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Sterling Radio Stations, Inc. v. Weinstine

January 31, 2002


Appeal from the Circuit Court of Cook County. No. 95-L-09661 Honorable David R. Donnersberger, Judge Presiding.

The opinion of the court was delivered by: Justice Theis


Plaintiff Alex R. Seith *fn1 appeals the trial court's grant of summary judgment to defendants Lester S. Weinstine, Robert L. Ellison, Weinstine, Shirk, Mellott & Leemon, and Klockau, McCarthy, Ellison & Marquis, P.C. (collectively, defendants), in this legal malpractice action. Seith contends that the trial court erred in finding that Seith suffered no damages as a matter of law and argues that his damages included: (1) $100,000 in attorney fees incurred in appealing the underlying suit in which the alleged legal malpractice occurred, and (2) $300,000 paid by a corporation in which he was a shareholder to satisfy the judgment entered against him in the underlying suit. For the reasons that follow, we affirm in part and reverse in part and remand for further proceedings.

On December 5, 1986, Sterling Radio Stations, Inc. (SRS), entered into an agreement to buy the WSDR radio station in Sterling, Illinois, from WSDR, Inc., and all of its individual shareholders. Pursuant to the purchase agreement, SRS executed a promissory note for the purchase of the radio station, which Seith, a shareholder of SRS, guaranteed. After making several payments on the note, SRS claimed that the WSDR sellers made misrepresentations, breached warranties, and violated restrictive covenants. SRS subsequently stopped making payments and defaulted on the promissory note. Seith also refused to pay on the note in his capacity as guarantor.

On March 13, 1992, the WSDR sellers filed suit in Whiteside County, Illinois (Whiteside Action), against SRS and Seith, seeking payment on the promissory note and guaranty. On June 10, 1994, Seith and SRS hired defendants to defend them in the Whiteside Action.

The trial court found in favor of the WSDR sellers, finding SRS liable on the note and Seith liable on the guaranty. Judgment was entered against SRS and Seith, jointly and severally, in the amount of $778,460.38. Seith then hired new attorneys, Schopf & Weiss, and paid them approximately $100,000 to represent him in his unsuccessful appeal.

In August 1994, SRS transferred substantially all of its assets to LH&S Communications, Inc. (LH&S), through a series of transactions that involved the direct sale of some assets and the execution of a long-term lease for others. At the time of the transfers, Seith was the largest common shareholder of LH&S stock and also held over 3 million shares of LH&S' preferred stock.

In 1996, the WSDR sellers filed suit against SRS and LH&S (State Court Action), as a result of the transfers of SRS' assets to LH&S. On May 5, 1997, an involuntary petition under chapter 7 of the United States Bankruptcy Code was filed against SRS. 11 U.S.C. §303 (1994); 11 U.S.C. §701 et seq. (1994). Keith J. Shapiro, the trustee, acted as the chapter 7 trustee for SRS' estate. On May 21, 1997, the bankruptcy court entered an order for relief under chapter 7. In October 1997, LH&S entered into an agreement with two separate buyers to sell its assets for $3.25 million. On October 30, 1997, the WSDR sellers, with the trustee's support, obtained a temporary restraining order (TRO) in the State Court Action, which prevented LH&S from distributing any proceeds from the proposed sale of its assets.

The trustee contended that SRS was insolvent at the time of the transfer of its assets to LH&S. The trustee believed that he could pursue claims against LH&S for its alleged receipt of avoidable transfers. LH&S and Seith denied the trustee's contentions.

The parties agreed to settle their dispute in SRS' chapter 7 bankruptcy proceeding so that LH&S could proceed with its asset sale and distribute the proceeds. Seith and the other directors and shareholders of LH&S voted and agreed to a settlement agreement. The agreement provided that LH&S would pay $300,000 to the WSDR sellers in satisfaction of the $778,460.38 judgment owed by SRS and Seith, and $625,000 to the trustee to settle other debts. The TRO was then removed, and LH&S was allowed to consummate the sale of its assets.

On June 7, 1995, SRS and Seith filed suit against defendants, alleging legal malpractice in the underlying Whiteside Action. In their verified complaint, SRS and Seith alleged that defendants failed to file pleadings which asserted any affirmative defenses or counterclaims, failed to take discovery, failed to investigate and assemble evidence as to the defenses and counterclaims, and failed to move to enforce a favorable settlement agreement reached prior to trial.

On November 13, 1998, the trial court entered summary judgment in favor of defendants. Seith filed a motion to vacate the entry of summary judgment, which was denied on April 29, 1999. Seith then filed this timely appeal.

Seith first argues that the trial court erred in granting summary judgment when it held that he had suffered no damages as a result of the alleged legal malpractice. In response, defendants maintain that Seith, in his capacity as guarantor and a shareholder of SRS, lacks standing to bring this legal malpractice suit. Thus, we address both of these claims.

Summary judgment is appropriate where the pleadings, depositions, affidavits, and admissions on file, when viewed in the light most favorable to the nonmoving party, show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 1998); Jones v. Chicago HMO Ltd. of Illinois, 191 Ill. 2d 278, 291, 730 N.E.2d 1119, 1127 (2000). Our review of summary judgment is ...

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