Opinion ID: 2092371
Heading Depth: 1
Heading Rank: 4

Heading: Preparation Contracts

Text: Counts I and II were brought by the Attorney General against defendants E & E Hauling, E & E's director Heil, E & E's agent Schiewe, Leininger Mid-States Paving, Leininger's agent Zawacki, Lo-Mar, Lo-Mar's president Melesio and Nu-Way's vice-president Schreiner. These counts alleged that in 1984, the Authority contracted with E & E for site preparation work at the McCormick Place Annex. As a condition of these contracts, E & E agreed to employ certain specified percentages of minority business enterprises (MBEs) and women business enterprises (WBEs). Counts I and II allege that as the prime contractor, E & E was required to submit sworn statements to the Authority allocating the contract price to E & E and its subcontractors. In addition the complaint alleges that defendant subcontractors were required to submit lien waivers which disclosed the true, cumulative dollar amount received by each subcontractor. Counts I and II allege that defendants submitted sworn statements and lien waivers indicating that Nu-Way, Leininger and Lo-Mar were paid $40,000, $250,000 and $300,000 respectively when in fact these subcontractors received $37,600, $318,261.46 and $348,652.71. In count I, the Attorney General asserts a common law fraud claim. Count I alleges that defendants withheld and concealed from the [Authority] the actual facts in their possession which would have disclosed or led to disclosure of E & E's noncompliance with the MBE and WBE provisions of the contract. Count I also alleges that the misrepresentations in the sworn statements and lien waivers were made for the purpose of deceiving and defrauding the [Authority in order] to induce the [Authority] in reliance thereon to pay E & E. The complaint alleges that as a result of these misrepresentations, bona fide MBEs and WBEs were deprived of work, other contractors were prevented from obtaining the contract with the Authority and E & E improperly received payments to which it was not entitled. In order to state a cause of action for common law fraud, a complaint must allege (1) a false statement of material fact, (2) knowledge or belief of the falsity by the party making it, (3) intention to induce the other party to act, (4) action by the other party in reliance on the truth of the statements, and (5) damage to the other party resulting from such reliance. ( A, C & S, 131 Ill.2d at 452, 137 Ill.Dec. 635, 546 N.E.2d 580.) Further, a complaint `must plead sufficient acts or facts relied upon to establish the fraud' ( Hart v. Brown (1949), 404 Ill. 498, 503, 89 N.E.2d 370), and fraud must be a necessary or probable inference from the facts alleged. Glazewski v. Coronet Insurance Co. (1985), 108 Ill.2d 243, 249, 91 Ill.Dec. 628, 483 N.E.2d 1263. We agree with the appellate court that count I was properly dismissed because it contain[s] no allegations supporting the conclusion that the representations contained in the waivers were fraudulent or that injury resulted from the Authority's reliance on them. (218 Ill.App.3d at 40, 160 Ill.Dec. 691, 577 N.E.2d 1262.) Count I does not allege that incorrect documents were submitted as an inducement for the Authority to enter into the contract. Although count I alleges that the documents were submitted to avoid detection of E & E's alleged non-compliance with the MBE and WBE provisions of the contract, that count contains no facts which show the MBE and WBE provisions were actually violated. For example, count I does not contain allegations regarding the MBE requirements under the contract, which subcontractors are MBEs and WBEs, or that the amounts actually paid to subcontractors were insufficient to meet these requirements. We note that elsewhere in the complaint Lo-Mar is identified as a purported MBE. If, as count I alleges, Lo-Mar received more than the amount indicated in the lien waiver, it is difficult to see how the lien waiver concealed E & E's noncompliance with the MBE provisions of the contract, or deprived MBEs of work to which they were entitled. Without specific allegations of facts which show a connection between submission of the inaccurate lien waivers and some injury to the Authority, count I was properly dismissed. Similarly, we believe count II was also properly dismissed. In count II, the Attorney General alleges that defendants committed acts of unfair competition under the Consumer Fraud and Deceptive Trade Practices Act (Ill.Rev.Stat.1985, ch. 121½, par. 261 et seq. ) and Uniform Deceptive Trade Practices Act (Ill.Rev.Stat.1985, ch. 121½, par. 312 et seq. ). In order to state a claim under the Consumer Fraud Act, a complaint must set forth specific facts which show that defendants misrepresented a material fact in the conduct of a trade or commerce, with the intent that others would rely on such misrepresentation. (Ill. Rev.Stat.1985, ch. 12½, par. 262.) The complaint