Goodman v. Hanson

FIRST DISTRICT
SIXTH DIVISION
MARCH 25, 2011

No. 1-09-3205
)
ALBERT IVAR GOODMAN, the Executor of the Estate )
of Edith-Marie Appleton and Trustee of the Edith-Marie )
Appleton Trust, )
) Appeal from the
Plaintiff-Appellee, ) Circuit Court of
) Cook County.
v. )
) No. 07 L 421
PER K. HANSON, )
) Honorable
Defendant-Appellant. ) Brigid McGrath,
) Judge Presiding.
(Charles Martin and Benham, Ichen and Knox, LLP, )
)
Defendants.) )
)

JUSTICE ROBERT E. GORDON delivered the judgment of the court, with opinion.
Justices Cahill and McBride concur in the judgment and opinion.

OPINION

This matter is before us on interlocutory appeal pursuant to Illinois Supreme Court Rule

308 (eff. Feb. 1, 1994), to consider two questions certified by the trial court. Plaintiff is the

executor and principal heir of the estate of Edith-Marie Appleton (decedent), and is co-trustee

and principal beneficiary of the Edith-Marie Appleton Trust (trust). Plaintiff brought suit against

defendant Per K. Hanson and his former law firm, Erickson, Papanek, Peterson, and Erickson

(EPPE),1 for legal malpractice based on Hanson’s allegedly negligent failure to file an Illinois

estate and generation-skipping transfer tax return. That suit was settled, and the parties entered

1
During a portion of the time encompassed by the proceedings, Hanson was a partner in

the law firm of Erickson, Papanek, Hanson, Peterson, which was the predecessor to EPPE.
No. 1-09-3205

into a “Settlement Agreement and Mutual General Release” (release).

Plaintiff later filed a second suit against Hanson and EPPE for legal malpractice, and

against Charles Martin and the accounting firm of Benham, Ichen & Knox, LLP, for accounting

malpractice; the basis for the malpractice claims was Hanson’s failure to take allowable

deductions on the federal estate tax return. Hanson moved to dismiss the suit pursuant to section

2-619(a)(6) of the Code of Civil Procedure (Code) (735 ILCS 5/2-619(a)(6) (West 2008)),

claiming that the release barred plaintiff’s claim. Plaintiff opposed the motion, arguing that the

claims arising out of the federal estate tax were unknown to plaintiff at the time the release was

signed. The trial court denied Hanson’s motion in relevant part. After plaintiff had amended his

complaint several times, Hanson filed a motion to dismiss plaintiff’s fourth amended complaint

pursuant to section 2-619(a)(9) of the Code; the trial court denied Hanson’s motion. Hanson then

moved for a permissive interlocutory appeal pursuant to Supreme Court Rule 308, and the trial

court granted Hanson’s motion, certifying two questions for review. We answer both questions

in the negative.

BACKGROUND

Plaintiff was the only son and principal heir of the decedent, who died testate on

December 9, 1999. Plaintiff was named executor of her estate. At the time of her death, the

decedent was the settlor, trustee, and beneficiary of a trust that held most of the decedent’s assets;

upon the decedent’s death, plaintiff became co-trustee and the principal beneficiary of the trust.

The trust provided that the trustee was to pay “all reasonable costs and expenses attendant the

administration of the Estate, including taxes.”

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No. 1-09-3205

Hanson had been employed by the decedent for many years prior to her death, and plaintiff

retained Hanson as the attorney for the executor of the estate and for the trustees of the trust.

Hanson filed decedent’s last will and testament for probate on December 14, 1999. The will was

admitted to probate and plaintiff was appointed as executor on January 19, 2000.

Hanson performed a number of duties related to the administration of the estate. Among

his duties was the preparation and filing of the Illinois estate and generation-skipping transfer tax

return (Illinois return). As part of his duties, Hanson also notified Florida State University of the

filing and admission to probate of the decedent’s estate and of the final date to file claims against

the estate. Litigation ensued with Florida State, and Hanson moved to withdraw as attorney for

the executor with respect to the litigation, which was granted approximately March 12, 2001.

Attorneys Sherman C. Magidson and Richard Miller represented the estate with respect to the

claim.

Hanson, with assistance from his law firm, continued to represent the executor with

respect to the administration of the estate and trust. Prior to June 1, 2003, Hanson terminated his

employment with EPPE and practiced law as a sole practitioner; Hanson continued to represent

the executor and trustee. On January 21, 2005, Hanson withdrew as plaintiff’s attorney, and

attorney Paul S. Shapiro was substituted as the attorney for the executor and the trust.

First Lawsuit

On March 21, 2005, plaintiff filed a lawsuit against Hanson and EPPE in the probate

division of the circuit court of Cook County. In his complaint, plaintiff in part alleged that

Hanson and EPPE had committed malpractice in the filing of the Illinois return.

