Kimco Corp. v. Murdoch, Coll and Lillibridge, Inc.
313 Ill. App. 3d 768, 730 N.E.2d 1143, 246 Ill. Dec. 678 (2000)
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Rule of Law:
When an agent enters into a divisible, executory contract on behalf of an undisclosed or partially disclosed principal, the agent's personal liability for future performance ceases if the agent discloses the principal's identity and the third party elects to continue performance.
Facts:
- Kimco Corporation (Kimco) entered into a month-to-month contract with Murdoch, Coll & Lillibridge, Inc. (MC&L) to provide janitorial services for the Fisher Building.
- MC&L was acting as a managing agent for the building's owner, The Fisher Building Limited Partnership, but did not initially disclose the owner's identity to Kimco.
- The building owner's account fell into arrears.
- In February 1993, representatives from Kimco and MC&L met to discuss the overdue payments.
- At the meeting, MC&L's president, Gary Gries, informed Kimco that MC&L was an agent for the building owner, who was experiencing financial difficulties.
- The parties dispute whether Gries specifically identified 'The Fisher Building Limited Partnership' by name during this meeting.
- Kimco continued to provide services until August 1993.
- Kimco was eventually paid for all services rendered before the February 1993 meeting, but received no payment for services performed after the meeting.
Procedural Posture:
- Kimco Corporation filed suit against Murdoch, Coll & Lillibridge, Inc. (MC&L) in the trial court for breach of contract, on the theory that MC&L was liable as the agent of an undisclosed principal.
- MC&L raised the affirmative defense that it had disclosed the identity of its principal at a February 1993 meeting.
- The trial court granted summary judgment in favor of Kimco, awarding it damages, fees, and interest totaling $91,724.
- MC&L (appellant) appealed the trial court's entry of summary judgment to the Illinois Appellate Court, with Kimco (appellee) responding.
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Issue:
Does an agent who enters into a divisible contract on behalf of an undisclosed principal escape personal liability for future performance by disclosing the principal's identity mid-contract?
Opinions:
Majority - Presiding Justice Cousins
Yes. An agent who made a contract for an undisclosed principal is generally not liable for future performance under a continuing, divisible contract if the third party, after learning the principal's identity, chooses to continue performing. The court formally adopted this exception into Illinois law, reasoning that once the principal is disclosed, the third party has the option to deal with either the agent or the principal. The court determined that the month-to-month service contract was divisible because performance was apportioned into equivalent pairs: one month of janitorial services for one monthly payment. However, a genuine issue of material fact exists as to whether MC&L's agent, Gries, actually disclosed the principal's full and correct name at the meeting. The court held that Gries's initial deposition testimony stating he did not remember was not a binding judicial admission, and his subsequent affidavit created a factual dispute that precluded summary judgment.
Analysis:
This case is significant for formally incorporating into Illinois law the agency principle that an agent's liability can be severed mid-performance in a divisible contract upon disclosure of the principal. It clarifies that an agent's initial failure to disclose does not create perpetual personal liability for the entire contractual relationship. The decision provides a crucial defense for agents in ongoing contracts, allowing them to shift liability for future performance to the principal once a proper disclosure is made. This holding impacts how parties in agency relationships must handle disclosures and serves as a warning to third parties that continuing performance after a disclosure may constitute an election to deal with the now-disclosed principal.
