Beaton & Associates, Ltd. v. Joslyn Mfg. & Supply Co.

• Decision Date: 30 July 1987
• Docket Number: No. 85-3272,85-3272
• Citation: 512 N.E.2d 1286,111 Ill.Dec. 649,159 Ill.App.3d 834
• Parties: , 111 Ill.Dec. 649 BEATON & ASSOCIATES, LTD., an Illinois corporation, Plaintiff-Appellee, v. JOSLYN MANUFACTURING & SUPPLY CO., an Illinois corporation, Defendant-Appellant, (John L. McGinley, Jr., Defendant-Appellee, v. Wilbur L. Beaton, Sr. and Wilbur L. Beaton, Jr., Counterdefendants-Appellees).
• Court: United States Appellate Court of Illinois

Page 1286

512 N.E.2d 1286

159 Ill.App.3d 834, 111 Ill.Dec. 649

BEATON & ASSOCIATES, LTD., an Illinois corporation, Plaintiff-Appellee, v. JOSLYN MANUFACTURING & SUPPLY CO., an Illinois corporation Defendant-Appellant, (John L. McGinley, Jr. Defendant-Appellee, v. Wilbur L. Beaton, Sr. and Wilbur L Beaton, Jr., Counterdefendants-Appellees).

No. 85-3272.

Appellate Court of Illinois First District, Fourth Division.

July 30, 1987.

Rehearing Denied Sept. 22, 1987.

Reuben & Proctor, Chicago (William G. Schopf, Jr., Andrew Butz, of counsel), for defendant-appellant.

Patrick J. Leston, Ltd., Glen Ellyn (Patrick J. Leston, Maureen C. Strauts, of counsel), for plaintiff-appellee.

Clausen Miller Gorman Caffrey & Witous, Chicago (James T. Ferrini, Paul D. Sheldon, Ivar R. Azeris, of counsel), for counterdefendants-appellees.

Justice JOHNSON delivered the opinion of the court:

Plaintiff, Beaton and Associates, Ltd., brought an action in the circuit court of Cook County against defendants, the Joslyn Manufacturing and Supply Company, and John L. McGinley. Plaintiff sought damages and other relief from Joslyn for services rendered. Plaintiff alleged also that Joslyn interfered with its business relationship with McGinley. Plaintiff additionally alleged that McGinley interfered with the contract between it and Joslyn, and also that McGinley conspired with Joslyn to injure it.

Joslyn counterclaimed, alleging that plaintiff obtained its contract through fraud. Joslyn sought damages for the common law fraud and also sought damages for statutory fraud, punitive damages, attorney fees and costs.

The trial court entered judgment for plaintiff only on the unpaid contract balance of $59,038.18 and entered judgment also for plaintiff on Joslyn's counterclaim. The court, however, subsequently amended its order and entered judgment for Joslyn on its counterclaim. Although the court found plaintiff guilty of common law fraud, it limited Joslyn's award to $35,170 in actual damages and denied Joslyn an additional $11,022 that it would have paid plaintiff as a result of the fraud. The court also denied Joslyn statutory fraud and punitive damages, attorney fees and costs.

On appeal, plaintiff and McGinley contend that the trial court erred in entering judgment for Joslyn on the counterclaim, or at least was correct in limiting Joslyn's award to the amount that Joslyn actually paid plaintiff rather than the amount it would have paid as a result of the fraud. Joslyn contends on appeal that it should not pay the unpaid contract balance due to the fraud, and that the trial court erred in limiting its award and in denying it statutory fraud and punitive damages, and attorney fees.

We affirm, as modified, and remand.

The trial court found the following facts. Joslyn operated a manufacturing plant of its Electrical Apparatus Division (EAD) at 969 West 37th Place in Chicago, Illinois. The United Steel Workers Union represented the workers at the EAD plant. In early 1979, Joslyn held contract negotiations with a local of the union. At this time, Joseph S. Washburn was a Vice President of Joslyn and its Director of Industrial Relations. Washburn was responsible for conducting the negotiations and planning Joslyn's response to a work strike and related plant security problems.

The record further shows that on February 27, 1979, Washburn resigned his positions with Joslyn, but remained employed by Joslyn as an advisor and consultant to its President. Washburn continued to serve as Joslyn's chief negotiator in the labor dispute at the EAD plant. He also continued to plan for security services if a strike occurred. Washburn received a salary and health insurance benefits from Joslyn. In his written agreement, Washburn promised that he would do nothing detrimental to Joslyn's business.

Washburn subsequently formed J.W. Associates, Inc., a privately held corporation in the business of labor consulting. Joslyn provided no offices for Washburn; he maintained offices for J.W. Associates at his home. Joslyn knew of Washburn's consulting firm.

Wilbur L. Beaton, Sr., and Wilbur L. Beaton, Jr., represented plaintiff, Beaton and Associates, Ltd., an investigation and security service firm. In early April 1979, Washburn contacted plaintiff concerning the possibility of Joslyn obtaining from plaintiff armed guards and related strike security services. Washburn told plaintiff that he was a labor consultant, had his own business and referred to Joslyn as his client; he distributed business cards advertising J.W. Associates, Inc.