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No. 1-09-3205

According to the complaint, Hanson had failed to file the Illinois return on time and did

not seek an extension of time in which to file the return. When plaintiff learned of the delay, he

called Hanson and asked if there was a problem. Hanson told plaintiff not to worry, that Hanson

had a meritorious excuse for not having timely filed the Illinois return, and that the Attorney

General’s office would not take any adverse action against the estate. On September 18, 2003,

plaintiff received a letter from the Attorney General’s office rejecting Hanson’s excuses as lacking

merit, turning down Hanson’s offer of $500 to settle the claim, and announcing an intention to

seek penalties of approximately $1.4 million from the estate and trust. When confronted by

plaintiff, Hanson admitted that the delay was wholly Hanson’s fault and that Hanson would

personally be responsible for and pay any penalties imposed.

In late 2003 or early 2004, plaintiff learned that the Attorney General’s office had rejected

all of Hanson’s excuses and was intending to collect the entire penalty. Plaintiff empowered

accountant Charles Martin to seek a final resolution of the penalty. Martin negotiated a

settlement of 10% of the claimed penalty, or approximately $140,000, in early 2004.

In mid-February 2004, Hanson issued a check to the Cook County treasurer for

approximately $65,000. Hanson then directed the Attorney General’s office to apply almost

$75,000 of excess funds which had previously been deposited by the trust on behalf of the estate

toward payment of the settlement. Plaintiff claimed no knowledge of this payment. Plaintiff

claimed of learning of the payment when he received a billing statement from Hanson dated

February 19, 2004. The statement credited the estate with a payment of $74,874 toward its

outstanding balance of $185,089.61; plaintiff had previously disputed the amount of the balance

4
No. 1-09-3205

due.

On approximately December 19, 2005, plaintiff, Hanson, and EPPE entered into a

settlement agreement, which included a mutual general release of all parties. While Hanson and

EPPE denied any error or omission in the performance of legal services on behalf of the estate or

trust, they agreed to pay plaintiff $35,000 and released any claim for unpaid legal fees.

The release entered into by plaintiff read:

“General Release by Albert Ivar Goodman, individually, as

Executor of the Estate of Edith-Marie Appleton, Trustee of the

Edith-Marie Appleton Trust and President of the Edith-Marie

Appleton Foundation

In consideration of the sum of Thirty-five Thousand Dollars

($35,000) ***, the adequacy of which is hereby acknowledged by

the parties, Albert Ivar Goodman, individually as Executor of the

Estate of Edith-Marie Appleton, as Trustee of the Edith-Marie

Appleton Trust and as President of the Edith-Marie Appleton

Foundation and his heirs, representatives, administrators,

successors and assigns do hereby remise, release and forever

discharge Per K. Hanson, individually, The Firm of Per K. Hanson

Associated, P.C., Erickson, Papanek, Peterson, Erickson, successor

to Erickson, Papanek, Hanson, Peterson, and their representatives,

executors, heirs, agents, administrators, personal representatives,

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No. 1-09-3205

successors, insurers and assigns, from any and all manner of

actions, cause or causes of action, suits, debts, sums of money,

accounts, bills, specialties, covenants, controversies, agreements,

promises, variances, trespasses, damages, judgments, executions,

claims and demands, whatsoever, known or unknown, in law or in

equity, or for any other reason whatsoever, from the beginning of

the world to the date hereof, and including, but not limited to, any

and all claims and matters that have been asserted in the Litigation

or that could have been asserted in the Litigation, and any and all

claims arising out of or in any way related to the obligations, duties

and management or administration of the Estate and/or Trust,

Hanson and EPPE’s fees and expenses, and the rendering of

professional services by Hanson, The Firm of Per K. Hanson

Associated, P.C., and EPPE and any and all claims which were

asserted or could have been asserted in the Litigation in law or

equity, the liability for which is expressly denied by Hanson, The

Firm of Per K. Hanson Associated, P.C., and EPPE ***.”

On December 30, 2005, the probate court entered an order approving the settlement,

stating:

“The Complaint and all claims and causes of action between

the Estate, Trust, Hanson and EPPE as more fully described in the

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No. 1-09-3205

Settlement Agreement and Mutual General Release are hereby

dismissed with prejudice, pursuant to the Settlement Agreement

and Mutual General Release, and this dismissal shall be a bar to any

claim or cause of action asserted or which could have been asserted

with respect to the performance of professional services by Hanson

and EPPE to the Estate and Trust, with each party is to bear his or

her costs in the litigation.”

Second Lawsuit

On January 12, 2007, plaintiff filed a second lawsuit against Hanson and EPPE for legal

malpractice, and also filed suit against Charles Martin and Benham, Ichen & Knox, LLP, for

accounting malpractice.2 In the complaint, plaintiff alleged malpractice based on the same facts

surrounding the filing of the Illinois return as he had in the first lawsuit.

