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Docket Number

No. 3-86-0532

Attorney(S)

Karen L. Kendall and Robert H. Schultz, Jr., both of Heyl, Royster, Voelker Allen, of Peoria (Lyle W. Allen, of counsel), for appellants. Jerome Mirza Associates, Ltd., of Bloomington (Jerome Mirza, of counsel), for appellees.

Judges

JUSTICE SCOTT delivered the opinion of the court:

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Smart Summary

Case Summary: McLane v. Russell, No. 3-86-0532 (Ill. App. Ct., 3d Dist. Aug. 12, 1987)

Factual and Procedural Background

This appeal arises from a legal malpractice suit brought by plaintiffs (the McLanes, father and son — Keith and Cecil McLane) against defendants (attorney Fred G. Russell and the law firm Johnson, Martin Russell), claiming that Russell's failure to sever a joint tenancy frustrated Grace M. Shugart's testamentary intent and irrevocably denied the McLanes a one-half interest in a 240-acre Shugart farm.

Relevant background facts (previously presented in In re Estate of Shugart (1980), 81 Ill. App.3d 538): Grace and Helen Shugart, unmarried sisters, owned the 240-acre farm as joint tenants with right of survivorship. Grace executed wills in 1975 and a revised will in 1976 leaving her interest in the farm as a life estate to Cecil and the remainder to Keith. Attorney Russell drafted those wills but did not sever the joint tenancy. Grace died April 1977, and her undivided one-half interest passed by operation of law to Helen; upon Helen's later death the property passed to cousins.

The McLanes sued in Peoria County (filed March 1982) for damages equal to one-half the value of the farm. After a four-day jury trial, judgment on the verdict in favor of the McLanes was entered for $325,000. The trial court granted a setoff equal to one-half of a prior settlement the McLanes had obtained against the administrator of Helen's estate, reducing the award to $258,545. Defendants appealed and the McLanes cross-appealed the setoff decision.

Legal Issues Presented

Whether the McLanes, as nonclients, were proper plaintiffs in a legal malpractice action — i.e., whether an attorney (Russell) owed them a duty under the Pelham doctrine.
Whether the five-year statute of limitations barred the malpractice action (and, if so, when the limitations period began to run).
Whether the McLanes' settlement with the administrator of Helen Shugart's estate barred the instant malpractice suit or required admission of evidence of that prior claim and settlement to the jury.
Whether venue in Peoria County was proper or should have been transferred to Bureau County.
Whether the McLanes established a prima facie case that Russell's negligence proximately caused their damages.
Whether certain evidentiary rulings (admission of conflict-of-interest evidence, exclusion of an expert's reliance on a deposition, admission of expert testimony regarding standard of care) constituted reversible error.
Whether the trial court erred in allowing a setoff equal to one-half of the McLanes' prior settlement against the jury award (or whether the full settlement amount should offset the award).

Arguments of the Parties

Defendants-Appellants (Russell and Johnson, Martin Russell)

They sought reversal (or judgment notwithstanding the verdict / new trial), arguing reversible error occurred when the trial court ruled the McLanes' prior settlement against Helen's estate did not bar the malpractice suit and the jury should not be allowed to hear evidence of that prior suit and settlement.
They contended the five-year statute of limitations began on August 19, 1976 (date of Grace's final will) and thus the suit filed in March 1982 was time-barred.
They argued venue was improper in Peoria County and should have been transferred to Bureau County.
They asserted the McLanes were not the primary intended beneficiaries of the attorney-client relationship and therefore not proper plaintiffs in malpractice under Pelham.
They maintained the McLanes failed to establish a prima facie case of negligence and proximate cause linking Russell's conduct to the alleged loss.
They challenged certain evidentiary rulings: admission of conflict-of-interest evidence, exclusion of their expert's testimony regarding a deposition he reviewed, and admission of expert testimony they claimed did not sufficiently establish the applicable standard of care.
On setoff, they argued the verdict should be offset by the entire prior settlement amount (not just one-half).

