Roti v. Roti ( 2006 )

SIXTH DIVISION
March 10, 2006
No. 1-05-0496
MICHAEL F. ROTI, ) Appeal from the
) Circuit Court of
Plaintiff-Appellant, ) Cook County
)
v. )
)
SAMUEL J. ROTI, ) Honorable
) Paddy H. McNamara,
Defendant-Appellee. ) Judge Presiding
PRESIDING JUSTICE McNULTY delivered the opinion of the
court:
Michael Roti sued his cousin Samuel Roti for breach of
contract and on a theory of promissory estoppel. The trial court
dismissed the complaint, holding that the Frauds Act (740 ILCS
80/2 (West 1996)) barred the claim because Michael sought an
interest in lands without a signed contract to support the claim.
In a proposed amended complaint Michael pled that he sought only
a percentage of the profit Samuel earned from sale of land. In
the alternative, Michael sought relief in quantum meruit. The
trial court disallowed the amendment.
We agree with the trial court that the Frauds Act barred the
original complaint. Michael's judicial admissions in the initial
complaint defeat the contract and estoppel claims in the amended
complaint. Michael also failed to plead facts that could support
a finding that Samuel paid Michael less than the reasonable value
of his services, so the proposed amendment did not state a claim
in quantum meruit. Therefore we affirm the trial court's
1-05-0496
judgment.
BACKGROUND
Michael and Samuel worked together in the real estate
business for several years without a written contract. Michael
took a regular salary from the business for most of those years.
After they stopped working together in 2001, Samuel paid Michael
an additional $247,561.
Michael filed this lawsuit in September 2004. He alleged:
"In the fall of 1996, Samuel approached Michael
about joining him in the real estate business. Samuel
promised Michael equivalent pay plus 10% of Samuel's
interest in the current real estate and all future real
estate ventures if Michael would come to work with him.
***
*** Over the next four years, Michael performed
substantial legal, accounting, tax and management
services for Samuel personally, as well as for each of
the real estate properties and other potential projects
and business opportunities.
* * *
*** Michael was forced from the business *** in
the fall of 2001.
*** Michael and Samuel then had discussions
regarding the value of Michael's 10% interest in the
real estate. ***
-2-
1-05-0496
***
*** Samuel told Michael that his 10% interest was
worth only $247,561 and prepared a writing setting
forth how he calculated this amount. A copy of that
writing is attached as Ex. A.
* * *
*** Michael *** fully performed all of his
obligations under the agreement prior to being forced
from the business.
* * *
*** Michael detrimentally relied on Samuel's
promise in devoting his time and efforts to this
relationship to come and work with Samuel."
Exhibit A to the complaint had no heading. We set out its
content in full:
"W/R
3,731,205 Net Monies
59,901 Reproration
3,791,108
- 350,000 Bills
3,441,108
1,998,496 Downpayment 1.3 mil. + 10% interest
1,442,612
10%
144,[261].00
-3-
1-05-0496
W T
5,000,000 Value
2,856,953 Mor[t]gage
2,143,047
236,912 R.E. Taxes
1,906,135
230,596 Downpayment 150,000 + 10% interest
1,675,539
50,000 C[los]ing Cost 1%
1,625,539
10%
162,554.00
Boca
5,000,000 Value
4,500,000 mor[t]gage
500,000
50,000 Closing Cost 1%
450,000
10%
45,000.00
W/R +144,261
W T +162,554
-4-
1-05-0496
Boca + 45,000
+351,815.00 +351,815.00
Overpay MR -289,140
paiD Back MR +55,556
-233.584 -233,584
SR total pay -1,533,300
4 x 60,000.00 per yr. -240,000
SR over pay 1,293,300
10%
129,330 +129,330
MR +247,561"
Samuel moved to dismiss the complaint under section 2-
619(a)(7) of the Code of Civil Procedure (735 ILCS 5/2-619(a)(7)
(West 2004)). The court granted the motion, finding that Michael
pled an unenforceable oral contract for the transfer of an
interest in land.
