Gray v. Mundelein College modified June 17
Annotate this Case
THIRD DIVISION
June 17, 1998
Nos. 1-97-0605, 1-97-0622, Consolidated
YOHMA GRAY and ELVIRA FERNANDEZ HASTY,
Plaintiffs-Appellees,
v.
MUNDELEIN COLLEGE,
Defendant-Appellant,
and
LOYOLA UNIVERSITY OF CHICAGO,
Defendant.
________________________________________
JUDITH R. MYERS, YOHMA GRAY and ELVIRA
FERNANDEZ HASTY,
Plaintiffs-Appellants,
v.
LOYOLA UNIVERSITY OF CHICAGO and
MUNDELEIN COLLEGE,
Defendants-Appellees.
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) Appeal from the
Circuit Court of
Cook County
Nos. 90 CH 12300, 91
CH 12540
Consolidated below
with No. 96 CH 1100
Honorable
Michael Getty,
Judge Presiding.
MODIFIED ON DENIAL OF REHEARING
JUSTICE CAHILL delivered the opinion of the court:
We revisit plaintiffs' breach of contract suit against
defendants Mundelein College and Loyola University. In an earlier
appeal, we reversed summary judgment for defendants, holding that
an issue of fact remained about whether the coming together of
Loyola and Mundelein extinguished Mundelein's tenure obligations to
plaintiffs. After a trial on remand, the trial court entered
judgment for plaintiffs Yohma Gray and Elvira Fernandez Hasty
against Mundelein only, including prejudgment interest. Judgment
was entered against plaintiff Judith Myers. The trial court also
granted summary judgment to Loyola on plaintiffs' successor
liability claims. We now affirm the trial court's judgment in
favor of plaintiffs Gray and Hasty against Mundelein and summary
judgment for Loyola. We reverse the judgment against plaintiff
Myers and the award of prejudgment interest to plaintiffs.
Defendants Loyola and Mundelein argue on appeal that: (1) the
trial court exceeded the mandate of Gray v. Loyola University of
Chicago, 274 Ill. App. 3d 259, 652 N.E.2d 1306 (1995) (Gray I); (2)
the trial court's interpretation of Mundelein's faculty manual
"contradicts all evidence of intent presented at trial"; (3)
plaintiffs did not prove that Mundelein's breach caused damages
beyond two years' salary; (4) the trial court erroneously retained
jurisdiction to award future damages; and (5) the trial court erred
in awarding prejudgment interest.
Plaintiffs cross-appeal. They argue that the trial court
erred by finding Loyola, as a successor corporation, is not liable
for Mundelein's breach. Plaintiff Myers argues that the trial
court erred in finding that she waived her right to sue for loss of
her tenure at Mundelein by accepting a five-year teaching contract
with Loyola.
Plaintiffs were tenured professors at Mundelein College until
1992. Under Mundelein's faculty manual, tenured positions could be
terminated for the following reasons: (1) financial exigency; (2)
the discontinuance of a program or department; (3) health; or (4)
cause. The manual also explained how "financial exigency" was to
be established:
"If, after consultation with the administration, faculty,
and other bodies, the [board of trustees] determines that
the financial viability of the institution is endangered
and that a state of exigency exists, the Board shall so
declare a state of financial exigency."
In 1989 and 1990, Mundelein was faced with serious financial
problems. But the board of trustees never declared a state of
financial exigency. In the summer of 1989, Mundelein borrowed $4
million from Continental Bank. The Catholic Order of the Sisters
of Charity of the Blessed Virgin Mary (the BVM Order) agreed to
guarantee the loan. In exchange, Mundelein gave the BVM Order a
security interest in some of its property. Mundelein also agreed
not to obtain other loans without approval of the BVM Order and not
to borrow from Mundelein's endowment fund. Should Mundelein
violate the agreement, Mundelein's board of trustees would have 90
days to either "cure the breach" or vote to close the college
within 18 months.
In October and November 1990, Mundelein borrowed from its
endowment fund to pay bills. The BVM Order demanded that
Mundelein's board of trustees "cure the breach" or vote to close
the school.
To prevent closing, Mundelein negotiated with Loyola. On
April 15, 1991, Mundelein and Loyola agreed to an "affiliation."
Under their agreement, Loyola acquired Mundelein's assets and
assumed certain Mundelein financial obligations. Mundelein was to
remain in existence as a separate college governed and administered
by Loyola. Loyola agreed to continue Mundelein's educational
mission and to accept its students. Loyola agreed to offer 26 of
Mundelein's tenured faculty tenured positions at Loyola; to offer
11 tenured faculty a five-year appointment; and to offer three
tenured faculty payments equal to two years' salary in lieu of
employment. The agreement was finalized on June 14, 1991.
On April 29, 1991, Mundelein sent to all tenured faculty a
document entitled "1991-92 CONDITIONAL AND TERMINAL CONTRACT FOR
TENURED FACULTY." This document stated that it was conditioned on
Mundelein remaining independent and that if Mundelein College
became part of Loyola, the document would not take effect.
When Mundelein joined Loyola, the three plaintiffs in this
suit were not offered tenured faculty positions at Loyola. Loyola
offered Myers a five-year nontenured position. She accepted.
Loyola offered Gray and Hasty two years' salary, which they
rejected.
In the first appeal of this case, we reversed the trial
court's finding that plaintiffs' tenure rights were extinguished
when Mundelein affiliated with another school and ceased to exist
as an independent college. We found "no law to support the
proposition that an independent college ceases to exist and its
contractual obligations are extinguished when it becomes part of a
university." Gray I, 274 Ill. App. 3d at 264. We held that the
question of whether the tenure rights of Mundelein faculty survived
the "coming together" of Mundelein and Loyola could not be resolved
as a matter of law because the faculty manual did not address "the
fate of the faculty in the case of an affiliation, merger, or de
facto merger." Gray I, 274 Ill. App. 3d at 266. The silence of
the manual on the issue of tenure after affiliation created a
question of fact as to the intent of the parties.
On remand, the trial court heard testimony about the parties'
intent regarding Mundelein's tenure obligations in the event of
affiliation. Plaintiffs testified that, although the effect of an
affiliation on tenure was never discussed, they expected Mundelein
to "safeguard" their tenure rights.
Mundelein presented two witnesses who testified about the
custom of educational institutions with respect to tenure after
affiliation. Peter Ruger, an attorney with 20 years' experience
representing educational institutions, testified that the American
Association of University Professors (the AAUP) publishes a "Red
Book" that contains "views of faculty on a variety of issues that
affect faculty." Ruger testified that the "Red Book" is "used by
the higher education community to determine the meaning of tenure."
According to Ruger, under the "prevailing view of the academic
community" and the "Red Book," an affiliating college is not
obliged to preserve tenure for all tenured faculty. Ruger
testified that under AAUP guidelines a declaration of a financial
exigency is not required before a college terminates tenure as a
consequence of affiliation.
