WestAmerica Mtg. Co. v. Tri-County Reports, Inc.
| Decision Date | 21 September 1987 |
| Docket Number | No. 85 C 0281.,85 C 0281. |
| Citation | 670 F. Supp. 819 |
| Parties | WESTAMERICA MORTGAGE COMPANY, Plaintiff, v. TRI-COUNTY REPORTS, INC., Defendant and Third-Party Plaintiff, Trans Union Credit Information Co.; James Berke, d/b/a Berke Insurance Agency; and G.A. Mavon and Company, Third-Party Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Sheldon L. Solow, Weissman, Smolev and Pond, Larry Selander/Monica L. Thompson (TPD Trans Union), Keck Mahin & Cate, Chicago, Ill., for plaintiff.
Franklin S. Schwerin/Eric S. Rein (Tri-County), Schwartz Cooper Kolb & Gaynor, Dale L. Schlafer/Stephen E. Ford/Mark S. Vilimek/Jo N. Bonell (TPD G.A. Mavon), Kielser & Berman, Willis R. Tribler (TPD Berke), Tribler & Marwedel, Chicago, Ill., for defendant and third-party plaintiff.
Third-party defendants James Berke, d/b/a Berke Insurance Agency and G.A. Mavon and Company ("Berke and Mavon") brings this motion to vacate a settlement entered into between plaintiff WestAmerica Mortgage Company ("WestAmerica") and defendant third party plaintiff, Tri-County Reports, Inc. ("Tri-County") in WestAmerica's action against Tri-County for breach of contract and negligence. For the reasons noted below, we deny the motion to vacate.
WestAmerica is a Colorado corporation with its principal place of business in Colorado. WestAmerica makes mortgage loans to businesses and individuals. In connection with its business, WestAmerica received a loan application from a company and three businessmen (collectively "the applicants") for a loan to purchase an apartment building in Lockport, Illinois. As part of its loan approval process, WestAmerica requested Tri-County, a credit investigation company, to prepare reports on the creditworthiness of the applicants. WestAmerica alleges in its complaint that it then relied on Tri-County's credit reports in determining that the applicants were qualified for the loan. Unfortunately the applicants subsequently defaulted on the loan. WestAmerica then brought this action against Tri-County alleging that it failed to include in its report to WestAmerica seven lawsuits and judgments involving the applicants, and that had WestAmerica been advised of the lawsuits prior to making the loan, it would not have made the loan.
Tri-County, in turn, filed a third party complaint for indemnification against Trans Union Credit Information Company ("Trans Union") and Berke and Mavon. Tri-County alleged that Trans Union failed to report the existence of the lawsuits and judgments to Tri-County when Tri-County requested a credit report from Trans Union on the applicants. In its complaint against Berke and Mavon, Tri-County alleged that Berke agreed to procure insurance for Tri-County for errors and omissions coverage, and that Mavon agreed to issue such a policy. Tri-County further alleged that Berke breached its agreement and breached its duty of reasonable care by obtaining for Tri-County a policy which failed to provide the necessary insurance coverage and by simultaneously assuring Tri-County that the existing policy provided the requested coverage. Mavon allegedly breached its duty of reasonable care by writing a policy which failed to protect Tri-County from errors and omissions.
Shortly after a pretrial conference with all parties, Tri-County entered into settlement agreement with WestAmerica for $325,000 which was to be satisfied by a lump sum payment of $10,000 and by the unconditional assignment of Tri-County's rights in and to any and all claims and causes of action it has against Trans Union, Berke and Mavon arising in tort, contract or otherwise relating to this case. Prior to this settlement, Berke and Mavon were told by Tri-County's attorney that it would probably settle with WestAmerica for $10,000 and an assignment of Tri-County's third party claims. (¶ 8, Thompson aff.; ¶ 3, Rein aff.; ¶ 5, Trible aff.) It is this settlement agreement that Berke and Mavon seek to vacate.
Under Illinois law,1 Berke and Mavon, if found liable on the third party complaint for indemnity, will be liable for the full amount of Tri-County's settlement, as long as that settlement was made in reasonable anticipation of personal liability and the settled amount was reasonable even if they were not provided with notice of the settlement. N.E. Finch Co. v. R.C. Mahon Co., 54 Ill.App.3d 573, 12 Ill.Dec. 537, 370 N.E.2d 160 (3d Dist.1977); Nogacz v. Procter and Gamble, 37 Ill.App.3d 636, 347 N.E.2d 112 (1st Dist.1975); St. Paul Fire & Marine Insurance Co. v. Michelin Tire Corp., 12 Ill.App.3d 165, 298 N.E.2d 289 (1st Dist.1973).
An indemnitee who settles without notice to the prospective indemnitor need not prove that it was in fact liable in the principal action, but "need prove only that, by settling, he was responding to a reasonable anticipation of personal liability rather than acting as a mere volunteer." St. Paul Fire and Marine Insurance Co. v. Michelin Tire Corporation, 12 Ill.App.3d 165, 169, 298 N.E.2d 289, 292 (1st Dist. 1979). Accordingly, we reject Berke and Mavon's argument that they have the right to litigate Tri-County's liability to WestAmerica. Accord Moses-Ecco Company v. Roscoe-Ajax Corporation, 320 F.2d 685, 689 (D.C.Cir.1963).
Accordingly, the only relevant inquiry is whether the settlement was made in a reasonable anticipation of personal liability and whether the amount of the settlement was reasonable. Tri-County presented the affidavit of its attorney that during the course of discovery he examined documents which indicated that if WestAmerica succeeded on its claims, its damages award would have been between $581,851 and $1,143,522. The only evidence raised which casts any doubt upon Tri-County's liability to WestAmerica is the statement by Berke's attorney, Willis R. Tribler, that Tri-County's attorney, Eric Rein, told him "that there was no liability in Tri-County because an agent of WestAmerica, Paul Kessel, had admitted that he did not review the Tri-County report before making the loan that is the basis for this lawsuit." (¶ 9, Tribler aff.) Berke and Mavon do not explain why this fact is relevant to the issue of Tri-County's liability to WestAmerica. They do not provide any evidence which indicates what authority Kessel had or, if he had authority, whether Kessel was the only person with approval authority. On the other hand, Tri-County and WestAmerica provided the affidavits of Tri-County's attorney, Rein, and Trans Union's attorney, Monica L. Thompson, both of whom stated that at no time did Rein indicate that WestAmerica's case was one of non-liability. (¶ 5, Thompson, aff.; ¶ 10 Rein aff.) There need not be proof more likely than not that Tri-County was liable to WestAmerica, only that it is clear that Tri-County was faced with a "reasonable anticipation of liability." St. Paul, 12 Ill. App.3d at 169, 299 N.E.2d at 292. We find, based on the record, that Tri-County faced a reasonable anticipation of liability.
The second issue we must consider is whether the settlement amount was reasonable. "The reasonableness of the amounts paid in settlement is a matter bearing solely upon the issue of damages." Id. Berke and Mavon's attack on the reasonableness of the settlement ignores the question of WestAmerica's damages and instead focuses on the figures discussed at settlement conferences. Berke and Mavon argue that, because the figure $325,000 was...
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