Monarch Hospice & Palliative Care, Inc. v. Ybarra , 2021 IL App (1st) 200536-U ( 2021 )

2021 IL App (1st) 200536-UTHIRD DIVISION
December 22, 2021
No. 1-20-0536
NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the
limited circumstances allowed under Rule 23(e)(1).
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
______________________________________________________________________________
MONARCH HOSPICE & PALLIATIVE CARE, INC., ) Appeal from the
d/b/a HERITAGE HEALTHCARE, STEPHEN M. ) Circuit Court
MASTERS, JR., ELLIOTT LATINIK, LEAH MIRANDA, ) Cook County.
MOISHE GUBIN, and MICHAEL BLISKO, all )
Individually, )
)
Plaintiffs, )
)
v. )
) No. 17 L 002957
YOLANDA YBARRA and RUBEN YBARRA, )
)
)
Defendants. )
YOLANDA YBARRA, )
)
Counter-Plaintiff/Appellant-Cross-Appellee, )
)
v. )
)
MONARCH HOSPICE & PALLIATIVE CARE, INC., )
d/b/a HERITAGE HEALTHCARE, STEPHEN M. )
MASTERS, JR., ELLIOTT LATINIK, LEAH MIRANDA, )
MOISHE GUBIN, and MICHAEL BLISKO, all )
Individually, ) Honorable
) Margaret Ann Brennan,
Counter-Defendants/Appellees-Cross-Appellant. ) Judge Presiding.
______________________________________________________________________________
No. 1-20-0536
JUSTICE McBRIDE delivered the judgment of the court.
Presiding Justice Gordon and Justice Ellis concurred in the judgment.
ORDER
¶1 Held: (1) The trial court properly allowed Ybarra to file an amended counterclaim; (2) the
judgment against Monarch was proper where Monarch had been a party from the
start of the action; (3) plaintiffs’ claims on the breach of contract claim lack merit;
(4) attorney fees for the breach of contract claim were improper and are vacated;
and (5) the trial court’s denial of damages for accounts receivable was not against
the manifest weight of the evidence.
¶2 This appeal arises from sale of the common capital stock in plaintiff Monarch Hospice &
Palliative Care, Inc., (Monarch) from defendant Yolanda Ybarra to plaintiffs Stephen M. Masters,
Jr., Elliott Latinik, and Leah Miranda (collectively Purchasers). 1 Monarch is a Medicare certified
and licensed hospice provider for terminally ill patients. Following a bench trial, the trial court
entered judgment in favor of Ybarra on plaintiffs’ breach of contract claim. The court also entered
judgment in favor of Ybarra on her amended counterclaims of breach of contract and action on a
promissory note and awarded Ybarra the principal amount due from the Monarch sale with interest,
plus attorney fees and costs.
¶3 Ybarra appeals, arguing that the trial court erred by denying her request to award
$239,462.70 she claimed was due her for the account receivables accrued prior to the sale of
Monarch.
¶4 Plaintiffs filed a cross-appeal, raising multiple issues related to the judgment on Ybarra’s
amended counterclaim, arguing that the trial court erred in: (1) allowing Ybarra to file an amended
complaint after the close of proofs; (2) entering judgment against Monarch without notice and an
1
Plaintiffs Moishe Gubin and Michael Blisko were dismissed with prejudice from the action in
the trial court’s judgment order on October 7, 2019, and are not parties to the appeal.
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No. 1-20-0536
opportunity to be heard; (3) entering judgment against the Purchasers for the new breach of
contract claims; (4) awarding attorney fees on the breach of contract claim in the absence of a
contractual provision for such an award; and (5) ignoring admitted evidence of a set-off claim.
Plaintiffs have not appealed the trial court’s judgment in favor of Ybarra on their complaint.
¶5 Ybarra and the Purchasers entered into a stock purchase and settlement agreement (SPA),
dated December 31, 2013, for the sale of all outstanding shares in Monarch from Ybarra to the
Purchasers for $750,000. Under section 1.2(e), the Purchasers agreed to pay $50,000 to Ybarra
upon the execution of the SPA with an additional $100,000 paid at closing and held in escrow until
the delivery date. The remainder of the purchase price, $600,000, was financed by Ybarra and
scheduled to be paid as follows: $100,000 to be paid on or before 90 days after the delivery date
and $500,000 on or before the two year anniversary date with interest of 5% per annum. The
closing date was scheduled for December 31, 2013.
¶6 Also, under section 1.2(e) the SPA, Ybarra acknowledged that she was representing the
financial condition of Monarch to the Purchasers, and in the event that she failed to disclose a
liability that existed prior to the closing, then the Purchasers “may reduce the amounts due under
the Note in an amount equal to the undisclosed liability.” The SPA further provided in section
1.2(e)(iii):
“The parties agree on or around March 31, 2014 (the “Accounting Date”) to review
all accounts payable and accounts receivable of the Company related or attributed
to the period prior to Closing, but incurred or received during the period starting
with the Closing and ending with the Accounting Date (the “Accounting Period”).
The parties shall agree on a method to calculate whether: (1) the relevant accounts
receivable exceeded the relevant accounts payable, with any excess amount then
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No. 1-20-0536
paid to Seller; or (2) the relevant accounts payable exceeded the relevant accounts
receivable, with the amount of any deficiency deducted from the balance of the
Note. The parties agree to cooperate with one another as reasonably necessary to
make the determinations set forth in this subsection.”
¶7 Monarch’s assets and liabilities were attached to the SPA as follows: accounts receivable
in Schedule 2.14(a); accounts payable in Schedule 2.14(b); and all banks, bank accounts, and other
financial institutions in Schedule 2.14(c).
¶8 A secured promissory note for the balance of $600,000 was also executed on December
13, 2013, between the Purchasers and Ybarra. The note provided that the principal sum “may be
reduced pursuant to the provisions of Section 1.2” of the SPA.
¶9 In January 2014, Monarch received a letter from Palmetto GBA (Palmetto) regarding a
review of Monarch’s inpatient day limitation and hospice cap amount for Medicare. As a result of
the review, Monarch was required to pay $130,428 to Medicare for exceeding the hospice cap
amount for the year running from November 1, 2011 to October 31, 2012.
¶ 10 Following the Palmetto letter notifying of the required payment, Ybarra and the Purchasers
entered into an amended SPA (Amended SPA), effective May 31, 2014, in which the parties
modified the SPA and promissory note. The Amended SPA changed the financing terms under
section 1.2(e): $100,000 to be paid on or before December 13, 2105, with 5% interest per year,
and $370,000 on or before the two year anniversary of the delivery date, with 5% interest per year.
¶ 11 Section 1.2(e)(ii) further stated:
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No. 1-20-0536
“The parties agree that any future CAP issues, other than ‘clawback’ 2 claims of
Medicare or other third party providers arising before December 31, 2012 (i.e., the
pre-2012 Medicare clawback claims reduced the sums due under the Secured
Promissory Note to the $370,000 principal sum due under the Modified Note),
which arise after the Effective Date will be reduced from the loan balance of
$370,000 and not from other amounts owed by Purchasers to Seller under this
Agreement or which otherwise are the property of Seller pursuant to this
Agreement.”
¶ 12 The Amended SPA also modified section 1.2(e)(iii) related to account receivables due to
Ybarra, which now included the additional language that the Purchasers “shall pay to [Ybarra] all
accounts receivable of [Monarch] which relate to the period prior to Closing (the ‘Old A/R’) on
the 15th and 30th of every month.” Section 2.14(b) included an indemnification from Ybarra to
the Purchasers for any claims made against Monarch for accounts payable or invoices that arose
prior to closing until December 31, 2015. The Amended SPA also included the following
provision:
“In all other respects, the Agreement and the Pledge Agreements are ratified
and approved, and the security interest of Seller in the Stock of the Purchasers will
2
A “clawback” is defined as “the recovery of previously dispensed or protected money or
benefits through a contractual provision or tax law, typically triggered to counter a shortfall in
financial performance or offset a liability.” Dictionary.com,
https://www.dictionary.com/browse/clawback, last accessed on Nov. 17, 2021.
5
No. 1-20-0536
remain in full force and effect until the obligations under the Modified Note are
satisfied in full.”
