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03/29/89 Gerill Corporation Et Al., v. Jack L. Hargrove Builders

March 29, 1989

GERILL CORPORATION ET AL., APPELLANTS AND CROSS-APPELLEES

v.

JACK L. HARGROVE BUILDERS, INC., ET AL., APPELLEES AND CROSS-APPELLANTS



SUPREME COURT OF ILLINOIS

538 N.E.2d 530, 128 Ill. 2d 179, 131 Ill. Dec. 155 1989.IL.409

Appeal from the Appellate Court for the Second District; heard in that court on appeal from the Circuit Court of Du Page County, the Hon. Helen C. Kinney and Hon. John S. Teschner, Judges, presiding.

APPELLATE Judges:

JUSTICE CLARK delivered the opinion of the court. WARD and CALVO, JJ., took no part in the consideration or decision of this case.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE CLARK

This appeal arises out of a judgment of the circuit court of Du Page County against appellees and cross-appellants, Jack L. Hargrove Builders, Inc., and its president and majority shareholder, Jack L. Hargrove (hereinafter referred to collectively as Hargrove), awarding damages to appellee John F. Rosch for Hargrove's fraudulent misrepresentations. Following the judgment, the circuit court dismissed Hargrove's third-party complaint, which sought contribution under the Illinois Contribution Among Joint Tortfeasors Act (the Contribution Act) (Ill. Rev. Stat. 1987, ch. 70, par. 301 et seq.) from appellants and cross-appellees, Gerill Corporation and its president and majority shareholder, Gerald A. Heinz. The court dismissed the complaint, holding that intentional tortfeasors are not entitled to contribution under the Contribution Act. The appellate court affirmed the circuit court's decision finding Hargrove liable for fraudulent misrepresentation, but reversed the dismissal of Hargrove's third-party complaint, holding that intentional tortfeasors can receive contribution under the Contribution Act. 165 Ill. App. 3d 1160 (unpublished order under Supreme Court Rule 23).

Gerill and Heinz subsequently filed a petition for leave to appeal (No. 66788) to challenge the appellate court's holding that intentional tortfeasors are entitled to contribution under the Contribution Act. Hargrove filed a separate petition for leave to appeal (No. 67035) raising questions, which we set out in detail below, about a number of the circuit court's evidentiary and procedural findings. We granted and consolidated both petitions. (107 Ill. 2d R. 315.) As discussed below, we reverse the appellate court's holding with respect to the Contribution Act and affirm its decision upholding the rest of the circuit court's findings.

FACTUAL BACKGROUND

In 1976, Heinz and Hargrove orally agreed that their corporations, Gerill Corporation and Jack L. Hargrove Builders, Inc., would form a joint venture to develop approximately 110 acres of land owned by Gerill in Woodridge, Illinois (the Woodridge properties). Gerill contributed the land and Hargrove managed the development and construction on the land, maintained the joint venture's records and books, and handled its financial affairs. Hargrove also obtained a $352,000 loan in 1978 from the Concordia Federal Savings and Loan Association (the Concordia loan) and then loaned $290,000 to the joint venture to pay off a mortgage held by the Glen Ellyn Savings & Loan Association on a parcel of land in the Woodridge properties.

In December 1980, Hargrove decided that due to the state of the economy at that time, it was unfeasible to continue developing the Woodridge properties as a joint venture. He thus proposed to Heinz that one partner buy out the other's interest in the joint venture. Heinz asked Hargrove to prepare a list of the joint venture's outstanding loans and open invoices, which Hargrove did in January 1981 by giving Heinz a 19-page handwritten list.

Heinz realized that he did not have enough money to purchase Hargrove's interest and so he then approached John Rosch, the president of the Glen Ellyn Savings & Loan Association and an attorney who had represented Gerill and Heinz, with the proposition that Rosch purchase Hargrove's interest in the joint venture. There is a conflict in the evidence as to whether it was Heinz's or Hargrove's idea to approach Rosch. Heinz gave Rosch the 19-page list of loans and open invoices and told him that it had been prepared by Hargrove.

Rosch, Heinz and Hargrove held a meeting on February 7, 1981, after which Rosch prepared a draft contract that Hargrove subsequently refused to sign. A new contract was then prepared (the evidence is unclear as to by whom) which provided that Rosch would purchase Hargrove's interest for $200,000. The contract specified:

"hat to the best of Jack L. Hargrove Builders, Inc. and Jack L. Hargrove individually's knowledge, they have advised the Gerill Corporation, Gerald A. Heinz and John F. Rosch of any and all open invoices and any and all liabilities in the form of monies due and owing on the properties."

Furthermore, the contract provided that Rosch, Gerill and Heinz would "assume all liabilities and responsibilities for the Woodridge properties and . . . hold [Hargrove] harmless and indemnify same from any and all debts, liabilities and claims of every kind and nature which may arise in reference to said Woodridge properties."

