No. 3-05-0754 Filed October 18, 2006. _________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
A.D., 2006
TAD TYLER and RICHARD TYLER, ) Appeal from the Circuit Court ) of the 12th Judicial Circuit, Plaintiffs-Appellants, )Will County, Illinois, ) v. ) ) JOHN GIBBONS, JOEL ANDERSON, ) KATHLEEN LESTINA, ROBERT WALKER, ) No. 03-L-518 TOM HARVEY, BRUCE JASURDA, ) DAN WALKER, ROE WALKER, ANDREA ) SILVERMAN, CLIFTON GUNDERSON ) L.L.P., SCHRADER AUCTIONEERING ) SERVICES, INC., ) Honorable ) Susan T. O=Leary, Defendants-Appellees. )Judge, Presiding. _________________________________________________________________
JUSTICE LYTTON delivered the opinion of the court: _________________________________________________________________
Plaintiffs Richard and Tad Tyler filed a complaint against the former officers and
directors of Ty-Walk Agricultural, Inc. (Ty-Walk), alleging that defendants mismanaged
corporate assets and breached their fiduciary duty to the shareholders to exercise
reasonable care in the conduct of the business of Ty-Walk. The trial court granted
defendants= motion to dismiss based on the doctrines of res judicata and Moorman. We
affirm. Ty-Walk was a Delaware corporation with its primary place of business in Minooka,
Illinois. Ty-Walk=s business was to "manufacture, distribute, apply liquid fertilizer and allied
products, and lease equipment for application, as well as deal in general farm products and
equipment." Defendants Richard Walker and Bruce Jasurda were officers and members of
the board of directors of Ty-Walk.
In 1998, Tad and Richard Tyler, were approached by representatives of Ty-Walk
regarding the possible sale of plaintiffs= company, James Tyler & Sons. Following
negotiations, Ty-Walk purchased the company. As part of the sale, plaintiffs received
shares of Ty-Walk stock and a "put/sale" option to sell those shares to the Ty-Walk
company in the event of a sale of 51% or more of Ty-Walk stock to a third party.
During 2001, plaintiffs properly exercised their "put/sale" options. At that time, the
value of Richard Tyler=s stock was approximately $1.075 million, and the value of Tad
Tyler=s stock was approximately $750,000. Shortly after the exercise of the options, the
Illinois Department of Agriculture took control of Ty-Walk, finding improper, illegal and
fraudulent business practices. Ty-Walk was subsequently placed in bankruptcy and
refused to purchase plaintiffs= stock.
In the fall of 2001, Richard Tyler filed suit against Ty-Walk to recover the value of his
"put/sale" options. On November 5, 2001, the trial court entered a default judgment in favor
of Tyler in the amount of $1.075 million.
In August of 2003, Richard and Tad Tyler filed suit against Walker, Jasurda, and
others who are not part of this appeal. Against Walker and Jasurda, plaintiffs alleged that
defendants were officers and directors of the company and therefore owed a duty to
plaintiff shareholders to use reasonable care in their conduct of the business of Ty-Walk so
2 as not to harm plaintiffs. Plaintiffs asserted that defendants breached their fiduciary duty to
act in the best interests of the shareholders. They further claimed that in violation of that
duty, Walker and Jasurda failed to properly conduct, monitor and verify the business
activities of Ty-Walk. Plaintiffs sought monetary damages in excess of $50,000.
Defendants moved to dismiss the complaint pursuant to section 2-619 of the Code of
Civil Procedure (735 ILCS 5/2-619 (West 2002)) based on res judicata and the Moorman
doctrine. The trial court found that both grounds applied and granted the motion.
ANALYSIS
I. Procedural Requirements for Motion to Dismiss
Plaintiffs first claim that the grounds for dismissal were not properly supported by
exhibits and affidavits. They argue that the court erred in ruling on the motion to dismiss
without sufficient support and improperly shifted the burden of proof to plaintiffs.
A section 2-619 motion to dismiss raises certain defects or defenses and questions
whether defendant is entitled to judgment as a matter of law. In re Parentage of M.J., 325
Ill. App. 3d 826 (2001). Since the resolution of the motion involves a question of law, the
standard of review is de novo. Prime Leasing, Inc. v. Kendig, 332 Ill. App. 3d 300 (2002).
On a motion to dismiss, this court must accept all well-pleaded facts as true. Prime
Leasing, Inc., 332 Ill. App. 3d 300. It is well settled that a verified complaint stands as an
admission by a party. Sarelas v. Fagerburg, 316 Ill. App. 606 (1942).
In support of their motion to dismiss, defendants submitted an affidavit, certified
copies of the certificate of incorporation of Ty-Walk and a verified amended complaint of
the suit previously filed by Richard Tyler. All of these attachments were submitted in
opposition to plaintiffs= claims. The affidavit averred that plaintiffs were also directors of the
3 corporation. The certificate of incorporation stated that Ty-Walk was "in the business of"
applying agricultural products and leasing agricultural equipment. The complaint from
Tyler=s 2001 lawsuit was verified and sought to establish that plaintiffs were seeking to
recover similar damages for similar claims of negligence in this second case.
