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05/15/89 Raymond A. Gillilan Et Al. v. Trustees For Central

May 15, 1989





539 N.E.2d 303, 183 Ill. App. 3d 306, 131 Ill. Dec. 950 1989.IL.733

Appeal from the Circuit Court of Kane County; the Hon. James F. Quetsch, Judge, presiding.


JUSTICE INGLIS delivered the opinion of the court. UNVERZAGT, P.J., and WOODWARD, J., concur.


Plaintiffs, Raymond A. Gillilan, Bessie A. Gillilan, Fox Fields Racing Association, Inc., and North Aurora Raceway, Inc., appeal from an order dismissing their complaint against defendants, trustees for Central States, Southeast and Southwest Areas Pension Fund and the Equitable Life Assurance Society of the United States. The trial court granted defendants' motions to dismiss after concluding that the action was barred as the result of a prior release executed on behalf of Raymond Gillilan by a trustee in bankruptcy and on the basis of estoppel by judgment. Plaintiffs raise two issues on appeal: (1) whether a release executed by a trustee in bankruptcy for one party to an action bars the claims of other parties to the action who were not represented by the trustee and who were not named in the release; and (2) whether a judgment of dismissal entered pursuant to a settlement agreement executed by a trustee in bankruptcy for one party to an action bars the claims of other parties to the action who were not represented by the trustee and who were not named in the dismissal order. We affirm in part and reverse in part.

On August 31, 1978, plaintiffs Raymond and Bessie Gillilan purchased the beneficial interest in a land trust which held title to Aurora Downs, a/k/a Fox Fields, a horse racing track located in North Aurora, Illinois. Aurora Downs was originally owned by Marge Everett, who acquired and developed the property with a $1,800,000 loan from defendant Trustees of the Central States, Southeast and Southwest Areas Pension Fund (Trustees). The Trustees were administrators of a pension fund operated on behalf of the International Brotherhood of Teamsters. The Trustees' loan was secured by a first mortgage on the property. Everett later gifted the property, subject to the Trustees' first mortgage, to Knox College. Knox College then sold the property to investors known as the East-West group, and, in connection with that sale, obtained a second mortgage on the property. The Gillilans purchased Aurora Downs from the East-West group subject to the first mortgage held by the Trustees and the second mortgage held by Knox College. At that time, the mortgages were in default, and the property was in a substantial state of disrepair.

In early 1979, the Gillilans entered into negotiations with defendant Equitable Life Assurance Society of the United States (Equitable) to restructure the Trustees' loan and mortgage. Equitable acted as attorney in fact for the Trustees and was responsible for the management of the pension fund's assets. In June 1979, Equitable, acting on behalf of the Trustees, agreed to defer all delinquent and future principal and interest payments due under the Trustees' loan until December 1, 1981, at which time the loan would be restructured. The agreement was contingent upon the Gillilans selling their interests in a California racing entity and investing those proceeds in the renovation of Aurora Downs. The Gillilans accomplished the contemplated sales and began renovations at Aurora Downs. Equitable subsequently wrote Raymond Gillilan and stated that the deferment program would go into effect contingent upon the continued renovation and maintenance of the property, maintenance of real estate taxes and insurance premiums, and Knox College restructuring its second mortgage.

While the property was being renovated, the Gillilans formed two corporations, plaintiffs, North Aurora Raceway, Inc. , and Fox Fields Racing Association, Inc. . Each of the Gillilans owned a one-half interest in the stock of NAR. The record does not indicate the details of ownership in FFRA. Through NAR, the Gillilans employed approximately 45 persons and conducted various events at the track unrelated to horse racing. In September 1980, renovation of the track was completed, and FFRA was awarded 26 racing dates for the 1981 racing season.