Plaintiff chose John L. McGinley, Jr. to supervise the proposed strike security operation for the plant. McGinley had done strike security work previously for plaintiff. On April 16, 1979, Washburn, Beaton Jr., and McGinley met and discussed security service for Joslyn during the anticipated strike. They eventually agreed that plaintiff would charge Joslyn $30 per hour for armed guards, $40 per hour for McGinley's supervision and $100 per hour for plaintiff. Plaintiff would charge Joslyn for equipment at rental cost. Plaintiff additionally charged Joslyn $500 for its survey of the plant to determine its security needs. McGinley and plaintiff eventually agreed, verbally, to a 50% division of the profits. Washburn considered two other security firms, but chose plaintiff.

The record further shows that Washburn, plaintiff and McGinley entered into an additional agreement on April 16, 1979. Beaton Jr. stated that he gave a 20% bonus to those who referred business to him because the company derived its business entirely from referrals. Plaintiff paid Washburn such a fee: $6 for every hour of labor billed to Joslyn and $100 out of the strike survey fee. Joslyn did not know of this agreement; Washburn, plaintiff and McGinley did not tell Joslyn about it.

On May 6, 1979, the union struck Joslyn's EAD plant. Washburn notified plaintiff of the strike; plaintiff sent McGinley to the plant to establish and supervise plant security. Plaintiff billed Joslyn weekly; Joslyn's payments were weekly. Washburn reviewed the weekly invoices and Joslyn paid them at his approval. A week after the strike began, McGinley requested more money from plaintiff because he was spending more time at the plant than he anticipated. McGinley and plaintiff agreed on a $27 per hour salary in addition to his 50% share of the profits. The hourly salary came out of plaintiff's $40 per hour billing for McGinley's time.

In mid-June, Joslyn hired Fred Haynes, a labor consultant, to supervise its strike security and to cut security costs. Shortly thereafter, Joslyn terminated plaintiff's services, effective July 1, 1979. Joslyn then offered the plant security job to McGinley. McGinley told Joslyn that plaintiff owed him money and he feared that plaintiff would not pay him if he accepted the offer. Consequently, Joslyn held back payment of plaintiff's last two invoices, totalling $59,039.18, to insure that McGinley would receive his money. McGinley accepted Joslyn's offer. Plaintiff did not pay McGinley.

Between May 6, 1979 and July 1, 1979, Washburn received from plaintiff payments totalling $35,170 pursuant to their April 16, 1979 agreement. Had Joslyn paid plaintiff its last two invoices, plaintiff would have paid Washburn an additional $11,022. Joslyn did not know of plaintiff's payments to Washburn and no one told Joslyn about them.

On April 12, 1984, the trial court found the foregoing facts and entered judgment for plaintiff on the contract. The trial court found also that Joslyn did not interfere with plaintiff's business relationship with McGinley. The court likewise found that McGinley did not interfere with the contract between it and Joslyn. Additionally, the court found that plaintiff did not prove the existence of a conspiracy between McGinley and Joslyn. The trial court also entered judgment for McGinley on his counterclaim against plaintiff; the court awarded him his $27 per hour salary, without interest, out of plaintiff's judgment against Joslyn.

The trial court also found for plaintiff on the counterclaim. The court did not find sufficient "evidence to show that [plaintiff] knew that Washburn was not an independent labor consultant but was an employee of Joslyn." Consequently, the court found no fraud.

On October 9, 1985, however, the trial court amended its findings, concluding that the agreement between plaintiff and Washburn was based on constructive or common law fraud. The court reasoned that Joslyn need not show that Washburn was its employee, but rather only that he was its agent. Washburn, therefore, owed Joslyn a fiduciary duty of loyalty. Consequently, the trial court vacated its earlier judgment for plaintiff on the counterclaim and entered judgment for Joslyn.

The trial court, however, failed to find plaintiff guilty of statutory fraud. The trial court also limited Joslyn's award to the amount that Washburn actually received, $35,170; the court excluded the additional $11,022 that Washburn would have received had Joslyn paid plaintiff's last two invoices. The court also denied Joslyn punitive damages. The trial court entered an amended final judgment order on October 22, 1985, wherein it incorporated all of its prior orders and made final allocations between plaintiff and McGinley. Plaintiff, Joslyn and McGinley appeal.

Joslyn appeals from plaintiff's judgment for the unpaid contract balance of $59,038.18, contending that it should not pay plaintiff due to its fraud. Plaintiff and McGinley dispute their liabilities on Joslyn's fraud claims and all parties dispute the trial court's disposition of those claims. We note that this was a bench trial in which the trial court heard conflicting evidence. Accordingly, we will not disturb the trial court's findings and substitute our own opinion unless its holding is against the manifest weight of the evidence. Greene v. City of Chicago (1978), 73 Ill.2d 100, 110, 22...