Based on our review of the record, we find that the motion to dismiss was
adequately supported by attachments and properly considered by the trial court. We
further find that the burden of proving the motion remained with defendants.
II. The Moorman Doctrine
Substantively, plaintiffs claim that the trial court erred in ruling that their claims were
barred by the Moorman doctrine.
In Illinois, solely economic losses are generally not recoverable in tort actions.
Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d 69 (1982). The economic loss
doctrine adopted by the supreme court in Moorman bars a plaintiff from recovering in
negligence for losses which are purely economic, which do not involve personal injury or
property damage. Moorman, 91 Ill. 2d 69. The supreme court reasoned that tort law is not
intended to compensate parties for monetary losses suffered as a result of duties which are
owed to them simply as a result of a contract. Losses related to a purchaser=s disappointed
expectations due to deterioration, internal breakdown or nonaccidental causes lie in
contract. Moorman, 91 Ill. 2d at 86. However, negligent misrepresentation by a defendant
in the business of supplying information for the guidance of others in their business
transactions is an exception to the Moorman doctrine. In re Illinois Bell Switching Station
Litigation, 161 Ill. 2d 233 (1994).
To state a claim based on the negligent misrepresentation exception to the Moorman
4 doctrine, the plaintiff must demonstrate that the defendant: (1) is in the business of
supplying information for the guidance of others in their business dealings; (2) provided
false information; and (3) supplied the information for the guidance of the plaintiff=s
business transactions. Prime Leasing, Inc., 332 Ill. App. 3d at 311. An allegation that the
defendant is in the business of supplying information for the guidance of others is a legal
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No. 3-05-0754 Filed October 18, 2006. _________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
A.D., 2006
TAD TYLER and RICHARD TYLER, ) Appeal from the Circuit Court ) of the 12th Judicial Circuit, Plaintiffs-Appellants, )Will County, Illinois, ) v. ) ) JOHN GIBBONS, JOEL ANDERSON, ) KATHLEEN LESTINA, ROBERT WALKER, ) No. 03-L-518 TOM HARVEY, BRUCE JASURDA, ) DAN WALKER, ROE WALKER, ANDREA ) SILVERMAN, CLIFTON GUNDERSON ) L.L.P., SCHRADER AUCTIONEERING ) SERVICES, INC., ) Honorable ) Susan T. O=Leary, Defendants-Appellees. )Judge, Presiding. _________________________________________________________________
JUSTICE LYTTON delivered the opinion of the court: _________________________________________________________________
Plaintiffs Richard and Tad Tyler filed a complaint against the former officers and
directors of Ty-Walk Agricultural, Inc. (Ty-Walk), alleging that defendants mismanaged
corporate assets and breached their fiduciary duty to the shareholders to exercise
reasonable care in the conduct of the business of Ty-Walk. The trial court granted
defendants= motion to dismiss based on the doctrines of res judicata and Moorman. We
affirm. Ty-Walk was a Delaware corporation with its primary place of business in Minooka,
Illinois. Ty-Walk=s business was to "manufacture, distribute, apply liquid fertilizer and allied
products, and lease equipment for application, as well as deal in general farm products and
equipment." Defendants Richard Walker and Bruce Jasurda were officers and members of
the board of directors of Ty-Walk.
In 1998, Tad and Richard Tyler, were approached by representatives of Ty-Walk
regarding the possible sale of plaintiffs= company, James Tyler & Sons. Following
negotiations, Ty-Walk purchased the company. As part of the sale, plaintiffs received
shares of Ty-Walk stock and a "put/sale" option to sell those shares to the Ty-Walk
company in the event of a sale of 51% or more of Ty-Walk stock to a third party.
During 2001, plaintiffs properly exercised their "put/sale" options. At that time, the
value of Richard Tyler=s stock was approximately $1.075 million, and the value of Tad
Tyler=s stock was approximately $750,000. Shortly after the exercise of the options, the
Illinois Department of Agriculture took control of Ty-Walk, finding improper, illegal and
fraudulent business practices. Ty-Walk was subsequently placed in bankruptcy and
refused to purchase plaintiffs= stock.
In the fall of 2001, Richard Tyler filed suit against Ty-Walk to recover the value of his
"put/sale" options. On November 5, 2001, the trial court entered a default judgment in favor
of Tyler in the amount of $1.075 million.
In August of 2003, Richard and Tad Tyler filed suit against Walker, Jasurda, and
others who are not part of this appeal. Against Walker and Jasurda, plaintiffs alleged that
defendants were officers and directors of the company and therefore owed a duty to
plaintiff shareholders to use reasonable care in their conduct of the business of Ty-Walk so
2 as not to harm plaintiffs. Plaintiffs asserted that defendants breached their fiduciary duty to
act in the best interests of the shareholders. They further claimed that in violation of that
duty, Walker and Jasurda failed to properly conduct, monitor and verify the business
activities of Ty-Walk. Plaintiffs sought monetary damages in excess of $50,000.
