Rutkoski v. Hollis

• Decision Date: 30 September 1992
• Docket Number: No. 4-91-0798,4-91-0798
• Citation: 175 Ill.Dec. 826,600 N.E.2d 1284,235 Ill.App.3d 744
• Parties: , 175 Ill.Dec. 826 Mary RUTKOSKI, as Executor for the Estate of Charles Rutkoski, Plaintiff-Appellant, v. Richard A. HOLLIS, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 1284

600 N.E.2d 1284

235 Ill.App.3d 744, 175 Ill.Dec. 826

Mary RUTKOSKI, as Executor for the Estate of Charles Rutkoski, Plaintiff-Appellant, v. Richard A. HOLLIS, Defendant-Appellee.

No. 4-91-0798.

Appellate Court of Illinois,

Fourth District.

Sept. 30, 1992.

Hasselberg & Rock, Peoria, for plaintiff-appellant.

Bruce D. Locher, Springfield, for defendant-appellee.

Justice KNECHT delivered the opinion of the court:

Plaintiff, Mary Rutkoski, filed a one-count amended legal malpractice complaint in the Sangamon County circuit court against defendant, attorney Richard Hollis, on behalf of her deceased husband's estate. She appeals from the trial court's dismissal of her complaint. The complaint alleged her husband, Charles Rutkoski, received deficient advice regarding his role as executor of the estate of his brother, Alexander Rutkoski. The trial court concluded the complaint failed to state a cause of action because Illinois law precludes recovery for economic losses in legal malpractice cases where the claim is based on negligence. Plaintiff argues her amended complaint adequately alleged decedent was owed an extracontractual duty by defendant, thereby allowing her to recover damages in tort. She also contends her complaint stated a third-party beneficiary breach of contract cause of action. We disagree and affirm.

I. FACTS

A. Plaintiff's Complaint

Charles sought legal advice from defendant in connection with Charles' role as executor of Alexander's estate. Charles later died and plaintiff was appointed executor of his estate. Plaintiff's July 1989 complaint alleged defendant committed legal malpractice by failing to advise Charles regarding his role as executor of Alexander's estate. Charles was also a beneficiary of the estate.

Before Alexander died, they owned farmland in a closely held corporation named Rutkoski Brothers, Inc. When Alexander died, Charles and his heirs intended to continue to farm the property owned by the corporation. The complaint alleged that all conditions of the special-use valuation for Federal and State tax laws were met when Alexander died and these conditions have continually been met.

Plaintiff alleged that defendant, as an attorney, breached his duty by negligently and carelessly failing to make an election under the special-use valuation provisions of the Federal and State tax laws, specifically, but not limited to, elections pursuant to section 2032(a) of the Internal Revenue Code of 1939 (26 U.S.C. § 2032(a) (1988)). This negligence resulted in the estate paying excessive estate taxes in the amount of $250,000, which reduced Charles' share of the estate proceeds. Plaintiff sought damages in excess of $15,000 plus costs.

Defendant sought an involuntary dismissal of the complaint pursuant to section 2-615 of the Code of Civil Procedure (Ill.Rev.Stat.1989, ch. 110, par. 2-615). In April 1990, the trial court granted the dismissal because, in pertinent part, the complaint failed to set forth facts establishing a duty owed to Charles by defendant and breach of that duty.

B. Plaintiff's Amended Complaint

In May 1990, plaintiff filed a one-count amended complaint. The complaint alleged an attorney-client relationship existed between defendant and Charles, the executor of Alexander's estate, and that defendant undertook the duty to act as the attorney of the estate and prepared documents for the estate. The complaint also stated in relevant part:

"6. Charles Rutkoski was a direct beneficiary of the Will of Alexander Rutkoski.

* * * * * *

13. In performance of the legal services to Charles * * * [defendant] breached his duty in that he negligently and carelessly failed to make an election under the special use valuation provisions of the federal and state tax laws, specifically, but not limited to, elections pursuant to Section 2032(a) of the Internal Revenue Code.

* * * * * *

15. As a direct and proximate result of the negligent and careless acts of the Defendant, Charles Rutkoski suffered damage for the reason that his share, as a beneficiary of the estate, was reduced as a result of the payment of excessive estate taxes.

* * * * * *

17. Charles Rutkoski during his lifetime was not familiar with the provisions of the Internal Revenue Code.

18. During his lifetime, Charles Rutkoski did not receive any legal advice regarding various tax elections that could have been made at the time of Alexander Rutkoski's death."

Plaintiff again sought damages in excess of $15,000 plus costs. In July 1991, defendant filed a motion to dismiss (Ill.Rev.Stat.1989, ch. 110, par. 2-615). He argued plaintiff's complaint failed to state a cause of action because the claim was based on negligence and she sought only economic damages. Defendant contended purely economic damages cannot be recovered from an attorney under a tort theory of negligence. Plaintiff responded she was not seeking economic loss damages. Rather, she sought damages for an intended beneficiary of the contract between Charles and defendant. She argued the Illinois Supreme Court authorizes actions where there was an extra-contractual duty to the persons whom the client intended to benefit from the agreement between the parties.

