55 Est Washington Development, LLC v. Lynd

2022 IL App (1st) 210549-U

• Court: Appellate Court of Illinois
• Decided: May 10, 2022
• Docket: 1-21-0549
• Status: Unpublished

Opinion

2022 IL App (1st) 210549-U

No. 1-21-0549

Order filed May 10, 2022.

Second 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 ______________________________________________________________________________

55 EAST WASHINGTON ) Appeal from the DEVELOPMENT, LLC, ) Circuit Court of ) Cook County. Plaintiff-Appellant, ) ) v. ) No. 2020 CH 05706 ) ADAM DAVID LYND, ) The Honorable ) Neil H. Cohen, Defendant-Appellee. ) Judge Presiding. ______________________________________________________________________________

JUSTICE LAVIN delivered the judgment of the court. Presiding Justice Fitzgerald Smith and Justice Howse concurred in the judgment.

ORDER

¶1 Held: The circuit court properly dismissed plaintiff’s claim for malicious prosecution where plaintiff’s allegations failed to establish special damages. ¶2 This interlocutory appeal arises from the circuit court’s order dismissing with prejudice

the malicious prosecution claim brought by plaintiff 55 East Washington Street Development,

LLC (East Washington), against defendant Adam David Lynd. The circuit court found, among No. 1-21-0549

other things, that East Washington failed to plead special damages. For the following reasons, we

affirm the circuit court’s judgment.

¶3 I. Background

¶4 Pursuant to a September 2015 agreement, Adam David Partners I, LLC (ADP), was to

purchase from East Washington, for $55 million, certain floors (Fornelli Tower) of the historic

Pittsfield building, located at 55 East Washington Street. ADP entered into the purchase

agreement through Lynd.

¶5 The purchase agreement required ADP to deposit $800,000 in earnest money into an

escrow account by September 16, 2015. In addition, ADP could terminate the agreement for any

reason before October 9, 2015, and retain its earnest money. Alternatively, ADP was required to

deposit a nonrefundable $2.7 million into the escrow account by that same date. Closing was to

occur no later than November 9, 2015, but ADP could obtain a 30-day extension by making a

nonrefundable $1 million payment, which would be applied toward the purchase price at closing.

¶6 ADP did not terminate the agreement or make a $2.7 million deposit by October 9, 2015.

Instead, on October 8th, ADP’s attorney told East Washington that it had misrepresented Fornelli

Tower’s rentable square footage, leading ADP to require additional time. ADP asked that the

closing date be extended 120 days. East Washington refused, however, responding that ADP had

to make the additional $2.7 million payment before East Washington would consider an

extension.

¶7 On November 20, 2015, ADP, through counsel, filed a five-count complaint (2015 CH

17028) against East Washington seeking, among other things, reformation of contract and

specific performance (count IV). ADP also caused a lis pendens to be recorded against Fornelli

Tower. In response, East Washington moved to dismiss count IV, cancel the lis pendens, and

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impose sanctions against ADP’s counsel under Illinois Supreme Court Rule 137 (eff. July 1,

2013).

¶8 The circuit court dismissed count IV with prejudice, and apparently canceled the lis

pendens. The court later granted East Washington summary judgment on ADP’s remaining

claims as well as East Washington’s counterclaim for breach of contract.

¶9 On December 20, 2019, the circuit court entered a 38-page written order sanctioning

ADP’s attorneys for filing count IV. The court found that East Washington had not

misrepresented the Fornelli Tower’s square footage; rather, ADP essentially manufactured a

discrepancy in square footage to obtain more time after facing several impediments to financing

the purchase. Specifically, ADP’s attorneys filed count IV to enable them to file a lis pendens,

which would discourage other purchasers.

¶ 10 On September 3, 2020, East Washington filed the present complaint against Lynd in his

personal capacity. East Washington alleged fraud (count I) as well as malicious prosecution

based on Lynd’s role in having ADP’s attorneys file the 2015 equitable claim for reformation

and specific performance as well as the lis pendens (count II). East Washington also sought to

pierce the corporate veil (count III).

¶ 11 With respect to the malicious prosecution claim, East Washington alleged that Lynd

directed ADP’s attorneys to file the 2015 claims and lis pendens so that ADP could obtain more

time and prevent East Washington from selling Fornelli Tower to a different buyer. In addition,

Lynd, through ADP, agreed that the $3.5 million in escrow and $1 million extension fee would

compensate East Washington for harm caused by having Fornelli Tower kept off the market

should Lynd fail to cause ADP to close on the property for the full purchase price. Furthermore,

Lynd’s misconduct caused East Washington special damages, “including the harm *** of at least

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$4.5 million caused by the improperly filed lis pendens, which prevented 55 East Washington’s

from being able to sell the property to a different buyer well past December 9, 2015.”

