Kasny v. Coonen And Roth, Ltd. ( 2009 )

No. 2--08--0220 Filed: 11-13-09
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
______________________________________________________________________________
ROGER R. KASNY, ) Appeal from the Circuit Court
) of McHenry County.
Plaintiff-Appellant, )
)
v. ) No. 07--LA--120
)
COONEN AND ROTH, LTD., )
n/k/a Roth, Melei, Santeler, Ltd., ) Honorable
) Maureen P. McIntyre,
Defendant-Appellee. ) Judge, Presiding.
______________________________________________________________________________
JUSTICE McLAREN delivered the opinion of the court:
Plaintiff, Roger R. Kasny, appeals the dismissal of his legal malpractice claim against
defendant, Coonen & Roth, Ltd., n/k/a Roth, Melei, Santeler, Ltd. Plaintiff contends that a small
claims judgment for outstanding attorney fees entered in defendant's favor does not bar his legal
malpractice case. We reverse and remand.
In 2002, plaintiff retained defendant to represent him in the dissolution of his marriage.
Plaintiff signed an engagement agreement with defendant, whereby plaintiff agreed to pay defendant
reasonable fees for necessary work done and to work toward reconciliation. Plaintiff and his ex-wife
eventually executed a marital settlement agreement, and plaintiff failed to pay defendant for its
services. Defendant sued plaintiff in small claims court for outstanding legal fees totaling $4,955.15.
Plaintiff never appeared in small claims court to defend against the breach of contract action. A
judgment for the unpaid legal fees plus costs was entered in defendant's favor on April 13, 2006.
No. 2--08--0220
In 2007, plaintiff sued defendant for breach of contract and legal malpractice. Although the
trial court dismissed plaintiff's breach of contract claim with prejudice, it dismissed plaintiff's legal
malpractice claim without prejudice, and plaintiff filed an amended complaint. In plaintiff's
amended complaint, in which he claimed at least $200,000 in damages, he alleged that defendant:
failed to appraise various marital assets and relied on the inaccurate appraisals that plaintiff's ex-wife
prepared; did not discover plaintiff's ex-wife's nonmarital assets and understand the impact that her
nonmarital real property could have on a fair division of the marital property; neglected to promptly
and properly answer discovery; allowed the dissolution case to continue for more than three years
with little or no work done toward resolving the matter; violated discovery rules, for example by
failing to disclose expert witnesses who could testify about the value of various marital assets, which
violations resulted in plaintiff's inability to proceed with a trial; failed to advise plaintiff that he could
not proceed with a trial because of the discovery violations; and induced plaintiff to settle the case
by telling plaintiff that appraisals were too expensive, that his own appraisals would not alter the
valuation of the property, and that he had no choice but to agree to a settlement. Plaintiff asserted
that he was unaware of a cause of action for legal malpractice against defendant until sometime in
June 2006, two months after the small claims case was resolved, when the malpractice attorney he
contacted had adequately investigated plaintiff's case.
Defendant moved to dismiss plaintiff's amended complaint, arguing that the judgment for
unpaid legal fees entered in the small claims case barred plaintiff from bringing a cause of action for
legal malpractice. Defendant asserted that plaintiff's lack of knowledge of a legal malpractice claim
was no defense, as he could have discovered a cause of action for legal malpractice had he exercised
due diligence. The trial court granted defendant's motion to dismiss, finding that professional
-2-
No. 2--08--0220
negligence is a defense to a claim for outstanding attorney fees and that, thus, plaintiff should have
raised the issue of legal malpractice in the small claims case. This timely appeal followed.
At issue in this case is whether defendant's motion to dismiss plaintiff's complaint for legal
malpractice was properly granted. More specifically, we consider whether the judgment for
outstanding attorney fees entered in the small claims case has res judicata effect in plaintiff's action
for legal malpractice.
A motion to dismiss pursuant to section 2--619 of the Code of Civil Procedure (735 ILCS
5/2--619 (West 2006)) admits all well-pleaded facts, the reasonable inferences to be drawn from
those facts, and the legal sufficiency of the complaint; but it asserts affirmative matter to avoid or
defeat the claim. Floyd v. Rockford Park District, 355 Ill. App. 3d 695, 704 (2005). When ruling
on a motion to dismiss, the trial court must interpret all pleadings and supporting documents in a
light most favorable to the nonmoving party. Lucas v. Taylor, 349 Ill. App. 3d 995, 998 (2004). We
review de novo the dismissal of the amended complaint. Stahelin v. Forest Preserve District of
Du Page County, 376 Ill. App. 3d 765, 771 (2007).
