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Bank of Lyons v. Schultz





Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County, the Hon. Daniel P. Coman, Judge, presiding.


The plaintiff, Mary Schultz, brought an action in October 1975 in the circuit court of Cook County against the Bank of Lyons for malicious prosecution for damages allegedly sustained as a result of two suits filed against her by the bank, both of which were decided in her favor. The trial court dismissed her complaint and the appellate court reversed. (66 Ill. App.3d 698.) We granted the bank's petition for leave to appeal.

The plaintiff's claim of malicious prosecution by the bank is founded upon the following events. In April of 1962 the bank filed a creditor's suit against the plaintiff and her late husband, Alvin Schultz, who died during the pendency of that suit. As the beneficiary of his life insurance policies the plaintiff was to receive $61,533.27. The bank filed a suit in equity in June 1963 petitioning for an accounting and for an injunction to restrain distribution of the insurance proceeds to the plaintiff. The trial court issued a preliminary injunction enjoining the insurance companies from making payments to the plaintiff and ordering that the funds be deposited with the clerk of the circuit court. The trial court, however, following the recommendation of a master in chancery to whom the matter was referred, dissolved the injunction on July 2, 1963, and dismissed the complaint in equity. The plaintiff was also granted leave to file a suggestion of her damages on account of the injunction's issuance as provided for in section 12 of the Injunction Act (Ill. Rev. Stat. 1963, ch. 69, par. 12). She was subsequently awarded $2,369.67 on her suggestion of damages to cover interest she would have earned on the insurance proceeds held by the clerk of the court, attorneys' fees and costs.

Seventeen days after the injunction was dissolved, the bank was given leave to amend the complaint in its pending creditor's suit by adding a second count, and in it the bank again prayed for an accounting and for a preliminary injunction prohibiting distribution of the insurance proceeds. A preliminary injunction was entered on July 19, but almost two years later, on September 24, 1965, the court dismissed the second count, stating that the injunction had been wrongfully issued. The court also dissolved this injunction and ordered the clerk of the court to release to the plaintiff those insurance proceeds in excess of $30,000. The plaintiff was also given leave to file a suggestion of damages under section 12.

In November of 1965 the bank, with leave of court, filed another count to its creditor's suit. This third count alleged conversion and unlawful withholding of funds based on claims that the bank had been induced to issue cashier's checks to Alvin Schultz without consideration and that the bank had erroneously credited the plaintiff's account in the amount of $10,200. A master in chancery found, however, that the bank failed to prove a prima facie cause of action, and the circuit court, following the recommendation of the master, dismissed this third count. This was in September 1969.

The court also ordered the release of the balance of the insurance proceeds to the plaintiff. The bank appealed, and the appellate court remanded to the trial court to determine whether the plaintiff was a holder in due course. (Bank of Lyons v. Schultz (1971), 1 Ill. App.3d 495.) On remand the trial court found the plaintiff was a holder in due course and again dismissed the third count.

On June 21, 1972, the trial court dismissed count I of the bank's creditor's suit because of a failure to allege fraud. No appeal was taken by the bank. On August 1, 1972, the plaintiff filed her second suggestion of damages pursuant to the September 1965 order and, on March 6, 1973, was awarded a total of $24,103.52, representing unearned interest on the proceeds of insurance, attorneys' fees and costs. Upon the bank's appeal, the appellate court affirmed. Bank of Lyons v. Schultz (1974), 22 Ill. App.3d 410.

Plaintiff filed this suit for malicious prosecution in October 1975, claiming $49,848.13 in compensatory damages for the forfeiture of her interest in a house which she had owned jointly with her late husband, Alvin Schultz, which interest was foreclosed, she alleged, as a result of the injunction which prevented her from using the insurance proceeds to make mortgage payments. She also claimed $300,000 in punitive damages.

It appears that the plaintiff's complaint for malicious prosecution was dismissed by the trial court on the ground that the damages claimed should have been requested when she filed her second statutory suggestion of damages, and that recovery was barred under the doctrine of res judicata, and, further, because she failed to allege an arrest of her person, seizure of property, or some other special injury. The appellate court, in reversing, held that the wrongful issuance of the preliminary injunction constituted a seizure of property for purposes of establishing a cause of action for malicious prosecution and that the plaintiff's claim for compensatory and punitive damages was not barred by the doctrine of res judicata.

In this jurisdiction a plaintiff, in a suit for malicious prosecution founded on the defendant's wrongful bringing of a civil suit, must show that the suit he claims was wrongfully filed was terminated in his favor. He must also prove that it was brought maliciously and without probable cause and, further, he must establish evidence of his arrest, the seizure of his property, or some other special injury which exceeds the usual expense and annoyance and inconvenience of defending a lawsuit. Schwartz v. Schwartz (1937), 366 Ill. 247; Smith v. Michigan Buggy Co. (1898), 175 Ill. 619.

The first question here, in determining if there is a cause of action for malicious prosecution, is whether the wrongful issuance of an injunction may constitute a seizure of property or other special injury.

We do not have decisions which specifically hold that the issuance of a preliminary injunction, as here, satisfies the requirement that there must have been a seizure of property or special injury, but a number of decisions have referred to the nature of that special injury or grievance. For example, after declaring that it was necessary for a plaintiff to prove that he had incurred some special damage to support his suit for malicious prosecution this court, in Schwartz v. Schwartz (1937), 366 Ill. 247, 252, stated that "[i]t is not claimed that any of the appellant's property was attached or that he was in any way hindered in handling it. * * * There is [also] no evidence of special loss to him of any character, over and above the ordinary expense and trouble attendant upon the defense of an ordinary civil suit * * *." In Alswang v. Clayborn (1976), 40 Ill. App.3d 147, 150, it was said that "[w]ithin this context [of an action for malicious prosecution], `special injury' generally means a deprivation of liberty or an interference with property."

Clearly as a result of the preliminary injunctions the plaintiff was prevented from using the insurance proceeds for a period of more than nine years. There have been holdings in jurisdictions, which have the same requirements for malicious prosecution as we do, to the effect that an injunction may constitute a sufficient interference with property for purposes of bringing a malicious prosecution suit. In Black v. Judelsohn (1937), 251 App. Div. 559, 562-63, 296 N.Y.S. 860, 865, the court stated:

"While the institution of an ordinary civil action or proceeding, no matter how unfounded, vexatious or malicious it may be, does not give rise to an action for malicious prosecution, the rule is otherwise where, as here, there has been some interference with the person or property of the defendant in connection with the bringing or conduct of the civil action or proceeding. The law is well settled that if a person brings a civil action against another maliciously and without probable cause, which terminates favorably to the defendant, and an order of arrest is procured under which the defendant is arrested, or if, by virtue of a writ of replevin, warrant of attachment, injunction or other provisional remedy issued ...

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