Capitol Indem. Corp. v. Stewart Smith Intermediaries, Inc.

• Decision Date: 11 May 1992
• Docket Number: No. 1-90-1193,1-90-1193
• Citation: 229 Ill.App.3d 119,593 N.E.2d 872
• Parties: , 171 Ill.Dec. 52 CAPITOL INDEMNITY CORPORATION, a Wisconsin corporation, Plaintiff-Appellant, v. STEWART SMITH INTERMEDIARIES, INC., individually and formerly known as Stewart Smith East, Inc.; Stewart Smith Treaties, Inc.; Stewart Smith and Kingaby, Inc.; and Stewart Smith & Company, Inc., Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 872

593 N.E.2d 872

229 Ill.App.3d 119, 171 Ill.Dec. 52

CAPITOL INDEMNITY CORPORATION, a Wisconsin corporation Plaintiff-Appellant, v. STEWART SMITH INTERMEDIARIES, INC., individually and formerly known as Stewart Smith East, Inc.; Stewart Smith Treaties, Inc.; Stewart Smith and Kingaby, Inc.; and Stewart Smith & Company, Inc., Defendants-Appellees.

No. 1-90-1193.

Appellate Court of Illinois First District, First Division.

May 11, 1992.

Pretzel & Stouffer, Chartered, (Joseph B. Lederleitner, John V. Smith III, Robert Marc Chemers and Michael G. Bruton, of counsel), Chicago, for plaintiff-appellant.

Peterson & Ross, (Robert S. Milnikel, Vincent P. Reilly and James A. Knox, Jr., of counsel), Chicago, for defendants-appellees.

Justice CAMPBELL delivered the opinion of the court:

Plaintiff Capitol Indemnity Corp. ("Capitol") appeals an order of the circuit court of Cook County dismissing its complaint against defendant Stewart Smith Intermediaries, Inc. ("SSI"), individually and formerly known as Stewart Smith East, Inc. ("SSE"); Stewart Smith Treaties, Inc. ("SST"); Stewart Smith & Kingaby, Inc. ("SS & K") and Stewart Smith & Company, Inc. ("SS & Co."). For the following reasons, we affirm.

The record on appeal indicates the following facts. On July 13, 1989, Capitol filed a complaint against defendant in the circuit court of Cook County. The complaint indicated that it was a refiling of a cause of action previously dismissed for want of prosecution on April 4, 1989. The complaint was 24 pages long; 115 pages of exhibits were attached.

Count I of the complaint alleged the following facts. In 1973, Capitol agreed to reinsure the business of certain issuing insurance companies whose policies were placed and managed by a common agent. This agreement was memorialized in two contracts, numbered 0697 and 0697A. Contract 0697 was a 20% quota share reinsurance agreement between Capitol and the policy issuing companies of OMNI Aviation Managers, Inc. ("OMNI"), which included the National Indemnity Company ("National"), among others. Contract 0697 was signed by Capitol and Michael Eisenstadt, President of OMNI, as the agent of National. Contract 0697A was a retrocession agreement between Capitol and the Superior Insurance Company of Providence ("Superior"). Under this agreement, a portion of the business Capitol had reinsured would go to Superior on the same terms as the original agreement. Michael Eisenstadt signed 0697A as an officer of Superior. This second agreement was typed on SST stationery.

In 1976, Capitol filed suit in the Federal District Court for Central California against Eisenstadt, OMNI, Superior and Upstart Eagle, Inc. ("Upstart"), which managed both OMNI and Superior and which was also owned by Eisenstadt. Capitol alleged that it was fraudulently induced into executing the retrocession agreement. The federal court entered a judgment in favor of Capitol for $75,980.29 in compensatory damages and $100,000 in punitive damages.

The complaint also alleged that defendant brokered the business of the issuing-fronting companies, including the business of National. Defendant was allegedly compensated for the brokerage services. The complaint then alleged that at the time of the transactions at issue, Capitol dealt with employees or agents of the defendant broker, usually Harry Ambrose and Leonard Corsentino, who were officers and directors in the various Stewart Smith companies. The complaint listed a number of exhibits from the California lawsuit which identify communications between the various parties, including alleged wrongdoers. The complaint also noted that an order in the California lawsuit states that in 1972 and 1973, Capitol and Eisenstadt (on behalf of Superior) negotiated through SST.

The complaint also alleged that Ambrose and Corsentino were initially employed by SS & Co. In 1969, the reinsurance business of SS & Co. was spun off to SS & K, which later changed its name to SST. Around 1975, SST was merged into SSE. SSI was formed in 1982; sometime thereafter the reinsurance business of SSE was merged into SSI. Ambrose and Corsentino allegedly brokered business for these entities as a business conduit, as the entities were interrelated and had a common business purpose and common control. It was also alleged that the parent corporation for these various entities is Stewart Wrightson, P.L.C.