Lawrence White, who served as counsel for the AAUP and as in-
house counsel for several schools, described the AAUP as an
organization of university professors that "formulate[s] and
disseminate[s] policies [about] the rights and duties of faculty
members across the country." White testified that according to the
custom of educational institutions and AAUP standards, an
institution that acquires another in an affiliation is not required
to hire all the tenured faculty. Nor must the acquired institution
insist that all its tenured faculty be hired. Both Ruger and White
suggested that such requirements would hamper negotiations and
discourage affiliation.
The trial court ruled that the Mundelein faculty manual set
out the reasons and procedures for tenure termination and made no
provisions for termination when an affiliation occurs. Although
financial exigency was a valid reason to terminate tenure, no
financial exigency had been declared by Mundelein's board of
trustees as required under the manual. The trial court further
ruled that even if Mundelein had declared a financial exigency, a
bona fide exigency did not exist. The court acknowledged
Mundelein's "cash flow" problems, but noted that Mundelein still
had valuable assets. The court also found that Mundelein's board
of trustees "triggered a breach" of the agreement with the BVM
Order, thereby causing the financial crisis on which Mundelein
relied to "justify" affiliation.
The trial court did not find useful the testimony regarding
the common practices of affiliating institutions or the AAUP
guidelines. The court reasoned that "the parties never agreed that
the AAUP [guidelines] would abrogate tenure rights upon an
affiliation." Even if the AAUP guidelines controlled, the AAUP
guidelines required a bona fide financial exigency, faculty
involvement, and due process to end tenure in the event of
affiliation.
The trial court ruled in favor of plaintiffs Gray and Hasty on
their breach of contract claims and awarded damages in the amounts
of $262,371 and $205,349. The trial court ruled against plaintiff
Myers, holding that she had waived her claim by accepting a five-
year nontenured teaching position at Loyola.
Plaintiffs moved for a recalculation of damages. The trial
court then recalculated damages through December 31, 1996, and
ruled that Gray and Hasty were entitled to prejudgment interest.
The trial court also said that plaintiffs may bring future actions
for damages obtained after trial. The trial court granted summary
judgment for Loyola on plaintiffs' successor liability claim,
holding that plaintiffs had not established a de facto merger.
Mundelein first argues that the trial court exceeded the
mandate of Gray I on remand by finding, after trial, that there was
no bona fide financial exigency. Mundelein refers to the trial
court's comments:
"[I]t is clear that the Board of Trustees never declared
a financial exigency ***.
Even if *** Mundelein had declared a financial
exigency this [c]ourt could not conclude, based on the
evidence before the [c]ourt, that a bona fide financial
exigency actually existed.
The evidence clearly indicates that Loyola valued
Mundelein at $65.7 million. ***
***
Mundelein had cash flow problems but, based upon
the valuation of $65.7 million at a cost [to Loyola] of
only $12.8 million, there is no support for the
conclusion that a financial exigency existed.
***
The Mundelein Board of Trustees *** intentionally
triggered a breach of the loan guarantee covenant
knowing it would result in a call for a $4 million
loan. *** The 'breach' precipitated the 'crisis'
which 'justified' the action *** [of] entering into
negotiations with Loyola *** regarding 'affiliation.'"
Mundelein relies on Ptaszek v. Konczal, 10 Ill. 2d 326, 140 N.E.2d 725 (1957). In Ptaszek, our supreme court had earlier
reversed the trial court's ruling and remanded, noting that one
issue, a trustee's duty to account, was "not at issue." Ptaszek,
10 Ill. 2d at 327. On remand, the trial court rendered findings on
that issue and ordered an accounting. Our supreme court reversed
because the "trial court did not follow our opinion and mandate."
Ptaszek, 10 Ill. 2d at 327.
Mundelein points out that in Gray I, we held that Mundelein's
"state of severe financial crisis" and that the affiliation was "a
direct result of the financial crisis" were undisputed facts. Gray
I, 274 Ill. App. 3d at 263. Mundelein argues that, like the trial
court in Ptaszek, the trial court here exceeded its mandate by
making a ruling that contradicted our findings of "undisputed
fact."
We acknowledge that the trial court's findings deviate from
our finding in Gray I that the uncontradicted evidence established
affiliation was driven by a legitimate financial crisis. But the
trial court's comments are superfluous in context. In Gray I, the
evidence established, and we held, that financial exigency had to
be formally declared to extinguish plaintiffs' tenure rights. That
was never done. The trial court's findings that there was no
genuine financial crisis were unnecessary to a resolution of the
case and do not require reversal.
Mundelein next argues that the trial court erred in finding
that the parties did not intend affiliation to release Mundelein
from tenure obligations to plaintiffs. The interpretation of a
contract is a question of law to be reviewed de novo on appeal.
Regnery v. Meyers, 287 Ill. App. 3d 354, 360, 679 N.E.2d 74 (1997).
But Mundelein suggests that something outside the manual, for which
it offered extrinsic evidence at trial, governs here. Where
extrinsic evidence is needed to establish the intent of the
parties, that intent is a question of fact and will not be
disturbed on review unless it is contrary to the manifest weight of
the evidence. See Howard A. Koop & Associates v. KPK Corp., 119
Ill. App. 3d 391, 398, 457 N.E.2d 66 (1983).
Mundelein emphasizes the trial court's finding that "[n]either
the faculty of Mundelein *** nor Mundelein itself ever considered
what would happen if there were an affiliation or merger."
Mundelein maintains that this finding "eliminated any possibility
that Mundelein *** contractually 'intended' to assume obligations
in the event of an affiliation." Mundelein argues that the court
inverted the burden of proof and required Mundelein to "disprove
the existence and breach of a 'phantom' contract term."
Mundelein contends that plaintiffs must prove the existence of
a contract term obligating Mundelein to safeguard plaintiffs'
contractual rights in the event of affiliation. But plaintiffs'
argument is based on unambiguous contract terms--that Mundelein can
terminate tenure for no reason other than those listed in the
manual. And if affiliation is driven by a financial exigency,
tenured faculty are entitled to participation in the determination
and to a board declaration that a financial exigency existed. Gray
I left open the possibility that Mundelein could show on remand the
existence of an agreement, other than the faculty manual, that
controlled the parties' tenure obligations in an affiliation. But
where a party suggests that an agreement outside the underlying
contract controls, the party relying on it bears the burden of
proof. Cf. Ashe v. Sunshine Broadcasting Corp., 90 Ill. App. 3d
97, 100, 412 N.E.2d 1142 (1980).
Mundelein further argues that the manual term requiring a
declaration of financial exigency applies only where tenure is
terminated for one of the reasons specified in the manual.
Mundelein suggests that "financial crisis affiliation," although
not among the reasons listed in the manual, is another way that
termination of tenure may be achieved, and that declaration of
financial exigency is not required before such an affiliation.
Mundelein suggests that in Gray I we already determined that tenure
could be terminated for a reason not listed in the manual.
Mundelein argues that if "this court had already decided that the
[m]anual procedures applied, there would have been no need for a
remand." We agree with the Mundelein analysis, but not with the
conclusion.