¶ 12 Lynd filed a combined motion to dismiss all counts. As to malicious prosecution, Lynd

argued, among other things, that ADP, rather than he, instituted a lawsuit against East

Washington. Additionally, East Washington failed to allege that it sustained a special injury and

its reliance on the lis pendens was insufficient. Lynd further argued that the malicious

prosecution claim was barred by the statute of limitations.

¶ 13 In response, East Washington argued that the lis pendens, while not an injunction, had the

same effect as one and was obtained to prevent East Washington from selling Fornelli Tower to

another party while Lynd tried to raise money to finance the purchase. In addition, East

Washington “suffered at least a $4.5 million special injury from the property’s being wrongly

removed from the market.” According to East Washington, “Lynd acknowledged in the Purchase

Agreement that this amount was a reasonable measure of the damages 55 East Washington

would suffer from the property being off the market if Lynd did not timely close.”

¶ 14 On April 22, 2021, the circuit court entered a written order dismissing the malicious

prosecution claim with prejudice pursuant to section 2-615 for failure to state a claim and

dismissing ADP’s other counts without prejudice. The court found that Lynd himself had not

commenced any judicial proceeding against ADP and the lis pendens did not constitute special

damages. The court subsequently found, over Lynd’s objection, that there was no just reason to

delay the appeal of the dismissal with prejudice of East Washington’s malicious prosecution

claim. 1

¶ 15 II. Analysis

1 On June 9, 2021, we denied Lynd’s motion to dismiss this appeal for want of jurisdiction.

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¶ 16 On appeal, ADP asserts that the circuit court erroneously found it failed to state a claim

for malicious prosecution.

¶ 17 A section 2-615 motion attacks the legal sufficiency of the complaint. Prakash v.

Parulekar, 2020 IL App (1st) 191819, ¶ 21. The critical inquiry is whether the complaint’s

allegations are sufficient to state a cause of action. Mayle v. Urban Realty Works, LLC, 2022 IL

App (1st) 210470, ¶ 39. In making that determination, we take all well-pleaded facts, and

reasonable inferences therefrom, as true, construing them in the light most favorable to the

nonmovant. Id. ¶ 39; Dvorkin v. Soderquist, 2022 IL App (1st) 201368, ¶ 75. That being said,

conclusory allegations are insufficient. Mayle, 2022 IL App (1st) 210470, ¶¶ 78-79. Specifically,

because Illinois is a fact pleading state, a court cannot rely upon legal conclusions or conclusory

factual allegations unsupported by specific facts. Prakash, 2020 IL App (1st) 191819, ¶ 21. We

review the circuit court's judgment de novo. Dvorkin, 2022 IL App (1st) 201368, ¶ 75. Thus, we

may affirm the court’s judgment on any basis in the record. Mayle, 2022 IL App (1st) 210470, ¶

39.

¶ 18 It is well settled that malicious prosecution actions are disfavored. Beaman v.

Freesmeyer, 2019 IL 122654, ¶ 24. Courts permit all citizens to claim what they believe to be

their right without fear of prosecution for heavy damages. Cult Awareness Network v. Church of

Scientology International, 177 Ill. 2d 267, 280-81 (1997). In addition, law-abiding citizens

should endure the ordinary trouble and expense arising from ordinary forms of legal controversy

as an inevitable burden of civil government. Id. at 281. Courts have a responsibility to maintain

an appropriate balance between society’s interest in preventing harassing lawsuits and permitting

parties to bring honest assertions of their rights in court. Id. at 284.

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¶ 19 To establish malicious prosecution, the plaintiff must show that the defendant filed the

underlying lawsuit maliciously and without probable cause and that the former action was

terminated in the plaintiff’s favor. Beaman, 2019 IL 122654, ¶ 23. The plaintiff must also plead

and prove, however, that it sustained some special injury or special damage beyond the usual

time, expense and annoyance in defending a legal action. Cult Awareness Network, 177 Ill. 2d at

272. Special injury has usually been identified with arrest, seizure of property, some constructive

taking or interference with property. Levin v. King, 271 Ill. App. 3d 728, 730-31 (1995). In most

cases finding a special injury, the nature of the underlying action imposed “some quantifiable

damage-causing characteristic” upon the malicious prosecution plaintiff. Thomas v. Hileman,

333 Ill. App. 3d 132, 138 (2002). In determining whether an injury was special, courts must

focus on “the peculiar effect of the suit together with the remedy sought and not upon the

subjective effect that the suit may have on the plaintiff.” Id.

¶ 20 Here, East Washington asserts that the lis pendens filed at Lynd’s direction in the

underlying action constitutes special damages.