Defendants moved to dismiss the complaint pursuant to section 2-619 of the Code of
Civil Procedure (735 ILCS 5/2-619 (West 2002)) based on res judicata and the Moorman
doctrine. The trial court found that both grounds applied and granted the motion.
ANALYSIS
I. Procedural Requirements for Motion to Dismiss
Plaintiffs first claim that the grounds for dismissal were not properly supported by
exhibits and affidavits. They argue that the court erred in ruling on the motion to dismiss
without sufficient support and improperly shifted the burden of proof to plaintiffs.
A section 2-619 motion to dismiss raises certain defects or defenses and questions
whether defendant is entitled to judgment as a matter of law. In re Parentage of M.J., 325
Ill. App. 3d 826 (2001). Since the resolution of the motion involves a question of law, the
standard of review is de novo. Prime Leasing, Inc. v. Kendig, 332 Ill. App. 3d 300 (2002).
On a motion to dismiss, this court must accept all well-pleaded facts as true. Prime
Leasing, Inc., 332 Ill. App. 3d 300. It is well settled that a verified complaint stands as an
admission by a party. Sarelas v. Fagerburg, 316 Ill. App. 606 (1942).
In support of their motion to dismiss, defendants submitted an affidavit, certified
copies of the certificate of incorporation of Ty-Walk and a verified amended complaint of
the suit previously filed by Richard Tyler. All of these attachments were submitted in
opposition to plaintiffs= claims. The affidavit averred that plaintiffs were also directors of the
3 corporation. The certificate of incorporation stated that Ty-Walk was "in the business of"
applying agricultural products and leasing agricultural equipment. The complaint from
Tyler=s 2001 lawsuit was verified and sought to establish that plaintiffs were seeking to
recover similar damages for similar claims of negligence in this second case.
Based on our review of the record, we find that the motion to dismiss was
adequately supported by attachments and properly considered by the trial court. We
further find that the burden of proving the motion remained with defendants.
II. The Moorman Doctrine
Substantively, plaintiffs claim that the trial court erred in ruling that their claims were
barred by the Moorman doctrine.
In Illinois, solely economic losses are generally not recoverable in tort actions.
Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d 69 (1982). The economic loss
doctrine adopted by the supreme court in Moorman bars a plaintiff from recovering in
negligence for losses which are purely economic, which do not involve personal injury or
property damage. Moorman, 91 Ill. 2d 69. The supreme court reasoned that tort law is not
intended to compensate parties for monetary losses suffered as a result of duties which are
owed to them simply as a result of a contract. Losses related to a purchaser=s disappointed
expectations due to deterioration, internal breakdown or nonaccidental causes lie in
contract. Moorman, 91 Ill. 2d at 86. However, negligent misrepresentation by a defendant
in the business of supplying information for the guidance of others in their business
transactions is an exception to the Moorman doctrine. In re Illinois Bell Switching Station
Litigation, 161 Ill. 2d 233 (1994).
To state a claim based on the negligent misrepresentation exception to the Moorman
4 doctrine, the plaintiff must demonstrate that the defendant: (1) is in the business of
supplying information for the guidance of others in their business dealings; (2) provided
false information; and (3) supplied the information for the guidance of the plaintiff=s
business transactions. Prime Leasing, Inc., 332 Ill. App. 3d at 311. An allegation that the
defendant is in the business of supplying information for the guidance of others is a legal
conclusion that must be supported with well-pleaded factual allegations. Tolan & Sons, Inc.
v. KLLM Architects, Inc., 308 Ill. App. 3d 18 (1999).
Plaintiffs argue that the negligent misrepresentation exception applies to their claims
because defendants, as officers and directors of Ty-Walk, were in the business of supplying
information for the guidance of the shareholders in their business transactions. We
disagree.
Here, the business of the board of directors of Ty-Walk was to run the agronomy-
based company. That company provided chemical products and equipment to agricultural
producers, not financial information. Since the company was not in the business of
supplying information for the guidance of others, its directors were not either. See Prime
Leasing v. Kendig, 332 Ill. App. 3d 300 (2002) (plaintiffs= negligence claims were barred by
the Moorman doctrine because the Ben Franklin corporation was not in the business of
supplying information and, as such, its directors were not either). Therefore, the negligent
misrepresentation exception to the Moorman doctrine does not apply.
Moreover, plaintiffs clearly admit that Ty-Walk was in the business of buying and
dealing in agricultural products. Their complaint does not specifically allege that the
directors were in the business of supplying financial information to the shareholders, nor
does it demonstrate that defendants supplied the information for the guidance of Tad and
5 Richard Tyler=s business transactions. Thus, plaintiffs= complaint fails to plead a cause of
action that would allow the application of the exception. Accordingly, the trial court properly
granted defendants= motion to dismiss.
In light of the above disposition, we need not consider plaintiffs= remaining
arguments on appeal.
CONCLUSION
The judgment of the circuit court of Will County is affirmed.
Affirmed.
SCHMIDT, PJ., and HOLDRIDGE, J., concurring.