Additionally, plaintiff alleged malpractice based on Hanson’s failure to take certain

deductions in the federal estate tax return (Federal return). In his complaint, plaintiff alleged that

Hanson “negligently failed to take proper, allowable deductions” on the Federal return. During

the administration of the estate and trust, “professional fees” of over $2 million were incurred,

including legal fees and accounting fees. These professional fees were entitled to be deducted

from either the Federal return or the estate or trust income tax returns. Most of the deductions

2
Since the cause of action for accounting malpractice is not at issue, we will not delve into

the details of the allegations, other than to note that the claim was based on the same transactions

as the claims of legal malpractice.

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No. 1-09-3205

were taken on the trust’s income tax returns, even though the marginal tax rate for the Federal

return was higher. Any claim for refund or for the filing of a protective claim for professional fees

was required to be filed by July 11, 2005; no such claim was filed.

Plaintiff acknowledged the release, but claimed to be unaware that Hanson and EPPE had

failed to take all allowable deductions on the Federal return. Neither Hanson nor EPPE informed

plaintiff of the failure to take deductions on the Federal return, and if the failure had been

disclosed, plaintiff would not have agreed to settle his claims for $35,000. Plaintiff first became

aware of the alleged negligence on September 8, 2006, when he was informed by Martin.

Accordingly, no claim involving the Federal return was alleged in the first malpractice suit.

On March 15, 2007, EPPE filed a motion to dismiss count I of plaintiff’s complaint

pursuant to section 2-619(a)(6) of the Code. In support, EPPE argued that the release entered

into by the parties was valid and binding and precluded plaintiff’s suit. EPPE also noted that on

November 16, 2005, prior to entering into the settlement agreement, Hanson’s attorney sent a

letter to Shapiro, plaintiff’s attorney, indicating that she was enclosing a number of documents

that had been requested by Shapiro; among the documents listed was the Federal return. On

March 26, 2007, Hanson joined in EPPE’s motion and adopted its arguments, stating that plaintiff

simply desired a “second bite of the apple.” Hanson also claimed that the lawsuit was barred by

res judicata.

In response, plaintiff argued that the release did not bar the claims alleged in the suit

because they were unknown to plaintiff at the time of the release. Plaintiff also claimed that even

if the release was valid, it was not enforceable because Hanson and EPPE had duties as fiduciaries

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No. 1-09-3205

to disclose the fact that they had not taken the allowable deductions. Plaintiff further denied that

the claims should be barred by res judicata, saying that it would be fundamentally unfair to apply

it in this situation because had he known of the Federal return, plaintiff would not have entered

into the settlement agreement and the court would not have approved it.

A hearing on the motion was held on July 11, 2007. During the hearing, the court noted:

“I’m stuck with this Illinois Supreme Court case filed which

I wish they would give more specific guidelines on how you’re

going to make a determination of whether or not a claim is within

the contemplation of the parties at the time they executed the

settlement agreement.”

The court found that there was an issue of fact as to whether plaintiff was aware of the

issues surrounding the Federal return at the time of the settlement agreement. The court also

noted:

“An issue of fact. But in another case I have -- and it’s not

a jury case -- we’re having a hearing on that very issue, as to their

specific knowledge regarding that because there’s also an argument

-- and I know there’s some case law on either side of it -- that there

had to be objective knowledge, knew or should have known and

whether they specifically knew.

So I think even the defendant’s knowledge of this issue

would bear on that as well. Like I said, I wish I had better

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No. 1-09-3205

guidance from the Appellate Court as to how -- because I -- it’s a

waste to leave this until a jury trial. But doing [sic] through all of

this discovery, this may very well be covered by the release.

And I guess it’s something that I should have taken care of

sooner rather than later actually.”

The court granted the motion to dismiss in part and denied it in part; the motion was

granted as to all claims in plaintiff’s complaint with the exception of those claims related to

deductions associated with the Federal return. On September 14, 2007, the trial court denied

Hanson and EPPE’s motion for rehearing, and ordered plaintiff to amend his complaint. Plaintiff

amended his complaint three times, with Hanson filing motions to dismiss each amended

complaint on various grounds.

On April 16, 2009, plaintiff filed his fourth amended complaint, and Hanson filed a motion

to dismiss it pursuant to section 2-619(a)(9) of the Code (735 ILCS 5/2-619(a)(9) (West 2008)),

while preserving his arguments from the previous motions to dismiss.3 On September 25, 2009,

the trial court entered an order granting EPPE’s motion to dismiss, subject to reinstatement, and

denied Hanson’s motion to dismiss.

On October 7, 2009, Hanson filed a motion for a permissive interlocutory appeal pursuant

to Rule 308. The trial court granted Hanson’s motion on November 10, 2009, finding that there

were questions of law as to which there was substantial ground for difference of opinion and that

3
EPPE also filed a motion to dismiss the fourth amended complaint, but that motion is not

in the record.

