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Gerill Corp. v. Jack L. Hargrove Builders, Inc.
Citations: 128 Ill. 2d 179; 131 Ill. Dec. 155; 538 N.E.2d 530; 1989 Ill. LEXIS 49Docket: No. 66788; No. 67035
Court: Illinois Supreme Court; March 29, 1989; Illinois; State Supreme Court
The court opinion, delivered by Justice Clark, addresses an appeal stemming from a Du Page County circuit court judgment against Jack L. Hargrove Builders, Inc. and its president, Jack L. Hargrove, who were found liable for fraudulent misrepresentations to John F. Rosch. The circuit court dismissed Hargrove’s third-party complaint seeking contribution from Gerill Corporation and its president, Gerald A. Heinz, under the Illinois Contribution Among Joint Tortfeasors Act, ruling that intentional tortfeasors are not entitled to contribution. The appellate court affirmed Hargrove's liability but reversed the dismissal, stating that intentional tortfeasors can indeed seek contribution under the Act. Gerill and Heinz petitioned for leave to appeal this ruling, and Hargrove filed a separate petition challenging various circuit court evidentiary and procedural findings. The Supreme Court granted and consolidated both petitions, ultimately reversing the appellate court's position on the Contribution Act while affirming the remainder of the circuit court's findings. In the factual background, it is noted that in 1976, Heinz and Hargrove agreed to a joint venture to develop land owned by Gerill Corporation, with Gerill contributing the land and Hargrove managing the development and finances. Hargrove secured a loan and later proposed a buyout of one partner’s interest in the venture. Heinz, unable to finance the buyout, sought Rosch’s assistance to purchase Hargrove's interest, leading to a meeting where a contract was drafted, which Hargrove later refused to sign, resulting in further contractual negotiations. The contract between Jack L. Hargrove Builders, Inc. and the Gerill Corporation, involving parties Jack L. Hargrove, Gerald A. Heinz, and John F. Rosch, stipulated that Hargrove informed them of all open invoices and liabilities related to the Woodridge properties. The contract mandated that Rosch, Gerill, and Heinz would assume all liabilities and indemnify Hargrove against any claims pertaining to these properties. During the signing on March 1, 1981, Rosch inquired if the 19-page document encompassed all debts concerning the properties, to which Hargrove allegedly confirmed; however, he later disputed this exchange. Following the contract signing, Rosch paid Hargrove $200,000 and engaged accountant Daniel Gilmartin to review the joint venture’s financial records. Subsequently, they found undisclosed or inaccurately reported liabilities not included in Hargrove's list. On November 15, 1982, Rosch, Gerill, and Heinz initiated a four-count complaint against Hargrove in DuPage County, seeking an accounting, a declaratory judgment, and damages for fraudulent misrepresentation. This led to separate complaints from Rosch for fraudulent misrepresentation and from Gerill and Heinz for an accounting, the latter of which has been severed. In response, on November 18, 1982, Hargrove filed a multi-count complaint in Cook County against Rosch, Gerill, Heinz, and two banks, which were later dismissed. This complaint was transferred and consolidated with the case from Rosch, Gerill, and Heinz, resulting in the dismissal of six counts by the circuit court. Hargrove then filed a second amended complaint with ten counts on September 6, 1983, claiming that Rosch, Gerill, and Heinz were responsible for a $352,000 loan from Concordia Federal Savings and Loan Association as per the March 1, 1981, contract. He sought injunctive relief and specific performance to ensure payment of the loan to avoid foreclosure, alongside a claim of conspiracy to defraud and a request to rescind allegedly fraudulent property conveyances made by Rosch, Gerill, and Heinz. Counts V and VI of the complaint sought $30,000 in damages for breach of contract and promissory estoppel related to an alleged $50,000 loan from Hargrove to Rosch, Gerill, and Heinz. Counts VII and VIII involved similar claims against the same parties concerning an agreement with an architect for the Woodridge properties. Count IX requested rescission of a March 1 contract and restitution from Rosch, Gerill, and Heinz. Count X sought contribution from Gerill and Heinz contingent on Hargrove being found liable for fraudulent misrepresentation to Rosch. On January 31, 1984, Hargrove filed a motion for a change of venue, citing perceived prejudice from the circuit court judge. This motion