Kay v. Prolix Packaging, Inc. , 993 N.E.2d 39 ( 2013 )

ILLINOIS OFFICIAL REPORTS
Appellate Court
Kay v. Prolix Packaging, Inc., 2013 IL App (1st) 112455
Appellate Court BARRY KAY, Plaintiff-Appellant and Cross-Appellee, v. PROLIX
Caption PACKAGING, INC., Defendant-Appellee and Cross-Appellant.
District & No. First District, Third Division
Docket No. 1-11-2455
Filed June 12, 2013
Rehearing denied June 28, 2013
Held In an action arising from a dispute over the compensation due plaintiff
(Note: This syllabus after he sold his packaging business to defendant and then took a sales
constitutes no part of position with defendant, the trial court erred in finding plaintiff was not
the opinion of the court entitled to estimate his damages for the period during which there was no
but has been prepared documentary evidence of his actual damages and the cause was remanded
by the Reporter of for a hearing to determine those damages, but the denial of plaintiff’s
Decisions for the request to add claims for a violation of the Wage Payment and Collection
convenience of the Act and for prejudgment interest was upheld and plaintiff’s award was
reader.)
recalculated by applying the correct commission rate.
Decision Under Appeal from the Circuit Court of Cook County, No. 04-CH-2033; the
Review Hon. Ronald Bartkowicz, Judge, presiding.
Judgment Affirmed in part and reversed in part; cause remanded with directions.
Counsel on Steven M. Mora, of Chicago, for appellant.
Appeal
Barry C. Kessler & Associates, of Glenview (Barry C. Kessler and
Laurence P. Becker, of counsel), for appellee.
Panel JUSTICE HYMAN delivered the judgment of the court, with opinion.
Justices Sterba and Pierce concurred in the judgment and opinion.
OPINION
¶1 After defendant Prolix Packaging, Inc., purchased the assets of plaintiff’s business
through an assignment for the benefit of creditors, Prolix employed plaintiff Barry Kay as
a salesperson. Some five years later Prolix sold its business to a third party and, thereafter,
Kay sued Prolix for allegedly failing to pay certain sales commissions under the employment
agreement. The focal point of this appeal is whether or not Prolix owes Kay for his
commissions, and if so, how much.
¶2 Following a bench trial, the court found in favor of Kay and awarded damages of
$373,417.99. Kay’s posttrial motions for additional damages, to add a count under the
Illinois Wage Payment and Collection Act (820 ILCS 115/1 et seq. (West 2010)), and for an
award of prejudgment interest were denied. Kay argues he should have been allowed to
estimate his damages, claiming Prolix wrongfully failed to produce summary business
records, thus preventing Kay from presenting the full extent of actual damages for the entire
time of his employment. Kay further argues the trial court erred by disallowing the additional
count and by denying his request for prejudgment interest.
¶3 In its cross-appeal, Prolix contends the judgment should be vacated because no contract
existed between the parties. Prolix further contends the trial court erred in computing Kay’s
damages by ignoring Kay’s testimony and his counsel’s admissions as to the appropriate
commission rate. Lastly, Prolix contends the trial court erred by holding Prolix’s equitable
defenses were inapplicable.
¶4 We hold the trial court erred by not allowing Kay to introduce evidence of estimates of
his unpaid commissions based on his past sales for the 34 months in which no summary
documents were produced. This evidence is part of Kay’s offer of proof and exhibits and,
therefore, we remand the case to allow plaintiff to further testify and defendant to defend on
the sole issue of the amount of damages for the 34 months. We hold the trial court did not
abuse its discretion in denying Kay’s request for prejudgment interest and to amend his
amended complaint to include a count for violation of the Wage Payment and Collection Act.
¶5 Concerning Prolix’s cross-appeal, we hold the trial court’s determination of Kay’s
customer master listing as the missing “Exhibit A” to the employment agreement was not
against the manifest weight of the evidence and, therefore, is upheld. The trial court also
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properly determined Prolix failed to meet its burden to show the equitable defenses were
warranted by the evidence. We find, however, that the trial court erred in computing Kay’s
damages by disregarding Kay’s testimony and his counsel’s admissions as to the commission
rate to which Kay was entitled.
¶6 BACKGROUND
¶7 Plaintiff was the owner of The Kay Group, Inc., a business that sold paper products,
including grocery bags, primarily to grocery stores. Defendant Prolix Packaging, Inc., was
a direct competitor of The Kay Group, Inc. On January 20, 1999, Prolix Packaging, Inc.,
purchased the assets of The Kay Group, Inc., through an assignment for the benefit of
creditors (the ABC transaction). The parties executed an employment agreement,
“Commissioned Salesperson Employment, Consulting and Non-Competition Agreement,”
to provide Kay with two types of compensation: (1) a 5% commission on all product sales
he made; and (2) a 2% override commission on all sales made by Prolix to Kay’s former
customers. Paragraph 7(A) of the contract provided the 5% direct sales commission;
paragraph 7(B) of the contract defined the 2% indirect or override commission. The
employment agreement anticipated the parties agreeing on Kay’s former customers and
attaching a list of them as “Exhibit A.” No document entitled “Exhibit A” was attached to
the employment agreement, and the parties disagree as to which of Kay’s former customers
were to be included in “Exhibit A.”
¶8 For the next five years, Prolix made regular commission payments to Kay, and Kay
created documents acknowledging receipt of the payments. It is undisputed that Kay was paid
commissions on all direct sales attributable to him. Kay admitted being paid a yearly
commission of between $100,000 and $125,000 on direct sales he made.
¶9 In December 2003, Prolix sold its business to Bunzl. Two months later, Kay filed an
action against Prolix seeking to recover compensation under the employment agreement for
the 2% override commissions allegedly due him for the indirect sales customers who would
have been identified in “Exhibit A.”