One defense that a defendant may raise in a section 2--619 motion is that a prior judgment
bars the plaintiff's cause of action, i.e., that the prior judgment has res judicata effect in the
subsequent lawsuit. 735 ILCS 5/2--619(a)(4) (West 2006). "The doctrine of res judicata provides
that a final judgment on the merits rendered by a court of competent jurisdiction is conclusive as to
the rights of the parties and their privies, and as to them constitutes an absolute bar to a subsequent
action involving the same claim, demand, or cause of action." City of Rockford v. Unit Six of the
Policemen's Benevolent & Protective Ass'n, 362 Ill. App. 3d 556, 560-61 (2005). Res judicata
applies if (1) there was a final judgment on the merits rendered by a court of competent jurisdiction;
-3-
No. 2--08--0220
(2) there is an identity of causes of action; and (3) there is an identity of parties or their privies.
Yorulmazoglu v. Lake Forest Hospital, 359 Ill. App. 3d 554, 558 (2005). The party seeking to
invoke res judicata bears the burden of demonstrating that it applies (Cload v. West, 328 Ill. App.
3d 946, 950 (2002)), and the doctrine bars not only all claims actually resolved in the former suit,
but also any claims that could have been raised (In re Marriage of Kohl, 334 Ill. App. 3d 867, 879-80
(2002)).
The parties agree that the judgment for outstanding fees represents a final judgment on the
merits rendered by a court of competent jurisdiction and that there is an identity of parties in both
cases. However, they disagree about whether there is an identity of causes of action between the
malpractice cause and the small claims cause.
In considering whether there is an identity of causes of action in this case and the small
claims case, we note that, "in Illinois, counterclaims are generally permissive rather than mandatory."
Corcoran-Hakala v. Dowd, 362 Ill. App. 3d 523, 530 (2005). "Thus, a defendant [in the original
action] generally may raise his or her claim against the plaintiff [in the original action] by way of a
counterclaim or by way of a separate action." Dowd, 362 Ill. App. 3d at 530-31. "However, if the
defendant's claim involves the same operative facts as the plaintiff's claim, res judicata may bar the
defendant from raising his or her claim in a subsequent action." Dowd, 362 Ill. App. 3d at 531.
"Specifically, res judicata bars a subsequent action if successful prosecution of that action would in
effect nullify the judgment entered in the initial action." Dowd, 362 Ill. App. 3d at 531.
Illinois cases are split on the issue of whether an attorney's claim for fees and a client's claim
for malpractice are a single cause of action. In Bennett v. Gordon, 282 Ill. App. 3d 378, 383-84
(1996), the First District held that they were. Plaintiff, on the other hand, relies on Wilson v. M.G.
-4-
No. 2--08--0220
Gulo & Associates, Inc., 294 Ill. App. 3d 897 (1998), in which the Third District held to the contrary.
See also Weisman v. Schiller, Ducanto & Fleck, 314 Ill. App. 3d 577, 581 (2000) (First District
declines to follow Bennett). However, in River Park, Inc. v. City of Highland Park, 184 Ill. 2d 290,
316 (1998), the supreme court cited Bennett with approval, and in Dowd, this court stated its belief
"that Wilson was wrongly decided." Dowd, 362 Ill. App. 3d at 529. Thus, at least in this district,
the law is settled that these claims indeed are the same cause of action, such that ordinarily a
counterclaim is mandatory. See Dowd, 362 Ill. App. 3d at 530-31.
This is not to say, however, that res judicata necessarily applies. As noted, the doctrine bars
only those claims that could have been raised. Indeed, res judicata extends only to claims that
" 'could have been presented by the exercise of due diligence.' " (Emphasis added.) Hughey v.
Industrial Comm'n, 76 Ill. 2d 577, 582 (1979), quoting 46 Am. Jur. 2d Judgments §417, at 585-86.
Citing Hughey, defendant asserts that "the relevant inquiry is not whether the litigant knew of a
claim, but rather whether the claim[] existed at the time of the prior proceeding and therefore could
have been raised by exercising due diligence." (Emphases in original.) However, the mere fact that
a claim exists does not establish that a litigant exercising due diligence would discover it. If a claim
exists and the litigant does not discover it despite his due diligence, res judicata does not apply. This
principle is perfectly consistent with the notion that res judicata, at its core, is a doctrine of equity,
not law. See City of Chicago v. Midland Smelting Co., 385 Ill. App. 3d 945, 963 (2008) ("res
judicata is an equitable doctrine that should only be applied as fairness and justice require").
