Paul v. Gerald Adelman & Associates, Ltd.

• Decision Date: 19 October 2006
• Docket Number: No. 100383.,100383.
• Parties: Promila Daman PAUL, as Trustee for the S. Daman Paul, M.D., and P. Daman Paul, M.D., Ltd. Pension Plan and Trust, Appellee, v. GERALD ADELMAN & ASSOCIATES, LTD., et al., Appellants.
• Court: Illinois Supreme Court

Page 1

858 N.E.2d 1

223 Ill.2d 85

306 Ill.Dec. 556

Promila Daman PAUL, as Trustee for the S. Daman Paul, M.D., and P. Daman Paul, M.D., Ltd. Pension Plan and Trust, Appellee, v. GERALD ADELMAN & ASSOCIATES, LTD., et al., Appellants.

No. 100383.

Supreme Court of Illinois.

October 19, 2006.

COPYRIGHT MATERIAL OMITTED

Michael C. Bruck, Jean M. Prendergast and Kate R. O'Loughlin, of Crisham & Kubes, Ltd., Chicago, for appellant Gerald Adelman & Associates, Ltd.

Paul R. Garry and Julie L. Trester, of Meckler, Bulger & Tilson, L.L.P., Chicago, for appellant Federal Kemper Life Assurance Co.

Monte Mann, of Navack & Macey, L.L.P., Chicago, for appellants Gary R. Mann and Gary R. Mann & Associates.

Thomas D. Rosenwein, of Gordon, Glickman, Flesch & Rosenwein, Chicago, for appellee.

OPINION

Justice FITZGERALD delivered the judgment of the court, with opinion.

Plaintiff, Promila Daman Paul, as trustee for the S. Daman Paul, M.D., and P. Daman Paul, M.D., Ltd. Pension Plan and Trust (the joint pension plan), filed two petitions in the circuit court of Cook County seeking relief from judgment pursuant to section 2-1401 of the Code of Civil Procedure (735 ILCS 5/2-1401 (West 2002)). Plaintiff sought to vacate two orders dismissing her causes of action for want of prosecution (DWP) against several defendants who provided administrative, actuarial, insurance, and other services to the joint pension plan. The circuit court granted plaintiff's petitions, thus reinstating her cases, and consolidated the cases for further action. Defendants appealed. The appellate court affirmed. Nos. 1-04-0189, 1-04-0214 cons. (unpublished order under Supreme Court Rule 23).

We allowed defendants' petition for leave to appeal. See 177 Ill.2d R. 315; 155 Ill.2d R. 304(b)(3). For the reasons discussed below, we affirm in part and vacate in part the judgment of the appellate court, and remand the matter to the circuit court for further proceedings.

BACKGROUND

In 1971, plaintiff, a physician, married Shashi Daman Paul, also a physician. The couple operated their medical practice as an Illinois corporation known as S. Daman Paul, M.D., and P. Daman Paul, M.D., Ltd. In 1977, the corporation adopted the joint pension plan, under which plaintiff and Shashi were the plan trustees. At some point prior to 1991, plaintiff and Shashi moved to Indiana. In January 1991, plaintiff initiated divorce proceedings in Jasper County, Indiana.

On January 18, 1995, while the divorce action was pending, plaintiff, as a trustee of the joint pension plan, filed a multicount complaint in the circuit court of Cook County against defendants, Gerald Adelman & Associates, Ltd. (Adelman), and Federal Kemper Life Assurance Company (Kemper) (the Adelman case). According to the complaint, the joint pension plan engaged Adelman, an Illinois insurance agency, to provide services with regard to the life insurance assets of the plan, including a $1 million Kemper policy on the life of Shashi. The complaint alleged that in January 1990, March 1991, and June 1991, Shashi directed Adelman to obtain the maximum cash loans possible on the Kemper policy. The loans, which totaled almost $140,000, were allegedly made for Shashi's own benefit without plaintiff's knowledge or consent. Plaintiff claimed that Shashi forged her signature on loan request forms; Adelman falsely witnessed the forged signature; and Kemper failed to verify plaintiff's signature before making the loans. The complaint further alleged that the $1 million Kemper policy was fraudulently transferred from the joint pension plan to Shashi's own pension—the S. Daman Paul, M.D., P.C. Pension Plan and Trust. Plaintiff sought damages for breach of contract, breach of fiduciary duty, fraud, negligence, conversion, and violations of the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/1 et seq. (West 1994)).

Kemper attempted to have the Adelman case removed to federal court. On April 19, 1995, the district court for the Northern District of Illinois remanded the cause to the circuit court of Cook County. After remand, Kemper filed, among other pleadings, a counterclaim against Adelman and a third-party action against Shashi.

