Tri-G, Inc. v. Burke, Bosselman and Weaver

• Decision Date: 19 October 2004
• Docket Number: No. 2-02-1299.,2-02-1299.
• Citation: 288 Ill.Dec. 580,817 N.E.2d 1230,353 Ill. App.3d 197
• Parties: TRI-G, INC., Plaintiff-Appellee and Cross-Appellant, v. BURKE, BOSSELMAN AND WEAVER, Defendant-Appellant and Cross-Appellee.
• Court: United States Appellate Court of Illinois

817 N.E.2d 1230

353 Ill. App.3d 197

288 Ill.Dec. 580

TRI-G, INC., Plaintiff-Appellee and Cross-Appellant, v. BURKE, BOSSELMAN AND WEAVER, Defendant-Appellant and Cross-Appellee.

No. 2-02-1299.

Appellate Court of Illinois, Second District.

October 19, 2004.

Theodore A.E. Poehlmann, Philip A. Prossnitz, Law Office of Theodore A.E. Poehlmann, P.C., Woodstock, Michael L. Shakman, Diane F. Klotnia, Thomas M. Staunton, Miller, Shakman & Hamilton, Chicago, for Burke, Bosselman & Weaver.

Daniel A. Edelman, Cathleen M. Combs, James O. Latturner, Francis R. Greene, Tara L. Goodwin, Edelman, Combs & Latturner, Chicago, Thomas W. Gooch III, Law Offices of Thomas W. Gooch III, Wauconda, Daniel A. Mengeling, Johnson, Leahy & Mengeling, Ltd., Woodstock, for Tri-G.

Presiding Justice O'MALLEY delivered the opinion of the court as to Parts I, II, III, and IV, in which Justice BOWMAN and Justice GILLERAN JOHNSON concur. Justice BOWMAN delivered the opinion of the court as to Part V, in which Presiding Justice O'MALLEY concurs. Justice GILLERAN JOHNSON dissents from Part V.

I. BACKGROUND

In 1987, plaintiff, Tri-G, Inc. (Tri-G), retained defendant, Burke, Bosselman & Weaver (BBW), to prosecute a complaint against Elgin Federal Bank (Elgin Federal) that Tri-G had filed in 1981. On the day of trial on the 1981 complaint, the BBW attorney who was handling Tri-G's case claimed that he was not prepared to proceed. Accordingly, the trial court dismissed Tri-G's case with prejudice. In 1989, Tri-G filed a legal malpractice action against BBW and received a jury verdict in the amount of $2,337,550. The trial court denied BBW's posttrial motion, and this appeal ensued. Tri-G has also filed a cross-appeal. We affirm in part, reverse in part, and remand for further proceedings.

The trial of this matter consisted of a "trial within a trial," in which the parties presented evidence pertaining to both the underlying lawsuit between Tri-G and Elgin Federal and the malpractice suit between Tri-G and BBW. Much of the evidence at trial pertained to whether BBW's negligence caused the dismissal of Tri-G's suit against Elgin Federal, but BBW concedes for purposes of this appeal that its negligence caused the dismissal. The remaining issue is whether Tri-G would have prevailed in the underlying lawsuit but for BBW's negligence.

In 1981, Tri-G filed a 10-count lawsuit against Elgin Federal, asserting breach of contract, common-law fraud, and violations of the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (Ill.Rev.Stat.1981, ch. 121 1/2, par. 261 et seq. (now 815 ILCS 505/1 et seq. (West 2002))).

Tri-G alleged that, in 1976, it was the general contractor for a residential real estate development in McHenry County known as the Huntington Point subdivision. First National Bank of Woodstock (First National) owned Huntington Point as the trustee of a land trust with Tri-G as beneficiary. Tri-G alleged that, in 1978, Elgin Federal made construction loans to Tri-G to build residential homes on lots 7, 16, 17, 24, 25, 26, 28, 30, 31, 32, 35, 36, and 37 of Huntington Point. Tri-G further alleged that it entered into a contract with Chain of Lakes Group (CLG) on August 10, 1978, in which CLG agreed to complete construction on lots 7, 24, 25, 30, 32, 35, 36, and 37.

Tri-G alleged that Elgin Federal breached its construction loan agreements with Tri-G by making payouts to CLG from the construction loans without the written authorization of Tri-G, and by allowing CLG to submit new contractor's affidavits that Elgin Federal used as a basis for additional payouts in excess of the amounts stated in the original contractor's affidavits submitted by Tri-G. Tri-G also alleged that Elgin Federal breached the land loan agreement by withholding payouts owed to Tri-G after it entered into the contract for CLG to complete construction on lots 7, 24, 25, 30, 32, 35, 36, and 37.

