People ex rel. Hartigan v. Community Hosp. of Evanston

• Decision Date: 21 September 1989
• Docket Number: No. 1-87-3143,1-87-3143
• Citation: 136 Ill.Dec. 702,545 N.E.2d 226,189 Ill.App.3d 206
• Parties: , 136 Ill.Dec. 702 The PEOPLE of the State of Illinois ex rel. Neil F. HARTIGAN, Attorney General, Plaintiff, v. COMMUNITY HOSPITAL OF EVANSTON, et al., Defendants. Dr. Douglas FOSTER, Cross-Plaintiff-Appellant, v. CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST, Cross-Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 226

545 N.E.2d 226

189 Ill.App.3d 206, 136 Ill.Dec. 702

The PEOPLE of the State of Illinois ex rel. Neil F.

HARTIGAN, Attorney General, Plaintiff, v. COMMUNITY HOSPITAL OF EVANSTON, et al., Defendants.

Dr. Douglas FOSTER, Cross-Plaintiff-Appellant, v. CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST,

Cross-Defendant-Appellee.

No. 1-87-3143.

Appellate Court of Illinois,

First District, Fourth Division.

Sept. 21, 1989.

Fred R. Harbecke, Chicago, for cross-plaintiff-appellant.

Alan Ganz, Chicago (William J. Barath, of counsel), for cross-defendant-appellee.

Justice McMORROW delivered the opinion of the court:

Dr. Douglas Foster (Foster) appeals from the trial court's dismissal of his cross-claim against Continental Illinois National Bank and Trust (Continental Bank or the Bank). The Attorney General of Illinois (the Illinois Attorney General) filed suit against Foster and Continental, alleging that they had mishandled and dissipated a restricted endowment fund donated to the Community Hospital of Evanston (Community Hospital or the Hospital). Foster was a member of the board of directors of Community Hospital during the relevant time period. Continental Bank had agreed to provide certain investment and management services to Community Hospital with respect to the Hospital's funds, including the restricted endowment fund. Continental Bank settled the claim brought against it by the Illinois Attorney General. Based on that settlement agreement, the trial court dismissed Foster's cross-claim, finding that it was barred under the Illinois Contribution Act. (Ill.Rev.Stat.1987, ch. 70, par. 302.) Foster appeals. We affirm.

The Illinois Attorney General's amended complaint alleged the following facts. In 1977, a private donor gave $500,000 to Community Hospital. The donation was specified as a restricted endowment fund, i.e., the principal of the fund could not be expended by the Hospital on a current basis. (See Ill.Rev.Stat.1977, ch. 32, par. 1102.01.) A few years after the donation, Community Hospital deposited a number of its accounts, including the restricted endowment fund, with Continental Bank. Thereafter Community Hospital appointed Continental Bank as its agent pursuant to the terms of an "Investment Advisory Account" Agreement (hereinafter the Advisory Agreement) with regard to the funds deposited with Continental Bank, including the restricted endowment fund.

Shortly thereafter, and at the alleged inducement of Continental Bank, Community Hospital pledged the entire restricted endowment fund as collateral for a $250,000 loan it received from Continental Bank. Approximately four months later, Community Hospital defaulted on the loan and the Bank set off the obligation and accrued interest from the restricted endowment fund. Thereafter Continental Bank allowed transfer of the remainder of the restricted endowment fund to Community Hospital's general fund, where the monies were eventually dissipated.

On April 16, 1984, the Illinois Attorney General filed an amended complaint based upon the dissipation of the restricted endowment fund. The complaint contained the following allegations pertinent to this appeal:

Count I: breach of fiduciary duty by Community Hospital and its Board of Directors (including Foster), both individually and in their capacities as officers and directors, for failing to preserve the restricted endowment fund principal;

Count II: breach of statutory duties (Ill.Rev.Stat.1983, ch. 17, pars. 2004 to 2007, 2009 and 2011) by Continental Bank for its participation in Community Hospital's dissipation of the restricted endowment fund;

Count III: breach of fiduciary duty by Continental Bank with respect to dissipation of the restricted endowment fund, based upon the Bank's Advisory Agreement with Community Hospital; and

Count V: trustee mismanagement, waste, and fraud by Community Hospital and its Board of Directors (including Foster), both individually and as directors and officers of the Hospital, with respect to the restricted endowment fund.

Continental answered the complaint and denied all relevant factual allegations pertaining to it. Foster also answered the complaint, denying all relevant factual allegations pertaining to him, and filed inter alia a cross-claim against Continental Bank.