¶ 10 Although numerous documents were brought to the ABC transaction closing, the
evidence at the bench trial established that none was ever marked as “Exhibit A” to the
employment agreement. Kay testified, “I want an accounting of all of the Kay Packing sales
made by Prolix’s other people, of which I would be entitled to my 2 percent commission.”
At his deposition, Kay stated there was a document at closing entitled “Exhibit A,” but he
recanted that testimony at trial, admitting that the document he thought was “Exhibit A,” was
not. Kay further admitted that neither of the parties ever signed off on or initialed an “Exhibit
A” to the employment agreement.
¶ 11 Kay’s understanding of the employment agreement was that “[o]n all of my sales that I
personally called on, I was to be paid a five percent commission. On all of my customers that
were already on the Kay Packaging list, I was to be paid another 2 percent.” Kay testified he
was paid the 5% commission on all his sales; however, Prolix failed to pay the additional 2%
commission for sales made to his former customers.
¶ 12 Eva Jakubowski, Prolix’s president and co-owner with Caesare Jakubowski, testified that
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Prolix never agreed to a document as “Exhibit A” to the employment agreement. Concerning
the commissions Kay was to receive for the customers he brought from Kay Packaging,
Jakubowski testified that although paragraph 7(B) discussed the array of customers for which
Kay was to receive a 2% commission, Kay was paid “one-third because it was too much of
an accounting difficulty.” Jakubowski explained that according to the employment
agreement, Kay was to be paid a 5% commission for brand new customers, those he did not
bring with him from Kay Packaging. Kay was actually paid a 7% commission on those sales.
Jakubowski said “we just lumped [the five percent and the 2 percent] together.” She testified
Kay was paid a 7% commission for sales he made directly to his former customers, as well
as for sales made to customers he brought with him from Kay Packaging that other Prolix
employees serviced. Jakubowski explained that to be profitable, Prolix had to keep the profit
margins at 21% and so, Kay would receive one-third of the profit or 7%. She testified the
parties agreed that if the profit margin was less than 21%, Prolix did not have to sell to the
former clients of Kay Packaging. Jakubowski testified that Kay received one-third of the
profit, or 7%, for any client he sold to, regardless of how that client came to be.
¶ 13 Prolix argues the reason “Exhibit A” was not attached to the signed employment
agreement was because the parties disagreed as to which customers comprised override
customers. Kay believed all former Kay Packaging customers should be included. Prolix
believed only those customers who were purchasing from Kay 30 days before the ABC
transaction represented current customers of Kay Packaging for which override commissions
were owed.
¶ 14 Kay testified that “Exhibit A” was a computerized list of Kay Packaging customers
entitled “Customer Master Listing,” dated January 15, 1999. This customer list included all
of Kay Packaging’s customers that existed in 1997 through January 1999, just before the
parties signed the employment agreement, and a copy was at the ABC transaction closing.
Jakubowski testified the Customer Master Listing was not “Exhibit A” to the employment
agreement and did not represent the customers of Kay Packaging for which Kay should be
compensated under the override commission provision. She said the parties had an oral
understanding that only those customers of Kay Packaging that ordered product from Kay
Packaging in the month proceeding the ABC transaction were to be considered former
customers for which Kay was entitled to an override commission.
¶ 15 Jakubowski further testified that the parties orally agreed that no customers to which both
Kay Packaging and Prolix were selling product to at the time just before the ABC transaction
were to be considered Kay Packaging customers for the purposes of the employment
agreement. Kay denied this arrangement. According to Kay, a few months into his
employment with Prolix, he raised the issue of the underpayment of override commissions,
but when the issue went unresolved he decided not to pursue it further for fear of
jeopardizing his employment. Kay acknowledged receiving sales commissions from Prolix
during his employment, but claims he believed he was only acknowledging receipt of
commissions on his direct sales.
¶ 16 For the first two months of 2000 and all of 2002 and 2003, Kay obtained, through
discovery, actual sales summaries from which his purportedly unpaid 2% commission could
be easily calculated. Unavailable, though, were similar sales summaries for the years 1999,
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2001, and the last 10 months of 2000. For these 34 months, Kay made an offer of proof
regarding his estimate of sales by Prolix to his former customers. The trial court did not
allow Kay’s offer of proof to stand and denied Kay damages for the entire 34 months. The
trial court observed that Kay refused to wade through documents stored by Prolix in a
warehouse that showed every sale by every Prolix salesperson, including Kay, despite a court
order splitting the cost of the review between the parties. The documents would have enabled
a sales calculation for the missing months. Kay insisted that the exercise of creating
summaries from the sales records in the warehouse would have been overly time-consuming
and too expensive.
¶ 17 During trial, the court acknowledged the uncertainty between the parties concerning the
identity of “Exhibit A,” stating:
“Up until today, I don’t believe that there is any evidence that conclusively
establishes what Exhibit A was at or about the time in which the contract was entered
into. We attempted to see if we could get some clarification from the attorneys who were
participating in the transaction and the result as least as far as my view is really
inconclusive. And the parties, the plaintiff and defendant [who] were actually at the
location of the closing are not quite sure in their own mind or in their testimony before
me what exactly Exhibit A was, but it has to be resolved because Exhibit A is a very
important document.”
Later, the court ruled that the Customer Master Listing offered by Kay would constitute
“Exhibit A.” The court stated:
“One factual issue in dispute is the identification of Exhibit A referenced in Section
2A of the Agreement. Kay maintains Exhibit A is his Exhibit 3 which was admitted over
Prolix’s objections. Prolix maintains their Exhibit 27 is the correct version of Exhibit A.