was not granted outright due to its late timing but was assigned to another judge for consideration. After hearings, it was determined there was no prejudice, and the motion was denied. Subsequently, Rosch, Gerill, and Heinz filed a motion to dismiss most of Hargrove's second amended complaint, resulting in the dismissal of counts I, II, III, IV, VII, VIII, IX, and X. Counts I, II, III, IV, IX, and X were dismissed with prejudice, while Hargrove was allowed to amend counts VII and VIII. Hargrove later filed another motion for a change of venue, which was granted, transferring the case to a different judge in Du Page County. On February 7, 1985, Hargrove sought to file a third amended complaint with 11 counts, closely mirroring the previous counts. Count XI introduced a new claim for 'Contractual Indemnification' related to a $352,000 Concordia loan, but the judge only permitted counts V through VIII to be filed, dismissing counts I through IV, IX, and X with prejudice. Count XI was denied but allowed to be repleaded. Hargrove was later granted leave to file counts I and IX against Rosch only, as the previous dismissal did not apply to Rosch. Hargrove subsequently added a count XII for contractual indemnification. On September 19, 1985, counts I, VI, and IX were dismissed without leave to replead, while count XII was dismissed with one final chance to replead for breach of contract concerning the Concordia loan. Count VIII was also dismissed, and Hargrove later filed an amended count XIII for contractual indemnification and breach of contract. In September 1986, cross-motions for summary judgment were filed regarding count XIII. Hargrove's response to Rosch’s motion lacked supporting evidence or affidavits, relying instead on exhibits from its own motion for summary judgment. The trial court judge ruled that only materials within Rosch’s motion and Hargrove’s direct response would be considered, excluding Hargrove’s additional motion. Rosch's motion for summary judgment was granted due to Hargrove's failure to provide evidence of indemnity related to the Concordia loan. Hargrove's subsequent motion to reconsider was denied, as the court noted Hargrove had sufficient time to prepare for the hearing but did not raise any facts disputing the issue of liability for a $352,000 mortgage. The case proceeded to trial on September 29, 1986, concerning Rosch's claim of intentional misrepresentation and Hargrove's counterclaim of $30,000 for an alleged loan. The court found Hargrove had intentionally misrepresented liabilities exceeding $1.1 million, but reduced the damages to approximately $300,000, ultimately settling at $148,799.69 to account for Rosch’s half-interest in the joint venture. Hargrove's counterclaim for $30,000 was denied. During the trial, Hargrove was allowed to file a third-party complaint against Gerill and Heinz for contribution under the Illinois Contribution Act, alleging fraudulent and negligent misrepresentation. Gerill and Heinz moved to dismiss this amended complaint, with the hearing occurring post-judgment for Rosch. The court dismissed both counts of Hargrove's complaint, citing precedent that intentional tortfeasors cannot seek contribution and a lack of evidence showing Gerill and Heinz were in the business of providing information to others. The judge also indicated that, had the claims been evaluated on their merits, the outcome would still favor Gerill and Heinz, given the insufficiency of evidence against them. The appellate court upheld all trial court rulings except for the dismissal of Hargrove’s third-party complaint for contribution. It identified a conflict among appellate districts regarding whether intentional tortfeasors can seek contribution under the Contribution Act. The second district (Dovin v. Winfield Township) recognized this right, whereas the first district (Bresland v. Ideal Roller) denied it. The fifth district (Pipes v. American Logging Tool Corp.) allowed contribution for willful and wanton tortfeasors. Following Dovin, the appellate court ruled that intentional tortfeasors are entitled to contribution, reversing the trial court's dismissal of Hargrove's claim and remanding the case for consideration of the merits. In Hargrove’s appeal, he challenges several trial court findings, including the determination of fraudulent misrepresentation regarding the joint venture’s liabilities, the judgment against him on a counterclaim, the dismissal of parts of his complaint, and the granting of summary judgment against him. The appellate court emphasized that factual determinations, such as those regarding fraudulent misrepresentation, are upheld unless