the lease, and that the Foundation subsequently ratified the lease. To state a cause of action based on an agency relationship, a plaintiff must allege facts showing that one person acted for another "under circumstances that imply knowledge on the part of the alleged principal of such acts." (Hofner v. Glenn Ingram & Co. (1985), 140 Ill. App. 3d 874, 880.) A principal is liable for those acts of its agent which the agent has actual or apparent authority to perform. (Schoenberger v. Chicago Transit Authority (1980), 84 Ill. App. 3d 1132.) The Foundation submitted the deposition testimony of Charles Shanhouse, who executed the lease, in which Shanhouse stated that his authority as executive director of the Chapter came only from the board of directors of the Chapter itself, that he executed the lease on behalf of the Chapter, and that the rent was always paid by the Chapter. He stated that he had never been employed by the Foundation and that he did not need, request, or receive approval or authorization from the Foundation to execute the lease. The Foundation also submitted Margery Ashley's deposition, in which she stated that the Foundation and Chapter are separate and autonomous organizations and that the Chapter has exclusive control over its own financial decisions. The depositions therefore indicate that Shanhouse had actual authority to bind only the Chapter.

Where a movant for summary judgment supplies facts which, if uncontradicted, would entitle that party to judgment as a matter of law, the non-movant cannot rely on its pleadings to raise genuine issues of material fact. (Carruthers v. B. C. Christopher & Co. (1974), 57 Ill. 2d 376, 380.) Plaintiff, however, submitted only portions of the affiliation agreement to contradict the allegations made in the depositions. The agreement establishes only that the two corporations were affiliated. It does not purport to confer authority on the Chapter to execute contracts for the Foundation, and the degree of control it purports to give the Foundation over the operations of the Chapter are far less than that found insufficient to establish an agency relationship in Slates v. International House of Pancakes, Inc. (1980), 90 Ill. App. 3d 716, 727. (See also Salisbury v. Chapman Realty (1984), 124 Ill. App. 3d 1057, 1061-62 (finding plaintiff's reliance on a franchise agreement containing similar language insufficient to overcome defendant-franchisor's motion to dismiss the complaint).) Plaintiff has therefore failed to establish a genuine issue of fact regarding the Chapter's actual authority to bind the Foundation.

Plaintiff's contention that the Chapter and Shanhouse had apparent authority to bind the Foundation must also fail. Apparent authority arises where the principal, through words or conduct, creates the impression that the agent has the authority to perform the act in question. (See Mateyka v. Schroeder (1987), 152 Ill. App. 3d 854, 863.) Apparent authority must therefore be traced to some word or act of the alleged principal. (See Lundberg v. Church Farm, Inc. (1986), 151 Ill. App. 3d 452, 461; Hofner, 140 Ill. App. 3d at 881.) In his deposition, Simcic admitted that he had no direct contact with the Foundation regarding Shanhouse or the lease. Simcic stated that he believed Shanhouse was acting for the Foundation because: (1) Shanhouse told him he represented the Foundation; (2) Shanhouse told him "the home office" had to approve the lease terms; and (3) Shanhouse told him that two men who accompanied him on one occasion were from the "home ...


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