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07/29/88 Hpi Health Care Services, v. Mt. Vernon Hospital

July 29, 1988

HPI HEALTH CARE SERVICES, INC., PLAINTIFF-APPELLANT

v.

MT. VERNON HOSPITAL, INC., ET AL., DEFENDANTS-APPELLEES



Before addressing the appeal on its merits, there are two preliminary matters which we must address. First, the briefs submitted on behalf of defendants Centerre and National Medical exceed the page limitations imposed by Supreme Court Rule 341(a) (113 Ill. 2d R. 341(a)). That rule expressly provides:

APPELLATE COURT OF ILLINOIS, FIFTH DISTRICT

527 N.E.2d 97, 172 Ill. App. 3d 718, 122 Ill. Dec. 725 1988.IL.1176

Appeal from the Circuit Court of Jefferson County; the Hon. Bruce Irish, Judge, presiding.

APPELLATE Judges:

PRESIDING JUSTICE HARRISON delivered the opinion of the court. CALVO, J., concurs. JUSTICE KARNS, Dissenting.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE HARRISON

Plaintiff, HPI Health Care Services, Inc. , appeals from that portion of a judgment of the circuit court of Jefferson County which dismissed counts IV, VI, VII, and VIII of its second amended complaint. The circuit court's judgment of dismissal was entered pursuant to section 2-615 of the Code of Civil Procedure (Ill. Rev. Stat. 1985, ch. 110, par. 2-615), and the question presented for our review is whether the aforementioned counts were substantially insufficient in law. For the reasons, which follow, we reverse and remand for further proceedings.

A motion to dismiss brought pursuant to section 2-615 of the Code of Civil Procedure (Ill. Rev. Stat. 1985, ch. 110, par. 2-615) attacks only the legal sufficiency of the complaint. (Longust v. Peabody Coal Co. (1986), 151 Ill. App. 3d 754, 756, 502 N.E.2d 1096, 1097.) A complaint may survive a motion to dismiss if the facts alleged state a cause of action and the complaint "reasonably informs the opposite party of the nature of the claim . . . which he or she is called upon to meet." (Glazewski v. Coronet Insurance Co. (1985), 108 Ill. 2d 243, 249, 483 N.E.2d 1263, 1265-66, quoting Ill. Rev. Stat. 1983, ch. 110, par. 2-612(b).) In assessing the sufficiency of a complaint, the court must accept all facts well pleaded as true and draw all reasonable inferences therefrom in favor of the nonmoving party. (Prudential Insurance Co. of America v. Van Matre (1987), 158 Ill. App. 3d 298, 301, 511 N.E.2d 740, 742.) A complaint should not be dismissed under section 2-615 for failure to state a cause of action or for insufficiency at law unless, clearly, no set of facts could be proven under the pleadings which would entitle the plaintiff to relief. Iverson v. Scholl, Inc. (1985), 136 Ill. App. 3d 962, 965, 483 N.E.2d 893, 896.

According to plaintiff's second amended complaint, defendant Mt. Vernon Hospital, Inc. (Mt. Vernon Hospital), entered into a lease or financing agreement with Jefferson County Health Facilities Authority, Inc. (Jefferson County), on or about July 1, 1980, pursuant to which Jefferson County agreed to lease a combined hospital-nursing home facility in Mt. Vernon, Illinois, to defendant Mt. Vernon Hospital. To finance the acquisition, renovation, and conversion of the hospital-nursing home facility by defendant Mt. Vernon Hospital, Jefferson County issued bonds. Defendant Centerre Trust Company of St. Louis (Centerre) was the trustee of those bonds under an "Indenture Mortgage and Deed of Trust" dated July 1, 1980 (the Indenture). Under the terms of the Indenture, all rental payments made by defendant Mt. Vernon Hospital pursuant to the financing agreement with Jefferson County were to be remitted directly to defendant Centerre for the account of Jefferson County, deposited in a trust fund designated "Jefferson County Health Facilities Authority, Inc. (Mt. Vernon Hospital, Inc.) Bond Fund for First Mortgage Medical Facilities Revenue Bonds" and used "to pay the principal of, premium, if any, and interest on the Bonds."