In Gray I we acknowledged that the faculty manual outlines
reasons for and procedures by which Mundelein could terminate
tenured faculty. Gray I, 274 Ill. App. 3d at 260. We did not hold
that the faculty manual lacked terms on which plaintiffs could base
their breach of contract claim. We addressed only the bases of the
trial court's first judgment: that the yearly employment contract,
the affiliation, and the closure of Mundelein as an "independent
college" extinguished Mundelein's obligations under the manual.
See Gray I, 274 Ill. App. 3d at 262. We concluded that the trial
court erred in finding, as a matter of law, that they did. We left
open the possibility that, as a matter of fact, the elimination of
tenure was a necessary consequence of affiliation in an educational
setting and could be established as such on remand. On remand the
Mundelein expert witnesses and evidentiary materials attempted to
establish just that.
Mundelein suggests that since the parties did not anticipate
affiliation in the manual, custom and practice of educational
institutions controls this case. Mundelein argues that the AAUP
guidelines should be used to "fill the [m]anual's silences." This
was a proper argument within the context of the remand. But it was
not an argument that Mundelein was forced to make because the
burden of proof was improperly shifted. If summary judgment had
not been entered in Mundelein's favor, Mundelein would have been
allowed to make the argument at trial.
Custom and usage is an aid to finding the intent of the
parties when the contract was made. See Chicago Bridge & Iron Co.
v. Reliance Insurance Co., 46 Ill. 2d 522, 531-32, 264 N.E.2d 134
(1970). Custom and usage may only be relied upon to interpret an
agreement if the practice was "so well known, uniform, long-
established and generally acquiesced in as to induce the belief
that the parties contracted with reference to it." Nielsen v.
United Services Automobile Asso'n, 244 Ill. App. 3d 658, 664, 612 N.E.2d 526 (1993). Evidence of custom and usage is only admissible
to explain uncertain or ambiguous terms. When terms of a contract
are clear, those terms alone determine the obligations of the
parties. Nielsen, 244 Ill. App. 3d at 663-64.
Mundelein would have us refer to the custom and usage of
educational institutions even though clear contract terms apply.
We agree that the evidence shows the parties never considered the
impact of affiliation, but the parties defined precise
circumstances under which Mundelein could terminate tenure. While
Mundelein offered evidence that custom and usage would dictate that
affiliation abolished tenure, they offered no evidence that
plaintiffs were aware of such custom and usage or that plaintiffs
understood that the faculty manual tenure provisions would not
apply in an affiliation scenario. Absent such knowledge,
plaintiffs had a right to rely on the manual. The manual
provisions are controlling here.
Mundelein next argues, without citing authority, that the
trial court's decision violates public policy by encouraging school
closures rather than affiliations. We disagree. Requiring
Mundelein to adhere to the terms set out in a manual it drafted
before terminating tenure violates no public policy. Nor does it
encourage school closure. Mundelein could have taken whatever
course was necessary to remedy its financial difficulties without
continued obligation to tenured faculty if it had followed the
procedures set out in its manual.
Mundelein next argues that plaintiffs failed to prove damages
beyond the two years' salary they were offered. Plaintiffs were
awarded damages through December 31, 1996. Mundelein argues that
if Mundelein had not affiliated with Loyola, Mundelein would have
closed in 1992, and plaintiffs could not have earned more than one
year's additional salary.
The measure of damages for breach of an employment contract is
the amount the plaintiff would have earned absent the breach, less
what he earned or could have earned during the contract period
after his termination. Ashe v. Sunshine Broadcasting Corp, 90 Ill.
App. 3d 97, 100, 412 N.E.2d 1142 (1980).
Mundelein argues that the following evidence showed that
Mundelein would have closed in 1992: plaintiffs' allegations in
their pleadings that Mundelein was insolvent at the time of the
affiliation; the chair of Mundelein's board of trustees' testimony
that the college's financial crisis was severe; a faculty
committee's report to the board of trustees in April 1991 that a
"state of exigency exists, and *** the [c]ollege is insolvent"; the
1991-92 annual contract provision that "all employment of faculty
by the college shall terminate on June 30, 1992"; and testimony
from a representative of the BVM Order that the BVM Order was
serious about forcing Mundelein to close.
We decline to rely on the imprecise use of the term
"insolvent" in plaintiffs' pleadings and the faculty committee
recommendations. The term "insolvency," as used in those
documents, is vague. Under Illinois and federal bankruptcy law, a
debtor is insolvent if the sum of his debts is greater than his
property at a fair valuation. See 11 U.S.C. 101(32)(A) (1994);
740 ILCS 160/3 (West 1996). There was no judicial finding of
insolvency here.
Mundelein cites no authority that plaintiffs must prove
Mundelein "[w]ould have survived" absent Mundelein's breach. And
Mundelein's claim that it would have closed is speculative. The
fate of Mundelein is not "undisputed," as Mundelein suggests.
Mundelein ignores the chair of Mundelein's board of trustees'
testimony that if affiliation negotiations with Loyola had failed,
Mundelein would have attempted to "restructure" or to affiliate
with another school. The board chair further testified that if
affiliation did not work out and "it came down to a restructuring
versus a close [of the school, there] would have been a
restructuring." Helen Garvey, a representative of the BVM Order
and a member of Mundelein's board of trustees, testified that she
was "very serious about closing the college" in accord with the BVM
Order's agreement with Mundelein. But she also said, "We didn't
want to *** close ***. What we hoped was that affiliation would
work and if it didn't we'd have to look at something else." Just
as Mundelein continued to exist when it affiliated with Loyola, it
may have continued to exist if it restructured or affiliated with
another school.
We next address an argument advanced in Mundelein's original
brief that "[t]here is no basis in the record for [the trial court]
to retain jurisdiction or entertain future proceedings to award
damages for additional lost compensation."
In the trial court's November 7, 1996, order, the court
awarded damages and "reserve[d] the right to adjust this figure
during the continued pendency of this case and in the interest of
both fairness and judicial economy to provide a suggested procedure
for 'future damages.'" Plaintiffs then filed a post trial motion
asking the court to recalculate damages. In its January 23, 1997,
order, the court recognized that it could not award future damages
(see Lewis v. Loyola University of Chicago, 149 Ill. App. 3d 88,
500 N.E.2d 47 (1986)), but acknowledged that "plaintiffs Gray and
Hasty may bring future actions during the term of their employment
contract for damages which are sustained subsequent to trial."
The record shows that the trial judge did not retain
jurisdiction but entered final orders on all matters before him.
We read his remarks as an affirmation of the right of the
plaintiffs to do what, under the law, they were already entitled to
do: bring a cause of action when it is ripe for adjudication. See
Corby v. Seventy-One Hundred Jeffery Avenue Building Corp., 325
Ill. App. 442, 457, 60 N.E.2d 236 (1945) ("[t]he plaintiff has a
right, if he so desires in the future to institute proceedings from
time to time during the term of the contract for damages which he
may have sustained").