¶ 21 Pursuant to the lis pendens doctrine, an individual who obtains an interest in property

while it is subject to a lawsuit is bound by the result of that litigation, as if the individual had

been a party to the litigation from the outset. LLC 1 05333303020 v. Gil, 2020 IL App (1st)

191225, ¶ 20. The doctrine is intended to (1) avoid endless litigation of property rights triggered

by the transfer of interests; (2) protect plaintiffs from third parties who might acquire an interest

in the property during litigation; and (3) protect purchasers by providing notice that the land

being purchased may be affected by a subsequent, binding judgment entered in a pending case.

Id. At common law, the mere existence of a pending lawsuit was deemed to provide notice to the

world, binding a subsequent purchaser to the lawsuit’s determination, regardless of whether that

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purchaser had actual or constructive notice. First Midwest v. Pogge, 293 Ill. App. 3d 359, 363

(1997). To ameliorate the doctrine’s effect on innocent purchasers, the legislature dictated that

purchasers are not bound by a pending lawsuit unless they have constructive notice of it, which

requires that a lis pendens notice be filed in the recorder’s office. Id. (citing 735 ILCS 5/2-1901

(West 1992)). A lis pendens is not an injunction, however, as it does not formally restrain

purchase or conveyance. E&E Hauling, Inc. v. DuPage County, 77 Ill. App. 3d 1017, 1025

(1979).

¶ 22 Pertinent to this appeal, in Nemanich v. Long Grove Country Club Estates, Inc., 119 Ill.

App. 2d 169, 173 (1970), the reviewing court held that the filing of a lis pendens notice and the

impairment of the party’s credit constituted an ordinary injury resulting in similar causes of

action, not special injury. East Washington nonetheless urges us to find that special injury

occurred from the lis pendens here, supporting its claim for malicious prosecution. East

Washington relies on the harsh realities accompanying the filing of a lis pendens. See E&E

Hauling, Inc., 77 Ill. App. 3d at 1025 (stating that filing a lis pendens often involves a harsh

result); Chappelle v. Gross, 26 A.D. 2d 340 (N.Y. App. Div. 1966) (recognizing that “the use of

lis pendens which interferes with one's power to sell the land against which the lis pendens is

filed, when used maliciously and without probable cause, is actionable” and “[i]t would be

extraordinary indeed if *** a proceeding created for a wise purpose and for good ends could be

used by a suitor with malice aforethought, without incurring any personal responsibility”).

Indeed, in E&E Hauling, Inc., the court stated, “the filing of a notice of a pending suit often has

the same practical effect as an injunction without providing a defendant with the protections built

into injunction statutes.” 77 Ill. App. 3d at 1025.

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¶ 23 Assuming without deciding that a lis pendens can result in special damages sufficient to

support a subsequent claim for malicious prosecution, we nonetheless find that East

Washington’s allegations did not establish special damages sufficient to survive a section 2-615

motion here.

¶ 24 East Washington, in a conclusory fashion, alleged that the lis pendens prevented it “from

being able to sell the property to a different buyer well past December 9, 2015.” East

Washington did not allege, however, that it had an interested buyer that was put off by the lis

pendens. Instead, East Washington alleged that it kept Fornelli Tower off the market, a decision

belonging solely to East Washington. Cf. Bank of Lyons v. Schultz, 78 Ill. 2d 235, 238, 240-41

(1980) (finding special damages existed where preliminary injunctions prevented the plaintiff

from using insurance proceeds for more than nine years, during which she was unable to make

mortgage payments and lost her house); see also Equity Associates, Inc. v. Village of Northbrook,

171 Ill. App. 3d 115, 118-199 (1998) (finding, where the defendants had sought but did not

obtain an injunction against a building permit, that the plaintiff’s allegations of potentially lost

lender commitments and damage to reputation as real estate developers, were inadequate to

satisfy the special injury requirement).

¶ 25 The complaint’s measure of damages is telling: “Lynd, through ADP, had agreed in the

Purchase Agreement that the $3.5 million in escrow sums plus the $1 million nonrefundable

extension fee would compensate 55 East Washington for harm caused to it by having Fornelli

Tower kept off the market through December 9 and in the event that Lynd never caused ADP to

complete the sale and timely pay the full purchase price.” Thus, East Washington’s damages

were, or could have been, dealt with through contract, through its litigation against ADP for

breach thereof or through its request for sanctions under Rule 137. These were ordinary

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damages. While East Washington seeks to hold Lynd personally liable, rather than ADP, the

party to the contract, this does not convert ordinary damages into something more, regardless of

Lynd’s despicable conduct.

¶ 26 Here, the circuit court properly dismissed East Washington’s malicious prosecution claim

due to its failure to allege special damages. Accordingly, we need not consider the parties’ other

contentions.

¶ 27 For the foregoing reasons, we affirm the circuit court’s judgment.

¶ 28 Affirmed.

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