On or about August 1, 1980, defendant Mt. Vernon Hospital entered into a contract with defendant Hospital Management Associates, Inc. . Under that contract HMA agreed to provide management services for the hospital and, among other things, to

"deposit in the Hospital's respective bank accounts . . . all receipts and monies arising from the operation of the Hospital or otherwise received by HMA for and on behalf of the Hospital . . . and shall disburse and pay the same from said accounts on behalf and in the name of the Hospital . . . in such amounts and at such times as the same are required. HMA shall be permitted to draw these funds only to pay the reasonably necessary expenses of the operation of the Hospital. HMA shall be responsible for the payment, from [Mt. Vernon Hospital's] funds, before the payment of any other obligation of the Hospital, of such payments as are required to be made under the Lease and the Indenture, and all other contractual obligations, entered into with respect to the Bonds, in such amounts and at such times as the same are required."

On or about January 7, 1981, defendant Mt. Vernon Hospital entered into a "Pharmaceutical Services Agreement" with plaintiff under which plaintiff was to provide pharmaceutical services and supplies for the operation of the hospital. One of the signatories to the agreement was Edward L. Holley, the hospital administrator, who was an agent and employee of defendant HMA. The hospital opened for business shortly thereafter, and plaintiff began providing the pharmaceutical goods and services required by its agreement with the hospital.

The complaint suggests that the hospital began experiencing serious financial difficulties during the months which followed. On or about October 1, 1981, defendant Centerre contacted an individual named Michael A. Alexander and requested that he assume the positions of chairman of the board and trustee on the board of trustees of the hospital. Alexander accepted those positions. Thereafter, a new management company was retained to replace HMA in the operation of the hospital. HMA's management obligations were ultimately assumed by defendants National Medical Health Care Services, Inc., and National Medical Enterprises, Inc. (collectively, National Medical), pursuant to an agreement executed on or about July 1, 1982. The defendant hospital's agreement with National Medical provided, among other things, that

"[in] accordance with policies to be established by the Hospital, [National Medical] shall deposit all receipts and money arising from the operation of the facility or otherwise received by [National Medical] on behalf of Hospital, and shall make disbursements from the accounts on behalf of Hospital and facility in such amounts and at such times as the same are required. Signatories and approvals as to the amounts on all checks shall be in accordance with the duly adopted policy of Hospital . . .."

The contract further provided that "[the] parties [acknowledged] that the cooperation of the Trustee is essential to the financial viability of the facility."

Plaintiff continued to provide pharmaceutical goods and services to defendant Mt. Vernon Hospital under the terms of its original agreement even after the management companies changed. These goods and services were, in turn, resold by the hospital to its patients. Plaintiff, however, never received one cent in payment. Instead, all revenues generated by the hospital, including the revenues from the resale of goods and services provided by plaintiff to the hospital's patients, were paid over by defendants HMA and National Medical to defendant Centerre (pursuant to the terms of the indenture and financing agreements) or to the hospital's other creditors. When the hospital's debt to plaintiff reached nearly $1 million, this litigation commenced.

Plaintiff's second amended complaint contained nine counts. Count I sought recovery against defendant Mt. Vernon Hospital for breach of the January 7, 1981, pharmaceutical services agreement. Count II sought recovery from defendant HMA based on negligence. Counts III and V were directed, respectively, at HMA and National Medical and sought recovery for breach of contract based on a third-party beneficiary theory. Counts IV and VI directed, respectively, against HMA and National Medical,

On May 4, 1987, the circuit court entered a default judgment in favor of plaintiff and against defendant Mt. Vernon Hospital on count I of the second amended complaint in the amount of $1,691,792.04. The following day, May 5, 1987, the circuit court entered an order dismissing all of the remaining counts of the second amended complaint. That order was entered based on motions to dismiss which had previously been filed by defendants HMA, National Medical, and Centerre. Although not all of those motions specified the statutory provision under which they were brought, they each argued that the complaint failed to state a cause of action. That is a matter properly raised under section 2-615 of the Code of Civil Procedure (Ill. Rev. Stat. 1985, ch. 110, par. 2-615) (Longust v. Peabody Coal Co. (1986), 151 Ill. App. 3d 754, 756, 502 N.E.2d 1096, 1097), and there seems to be no serious dispute that the circuit court's dismissal order was premised upon that provision. Rather than seek to amend its complaint again, plaintiff elected to stand on its pleadings. This appeal followed.

