Reese v. Forsythe Mergers Group, Inc.

No. 2--96--1144

_________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT
_________________________________________________________________

ROGER REESE, ) Appeal from the Circuit Court
) of Kane County.
Plaintiff-Appellant, )
) No. 94--L--1031
v. )
)
FORSYTHE MERGERS GROUP, INC., )
and GERALD FORSYTHE, )
)
)
Defendants-Appellees )
) Honorable
(Glen Marino, Guy Courtney, and ) Pamela K. Jensen,
The Machaira Group, Defendants).) Judge, Presiding.
______________________________________________________________

JUSTICE COLWELL delivered the opinion of the court:

Plaintiff, Roger Reese, appeals from the trial court's order
granting the defendants' motion for summary judgment pursuant to
counts I, III, and IV of his complaint and the court's granting the
defendants' section 2--619 motion (735 ILCS 5/2--619 (West 1994))
to dismiss pursuant to count V of his complaint. The trial court
determined that a binding agreement did not exist between Reese and
the defendants and that the alleged partial performance by the
parties was insufficient to take any oral agreement out of the
statute of frauds (740 ILCS 80/1 et seq. (West 1994)). Further,
the trial court found that there was no factual basis to support
Reese's allegations that a fiduciary duty existed between defendant
Gerald Forsythe and himself. On appeal, Reese contends that the
trial court's ruling is erroneous because a genuine issue of
material fact exists regarding each of the counts in his complaint.
We affirm.
The parties in this action were involved in an investment
project that never materialized. The record shows that Reese knew
Guy Courtney, an employee of Barron Chase Securities and president
of the Machaira Group, Inc. (TMG), through Reese's investments in
TMG. Courtney knew defendant Gerald Forsythe through Forsythe's
investments in TMG. Late in 1993, Courtney met with Forsythe to
discuss the formation of a "blank check" company. The purpose of
the company was to fund an acquisition of a financial institution.
Forsythe stated that he would be interested in investing "if the
proper people could be put together." The blank check company
became known as Forsythe Mergers Group (FMG).
Thereafter, Courtney met with Reese about his possible
investment and participation in FMG. Reese was the president and
CEO of Market Dimensions, Inc. (MDI), as well as an employee. As
an MDI employee, Reese consulted with banks relative to market
research issues and provided computer services to these banks and
savings and loans institutions. Reese also had experience with
initial public offerings (IPOs) similar to the one planned for FMG
because he had put together an IPO while working for Amcore
Financial in 1986. During the period that he was involved with
FMG, Reese remained employed with MDI.
At the meeting, Reese and Courtney discussed FMG and the IPO.
Reese testified in a deposition that he and Courtney orally agreed
that Reese would be "a principal of Forsythe Mergers Group, ***
assuming [Forsythe] would approve the deal." Reese said that he
was told more than once that the entire deal depended upon
Forsythe's approving the deal and his signing onto it.
Reese began working on the project. He reviewed prospectuses
of two other deals similar to the one that FMG was attempting to
complete, wrote a report after researching the pricing of banks and
recent transactions, and provided projections concerning FMG based
upon other similarly typed companies.
Meanwhile, Courtney forwarded Reese's r‚sum‚ to Forsythe.
Forsythe informed Courtney to go forward with the deal.
Subsequently, early in March 1994, Courtney contacted Reese and
told him that Forsythe had seen Reese's r‚sum‚ and that the "deal
was a go" with the next step being for Reese to meet Forsythe.
In April 1994 Reese met with Courtney and Bob Kirk, president
of Barron Chase Securities, in Courtney's office to discuss the
concept of the transaction and how Courtney and Kirk would be
involved. After the meeting, Reese, Courtney, and Kirk went to
Forsythe's office, where Reese met Forsythe for the first time.
Reese had never talked with Forsythe or received any written
communication from him prior to the meeting.
At the meeting, Reese, Courtney, and Forsythe discussed the
general structure of the IPO and FMG and some generalities
concerning the stock/share agreement. For example, the parties
discussed that the price range of the stock to be offered to the
public would be between $5 and $6. Forsythe repeated that the deal
was a "go" at the end of the meeting.