contrary to the manifest weight of the evidence. The elements of fraudulent misrepresentation were outlined, and although Hargrove contended that he did not knowingly make false statements, evidence showed he misrepresented the joint venture's liabilities and misled others into believing his statements were complete, supporting the circuit court's findings. Additionally, it was clarified that misrepresentation is considered fraudulent even without knowledge of its falsity if made with reckless disregard for the truth. The court found that Hargrove misrepresented the joint venture’s liabilities by approximately $1.1 million, despite Hargrove's claim of inadvertence. The circuit court determined that Hargrove, who had exclusive control over the joint venture’s financial records, either knowingly misrepresented the liabilities or acted with reckless disregard for the truth. Hargrove contended that Rosch's reliance on these misrepresentations was unjustified, arguing Rosch could have independently verified the records. The court disallowed over $800,000 of the misrepresented liabilities, concluding they were ascertainable by Rosch through reasonable diligence, specifically taxes, mortgages, and loans. However, the court permitted recovery for construction-related bills and damages from a Cook County lawsuit, reasoning that Rosch was justified in relying on Hargrove’s representations due to the lack of a written agreement and the complexities in verifying certain liabilities. The court's rationale was supported by legal precedents affirming that reliance without independent verification is justified when the person being misled cannot readily discover the truth. Rosch testified that he relied solely on a 19-page list of liabilities to assess the joint venture's value. Hargrove also challenged the circuit court's damage calculation, asserting that it should be based on the actual money paid due to misrepresentation, referencing that some misrepresented liabilities were never paid or paid after Rosch sold his interest. Disagreement exists regarding the application of the benefit-of-the-bargain rule in fraudulent misrepresentation cases, which dictates that damages are calculated by the difference between the actual value of the sold property and its value had the misrepresentations been accurate. In this instance, Hargrove misrepresented the joint venture's liabilities, leading the circuit court to determine damages based on the disparity between the misrepresented and actual liabilities. The subsequent handling of these liabilities by Rosch or the joint venture was deemed irrelevant. The circuit court's findings were supported by evidence, and Hargrove's counterclaim for $30,000, associated with a disputed $50,000 loan to Rosch, Gerill, and Heinz, was rejected. Hargrove's claims lacked documentation, as there was no signed note from the alleged borrowers, and Hargrove controlled the checking account, which had a negative balance prior to the loan deposit. Additionally, Hargrove had withdrawn funds for personal use and deposited funds belonging to Rosch and Heinz into the account. The credibility of Hargrove and his secretary's testimonies was questioned, leading the trial judge to find a significant lack of supporting documentation for Hargrove's claim. The trial court’s evidentiary findings were upheld, affirming the ruling in favor of Rosch, Gerill, and Heinz. Hargrove also contended that the circuit court erred in dismissing parts of his third amended complaint. However, the second judge upheld the dismissal based on earlier similar dismissals by the original judge, citing the lengthy duration of the case and the procedural context. Hargrove does not contest the original judge’s order dismissing parts of the second amended complaint but asserts that the subsequent judge should have disregarded the original judge's rulings. He references a rule stating that if a judge erroneously denies a change of venue, subsequent orders are void. Hargrove claims this demonstrates the original judge's prejudice, but this assertion is rejected. The original judge denied Hargrove’s initial change of venue petition due to a lack of demonstrated prejudice, and later dismissed most of Hargrove's second amended complaint. An eight-month delay led to a new petition for change of venue, which was granted not due to prejudice but due to the unprofessional conduct of Hargrove's attorneys. Ultimately, the subsequent judge's discretion in following the original rulings was upheld, with no abuse of discretion found. Regarding Hargrove's counterclaim for contractual indemnification concerning a $352,000 loan from Concordia, the