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No. 1-09-3205

an immediate appeal could materially advance the ultimate termination of the litigation. The court

then certified two questions for appeal:

“Can a party who has released all claims that were brought

or could have been brought in a prior suit maintain a subsequent

suit based on a claim that could have been brought in the prior suit

based on his assertion that he did not contemplate the claim at the

time of the release?

Is plaintiff’s present action barred by res judicata based

upon the dismissal of his prior action with prejudice?”

We initially denied Hanson’s petition for leave to appeal, and on March 24, 2010, the

Illinois Supreme Court entered a supervisory order directing us to grant leave to appeal and to

answer the certified questions.

ANALYSIS

Illinois Supreme Court Rule 308 provides a remedy of permissive appeal from

interlocutory orders where the trial court has deemed that they involve a question of law as to

which there is substantial ground for difference of opinion and where an immediate appeal from

the order may materially advance the ultimate termination of the litigation. We apply a de novo

standard of review to legal questions presented in an interlocutory appeal brought pursuant to

Supreme Court Rule 308. Simmons v. Homatas, 236 Ill. 2d 459, 466 (2010).

Release

In the case at bar, the first question certified by the trial court concerns the interpretation

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No. 1-09-3205

of the release contained in the parties’ settlement agreement. A release “ ‘is the abandonment of a

claim to the person against whom the claim exists.’ ” Thornwood, Inc. v. Jenner & Block, 344 Ill.

App. 3d 15, 21 (2003) (quoting Hurd v. Wildman, Harrold, Allen & Dixon, 303 Ill. App. 3d 84,

88 (1999)); Fuller Family Holdings, LLC v. Northern Trust Co., 371 Ill. App. 3d 605, 614

(2007). It is a contract and is therefore governed by contract law. Farm Credit Bank of St. Louis

v. Whitlock, 144 Ill. 2d 440, 447 (1991) (citing Polo National Bank v. Lester, 183 Ill. App. 3d

411, 414 (1989)). Where a contract is clear and explicit, a court must enforce it as written, and

the meaning of the contract, as well as the intention of the parties, must be gathered from the

document without the assistance of extrinsic aids. Rakowski v. Lucente, 104 Ill. 2d 317 (1984);

Fuller Family, 371 Ill. App. 3d at 614; Shultz v. Delta-Rail Corp., 156 Ill. App. 3d 1, 10 (1987).

However, a release will not be construed to include claims that were not within the contemplation

of the parties. Carlile v. Snap-On Tools, 271 Ill. App. 3d 833, 838 (1995) (citing Carona v.

Illinois Central Gulf R.R. Co., 203 Ill. App. 3d 947, 951 (1990)). “ ‘[N]o form of words, no

matter how all encompassing, will foreclose scrutiny of a release [citation] or prevent a reviewing

court from inquiring into surrounding circumstances to ascertain whether it was fairly made and

accurately reflected the intention of the parties.’ ” Carlile, 271 Ill. App. 3d at 839 (quoting

Ainsworth Corp. v. Cenco, Inc., 107 Ill. App. 3d 435, 439 (1982)).

The release at issue here provided that plaintiff:

“do[es] hereby remise, release and forever discharge Per K.

Hanson, individually, The Firm of Per K. Hanson Associated, P.C.,

Erickson, Papanek, Peterson, Erickson, successor to Erickson,

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No. 1-09-3205

Papanek, Hanson, Peterson, *** from any and all manner of

actions, *** whatsoever, known or unknown, in law or in equity, or

for any other reason whatsoever, from the beginning of the world

to the date hereof, and including, but not limited to, any and all

claims and matters that have been asserted in the Litigation or that

could have been asserted in the Litigation, and any and all claims

arising out of or in any way related to the obligations, duties and

management or administration of the Estate and/or Trust, Hanson

and EPPE’s fees and expenses, and the rendering of professional

services by Hanson, The Firm of Per K. Hanson Associated, P.C.,

and EPPE and any and all claims which were asserted or could have

been asserted in the Litigation in law or equity ***.” (Emphasis

added.)

The fundamental area of disagreement between the parties is whether the second lawsuit,

based on the Federal return, was within the contemplation of the parties at the time they signed

the release. To determine the answer, we must determine the scope of the release. If a release is

a general release and the releasing party was unaware of other claims, the release is restricted to

the specific claims contained in the release agreement. Whitlock, 144 Ill. 2d at 447. Where both

parties were aware of an additional claim at the time of signing the release, the general release will

be interpreted to release that claim as well. Whitlock, 144 Ill. 2d at 447. However, if the release

is specific, courts have been willing to bar additional claims falling within the scope of the release

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No. 1-09-3205

that do not explicitly appear in the release. See, e.g., Gavery v. McMahon & Elliott, 283 Ill. App.