"Unless authorized by order of the reviewing court or a Judge thereof, the appellant's brief and the appellee's brief, excluding only those matters required by Rule 342(a) to be appended thereto, shall each be limited to 50 pages if printed, or 75 pages if not printed . . .." 113 Ill. 2d R. 341(a).

Centerre and National Medical have each submitted briefs which are not printed, but their briefs are substantially longer than the 75 pages permitted. In each case, the excess text consists of documents from the record which have been appended as exhibits. The brief submitted on behalf of defendant Centerre, which was prepared by the St. Louis, Missouri, law firm of Lewis & Rice, contains no fewer than 10 such exhibits. With these exhibits, Centerre's brief appears to be slightly more than 50% as long as the entire common law record itself.

Neither Centerre nor National Medical was given leave by this court or by any Judge of this court to file a brief longer than Supreme Court Rule 341 (113 Ill. 2d R. 341) permits, and, as appellees, they cannot justify inclusion of the excess materials based on Supreme Court Rule 342(a), which concerns those matters which must be included as an appendix to the appellant's brief. Apparently, Centerre and National Medical have appended these additional exhibits to their briefs because they feel that the record which has been prepared and transmitted to this court is incomplete. We note, however, that neither party has ever moved to supplement the record, and a motion to strike the record on appeal for failure to comply with Supreme Court Rule 321 (107 Ill. 2d R. 321) was previously denied by this court.

The exhibits submitted by defendant Centerre are objectionable for another reason. As we have indicated, this appeal is limited solely to the question of a legal sufficiency of plaintiff's second amended complaint. With the exception of the pharmaceutical services agreement between plaintiff and defendant Mt. Vernon Hospital, which was attached to that complaint, the exhibits submitted by Centerre have no possible bearing on this issue. Those exhibits include such matters as earlier versions of the complaint, interrogatories and answers to interrogatories, the cover pages from two depositions, and certain documentary evidence. Putting aside the question of page limitations, such materials have no proper place on this appeal. In our view, they merely illustrate a basic principle which Centerre has apparently failed to comprehend, namely, that a defendant cannot prevail on a motion to dismiss by adducing evidence which merely negates the factual allegations on which the plaintiff's claim is based. If Centerre believed that plaintiff here could not prove its factual allegations, that no genuine issue of material fact existed, and that it was entitled to judgment as a matter of law, then what it should have filed is a motion for summary judgment (see Ill. Rev. Stat. 1985, ch. 110, par. 2-1005), not a motion to dismiss for failure to state a cause of action. See Longust v. Peabody Coal Co. (1986), 151 Ill. App. 3d 754, 757, 502 N.E.2d 1096, 1098.

Disregard for Supreme Court Rules 341 and 342 dilutes the effectiveness of an appeal and cannot be condoned. (See Curtis v. Birch (1983), 114 Ill. App. 3d 127, 132, 448 N.E.2d 591, 595.) While the plaintiff in this case has allowed the violations by Centerre and National Medical to pass without objection, counsel are admonished that future violations may result in their briefs being stricken by this court on its own motion.

Centerre and National Medical are not the only parties to this proceeding guilty of making a procedural error. Plaintiff has also made a mistake, although it is a far less extreme one, and this brings us to the second preliminary matter we must consider before addressing the appeal on its merits. Plaintiff's notice of appeal provides:

"HPI HEALTH CARE SERVICES, INC. hereby appeals to the Appellate Court of Illinois for the Fifth Judicial District, from the Order entered by the Circuit Court of the Second Judicial Circuit, Jefferson County, Illinois, in which the Court dismissed Counts II through IX of plaintiff's Second Amended Complaint.

HPI HEALTH CARE SERVICES, INC. prays that the Circuit Court be reversed, that the Order of the Court entered May 4, 1987, be vacated, and that the cause be remanded with instructions to the Circuit Court that the defendant be ordered to answer the Second Amended Complaint filed by HPI HEALTH CARE SERVICES, INC."

This notice is not correct. The circuit court's order of May 4, 1987, concerned the default judgment entered in favor of plaintiff and against defendant Mt. Vernon Hospital, not the order dismissing counts II through IX of the second amended complaint, which is the subject of this appeal. That ...


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