Davis v. Loftus

• Decision Date: 09 September 2002
• Docket Number: No. 1-00-1772, No. 1-00-2197.
• Citation: 334 Ill. App.3d 761,778 N.E.2d 1144,268 Ill.Dec. 522
• Parties: Terry A. DAVIS, Tinley Park Partners 3, Edgecorp I, Inc., Tad Associates Inc., Southwest Construction Corporation, David G. Tillinghast, and Edgewater Walk Apartments, Plaintiffs-Appellants, v. P. Michael LOFTUS, Donald F. Engel, Gottlieb & Schwartz, an Illinois Partnership, Keith R. Abrams, Roy L. Bernstein, Stephen R. Chesler, Barry J. Freeman, Anthony L. Frink, Marvin H. Glick, Norton N. Gold, Daniel V. Kinsella, David C. Kluever, Richard S. Kuhlman, Harvey I. Lapin, Jerold Lavin, Stephen H. Lavin, Loren J. Mallon, Jonathan L. Mills, David G. Mueller, Amy R. Perlman, Carlos G. Rizowy, Sally H. Saltzberg, Stanton Schuman, Ellis Shafer, Herbert L. Stern, Jr., David Sugar, Jay P. Tarshis and Dennis C. Waldon, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

778 N.E.2d 1144

334 Ill. App.3d 761

268 Ill.Dec. 522

Terry A. DAVIS, Tinley Park Partners 3, Edgecorp I, Inc., Tad Associates Inc., Southwest Construction Corporation, David G. Tillinghast, and Edgewater Walk Apartments, Plaintiffs-Appellants, v.P. Michael LOFTUS, Donald F. Engel, Gottlieb & Schwartz, an Illinois Partnership, Keith R. Abrams, Roy L. Bernstein, Stephen R. Chesler, Barry J. Freeman, Anthony L. Frink, Marvin H. Glick, Norton N. Gold, Daniel V. Kinsella, David C. Kluever, Richard S. Kuhlman, Harvey I. Lapin, Jerold Lavin, Stephen H. Lavin, Loren J. Mallon, Jonathan L. Mills, David G. Mueller, Amy R. Perlman, Carlos G. Rizowy, Sally H. Saltzberg, Stanton Schuman, Ellis Shafer, Herbert L. Stern, Jr., David Sugar, Jay P. Tarshis and Dennis C. Waldon, Defendants-Appellees.

Nos. 1-00-1772, 1-00-2197.

Appellate Court of Illinois, First District, First Division.

September 9, 2002.

Rehearing Denied November 13, 2002.

Keeley, Kuenn & Reid, Chicago (Michael T. Reid, of counsel), for Appellant.

Neal, Gerber & Eisenberg(Terry D. Weissman, John Guarisco, of counsel); Nash, Lalich & Kralovec(Michael J. Kralovec, Joseph R. Lemersal, of counsel); Swanson, Martin & Bell(Joseph P. Kincaid, of counsel); Ungaretti & Harris(Gary A. Grasso, Ryan E. Yagoda, of counsel), Chicago, for Appellees.

Justice McNULTYdelivered the opinion of the court:

Terry Davis and several corporations he controlled filed a complaint against Michael Loftus, Donald Engel, and the partners in the law firm of Gottlieb & Schwartz, alleging that Loftus and Engel committed legal malpractice in connection with a real estate transaction.Two counts of the complaint sounded in negligence, while two other counts repeated the same allegations as breach of a contract to provide competent legal representation.The trial court struck the contract counts and part of the damages claimed in the negligence counts.The court also dismissed a claim against the income partners of Gottlieb & Schwartz.The court held that income partners did not qualify as partners, and therefore they did not share liability for the acts of partners and employees of the law firm.Davis appeals from the rulings.

We find that we lack jurisdiction to decide the appeal from the dismissal of the contract counts, because the counts only restate the allegations of the negligence counts that remain before the trial court.The judgment striking the contract counts does not dispose of any entire claim.For similar reasons, we lack jurisdiction to decide the appeal from the order striking part of the claim for damages in the negligence count.We agree with the trial court's holding that the income partners of Gottlieb & Schwartz are employees, not partners, of the law firm, and therefore they do not bear liability for the acts of other partners and employees of the law firm.However, the record on appeal does not adequately show that all of the defendantsthe trial court dismissed from the case served as income partners and not equity partners.Therefore, we dismiss part, of the appeal, affirm in part, and reverse in part.

BACKGROUND

In 1992 Davis needed new financing for a large real estate development in Tinley Park.He hired Engel and Loftus, of Gottlieb & Schwartz, to represent him in negotiations with potential investors.In February 1993 Davis and Thrush Development Company signed an agreement for a joint venture to develop the property.In exchange for an ownership interest in the development, Thrush promised to meet the immediate financing needs of the development and, amongst other things, pay Davis $780,000.Davis and Thrush set March 3, 1993, as the date for closing on the transfer of an ownership interest in the development.

On March 2, 1993, Thrush sent Engel and Loftus a stack of documents related to the closing.Davis signed the closing documents on March 4,1993.