Reese testified that, between a few days and two weeks after
the meeting took place, he and Forsythe made contributions in FMG.
On June 6, 1994, FMG was incorporated in Nevada as a start-up
entity to conduct the proposed offering. Reese stated that "[a]s
president of Forsythe Mergers Group, [he] established a bank
account and deposited [the money] into it." Reese contributed
$20,176.47 and Forsythe contributed $21,000. Reese said that he
did not know if anyone aside from himself was the signatory power
on the bank account.
Reese testified that, although Forsythe said the deal was a
"go" in April, Reese understood that several things had to be
accomplished before things "became a done deal." Specifically,
Reese explained that the Securities and Exchange Commission (SEC)
had to approve the registration statement, there had to be a public
offering of the stock, and the stock had to be sold.
Reese added, however, that the point at which the actual
consummation of an IPO occurred could be interpreted many ways,
such as when the filing of the registration statement occurred,
when the SEC's approval was received, or when the underwriters'
agreement was finalized. Although Reese acknowledged that none of
these things were ever accomplished, Reese testified that to him
the IPO was consummated upon depositing his and Forsythe's money in
the FMG bank account. Later in his deposition, however, Reese
admitted that Courtney told him that it was only after Forsythe
"signed on" that the investment was a "done deal."
In his deposition, Forsythe testified that, when he first met
Reese in April, Reese made him feel uncomfortable. After the
meeting with Courtney and Reese, Forsythe telephoned an employee,
Arnold Becker, to complete a background check on Reese. Forsythe
said that he did not remember the specifics of his conversation
with Becker, but, upon speaking with Becker after Becker's
background check, Forsythe told Courtney that he did not want to
proceed with Reese. Thereafter, Courtney called Reese.
Around June 15, 1994, approximately two weeks after the
incorporation of FMG, Reese received notice, by telephone, from
Courtney that he was no longer in the deal. Reese testified that
after the April meeting he had begun working on the registration
statement and that the only things remaining on it when he received
Courtney's notice were the "accountant's report and opinion" and
the attorney's opinion "as it relate[d] to the legality of the
stock issue." Reese then added that the draft of the statement
needed "more polishing" and also that an employment agreement had
not yet been entered between him and FMG in written form.
Regarding the employment agreement, Reese stated that prior to
June 15 he had discussed the terms of the agreement with Courtney.
Reese said that he and Steve Kroll, an attorney for FMG, structured
the employment agreement to be similar to an agreement used with
another company in a merger deal. Reese stated that he and
Courtney met Kroll on the same day as the day of the April meeting
with Forsythe and that he later requested Courtney to obtain the
contract upon which they were going to base Reese's employment
agreement. Reese explained that he made several drafts of the
employment agreement and sent each successive draft to Kroll and
Courtney.
Reese stated that as president of FMG he had final approval of
his employment agreement, but that he never would have implemented
it until or unless Forsythe approved it. Reese explained that no
one ever signed the employment agreement, but that the terms of the
employment agreement had been discussed and agreed upon between him
and Courtney.
Reese testified that he did not send any copies of the
agreement to Forsythe and that Courtney told him that he would
serve as the go-between for Reese and Forsythe regarding all
matters relating to the corporation. Reese said that no one else
ever told him that all communication with Forsythe would take place
through Courtney and that Courtney never indicated to him that he
had the authority to speak for Forsythe. Reese added, however,
that as things went along "it was very clear in [his] mind" that
Courtney was speaking for Forsythe. In his deposition, Courtney
acknowledged that, because access to Forsythe could be difficult
and because he had the accessibility to Forsythe based on his prior
relationship with him, he may have told Reese to deal strictly with
him and not go through Forsythe.
Upon hearing from Courtney that Forsythe did not want him in
the deal anymore, Reese asked Courtney whether the deal was going
to go through without him. Courtney replied that he was not
positive. Reese said that his conversation with Courtney was
relatively short, but that Courtney may have told him that he was
going to try to get Reese's money back for him. Reese said that a
couple of weeks later he received a check for $21,176.47, an amount
equal to his remaining stake in the offering. We note that
Courtney testified that Reese called him and told him the amount of
money owed to Reese on the FMG deal and that he issued the check in
response to Reese's request. In any event, after receiving the
check, Reese deposited it into his account.
