INSURANCE CORPORATION OF HANNOVER, as subrogee of PHOENIX EVENT SPECIAL SERVICES, LLC, d/b/a Chicago Party Rental, Claimant, v. THE BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS, Respondent.
Case summary
Claimant sought to enforce an indemnity provision in a chair rental contract signed by an assistant athletic director. The court denied the claim because the Board of Trustees never authorized the agent to bind the university to an indemnity agreement, and no proper appropriation or authority existed.
Cases cited: Central Office Equipment Co. v. State, 33 Ill. Ct. Cl. 90, 91 (1979); Black Knight Productions, Inc. v. University of Illinois at Chicago, 50 Ill. Ct. Cl. 406 (1998)
AI-generated summary from the opinion text — may contain errors. The opinion text and PDF above are the official record.
INSURANCE CORPORATION OF HANNOVER, as subrogee of PHOENIX EVENT
SPECIAL SERVICES, LLC, d/b/a Chicago Party Rental, Claimant, v. THE BOARD
OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS, Respondent.
Opinion filed April 29, 2013
RICHARD FOODY, for Claimant
LISA MADIGAN, Attorney General (MICHAEL CLARK, Assistant Attorney
General, of counsel), for Respondent
Agency/Principle Relationship- it is well settled principle of Illinois law that in
dealing with an agent of the State, one must ascertain at his peril the
authority of the agent, and the mere assertions of the agent are not sufficient
to bind the State.
Agency/Principle- Apparent Authority- In order to establish apparent
authority, the following elements must be present: 1) the principle consented
or knowingly acquiesced in the agent’s exercise of authority; 2) a third party
reasonably concluded, based on the actions of the principle and agent, that
the party was an agent of the principal with authority to bind them; and 3) [*147]
the third party justifiably relied on the agent’s authority to his or her
detriment.
Agency/Principle- Apparent Authority- State Entities- When dealing with the
subject of apparent authority, this Court has noted that the ability of a person
with apparent authority to bind the state to a contract is generally eschewed
when dealing with State entities.
OPINION
Birnbaum, Peter J.
THIS MATTER is before the Court following a hearing held before Commissioner Buford on March 13, 2012.
On February 7, 2011, this Court denied Respondent’s Motion to dismiss, concluding it would be premature, with the limited record, to rule as a matter of law whether the agent acting on behalf of Respondent lacked proper authority in this case.
Following the March 13, 2012 hearing, Commissioner Buford allowed each party a period of sixty (60) days to file initial briefs and a period of thirty (30) days thereafter to file reply briefs in response. Nature of the Claim
On August 16, 2002, Phoenix Event Services, LLC d/b/a Chicago Party Rental (“CPR”) entered into a contract with the University of Illinois (“UIC”) for the rental of one thousand (1,000) folding chairs for an event at the UIC Physical Education Building.
The
back side of the contract included its terms and conditions and called for the indemnification of CPR with the renter.
Prior to the August 16, 2002 contract, CPR and UIC had entered into similar contracts at least one hundred (100) times and payment was promptly made on each contract.
According to testimony at the hearing, the contracts were signed by numerous individuals at UIC, including Bill Bavirsha, the Assistant Athletic Director.
Mr. Bavirsha has worked for UIC since 1991 and was the highest-ranking person responsible for the UIC Physical Education Building and the set-up of various athletic events.
Mr. Bavirsha signed the instant contract on behalf of UIC, as he has done on multiple occasions.
Importantly, Mr. Bavirsha was never told he was not authorized to sign on behalf of UIC nor was he given express authority to sign.
The General Rules concerning University Organization and Procedures and the Bylaws of the Board of Trustees of the University of Illinois give the Comptroller the authority to sign contracts requiring express contractual indemnity, unless otherwise ordered by the Board of Trustees.
Specifically, Article II, Section 1 of the General Rules states that the Comptroller, “as an officer of the Board of Trustees, and in accordance with the Bylaws of the board,” shall: “(d) Sign contracts to which the University is a party unless otherwise ordered by the board in specific cases.”
The Bylaws, in Article VI, Section 5, state similar language regarding the Comptroller’s duties; “unless otherwise ordered by the board in specific cases, contracts to which the University is a party shall be signed by the Comptroller and attested to by the Secretary of the board.”
Mr. Bavirsha has never held the title of Comptroller of UIC.
Additionally, Claimant did not present any evidence that Mr. Bavirsha was given express authority by the Comptroller or the Board of Trustees to enter into a contract on their behalf.
[*148] On or about August 20, 2002, the chairs were delivered and thereafter inspected by UIC.
At this time, UIC did not identify any defects with the chairs.
However, at a religious rally on August 20, 2002, a person was allegedly injured when a chair collapsed.
The
injured individual filed a personal injury lawsuit in the Circuit Court of Cook County against CPR to recover for personal injuries allegedly sustained.
CPR sought to enforce UIC’s indemnification obligations under the contract but UIC denied its alleged obligations, insisting that its Board of Trustees is the only entity empowered to bind UIC to a contract under section 1 of the University Of Illinois Act (110 ILCS 305/1) and Article II, subsections 3(a) and 4(c) of the “General Rules”.