After reviewing the trial testimony and the Parties’ proposed findings, the Court finds
Kay has met his burden of proof establishing Kay’s Exhibit 3 as the correct version of
Exhibit A referenced in the Agreement.”
In so holding, the trial court said, “I don’t think Mr. Kay’s testimony has been severely
impeached or impaired in terms of credibility. So I am willing to accept Exhibit A as he
identified it and as it is in the record.”
¶ 18 The court entered judgment in favor of Kay, awarding $373,417.90 in damages. In
entering its order, the court construed the fifth recital of the employment agreement as
requiring one-third of the gross profit margin (effectively 7%) to be paid as a commission
to Kay for sales made by Kay or by Prolix’s salespeople to former customers of Kay
Packaging.
¶ 19 The court denied posttrial motions by Kay (i) for additional damages, (ii) to amend the
amended complaint to include a count under the Illinois Wage Payment and Collection Act
(820 ILCS 115/1 et seq. (West 2010)), and (iii) for an award of prejudgment interest under
the Interest Act (815 ILCS 205/2 et seq. (West 2010)).
¶ 20 Kay filed a timely notice of appeal and Prolix filed its cross-appeal.
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¶ 21 ANALYSIS
¶ 22 Estimation of Damages
¶ 23 Kay contends he should have been allowed to testify as to his estimate of damages for
the 34 months for which he claims Prolix wrongfully withheld summary sales reports. Kay
argues the trial court erred in holding as it did, contending that Prolix’s failure to produce the
summary reports or adequately preserve them caused the difficulty in proving actual damages
and, therefore, Kay should not have been prevented from estimating his damages. Moreover,
Kay argues that regardless of whether the documents were available for review, because he
testified to the facts from which he was able to estimate his sales and, therefore, his
commissions for the years for which the summaries were not produced, the evidence should
have at least been considered in determining his damages.
¶ 24 Kay testified he requested all documents from Prolix relevant to sales made to Kay’s
former customers. The only documents made available to him, he said, were thousands of
sheets which showed every sale by every Prolix salesperson, not just Kay, to every customer
of Prolix’s, not just Kay’s former customers, arranged chronologically over a five-year period
of time and available for review only in a cold warehouse. Kay claims there “were probably
close to 100,000 pieces of paper organized not by salesman or by sales but organized by time
when they came in a particular day” and these sheets “were totally worthless. *** There was
no possible way, unless we would have hired a team of forensic accountants, to come in and
check all that. It was useless.”
¶ 25 Kay testified he obtained limited summary documents, titled “Analysis of Deviation,”
from Bunzl. These documents were generated by Prolix’s computer system and show total
sales to all Prolix customers for the years 2002 and 2003. The report was printed in
December 2003, at the same time as the sale of Prolix to Bunzl. Kay introduced this
document as trial exhibit 8.
¶ 26 Jakubowski testified that in response to Kay’s request for production of documents,
Prolix made available for inspection records of sales for every customer of Prolix from 1999
through 2003. Prolix also provided a computer-generated document, entitled “Sales by
Salesmen,” for the first two months of 2000, which summarized Prolix’s sales to Kay’s
former customers.
¶ 27 The court summarized its understanding of Jakubowski’s testimony stating, “unless I
have it incorrectly in my record, that there are no summary reports she is aware of or has in
her possession, but there are individual daily, weekly, and monthly reports.” Jakubowski
confirmed the court’s understanding.
¶ 28 Kay argues the analysis of deviation, which he obtained from Bunzl, as well as the sales
by salesman report, show Kay could have easily proved up damages had those summary
reports been provided to Kay in their entirety as requested. Kay argues the only inference that
can be drawn from the documentary evidence is that the summary documents were available
for the entire time period of his employment and were intentionally withheld by Prolix. Kay
testified the only summary reports he received were those from Bunzl for the years 2002 and
2003, and a computer-generated report from Prolix for the first two months of 2000.
¶ 29 The trial court questioned Jakubowski about the documents Prolix made available to
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Kay. The evidence is confusing concerning whether summary reports were made available
to Kay. Initially, Jakubowski’s testimony appears to be that summary reports were not
available. Later, Jakubowski testified the “entire universe of documents” Prolix retained after
its sale to Bunzl were made available to Kay, including summary reports. Jakubowski
testified that as part of the sale to Bunzl, Prolix’s entire computer system was turned over.
She was unsure whether the information technology personnel had retained a backup system
for Prolix’s files, but claimed that all of the data from their computer systems was retained
in hard copy form and made available to Kay for review.
¶ 30 To overcome the lack of business records provided by Prolix, Kay prepared exhibit 12
to show the commissions he was due for 1999, a 10-month period in 2000, and 2001. Exhibit
12 showed the sales and commissions due Kay for sales to his former customers by Prolix
employees which were directly supported and proven by the business records in the form of
summary reports obtained from Bunzl along with Kay’s estimates of sales and commissions
for the 34 months for which no summary reports were produced. The estimates for the 34
months were based on an offer of proof in which Kay testified from his knowledge and
experience that sales to his customers were about the same for the entire time of his
employment. Exhibit 12 used the average amount of sales during the period, which was
supported by Prolix’s business records to support the estimate of sales and commissions he
was owed for the undocumented period.
¶ 31 The trial court ruled that Kay’s testimony was too speculative and, therefore, the court
refused to consider it as proof of his actual damages for those time periods. In its order of
judgment on January 5, 2011, the trial court refused to enforce a sanction against Prolix as
requested by Kay for the spoliation of evidence. In response to the parties’ dispute
concerning the production of summary reports, the court stated that Prolix was only required
to produce documents maintained in the “ordinary course of business.”