On May 22, 1995, plaintiff, in her capacity as a trustee of the joint pension plan, filed a second complaint in the circuit court of Cook County, this one against defendants Gary R. Mann, Gary R. Mann & Associates, Inc. (collectively, Mann), and Engler, Zoghlin, Mann, Ltd. (EZM) (the Mann case). The complaint identified EZM as an Illinois pension actuarial firm that was retained in 1977 to provide services in connection with the creation and administration of the joint pension plan. Gary R. Mann was named as the individual at EZM principally responsible for plan administration. Gary R. Mann & Associates, Inc., was the successor firm to EZM.

According to the allegations of the complaint, in early 1991, Shashi began an independent medical practice in Indiana, incorporated under the name S. Daman Paul, M.D., P.C., and retained the services of EZM to create and administer a pension plan for his practice, purportedly to be funded with assets from the joint pension plan. The complaint alleged that EZM and Mann prepared certain corporate resolutions, which Shashi executed, that changed the name of the joint pension plan to the S. Daman Paul, M.D., P.C. Pension Plan and Trust, and removed plaintiff as a trustee of the joint pension plan, thus enabling Shashi to transfer assets from the joint pension plan to his individual pension plan. Plaintiff sought damages for breach of contract, breach of fiduciary duty, fraud, negligence, conversion, and violations of the Consumer Fraud Act.

In January 1996, plaintiff filed a petition for personal bankruptcy in the United States Bankruptcy Court for the Northern District of Indiana. The Adelman and Mann cases became part of the bankruptcy estate under the control of the trustee in bankruptcy. Although plaintiff initially represented herself in the bankruptcy court, in June 1997, she retained attorney Thomas Rosenwein, who had represented plaintiff in the Adelman and Mann cases. Rosenwein represented plaintiff in the bankruptcy court until mid-May 2001, when she could no longer afford legal fees.

In light of the ongoing bankruptcy proceedings, on February 18, 1998, the Cook County circuit court placed the Adelman case on the court's bankruptcy calendar. Similarly, on April 16, 1998, the circuit court placed the Mann case on the bankruptcy calendar.

A printout of the circuit court activity on the Adelman case indicates that three years after the case was placed on the bankruptcy calendar, the case was set on the court's October 10, 2001, status call. At that call, the circuit court removed the Adelman case from the bankruptcy calendar, renumbered the case, and because no one appeared for plaintiff, entered a DWP order. The following day, the circuit court entered a DWP order as to the Mann case. Although a printout of the circuit court activity in the Mann case does not appear in the record, presumably the Mann case was also set on the court's status call. At the time the DWP orders were entered, plaintiff was no longer represented by counsel.

On March 28, 2003, 15 months after the Cook County circuit court dismissed plaintiff's cases, the United States bankruptcy court entered an order stating that the Adelman case and the Mann case "are properly claimed as exempt and are no longer property of [the] Debtor's estate" and, accordingly, are "abandoned back to the Debtor."

Six months later, on September 29, 2003, plaintiff filed a section 2-1401 petition seeking to vacate the circuit court's DWP order as to the Adelman case. The plaintiff followed with a section 2-1401 petition as to the Mann case on October 8, 2003. Plaintiff supported her petitions with her own affidavit, as well as the affidavit of attorney Rosenwein, who prepared the section 2-1401 petitions.

According to the petitions and affidavits, the trustee in bankruptcy would not agree to allow plaintiff to proceed with the Adelman and Mann cases, nor would the trustee himself pursue the litigation on behalf of the bankruptcy estate. When the trustee finally abandoned the Adelman and Mann cases back to plaintiff and the court entered an order to that effect on March 28, 2003, plaintiff immediately contacted Rosenwein and provided him a copy of the order. In early April 2003, Rosenwein checked the court files in Cook County and learned for the first time that both cases had been dismissed 18 months earlier. Plaintiff and Rosenwein averred that neither had received notice that the cases had been dismissed.

Rosenwein also averred that, at the time plaintiff contacted him about pursuing the Adelman and Mann cases again, plaintiff's files were being held by the Peterson & Ross Dissolution Committee—the entity formed to wind up the affairs of Peterson & Ross which was dissolved in February 2003. Rosenwein's affidavit explained that he had joined Peterson & Ross in April 2000, where he continued to represent plaintiff in the bankruptcy court until she was unable to afford legal fees. Rosenwein's affidavit also states that he left Peterson & Ross in January 2003 and joined another firm, but plaintiff's files remained with Peterson & Ross because plaintiff had incurred a large debt for legal services. According to Rosenwein, after extensive discussion and negotiation, the Peterson & Ross Dissolution Committee finally agreed, in a document dated August 31, 2003, to release plaintiff's files.

Plaintiff maintained that she could not pursue the cases in her own right until receipt of the March 28, 2003, order of the bankruptcy court releasing the causes of action back to her, and until she had reached an agreement on August 31, 2003, with the Peterson & Ross Dissolution Committee to release her files. She thus maintained that she exercised due diligence in prosecuting her...