Mundelein next argues that the trial court erred in ruling
that the faculty manual is "an instrument in writing" that supports
an award of prejudgment interest under section 2 of the Interest
Act (815 ILCS 205/2 (West 1996)). Whether to award
prejudgment interest is a matter within the sound discretion of the
trial court and will not be reversed absent an abuse of discretion.
Krantz v. Chessick, 282 Ill. App. 3d 322, 327, 668 N.E.2d 77
(1996).
Section 2 allows creditors to receive 5% interest "for all
moneys after they become due on any bond, bill, promissory note, or
other instrument of writing." 815 ILCS 205/2 (West 1996). We have
held that "[t]he type of instrument contemplated is [one] that
evidences money lent or advanced, thus setting up a creditor-debtor
relationship," and that the writing must "bear a specific date by
which the indebtedness created comes due." Wilder Binding Co. v.
Oak Park Trust & Savings Bank, 173 Ill. App. 3d 34, 42-43, 527 N.E.2d 354 (1988), rev'd on other grounds, 135 Ill. 2d 121 (1990);
see also Krantz, 282 Ill. App. 3d 322. A faculty manual is not an
"instrument in writing" for purposes of the Interest Act. See
Arneson v. Board of Trustees, 210 Ill. App. 3d 844, 853, 569 N.E.2d 252 (1991). We must reverse the trial court's award of prejudgment
interest.
Plaintiffs next argue that the trial court erred in granting
summary judgment to Loyola on the issue of successor liability. We
review summary judgment de novo. Prettyman v. Commonwealth Edison
Co., 273 Ill. App. 3d 1090, 1093, 657 N.E.2d 637 (1995).
As a general rule, when a corporation merges with another, it
takes on the latter's obligations and liabilities. But when a
corporation merely purchases the assets of another corporation, the
purchasing corporation is not liable for the debts and liabilities
of the selling corporation by reason of its succession. Kaleta v.
Whittaker Corp., 221 Ill. App. 3d 705, 708-09, 583 N.E.2d 567
(1991). But a purchasing corporation will be liable if the
plaintiff establishes that the purchase amounts to a de facto
merger. To establish de facto merger, plaintiffs must show that:
(1) the seller ceased operation and dissolved; (2) the buyer
assumed the seller's liabilities and obligations necessary for the
uninterrupted continuation of business; (3) there is a continuity
of shareholders; and (4) there is a continuity of the business
enterprise, including management, employees, location, general
business operations, and assets. Kaleta, 221 Ill. App. 3d at 709.
All four elements must be proven to establish de facto merger.
Myers v. Putzmeister, Inc., 232 Ill. App. 3d 419, 424, 596 N.E.2d 754 (1992); Kaleta, 221 Ill. App. 3d at 710.
Plaintiffs do not argue that any of the elements of de facto
merger have been established. Instead they argue that "[u]nder the
unique facts of this case, the four indicia of de facto merger ***
should not be immutable rules which apply with full force to [not]-
for-profit corporations, which do not have shareholders." But
plaintiffs cite no authority that would allow us to deviate from
the clear requirements to establish a de facto merger. And
plaintiffs do not suggest what "indicia" should be applied to not-
for-profit corporations. We note that not-for-profit corporations
are controlled by "members" rather than "shareholders." Compare
805 ILCS 5/7.05 (West 1996) to 805 ILCS 105/107.03 (West 1996).
But even disregarding the requirement that there be a continuation
of shareholders, plaintiffs cannot establish the other elements of
de facto merger. Mundelein did not dissolve. Nor did Mundelein's
business continue "uninterrupted." There were significant changes
in the management, employees, and business operations after the
affiliation. The "affiliation" of Loyola and Mundelein is not the
type of union covered by the de facto merger doctrine.
Plaintiffs note that "[t]he imposition of liability upon the
successor corporation is grounded upon the notion that no
corporation should be permitted to commit a tort or breach a
contract and avoid liability through corporate transformation in
form only." Munim v. Azar, 648 So. 2d 145, 154 (Fla. Dist. Ct.
App. 1994). But Mundelein continues to exist as a corporate entity
and has not avoided liability here.
We next address plaintiff Myers' cross-appeal. She argues
that she did not waive her tenure rights by accepting a five-year
teaching contract with Loyola.
Whether Myers waived her right to sue for loss of tenure is a
question of fact, the resolution of which will not be disturbed
unless it is contrary to the manifest weight of the evidence.
Sexton v. Smith, 112 Ill. 2d 187, 194, 492 N.E.2d 1284 (1986).
Waiver is the relinquishment of a known right. Pantle v.
Industrial Comm'n, 61 Ill. 2d 365, 372, 335 N.E.2d 491 (1975). A
waiver may be made by express agreement or implied from the conduct
of the party who allegedly waived the right. Ryder v. Bank of
Hickory Hills, 146 Ill. 2d 98, 105, 585 N.E.2d 46 (1991). Waiver
will be implied when a party's conduct is inconsistent with an
intention to assert the right. Ryder, 146 Ill. 2d at 105.
Myers argues that nothing she did was inconsistent with
asserting her breach of contract claim against Mundelein. We
agree. Myers' acceptance of a five-year teaching position and her
efforts to obtain tenure at Loyola are not inconsistent with
pursuit of a remedy against Mundelein. A plaintiff has a duty to
mitigate damages. In breach of employment contract cases, this
duty includes seeking other employment. See Arneson, 210 Ill. App.
3d at 851-52. Myers' mitigation of damages by accepting employment
with Loyola does not amount to waiver.
We note that continued employment under new employment
conditions after a breach of employment contract may, in some
circumstances, result in a waiver of a plaintiff's breach of
contract claim. See Vandevier v. Mulay Plastics, Inc., 135 Ill.
App. 3d 787, 482 N.E.2d 377 (1985) (finding waiver where plaintiff
acquiesced for seven years to the payment of a lower commission
than he alleged he was entitled to under a contract). But Myers
did not continue to work for Mundelein. She worked for Loyola.
Defendants cite no case in which the acceptance of employment with
a different entity amounts to waiver.
Mundelein notes that it was the affiliation agreement between
Mundelein and Loyola that created the five-year teaching position
Myers was selected to fill. But Mundelein does not dispute that
Loyola, not Mundelein, selected Myers and offered her the position.
If Loyola intended to extinguish Myers' tenure claim against
Mundelein through acceptance of Loyola's offer, nothing prohibited
Loyola from including that condition in its offer of employment.
But Myers is entitled only to a declaration that Mundelein
breached its contract. In defendant Mundelein's petition for
rehearing, Mundelein notes that Myers did not seek damages or prove
damages before the trial court. Myers sought only a declaratory
judgment and injunctive relief in her complaint.
We remand with directions to enter judgment for plaintiff
Myers. The trial court is instructed to recalculate plaintiffs
Gray and Hasty's damages in a manner consistent with this opinion.
Affirmed in part and reversed in part; cause remanded.