3d 484, 488-89 (1996); Chubb v. Amax Coal Co., 125 Ill. App. 3d 682, 686 (1984).

In the case at bar, the release as a whole is general, because it releases “any and all manner

of actions, *** whatsoever, known or unknown, in law or in equity, or for any other reason

whatsoever, from the beginning of the world to the date hereof.” This type of language has been

held to constitute a general release. See Whitlock, 144 Ill. 2d at 447; Thornwood, 344 Ill. App.

3d at 22; Carona, 203 Ill. App. 3d at 951. Under the express language of the general release, the

claim involving the Federal return would be barred even if unknown, because the language

provides a release of claims “known or unknown.”

However, plaintiff stated in his complaint and affidavit that he was unaware of other

claims at the time of signing the release. Accordingly, we limit the release to its specific terms,

namely, “any and all claims and matters that have been asserted in the [probate court] Litigation

or that could have been asserted in the Litigation, and any and all claims arising out of or in any

way related to the obligations, duties and management or administration of the Estate and/or

Trust.”

The claims relating to the Federal return are claims that could have been raised in the first

lawsuit, and are also “related to the obligations, duties and management or administration” of the

estate and trust. Accordingly, they fall within the specific language of the release. Thus, the

question we must answer is whether unknown claims that fall within the specific terms of a

general release are barred by the release.

The first case we must consider is the Illinois Supreme Court’s Whitlock case, which was

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No. 1-09-3205

heavily relied on by the trial court and plaintiff. In Whitlock, the defendant children purchased a

farm using financing obtained from the plaintiff bank; one of the conditions of the bank’s

agreement to provide financing was that the children’s parents pledged their farm as security.

Whitlock, 144 Ill. 2d at 443. As a result, two loans were arranged: loan No. 1 was secured by the

parents’ farm and was signed by both the parents and the children, and loan No. 2 was secured by

the farm that the children were purchasing and was signed by the children alone. Whitlock, 144

Ill. 2d at 443-44. The children defaulted on loan No. 2, and in order to avoid foreclosure, the

children transferred the land to the bank in exchange for a release agreement providing in part:

“ ‘Bank *** does hereby remise, release and forever discharge

Borrower, and each of them if more than one, of and from all

manner of actions, *** whatsoever, at law or in equity, and

particularly without limiting the generality of the foregoing all

claims relating to the mortgage loan transaction aforesaid and the

conveyance of title hereunder, which either party *** ever had,

now have or may have in the future, for, upon or by reason of any

matter, cause or thing, whatsoever.’ ” (Emphasis omitted.)

Whitlock, 144 Ill. 2d at 444-45.

The bank attempted to foreclose on the parents’ farm, and in an affirmative defense, the

defendants argued that the release acted as a bar to the foreclosure action. Whitlock, 144 Ill. 2d

at 445.

The bank claimed that the release was intended to apply solely to loan No. 2, pointing to

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numerous references to loan No. 2 contained in the release. Whitlock, 144 Ill. 2d at 445-46. The

defendants argued that the general release language should apply to both loans. Whitlock, 144 Ill.

2d at 446. The court found that the claim was general and ambiguous on its face. Whitlock, 144

Ill. 2d at 447. The court noted that the release stated that the bank released the borrowers from

all actions and claims, but particularly those relating to loan No. 2. Whitlock, 144 Ill. 2d at 448.

Both parties were aware at the time of claims that might arise from loan No. 1, but the court

found that it was not clear on the face of the release whether the parties intended to release both

loans or limit the release to loan No. 2. Whitlock, 144 Ill. 2d at 448. Thus, the intent of the

parties needed to be determined by examining extrinsic evidence. Whitlock, 144 Ill. 2d at 448.

Whitlock does not answer the question before us. While the case is instructive for the rule

that a general release is inapplicable to an unknown claim, the claims in Whitlock were known to

both parties at the time they entered into the release. See Whitlock, 144 Ill. 2d at 448.

Additionally, the relevant language in this case is the specific language contained in the release,

not the release’s general language.

Plaintiff relies on Myers v. Health Specialists, S.C., 225 Ill. App. 3d 68 (1992), to support

his argument that the release does not apply to the claim involving the Federal return. However,

that case is inapposite. In Myers, the plaintiff and the defendant settled a lawsuit in which plaintiff

asked for an accounting to enforce compensation provisions of an employment agreement;

plaintiff executed a release providing that the plaintiff

“ ‘does *** remise, release, and forever discharge [defendant] of

and from all manner of actions, *** whatsoever, in law or in equity,

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and particularly, without limiting the generality of the foregoing,

from all claims which were or might have been asserted in that

certain action entitled Stephen A. Myers, v. Health Specialists,

S.C., Case No. 79 CH 621, or in any manner arising from or related

to the subject matter of such action or, arising from any

employment agreement between the [parties], which [plaintiff] now

has against [defendant] or ever had, *** by reason of any matter,

cause, or thing, whatsoever, on or at any time prior to the date of

these Presents.’ ” Myers, 225 Ill. App. 3d at 70.

