McLane v. Russell

• Decision Date: 27 September 1989
• Docket Number: No. 66019,66019
• Parties: , 137 Ill.Dec. 554 Keith McLANE et al., Appellees, v. Fred G. RUSSELL et al., Appellants.
• Court: Illinois Supreme Court

Page 499

546 N.E.2d 499

131 Ill.2d 509, 137 Ill.Dec. 554

Keith McLANE et al., Appellees, v. Fred G. RUSSELL et al., Appellants.

No. 66019.

Supreme Court of Illinois.

Sept. 27, 1989.

Rehearing Denied Dec. 4, 1989.

Heyl, Royster, Voelker & Allen, Peoria (Lyle W. Allen, Robert H. Schultz, Jr., and Karen L. Kendall, of counsel), for appellants.

Jerome Mirza & Associates, Ltd., Chicago (Jerome Mirza, of counsel), for appellees.

Justice WARD delivered the opinion of the court:

The plaintiffs, Keith McLane and Cecil McLane, individually and as executor of the estate of Grace Shugart, who were named beneficiaries under a will, instituted an action for legal malpractice in the circuit court of Peoria County against Fred Russell, the attorney who drafted the will, and his law firm, Johnson, Martin & Russell, a professional corporation. Following trial, the jury returned a verdict for the plaintiffs in the amount of $325,000. The trial court granted the defendants' motion for setoff and reduced the verdict by one-half of the amount the plaintiffs received in a pretrial settlement with the estate of a sister of the testator, against which the plaintiffs had filed a suit. Upon the defendants' appeal and the plaintiffs' cross-appeal, the appellate court affirmed. (159 Ill.App.3d 429, 111 Ill.Dec. 250, 512 N.E.2d 366.) We allowed the defendants' petition for leave to appeal (107 Ill.2d R. 315).

The plaintiffs, Cecil McLane and his son, Keith, were tenant farmers on a 240-acre farm located in Bureau County owned by Grace and Helen Shugart, two unmarried sisters. In 1942, the Shugart sisters executed wills in which they left all of their property to each other. In 1958, attorney Fred Russell, a defendant in this action, began to represent Grace and Helen Shugart. At their request, Russell placed their farm in joint tenancy ownership with right of survivorship. In 1961, Russell drafted a new will for Grace under the terms of which all her property was left to Helen. Helen was adjudicated incompetent in 1971 and Russell was appointed her conservator. Subsequently, Grace went to the defendant's office and discussed methods of leaving the farm to the McLanes.

In 1975, Russell drafted a new will for Grace which contained the following paragraph:

"ARTICLE XI

I devise and bequeath unto CECIL McLANE, who has worked for me and my sister, Helen R. Shugart, and been our farm tenant for a period of over 28 years, a life estate in my interest in the home farm situated in * * * Bureau County, Illinois, containing 240 acres, more or less, for him to use and to receive all income therefrom for and during his lifetime; he, however, to pay the taxes and to keep the improvements adequately insured and maintained during his tenure as life tenant. Upon the demise of the said Cecil McLane, I hereby devise unto his son, KEITH McLANE, the remainder of my interest in said real estate."

In 1976, Russell revised Grace's 1975 will, making some minor changes unimportant here, but leaving unchanged the provision devising a life estate of Grace's interest in the farm to Cecil McLane and a remainder interest to Keith McLane. The joint tenancy in the Shugart farm was never severed. Upon Grace's death in 1977, legal title to the farm passed by operation of law to the surviving joint tenant, Helen Shugart. On Helen's subsequent death, title to the farm transferred by intestate succession to the Shugarts' cousins in fee simple.

The plaintiffs, Cecil and Keith McLane, brought this legal malpractice action in the circuit court of Peoria County. The plaintiffs alleged that Russell was negligent in failing to sever the joint tenancy between the sisters, in failing to advise Grace that a severance of the joint tenancy was necessary to devise her interest in the farm to the plaintiffs, and in drafting a will which operated to defeat Grace's testamentary intent. The plaintiffs claimed that Russell's negligence permanently deprived them of Grace's interest in the farm and they claimed damages in the amount of one-half of the value of the Shugart farm.

Following a four-day trial, the jury returned a verdict for the plaintiffs in the amount of $325,000, representing one-half of the value of the farm. The trial court allowed the defendants' motion for a setoff, and reduced the verdict by one-half of the amount the plaintiffs received in settlement of their suit against Helen Shugart's estate, thereby reducing the damage award to $258,545.

