Shrock v. Union National Bank ( 2021 )

2021 IL App (1st) 200653-UNos. 1-20-0653 & 1-20-0951
Order filed December 1, 2021
Third Division
NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the
limited circumstances allowed under Rule 23(e)(1).
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
______________________________________________________________________________
EDWARD SHROCK and BABY SUPERMALL, LLC, ) Appeal from the
) Circuit Court of
Plaintiffs-Appellants, ) Cook County.
)
v. ) No. 16 L 11405
)
UNION NATONAL BANK and JAY DEIHS, ) Honorable
) Brigid M. McGrath and
Defendants-Appellees. ) Michael F. Otto,
) Judges, presiding.
JUSTICE BURKE delivered the judgment of the court.
Justice McBride and Justice Ellis concurred in the judgment.
ORDER
¶1 Held: Circuit court’s grant of judgment on the pleadings on plaintiffs’ claims of fraud and
breach of fiduciary duty and its dismissal of plaintiffs’ claims of tortious
interference with contract and conversion are affirmed where all claims are barred
by the relevant statutes of limitations. Circuit court’s dismissal of plaintiffs’ claims
for respondeat superior liability, prejudgment interest, and attorneys’ fees is
affirmed where plaintiffs’ substantive claims are untimely.
¶2 On November 18, 2016, plaintiffs Edward Shrock and Baby Supermall, LLC (BSM), sued
Union National Bank and its vice president, Jay Deihs. Plaintiffs alleged that defendants aided
Nos. 1-20-0653 & 1-20-0951
Robert Meier, BSM’s former president and majority owner, in expropriating millions of dollars
from BSM during a decade-long scheme beginning in 2003. The circuit court dismissed plaintiff’s
claims for conversion, tortious interference with contract, respondeat superior liability,
prejudgment interest, and attorneys’ fees. The court then granted judgment on the pleadings for
defendants on plaintiffs’ remaining claims of fraud and breach of fiduciary duty, finding that
Shrock’s release of a $11.16 million judgment against Meier in a 2009 lawsuit operated to release
defendants in this case. We affirm.
¶3 I. BACKGROUND
¶4 BSM, an online retailer of baby products, was formed on October 21, 2003. Meier owned
87.5% of the company and Shrock owned 12.5%; BSM’s operating agreement called for profits to
be distributed to Meier and Shrock in those percentages. Meier was BSM’s president and manager
in charge of day-to-day operations and Shrock was, at least for some time, an employee responsible
for maintaining BSM’s website.
¶5 Beginning in 2003, Meier created a series of “profit-sharing” agreements between himself
and BSM. Under these agreements, BSM paid Meier more than 87.5% of its profits in exchange
for Meier deferring his salary and for personally guaranteeing BSM’s debts. Meier also hired his
girlfriend and her son as employees and paid them shares of BSM’s profits. As a result, Meier and
his family took more than 100% of BSM’s profits, and BSM’s balance sheet showed no-bottom
line profits that could be distributed to Shrock. Plaintiffs allege that Meier’s scheme lasted from
2003 through 2013, and that Meier and his family seized over $16 million from BSM, while Shrock
received only $165,000.
¶6 A. The 2009 Lawsuit
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¶7 Plaintiffs claim that when Shrock discovered Meier’s scheme, he demanded that Meier
return the money and Meier refused. On February 9, 2009, Shrock sued Meier, alleging essentially
the facts set out above (the 2009 lawsuit). Shrock v. Meier, No. 09 L 1455 (Cir. Ct. Cook. Co.
2009). 1 On May 18, 2010, the trial court granted Shrock’s motion to enjoin Meier and his family
against taking payments from BSM under the “profit-sharing” plans that Meier created.
¶8 On March 8, 2011, Shrock filed another motion for an injunction to prohibit Meier from
using BSM’s funds to pay for his personal expenses. This motion accused Meier of using BSM as
his “personal piggy bank” by paying approximately $1.4 million of company funds to his divorce
attorneys and his ex-wife to settle his divorce, and by loaning himself $788,000 from BSM for
personal use. On March 24, 2011, Meier filed a response, which acknowledged that the payments
occurred but contended that they occurred prior to the 2010 injunction, and that they were proper
under the “profit-sharing” agreements he created. Meier also stated that, “after speaking with the
Bank [identified as ‘Union Bank of Elgin’], it was determined that the best way to finance his”
purchase of a personal residence was for Meier to borrow the purchase funds from BSM and repay
the loan at a higher interest rate than BSM paid on its line of credit with Union National. Meier
also filed an affidavit attesting to these facts. Shrock’s reply indicated that he discovered the
payments and loan to Meier in “excerpts from BSM’s general ledger,” which was “produced by
Meier pursuant to a Rule 214 request.”
1
We glean the facts of the 2009 lawsuit from pleadings in the record on appeal that summarize
the allegations and procedural history of that case and that contain filings from that case as exhibits.
Moreover, we take judicial notice of the online docket report in the 2009 lawsuit issued by the clerk of the
circuit court because the dates of several events in that case are relevant to the statute of limitations
analysis. See Wells Fargo Bank, N.A. v. Simpson, 2015 IL App (1st) 142925, ¶ 24 n. 4.
