Court Opinion

ID: 3146560
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:18:48.34063+00
Date Added: 2024-06-11T12:06:16.020346
License: Public Domain

SIXTH DIVISION
                                               September 7, 2007

No. 1-05-3969

SPIRO VISVARDIS AND JOANNE VISVARDIS,     )    Appeal from the
                                          )    Circuit Court of
          Plaintiffs-Appellants,          )    Cook County
                                          )
     v.                                   )
                                          )
ERIC P. FERLEGER, P.C., ERIC P.           )
FERLEGER, FERLEGER & ASSOCIATES, and      )
FERLEGER & COHEN,                         )    Honorable
                                          )    Abishi Cunningham,
          Defendants-Appellees.           )    Judge Presiding

          OPINION AS MODIFIED UPON DENIAL OF REHEARING

     JUSTICE McNULTY delivered the opinion of the court:

     In July 2002, Spiro Visvardis brought a legal malpractice

action against Eric Ferleger, the attorney who represented him in

a lawsuit against Spiro's brother, Nick Visvardis.   The trial

court dismissed the complaint against Ferleger, under section 2-

615 of the Code of Civil Procedure (the Code) (735 ILCS 5/2-615

(West 2002)), based on the decision of the court that dismissed

the underlying action against Nick.    We hold that the court

should not have considered documents outside of the complaint in

ruling on Ferleger's motion to dismiss under section 2-615.

Because Spiro has alleged facts that could support a finding he

would have won the underlying lawsuit if Ferleger had not acted

negligently, we reverse and remand.    We publish the decision to

criticize and clarify the rule in Illinois requiring plaintiffs

in legal malpractice cases to plead the solvency of the
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underlying defendants.

                             BACKGROUND

     In 1986, Spiro and Nick formed Techco, a company

specializing in industrial painting and sandblasting.     Nick and

Spiro each owned half of Techco's shares.     Nick managed Techco's

finances and Spiro oversaw the work sites.     Techco employed

Nick’s wife, Maria Visvardis, to handle various accounting

matters.    Nick and Maria also set up two other corporations,

which they named Tecorp and Omega Industries.     Techco granted the

National Bank of Greece a security interest in Spiro’s primary

residence in exchange for a loan.      On December 31, 1995, Techco

had $425,602 in cash, accounts receivable of $631,437, and

retained earnings in the amount of $784,851.     The National Bank

foreclosed the mortgage on Spiro’s home in 1996 because Techco

defaulted on the loan.

     In July 1997, through Ferleger, Spiro sued Nick, Maria,

Techco, Tecorp, and Omega Industries ("the original defendants"),

seeking equitable relief and damages for breach of fiduciary duty

and fraud.    According to the complaint in the action for legal

malpractice, Nick and Spiro agreed to take equal salaries from

Techco.    Techco paid Spiro $28,600 in 1996, while it paid Nick

$72,800 in salary and $101,810 in other income.     Also in 1996

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Nick transferred $400,000 from Techco’s bank account to his

personal bank account without Spiro’s authorization and without

Spiro receiving a similar monetary draw.   Nick changed all of the

locks on the doors of Techco without providing Spiro new keys.

He removed Spiro as an authorized signatory from Techco’s bank

accounts.   Maria forged Spiro’s signature on negotiable

instruments written on behalf of Techco.   Nick and Maria

intentionally defaulted on the loan from National Bank, despite

the availability of substantial assets to repay the loan.

     According to the complaint Spiro filed against Ferleger,

Nick owned all shares of Allied Maintenance Contractors, and

Maria owned Tecorp and served as president of Century Financial &

Realty Corporation.   In July 1997 Century purchased Techco’s

assets, valued at $996,098, for $87,970.45.   Pete Maroulis, a

former Techco employee, swore in an affidavit incorporated into

the malpractice complaint that subsequent to 1996, Nick and Maria

owned various pieces of equipment costing a total of

approximately $422,000, Techco performed several jobs from which

it earned approximately $740,000, and Allied Maintenance

performed several jobs from which it earned over $1 million.