GORDON and BURKE, JJ., concur.
June 17, 1998
Nos. 1-97-0605, 1-97-0622, Consolidated
YOHMA GRAY and ELVIRA FERNANDEZ HASTY,
Plaintiffs-Appellees,
v.
MUNDELEIN COLLEGE,
Defendant-Appellant,
and
LOYOLA UNIVERSITY OF CHICAGO,
Defendant.
________________________________________
JUDITH R. MYERS, YOHMA GRAY and ELVIRA
FERNANDEZ HASTY,
Plaintiffs-Appellants,
v.
LOYOLA UNIVERSITY OF CHICAGO and
MUNDELEIN COLLEGE,
Defendants-Appellees.
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) Appeal from the
Circuit Court of
Cook County
Nos. 90 CH 12300, 91
CH 12540
Consolidated below
with No. 96 CH 1100
Honorable
Michael Getty,
Judge Presiding.
MODIFIED ON DENIAL OF REHEARING
JUSTICE CAHILL delivered the opinion of the court:
We revisit plaintiffs' breach of contract suit against
defendants Mundelein College and Loyola University. In an earlier
appeal, we reversed summary judgment for defendants, holding that
an issue of fact remained about whether the coming together of
Loyola and Mundelein extinguished Mundelein's tenure obligations to
plaintiffs. After a trial on remand, the trial court entered
judgment for plaintiffs Yohma Gray and Elvira Fernandez Hasty
against Mundelein only, including prejudgment interest. Judgment
was entered against plaintiff Judith Myers. The trial court also
granted summary judgment to Loyola on plaintiffs' successor
liability claims. We now affirm the trial court's judgment in
favor of plaintiffs Gray and Hasty against Mundelein and summary
judgment for Loyola. We reverse the judgment against plaintiff
Myers and the award of prejudgment interest to plaintiffs.
Defendants Loyola and Mundelein argue on appeal that: (1) the
trial court exceeded the mandate of Gray v. Loyola University of
Chicago, 274 Ill. App. 3d 259, 652 N.E.2d 1306 (1995) (Gray I); (2)
the trial court's interpretation of Mundelein's faculty manual
"contradicts all evidence of intent presented at trial"; (3)
plaintiffs did not prove that Mundelein's breach caused damages
beyond two years' salary; (4) the trial court erroneously retained
jurisdiction to award future damages; and (5) the trial court erred
in awarding prejudgment interest.
Plaintiffs cross-appeal. They argue that the trial court
erred by finding Loyola, as a successor corporation, is not liable
for Mundelein's breach. Plaintiff Myers argues that the trial
court erred in finding that she waived her right to sue for loss of
her tenure at Mundelein by accepting a five-year teaching contract
with Loyola.
Plaintiffs were tenured professors at Mundelein College until
1992. Under Mundelein's faculty manual, tenured positions could be
terminated for the following reasons: (1) financial exigency; (2)
the discontinuance of a program or department; (3) health; or (4)
cause. The manual also explained how "financial exigency" was to
be established:
"If, after consultation with the administration, faculty,
and other bodies, the [board of trustees] determines that
the financial viability of the institution is endangered
and that a state of exigency exists, the Board shall so
declare a state of financial exigency."
In 1989 and 1990, Mundelein was faced with serious financial
problems. But the board of trustees never declared a state of
financial exigency. In the summer of 1989, Mundelein borrowed $4
million from Continental Bank. The Catholic Order of the Sisters
of Charity of the Blessed Virgin Mary (the BVM Order) agreed to
guarantee the loan. In exchange, Mundelein gave the BVM Order a
security interest in some of its property. Mundelein also agreed
not to obtain other loans without approval of the BVM Order and not
to borrow from Mundelein's endowment fund. Should Mundelein
violate the agreement, Mundelein's board of trustees would have 90
days to either "cure the breach" or vote to close the college
within 18 months.
In October and November 1990, Mundelein borrowed from its
endowment fund to pay bills. The BVM Order demanded that
Mundelein's board of trustees "cure the breach" or vote to close
the school.
To prevent closing, Mundelein negotiated with Loyola. On
April 15, 1991, Mundelein and Loyola agreed to an "affiliation."
Under their agreement, Loyola acquired Mundelein's assets and
assumed certain Mundelein financial obligations. Mundelein was to
remain in existence as a separate college governed and administered
by Loyola. Loyola agreed to continue Mundelein's educational
mission and to accept its students. Loyola agreed to offer 26 of
Mundelein's tenured faculty tenured positions at Loyola; to offer
11 tenured faculty a five-year appointment; and to offer three
tenured faculty payments equal to two years' salary in lieu of
employment. The agreement was finalized on June 14, 1991.
On April 29, 1991, Mundelein sent to all tenured faculty a
document entitled "1991-92 CONDITIONAL AND TERMINAL CONTRACT FOR
TENURED FACULTY." This document stated that it was conditioned on
Mundelein remaining independent and that if Mundelein College
became part of Loyola, the document would not take effect.
When Mundelein joined Loyola, the three plaintiffs in this
suit were not offered tenured faculty positions at Loyola. Loyola
offered Myers a five-year nontenured position. She accepted.
Loyola offered Gray and Hasty two years' salary, which they
rejected.
In the first appeal of this case, we reversed the trial
court's finding that plaintiffs' tenure rights were extinguished
when Mundelein affiliated with another school and ceased to exist
as an independent college. We found "no law to support the
proposition that an independent college ceases to exist and its
contractual obligations are extinguished when it becomes part of a
university." Gray I, 274 Ill. App. 3d at 264. We held that the
question of whether the tenure rights of Mundelein faculty survived
the "coming together" of Mundelein and Loyola could not be resolved
as a matter of law because the faculty manual did not address "the
fate of the faculty in the case of an affiliation, merger, or de
facto merger." Gray I, 274 Ill. App. 3d at 266. The silence of
the manual on the issue of tenure after affiliation created a
question of fact as to the intent of the parties.
On remand, the trial court heard testimony about the parties'
intent regarding Mundelein's tenure obligations in the event of
affiliation. Plaintiffs testified that, although the effect of an
affiliation on tenure was never discussed, they expected Mundelein
to "safeguard" their tenure rights.
Mundelein presented two witnesses who testified about the
custom of educational institutions with respect to tenure after
affiliation. Peter Ruger, an attorney with 20 years' experience
representing educational institutions, testified that the American
Association of University Professors (the AAUP) publishes a "Red
Book" that contains "views of faculty on a variety of issues that
affect faculty." Ruger testified that the "Red Book" is "used by
the higher education community to determine the meaning of tenure."
According to Ruger, under the "prevailing view of the academic
community" and the "Red Book," an affiliating college is not
obliged to preserve tenure for all tenured faculty. Ruger
testified that under AAUP guidelines a declaration of a financial
exigency is not required before a college terminates tenure as a
consequence of affiliation.