In September 1991, the trial court dismissed this complaint for failure to state a cause of action. The trial judge relied on this court's ruling in Collins v. Reynard (1990), 195 Ill.App.3d 1067, 142 Ill.Dec. 719, 553 N.E.2d 69, reh'g allowed (1992), 135 Ill.2d 554, 159 Ill.Dec. 102, 575 N.E.2d 909, that Illinois law precludes recovery of economic losses in tort cases, including legal malpractice, which are based on claims of negligence.

Defendant contends dismissal of plaintiff's amended complaint was proper because it alleged only economic damages and did not allege (1) the primary purpose of the attorney-client relationship between Charles, as executor, and defendant, as attorney, was for Charles' benefit as a beneficiary of Alexander's estate; or that (2) a duty owed to a nonclient was breached and was the proximate cause of plaintiff's loss.

II. NEGLIGENCE BASED CLAIM FAILS

A proper complaint for legal malpractice under a tort theory of negligence must allege (1) the existence of an attorney-client relationship; (2) a duty arising from that relationship, and in the case of a nonclient, that the relationship between the attorney and client was primarily or directly to benefit the nonclient; (3) a breach of that duty by defendant counsel; (4) proximate cause; and (5) damages. (Pelham v. Griesheimer (1982), 92 Ill.2d 13, 18, 64 Ill.Dec. 544, 546, 440 N.E.2d 96, 98; McLane v. Russell (1989), 131 Ill.2d 509, 514-15, 137 Ill.Dec. 554, 556-57, 546 N.E.2d 499, 501-02.) Plaintiff contends her complaint adequately alleged a negligence claim against defendant based on defendant's duties to Charles as a beneficiary of Alexander's estate.

The deficiency in plaintiff's pleadings lies in her failure to allege that the relationship between Charles and defendant was primarily for the benefit of Charles as a beneficiary of the estate.

A. Points Adequately Pleaded

Contrary to defendant's contentions, plaintiff's amended complaint adequately addressed the additional factors. It sufficiently established the existence of an attorney-client relationship. It also adequately alleged a duty on the part of defendant and breach of duty causing damages.

Defendant argues that plaintiff's amended complaint does not allege defendant breached his duty by failing to advise Charles about tax elections. Paragraph No. 18 states Charles did not receive any legal advice about these tax elections. Although this does not specifically allege defendant's failure to advise, it adequately informed defendant that plaintiff alleged he did not do so. Mid-America Fire & Marine Insurance Co. v. Middleton (1984), 127 Ill.App.3d 887, 892, 82 Ill.Dec. 555, 558, 468 N.E.2d 1335, 1338.

Plaintiff's pleading adequately alleged defendant breached his duty to Charles as executor by failing to advise him about taxes. This allegation does not, however, address a duty owed Charles as a third-party beneficiary of the estate.

Defendant also argues plaintiff cannot maintain an action against him when Charles suffered no monetary damages due to defendant's actions. He cites Jackson Jordan, Inc. v. Leydig, Voit & Mayer (1990), 199 Ill.App.3d 728, 733, 145 Ill.Dec. 755, 758, 557 N.E.2d 525, 528, as support. Plaintiff correctly notes Jackson Jordan, Inc., involved an action by a corporate client against its attorney and did not involve the issue of an attorney's extracontractual duty to a nonclient. Jackson Jordan, Inc., 199 Ill.App.3d at 730, 145 Ill.Dec. at 756, 557 N.E.2d at 526.

A nonclient can sufficiently plead a cause of action against an attorney for negligence without having to allege the client suffered monetary damages. (See McLane, 131 Ill.2d at 514-15, 137 Ill.Dec. at 556-57, 546 N.E.2d at 501-02; Pelham, 92 Ill.2d at 20-21, 64 Ill.Dec. at 547, 440 N.E.2d at 99; Ogle v. Fuiten (1983), 112 Ill.App.3d 1048, 1050, 68 Ill.Dec. 491, 493, 445 N.E.2d 1344, 1346, aff'd (1984), 102 Ill.2d 356, 80 Ill.Dec. 772, 466 N.E.2d 224.) Plaintiff adequately alleged damages. However, without more than economic damages, this legal malpractice claim founded in a tort theory of negligence could not survive unless it was alleged that defendant owed Charles an extracontractual duty. Plaintiff failed to include such an allegation.

B. Insufficient Complaint

Plaintiff contends she seeks compensation for damages suffered by Charles in his capacity as a third-party beneficiary of the contract between him and defendant. She indicates Charles suffered no damages as executor of Alexander's estate. The damages for which she seeks compensation were incurred by Charles as beneficiary of Alexander's estate and were caused by excessive or unnecessary estate taxes, which taxes reduced Charles' share of the estate.

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