*1 ISRAEL, ALAN H. on Behalf of the Partnership, Dundee-Landwehr Limited Plaintiff-Appellant, CORPORATION, v. NATIONAL CANADA Defendant-
Appellee. (1st Division) First District No. 1 — 92—3091 Opinion September 25, filed Rehearing January denied 1995.— *2 dissenting part. J., in
WOLFSON, concurring part and Mannix, Harte, Ltd., William J. Harte and Joan M. both of William J. Joyce Aufmann, and Edward T. and Arthur Joyce, W. both of Edward T. P.C., Chicago, appellant. both of for Lynch Stanley Adelman, David G. Wolfe, and J. both of Rudnick & Chicago, appellee. JUSTICE opinion BRADEN delivered the of the court: Plaintiff, (Israel), Alan H. appeals August from an order the circuit court County, dismissing of Cook III counts V of Israel’s fourth complaint, amended August as well as an order granting judgment defendant, in favor of National Canada (NCC). Corporation
We affirm. argues (1) that the trial court in ruling erred and the establish, failed to preponderance evidence, agency relationship between Focus Real Estate (Focus) (2) Company Finance NCC; delays NCC’s 3210 Partnership loan did not constitute a estopping material breach (3) rescinding NCC from agreement; the loan a material adverse change in Israel’s financial condition constituted a material breach of agreement; the loan Israel experienced a material adverse condition; his financial NCC could "mend its hold” in order to articulate an excuse for its perform refusal to agree- under the loan ment; three letters allegedly related to the material adverse *3 (7) in Israel’s financial inadmissible; condition were and Israel plead failed to a cause of action for intentional interference with contractual relations and common law fraud. The record indicates that general partner Israel was the of the (3210
Dundee-Landwehr Partnership Partnership), an Illinois limited partnership. The was beneficial owner real improvements estate and located at the northwest corner of Land- Roads, Northbrook, wehr and Dundee (property). Legal Illinois title to the property by Bank, was held La Salle National as trustee (Land Trustee) agreement. During under a trust the summer of application Focus, submitted a loan to on behalf of the 3210 Partnership, financing to building construct a commercial office property. August 4, 1988, on the On mortgage Focus issued a commit- Israel, ment letter approving to a construction loan to the Land (Focus Commitment). $14,975,000 Trustee in the amount of Under Commitment, terms of the Focus the construction loan was to be by mortgage addition, secured a first property. lien In 3210 Partnership provide was to independent appraisal Focus with an prior closing. value of the new construction to ability to Focus’ upon was conditioned Focus Commitment funding a co-lender as participate to an additional obtain formally advised 17, 1987, Focus was On November
the loan. letter that mortgage commitment Canada via Bank of National in the NCC, affiliates, including participate would of its one and/or Commitment). (NCC and NCC The Focus loan subject construction completion guarantee the personally' Israel to required Commitments interest due under payment construction and proposed was closing, Prior to loan. the construction the terms of and to Focus statement personal required to submit a written subsequently executed and NCC Focus NCC for review. for the as a co-lender participate to agreement which NCC was under On or about Agreement). (Participation subject construction loan Trustee, and Focus Partnership, Land the 3210 December (loan agreement). loan executed a construction NCC executed the documents parties On December loan; the 3210 subject Israel submitted necessary open the to agreement, loan request under the Partnership’s first draw draw $2,419,799; the full amount of the total amount of adjustments. minor request funded Focus with was requests on five successive draw subsequently submitted that each draw Partnership. The record indicates behalf of the 3210 funding precedent under request complied with the conditions were agreement, Focus and NCC loan Under loan days from requested funds within five business required to disburse Partnership. The record receipt request of a that, funding request, Focus exception of the first reveals with five-day period. Specifi- within the failed to disburse funds days request funded 11 cally, of the second draw was the full amount submitted, amount of the the full funding request after the had been days funding request had after request third draw was funded submitted, request the fourth draw the full amount of been and the funding request had been submitted days after the funded 36 days after the was funded 28 request of the fifth draw full amount funding request had been submitted. Partnership’s sixth July 20, Israel submitted the 3210
On agree- loan the construction and NCC under request draw to Focus complied request also indicates that this draw ment. The record funding. and NCC refused Focus precedent the conditions the terms of the loan required as under disburse funds *4 2, 1988, advised and Focus August NCC The record indicates that on bonds Partnership that certain construction 3210 Israel and the request would sixth draw any portion before of the required would be 458
be disbursed. The record supplied indicates that Israel the construc- tion bond requested. as The record indicates that Focus and NCC expressed their respect concerns with to the personal status of Israel’s and, such, financial condition as continued to refuse to authorize fur- ther disbursements agreement. under the loan 29, 1988, September
On Focus served Israel and the 3210 Partner- ship awith written notice of default agreement. under the loan Focus cited the existence default, of seven instances of including a material change in Israel’s financial condition.