Several years later, the plaintiff filed a declaratory judgment action, in part asserting that

the defendant had breached the employment agreement by failing to maintain insurance for acts

performed during the plaintiff’s employment. Myers, 225 Ill. App. 3d at 70-71. The defendant

argued that the claim was barred by the release, since the claim arose from the insurance provision

of the employment agreement and the plaintiff had released “ ‘all claims *** arising from any

employment agreement between [the parties here].’ ” Myers, 225 Ill. App. 3d at 73.

The court, relying on Whitlock, held that the claim was not barred by the release. The

court first noted that the release’s own terms excluded the plaintiff’s claim, because the release

only applied to claims that the plaintiff had on or before the date of the release, and the plaintiff’s

claim arose at a later time. Myers, 225 Ill. App. 3d at 74-75. However, more importantly, the

court also found that the release was a general one. Myers, 225 Ill. App. 3d at 75. The court

acknowledged that the “ ‘particularly’ ” provision at first seemed to specify a certain set of claims,

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No. 1-09-3205

but that upon closer inspection, the release of defendant from “ ‘all claims *** in any manner ***

arising from any employment agreement’ ” (emphasis in original) was sufficiently broad to

transform the “ ‘particularly’ ” provision itself into a general release. Myers, 225 Ill. App. 3d at

75. Accordingly, the court held that the new claim, of which the plaintiff had no knowledge at the

time of entering into the release, was not barred by the release. Myers, 225 Ill. App. 3d at 75.

In the case at bar, the specific portion of the release is not nearly as broad as in Myers. In

fact, the clause at issue here is very similar to the first part of Myers’ “ ‘particularly’ ” clause,

which released all claims which were brought or could have been brought in the prior litigation.

See Myers, 225 Ill. App. 3d at 70. However, the Myers court did not hold that part of the clause

to have been sufficiently broad to constitute a general release but focused its analysis solely on the

second portion of the clause. See Myers, 225 Ill. Ap. 3d at 75. Thus, Myers does not speak to

whether the parties must contemplate every situation to which a specific release may apply.

Plaintiff also places great reliance on Thornwood, which we also find instructive.

Thornwood involved two releases. The first was a release between the plaintiff and the defendant

law firm, which provided that the law firm was relieved

“ ‘from any liability from any and all claims, *** or liabilities of any

nature whatsoever in law of [sic] in equity, whether known or

hereinafter discovered, that arose out of events that have occurred

from the beginning of time until the date hereof.’ ” Thornwood,

344 Ill. App. 3d at 20.

We found that this release contained “sweeping language” that rendered the release general.

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No. 1-09-3205

Thornwood, 344 Ill. App. 3d at 22. Since the plaintiff’s claims of aiding and abetting breach of

fiduciary duty and fraud were unknown to him at the time he executed the release, we held that

the release did not bar the claims. Thornwood, 344 Ill. App. 3d at 22. Additionally, we noted

that the claims may have been contemplated by the law firm, but that “knowledge by one party,

where the other party lacks knowledge, does not bring the claim within the ‘contemplation of the

parties.’ ” Thornwood, 344 Ill. App. 3d at 22 (quoting Todd v. Mitchell, 168 Ill. 199, 204

(1897)).

However, when examining the second release, we found it much less general than the first.

The second release, between the plaintiff and his former business partner, limited the subject

matter to which the release applied and identified several types of claims that were explicitly

released. Thornwood, 344 Ill. App. 3d at 23. We found that, since the claims of aiding and

abetting breach of fiduciary duty and fraud were based on alleged breaches of fiduciary duty,

which was explicitly released, the claims were barred by the release. Thornwood, 344 Ill. App. 3d

at 23.

Plaintiff points to the analysis in Thornwood concerning fraud, in which we noted that on a

defendant’s motion to dismiss, if the release is valid on its face, the burden shifts to the plaintiff to

allege facts invalidating the agreement, such as the presence of fraud, duress, or mutual mistake.

Thornwood, 344 Ill. App. 3d at 23. However, that is not the issue before us today. In

Thornwood, the allegations of the complaint indicated that the releases may have been obtained by

fraud. Thornwood, 344 Ill. App. 3d at 26. Here, the complaint does not allege fraud. While

plaintiff argues in his brief that defendant was in a fiduciary relationship with plaintiff and

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breached his fiduciary duty by failing to disclose the allegedly improper deductions, we are limited

to the issues raised in the certified questions and will not go beyond those questions to consider

plaintiff’s claim. See Townsend v. Sears, Roebuck & Co., 227 Ill. 2d 147, 153 (2007) (“An

interlocutory appeal pursuant to Supreme Court Rule 308 is ordinarily limited to the question

certified by the circuit court ***.”).