¶ 13 The modified promissory note obligated the Purchasers, who were listed in the note by
name and referred to collectively as the “Borrowers,” to pay Ybarra $370,000, under the terms
provided in the Amended SPA and was signed on behalf of the Purchasers by Masters, as the
president of Monarch. The modified note further provided the following remedy for enforcement:
“In the event that this Note is placed by Lender in the hands of an attorney
for collection or is collected by the institution of legal proceedings, or if an attorney
is retained to represent Lender in any other proceeding whatsoever in connection
with this Note, Borrower agrees to pay all costs and expenses of such proceeding
including, but not limited to, reasonable attorney’s fees.”
¶ 14 In March 2017, plaintiffs filed their complaint against defendants Ybarra and Ruben Ybarra
alleging four counts: breach of contract against Ybarra, misrepresentation against Ybarra and
Ruben, accounting against Ybarra, and fraud against Ybarra and Ruben. Each of the counts in the
complaint were premised on the allegation that since January 1, 2014, “innumerable monetary
claims have been asserted, assessed and paid from or against Monarch,” including Medicare
withholding payments, Medicare payment plan payments, Department of Treasury payments,
Medicare CAP payments, and other listed payments and bills. These setoffs represent monies owed
from Ybarra as it related to the purchase price and the amount of the setoffs due to the Purchasers
was “far in excess of the monies delineated in the Stock Purchase owing and due” Ybarra. Plaintiffs
sought in excess of $750,000, plus interest at 5% per year since January 2, 2014, for each count in
damages.
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No. 1-20-0536
¶ 15 Plaintiffs filed an amended complaint on June 30, 2017, which was substantially similar to
the initial complaint, except it added Gubin and Blisko as plaintiffs and attached signed copies of
the SPA agreements and promissory notes.
¶ 16 In August 2017, Ybarra filed her answer to the amended complaint and filed her
counterclaim against plaintiffs. She alleged one count of “action on a promissory note” based on
the Purchasers’ failure to pay the amounts due and owing under the amended promissory note,
$370,000, plus interest and costs, which matured on May 31, 2016. Ybarra sought the principal
balance, accrued interest, costs, and attorney fees.
¶ 17 By a May 2019 case management order, plaintiffs voluntarily withdrew the counts alleging
fraud and misrepresentation from their amended complaint with prejudice. Thereafter, the trial
court dismissed Ruben Ybarra from the action with prejudice following the withdrawal of the only
claims plaintiffs alleged against him.
¶ 18 In October 2019, the parties proceeded to a bench trial on plaintiffs’ breach of contract
claim as well as Ybarra’s counterclaim. Plaintiffs dismissed their accounting claim at the start of
the trial. The following summarizes the relevant evidence presented at the trial.
¶ 19 Elly Latinik testified that he was currently employed as the general oversight manager of
Xcel Med, which provides medical supplies and durable medical equipment to nursing homes, as
well as several other health care companies. He was one of the owners of Monarch and was
involved in the general oversight. Monarch was a hospice and provided care for terminally ill
patients. It does not admit patients to a facility, but caregivers visit patients and their family
wherever the patients reside.
¶ 20 Latinik admitted that he was not claiming that he was fraudulently induced into entering
into the SPA and promissory notes, nor was he prevented from investigating Monarch. When he
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No. 1-20-0536
began operating Monarch, the cash flow was not positive and approximately 50% of the patients
were found not to qualify for hospice care. These patients were “inappropriate” for hospice care
and were discharged. Latinik described a terminally ill patient as one who has six months or less
to live. He added that a patient had to be terminally ill in order to qualify for hospice care.
¶ 21 The Purchasers executed a promissory note for $600,000 to finance the purchase. Pursuant
to an amended agreement, a new promissory note was executed for $370,000, which replaced the
original note. Latinik admitted that no payments were made to Ybarra on the $370,000 note
because the Purchasers did not receive any reimbursements for any care provided by Monarch and
for over a couple of years, “virtually no payments came in.” He also admitted that the $100,000
payment due on or before December 31, 2015, pursuant to the Amended SPA was not paid. He
explained that if Monarch owed Medicare, then when the explanation of benefits was received, the
claim would be approved, but no money was received, and the amount was credited toward the
balance due to Medicare.
¶ 22 Monarch was still in operation at the time of the trial and was operating profitably. It was
“maybe slightly” profitable in 2017, but Latinik did not believe Monarch was profitable in 2016.
None of the Purchasers had prior experience in palliative care and hospices but were in the health
care industry. Latinik was not aware that plaintiffs did not produce any bank statements or a
general ledger during discovery. He could provide no reason why Monarch’s tax returns from 2013
to 2018 were not produced during discovery.
¶ 23 Martin Chochol 3 testified that he was from Poland and English was his second language.
He was employed as the chief financial officer (CFO) for Xcel Medical and he also provided
3
Martin Chochol’s first name is also referred to as Marcin in the record.
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No. 1-20-0536
bookkeeping for five other entities. He performed bookkeeping services for Monarch in 2015 and
was still overseeing those services at the time of the trial. He was not involved with the financial
affairs of Monarch in 2013 or 2014. He had never seen the SPA between the parties or the
schedules to the agreement.
¶ 24 When he was the bookkeeper for Monarch, he handled the booking for accounts receivable,
in-flows and out-flows, bank reconciliations, and prepared financial statements. As part of the
accounts receivable, he would record any money that came in and reviewed all explanation of
benefits (EOBs). The review of EOBs meant that Monarch was billing insurance, mostly Medicare,
for services provided to patients. Then the insurance would pay Monarch for the services. The
EOBs would detail the benefits and show what services the insurance would be paying for or what
they were denying. The EOBs also disclosed when Medicare was withholding payment for an
approved claim to pay debts owed to Medicare. Chochol referred to an Excel spreadsheet he
created in September 2016 as a business record to see how much money had been withheld by
Medicare. The spreadsheet was admitted as plaintiffs’ exhibit number 4. He described the
spreadsheet format.
“The first column, it says Remit Date. This is the date that relates to the
EOB. The second column is a payment. This is the amount that Medicare paid us,
meaning that that money hit our bank account. The next column which is 2013, ‘14,
‘15 and ‘16 represents service dates. So what I did is I took every payment that
came. I broke it down by service dates. Then the next column is withhold. I took
each payment in that column, in the orange column, and I did exactly the same
thing. Each payment that was withhold [sic] from us, I break it down by the service
dates which are 2013, ‘14, ‘15 and ‘16. So we had money that came in the bank
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No. 1-20-0536
account that are on the left, and I broke down by the service dates, and we have
money that was approved to us but were withheld and are broken down by the
service dates.”
¶ 25 Chochol explained that Monarch would bill Medicare for services, but the payments were
withheld from Monarch to pay for old claims from 2013 service dates. According to Chochol,
Medicare withheld $260,082.61 from approved services in 2014 to pay for 2013 service dates.
Medicare withheld $185,892.68 from 2015 service claims, as well as an additional $188,873.28
for a Medicare cap payment. Between January 2014 and August 2016, Medicare withheld
$705,967.64. Chochol testified that the money withheld by Medicare in 2014 and 2015 was not
due to improperly billed services during 2014 and 2015, but rather it “was denied because
Medicare found some issues with 2013 service dates and they asked for the money back.”
¶ 26 On cross-examination, Chochol was shown Schedule 2.14(a) from the SPA, admitted as
Ybarra’s exhibit number 17, which listed $325,471.53 for the total in accounts receivable as of
December 4, 2013, but he testified that he did not know what service dates that figure represented.
Chochol also testified about his spreadsheet from plaintiffs’ exhibit number 4 which showed
Monarch collected $239,462.70 for accounts receivable on services accrued prior to December 31,
2013.
¶ 27 Plaintiffs rested after Chochol’s testimony. Ybarra moved for a directed finding, which the
trial court granted. The court found that plaintiffs failed to establish full performance of the
contract as well as the breach amount and damages. The court observed that plaintiffs’ spreadsheet
in an exhibit showed the remit dates, but it did not have dates of service. The court concluded that
plaintiffs failed to “tie up” the monies withheld with dates of services rendered. The case then
proceeded on Ybarra’s counterclaim.
