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No. 3-02-0210

IN THE

APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

A.D., 2003

PRESIDING JUSTICE McDADE delivered the opinion of the court:

Plaintiff, Turner Investors, appeals from an entry ofsummary judgment against it in an action for conversion ofbusiness funds. Defendant, David Van Acker cross-appeals from thetrial court's denial of his motion for sanctions and motion todeem facts admitted. We affirm.

FACTS

On May 18, 1999, plaintiff filed a complaint againstdefendants, Sharon Pirkl and David Van Acker. In its complaint,plaintiff alleged, among other things, that defendants hadconverted plaintiff's funds. Plaintiff specifically alleged thatdefendants had wrongfully exerted control over the plaintiff'sbusiness accounts by improperly distributing funds to thethemselves.

Subsequent discovery revealed that plaintiff owned certainreal estate located in Moline, Illinois, and operated agymnastics business on a portion of that real estate. Thegymnastics business, Moline Gymnastics and Dance Academy (theAcademy), offered instructional training as well as competitivegymnastics. Pirkl served as manager of the Academy and Van Ackeras a gymnastics coach.

The Academy maintained two commercial bank accounts. Fundsdesignated for gymnastics competitions were deposited in the"competition account." Other funds and proceeds were deposited inthe "general account." In her capacity as the business manager,Pirkl was responsible for the payment of business expenses andthe disbursement of paychecks to Academy employees. Pirkl alsoconsistently deducted and disbursed bonuses from the Academy'sgross annual income. The bonus pool equaled the amount by whichthe Academy's pretax income exceeded its operating expenses. Thismethod of determining and paying bonuses was pursuant to anarrangement adopted by the parties.

In April of 1999, plaintiff entered into a contract withLisa and Allen Miskowiec to sell the Academy and the real estateon which it was located. Prior to that time, defendants had madeseveral unsuccessful attempts to purchase the real estate and theAcademy. Plaintiff informed defendants of the pending sale oneweek prior to its closing. On April 29, 1999, four days beforethe closing, Pirkl authorized Van Acker to disburse the fundsheld in the competition account. Van Acker then wrote 16 checkstotaling $960 to the parents of Academy's gymnastics teammembers. On that same day, Pirkl withdrew funds from the generalaccount and distributed them as bonus checks. The funds weredivided equally between Pirkl and Van Acker, each receiving$9,950. These withdrawals and disbursements brought both accountsclose to a zero balance.

Van Acker testified in his deposition that the funds in thecompetition account did not belong to the Academy:

"[T]he money that was there [competition account]actually belonged to the clientele, because it was anescrow account. That money was used to take care ofcoaching expenses, to go to meets, them [the parents]doing that versus using a booster club.

So instead of that group fund-raising money, theyput money into that account to be used for thatpurpose, and so since we knew that the season was goingto be--the competitive season was over, this amount wasthere, and we decided to give it back to them becauseit was their money."

When asked about the partnership's interest in thecompetition account, one of plaintiff's partners, DonaldCarothers, testified at his deposition as follows:

"Q. And with regard to the competition account,did you have any conversation with any of the investorsabout the account?

A. No

Q. Did you deliver those accounts to BrucePeterson?

A. Yes.

Q. Did you make any comment to him with regard towhether that money belonged to the individuals that putthe money into the accounts?

A. Not really because he knew about thatparticular account. That wasn't our money or Turner'smoney or anything else. That belonged to the people.

Q. How was it that you believed that BrucePeterson knew that the money in the competition accountbelonged to the people who put the money in as opposedto the Turner Investors Group?

A. He was involved in it as much as I was.

Q. So you think it was pretty clear to the TurnerInvestors at least to you and to Bruce Peterson, thatthe competition account money did not belong to theTurner Investor Group?

A. True. I believe that."

On September 27, 2000, plaintiff filed its second amendedcomplaint, alleging breach of fiduciary duty and conversion. Inresponse to this complaint, defendants filed a motion for summaryjudgment on all counts. On June 18, 2001, Judge Ronald C. Taber,who presided over the case, granted defendants' summary judgmentmotion without making any factual findings.