¶ 32 On the issue of damages, the trial court only considered the documentary evidence of
Kay’s actual sales, not the projected numbers testified to in the offer of proof. The trial court
held Kay failed to offer evidence that the documents he needed to show his actual damages
were not made available for inspection by Prolix. The court explained that Prolix was not
required to “create documents for [Kay],” but rather, only to “make them available to [Kay]
in the manner in which the ordinary course of business they were kept.” The trial court found
it significant that, despite having the opportunity to do so, Kay chose not to inspect Prolix’s
actual documents and, instead, chose to rely on projections to support his request for
damages. The trial court recognized that in certain circumstances projections may be
admissible, but found that because Kay had an opportunity to view the actual documents and
chose not to go through them, this situation was not a circumstance in which projected
damages were appropriate.
¶ 33 We review a challenge to the trial court’s rulings after a bench trial using the manifest
weight of the evidence standard of review. Fox v. Heimann, 375 Ill. App. 3d 35, 46 (2007).
To reverse a finding of damages as a reviewing court, we must find that the trial court
ignored the evidence or that the measure of damages was erroneous as a matter of law. B&Y
Heavy Movers, Inc. v. Fluor Constructors, Inc., 211 Ill. App. 3d 975, 984 (1991). The party
seeking damages bears the burden to establish not only that it has sustained damages, but also
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a reasonable basis for computation of those damages. Dowd & Dowd, Ltd. v. Gleason, 352
Ill. App. 3d 365, 383-84 (2004). Speculation and conjecture are not proper bases for an
award of damages. Dowd & Dowd, Ltd., 352 Ill. App. 3d at 383.
¶ 34 The trial court erred in refusing to consider Kay’s estimation of his damages for the
undocumented period of his employment. Kay’s estimation of his damages was not
improperly based on speculation and conjecture, but on reasonable inferences based on his
personal knowledge and sales numbers for the surrounding time period, as well as the
difficulty and cost-prohibitive nature of ascertaining the actual amount of his damage for that
period by inspecting the voluminous available documents. Kay testified to the facts by which
he was able to estimate his sales and, therefore, his override commissions for the years for
which summary documentary evidence was unavailable. He testified that the sales by Prolix
employees to the former customers of Kay Packaging remained about the same for his five-
year period of employment and also similar to his prior years’ sales at Kay Packaging. Under
these circumstances, Kay’s testimony and his exhibits should have been allowed into
evidence as a reasonable estimation of his unpaid commissions for the undocumented time
period. The sufficiency of the evidence of damages goes to the weight accorded Kay’s
testimony, but not to its admissibility. To the extent Prolix’s concern is that Kay
overestimated his damages, Prolix’s counsel properly could have cross-examined Kay as to
his projections or offered evidence to the contrary.
¶ 35 In holding the trial court erred in ruling that the estimation of Kay’s damages was not
warranted under these circumstances, we make clear that going forward, the trial court is
under no obligation to accept Kay’s estimations for the undocumented time period as they
were provided. In a bench trial, it is the responsibility of the trial judge, as the trier of fact,
to resolve factual issues and to determine the credibility of the witnesses, the weight to be
given their testimony, and the reasonable inferences to be drawn from the evidence. People
v. Campbell, 146 Ill. 2d 363, 375 (1992).
¶ 36 We remand this matter for the trial court to consider Kay’s testimony and exhibits
concerning estimation of the damages he sustained for the 34 months of his employment in
which no summary documentation was provided from which he could definitively prove his
damages. The appropriate damages for this time period must be awarded by the trial court
using the 2% override commission rate provided in paragraph 7(B) of the parties’
employment agreement.
¶ 37 Wage Payment and Collection Act Claim
¶ 38 Kay contends he should have been allowed to amend his complaint to include a count for
violation of the Illinois Wage Payment and Collection Act (820 ILCS 115/1 et seq. (West
2010)).
¶ 39 The original complaint was filed on February 3, 2004. Kay filed a motion to add a count
for attorney fees under the Sales Representative Act (820 ILCS 120/1 (West 2010)), before
the onset of trial, which the court denied. Trial was held and the evidence heard and taken
before August 16, 2010. On January 5, 2011, the trial court entered its finding of liability and
ordered Kay to submit his damage computation before January 19, 2011. On January 27,
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2011, almost seven years after the filing of his original complaint, Kay filed his motion for
leave to file a second amended complaint to state a cause of action under the Wage Payment
and Collection Act. The trial court denied Kay’s motion on March 17, 2011, stating there are
“no provisions in the Wage Act that authorize the court to award attorney fees to a successful
litigant,” and holding that the motion would require reopening of proofs and, thus, was
bought too late.
¶ 40 Kay argues that the trial court was incorrect because the amended version of the Act,
which became effective January 1, 2011, provided for attorney fees to be awarded to a
successful plaintiff, as well as 2% interest per month on the amount of wages wrongfully
withheld by the employer. Kay contends that the existing Illinois Wage Payment and
Collection Act granted the same relief Kay had sought at trial, the only relevant change being
the addition of a right to attorney fees and an increase in the assessed penalty. Although
Kay’s original motion should have been filed under the Wage Payment and Collection Act,
not the Sale Representative Act, he argues that allowing the amendment would not prejudice
Prolix because Prolix was aware of the facts necessary for a cause of action under the Wage
Payment and Collection Act, and the motion came before the court’s final ruling. Kay
contends the trial court abused its discretion in denying his motion to amend because his
motion was one to conform the pleadings to the proof and the trial court improperly
considered it untimely.
¶ 41 We review an order denying a motion seeking leave to amend a complaint using an abuse
of discretion standard. Mandel v. Hernandez, 404 Ill. App. 3d 701, 707-08 (2010). The
general rule is that amendments should be granted liberally; nevertheless, a party’s right to
amend is not absolute and unlimited. Goldberg v. Brooks, 409 Ill. App. 3d 106, 113 (2011).