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No. 1-20-0536
¶ 28 Melissa Haney testified that she was employed by Monarch as the clinical director from
approximately April to October 2014. She explained that Medicare would sometimes withhold
payments because there was not enough documentation submitted to establish that the patient
qualified for hospice. She was aware that a cap existed per patient, but was not involved in the
clawbacks for when a cap was exceeded.
¶ 29 Ybarra then provided the following testimony. She has been married to Ruben Ybarra since
2007. She first became aware of a business opportunity to purchase the Monarch stock in 2012.
She was informed that there were issues at Monarch and the prior owners wanted to potentially
sell. She thought it looked like a “good business opportunity” where she would have the ability to
“kind of clean up some of the liabilities that were happening there, and ability to kind of turn
around the business” and make it profitable. Ybarra was involved in real estate businesses,
including investing in apartment buildings.
¶ 30 She purchased Monarch in 2012, but she did not plan on keeping the business as a long
term asset. She was approached in August 2013 by the Purchasers about their interest in buying
Monarch. By then, Ybarra had “cleaned up” many of the liabilities and had worked to make the
business “look a lot better and be a lot better.” When she purchased Monarch, the liabilities were
close to $2.5 million. She believed the liabilities were approximately $800,000 when the
Purchasers first looked at Monarch.
¶ 31 Ybarra recognized schedules attached to the SPA and testified that the schedules were
accurate. She specifically recognized a document generated from Monarch’s billing software
which reflected $325,471.53 in accounts receivable as of December 4, 2013. Plaintiffs’ counsel
then objected to the relevance of these documents and Ybarra’s counsel informed the trial court
that he intended to seek leave to amend the counterclaim pleading to conform with the proofs.
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¶ 32 As part of the sale, Ybarra received $50,000 from the Purchasers with an additional
$100,000 paid a few months later. After the closing on the sale of Monarch to the Purchasers,
Ybarra stayed on to help with the accounts receivable that were due to her as well as making sure
that bills and staffing were paid. Ybarra never received any notice from the Purchasers for her to
pay a sum of money prior to the filing of the lawsuit. Ybarra never received any payments on the
$370,000 principal due under the promissory note. The parties stipulated that the promissory note
was only signed by Masters.
¶ 33 Virginia Mozola testified that she was employed by Monarch as the vice president of
operations beginning in 2006 until May 2014. She was involved in day-to-day operations including
handling the accounts receivable and accounts payable. Monarch was “not in real good shape”
when Ybarra first became involved. Monarch was being audited and some of the funds that were
supposed to come in from Medicare on claims were being held to accommodate the cap. Monarch
was also in debt over $2 million, which included payroll taxes and payments to vendors. Collection
lawsuits had been filed against Monarch.
¶ 34 Mozola was familiar with Schedule 2.14(a) showing accounts receivable that was
generated from the billing software. The schedule was a report that indicated what had been billed
for the year. She generated the report and had no reason to believe it was inaccurate. The schedule
was prepared on December 4, 2013, and reflected amounts as of November 30, 2013. The first
column, indicated as balance, listed several figures and showed a total of $325,471.53. Mozola
referred to the numbers as reflecting what Monarch would bill after reviewing a “pre-bill report.”
Mozola also identified a balance sheet for Monarch as of November 30, 2013, which she generated.
It indicated that the total for accounts receivable as of that date was $263,013.40, which reflected
a deduction of $62,458.13 from $325,471.53. Mozola testified that prior to her leaving Monarch,
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No. 1-20-0536
the Purchasers did not pay any of the proceeds from the accounts receivable to Ybarra. However,
she did not testify to what was received
¶ 35 Ruben Ybarra testified that he had worked in real estate and banking, and prior to Monarch,
he was not involved in any health care related entities. The Ybarras were approached by an
acquaintance in 2011 about the opportunity to invest or purchase a hospice company that was
distressed. The company needed a capital injection and had the potential to be lucrative once it
was stabilized. They arranged to meet with the principals at Monarch and engaged in due diligence
regarding Monarch’s financial and business affairs.
¶ 36 At the time his wife purchased the Monarch stock, Monarch’s liabilities totaled
approximately $2.3 million. Ybarra’s role at Monarch was general oversight, she was supervisory
while Mozola was the general manager who handled the accounts and checks. Ruben helped with
the accounts payable to help prioritize vendors and also to negotiate vendor settlements.
¶ 37 When the Purchasers approached Ybarra to purchase the Monarch stock, they engaged in
extensive due diligence, including bringing in their own specialists to review the accounts
receivable. The Purchasers had access to all of the financials, including the billing software.
Ruben’s main contact with the sale was Latinik and he negotiated most of the sale for Ybarra.
Ruben reviewed Schedule 2.14(a) and believed that the total for accounts receivable of
$325,471.53 was accurate. It was generated by Mozola using the business’s software. He believed
they collected approximately $50,000 before leaving Monarch. He never received payment for any
other receivables from Monarch. He also reviewed Schedule 2.14(b) which detailed the accounts
payable and was also generated by Mozola.
¶ 38 Ruben explained that the sale of Monarch was “the culmination of a couple year’s work.”
The goal was to buy the distressed company, use their knowledge and expertise to fix it, and then
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sell it once it stabilized. They remained involved after the sale for about three months. The initial
$150,000 received from the sale was used to pay outstanding payables that were Ybarra’s
responsibility under the SPA.
¶ 39 In January 2014, Monarch received the Palmetto letter regarding the hospice cap and
seeking a clawback of $130,000. As a result, the parties created the Amended SPA because the
clawback related to a time frame for which Ybarra would be responsible. The Amended SPA
required an upfront payment of $100,000, with interest at 5% per annum, on or before December
31, 2015, and $370,000 payable on terms noted above. This $100,000 payment was never made
by the Purchasers, and Ruben testified that Ybarra’s testimony that it had been paid was incorrect.
The Purchasers did not make any payment on the second promissory note amount of $370,000,
plus interest.
¶ 40 Mary Sheehan testified that she was a nurse and worked as a consultant. She consulted
with hospice programs about either their admission process, their quality process, or operations.
Sheehan was retained as a consultant by Masters to provide an assessment of Monarch in 2013
when he was considering a purchase of the business. She made several site visits to prepare her
assessment. She talked to staff and reviewed policies, patient charts, and financial statements. She
was given access to the billing software by Mozola.
¶ 41 In her August 2013 assessment, Sheehan found that the records she reviewed were
incomplete and the documentation would not meet the requirements such that many of the patients
could be audited by Palmetto and the payment would be denied. She found that the conditions of
participation that govern a hospice for Medicare were not being followed. She was concerned
about Monarch being able to successfully bill Medicare. She believed there would be an upcoming
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Medicare clawback. She did not recall if she gave a recommendation regarding the purchase, but
she was critical of the business and let her report speak for itself.
¶ 42 Following Sheehan’s testimony, Ybarra rested. Ybarra’s attorney moved to conform the
pleadings to the proofs presented at trial. The proposed amended counterclaim set forth two counts:
breach of contract and action on a promissory note. The breach of contract count alleged that
plaintiffs breached the Amended SPA by failing to pay (1) the stock purchase price as specified in
the Amended SPA and promissory note, (2) the accrued interest, and (3) the accounts receivable.
At the time of filing, the alleged amounts due and owing were: (1) $470,000 for the principal
balance, (2) $117,500 in accrued interest, and (3) $325,471.53 in accounts receivable. The action
on a promissory note alleged that the maturity date on the note had passed and plaintiffs failed to
remit the sums as set forth in the amended promissory note. Ybarra sought the full amount with
accrued interest, plus enforcement costs and attorney fees.
¶ 43 Plaintiffs’ counsel objected to filing of the amended counterclaim as prejudicial. He argued
that the breach of contract claim was “entirely different” from a breach of promissory note, and
he was unable to prepare a defense for that claim. Following arguments, the trial court granted
Ybarra’s motion to file the amended counterclaim. The court also dismissed plaintiffs Blisko and
Gubin from Ybarra’s countersuit.
