Cwikla v. Sheir

• Decision Date: 10 December 2003
• Docket Number: No. 1-01-4258.,1-01-4258.
• Citation: Cwikla v. Sheir, 345 Ill.App.3d 23, 280 Ill.Dec. 158, 801 N.E.2d 1103 (Ill. App. 2003)
• Parties: Adam CWIKLA and D2 Trucking, Inc., Plaintiffs-Appellants, v. Tom SHEIR and Flocarol Crigler, Defendants-Appellees.
• Court: Appellate Court of Illinois

801 N.E.2d 1103

345 Ill. App.3d 23

280 Ill.Dec. 158

Adam CWIKLA and D2 Trucking, Inc., Plaintiffs-Appellants, v.Tom SHEIR and Flocarol Crigler, Defendants-Appellees.

No. 1-01-4258.

Appellate Court of Illinois, First District, Third Division.

December 10, 2003.

Joseph V. Roddy and Tamara L. Cummings of Law Offices of Joseph V. Roddy, Chicago, for Appellant.

Michael A. Cotteleer of Cotteleer Law Offices, Wheaton, for Appellee.

Justice HALLdelivered the opinion of the court:

This appeal arises from two circuit court orders.The first order entered on May 15, 2001, dismissed the amended complaint filed by plaintiffs, Adam Cwikla and D2 Trucking, Inc.(D2 Trucking), against defendants, Tom Sheir¹ and Flocarol Crigler, alleging fraud and breach of fiduciary duty.The second order entered on November 28, 2001, granted summary judgment in favor of Sheir on his counterclaim for attorney fees.

On appeal, plaintiffs contend that: (1)the circuit court erred in dismissing the breach of contract claim in their original complaint; (2)they properly pled a viable fraud claim in their amended complaint; (3)they properly pled a separate claim for breach of fiduciary duty in their amended complaint; and (4)the trial court erred by entering judgment in favor of Sheir on his counterclaim for attorney fees.For the reasons that follow, we affirm in part, reverse in part, and remand the cause for further proceedings consistent with this opinion.

The facts in this case center on the termination of a business relationship within what is described as a small and close-knit trucking company.Plaintiff Cwikla was president, shareholder and director of plaintiff D2 Trucking.Defendant, Sheir was secretary/treasurer, as well as a shareholder and director, of D2 Trucking.Cwikla and Sheir were sole equal co-shareholders of D2 Trucking.Sheir was responsible for the company's financial matters, which included billing and payroll.He was also authorized to sign company checks.

On November 11, 1997, Cwikla and D2 Trucking entered into a mutual release and termination agreement with Sheir.Under the terms of the agreement, Sheir severed his relationship with Cwikla and D2 Trucking, and Cwikla obtained all of Sheir's rights, titles and interests in D2 Trucking, in exchange for a lump-sum payment of $40,000.

Subsequent to the termination agreement and during the compilation of financial statements, accountants for D2 Trucking allegedly discovered that Sheir had issued company check No. 4057, dated January 7, 1997, made payable to Sheir's mother-in-law, defendantFlocarol Crigler, in the amount of $40,000.Thereafter, on February 20, 1998, plaintiffs Cwikla and D2 Trucking filed a verified three-count original complaint against defendants Sheir and Crigler for breach of an oral contract (count I), fraud (count II), and breach of fiduciary duty (count III).

In the breach of contract claim, plaintiffs alleged that Crigler and D2 Trucking had entered into an oral agreement wherein D2 Trucking loaned Crigler $40,000, in return for Crigler's promise to repay this loan amount, and that Crigler had breached the oral agreement by failing to repay the loan.In the fraud claim, plaintiffs alleged that Sheir committed fraud by failing to disclose the loan agreement during termination agreement negotiations.And in the breach of fiduciary claim, plaintiffs alleged that Sheir's conduct in making the loan to Crigler, his mother-in-law, amounted to a diversion of corporate funds in breach of his fiduciary obligations to D2 Trucking.

On November 2, 2000, after the parties conducted discovery and submitted pretrial materials, defendants filed a motion for judgment on the pleadings pursuant to section 2-615(e) of the Code of Civil Procedure(Code)(735 ILCS 5/2-615(e)(West 1996)).On November 30, 2000, the circuit court granted defendants' motion, without prejudice, and allowed plaintiffs leave to file an amended complaint.Plaintiffs filed their two-count amended complaint on December 28, 2000, alleging fraud and breach of fiduciary duty.No allegation was made nor relief sought against Crigler in the amended complaint.

Thereafter, defendants Sheir and Crigler filed their motion to dismiss plaintiffs' amended complaint pursuant to sections 2-615(a), (b), (c), and (d), andsection 2-619(a)(9) of the Code.In the motion, defendants argued as follows: since the amended complaint was unverified it should be dismissed pursuant to section 2-615(b); Crigler should be dismissed from the action pursuant to sections 2-615(b), (c), and (d) of the Code, since no allegation was made nor relief sought against Crigler in the amended complaint; the fraud claim as to D2 Trucking should be dismissed pursuant to sections 2-615(b), (c), and (d) of the Code; the fraud claim as to Cwikla should be dismissed pursuant to section 2-619(a)(9) of the Code; and the breach of fiduciary duty claim should be dismissed pursuant to section 2-619(a)(9) of the Code.