Pursuant to Supreme Court Rule 137 (134 Ill. 2d R. 137),defendant Van Acker filed a motion for sanctions againstplaintiff and its counsel on July 16, 2001. Defendant Van Ackeralso filed a motion seeking to deem allegations contained in hisrequests for admission Nos. 2 and 3 admitted.

Defendant Van Acker's first request for admissions, filed inJanuary of 2002, sought admission of the following:

"2. William Stengel reviewed and/or approved aprovision in said sales agreement which specificallyincluded the sale of the "Competition" account with allother cash accounts.

3. Statements made by Don Carothers, in his May 3,2000 deposition testimony that the money in thecompetition account did not belong to Turner InvestorsGroup was and is accurate."

In its response to the request for admissions, plaintiffreplied, in relevant parts:

"2. Plaintiff declines to answer this request asthe question is in the alternative.

3. Plaintiff declines to answer this request asthe quest is unclear as to whether Don Carothers madesuch statements; or, if Don Carothers made thestatements, were the statements accurate." 

Before ruling on these motions, Judge Taber retired. For thefirst time, Judge Mark A. Vandewiele presided over the case. OnFebruary 19, 2002, Judge Vandewiele held a hearing on defendants'motions. On March 1, 2002, the court denied the motion forsanctions, finding that "[p]laintiff had a good faith basis toinitiate and proceed with the litigation and that [p]laintiffacted reasonably and in good faith under the circumstances." Inaddition, the trial court's written order, entered on the sameday, denied defendant Van Acker's motion to deem facts admitted.Judge Vandewiele specifically found that "plaintiff did object toRequests for Admission Nos. 2 and 3, and gave grounds whyplaintiff could not truthfully answer the Requests."

Plaintiff now appeals the order granting summary judgment,and defendant Van Acker cross-appeals the denial of his motionfor sanctions and motion to deem facts admitted.

ANALYSIS

I. Summary Judgment

First, we examine whether the trial court erred in grantingdefendants' motion for summary judgment.

In Illinois, summary judgment is governed by the provisionsof section 2-1005 of the Code of Civil Procedure. 735 ILCS 5/2-1005 (West 1994). Under section 2-1005(c), a party is entitled tosummary judgment "if the pleadings, depositions, and admissionson file, together with the affidavits, if any, show that there isno genuine issue as to any material fact and that the movingparty is entitled to a judgment as a matter of law." 735 ILCS5/2-1005(c) (West 1994). Because summary judgment is a drasticmethod of terminating litigation, the movant's entitlement mustbe free from doubt. Logan v. Old Enterprise Farms, Ltd., 139 Ill.2d 229, 564 N.E.2d 778 (1990). Accordingly, the reviewing courtmust construe the evidence strictly against the movant andliberally in favor of the nonmoving party. Logan, 139 Ill. 2d at234. And where a reasonable person could draw divergentinferences from undisputed facts, summary judgment should bedenied. Loyola Academy v. S&S Roof Maintenance, Inc., 146 Ill. 2d263, 586 N.E.2d 1211 (1992). In appeals from summary judgmentrulings, we conduct a de novo review. Outboard Marine Corp. v.Liberty Mutual Insurance Co., 154 Ill. 2d 90, 607 N.E.2d 1204(1992).

Although far from clearly stated, it seems the gist ofplaintiff's first argument is that the trial court erred ingranting summary judgment because factual questions existregarding whether defendants converted its funds. Defendantsargue they were entitled to summary judgment as a matter of lawbecause plaintiff failed to establish an element of its claim forconversion. In re Estate of Albergo, 275 Ill. App. 3d 439, 446,656 N.E.2d 97 (1995).

A conversion is any unauthorized act that deprives a personof his or her or its property permanently or for an indefinitetime. Colonial Funding, L.L.C. v. American Empire Surplus LinesInsurance. Co., 308 Ill. App. 3d 376, 719 N.E.2d 1098 (1999). Toestablish a conversion claim, a plaintiff must establish that (1)it has a right to the property; (2) it has an absolute andunconditional right to the immediate possession of the property;(3) it made a demand for possession; and (4) the defendantwrongfully and without authorization assumed control, dominion,or ownership over its property. Cirrincione v. Johnson, 184 Ill.2d 109, 703 N.E.2d 67 (1998), citing Western States Insurance Co.v. Louis E. Olivero & Associates, 283 Ill. App. 3d 307, 310, 670N.E.2d 333 (1996).

