Approved Home v. State of Illinois

ORDER

SPRAGUE, C. J. This cause comes to be heard on Respondent’s Motion to Dismiss the Amended Complaint based on allegations that the Claimant has committed fraud on the State of Illinois. The Amended Complaint asserts jurisdiction in this Court under both paragraphs 705 ILCS 505/8(a) and 705 ILCS 505/8(b). Two different causes of action were pled, enforcement of a Circuit Court order and implied contract. The claimed damages are $211,802.

[*210] FACTS

The claim arises out of litigation in the Circuit Court of Cook County between Respondent’s agencies and the Claimant, which owned and operated a licensed intermediate care facility for mentally retarded residents, serving lowincome and destitute clients under the Medicaid program. Pursuant to an order of the Circuit Court of Cook County dated August 1, 1996, the respondents were directed to “assume control of Approved Home on…August 2, 1996” and “to compensate Approved Home for the use of its premises, furnishings, supplies, etc.” Claimant alleges that the respondent’s agencies remained in control of its property until October 1, 1996. Exhibit C of the Amended Complaint details the Claimant’s calculations for rent and other items for the period from August 2, 1996 through September 31, 1996.

The Amended Complaint was filed on October 28, 2002. On April 28, 2003, Respondent filed their Answer. This Answer contained Affirmative Defenses which amounted to a list of “setoffs” which Respondent claimed should reduce any award that might be given to Claimant. Fraud was not one of those Affirmative Defenses. On March 23, 2005, Respondent filed the instant Motion to Dismiss. Said motion is based solely on allegations that Claimant, through one of its agents, made an unauthorized withdrawal of certain funds from a Residence Allowance Fund and has steadfastly failed to account for these funds. Respondent claims that this alleged activity is such as to amount to fraud against Illinois and accordingly the Amended Complaint should be dismissed under the auspices of 705 ILCS 505/14.

LEGAL ANALYSIS

Respondent’s motion gives rise to two issues, one is a procedural question and one with regard to the burden of proof. Each issue will be discussed separately.

I. Procedural Issue

705 ILCS 505/14 states as follows:

Sec. 505/14. Fraud against state. Whenever any fraud against the State of Illinois is practiced or attempted by any claimant in the proof, statement, establishment, or allowance of any claim or of any part of any claim, the claim or part thereof shall be forever barred from prosecution in the court.

[*211] There is no doubt but that Fraud is an absolute defense that can be asserted by Illinois in the Court of Claims. The state has the burden of proving such a defense by clear and convincing evidence. First of American Bank et. al. v. Jelenos, 48 Ill. Ct.Cl. 191 (1996).

So the question becomes, is a motion to dismiss the appropriate procedural method to pose the question of fraud on the state? The answer to this question is found in 735 ILCS 5/2-613 (d), which states as follows:

(d) The facts constituting any affirmative defense, such as payment, release, satisfaction, discharge, license, fraud, duress, estoppel, laches, statue of frauds, illegality, that the negligence of complaining party contributed to in whole or in part to the injury of which he complains, that an instrument or transaction is either void or voidable in point of law, or cannot be recovered upon by reason of any statue or by reason of nondelivery, want or failure of consideration in while or in part, any defense which by other affirmative matter seeks to avoid the legal effect of or defeat the cause of action set forth in complaint, counterclaim, or third-party complaint, in whole or in part, and any ground or defense, whether affirmative or not, which, if not expressly stated in the pleading, would be likely to take the opposite party by surprise, must be plainly set forth in the answer or reply. [Emphasis Added].

Accordingly, the defense of fraud should either be raised as an Affirmative Defense, or be plainly set forth in the answer or reply. Respondent has done neither, opting instead to raise the issue, for the first time, by way of a motion to dismiss. The Court finds this tactic to be procedurally improper and on that basis alone the motion should be denied.

II. Burden of Proof Even were the motion to be permissible under this set of facts; there would still remain the issue of Respondent’s burden of proof. To answer this issue, the Court looks to the language of Madison-Kedzie Inc., v Illinois, 39 Ill.

Ct. Cl. 16 (1986), which states:

In order to sustain its affirmative defense of fraud the Respondent must prove the fraudulent conduct by clear and convincing evidence. The Respondent must also prove the Claimant made a false representation with the intent to deceive. Such evidence of fraud must be affirmatively proved by clear and convincing testimony and cannot be based on suspicion. Bethune Plaza, Inc. v. State Department of Public Aid, 90 Ill. App.3d 1133 (1980); Oltmer v. Zamora, 94 Ill. App. 3d 651 (1981).

[*212] A review of the evidence offered by the Respondent in support of its defense of fraud shows that the Respondent has not met its burden of proof by clear and convincing evidence. At most, Respondent offers mere allegations that one of Claimant’s principles may have mishandled the Resident Allowance Fund. Even assuming that such conduct constitutes fraud, and assuming that this fraud is the type of fraudulent conduct that is referred to in Section 505/14, Respondent puts forth no evidence that the Claimant had the intent to deceive.

Without proof of this element, the burden of proof has not been met.

WHEREFORE, Respondent’s motion to dismiss is denied.