Michael sought leave to file an amended complaint. In the
proposed amendment he alleged:
"Samuel promised Michael that, if Michael would leave
his practice and join Samuel in business, that he and
Michael would take equivalent pay from the income of
the business and share the profits of the real estate
-5-
1-05-0496
developments that their venture would engage in, Samuel
taking 90% of the net profits and Michael taking 10% of
the net profits."
He again sought to recover for breach of contract and on a theory
of promissory estoppel. He added counts for equitable estoppel,
partnership accounting and quantum meruit. The trial court
denied leave to amend and made the dismissal of the complaint
final and appealable. Michael filed this timely appeal.
ANALYSIS
I
We review de novo the decision to dismiss the complaint.
Carroll v. Paddock, 199 Ill. 2d 16, 22 (2002). When the trial
court dismisses the complaint under section 2-619, "the question
on appeal is whether there is a genuine issue of material fact
and whether defendant is entitled to judgment as a matter of
law." Illinois Graphics Co. v. Nickum, 159 Ill. 2d 469, 494
(1994).
The Frauds Act provides:
"No action shall be brought to charge any person
upon any contract for the sale of lands, tenements or
hereditaments or any interest in or concerning them,
for a longer term than one year, unless such contract
or some memorandum or note thereof shall be in writing,
and signed by the party to be charged therewith, or
some other person thereunto by him lawfully authorized
-6-
1-05-0496
in writing, signed by such party." 740 ILCS 80/2 (West
1996).
In the complaint Michael alleged that Samuel promised him
"10% of Samuel's interest in the current real estate and all
future real estate ventures." The agreement alleged in the
original complaint does not involve payment of a brokerage
commission. Compare Real Estate Buyer's Agents, Inc. v. Foster,
234 Ill. App. 3d 257, 259 (1992). The agreement appears akin to
the written option contracts at issue in Hartbarger v. SCA
Services, Inc., 200 Ill. App. 3d 1000, 1009-10 (1990). We agree
with the trial court's conclusion that Michael seeks to enforce
an agreement for the transfer of an interest in real estate
within the meaning of the Frauds Act. See Goldstein v. Nathan,
158 Ill. 641, 647-48 (1895).
Michael claims that Exhibit A appended to his complaint
comports with the requirements of the Frauds Act. The statute
requires that the writing bear the signature of the party against
whom the court enforces the contract. 740 ILCS 80/2 (West 1996).
Marks of many different sorts may qualify as signatures, as long
as the mark "manifests that the instrument has been executed or
adopted by the party to be charged by it" Just Pants v. Wagner,
247 Ill. App. 3d 166, 173 (1993). We agree with the reasoning of
a California court that distinguished signatures from uses of a
name for identification:
"[S]ubscription does not require that the signature
-7-
1-05-0496
appear at the end of the instrument, nor that it be
handwritten. The name of the party will satisfy the
statutory requirement if it were intended as a
signature, i.e., as an authentication, but not if it
appears for some other purpose, as for mere
identification." (Emphases omitted.) Rader Co. v.
Stone, 178 Cal. App. 3d 10, 23, 223 Cal. Rptr. 806, 812
(1986).
In Vess Beverages, Inc. v. Paddington Corp., 941 F.2d 651
(8th Cir. 1991), the plaintiff's officers met with the
defendant's officers to discuss a proposal for sale of one of the
defendant's subsidiaries to the plaintiff. One of the
defendant's officers took notes at the meeting and included his
own initials in the notes. The plaintiff claimed that the
parties agreed to the sale of the subsidiary, and it argued that
the notes sufficed to meet the requirements of the statute of
frauds. The appellate court held:
"[T]he signer must sign with intent to indicate that
the document is his. *** [I]nitials written as part of
an attendance list do not qualify even as
authentication of the writing. *** [T]o hold for [the
plaintiff] would mean that in future one who took notes
at a meeting would risk a lawsuit for breach of
contract if he or she happened to include an attendance
list at the top. We do not believe the Statute of
-8-
1-05-0496
Frauds permits such a result.
[The plaintiff] argues that the mere fact that the
notes are in [the officer's] handwriting counts as a
signature. [The plaintiff] cites no case or treatise
that supports this proposition, nor have we been able
to find any through independent research. *** If [the
officer] had initialed them with intent to identify the
notes as his or *** with intent to approve the terms of
the agreement, the agreement would be enforceable.