In a letter dated June 20, 1994, Reese explained to Courtney
the amount of work he performed to incorporate FMG. The letter
states that Reese believed that he should be compensated for his
work in the same manner as if FMG had been a client of MDI. At the
end of the letter, Reese computes his costs and expenses as
$4,922.78. We note that in his deposition Reese testified that he
was aware that FMG's lawyers were not going to be paid for their
legal services unless the IPO was consummated. Reese stated that
he believed that the arrangement was fair.
Reese received a response from Courtney in July. A "release
of liability" accompanied the letter and stated that Reese's costs
and expenses would be paid in exchange for Reese's release of any
claim of liability. Reese called Courtney and told him that he was
not going to sign anything. Reese stated that he believed that it
was about that time that he learned that the deal was going to go
ahead without him. Reese said that not being a part of the deal
angered him, and at that point he sought counsel.
Courtney's deposition testimony mirrored Reese's in nearly all
material aspects. Courtney added, however, that, within a few
hours after Reese's initial meeting with Forsythe, Forsythe called
Courtney and told him that he did not have a good feeling about
Reese. Courtney stated that after Reese was gone from the deal his
responsibilities included finding someone else with whom Forsythe
would conduct business. Courtney said that Reese's replacement was
Glen Marino and that, after Forsythe bought Reese's stock back from
him, Forsythe sold part of it to Marino. Courtney added that,
subsequently to Forsythe's selling stock to Marino, Forsythe
decided to terminate the deal.
Forsythe testified to his perspective of the FMG deal.
Forsythe stated that it was always his intention to go through with
the deal as long as the right people were attached. Forsythe said
that he was uncomfortable with Reese and that was why he told
Courtney that he did not want Reese to become a part of FMG.
Forsythe stated that he met Courtney's replacement for Reese,
Marino, after he terminated the process with Reese. Thereafter,
however, he called Courtney and told him to put "on hold any
effort" on FMG. Forsythe explained that at that time he was
involved in another offering and had been advised that it would not
be good to have his name in the public in two transactions at the
same time. Finally, Forsythe stated that he had no intention of
starting the process again for FMG.
Reese filed a four-count complaint against FMG, Forsythe,
Courtney, Marino, and TMG. Count I requested a judgment for
specific performance based upon the partial oral and written
agreements of the parties. Count II is not at issue in this
appeal. Counts III and IV alleged, respectively, that Forsythe and
FMG breached the employment agreement between Reese and FMG.
Finally, Reese later amended his complaint to include count V,
which alleged that Forsythe breached a fiduciary duty. We note
that the court dismissed without prejudice TMG, Marino, and
Courtney from Reese's complaint.
The remaining defendants filed a motion for summary judgment
concerning counts I, III, and IV of Reese's complaint, as well as
a motion to dismiss count V. The trial court granted all of the
defendants' motions. On appeal, Reese contends that the trial
court's rulings were erroneous because an issue of material fact
exists regarding each of the counts.
We turn first to whether the trial court properly granted the
defendants' motions for summary judgment. Summary judgment is
appropriate only when the pleadings, depositions, and admissions on
file, together with the affidavits, if any, disclose that there is
no genuine issue as to any material fact and the moving party is
entitled to judgment as a matter of law. Bolingbrook Equity I Ltd.
Partnership v. Zayre of Illinois, Inc., 252 Ill. App. 3d 753, 764
(1993). While plaintiffs need not prove their cases at the summary
judgment stage, they must come forward with some facts that would
arguably entitle them to judgment. Jones v. Minster, 261 Ill. App.
3d 1056, 1059 (1994). Indeed, summary judgment is a drastic
measure and should be granted only if the movant's right to
judgment is clear and free from doubt. Outboard Marine Corp. v.
Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102 (1992).
Therefore, where a reasonable person can draw divergent inferences
from undisputed facts, summary judgment should be denied.
