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A.J. Maggio Co. v. Willis

IN THE COURT OF APPEALS OF THE STATE OF ILLINOIS FIRST DISTRICT SECOND DIVISION


May 23, 2000

A.J. MAGGIO COMPANY, AN ILLINOIS CORPORATION, PLAINTIFF-APPELLANT,
v.
COY WILLIS, D/B/A WILLIS CONSTRUCTION; DEBRA L. TENNANT AND HAROLD E. TENNANT, D/B/A TENNANT INSURANCE AGENCY; AND ILLINOIS EMCASCO INSURANCE COMPANY, AN ILLINOIS INSURANCE COMPANY, DEFENDANTS-APPELLEES.

Appeal from the Circuit Court of Cook County No. 95 L 15452 The Honorable John W. Gustafson and Honorable James F. Henry, Judges Presiding.

The opinion of the court was delivered by: Justice Cousins

The Board of Education of Reed-Custer Community Unit School District 255U (School) entered into a contract with A.J. Maggio Co. (Maggio), a general contractor, for the construction of Braidwood Middle School, in Braidwood, Illinois. Maggio subcontracted with Willis Construction (Willis) to construct and install a sanitary and storm sewer. Willis is owned by Coy Willis.

Pursuant to the contract between Willis and Maggio, Willis agreed that if the materials or workmanship it furnished were deemed inadequate, Willis would perform the necessary corrective work. If Willis failed to make these corrections, Maggio could deduct the cost sustained in making the necessary corrective work from the amount due Willis. If this amount was insufficient to reimburse Maggio, Willis agreed to pay the outstanding balance owing Maggio.

The contract between Maggio and Willis also required Willis to carry comprehensive general liability insurance and to name Maggio and others as additional insureds under the policy. Willis retained Tennant Insurance Agency (Tennant) to acquire the insurance. The insurance policy Tennant procured for Willis was written by Illinois Emcasco Insurance Company (Emcasco) and provided coverage from September 11, 1991, through September 11, 1992. The policy provided the correct type of insurance but failed to provide coverage to Maggio as mandated by the contract between Maggio and Willis.

Tennant issued a certificate of insurance to Maggio, which stated that Maggio was an additional insured on the policy, but Maggio was not named as an additional insured on the policy. Subsequent to receiving the certificate of insurance, Maggio made requests to Tennant to be placed on the insurance policy as an additional insured. The architect and School were added to the policy on May 18, 1992, yet Maggio was not.

Emcasco renewed the policy from September 11, 1992, through September 11, 1993. Again, Maggio was not named as an additional insured. Maggio alleges that Emcasco failed to add Maggio to the policy after being requested to do so.

Shortly after Willis completed installation of the sanitary and storm sewer, sinkholes began to appear under driveways and sidewalks. Maggio requested Willis to perform the necessary corrective work. Willis refused. Maggio was subsequently notified by the School on October 12, 1993, to perform the corrective work within seven days or the School would perform the repairs and back charge Maggio. Under its contract with the School, Maggio was required to correct Willis' defective work. Subsequently, Maggio hired another company to perform the repairs and incurred a bill of $497,067. Maggio billed Willis. However, Willis refused to pay and Maggio paid the bill.

After Maggio had paid $497,067 to correct the defective work, the School, which was named as an additional insured on the insurance policy issued by Emcasco, executed a written assignment transferring and assigning to Maggio any causes of action the School may have had against Emcasco. The assignment, which was executed on October 18, 1995, authorized Maggio to sue Emcasco to recover the $497,067 spent on corrective work.

On October 30, 1995, Maggio filed a two-count complaint. Count I named Willis as a defendant, and count II named Willis, Emcasco, and Tennant as defendants. On February 22, 1996, the trial court dismissed count II of Maggio's original complaint against Tennant pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 1996)) without prejudice. On March 21, 1996, Maggio filed a two-count amended complaint. Count I named Willis as a defendant, and count II named Willis, Tennant, and Emcasco as defendants. On May 28, 1996, the trial court dismissed count II of Maggio's amended complaint against Tennant pursuant to section 2-615 without prejudice.

On June 25, 1996, Maggio filed its second amended complaint. The complaint contained four counts, which were: (1) breach of contract against Willis; (2) third-party breach of contract against Emcasco; (3) assignment of cause of action against Emcasco; and (4) subrogation of cause of action against Emcasco. On July 15, 1996, Emcasco filed a motion to dismiss the second amended complaint pursuant to section 2-615 and section 2-619 of the Code of Civil Procedure.