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¶9 On March 5, 2014, a jury found that Meier willfully and wantonly violated his fiduciary
duty to Shrock from 2003 through 2012 and awarded $10,025,000 in punitive damages.
¶ 10 Meier then filed for bankruptcy. In re Robert J. Meier, No. 14 BK 10105 (N.D. Ill. 2014).
According to plaintiffs, bankruptcy litigation revealed a note that Deihs wrote to BSM’s loan file
on March 29, 2013, stating that “Baby Supermall had another strong year. Bob [Meier] utilizes the
profit sharing expense which was $1.7MM last year as he still has disputes with the minority
shareholder, Ed [Shrock], to avoid distributions.” Plaintiffs claim that this note was not produced
until the 2014 bankruptcy litigation because defendants, working with Meier’s attorneys, refused
to produce documents regarding BSM’s loans during the 2009 lawsuit. In 2015, Shrock purchased
Meier’s ownership interest in BSM from the bankruptcy estate.
¶ 11 After the bankruptcy stay was lifted, on February 9, 2016, the trial court determined that
Shrock incurred compensatory damages of $1,164,500 as a result of Meier’s scheme. The court
added the compensatory damages to $10,000,000 in punitive damages and entered judgment
against Meier in the amount of $11,164,500.
¶ 12 On March 21, 2018, the trial court entered a partial satisfaction and release of judgment,
drafted by Shrock’s attorney, which stated:
“On February 9, 2016, an $11,164,500 judgment was entered for Plaintiff Edward
Shrock and against Defendant Robert J. Meier in the above-captioned case.
In partial satisfaction of the judgment, Defendant Robert J. Meier transferred a
residence at [address] to Plaintiff Edward Shrock. The full judgment amount has not been
satisfied by Defendant Robert J. Meier.
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Despite only a partial satisfaction, Plaintiff Edward Shrock hereby releases the
$11,164,500 judgment against Defendant Robert J. Meier entered on February 9, 2016.”
¶ 13 B. This Lawsuit
¶ 14 Approximately 16 months before Shrock released Meier, on November 18, 2016, Shrock
and BSM filed the instant lawsuit against Union National Bank and bank vice president Jay
Deihs. Plaintiffs ultimately filed a second amended complaint, which alleged counts of fraud,
constructive fraud, aiding breach of fiduciary duty, intentional interference with contract,
conversion, and respondeat superior liability. Plaintiffs claimed that Union National was BSM’s
bank during the entirety of Meier’s scheme and that Deihs was responsible for handling BSM’s
business with the bank.
¶ 15 Specifically, plaintiffs alleged that defendants allowed Meier to use BSM as his “personal
piggy bank” and to avoid profit distributions to Shrock. Between 2009 and 2010, Meier
withdrew almost $2 million in four separate transactions from BSM’s bank account to pay
himself, his personal attorneys, his ex-wife, and his personal taxes. Eight days after the May
2010 injunction was entered, Meier wired himself $788,000 from BSM’s bank account to buy a
house. Also in 2010, defendants helped BSM obtain a $1.75 million loan, which Meier used to
buy a house and finance his divorce. As a result of Meier’s abuse of BSM’s cash and credit,
BSM became insolvent and sold most of its assets to pay creditors. Shrock lost nearly all the
value of his BSM membership interest and did not receive BSM profit distributions.
¶ 16 Defendants filed motions to dismiss plaintiffs’ second amended complaint pursuant to
sections 2-615 and 2-619 of the Code of Civil Procedure (735 ILCS 5/2-615, 2-619 (West 2018)).
Defendants’ section 2-619 motion argued that all of plaintiffs’ claims were barred by the five-year
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statute of limitations because those claims “began to accrue in 2003 and were known to Shrock no
later than 2009 when Shrock filed his lawsuit against Meier,” more than five years before plaintiffs
filed this lawsuit. Defendants’ section 2-615 motion argued that plaintiffs failed to state a claim
for respondeat superior liability, and that Illinois law did not support plaintiffs’ request for
attorneys’ fees or prejudgment interest. The circuit court denied defendants’ section 2-619 motion
with respect to “issues of assignment (standing) & UCC 4-406.” The court granted defendants’
section 2-615 motion and struck with prejudice plaintiffs’ claims for conversion and respondeat
superior liability and their requests for prejudgment interest and attorneys’ fees. The record does
not reflect the court’s reasoning for its rulings.
¶ 17 Plaintiffs then filed their third amended complaint, which alleged essentially the same facts
as the second amended complaint and counts of fraud, breach of fiduciary duty, and intentional
interference with contract.
¶ 18 Defendants filed a section 2-619 motion to dismiss plaintiffs’ third amended complaint,
again arguing that plaintiffs’ claims were untimely. Defendants also filed a section 2-615 motion
to dismiss plaintiffs’ third amended complaint, which argued plaintiffs had failed to state claims
of intentional interference with contract because they did not allege defendants induced or caused
Meier to breach a contract with Shrock. The circuit court denied defendants’ section 2-619 motion
without prejudice with respect to the statute of limitations argument. The court dismissed the
counts of intentional interference with prejudice pursuant to section 2-615. The record does not
reflect the court’s reasoning for its rulings.