UIC also denied that the Board of Trustees had instilled Mr. Bavirsha with authority to contract with CPR.
Ultimately, CPR was defended in the suit by its insurer, the Insurance Corporation of Hannover (“Hannover”), and the claim was eventually settled by Hannover for the sum of $45,000.00.
Subsequently, Hannover, as subrogee of CPR, filed an amended verified Complaint in this Court seeking damages for alleged breach of contract/indemnity in Count I and seeking contribution in Count II.
Specifically, in Count I Claimant asserts that UIC, through its purported agent Bill Bavirsha, entered into a binding contract in which it undertook to indemnify CPR for any losses arising out of delivery of chairs to UIC.
In Count II, Claimant alleges UIC was negligent in the operation of its facility by failing to recognize that a purportedly defective chair had been provided by CPR.
Respondent argues the contract between CPR and UIC is void because Mr. Bavirsha lacked the authority to bind UIC.
Additionally, they allege the indemnity provision within the contract violates State law because it does not provide for the proper appropriation of State funds, which they argue is a condition precedent to any agreement with the State calling for the expenditure of funds.
In contrast, Claimant argues the irregular exercise of UIC’s contracting power in the 2002 Rental Agreement would only make the contract voidable, and the contract could still be enforced under the doctrine of equitable estoppel, ratification and quantum meruit.
Specifically, Claimant argues that the Board of Trustees ratified its contract with CPR through its history of nine (9) years paying for contracts with CPR.
Analysis
It is a well-settled principle of Illinois law that “in dealing with an agent of the State one must ascertain at his peril the authority of the agent, and the mere assertions of the agent are not sufficient to bind the State.”
Further, it is well settled that the theory of quantum meruit does not apply against the State.
Melvin v. State of Illinois, 41 Ill. Ct. Cl. 88 (1989).
Based on the testimony at trial, this Court concludes that Mr. Bavirsha signed what he believed to be a Bill of Lading, without the University and the Board of Trustee’s knowledge of an agreement for express contractual indemnity.
However, Claimant argues the Board of Trustees knowingly acquiesced to Mr. Bavirsha entering the 2002 agreement because the Board of Trustees honored the contracts by paying CPR over a period of nine (9) years.
As such, Claimant argues CPR was justified in believing the Board of Trustees authorized Mr. Bavirsha to enter into the agreement and that Mr. Bavirsha had apparent authority to bind Respondent in the agreement with CPR, including the indemnification and hold harmless provisions
This Court finds that Claimant failed to establish Mr. Bavirsha had apparent authority to bind Respondent.
In order to establish apparent authority, the following elements must be present: 1) the principal consented or knowingly acquiesced in the [*149] agent’s exercise of authority; 2) a third party reasonably concluded, based on the actions of the principal and agent, that the party was an agent of the principal with authority to bind them; and 3) the third party justifiably relied on the agent’s authority to his or her detriment. Northern Trust Co. v. St. Francis Hospital, 168 Ill.App.3d 270, 278, 119 Ill.Dec. 37, 42, 522 N.E. 2d 699, 704 (1st Dist. 1988).
When dealing with the subject of apparent authority, this Court has noted that the ability of a person with apparent authority to bind the state to a contract is generally eschewed when dealing with State entities.
Agles v. State, Ill. Ct. Cl. 134 (1984).
Specifically, no evidence was presented establishing that Respondent “vested” Mr. Bavirsha with authority to bind them to the indemnification and hold harmless provision of the 2002 agreement.
Regardless, Claimant argues that UIC’s past practice of paying for the chair rentals “ratifies” the agreement in question, including the indemnity and hold harmless provision.
This Court disagrees and concludes that the Board of Trustees never consented or knowingly agreed to be bound to an agreement for express contractual indemnity.
As a side-note, Claimant asserts that Respondent is merely reiterating the arguments in its Motion to Dismiss, which Claimant believes this Court has already found to be without merit.
However, this Court denied Respondent’s Motion to dismiss on February 7, 2011 merely because it concluded it would be premature, with the limited record, to rule as a matter of law whether the agent acting on behalf of Respondent lacked proper authority in this case.
As such, Respondent’s arguments in its supporting briefs following trial are appropriate.
The Court of Claims has consistently held that a purchase order emanating from an office or official authorized to obligate State funds is a prerequisite to the establishment of an obligation against the State.
Central Office Equipment Co. v. State, 33 Ill. Ct. Cl. 90, 91 (1979); Black Knight Productions, Inc. v. University of Illinois at Chicago, 50 Ill. Ct. Cl. 406 (1998).
As previously stated, the UIC General Rules regarding procedure hold that “No financial obligation shall be entered into except on authority of the board and after general or specific appropriation has been made by the board allocating funds therefore.”
Article II, Section 3(a).
In this case, there was never proper appropriation or authority of the board to enter into an agreement containing an indemnification and hold harmless provision.
As
such, this Court concludes that this 2002 agreement is not enforceable against Respondent based upon the theories advanced by Claimant.
IT IS HEREBY ORDERED that Claimant’s claim is DENIED and DISMISSED with prejudice.