Appeal from the Circuit Court of Du Page County; the Hon. John
J. Bowman, Judge, presiding.
JUSTICE REINHARD DELIVERED THE OPINION OF THE COURT:
Defendant, Frank J. Belline, an attorney, appeals from a judgment for $64,500 entered against him following a jury verdict in favor of plaintiff, Anthony Gruse, a former client, based upon plaintiff's complaint for legal malpractice.
On appeal, defendant contends that (1) the verdict was not supported by the evidence, (2) the plaintiff failed to prove certain damages, and (3) the trial court committed prejudicial error in denying certain instructions tendered by him.
In essence, plaintiff's complaint alleges a cause of action for attorney malpractice against defendant arising from defendant's failure to properly advise plaintiff regarding a mortgage financing contingency clause contained in a real estate sales contract signed by plaintiff which he failed to perform, resulting in the loss of his earnest money, in two judgments against him, and in the expenditure of attorney fees. At the jury trial, the following evidence relevant to the issues raised on appeal is summarized.
Plaintiff testified that in early 1977 he was a self-employed owner of an auto parts business. In April of that year, after many years of living in an apartment, plaintiff and his wife began looking for a home to purchase. Lisa Formusa, a sales associate with G. Grant Dixon & Company, a realty company, showed them a house in Oak Brook which was then owned by Herbert and Pauline Imhoff. A price of $275,000 was ultimately agreed upon, and a real estate sales contract was signed on April 24, 1977. Among the provisions of the contract was a mortgage financing contingency clause providing that the contract would become null and void if, within 25 days, plaintiff, after reasonable efforts, was unable to secure a commitment for a loan of 80% of the purchase price and so notified the seller in writing.
Also, on April 24, plaintiff executed and tendered to the realty company a promissory note, due nine days after acceptance, in the sum of $25,000 as earnest money. Plaintiff then consulted LaGrange State Bank, his own bank, but was unable to borrow any money for the earnest money and was told he could not qualify financially for a mortgage. Plaintiff borrowed $12,500 from relatives and used this money to pay the realtor half of the amount due on the note. He was otherwise unable, however, to arrange any money for financing the balance of the note. Plaintiff informed Lisa Formusa of his difficulties and she told him she would talk to some other banks on his behalf. She later directed him again to the LaGrange State Bank, but a loan officer whom he knew there told plaintiff he was wasting his time. Formusa nevertheless encouraged plaintiff to apply to other lenders she suggested. Plaintiff, assuming that another bank would not help him if his own bank had refused, did not look further for financing and decided he needed an attorney to get him out of the contract. He then consulted defendant.
Plaintiff testified to several consultations between himself and defendant. He testified to informing defendant of his inability to perform his undertakings under the real estate sales contract, expressing a need to get out of it right away. Defendant requested a retainer of $2,000, stating that he doubted that plaintiff would ever be able to get a mortgage. According to plaintiff, he informed defendant of Lisa Formusa's assurances that mortgage money was available, and defendant responded not to pay any attention to her or waste his time applying for financing. Defendant said that plaintiff would never qualify for a mortgage, and "that they are trying to railroad you. * * * [W]e can sue them and make big bucks on this." On May 17, 1977, defendant wrote to the realty company on plaintiff's behalf, demanding return of the promissory note and the $12,500 partial payment, stating that the failure to make this return within 10 days would leave defendant no alternative "but to pursue the return of the same through other means."
Plaintiff thereafter believed that defendant would file suit against the realty company and Herbert Imhoff on theories of fraud and the unauthorized practice of law. Plaintiff was confident that defendant was handling the matter ably. A lawsuit was subsequently filed against plaintiff in the circuit court of Du Page County, and on January 7, 1980, the court found that Herbert and Pauline Imhoff were entitled to summary judgment for $15,000 on account of plaintiff's breach of the real estate sales agreement. The Imhoffs were also found entitled to the $12,500 cash deposit plaintiff had given the realty company, as well as to the balance due on the promissory note, subject to the commission owed the realty company.
