Opinion ID: 2092371
Heading Depth: 1
Heading Rank: 6

Heading: Delivery of Materials

Text: Counts X and XI were brought against Leininger, its president Joseph Palumbo, Coke Contracting, its president Sam Alberto and its agent Tom Alberto. Counts X and XI allege that Coke submitted four invoices to Leininger requesting payment for hauling tunnel stone to McCormick Place. After Leininger received these invoices, Palumbo called Coke and stated Leininger would not pay unless the invoices were altered to show that another type of stone was delivered to the Department's Eisenhower project. Coke then submitted four new invoices reflecting the requested changes and Leininger paid Coke the amount on the invoices. The complaint alleges that as a result of the altered invoices government agencies apparently have paid for materials they never received. Count X asserts a claim for common law misrepresentation. The appellate court correctly dismissed this count because it contains no allegations that the alleged misrepresentations were material or false. In addition, we note that the complaint does not allege that defendants intended these misrepresentations to induce any party to rely on them or that anyone did in fact rely on them. This count is wholly lacking in the specific allegations of fact necessary to support a claim of fraud. Similarly, count XI fails to state a cause of action for violation of the Consumer Fraud Act. Count XI fails to allege that defendants intended to induce reliance and, therefore, this count was properly dismissed. Counts XII and XIII allege that the Attorney General subpoenaed documents from Leininger concerning the delivery of stones to McCormick Place. In response to this subpoena, Leininger submitted check vouchers which contained Leininger's job numbers. Later, Leininger also submitted a list of job numbers and the corresponding job description. Counts XII and XIII allege that the job numbers contained on the checks for McCormick Place do not correspond to the list of jobs. Count XII asserts a claim for common law fraud and count XIII asserts a claim under the Consumer Fraud Act. As the appellate court noted, neither of these counts alleges that defendants intended to induce reliance or that any party in fact relied on the alleged misrepresentation. Therefore, both counts were properly dismissed. MBE Provisions of Concrete Contracts Counts XIV and XV were brought against the contractors responsible for supplying concrete to the Authority. The defendants included Paschen Contractors International; Paschen Contractors Associates, Inc.; Paschen Contractors, Inc.; Gust K. Newberg Construction Company; Paschen-Newberg Joint Venture; Hi-Gate Erectors, Inc.; Gateway Construction Company, Inc.; George N. Weiland, Jr., individually and as an officer of Hi-Gate Erectors and Gateway; Highway Safety Corporation; and Reuben Melesio, individually and as president of Highway Safety Corporation and Hi-Gate Erectors, Inc. The Paschen and Newberg defendants reached a settlement agreement and are not part of this appeal. Counts XIV and XV allege that Paschen-Newberg received the primary concrete contract. Under this contract Paschen-Newberg was required to employ a certain percentage of MBEs. In order to meet this requirement, Paschen-Newberg hired Hi-Gate and represented that this firm was a bona fide MBE. Hi-Gate is a corporation whose stock is owned by two other corporations: Gateway, a nonminority firm, owned 49% of the stock and Highway Safety, a minority firm, owned 51% of the stock. Melesio owned all of Highway Safety's stock and was president of the corporation. Weiland was a vice-president and director of Hi-Gate, owned all of Gateway's stock and was that corporation's president. Because the allegations against Weiland and Gateway are somewhat different than those against Melesio and Hi-Gate, we will address the defendants separately. The complaint alleges that Hi-Gate and Melesio submitted an affidavit of MBE status to the Authority. This affidavit was incorrect in that it failed to include $100,000 of investments and advances made by Gateway in and to Hi-Gate; omitted tens of thousands of dollars of equipment rental by Hi-Gate from Gateway; and omitted several instances in which Hi-Gate, Melesio and Highway Safety were denied MBE certification by government agencies. The complaint alleges that the misrepresentations were material, that defendants intended these misrepresentations to induce reliance by the Authority and that the Authority in fact did rely on these misrepresentations to its detriment. Count XIV asserts a common law fraud claim and count XV asserts a claim under the Consumer Fraud Act. We have already set forth the pleading requirements for a common law and statutory fraud claims. The allegations in counts XIV and XV meet these requirements and state a cause of action for common law and statutory fraud against Melesio and Hi-Gate. Therefore, the appellate court correctly reinstated these counts. We now address Weiland's and Gateway's contention that the complaint is not sufficient to state a cause of action against them. These defendants argue that they cannot be held accountable for the actions of Melesio and Hi-Gate because there is no allegation that they participated in or had specific knowledge of the misrepresentations. The general rule with respect to a corporate officer's liability for the fraudulent acts of a corporation was set forth in Murphy v. Walters (1980), 87 Ill.App.3d 415, 43 Ill.Dec. 107, 410 N.E.2d 107. In that case, the appellate court stated: `The mere fact that a person is an officer or director does not per se render him liable for the fraud of the corporation or of other officers or directors. He is liable only if he with knowledge, or recklessly without it, participates or assists in the fraud.' Murphy, 87 Ill. App.3d at 418-19 [43 Ill.Dec. 107, 410 N.E.2d 107], quoting Citizens Savings & Loan Association v. Fischer (1966), 67 Ill.App.2d 315, 322-23 [214 N.E.2d 612]. The complaint alleges that Gateway assisted in the preparation of Hi-Gate's affidavit, and that Gateway knew or was reckless in not knowing that the information was incorrect. In addition, the complaint alleges that Weiland was a vice-president and director of Hi-Gate and that he instituted the policies complained of in this case and has been and continues to be responsible for establishing, supervising, directing, and controlling the business activities and practices of Hi-Gate Erectors, Inc. and Gateway Construction Co., Inc. Taking these allegations as true, the complaint is sufficient to hold Weiland and Gateway liable for the misrepresentation in Hi-Gate's MBE affidavit.