¶ 19 Defendants then filed a section 2-615(e) motion for judgment on the pleadings as to
plaintiffs’ remaining claims of fraud and breach of fiduciary duty, which argued that plaintiffs
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failed to file suit within the five-year statute of limitations. Defendants contended that plaintiffs
knew of those claims in 2009, when Shrock sued Meier, or by March 24, 2011, at the latest, when
Meier’s court filings confirmed that BSM was banking with Union National and that Union
allowed an improper loan for Meier to buy a house, but plaintiffs did not file suit until November
18, 2016. Defendants also argued that Shrock’s release of Meier in the 2009 lawsuit barred his
claims against defendants in this case because both cases sought to recover the same damages.
¶ 20 In response, plaintiffs argued that the doctrine of adverse domination tolled the statute of
limitations because Shrock, the minority owner of BSM, had no authority to bring a derivative
lawsuit on BSM’s behalf. As to the release, plaintiffs acknowledged that, at common law, a release
of one wrongdoer from judgment releases all wrongdoers whose conduct produced a single injury.
However, they contended that the Joint Tortfeasor Contribution Act (740 ILCS 100/1 et seq. (West
2018)) abrogated the common law rule; therefore, Shrock’s release of Meier in the 2009 lawsuit
did not release defendants in this case because defendants were not identified in that release. In
reply, defendants argued that Shrock had both the motivation and the ability to sue Meier on
BSM’s behalf no later than March 2011, but did not file suit until November 2016; thus, plaintiffs’
claims fell outside the five-year statute of limitations.
¶ 21 On March 27, 2020, the circuit court granted defendants’ motion for judgment on the
pleadings in a written opinion. The court found that plaintiffs were seeking to recover for the same
loss at issue in the 2009 lawsuit. Citing Cherney v. Soldinger, 299 Ill. App. 3d 1066 (1998), the
court concluded that Shrock’s release of Meier was “absolute and unconditional” and “released
the judgment in its entirety,” including “any other parties which might be responsible for the
injury.” Quoting Kinzer v. City of Chicago, 128 Ill. 2d 437 (1989), the court explained that “so
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long as there is a ‘single indivisible injury,’ a release of any party alleged to have caused the injury
by breaching their fiduciary duty will operate to release any other parties also alleged to have
caused the injury.” The court did not address the statute of limitations.
¶ 22 On April 27, 2020, plaintiffs appealed the circuit court’s grant of judgment on the
pleadings, which initiated case number 1-20-0653.
¶ 23 Also on April 27, 2020, plaintiffs filed a motion to reconsider judgment on the pleadings
pursuant to section 2-1203 of the Code of Civil Procedure (735 ILCS 5/2-1203 (West 2020)).
Plaintiffs argued that the intent of the parties controlled whether Shrock had released Union
National Bank and Deihs, and the parties expressed their intent in a settlement agreement that
plaintiffs attempted to introduce during oral argument on the motion for judgment on the
pleadings. 2 Plaintiffs contended that this settlement agreement established that Shrock intended to
release only Meier and his family, not Union National Bank or Deihs. Plaintiffs attached the
settlement agreement to their motion to reconsider. Shrock also attested that he never
“contemplated releasing *** any other parties other than the specific parties” named in the
settlement agreement. The record does not include defendants’ response to plaintiffs’ motion to
reconsider or indicate whether they filed one.
¶ 24 On August 11, 2020, the circuit court denied plaintiffs’ motion to reconsider. The court
reasoned that plaintiffs’ motion was “comprised almost exclusively of arguments Plaintiffs failed
to make in opposition to the original motion” for judgment on the pleadings and found that those
arguments had been waived. The court also concluded that, to the extent plaintiffs had not waived
2
No reports of proceedings are included in the record on appeal.
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certain arguments, none of plaintiffs’ arguments warranted reconsidering of judgment on the
pleadings.
¶ 25 Plaintiffs timely appealed on September 9, 2020, which initiated case number 1-20-0951.
The notice of appeal indicates that plaintiffs are challenging the circuit court’s March 27, 2020,
grant of judgment on the pleadings, the August 11, 2020, order denying plaintiffs’ motion to
reconsider judgment on the pleadings, and “[a]ny other order that was a procedural step to the
foregoing orders.” This appeal was consolidated with plaintiff’s original appeal of April 27, 2020.
¶ 26 II. ANALYSIS
¶ 27 On appeal, plaintiffs contend that the circuit court erred in granting judgment on the
pleadings, in denying their motion to reconsider judgment on the pleadings, and in dismissing their
claims for conversion, tortious interference with contract, and respondeat superior liability, and
their requests for prejudgment interest and attorneys’ fees.
¶ 28 A. Judgment on the Pleadings
¶ 29 The circuit court entered judgment on the pleadings in favor of defendants as to plaintiffs’
claims of fraud and breach of fiduciary duty. Judgment on the pleadings is proper when there are
no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.
Hess v. Estate of Klamm, 2020 IL 124649, ¶ 14. We review judgment on the pleadings de novo.
Id.¶ 30 Defendants maintain that we should affirm the circuit court’s entry of judgment on the
pleadings because, inter alia, plaintiffs filed this lawsuit after the statute of limitations for claims
of fraud and breach of fiduciary duty expired. Although the circuit court did not address the statute
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of limitations, we may affirm on any basis in the record. People ex rel. Department of Human
Rights v. Oakridge Healthcare Center, LLC, 2020 IL 124753, ¶ 36.