¶ 44 In its findings on the record, the trial court indicated that it did not find that Chochol was
incredible. However, the court stated it was “not affording to [Chochol’s spreadsheet admitted as
plaintiffs’ exhibit number 4] the weight I would of business records that clearly were created in
the ordinary course of business; rather, it looked more like an accountant’s take.” The court found
the spreadsheet appeared like “an Excel spreadsheet.” The records did not have “the necessary
backup” for the court to take into account that the clawbacks were appropriately reflected in the
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documentation. The court further found Sheehan to be “quite credible.” The court also discussed
Mozola’s testimony regarding the books and records and noted that Mozola had described
Monarch’s financials as “in shambles” and she was the person trying to keep track of “those not-
so-great-shape financials.”
¶ 45 The court concluded that the promissory note was valid and observed that the reduction of
$130,000 for the clawback showed consideration. The court noted that Masters signed the note on
behalf of Monarch, and based on this, the court found Monarch liable on the promissory note for
$370,000, plus accrued interest.
¶ 46 Regarding the breach of contract count, the court reiterated its finding that Chochol’s
numbers were not credible. The court also concluded that the accounts receivable as testified to by
Mozola was not credible either. The court found there was a breach of contract for $100,000, plus
interest. The court also held that attorney fees were warranted under the agreement. The court
further found that the $370,000 owed to Ybarra was collectible against all the Purchasers who
signed the Amended SPA. The total award was $470,000, plus interest and attorney fees on the
Amended SPA.
¶ 47 In a written order, dated October 7, 2019, the court ordered as follows: (1) judgment in
favor of Ybarra and against plaintiffs for both the accounting and breach of contract counts from
plaintiffs’ amended complaint; (2) judgment entered in favor of Ybarra and against Latinik,
Masters, and Miranda, jointly and severally, for breach of contract in the principal amount of
$470,000, plus interest in the amount of $125,869.86, costs of $260.70, and attorney fees to be
determined; and (3) judgment in favor of Ybarra and against Monarch on the breach of the
promissory note, in the principal amount of $370,000, plus $99,089.04 in interest, $260.70 in costs,
and attorney fees. The court further ordered that “the payment of the Monarch Judgment will
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reduce dollar-for-dollar the [Purchasers] judgment. Likewise, the payment of the [Purchasers]
judgment will reduce dollar-for-dollar the Monarch Judgment.”
¶ 48 In November 2019, following a hearing on Ybarra’s petition for attorney fees, the trial
court awarded a total of $124,857.50 in attorney fees, jointly and severally against plaintiffs. The
court also rejected plaintiffs’ argument that there was no basis for attorney fees under the contracts.
Following a hearing on February 27, 2020, the court denied plaintiffs’ motion to reconsider
allowing the amended counterclaim. The court also denied Ybarra’s motion to reconsider the
court’s denial of an award for accounts receivable.
¶ 49 All parties have appealed. Ybarra filed her notice of appeal on March 18, 2020. Plaintiffs
filed their notice of cross-appeal on March 20, 2020. All notices of appeal were filed in compliance
with Illinois Supreme Court Rule 303 (eff. Jan. 1, 2015). Accordingly, this court has jurisdiction
of this appeal under Illinois Supreme Court Rule 301 (eff. Feb. 1, 1994).
¶ 50 For expediency, we first consider plaintiffs’ cross-appeal, which raises multiple claims.
Plaintiffs argue the trial court abused its discretion in allowing Ybarra to raise new claims in her
amended counterclaim which was filed after the close of proofs. Specifically, plaintiffs contend
that were not prepared to defend against the new breach of contract claim which differed from the
original count of breach of a promissory note. Ybarra responds that the promissory note was not a
freestanding, separate contract and was executed in the same transaction as the SPA and other
documents, and her initial counterclaim was premised on plaintiffs’ failure to pay pursuant to these
documents.
¶ 51 Section 2-616(c) of the Code of Civil Procedure (the Code) provides: “A pleading may be
amended at any time, before or after judgment, to conform the pleadings to the proofs, upon terms
as to costs and continuance that may be just.” 735 ILCS 5/2-616(c) (West 2018). The test is
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“ ‘whether the allowance of the amendment furthers the ends of justice.’ ” Benzakry v. Patel, 2017
IL App (3d) 160162, ¶ 85 (quoting American National Bank & Trust Co. of Chicago v. Dozoryst,
256 Ill. App. 3d 674, 678 (1993)). “ ‘Any doubt as to whether pleadings should be amended should
be resolved in favor of an amendment.’ ” Id. (quoting American National Bank, 256 Ill. App. 3d
at 678).
¶ 52 Although plaintiffs did not include a proper standard of review for this issue (see Ill. S. Ct.
R. 341(h)(3) (eff. Oct. 1, 2020)), it is well established that “[t]he circuit court retains broad
discretion in allowing or denying amendment to pleadings prior to the entry of final judgment, and
a reviewing court will not reverse the trial court’s decision absent a manifest abuse of such
discretion.” Richter v. Prairie Farms Dairy, Inc., 2016 IL 119518, ¶ 35. “An abuse of discretion
occurs when the trial court’s ruling is arbitrary, fanciful, or unreasonable or where no reasonable
person would take the view adopted by the trial court.” Direct Auto Ins. Co. v. Bahena, 2019 IL
App (1st) 172918, ¶ 35.
¶ 53 Illinois courts recognize “the long-standing principle that instruments executed at the same
time, by the same parties, for the same purpose, and in the course of the same transaction are
regarded as one contract and will be construed together.” Gallagher v. Lenart, 226 Ill. 2d 208, 233
(2007). In this case, the SPA and promissory note were executed as part of the same transaction
with the same parties for the purchase of Monarch stock from Ybarra. The SPA, and the later
Amended SPA, detailed the amount of the purchase price and the payments to be made, including
the financing of a portion of the purchase price. The promissory note set forth the promise by the
Purchasers to pay Ybarra under the terms in the contract. The Amended SPA and amended
promissory note set forth that the Purchasers financed the reduced purchase price of $370,000,
with 5% interest per annum, to be paid in May 2016. It is uncontested that this payment was not
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No. 1-20-0536
made. The Purchasers also agreed to pay $100,000, with 5% interest per annum, in December
2015, which the trial court also found was unpaid.
¶ 54 In reviewing whether a trial court abused its discretion in allowing leave to amend, Illinois
courts must determine whether “(1) the proposed amendment would cure the defective pleading;
(2) the proposed amendment would surprise or prejudice the opposing party; (3) the proposed
amendment was timely filed; and (4) the moving party had previous opportunities to amend.”
Sheffler v. Commonwealth Edison Co., 2011 IL 110166, ¶ 69; see also Loyola Academy v. S & S
Roof Maintenance, Inc., 146 Ill. 2d 263, 273 (1992). Plaintiffs assert that all four factors weigh
against allowing the amended counterclaim. These same contentions were presented to the trial
court and were rejected.
¶ 55 Plaintiffs first assert that Ybarra was not curing a defect because she was suing the wrong
parties on the breach of the promissory note. More specifically, they contend that the Purchasers
were not parties to the note because Masters signed as president of Monarch. We disagree.
Ybarra’s initial counterclaim alleged that the Purchasers executed the amended promissory note
but failed to pay. Significantly, the Purchasers, i.e. Masters, Latinik, and Miranda, were
specifically named on the amended note as the “Borrowers.” Even if Ybarra had named the wrong
parties in the breach of the promissory note, she cured this potential defect with the breach of
contract claim. By adding the breach of contract claim based on the same allegations that the
Purchasers failed to pay Ybarra under the contract and note, she corrected any defect related to the
signatory of the note. This factor weighs in favor of allowing the amendment.
¶ 56 Second, plaintiffs argue that they were prejudiced and surprised by the breach of contract
claim because it required them to defend against different claims. We again disagree and conclude
there was no prejudice or surprise because the breach of contract claim alleged the same failure to
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No. 1-20-0536
pay as set forth in the promissory note. Both claims relate to documents executed as part of one
transaction for the sale of Monarch. “[I]n order to allow the amendment of a pleading to conform
to proof, the proof already produced must support the amendment.” Harding v. Amsted Industries,
Inc., 276 Ill. App. 3d 483, 494 (1995). Here, Ybarra’s counsel indicated that he intended to file a
motion to amend the counterclaim to conform to the proofs during Ybarra’s testimony and
presented evidence to support the claim. In denying plaintiffs’ motion to reconsider, the trial court
explained that it allowed the amended counterclaim because it was looking at a “a totality of
documents.” Further, plaintiffs alleged a breach of the same contract at trial, and while
unsuccessful, they were fully aware of the terms and obligations due under the Amended SPA.