must set forth specific facts which establish each element of the claim. In regard to count II, the representations in the lien waivers will only be material if some connection is shown between the lien waivers and the MBE and WBE requirements. Because count II suffers from the same deficiencies discussed with respect to count I, we find that the complaint is insufficient to establish such a connection. Counts III and IV were brought against E & E, Heil, Schreiner, Leininger, Leininger's managing agent Peter Palumbo, its president Joseph Palumbo, its agent Tessarolo, Lo-Mar, Melesio and Lois Nugent. These counts allege that under its contract with the Authority, E & E agreed to employ a certain percentage of MBEs and WBEs who would perform a commercially useful function. Pursuant to the the contract, defendant Heil, acting on behalf of E & E, submitted a sworn statement indicating that Lo-Mar would perform $300,000 in work and that Nu-Way, a purported WBE, would perform $40,000 in work. The complaint alleges that at the time of this statement, Heil knew that Leininger, a nonminority firm, would perform Lo-Mar's work and that an unnamed, nonminority, nonwomen firm would perform Nu-Way's work. Counts III and IV also allege that defendant Melesio, acting on behalf of Lo-Mar, represented that Lo-Mar would not subcontract any portion of its work. Despite these representations, the complaint alleges that Lo-Mar received $348,652.71 for its portion of the work, that it subcontracted all of its work to Leininger and paid Leininger $335,078.83 for that work, and that Lo-Mar retained $13,573.88 for its role as an illegal conduit for [E & E] paying Leininger. Counts III and IV allege that E & E, Lo-Mar, Leininger and Nu-Way made these representations for the purpose of deceiving and defrauding the Authority, and to induce the Authority to rely on these representations in awarding the contract to E & E. Counts III and IV also allege that the Authority reasonably relied on these misrepresentations, and that had the Authority known the truth it would not have awarded the contract to E & E or paid E & E under the contract. Defendants argue that the Authority suffered no damages as a result of their failure to comply with the MBE and WBE provisions. Defendants contend that the Authority received what it paid for, i.e., the site preparation work, and that if it had not paid defendants for this work it would have paid someone else for it. Defendants contend that since the complaint does not allege that the Authority was overcharged for the work, that the work was not satisfactorily completed or that absent the misrepresentation it would have paid other contractors less, the Authority has suffered only an intangible loss. This argument ignores the fact that the complaint alleges that defendants breached the MBE and WBE provisions of the contract and then undertook to conceal that breach through misrepresentation. Based on the contract and the allegations in the complaint, the parties considered the MBE-WBE provisions to be material. The contract stated that failure to comply with the MBE-WBE provisions would constitute a breach of the contract and result in termination of the contract or such remedy as deemed appropriate. The complaint alleges that defendants employed a scheme of misrepresentation and deceit to conceal their noncompliance with these provisions. Defendants cannot be placed in a better position than they would have been in without the misrepresentation. While it is clearly too late to terminate the contract, plaintiffs are not precluded from seeking another appropriate remedy. At this stage of the proceedings, we need not address the proper measure of damages. In order for plaintiffs to meet the pleading requirement for the element of damage, it is sufficient that we find plaintiffs are entitled to some remedy for the alleged breach and subsequent misrepresentation. Counts V, VI and VII were brought against E & E and Heil and relate to a letter Heil sent to the Authority. The complaint alleges that in a meeting with E & E representatives, the Authority demanded a statement from E & E Hauling so that [the Authority] could verify that E & E had complied with [the Authority's] minority and women business enterprise program. Specifically, the Authority stated that it would not pay E & E an installment of $133,353.62 unless E & E provided a statement indicating the amounts received by Leininger, Lo-Mar, and Nu-Way and whether those amounts were in connection with work on the base contract or change orders on the site preparation job. In response to this demand, Heil sent a letter which contained the following chart: Base Contract Change Order Total $1,298,000.00 $977,908.86 $2,275,908.86 [LABOR] 762,543.00 178,480.00 41,023.00 E & E 12,800.00 NONE 12,800.00 Nu-Way (WBE) NONE NONE NONE Lo-Mar (MBE) [MATERIALS] E & E 195,457.00 549,428.86 744,885.86 Leininger NONE 250,000.00 250,000.00 