circuit court granted summary judgment for Rosch, Gerill, and Heinz. Hargrove's arguments include that the loan was linked to Woodridge properties and that it was treated as a liability by the joint venture. He also outlines the history of payments and obligations associated with the loan, including a claim from Concordia against him. However, Hargrove fails to establish a key element for indemnity; specifically, he has not shown any actual loss or a judgment against him related to the loan. As a result, the circuit court's decision to grant summary judgment against Hargrove on the indemnification claim was deemed correct. Hargrove contends that the circuit court erred by allowing Rosch to represent himself while also having co-counsel, arguing this violates Illinois law. He cites case law indicating that an accused cannot simultaneously act pro se and be represented by counsel, as established in *People v. Ephraim* and *People v. Page*. Hargrove asserts there is no constitutional or statutory right to dual representation. However, the court concludes that while there is no inherent right to this arrangement, it is within a trial court judge's discretion to permit it, supported by various federal and state court rulings. The court finds no abuse of discretion in allowing Rosch’s dual representation. Regarding the appeal by Gerill and Heinz, the issue at hand is whether intentional tortfeasors can seek contribution under the Illinois Contribution Among Joint Tortfeasors Act. This has created a split in appellate court interpretations, with some cases affirming that intentional tortfeasors are entitled to contribution while others deny it. To resolve this, the court seeks to ascertain the General Assembly’s intent through the Contribution Act's language, which does not distinguish between intentional and nonintentional torts. Hargrove argues that the term "tort" encompasses both types, asserting that the statute thus provides intentional tortfeasors with a right to contribution. The term "tort" is recognized as ambiguous, with historical definitions proving inadequate. Prosser noted that attempts to define "tort" often result in overly broad or narrow interpretations, while Wigmore criticized the term's obfuscation of understanding. The court's previous definition of a tort as an act or omission leading to a civil remedy, distinct from a contract, reflects this ambiguity. This complexity necessitates examining the legislative history of the Contribution Act to understand the General Assembly's intent, particularly in light of the court's ruling in Skinner v. Reed-Prentice Division Package Machinery Co., which overturned the no-contribution rule among tortfeasors. Skinner established that strict liability defendants could seek contribution from third parties, correcting the misapplication of the English case Merryweather v. Nixan, which only prohibited contribution for intentional tortfeasors. The Skinner decision argued for abolishing the no-contribution rule, although a dissenting justice highlighted the ambiguity regarding intentional tortfeasors specifically. Hargrove's interpretation incorrectly suggests that Skinner eliminated the no-contribution rule for all tortfeasors. The court determined that a right of contribution exists for defendants in strict liability actions but did not address whether such a right applies to intentional tortfeasors. The dissent in the Skinner case indicated that the majority's reliance on Merryweather, which denied contribution to intentional tortfeasors, maintained the no-contribution rule for them. The interpretation of Skinner aligns with the General Assembly's understanding prior to the enactment of the Contribution Act, which aimed to establish a right of contribution specifically for negligent tortfeasors. Legislative floor debates revealed that the Act was intended to address contributions among joint tortfeasors who caused damages through negligence. Hargrove contended that the removal of a clause excluding intentional tortfeasors implied their inclusion in the Act. However, the deletion was made by the Senate Judiciary Committee without full debate, and no rationale was documented. Thus, the court declined to speculate on legislative intent concerning the clause's removal. Ultimately, the court concluded that intentional tortfeasors are not entitled to contribution under the Illinois Contribution Among Joint Tortfeasors Act, overruling Dovin v. Winfield Township, which had previously supported such a right. The appellate court's decision regarding Rosch’s and Hargrove’s claims was upheld, while the part concerning intentional tortfeasors was reversed.