While this suit was pending, plaintiff applied for a credit card at a major retail store. On January 4, 1980, he was refused credit on the grounds that a judgment had been entered against him. Plaintiff then learned that a judgment by confession had been taken against him by the realty company in the circuit court of Cook County on June 20, 1977, and confirmed in January 1980. This judgment awarded the realty company $13,296.69 on the promissory note, which judgment included an award of interest and attorney fees. Having thus learned for the first time about the judgment in Cook County, plaintiff made several attempts to call defendant. He eventually made contact and was told by defendant not to worry about this judgment. Defendant stated that he was too busy to represent plaintiff in the matter, but that if plaintiff got a white card in the mail relating to the judgment, plaintiff should hire another lawyer.
Defendant testified both as an adverse witness and on his own behalf. He stated he had been a practicing attorney since 1955. In 1977, approximately 50% of his practice involved matters relating to real estate. When plaintiff had consulted him, plaintiff had related that Lisa Formusa had represented that she could obtain mortgage financing for plaintiff if plaintiff were unable to do so. Plaintiff had further related that he had been able to make only a partial payment toward the $25,000 earnest money and had negotiated an extension for the payment of the balance. At a later meeting, defendant accepted a $2,000 retainer and requested that plaintiff prepare a handwritten record of his prior dealings with Lisa Formusa. Defendant later reviewed that document, as well as correspondence which Formusa sent plaintiff on May 9, 1977, directing plaintiff to seek financing at LaGrange State Bank. Defendant then performed a title search on the Imhoff property and discovered that title was held in a land trust. He next performed legal research and discovered case authority (Madigan v. Buehr (1970), 125 Ill. App.2d 8, 260 N.E.2d 431) leading him to believe that a real estate sales contract signed as seller by the beneficiary of a land trust without disclosing the beneficial interest was unenforceable against the buyer. Defendant determined that plaintiff's best course of action was to contest the validity of the contract on this basis.
Defendant testified that, in the presence of plaintiff and his wife, he had placed telephone calls to Formusa and to the realty company. During these calls, defendant was told that the realtors felt mortgage financing could be made available, despite plaintiff's inability to obtain the remaining $12,500 in earnest money. Defendant did not at this time advise the realtors of his views regarding the "legalistics" of the contract's validity. Following these telephone conversations, plaintiff stated that there was no way he was going to make a mortgage application because he could not come up with the balance of the down payment.
Defendant testified that he had explained to plaintiff that there was a likelihood of a lawsuit being filed against him and that if this took place, defendant would file a counterclaim alleging the invalidity of the contract because of the failure to disclose the land trust and because the extent of the realty company's involvement in the transaction constituted the unauthorized practice of law.
Defendant acknowledged that he did not file suit to declare the contract invalid, and did not mention his theory of invalidity in the May 17, 1977, letter he wrote the realty company. He did, however, file a counterclaim on these grounds when the realty company brought its suit in Du Page County against plaintiff. The counterclaim was rejected by the trial court on the basis of this court's opinion in Lampinen v. Hicks (1979), 73 Ill. App.3d 376, 391 N.E.2d 1105. Following the rendering of judgment against plaintiff on the suit and counterclaim, plaintiff instructed defendant to do nothing with the files because plaintiff was in the process of retaining other counsel.
Defendant testified that he was unaware during his representation of plaintiff that a default judgment had been taken against plaintiff in Cook County in 1977. Defendant also testified that he believed plaintiff had never actually made a good faith application for mortgage financing to a lending institution. In defendant's experience, there was a rule of thumb that at least three applications for financing had to be made and rejected in order for a buyer's efforts to obtain financing to be considered made in good faith. Defendant acknowledged that he did not advise plaintiff to make three such applications. At the time of his calls to Lisa Formusa, defendant had not ...