this was so. Golden, on the other hand, contends that he raised allegations of independent wrongdoing by appellees. Count I alleged that Coldwell Banker committed fraud "with the knowing assistance of Barenborg and Salomon Brothers." Plaintiff's Complaint, P 13. Count I also alleged that appellees "knew . . . material facts" that Coldwell Banker was under a duty to disclose to Golden, Plaintiff's Complaint, P 15; and that appellees "act[ed] in concert with" Coldwell Banker, Plaintiff's Complaint, P 17. Counts II through IV reasserted these same allegations. Golden offered no further facts or allegations to show that either Barenborg or Solomon Brothers acted unlawfully independently of Coldwell Banker. Therefore, Golden has not established a genuine issue of material fact concerning whether or not appellees were charged only with vicarious liability.
The court agrees with appellees and the Magistrate Judge that Counts I through IV are based only on vicarious liability.
2. Existence of Agency Relationship
Golden argued to the Magistrate Judge and asserts in his briefs to this court that a principal-agent relationship existed between appellees and Coldwell Banker. Appellees assert that no agency relationship existed between them and Coldwell Banker but, for purposes of the res judicata argument, assume that such a relationship exists.
In reaching her conclusion that res judicata barred Golden's lawsuit against appellees, the Magistrate Judge assumed for purposes of argument that a principal-agent relationship existed between appellees and Coldwell Banker. But the existence of an agency relationship is not something to be presumed. It is a question of fact to be decided by the court or jury based on an examination of the situation of the parties, their acts, and other relevant information. See, e.g., Phipps v. Cohn, 139 Ill. App. 3d 210, 212, 487 N.E.2d 428, 430, 93 Ill. Dec. 761 (5th Dist. 1985); Sherman v. Field Clinic, 74 Ill. App. 3d 21, 25, 392 N.E.2d 154, 157-58, 29 Ill. Dec. 597 (1st Dist. 1979).
This case, however, is not dependent upon the existence or nonexistence of an agency relationship between appellees and Coldwell Banker. Either possibility (that is, agency relationship or no agency relationship) produces the same outcome -- that Golden may not bring this lawsuit against appellees.
a. Agency relationship exists
Golden argues that Coldwell Banker acted as the agent of appellees. Appellees respond that even if an agency relationship existed between them and Coldwell Banker, the settlement agreement releasing Coldwell Banker from further liability operated as a release of appellees, as principals.
The release in the settlement agreement nowhere mentioned appellees by name or stated that the released parties included any principals of Coldwell Banker. See Golden v. Barenborg, 1992 U.S. Dist. LEXIS 10125, No. 91 C 7359, at 5-6 (N.D. Ill. July 6, 1992) (Order of Magistrate Judge Bucklo granting defendants' motion for summary judgment). Therefore, appellees were not explicitly released from liability to Golden by the settlement agreement between Coldwell Banker and Golden. Appellees correctly note, however, that as a general rule, a covenant not to sue the agent releases the principal from liability. Holcomb v. Flavin, 34 Ill. 2d 558, 565, 216 N.E.2d 811, 815 (1966).
Golden counters by raising a creative argument regarding Illinois law on implied indemnity.
Golden bases his argument on his belief that Illinois' Joint Tortfeasor Contribution Act ("Contribution Act"), 740 ILCS 100/0.01 to 100/5 (formerly ILL. REV. STAT. 1991, ch. 70, PP 300-05), abolished the Illinois common law of implied indemnity, under which an agent must indemnify its principal if the principal is sued for the agent's acts under a theory of vicarious liability. According to Illinois law, if the concept of implied indemnity exists, it is unfair to allow a third person to sue a principal after collecting from and releasing the agent, because then the agent would be subject to double liability. See Bristow v. Griffitts Construction Co., 140 Ill. App. 3d 191, 198, 488 N.E.2d 332, 338, 94 Ill. Dec. 506 (4th Dist. 1986). Golden contends, however, that implied indemnity no longer exists in Illinois, and therefore that a third person may sue an agent's principal even after suing and collecting from the agent.