The record indicates that subsequently Israel brought an action against co-lender, Focus, NCC and its on behalf of the 3210 Partner- ship, alleging claims of breach agreement, fraud, of the loan intentional interference with contractual relations. The fraud and intentional interference claims subsequently were dismissed before trial for failure to state cause of trial, action. Before the 3210 Partnership Focus, settled with which subsequently dismissed from the proceeded case. Israel to trial on the breach of contract against claim NCC.
The trial judgment court entered against favor of NCC and Partnership. and the 3210 The trial court found that and the Partnership establish, 3210 failed a preponderance of evidence, agency an relationship NCC; between Focus and Israel and the Partnership breached the loan when experienced a material in his financial condi- tion; breach, after Israel’s duty obligation had no disburse funds agreement. under the loan
The first issue raised on is whether Israel and the 3210 established, preponderance aby evidence, an agency relationship between Focus and NCC. Israel asserts that erroneously court concluded that agent Focus was not NCC’s respect to the loan Specifically, Israel contends that evidence, counsel, well as the as admissions of established an agency relationship between NCC and respect Focus with to the loan reviewing role of the court is to determine whether the trial findings contrary court’s are weight to the manifest of the evidence. (Ruggio Ditkowsky v. App. 3d 498 N.E.2d judgment For a to be weight the manifest of the evi- dence, (Wilmette opposite clearly conclusion must be evident. Partners v. Hamel
1184.) A reviewing court judgment merely not reverse a because different conclusions could be drawn or because the reviewing court disagrees, long so as support judgment. there is evidence to Wil- 1184; Ruggio, at N.E.2d Partners, mette *5 at 750. App. 3d at consensual, fiduciary relation law, agency is a Under Illinois right the has whereby principal the legal entities ship two between by performed is work method in which and the manner to control of the legal relations effect right to agent has the and the agent the Hall & Co. Frank B. Co. v. Security Insurance State principal. 940, 945. 588, 595, 630 N.E.2d agreement for participation Here, entered into and NCC Focus 6-A paragraph reveals that loan. The record subject construction agreement reads: participation of the charge or fee to credit without shall service the principals
"The review and evalu- servicing include the shall participant. Such advances, obtaining and by requests borrower ation of all agreement with reports in accordance updated title of review 9(c) respect hereof with Paragraph subject provisions of to the and to performed thereto improvements property,, property, inspections of representative, duly authorized by principal or its haz- agreement of throughout the terms of this the maintenance the enforcement coverage property, insurance on ard loan documents notices of delivery any of including limitation the without any making de- default, any taking of action documents, and all in the loan provided for herein or termination by principal respect to loans normally taken other action granted.” participation is comparable nature in which no relationship question is a factual agency The existence of'an fact, alleging party trier and the determined which must be by preponderance of the evi- relationship prove must agency Co. Investment Ltd. v. Granite Properties Granite dence. be finding agency relationship Here, of no the trial court’s weight manifest contrary to the and Focus was tween NCC right had no to control that NCC The record indicates evidence. agreement was serviced the loan and method which manner servicing to Focus. to loan questions all related Focus. NCC deferred into a merely entered and Focus that NCC The record reveals duties of rights and expressly defined participation agreement which under the loan financing provided they relate to the each as testimony or any documentation agreement. record is devoid of agree loan under the evidencing provided of services NCC’s control Focus’ administra A review of the record reveals ment. careful were not sufficient participation agreement under the tive duties v. John (Wapensky NCC. agent as an establish that Focus acted (N.D. 1991), Supp. 774 F. Co. Hancock Mutual Insurance Life 1119.) There is no evidence that any way Focus could in affect the legal relations of NCC under agreement. the loan legal rights NCC’s and duties were agreement defined the loan participation and the agreement, respectively. assuming,
Even arguendo, that NCC and principal- Focus had a agent relationship and that the trial holding court erred in to the contrary, such error is harmless. The simply record support does not argument the trial court’s determination have substantially prejudiced unduly affected the outcome of the trial.