Lawrence White, who served as counsel for the AAUP and as in-
house counsel for several schools, described the AAUP as an
organization of university professors that "formulate[s] and
disseminate[s] policies [about] the rights and duties of faculty
members across the country." White testified that according to the
custom of educational institutions and AAUP standards, an
institution that acquires another in an affiliation is not required
to hire all the tenured faculty. Nor must the acquired institution
insist that all its tenured faculty be hired. Both Ruger and White
suggested that such requirements would hamper negotiations and
discourage affiliation.
The trial court ruled that the Mundelein faculty manual set
out the reasons and procedures for tenure termination and made no
provisions for termination when an affiliation occurs. Although
financial exigency was a valid reason to terminate tenure, no
financial exigency had been declared by Mundelein's board of
trustees as required under the manual. The trial court further
ruled that even if Mundelein had declared a financial exigency, a
bona fide exigency did not exist. The court acknowledged
Mundelein's "cash flow" problems, but noted that Mundelein still
had valuable assets. The court also found that Mundelein's board
of trustees "triggered a breach" of the agreement with the BVM
Order, thereby causing the financial crisis on which Mundelein
relied to "justify" affiliation.
The trial court did not find useful the testimony regarding
the common practices of affiliating institutions or the AAUP
guidelines. The court reasoned that "the parties never agreed that
the AAUP [guidelines] would abrogate tenure rights upon an
affiliation." Even if the AAUP guidelines controlled, the AAUP
guidelines required a bona fide financial exigency, faculty
involvement, and due process to end tenure in the event of
affiliation.
The trial court ruled in favor of plaintiffs Gray and Hasty on
their breach of contract claims and awarded damages in the amounts
of $262,371 and $205,349. The trial court ruled against plaintiff
Myers, holding that she had waived her claim by accepting a five-
year nontenured teaching position at Loyola.
Plaintiffs moved for a recalculation of damages. The trial
court then recalculated damages through December 31, 1996, and
ruled that Gray and Hasty were entitled to prejudgment interest.
The trial court also said that plaintiffs may bring future actions
for damages obtained after trial. The trial court granted summary
judgment for Loyola on plaintiffs' successor liability claim,
holding that plaintiffs had not established a de facto merger.
Mundelein first argues that the trial court exceeded the
mandate of Gray I on remand by finding, after trial, that there was
no bona fide financial exigency. Mundelein refers to the trial
court's comments:
"[I]t is clear that the Board of Trustees never declared
a financial exigency ***.
Even if *** Mundelein had declared a financial
exigency this [c]ourt could not conclude, based on the
evidence before the [c]ourt, that a bona fide financial
exigency actually existed.
The evidence clearly indicates that Loyola valued
Mundelein at $65.7 million. ***
***
Mundelein had cash flow problems but, based upon
the valuation of $65.7 million at a cost [to Loyola] of
only $12.8 million, there is no support for the
conclusion that a financial exigency existed.
***
The Mundelein Board of Trustees *** intentionally
triggered a breach of the loan guarantee covenant
knowing it would result in a call for a $4 million
loan. *** The 'breach' precipitated the 'crisis'
which 'justified' the action *** [of] entering into
negotiations with Loyola *** regarding 'affiliation.'"
Mundelein relies on Ptaszek v. Konczal, 10 Ill. 2d 326, 140 N.E.2d 725 (1957). In Ptaszek, our supreme court had earlier
reversed the trial court's ruling and remanded, noting that one
issue, a trustee's duty to account, was "not at issue." Ptaszek,
10 Ill. 2d at 327. On remand, the trial court rendered findings on
that issue and ordered an accounting. Our supreme court reversed
because the "trial court did not follow our opinion and mandate."
Ptaszek, 10 Ill. 2d at 327.
Mundelein points out that in Gray I, we held that Mundelein's
"state of severe financial crisis" and that the affiliation was "a
direct result of the financial crisis" were undisputed facts. Gray
I, 274 Ill. App. 3d at 263. Mundelein argues that, like the trial
court in Ptaszek, the trial court here exceeded its mandate by
making a ruling that contradicted our findings of "undisputed
fact."
We acknowledge that the trial court's findings deviate from
our finding in Gray I that the uncontradicted evidence established
affiliation was driven by a legitimate financial crisis. But the
trial court's comments are superfluous in context. In Gray I, the
evidence established, and we held, that financial exigency had to
be formally declared to extinguish plaintiffs' tenure rights. That
was never done. The trial court's findings that there was no
genuine financial crisis were unnecessary to a resolution of the
case and do not require reversal.
Mundelein next argues that the trial court erred in finding
that the parties did not intend affiliation to release Mundelein
from tenure obligations to plaintiffs. The interpretation of a
contract is a question of law to be reviewed de novo on appeal.
Regnery v. Meyers, 287 Ill. App. 3d 354, 360, 679 N.E.2d 74 (1997).
But Mundelein suggests that something outside the manual, for which
it offered extrinsic evidence at trial, governs here. Where
extrinsic evidence is needed to establish the intent of the
parties, that intent is a question of fact and will not be
disturbed on review unless it is contrary to the manifest weight of
the evidence. See Howard A. Koop & Associates v. KPK Corp., 119
Ill. App. 3d 391, 398, 457 N.E.2d 66 (1983).
Mundelein emphasizes the trial court's finding that "[n]either
the faculty of Mundelein *** nor Mundelein itself ever considered
what would happen if there were an affiliation or merger."
Mundelein maintains that this finding "eliminated any possibility
that Mundelein *** contractually 'intended' to assume obligations
in the event of an affiliation." Mundelein argues that the court
inverted the burden of proof and required Mundelein to "disprove
the existence and breach of a 'phantom' contract term."
Mundelein contends that plaintiffs must prove the existence of
a contract term obligating Mundelein to safeguard plaintiffs'
contractual rights in the event of affiliation. But plaintiffs'
argument is based on unambiguous contract terms--that Mundelein can
terminate tenure for no reason other than those listed in the
manual. And if affiliation is driven by a financial exigency,
tenured faculty are entitled to participation in the determination
and to a board declaration that a financial exigency existed. Gray
I left open the possibility that Mundelein could show on remand the
existence of an agreement, other than the faculty manual, that
controlled the parties' tenure obligations in an affiliation. But
where a party suggests that an agreement outside the underlying
contract controls, the party relying on it bears the burden of
proof. Cf. Ashe v. Sunshine Broadcasting Corp., 90 Ill. App. 3d
97, 100, 412 N.E.2d 1142 (1980).
Mundelein further argues that the manual term requiring a
declaration of financial exigency applies only where tenure is
terminated for one of the reasons specified in the manual.
Mundelein suggests that "financial crisis affiliation," although
not among the reasons listed in the manual, is another way that
termination of tenure may be achieved, and that declaration of
financial exigency is not required before such an affiliation.
Mundelein suggests that in Gray I we already determined that tenure
could be terminated for a reason not listed in the manual.
Mundelein argues that if "this court had already decided that the
[m]anual procedures applied, there would have been no need for a
remand." We agree with the Mundelein analysis, but not with the
conclusion.