The Illinois Supreme Court recently addressed Golden's contentions squarely and reached a contrary conclusion. In American Nat'l Bank & Trust Co. v. Columbus-Cuneo-Cabrini Medical Center, 154 Ill. 2d 347, 609 N.E.2d 285, 181 Ill. Dec. 917 (1992), the Illinois court concluded that the Contribution Act did not abolish actions for common law implied indemnity for quasi-contractual situations (i.e., principal-agent relationships) involving solely vicarious liability. That court noted that the Contribution Act addresses relative culpability of tortfeasors at fault in fact and, as such, is premised on "fault-based considerations". American Nat'l Bank, 154 Ill. 2d at 353, 354, 609 N.E.2d at 289. In the case of vicarious liability, however, "only the agent is at fault in fact for the plaintiff's injuries." American Nat'l Bank, 154 Ill. 2d at 354, 609 N.E.2d at 289. So, the principal "cannot be one of the 'other tortfeasors' to which . . . the Contribution Act refers." Id. (citing Bristow, 140 Ill. App. 3d at 198, 488 N.E.2d at 337-38). The court then expressly adopted the approach of Bristow that "any settlement between the agent and the plaintiff must also extinguish the principal's vicarious liability." American Nat'l Bank, 154 Ill. 2d at 355, 609 N.E.2d at 289. Accord, Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d 511, 527-29, 622 N.E.2d 788, 796-97, 190 Ill. Dec. 758 (1993) (the same result obtains even if the release expressly exempts the principals).
Thus, according to Illinois law, if Coldwell Banker was the agent of appellees, the settlement between Coldwell Banker and Golden served to extinguish any vicarious liability of appellees. So, if a principal-agent relationship existed between appellees and Coldwell Banker, Counts I through IV cannot be maintained.
b. Agency relationship does not exist
Appellees contend that Coldwell Banker was not their agent, and thus that liability for Coldwell Banker's acts cannot be imposed on them. Absent an agency relationship between Coldwell Banker and appellees, there can be no vicarious liability imposed upon appellees; the only basis for imposing vicarious liability would be the agency relationship. See, e.g., Northrop v. Lopatka, 242 Ill. App. 3d 1, 5, 610 N.E.2d 806, 810, 182 Ill. Dec. 937 (4th Dist. 1993); Anderson v. Boy Scouts of America, Inc., 226 Ill. App. 3d 440, 442, 589 N.E.2d 892, 893-94, 168 Ill. Dec. 492 (1st Dist. 1992). Since Counts I through IV all are based on the vicarious liability of appellees for Coldwell Banker's acts, all four counts must fail as a matter of law if no agency relationship exists.
Accordingly, regardless of whether or not an agency relationship existed between appellees and Coldwell Banker, summary judgment is proper. There can be but one outcome -- that appellees cannot be held liable to Golden for Coldwell Banker's acts.
D. Count V
In count V of his amended complaint, Golden claimed that he was entitled to damages as the intended third party beneficiary of a warranty in the contract of sale between Barenborg and Coldwell Banker that as of the date Coldwell Banker took possession of Barenborg's residence, the residence would be free of any damage from or infestation by termites. Appendix to Brief and Argument of Plaintiff-Appellant, at 13. Golden alleged that as of the possession date and through April 1, 1991, the residence suffered from massive termite damage. Golden alleged that Barenborg knew that the intended and direct beneficiary of the agreement was the ultimate purchaser of the residence. Id. at 14. Golden claimed that his damages were a direct result of Barenborg's material breach of warranty. Id.
In their motion for summary judgment, appellees argued that Golden was not a direct or an intended beneficiary of the contract of sale between Barenborg and Coldwell Banker, and that Golden could not establish the existence of any genuine issue of material fact to the contrary. Joint Motion of Defendants to Dismiss Complaint, P 12. Appellees pointed out that the agreement between Barenborg and Coldwell Banker expressly provided that it was not intended to create any rights in Coldwell Banker's nominee or in any person not a party to the agreement. Joint Memorandum of Defendants in Support of Motion to Dismiss Complaint, at 14. Appellees also contended that Golden failed to allege that the contracting parties ever wavered from their intentions as expressed in the agreement. Id.
Golden countered that whether a third-party beneficiary status was conferred upon Golden was a question of fact, and thus not appropriate for summary judgment. Appendix to Brief and Argument of Plaintiff-Appellant, at 104 (from Plaintiff's Response to Defendants' Joint Motion to Dismiss Complaint). Golden also argued that Barenborg's execution of a Seller's Real Property Information Statement ("seller's statement") one week after he and Coldwell Banker entered into the contract of sale for Barenborg's home made obvious the contracting parties' intent that third parties rely on the contract of sale. Id. at 106. Golden noted that the seller's statement contained many references to the contract of sale. He pointed out that the seller's statement stated that the information in it was true and correct, that no material problems existed with respect to Barenborg's property, and that Coldwell Banker was authorized to furnish the information to any prospective purchaser. Id.
Golden also argued that the seller's statement itself was intended to create rights in favor of third-party purchasers. He thus contended that because his complaint contained numerous references to the falsity of information furnished in the seller's statement, Count V stated a cause of action against Barenborg independent of the contract of sale. Id.