Approximately three years after its amended complaint was filed, the Illinois Attorney General agreed to dismiss those counts of the complaint directed against Continental Bank in exchange for Continental Bank's payment of $8,000 to the Hospital. The trial court found the agreement was entered into in good faith in accordance with the Illinois Contribution Act and entered an order that approved the settlement agreement. Thereafter Continental Bank filed a section 2-619 motion (Ill.Rev.Stat.1987, ch. 110, par. 2-619) to dismiss Foster's cross-claim against it on the ground that the cross-claim was barred under the Illinois Contribution Act by the court-approved settlement agreement between Continental Bank and the Illinois Attorney General. Following briefing and oral argument on the parties' respective positions, the court allowed Continental's motion and dismissed Foster's cross-claim with prejudice. Foster timely appeals from this ruling.

In a supplemental brief filed with this court, Foster acknowledges that he has entered into a settlement agreement with respect to the claims filed against him by the Illinois Attorney General. According to Foster's supplemental brief, "Foster's settlement with the [Illinois Attorney General] required that Foster give up certain rights, as opposed to money."

Based upon the briefs filed by Foster with this court, it is our opinion that Foster's arguments on appeal are, in substance, that his cross-claim seeks three separate remedies from Continental Bank: contribution, implied indemnity, and monetary damages. The Bank contends that Foster's cross-claim seeks only contribution from the Bank, and that Foster's arguments on appeal are an attempt to amend and enlarge the scope of the pleading filed by Foster in the trial court. (See Ill.Rev.Stat.1987, ch. 110, par. 2-603(b) (separate legal theories and remedies should be separately alleged in pleadings).) For complete analysis of the parties' arguments in this cause, we will assume arguendo that Foster's cross-claim seeks the three separate remedies for which he argues in this appeal.

I. Contribution

Foster initially asserts in his brief that his cross-claim seeks "contribution for amounts that he could have been required to pay to the [Illinois Attorney General] in the underlying cause of action." Apparently in anticipation of the Bank's renewal of its argument that his cross-claim is governed by the Illinois Contribution Act (Ill.Rev.Stat.1987, ch. 70, pars. 301 to 305), which argument the Bank successfully addressed to the trial court, Foster's brief thereafter recognizes that, with respect to the Illinois Contribution Act, "[t]o the extent that Foster could have been required to restore [the endowment] fund[*] after settlement by Continental Bank, Foster would arguably have been barred from seeking contribution from Continental Bank."

We consider this latter statement by Foster as an acknowledgment that, because of the Bank's settlement with the Illinois Attorney General, Foster's cross-claim cannot seek contribution from the Bank for any amounts which Foster might have been liable to pay to replenish the restricted endowment fund. In addition, if Foster has not conceded his inability to seek contribution from the Bank "for amounts that he could have been required to pay to the [Illinois Attorney General] in the underlying cause of action," we nevertheless conclude that Foster cannot seek contribution from the Bank, for two reasons: (1) Foster and the Bank are not alleged to be "liable in tort" in the Illinois Attorney General's complaint; and (2) even if Foster and the Bank were alleged to be "liable in tort" in the Illinois Attorney General's complaint, the Bank's settlement agreement with the Illinois Attorney General would shield the Bank from any contribution liability to Foster.

The Illinois Contribution Act states in pertinent part that "where 2 or more persons are subject to liability in tort arising out of the same injury to person or property, * * * there is a right of contribution among them, even though judgment has not been entered against any or all of them." (Ill.Rev.Stat.1987, ch. 70, par. 302(a).) As the Act plainly states, contribution is permitted between parties who are both subject to liability in tort. The Illinois Supreme Court has also stated that the purpose of contribution is to "distribute[*] the [plaintiff's] loss among tortfeasors by requiring each to pay a proportionate share based on the relative fault of the parties. [Citation.]" Frazer v. A.F. Munsterman, Inc. (1988), 123 Ill.2d 245, 256, 123 Ill.Dec. 473, 527 N.E.2d 1248; see also, e.g., Gerill Corp. v. J.L. Hargrove Builders (1989) 128 Ill.2d 179, 131 Ill.Dec. 155, 538 N.E.2d 530; Doyle v. Rhodes (1984), 101 Ill.2d 1, 77 Ill.Dec. 759, 461 N.E.2d 382; Skinner v. Reed-Prentice Division Package Machinery Co. (1977), 70 Ill.2d 1, 15 Ill.Dec. 829, 374 N.E.2d 437.

Because of the requirement stated in Illinois Supreme Court decisions and the Contribution Act itself that the parties be "subject to liability in tort arising out of the same injury to person or property," it has been held that, if the parties are not both subject to liability in tort for the plaintiff's injuries at issue in the underlying action, there is no right of contribution between those parties. See Dixon v. Northwestern Publishing Co. (1988), 166 Ill.App.3d 745, 117 Ill.Dec. 581, 520 N.E.2d 932, citing Jodelis v. Harris (1987), 118 Ill.2d 482, 115 Ill.Dec. 369, 517 N.E.2d 1055; see also Hopkins v. Powers (1986), 113 Ill.2d 206, 100 Ill.Dec. 579, 497 N.E.2d 757; J.M. Krejci Co. v. St. Francis Hospital (1986), 148 Ill.App.3d 396, 499...