Hamilton v. Williams

• Decision Date: 24 November 1992
• Docket Number: No. 2-92-0026,2-92-0026
• Citation: 604 N.E.2d 470,237 Ill.App.3d 765
• Parties: , 178 Ill.Dec. 214 Allan J. HAMILTON, Indiv. and as Trustee, et al., Plaintiffs-Appellants, v. J. McDonald WILLIAMS, Joel C. Peterson, Jon D. Hammes, Donald J. Thomas, Jr., Mark Biggs and Trammell Crow Company, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 470

604 N.E.2d 470

237 Ill.App.3d 765, 178 Ill.Dec. 214

Allan J. HAMILTON, Indiv. and as Trustee, et al Plaintiffs-Appellants, v. J. McDonald WILLIAMS, Joel C. Peterson, Jon D. Hammes Donald J. Thomas, Jr., Mark Biggs and Trammell Crow Company, Defendants-Appellees.

No. 2-92-0026.

Appellate Court of Illinois Second District.

Nov. 24, 1992.

Myron M. Cherry, Peter Flynn, William R. Coulson, Cherry & Flynn, Chicago, James R. Schirott (argued), Schirott & Associates, P.C., Itasca, Allan J. Hamilton, Indv., Managing General Partner, Philip Leon Harris, Wauterlek, John Wauterlek, Indv. & Trustee, Lunt, Ronald C. Lunt, and Trammell Crow Mgmt. Co.

Howard P. Ryan, Peterson & Ross, Chicago.

Daniel E. Reidy (argued), James R. Daly, F. Samuel Eberts, III, Carol A. Tiesi, Jones, Day, Reavis & Pogue, Chicago, for J. McDonald Williams, Joel C. Peterson, Jon D. Hammes, Donald J., Thomas Jr., Biggs, Mark Biggs, and Trammell Crow Co.

John E. Norton, O'Reilly Cunningham Norton & Mancini, Wheaton, Dan K. Webb, Winston & Strawn, Chicago.

Justice DOYLE delivered the opinion of the court:

Plaintiffs, former partners in a real estate venture with defendants, filed this timely appeal from an order of the circuit court of Du Page County denying, inter alia, their motion pursuant to section 2-1401 of the Civil Practice Law (Ill.Rev.Stat.1991, ch. 110, par. 2-1401) to declare as void for lack of subject-matter jurisdiction an earlier mandate entered by this court. Defendants filed a motion to dismiss this appeal and for an award of sanctions. Defendants' motion and objections thereto are taken with the case.

The issues presented for review are: (1) whether a section 2-1401 petition brought in the trial court is the proper means to challenge the subject-matter jurisdiction of an appellate court over an earlier appeal by the parties; (2) whether this court had jurisdiction to consider the first appeal between the parties in this matter (see Hamilton v. Williams (1991), 214 Ill.App.3d 230, 158 Ill.Dec. 91, 573 N.E.2d 1276); and (3) whether the institution of this appeal warrants the imposition of sanctions.

The facts underlying this matter are detailed in Hamilton v. Williams (1991), 214 Ill.App.3d 230, 158 Ill.Dec. 91, 573 N.E.2d 1276. We will, therefore, provide only a background summary of the facts taken from our earlier opinion.

Defendant Trammell Crow (Crow) is a large nationwide real estate organization. Plaintiffs (Hamilton Partners) are former partners of Crow in various real estate projects located in and around the Chicago area. In January 1987, Hamilton Partners resigned from Crow, triggering the buy-sell provisions of various limited real estate partnership agreements. As a result, litigation ensued, and the parties subsequently entered into settlement negotiations.

During the negotiations, the parties agreed to a division of the properties. The parties' settlement agreement was memorialized, in part, in a letter of intent. The letter of intent provided that in the event the parties could not agree upon a value for various properties within 10 days, Sudler Marling, Inc., and American Appraisal Associates would be directed by Hamilton Partners and Crow, respectively, to deliver their independent determinations of the value of each party's respective interest in the disputed properties. The agreement also provided "that if one party should fail to submit its report in a timely manner, as outlined in the letter of intent, the first determination delivered would be conclusive and binding on the parties" (hereinafter referred to as the "first in time remedy"). Upon submission of the two reports, the parties were then allowed two additional days to resolve differences in the reports, and failing that, the reports would be submitted to an arbitrator named in the document. Such arbitration would be considered final and conclusive.

