Forms World of Illinois, Inc. v. Magna Bank, N.A.

Case Date: 10/29/2002
Court: 5th District Appellate
Docket No: 5-01-0849 Rel

Notice

Decision filed 10/29/02. The text of this decision may be changed or corrected prior to the filing of a Petition for Rehearing or the disposition of the same.

NO. 5-01-0849

IN THE

APPELLATE COURT OF ILLINOIS

FIFTH DISTRICT


FORMS WORLD OF ILLINOIS, INC., ) Appeal from the
) Circuit Court of
         Plaintiff-Appellant, ) St. Clair County.
)
v. ) No. 96-L-232A
)
MAGNA BANK, N.A., and )
MAGNA GROUP, INC.,  ) Honorable
) Jan V. Fiss,
        Defendants-Appellees. ) Judge, presiding.

JUSTICE KUEHN delivered the opinion of the court:

In this sale-of-goods case involving the statute of frauds (Ill. Rev. Stat. 1987, ch. 26,par. 2-201 (now 810 ILCS 5/2-201 (West 2000))), Forms World of Illinois, Inc., appealsfrom the trial court's June 4, 2001, order granting motions for summary judgment filed onbehalf of Magna Bank, N.A., and Magna Group, Inc. We affirm.

The relationship between the parties dates back to December 1988, at which timeForms World of Illinois, Inc. (Forms World), offered to perform a systems managementstudy on behalf of Magna Bank, N.A. (Magna Bank). The purpose of the study was toidentify potential costs savings for Magna Bank relative to its forms management, systemsmanagement, and purchasing. Over the course of several months, Bud Powers, on behalfof Forms World, conducted this study. At the conclusion of this process, Bud Powersgenerated a proposal directed to Magna Bank. This proposal was dated May 10, 1989.

It is this proposal letter that is at the core of the controversy between the parties. Forms World argues that this five-page proposal, although labeled a proposal, is in fact thecontract to which Magna Bank agreed. In support of this theory, Forms World offers onlyan undated interoffice memorandum authored by G. Thomas Andes (Tom Andes), thepresident of Magna Bank on the date of the proposal, and directed to "All Employees,"which stated as follows:

"For the past five months, Mr. Bud Powers, owner of Forms World *** outof St. Louis, has been doing an internal study of Magna Bank *** to see if we mightimprove our forms design, control of flow of paper in our systems, inventorycontrol[,] and inventory delivery system. As a result of this study, we have agreedto use his services over the next two years.

Please bear with him during the ensuing months as he gets into more detailedinvolvement in various departments. If you have the occasion to spend some timewith Bud, I think you will find him astute in the banking area and quite helpful inreducing costs allocated to your department.

Any systems changes that are proposed will be placed into effect only with theappropriate department head approval, but it is important to cooperate with himduring his fact-finding missions in order to utilize his services to the greatest degree.

The intent of the program should reduce costs and provide increasedefficiency in maintaining and providing supplies to your department."

The memo was then signed "Tom Andes." Forms World acknowledges that Magna Bankdid not provide it with any formal written confirmation or acceptance of its proposal.

Either in response to the proposal or otherwise, Magna Bank proceeded to utilizeForms World's services. Magna Bank paid all bills submitted by Forms World. Thisarrangement lasted longer than the two years referenced in Tom Andes' memorandum. Forms World brought this suit, however, because it contends that Magna Bank did not liveup to the terms of the contract and did not purchase the percentage of its forms referencedin the proposal. The proposal contemplated that Magna Bank would purchase "substantiallyall" of its forms (less 15% to 20% related to previous business relationships) and order"substantially all" of its printing from Forms World. Because Magna Bank did not conductat least 80% of this type of business with Forms World, Forms World argued that there wasa breach of the contract.

The terms set forth in the proposal were based upon Magna Bank's then-asset size ofbetween $540 million and $560 million. By 1990, Magna Bank's assets had grown tobetween $940 million and $960 million.

Forms World made additional proposals to Magna Bank and to Magna Group, Inc., Magna Bank's holding company. Forms World did not receive a response to any of theseproposals, but it argues that in the fall of 1989 additional work related to Magna Bank's sizeincrease was approved and assigned to Forms World. No documentation of this assignmentwas produced. Forms World contends that in the three years following its 1989 proposal,there were numerous verbal modifications of the contract, but never anything in writing.

