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Builders Bank v. Barry Finkel and Associates

May 5, 2003


Appeal from the Circuit Court of Cook County. No. 00 L 6961 Honorable Sheldon Gardner Judge Presiding.

The opinion of the court was delivered by: Justice O'malley


Plaintiff, Builders Bank, brought this action against defendant Barry Finkel & Associates, P.C., to recover losses allegedly sustained from plaintiff's professional malpractice and negligent misrepresentation. Plaintiff alleges that it relied upon reviewed financial statements that defendant prepared for Urkov Manufacturing Company (UMC) for purposes of lending UMC $1.5 million. Defendant filed a motion to dismiss pursuant to section 2-619 of the Code of Civil Procedure (the Code) (735 ILCS 5/2-619 West (2000)). The trial court granted defendant's motion to dismiss plaintiff's amended complaint. Plaintiff appeals claiming that the trial court erred by misinterpreting section 30.1 of the Illinois Public Accounting Act (the Act) (225 ILCS 450/30.1 (West 2000)).


The following facts are derived from the well-pleaded facts in plaintiff's amended complaint and the reasonable inferences drawn therefrom, which for purposes of this appeal must be accepted as true (In re Chicago Flood Litigation, 176 Ill. 2d 179, 184, 680 N.E.2d 268 (1997)), as well as the various evidentiary materials submitted by both parties in connection with defendant's motion to dismiss. *fn1 See Lawson v. City of Chicago, 278 Ill. App. 3d 628, 634, 662 N.E.2d 1377 (1996) (in ruling on a section 2-619 motion for dismissal, the court may properly consider "external submissions of the parties"); In re Petition for Submittal of the Question of Annexation to the Corporate Authorities of the City of Joliet, 282 Ill. App. 3d 684, 688, 668 N.E.2d 1073 (1996) (court may consider when ruling on section 2-619 motion to dismiss "pleadings, depositions, affidavits [citations], and other evidence offered by the parties").

In November 1998, UMC, a private corporation then engaged in the distribution of upholstery, designer fabrics and custom draperies, applied for a business loan from plaintiff. In connection with the loan and at plaintiff's request, defendant, UMC's long-time accounting firm, furnished plaintiff with reviewed financial statements, dated July 7, 1998, concerning UMC's operations for the years ending June 30, 1998, and June 30, 1997. Defendant further supplied projected consolidated financial statements, dated October 15, 1998, for the year ending September 30, 1999.

Plaintiff alleges that when defendant prepared the projected statements for UMC in October 1998, it did so knowing that UMC intended to use the statements primarily to influence UMC's lenders. A loan preparation document prepared by plaintiff's staff during consideration of UMC's application utilized the reviewed statements prepared by defendant. Moreover, plaintiff's presenting officer used the projected statements prepared by defendant as evidence of UMC's future profitability. The reviewed statements listed, inter alia, a value for inventory in excess of $2.5 million. The stated value of the inventory, however, was purportedly inflated and the inventory was worth much less than the value stated in the financial statements.

On November 24, 1998, plaintiff requested that defendant furnish it with additional financial statements for the years prior to those ending June 30, 1997, and June 30, 1998. Finkel personally consulted with UMC and sent financial statements for the years ending June 30, 1995, and June 30, 1996, either to plaintiff or to UMC, which then sent them to plaintiff.

On November 24, 1998, plaintiff approved a loan to UMC in the amount of $1.3 million. According to the complaint, plaintiff specifically relied on the reviewed and projected financial statements prepared and submitted by defendant in making its decision to grant the loan.

On February 26, 1999, Barry Finkel and UMC's president, Morrie Urkov, personally met with plaintiff's president and the senior vice-president to discuss a UMC request to increase the original loan amount by $200,000, to $1.5 million. At the meeting, Finkel personally provided plaintiff with consolidated financial statements, dated February 4, 1999, for UMC for the six months ending December 31, 1998, which showed over $2.7 million in UMC inventory for both 1997 and 1998. Finkel reviewed these statements with plaintiff's president and senior vice-president.

The new loan proposal was subsequently presented to plaintiff's board of directors (Board). The proposal included a full analysis of the financial information contained in the statements prepared by defendant and specifically used the statements for the year ending December 31, 1998, to calculate the loan amount.

On March 17, 1999, the Board, allegedly acting in substantial reliance on the financial statements prepared by defendant, approved an increase in the amount of UMC's original loan by the requested $200,000 following discussions with Finkel. Following the loan increase, UMC experienced financial hardship and ceased its operations on November 30, 1999. The inventory listed in the financial statements by defendant was subsequently liquidated for approximately $50,000.


The purpose of involuntary dismissal under section 2-619 of the Code is to afford litigants a means to dispose of issues of law and easily proved issues of fact at the onset of the case, reserving disputed questions of fact for trial. Zedella v. Gibson, 165 Ill. 2d 181, 185, 650 N.E.2d 1000 (1995); Goran v. Glieberman, 276 Ill. App. 3d 590, 592, 659 N.E.2d 56 (1995). A motion to dismiss pursuant to section 2-619(a)(9), the section upon which defendant relies, acknowledges the plaintiff's cause of action but presents an affirmative matter that avoids the legal effect of the claim. 735 ILCS 5/2-619(a)(9) (West 2000). In the instant case, the "affirmative ...

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