On appeal, Golden raises the issue of the seller's statement for yet another purpose -- in response to the Magistrate Judge's finding that Golden had not shown that the intent of the parties to the contract of sale had ever changed, presumably with respect to whether the contract of sale was meant to confer rights upon the subsequent buyer of Barenborg's home. Brief and Argument of Plaintiff-Appellant, at 25. Golden claims that the Magistrate Judge applied the wrong standard in evaluating appellees' motion for summary judgment. Golden correctly notes that in ruling on Rule 56 motions, all allegations must be viewed in the light most favorable to the non-movant -- Golden in this case -- and all reasonable inferences must be drawn in his favor. Brief and Argument of Plaintiff-Appellant, at 24. Golden contends that rather than take his allegations in the light most favorable to him, the Magistrate Judge took appellees' allegations in the light most favorable to them in reaching the erroneous conclusion that Golden could not show that the intent of the parties had changed. Golden argues that he brought the question of changed intent into issue by raising the seller's statement, which Barenborg executed one week after he executed the contract of sale. Id. at 25.
Illinois law unequivocally holds that if a contract is entered into for the direct benefit of a third person not a party to the contract, then the third person may sue for the breach of the contract. Carson Pirie Scott & Co. v. Parrett, 346 Ill. 252, 257, 178 N.E. 498, 501 (1931). However, it is equally clear that if the benefit to the third person is merely an incidental one arising from the contract, the third person cannot sue for the breach of the contract. Id. "This test is to be determined within the language of the contract." Securities Fund Services, Inc. v. American Nat'l Bank & Trust Co., 542 F. Supp. 323, 329 (N.D. Ill. 1982) (citing Carson Pirie Scott, 346 Ill. at 257-58, 178 N.E. at 501). The contracting parties must manifest in the contract an intention to confer a benefit upon the third party. Altevogt v. Brinkoetter, 85 Ill. 2d 44, 54, 421 N.E.2d 182, 187, 51 Ill. Dec. 674 (1981). An allegation that a contracting party knew that a third party ultimately would benefit from the contract is not sufficient to establish that the third party is a direct beneficiary of the contract. Altevogt, 85 Ill. 2d at 56, 421 N.E.2d at 188. Such knowledge "has never been enough under Illinois law" to make the third person a direct rather than indirect beneficiary. Slate Printing Co. v. Metro Envelope Co., 532 F. Supp. 431, 433 (N.D. Ill. 1982). In addition, there is a presumption against third party beneficiaries: "Inasmuch as people usually stipulate for themselves, and not for third persons, a strong presumption obtains in any given case that such was their intention, and that the implication to overcome that presumption must be so strong as to amount practically to an express declaration." Slate Printing, 532 F. Supp. at 433 (citing Midwest Concrete Products Co. v. LaSalle Nat'l Bank, 94 Ill. App. 3d 394, 396, 418 N.E.2d 988, 990, 49 Ill. Dec. 968 (1st Dist. 1981)).
Golden cannot be a third-party beneficiary to the contract between Barenborg and Coldwell Banker, and thus cannot benefit from Barenborg's warranty to Coldwell Banker. The express wording of the contract of sale to extinguish rights in any person not a party to the contract leaves no doubt that Barenborg and Coldwell Banker did not intend to make Golden or any other potential buyer a third-party beneficiary of the contract. Golden's allegations that Barenborg knew that the intended beneficiary of the warranty was the ultimate purchaser of the residence are insufficient to confer third-party beneficiary status on Golden. The contract makes clear that Barenborg and Coldwell Banker only intended to benefit themselves by executing the warranty.
Golden's allegations with respect to the seller's statement do not change this analysis. The seller's statement was an entirely separate document from the contract of sale. Count V was based not on the seller's statement, but on the warranty in the contract of sale. Any misrepresentations that may have occurred in the context of the seller's statement have no bearing on this case, since they were not made a basis of any count in Golden's complaint. Again, Illinois law is clear that it is the intent of the parties as manifested in the contract, and not in other documents, that dictates whether a third person was meant to be a direct beneficiary of that contract.
In ruling on a motion for summary judgment, the court is required to draw reasonable inferences in Golden's favor. Golden is asking the court to draw unreasonable inferences in his favor -- inferences that are contrary to the law of Illinois. Accordingly, the court finds that the Magistrate Judge correctly granted appellees' motion for summary judgment on Count V of Golden's complaint.
For the reasons set forth above, the decision of the Magistrate Judge is affirmed.
Date: APR 25 1994
JAMES H. ALESIA
United States District Judge