As this court has explained:
“The right to amend pleadings is not absolute, and the timeliness of such a request may
be considered by the court in its discretion. [Citation.] The court should exercise its
power to permit amendment with a view toward allowing a party to present fully his
causes of action. [Citation.] Ordinarily, amendment should not be allowed where the
matters asserted were known by the moving party at the time the original pleading was
drafted and for which no excuse is offered in explanation of the initial failure. [Citation.]
The test to be applied in determining whether the trial court’s discretion was properly
exercised is whether allowance of the amendment furthers the ends of justice. [Citation.]”
Trans World Airlines, Inc. v. Martin Automatic, Inc., 215 Ill. App. 3d 622, 627-28
(1991).
¶ 42 In determining whether to allow an amendment to the pleadings, the trial court considers
the following factors: (1) whether the proposed amendment would cure a defect in the
pleadings; (2) whether the proposed amendment would prejudice or surprise the other party;
(3) whether the proposed amendment is timely; and (4) whether there were previous
opportunities to amend the pleading. Loyola Academy v. S&S Roof Maintenance, Inc., 146
Ill. 2d 263, 273 (1992). “The test to be applied in determining whether the trial court’s
discretion was properly exercised is whether allowance of the amendment furthers the ends
of justice.” Trans World Airlines, Inc. v. Martin Automatic, Inc., 215 Ill. App. 3d 622, 628
(1991) (no abuse of discretion in denying defendant’s motion to file second amended
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counterclaim).
¶ 43 The trial court properly exercised its discretion in denying Kay’s request to amend his
complaint for a second time to add a new claim seeking additional relief. Considering each
factor, none weighs in favor of allowing Kay to amend his complaint.
¶ 44 Kay filed his motion for leave to file a second amended complaint on January 27, 2011,
almost seven years after filing his original complaint, five months after the close of evidence,
and several weeks after the court issued its order finding liability. Although Kay technically
sought to amend his complaint before the court entered its final judgment, Kay neither
moved to conform the pleadings to the proof nor offered any explanation for filing his
motion at such a late stage in the proceedings. “[W]here the facts sought to be alleged on the
eve of or during trial are known to the party at the time of original pleading and no good
reason is offered for their not having been filed at that time, leave to amend is properly
denied.” Carlisle v. Harp, 200 Ill. App. 3d 908, 915 (1990) (citing First National Bank &
Trust Co. of Evanston v. Sousanes, 66 Ill. App. 3d 394, 396 (1978)).
¶ 45 The trial court properly found Kay’s motion to amend was untimely. Kay had ample
opportunities to amend his complaint. In fact, Kay was granted leave to amend his original
complaint, but at that time, he did not request leave to add a claim under the Wage Payment
and Collection Act, even though the facts needed to prove the claim were known to him.
Additionally, Kay’s untimely request would have prejudiced Prolix. Had the trial court
allowed Kay’s proposed amendment, plaintiff’s prayer for relief would have increased
significantly. Had plaintiff’s amendment been allowed, Prolix could have been liable not
only for unpaid commissions, but also significant penalties and possibly attorney fees
depending on whether the amended version of the Wage Payment and Collection Act was
to be applied retroactively.
¶ 46 Kay’s proposed amendment was not made to cure a defect in the pleading. Instead, Kay
sought to amend his pleadings to add a new claim, seeking an amount of relief substantially
greater than what was originally sought.
¶ 47 Lastly, Kay has not shown the ends of justice would be furthered by granting his request
to amend. The request to amend went only to the amount of recovery he sought, not to his
right to recover. In light of the fact that Kay’s request came after the trial had ended and after
liability had been determined, we cannot say allowing the amendment would have furthered
the ends of justice.
¶ 48 Since the amendment was proposed after the close of the trial and not during the pleading
stage, the trial court did not abuse its discretion when it denied Kay’s motion to amend the
pleadings because the motion was untimely, prejudiced Prolix, and could have been brought
at an earlier time. We affirm the trial court’s decision denying Kay leave to file an amended
complaint to include a Wage Payment and Collection Act claim.
¶ 49 Prejudgment Interest
¶ 50 Lastly, Kay contends the trial court erred when it denied prejudgment interest under the
Interest Act (815 ILCS 205/2 (West 2010)). The trial court ruled that uncertainty existed
regarding the customer list and sales numbers until trial and, thus, the judgment was not
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subject to prejudgment interest.
¶ 51 We review the trial court’s decision under the Interest Act using an abuse of discretion
standard. Greenberger, Krause & Tenenbaum v. Catalfo, 293 Ill. App. 3d 88, 97 (1997). The
Interest Act provides for the award of interest when money is withheld “by an unreasonable
and vexatious delay of payment.” Greenberger, Krause & Tenenbaum, 293 Ill. App. 3d at
99. As the trial court correctly held, Prolix raised legitimate arguments at trial concerning the
existence and enforceability of the override commissions clause in the employment
agreement and, therefore, the trial court did not abuse its discretion in holding that Prolix’s
actions were not unreasonable or vexatious and prejudgment interest was not warranted.
Accordingly, we uphold the trial court’s ruling.
¶ 52 Cross-Appeal
¶ 53 “Exhibit A” of Employment Agreement
¶ 54 In its cross-appeal, Prolix contends the trial court’s judgment in favor of Kay should be
reversed where the evidence was undisputed that there was no meeting of the minds as to
“Exhibit A,” which Prolix characterizes as essential to Kay’s employment agreement. Prolix
argues that by adopting the customer list offered by Kay to constitute “Exhibit A,” the court
supplied a material term to the parties’ employment agreement to which the parties had not
agreed. Prolix acknowledges the parties agreed that an override commission was to be paid
to Kay, but argues the parties never agreed on the identity of the customers for whom the
override commission was owed and, therefore, they never reached an actual agreement on
this contract provision.