On August 22, 1996, the trial court granted Emcasco's motion to dismiss count II without prejudice. On September 11, 1996, Emcasco filed a separate motion to dismiss counts III and IV of the second amended complaint pursuant to section 2-615. On October 10, 1996, the trial court granted Emcasco's motion to dismiss counts III and IV.

On April 27, 1999, the trial court granted Maggio's motion to file an amended count II to its second amended complaint. On May 10, 1999, Maggio filed its amended count II. On May 27, 1999, Emcasco filed a motion to vacate the order allowing Maggio to file an amended count II. On August 20, 1999, the trial court vacated the order of April 27, 1999, which allowed Maggio to file an amended count II. On August 27, 1999, the trial court denied Maggio leave to file an amended count II and found that there was no just reason to delay enforcement or appeal of that order or the order of October 10, 1996, dismissing counts III and

IV. Maggio appeals.

We affirm in part and reverse in part.

ANALYSIS

I.

Maggio maintains the trial court erred in granting Emcasco's motion to dismiss count III based on assignment for failure to state a cause of action in its second amended complaint. Maggio argues it has sufficiently alleged a cause of action based on assignment. We agree.

When a complaint is dismissed pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 1996)), the standard of review is de novo. Vernon v. Schuster, 179 Ill. 2d 338, 344, 688 N.E.2d 1172, 1175 (1997). The question presented by a section 2-615 motion to dismiss is whether the allegations of the complaint, when viewed in a light most favorable to the plaintiff, are sufficient to state a cause of action upon which relief can be granted. Vernon, 179 Ill. 2d at 344, 688 N.E.2d at 1175. A cause of action should not be dismissed on the pleadings unless it clearly appears that no set of facts can be proved under the pleadings that entitle the plaintiff to recover. Bryson v. News America Publications, Inc., 174 Ill. 2d 77, 86-87, 672 N.E.2d 1207, 1214 (1996).

As a general rule, "an assignment is *** the transfer of some identifiable property, claim or right from the assignor to the assignee". Buck v. Illinois National Bank & Trust Co., 79 Ill. App. 2d 101, 106, 223 N.E.2d 167, 169 (1967). The assignment operates to transfer to the assignee all the assignor's right, title or interest in the thing assigned. In re Estate of Martinek, 140 Ill. App. 3d 621, 628, 488 N.E.2d 1332, 1336 (1986). It is an elementary principle of law applicable to all assignments that they are void unless the assignor has either actually or potentially assigned the thing that he attempts to assign. North Chicago Street R.R. Co. v. Ackley, 171 Ill. 100, 111, 49 N.E. 222, 226 (1897). "The assignee can obtain no greater right or interest than that possessed by the assignor, inasmuch as one cannot convey that which he does not have. North Chicago St. R.R.,[171 Ill. 100, 49 N.E. 222]; Mid-City Trust & Savings Bank v. City of Chicago, 292 Ill. App. 471, 11 N.E.2d 617 [(1937)]." Litwin v. Timbercrest Estates, Inc., 37 Ill. App. 3d 956, 958, 347 N.E.2d 378, 379-80 (1976).

Maggio maintains the School incurred damages to its property as a result of sinkholes. Maggio argues this loss gave the School the right to file a claim pursuant to the insurance policy written by Emcasco. Maggio contends the School assigned to Maggio the right to place this claim.

Emcasco argues the School cannot assign that which it does not have. To support its contention, Emasco cites Toepper v. Brookwood Country Club Road Ass'n, 204 Ill. App. 3d 479, 561 N.E.2d 1281 (1990), and Litwin v. Timbercrest Estates, Inc., 37 Ill. App. 3d 956, 347 N.E.2d 378 (1976). The cases that Emcasco cites as support for its position are distinguishable from the the case sub judice. In Toepper the three parties to a developer agreement purported to assign and cross-assign the developer's rights to one another. None of the parties to the developer agreement relinquished any developer rights to others. Toepper, 204 Ill. App. 3d at 489, 561 N.E.2d at 1287. The Toepper court held:

"Since none of the parties to the development agreement relinquished any developer rights to the others, the agreement cannot be characterized as an assignment even though the word is repeatedly used in the agreement. The issue of whether an assignment has taken place is dependent upon the intent of the parties. [Citation.] Since the intention of the parties to the developer agreement was to share and jointly exercise the developer rights, and no party intended to relinquish such rights, no assignment took place."

Toepper, 204 Ill. App. 3d at 489, 561 N.E.2d at 1287. The instant case is distinguishable from Toepper because here the School had a claim against Emcasco and intended to transfer all of its right, title and interest to the assignee.

