Spraying Systems Co. v. William G. Smart Co., Inc., 91 C 1049.

• Citation: 816 F. Supp. 465
• Decision Date: 19 March 1993
• Docket Number: No. 91 C 1049.,91 C 1049.
• Parties: SPRAYING SYSTEMS CO. v. WILLIAM G. SMART COMPANY, INC.
• Court: U.S. District Court — Northern District of Illinois

816 F. Supp. 465

SPRAYING SYSTEMS CO. v. WILLIAM G. SMART COMPANY, INC.

No. 91 C 1049.

United States District Court, N.D. Illinois.

February 22, 1993.

Reconsideration Denied March 19, 1993.

Marc D. Janser, Pedersen & Houpt, Chicago, IL, for plaintiff.

Francis X. King, Grosse Pt. Woods, MI, James A. Davids, Hoogendoorn, Talbot, Davids, Godfrey & Milligan, Chicago, IL, for defendant.

MEMORANDUM OPINION AND ORDER

SHADUR, Senior District Judge.

This action has already reached the final pretrial order ("FPTO") stage, which is the necessary prerequisite to setting the case for trial. Since then the parties have submitted motions in limine that require resolution by this Court so that they may complete their planning for conduct of the trial.

This Court has now reviewed those motions in detail. They pose some questions that have required a review of all that has gone before in this action. And as a result of that review this Court has become convinced that one critical facet of its earlier analysis was mistaken and therefore requires correction.

This Court's January 3, 1992 oral ruling denied a motion that plaintiff Spraying Systems Co. ("Spraying Systems") had some-what inaccurately characterized as one for summary judgment. That oral ruling was then followed a few months later by a written opinion (the "Opinion," 789 F.Supp. 257 (N.D.Ill.1992))¹ dealing with another aspect of the case. Those two decisions shared a common focus: the operation of certain provisions of the Illinois Dead Man's Act (the "Act," Ill.Rev.Stat. ch. 110, ¶ 8-201 and id. ¶ 8-301²), and the impact of those provisions on the identity of potential witnesses and on the permitted scope of their testimony. It is essential that this Court deal with those questions because what is at issue in this case is the content of an oral agreement entered into a full quarter century ago in a meeting between William Smart ("Smart"), who is now the principal in defendant William G. Smart Company, Inc. ("Smart Company"), and the now-deceased founder of Spraying Systems, Svend Bramsen ("Bramsen").

This Court had thus stated in its oral ruling, and had then reconfirmed in the Opinion (en route to its discussion there of whether two prospective witnesses other than Smart would be silenced by provisions of the Act), that Section 8-301 literally barred Smart from testifying as to the content of his 1967 face-to-face negotiation with Bramsen. But some further reflection, triggered by this Court's going back to the point of beginning for purposes of the current motions in limine, has persuaded this Court that the case law in Illinois (which provides the rules of decision in this diversity case) really calls for a different conclusion here. To see why that is so, a brief rehearsal of the gravamen of this case is in order.

Spraying Systems originally brought this declaratory judgment action in the Circuit Court for the Eighteenth Judicial District, DuPage County, Illinois (from which court Smart removed it to this District Court), seeking this relief:

The entry of a binding declaration, having the force of a final judgment, that under the terminated oral contract, Spraying Systems does not have the obligation to pay Smart, and Smart does not have the right to receive, any further commissions, including commissions on shipments into the State of Louisiana of Spraying Systems products purchased after the termination of the parties' oral contract.

From the very nature of Spraying Systems' Complaint, in which it expressly alleged the existence of an oral agreement and placed the terms of that agreement in issue, Spraying Systems necessarily undertook to establish what the terms of that oral agreement were from its own perspective.

Under Illinois law there is no question that the burden of proof in a declaratory judgment action in a case such as this rests squarely on the plaintiff. In Board of Trade v. Dow Jones & Co., 98 Ill.2d 109, 115, 74 Ill.Dec. 582, 585, 456 N.E.2d 84, 87 (1983) the Illinois Supreme Court addressed this argument, which was said by the declaratory judgment action plaintiff in that case to be supported by several earlier Illinois Appellate Court decisions:

Settled law states the proper rule—the party asserting rights has the burden of proof, and the party alleged to violate those rights who files a declaratory judgment action, is not required to prove a negative.