Outboard, 154 Ill. 2d at 102. Finally, our review of the trial
court's entry of summary judgment is de novo. Monticello Insurance
Co. v. Wil-Freds Construction, Inc., 277 Ill. App. 3d 697, 701
(1996).
Counts I, III, and IV of Reese's complaint depend upon a
finding that a valid contract existed between Reese and the
defendants. Accordingly, before this court discusses whether
specific performance could have been granted regarding count I and
whether FMG or Forsythe breached the contract as counts III and IV
allege, we will address whether the record raises a factual
question regarding the existence of a valid contract between the
parties.
Reese contends that the parties entered into an enforceable
contract when they incorporated FMG in Nevada, deposited their
funds in a FMG bank account, and agreed to "the tasks to be
performed." Further, Reese argues that, although the employment
agreement was never signed by any party, the terms in it were
agreed upon by Courtney and Forsythe, and, therefore, the
employment agreement, along with the oral agreement to go forward
with the deal, constituted a contract. We disagree.
Overall, a party seeking to enforce an agreement has the
burden of establishing the existence of the agreement.
Commonwealth Edison Co. v. Industrial Comm'n, 167 Ill. App. 3d 229,
233 (1988). To form a valid contract between two parties, there
must be mutual assent by the contracting parties on the essential
terms and conditions of the subject about which they are
contracting. Commonwealth Edison, 167 Ill. App. 3d at 233.
Accordingly, when determining whether an enforceable contract
exists, we must look at the intent of the parties, as evidenced by
the language in the document. Bradley Real Estate Trust v. Dolan
Associates Ltd., 266 Ill. App. 3d 709, 712 (1994). Further, oral
contracts are proved not only by what the parties have said, but
also by what they have done. See In re Marriage of Sherrick, 214
Ill. App. 3d 92, 95 (1991).
We note that the existence of a contract is generally a
question reserved for the trier of fact. Yorke v. B.F. Goodrich
Co., 130 Ill. App. 3d 220, 222-23 (1985). Where the facts are not
in dispute, however, the existence of a contract is a question of
law which the trial court may decide on a motion for summary
judgment and which this court may independently review. Lewis-
Connelly v. Board of Education of Deerfield Public Schools,
District 109, 277 Ill. App. 3d 554, 557 (1996).
We find that the record in this case demonstrates that a
contract did not exist between Reese and the defendants. Indeed,
Reese argues that an agreement existed, but avoids the pertinent
issue of explaining to what the parties agreed. It is unclear from
Reese's brief and complaint what he believes exactly the
"agreement" with the defendants entails.
Turning to the employment agreement, Reese acknowledges that
the agreement was never signed by himself or Forsythe. Reese even
admits that he did not know whether Forsythe knew about the
employment agreement that Reese was drafting for himself. Further,
Reese stated that, although he was president of FMG, he would not
adopt the employment agreement without Forsythe's approval.
Finally, we note that the employment agreement never got out of the
drafting stage. In his June 20, 1994, letter, Reese states that a
"model" employment contract is in place and the employment
agreement enclosed in the record is stamped with the word "draft."
We cannot say that such an agreement constitutes a contract that is
binding upon Reese and the defendants. Instead, the undisputed
facts demonstrate that the agreement was never executed.
Reese places extreme emphasis on Forsythe's stating that the
deal was a "go" at the April meeting. Reese contends that this
comment created an oral contract between both parties regardless of
the employment agreement's not being signed. Again, we note that
Reese does not explain exactly what the agreement is; he simply
contends that a contract was formed when Forsythe said the deal was
a "go," and then deposited money in the bank in FMG's name after
FMG was incorporated. We decline to find that these acts formed a
valid contract.
