Zamouski v. Gerrard

• Decision Date: 03 November 1971
• Docket Number: Gen. No. 71--21
• Citation: 1 Ill.App.3d 890,275 N.E.2d 429
• Parties: Julius ZAMOUSKI, Plaintiff-Appellant, v. Michael A. GERRARD et al., Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 429

275 N.E.2d 429

1 Ill.App.3d 890

Julius ZAMOUSKI, Plaintiff-Appellant, v. Michael A. GERRARD et al., Defendants-Appellees.

Gen. No. 71--21.

Appellate Court of Illinois, Second District.

Nov. 3, 1971.

David Alswang, Chicago, Russell J. Goldman, Rockford, for plaintiff-appellant.

Caldwell, Berner & Caldwell, Woodstock, Keepgan & Gosdick, Welsh, Holmstrom, Hyzer, Jacobson & Worden, Rockford, for defendants-appellees.

SEIDENFELD, Justice.

The plaintiff, Julius Zamouski appeals from a judgment order which dismissed his complaint as to all defendants with prejudice and denied him leave to amend.

Count I of the complaint alleges in substance that on March 26th, 1970, the defendant LaSalle National Insurance Company (or its predecessor LaSalle Casualty Company), acting by and through attorneys Michael A. Gerrard and Peter S. Switzer from the firm of Barrick, Jackson & Switzer, accepted plaintiff's offer to settle a personal injury claim against LaSalle's insureds for $125,000; and that after plaintiff discontinued all preparations being made for trial of the suit, LaSalle refused to comply with the oral settlement agreement. Plaintiff sought damages of $125,000 plus additional expenses and costs from both LaSalle and the lawyers individually for this alleged breach.

Count II contains the same allegations, and prays for exemplary damages in addition to the actual damages suffered.

Count III alleges that the settlement agreement was breached due to a series of systematic and intentional activities, instituted by defendants, Peterson, Lowry, Rall, Barber & Ross, acting through Walter W. Ross, Jr., designed to cause a repudiation of the agreement. A letter dated April 3, 1970 from Ross to plaintiff's lawyer, was attached to the complaint as an exhibit. It stated:

'We are advised that you recently had settlement discussions with Attorney Michael Gerrard, the attorney of record for Ashlar Construction, Inc., one of the defendants in the above case. Please be advised that we are the attorneys for the insurers of that defendant and at no time has a settlement of the above case been authorized by them or ourselves.'

It was further stated in this count that 'Plaintiff is informed and believes' that these defendants were not the attorneys for La Salle, nor were they the attorneys for the insureds of LaSalle, and thus were without legal justification to intercede in the matter.

All of the defendants filed motions to dismiss the complaint. The trial court in ruling on these motions held that the action could not be maintained to enforce an alleged oral settlement as no judgment had been entered thereon nor had the case been dismissed or the releases executed; and further held that, in any event, such action could not be maintained against the attorneys acting in their representative capacities. A separate order entered on the same day as the order of dismissal denied plaintiff leave to file an amended complaint.

Settlement of disputed claims is to be encouraged and generally given full force and effect. Bingham v. Browning, 197 Ill. 122, 136, 64 N.E. 317 (1902). Both parties agree with this general proposition but defendant argues that under Vece v. De Biase, 46 Ill.App.2d 248, 197 N.E.2d 79 (1964), an oral settlement, although binding in a contract action, is not enforceable in a tort case without further positive action confirming the settlement. In Vece, defendant orally agreed to pay plaintiff $10,000 in settlement of a will contest suit. After learning that an income tax claim consuming the entire estate was to be filed, defendant refused to comply with the agreement and plaintiff sued to enforce it. The Appellate Court, finding for the defendant, stated as one of the bases that oral settlements in tort actions, which it considered this to be, are not final until either a judgment has been entered or the case has been disposed of and releases signed. However, also important to the court was the parties' right to rescind the agreement because of a material mistake of fact. Furthermore, the court found that the settlement agreement was expressly contingent upon the approval of the Probate Court, which was never obtained. The only decisions cited as authority were cases of rescission because of mutual mistake, which did not deal with the tort-contract differentiation (Steinmeyer v. Schroeppel, 226 Ill. 9, 80 N.E. 564 (1907), and Winkelman v. Erwin, 333 Ill. 636, 165 N.E. 205 (1929)). The plaintiff cites Country Mutual Ins. Co. v. Drendel, 116 Ill.App.2d 466, 252 N.E.2d 757 (1969), and Knoll v. Swanson, 92 Ill.App.2d 398, 234 N.E.2d 543 (1968). Country Mutual is inapplicable since we there ruled upon an oral settlement in a contract action. In Knoll, the plaintiff was held bound by an oral settlement of his suit seeking an injunction against defendant's obstruction of drainage flow of natural surface water. While it is questionable whether this could be termed an action in tort, it sounds more closely in tort than in contract. The court clearly treated this as an oral agreement, even though two letters referring to it were present. The court stated that an agreement of settlement need not be in writing unless it is within the Statute of Frauds, and held that it would not disturb the oral agreement unless mistake or fraud were present.

On policy grounds, making the distinction between contract and tort settlements as a matter of law seems without basis. We can see no reason to allow one settling a tort claim to escape his commitment, while enforcing the settlement of the contract claim. While we recognize that there may be special problems of proving that a binding settlement of a lawsuit in all of its terms has been reached in a tort case, these would more properly be matters to consider in a hearing on the merits. Since no issue of mistake or fraud was presented by the pleadings, the oral settlement could not be said to be unenforceable as a matter of law and the dismissal on this basis would have been improper.

We now consider whether the pleadings were properly dismissed for reasons other than the unenforceability of an oral agreement to settle a tort claim.

The motion to dismiss of LaSalle National Insurance Co. stated that the complaint contained no allegation of authority in the attorneys with whom plaintiff negotiated to settle on behalf of LaSalle. An attorney authorized to represent a client in litigation does not necessarily have authority to conclude a settlement. Danziger v. Pittsfield Shoe Co., 204 Ill. 145, 149, 68 N.E. 534 (1903). Generally, allegations that the principal contracted 'by' an agent are held sufficient to withstand a motion to dismiss. Ohio & Mississippi Railroad Company v. Middleton, 20 Ill. 629, 634 (1858). There is also authority that if a pleading relied upon sets forth the contract in suit so as to disclose that it was a transaction for which special authority is required, the pleading may be subject to dismissal if it fails to allege facts showing that the agent was possessed of the necessary special authority. See Anno.: 45 A.L.R.2d 583, Sec. 9, page 607. Here, there is an allegation in plaintiff's complaint that LaSalle acted 'by and through' the attorneys in accepting plaintiff's settlement offer. While a close question is presented, it is sufficient to withstand LaSalle's motion to dismiss. We, therefore, conclude that the court erred in dismissing the complaint as to this defendant.

We think, however, that the pleadings were insufficient to state a cause of action against the defendants Gerrard and Switzer, and the firm of Barrick, Jackson & Switzer. Plaintiff contends that these defendants should be personally liable if they were without authority to conclude a settlement on behalf of LaSalle. Defendants answer that an attorney is not personally liable to third persons for acts which he performs in his representative capacity. Defendant cites several cases for the proposition that if an agent, in making a contract, discloses his agency in the name of his principal (or the principal was known at the time by the other party), the agent is...