After it had characterized that issue as one of first impression on its docket, the Supreme Court responded flatly "We do not agree with plaintiff's contention" (id.). It then went on to explain (id.):

Although this court has not considered the specific question, the rule is well stated in International Hotel Co. v. Libbey (7th Cir. 1946), 158 F.2d 717, 721:

When an issue of fact is tendered by the complaint and denied by the answer, the plaintiff must prove its complaint, even though it is a complaint for a declaratory judgment.³

In this case the issue of fact that is directly tendered by Spraying Systems' Complaint and is denied by Smart Company's Answer is the question whether the oral agreement that was reached by Smart and Bramsen back in 1967 did or did not include a provision for Smart to continue to receive commissions after the termination of his sales representative relationship with Spraying Systems. Thus this action centers around, and its result will be controlled by, what was or was not agreed upon in the key conversation between Smart and Bramsen.⁴

When Spraying Systems earlier moved for summary judgment, it unquestionably recognized that as the essential nature of this action (even though it did not acknowledge its own burden of proof on the issue), for it tendered in support of its motion a host of affidavits of its remaining personnel whose tenure with Spraying Systems dated back to 1967. All of those affidavits were in identical form, and each of them stated this in Paragraph 3:

3. William G. Smart, Jr. and Spraying Systems entered into an oral agreement in 1967 for Mr. Smart to perform duties as a manufacturer's representative for Spraying Systems. Mr. Smart subsequently incorporated William G. Smart Company, Inc. ("Smart"), and continued to perform duties as a manufacturer's representative for Spraying Systems through the corporate entity.

Then after Paragraphs 4 and 5 had described certain terms that the oral agreement did contain according to Spraying Systems, each affidavit went on to say:

7. I have no knowledge (a) of any agreement by Spraying Systems to pay Smart commissions on sales made after termination, (b) of any evidence to suggest that such an agreement was made, or (c) of any assertion by Smart before approximately late 1990 or 1991 that Spraying Systems had made such an agreement. I do not believe that any such agreement was made.

8. I do not know of anyone who has knowledge (a) that Spraying Systems made such an agreement, (b) that there is any evidence to suggest that such an agreement was made, or (c) that, at any time before approximately late 1990 or 1991, Smart had asserted that Spraying Systems had made such an agreement.

9. I never heard Svend Bramsen or anyone else at Spraying Systems state that Spraying Systems would pay or had promised to pay Smart commissions on sales made after termination.

Spraying Systems urges that it is not offering any proof of what Bramsen said to Smart or what Smart said to Bramsen. But because the oral agreement was indeed entered into between those two individuals (perhaps the one matter in this case on which there is no dispute), the only purpose and effect of the just-quoted statements by Spraying Systems' surviving personnel is to demonstrate that the two-party Smart-Bramsen conversation did not contain a discussion about post-termination commissions. Spraying Systems essays its own proof of that negative by inference, and it tries to compel Smart to parry that inference with both arms tied behind his back because of the prohibition contained in the Act.

To put the matter simply, if the triers of fact were to credit the witnesses that Spraying Systems has offered to testify about the terms of the oral agreement on which it has based its Complaint for declaratory judgment, by definition those factfinders would be deciding that the only human beings who were parties to that oral agreement—Bramsen and Smart—had not discussed and arrived at an understanding about post-termination commissions. By having thus put that factual question into issue, Spraying Systems must be viewed as having waived Smart's disability under the Act to testify directly about the issue.

Neither side has identified any Illinois case on all fours with this one—hardly a surprise, given the context in which this action arises—but the principle that has just been stated here is entirely consistent with the one case on which both litigants relied (and that is surprising) during the course of briefing Spraying Systems' motion for summary judgment⁵: Schuppenhauer v. Peoples Gas Light & Coke Co., 30 Ill.App.3d 607, 332 N.E.2d 583 (1st Dist.1975). In the portion of Schuppenhauer relevant to this case (id. at 612, 332 N.E.2d at 589) the court said of the Act:

Neither the statutory language nor its purpose to place parties upon an equal footing may be evaded by indirection. Interested witnesses cannot testify to the substance and legal effect of a conversation in place of the actual words spoken.

That perspective on the Act obviously has direct applicability here. What Spraying Systems is urging—and what by the very nature of things it is undertaking to prove— is what it claims Bramsen did not say in his critical conversation with Smart. It seeks to do so by indirection, by showing the understandings and beliefs of its still-living employees based in part on what Bramsen did not say to them while he was still alive. In the language of Schuppenhauer, that process is directly tantamount to those "interested witnesses ... testifying to the...