In the present case, plaintiff has failed to providesufficient facts to show that it has a right to the disbursedfunds. Plaintiff also does not contend that his right topossession, if established, was absolute and unconditional.Moreover, Carothers admits in his deposition that the funds inthe competition account did not belong to the Academy. Plaintifffurther admits that defendant's method of determining and payingbonuses was pursuant to an arrangement adopted by the parties.There is nothing in the record which shows that plaintiff tolddefendants or its accountant that the arrangement had beenmodified or terminated.

Accordingly, we hold that the trial court did not err inentering a summary judgment in favor of defendants with respectto plaintiff's conversion claim.

II. Motion for Sanctions

Next, we examine whether the trial court abused itsdiscretion in denying Van Acker's motion for sanctions. In hiscross-appeal, Van Acker claims that plaintiff's claims were basedupon unsupported allegations of fact. Van Acker first argues thatJudge VandeWiele's decision to deny sanctions is not entitled toany deference and that our review should be de novo because JudgeVandeWiele did not preside over any aspect of the case. See Toland v. Davis, 295 Ill. App. 3d 652, 657, 693 N.E.2d 1196(1998). We reject this argument. In Toland, this court heldthat where the order was entered by a judge who neither presidedover any pertinent aspect of the case nor conducted anevidentiary hearing on the motion for sanctions, his decision wasbased on the same "cold record" as that before the appellatepanel and review should be de novo. Judge Vandewiele held ahearing on pending motions.

Generally, a trial court's decision regarding whether toimpose sanctions is within the sound discretion of the trialcourt, is entitled to considerable deference, and will not bereversed on appeal absent an abuse of discretion. Yassin v.Certified Grocers of Illinois, Inc., 133 Ill. 2d 458, 551 N.E.2d1319 (1990). However, the logical predicate to such deference isthat the circuit court make and the appellate court be able todiscern an informed and reasoned decision.

There is a split of authority among the districts of theappellate court reflecting some confusion over when the circuitcourt is obligated to make written findings of fact in ruling ona motion for sanctions. Compare In re Estate of Smith, 201 Ill.App. 3d 1005, 559 N.E.2d 571 (3d Dist. 1990),and O'Brien &Associates, P.C. v. Tim Thompson, Inc., 274 Ill. App. 3d 472, 653N.E.2d 956 (2d Dist. 1995), (holding that written findings offact are required even where sanctions are denied), with Rein v.David A. Noyes & Co., 271 Ill. App. 3d 768, 649 N.E.2d 64 (2dDist. 1995), Elledge v. Reichert, 250 Ill. App. 3d 1055, 620N.E.2d 543 (4th Dist. 1993) (if sanctions are not imposed, thetrial court need not provide reasons for its denial).

Inasmuch as the slide down the slippery slope appears tohave begun with this court's 1990 decision in In re Smith, webegin our analysis with that case. Smith involved a situationsubstantively similar to the case at bar, in that sanctions weresought for an alleged failure to properly respond to discovery. The decision required an analysis of the original sanctionsstatute, which had been in effect during a portion of thelitigation in the circuit court (Ill. Rev. Stat. 1987, Ch. 110,Par. 2-611); the recently enacted Supreme Court rule 137 (134Ill. 2d R. 137) (effective August 1, 1989), which had supersededthe statute (see 134 Ill. 2d R 137, Committee Comments) andSupreme Court rule 219 (134 Ill. 2d R. 219), which provided fordiscovery sanctions (134 Ill. 2d R. 219(b)). The Smith court wasfaced with a dilemma. While section 2-611 was completely silenton the need for written findings, Rule 137 mandated them, butonly if sanctions were imposed. By contrast, rule 219(b)mandated the imposition of sanctions upon the denial of a requestto admit the genuineness of a document or the truth of a factthat is thereafter proven to be genuine or true, unless "thecourt finds that there were good reasons for the denial or thatthe admissions sought were of no substantial importance." 134Ill. 2d R. 219 (b)

In the face of these competing requirements, and beingunable to ascertain from the record whether an evidentiaryhearing had been held and whether the circuit court's decisionwas or was not an abuse of discretion, this court remanded foran evidentiary hearing and specific findings of fact.