In Gray I we acknowledged that the faculty manual outlines
reasons for and procedures by which Mundelein could terminate
tenured faculty. Gray I, 274 Ill. App. 3d at 260. We did not hold
that the faculty manual lacked terms on which plaintiffs could base
their breach of contract claim. We addressed only the bases of the
trial court's first judgment: that the yearly employment contract,
the affiliation, and the closure of Mundelein as an "independent
college" extinguished Mundelein's obligations under the manual.
See Gray I, 274 Ill. App. 3d at 262. We concluded that the trial
court erred in finding, as a matter of law, that they did. We left
open the possibility that, as a matter of fact, the elimination of
tenure was a necessary consequence of affiliation in an educational
setting and could be established as such on remand. On remand the
Mundelein expert witnesses and evidentiary materials attempted to
establish just that.
Mundelein suggests that since the parties did not anticipate
affiliation in the manual, custom and practice of educational
institutions controls this case. Mundelein argues that the AAUP
guidelines should be used to "fill the [m]anual's silences." This
was a proper argument within the context of the remand. But it was
not an argument that Mundelein was forced to make because the
burden of proof was improperly shifted. If summary judgment had
not been entered in Mundelein's favor, Mundelein would have been
allowed to make the argument at trial.
Custom and usage is an aid to finding the intent of the
parties when the contract was made. See Chicago Bridge & Iron Co.
v. Reliance Insurance Co., 46 Ill. 2d 522, 531-32, 264 N.E.2d 134
(1970). Custom and usage may only be relied upon to interpret an
agreement if the practice was "so well known, uniform, long-
established and generally acquiesced in as to induce the belief
that the parties contracted with reference to it." Nielsen v.
United Services Automobile Asso'n, 244 Ill. App. 3d 658, 664, 612 N.E.2d 526 (1993). Evidence of custom and usage is only admissible
to explain uncertain or ambiguous terms. When terms of a contract
are clear, those terms alone determine the obligations of the
parties. Nielsen, 244 Ill. App. 3d at 663-64.
Mundelein would have us refer to the custom and usage of
educational institutions even though clear contract terms apply.
We agree that the evidence shows the parties never considered the
impact of affiliation, but the parties defined precise
circumstances under which Mundelein could terminate tenure. While
Mundelein offered evidence that custom and usage would dictate that
affiliation abolished tenure, they offered no evidence that
plaintiffs were aware of such custom and usage or that plaintiffs
understood that the faculty manual tenure provisions would not
apply in an affiliation scenario. Absent such knowledge,
plaintiffs had a right to rely on the manual. The manual
provisions are controlling here.
Mundelein next argues, without citing authority, that the
trial court's decision violates public policy by encouraging school
closures rather than affiliations. We disagree. Requiring
Mundelein to adhere to the terms set out in a manual it drafted
before terminating tenure violates no public policy. Nor does it
encourage school closure. Mundelein could have taken whatever
course was necessary to remedy its financial difficulties without
continued obligation to tenured faculty if it had followed the
procedures set out in its manual.
Mundelein next argues that plaintiffs failed to prove damages
beyond the two years' salary they were offered. Plaintiffs were
awarded damages through December 31, 1996. Mundelein argues that
if Mundelein had not affiliated with Loyola, Mundelein would have
closed in 1992, and plaintiffs could not have earned more than one
year's additional salary.
The measure of damages for breach of an employment contract is
the amount the plaintiff would have earned absent the breach, less
what he earned or could have earned during the contract period
after his termination. Ashe v. Sunshine Broadcasting Corp, 90 Ill.
App. 3d 97, 100, 412 N.E.2d 1142 (1980).
Mundelein argues that the following evidence showed that
Mundelein would have closed in 1992: plaintiffs' allegations in
their pleadings that Mundelein was insolvent at the time of the
affiliation; the chair of Mundelein's board of trustees' testimony
that the college's financial crisis was severe; a faculty
committee's report to the board of trustees in April 1991 that a
"state of exigency exists, and *** the [c]ollege is insolvent"; the
1991-92 annual contract provision that "all employment of faculty
by the college shall terminate on June 30, 1992"; and testimony
from a representative of the BVM Order that the BVM Order was
serious about forcing Mundelein to close.
We decline to rely on the imprecise use of the term
"insolvent" in plaintiffs' pleadings and the faculty committee
recommendations. The term "insolvency," as used in those
documents, is vague. Under Illinois and federal bankruptcy law, a
debtor is insolvent if the sum of his debts is greater than his
property at a fair valuation. See 11 U.S.C. 101(32)(A) (1994);
740 ILCS 160/3 (West 1996). There was no judicial finding of
insolvency here.
Mundelein cites no authority that plaintiffs must prove
Mundelein "[w]ould have survived" absent Mundelein's breach. And
Mundelein's claim that it would have closed is speculative. The
fate of Mundelein is not "undisputed," as Mundelein suggests.
Mundelein ignores the chair of Mundelein's board of trustees'
testimony that if affiliation negotiations with Loyola had failed,
Mundelein would have attempted to "restructure" or to affiliate
with another school. The board chair further testified that if
affiliation did not work out and "it came down to a restructuring
versus a close [of the school, there] would have been a
restructuring." Helen Garvey, a representative of the BVM Order
and a member of Mundelein's board of trustees, testified that she
was "very serious about closing the college" in accord with the BVM
Order's agreement with Mundelein. But she also said, "We didn't
want to *** close ***. What we hoped was that affiliation would
work and if it didn't we'd have to look at something else." Just
as Mundelein continued to exist when it affiliated with Loyola, it
may have continued to exist if it restructured or affiliated with
another school.
We next address an argument advanced in Mundelein's original
brief that "[t]here is no basis in the record for [the trial court]
to retain jurisdiction or entertain future proceedings to award
damages for additional lost compensation."
In the trial court's November 7, 1996, order, the court
awarded damages and "reserve[d] the right to adjust this figure
during the continued pendency of this case and in the interest of
both fairness and judicial economy to provide a suggested procedure
for 'future damages.'" Plaintiffs then filed a post trial motion
asking the court to recalculate damages. In its January 23, 1997,
order, the court recognized that it could not award future damages
(see Lewis v. Loyola University of Chicago, 149 Ill. App. 3d 88,
500 N.E.2d 47 (1986)), but acknowledged that "plaintiffs Gray and
Hasty may bring future actions during the term of their employment
contract for damages which are sustained subsequent to trial."
The record shows that the trial judge did not retain
jurisdiction but entered final orders on all matters before him.
We read his remarks as an affirmation of the right of the
plaintiffs to do what, under the law, they were already entitled to
do: bring a cause of action when it is ripe for adjudication. See
Corby v. Seventy-One Hundred Jeffery Avenue Building Corp., 325
Ill. App. 442, 457, 60 N.E.2d 236 (1945) ("[t]he plaintiff has a
right, if he so desires in the future to institute proceedings from
time to time during the term of the contract for damages which he
may have sustained").