¶ 55 In a bench trial, it is the function of the trial judge, as the trier of fact, to weigh the
evidence and make factual determinations. Kalata v. Anheuser-Busch Cos., 144 Ill. 2d 425,
433 (1991). Whether a contract exists between the parties, the parties’ intent in forming it,
and the contract’s terms are all questions of fact. Hedlund & Hanley, LLC v. Board of
Trustees of Community College District No. 508, 376 Ill. App. 3d 200, 205 (2007). Where
the evidence is close and the findings of fact must be determined from the credibility of the
witnesses, as a court of review, we defer to the trial court’s factual findings unless they are
against the manifest weight of the evidence. Kalata, 144 Ill. 2d at 433. A judgment is against
the manifest weight of the evidence when the opposite conclusion is apparent or when the
findings are unreasonable, arbitrary, or not based on the evidence. Hedlund & Hanley, LLC,
376 Ill. App. 3d at 205.
¶ 56 Prolix argues the trial court’s determination that Kay’s proffered Customer Master
Listing was meant to be “Exhibit A” was not sufficiently supported by the evidence. Prolix
contends the parties’ testimony is undisputed that despite there being numerous documents
present at the ABC transaction closing, no document was marked “Exhibit A,” nor was there
any agreement between the parties as to which customers were to be included in “Exhibit A.”
Prolix argues these facts support its contention that the parties had different views of which
customers should be included in “Exhibit A” and, therefore, the trial court’s finding as to
what constitutes “Exhibit A” was unreasonable and not based on the evidence presented.
¶ 57 Relying on the supreme court’s decision in Academy Chicago Publishers v. Cheever, 144
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Ill. 2d 24 (1991), Prolix argues no enforceable contract existed because the parties did not
agree about the identity of the customers who were to comprise “Exhibit A,” a prerequisite
to computing any override commissions due plaintiff. In Academy Chicago Publishers, the
supreme court found no contract existed between the parties because the terms of the
publishing agreement were not definite and certain enough to allow the court to determine
the intent of the parties. Academy Chicago Publishers, 144 Ill. 2d at 29.
¶ 58 Kay contends the trial court’s finding regarding “Exhibit A” was not an interpretation of
the contract as argued by Prolix, but a factual finding determining which documentary
evidence presented at trial was the document referred to as “Exhibit A” in the employment
agreement. Kay argues, therefore, the trial court’s finding cannot be overturned unless it was
against the manifest weight of the evidence, which Kay contends it was not.
¶ 59 Kay argues that because a written contract existed between the parties, the trial court, as
trier of fact, was charged with determining the meaning of the words of that contract,
specifically, what documentary evidence constituted “Exhibit A.” Kay contends ample facts
in the record support the trial court’s factual finding that the Customer Master Listing,
Exhibit 3, is what the parties’ contemplated as “Exhibit A” to the employment agreement.
The parties agree that copies of the Customer Master Listing were at the closing and there
was no other document listing customers present. The only reason the Customer Master
Listing was not attached to the employment agreement, according to Kay, was its hefty size.
¶ 60 Despite the absence of an “Exhibit A,” the employment agreement is enforceable. As the
Seventh Circuit Court of Appeals has noted, “[t]he fact that a contract is incomplete, presents
interpretive questions, bristles with unresolved contingencies, and in short has as many holes
as a Swiss cheese does not make it unenforceable for indefiniteness.” Haslund v. Simon
Property Group, Inc., 378 F.3d 653, 655 (7th Cir. 2004). Moreover, the conduct of the
parties in performing under the employment agreement for almost five years shows the
parties could not have possibly intended that unless there was an agreed list of customers for
purposes of the override commissions, there would be no contract.
¶ 61 Generally, when the contract is a fully integrated writing the parol evidence rule bars
evidence of understandings reached before or contemporaneously with the contract’s
execution that vary or modify its terms. Eichengreen v. Rollins, Inc., 325 Ill. App. 3d 517,
521 (2001). But, the parol evidence rule allows extrinsic evidence of additional and
consistent terms when the contract appears incomplete or ambiguous on its face. “It is well
settled that a court, when construing a contract, should ascertain the intent of the parties and
give effect to that intent.” Id. Looking at the four corners of the instrument reveals whether
or not it is fully integrated. Midwest Builder Distributing, Inc. v. Lord & Essex, Inc., 383 Ill.
App. 3d 645, 661-62 (2007). Moreover:
“Where a contract is not expressive of the complete agreement and understanding of the
parties, consideration of antecedent proceedings does not serve to vary the contract terms
but exemplifies the terms of the agreement. Furthermore, all relevant evidence may be
considered to determine whether a particular writing is the complete agreement of the
parties.” Northern Trust Co v. Brentwood North Nursing & Rehabilitation Center, Inc.,
225 Ill. App. 3d 1039, 1042 (1992) (citing Lewis v. Loyola University of Chicago, 149
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Ill. App. 3d 88, 93 (1986)).
Having found the trial court properly determined there was an ambiguity in the contract
concerning what constituted “Exhibit A,” where no document entitled “Exhibit A” was
attached to the employment agreement, the trial court properly admitted parol evidence of
the parties’ intent.