The parties were unable to agree on the values for various properties thus triggering the arbitration mechanism in the letter of intent. In particular, two properties were at issue, the Hamilton Lakes business park and Hamilton Lakes office park. During the appraisal period, Crow became concerned that the quality of the appraisal information provided by American Appraisal was not of sufficient quality and that American might not meet the submission deadline. Consequently, Crow hired Jared Schlaes to appraise the two properties. Schlaes subsequently learned that the arbitrator was to be John T. Ryan of Cushman and Wakefield. Schlaes disclosed to Crow that he and Ryan had a prior employment relationship, but he did not consider it to be a problem.

After becoming concerned about its use of Schlaes instead of American, Crow persuaded American to assume the appearance of a contractor/subcontractor relationship with Schlaes. American subsequently "adopted" Schlaes' appraisal reports. Schlaes' report valued the two properties in question at $22.8 million and $14.8 million, respectively. In contrast, Hamilton Partners' appraiser set the values substantially higher at $67.29 million and $22.5 million.

Upon discovering that the Crow appraisals were prepared by Schlaes rather than American, Hamilton Partners became concerned and felt that the matter was in need of investigation. Despite their concern and uncertainty about the use of the Schlaes reports, however, Hamilton Partners chose to proceed with the arbitration. Apparently, they were of the opinion that because the reports were of such poor quality and reflected values that were unreasonably low, the arbitrator would reject them thus possibly providing Hamilton Partners with a strategic advantage. Accordingly, Hamilton Partners raised no objection to the use of the reports prior to the arbitrator's decision. The arbitrator subsequently determined the values of the two properties to be $25 million and $15 million (i.e., values very close to the Schlaes appraisal) and nearly $50 million less than the Hamilton Partners' appraisal.

Two days later, Hamilton Partners filed an emergency motion to enforce the letter of intent and to apply the "first in time remedy" on the grounds that (1) Crow's use of Schlaes amounted to a breach of the letter of intent; and (2) Schlaes' former employment relationship with the arbitrator fatally tainted the arbitration.

In a subsequent proceeding, the trial court determined that the relationship of Schlaes and the arbitrator was not a fatal conflict of interest. Following a lengthy trial on Hamilton Partners' emergency motion, the trial court concluded that Crow's use of Schlaes was tantamount to a breach of the letter of intent; that Hamilton Partners had not knowingly and intentionally waived Crow's breach of the agreement; but their conduct subsequent to the breach waived their right to the "first in time remedy."

Significant to the present appeal, the trial court, on June 24, 1988, entered its order nunc pro tunc June 16, 1988 (June 24 order), vacating the arbitration award with respect to the two properties, and directing the parties to submit a plan for appraisal and rearbitration. On December 2, 1988, the parties entered into an agreed order for rearbitration (December 2 order).

As a practical matter, the June 24 order consists of two component parts. The first part of the order vacated the original arbitration award, in connection with the Hamilton Lakes office and business park properties, made by arbitrator John Ryan. The second part directed the parties to submit a plan for appraisal and arbitration of the properties which were the subject of the vacated award. We note that the order contained no express language compelling arbitration, nor was the order entered pursuant to a motion by either party to compel arbitration. Additionally, Hamilton Partners state in their brief that at that instant in the litigation neither party desired further arbitration and that the parties desired the trial court to determine the values of the properties in question.

The December 2 order, entitled "Agreed Order for Rearbitration," provided the methodology for determining, inter alia: the fair-market value of the properties; qualifications and selection of appraisers; selection and duties of the arbitrator; deadlines for appraisals; and an agreement that the entry of the order was "without prejudice to the rights of any party to appeal consistent with Illinois law from the rulings and orders heretofore made on June 16 and June 24, 1988." Also included in the December 2 order was a statement in the introductory paragraph that reads, in part, as follows: "that the appraisal and arbitration of the * * * properties * * * ordered by this Court shall be implemented as set forth herein."

In July 1989, the new arbitrator assigned values of $53 million and $19.5 million to the two properties, the identical values assigned by Hamilton Partners' second appraiser. Following subsequent motions and hearings, the court, on November 22, 1989, entered its order "with respect to all issues arising from [Hamilton Partners'] July 22, 1987, Emergency Motion Pursuant to the Court's Order to Retain Jurisdiction." The order decreed, among other things, that Crow pay to Hamilton Partners $8,535,000 as a result of the partial order entered August 8, 1988, confirming the rearbitration award, and interest on the amount from August 26, 1987, to August 18, 1989. The order also contained a Rule 304(a) finding (see 134 Ill.2d R. 304(a)) that there was "no just reason for delaying enforcement of, or any appeal from, this order and/or any other orders and rulings arising from [p]laintiffs' July 22, 1987, [e]mergency motion." On December 19, 1989, defendants filed their notice of appeal from various orders entered by the trial court including the June 24, 1988, order, the December 2, 1988, order and the November 22, 1989, order.

In the first appeal to this court, we determined the dispositive issue as being whether the trial court...