¶ 31 1. Discovery Rule
¶ 32 The statute of limitations for claims of breach of fiduciary duty and common law fraud is
five years. Richter v. Prairie Farms Dairy, Inc., 2015 IL App (4th) 140613, ¶ 41 (fraud); Fuller
Family Holdings, LLC v. Northern Trust Co., 371 Ill. App. 3d 605, 618 (2007) (breach of fiduciary
duty). Under the discovery rule, the statute of limitations does not begin to run until the plaintiffs
knew or reasonably should have known of their injury and that it might have been wrongfully
caused. Fuller Family Holdings, 371 Ill. App. 3d at 618. The question is when the plaintiffs
developed “a reasonable belief that the injury was caused by wrongful conduct, thereby creating
an obligation to inquire further on that issue.” Dancor Intern., Ltd. v. Friedman, Goldberg, &
Mintz, 288 Ill. App. 3d 666, 672 (1997). It does not matter whether the plaintiffs knew or suspected
who the wrongdoer was because knowledge than an injury has been wrongfully caused does not
require knowledge of a specific defendant’s wrongful conduct. Janousek v. Katten Muchin
Rosenman LLP, 2015 IL App (1st) 142989, ¶ 13. Under the discovery rule, the determination of
when the limitations period began running is generally a question of fact. Fuller Family Holdings,
371 Ill. App. 3d at 618. However, we may address the question as a matter of law when the answer
is clear from the pleadings. Id.
¶ 33 The issue in this case is when plaintiffs had sufficient information to reasonably believe
that they had suffered an injury and that it was wrongfully caused. If the answer is more than five
years before they filed this lawsuit on November 18, 2016, then their claims of fraud and breach
of fiduciary duty are time-barred.
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¶ 34 Plaintiffs must have learned of Meier’s scheme and the financial losses it caused by
February 9, 2009, because that is when Shrock sued Meier. The misconduct and financial injury
alleged in the 2009 lawsuit is the same as in this lawsuit, i.e., expropriation of funds from BSM
for Meier’s personal use to the detriment of the company and Shrock. Thus, plaintiffs knew of
their injury and that it was wrongly caused no later than February 9, 2009. Under the discovery
rule, the five-year statute of limitations for plaintiffs’ claims of fraud and breach of fiduciary duty
expired on February 9, 2014. Plaintiffs filed this lawsuit on November 18, 2016. Thus, their claims
of fraud and breach of fiduciary duty are time-barred.
¶ 35 Plaintiffs contend that they did not discover defendants’ involvement in Meier’s scheme
until bankruptcy litigation in 2014 or 2015, when Deihs’s note to BSM’s loan file was produced.
However, that is not the relevant inquiry under the discovery rule. We have repeatedly rejected the
notion that the identity of the party who caused the plaintiffs’ injury is a prerequisite to the running
of the statute of limitations. Guarantee Trust Life Ins. Co. v. Kribbs, 2016 IL App (1st) 160672, ¶
30. Rather, the question is when plaintiffs learned of their own financial loss and that it was
wrongfully caused. See Janousek, 2015 IL App (1st) 142989, ¶ 13. As explained above, that cannot
have been any later than February 9, 2009.
¶ 36 Even if the issue was when plaintiffs learned of defendants’ involvement specifically,
filings from the 2009 lawsuit, which are included in the record on appeal, indicate that plaintiffs
had reason to know of defendants’ involvement in Meier’s scheme more than five years before
they filed this lawsuit. Shrock’s March 8, 2011, motion for an injunction accuses Meier of
obtaining millions of dollars from BSM’s bank account for his personal use. Shrock clearly
recognized that this behavior was improper; that is why he filed a motion for an injunction to stop
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it. Thus, Shrock’s own motion indicates that, in March 2011, he should have inquired as to why
BSM’s bank allowed Meier to withdraw substantial amounts of non-salary funds from the
company’s account.
¶ 37 Moreover, Meier’s March 24, 2011, filings confirmed that BSM was banking with “Union
Bank” in Elgin, which is where Union National Bank is located, and admitted that Meier had
received direct payments from BSM’s bank account. Most importantly, Meier explicitly stated that
he financed the purchase of his personal residence using a loan from BSM and BSM’s line of credit
“after speaking with the Bank.” This admission confirmed that Meier using BSM’s finances for
his personal benefit and that Union National was advising him to do so. In addition, Shrock’s reply
stated that he had received BSM’s general ledger in discovery, and it showed that hundreds of
thousands of dollars came directly from BSM’s “Cash in Bank” account to pay for Meier’s
personal expenses. These filings all but described the allegations in this lawsuit, which plaintiffs
did not file until November 2016.
¶ 38 Altogether, the record on appeal establishes that, by March 24, 2011, plaintiffs had
sufficient information to conclude that Union National Bank was allowing and assisting Meier’s
improper use of BSM’s bank account and its credit. Thus, at the very latest, the statute of
limitations for plaintiffs’ claims of fraud and breach of fiduciary duty expired on March 24, 2016.
Plaintiffs filed suit on November 18, 2016, so these claims are time-barred.