On May 15, 2001, after briefing and oral argument, the circuit court granted defendants' motion to dismiss plaintiffs' amended complaint, with prejudice.On June 7, 2001, plaintiffs filed a notice of appeal from the orders entered on November 30, 2000, and May 15, 2001.On August 21, 2001, defendant Sheir filed a motion for summary judgment on count II (attorney fees) of his counterclaim.The plaintiffs' appeal from the May 15, 2001, order was dismissed by this court on October 10, 2001, for want of jurisdiction as a consequence of the pendency of Sheir's unresolved counterclaim for attorney fees.

On November 28, 2001, the circuit court entered judgment on count II of Sheir's counterclaim in his favor and against plaintiffs in the amount of $20,609.70.On the same date, Sheir voluntarily dismissed count I (indemnification) of his counterclaim.On December 3, 2001, plaintiffs filed their notice of appeal seeking relief from the circuit court's orders of May 15, 2001, and November 28, 2001.

ANALYSIS

I.Breach of Contract

Plaintiffs first contend that the circuit court erred in dismissing their breach of contract claim.We find that pursuant to the Foxcroft rule(Foxcroft Townhome Owners Ass'n v. Hoffman Rosner Corp.,96 Ill.2d 150, 154, 70 Ill.Dec. 251, 449 N.E.2d 125(1983)), plaintiffs have waived objection to the circuit court's order dismissing the breach of contract claim.The decision in Foxcroft stands for the proposition that "[w]hen a complaint is amended, without reference to the earlier allegations, it is expected that these allegations are no longer at issue."Foxcroft,96 Ill.2d at 154, 70 Ill.Dec. 251, 449 N.E.2d 125.The Foxcroft rule applies "not only to factual allegations, but also to theories of recovery."Bilut v. Northwestern University,296 Ill.App.3d 42, 46, 230 Ill.Dec. 161, 692 N.E.2d 1327(1998), citingFoxcroft,96 Ill.2d at 155, 70 Ill.Dec. 251, 449 N.E.2d 125.

In the instant case, the record shows that plaintiffs pled a breach of contract claim in their original three-count complaint.However, after the circuit court granted defendants' motion to dismiss and thereafter allowed plaintiffs leave to file an amended complaint, plaintiffs failed to reallege the breach of contract claim in their two-count amended complaint.Therefore, since the amended complaint did not replead the breach of contract claim, it did not serve to preserve this claim for review.Corsi v. Corsi,302 Ill. App.3d 519, 524, 236 Ill.Dec. 82, 706 N.E.2d 956(1998).Consequently, the plaintiffs have waived objection to dismissal of the previous breach of contract count.SeeTabora v. Gottlieb Memorial Hospital,279 Ill.App.3d 108, 113, 215 Ill.Dec. 870, 664 N.E.2d 267(1996);Abrams v. Watchtower Bible & Tract Society,306 Ill.App.3d 1006, 1014, 240 Ill.Dec. 111, 715 N.E.2d 798(1999);Zawadzka v. Catholic Bishop,337 Ill.App.3d 66, 69, 271 Ill.Dec. 420, 785 N.E.2d 71(2003).

II.Fraud Claim

Plaintiffs next contend that in count I of their amended complaint they pled a viable fraud claim against Sheir on the ground that Sheir misrepresented the financial status of D2 Trucking during negotiations of the termination agreement when he indicated that the trucking company had no outstanding liabilities or debts, thereby concealing the $40,000 check he issued to Crigler.In response, Sheir asserts that count I of plaintiffs' amended complaint fails to allege a cause of action for fraud.

Defendants Sheir and Crigler's motion specified that dismissal of count I in favor of D2 Trucking was brought pursuant to sections 2-615(b),(c), and (d) of the Code, and that dismissal of count I in favor of Cwikla was brought pursuant to section 2-619(a)(9) of the Code.The trial court granted defendants' motion to dismiss without stating whether it granted the motion based on section 2-615 or section 2-619 grounds.We will proceed under the assumption that the trial court dismissed count I pursuant to the sections of the Code specified by defendants in their motion to dismiss.However, we will review the dismissal of the fraud count in favor of Cwikla under both sections of the Code.

Our review of a dismissal under both sections is de novo (In re Chicago Flood Litigation,176 Ill.2d 179, 189, 223 Ill.Dec. 532, 680 N.E.2d 265(1997)), and under both sectionswe accept all well-pled facts as true and draw all reasonable inferences in favor of the plaintiff(Doe v. Chicago Board of Education,339 Ill.App.3d 848, 853, 274 Ill.Dec. 872, 791 N.E.2d 1283(2003)); the analysis, however, differs.

A significant difference between the two motions is that a section 2-615 motion is based on the pleadings rather than on the underlying facts.Barber-Colman Co. v. A & K Midwest Insulation Co.,236 Ill.App.3d 1065, 1068, 177 Ill.Dec. 841, 603 N.E.2d 1215(1992).A section 2-615 motion challenges a complaint for failing to state a cause of action, while a section 2-619(a)(9) motion admits the legal sufficiency of the complaint but asserts that it...