In April 1995 Davis wrote to Engel, seeking to discuss legal strategies for obtaining the amounts Thrush promised to pay.Engel, by letter dated June 19, 1995, demanded payment from Thrush.Engel wrote: "Pursuant to * * * the Agreement dated February 5, 1993, * * * Thrush Development was obligated, among other things, to pay to Mr. Davis the sum of $780,000 on the date of closing * * *.As you know, no portion of the $780,000 which has been due to my client for more than 2 years has yet been paid."

Thrush denied that it owed any payment to Davis.Davis sued Thrush in 1995, seeking performance of the duties outlined in the February 1993 agreement.Thrush denied liability.

In July 1997 Davis sued Engel, Loftus, and all equity and income partners of Gottlieb & Schwartz, in the case now before the court.Davis alleged that between March 2, 1993, and March 4, 1993, he, Engel and Loftus discovered that the documents Thrush prepared for the closing lacked some of the important provisions Thrush accepted in the February 1993 agreement.Engel and Loftus advised Davis that the February agreement fully bound Thrush.Davis executed the documents in reliance on this advice.Another attorney later advised Davis that Engel and Loftus might have provided inadequate assistance and advice in the course of the transaction with Thrush.Davis claimed that Engel and Loftus violated their duty "to document fully and accurately the parties' rights and obligations * * * and to close the transactions in a manner that preserved * * * [Davis's] contractual rights against Thrush."He alleged that he suffered damages because Engel and Loftus failed to advise him to file a vendor's lien on the property under development.

Davis also alleged, in paragraphs 71 through 76 of count I of the third amended complaint, that he would suffer further damages if his lawsuit against Thrush did not succeed.If Thrush did not have legally binding obligations under the February 1993 agreement, including an obligation to pay Davis $780,000, then Engel and Loftus "breached their duty of care * * * by failing to provide adequate documentation of Thrush's obligations * * * at and after the Thrush closing on March 3 and 4, 1993."The legal malpractice caused Davis damages including the $780,000 loss, unless Davis recovers the $780,000 in the litigation against Thrush.Davis added that he suffered further damages in the form of attorney fees incurred in filing the lawsuit against Thrush.

In count II, Davis alleged that Engel and Loftus agreed to represent him in the Thrush litigation in exchange for payment of attorney fees.

"[Engel and Loftus] impliedly agreed to exercise that duty of care prevailing in the legal field * * *.Defendants were obligated to document fully and accurately the parties' rights and obligations and to close the transactions in a manner [that] preserved and did not waive [Davis's] contractual rights against Thrush."

Davis alleged that Engel and Loftus "breached their contract with [Davis] in the manner and fashion described" in the first count.

Count III is not at issue in this appeal.Davis repeated all of count I as count IV of the complaint, but in count IV he added all of the partners in Gottlieb & Schwartz as defendants, arguing that all shared liability for the malpractice of Loftus and Engel.Count V similarly alleged that all partners in Gottlieb & Schwartz shared liability for the breach of the unwritten contract to provide legal services for Davis.

By order dated May 10, 2000, the trial court struck with prejudice counts II and V, the contract counts, as needless duplication of the malpractice counts.The court also struck, with prejudice, the damages claimed in paragraphs 71 through 76 of the first count, because Davis admitted that he would suffer no such damages if he won all the relief he sought in his lawsuit against Thrush.The ruling permitted the lawsuit to proceed on Davis's other claims for damages from the legal malpractice.The court expressly found no just reason to delay appeal of the dismissals of counts II and V and the dismissal of the damage claim in paragraphs 71 through 76 of the complaint.Davis filed a timely notice of appeal.The case has docket number X-XX-XXXX.

One of the partners named as a defendant, Anthony Frink, filed a motion to dismiss count IV against him because he did not qualify as a "partner" in Gottlieb & Schwartz for purposes of vicarious liability.Frink attached a copy of Gottlieb & Schwartz' partnership agreement listing Frink, Jay Tarshis, Roy Bernstein, and others not named in the complaint, as "Income Partners."According to the agreement, the firm paid each income partner "a fixed level of compensation determined on an annual basis by the Executive Committee," plus a bonus.The agreement expressly added: "Income Partners will not share in Partnership Net Profit or Loss."

Each income partner made a "capital contribution" of $10,000 to the firm.If an income partner withdrew from the firm, or upon dissolution of the firm, the firm would return the $10,000 capital contribution to the income partner, without any adjustment for the growth or profits of the firm from the time of the capital contribution.Income partners also had no voting rights and were not eligible to serve on the executive committee.

Jerold Lavin, Dennis Waldon and Carlos Rizowy moved to join in Frink's motion.All three alleged, without supporting documents, that they were income partners.

The trial court on May 30, 2000, joined all defendants it identified as income partners for consideration of Frink's motion to dismiss.The court granted the motion and said:

"The defendants hereby dismissed from Count IV (Vicarious Liability) are: Anthony Frink, Keith R. Abrams, Roy L. Bernstein, Donald F. Engel, Daniel V. Kinsella, David C. Kluever, Jerold Lavin, P. Michael Loftus, David G. Mueller, Carlos G. Rizowy, Sally H. Saltzberg, Jay P. Tarshis and Dennis C. Waldon."

The court again expressly found no just reason to delay appeal from the order.Davis filed a timely notice of appeal.The case is...