Appeal from the Circuit Court of Winnebago County; the Hon.
John C. Layng, Judge, presiding.
JUSTICE SCHNAKE DELIVERED THE OPINION OF THE COURT:
Rehearing denied July 28, 1986.
J.L. Divis & Co., Inc., bought a restaurant in Rockford known as Davey J's Fish and Chips from J.F. Heckinger, Larry Short, and Mary Short (the Heckinger group). The exact terms of the sale are not set forth in the record, but it appears that, as part of the consideration, James and Dorothy Divis, two of the principals of the corporation, personally guaranteed an installment note payable to the Heckinger group. Subsequently, the Divises and their corporation began to have financial problems, so they sought out someone to take over the restaurant and to assume their obligations under the note. The people who eventually agreed to do so were John Powers, Albert and Lucy Eslora, and Hermilo Torres (the Powers group).
All of the parties involved in the transaction entered into a written novation agreement dated December 28, 1982. According to the terms of that agreement, the Heckinger group consented to the substitution of the Powers group "for J.L. Divis as debtor for obligations due and running to them [the Heckinger group]." The Powers group accepted those obligations and agreed to take over the management of the restaurant. The Divis corporation agreed to remain responsible for all business debts incurred before the novation. The Powers group signed an installment note securing the obligation to the Heckinger group.
After Powers, the Esloras, and Torres took over the restaurant, they became aware of numerous debts which had been incurred by the business before the novation. Some of the debts were secured by liens. The Divis corporation and the Divises were unable to pay the debts, and, as a result, the Powers group was unable to operate the restaurant at a profit.
Less than three months after the novation agreement had been signed, the Powers group filed an action for rescission of the novation agreement. The Heckinger group filed a counterclaim seeking judgment on the installment note. Following a bench trial, the court ruled that the agreement should not be rescinded, and judgment was entered in favor of the Heckinger group and against the Powers group on the installment note in the amount of $81,187.50.
Torres filed a third-party action against J. Laird Lambert, the attorney who represented the Divis corporation, and the Divises, in connection with the novation agreement, and against Lambert's law firm, Crosby & Lambert, a partnership, seeking reimbursement for any portion of the judgment he was required to pay. Torres also filed an original action against Lambert and his law firm seeking to recover $11,385, which Torres had invested in the restaurant. On motion of Lambert and his law firm, the court dismissed Torres' second amended complaint, and Torres has appealed pursuant to Supreme Court Rule 304(a) (87 Ill.2d R. 304(a)). Other claims remain pending below. *fn1
Torres' second amended complaint includes 10 counts. In this court, he has conceded that counts IV and IX were properly dismissed. Counts I and III sought judgment against Lambert for legal malpractice, count II for breach of contract, and count V for violation of the Illinois Securities Law of 1953 (Ill. Rev. Stat. 1985, ch. 121 1/2, par. 137.1 et seq.). Counts VI, VII, VIII, and X were based on the same theories of recovery and sought judgment against Lambert's law firm.
The motion to dismiss filed by Lambert and his law firm was brought under both sections 2-615 and 2-619 of the Code of Civil Procedure (Ill. Rev. Stat. 1985, ch. 110, pars. 2-615, 2-619). Insofar as it was based on section 2-615, it alleged that each count failed to state a cause of action. Insofar as it was based on section 2-619, it attempted to refute what defendants considered to be a conclusory allegation in Torres' complaint to the effect that an attorney-client relationship existed between Lambert and Torres. An affidavit of Lambert was attached for that purpose. (See In re Marriage of Musa (1982), 103 Ill. App.3d 189, 430 N.E.2d 727 ("affirmative matter" which may be raised under section 2-619 is something in the nature of a defense that negates an alleged cause of action completely or refutes crucial conclusions of law or conclusions of material fact unsupported by allegations of specific fact contained in or inferred from the complaint).) In response, Torres submitted an affidavit of his own, along with portions of a deposition of Powers' and of a transcript of Lambert's testimony at the bench trial. After the court granted the motion to dismiss, Torres filed a motion to reconsider along with certain other depositions and transcripts.
Before we undertake to evaluate the sufficiency of Torres' second amended complaint, it will be helpful to review some of the applicable principles. As stated in Doyle v. Shlensky (1983), 120 Ill. App.3d 807, 811, 458 N.E.2d 1120:
"Illinois is a fact-pleading State. This means that although pleadings are to be liberally construed and formal or technical allegations are not necessary, a complaint must contain those `substantial averments of fact necessary to state a cause of action.' [Citations.] To state a cause of action a complaint must be both legally and factually sufficient; it must set forth a legally recognized claim as its basis for recovery and must plead facts which bring the claim within the legally recognized cause of action alleged. [Citation.] Failure to meet both requirements mandates dismissal of the complaint. [Citation.] When examining the legal sufficiency of a complaint, a court must assume the truth of `all facts properly pleaded' [citation], but it must ignore `conclusions of law or conclusions of fact unsupported by allegations of specific facts upon which such conclusions rest' [citation]. A cause of action should not be dismissed on the pleadings unless it is clear that plaintiff can prove no set of facts which will entitle him to recover. [Citation.]"
With these principles in mind, we turn to a consideration of counts III and VIII of Torres' second amended complaint, which purport to state a cause of action for legal malpractice.
These counts alleged that on December 26, 1982, before the novation agreement was entered into, Powers went to Lambert's law office. He told Lambert that he, the Esloras, and Torres intended to form a corporation called Capricorn Investment, Inc., and to use the corporation to purchase Davey J's restaurant and the Second Chance Deli from J.L. Divis, Inc., and to manage the restaurants thereafter. Powers told Lambert that Torres was to provide financial support for Capricorn and would be a shareholder, officer, and member of the board of directors of the corporation. It is also alleged that Powers told Lambert these things for the purpose of retaining Lambert to represent Capricorn. Counts III and VIII also allege that an attorney-client relationship existed between Lambert and Torres which imposed a duty on Lambert to exercise ordinary care for the protection of Torres' financial interests. It is alleged that Lambert breached that duty by failing to discover the extent of the business debts incurred by the Divis corporation while it was managing Davey J's, and by failing to advise Torres not to enter into the novation agreement, nor to sign the installment note, nor to invest any money in the restaurant.
In his affidavit attached to the motion to dismiss, Lambert averred that Torres never asked him to represent Torres in any transaction, and that he was not present when Torres signed the novation agreement or the installment note. Lambert further stated that he was never present when Torres transferred funds to Powers or the Esloras, and that he (Lambert) had no knowledge of these transfers until Powers told him about them. Lambert indicated that he did not know whether the funds transferred were loans, gifts, or investments. Finally, Lambert stated that Torres never asked him to form a corporation or inquired of him "whether or when such corporation had been formed."
Torres' affidavit, filed in response, set forth that he had discussed investing in Capricorn with Powers and the Esloras before he signed any papers. Powers and the Esloras told him that Lambert was the lawyer for Capricorn. Finally, Torres stated that he believed Lambert was representing him and would not have signed any papers but for that belief. The portions of Powers' deposition and Lambert's testimony at the trial, which Torres submitted, indicated that Powers retained Lambert at the meeting to form Capricorn. The other materials submitted by ...