¶ 39 We reached a similar conclusion in a related case, Shrock v. Ungaretti & Harris, Ltd., 2019
IL App (1st) 181698. On November 18, 2016, the same day as they filed the case at bar, Shrock
and BSM sued Meier’s attorneys, alleging that they aided Meier in violating the injunction in the
2009 lawsuit. Shrock, 2019 IL App (1st) 181698, ¶¶ 1, 40. The trial court dismissed plaintiffs’
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claims as barred by the statute of limitations and we affirmed. Id. ¶ 1. We applied the discovery
rule to the two-year statute of limitations for claims of attorney misconduct under section 13-
214.3(b) of the Code of Civil Procedure (735 ILCS 5/13-214.3(b) (West 2016)). Id. ¶ 49. We found
that Shrock’s filings in the 2009 lawsuit and in Meier’s bankruptcy litigation established that, by
August 2013, he had sufficient information to know that Meier was violating the injunction and,
by November 7, 2014, to know that Meier’s attorneys assisted him in doing so. Id. ¶ 63. Thus,
plaintiffs filed suit more than two years after the relevant statute of limitations expired and their
claims were time-barred. In the instant case, although the statute of limitations is five years instead
of two, the logic is the same. Because plaintiffs did not sue defendants until more than five years
after they discovered their financial injury, plaintiffs’ claims of fraud and breach of fiduciary duty
are barred by the statute of limitations.
¶ 40 2. Fraudulent Concealment
¶ 41 Plaintiffs argue that fraudulent concealment tolls the statute of limitations under section
13-215 of the Code of Civil Procedure (735 ILCS 5/13-215 (West 2016)). Section 13-215 applies
if “a plaintiff pleads and proves that fraud prevented discovery of the cause of action.” DeLuna v.
Burciaga, 223 Ill. 2d 49, 76 (2006). “Illinois courts have consistently interpreted section 13-215
to apply only to fraudulent concealment of causes of action” and not to the identity of a defendant.
Levine v. EBI, LLC, 2013 IL App (1st) 121049, ¶ 21. In other words, “[w]hen the tortfeasor
fraudulently conceals the identify of the tortfeasors, and the tortfeasor does not conceal the fact
that the plaintiff suffered an injury, section 13-215 does not allow the plaintiff an extension of the
limitations period for filing his claim.” Id.- 13 -
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¶ 42 Plaintiffs’ third amended complaint alleges that fraudulent concealment tolls the statute of
limitations because, until June 22, 2016, Meier insisted that he had not received any funds from
BSM and that BSM was simply “accruing” amounts that would be paid to him later. The record
on appeal shows that this is untrue. Meier’s March 24, 2011, filings explicitly stated that Meier
had already received payments from BSM’s bank account and that he was using BSM’s credit to
finance the purchase of his home because Union National Bank told him to. Plaintiffs’ third
amended complaint directly quotes these filings. Thus, plaintiffs’ own complaint belies their
attempt to plead fraudulent concealment. To the extent that plaintiffs now suggest that defendants’
refusal to produce documents caused plaintiffs’ failure to timely assert their claims, silence by
defendants does not relieve plaintiffs from acting on what they knew from Meier’s filings of March
24, 2011. See Kribbs, 2016 IL App (1st) 160672, ¶ 41. Thus, fraudulent concealment does not toll
the statute of limitations.
¶ 43 3. Equitable Estoppel
¶ 44 Similarly, plaintiffs contend that equitable estoppel tolls the statute of limitations because
“[t]he conspiracy lasted through at least 2015, when Union revealed the note indicating their
complicity” and defendants cannot raise the statute of limitations as a defense when their own
actions caused plaintiffs’ delay in filing suit.
¶ 45 When a plaintiff alleges a defendant misled him into filing outside the applicable statute
of limitations, he seeks relief under principles of equitable estoppel. Klancir v. BNSF Ry. Co.,
2015 IL App (1st) 143437, ¶ 21. “ ‘The party claiming estoppel has the burden of proving it by
clear and unequivocal evidence.’ ” Id. (quoting Steinmetz v. Wolgamot, 2013 IL App (1st)
121375, ¶ 40). To demonstrate equitable estoppel barring a statute of limitations defense,
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plaintiffs must show: (1) the defendants misrepresented or concealed material facts; (2) the
defendants knew at the time the representations were made that they were untrue; (3) the
plaintiffs did not know that the misrepresentations were untrue when they were made and acted
upon; (4) the defendants intended or reasonably expected that the plaintiffs would act on the
misrepresentations; (5) the plaintiffs reasonably relied on the misrepresentations in good faith to
their detriment; and (6) the plaintiffs were prejudiced by their reliance on the misrepresentations.
Hanmi Bank v. Chuhak & Tecson, P.C., 2018 IL App (1st) 180089, ¶ 23.
¶ 46 Plaintiffs cannot establish equitable estoppel by clear and unequivocal evidence. To the
extent that defendants’ alleged refusal to produce documents during the 2009 lawsuit constituted
a “representation” that they were not involved in Meier’s scheme, plaintiffs cannot not have
relied in good faith on that representation. Meier’s March 2011 filings essentially confirmed
defendants were involved and claimed that Meier’s use of BSM’s credit to buy a house was the
bank’s idea. While Shrock may not have understood the significance of Meier’s March 24, 2011,
filings, defendants did nothing that prevented plaintiffs from filing suit against them at that time.