According to plaintiffs, shortly after FFRA was awarded its racing dates, the Gillilans were contacted by representatives of various labor unions who demanded that the Gillilans discharge all of their nonunion employees and hire only union members to work at the track. The Gillilans refused to accede to the unions' demands and were subsequently threatened with economic action. The unions' threats of economic action took the form of demonstrations and interference with the Gillilans' operation of the track. On the first day the track was open for racing and on each racing date thereafter, numerous representatives of the unions blocked access to the track entrance and allegedly threatened plaintiffs' employees, suppliers, and patrons. FFRA obtained a temporary restraining order and preliminary injunction against the unions; however, the activities continued, and the Gillilans suspended racing at the track. In addition to disrupting the operation of the track, the unions also contacted the Trustees and Equitable and allegedly induced them to breach their agreement with the Gillilans and institute foreclosure proceedings.

On April 9, 1981, the Trustees exercised their option to accelerate payment of the principal and interest due on the note. The Trustees subsequently declared a default and filed suit to foreclose on the mortgage against Raymond Gillilan, NAR, and FFRA among others. Raymond Gillilan, NAR, and FFRA filed a counterclaim against the Trustees and a third-party complaint against Equitable and the unions that were involved in the demonstrations at the track. In their counterclaim and third-party complaint, Raymond Gillilan, NAR, and FFRA alleged that the Trustees and Equitable breached their agreement to restructure the loan and, further, that the Trustees, Equitable, and the unions conspired to tortiously interfere with the operation of Aurora Downs by, among other things, engaging in acts of violence and instituting the foreclosure proceeding. These claims remained pending for three years during which time the Gillilans continued in possession of the track.

On February 14, 1984, Raymond Gillilan filed for bankruptcy, and the foreclosure proceedings were automatically stayed. Allan J. DeMars was appointed trustee of the bankruptcy estate of Raymond Gillilan. On September 24, 1984, DeMars and the Trustees entered into an agreed order in the bankruptcy court. Pursuant to that order, the chapter 11 proceeding was converted into a chapter 7 proceeding for involuntary liquidation, the Trustees were granted relief from the automatic stay, and DeMars was authorized to actively market the property. The Trustees subsequently entered into negotiations with DeMars to settle the claims which had been asserted against them in the foreclosure proceeding.

On April 9, 1985, the bankruptcy court entered an order approving a "compromise and settlement of claims asserted by Raymond Gillilan and various entities controlled by him as against the [Trustees] and . . . [Equitable]." That order authorized DeMars to proceed with all steps necessary to implement the settlement. On April 26, 1985, Gillilan appealed the order of the bankruptcy court, challenging the fairness of the settlement agreement and further asserting that there was a conflict of interest precluding DeMars from entering into the agreement. In the interim, DeMars began carrying out the terms of the settlement agreement.

On April 12, 1985, pursuant to the settlement agreement, the Trustees and DeMars entered into a "STIPULATION TO COMPROMISE AND DISMISS CLAIMS." In that stipulation, DeMars, acting "as Trustee for Debtor Raymond A. Gillilan and on behalf of . . . Raymond A. Gillilan d/b/a Fox Fields (but not on behalf of Fox Fields Racing Association Inc., an Illinois corporation); [and] North Aurora, Raceway, Inc." agreed to (1) file his appearance in the foreclosure proceeding as trustee for the estate of Raymond A. Gillilan; (2) withdraw the answer to the foreclosure complaint and file a new answer admitting the existence of a default; (3) dismiss with prejudice the counterclaim and third-party complaint against the Trustees and Equitable; (4) not oppose a motion for entry of judgment and decree of foreclosure and sale; and (5) execute a release on behalf of Raymond Gillilan and NAR releasing all claims against the Trustees and Equitable relating to the Aurora Downs property. On April 16, 1985, DeMars, acting on behalf of "the Bankruptcy Estate of Raymond A. Gillilan," and NAR, an "[entity] represented by said estate," executed a stipulation to dismiss the counterclaim against the Trustees and third-party complaint against Equitable. Subsequently, DeMars, again acting on behalf of Raymond Gillilan and NAR, executed and delivered a "GENERAL AND SPECIAL RELEASE" to the Trustees and Equitable releasing them from all liability relating to the ...

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