Several former employees testified by deposition about the matter. Steve Marsho wasthe vice president of operations for Magna Bank in 1989. His employment with MagnaBank ended sometime prior to December 1991. Steve Marsho read the above-referencedmemorandum authored by Tom Andes and interpreted it to mean that Magna Bank wouldutilize all of Forms World's services as outlined in the proposal. He also testified that hebelieved that the term of the contract was for more than the two years referenced in thememorandum. A. Clay Williams testified that he worked for Magna Bank until hisSeptember 30, 1993, retirement. In 1989, A. Clay Williams maintained authority over thepurchasing department. He testified that he understood that Magna Bank would buy themajority of its forms from Forms World for three to five years, and he stated that once TomAndes became aware that these forms were being furnished to other banks, the furnishingof forms became an action on the part of Magna Group, Inc. Gary Hemmer was anexecutive vice president of both Magna Bank and Magna Group, Inc., in 1990. GaryHemmer testified that there was no written documentation between the companies and thata major problem with the relationship related to the interpretation of the term "benchmarkpricing," by which the price of the forms and printing was to be determined. There wasnever an agreement on pricing. Gary Hemmer testified that Forms World was unable toprovide the cost savings originally represented in the proposal. The relationship was fraughtwith disagreement regarding whether Forms World was supposed to service the newlyacquired banks and regarding pricing. Tom Andes is no longer associated with Magna Bankor Magna Group, Inc., but he was formerly the president of both entities. He testified thathe recalled little about the relationship Forms World had with Magna Bank but that he feltthat any relationship was only supposed to endure for two years. Additionally, Tom Andesindicated that after some time, various individuals began questioning the value of whatForms World provided to Magna Bank.

Rather than argue that it did or did not comply with the contractual terms alleged byForms World, Magna Bank countered that the claim must fail because the alleged contractdid not comply with the statute of frauds. The defendants filed motions for summaryjudgment and to dismiss on the bases that the contract was unenforceable pursuant to thestatute of frauds and was unenforceable due to a lack of definite price and quantity terms. The trial court heard arguments on the motions, and on March 24, 2001, the court grantedthe motions for summary judgment. The trial court held that Forms World could notmaintain a breach-of-contract cause of action against Magna Bank because its "agreement"did not satisfy the statute of frauds. Furthermore, the trial court found that there was nomeeting of the minds because one or more terms were too indefinite to enforce. Specifically,the trial court found ambiguity regarding the quantity of goods to be purchased, the pricingof the goods, the duration of the "agreement," and the establishment of a "level ofachievement" at which Forms World could expect continued forms purchases. The trialcourt also concluded that Forms World could not prevail on a cause of action against MagnaGroup, Inc., for tortious interference with a contract, because the officers were protected bythe privilege of using their business judgment in the interests of Magna Bank. Forms Worldcould not overcome the privilege because the officers' actions were not unjustified ormalicious.

Forms World appeals.

In determining the appropriateness of a summary judgment, the trial court strictlyconstrues all evidence in the record against the movant and liberally in favor of theopponent. Purtill v. Hess, 111 Ill. 2d 220, 240, 489 N.E.2d 867, 871 (1986). The courtmust consider all pleadings, depositions, admissions, and affidavits on file to decide if thereis any issue of material fact. Myers v. Health Specialists, S.C., 225 Ill. App. 3d 68, 72, 587N.E.2d 494, 497 (1992). On appeal, courts review summary judgment orders de novo. Myers, 225 Ill. App. 3d at 72, 587 N.E.2d at 497.

We first review the trial court's judgment that there was no writing sufficient tosatisfy the statute of frauds. Section 2-201(1) of the Uniform Commercial Code providesas follows:

"[A] contract for the sale of goods for the price of $500 or more is not enforceableby way of action or defense unless there is some writing sufficient to indicate that acontract for sale has been made between the parties and signed by the party againstwhom enforcement is sought or by his authorized agent or broker. A writing is notinsufficient because it omits or incorrectly states a term agreed upon, but the contractis not enforceable under this paragraph beyond the quantity of goods shown in suchwriting." Ill. Rev. Stat. 1987, ch. 26, par. 2-201(1) (now 810 ILCS 5/201(1) (West2000)).

Forms World argues that the requirement is satisfied by its proposal and the undated TomAndes memorandum. Assuming that the proposal is in fact the contract, that contract is notsigned by any Magna Bank agent or representative as clearly required. The undatedmemorandum is signed. The issue is whether the undated, signed memorandum complieswith the statute of frauds.

Forms World acknowledges that the memorandum contains no quantity term, but itargues that the memorandum can be linked to the proposal in order to satisfy the statute offrauds. In Illinois, the writing must contain a quantity term in order to comply with thestatute of frauds. See Zayre Corp. v. S.M. & R. Co., 882 F.2d 1145, 1154 (7th Cir. 1989). The memorandum at issue does not contemplate or otherwise specify a quantity of product. Even if we agreed that one writing can omit a quantity requirement but satisfy that samerequirement by a link to another writing, the writing lacking a quantity designation must atleast reference the document to which it intends to be linked. The Tom Andes memorandummakes absolutely no reference to the proposal or any other document. Therefore, thememorandum could not be linked to the proposal in order to satisfy the statute of frauds.

Forms World also argues that a written contract was not required because both partieswere merchants. The statute of frauds exempts merchants under the following limitedcircumstances:

"[I]f within a reasonable time a writing in confirmation of the contract and sufficientagainst the sender is received and the party receiving it has reason to know itscontents, it satisfies the requirements of subsection (1) [the writing] against suchparty unless written notice of objection to its contents is given within 10 days afterit is received." Ill. Rev. Stat. 1987, ch. 26, par. 2-201(2) (now 810 ILCS 5/2-201(2)(West 2000)).