Thus, plaintiffs have failed to establish that equitable estoppel applies.
¶ 47 4. Continuing Violation Rule
¶ 48 Plaintiffs next argue that, under the continuing violation rule, the statute of limitations
“runs from the last continuing tort,” which “extended through 2014.” Breach of fiduciary duty is
not a tort, so the continuing violation rule does not apply to those claims. See Hassebrock v. Ceja
Corp., 2015 IL App (5th) 140037, ¶ 33.
¶ 49 However, plaintiffs do allege torts in their claims of common law fraud. See Giammanco
v. Giammanco, 253 Ill. App. 3d 750, 761 (1993) (“the tort of common-law fraud is primarily
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addressed to the invasion of economic interests.”). “[U]nder the ‘continuing tort’ or ‘continuing
violation’ rule, ‘where a tort involves a continuing or repeated injury, the limitations period does
not begin to run until the date of the last injury or the date the tortious acts cease.’” Feltmeier v.
Feltmeier, 207 Ill. 2d 263, 278 (2003) (quoting Belleville Toyota, Inc. v. Toyota Motor Sales,
U.S.A., Inc., 199 Ill. 2d 325, 345 (2002)). The rule does not apply to a series of discrete acts, each
of which is independently actionable, even if those acts form a pattern of wrongdoing. Belleville
Toyota, 199 Ill. 2d at 348-49. Our supreme court has not adopted “a continuing violation rule of
general applicability in all tort cases.” Id. at 347.
¶ 50 We have found no binding authority that applies the continuing violation rule to all claims
of common law fraud, and we do not believe that the rule applies in this case. 3 Plaintiffs’ pleadings
broadly allege that Meier’s scheme ran from 2003 to 2013 or 2014, and that Union National was
BSM’s bank during that time. However, plaintiffs also allege distinct transactions that defendants
allowed or aided. For example, plaintiffs allege that, between November 2009 and April 2010,
Meier transferred almost $2 million from BSM’s Union National Bank account to pay himself, his
attorneys, his ex-wife, and his personal taxes. After the injunction was entered in May 2010,
defendants allowed Meier to wire himself $788,000 to buy a house, then assisted him in obtaining
a $1.75 million loan for BSM that defendants knew Meier would use to finance his divorce. Each
of these is a distinct instance of misconduct. Plaintiffs’ claims of fraud do not depend on Meier,
3
We acknowledge that the Second District applied to the continuing violation rule to a “scheme
to defraud” (Sommer v. United Sav. Life Ins. Co., 128 Ill. App. 3d. 808, 817 (1984)), and the Fifth District
applied the rule to a bank’s monthly deposits of checks into an unauthorized account (Field v. First Nat.
Bank of Harrisburg, 249 Ill. App. 3d 822, 826 (1993)). However, both cases predate our supreme court’s
opinion in Belleville Toyota, and the opinion of one district of the appellate court is not binding on other
districts. O’Casek v. Children’s Home & Aid Society of Illinois, 229 Ill. 2d 421, 440 (2008). We do not
believe that the Illinois Supreme Court’s citation of Field in Feltmeier as an illustration of historical case
law constitutes a holding that binds us in this case.
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Union National, and Deihs’s pattern of behavior, and the ongoing nature of those acts did not
prevent plaintiffs from suing Union National and Deihs along with Meier. Thus, the continuing
violation rule does not apply.
¶ 51 Our decision in Kidney Cancer Ass’n v. North Shore Community Bank and Trust Co., 373
Ill. App. 3d 396 (2007) supports this conclusion. In that case, the plaintiff alleged that the defendant
bank allowed the plaintiff’s director to set up an account into which the director deposited checks
intended for the plaintiff, then withdrew funds from the account for his own personal use. Kidney
Cancer Ass’n, 373 Ill. App. 3d at 398. The trial court dismissed the complaint as untimely and we
affirmed, finding that “the continuing violation rule does not apply to a series of discrete acts, each
of which is independently actionable, even if those acts form an overall pattern of wrongdoing.”
Id. at 405. Just as the plaintiff in Kidney Canncer Ass’n could have sued the bank for its role in
each conversion, plaintiffs in this case could have sued Union National and Deihs for aiding each
breach of Meier’s fiduciary duties. Thus, the continuing violation rule does not apply to this case.
See Belleville Toyota, 199 Ill. 2d. at 348. Plaintiffs’ claims are untimely.
¶ 52 5. Adverse Domination
¶ 53 Finally, plaintiffs argue that BSM’s statute of limitations was tolled under the adverse
domination doctrine. The adverse domination doctrine tolls the statute of limitations for claims
by a corporation against its officers during the time the corporation is controlled by those
officers. Lease Resolution Corp. v. Larney, 308 Ill. App. 3d 80, 86 (1999). The doctrine creates a
rebuttable presumption that the corporation does not “know” of its own injuries when it is
controlled by the officers who caused those injuries. Id. at 90. This presumption may be rebutted
by evidence that someone other than the wrongdoing officers knew of the cause of action and
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had both the ability and motivation to bring suit. Id. The doctrine also applies to claims against
non-corporate actors who conspired with or aided the wrongdoing officers because wrongdoing
officers are unlikely to sue non-corporate actors who are helping them commit misconduct. Id. at
89-90.
