Case Name: DONALD J. ORR et al., Plaintiffs-Appellants, v. CARTER SHEPARD et al., Defendants (Edmund P. Burke et al., Defendants-Appellees)
Court: Illinois Appellate Court
Jurisdiction: Illinois
Decision Date: 1988-05-25
Citations: 171 Ill. App. 3d 104
Docket Number: No. 85-3108
Parties: DONALD J. ORR et al., Plaintiffs-Appellants, v. CARTER SHEPARD et al., Defendants (Edmund P. Burke et al., Defendants-Appellees).
Judges: 
Reporter: Illinois Appellate Court Reports, Third Series
Volume: 171
Pages: 104–115

Head Matter:
DONALD J. ORR et al., Plaintiffs-Appellants, v. CARTER SHEPARD et al., Defendants (Edmund P. Burke et al., Defendants-Appellees).
First District (3rd Division)
No. 85—3108
Opinion filed May 25, 1988.
FREEMAN, J., dissenting.
Saul R. Wexler, of Shaheen, Lundberg, Callahan & Orr, P.C., of Chicago, for appellants.
Pretzel & Stouffer, Chartered, of Chicago (Robert Marc Chemers, of counsel), for appellees.

Opinion:
JUSTICE RIZZI
delivered the opinion of the court:
Plaintiffs, Donald Orr, William Orr and Margaret Orr (Orrs), brought an action against defendants, Carter Shepard, Cassie Shepard, Signal Printing Company, Continental Illinois Bank & Trust Company of Chicago, Edmund P. Burke, Burke & Burke, Ltd., and numerous other depositories suspected of maintaining funds of the Shepards. In their complaint against Edmund P. Burke and Burke & Burke, Ltd. (Burke), the Orrs alleged professional negligence or, in the alternative, breach of contract, in that Burke: (1) failed to inform the bank that the account was to be an escrow account; (2) established the account in such a manner so as to permit Shepard to withdraw the funds in violation of the escrow agreement; and (3) failed to review the certificate of deposit whén received to determine whether it was in conformance with the escrow agreement. Burke made a motion to dismiss which was granted by the trial court. The court further entered an order finding no just cause to delay enforcement or appeal as to the dismissal of Burke.
On appeal, the Orrs allege that the circuit court erred in dismissing Burke from the lawsuit and not allowing them to file an amended complaint. We affirm.
The Orrs were the sole shareholders in a now dissolved Illinois cor poration which was known as Orr Building Company (Orr Building). Signal Printing Company, Inc. (Signal), was an Illinois corporation in which Carter Shepard was an officer, director and sole shareholder. Orr Building and Signal entered into a contract for the sale and purchase of realty owned by Orr Building. Under this contract, Shepard and his wife, Cassie, personally guaranteed payment and performance by Signal.
Prior to closing the contract, but after Signal took possession and occupied the property, the realty was destroyed by fire. Following the payment of approximately $100,000 in insurance proceeds to Orr Building, a dispute arose as to the portion, if any, of the proceeds which Signal was entitled to receive. Signal claimed that $30,000 of the $100,000 belonged to Signal to cover the value of its personal property allegedly destroyed in the fire.
Orr Building and Signal could not reach an agreement as to what amount, if any, Signal was entitled to receive. They did, however, agree to pay the insurance adjusters their fee and place the remaining proceeds in an escrow account pending resolution of their dispute. On August 4, 1982, the parties met at the law firm of Burke & Burke and executed an escrow agreement prepared by Burke & Burke. The agreement provided that the insurance proceeds would be deposited into an interest-bearing account at Continental Illinois National Bank (Continental) and further stated that "said escrow may be terminated by the agreement of the parties and upon the joint signatures of the parties."
Burke established the escrow account in December 1982 at Continental, and the certificate of deposit indicated that the account was a joint tenancy account. However, on May 15, 1984, the Orrs were informed by Continental that Shepard had withdrawn all of the money from the account in December 1983. The Orrs had neither given Shepard permission to withdraw the money nor authorized Continental to disburse the money to Shepard.
Shepard admitted to withdrawing the money and voiced an intention not to return the money to Continental. Thereafter, an attorney for the Orrs met with Burke. Burke stated that it established the escrow account, gave the copy of the certificate of deposit to the Orrs' attorney and kept the original certificate of deposit in its possession.
The Orrs filed their suit in chancery, naming Burke as a defendant. The circuit court granted Burke's motion to dismiss on July 18, 1985. On August 9, 1985, the Orrs filed a motion for reconsideration. In this motion, the Orrs stated:
"[Accordingly, based upon the allegations set forth in the com plaint, if the Court deems those to be inappropriate to support a cause of action against Defendant Edmund P. Burke and Burke & Burke, Ltd., Plaintiffs should be allowed to amend the complaint to state a valid cause of action, if they so desire."
The Orrs, however, never tendered an amended complaint or indicated how their complaint could be amended to state a cause of action. The court denied the Orrs' motion for reconsideration and this appeal followed.
The Orrs first argue that the trial court erred in dismissing Burke from the lawsuit. It is the Orrs' position that the Illinois Supreme Court case of Pelham v. Griesheimer (1982), 92 Ill. 2d 13, 440 N.E.2d 96, is not applicable to this case. We disagree.
In Pelham, our supreme court delineated the test for determining if a duty exists between an attorney and a nonclient. The court stated:
"In the area of legal malpractice the attorney's obligations to his client must remain paramount. In such cases the best approach is that the plaintiffs must allege and prove facts demonstrating that they are in the nature of third-party intended beneficiaries of the relationship between the client and the attorney in order to recover in tort. [Citations.] By this we mean that to establish a duty owed by the defendant attorney to the nonclient the nonclient must allege and prove that the intent of the client to benefit the nonclient third party was the primary or direct purpose of the transaction or relationship. [Citation.]" (Emphasis added.) 92 Ill. 2d at 20-21, 440 N.E.2d at 99.