On March 1, 1981, the parties met to sign the contract. Rosch and Heinz testified that Rosch asked Hargrove if the 19 handwritten pages "contain[ed] all of the debts that relate to the Woodridge properties," to which Hargrove replied "Yes, they do." Hargrove denies that Rosch asked him any such question. The parties then signed the contract and on the next day Rosch paid Hargrove the $200,000.

Rosch hired an accountant, Daniel Gilmartin, to review the joint venture's books and records and to assist in their transfer from Hargrove to Rosch. After several months, Gilmartin and Rosch discovered that the joint venture's liabilities were greater than those included in the 19-page handwritten list that had been prepared by Hargrove. A number of liabilities relating to the Woodridge properties had either been omitted from the list or misstated.

PROCEDURAL HISTORY

On November 15, 1982, Rosch, Gerill and Heinz filed a four-count complaint against Hargrove in the circuit court of Du Page County seeking an accounting from Hargrove for Gerill and Heinz, a declaratory judgment for Rosch, and actual and punitive damages for Rosch, Gerill and Heinz from Hargrove for fraudulent misrepresentation of the joint venture's liabilities. Following various motions and amendments, Rosch, Gerill and Heinz filed two separate complaints: Rosch alleging fraudulent misrepresentation and Gerill and Heinz seeking an accounting. The accounting claim has since been severed from the rest of the case.

On November 18, 1982, Hargrove filed an eight (subsequently amended to nine) count complaint against Rosch, Gerill, Heinz, the Trust Company of Glen Ellyn, and the Beverly Bank in the circuit court of Cook County (both the Trust Company and the Beverly Bank were eventually dismissed from the case). The complaint was transferred to the circuit court of Du Page County, where it was consolidated with the case previously filed by Rosch, Gerill and Heinz. Soon thereafter, the circuit court dismissed six of the complaint's nine counts. Hargrove then filed a 10-count second amended complaint on September 6, 1983.

The first three counts of Hargrove's second amended complaint involved Hargrove's claim that under the March 1, 1981, contract, which effectuated the transfer of Hargrove's interest in the joint venture, Rosch, Gerill and Heinz were obligated to pay off the $352,000 loan which Hargrove had taken out from the Concordia Federal Savings and Loan Association. In counts I and II, Hargrove sought injunctive relief to require Rosch, Gerill and Heinz to continue making payments on the loan to prevent a mortgage foreclosure action from being brought against Hargrove during the proceedings and an order for specific performance requiring them to assume the mortgage or provide an irrevocable letter of credit for the loan at Concordia. Count III sought the same relief based upon a claimed "Conspiracy to Defraud." Count IV sought to prevent or rescind certain allegedly fraudulent conveyances by Rosch, Gerill and Heinz of their interest in the Woodridge properties without sufficient consideration "contrary to the rights of Hargrove . . . and contrary to the obligations of Heinz to Hargrove." Counts V and VI sought $30,000 in damages based upon breach of contract and promissory estoppel arguments arising out of an alleged default by Rosch, Gerill and Heinz in repaying an alleged $50,000 loan made to them by Hargrove. Counts VII and VIII were also based upon breach and estoppel arguments

On January 31, 1984, Hargrove brought a motion for change of venue based upon the alleged prejudice of the circuit court Judge in the case. Because it was brought well after substantial issues had been ruled upon, such as the dismissal of Hargrove's first amended complaint, the Judge did not grant the motion as a matter of right. He did, however, assign the motion to another Judge of the circuit court for a hearing to determine whether he, the original Judge, was prejudiced. After extensive argument by both parties, it was concluded that there was no prejudice against Hargrove; the motion was denied.

Rosch, Gerill and Heinz then filed a motion to dismiss most of Hargrove's second amended complaint, which the Judge granted, dismissing counts I, II, III, IV, VII, VIII, IX, and X of the complaint. In a subsequent order, the Judge made the dismissal of counts I, II, III, IV, IX and X with prejudice and Hargrove was granted leave to amend counts VII and VIII. Hargrove then filed another motion for change of venue,

alleging again that the Judge was prejudiced. This time, the motion was granted and the case was transferred to a different Judge of the circuit court of Du Page County.

On February 7, 1985, Hargrove sought leave to file an 11-count third amended complaint. Counts I through X of the complaint were very similar to counts I through X of Hargrove's second amended complaint. Count XI was a new claim for "Contractual Indemnification" arising out of the $352,000 Concordia loan. However, the Judge would not grant Hargrove leave to file except for counts V through VIII. Hargrove was denied leave to file counts I through IV, IX and X because those counts had previously been dismissed with prejudice by the original Judge in the case. Count XI of the third amended complaint was denied with leave to replead because the new Judge in the case found it to be illogical on its face. In a later order, Hargrove was granted leave to file counts I and IX against Rosch because the original Judge's order had dismissed those counts only as to Gerill and Heinz, not as to Rosch.

Soon thereafter, Hargrove repled a count for contractual indemnification by adding a count XII to its third amended complaint. On September 19, 1985, Hargrove's counts I, VI and IX were dismissed without leave to replead, and count XII was dismissed with leave to replead one final time for breach of contract arising out of the ...


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