Plaintiffs-Appellees and Cross-Appellants (Keith and Cecil McLane)

The McLanes argued their suit was timely because the statute of limitations began to run when they reasonably discovered the alleged malpractice — after Grace's death during probate in 1977 (applying the discovery rule).
They maintained the prior settlement they obtained against the administrator of Helen's estate did not bar their malpractice action and that evidence of that prior claim and settlement should not be presented to the jury.
On cross-appeal they argued the trial court erred in applying a setoff equal to one-half of their prior settlement and requested reinstatement of the full jury award, asserting the sum of the prior settlement and the jury award did not equal full value of the entire farm.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Pelham v. Griesheimer, 92 Ill.2d 13 (1982)	Establishes that an attorney can owe a duty to a nonclient when the client intended to benefit the nonclient and the primary purpose of the attorney-client transaction was to achieve that benefit.	The court applied Pelham and found that Grace intended to benefit the McLanes and that drafting her 1975 and 1976 wills had the primary purpose of achieving that benefit; therefore the McLanes were proper plaintiffs under the Pelham doctrine.
In re Estate of Shugart, 81 Ill. App.3d 538 (1980)	Background/factual history of the estates and prior proceedings relevant to this case.	The court relied on the prior opinion for the underlying facts concerning ownership, wills, and probate events recited in this opinion.
Borowski v. Von Solbrig, 60 Ill.2d 418 (1975)	Principle that release of one tortfeasor does not release another separate tortfeasor who contributed to the same injury.	The court cited this principle to support the trial court's ruling that the McLanes' settlement with the administrator of Helen's estate did not bar the malpractice suit against Russell.
Clear-Vu Packaging, Inc. v. National Union Fire Ins. Co., 105 Ill. App.3d 671 (1982)	Related authority on the effect of releases and settlements among potentially separate tortfeasors.	Cited alongside Borowski to support the conclusion that the prior settlement against the administrator did not automatically release Russell from liability.
Anderson v. Martzke, 131 Ill. App.2d 61 (1970)	Additional authority on settlements and releases among tortfeasors.	Used with other authorities to support the court's ruling that the settlement did not bar the instant action.
Scoggins v. Village of Hartford, 86 Ill. App.2d 233 (1967)	Another authority on the effect of releases and settlements.	Included among cases supporting the proposition that release of one does not release another separate tortfeasor.
DeGerlia v. First Bank Trust Co., 121 Ill. App.3d 658 (1984)	Authority concerning what constitutes "doing business" in a county for venue purposes.	The court relied on DeGerlia in finding the law firm's filing of proofs of claim and representation of creditors in Peoria County constituted sufficient activity to fix venue there.
Baltimore & Ohio R.R. Co. v. Mosele, 67 Ill.2d 321 (1977)	Venue and business activities relevant to fixing venue.	Used to support the conclusion that the firm's activities in Peoria County were of sufficient substance to establish venue there.
Weaver v. Midwest Towing, Inc., 139 Ill. App.3d 1075 (1986)	Authority cited in the venue discussion (context in text).	Cited in connection with the court's finding that venue in Peoria County was proper; included in the string of authorities supporting that conclusion.

Court's Reasoning and Analysis

The court's analysis proceeds issue-by-issue, applying governing legal principles explicitly referenced in the opinion to the record facts:

Duty to nonclient (Pelham): The court applied Pelham's two-part test for an attorney's duty to a nonclient — (a) the client intended to benefit the nonclient, and (b) the primary purpose of the attorney-client transaction was to achieve that benefit. The court found Grace's wills and the drafting transactions in 1975 and 1976 demonstrated Grace's intent to benefit the McLanes and that the purpose of Russell's drafting was to obtain that benefit. Accordingly, the McLanes were proper plaintiffs under Pelham and could pursue malpractice claims.
Statute of limitations (discovery rule): The defendants argued the limitations period began on August 19, 1976 (the date of Grace's final will). The McLanes argued it began upon Grace's death. The court concluded the earliest reasonable time the McLanes could be said to have discovered the malpractice (failure to sever the joint tenancy) was after Grace's death and during probate in 1977; applying the discovery rule, the March 1982 filing was timely within the five-year limitations period.
Effect of prior settlement and admissibility: The court considered precedent holding that the release of one tortfeasor does not release another separate tortfeasor. It found the defendants in the two actions were not joint tortfeasors whose joint liability would cause one release to bar another. The court also found the trial court did not err in excluding evidence of the prior complaint and settlement because the prior pleadings did not unequivocally negate Grace's testamentary intent to convey life and remainder interests to the McLanes. Thus the settlement did not bar the malpractice suit, and exclusion of that evidence was not reversible error.
Venue: Defendants sought transfer to Bureau County. The McLanes asserted the firm was doing business in Peoria County. The firm had filed proofs of claim and represented creditors in bankruptcy proceedings in the Central District of Illinois (Peoria). The court found those activities sufficiently substantive and not merely incidental to satisfy the venue statute's "doing business" requirement, relying on cited authorities. The defendants did not seek intermediate Rule 306 review; the court nonetheless reviewed and found no reversible error in the trial court's venue ruling.
Prima facie case and proximate cause: Defendants argued the McLanes failed to prove proximate cause. The court noted Helen was adjudged incompetent years before Grace's 1975 will, and Russell had been appointed Helen's conservator and thus was aware of Helen's incapacity to execute a similar will. The court held that Russell's failure to sever the joint tenancy after drafting Grace's wills was sufficient to proximately cause the injuries claimed, satisfying the prima facie burden and permitting submission to the jury.
Evidentiary rulings: The defendants challenged several trial rulings: allowing conflict-of-interest evidence, precluding an expert's testimony referencing a deposition he reviewed, and admitting plaintiff expert testimony on the standard of care. The appellate court found the record contained sufficient expert testimony to inform the jury of the applicable standard of care and concluded that the challenged rulings were, at most, harmless error and did not produce prejudice warranting reversal or remand.
Setoff: The trial court allowed a setoff equal to one-half of the McLanes' prior settlement against the verdict, reasoning the earlier settlement concerned a claim for the entire farm and therefore one-half of that settlement reasonably represented partial recovery for the one-half undivided interest at issue in the malpractice case. Given that no party disputed the approximate $325,000 value of an undivided one-half interest, the appellate court found no error in the trial court's approach to avoiding double recovery.

Holding and Implications

Holding: The appellate court affirmed the judgment of the circuit court of Peoria County in all respects, including: (a) its determination that the McLanes were proper plaintiffs under the Pelham doctrine; (b) that the malpractice action was timely under the discovery rule; (c) that the prior settlement did not bar the instant action and exclusion of evidence of that settlement was not reversible error; (d) that venue in Peoria County was proper; (e) that the McLanes established a prima facie case with proximate causation; (f) that the challenged evidentiary rulings were harmless; and (g) that the setoff of one-half of the prior settlement against the jury award was proper.

Implications: The direct consequence of this decision is that the trial court's verdict in favor of the McLanes stands, along with the trial court's setoff calculation (resulting in the reduced award reflected in the trial court's entry). The opinion applies existing precedent (notably Pelham) to the facts at hand but does not announce a novel legal rule beyond the application of those precedents. No new precedent or broader rule beyond the court's application of established authorities is stated in the opinion.

Disposition: Affirmed.

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KEITH McLANE et al., Plaintiffs-Appellees and Cross-Appellants, v. FRED G. RUSSELL et al., Defendants-Appellants and Cross-Appellees.

JUSTICE SCOTT delivered the opinion of the court:

Defendants, Fred G. Russell and Johnson, Martin Russell, a professional corporation, appeal the trial court's judgment on the verdict entered in favor of the plaintiffs, Keith McLane and Cecil McLane, individually, and Cecil McLane, executor of the estate of Grace M. Shugart, in the amount of $325,000 for damages resulting from their not receiving a one-half interest in the Shugart 240-acre farm on the death of Grace M. Shugart. The McLanes cross-appeal the trial court's setoff of $66,455, which was one-half of the amount they received in settlement of a suit filed against the administrator of Helen Shugart's estate for the entire farm.