For a valid contract to be formed, an " 'offer must be so
definite as to its material terms or require such definite terms in
the acceptance that the promises and performances to be rendered by
each party are reasonably certain.' " Academy Chicago Publishers
v. Cheever, 144 Ill. 2d 24, 29 (1991), quoting 1 Williston,
Contracts 38 through 48 (3d ed. 1957); 1 Corbin, Contracts 95
through 100 (1963). A contract is " 'sufficiently definite and
certain to be enforceable if the court is enabled from the terms
and provisions thereof *** to ascertain what the parties have
agreed to do.' " Academy Chicago Publishers, 144 Ill. 2d at 29,
quoting Morey v. Hoffman, 12 Ill. 2d 125, 131 (1957). While it is
true that a contract may be enforced if some contract terms are
missing, if the essential terms are so uncertain that there is no
basis for deciding whether the agreement has been kept or broken,
there is no contract. Champaign National Bank v. Landers Seed Co.,
165 Ill. App. 3d 1090, 1093 (1988).
We find that Forsythe's stating that the deal is a "go" lacks
the definite and certain essential items required for the formation
of an oral contract. First, we reiterate that this court is
unclear as to what the agreement is that Reese refers to as being
formed. Consequently, because it is unclear what Reese and the
defendants have agreed to do, there is no enforceable contract.
See Academy Chicago Publishers, 144 Ill. 2d at 29.
Indeed, the only definite thing that the actions of Reese and
the defendants show is that the parties agreed that Courtney's
project was a deal in which both were interested. In other words,
the facts demonstrate merely that Reese and Forsythe were two
investors who were interested in a particular project. Courtney
had an idea to form a blank check company for which his company,
TMG, could serve as underwriters. Courtney approached Forsythe, as
Forsythe had investments with TMG. Forsythe told Courtney that he
was interested if the right people were involved. Next, Courtney
approached another TMG investor, Reese. Reese also wanted to be
involved in the deal and Courtney and Reese agreed that, if
Forsythe approved and "signed on" the deal, Reese would be a
principal of the new company formed, FMG. As Reese acknowledged,
however, his participation in the deal depended on Forsythe. There
would not be any deal if Forsythe was not interested in it or, as
Forsythe stated in his first meeting with Courtney, if the right
people were not involved.
That Forsythe stated that the deal was a "go" does not change
these conditions. Indeed, Reese acknowledges that meeting Forsythe
was a "step" in putting the deal together and that several things
had to be completed before things were a "done deal." It is
undisputed that not one of these things was accomplished before
Forsythe informed Courtney that he did not want to work with Reese.
Further, even if Forsythe's stating that the deal was a "go"
did constitute an agreement, there are too many undetermined
essential elements concerning the agreement for it to be
enforceable. Although our list is certainly not exhaustive, we
note the following contingencies concerning the parties' alleged
"agreement." First, although a draft existed, Reese's employment
contract had not been executed. Second, a price for the shares had
yet to be agreed upon, and Reese even admitted at one point in his
deposition that he was unsure whether he and Forsythe discussed the
share price at the April meeting. Third, although Reese had
completed preliminary research on the market, a "target" company
for acquisition had not been decided upon, and at the April meeting
Forsythe and Reese merely discussed the "potential market for
target companies." Finally, there is no record of any discussion
concerning the overall timetable regarding the entire deal, when
the stock would be offered, what would happen if a "target" company
was not found, or even what each party's responsibilities were.
Consequently, even if an oral agreement was reached, it was too
indefinite to serve as a valid and enforceable contract. See
Champaign, 165 Ill. App. 3d at 1094 (alleged agreement must contain
sufficient definitiveness to be enforceable).
In light of our decision that there is no valid and
enforceable contract between the parties, we need not address
whether specific performance could have been granted or whether
Forsythe and FMG breached the contract. Accordingly, we turn next
to whether the trial court properly dismissed count V of Reese's
complaint.
A motion to dismiss under section 2--619 of the Code of Civil
Procedure admits all well-pleaded facts. Geick v. Kay, 236 Ill.
App. 3d 868, 874 (1992). The purpose of a section 2--619 motion is
to provide a mechanism to dispose of issues of law or easily proved
issues of fact, and the cause of action should not be dismissed on
the pleadings unless it is apparent that no set of facts can be
proved which will entitle a plaintiff to recover. Meerbrey v.