The defendants appealed, claiming inter alia that venue was improper in Peoria County, and that the plaintiffs were not intended beneficiaries of the attorney-client relationship between Russell and Grace and had no right to bring an action for legal malpractice against the defendants. The plaintiffs cross-appealed, claiming that the defendants were not entitled to a setoff and requesting reinstatement of the judgment in full. As stated, the appellate court affirmed the judgment of the circuit court (159 Ill.App.3d 429, 111 Ill.Dec. 250, 512 N.E.2d 366).

Three issues are presented for our review: (1) whether the plaintiffs were intended beneficiaries of the attorney-client relationship between Russell and Grace Shugart and thereby entitled to bring a legal malpractice action against the defendants; (2) whether venue was proper in Peoria County; and (3) whether the defendants were entitled to a setoff.

To state a legally sufficient claim for negligence, a plaintiff must allege the existence of a duty owed by the defendant to the plaintiff, a breach of that duty, and an injury proximately caused by that breach. (Curtis v. County of Cook (1983), 98 Ill.2d 158, 162, 74 Ill.Dec. 614, 456 N.E.2d 116.) The determination of whether a duty exists is an issue of law to be determined by the court. (Kirk v. Michael Reese Hospital & Medical Center (1987), 117 Ill.2d 507, 525, 111 Ill.Dec. 944, 513 N.E.2d 387.) To conclude that a duty exists, a court must find that the defendant and the plaintiff stood in such a relationship to one another that the law imposed upon the defendant an obligation of reasonable conduct for the benefit of the plaintiff. Kirk v. Michael Reese Hospital & Medical Center (1987), 117 Ill.2d 507, 525, 111 Ill.Dec. 944, 513 N.E.2d 387.

Typically, an attorney owes a professional obligation only to his client, not to nonclient third persons. (National Savings Bank v. Ward (1880), 100 U.S. 195, 25 L.Ed. 621; Byron Chamber of Commerce, Inc. v. Long (1981), 92 Ill.App.3d 864, 868, 48 Ill.Dec. 77, 415 N.E.2d 1361.) In Pelham v. Griesheimer (1982), 92 Ill.2d 13, 64 Ill.Dec. 544, 440 N.E.2d 96, this court held that, under limited circumstances, a nonclient may maintain a negligence action against an attorney. Under Pelham, a nonclient may maintain a negligence action against an attorney only when the nonclient can show that he was the primary intended beneficiary of the attorney-client relationship. Pelham held that a nonclient-plaintiff seeking to recover in tort for legal malpractice must establish that the defendant-attorney owed him a duty of due care by showing that the primary purpose of the relationship between the defendant-attorney and the client was to benefit or influence the nonclient-plaintiff. Pelham v. Griesheimer (1982), 92 Ill.2d 13, 64 Ill.Dec. 544, 440 N.E.2d 96.

The evidence in Pelham showed that the plaintiffs' mother retained the defendant-attorney to represent her in a divorce proceeding against her husband. Although the divorce decree required the husband to maintain his children as the primary beneficiaries of his life insurance policies, the husband subsequently remarried and named his second wife as the sole beneficiary of his only insurance policy. His second wife received the proceeds of the policy after his death. The children sued the attorney who represented their mother in the divorce proceeding for negligence, claiming that they were direct third-party beneficiaries of the contract between their mother and her attorney. The court concluded that the plaintiffs' mother retained the defendant to obtain a divorce, a property settlement, and custody of the children, not to represent her children's interests as beneficiaries under an insurance policy, and that the plaintiffs were incidental, rather than intended, beneficiaries of the contract between their mother and her attorney.

The appellate court applied the doctrine stated in Pelham to the facts in this case, and concluded that the plaintiffs could maintain a legal malpractice claim against the defendants. The court held that the plaintiffs had proved that the primary purpose of the 1975 and 1976 transactions between Grace Shugart and Fred Russell, in which Russell drafted Grace's wills, was to confer a benefit upon the McLanes. The court concluded that evidence established that Grace's intent was to confer her one-half interest in the farm to the McLanes at her death. 159 Ill.App.3d at 433, 111 Ill.Dec. 250, 512 N.E.2d 366.

The defendants argue that the appellate court's decision conflicts with this court's decision in Pelham in two respects. First, they argue that the appellate court improperly focused upon a single transaction between Russell and Grace Shugart, rather than the attorney-client relationship they had maintained for 25 years prior to the time the 1975 will was drafted. They claim that, had the appellate court properly focused upon the entire attorney-client relationship rather than a single transaction, it would have concluded that the primary intended beneficiary of the relationship between Russell and Grace Shugart was Grace's sister, Helen Shugart.

The language in Pelham refutes the defendants' claim that a court may not consider a single transaction between an attorney and client when determining whether the attorney owes a duty to a nonclient. In defining the circumstances in which an attorney may be held liable to a nonclient, Pelham stated:

"In the area of legal malpractice the attorney's...