The facts which underlie the cause in this appeal have been presented previously in this court's earlier opinion in In re Estate of Shugart (1980), 81 Ill. App.3d 538, 401 N.E.2d 611. In summary, the McLanes, father and son, were tenant farmers on a 240-acre farm located in Bureau County which was owned in joint tenancy by Grace M. and Helen Shugart, sisters who never married. The elder McLane had farmed the Shugart land since 1946. Grace and Helen first executed wills in 1942, wherein they left all of their property to each other. In 1958, attorney Fred G. Russell, at the sisters' request, placed their farm into joint tenancy ownership, with right of survivorship. In 1961, Russell drafted a new will for Grace wherein she left all of her property to Helen. Helen was adjudged incompetent in 1971 and Russell was appointed her conservator.

Russell drafted a new will for Grace in 1975, wherein she devised a life estate of her interest in the farm to Cecil McLane with the remainder interest to Keith McLane. In 1976, Russell revised Grace's 1975 will making some minor changes, but leaving unmodified the provisions for the McLanes. At no time prior to Grace's death in April 1977 was the joint tenancy of the Shugart farm severed and on Grace's death her one-half undivided interest in the farm transferred by operation of law to Helen. On Helen's subsequent death, the farm transferred to the Shugarts' cousins in fee simple.

The McLanes brought the instant suit in the circuit court of Peoria County alleging that Russell's failure to sever the joint tenancy between the sisters following his drafting and the execution of Grace's two wills frustrated Grace's testamentary intent and irrevocably denied them a one-half interest in the Shugart farm. The McLanes sought an award of damages for one-half the value of the Shugart farm. Following a four-day jury trial, the trial court entered judgment on the verdict in favor of the McLanes in the amount of $325,000. The trial court granted the defendants' motion for setoff, but only as to one-half the amount the McLanes received in settlement of their suit against Helen Shugart's estate, thereby reducing the damage award to $258,545.

Russell and Johnson, Martin Russell, a professional corporation, request this court to reverse the judgment entered and to enter judgment notwithstanding the verdict or, in the alternative, to remand the cause for a new trial. They contend that reversible error occurred when the trial court ruled (1) that the McLanes' settlement of their suit filed against Helen Shugart's estate did not bar the instant suit and that evidence regarding the other suit and settlement should not be heard by the jury; (2) that the statute of limitations had not run to bar the instant suit; (3) that venue was proper in the circuit court of Peoria County; (4) the McLanes were the primary intended beneficiaries of the attorney-client relationship which existed between Russell and Grace and they were therefore proper plaintiffs in a legal malpractice action; and (5) the McLanes met their burden of establishing a prima facie case that Russell was negligent and that the alleged negligence was a sufficient proximate cause of their loss and therefore the case could be submitted to the jury. Further, Russell and Johnson, Martin Russell maintain that the trial court committed reversible error in certain evidentiary rulings concerning testimony by the McLanes' experts, in allowing the jury to consider conflict of interest evidence, and in precluding their expert witness from testifying regarding a deposition he reviewed and which allegedly was relied on to form the basis of his opinion.

The McLanes cross-appeal the trial court's setoff of the jury's damage award and request reinstatement of the judgment in full. They contend that the sum of their prior settlement and the jury award does not equal the full value of the entire farm, which they claim they would have received after the death of both Shugart sisters.