Plaintiffs, through Latinik’s testimony, admitted that they did not fulfill their payment obligations
under the contract. This factor also weighs in favor of allowing the amendment.
¶ 57 Third, plaintiffs contend that the amendment was not timely because the trial court
previously denied Ybarra’s motion for summary judgment on the counterclaim and Ybarra’s
counsel had not raised a claim on the Amended SPA during the litigation. Plaintiffs offer no further
discussion as to how the amended counterclaim was untimely, nor do they address section 2-616(c)
which expressly allows an amendment to conform the pleadings to the proof. Plaintiffs’ failure to
discuss this section is fatal to their argument. Since the amendment was permitted under the Code,
we find no abuse of discretion on this ground.
¶ 58 Fourth, plaintiffs assert that Ybarra had previous opportunities to amend the pleading.
Plaintiffs rely on a discussion between the trial court and Ybarra’s counsel in which counsel
admitted that he had drafted both the Amended SPA and promissory note and none of the
additional evidence presented at trial was necessary to file the breach of contract claim. However,
after the conclusion of the discussion, the court granted the motion to file the amended
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No. 1-20-0536
counterclaim. Moreover, the court’s primary concern related to Gubin and Blisko, but Ybarra
agreed to dismiss them from the counterclaim when the court granted the motion for leave to
amend. The trial court considered the argument raised by plaintiffs and rejected it. Plaintiffs again
fail to discuss how the trial court abused its discretion in granting the motion, setting forth only a
bare conclusion that the trial court erred in allowing the amended counterclaim. Absent any
argument, we find this factor also weighs in favor of amending the counterclaim.
¶ 59 As discussed above, the trial court had the opportunity to consider and reject plaintiffs’
arguments at both the hearing on the motion for leave to amend and the motion to reconsider. In
allowing the amended counterclaim, the trial court specifically found that under the Amended
SPA, the modified promissory note required the Purchasers and Monarch to sign off on the
promissory note. The court observed that it was “looking at a totality of documents.” Plaintiffs
have not argued that the court’s decision to allow the posttrial amended counterclaim was arbitrary,
fanciful, or unreasonable or where no reasonable person would take the view adopted by the trial
court. The trial court acted within its discretion to allow the amended counterclaim.
¶ 60 Next, plaintiffs contend that the trial court erred in entering judgment against Monarch.
Specifically, plaintiffs argue that no claims existed against Monarch prior to trial and there was no
evidence that Monarch executed the promissory note. Once again in violation of Supreme Court
Rules, plaintiffs fail to set forth the standard of review. See Ill. S. Ct. R. 341(h)(3). According to
plaintiffs, Monarch was a nominal party and lacked notice that it was subject to any liability and
no evidence was introduced at trial that Monarch executed the promissory note.
¶ 61 Here, plaintiffs cite a single case, Nye v. Parkway Bank & Trust Co., 114 Ill. App. 3d 272,
274 (1983), for the general proposition that procedural due process and equal protection require a
person to be given notice, an opportunity to be heard, and to defend against a claim in an orderly
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No. 1-20-0536
proceeding. In Nye, an attorney filed a complaint seeking his unpaid attorney fees from a client.
The trial court entered judgment in favor of the attorney before the attorney had rested his case
and before the defendant had been afforded the opportunity to present his case. Id. at 272-73. On
appeal, the defendant argued that the trial court had deprived him of his due process rights when
it entered judgment before he was able to present a defense. Id. at 273. The reviewing court
concluded that the “defendant was deprived of the protection of his day in court when he was not
given the opportunity to be heard in his defense, a basic principle provided for by our constitutional
mandates and consistent with the fundamental concept of an equitable judicial system.” Id. at 276.
Nye does not assist because Monarch was a party to the lawsuit from its inception and was
represented by counsel throughout the proceedings.
¶ 62 In the amended complaint, Monarch is described as: “an Illinois corporation, owned by
[Ybarra] and sold to the individual Plaintiffs, via a Stock Purchase Agreement and the individual
purchasers became shareholders of the MONARCH entity, subsequent to the stock purchase.”
Plaintiffs alleged that “pursuant to the Stock Purchase, the individual Plaintiffs via MONARCH,
paid [Ybarra] the additional sum of $50,000.00.” All of the counts alleged in the complaint were
on behalf of all plaintiffs, including Monarch, with relief demanded on behalf of all plaintiffs. On
the breach of contract count upon which plaintiffs proceeded to trial, they alleged that Monarch
“has made substantial payments to attorneys, accountants, business brokers, totaling sum in excess
of $99,640.73, to date and have additionally incurred substantial other liabilities ***.” It is clear
from the record that Monarch was not merely a nominal party.
¶ 63 Moreover, the initial counterclaim alleged that the “Borrowers,” referring to the
Purchasers, failed to pay the principal balance of the promissory note and asked the court for a
judgment order of the principal balance plus interest. The counterclaim specifically alleged that
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No. 1-20-0536
the “defendants,” referring to plaintiffs, were required under the Amended SPA to provide Ybarra
with written notice for any reduction in the note. Ybarra further alleged that no written notice “was
provided by the Defendants before the Maturity Date” and that “Defendants have waived any
reduction in principal that may be due and owing to them.” The language of the counterclaim
specifically designated between the Borrowers, i.e., Latinik, Masters, and Miranda, and the
collective Defendants, which included Monarch. Thus, the counterclaim included allegations
against Monarch, as well as the Purchasers, and their claim to the contrary fails.
¶ 64 Plaintiffs also contend that there was no evidence that Monarch executed the promissory
note. This argument is somewhat counter to their position taken at trial. During the trial, plaintiffs
argued that the Purchasers could not be held responsible for the obligations of the amended
promissory note because it was only signed by Masters, as president of Monarch. Based on
plaintiffs’ assertion that the individual Purchasers did not sign the amended note, the court entered
judgment against Monarch. At the time the amended note was executed, the transfer of the
Monarch stock from Ybarra to the Purchasers had already occurred. As discussed above, the SPA
and note were amended to reflect a reduction in the purchase price to offset the Medicare
clawbacks for services rendered while Ybarra owned Monarch. While plaintiffs contend there was
no proof that Masters was president of Monarch, it is clear that ownership of Monarch had
transferred to the Purchasers, and they were responsible for the debts owed by the entity. Their
argument to the contrary is a disingenuous attempt to avoid liability that they owed the purchase
price to Ybarra. Monarch was a named and active party owned by the Purchasers, who executed
the Amended SPA and amended note to their benefit of a reduction in the purchase price. We reject
these claims to the contrary.
¶ 65 Plaintiffs next raise the following issues related the judgment against the Purchasers: (1)
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No. 1-20-0536
there was no breach of the Amended SPA; (2) Ybarra’s right to payment for the Monarch stock
was limited to the amended note; (3) the trial court erred in allowing Ybarra to present irrelevant
evidence; and (4) the trial court erred in awarding attorney fees absent a provision for fees in the
Amended SPA.
¶ 66 First, plaintiffs argue that there was no breach of the Amended SPA because the
purchasers’ obligations “consisted solely of delivering the Modified Note,” which they performed.
However, in their brief argument, plaintiffs fail to cite any relevant authority, nor do they set forth
the requisite standard of review. Supreme Court Rule 341(h)(7) requires an appellant to include in
its brief an “[a]rgument, which shall contain the contentions of the appellant and the reasons
therefor, with citation of the authorities and the pages of the record relied on.” Ill. S. Ct. R.
341(h)(7) (eff. Oct. 1, 2020). Mere contentions, without argument or citation to authority, do not
merit consideration on appeal. Palm v. 2800 Lake Shore Drive Condominium Association, 401 Ill.