¶ 54 We rejected BSM’s assertion of adverse domination in the lawsuit against Meier’s
attorneys (Shrock, 2019 IL App (1st) 181698, ¶ 85) and we reject it again here. Shrock had
knowledge of BSM’s potential claims against defendants in February 2009, and certainly no later
than March 24, 2011. There is no doubt Shrock had “the motivation to bring suit” against
defendants at that time. See Id. In fact, Shrock had already filed the 2009 lawsuit against Meier
seeking to recover for financial harm that Meier caused by the depletion of BSM’s bank account
and the use of its credit. Shrock also filed multiple motions seeking to enjoin Meier from taking
BSM’s funds for his personal use.
¶ 55 In addition, Shrock had the ability to bring suit on behalf of BSM at the relevant time.
Section 40-1 of the Limited Liability Company Act, which governed BSM (see 805 ILCS
180/15-1 (West 2008)), provides that “[n]o action shall be brought by a member *** in the right
of a limited liability company to recover a judgment in its favor unless members or managers
with authority to do so have refused to bring the action or unless an effort to cause those
members or managers to bring the action is not likely to succeed.” 805 ILCS 180/40-1 (West
2008).
¶ 56 In both 2009 and 2011, Meier was BSMs’ sole manager with exclusive authority to
initiate litigation, and “there is simply no possibility that Meier, had he been asked by Shrock,
would have authorized” a lawsuit alleging that Union National and Deihs helped him expropriate
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millions of dollars from BSM’s bank account for his personal use. See Shrock, 2019 IL App (1st)
181698, ¶¶ 81-83. “Because a request to authorize this litigation could have been hopelessly
futile, Shrock was entitled, under section 40-1, to file a lawsuit on BSM’s behalf against” Union
National Bank and Deihs. See Id. ¶ 84. No later than March 24, 2011, Shrock knew that
defendants were allowing Meier to misuse BSM’s bank assets. “Thus, at that point in time,
Shrock could have initiated a derivative action on behalf of BSM against defendants.” See Id.Because Shrock had the motivation, ability, and knowledge to bring a cause of action against
defendants before the five-year window expired, the adverse-domination presumption is
rebutted. As a result, that doctrine does not toll the running of BSM’s statute of limitations.
Accordingly, we affirm the circuit court’s grant of judgment on the pleadings with respect to
plaintiffs’ claims of fraud and breach of fiduciary duty on the grounds that those claims were
barred by the relevant statutes of limitations.
¶ 57 B. Dismissed Claims
¶ 58 Plaintiffs also challenge the circuit court’s dismissal of their claims for conversion,
intentional interference with contract, and respondeat superior liability, and their requests for
prejudgment interest and attorneys’ fees. Defendants moved for dismissal of these claims pursuant
to sections 2-615 and 2-619; the circuit court dismissed them pursuant to section 2-615. Plaintiffs
preserved their dismissed claims for conversion, intentional interference with contract, respondeat
superior liability, prejudgment interest, and attorneys’ fees pursuant to Foxcroft Townhome
Owners Ass’n v. Hoffman Rosner Corp., 96 Ill. 2d 150 (1983) in their third amended complaint.
¶ 59 We may affirm a dismissal on any basis apparent in the record regardless of the circuit
court’s reasoning and regardless of whether the circuit court relied on section 2-615 or section 2-
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619. O’Callaghan v. Satherlie, 2015 IL App (1st) 142152, ¶ 17; Joseph v. Collis, 272 Ill. App.
3d 200, 206 (1995). Our review is de novo under either section. Edelman, Combs and Latturner
v. Hinshaw and Culbertson, 338 Ill. App. 3d 156, 164 (2003).
¶ 60 A section 2-615 motion to dismiss challenges the legal sufficiency of the complaint on its
face. Doe-3 v. McLean County Unit Dist. No. 5 Bd. of Directors, 2012 IL 112479, ¶ 15. The
question is whether the facts alleged, viewed in the light most favorable to the plaintiff, and
taking all well-pleaded facts and all reasonable inferences as true, are sufficient to state a cause
of action upon which relief may be granted. Id. at ¶ 16. The circuit court should only grant a
section 2-615 motion to dismiss if no set of facts can be proved that would entitle the plaintiff to
recovery. Marshall v. Burger King Corp., 222 Ill. 2d 422, 429 (2006). The court only considers
facts apparent from the face of the pleadings, matters subject to judicial notice, and judicial
admissions in the record. Gillen v. State Farm Mut. Auto. Ins. Co., 215 Ill. 2d 381, 385 (2005).
¶ 61 A section 2-619 motion to dismiss “ ‘admits the legal sufficiency of a plaintiff’s
complaint but raises defects, defenses, or other affirmative matters that appear on the complaint’s
face or that are established by external submissions acting to defeat the complaint’s allegations.’
” Kribbs, 2016 IL App (1st) 160672, ¶ 27 (quoting Burton v. Airborne Express, Inc., 367 Ill.
App. 3d 1026, 1029 (2006). One such defense is “[t]hat the action was not commenced within
the time limited by law.” 735 ILCS 5/2-619(a)(5) (West 2018). A section 2-619 motion should
be granted when a “plaintiff’s claim can be defeated as a matter of law or on the basis of easily
proven issues of fact.” Gadson v. Among Friends Adult Day Care, Inc., 2015 IL App (1st)
141967, ¶ 14.