In Litwin, the assignees bought a house from the assignors. At the time the assignors sold the house to the assignees, the house had no known defects. Two years after the purchase of the house, the assignees learned of defects and received an assignment from the original sellers, the assignors, for the purpose of suing the builders of the house. The Litwin court held that, at the time of the assignment, the assignors did not have a claim or a potential claim against the builders and therefore the assignment was void. Litwin, 37 Ill. App. 3d at 959, 347 N.E.2d at 380. Litwin is distinguishable because at the time of the assignment, the School had already suffered damages and had a potential claim against Emcasco.

Emcasco, however, argues the School never incurred a loss. Emcasco argues the School incurred no loss because the School required Maggio to have the damages repaired. Emcasco's contention is not well founded. Webster defines "loss" as follows: "[T]he amount of an insured's financial detriment due to the occurrence of a stipulated contingent event (as death, injury, destruction, or damage) in such a manner as to charge the insurer with a liability under the terms of the policy." Webster's Third New International Dictionary 1338 (1986). Accordingly, "damage" and "loss" are synonymous and any damage to the School's property constituted loss. Emcasco contends on appeal that the School's claim could not be assigned to Maggio after Maggio had the damage repaired. We disagree. An insured's claim under a policy may be assigned after a loss. Service Adjustment Co. v. Underwriters at Lloyd's, London, 205 Ill. App. 3d 329, 334, 562 N.E.2d 1046, 1049 (1990).

Viewed in a light most favorable to Maggio, count III stated a cause of action for assignment. Accordingly, we hold that the trial court erred in dismissing count III.

II.

Maggio also contends that the trial court erred in granting Emcasco's motion to dismiss count IV based on subrogation for failure to state a cause of action in its second amended complaint. We agree.

Subrogation is a method whereby one who has involuntarily paid a debt or claim of another succeeds to the rights of the other with respect to the claim or debt so paid. Dix Mutual Insurance Co. v. LaFramboise, 149 Ill. 2d 314, 319, 597 N.E.2d 622, 624 (1992). One who asserts a right of subrogation must step into the shoes of, or be substituted for, the one whose claim or debt he has paid and can only enforce those rights that the latter could enforce. Dix, 149 Ill. 2d at 319, 597 N.E.2d at 624. Recovery by subrogation is available only where the plaintiff is under a legal obligation to pay the debt of another. Bernot v. Primus Corp., 278 Ill. App. 3d 751, 753, 663 N.E.2d 464, 466 (1996).

Emcasco argues Maggio was paying its own debt. Emcasco cites Dix Mutual Insurance Co. v. LaFramboise, 149 Ill. 2d 314, 597 N.E.2d 622 (1992). However, Dix is inapposite because in Dix the insurer sought to subrogate against its own insured. Here, Maggio was under a legal obligation to pay for the School's damage. See Bernot, 278 Ill. App. 3d 751, 663 N.E.2d 464. Here, Maggio is not an insurer seeking to subrogate against its own insured. Rather, Maggio in the instant case seeks subrogation against the School's insurer.

Viewed in the light most favorable to Maggio, count IV stated a cause of action for subrogation. Accordingly, we hold the trial court erred in dismissing count IV.

III.

Maggio further contends that Tennant had apparent authority to issue a certificate of insurance and obligate Emcasco to provide coverage to Maggio under the insurance policy. However, Emcasco argues that Maggio raised the issue of apparent authority neither in its original complaint nor in its second amended complaint. If an issue is not raised in a complaint, it cannot be considered on appeal. Eagan v. Chicago Transit Authority, 158 Ill. 2d 527, 534-35, 634 N.E.2d 1093, 1097 (1994). In response, Maggio argues it sufficiently alleged facts in count II of its second amended complaint that raised the issue of apparent authority. We disagree.

Apparent authority arises when the principal holds an agent out as possessing the authority to act on its behalf and a reasonably prudent person, exercising diligence and discretion, would naturally suppose the agent to possess this authority in light of the principal's conduct. Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d 511, 523, 622 N.E.2d 788, 795 (1993). To prove the existence of an apparent authority, the plaintiff must show: (1) the principal consented to or knowingly acquiesced in the agent's exercise of authority; (2) based on the actions of the principal and agent, the third person reasonably concluded that the party was an agent of the principal; and (3) the third person justifiably relied on the agent's apparent authority to his detriment. Letsos v. Century 21-New West Realty, 285 Ill. App. 3d 1056, 1065, 675 N.E.2d 217, 224 (1996).

