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05/16/95 PHYLLIS C. KINZER v. FIDELITY AND DEPOSIT

May 16, 1995

PHYLLIS C. KINZER, A TAXPAYER OF THE CITY OF CHICAGO, ON BEHALF OF AND FOR THE BENEFIT OF, THE CITY OF CHICAGO, PLAINTIFF-APPELLEE AND CROSS-APPELLANT,
v.
FIDELITY AND DEPOSIT COMPANY OF MARYLAND, DEFENDANT-APPELLANT AND CROSS-APPELLEE, AND CITY OF CHICAGO, ET AL., DEFENDANTS.



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. THE HONORABLE RICHARD L. CURRY, JUDGE PRESIDING.

As Modified On Denial of Rehearing June 30, 1995.

Presiding Justice Scariano delivered the opinion of the court: Hartman and McCormick, JJ., concur.

The opinion of the court was delivered by: Scariano

AS MODIFIED UPON DENIAL OF PETITIONS FOR REHEARING

PRESIDING JUSTICE SCARIANO delivered the opinion of the court:

Fidelity and Deposit Company of Maryland ("Fidelity") appeals from the grant of partial summary judgment in favor of Phyllis C. Kinzer ("Kinzer") holding Fidelity liable under a Public Employees' Bond (the "bond"), which Fidelity issued to the City of Chicago (the "City") in 1977, and from a grant of summary judgment in favor of Kinzer in the amount of $1,075,000, plus pre-judgment interest.

Kinzer cross-appeals from the trial court's order which limited Fidelity's liability under the bond to $1,075,000 and adjudicated how the City's "loss" was to be calculated. She also appeals from the denial of both her motion for attorney's fees and costs, and her motion for sanctions.

Under the bond, the City is covered for the failure of an employee to perform faithfully the duties of his office or to account properly for all monies and property received by virtue of his position. Insuring Agreement 4 of the bond provides a primary layer of coverage of up to $25,000 per employee, and Insuring Agreement 3 provides a secondary layer of coverage over all employees of up to $975,000.

This is the third time we have reviewed this litigation, which arises out of the conduct of several former city officials *fn1 who, absent prior appropriation by the city council, entered into contracts and incurred expenses relating to various special events which the City sponsored between 1978 and 1983. See Kinzer v. Chicago (1988), 169 Ill. App. 3d 447, 523 N.E.2d 919, 120 Ill. Dec. 8, modified in part and rev'd in part, (1989), 128 Ill. 2d 437, 539 N.E.2d 1216, 132 Ill. Dec. 410 (hereinafter Kinzer I); and Kinzer v. Fidelity & Deposit Co. (1991), 213 Ill. App. 3d 606, 572 N.E.2d 1151, 157 Ill. Dec. 687 (hereinafter Kinzer II).

A complete recitation of the underlying facts regarding the misconduct of the city officials is contained in the above cited decisions, and while those facts need not be detailed here, a brief review of the holdings in those prior decisions would be helpful. In Kinzer I, this court held that the City and comptroller Grim *fn2 violated section 8-1-7 of the Municipal Code (Ill. Rev. Stat. 1985, ch. 24, par. 8-1-7, now codified at 65 ILCS 5/8-1-7 (West 1993)) by expending money for city-sponsored events through an account designated "Fund 666" without prior appropriation, and that Grim was strictly liable for any resulting loss he caused the City. ( Kinzer I, 169 Ill. App. 3d at 455-58, 523 N.E.2d 919.) The supreme court affirmed our judgment that the expenditures violated section 8-1-7, but found that the common law public official immunity doctrine exempted Grim from liability as to any loss incurred by the City. ( Kinzer I, 128 Ill. 2d at 445-46, 539 N.E.2d 1216.) On our last review of this litigation, we held that Fidelity's liability was not predicated on its being a "surety" for Grim, but that its liability was broader in scope. ( Kinzer II, 213 Ill. App. 3d at 610-11, 572 N.E.2d 1151). The instant appeal treats with the following trial court rulings issued since the previous appeals were decided:

In an order dated November 13, 1991, the trial court granted Kinzer's motion for partial summary judgment on the issue of Fidelity's liability under the bond; Fidelity appeals from this order. On March 18, 1992, it orally ruled that Fidelity's total limit of liability under the bond was $1,075,000, and that the City's loss would be measured in terms of the total expenditures from Fund 666 minus the "revenue actually recovered" by the City in holding the disputed events, i.e., the net-loss. Kinzer maintains that these rulings were in error. On February 10, 1993, the court further ruled that the automatic "cancellation upon discovery" provision (the "cancellation provision" or "section 6(a)") of the bond was valid, and that the City would not be held to have discovered the misconduct of the its officials until August 2, 1982, the date of Kinzer's original complaint. Both Kinzer and Fidelity contend that this ruling was in error.

Thereafter, Kinzer filed her motion for summary judgment contending, by using figures calculated by Fidelity's experts, that net expenditures from Fund 666 exceeded revenues by $1,398,386, and thus she was entitled to $1,075,000, the limit stated in the bond, plus pre-judgment interest. Fidelity responded to Kinzer's motion and filed a cross-motion for summary judgment, maintaining, inter alia, that genuine issues of material fact existed with respect to the amount of "loss" the City sustained; and it contended specifically that the City had, in fact, received a net gain from Fund 666 expenditures of $801,020, and had discovered the misconduct of its officials no later than December 8, 1980, the date on which the 1979 Annual Report of the Comptroller of the City was presented to the city council, thereby triggering the cancellation provision.