App. 3d 868, 881 (2010). The rule is consistent with the principle that “[a] reviewing court is
entitled to have issues clearly defined with pertinent authority cited and cohesive arguments
presented ***, and it is not a repository into which an appellant may foist the burden of argument
and research.” Obert v. Saville, 253 Ill. App. 3d 677, 682 (1993). The above cited procedural rules
concerning the content and format of appellate briefs are mandatory. Voris v. Voris, 2011 IL App
(1st) 103814, ¶ 8.
¶ 67 It is not this court’s role to create an appellate argument, research the issue, and then apply
the relevant authority to the facts in order to determine whether the claims have merit. Undertaking
these tasks would not only shift plaintiffs’ burden to this court, but also deprive Ybarra of a
meaningful opportunity to respond to the theory. For these reasons, plaintiffs’ claim falls well short
of the Rule 341 and has been forfeited.
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No. 1-20-0536
¶ 68 Forfeiture aside, we find no merit in plaintiffs’ contention that purchasers’ obligations
under the contract “consisted solely of delivering the Modified Note,” which they performed. First,
plaintiffs fail to argue that the trial court’s finding was against the manifest weight of the evidence.
And as noted above, they fail to cite the appropriate standard of review. Plaintiffs offer a citation
to the report of proceedings as evidence that they performed the obligation of delivering the
modified note. Specifically, plaintiffs cite to the following four lines from Ruben’s direct
examination.
“thing.
He kept saying he signed it. And I'm like,
no, Elly -- or, Steve, you didn't.
He goes, Well, I signed it for Monarch.”
However, these statements from Ruben’s testimony fail to support this contention.
¶ 69 Moreover, plaintiffs’ assertion is absurd that the Amended SPA only required delivery of
the note, but did not obligate them to pay the agreed purchase price. The Amended SPA clearly
belies plaintiffs’ contention. As noted above, the Amended SPA made amendments to specific
portions of the SPA and ratified and approved the SPA in all other respects. Section 1.2(e)(ii) with
the relevant amendments from the Amended SPA provides, in relevant part:
“(e) The balance of the Purchase Price, [$370,000,] shall be paid to Seller
by Purchaser as follows (‘Financed Portion’) as set forth in a Promissory Note (the
‘Note’), dated as of Closing, a copy of which is attached hereto and made a part
hereof as Schedule 1.2(e):
***
ii. Three Hundred Seventy Thousand Dollars ($370,000) on or
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No. 1-20-0536
before the two (2) year anniversary after the Delivery Date. All amounts
payable under the Modified Note will accrue interest at five percent (5%)
per annum. Purchaser agrees to pledge to Seller the Shares as collateral to
secure timely payment of all sums due under the Modified Note pursuant to
the terms of the existing Pledge Agreements attached hereto as Schedule
1.2(d).”
¶ 70 This provision specifically detailed the amount due to Ybarra from the Purchasers, when
the payment was due, and the amount of interest to accrue. Thus, purchasers’ argument that no
breach occurred when they admittedly failed to pay the purchase price by the due date listed in
Amended SPA is without merit.
¶ 71 Plaintiffs’ next contention consists of four sentences without a single citation to any
authority, a standard of review, or the record. Again, this argument fails to comply with Supreme
Court Rule 341(h)(7), which requires an appellant to include in its brief an “[a]rgument, which
shall contain the contentions of the appellant and the reasons therefor, with citation of the
authorities and the pages of the record relied on.” Ill. S. Ct. R. 341(h)(7) (eff. Oct. 1, 2020). Mere
contentions, without argument or citation to authority, do not merit consideration on
appeal. Palm, 401 Ill. App. 3d at 881. As already noted above, the rule is consistent with the
principle that “[a] reviewing court is entitled to have issues clearly defined with pertinent authority
cited and cohesive arguments presented ***, and it is not a repository into which an appellant
may foist the burden of argument and research.” Obert, 253 Ill. App. 3d at 682. The above cited
procedural rules concerning the content and format of appellate briefs are mandatory. Voris, 2011
IL App (1st) 103814, ¶ 8.
¶ 72 However, forfeiture aside, plaintiffs’ argument lacks merit. While plaintiffs contend in
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No. 1-20-0536
their subheading that Ybarra’s right to payment for her stock was limited to the modified note, the
brief argument merely restates that same assertion as the previously rejected argument, i.e., the
Amended SPA only required the Purchasers to execute and deliver the modified note and Ybarra
lacks any recourse under the Amended SPA. We have already considered and rejected this
argument above. Thus, this contention fails as well.
¶ 73 Next, plaintiffs argue in a single paragraph that it was “unjust” for the trial court to allow
“Ybarra to adduce proofs at trial for an unfiled claim for the sole purpose of allowing Ybarra to
‘conform the pleading to the proofs.’ ” Again, plaintiffs failed to cite any authority, a standard of
review, or any page in the record on appeal. Thus, this argument fails to comply with Supreme
Court Rule 341(h)(7) (Ill. S. Ct. R. 341(h)(7) (eff. Oct. 1, 2020)) and the well-established precedent
discussed above.
¶ 74 Forfeiture aside, plaintiffs’ contention fails because it is merely a restyling of its prior
argument that the trial court erred in allowing Ybarra to file an amended counterclaim. In their
brief argument, plaintiffs assert that they were denied their right to respond or plead to an amended
counterclaim before the trial court entered judgment on that claim. This is essentially the same
argument we considered and rejected above that the trial court abused its discretion in allowing
Ybarra to file the amended counterclaim. Since we already considered the claim, we need not
address it again here.
¶ 75 Finally, plaintiffs argue that the trial court erred in awarding attorney fees for breach of
contract because the Amended SPA does not contain a provision for the award of fees. Once again,
plaintiffs failed to cite any authority or a standard of review in their short four-sentence argument.
Accordingly, this argument also fails to comply with Supreme Court Rule 341(h)(7) (Ill. S. Ct. R.
341(h)(7) (eff. Oct. 1, 2020)) and the well-established precedent discussed above
27
No. 1-20-0536
¶ 76 Although this argument is clearly forfeited, but we choose to address it and consider
whether the award of attorney fees for the breach of the Amended SPA was proper. Illinois follows
the American Rule under which a party is responsible for his own attorney fees. Geisler v. Everest
National Insurance Co., 2012 IL App (1st) 103834, ¶ 86. The American Rule “prohibits prevailing
parties from recovering their attorney fees from the losing party, absent express statutory or
contractual provisions.” Sandholm v. Kuecker, 2012 IL 111443, ¶ 64.
¶ 77 Section 9.9 of the SPA, which was incorporated into the Amended SPA, states:
“Damages/Remedies. Should any party default pursuant to its obligations
contained herein, the opposing party shall have available all rights at law and/or at
equity to remedy said default. The defaulting party shall be liable for actual and all
consequential damages. The non-defaulting party shall have the right to setoff any
amounts owed to the defaulting party. The parties acknowledge that Purchaser is
explicitly not responsible for the obligations of the Company contained herein or
otherwise.”
¶ 78 This damages provision does not expressly provide for the award of attorney fees for any
default under the contract. Thus, under the American Rule, Ybarra was not entitled to an award of
attorney fees for the breach of contract claim.
¶ 79 However, we point out that the enforcement provision for the modified note provides:
“Borrower [referring to Purchasers] agrees to pay all costs and expenses of such proceeding
including, but not limited to, reasonable attorney’s fees.” Further, the escrow agreements executed
by the Purchasers stated:
“In case of a breach, the parties shall have all cumulative remedies at law and
equity. The parties prevailing in litigation shall be entitled to their reasonable
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No. 1-20-0536
attorneys’ fees.”
¶ 80 Since the modified note provided for an award of attorney fees, Ybarra was entitled to
attorney fees related to her claim on the note. Therefore, we vacate the award of attorney fees
related to the breach of contract claim, but affirm the portion of attorney fees awarded related to
Ybarra’s claim for the breach of the modified note. We remand to the trial court to modify the
award of attorney fees consistent with these findings.
¶ 81 Having resolved plaintiffs’ claims regarding the amended counterclaim, we turn to
Ybarra’s claim on appeal that the trial court’s decision denying damages for the accounts
receivable was against the manifest weight of the evidence. Specifically, Ybarra argues that the
trial court disregarded a proven element of damages, the accounts receivable from the period when
she owned Monarch. Ybarra contends that the amount of these damages was “undisputed” and the
trial court’s failure to award this amount was against the manifest weight of the evidence.
