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Milligan v. Gorman

May 17, 2004

[5] PATRICK MILLIGAN, PLAINTIFF-APPELLEE AND CROSS APPELLANT,
v.
GERALD GORMAN AND RIDGE CHRYSLER PLYMOUTH, L.L.C., DEFENDANTS-APPELLANTS AND CROSS-APPELLEES.



[6] Appeal from the Circuit Court of Cook County Honorable Paddy McNamara, Judge Presiding.

[7] The opinion of the court was delivered by: Justice McNULTY

[8]  A settlement agreement required Lawrence Foley to pay Patrick Milligan $150,000 out of the proceeds of a sale of assets to Gerald Gorman. The agreement also required Gorman to take all steps necessary at the closing to cause Foley to make the payment to Milligan. Foley did not pay Milligan, and a default judgment against Foley proved partially unenforceable. Milligan sued Gorman for breach of the settlement agreement. The court found that Gorman failed to take the steps necessary at the closing to protect Milligan, in breach of the agreement. The court awarded Milligan the unpaid balance of the settlement amount, but the court refused to grant Milligan's request for prejudgment interest. Gorman appeals from the judgment and Milligan cross-appeals from denial of prejudgment interest.

[9]  We hold that credible evidence supported the trial court's finding that Gorman breached the contract. When Gorman failed to take steps at the closing to cause payment to Milligan, he and Foley both became debtors to Milligan, within the meaning of the Interest Act (the Act) (815 ILCS 205/2 (West 1998)). Because the debt met statutory criteria for the award of interest, the trial court erred by denying Milligan's request for prejudgment interest. Thus, we affirm in part and reverse in part, and we remand for recalculation of the judgment amount.

[10]   On October 2, 1998, Foley agreed to sell the assets of his automobile dealership to Ridge Chrysler Plymouth, which Gorman owned. Three weeks later, Foley agreed to sell the same assets to Milligan. When Gorman learned of the later agreement, he and Ridge sued for specific performance of their contract. Milligan sought to intervene and filed his own complaint for specific performance of the agreement to sell the assets to him.

[11]   On November 18, 1998, the parties settled the case. The settlement specified:

[12]   "2. Foley agrees to pay the sum of $150,000.00 (one hundred fifty thousand dollars) to Milligan at the time of closing of the Buy-Sell Agreement between Foley and Gorman/John Barnard for the Dealership assets.

[13]   3. Foley and Gorman agree to take all necessary steps at closing to cause the $150,000.00 payment referred to in paragraph 2 to be paid to Milligan in Cashier's funds out of the proceeds of the closing of the Foley-Gorman/Barnard Buy-Sell for the Dealership assets."

[14]   Milligan's attorney wrote to Gorman's attorney on February 4, 1999, seeking notification of the time and place of the closing so the attorney could arrange to receive Milligan's check. Neither Gorman nor his attorneys sent any written response to the letter. Gorman and Foley closed the sale on February 10, 1999. Neither Milligan nor his attorney attended the closing. At the closing Foley signed a separate agreement to indemnify Gorman and Ridge for any claim Milligan might file against them. Gorman paid the full price due under the sales contract. Foley and Gorman issued no check payable to Milligan and the closing statement showed no allocation of funds to Milligan. Milligan received no proceeds from the sale.

[15]   Milligan sued Foley, Ridge and Gorman on March 2, 1999, for breach of the settlement agreement. Gorman filed a cross-claim against Foley for indemnification. Foley separately sued Gorman, claiming that Gorman's accountants undervalued Foley's assets at the closing, and therefore Gorman had paid less than the amount properly due under the contract for sale of the dealership assets. Gorman and Foley settled the case when Gorman agreed to pay Foley an additional $126,000.

[16]   Gorman notified Milligan of the settlement and Milligan obtained a default judgment against Foley for $171,575.34. Milligan served a citation to discover assets on Foley's attorney. By order dated November 30, 2001, the court permitted the attorney to retain $26,000 as his fee, and ordered the attorney to pay Milligan the balance of $100,000. Milligan received the payment on December 3, 2001.

[17]   On July 24, 2002, trial began on Milligan's claim against Gorman and Ridge. Gorman admitted that he did not call Milligan to inform him of the closing, but he testified that he told Richard Carr, one of his attorneys, to call Milligan. According to Gorman, Carr reported repeatedly calling Milligan's office on the day of closing, but he could not contact Milligan. Foley's attorney then said he would accept the full payment and he would send Milligan his share of the proceeds.

[18]   Carr testified that Gorman never asked him to call Milligan, Carr never called Milligan, and Carr did not tell Gorman that he had tried to call Milligan.

[19]   Foley's attorney swore that he never said he would accept Milligan's money and send it to Milligan. The attorney admitted that an escrow account used in the sale held $150,000. He knew of no reason for failing to send that money to Milligan, apart from "the decision of the clients." The attorneys discussed Milligan's interest with Foley and Gorman, and admitted that no court order required payment to Milligan. Gorman agreed to "permit the transaction to close without Milligan being paid out of the proceeds as long as Foley would sign an Indemnification Agreement."

[20]   Milligan sought to introduce evidence of Gorman's finances to aid the court in assessing ...


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