Because the relevant statute and rules have changed, we findthe legal analysis in Smith is no longer valid. We do, however,believe that the appellate court has a duty in assessing whetherthere has been an abuse of discretion to ascertain whether therewas a legitimate factual basis for the sanctions decision. Fulfillment of this duty may require a remand for the developmentof a more enlightening record, which may or may not includeexpress findings of fact. Accordingly, to the extent that Smithheld that the predicate to the appellate court's deference to thecircuit court's sanction decision is grounded in a determinationthat it was informed and reasoned, we think Smith was correctlydecided. We reject, however, any suggestion in Smith that trialcourts must make findings of fact whether they impose or deny amotion for sanctions.

Turning to the case at bar, we note first that the plainlanguage of Supreme Court rule 137 only requires the circuitcourt to make written findings "[w]here a sanction is imposedunder this rule." (Emphasis added.) 134 Ill. 2d R. 137 We findno authority in this rule for defendant Van Acker's claim thatwritten findings are mandated even where sanctions are denied. The fact that the court made no findings of fact does not,standing alone, justify reversal and remand.

We look to the record to determine whether it sheds enoughlight on the basis for the court's decision denying sanctions topermit us to determine whether there was an adequate basis forthe court's decision or whether it was an abuse of discretion. The order does not help us in that regard since it states onlythe conclusion that: "Plaintiff had a good faith basis toinitiate and proceed with the litigation and that plaintiff actedreasonably and in good faith under the circumstances," withoutdisclosing any of the court's underlying reasoning.

We, therefore, focus our attention on the transcript of thehearing on the various pending motions, including the motion forsanctions, because this provides us with the only other potentialsource of the court's thinking. Our review is undertaken withoutbenefit of direction by defendant Van Acker to anything in thetranscript or elsewhere in the record that he believes to beevidence of an abuse of discretion. Nor did we find any suchevidence on our own. The only substantive statement made by thecourt during the hearing was to allow certain testimony, which heacknowledged would be inadmissible at trial, because, "I wantsome general background to how he feels he had a good faith basisto proceed with the lawsuit in that regard [conversion issue]."

We have found nothing in the record to lead us to conclude thatthe court's decision, reached after hearing all of the evidenceand reviewing the case file, was an abuse of discretion.

We, therefore, affirm the denial of defendant Van Acker'smotion for sanctions.

III. Motion to Deem Facts Admitted.

Finally, defendant Van Acker's last claim involves hisrequest for admission of certain facts, and, because plaintiffnever denied them, defendant Van Acker argues that they standadmitted under Supreme Court Rule 216(c) (134 Ill. 2d R. 216(c)).

In general, under Supreme Court Rule 216 (134 Ill. 2d R.216), if a party fails to respond properly or object to a requestto admit facts within 28 days of service of the request, thefacts requested to be admitted therein are admitted. Deboe v.Flick, 172 Ill. App. 3d 673, 526 N.E.2d 913 (1988). However, thisrule is not to be applied automatically whenever a party fails toadmit or deny a request to admit facts. Supreme Court Rule 216states, in relevant part:

"(c) Admission in the Absence of Denial. Each ofthe matters of fact and the genuineness of eachdocument of which admission is requested is admittedunless, within 28 days after service thereof, the partyto whom the request is directed serves upon the partyrequesting the admission either (1) a sworn statementdenying specifically the matters of which admission isrequested or setting forth in detail the reasons why hecannot truthfully admit or deny those matters or (2)written objections on the ground that some or all ofthe requested admissions are privileged or irrelevantor that the request is otherwise improper in whole orin part." 134 Ill. 2d R. 216(c).

A circuit court has wide discretion with regard to therequests to admit. Sims v. City of Alton, 172 Ill. App. 3d 694,526 N.E.2d 931 (1988).

We find that plaintiff conformed its response to therequirements of Rule 216. Peterson, one of the Turner Investors'partners, signed the response to the request to admit facts, inwhich, plaintiff set forth in detail the reasons why it couldneither admit nor deny the requests in question.

CONCLUSION

For the foregoing reasons, the judgment of the circuit court granting summary judgment in favor of defendants and againstplaintiff is affirmed. The order denying the motion forsanctions and the motion to deem facts admitted is also affirmed. Affirmed.

SLATER and SCHMIDT, JJ., concur.