The next issue raised on is delays whether NCC’s agreement under the loan constituted a material breach estopping rescinding NCC from the loan Israel contends NCC breached prior the loan material in Israel’s condition and that NCC should have been estopped rescinding from the loan agree. We cannot
The record reveals that sought NCC never to rescind the loan agreement. The record reveals that merely refused to continue *6 funding response disbursements in to a change material adverse in condition, Israel’s financial provided as for under express the language agreement. of the loan
Israel relies on Devon (1979), Bank v. App. Schlinder 72 Ill. 3d 147, 447, 390 proposition N.E.2d for the party’s that one breach of contract prima constitutes a allegation defense to the that facia party other has defaulted under a argues delays contract. Israel that funding in requests through five, Israel’s draw two combined with NCC and Focus’ refusal requests seven, to fund draw six and consti- tuted a agreement. material breach of the loan suggests that under Devon Bank funding delays these a any constitute defense to attempt by NCC and Focus to rescind the contract. distinguishable.
Devon Bank is delayed The funding, in the case bar, at only constituted partial a breach. It is uncontroverted each requests of these ultimately funded NCC and Focus. Therefore, funding constitute, the aforementioned delays would most, partial a breach agreement. of the loan " Bank, Under holding in Devon partial '[a] breach one *** party justify does not party’s subsequent other failure to perform; parties may guilty breaches, both having right be of each a ” (Devon damages.’ Bank, to 154, App. 452, 72 Ill. 3d at 390 N.E.2d at (1951).) quoting Corbin, 946, 4 A. Corbin on Contracts at 811 The § any record is also damages devoid of evidence that incurred delay funding Therefore, from the requests through draw two five. properly trial court delays concluded that NCC’s estopping loan did not constitute a material breach agree- monies under loan refusing from to further disburse NCC ment. weight of the manifest to addressed is whether
The next issue be material that a conclusion supports court’s the evidence a material constituted change in Israel’s financial condition adverse erred argues that the court agreement. of the loan breach in Israel’s financial change that a material adverse when concluded agreement. We material of the loan condition constituted a breach disagree. will provision of a only breach contract
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The next issue be addressed is whether the manifest *7 supports conclusion that a material the evidence court’s change in financial condition occurred between adverse Israel’s default. of and the date Focus declared date the loan state- two of Israel’s financial comparison Israel contends that a change in that material adverse ments shows there was no disagree. financial We condition. law, seeking party to enforce the contract
Under contract complied all substantially he proving has the that has burden (Goldstein (1987), Lustig 154 material terms of the contract. v. 164.) 595, a material adverse App. 3d The issue of whether 507 N.E.2d 462
change question in Israel’s financial condition occurred is a of fact finding not on and will be disturbed review unless the is Maco, weight (1981), manifest of the evidence. Barrows v. Inc. 634, 419 N.E.2d Here, the trial properly court determined that there been had change a material adverse Israel’s financial condition. The record liquid reveals that Israel’s assets September decreased between that, 1987; October certain assets listed in Israel’s equity financial statement consisted of in a building certain office project Road, Chicago, Illinois; located at 3400 Dundee that partnership project which owned the Dundee had com bankruptcy proceedings subsequent menced to execution of the loan agreement. argues expert its witness testified that there no change in
adverse his financial argument unper- condition. This is given weigh suasive the trier of is fact entitled to the evidence presented. law, weight Under testimony experts Illinois is a (Doser question Sales, for trier Savage of fact. v. Manufacturing & 814.) (1990), 176, Inc. 142 Ill. 2d For the aforementioned reasons, weight supports the manifest of the evidence the trial court’s change conclusion that there awas material in Israel’s during subject agreement. financial condition life loan next issue on is whether the trial court errone permitted ously NCC to "mend its hold” in order to an articulate perform for excuse its refusal under the loan erroneously permitted contends the trial court NCC to "mend its disagree. hold.” We
