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09/27/89 Hpi Health Care Services, v. Mt. Vernon Hospital

September 27, 1989

HPI HEALTH CARE SERVICES, INC., APPELLEE

v.

MT. VERNON HOSPITAL, INC., ET AL. (HOSPITAL MANAGEMENT ASSOCIATES, INC., APPELLANT). -- HPI HEALTH CARE SERVICES, INC., APPELLEE,

v.

MT. VERNON HOSPITAL, INC., ET AL.

HEALTH CARE SERVICES, INC., APPELLEE

v.

MT. VERNON HOSPITAL, INC., ET AL. (NATIONAL MEDICAL HEALTH CARE



Before engaging in a detailed recitation of the specific facts alleged in HPI's complaint, we find it appropriate to first briefly summarize the factual background in this case. Mt. Vernon operated a hospital in Jefferson County, Illinois. Centerre is a trust company which acted as the trustee for a series of municipal bonds which had been issued to finance the facility used by Mt. Vernon as its hospital, and to whom Mt. Vernon made rental payments for its use of the hospital facility. Hospital Management and National Medical are hospital management companies which had been hired by Mt. Vernon to manage the hospital and, in particular, to collect payments owed to Mt. Vernon. From these collected funds, the management companies were to pay Mt. Vernon's creditors. HPI is a company that had a contract with Mt. Vernon to provide pharmaceutical goods and services for the hospital. This action was initiated by HPI because Mt. Vernon failed to pay HPI for HPI's provision of these pharmaceutical goods and services.

SUPREME COURT OF ILLINOIS

(Centerre Trust Company of St. Louis, Appellant). -- HPI

Services, Inc., et al., Appellants)

545 N.E.2d 672, 131 Ill. 2d 145, 137 Ill. Dec. 19 1989.IL.1513

Appeal from the Appellate Court for the Fifth District; heard in that court on appeal from the Circuit Court of Jefferson County, the Hon. Bruce Irish, Judge, 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

Appellee, HPI Health Care Services, Inc. , appealed from that portion of a judgment of the circuit court of Jefferson County which dismissed counts IV, VI, VII and VIII of HPI's second amended complaint pursuant to section 2 -- 615 of the Code of Civil Procedure (Ill. Rev. Stat. 1985, ch. 110, par. 2 -- 615) for failure to state a cause of action. In a separate aspect of the judgment which is not at issue here, the circuit court also entered a default judgment against Mt. Vernon Hospital, Inc. (Mt. Vernon), a now-defunct hospital. The appellate court reversed the trial court's dismissal of the four counts of the complaint and remanded. (172 Ill. App. 3d 718, 720.) Appellants, Hospital Management Associates, Inc. (Hospital Management), Centerre Trust Company of St. Louis (Centerre), and National Medical Health Care Services, Inc., and National Medical Enterprises, Inc. (collectively, National Medical), filed separate petitions for leave to appeal, which we granted and subsequently consolidated (107 Ill. 2d R. 315). Since the issue before us is whether the trial court should have dismissed certain counts of HPI's second amended complaint, we must regard all well-pleaded facts in the complaint, and all reasonable inferences which arise from them, as true and correct. Krasinski v. United Parcel Service, Inc. (1988), 124 Ill. 2d 483, 485-86.

The specific factual allegations in HPI's complaint are that on July 1, 1980, Jefferson County issued certain revenue bonds to finance the acquisition, renovation and conversion of a combined hospital/nursing-home facility. The trustee of the bonds under an "Indenture of Mortgage and Deed of Trust" (indenture) was the Centerre Trust Company of St. Louis. Around the same time, Mt. Vernon Hospital, Inc., entered into a financing agreement with Jefferson County whereby Mt. Vernon agreed to lease the hospital/nursing-home facility. Under the terms of the indenture, all rental payments made by Mt. Vernon for the facility were to be remitted directly to Centerre to be deposited into a trust fund and used to pay the principal of, and the premium and interest on, the bonds.