     On May 2, 2000, the original defendants moved for summary

judgment.   Ferleger filed a response that included an expert

opinion as to the amount of damages Spiro sustained.   The court

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granted the motion for summary judgment, stating that Ferleger

failed to produce "a single fact" in his response.     On behalf of

the plaintiffs, Ferleger filed a motion to reconsider the court’s

entry of summary judgment.    To this motion, Ferleger attached 30

exhibits, including various affidavits, a "Facts Chart," and

other materials.

     The court denied the motion, stating that Ferleger had

produced "an unorganized bulk of fact, charges, lists [of] a

bunch of things that are supposedly facts.     They’re not organized

in any way as to how they’re material facts."     The trial court

noted that the affidavit of the expert indicated that he lacked

the documents he needed to reach a conclusion concerning some of

Spiro's allegations of wrongdoing.     The trial court reasoned:

            "The proper procedure would have been *** to

     insist vigorously on that production in front of the

     Court with a motion to compel.     That was not done.   The

     motion for reconsideration is not the proper vehicle

     for Counsel to reverse his trial tactics."

     Ferleger filed an appeal on behalf of Spiro on April 19,

2002.   Spiro retained new counsel to prosecute the appeal.     On

June 30, 2003, this court affirmed the judgment in favor of the

original defendants.

     In July 2002, Spiro initiated a legal malpractice action

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against Ferleger, alleging that Ferleger acted negligently by

failing to sue all responsible parties, by failing to obtain all

documents the expert needed, and by failing to produce available

evidence in response to the motion for summary judgment.      In

November 2005, the trial court dismissed Spiro’s fourth amended

complaint, with prejudice, pursuant to section 2-615 of the Code.

735 ILCS 5/2-615 (West 2002).    The trial court found that even if

Ferleger had not committed the alleged malpractice, Spiro would

have lost his claim against the original defendants.      The trial

court reasoned, "both the trial and appellate courts found the

facts as alleged to be insufficient to sustain the case" against

the original defendants.   Spiro now appeals.

                               ANALYSIS

     A section 2-615 motion attacks only the legal sufficiency of

the complaint. 735 ILCS 5/2-615 (West 2002); Illinois Graphics

Co. v. Nickum, 159 Ill. 2d 469, 484 (1994).      Section 2-615

motions "raise but a single issue: whether, when taken as true,

the facts alleged in the complaint set forth a good and

sufficient cause of action."    Scott Wetzel Services v. Regard,

271 Ill. App. 3d 478, 480 (1995).      Ferleger brought his motion

pursuant to section 2-615, but his arguments      and the trial

court's rulings rest primarily on the appellate court's

disposition of the underlying action.      Ferleger argues that

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Visvardis is "[r]ehashing unsuccessful allegations and materials"

rejected by the court in the underlying case.   Ferleger asserts

that "there is nothing in the record suggesting that the trial

and appellate courts in the underlying case" did not review the

new evidence submitted with the motion for reconsideration.

Spiro did not incorporate into the complaint against Ferlenger

the appellate court's order disposing of the underlying action.

Facts not alleged in or attached to the complaint cannot support

a section 2-615 motion.   Gilmore v. Stanmar, Inc., 261 Ill. App.
3d 651, 654 (1994).

     In essence, Ferleger’s argument sounds in collateral

estoppel.   He claims that Spiro cannot relitigate a question that

the appellate court has adjudicated against him in the underlying

suit.   Todd v. Katz, 187 Ill. App. 3d 670, 674 (1989).   Defendant

should use section 2-619(a)(4) (735 ILCS 5/2-619(a)(4) (West

2002)) to attack the complaint on grounds that a prior judgment

bars the cause of action. See Todd, 187 Ill. App. 3d at 674.

     Meticulous practice requires proper designation of all

motions. Premier Electrical Construction Co. v. La Salle National

Bank, 115 Ill. App. 3d 638, 642 (1983).   The appellate court

shall reverse if the misdesignation prejudices the nonmovant.