¶ 62 1. Conversion and Tortious Interference with Contract
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¶ 63 Plaintiffs’ second amended complaint alleged counts of conversion. Essentially, plaintiffs
alleged that defendants assisted Meier in converting BSM’s funds, some of which should have
flowed to Shrock as profit distributions, for his personal use. The statute of limitations for
conversion is five years. See 735 ILCS 5/13-205 (West 2002); Kribbs, 2016 IL App (1st)
160672, ¶ 23; see also One Fish Two Fish, LLC v. Struif, 2021 IL App (1st) 191441, ¶ 45 (not
yet released for publication and subject to revision or withdrawal). The discovery rule applies to
conversion claims. One Fish Two Fish, 2021 IL App (1st) 191441, ¶ 45.
¶ 64 The third amended complaint alleged counts of “intentional interference,” which
essentially claimed that defendants interfered with BSM’s operating agreement by allowing
Meier to avoid paying profit distributions to Shrock. Plaintiffs’ brief discusses these claims in the
context of “inducements of breaches of contract” and “interference with the third party’s
performance of the contract.” Thus, we construe these counts as alleging of tortious interference
with contract. The statute of limitations for tortious interference with contract is five years.
Federal Signal Corp. v. Thorn Automated Systems, Inc., 295 Ill. App. 3d 762, 767 (1998). The
limitations period generally begins to run on the date of breach, but the discovery rule applies to
contractual torts just as it does to other torts. Id. at 766-67.
¶ 65 Plaintiffs’ claims for conversion and tortious interference with contract are time-barred
for the same reasons as their claims for fraud and breach of fiduciary duty. As explained above,
plaintiffs must have discovered their injury by February 9, 2009, when Shrock sued Meier. Thus,
the statute of limitations for claims of tortious interference with contract and conversion expired
on February 9, 2014, more than two years before plaintiffs filed this lawsuit.
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¶ 66 Moreover, plaintiffs’ third amended complaint alleges that “[i]n a 2010 [sic] affidavit in
Shrock’s case, Meier tried to explain why he used BSM’s money to buy the house. Meier
claimed he ‘spoke with the Bank’ and ‘it was determined’ that Meier would ‘borrow the money
from’ BSM.” It is reasonable to infer that this allegation quotes Meier’s March 24, 2011, filings,
which were attached as exhibits to defendants’ motion to dismiss plaintiffs’ third amended
complaint. Viewed in the light most favorable to plaintiffs, these pleadings establish that, by
March 24, 2011, plaintiffs knew or should have known that Union National was inducing Meier
to breach BSM’s operating agreement, to which Shrock was a party. Plaintiffs also knew or
should have known that Meier’s was converting BSM’s funds for his personal use at the advice
of Union National because Meier’s filings said as much. Plaintiffs did not file suit against
defendants until November 18, 2016, more than five years later. Accordingly, plaintiffs’ claims
of tortious interference with contract are and conversion time-barred and were properly
dismissed.
¶ 67 2. Respondeat Superior Liability
¶ 68 Plaintiffs’ second amended complaint alleged that “Union Bank was responsible for
Deihs’[s] actions under the doctrine of respondeat superior. Also, because Deihs was a Senior
Vice President, his actions as a high ranking officer should be imputed to Union Bank.” As
explained above, Deihs cannot be liable on any of plaintiffs’ substantive claims because those
claims are untimely. Accordingly, Union National Bank cannot be liable for Deihs’s actions
under respondeat superior. Thus, we have no basis to reverse the circuit court’s ruling on this
issue.
¶ 69 3. Prejudgment Interest and Attorneys’ Fees
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¶ 70 Finally, plaintiffs argue that the circuit court erred in striking their requests for
prejudgment interest and attorneys’ fees. “Prejudgment interest may be recovered when
warranted by equitable considerations” Jones v. Hryn Development, Inc., 334 Ill. App. 3d 413,
418 (2002). For example, “[t]he rationale underlying an equitable award of prejudgment interest
in a case involving a breach of fiduciary duty is to make the injured party complete by forcing
the fiduciary to account for profits and interest he gained by the use of the injured party's
money.” In re Estate of Wernick, 127 Ill. 2d 61, 87 (1989). Because all of plaintiffs’ substantive
claims are time-barred for the reasons outlined above, plaintiffs have not and cannot obtain any
money judgment to which prejudgment interest could apply. Similarly, under Illinois law, a
successful litigant may only recover attorneys’ fees if provided for by contract or statute. Taylor
v. Pekin Ins. Co., 231 Ill. 2d 390, 398-99 (2008). Plaintiffs cannot be successful litigants and
therefore cannot be entitled to attorneys’ fees. Accordingly, we have no basis to reverse the
circuit court’s judgment on these issues.
¶ 71 III. CONCLUSION
¶ 72 Because we affirm on the grounds that plaintiffs’ claims are barred by the statute of
limitations, it is not necessary to address defendants’ other basis for affirming the circuit court’s
grant of judgment on the pleadings regarding Shrock’s release of judgment.
¶ 73 For the foregoing reasons, we affirm the judgment of the circuit court of Cook County.
¶ 74 Affirmed.
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