Since he did not, we have no choice but to hold the
agreement unenforceable." Vess, 941 F.2d at 655.
Here, Michael contends that Samuel signed Exhibit A by
writing:
"SR total pay -1,533,300
4 x 60,000.00 per yr. -240,000
SR over pay 1,293,300"
We disagree. The use of SR in this exhibit at most identifies
the numbers on the same line. The exhibit cannot support a
finding that by writing "SR" on the exhibit, Samuel intended to
execute or adopt the document as his own. Thus, Michael
proffered no signed document evidencing the alleged contract for
transfer of an interest in land.
Michael argues that the Frauds Act does not bar his
complaint because he performed his duties under the contract.
The United States Court of Appeals for the Seventh Circuit
-9-
1-05-0496
explained the performance exception to the statute of frauds:
"Unilateral performance is pretty solid evidence that
there really was a contract--for why else would the
party have performed unilaterally? *** [I]f a party
performs first there is some basis for inferring that
he had a contract. *** The partial-performance
exception to the statute of frauds is often explained
(and its boundaries fixed accordingly) as necessary to
protect the reliance of the performing party, so that
if he can be made whole by restitution the oral
contract will not be enforced." Monetti, S.P.A. v.
Anchor Hocking Corp., 931 F.2d 1178, 1183-84 (7th Cir.
1991).
Illinois courts have concluded that employment contracts usually
do not qualify for the performance exception to the Frauds Act:
"Before a contract is taken out of the statute of
frauds, partial performance must be of such a character
that it is impossible or impractical to place the
parties in status quo or restore or compensate the
party performing for what he has parted with or the
value of his performance ***. Normal employment
contracts, such as the one here, do not involve this
kind of performance. To allow the fact that an employee
worked and was paid for part of the duration of the
contract to act as such a bar would make the relevant
-10-
1-05-0496
provision of the Statute of Frauds meaningless. Any
contract where the employee had started work and
received a paycheck would be protected from the
application of the statute." Mariani v. School
Directors of District 40, 154 Ill. App. 3d 404, 407
(1987).
See also Prodromos v. Howard Savings Bank, 295 Ill. App. 3d 470,
476 (1998).
Michael relies on three cases as authority for applying the
performance exception to the employment contract alleged in this
case. In the first, Payne v. Mill Race Inn, 152 Ill. App. 3d
269, 278 (1987), the court noted that the performance exception
to the Frauds Act did not apply to employment contracts and
distinguished the oral contract for sale of the plaintiff's
business from employment contracts.
The second case, Noesges v. Servicemaster Co., 233 Ill. App.
3d 158 (1992), involved an oral contract for the plaintiff to
develop one specific computer software package in exchange for a
salary plus $200 for each software package the defendant sold.
After the plaintiff developed the software in less than a year,
the defendant refused to pay the plaintiff the agreed sums. The
appellate court noted that the Frauds Act did not apply both
because the plaintiff completed his obligations in less than a
year, and because the plaintiff fully performed his limited
obligations. The contract for the development of a single
-11-
1-05-0496
specified product appears very unlike Michael's alleged
employment contract for many varied services for an indefinite
period.
In the third case Michael cites, Reiss v. El Bauer Chevrolet
Co., 96 Ill. App. 2d 266 (1968), the defendant orally promised to
pay an annual bonus, based on sales for the year, to each
salesman who worked to the end of the fiscal year. The plaintiff
stopped working for the defendant following the end of the fiscal
year in 1966, and the defendant refused to pay the plaintiff his
annual bonus. The defendant, who interposed the Frauds Act as a
defense to the plaintiff's suit for the bonus, argued that the
plaintiff could not fully perform his duties as a salesman within
one year. The trial court rejected the defense. The appellate
court affirmed, and it stated as a general principle: "The
Statute of Frauds is no defense to an executed contract of
employment ***." Reiss, 96 Ill. App. 2d at 269.
The result in Reiss appears correct, because the plaintiff
could fully perform the obligations that entitled him to the
annual bonus within one year. However, the general principle
stated in Reiss seems irreconcilable with more recent cases,
including Mariani, Prodromos and Payne. That case law supports
the trial court's decision to dismiss the claim for breach of the
alleged employment contract.