Courts are to construe pleadings liberally, with the view to do substantial justice between the parties. Disc Jockey Referral Network, Ltd. v. Ameritech Publishing, 230 Ill. App. 3d 908, 912, 596 N.E.2d 4, 7 (1992). No pleading is defective in substance if it contains facts that reasonably inform the opposite party of the nature of the charge to be answered. Skorek v. Przybylo, 256 Ill. App. 3d 288, 289, 628 N.E.2d 738, 739 (1993). However, our review of the pleadings in the instant case establishes that Maggio failed to adequately allege facts that would have reasonably informed Emcasco that the issue of apparent authority was being raised. Specifically, Maggio makes no allegations that Emcasco held Tennant out as its agent.

A controlling case on this issue is in Connick v. Suzuki Motor Co., Ltd., 174 Ill. 2d 482, 675 N.E.2d 584 (1996). In Connick a complaint involving the same issue was considered by the Illinois Supreme Court. The Connick court held the complaint in that case insufficient and wrote: "In short, plaintiffs have alleged no facts to support a claim that Suzuki held out the local dealers as Suzuki's agents, thus giving them apparent authority." Connick v. Suzuki Motor Co., Ltd., 174 Ill. 2d 482, 499, 675 N.E.2d 584, 592 (1996).

IV.

Maggio maintains the circuit court erred in its refusal to allow Maggio leave to file an amended count II to its second amended complaint. The trial court's determination whether to allow or deny an amendment to a complaint is a matter of discretion and will not be reversed absent an abuse of discretion. In re Estate of Hoover, 155 Ill. 2d 402, 416, 615 N.E.2d 736, 742 (1993). The factors used when determining whether the trial court's denial of a motion to amend a complaint constituted an abuse of discretion are: (1) whether the proposed amendment will cure the defective pleading; (2) whether the proposed amendment would surprise or prejudice the opposing party; (3) whether the proposed amendment was timely filed; and (4) whether the movant had previous opportunities to amend. Loyola Academy v. S&S Roof Maintenance, Inc., 146 Ill. 2d 263, 273, 586 N.E.2d 1211, 1215-16 (1992).

Maggio's amended count II alleges third-party beneficiary breach of contract against Emcasco. Emcasco argues the proposed amendment does not cure the defective pleading. Emcasco argues the proposed amendment fails to effectively show that Maggio was an intended third-party beneficiary under the insurance policy between Emcasco and Willis and as such should be dismissed.

In Illinois, the promisor's intention must be evidenced by an express provision in the contract identifying the third-party beneficiary. Wheeling Trust & Savings Bank v. Tremco Inc., 153 Ill. App. 3d 136, 140, 505 N.E.2d 1045, 1048 (1987). However, a person who is not a party to a contract may nevertheless sue based on the contract if that person is directly benefitted by the contract. Paukovitz v. Imperial Homes, Inc., 271 Ill. App. 3d 1037, 1039, 649 N.E.2d 473, 475 (1995). A person's status as a third-party beneficiary depends upon the intent of the parties to the contract and must be determined on a case- by-case basis. Paukovitz, 271 Ill. App. 3d at 1039, 649 N.E.2d at 475. Liability to a third-party must affirmatively appear from the contract's language and from the circumstances surrounding the parties at the time of its execution and cannot be expanded or enlarged simply because the situation and circumstances justify or demand further or other liability. Ball Corp. v. Bohlin Building Corp., 187 Ill. App. 3d 175, 177, 543 N.E.2d 106, 107 (1989).

Although whether Maggio could have adequately alleged a third-party breach of contract against Emcasco was argued before the trial court, the trial court dismissed count II because Maggio's amendment was untimely. Maggio filed its original complaint on October 30, 1995. A little more than 3½ years later, on May 10, 1999, Maggio filed an amended count II.

An instructive case is Wingate v. Camelot Swim Club, Inc., 193 Ill. App. 3d 963, 550 N.E.2d 665 (1990). In Wingate the court held that filing an amended complaint four years after filing the original complaint was untimely. Wingate v. Camelot Swim Club, Inc., 193 Ill. App. 3d 963, 967, 550 N.E.2d 665, 668 (1990). In the instant case, Maggio attempted to amend five months short of four years. In our view, Maggio's attempt to file an amended count II was untimely. Accordingly, we affirm the trial court's decision denying leave to amend count II alleging third-party breach of contract against Emcasco.

Affirmed in part and reversed in part; cause remanded.

McBRIDE and McNULTY, JJ., concur.

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