Nu-Way (WBE) 27,200.00 NONE 27,200.00 Lo-Mar (MBE) 300,000.00 NONE 300,000.00 The complaint alleges the letter contained four material misrepresentations, namely that (1) Lo-Mar received $300,000 for its work when in fact it did no work and received only $13,573.88 after paying Leininger; (2) Leininger did no work on the base contract when in fact it performed all of Lo-Mar's work; (3) Leininger received a total of $250,000 when in fact it received $653,340.29; and (4) Nu-Way received $40,000 when in fact it did no work and served as an illegal conduit for paying a non-women, nonminority firm. Finally, the complaint alleges that these misrepresentations were made for the purpose of inducing the Authority's reliance on the misrepresentations and that the Authority reasonably relied on these representations when it paid E & E $133,353.62. The appellate court considered each of the four alleged misstatements and found that the letter did not support plaintiffs' allegations. (218 Ill.App.3d at 42-43, 160 Ill.Dec. 691, 577 N.E.2d 1262.) The appellate court correctly noted that a motion to dismiss does not admit facts alleged in a complaint when those allegations are contradicted by facts contained in an exhibit. (218 Ill.App.3d at 43, 160 Ill.Dec. 691, 577 N.E.2d 1262.) Based on its finding that the allegations in the complaint were inconsistent with the letter, the appellate court upheld the dismissal of counts V and VI, which alleged common law misrepresentation and violation of the Consumer Fraud Act respectively. While we do not disagree with the legal basis for the appellate court's decision, we disagree with the finding that the letter contradicts the complaint. The appellate court found that the letter showed Lo-Mar received nothing for its labor and, therefore, the letter contradicts plaintiffs' claim that Lo-Mar received $300,000 for its work. The appellate court's conclusion in this regard is based on an unreasonably restrictive interpretation of work as that phrase is used in the complaint. The appellate court improperly reads the complaint and letter as if work entails nothing more than labor. It is reasonable to conclude that, as used in the complaint, work includes both labor and materials. When read this way, the allegations in the complaint are supported by the letter. Similarly, the appellate court took a narrow interpretation of the letter when it found the letter was silent as to the amount of work done by Leininger on the base contract. Again, the appellate court's interpretation was based on the assumption that work and labor were completely synonymous. Moreover, we note that the numbers supplied by Heil in the letter necessarily imply that Leininger received no payments under the base contract. If, as the complaint alleges, Leininger did all of Lo-Mar's work and received payment for that work, then the letter is misleading. In addition, the complaint alleges Leininger received total payments of $653,340.29 while the letter states the company received only $250,000. Again, we believe the allegations in the complaint are not contradicted by the letter. With respect to Nu-Way, the appellate court found that the complaint alleges only that Nu-Way did no work on the project, not that the letter misstates the amount Nu-Way was paid. (218 Ill. App.3d at 43, 160 Ill.Dec. 691, 577 N.E.2d 1262.) This statement ignores the fact that the complaint also alleges Nu-Way served as an illegal conduit for paying a nonwomen, nonminority firm. While complaints for fraud must plead specific facts, the semantical precision on which the appellate court based its opinion is not required. Because we are reviewing an order on a section 2-615 motion, all reasonable inferences from well-pleaded facts must be drawn in plaintiffs' favor. With this in mind, we find that counts V and VI state causes of action under the common law and Consumer Fraud Act respectively. On the other hand, count VII, which asserts a claim for unjust enrichment based on the letter, does not set forth a proper cause of action. The theory of unjust enrichment is based on a contract implied in law. To recover under this theory, plaintiffs must show that defendant voluntarily accepted a benefit which would be inequitable for him to retain without payment. ( Premier Electrical Construction Co. v. La Salle National Bank (1985), 132 Ill.App.3d 485, 496, 87 Ill.Dec. 721, 477 N.E.2d 1249.) Because unjust enrichment is based on an implied contract, where there is a specific contract which governs the relationship of the parties, the doctrine of unjust enrichment has no application. ( La Throp v. Bell Federal Savings & Loan Association (1977), 68 Ill.2d 375, 391, 12 Ill.Dec. 565, 370 N.E.2d 188, quoting Brooks v. Valley National Bank (1976), 113 Ariz. 169, 174, 548 P.2d 1166, 1171.) In count VII the Attorney General asserts that E & E had an express contract with the Authority. Therefore, count VII was properly dismissed.