Court Opinion

ID: 7017973
Source: CourtListenerOpinion
Date Created: 2022-07-24 04:28:33.53557+00
Date Added: 2024-06-11T16:10:27.600532
License: Public Domain

Mr. JUSTICE TRAPP, dissenting: The principal opinion appears to conclude that while the judgment below should be affirmed as to the asserted “original representation” that the Bishop corporation met the minimum capital requirements, the cause should be reversed and remanded as to “false representations” said to be made from time to time concerning the continuing financial requirements of the corporation with the result that plaintiff undertook to guarantee loans made to the corporation. In Zaborowski v. Hoffman Rosner Corp. (1976), 43 Ill. App. 3d 21, 25, 356 N.E.2d 653, 656, it is stated that: “Fraud must be pleaded with specificity; and while a motion to dismiss admits allegations of fraud properly pleaded it does not admit conclusions of law or conclusions of fact unsupported by specific facts. (See Zickur v. Irmiger, 15 Ill. App. 3d 805, 807 (1973).) The pleadings before us do not allege sufficient specific facts to state all of the elements of a cause of action for fraud and deceit.” (See also Bridge v. Newridge Chemical Co. (1967), 88 Ill. App. 2d 337, 232 N.E.2d 551.) The amended complaint does not contain a single allegation of fact disclosing elements of fraud or negligence. There are only statements of conclusions of the pleader regarding unstated “representations” made at unspecified times within or over a period of some three years. Such facts as are alleged or as otherwise appear in the record fail to show any duty of defendant to plaintiff. The pleadings and the record - show that plaintiff elected to become a substantial shareholder in the Bishop corporation at a time substantially prior to the execution of the franchise agreement. Defendant dealt solely with the corporation and we find no allegation of fact that defendant had any occasion to deal with plaintiff as an individual. MacAuley v. Rickel (1968), 96 Ill. App. 2d 283, 238 N.E.2d 603, is inapposite as the authority for the holding of this court. In that case defendant was dealing directly with plaintiff as the purchaser of the former’s business. The strength of the opinion was in the fact that plaintiff alleged and proved specific representations of the present volume of business and the condition of the equipment to be purchased. The issue of plaintiff’s negligence in failing to examine the books of the business was subordinate. Facts which appear of record through documents obtained in discovery including the incorporation of Bishop, plaintiff’s application as an investor, and an agreement between plaintiff and Mel Bishop disclosed that the plaintiff owned real estate and owned a vending machine company which operated in three states. The organization of the Bishop corporation shows that plaintiff participated therein as one of two shareholders, owning 50 shares of the value of *1000 per share while Mel Bishop owned 55 shares, each of that value. Thus, plaintiff necessarily knew that the paid-in capital was never more than *105,000. A shareholder’s agreement between plaintiff and Mel Bishop, effective as of the date of the organization of the corporation prior to the execution of the franchise agreement, provided that plaintiff would serve as vice president and director and that he was engaged to provide services as a consultant in the operation of the corporation. The shareholder’s agreement provided that in such capacity plaintiff was to receive copies of all financial statements, audits, and reports. By the terms of the shareholder’s agreement, the corporation was to pay plaintiff the amount of interest due on the note of Mel Bishop to plaintiff and to make quarterly payments of *1250 toward the purchase of plaintiff’s stocks. After a stated period such payments were to be made at the rate of 10 percent per annum upon the cost of plaintiff’s stock until he had been repaid the amount of his original investment. Finally, the shareholder’s agreement provided that if the Bishop note was paid and plaintiff’s stock redeemed by January 1, 1980, plaintiff was to receive a bonus of *25,000. If such payments and redemption were not completed by that date plaintiff was to receive a bonus of *50,000. The performance of the corporation’s contract to plaintiff personally as provided in the shareholder’s agreement would seem to require a substantial interest in his observing the financial performance of the corporation. In Schmidt v. Landfield (1960), 20 Ill. 2d 89, 94, 169 N.E.2d 229, 231-32, it is said: “This court has pointed out accordingly that ‘In all cases where it is sought to hold one liable for false representations, the question necessarily arises, whether, under all circumstances, the plaintiff had a right to rely upon them. In determining this question, the representations must be viewed in the light of all the facts of which the plaintiff had actual notice, and also of facts of such as he might have availed himself by the exercise of ordinary prudence.’ Dillman v. Nadlehoffer, 119 Ill. 567, 577. The rule is well established that a party is not justified in relying on representations made when he has ample opportunity to ascertain the truth of the representations before he acts. When he is afforded the opportunity of knowing the truth of the representations he is chargeable with knowledge; and if he does not avail himself of the means of knowledge open to him he cannot be heard to say he was deceived by misrepresentations. [Citations.]” See also National Republic Bank v. National Homes Construction Corp. (1978), 63 Ill. App. 3d 920, 381 N.E.2d 15; Lagen v. Lagen (1973), 14 Ill. App. 3d 74, 302 N.E.2d 201. Plaintiff had the foresight to provide that the shareholder’s agreement require that copies of reports, audits, and statements should be delivered to him. Now plaintiff seeks to plead that despite the fact that he was to be paid quarterly, the furnishing of the financial documents was a useless act for the reason that they were meaningless to him. In sum, the record actually shows that plaintiff has not pleaded facts which show a right to rely upon any gossamer of “representation” which he undertook to allege. The judgment of the trial court should be affirmed.