Tri-G alleged that Elgin Federal committed common-law fraud by: (1) making unauthorized payouts on the construction loans for lots 16, 17, 26, 28, and 31; (2) withholding money from Tri-G at the time of closing on lots 16, 26, 28, 30, and 37; (3) withholding from Tri-G the fact that Elgin Federal had made unauthorized disbursements to CLG; (4) allowing CLG to substitute new contractor's affidavits for the original contractor's affidavits with respect to the construction loans on lots 7, 16, 17, 24, 25, 26, 28, 30, 31, 32, 35, 36, and 37; and (5) misleading Tri-G into believing that an accounting would be done once all of the lots had been closed upon, at which time Tri-G would receive monies withheld by Elgin Federal. Tri-G's allegations under the Consumer Fraud Act essentially mirrored those of the common-law fraud count.

In setting forth its damages, Tri-G itemized the damages incurred with respect to the construction loans on lots 7, 17, 24, 25, 26, 28, 30, 31, 36, and 37. Tri-G further alleged that it was damaged by unauthorized payouts from a land loan it secured from Elgin Federal in the amount of $30,000.

Trial on Tri-G's complaint was postponed for several years, during which time Tri-G was represented successively by several law firms. Finally, the trial court set May 11, 1987, as a date certain for trial. Tri-G retained BBW in January 1987. On May 11, 1987, the BBW partner assigned to Tri-G's case answered "not ready" when the case was called for trial. The trial court dismissed Tri-G's case with prejudice.

Tri-G filed a legal malpractice suit against BBW in 1989 and voluntarily dismissed it in 1994. Tri-G refiled the malpractice suit in 1995. In its original complaint, Tri-G alleged that BBW was negligent for (1) failing to file an appearance until May 4, 1987; (2) failing to advise Tri-G's witnesses and discuss their testimony in advance of depositions; (3) failing to attend certain depositions; (4) failing to properly prepare the case for trial; and (5) failing to seek a voluntary nonsuit on the date of trial. One month before trial, Tri-G was allowed to amend its complaint to add a claim that BBW was negligent for failing to amend the original complaint against Elgin Federal. During the malpractice trial, Tri-G was allowed to introduce evidence of fraud and breach of contract relative to incidents not specified in the 1981 complaint, on the theory that these claims would have been brought had BBW properly amended the complaint.

The relevant trial testimony was as follows. Irene Geschke testified that, in June 1976, she and her husband Clarence (who died prior to trial) purchased a 16.5-acre tract of land with the intent of developing it as the Huntington Point subdivision. At the time, Irene was working as a real estate broker. Irene and Clarence obtained a land loan from First National to purchase the property and placed it in a land trust with First National as trustee and Irene and Clarence as beneficiaries. Irene and Clarence formed Tri-G as general contractor for the development of the property. Tri-G divided Huntington Point into 46 lots, 45 of which were for single-family homes. The remaining lot was for a duplex. Clarence was the sole shareholder of Tri-G and Irene was principally responsible for the operations of Tri-G.

Irene testified that, in 1977, she approached Dennis Neubert of Elgin Federal regarding financing for Tri-G. Subsequently, Tri-G obtained a land loan from Elgin Federal to pay off the loan from First National. The land loan was secured by 38 unsold Huntington Point lots. Irene also spoke with Neubert about the possibility of obtaining financing for the construction of homes on Huntington Point. Neubert told Irene that Elgin Federal would finance the construction but would not extend funds for more than four "spec" homes at any one time. Tri-G introduced into evidence a one-page document from Elgin Federal entitled "Construction Loan Procedure," which dealt with such matters as Elgin Federal's inspections of construction sites and its payouts of loan proceeds to subcontractors and suppliers of materials. Tri-G also introduced into evidence several loan commitment letters from Elgin Federal that set forth specific terms for each construction loan, such as the loan amount and the rate of interest. Irene testified that the documents, which purported to memorialize the loan agreements, actually included only some of the loan terms, the remainder having been agreed upon orally by Irene and Neubert. Irene testified to the following oral terms: (1) payouts from loans would be made only upon Tri-G's written request; (2) each loan was separate such that funds advanced on one loan could not be used for construction on a lot that was subject to a different loan; (3) although interest on a particular loan would begin accruing once funds were disbursed, principal and interest payments on that loan would not be due until all the funds on that loan had been paid out; and (4) the purchaser of a completed home would be given a loan with the same interest rate and terms (9% interest and no points) as the construction loan Tri-G had obtained for that house. Finally, Irene and Neubert agreed that if a subcontractor or seller of materials required more funds than were originally stated in Tri-G's affidavit itemizing the costs for constructing the home, Tri-G was required to submit an amended affidavit before the additional funds would be disbursed. Irene testified that the loan agreements contained no provision for when payouts could be terminated by Elgin Federal.

Irene testified that, although she and Neubert agreed that interest payments on any particular loan would not be due until the proceeds had been entirely paid out, Elgin Federal initially billed her for interest, and she paid the bills. However, Irene stopped paying interest in March 1978.

Irene testified that Tri-G's dealings with Elgin Federal initially went smoothly. When Tri-G needed a payout from one of its loans, Elgin Federal would issue the payout within three days...