Marshall Field & Co., 139 Ill. 2d 455, 473 (1990). While appellate
review of the dismissal of a complaint pursuant to a section 2--619
motion is limited to a consideration of the legal questions
presented by the pleadings, our review is independent and we need
not defer to the trial court's reasoning. Miranda v. Jewel Cos.,
192 Ill. App. 3d 586, 588 (1989).
Reese contends that as shareholders of FMG he and Forsythe had
a fiduciary duty toward each other. In support of his argument,
Reese relies on this court's decision in Hagshenas v. Gaylord, 199
Ill. App. 3d 60 (1990). In Hagshenas, the parties, the Gaylords
and the Hagshenas, formed a close corporation and served as
officers and directors of the corporation, with each party being a
50% shareholder. Thereafter, one of the parties, Bruce and Barbara
Hagshenas, resigned from the corporation. The following day, the
Hagshenas purchased a new agency, hired the prior corporation's
employees, and began directly competing with the prior corporation.
Each party filed a complaint and the Gaylords alleged that the
Hagshenas breached a fiduciary duty. Hagshenas, 199 Ill. App. 3d
at 63.
The Hagshenas court found that, because the corporation was a
close corporation operated similar to a partnership, both parties
were 50% shareholders, and both parties served as directors and
officers that oversaw the day-to-day operations of the corporation,
each party owed a fiduciary duty to the other. The court explained
that the Hagshenas owed a fiduciary duty similar to a partner to
the Gaylords and violated this duty by opening a competing business
and hiring away all the corporations' employees, who were of "great
significance" to the corporation's success. Hagshenas, 199 Ill.
App. 3d at 71.
We find Hagshenas inapplicable to the present case. First, it
is undisputed that, contrary to the close corporation in Hagshenas,
FMG was to be a publicly traded corporation, with possibly over
1 million shares being offered to the public. Second, the
relationship between Reese and Forsythe is drastically different
from the relationship between the parties in Hagshenas. Here,
Reese and Forsythe met only once to discuss the generalities of the
project. Reese even admits that the April meeting was the only
time he ever communicated with Forsythe. Accordingly, the
relationship between Forsythe and Reese does not even begin to
equate with the close relationship the Gaylords had with the
Hagshenas regarding their corporation.
Finally, there is no evidence that Forsythe did anything to
compete with FMG. From the beginning, Forsythe stated that he
would be interested in investing in Courtney's project if the right
people were involved. Later, Forsythe changed his mind and decided
not to invest. We note this decision came after Reese was no
longer with the project. Further, there is no evidence that the
"other" transaction that Forsythe was involved with was in
competition with FMG or a business opportunity available to FMG.
On the contrary, this other transaction involved electric-power
generation plants, not financial institutions.
Therefore, we find that the Hagshenas case is distinguishable
from the case at bar and no fiduciary duty existed between Reese
and Forsythe. Instead, we find that the facts show that two
investors formed a corporation for the purpose of creating an
investment project, and, one of those investors, Reese, took the
initiative to set up the preliminary groundwork for the project.
Indeed, the record shows that Reese began to work on the project
immediately after talking to Courtney in 1993. Reese testified
that after the meeting with Courtney he spent numerous hours
reviewing similar transactions and researching possible candidates
for the FMG acquisition. Reese accomplished all this work before
he even met Forsythe, even though he knew that without Forsythe's
approval there would not be any deal. After meeting with Forsythe
and hearing that Forsythe was interested, Reese continued
completing the preliminary work. That Reese continued working on
the project, however, does not mean that a contract had been
formed. Similarly, that Forsythe decided not to work with Reese
and not to invest in the project does not mean that a fiduciary
relationship existed or that a breach occurred. Instead, the facts
show only that Forsythe, an investor, decided not to invest in
Courtney's project with Reese and later decided not to invest in
the project at all.
In conclusion, we find that no genuine issues of material fact
exist regarding counts I, III, and IV of the plaintiff's complaint.
Further, we find that the trial court's order granting the
defendants' motion to dismiss regarding count V was not erroneous.
For the foregoing reasons, the judgment of the circuit court
of Kane County is affirmed.
Affirmed.
BOWMAN and DOYLE, JJ., concur.