Our review of the record demonstrates that the complaint herein clearly fails to state a cause of action for breach of contract or for legal malpractice. The complaint fails to allege, legally or factually, that a contract was entered into for the direct benefit of the Orrs, which is an indispensable element of a third-party beneficiary theory of recovery. (Altevogt v. Brinkoetter (1981), 85 Ill. 2d 44, 56, 421 N.E.2d 182, 187-88.) Moreover, for a complaint of legal malpractice grounded in negligence to be legally sufficient, the complaint must set forth facts that establish the existence of a duty owed by the defendant to the plaintiff, a breach of that duty, and an injury proximately resulting from the breach. Cunis v. Brennan (1974), 56 Ill. 2d 372, 374, 308 N.E.2d 617, 618.
Here, when we apply the intent-to-directly-benefit test to the facts alleged in the complaint, it is clear that the Orrs were not direct third-party beneficiaries. Burke was the law firm of the Shepards. The primary purpose of Burke's work was to protect the interests of the Shepards. At the time that Burke made contact with the Orrs, it was the Shepards, Burke's clients, who were attempting to get their share of the insurance proceeds from the Orrs. At no time do the Orrs allege that Burke in any way caused or contributed to the Shepards' withdrawal of the money or conspired with the Shepards to injure the Orrs. Nor do the Orrs claim that Burke represented them in any way in the transaction. Based on these circumstances, Burke owed no fiduciary duty to the Orrs. At best, the Orrs were only incidental beneficiaries. Therefore, if the Orrs reposed trust and confidence in Burke, it was unreasonably placed and could not be the basis for an equitable type of action founded on breach of a fiduciary or confidential relationship. We likewise find that no duty existed between the parties to this lawsuit. There is no indication from the record before us that Burke and the Orrs stood in such a relationship to one another that the law imposed upon Burke an obligation of reasonable conduct for the benefit of the Orrs.
To impose a greater liability on an attorney without the non-client demonstrating a primary or direct purpose relationship would have the undesirable effect of creating a duty to third parties which would take precedence over an attorney's fiduciary duty to his client. Public policy mandates that when an attorney acts in his professional capacity, he must be free to advise his client without fear of personal liability to third persons and nonclients if the advice later proves to be incorrect. Schott v. Glover (1982), 109 Ill. App. 3d 230, 234-35, 440 N.E.2d 376, 379.
Under the facts as pleaded, we hold that Burke owed no duty to the Orrs, the breach of which would give rise to a cause of action for negligence. Nor do the Orrs have a cause of action in contract. Accordingly, we conclude that the trial court properly dismissed the Orrs' complaint for failure to state a cause of action.
We note that the Orrs urge us to accept their position that their suit against Burke is not grounded in negligence or breach of contract with a third-party beneficiary as espoused in Pelham and therefore Pelham is inapplicable to the case at bar. The Orrs assert that Burke's gratuitous and voluntary undertaking to set up the escrow created a duty irrespective of his professional status as an attorney. As a result, Burke was required to exercise reasonable care and skill in performing that undertaking. The Orrs argue that Burke owed them this duty because Burke agreed in a face-to-face meeting that Burke would perform the task. Further, the Orrs argue that Burke owed them a duty under at least one of the following theories: (1) constructive trust theory, in that Burke undertook an obligation as trustee to exercise reasonable and prudent care; (2) principal/agent relation ship, which gave rise to a fiduciary relationship as a matter of law; and (3) bailment relationship whereby Burke, as bailee, had a duty to exercise reasonable care when dealing with the insurance proceeds delivered to them.
From our reading of the complaint, we find that Orrs' contortion of their grounds for recovery untenable. The Orrs cannot avoid the mandates of Pelham by couching their grounds for recovery in principles that have not been accepted in delineating the duty of an attorney to his clients and nonclients. This suit is unquestionably one against Burke in its professional capacity of rendering legal services. We are bound to follow the mandates of Pelham in spite of the urging of the Orrs to expand the duty and theories of liability of attorneys to non-clients.
Next, the Orrs argue that the trial court erred in not allowing them leave to file an amended complaint. We disagree.
A plaintiff's right to amend his complaint is not absolute, and it is within the trial court's discretion whether to grant or deny leave to amend. (Downers Grove Associates v. Red Robin International, Inc. (1986), 151 Ill. App. 3d 310, 319, 502 N.E.2d 1053, 1060.) On review, the trial court's determination regarding the right to file an amended complaint will not be disturbed unless that ruling is shown to be a clear abuse of discretion. Downers Grove Associates, 151 Ill. App. 3d at 319, 502 N.E.2d at 1060.
In the instant case, the Orrs never formally requested leave to amend. In their motion for reconsideration, the Orrs asked for leave to amend only if the court found that their complaint as tendered did not state a cause of action and if the Orrs so desired to amend. Under these circumstances, we cannot say that the trial court abused its discretion in not allowing the Orrs to amend their complaint. The Orrs did not tender an amended complaint nor did they present to the court how their original complaint could have been amended to state a cause of action. The Orrs cannot now argue that the trial court abused its discretion in light of the fact that they did not properly bring this issue before the court in the form of a request for leave to amend.
Accordingly, the judgment of the trial court is affirmed.
Affirmed.
WHITE, P.J., concurs.