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11/23/88 Joseph J. Buttitta, Indiv. v. Arthur L. Newell

November 23, 1988

JOSEPH J. BUTTITTA, INDI

v.

AND D/B/A 4-B ACCEPTANCE, PLAINTIFF-APPELLANT,

v.

ARTHUR L. NEWELL, DEFENDANT-APPELLEE



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, THIRD DIVISION

531 N.E.2d 957, 176 Ill. App. 3d 880, 126 Ill. Dec. 330 1988.IL.1694

Appeal from the Circuit Court of Cook County; the Hon. Alan Morrill, Judge, presiding.

APPELLATE Judges:

JUSTICE FREEMAN delivered the opinion of the court. McNAMARA and RIZZI, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE FREEMAN

Plaintiff, Joseph J. Buttitta, appeals from the circuit court of Cook County's dismissal of his amended complaint against defendant, Arthur L. Newell, an attorney. Plaintiff's complaint sought recovery of damages allegedly resulting from defendant's negligence in failing to advise plaintiff that, under the Interest Act (Ill. Rev. Stat. 1979, ch. 74, par. 1 et seq.), the "points" plaintiff charged on a residential mortgage loan to Catherine Saskill were treated as part of the interest rate charged on such loans in determining whether the loan was usurious. Saskill sued plaintiff for violation of the Interest Act and received a judgment against him which this court affirmed in Saskill v. 4-B Acceptance (1983), 117 Ill. App. 3d 336, 453 N.E.2d 761.

On May 23, 1985, the trial court dismissed plaintiff's cause of action under section 2-619 of the Civil Practice Law (Ill. Rev. Stat. 1985, ch. 110, par. 2-619) on the grounds that it was barred by collateral estoppel. Defendant had argued in his motion to dismiss under section 2-619 that the findings of the trial court and this court that plaintiff had knowingly and intentionally violated the Interest Act barred the instant action against defendant. The trial court subsequently denied plaintiff's motion to vacate the dismissal.

On appeal, plaintiff contends he was not collaterally estopped from maintaining the instant action. We disagree and affirm the dismissal of plaintiff's cause of action under section 2 -- 619.

"The doctrine of collateral estoppel provides that an adjudication on the merits of an issue by a court of competent jurisdiction precludes relitigation of the [identical] issue in a subsequent action." (Brumley v. Touche Ross & Co. (1984), 123 Ill. App. 3d 636, 643, 463 N.E.2d 195.) The doctrine applies when a party, or someone in privity therewith, takes part in two separate, consecutive cases arising from different causes of action and some fact controlling, or question material to, the determination of both cases has been adjudicated against that party in the prior case. However, the judgment in the prior case will estop only those issues actually litigated and determined therein. (Housing Authority v. YMCA (1984), 101 Ill. 2d 246, 252, 461 N.E.2d 959.) Moreover, the party sought to be estopped must have had a full and fair opportunity to litigate the issue in the prior action and an inJustice must not be done to him under the circumstances of the subsequent case. Fred Olson Motor Service v. Container Corp. (1980), 81 Ill. App. 3d 825, 401 N.E.2d 1098.

The questions thus posed by this appeal are: (1) whether a fact controlling, or question material to, the determination of both the prior Interest Act violation proceeding and this case were adjudicated against plaintiff in that proceeding; (2) whether that fact or question was actually litigated in the prior action; (3) whether plaintiff had a full and fair opportunity to litigate that fact or question in the prior action; and (4) whether application of collateral estoppel would be unjust under the circumstances of this case.

That plaintiff and defendant assert opposite answers to these questions is due primarily to their characterization of the issue which they claim controls plaintiff's malpractice action.

Defendant claims the controlling issue is whether plaintiff knowingly and intentionally violated the Interest Act. He concludes that since that fact also controlled the prior action, plaintiff is collaterally estopped from relitigating it.

Plaintiff claims the controlling issue is whether defendant was negligent in advising plaintiff that "points" are not considered in computing the interest rate charged on a mortgage loan. He concludes that since that issue was neither adjudicated nor controlling in the prior case, collateral estoppel is not a bar to his malpractice action. Moreover, plaintiff asserts that the trial court's and this court's findings of an intentional violation of the Interest Act were based merely on the fact that he charged a rate of interest which exceeded the maximum allowed by the Interest Act. He distinguishes such a violation of the Act from a violation based on the presence of an intent to charge a rate of interest which is known to exceed the maximum allowable rate. Plaintiff argues that only the existence of the latter intent in violating the Interest Act would preclude him from seeking a judgment that defendant's negligent legal advice caused the damages he incurred as a result of his violation of the Act.

In the portion of Saskill relevant to this appeal, we addressed the contention of the defendants therein, Buttitta and his company, 4-B Acceptance, that the loan at issue was exempt from the penalty provisions of section 6 of the Interest Act. Section 6 provides for statutory damages against lenders who "knowingly" contract for or receive unlawful interest. It also provides that bona fide errors in connection with a loan are not violations of section 6 if corrected within a reasonable time. (Ill. Rev. Stat. 1979, ch. 74, par. 6.) The defendants asserted that the interest charged Saskill resulted from a bona fide error made by Newell regarding the treatment of percentage points as interest. In rejecting this argument, we noted that whether a loan is usurious depends on whether the maker intended to charge an unlawful interest. We then found that, while the testimony at trial was conflicting and although Newell may have been mistaken about the computation of interest rates, the evidence before the trial court made it clear that both the defendants and Newell knew that the former were charging more for their money than the Interest Act permitted and that the defendants could not evade the statute by assessing charges for their money ...


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