Premier Electric, 115 Ill. App. 3d at 642.   Here, at the hearing

on the motion to dismiss, Spiro argued only the sufficiency of

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the allegations in his complaint, as he should in opposition to a

motion to dismiss pursuant to section 2-615.    The trial court

asserted that section 2-615 warranted the dismissal.    However,

the trial court’s reasoning relied on facts outside the

complaint, specifically that "both the trial and appellate courts

found the facts as alleged to be insufficient to sustain the

case" against the original defendants.

     Spiro did not have an opportunity to respond properly to the

mislabeled motion.   Allowing the defendant to attack the

complaint under section 2-619 after failing to file the proper

motion would be unjust "because the purpose of the statute is to

give the plaintiff an opportunity to respond to the objection and

to cure the defect in the trial court." Rowan v. Novotny, 157
Ill. App. 3d 691, 694 (1987).   As Ferleger brought only a section

2-615 motion, and the court granted only a section 2-615 motion,

we will confine our review to the standards for reviewing section

2-615 motions.   Accordingly, we ignore all arguments based on

facts not shown on the face of the complaint.

     Ferleger, relying on Goran v. Glieberman, 276 Ill. App. 3d
590 (1995), urges us to take judicial notice of the appellate

court's judgment.    In Goran the court took judicial notice of

documents in the record in order to decipher when plaintiff

incurred attorney fees. Goran, 276 Ill. App. 3d at 596.     However,

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the defendant in Goran brought his motion to dismiss under

section 2-619, not section 2-615, and therefore the court could

consider matters outside of the complaint.   Furthermore, in

Goran, the use of the documents did not prejudice either party.

     We review a dismissal under section 2-615 de novo.    Hopewell

v. Vitullo, 299 Ill. App. 3d 513, 516 (1998).    In order to

withstand a motion to dismiss based on section 2-615, a complaint

must allege facts that set forth the essential elements of the

cause of action.   Urbaitis v. Commonwealth Edison, 143 Ill. 2d
458, 475 (1991).   "[A] court must take as true all well-pled

allegations of fact contained in the complaint and construe all

reasonable inferences therefrom in favor of the plaintiff."

Vernon v. Schuster, 179 Ill. 2d 338, 341 (1997).    In ruling on a

motion to dismiss, the court will construe pleadings liberally.

Pfendler v. Anshe Emet Day School, 81 Ill. App. 3d 818, 821

(1980).   However, the court will not admit conclusions of law and

conclusory allegations not supported by specific facts. Village

of South Elgin v. Waste Management of Illinois, Inc., 348 Ill.

App. 3d 929, 930-31 (2004).   "A plaintiff is not required to

prove his case in the pleading stage; rather, he must merely

allege sufficient facts to state all the elements which are

necessary to constitute his cause of action."    Claire Associates

v. Pontikes, 151 Ill. App. 3d 116, 123 (1986).

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     To plead a cause of action for legal malpractice, a

plaintiff must allege facts that could support a finding that (1)

the attorney owed the plaintiff a duty arising from the attorney-

client relationship, (2) the attorney breached that duty, and (3)

the attorney’s breach proximately caused the plaintiff to sustain

damages. Metrick v. Chatz, 266 Ill. App. 3d 649, 652 (1994);

Claire Associates, 151 Ill. App. 3d at 122.    Where the

malpractice claimant seeks to recover for loss of a cause of

action, he must also plead and prove that he would have won a

judgment against a solvent defendant. Sheppard v. Krol, 218 Ill.

App. 3d 254, 259 (1991).

     Ferleger does not challenge the sufficiency of Spiro's

allegations of an attorney-client relationship and a breach of

duty.   To satisfy the proximate cause element of a malpractice

action, Spiro must plead and prove that "but for" Ferleger’s

negligence, Spiro would have won the underlying action.    Ignarski

v. Norbut, 271 Ill. App. 3d 522, 526 (1995).