Relying 578, on Gibson v. Brown N.E. argues prior that at no time NCC’s refusal to fund did indicate a material adverse condition perform was the basis its refusal under the terms of the loan raising only Israel contends that this condition was "the string last in a refusing baseless reasons for to fund” and violates long-established Illinois law. law, justify termination,
Under Illinois an asserted rescission, repudiation was, by proving of a contract that there time, cause, adequate although it did not become known to (IK him v. Corp. until later. One Financial Place requires Illinois law defendant in a breach of contract claim to first stand defense begun. However, litigation raised after has the law does not require the defense be asserted at the time the contract is terminated. Ordinarily party terminating contract need
463 termination, providing that some reason at the time of explain his Corp. v. United (College Point Boat exists. legally adequate reason 493, 199, 490, a. 200- 12, 15-16, 45 S. (1925), 69 L. Ed. 267 U.S. States 238.) legal (1878), 236, If the excuse App. 01; 2 Ill. Kantzler v. Grant termination, the terminat- of nonperformance exists the time for action even rely in a breach of contract may the excuse ing party on he at the time existed though the excuse he was unaware Commodities, (First Traders, v. Heinhold Commodity Inc. terminated. 1013.) (7th Here, 1985), 1007, not switch NCC did F.2d Inc. Cir. 766 precedent of the condition position at trial. Israel had notice its funding, via the written terms of the loan trial er court The next issue we must address is whether allegedly relat roneously to admit evidence three letters refused into change in financial condition. ing to the material adverse Israel’s in re prejudicial trial committed error Israel contends court attorneys. fusing to into letters from NCC’s admit evidence three of the is a matter within the discretion Admission evidence evidentiary rulings not be absent trial court and will reversed (Jackson (1991), 464, App. 210 Ill. 3d abuse discretion. v. Pellerano 172.) 471, 167, evidence Errors the exclusion of grounds constitute for a new where the errors are serious (Bartlett (1986), prejudicial. Bank & Co. v. McJunkins 147 Trust 405.) 398, seek- App. 3d N.E.2d The burden is on 471, (Jackson, ing prejudice. App. 3d at reversal establish 172.) 569 N.E.2d at Israel has met burden in the at bar. not this case Here, improperly need we not address whether letters were excluded, any is where the record devoid evidence the exclu- The prejudicial sion of such letters was to Israel. record reveals that the letters would have shown that NCC was unsure whether suffered a material condition. any probative of fi- Nowhere in the letters is there evidence contradicting claim that nances. Nor are there statements NCC’s change in experienced he had a material adverse his financial condi- tion. excluding
Alternatively, any error the letters would been have changed of the case. harmless because would not have outcome (Kim (1992), v. Hospital Evanston 378.) not in the case at bar because Reversal is warranted (Yates v. materially Chicago affect the result. exclusion did Club, League National Ball Inc. Careful record indicates that exclu-
N.E.2d review prevent the trial court sion the aforementioned letters did not change in reaching its that a material adverse from determination Israel’s financial condition had occurred. properly issue on next is whether Israel failed to
plead claims NCC for intentional interference with contrac argues tual relations and law common fraud. Israel the trial dismissing court erred in Israel’s claim for tortious interference with failing disagree. contract to state a cause of action. We action, On review of dismissal for failure to state a cause of this well-pleaded allegations court must determine whether the complaint, interpreted light when in the most favorable to the plaintiff, are forth upon sufficient to set a cause of action which relief (Dix granted. *9 must be Mutual Insurance Co. v. LaFramboise 624.) 314, 318-19, 622, 149 Ill. 2d Chapman 597 N.E.2d In v. Crown 995, Corp. (1990), App. 256, Glass 3d 597 N.E.2d the court explained that the elements of the of intentional tort interference (1) rights with a contractual are the existence of valid enforceable (2) another; plaintiff contract between the and the defendant’s aware- (3) relationship; ness of the unjusti- defendant’s intentional and a fied inducement of breach of the subsequent contract which causes a (4) other; by breach damages. and (Chapman, 197 Ill. 3d at 262.) 1005, Here, contrary at contentions, 597 N.E.2d to Israel’s allegations pleaded factual in count III the fourth amended com- plaint sufficiently do not plead against a claim NCC for tortious interference general contract with the for contractor Partnership project. to a Inducement breach contract involves parties acts aimed at plaintiff parties other than a and cause those to (Mitchell (1980), a by plaintiff. breach contract held v. Weiger that 40.) 38, allege 409 N.E.2d Count III did not that Group, party, NCC’s actions CD caused third to breach its contract Therefore, by with Israel. pleaded the facts as not con- could ceivably against state a cause of action NCC. (1) requisite elements law of common fraud are a false state- fact, made; intentionally