Forms World contends that Forms World and Magna Bank are merchants and thatForms World's May 10, 1989, proposal constituted the writing to which Magna Bank hadbut 10 days to object. With no objection having been produced, Forms World argues thatthe terms of its proposal are binding upon Magna Bank.

The question then is whether Magna Bank is a merchant. The term "merchant" isdefined in the Uniform Commercial Code as "a person who deals in goods of the kind orotherwise by his occupation holds himself out as having knowledge or skill peculiar to thepractices or goods involved in the transaction or to whom such knowledge or skill may beattributed by his employment of an agent or broker or other intermediary who by hisoccupation holds himself out as having such knowledge or skill." Ill. Rev. Stat. 1987, ch.26, par. 2-104(1) (now 810 ILCS 5/2-104(1) (West 2000)). The Uniform Commercial Codealso defines the phrase "between merchants" as "any transaction with respect to which bothparties are chargeable with the knowledge or skill of merchants." Ill. Rev. Stat. 1987, ch.26, par. 2-104(3) (now 810 ILCS 5/2-104(3) (West 2000)).

Without going further, it would seem clear that because Forms World's business isthe sale of forms and providing printing needs, Magna Bank could not be deemed amerchant in that arena. Forms World held itself out as an expert who could vastly reduceMagna Bank's forms and printing costs by careful analysis of usage and need and by theapplication of Forms World's recommendations. Magna Bank certainly did not hold itselfout as an expert on such matters. Magna Bank, in its banking functions, is a mere consumerof forms and printing. Magna Bank does not resell these forms or hold itself out as a copyservice to the general public. Despite the rather patent lack of merchant status, Forms Worlddirects us to a formal comment attached to the definition of merchant. That commentindicates that even banks can be deemed merchants, stating further that this only applies tobanks in their "mercantile capacity." 810 ILCS Ann. 5/2-104, Uniform Commercial CodeComment 2, at 70 (Smith-Hurd 1993). We interpret this comment to mean that a bank canbe deemed a merchant of goods in which it commonly deals. See, e.g., Bank OneMilwaukee, N.A. v. Loeber Motors, Inc., 293 Ill. App. 3d 14, 23, 687 N.E.2d 1111, 1117(1997) (in which the court concluded that a bank was a merchant of automobiles in light ofthe bank's lengthy history of leasing automobiles). The purchase of office supplies forultimate use by Magna Bank is not sufficient to treat Magna Bank as a merchant in the salesof forms and copies. Furthermore, the writing of confirmation contemplated by thelanguage of the statute could not be the proposal touted to be the writing in this case. Tohold otherwise makes little sense. As the reader might expect, the proposal is couched inproposal-like terms. In reading the proposal, one does not get the sense that the letterrepresents a contract between the parties. The document reads as if a negotiation betweenthe parties had just begun. The proposal "confirms" nothing.

Because we conclude that Forms World could not establish that it had the writingnecessary because of the statute of frauds, we find that the summary judgment in favor ofMagna Bank was appropriate. In light of our conclusion, we do not need to address thealternate grounds upon which the trial court based its decision.

Because there was no enforceable contract between Forms World and Magna Bank,we conclude that Magna Group, Inc., could not have tortiously interfered with that contract. See Galinski v. Kessler, 134 Ill. App. 3d 602, 610, 480 N.E.2d 1176, 1182 (1985)(establishing that the existence of a valid and enforceable contract between the parties is anecessary element of the tort of intentional interference with a contract). The trial court'sentry of a summary judgment on this issue was correct.

For the foregoing reasons, the judgment of the circuit court of St. Clair County ishereby affirmed.



Affirmed.

MAAG, P.J., and HOPKINS, J., concur.

NO. 5-01-0849

IN THE

APPELLATE COURT OF ILLINOIS

FIFTH DISTRICT


FORMS WORLD OF ILLINOIS, INC., ) Appeal from the
) Circuit Court of
         Plaintiff-Appellant, ) St. Clair County.
)
v. ) No. 96-L-232A
)
MAGNA BANK, N.A., and )
MAGNA GROUP, INC.,  ) Honorable
) Jan V. Fiss,
        Defendants-Appellees. ) Judge, presiding.

Opinion Filed: October 29, 2002


Justices: Honorable Clyde L. Kuehn, J.

Honorable Gordon E. Maag, P.J., and

Honorable Terrence J. Hopkins, J.,

Concur


Attorney Edward Renshaw, Feirich/Mager/Green/Ryan, 2001 West Main Street, P.O. Box

for 1570, Carbondale, IL 62903

Appellant


Attorney Myron A. Hanna, The Stolar Partnership, 10 South Jackson Street, Suite 300, P.O.

for Box 484, Belleville, IL 62222-0484

Appellees