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11/30/88 Jacob E. Farkas Et Al., v. Jerome H. Howard Et Al.

November 30, 1988

JACOB E. FARKAS ET AL., PLAINTIFFS-APPELLANTS

v.

JEROME H. HOWARD ET AL., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, THIRD DIVISION

531 N.E.2d 1025, 176 Ill. App. 3d 1005, 126 Ill. Dec. 398 1988.IL.1720

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

APPELLATE Judges:

JUSTICE FREEMAN delivered the opinion of the court. WHITE, P.J., and RIZZI, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE FREEMAN

Plaintiffs, Jacob E. Farkas and Ronald A. Horwitz, filed their original complaint for injunctive and other relief against several defendants in the circuit court of Cook County on April 14, 1978. On April 7, 1988, the trial court entered judgment on the pleadings on count I of plaintiffs' third amended complaint in favor of defendant Talman Home Federal Savings & Loan Association of Illinois (Talman), the successor in interest to defendant Home Federal Savings & Loan Association of Chicago (Home). Plaintiffs appeal.

Count I of the original complaint alleged, inter alia, that plaintiffs and defendant Jerome H. Howard were general partners in a partnership owning a nursing home in Homewood, Illinois, known as the Homewood Rehabilitation Center (Center), that Howard had misappropriated the Center property and transferred it to Health Care Ventures Ltd., a partnership between Howard and the other named individual defendants. Count I also alleged that Home was the mortgagee of the Center property but, like the remainder of the complaint, contained no other allegations against Home. Count II alleged certain breaches by Howard of a contract entered into on September 8, 1977, for the purchase of plaintiffs' interests in the Center. Count III alleged that, to induce plaintiffs to enter the contract, Howard misrepresented that certain individual defendants were not members of the investor group which he represented. It also alleged that Howard transferred all or part ownership of the Center to those investors as partners in Health Care Ventures Ltd. or as shareholders in Suburban Health Care Corporation, formed by Howard to operate the Center. Plaintiffs prayed, inter alia, for a rescission of the contract with Howard and that all defendants be enjoined from alienating their interests in the Center property. Neither the first amended complaint, filed on May 11, 1978, nor the second amended complaint, filed April 27, 1982, contained any new allegations against Home.

Plaintiffs filed their third amended complaint on May 5, 1986. Count I thereof contained new allegations against Home. In brief, plaintiffs alleged that Home had conspired with Howard in (a) the recasting of the mortgage on the Center property, and (b) its assumption by Howard and defendants Richard Wanland, Richard Johnson and Ralph Edgar, to the exclusion of plaintiff Farkas. Also for the first time, plaintiffs sought monetary damages from Home. However, the counts seeking such damages were dismissed pursuant to Talman's motion under section 2-615 of the Civil Practice Law (Ill. Rev. Stat. 1985, ch. 110, par. 2-615).

Talman then filed an affirmative defense to count I of the third amended complaint. Talman asserted that the acts of Home complained of therein occurred on or about July through September 1977. As such, it asserted, plaintiff's cause of action based thereon was barred by the "catchall" five-year statute of limitations. (Ill. Rev. Stat. 1985, ch. 110, par. 13-205.) Thereafter, Talman filed a motion for judgment on the pleadings under section 2-619 of the Civil Practice Law (Ill. Rev. Stat. 1985, ch. 110, par. 2-619) based on its affirmative defense, which the trial court granted.

On appeal, plaintiffs first contend that the third amended complaint grew out of the same transaction or occurrence set up in their original complaint (Zeh v. Wheeler (1986), 111 Ill. 2d 266, 489 N.E.2d 1342), viz., plaintiffs' dealings with defendants Howard, Wanland, Johnson and Edgar regarding the Center and Home's/Talman's mortgage on the Center property. As such, they conclude that the third amended complaint was properly filed under section 2-616(b) of the Civil Practice Law. Ill. Rev. Stat. 1985, ch. 110, par. 2-101 et seq.

Section 2-616(b) provides that a cause of action set up in an amended pleading is not barred by a statute of limitations if: (a) the limitations period had not expired when the original pleading was filed; and (b) it appears from the original and amended pleadings that the cause of action asserted in the amended pleading grew out of the same transaction or occurrence set up in the original pleading. If those requirements are met, the amended pleading relates back to the date of filing of the original pleading. Ill. Rev. Stat. 1985, ch. 110, par. 2-616(b).

As one of their affirmative defenses to the first amended complaint, defendants asserted that Home would not release Howard, Wanland, Johnson and Edgar from the "obligation they assumed pursuant" to plaintiffs' contract with Howard and would not accept plaintiffs' substitution on that obligation. Plaintiffs assert that this affirmative defense reveals Home's, and thus Talman's, awareness of: (1) the fact that plaintiffs were seeking rescission of the contract with Howard; (2) the consequences to Home and Talman if a rescission were granted, i.e., release of Howard, Wanland, Johnson and Edgar as the mortgage debtors and substitution of plaintiffs as such; and (3) the fact that plaintiffs had to prove actual or constructive fraud, breach of a confidential relationship or misrepresentation to obtain a rescission. (Roberts v. Sears, Roebuck & Co. (N.D. Ill. 1979), 471 F. Supp. 372, vacated on other grounds (7th Cir. 1980), 617 F.2d 460, cert. denied (1980), 449 U.S. 975, 66 L. Ed. 2d 237, 101 S. Ct. 386.) They therefore conclude that the allegations of the third amended complaint concern only one transaction and, thus, that the new allegations against Talman therein arose out of the same transaction or occurrence as the first amended complaint, which, like the original complaint, was filed within the five-year limitations period.

We disagree with plaintiffs that the transactions or occurrences set up in the complaints preceding the third amended complaint were their dealings with defendant Howard and Home's/Talman's mortgage on the Center property.

Beyond alleging that Home was the mortgagee of the Center property, no prior count I contained any allegations whatsoever with respect to the mortgage, its recasting by Home or its assumption by anyone. Plaintiffs' contract with Howard provided, with respect to the Home mortgage, only that Howard would secure plaintiff Farkas' release from the mortgage, the guarantee thereof and a mortgage foreclosure action filed by Home. No prior count II alleged that Howard had breached these provisions. Lastly, each prior count III set up only the two transactions we previously noted in the original complaint. Significantly, before the third amended complaint, plaintiffs never alleged that anyone had assumed, had attempted to or was attempting to assume the Home mortgage on the Center property as part of their dealings with Howard ...


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