¶ 82 “The basic theory of damages in a breach of contract action requires that a plaintiff
‘establish an actual loss or measurable damages resulting from the breach in order to recover.’ ” In
re Illinois Bell Tel. Link-Up II, 2013 IL App (1st) 113349, ¶ 19 (quoting Avery v. State Farm
Mutual Automobile Insurance Co., 216 Ill. 2d 100, 149 (2005)). The proper measure of damages
for a breach of contract is the amount of money necessary to place the plaintiff in a position as if
the contract had been performed. Id. Damages are an essential element of a breach of contract
action and a claimant’s failure to prove damages entitles the defendant to judgment as a matter of
law. Id. In proving damages, the burden is on the plaintiff to establish a reasonable basis for
computing damages. Razor v. Hyundai Motor America, 222 Ill. 2d 75, 107 (2006). Basic contract
theory requires that damages be proved with reasonable certainty and precludes damages based on
conjecture or speculation. Id. at 106-07.
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No. 1-20-0536
¶ 83 “Where an award of damages is made after a bench trial, the standard of review is whether
the trial court’s judgment is against the manifest weight of the evidence.” 1472 N. Milwaukee, Ltd.
v. Feinerman, 2013 IL App (1st) 121191, ¶ 13. “A decision is against the manifest weight of the
evidence only when an opposite conclusion is apparent or when the findings appear to be
unreasonable, arbitrary, or not based on the evidence.” Eychaner v. Gross, 202 Ill. 2d 228, 252
(2002). “[I]n overturning a damage award, a reviewing court must find that the trial judge either
ignored the evidence or that its measure of damages was erroneous as a matter of law.” 1472 N.
Milwaukee, 2013 IL App (1st) 121191, ¶ 13. Therefore, an award of damages is not against the
manifest weight or manifestly erroneous if there is an adequate basis in the record to support the
trial court’s determination of damages. Id.¶ 84 Here, the Amended SPA provided in section 1.2(e)(iii) that the Purchasers, in addition to
the purchase price, “shall pay to [Ybarra] all accounts receivable of [Monarch] which relate to the
period prior to Closing (the ‘Old A/R’) on the 15th and 30th of every month.” Ybarra alleged in
her amended counterclaim that she never received any payments for the accounts receivable from
the period prior to the sale of Monarch.
¶ 85 Ybarra argues that the trial court disregarded Chochol’s uncontradicted testimony that
plaintiffs collected $239,462.70 for the accounts receivable accrued for services while Ybarra
owned Monarch. Specifically, Ybarra points to the following colloquy from Chochol’s cross-
examination.
“Q. Okay. Now, you testified that you were in charge of accounts receivable
or bookkeeping or accounting for accounts receivable. Wasn’t that your testimony?
A. Yes, I was doing bookkeeping.
Q. Yeah. And you did that since 2015; correct?
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No. 1-20-0536
A. Correct.
Q. Okay. So how much of the old Monarch receivables were collected by
Monarch that accrued prior to December 31, 2013? Can you tell us that, please.
A. About 230 something thousand. It’s on my spreadsheet.
Q. You collected 230,000 of the old Monarch receivables; correct?
A. Yes. That was -- yes.
Q. Okay. Maybe you can show me where on your spreadsheet that is. I’ve
got a color coded one somewhere. Oh, here it is.
***
A. All of these are 2013 services that came [to] our bank account between
January 2014 and this date, so it’s $239,462.70.”
¶ 86 Chochol referred to his spreadsheet, admitted as plaintiffs’ exhibit number 4 at trial, to
obtain this figure. As discussed in Chochol’s testimony, the spreadsheet lists 11 column headings
across: the first states “Remit Date”, the second “Payment,” the next four state the years 2013,
2014, 2015, and 2016, respectively, the seventh column states “Withholds,” and the remaining
four again list the years 2013 to 2016. Under the Remit Date column, numerous dates are listed
starting at “1/1/2014” with the last date as “9/9/2016.” The Payment and Withhold columns list
varying dollar amounts that together correspond to all of the dates listed in the first column. For
the individual year columns, either all or a portion of a payment or withhold amount is listed under
a year. The bottom of the spreadsheet totaled all columns. Chochol’s testimony referred to the
2013 column following the Payment column that indicated a total of $239,462.70. In his testimony,
Chochol testified that Medicare withheld $705,967.64, and that the withholding totals for 2014
and 2015 were for 2013 service dates. The spreadsheet does not disclose the service dates related
31
No. 1-20-0536
to the corresponding money paid or withheld.
¶ 87 During her testimony, Mozola discussed Schedule 2.14(a) to the Amended SPA, which
was a schedule of the accounts receivable. She stated that the report was generated from the billing
software. The schedule was prepared on December 4, 2013, and reflected the amounts as of
November 30, 2013. The first column, indicated as balance, listed several figures and showed a
total of $325,471.53. It does not indicate what the balance reflects. Mozola referred to the numbers
as what Monarch would bill after reviewing a “pre-bill report.” Additionally, Mozola identified a
balance sheet, admitted as Ybarra’s exhibit number 21, for Monarch as of November 30, 2013,
which she generated. She testified that according to the balance sheet, the total for accounts
receivable as of that date was $263,013.40, which reflected a deduction of $62,458.13 from
$325,471.53. Mozola left her employment at Monarch in May 2014.
¶ 88 Although the court did not find Chochol incredible, the court concluded it would not afford
Chochol’s spreadsheet “the weight [it] would of business records that clearly were created in the
ordinary course of business; rather, it looked more like an accountant’s take.” The records did not
have “the necessary backup” for the court to take into account that the clawbacks were
appropriately reflected in the documentation. In granting the directed finding on plaintiffs’ breach
of contract claim, the court had observed that Chochol’s spreadsheet failed to include the dates of
services to “tie up” the monies remitted to Medicare. The court referred to this prior observation
during its findings at the end of the trial. The court also concluded that Mozola’s testimony was
not credible regarding the accounts receivable.
¶ 89 The crux of Ybarra’s argument is that the testimony from Chochol and Mozola based on
their respective spreadsheets was not refuted by plaintiffs, and therefore, the trial court committed
manifest error in rejecting Ybarra’s request for the accounts receivable damages. According to
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No. 1-20-0536
Ybarra, the trial court could not disregard the testimony of Chochol and Mozola and there were no
credibility findings to be made. We reject this argument for a number of reasons. First, in
“ ‘Illinois, the law is well established that the trial judge, sitting without a jury, has the obligation
of weighing the evidence and making findings of fact.’ ” Dobbs v. Wiggins, 401 Ill. App. 3d 367,
375 (2010) (quoting Chicago Investment Corp. v. Dolins, 107 Ill. 2d 120, 124 (1985)). The trial
court, as the factfinder, “is free to accept some evidence and reject others, as well as to determine
the credibility of the witnesses and weigh their testimony.” Barth v. State Farm Fire & Cas. Co.,
228 Ill. 2d 163, 180 (2008).
¶ 90 Next, we find the cases relied on by Ybarra to be distinguishable. In Pancoe v. Singh, 376
Ill. App. 3d 900 (2007), the plaintiff sued the defendant for the breach of an agreement related to
a joint venture. At the bench trial, the defendant’s expert witness had testified about his damages
analysis, which showed that “the amount remaining to be split between plaintiff and defendant
(under the dissolution agreement) totaled $54,847. [The expert] testified that, based on this
$54,847 figure, plaintiff’s 50% share would be $27,424.” Id. at 906. The plaintiff also called [the
expert] during his case and he testified about the financial statements prepared for the joint venture,
including the profitability of the projects under contract when the dissolution agreement was
signed. According to the expert, “these jobs, whose future earnings were projected at about
$22,000, actually ended up losing more than $152,000.” Id. at 905.
