Knaus v. Guidry

• Decision Date: 27 March 2009
• Docket Number: No. 1-07-3509.,1-07-3509.
• Citation: 906 N.E.2d 644
• Parties: Brian KNAUS and Aaron Everson, Plaintiffs-Appellees, v. Charles C. GUIDRY, Individually and as agent of Charles C. Guidry, P.C., and Charles C. Guidry, P.C., a professional corporation, Defendants-Appellants (Douglas Erickson, Robert Anderson, and Bruce Edwards, Each Individually and Each as Agent of The Richum Group, d/b/a Richum Corporation and Richum Group of Companies; Richum Corporation, a Corporation; The Richum Group, a Corporation; Jerome Carter, Individually and as Agent of PHD Management, L.L.C.; PHD Management, L.L.C., a Limited Liability Company; Wesley Taylor, Individually and as Agent of Taylor Group Corporation; and Taylor Group Corporation, an Illinois Corporation, Defendants).
• Court: United States Appellate Court of Illinois

906 N.E.2d 644

Brian KNAUS and Aaron Everson, Plaintiffs-Appellees, v. Charles C. GUIDRY, Individually and as agent of Charles C. Guidry, P.C., and Charles C. Guidry, P.C., a professional corporation, Defendants-Appellants (Douglas Erickson, Robert Anderson, and Bruce Edwards, Each Individually and Each as Agent of The Richum Group, d/b/a Richum Corporation and Richum Group of Companies; Richum Corporation, a Corporation; The Richum Group, a Corporation; Jerome Carter, Individually and as Agent of PHD Management, L.L.C.; PHD Management, L.L.C., a Limited Liability Company; Wesley Taylor, Individually and as Agent of Taylor Group Corporation; and Taylor Group Corporation, an Illinois Corporation, Defendants).

No. 1-07-3509.

Appellate Court of Illinois, First District, Sixth Division.

March 27, 2009.

Robert Marc Chemers, Scott L. Howie, Pretzel & Stouffer Chartered, Chicago, for Appellants.

John J. Curry, Jr., Jeremy S. Unruh, Amanda J. Kimble, Polsinelli Shalton Flanigan Suelthaus P.C., Chicago, for Appellees.

Justice JOSEPH GORDON delivered the opinion of the court:

Defendants appeal from an order of the circuit court denying their motion to dismiss for lack of personal jurisdiction. For the reasons that follow, we reverse.

I. BACKGROUND

In this action, plaintiffs Brian Knaus and Aaron Everson, residents of Florida and Missouri, respectively, contend they were defrauded by the captioned defendants Douglas Erickson, Robert Anderson, Bruce Edwards, the Richum Group, Jerome Carter, PHD Management, L.L.C., Wesley Taylor, the Taylor Group Corporation, Charles C. Guidry, and Charles C. Guidry, P.C., in what they describe as an "advance fee scheme." According to plaintiffs' complaint, the first part of the fraud was perpetrated by the Richum Group, a company that was previously incorporated in Wyoming, but whose registration has now lapsed. Plaintiffs contend that the Richum Group is currently operated by its president Robert Anderson, a resident of Illinois, its vice-president, Douglas Erickson, a resident of Missouri, and an agent of the corporation named Bruce Edwards, a resident of Illinois. They assert that Edwards, on behalf of the Richum Group, induced them to give the company $390,000 by representing that the money would be used to secure a loan for the Richum Group and that as soon as the loan was secured, they would receive $780,000 in return-in effect doubling their money for the temporary use of the funds. If a loan was not secured, the money, which they advanced, would be returned to them. Plaintiffs thereupon advanced the sum of $390,000, of which Knaus contributed $300,000 and Everson the remaining $90,000. The plaintiffs aver that these funds were placed in an escrow account in Chicago and none of these funds or proceeds therefrom was ever returned to plaintiffs.

According to plaintiffs' complaint, the Richum Group never intended to return any of the money, but instead conspired with other defendants to convert the money for their own use and benefit. Pursuant to this scheme, they allege that the vice-president of the Richum Group, Erickson, ordered the escrow agent, an Illinois attorney named Robert Riffner, to disburse $40,000 of plaintiffs' money to Erickson, Anderson and others. Erickson then arranged the transfer of the balance of the funds to another entity called PHD Management Group, L.L.C., a Florida limited liability company operated by its finance director, Jerome Carter, who was a resident of Texas. Plaintiffs contend that the remaining $350,000 was placed in a PHD escrow account located in Houston, Texas, and administered by the appellants in this matter, Charles C. Guidry and his law firm, Charles C. Guidry, P.C. (hereinafter Guidry defendants). Plaintiffs allege that Guidry distributed $338,000 to Carter and transmitted $12,000 to an Illinois entity called the Taylor Group Corporation, which was operated by its president, Wesley Taylor, who was a resident of Illinois.