     Spiro argues that he would have recovered a judgment against

the original defendants on his breach of fiduciary duty claims

but for Ferleger's negligence.   To state a cause of action for

breach of fiduciary duty, a plaintiff must allege: (1) a

fiduciary duty on the part of the defendant and (2) a breach of

that duty that (3) proximately caused (4) an injury. In re Estate

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of Lis, 365 Ill. App. 3d 1, 8 (2006).    In Illinois Rockford Corp.

v. Kulp, 41 Ill. 2d 215, 222-23 (1968), our supreme court held

that 50% shareholders in a corporation owe each other fiduciary

duties.   "[I]n a closely held corporation, the mere fact that a

business is run as a corporation rather than a partnership does

not shield the business venturers from a fiduciary duty similar

to that of true partners."   Hagshenas v. Gaylord, 199 Ill. App.
3d 60, 70 (1990). In this case, Spiro’s complaint alleges

sufficient facts to support an inference that Nick had fiduciary

duties to Spiro.

     In Hagshenas, 199 Ill. App. 3d at 72, the court found that

defendant had violated his fiduciary duty when the defendant

opened a competing business and hired away all of the

corporation’s employees.   In Kulp, the defendant negotiated a

better deal for himself in the sale of the corporation and misled

the other 50% shareholder to believe they would both receive

equal shares.   Our supreme court found that the defendant

breached his fiduciary duties to the plaintiff.    Kulp, 41 Ill. 2d

at 223.   Similarly, according to the complaint here, Nick

repeatedly misappropriated funds from Techco for his own personal

use without Spiro’s authorization.    Nick locked Spiro out of

Techco’s offices and intentionally defaulted on Techco’s loan,

resulting in the loss of Spiro’s home.    If Spiro proved these

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allegations, a trier of fact could find that Nick breached his

fiduciary duties.   As Nick controlled Techco's accounts and

payments on the bank loan the trier of fact could also infer that

Nick caused Spiro's damages.

     The appellate court in Sheppard, 218 Ill. App. 3d at 259,

held that the plaintiff in a legal malpractice action must plead

and prove that the defendant in the underlying case had some

funds from which to pay any damages that a court would have

awarded the plaintiff, had his attorney not committed

malpractice.   The court in Sheppard rested its holding on the

dubious authority of Goldzier v. Poole, 82 Ill. App. 469 (1899).

See Universal Underwriters Insurance Co. ex rel. Manley Ford,

Inc. v. Long, 215 Ill. App. 3d 396, 400 (1991) (appellate court

opinions dated before 1935 lack precedential value).    Other

jurisdictions have soundly criticized the rule adopted in

Sheppard.   Jourdain v. Dineen, 527 A.2d 1304, 1306 (Me. 1987);

Kituskie v. Corbman, 452 Pa. Super. 467, 474, 682 A.2d 378, 383

(1996); Smith v. Haden, 868 F. Supp. 1, 2 (D.D.C. 1994); Ridenour

v. Lewis, 121 Or. App. 416, 854 P.2d 1005 (1993); Teodorescu v.

Bushnell, Gage, Reizen & Byington, 201 Mich. App. 260, 506 N.W.2d
275 (1993); Albee Associates v. Orloff, Lowenbach, Stifelman &

Siegel, P.A., 317 N.J. Super. 211, 721 A.2d 750 (1999); Power

Constructors, Inc. v. Taylor & Hintze, 960 P.2d 20, 31-32 (Alaska

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1998).   Those courts have pointed to the unfairness of imposing

the burden of proving solvency on the plaintiff, who may have

lost evidence of solvency due to the attorney's negligence.

Lindenman v. Kreitzer, 7 A.D.3d 30, 36, 775 N.Y.S.2d 4, 8 (2004).

Because proof of uncollectability allows the negligent attorney

to avoid compensating the plaintiff for the negligence, the

attorney should bear the risk of uncertainty of proof concerning

collectibility.   Power Constructors, 960 P.2d at 31-32.