¶ 91 In reaching the damages award, the trial court adopted most of the expert’s figures, but
rejected his testimony that the projects lost over $150,000 and found this figure was not “ ‘a proper
amount.’ ” Id. at 907. “The court therefore ‘added [$152,310] onto the figures that [the expert]
testified to[, made] an adjustment for a ten percent retention,’ and divided the total amount in half,
concluding that the correct figure for plaintiff’s damages was $92,959.” Id.33
No. 1-20-0536
¶ 92 The defendant raised multiple issues on appeal, including a claim that the trial court’s
damages award was not supported by the evidence. Id. at 901-02. The defendant argued that there
was no evidentiary basis for the trial court’s rejection of the $152,310 loss figure, and if damages
are to be awarded to the plaintiff, then the amount should be reduced to $27,424. Id. at 916. The
reviewing court agreed with defendant and found that its review of the record had “revealed no
such other evidence that would contradict this [$152,310] figure.” Id. at 917. The court concluded
that the trial court’s rejection of the loss figure was against the manifest weight of the evidence
and modified the damages award to $27,424. Id. at 917.
¶ 93 In Bucktown Partners v. Johnson, 119 Ill. App. 3d 346 (1983), a forcible entry and detainer
action was brought by the landlord against the defendant tenant for nonpayment of rent. Id. at 347.
After a garnishment proceeding was initiated to collect the money owed, the defendant moved to
quash garnishment because the funds in her account were public assistance payments that were
exempt from garnishment. Id. At the hearing on the motion, the defendant testified that public
assistance payments were the sole source of the funds in her bank account. Id. No other witnesses
testified at the hearing, and no other evidence was presented by the plaintiff as to the source of the
defendant’s funds. Id. at 347-48. Despite this, the trial court denied the defendant’s motion to
quash garnishment. Id. at 348. On appeal, the reviewing court reversed, stating that the “the
unimpeached and uncontradicted testimony of a witness cannot be arbitrarily disregarded by a
finder of fact” absent certain exceptions, such as where the testimony of the witness is inherently
improbable. Id. at 353.
¶ 94 The facts of this case differ from both Pancoe and Bucktown Partners. In Pancoe, the trial
court not only rejected the figure of related to loss on projects, but it also awarded damages
unsupported by the record and based solely on the court’s belief. In Bucktown Partners, the tenant
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was not proving damages, but testified as to the source of her income from public assistance, which
the trial court rejected without any support in the record.
¶ 95 In contrast with those cases, the circumstances of the present case relate solely to whether
the evidence supported the damages sought by Ybarra. Ybarra was required to prove the damages
she suffered in the breach of contract, including the amount of the accounts receivable. The trial
court concluded that she failed to prove the total of the accounts receivable paid after she sold
Monarch. The trial court’s findings fully comport with section 1.2(e)(iii) of the Amended SPA,
which provided that the parties “shall agree on a method to calculate whether: (1) the relevant
accounts receivable exceeded the relevant accounts payable, with any excess amount then paid to
Seller; or (2) the relevant accounts payable exceeded the relevant accounts receivable, with the
amount of any deficiency deducted from the balance of the Note.” Ybarra failed to present any
evidence that the accounts receivable for 2013 service dates exceeded the relevant accounts
payable as required under the contract. She relies on Chochol’s spreadsheet for the figure of the
total for accounts receivable, but offers no discussion regarding the figures and testimony related
to the withholds, which exceed the accounts receivable.
¶ 96 We also point out that Chochol was not employed as a bookkeeper for Monarch until 2015,
more than a year after the sale to the Purchasers. His spreadsheet, which was not prepared using
business software, listed dates and payments that preceded his employment. It does not detail the
source of the payments, what service date was being paid, or the date the spreadsheet was prepared.
It only lists a date, an amount under payment, and an amount under a respective year. All but three
of the entries under the 2013 column predated Chochol’s employment at Monarch. Additionally,
Mozola’s exhibits predated the sale and set forth the amount due for accounts receivable. Neither
the balance sheet, nor the schedule show payments made on those accounts after the sale. All three
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exhibits show differing figures. Chochol’s spreadsheet purports to show $239,462.70 received for
2013, while Schedule 2.14(a) lists a balance of $325,471.53, and Mozola’s balance sheet shows
$263,013.40 as the total due in accounts receivable as of November 30, 2013. Additionally, Ruben
testified that Ybarra had received approximately $50,000 from the listed $325,471.53 in accounts
receivable prior to leaving Monarch in 2014. The remaining balance, approximately $275,471.53,
constituted a fourth calculation of the amount due for accounts receivable. He was unfamiliar with
Chochol’s figure of $239,462.70.
¶ 97 Unlike Pancoe and Bucktown Partners, the trial court did not disregard testimony, but
rather the court found the limited evidence presented lacked the foundation to establish the
damages claimed by Ybarra. Ybarra’s claim for damages relied on Chochol’s spreadsheet, which
the trial court concluded lacked sufficient foundation to support the amount of damages. The basic
rules of evidence require that a proper foundation be laid for the introduction of a document into
evidence. JPMorgan Chase Bank, N.A. v. E.-W. Logistics, L.L.C., 2014 IL App (1st) 121111, ¶ 92.
Under Illinois Supreme Court Rule 236, the business records exception to the hearsay rule permits
the admission of any business records of “any act, transaction, occurrence, or event” if those
records are made: (1) in the regular course of business; and (2) at the time or within a reasonable
time of the transaction. Ill. S. Ct. R. 236(a) (eff. Aug.1, 1992); US Bank, National Association v.
Avdic, 2014 IL App (1st) 121759, ¶ 23. The rule further states that “[a]ll other circumstances of
the making of the writing or record, including lack of personal knowledge by the entrant or maker,
may be shown to affect its weight, but shall not affect its admissibility.” Ill. S .Ct. R. 236(a) (eff.
Aug.1, 1992).
¶ 98 While the trial court admitted Chochol’s spreadsheet under the business records exception
during trial, the court afforded little weight to this exhibit when considering the amount of the
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accounts receivable for 2013 service dates. As noted above, the trial court observed that it was not
affording Chochol’s spreadsheet “the weight [it] would of business records that clearly were
created in the ordinary course of business; rather, it looked more like an accountant’s take.” The
court further found that the records did not have “the necessary backup” for it to take into account
that the clawbacks were appropriately reflected in the documentation. As discussed, the
spreadsheet was prepared by Chochol as a summary of payments and withholdings for Monarch
from January 2014 to September 2016. The spreadsheet listed figures, but did not include the
service dates or details related to the payments or withholdings. “The trial court may admit
summary exhibits into evidence if the court cannot conveniently examine the voluminous
documents summarized to extract the fact at issue.” In re Estate of Burren, 2013 IL App (1st)
120996, ¶ 32; see also Veco Corp. v. Babcock, 243 Ill. App. 3d 153, 166 (1993). “The party
presenting the summary must make all summarized documents available in court or to the
opposing party, ‘to give the opposing party an opportunity to verify the reliability and accuracy of
the summary prior to trial.’ ” Id. (quoting Paddack v. Dave Christensen, Inc., 745 F.2d 1254, 1261
(9th Cir.1984)). In its findings, the trial court concluded that the spreadsheet was a summary that
was not prepared in the normal course of business. The trial court did not find sufficient support
for Chochol’s spreadsheet in the other exhibits presented at trial.
¶ 99 As the trial court observed, none of the records provided any supporting documentation to
reflect the Medicare clawbacks from the Palmetto audit in 2014 or the service dates. Even if we
considered Chochol’s spreadsheet, Ybarra has not addressed Chochol’s testimony about the
significant amounts withheld due to errors arising from 2013 service dates. Additionally, the court
found Sheehan to be very credible. In her testimony, she stated that Monarch was not following
the conditions of participation that govern a hospice for Medicare and was concerned about
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Monarch being able to successfully bill Medicare and that there would be an upcoming Medicare
clawback. The trial court heard the testimony and reviewed the evidence before concluding that
the evidence did not support Ybarra’s claim for damages. Based on our review of the record, we
cannot say that the trial court’s finding regarding the damages for accounts receivable was against
the manifest weight of the evidence. We do not find that the opposite conclusion was apparent, nor
were the court’s findings unreasonable, arbitrary, or not based on the evidence.
¶ 100 Based on the foregoing reasons, we vacate the award of attorney fees related to the breach
of contract claim and affirm the decision of the circuit court of Cook County for all other claims.
We remand to the trial court to modify the award of attorney fees as directed in this decision.
¶ 101 Affirmed in part, vacated in part. Remanded with directions.
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