Appeal from the Circuit Court of Cook County. Honorable Leonard R. Grazian, Judge Presiding.
Presiding Justice Zwick delivered the opinion of the court: Egan, J., and Rakowski, J., concur.
The opinion of the court was delivered by: Zwick
PRESIDING JUSTICE ZWICK delivered the opinion of the court:
Defendant Continental Bank, N.A. (Continental), appeals from a judgment entered following a jury trial. The jury determined that Continental and its codefendants, Pioneer Bank & Trust Co. and The Mid-City National Bank of Chicago, breached an oral contract with plaintiffs Robert L. O'Neil, Henry D. Paschen, Jr., William J. Harte and Edward T. Joyce to support plaintiffs' bid to purchase a building and parcel of real estate during a bankruptcy auction. A judgment totalling $6.1 million was entered by the trial court pursuant to the jury's award of damages. Plaintiffs counterappeal, alleging that the trial court improperly dismissed several of the counts set out in their complaint.
The bankruptcy auction around which this case centers was conducted March 22, 1984. The principal asset of the bankruptcy estate was the Loop Hospital, a building located on the southeast corner of Franklin and Washington Streets in Chicago. Plaintiffs planned to purchase the Loop Hospital from the bankruptcy estate and then use the facility as "The Silvetti Wound Hospital and Burn Clinic" (the "Silvetti Clinic"). Defendants were creditors of the bankruptcy estate.
The Silvetti Clinic was to be a specialty hospital. Dr. Anthony Silvetti had pioneered the use of D-glucose Polysaccharide powder in the treatment of wounds, pressure sores and burns. Although Dr. Silvetti had not obtained approval from the U.S. Food and Drug Administration for the commercial use of D-glucose Polysaccharide powder, he anticipated such approval in the near future. By late 1983, Dr. Silvetti had used the treatment experimentally on hundreds of patients with what he characterized as "remarkable success." By 1984, he and the plaintiffs had begun final preparations for the commercial approval of the drug. The new treatment was to be the centerpiece of the facility.
At the time of the bankruptcy auction, defendants' claims against the bankruptcy estate, including appellant Continental's claim, were subordinated to $3.5 million of claims from third-party creditors. In December of 1983, a $3.5 million offer to purchase the property was submitted to the bankruptcy court by Leroy Inskeep on behalf of the Fifield Development Corporation. This offer was vigorously opposed by the defendants. In February of 1984, defendants submitted written appraisals to the bankruptcy court which indicated that the value of the Loop Hospital was $7 million if used as a hospital and clinic and $9.5 million if used as an office complex. Inskeep subsequently indicated that it would be willing to raise its offer to $3.7 million, but this offer would still have provided little or no recovery for the defendants once the claims of the third-party creditors were paid.
Following the Inskeep offer for the Loop Hospital, plaintiffs began negotiations with the defendants in order to garner their support for an offer the plaintiffs were preparing against the Inskeep bid. The parties met on February 15, 1984, in the cafeteria of the Federal Building. Plaintiff Edward Joyce explained that he and his partners intended to use the Loop Hospital as a facility specializing in wound healing using Dr. Silvetti's unique treatment. Joyce proposed that the defendants lend his group the earnest money required to tender a bid to the court. These funds could then be used to buy at a discount some of the third-party claims that were superior to the defendants' claims. The proposal further contemplated that the plaintiffs would pay as much as $5 million for the facility. If Joyce and his partners were able to obtain the necessary State licensing to run the new hospital (collectively referred to by the parties as a "Certificate of Need" or "CON"), $5 million would be paid in full and the defendants would share in the proceeds of the sale, in excess of the amount necessary to satisfy the superior claims. If, on the other hand, Joyce and his partners were unable to obtain the CON for the hospital, plaintiffs would pay only the amount necessary to satisfy the superior claims (estimated to be approximately $3.5 to $3.7 million). Under the former scenario, defendants expected to split between themselves between $1.3 million and $1.5 million. Under the latter scenario, defendants would receive nothing, the same amount they would have received if the Inskeep offer were to be accepted by the bankruptcy court.
On March 12, 1984, a formal meeting was held at Continental Bank. Joyce presented his proposal for acquiring the hospital. During the meeting, a slide presentation regarding Dr. Silvetti's wound-healing process was shown. This presentation was similar to one that had already been given in Springfield to the Illinois Department of Public Health in anticipation of requesting the CON. At the meeting, Joyce asked a Continental Bank officer, William Marcou, how long it would take to get the CON. Marcou, who had experience in such matters, responded "Ten months." Joyce said "Fine. As between the banks and my partners, we'll try and get that licensing for ten months." The meeting subsequently concluded.
The court-imposed deadline for submission of offers to purchase the Loop Hospital was March 16, 1984. On March 15, Continental's Richard Ferri contacted Joyce's associate, Richard Cremieux, and informed Cremieux that Continental would agree to the plaintiffs' proposal.