Nonetheless, Illinois apparently continues to require legal

malpractice plaintiffs to plead and prove the solvency of the

underlying defendants. Bloome v. Wiseman, Shaikewitz, McGivern,

Wahl, Flavin & Hesi, P.C., 279 Ill. App. 3d 469, 478 (1996);

Klump v. Duffus, 71 F.3d 1368, 1374 (7th Cir. 1995).

     Ferleger claims that Spiro must project some date on which

he would likely have won a judgment in the underlying case and

plead facts showing that on that date the underlying defendants

had sufficient wherewithal to pay the judgment.   We find no

support for such a requirement.   Instead the plaintiff must plead

facts supporting an inference that after the date of the

malpractice, and some time before the judgment against the

underlying defendant would become unenforceable due to its age,

the underlying defendant would have some funds available for

payment of some part of the damages.   Klump v. Duffus, 71 F.3d at

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1374; Lindenman, 7 A.D.3d at 36, 775 N.Y.S.2d at 9; Matson v.

Weidenkopf, 101 Wash. App. 472, 3 P.3d 805 (2000).

     According to the complaint against Ferleger, Ferleger first

committed malpractice in July 1997 when he filed the insufficient

complaint in the underlying case.     In 1997 and thereafter Nick

continued a profitable business in industrial painting and

sandblasting.   The corporations Nick and Maria owned generated

almost $2 million in revenue after 1996.     Nick and Maria also

owned industrial equipment costing more than $400,000.     The

complaint adequately alleges facts that could support a finding

that Nick remained solvent after the alleged malpractice.     Thus,

Spiro has sufficiently alleged facts from which a trier of fact

could infer that he had a viable cause of action against Nick.

     Spiro contends that he has sufficiently pled that Ferleger's

negligence caused him to lose the underlying action.     According

to the complaint, Ferleger failed to produce any evidence in

response to the motion for summary judgment.     Spiro further

argues that Ferleger’s production of evidentiary materials with

the motion for reconsideration did not rectify the error.

     Ferleger responds that the court in the underlying case

considered the newly produced evidence and plaintiff still lost.

According to the complaint against Ferleger, the trial court in

the underlying case found that Ferleger had "not organized [the

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evidence] in any way as to how they [show] material facts."   The

trial court added that the expert lacked the documents he needed

to assess Spiro's allegations of wrongdoing.   The trial court

concluded that "[t]he motion for reconsideration [was] not the

proper vehicle for Counsel to reverse his trial tactics."

     Ferleger argues that the trial and appellate courts in the

underlying action reviewed the evidence he presented in the

underlying case and found it insufficient to require trial.

Insofar as Ferleger’s argument rests on documents outside of the

complaint, Ferleger should have brought the motion under section

2-619(a)(4), not section 2-615.   Spiro has adequately alleged

facts that could support a finding that Ferleger committed legal

malpractice that caused Spiro to lose his viable claims against

the original defendants.   Accordingly, we reverse the judgment

dismissing the case pursuant to section 2-615, and we remand for

further proceedings consistent with this opinion.

     In his petition for rehearing Ferleger claims that the trial

court properly took judicial notice of the decision on appeal in

the case Spiro brought against Nick.   However, the record here

includes no mention of judicial notice prior to the petition for

rehearing.   The record on appeal does not even include either the

trial court's judgment or the decision of this court disposing of

the claims Spiro brought against Nick.   Therefore, Ferleger has

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waived, for this appeal, any argument based on judicial notice.

See Ball v. Village of Streamwood, 281 Ill. App. 3d 679, 687

(1996).   We have discretion to address the issue despite the

waiver.   See Ball, 281 Ill. App. 3d at 687.    We decide not to

address the issue.   Instead, we remand the case to permit the

parties to develop arguments concerning judicial notice and the

question of whether the prior appellate order leaves unresolved

factual issues that may determine the viability of Spiro's

claims.   We deny the petition for rehearing.

     Reversed and remanded.

     JOSEPH GORDON and FITZGERALD SMITH, JJ., concur.

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