• 1, 2 We direct our review initially to the issue of whether the McLanes may be considered proper plaintiffs in the instant legal malpractice action. The doctrine enunciated in Pelham v. Griesheimer (1982), 92 Ill.2d 13, 440 N.E.2d 96, which found a duty owing by an attorney to a nonclient is clearly applicable to the instant cause. For a nonclient to establish a duty owing him stemming from an attorney-client relationship, he must allege and prove that the intent of the client was to benefit him and that the primary purpose of the attorney-client transaction was to achieve for him the intended benefit. Our review of the record, the testimony of the witnesses, and Grace's last and final will clearly reveal that her intent was to benefit the McLanes as to her one-half interest in the farm at her death. The purpose of the attorney-client transactions in 1975 and 1976, which involved the drafting by Russell of Grace's last two wills, was to obtain for the McLanes the intended benefit of their receiving a one-half interest in the Shugart farm. We find the McLanes to be proper parties in the instant cause in keeping with the Pelham doctrine establishing a duty owing by an attorney to a nonclient. Given the existence of such a duty, the McLanes were entitled to proceed with their claim of a breach due to Russell's failure to sever the joint tenancy between Grace and her sister Helen.

We next consider whether the McLanes were precluded from going forward with their action due to the expiration of the five-year statute of limitations governing the instant suit (Ill. Rev. Stat. 1985, ch. 110, par. 13-205) and due to their settlement of the suit brought against the administrator of the Helen Shugart estate, the Citizens First National Bank of Princeton.

• 3 Russell and Johnson, Martin Russell maintain the five-year statute of limitations began running on August 19, 1976, the date Grace executed her final will, and thus the McLanes' suit must have been filed no later than August 19, 1981. The McLanes maintain their filing suit in March 1982 was within the applicable statute in that the limitation period began on Grace's death in April 1977. We find that the first time the McLanes reasonably could be said to have discovered the alleged malpractice, i.e., the failure to sever the joint tenancy between the Shugart sisters, was after Grace's death and during the subsequent probate of her estate in 1977. Therefore, the instant suit was timely filed in March 1982 and was within the five-year statute of limitations in conformity with the discovery rule applicable to the statute.

• 4 During the pendency of the instant suit, the McLanes entered into a settlement of their claim for the entire farm brought against the administrator of Helen's estate. The McLanes received in settlement a property transfer valued at $32,912.50, and a monetary sum of $100,000. The trial court ruled this settlement did not constitute a bar to the instant suit and that the jury would not be allowed to hear evidence of the prior claim and subsequent settlement. It is well settled that the release of one tortfeasor does not release the other where separate tortfeasors contributed to or produced the same injury, nor does the release of one who is not a tortfeasor release one who may be a tortfeasor. ( Borowski v. Von Solbrig (1975), 60 Ill.2d 418, 328 N.E.2d 301; Clear-Vu Packaging, Inc. v. National Union Fire Insurance Co. (1982), 105 Ill. App.3d 671, 434 N.E.2d 365; Anderson v. Martzke (1970), 131 Ill. App.2d 61, 266 N.E.2d 137; Scoggins v. Village of Hartford (1967), 86 Ill. App.2d 233, 229 N.E.2d 550.) The defendants in the instant suit and in the settled suit were not joint tortfeasors wherein the release of one can be held to release the other. Further, the trial court's ruling that the jury not be allowed to hear evidence of the prior claim and settlement does not rise to the level of reversible error in that the pleadings filed in the prior action do not unequivocally negate their claim that Grace Shugart's intent was to convey a life interest and a remainder interest to the McLanes, on her death, of her one-half interest in the farm.

• 5 Russell and Johnson, Martin Russell next maintain that the trial court erred in denying their motion to transfer venue from Peoria County to Bureau County. In responding to their motion, the McLanes maintained that the law firm of Johnson, Martin Russell was doing business in Peoria County and therefore venue was proper in that county. (Ill. Rev. Stat. 1985, ch. 110, par. 2-102(a), (b).) In hearing on the motion, the law firm was shown to be representing creditors in bankruptcy proceedings involving eight proofs of claim filed in the United States District Court in the Central District of Illinois in Peoria. Whether this representation was sufficient to establish a level of activity sufficient to meet the requirement of "doing business" when fixing venue pursuant to section 2-102 was an appealable issue authorized by Supreme Court Rule 306 (107 Ill.2d Rules 306 (a)(1)(ii), (a)(1)(iv)). Russell and Johnson, Martin Russell chose not to seek review pursuant to Rule 306 of the trial court's denial of their motion following entry of its order. Review pursuant to this rule is permissive, if timely filed, and therefore we are not precluded from reviewing this issue on appeal.