In the complaint Michael seeks added compensation, in the
form of an interest in real estate, for the work he performed for
-12-
1-05-0496
Samuel. Since Michael admitted that Samuel paid him more than
$400,000 for his work, we see no grounds for inferring that he
must have had an oral contract for yet more compensation. See
Monetti, 931 F.2d at 1183-84. Michael's performance of his
duties as an employee does not present adequate grounds in these
circumstances for finding an exception to the Frauds Act. We
affirm the dismissal of the breach of contract count from the
initial complaint.
The count for promissory estoppel also fails. "[I]n order
to trump the Statute of Frauds, a party must invoke the doctrine
of equitable estoppel, which differs from promissory estoppel in
that the party asserting it must additionally allege words or
conduct amounting to a misrepresentation or concealment of
material facts." Cohn v. Checker Motors Corp., 233 Ill. App. 3d
839, 845 (1992). Because Michael has not alleged that Samuel
misrepresented or concealed material facts to induce Michael to
work for him, the court properly dismissed the count based on
promissory estoppel.
II
Next, Michael argues that the court erred by disallowing his
proposed amended complaint. We will not reverse a decision on a
motion for leave to amend a complaint unless the trial court has
abused its discretion. Loyola Academy v. S & S Roof Maintenance,
Inc., 146 Ill. 2d 263, 273-74 (1992). To determine the issue, we
must consider:
-13-
1-05-0496
"(1) whether the proposed amendment would cure the
defective pleading; (2) whether other parties would
sustain prejudice or surprise by virtue of the proposed
amendment; (3) whether the proposed amendment is
timely; and (4) whether previous opportunities to amend
the pleading could be identified." Loyola, 146 Ill. 2d
at 273.
In the proposed amendment Michael sought to change the terms
of the alleged contract. According to the original complaint,
Samuel promised to give Michael "10% of Samuel's interest in the
current real estate and all future real estate ventures." In the
proposed amendment Michael alleged instead that Samuel promised
"he and Michael would *** share the profits of the real estate
developments that their venture would engage in, Samuel taking
90% of the net profits and Michael taking 10% of the net
profits."
The trial court did not address the issue of whether the
Frauds Act would bar recovery on the promise alleged in the
amended complaint. At the hearing on the motion for leave to
amend, the trial court explained the denial of the motion:
"THE COURT: ***
What you did say [in the initial complaint] was
that it was an agreement for an interest in land ***.
Are you going to change your theory as to what it is?
[Plaintiff's counsel]: No, your Honor, I don't
-14-
1-05-0496
think I am.
THE COURT: In the [proposed amended] complaint
you say it is a partnership agreement instead of a sale
of land.
* * *
[Plaintiff's counsel]: I don't think I am
changing it, your Honor, I really don't.
THE COURT: Well I do. I think you are stuck with
what I did."
The trial court effectively treated the allegations of the
original complaint as judicial admissions that Michael could not
contradict in later pleadings.
Our supreme court explained the doctrine of judicial
admission:
"Judicial admissions are defined as deliberate,
clear, unequivocal statements by a party about a
concrete fact within that party's knowledge.
[Citation.] Where made, a judicial admission may not
be contradicted in a motion for summary judgment
[citation] or at trial [citation]. The purpose of the
rule is to remove the temptation to commit perjury."
In re Estate of Rennick, 181 Ill. 2d 395, 406-07
(1998).
Generally, "[a]llegations contained in a complaint are judicial
admissions and are conclusive against the pleader." Calloway v.
-15-
1-05-0496
Allstate Insurance Co., 138 Ill. App. 3d 545, 549 (1985); see
Baker v. Daniel S. Berger, Ltd., 323 Ill. App. 3d 956, 963
(2001).
The terms of Michael's oral agreement with Samuel must fall
within Michael's knowledge, and he unequivocally alleged the
concrete fact that Samuel agreed to give him an interest in real
estate in exchange for his agreement to work with Samuel. The
trial court properly held that Michael in his complaint
judicially admitted that he sought to enforce a contract for
transfer of an interest in real estate. In light of the judicial
admissions, the Frauds Act defeats the counts for breach of
contract and promissory estoppel in the proposed amended
complaint. The new count based on equitable estoppel also fails
to state a viable claim because Michael still does not allege
that Samuel fraudulently induced him to enter the contract. See
Cohn, 233 Ill. App. 3d at 845.