We do find Thornwood instructive, however, because in it, we found that the claims of

aiding and abetting breach of fiduciary were barred by the second release despite our earlier

statement that those specific claims were not contemplated by the parties. See Thornwood, 344

Ill. App. 3d at 22-23. We reached this result “because the claims contemplated by the parties

included partnership-related claims.” Thornwood, 344 Ill. App. 3d at 23. Our analysis in

Thornwood would likewise apply in the case at bar. Here, although the parties may not have

contemplated claims specifically based on the Federal return, the terms of the release indicate that

they contemplated (1) there were matters that were not asserted in the first lawsuit that could

have been and (2) claims related to the “obligations, duties and management or administration of

the Estate and/or Trust.” Both of these categories include the claims based on the Federal return,

and accordingly, those claims are barred.

Our conclusion is bolstered by the analysis in Gavery, which is heavily relied on by

Hanson. In that case, the plaintiff entered into an asset purchase agreement and a noncompetition

agreement to sell his medical practice, and was represented in those negotiations by the defendant

law firm. Gavery, 283 Ill. App. 3d at 485. The plaintiff was later involved in a dispute with the

purchaser over whether credits were to be applied against the purchase price, and the plaintiff was

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represented by a different law firm in relation to that dispute. Gavery, 283 Ill. App. 3d at 485.

The defendant refused to cooperate with the new law firm unless the plaintiff released it from any

claims he might have against it; the new law firm advised the plaintiff that he might have “ ‘certain

claims’ ” against the defendant related to the credits, and the plaintiff executed the release.

Gavery, 283 Ill. App. 3d at 486. Some time after executing the release, the purchaser filed an

action for declaratory relief against the plaintiff in relation to the noncompetition agreement, and

the plaintiff had to settle the claim. Gavery, 283 Ill. App. 3d at 486. The plaintiff then filed suit

against the defendant and his new law firm for breach of contract and negligence, alleging that

they failed to advise him about the validity of the noncompetition agreement. Gavery, 283 Ill.

App. 3d at 486.

The court held that the release barred the plaintiff’s claims against the defendant. Gavery,

283 Ill. App. 3d at 487. The court noted that the release agreement was “very specific and

unambiguous,” pointing to recitals that stated that the plaintiff was advised that he may have

claims against the defendant and the language of the release, which provided that the plaintiff

released all claims “ ‘as a result of the sale of the assets and goodwill of [his medical practice],

including but without limitation, any injury or damage sustained by [plaintiff] by virtue of entering

into the Asset Purchase Agreement and/or the Non-Competition Agreement.’ ” (Emphasis

omitted.) Gavery, 283 Ill. App. 3d at 487. The court distinguished Myers and Whitlock, because

they were based on either ambiguous or general releases. Gavery, 283 Ill. App. 3d at 487-88.

The court also rejected the argument that the specific claims were not within the contemplation of

the parties, finding that extrinsic evidence would not be considered because the release was

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unambiguous and the claims fell within the scope of the specific release. Gavery, 283 Ill. App. 3d

at 488-89.

Similarly, in the case at bar, the release is unambiguous and specifically releases claims

that could have been previously raised in the first lawsuit and claims that relate to the

administration of the estate. Accordingly, we need not consider plaintiff’s extrinsic evidence

indicating that he did not specifically contemplate claims relating to the Federal return because the

claim falls within the scope of the claims specifically released.

During oral argument, plaintiff cited to the recent case of Janowiak v. Tiesi, 402 Ill. App.

3d 997 (2010), arguing that it was analogous to the case at bar. However, we find the case

inapposite. In Janowiak, the release at issue purported to release the defendant from “any and all

liability relating to his acts or failure to act as trustee.” (Internal quotation marks omitted.)

Janowiak, 402 Ill. App. 3d at 1016. The court found the language of the release to be general

because it did not specify which claims were to be released. Janowiak, 402 Ill. App. 3d at 1016.

Additionally, the court found that even if the release was a specific release, the claims of breach of

fiduciary duty and fraud did not arise from the plaintiff’s actions as trustee and there was an issue

of fact since the plaintiff alleged that it was not his intent to release those claims. Janowiak, 402

Ill. App. 3d at 1016-17.

In the case at bar, however, the release is more specific than that in Janowiak, referring to

“any and all claims and matters that have been asserted in the Litigation or that could have been

asserted in the Litigation, and any and all claims arising out of or in any way related to the

obligations, duties and management or administration of the Estate and/or Trust.” This language

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is sufficiently specific to identify the claims that are being released. Moreover, the claim

concerning the Federal return falls within the specific language of the release. Accordingly, we

answer the first certified question in the negative.