Here, plaintiff alleged that he "did not learn of the existence of a cause of action for legal
malpractice and consequently could not file such action until at the earliest *** well after Defendants
[sic] had sued [plaintiff] and successfully obtained a default judgment for fees." He further alleged
-5-
No. 2--08--0220
that he did not, and could not, discover his malpractice claim "until after consulting with an attorney
experienced in legal malpractice matters and *** until that attorney had adequate time to investigate
and opine on the existence of a legal malpractice matter after sufficient due diligence so as not to run
afoul of [Supreme Court] Rule 137, in the proper investigation of facts and law prior to opining and
the preparation of a suitable complaint." That is, plaintiff alleged that, through the exercise of due
diligence, he could not have raised his malpractice claim as a counterclaim in defendant's small
claims case. Taking these allegations as true and reading them liberally, as we must at this stage,
we hold that defendant has failed to establish the applicability of res judicata.
The cases on which defendant relies are easily distinguishable. In Singer v. Steven Kokes,
Inc., 39 Md. App. 180, 384 A.2d 463 (1978), the plaintiffs sued to recover for the defendant's alleged
breach of warranty and negligence in constructing a house. The defendant claimed res judicata. In
a prior suit, the defendant had sought to foreclose a mechanic's lien, and the plaintiffs had alleged
57 defects as a credit against the lien. The plaintiffs attempted to avoid res judicata by claiming that
they had not known of the 141 additional defects that supported their present suit. In affirming
summary judgment for the defendant, the appellate court held that the plaintiffs "could not avoid the
entry of summary judgment by merely alleging they had no knowledge of the defects. Rather, they
were required to have shown also that the defects could not have been discovered with reasonable
diligence." Singer, 39 Md. App. at 185, 384 A.2d at 467; see also Badger v. Badger, 69 Utah 293,
301, 254 P. 784, 787 (1927) ("In the amended petition which was stricken there is no allegation that
[the petitioner] did not have the same knowledge *** at the time she filed her first petition"). Here,
of course, plaintiff did not allege merely that during the small claims case he had no knowledge of
-6-
No. 2--08--0220
his malpractice claim. Rather, he alleged that through the exercise of reasonable diligence he could
not have discovered it in time to raise it there.
Defendant asserts that due diligence "would have required [plaintiff] to at least appear at the
[small claims] hearing to contest his liability. Had he appeared and responded to the fee litigation,
[plaintiff] could have learned of the purported legal malpractice and should have raised the claim at
that time." Defendant notes also that plaintiff could have sought to take discovery to realize his
claim. See 145 Ill. 2d R. 287(a) (no discovery in small claims except by leave of court). "Instead,
[plaintiff] simply ignored the fee litigation."
Defendant here raises only a question of fact. In light of plaintiff's allegations, we cannot
necessarily attribute his default in the small claims case to a lack of diligence in exploring his
defenses. Small claims proceedings are designed to be expedient (Tannenbaum v. Fleming, 234 Ill.
App. 3d 1041, 1044 (1992)), such that plaintiff might have diligently investigated but determined
that, as of then, he simply had no defense to offer. To the extent he had any inkling of malpractice,
he would not necessarily have been unreasonable for failing to rely on the prospect of small claims
discovery, which he could not conduct as a matter of right, to flesh it out. While a small claims
defendant cannot use the expediency of the proceeding as a shield if he has truly failed to be diligent,
the small claims plaintiff cannot use it as a sword if the defendant, despite his diligence, is unable
to marshal a counterclaim in time.1
1
Indeed, some authority suggests that res judicata is inapplicable precisely because plaintiff
did not appear in the small claims case. See Restatement (Second) of Judgments §22, Comment a,
at 186 (1982) ("Even in jurisdictions having a statute or rule making certain counterclaims
compulsory, such provisions may not apply when no answer or other responsive pleading is filed");
-7-
No. 2--08--0220
A section 2--619 motion may not be granted when the asserted defense requires the resolution
of a material fact before it is proven. Reilly v. Wyeth, 377 Ill. App. 3d 20, 36 (2007). Here, plaintiff
alleged that he was duly diligent, and defendant alleged otherwise. Diligence is generally a question
of fact (In re Application of the County Collector, 219 Ill. App. 3d 396, 404 (1991)), and it certainly
is here. Thus, res judicata has not been proven, and the trial court erred in granting defendant's
motion.
The judgment of the circuit court of McHenry County is reversed, and this cause is remanded
for further proceedings.
Reversed and remanded.
BURKE and HUDSON, JJ., concur.
Restatement (Second) of Judgments §22, Illustration 2, at 186 (1982) ("A, a physician, brings an
action against B for the price of medical services rendered to B. B fails to plead and judgment by
default is given against him. B is not precluded from subsequently maintaining an action against A
for malpractice relating to the services sued upon in the prior action"). Plaintiff does not make this
argument, however, and thus we do not address it.
-8-