In August 1980, Mt. Vernon entered into an agreement with Hospital Management whereby Hospital Management agreed to provide management services for the hospital and to:

"deposit in the Hospital's respective bank accounts . . . all receipts and moneys arising from the operation of the Hospital or otherwise received by [Hospital Management] 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. [Hospital Management] shall be permitted to draw these funds only to pay the reasonably necessary expenses of the operation of the Hospital. [Hospital Management] shall be responsible for the payment, from [Mt. Vernon'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 January 7, 1981, Mt. Vernon and HPI entered into a pharmaceutical services agreement in which Mt. Vernon agreed to pay HPI for the provision of pharmaceutical goods and services. On July 1, 1982, National Medical entered into a contract with Mt. Vernon whereby it assumed Hospital Management's responsibilities as manager of the hospital. The contract between National Medical and Mt. Vernon provided:

"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."

Pursuant to the January 7, 1981, pharmaceutical services agreement, HPI provided Mt. Vernon with pharmaceutical goods and services for at least two years. Mt. Vernon, however, never paid HPI. Because of Mt. Vernon's failure to pay, HPI filed suit in the circuit court of Jefferson County. HPI's second amended complaint consisted of nine counts and named Mt. Vernon, Hospital Management, National Medical, and Centerre as defendants. Count I was a claim for breach of contract against Mt. Vernon. Count II was a negligence action against Hospital Management. Counts III and V sought damages under a third-party beneficiary theory from Hospital Management and National Medical for breach of contract. Count IX sought recovery from all four defendants for alleged violations of a Federal RICO statute. Counts IV, VI, VII and VIII, which are the subject of this appeal and which will be discussed in greater detail later, were as follows: counts IV and VI alleged that Hospital Management and National Medical intentionally interfered with the contract between HPI and Mt. Vernon; count VII sought recovery from Centerre based upon an unjust-enrichment theory; and count VIII sought damages from all four defendants for fraudulent misrepresentation.

Hospital Management, National Medical, and Centerre filed motions to dismiss counts II through IX of HPI's complaint pursuant to section 2-615 of the Code of Civil Procedure (Ill. Rev. Stat. 1985, ch. 110, par. 2-615) for failure to state a cause of action. After hearing argument, the circuit court took the motions under advisement. On May 3, 1987, the court entered a default judgment in favor of HPI against Mt. Vernon on count I of the second amended complaint in the amount of $1,691,792.04. The circuit court then granted defendants' motions to dismiss the remaining counts of the complaint. The appellate court, with one Justice Dissenting (172 Ill. App. 3d at 739 (Karns, J., Dissenting)), reversed the circuit court's dismissal of counts IV, VI, VII and VIII and remanded to the circuit court (172 Ill. App. 3d at

This court has never explicitly set out the elements of the tort of intentional interference with existing contract rights. However, it is generally recognized in Illinois that the elements of this tort are:

"'(1) the existence of a valid and enforceable contract between the plaintiff and another; (2) the defendant's awareness of this contractual relation; (3) the defendant's intentional and unjustified inducement of a breach of the contract; (4) a subsequent breach by the other, caused by the defendant's wrongful conduct; and (5) damages.'" Prudential Insurance Co. v. Van Matre (1987), 158 Ill. App. 3d 298, 304, quoting Belden Corp. v. InterNorth, Inc. (1980), 90 Ill. App. 3d 547, 551.

The specific allegations of counts IV and VI of HPI's complaint, which are essentially the same except that count IV is directed toward Hospital Management and count VI is directed toward National Medical, are that: (1) Hospital Management (count IV) and National Medical (count VI) had entered into contracts with Mt. Vernon to provide management

services for Mt. Vernon, and under the management services contracts, both management companies were obligated to deposit in Mt. Vernon's bank accounts all receipts and monies arising from the operation of the hospital, and to pay Mt. Vernon's creditors from those accounts; (2) there was a contract between HPI and Mt. Vernon whereby Mt. Vernon would pay HPI to supply pharmaceutical goods and services to Mt. Vernon, and HPI provided such goods and services to Mt. Vernon; (3) the management companies had knowledge of the pharmaceutical agreement between HPI and Mt. Vernon, and had knowledge that HPI had been providing the goods and services to Mt. Vernon; (4) the management companies intentionally paid Mt. Vernon's receipts and funds over to other creditors, and intentionally caused no payments due and owing under the pharmaceutical services agreement to be made to HPI; (5) the management companies' intentional decisions not to pay HPI were done "without legal justification and knowingly in violation of [HPI's] contractual right to said ...


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