In a memorandum opinion and judgment order dated October 13, 1993, the trial court granted Kinzer's summary judgment motion, and it denied Fidelity's. Subsequently, Kinzer filed a motion under section 155 of the Insurance Code for attorney's fees and costs (215 ILCS 5/155 (West 1993)), as well as under Supreme Court Rule 137 for sanctions (134 Ill. 2d R. 137), both of which were denied along with Fidelity's motion to reconsider the court's summary judgment order, on December 13, 1993. Fidelity filed its notice of appeal on January 12, 1994, and Kinzer filed her notice of cross-appeal on January 14, 1994.

A review of summary judgment orders is de novo, and a reviewing court should make an independent determination as to whether genuine issues of material fact exist with respect to any issue. ( Lavat v. Fruin Colnon Corp. (1992), 232 Ill. App. 3d 1013, 1023, 597 N.E.2d 888, 173 Ill. Dec. 914.) The non-movant is not required to prove his claim or defense at the summary judgment stage but must present some evidence to raise factual disputes regarding one or more elements of that claim or defense. Further, the evidence presented must be construed strictly against the movant and liberally in favor of the non-movant. Quality Lighting, Inc. v. Benjamin (1992), 227 Ill. App. 3d 880, 884, 592 N.E.2d 377, 169 Ill. Dec. 890; Gardner v. Navistar Int'l. Transp. Corp. (1991), 213 Ill. App. 3d 242, 250, 571 N.E.2d 1107, 157 Ill. Dec. 88.

Despite this court's rulings in Kinzer I and II, Fidelity still claims that the trial court erred in ruling that Fidelity was liable under the bond because: (1) the City exercised its home rule power when it expended the funds at issue, thereby superseding any statutory appropriation requirements, (2) the city council ratified the acts of Grim and the other implicated city officials, and (3) the City's liability is not predicated upon that of Grim's or, in the alternative, (4) is co-extensive with that of Grim's, and therefore may avail itself of the public official immunity doctrine.

We hold each of these contentions to be irredeemably without merit and not in need of any gloss further than that which we have already given them in Kinzer I and II. People v. Patterson (1992), 154 Ill. 2d 414, 468-69, 610 N.E.2d 16, 182 Ill. Dec. 592 (courts generally refuse to re-open what has been decided, and "a rule established as controlling in a particular case will continue to be the law, as long as the facts are the same"); Stallman v. Youngquist (1987), 152 Ill. App. 3d 683, 689, 504 N.E.2d 920, 105 Ill. Dec. 635, rev'd on other grounds, (1988) 125 Ill. 2d 267, 531 N.E.2d 355, 126 Ill. Dec. 60 (when the evidence on a subsequent appeal is the same or substantially the same as that of a prior appeal, i.e., there is an identity of particular issues, facts and evidence, the adjudications of the prior appeal become the law of the case, and are binding upon that court on a following appeal, regardless of whether the prior decision was right or wrong).

Continuing with its challenge to its liability under the bond, Fidelity asserts that the city officials are not covered by the bond because in failing to execute, as a condition of their office, an "individual bond" they were not "employees" of the City. Ill. Rev. Stat. 1985, ch. 24 par. 3-14-3, now codified at 65 ILCS 5/3-14-3 (West 1993).

As Kinzer aptly demonstrates in her brief, this contention is disingenuous for a number of reasons. Fidelity is, of course, bound by its admissions, and this claimed defense to liability, as the trial judge stated, "contradicts [its] longstanding answers to [Kinzer's] interrogatories." It admitted that the bond was the only such bond that covered the comptroller defendants during the relevant time period, and that all three (Coyne, Grim, and Fratto) were principals on the bond during their respective terms in office. Fidelity also failed to raise this defense until more than nine years after Kinzer filed her original complaint; thus, it was clearly within the trial court's discretion to deny it as untimely. Turner v. Cosmopolitan National Bank (1989), 180 Ill. App. 3d 1022, 1029, 536 N.E.2d 806, 129 Ill. Dec. 756.

Moreover, the defense lacks merit substantively because the term "individual" does not appear in section 3-14-3, nor, contrary to Fidelity's claim, does the statutory scheme suggest that the use of the term "execute" in that section requires a city comptroller to furnish an "individual bond." See Ill. Rev. Stat. 1985, ch. 24 pars. 3-11-21 through 24, now codified at 65 ILCS 5/13-11-21 through 24 (West 1993).

Fidelity further contends that the November 12, 1993 partial-summary judgment order was not based on Geary's alleged conduct, but only on that of the three comptrollers, and that therefore the trial court's order limiting Fidelity's liability to $1,075,000 should be reduced by $25,000.

However, in failing to argue this issue when it opposed Kinzer's motion for partial-summary judgment, and because its own counsel prepared the March 18, 1992 order which limited that liability to $1,075,000, Fidelity has waived review of this issue on appeal. Boumenot v. North Community Bank (1992), 226 Ill. App. 3d 137, 145, 590 N.E.2d 126; ...


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