Michael also added counts for partnership accounting and for
quantum meruit. He argues that the Frauds Act does not apply to
joint ventures because "[a] written agreement is not required to
form a joint venture and the existence of a joint venture may be
inferred from a variety of facts and circumstances." Russell v.
Klein, 33 Ill. App. 3d 1005, 1007 (1975). While parties may
orally contract to form a joint venture, "the statute [of frauds]
is applicable to the joint venture agreement if the partners
agree to share the proceeds of a sale of land that is owned by
-16-
1-05-0496
one partner alone." B & B Land Acquisition, Inc. v. Mandell, 305
Ill. App. 3d 1068, 1073 (1999). The Frauds Act renders
unenforceable the alleged oral joint venture agreement for Samuel
to give Michael an interest in his real estate. See Goldstein,
158 Ill. at 647-48. Accordingly, the count for partnership
accounting in the proposed amended complaint fails to state a
viable claim.
Courts that have found oral employment contracts
unenforceable have pointed to quantum meruit as the proper
remedy. E.g., Fischer v. First Chicago Capital Markets, Inc.,
195 F.3d 279, 284 (7th Cir. 1999). To state a cause of action
for quantum meruit, a plaintiff must allege facts that show "the
performance of services by the party, the conferral of the
benefit of those services on the party from whom recovery is
sought, and the unjustness of the latter party's retention of the
benefit in the absence of any compensation." First National Bank
of Springfield v. Malpractice Research, Inc., 179 Ill. 2d 353,
365 (1997). A court deciding whether a proposed complaint states
a cause of action should "accept[] as true all well-pleaded facts
and all reasonable inferences that can be drawn therefrom."
Palmer v. Chicago Park District, 277 Ill. App. 3d 282, 284
(1995). However, the court need not accept conclusions
unsupported by specific factual allegations. Classic Hotels,
Ltd. v. Lewis, 259 Ill. App. 3d 55, 60 (1994).
Michael alleged that he performed legal and accounting
-17-
1-05-0496
services for Samuel from 1996 until 2001. He also admitted that
Samuel paid him more than $400,000 for those services. In the
count for quantum meruit, Michael alleged:
"Michael provided valuable services from which
Samuel profited greatly.
*** Michael has not received the reasonable value
of his services.
*** It would be unjust to allow Samuel to retain
the value of Michael's services without paying the
reasonable value of those services."
Michael relies solely on his conclusory allegations for his
cause of action. We find no specific factual allegations in the
proposed amended complaint that could support the conclusion that
Samuel paid less than the reasonable value of Michael's services.
Thus, the proposed amended complaint fails to state a cause of
action in quantum meruit. Because Michael failed to present an
amended complaint that stated any viable cause of action, the
trial court did not abuse its discretion by denying Michael leave
to amend his complaint. See Kittay v. Allstate Insurance Co., 78
Ill. App. 3d 335, 339 (1979).
III
The Frauds Act bars Michael from recovering for breach of
the alleged oral contract for the conveyance of an interest in
real estate. Michael received substantial compensation for the
services he performed, so his performance does not support an
-18-
1-05-0496
inference that he must have had an oral contract for more
compensation. Moreover, the performance doctrine does not apply
to remove this contract for indefinite employment from the
operation of the Frauds Act. The bare allegation of reliance on
an oral promise does not overcome the strictures of the Frauds
Act, so the court correctly dismissed the count for promissory
estoppel.
Judicial admissions in the original complaint defeated most
counts of the proposed amended complaint. The proposed amendment
failed to state facts that could support an inference that the
reasonable value of Michael's services exceeded the amounts
Samuel paid for those services. Because the proposed amendment
failed to state a claim based on quantum meruit, the trial court
did not abuse its discretion by denying leave to amend.
Accordingly, we affirm the dismissal of the complaint and the
denial of the motion for leave to amend.
Affirmed.
TULLY and O'MALLEY, JJ., concur.
-19-