Mundelein next argues that the trial court erred in ruling
that the faculty manual is "an instrument in writing" that supports
an award of prejudgment interest under section 2 of the Interest
Act (815 ILCS 205/2 (West 1996)). Whether to award
prejudgment interest is a matter within the sound discretion of the
trial court and will not be reversed absent an abuse of discretion.
Krantz v. Chessick, 282 Ill. App. 3d 322, 327, 668 N.E.2d 77
(1996).
Section 2 allows creditors to receive 5% interest "for all
moneys after they become due on any bond, bill, promissory note, or
other instrument of writing." 815 ILCS 205/2 (West 1996). We have
held that "[t]he type of instrument contemplated is [one] that
evidences money lent or advanced, thus setting up a creditor-debtor
relationship," and that the writing must "bear a specific date by
which the indebtedness created comes due." Wilder Binding Co. v.
Oak Park Trust & Savings Bank, 173 Ill. App. 3d 34, 42-43, 527 N.E.2d 354 (1988), rev'd on other grounds, 135 Ill. 2d 121 (1990);
see also Krantz, 282 Ill. App. 3d 322. A faculty manual is not an
"instrument in writing" for purposes of the Interest Act. See
Arneson v. Board of Trustees, 210 Ill. App. 3d 844, 853, 569 N.E.2d 252 (1991). We must reverse the trial court's award of prejudgment
interest.
Plaintiffs next argue that the trial court erred in granting
summary judgment to Loyola on the issue of successor liability. We
review summary judgment de novo. Prettyman v. Commonwealth Edison
Co., 273 Ill. App. 3d 1090, 1093, 657 N.E.2d 637 (1995).
As a general rule, when a corporation merges with another, it
takes on the latter's obligations and liabilities. But when a
corporation merely purchases the assets of another corporation, the
purchasing corporation is not liable for the debts and liabilities
of the selling corporation by reason of its succession. Kaleta v.
Whittaker Corp., 221 Ill. App. 3d 705, 708-09, 583 N.E.2d 567
(1991). But a purchasing corporation will be liable if the
plaintiff establishes that the purchase amounts to a de facto
merger. To establish de facto merger, plaintiffs must show that:
(1) the seller ceased operation and dissolved; (2) the buyer
assumed the seller's liabilities and obligations necessary for the
uninterrupted continuation of business; (3) there is a continuity
of shareholders; and (4) there is a continuity of the business
enterprise, including management, employees, location, general
business operations, and assets. Kaleta, 221 Ill. App. 3d at 709.
All four elements must be proven to establish de facto merger.
Myers v. Putzmeister, Inc., 232 Ill. App. 3d 419, 424, 596 N.E.2d 754 (1992); Kaleta, 221 Ill. App. 3d at 710.
Plaintiffs do not argue that any of the elements of de facto
merger have been established. Instead they argue that "[u]nder the
unique facts of this case, the four indicia of de facto merger ***
should not be immutable rules which apply with full force to [not]-
for-profit corporations, which do not have shareholders." But
plaintiffs cite no authority that would allow us to deviate from
the clear requirements to establish a de facto merger. And
plaintiffs do not suggest what "indicia" should be applied to not-
for-profit corporations. We note that not-for-profit corporations
are controlled by "members" rather than "shareholders." Compare
805 ILCS 5/7.05 (West 1996) to 805 ILCS 105/107.03 (West 1996).
But even disregarding the requirement that there be a continuation
of shareholders, plaintiffs cannot establish the other elements of
de facto merger. Mundelein did not dissolve. Nor did Mundelein's
business continue "uninterrupted." There were significant changes
in the management, employees, and business operations after the
affiliation. The "affiliation" of Loyola and Mundelein is not the
type of union covered by the de facto merger doctrine.
Plaintiffs note that "[t]he imposition of liability upon the
successor corporation is grounded upon the notion that no
corporation should be permitted to commit a tort or breach a
contract and avoid liability through corporate transformation in
form only." Munim v. Azar, 648 So. 2d 145, 154 (Fla. Dist. Ct.
App. 1994). But Mundelein continues to exist as a corporate entity
and has not avoided liability here.
We next address plaintiff Myers' cross-appeal. She argues
that she did not waive her tenure rights by accepting a five-year
teaching contract with Loyola.
Whether Myers waived her right to sue for loss of tenure is a
question of fact, the resolution of which will not be disturbed
unless it is contrary to the manifest weight of the evidence.
Sexton v. Smith, 112 Ill. 2d 187, 194, 492 N.E.2d 1284 (1986).
Waiver is the relinquishment of a known right. Pantle v.
Industrial Comm'n, 61 Ill. 2d 365, 372, 335 N.E.2d 491 (1975). A
waiver may be made by express agreement or implied from the conduct
of the party who allegedly waived the right. Ryder v. Bank of
Hickory Hills, 146 Ill. 2d 98, 105, 585 N.E.2d 46 (1991). Waiver
will be implied when a party's conduct is inconsistent with an
intention to assert the right. Ryder, 146 Ill. 2d at 105.
Myers argues that nothing she did was inconsistent with
asserting her breach of contract claim against Mundelein. We
agree. Myers' acceptance of a five-year teaching position and her
efforts to obtain tenure at Loyola are not inconsistent with
pursuit of a remedy against Mundelein. A plaintiff has a duty to
mitigate damages. In breach of employment contract cases, this
duty includes seeking other employment. See Arneson, 210 Ill. App.
3d at 851-52. Myers' mitigation of damages by accepting employment
with Loyola does not amount to waiver.
We note that continued employment under new employment
conditions after a breach of employment contract may, in some
circumstances, result in a waiver of a plaintiff's breach of
contract claim. See Vandevier v. Mulay Plastics, Inc., 135 Ill.
App. 3d 787, 482 N.E.2d 377 (1985) (finding waiver where plaintiff
acquiesced for seven years to the payment of a lower commission
than he alleged he was entitled to under a contract). But Myers
did not continue to work for Mundelein. She worked for Loyola.
Defendants cite no case in which the acceptance of employment with
a different entity amounts to waiver.
Mundelein notes that it was the affiliation agreement between
Mundelein and Loyola that created the five-year teaching position
Myers was selected to fill. But Mundelein does not dispute that
Loyola, not Mundelein, selected Myers and offered her the position.
If Loyola intended to extinguish Myers' tenure claim against
Mundelein through acceptance of Loyola's offer, nothing prohibited
Loyola from including that condition in its offer of employment.
But Myers is entitled only to a declaration that Mundelein
breached its contract. In defendant Mundelein's petition for
rehearing, Mundelein notes that Myers did not seek damages or prove
damages before the trial court. Myers sought only a declaratory
judgment and injunctive relief in her complaint.
We remand with directions to enter judgment for plaintiff
Myers. The trial court is instructed to recalculate plaintiffs
Gray and Hasty's damages in a manner consistent with this opinion.
Affirmed in part and reversed in part; cause remanded.
GORDON and BURKE, JJ., concur.
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