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Gibbons v. Stillwell





Appeal from the Circuit Court of Madison County; the Hon. Horace L. Calvo, Judge, presiding. JUSTICE JONES DELIVERED THE OPINION OF THE COURT:

The plaintiffs, D.W. Gibbons and Carolyn Dee Gibbons, husband and wife, brought suit for legal malpractice against the defendants, Raymond S. Stillwell and Emert L. Wyss, Jr. The action arose out of legal advice rendered by the defendants concerning the rights of plaintiff D.W. Gibbons against the Alton Banking and Trust Company (hereafter referred to as the bank) concerning an alleged oral agreement to loan him $275,000 at a rate of interest of 12 3/4% for a term of 20 years. The trial court entered judgment in favor of the defendants on the third amended complaint. This appeal followed in which the sole issue for review is whether the trial court erred in finding that the third amended complaint failed to state a cause of action against the defendants.

Although both D.W. Gibbons and Carolyn Gibbons sought relief in the complaint and the amended complaints up to and including the second amended complaint, D.W. Gibbons was the only plaintiff in the third amended complaint, which is the subject of this appeal. In that complaint the plaintiff alleged that in the fall of 1978 he had formulated a plan involving a real estate development in or near Alton and had retained the defendants concerning the matter. Thereafter he sought funding from the bank for the proposed development. He alleged that the bank had agreed to lend him $275,000 at a rate of interest of 12 3/4% for a term of 20 years, the money to be advanced by the bank as the plaintiff needed it for the project. The third amended complaint, to which we shall refer as the complaint, alleged:

"GIBBONS accepted said offer of financing from bank and GIBBONS and his spouse on February 21, 1979

executed a mortgage to bank giving bank a second mortgage on their home and security in other GIBBONS' properties for the purpose of securing said loan. GIBBONS and his spouse further to induce bank to finance GIBBONS' real estate development and further to assist bank in securing the financing executed a land trust and appointed [the Bank] as Trustee of said land trust with full power to borrow funds on behalf of said Trust and to pledge any and all assets of said Trust to secure loans advanced to the Trust."

A copy of a mortgage dated February 21, 1979, attached to the complaint as Exhibit A, indicates that it was recorded on January 17, 1980. The copy of the mortgage, signed by David William Gibbons and Carolyn Dee Gibbons, states that David William Gibbons, Sr., and Carolyn Dee Gibbons, husband and wife, are indebted to the bank as trustee as evidenced by a promissory note in the sum of $275,000 with interest at a rate of 12 3/4% due and payable on March 1, 1999. The complaint alleged further:

"At the time bank agreed to finance GIBBONS' Project according to the terms set forth hereinabove, GIBBONS requested bank to furnish to him a written commitment to make a loan to him in the amount of Two Hundred Seventy-five Thousand and 00/100 Dollars ($275,000) at Twelve and Three-Quarters Percent (12-3/4%) interest for a term of twenty (20) years. Bank then indicated to GIBBONS that it was bank's policy not to furnish written commitments of the sort requested by GIBBONS but that GIBBONS could rely on bank's promise to lend said sums on the terms stated. Bank further indicated to GIBBONS that the mortgage document dated February 21, 1979, exhibited hereto as Exhibit A, constituted a sufficient writing to memorialize bank's commitment to make the loan on the terms indicated."

The complaint alleged that in reliance upon the bank's commitment to make the loan as specified the plaintiff proceeded to purchase real estate and to expend other sums related to the development project. In reliance upon the bank's commitment, the complaint charged, the plaintiff changed his position materially, expending substantial effort and expense in reasonable reliance on the bank's promise.

According to the complaint, the bank made "loan advances" to the plaintiff for expenditure on the development project, but when the plaintiff sought the "second advance" of funds on about September 7, 1979, the bank informed him that it was unwilling to lend the money requested on the terms set forth above but would lend him money at a higher rate of interest that would vary with the bank's prime rate of interest. The complaint alleges that the bank further informed him that no mortgage in the amount and for the terms stated had ever existed. According to the complaint:

"GIBBONS consulted DEFENDANT STILLWELL and sought advice as to whether or not any independent proof of bank's earlier commitment to lend him the necessary funds at the Twelve and Three-Quarters Percent (12-3/4%) fixed rate existed, and whether GIBBONS had any rights against bank to enforce the fixed rate commitment above described. STILLWELL undertook investigation and research in order to ascertain whether or not evidence of said commitment did exist, and whether GIBBONS had any right to enforce the initial fixed rate long term commitment by bank.

10. STILLWELL advised GIBBONS that no mortgage commitment from GIBBONS to bank evidencing the loan commitment above described could be proved to exist and that GIBBONS should come to some compromise agreement with bank since so much had already been undertaken by GIBBONS and he stood already at great risk of efforts and funds for his commercial real estate Project. Attorney STILLWELL did then and there advise GIBBONS to abandon any claim that the original mortgage from GIBBONS to bank evidenced a commitment by bank to finance GIBBONS' Project on fixed terms. STILLWELL purportedly based his advice to GIBBONS on the ground that no legal theory supported enforcement of a loan commitment not in writing containing the terms allegedly promised by bank to GIBBONS."

In reliance upon the defendant Stillwell's advice, the plaintiff borrowed additional funds from the bank at higher rates of interest. The bank subsequently filed one or more lawsuits against D.W. Gibbons and "ultimately foreclosed on GIBBONS' Project." Defendant Stillwell represented the plaintiff in these matters. The complaint enumerates several ways in which the defendant attended negligently and carelessly to these matters and alleges actual and punitive damages totaling $3,500,000.

The defendants moved for judgment in their favor on the pleadings. The trial court in its judgment stated that "[t]he gist of the Defendant's Motion is that the alleged loan commitment agreement was unenforceable because of Section 1 of the Statute of Frauds (Ill. Rev. Stat. ch. 59, par. 1) in that it would be an oral contract not to be performed within a year." The court found without merit the plaintiff's allegations and arguments that there had been partial performance so as to take the alleged oral agreement by the bank out of the Statute of Frauds (Ill. Rev. Stat. 1985, ch. 59, par. 1). From the face of the complaint, the court said, neither the bank nor the plaintiffs fully performed the agreement involving the loan and repayment of the sum in question for a term of 20 years. On the basis of Sinclair v. Sullivan Chevrolet Co. (1964), 45 Ill. App.2d 10, 195 N.E.2d 250, aff'd (1964), 31 Ill.2d 507, 202 N.E.2d 516, the trial court found that the facts pleaded and argued by the plaintiffs concerning their detrimental reliance on the bank's alleged loan commitment were insufficient to take the alleged agreement out of the Statute of Frauds. In conclusion the court found further "that the legal advice allegedly given by Defendants to Plaintiffs that the alleged loan commitment agreement of the [Bank] was unenforceable was proper legal advice under the circumstances as pleaded herein and, as a matter of law, cannot support a claim of legal malpractice or legal negligence against Defendants."

Section 1 of the Statute of Frauds provides in pertinent part:

"That no action shall be brought * * * to charge any person upon any agreement * * * that is not to be performed within the space of one year from the making thereof, unless the promise or agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some ...

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