On March 16, 1984, no other offers besides Inskeep's $3.5 million offer had been submitted to the bankruptcy court. During the status hearing, plaintiff Joyce advised Bankruptcy Court Judge Robert L. Eisen of the deal that had been struck with Continental, Pioneer and Mid-City and of the fact that Continental had agreed to loan $1 million to Joyce and his partners to purchase the Loop Hospital. In response to an inquiry from Inskeep as to whether the Joyce offer was contingent upon his ability to obtain a hospital license, Joyce stated: "There may be contingencies that adversely affect the banks, and they're willing to accept them." Pioneer's representative informed the court that the "highest and best offer" was Joyce's offer.
Joyce, joined by the bank representatives, requested that Judge Eisen grant two weeks to the plaintiffs to finalize their proposal. Inskeep then indicated that his clients intended to withdraw their $3.7 million bid if it were not promptly accepted. Representatives of each of the banks spoke in favor of giving plaintiffs and the banks time to draft the real estate contract and to deposit the $1 million with the bankruptcy court. Judge Eisen denied the requested two-week delay in the proceedings, but granted Joyce and his partners until Tuesday, March 20, 1984, to deposit the funds with the court and to submit a real estate purchase contract.
The parties held a meeting late in the morning on March 20, 1984, to finalize the agreement. Continental's representative, Marcou, testified that before issuing the check for $1 million, Continental required all the parties to consent to the terms of the deal. Joyce testified that, during the meeting, Marcou stated that the other banks were concerned that the plaintiffs might intentionally slow down the process of obtaining a CON in an effort to pay less for the property. Joyce told Marcou that he had relied upon Marcou's own estimate of the time necessary to obtain the CON (ten months), and asked Marcou how much time he wanted. Marcou proposed a rider to the agreement which would require Joyce and his partners to continue to seek the appropriate authorizations for the hospital facility for six months beyond the original period. Frank Wetmore, an attorney for Mid-City and Continental, expressed his view that the Joyce partnership should pay $5 million if they ever received a CON. Joyce responded that he would not accept an open-ended commitment, but that he would agree to an additional six-month extension beyond that proposed by Marcou. The parties have referred to the changes Joyce agreed to make to the agreement with regard to the time he would have to seek a CON as the "Marcou Rider." Thus, with the Marcou Rider in place, the total period of time during which plaintiffs would be obligated to pay $5 million for the property if they received a CON was 22 months: the original 10-month period proposed by Marcou, the additional six-month period during which Continental could direct plaintiffs to continue to seek authorization and the final six-month period offered by Joyce.
Once the terms of the agreement had been finalized at the March 20th meeting, Joyce stated that he would not borrow the $1 million and would not submit his offer to the bankruptcy court unless the lawyers for the banks indicated that their clients would agree to the terms of his proposal without further modification. Pioneer's attorney stated that Joyce "wanted to be assured that whatever offer he was going to make would enjoy the support of the banks." Pioneer's attorney agreed to the terms, as did the lawyer present representing Mid-City and Continental. Joyce then executed a $1 million promissory note.
After the meeting, most of the participants proceeded to court. During the hearing, Joyce deposited the $1 million draft and submitted his revised real estate contract to purchase the Loop Hospital for $5 million. Continental's counsel stated at the hearing, "We have negotiated this thing out so that we are satisfied with the proposal that has been made by Mr. Joyce's client." Later in the proceedings the court stated, "I think that the [Joyce] offer has sufficient bona fides to take a very close look at it. And if the protection is there, I will approve it." The court then put the matter over until March 22.
After the hearing, at approximately 4:30 p.m., one of Joyce's associates, Richard Cremieux, asked whether he and Richard Ferri, a representative of Continental, should return to the office to prepare the formal written agreement. One of the Pioneer attorneys stated that it was not necessary to draw up the written agreement right away because there already was a deal in place. Counsel for Continental indicated that he was unconcerned about the court approving the deal because the parties had reached an agreement and because the court accepted Continental's escrow check. Joyce and several of the others who worked on the negotiations celebrated their agreement at the Union League Club that evening. Joyce and counsel for Pioneer discussed their successful venture over dinner.
Joyce associate Cremieux and Continental attorney Ferri began working on drafting the written agreement the following day. Each testified that no substantive changes were made to the terms of the oral agreements that had been negotiated.
When Joyce and his associate Cremieux arrived at the bankruptcy court for the hearing on March 22, 1984, Joyce noticed bank representatives talking to Inskeep in the hallway. When the case was called, Inskeep announced to Judge Eisen that his clients had authorized him to raise their bid to $4.3 million. Wetmore, on behalf of Continental and Mid-City, stated to Judge Eisen that both of his clients had determined that the $4.3 million offer better ...