¶ 62 The employment agreement specifically referred to a customer list, “Exhibit A,” that was
to be incorporated into the contract and, therefore, the trial court properly concluded that on
its face, the contract was incomplete. The trial court considered parol evidence, i.e., the
conflicting testimony about the adopted customer list, and concluded the parties meant for
Kay’s Customer Master Listing to be “Exhibit A” to the employment agreement. This finding
is not against the manifest weight of the evidence. The evidence established, and Prolix never
refuted, that copies of the Customer Master Listing were present in the room at the closing
of the ABC transaction. No other documents purporting to be a customer list were entered
into evidence. Jakubowski admitted she never put together a different customer list nor did
she allege there was one; instead, she claimed the parties had an oral understanding as to
which former Kay Packaging customers were to be considered for override commissions. She
further acknowledged that she read the employment agreement at the ABC transaction
closing and that she knew it referred to “Exhibit A” as an already existing document, not one
to be created by the parties at a later date. The trial court’s determination that Kay’s
Customer Master Listing was “Exhibit A” to the employment agreement is supported by the
evidence and, therefore, will not be reversed.
¶ 63 Computation of Damages
¶ 64 Prolix argues the trial court erred in its computation of the damages due Kay by failing
to give effect to the admissions of Kay and his counsel and the express language in paragraph
7(B) of the parties’ employment agreement that the commission rate attributable to override
sales was 2%.
¶ 65 The trial court entered judgment in favor of Kay in the amount of $373,417.99. In doing
so, the court held Kay was entitled to receive a 7% commission on all sales to Kay’s former
customers listed in “Exhibit A.” The basis for the trial court’s holding was its ruling that
recital five of the employment agreement required that Kay receive one-third of the gross
profit margin “meant to include the two percent (2 percent) consulting fee being paid to
plaintiff.” The trial court stated, “[t]he phrase consulting fee is not defined in the Agreement
and the Court construes it to mean the two percent payable under Section 7(b).” The court
explained:
“Kay’s proposed damages model calculates commission by applying two percent to
Gross Sales. The model does not include a calculation of Gross Profit Margin and as such
is incomplete by failing to take into account the provisions of Recital 5. In the Court’s
view, Kay’s damages (compensation due) must be calculated by determining the Gross
Sales Price for all product sold by Prolix to the customers listed in Exhibit A. The result
is then to be multiplied by the 21 percent expected profit and the result should then be
divided 2/3 to Prolix and 1/3 to Kay. *** It should be noted Kay and Prolix agreed to this
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method when determining commissions due to Kay for products sold by him.”
¶ 66 Prolix filed a posttrial motion challenging the court’s calculation of damages, which the
trial court denied. On appeal, Prolix argues the trial court’s finding ignored Kay’s counsel’s
admission that the fifth recital only referred to direct sales and not to commissions
attributable to sales by Prolix’s other employees, i.e., override commissions. Prolix contends
that by ordering a 7% commission due on override sales, the court’s order rendered nugatory
the entire provision in paragraph 7(B), which limited the commission on override sales to 2%
of gross sales.
¶ 67 Illinois law has long held that “an admission by an attorney for a party during the trial
supersedes all proofs upon the point in question.” Standard Management Realty Co. v.
Johnson, 157 Ill. App. 3d 919, 924 (1987) (citing Darling v. Charleston Community
Memorial Hospital, 50 Ill. App. 2d 253 (1964)). “Judicial admissions are defined as
deliberate, clear, unequivocal statements by a party about a concrete fact within that party’s
knowledge.” Smith v. Pavlovich, 394 Ill. App. 3d 458, 468 (2009) (citing In re Estate of
Rennick, 181 Ill. 2d 395, 406 (1998)). Admissions are “formal acts of a party or its attorney
in court, dispensing with proof of a fact claimed to be true, and are used as a substitute for
legal evidence at trial.” Dremco, Inc. v. Hartz Construction Co., 261 Ill. App. 3d 531, 535-36
(1994). “Attorneys are deemed agents of their clients for the purpose of making admissions
in all matters relating to the progress and trial of an action.” Lowe v. Kang, 167 Ill. App. 3d
772, 776 (1988). “[W]hether or not a statement by an attorney in the course of [a] trial is a
judicial admission depends upon the circumstances of the individual case and the giving of
a consistent meaning to the statement within the context in which it is found.” Lowe, 167 Ill.
App. 3d at 777. In reviewing the trial court’s treatment of a judicial admission, we apply an
abuse of discretion standard. Smith, 394 Ill. App. 3d at 468. An abuse of discretion is found
where no reasonable person would take the view adopted by the trial court. Smith, 394 Ill.
App. 3d at 468.
¶ 68 Throughout trial, Kay testified he was seeking compensation from Prolix for
underpayment of compensation for the 2% commissions attributable to indirect sales to
customers listed on “Exhibit A” to the employment agreement. Kay testified:
“No, they paid me my commission but I never got the two percent on the other
accounts.”
“I was entitled to two percent.”
“I want an accounting of all of the Kay Packaging sales made by Prolix’s other
people, of which I would be entitled to my two percent commission.”
Kay’s counsel admitted at trial that the override commission rate was 2%. Counsel stated:
“Your Honor, we’re not complaining about [plaintiff’s] direct sales. This [fifth]
recital refers to [plaintiff’s] direct sales, the sales he makes himself on which he gets five
percent plus two percent. We’re not complaining about that in this case.
All we’re complaining–as defendant well knows, all we’re complaining about is the
two percent that’s referred to in paragraph 7(B) that applies to his sales by Prolix
salesmen to [plaintiff’s] customers on the master list.”
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The damage calculation Kay tendered to the court confirmed in its title that he was only
seeking the 2% commission associated with the override sales:
“Analysis and Summary of Two Percent (2 percent) Commissions Due Barry Kay
Pursuant to ‘Commissioned Salesperson Employment, Consulting and Non-Competition
Agreement’ with Prolix Packaging, Inc.”
¶ 69 Prolix argues that because Kay admitted the override commission rate was 2%, the court
was bound to apply the 2% rate to compute the commissions due Kay.