Count I further alleged that through Ambrose and Corsentino, defendant became aware of negative facts regarding the acquisition and runoff of the fronting companies managed by Eisenstadt for several underwriting periods prior to the period beginning July 1, 1972. These negative facts were set forth in eleven subparagraphs of the complaint. The complaint concluded that defendant therefore "had knowledge of, consented to and acquiesced" in Eisenstadt's activities, was in "complicity" with his wrongdoings and cooperated with others to "silently aid and abet Eisenstadt." The complaint alleges in the alternative that defendant conspired with Eisenstadt to defraud Capitol.

Count I then alleged that defendant, as a broker/intermediary, acted as an agent for Capitol in the reinsurance transaction and stood in a fiduciary relationship to Capitol. The failure of defendant to disclose the allegedly negative facts specified in the complaint was alleged to be a breach of that fiduciary duty which caused Capitol to suffer losses in excess of $735,278 plus interest, costs and prejudgment interest. Count I sought to pierce defendant's corporate veil to ensure that Capitol could recover the damages it sought.

Count II of the complaint incorporated the allegations of count I, but sought the production of a number of documents pursuant to an accounting in equity. Count II also alleged that it was not until the adjudication of the California lawsuit in 1980 that Capitol discovered defendant's alleged wrongful acts.

On August 13, 1989, defendant moved to dismiss the complaint. Following a hearing on the motion, the trial court entered an order on January 19, 1990, granting defendant's motion to strike and dismiss the complaint, but also granting leave for Capitol to file an amended complaint within 28 days. On February 20, 1990, Capitol filed a motion to extend the time for filing an amended complaint, stating that its failure to meet the deadline in the trial court's order was due to an inadvertent error. On February 27, 1990, defendant filed a motion to dismiss the case with prejudice, noting that Capitol's motion indicated that the amended complaint was not completed at that time and sought an additional 14 days to file. Capitol then sought leave to file its amended complaint, which contained substantially similar allegations to the initial complaint, but which ran only 16 pages in length. Most of the exhibits were not attached to the amended complaint. Defendant filed its objections to that motion.

Following a hearing held on April 12, 1990, the trial court granted Capitol's motion to file the amended complaint, but also granted SSI's motion to dismiss the amended complaint with prejudice. Capitol timely filed a notice of appeal.

The sole issue on appeal is whether the trial court erred in dismissing Capitol's amended complaint. A trial court should dismiss a cause of action on the pleadings only if it is clearly apparent that no set of facts can be proven which will entitle a plaintiff to recover. (Burdinie v. Village of Glendale Heights (1990), 139 Ill.2d 501, 504, 152 Ill.Dec. 121, 124, 565 N.E.2d 654, 657.) This broad statement, however, should not be misconstrued as an adoption of notice pleading. (Board of Education v. A, C & S, Inc. (1989), 131 Ill.2d 428, 438, 137 Ill.Dec. 635, 640, 546 N.E.2d 580, 585.) Illinois is a fact-pleading jurisdiction. (Washington v. Chicago Board of Education (1990), 204 Ill.App.3d 1091, 1096, 150 Ill.Dec. 11, 14, 562 N.E.2d 541, 544.) When reviewing a dismissal, it is this court's duty not only to take all well-pleaded facts as true, but also to disregard mere conclusions of law or fact unsupported by the facts alleged. (See Weil, Freiburg & Thomas, P.C. v. Sara Lee Corp. (1991), 218 Ill.App.3d 383, 389, 160 Ill.Dec. 773, 778, 577 N.E.2d 1344, 1349.) On appeal, this court may affirm the dismissal of the claim on any legally valid basis appearing in the record. Natural Gas Pipeline Co. v. Phillips Petroleum Co. (1987), 163 Ill.App.3d 136, 142, 114 Ill.Dec. 372, 376, 516 N.E.2d 527, 531.

This court has recognized the difficulties facing a pleader in distinguishing between ultimate facts and conclusions and between pleading too much and too little. (Washington, 204 Ill.App.3d at 1096, 150 Ill.Dec. at 14, 562 N.E.2d at 544.) Nevertheless, the prolixity of Capitol's complaint should be noted. All pleadings must contain a "plain and concise statement of the pleader's cause of action * * *." (Ill.Rev.Stat.1989, ch. 110, par. 2-603(a).) The amended complaint, while shorter than its predecessor, still contains redundancies and does not appear to be either plain or concise. Capitol admits in its brief that the amended complaint "is not a model of pleading" while arguing that a lengthy pleading was necessary because of the complexity of the case. Yet the complexity of the case should underscore, rather than obviate, the necessity for a plain and concise statement of the cause of action. Moreover, if plaintiff believed that detailing the facts giving rise to the California litigation was essential to understanding the case, it should be noted that the brief contains numerous facts detailing the background of this litigation which may have aided the trial court in understanding the litigation, but which are absent from the pleadings. The complaint may also confuse the reader, for example, by referring to National as "the Defendant" in paragraph two of its amended complaint, while later noting that National was dismissed as a defendant during the 1985 litigation.

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