ment of material party to whom the right so; statement rely was made had a on it did the state- act; purpose inducing ment was for the other person reliance to whom the statement made led which injury. Estate, Zimmerman v. Real Inc. Northfield App. 3d Here, contrary allegations to Israel’s contentions the factual pleaded complaint in III count of the fourth amended do not suf- ficiently plead a claim NCC for common law fraud. Israel al- leges in a participated that NCC scheme to defraud. Under Illinois law, representations of a future intent to do not constitute a defraud (Baker, Bourgeois Taylor basis fraud claim. & Associates v. 84 App. The record reveals made any allegations that NCC is also devoid that count V any representa- relied on misrepresentations, that Israel fraudulent such, As in the scheme. NCC, participated that even tion NCC and V of the fourth counts III properly the trial court dismissed complaint. amended reasons, affirm the decision we
For the aforementioned County. circuit court of Cook
Affirmed.
CAMPBELL, P.J., concurs. part: in dissenting WOLFSON, concurring part and
JUSTICE correctly the counts for I dismissed agree the trial court common law contractual relations and intentional interference with to admit I the trial erred when refused fraud. also believe court the notice of default. three wrote to Focus after letters officials from easily respectfully That I dissent error cannot be dismissed. judg- majority opinion affirms the trial court’s part ment on the breach of contract claim. intentionally theory sabotaged
It at trial that Focus was Israel’s project having posi- do his financial nothing for reasons to with delays tion. Israel contended trial and this requests to fund draw funding draw four and five and the refusal request Focus and NCC. six were wilful breaches of contract excluded, NCC, no-
In after the first the three letters that were *10 default, a ma- tice of unable to determine whether told Focus was change position position terial in Israel’s financial had oc- Further, change curred. said even if a material adverse that occurred, agree had declaration of default. NCC it could not to Focus’ "precipitous described declaration of default as a action.” In one the letters, resume loan. NCC said it should letters, then, directly These went to the issue of whether a change position subterfuge, in was a claim of adverse material letters, plaintiff’s phony stop funding. to Without the excuse a theory collapsed for lack of foundation. judge’s
I say second-guess the trial factual de- do we should change position. I do termination the issue material of adverse say protect right to relevant litigant’s we should a have important by the trier of fact. evidence considered say any
I evidence do not see how we can "the record is devoid of prejudicial to Israel.” NCC was the exclusion of letters was refusing post-litigation to stated reason for to fund convert Focus’ project. seriously The letters indicate NCC did not believe there was an position. adverse material Israel’s by conduct,
NCC should be bound Focus’ as well as its own. This joint enterprise was between NCC and Their participation Focus. agreement expressly said that to "servicing agent” Focus was act as trial, for the judge loan. At "Well [counsel said: he for NCC] concedes that for purpose disbursing loan, agrees he represented, fact, Focus NCC.” That accurate statement trial court. court, In its brief in this agency question NCC refers as a "non-issue.” The majority finds the support record does not argument the trial nonagency court’s determination of preju- unduly diced affected the outcome of the trial. agency ought issue conduct, seriously. be taken more If NCC is
bound Focus’ part it is wilful breach Focus that proved by be I evidence. believe Israel should a fair have reason, chance prove theory. For I would reverse the judgment court’s and remand breach of contract case for a new trial. ILLINOIS,
THE PEOPLE OF Plaintiff-Appellee, THE STATE OF SAMv. McDONALD, Defendant-Appellant. (1st Division)
First District No. 1 — 92—3605 Opinion filed November