Res Judicata

The second question certified by the trial court asks whether plaintiff’s second lawsuit is

barred by res judicata based on the previous dismissal of the first lawsuit with prejudice. The trial

court in the first lawsuit entered an order stating:

“The Complaint and all claims and causes of action between

the Estate, Trust, Hanson and EPPE as more fully described in the

Settlement Agreement and Mutual General Release are hereby

dismissed with prejudice, pursuant to the Settlement Agreement

and Mutual General Release, and this dismissal shall be a bar to any

claim or cause of action asserted or which could have been asserted

with respect to the performance of professional services by Hanson

and EPPE to the Estate and Trust, with each party is to bear his or

her costs in the litigation.”

“ ‘The doctrine of res judicata provides that a final judgment on the merits rendered by a

court of competent jurisdiction bars any subsequent actions between the same parties or their

privies on the same cause of action.’ ” Hudson v. City of Chicago, 228 Ill. 2d 462, 467 (2008)

(quoting Rein v. David A. Noyes & Co., 172 Ill. 2d 325, 334 (1996)). Res judicata bars

relitigation of issues that were actually decided in the first lawsuit, as well as issues that could

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have been decided in that suit. River Park, Inc. v. City of Highland Park, 184 Ill. 2d 290, 302

(1998). Three requirements must be satisfied for res judicata to apply: (1) a final judgment on the

merits has been reached by a court of competent jurisdiction; (2) an identity of cause of action

exists; and (3) the parties or their privies are identical in both actions. Hudson, 228 Ill. 2d at 467

(citing Downing v. Chicago Transit Authority, 162 Ill. 2d 70, 73-74 (1994)).

Here, there is no dispute as to the third requirement: the parties are identical in both

actions. However, although not argued by either party, we cannot find that the first requirement

is satisfied because the first lawsuit was resolved through a settlement agreement. We have noted

in prior cases that there is a split of authority on the question of whether a dismissal with

prejudice pursuant to a settlement agreement operates as a final judgment on the merits. See

Jackson v. Callan Publishing, Inc., 356 Ill. App. 3d 326, 340 (2005) (noting split of authority).

However, we agree with the cases that find that the dismissal does not operate as a final judgment

on the merits for purposes of res judicata, because “an agreed order is not a judicial

determination of the parties’ rights, but rather is a recordation of the agreement between the

parties.” Kandalepas v. Economou, 269 Ill. App. 3d 245, 252 (1994). Since there was no actual

decision on the merits, we cannot find that the first requirement is satisfied and thus claim would

not be barred by res judicata.

Additionally, plaintiff argues that Hanson cannot establish the second requirement, that the

issues relating to the Federal return were decided in the first lawsuit, because the claim was

undisclosed by Hanson and unknown by plaintiff. In order to determine whether there is an

identity of cause of action, we apply the “transactional test.” River Park, 184 Ill. 2d at 311.

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“[P]ursuant to the transactional analysis, separate claims will be considered the same cause of

action for purposes of res judicata if they arise from a single group of operative facts, regardless

of whether they assert different theories of relief.” River Park, 184 Ill. 2d at 311.

In the case at bar, the allegations concerning the Federal return arise from the same group

of operative facts as was at issue in the first lawsuit. Both lawsuits concerned the administration

of the decedent’s estate and trust, and both lawsuits involved the tax aspects of the estate

administration. Thus, the claims are considered the same cause of action and the second

requirement is satisfied.

Even if all three requirements were satisfied, plaintiff argues that res judicata should not

apply because it would be fundamentally unfair to apply it in this case. See Weisman v. Schiller,

Ducanto & Fleck, 314 Ill. App. 3d 577, 581 (2000) (“the doctrine of res judicata need not be

applied where fundamental fairness so requires”). In support, plaintiff claims that “[t]he evidence

shows that Hanson concealed his failure to take allowable federal deductions on the Federal

Estate Tax Return and induced Plaintiff to agree to accept an inadequate settlement.” Plaintiff

also argues that he would not have agreed to the settlement agreement had he known of the

Federal return, nor would the trial court have approved it. The problem with plaintiff’s argument

is that there is no allegation in the complaint that Hanson concealed any information or that he did

so to induce plaintiff to accept an inadequate settlement. The allegations in the complaint simply

state that Hanson took deductions on one tax form instead of another. There is no allegation

about the reason for Hanson’s actions, or even that Hanson was aware of the failure at the time of

the first lawsuit. Thus, we cannot accept plaintiff’s argument that it would be inequitable to apply

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res judicata to the case at bar. However, since there was no final judgment on the merits, we find

that res judicata does not apply and answer the second certified question in the negative.

CONCLUSION

First, the release barred plaintiff’s claim under the second lawsuit. Second, res judicata

did not apply to bar the claim in the second lawsuit. Therefore, we answer both certified

questions in the negative.

Certified questions answered.

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