¶ 70 Kay submits there is nothing in the wording of the employment agreement that requires
an overruling of the trial court’s interpretation of the contract on this issue, and the trial court
could rule he was owed a 7% commission on all sales based on the behavior of the parties.
¶ 71 Kay’s trial testimony, as well as his counsel’s statements, establish that the override
commission due for indirect sales was 2% of gross sales. The trial court’s order overstated
the damages due Kay by ignoring the admissions of Kay and his counsel as to the proper
interpretation of the fifth recital and paragraph 7(B) and, therefore, applying a 7%
commission rate, when a 2% commission rate should have been used. Additionally,
principals of contract construction suggest that when a general and specific clause can be
read inconsistently, the specific clause should prevail. See Heifner v. Board of Education of
Morris Community High School District No. 101, 32 Ill. App. 3d 83, 88 (1975) (“Where one
intention is expressed in one clause in an instrument and a different conflicting intention
appears in another clause in the same instrument, it is the better rule that intention should be
given full effect which appears in the more principal and specific clause, and that the general
clause should be subjected to such modification or qualification as the specific clause makes
necessary.”). Accordingly, we find the trial court abused its discretion in failing to rule that
Kay and counsel’s statements constituted a binding judicial admission that the override
commission rate for indirect sales was 2% and by issuing a ruling that rendered nugatory
paragraph 7(B) in favor of the more general clause in recital five of the parties’ contract.
¶ 72 That Prolix overpaid Kay for commissions associated with indirect sales does not alter
the fact that under the express terms of the employment agreement, Kay was only entitled
to receive commissions on sales made by Prolix’s employees to customers identified in
“Exhibit A” at a 2% rate.
¶ 73 Prolix did not waive its right to enforce the terms of the contract as written because the
contract contained a “Non-Waiver” provision stating:
“E. Non-Waiver. The failure of any party to insist, in one or more instances, on
performance by the other in strict accordance with the terms and conditions of this
Agreement shall not be deemed a waiver or relinquishment of any right granted
hereunder or of the future performance of any such term or condition of this Agreement
unless such waiver is contained in writing signed by or on before of all parties.”
¶ 74 Accordingly, we recalculate the award to give meaning and effect to the express language
of paragraph 7(B) of the parties’ contract, as well as the admissions of Kay and his counsel
that the commission rate for override sales is 2%. Applying the correct rate of 2%, the
override commissions for the first two months of 2000, and the years 2002 and 2003, total
$106,858.05 (($336,747.21 + $2,429,378.64 + $2,576,776.00) x .02).
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¶ 75 Prolix’s Equitable Defenses
¶ 76 Prolix argues the trial court erred as a matter of law in failing to address its equitable
defenses of laches, estoppel, and unclean hands. Prolix contends that because Kay accepted
commission payments for five years and waited until after the sale of the business, when
Prolix no longer had access to its business records, to bring his claims, Prolix’s proffered
equitable defenses should have been considered by the trial court. Prolix requests that the
judgment be reversed to allow the trial court to consider the application of the equitable
defenses to Kay’s claim.
¶ 77 In asserting an affirmative defense, the defendant bears the burden of establishing the
defense by a preponderance of the evidence. O’Brien v. Meyer, 281 Ill. App. 3d 832, 834
(1996). The mere passage of time does not constitute laches; the party asserting the doctrine
must show prejudice. La Salle National Bank v. Dubin Residential Communities Corp., 337
Ill. App. 3d 345, 351 (2003). Estoppel requires a showing of prejudicial reliance on the other
party’s conduct. Trossman v. Philipsborn, 373 Ill. App. 3d 1020, 1040-41 (2007). The
unclean hands doctrine requires consideration of the party’s intent of fraud or bad faith.
Schivarelli v. Chicago Transit Authority, 355 Ill. App. 3d 93, 103 (2005).
¶ 78 Prolix argues Kay’s testimony supports its conclusion that Kay never informed it that he
had any concern of being undercompensated on override commissions. But, Kay testified he
spoke with both Jakubowskis at the beginning of his employment concerning the
underpayment of override commissions, and the Jakubowskis told him they would review
the issue. Kay said he later followed up with them and they informed him they had reviewed
the documents, but could not pay him the commissions.
¶ 79 Based on the evidence presented, Prolix failed to meet the requisite showings to support
its claim of equitable defenses. Under these circumstances, we cannot conclude the trial
court’s finding that the defenses were unavailable to Prolix was against the manifest weight
of the evidence.
¶ 80 CONCLUSION
¶ 81 The trial court erred in holding Kay was not entitled to estimate his damages for the 34-
month time period in which no documentary evidence was presented of his actual damages.
Accordingly, we remand this matter for the trial court to reopen the case for the limited
extent of hearing further testimony and other evidence regarding an award of the appropriate
damages for this limited time period, using the 2% override commission rate provided in
paragraph 7(B) of the parties’ employment agreement. We hold the trial court did not abuse
its discretion in denying Kay’s request to amend his complaint to include a count for
violation of the Wage Payment and Collection Act and for prejudgment interest.
¶ 82 With respect to Prolix’s cross-appeal, the trial court’s determination that the parties
meant for Kay’s Customer Master Listing to be “Exhibit A” to the employment agreement
was not against the manifest weight of the evidence and, therefore, will not be overturned.
The trial court also properly determined Prolix failed to meet its burden to show the equitable
defenses were supported by the evidence. We do find, however, that the trial court erred in
computing Kay’s damages without regard to Kay’s admissions as to the commission rate to
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which he was entitled. We recalculate the award, applying the correct rate of 2% and, thus,
the override commissions for the first two months of 2000 and the years 2002 and 2003 total
$106,858.05.
¶ 83 Affirmed in part and reversed in part; cause remanded with directions.
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