APPELLATE COURT OF ILLINOIS, FOURTH DISTRICT
539 N.E.2d 877, 183 Ill. App. 3d 987, 132 Ill. Dec. 314 1989.IL.825
Appeal from the Circuit Court of Coles County; the Hon. William J. Sunderman, Judge, presiding.
PRESIDING JUSTICE McCULLOUGH delivered the opinion of the court. LUND and GREEN, JJ., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE MCCULLOUGH
Plaintiff the First National Bank of Sullivan appeals an order dismissing its complaint with prejudice pursuant to section 2-615 of the Civil Practice Law (Ill. Rev. Stat. 1987, ch. 110, par. 2-615). Plaintiff urges its complaint adequately pleaded a cause of action against the defendant Brumleve and Dabbs for accountant malpractice and the court erred in finding no proximate cause as a matter of law. We agree and reverse.
FNBS is a national banking corporation located in Sullivan, Illinois. BD is an accounting partnership with an office in Sullivan. Prior to June 30, 1984, FNBS hired BD to perform a certified audit of the financial condition of FNBS. Subsequent to June 30, 1984, BD performed the audit and prepared a report of the financial condition of FNBS for the board of directors of FNBS. According to the parties, the report reflected the financial condition of FNBS as of June 30, 1985.
On August 20, 1987, FNBS filed a complaint against BD, alleging BD's negligence in conducting the audit and preparing the report of the financial condition of FNBS caused FNBS to sustain huge losses. FNBS listed 15 separate acts of negligence in the complaint. Specifically, FNBS alleged BD: (a) failed and omitted to report improper officer loans; (b) failed and omitted to discover loans in excess of the loan limit; (c) failed and omitted to require reasonable reserves for loan losses; (d) failed and omitted to disclose improper management practices; (e) failed and omitted to review examinations of the bank made by the comptroller of the currency; (f) failed and omitted to properly classify assets; (g) improperly approved deficient reporting systems; (h) reported a profit when in fact, operations resulted in a significant and substantial net loss; (i) failed and omitted to report violations of laws and regulations; (j) failed to discover and report insider transactions; (k) improperly valued nonearning assets; (l) improperly reported accrued interest; (m) improperly capitalized interest; (n) failed to make proper tax computations; and (o) employed improper methods in establishing reserves for loan losses.
FNBS further alleged it relied upon BD's audit and report in its management of FNBS' business affairs, and as a result of BD's actions, FNBS was not informed of the true financial condition of FNBS, sustained huge losses, was obliged to write off loans in excess of $2 million and an additional $1.5 million in loans is subject to criticism by Federal bank regulators.
On November 3, 1987, BD filed a demand for a bill of particulars, pursuant to section 2-607 of the Civil Practice Law (Ill. Rev. Stat. 1987, ch. 110, par. 2-607). In the bill, BD sought additional facts to support the complaint's allegations, including inter alia (1) when the financial condition of the bank was reported to the bank directors; (2) the names of bank directors and officers who relied upon BD's report; (3) the particular improper officer loans BD failed to report; (4) the loans in excess of the loan limit; (5) the amount of the loan reserves not revealed in the report; (6) the improper management practices not reported; (7) the assets improperly classified; (8) the bank's deficient reporting system; (9) facts supporting the allegation that BD reported a profit for FNBS when, in fact, FNBS suffered a substantial loss; (10) facts regarding insider transactions; (11) facts supporting the allegations of improper valuation of nonearning assets and improper reporting of accrued interest; and (12) details supporting the allegation of improper tax computations made by BD.
On January 4, 1988, FNBS filed its response to BD's bill and listed numerous facts to support its allegations of negligence against BD. Regarding the failure of BD to report improper officer loans, FNBS stated that two FNBS directors, John W. Hagen and Jan W. Haegen and Maximiano F. Nunes , were owners of M.V. Executive, Inc. , an enterprise involved in building a charter fishing boat. FNBS described in detail in the response the loans given to these three individuals for their joint venture in MVE from August 25, 1982, through June 28, 1984. During this time, 24 individual loans were given either to MFN or JWH for the MVE venture, all alleged to be in excess of legal limits established by Federal banking regulations. All of the loans were later approved by the board of directors of FNBS.
FNBS detailed additional facts to support its allegation of BD's failure to discover loans in excess of FNBS' loan limit. According to FNBS, a bank customer, David Mobley, was also given loans in excess of legal limits and these loans were based on false financial statements.
FNBS also revealed that loans to two other bank customers, Southshores, Inc., and Paul Stone, were renewed by FNBS officers, without collateral, in support of its allegation that BD failed to disclose improper management practices. In further support of this allegation, FNBS stated:
(1) BD failed to disclose the relationship between FNBS officers and those officers at Windsor State Bank, which ...