Agee v. First Nat. Bank of Maywood

• Decision Date: 14 February 1979
• Docket Number: No. 78-435,78-435
• Parties: , 25 Ill.Dec. 425 Bernard AGEE, and Rosalie Agee, Plaintiffs-Appellants, v. FIRST NATIONAL BANK OF MAYWOOD, Donald Williams, John Peppers, Donora Realty Company, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 899

386 N.E.2d 899

68 Ill.App.3d 794, 25 Ill.Dec. 425

Bernard AGEE, and Rosalie Agee, Plaintiffs-Appellants, v. FIRST NATIONAL BANK OF MAYWOOD, Donald Williams, John

Peppers, Donora Realty Company, Defendants-Appellees.

No. 78-435.

Appellate Court of Illinois, First District, Third Division.

Feb. 14, 1979.

Richard T. Sikes, Chicago, for plaintiffs-appellants.

Maurice L. Lewis, Frank C. Stanley, Jr., Chicago, for defendants, First Nat. Bank of Maywood.

Michael B. Mann, Maywood, for defendants-appellees, Donald Williams, Donora Realty Company and Frank Peppers.

JIGANTI, Justice:

This is an appeal by the plaintiffs, Bernard and Rosalie Agee, from orders of the circuit court of Cook County, which dismissed both their amended complaint against the defendants, the First National Bank of Maywood (the Bank), John Peppers (also called Frank Peppers), Donald Williams and Donora Realty Company (Donora) and their second amended complaint against Peppers, Williams and Donora for failure to state a cause of action.

On May 9, 1977, a fire destroyed the house which the Agees were purchasing from Peppers. Their fire insurance had expired March 9, 1977. The Agees filed suit against all the defendants, contending that by failing to provide, maintain and renew the fire insurance coverage for the house the defendants breached a duty they owed to the Agees and were liable for the loss of the house. The first complaint was dismissed.

The Agees filed an amended complaint alleging that they had earlier contracted to purchase the house from Peppers. Under the purchase contract and prior to March 9, 1977, they made monthly payments to Peppers and his agents, Williams and Donora. The payments were for principal, interest, taxes and fire insurance. They alleged that the Bank, as holder of the first mortgage on the house, received these funds from Peppers, Williams and Donora and maintained them in an escrow account for the purpose of providing fire insurance. The complaint stated that all the defendants had accepted the monies the Agees gave them for the fire insurance and had in fact provided fire insurance with these funds until March, 1977. According to the complaint, there had been established a course and custom in dealing among all the parties that the defendants "should renew all insurance upon the expiration of any policy procured by the defendants." They stated that this meant that the defendants accepted responsibility for providing adequate fire insurance for the house or at least advising the Agees that the insurance could not or would no longer be provided and that the Agees had relied on the defendants for the insurance. They contended that this duty was breached and asked $35,000 in damages.

In a motion to dismiss, the Bank admitted it held the mortgage on the property and that it held the insurance funds in the escrow account, but disclaimed any duty to provide or maintain insurance on the property. The Bank contended that it had no contractual privity with the Agees and it pointed out that the Agees failed to allege in their complaint that they had made any insurance payments at all to the Bank. The Bank alleged that its responsibility was only to accumulate the money to pay the insurance premiums and to pay such premiums to any insurance broker or agent selected by the Agees or other defendants. The court dismissed the Agees' amended complaint against the Bank and found that there was no just reason to delay enforcement or appeal. On a similar motion filed by the rest of the defendants, the court also struck the complaint but gave the Agees another opportunity to amend it.

In a second amended complaint the Agees realleged the assertions of the amended complaint: that all the named defendants (including the Bank) received money from the Agees to provide fire insurance prior to March 9, 1977, that the Agees relied upon the defendants to provide that insurance and that the defendants knew of the reliance. They stated that from 1967 to March 9, 1977, Peppers, Williams and Donora had provided insurance and it was an established course and custom of dealing among the parties that the defendants "should and would renew all insurance policies upon expiration." The Agees attached the sales contract between Peppers and themselves. The contract specifically named the offices of Donora as the place to which payments would be made. The contract contained a clause which, in part, stated that:

"(The Agees) further agree to keep (the) * * * premises fully insured in companies acceptable to (Peppers) and deposit the policies with * * * (Peppers or the Bank). And upon the expiration of any policies * * * (Peppers) shall have the right to, as agent (of the Agees) to place new insurance (on the property) * * *."

Williams, Donora and Peppers, in a motion to dismiss the second amended complaint, alleged that the real estate contract was the only basis for establishing any duty on the part of any of the defendants. According to Donora, Williams and Peppers, the contract states that the Agees, not anyone else, had the duty to obtain insurance. Further, they state that they were never notified by the Agees or the Bank that the property was not insured and that the Agees do not allege that any of the defendants had notice of the expiration of the insurance.

Finally, the defendant Williams contends that he was neither a party principal to the contract nor an agent of the principal nor in privity with any of the defendants nor the Agees, and that therefore, he could not have a duty to the Agees. The circuit court ruled that no cause of action could ever arise out of the facts alleged in any of the complaints filed by the Agees and dismissed the second amended complaint.

In a motion to dismiss for failure to state a cause of action in a complaint, the complaint must be liberally construed; all facts well pleaded are admitted as true; and all reasonable inferences are drawn from them. (Gartley v. Chicago Housing Authority (1975), 28 Ill.App.3d 705, 707, 329 N.E.2d 252, 254.) The motion to dismiss should not be granted unless it is clearly evident that no set of facts under the pleading could exist which would entitle the plaintiffs to relief. (Courtney v. Board of Education (1972), 6 Ill.App.3d 424, 425, 286 N.E.2d 25, 26.) The Agees contend their complaint alleges a cause of action in negligence. To be entitled to such relief the complaint "must set out: the existence of a duty owed by the defendant(s) to the plaintiff(s), a breach of that duty and an injury proximately resulting from the breach." Cunis v. Brennan (1974), 56 Ill.2d 372, 374, 308 N.E.2d 617, 618.

Under the contract for the sale of the home between Peppers and the Agees, the primary duty for obtaining and maintaining fire insurance on the property...