In their complaint, plaintiffs Knaus and Everson specifically allege that the fraud began when Edwards, acting as an agent of the Richum Group, induced them to individually enter into separate agreements entitled "Assignment of Escrow Funds" on December 8, 2003. Under the terms of these contracts, Knaus and Everson agreed to place $300,000 and $90,000 respectively in an escrow account administrated by attorney Robert Riffner on behalf of the Richum Group. According to plaintiffs, the money was to be used "as a bond against which the Richum Defendants would secure a loan." Under the agreements, if a loan was secured, the Richum Group would, within two business days thereafter, deposit into the escrow account funds equal to the amount plaintiffs had deposited into the account and direct the escrow agent, Riffner, to remit to each plaintiff an amount twice as large as the amount he had invested. The agreements also provided that in the event the Richum Group failed to secure a loan, all of plaintiffs' funds would be returned to them. Each agreement was executed by the individual plaintiffs, Edwards, and the Richum Group's vice-president, Erickson.

Plaintiffs aver that their $390,000 was placed into a Richum Group escrow account in Chicago pursuant to the agreements, but that they never received any money from defendants. According to bank deposit slips attached to the complaint, Everson's $90,000 cashier's check was deposited into the escrow account on December 12, 2003, and Knaus's $300,000 check was deposited on December 16, 2003. The complaint is also accompanied by a copy of Knaus's $300,000 cashier's check and a withdrawal slip drafted at Associated Bank and dated December 12, 2003, which states: "w/d from Sav per phone conversation/To: Riffner Barber Scott Law firm/Re: Richum Group, Escrow Account" and is directed to "Brian Knaus 813 English Ln Belleville, Il 62223." Plaintiffs allege that Erickson, with the knowledge and consent of Anderson, directed Riffner to distribute portions of the escrow funds to himself, Anderson and others on dates spanning from December 15, 2003, to December 31, 2003. A letter drafted by Riffner and various bank documents attached to the complaint show that Erickson received $4,600, Anderson received $22,155, Riffner's firm received $1500, and three other entities, not described in the record, received $11,745.

Plaintiffs allege that the balance of the escrow account, $350,000 was transferred by Erickson on behalf of the Richum Group to a Texas company called PHD Management Group, L.L.C. pursuant to a contract between the companies. They contend that, unbeknownst to them, Erickson, on behalf of Richum and with the knowledge of Anderson, entered into a "Contract/Loan Agreement" with Jerome Carter, the finance director and principal of PHD and Texas resident, on December 16, 2003. Under the terms of that agreement, PHD was to place a "Capital Indemnity Bond" with a face value of $300 million with a lender, which would, in turn, give the Richum Group a loan in the amount of $210 million against the bond. Of this amount, the Richum Group was to receive $10 million in cash and a line of credit in the amount of $190 million to fund a series of building projects. The remaining $10 million would be used by PHD to cover the cost of the bond. Under the contract, the Richum Group was obligated to repay the loan within one year and PHD was entitled to 40% of the Richum Group's net profits from the enumerated building projects. Also on December 16, 2003, the Richum Group and PHD entered into an accompanying "Escrow Account Agreement," which provided that the Richum Group would place $350,000 into a PHD escrow account located at a Wells Fargo Bank branch in Houston, Texas, and managed by appellant Charles C. Guidry, P.C., to be used by PHD in securing the "Capital Indemnity Bond" which would be used as collateral to secure the loan.¹ The Escrow Account Agreement was executed by Erickson, Carter, and Guidry.

According to the complaint, Carter, Guidry, and another defendant named Wesley Taylor, who is a resident of Illinois, falsely represented to the Richum Group that it had received a loan with which to transact business, but in fact, converted the plaintiffs' $350,000 for their own benefit. Plaintiffs allege that defendants Erickson, Anderson, Guidry, Carter, and Taylor never intended to return the $390,000 to them, but instead divided the funds amongst themselves.

In count I of the complaint, plaintiffs advance a claim for fraud. They specifically contend that Anderson, Erickson, and Edwards (the Richum Defendants) misrepresented to plaintiffs that the funds they deposited into the Illinois escrow account would not be transferred out of that account and would be used only as a bond to secure a loan, that they would be paid a premium if such a loan was secured, that their money would be returned if the loan was not received, and that they were dealing in good faith with third parties, "such as Defendants Guidry, Taylor, and Carter." Plaintiffs alleged that these intentional false representations induced them to give the Richum Defendants $390,000, which the defendants never intended to return. They further alleged:

"Upon information and belief, Defendants Carter, Guidry, and Taylor defrauded Plaintiffs when they induced the principals and agents of the Richum Group to pay over Plaintiff's funds from the Richum Group escrow account to the escrow account controlled by PHD Management, LLC, Charles C. Gudry [sic], P.C., and Taylor. In the alternative, upon information and belief, Defendants Edwards, Erickson, Anderson, Guidry, Carter, and Taylor fraudulently induced Erickson and Anderson to pay over the funds while in fact all of said Defendants had actually agreed to split up the funds among themselves."

Plaintiffs next assert that Carter and Taylor, on behalf of PHD, misrepresented to the Richum Group that they secured a loan on the Richum Group's behalf. Plaintiffs allege that these...