We find that the trial court properly considered the law firm's level of activity in Peoria County to be of sufficient substance and quantity to fix venue in that county. The filing of proofs of claim and the representation of creditors in bankruptcy proceedings may not be claimed as merely incidental services outside the normal scope of the law firm's customary practice. ( DeGerlia v. First Bank Trust Co. (1984), 121 Ill. App.3d 658, 460 N.E.2d 97; Baltimore Ohio R.R. Co. v. Mosele (1977), 67 Ill.2d 321, 368 N.E.2d 88.) We therefore find no reversible error in the trial court's ruling that the law firm's practice was sufficiently localized within the county to properly establish venue in Peoria County. Weaver v. Midwest Towing, Inc. (1986), 139 Ill. App.3d 1075, 487 N.E.2d 1259.

• 6 Russell and Johnson, Martin Russell lastly maintain that the McLanes did not establish a prima facie case in that they failed to prove that Russell's conduct was the proximate cause of the McLanes' alleged damages. The record reveals that Helen was adjudged incompetent approximately four years before Grace executed her 1975 will. Further, Russell was appointed Helen's conservator and was aware of her incapacity to execute a will making similar provisions for the McLanes of her jointly held undivided one-half interest. The nonseverance of the joint tenancy between Grace and Helen after the drafting and execution of Grace's 1975 will, and later her 1976 will, we find to be sufficient to proximately lead to the injuries complained of and therefore the burden of establishing proximate cause was met.

During the course of the trial certain evidentiary rulings were made by the court which Russell and Johnson, Martin Russell contend rise to a level of reversible error, to wit, allowing the jury to consider evidence of a potential conflict of interest involving Russell and the sisters, precluding their expert from testifying regarding a deposition not in evidence which he reviewed to form his opinion, and allowing into evidence expert testimony which they contend did not clearly or sufficiently establish a reasonable care and skill standard to be applied to Russell and his law firm. Our review of the record reveals the jury was properly informed of the standard of care due a client and nonclient in the transaction complained of through the testimony of both parties' expert witnesses and that allowance of conflict of interest considerations involving Russell and the sisters, and disallowance of an expert's referral to one deposition, to be harmless error which cannot be found to rise to a level of prejudice mandating reversal or remand for a new trial.

• 7 Lastly, we consider the issue of the trial court's setoff of the amount awarded the McLanes in the instant suit by one-half of the amount received in their settlement with the administrator of Helen's estate. The McLanes cross-appeal, requesting reinstatement in full of the original jury award. Russell and Johnson, Martin Russell, in keeping with the errors they alleged regarding the court's refusal to bar the instant suit due to the settlement, or to allow into evidence the claim and settlement, maintain the award should be offset by the entire settlement amount of $132,910. The instant suit sought recovery of damages stemming from the McLanes' loss of an undivided one-half interest in the Shugart farm. The trial court properly and fairly reasoned that the earlier settlement entered into with the administrator of Helen's estate was for a claim involving the entire farm. Therefore, one-half of the settlement amount represented a partial recovery of the value of the one-half undivided interest at issue. None of the parties hereto dispute that the value of an undivided one-half interest in the Shugart farm approximated $325,000. We find no error in the trial court's attempt to avoid duplication of monetary damages or double recovery regarding the loss of a one-half undivided interest which was the subject matter of the instant suit.

Based on the foregoing review of the issues and argument presented, we find that the verdict in favor of the McLanes should stand. We therefore affirm the trial court's judgment entered on the verdict in favor of the McLanes, including their judgment entered on the motion for setoff in favor of Russell and Johnson, Martin Russell.

Accordingly, the judgment of the circuit court of Peoria County is affirmed in all respects.

Affirmed.

STOUDER and WOMBACHER, JJ., concur.

McLANE v. RUSSELL