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Third Division
December 10, 2003

No. 1-01-4258

JUSTICE HALL delivered the opinion of the court:

This appeal arises from two circuit court orders. The firstorder entered on May 15, 2001, dismissed the amended complaintfiled by plaintiffs, Adam Cwikla and D2 Trucking, Inc. (D2Trucking), against defendants, Tom Sheir⁽¹⁾ and Flocarol Crigler,alleging fraud and breach of fiduciary duty. The second orderentered on November 28, 2001, granted summary judgment in favorof Sheir on his counterclaim for attorney fees.

On appeal, plaintiffs contend that: (1) the circuit courterred in dismissing the breach of contract claim in theiroriginal complaint; (2) they properly pled a viable fraud claimin their amended complaint; (3) they properly pled a separateclaim for breach of fiduciary duty in their amended complaint;and (4) the trial court erred by entering judgment in favor ofSheir on his counterclaim for attorney fees. For the reasonsthat follow, we affirm in part, reverse in part, and remand thecause for further proceedings consistent with this opinion.

The facts in this case center on the termination of abusiness relationship within what is described as a small andclose-knit trucking company. Plaintiff Cwikla was president,shareholder and director of plaintiff D2 Trucking. Defendant,Sheir was secretary/treasurer, as well as a shareholder anddirector, of D2 Trucking. Cwikla and Sheir were sole equal co-shareholders of D2 Trucking. Sheir was responsible for thecompany's financial matters, which included billing and payroll.He was also authorized to sign company checks.

On November 11, 1997, Cwikla and D2 Trucking entered into amutual release and termination agreement with Sheir. Under theterms of the agreement, Sheir severed his relationship withCwikla and D2 Trucking, and Cwikla obtained all of Sheir'srights, titles and interests in D2 Trucking, in exchange for alump-sum payment of $40,000.

Subsequent to the termination agreement and during thecompilation of financial statements, accountants for D2 Truckingallegedly discovered that Sheir had issued company check No.4057, dated January 7, 1997, made payable to Sheir's mother-in-law, defendant Flocarol Crigler, in the amount of $40,000.Thereafter, on February 20, 1998, plaintiffs Cwikla and D2Trucking filed a verified three-count original complaint againstdefendants Sheir and Crigler for breach of an oral contract(count I), fraud (count II), and breach of fiduciary duty (countIII).

In the breach of contract claim, plaintiffs alleged thatCrigler and D2 Trucking had entered into an oral agreementwherein D2 Trucking loaned Crigler $40,000, in return forCrigler's promise to repay this loan amount, and that Crigler hadbreached the oral agreement by failing to repay the loan. In thefraud claim, plaintiffs alleged that Sheir committed fraud byfailing to disclose the loan agreement during terminationagreement negotiations. And in the breach of fiduciary claim,plaintiffs alleged that Sheir's conduct in making the loan toCrigler, his mother-in-law, amounted to a diversion of corporatefunds in breach of his fiduciary obligations to D2 Trucking.

On November 2, 2000, after the parties conducted discoveryand submitted pretrial materials, defendants filed a motion forjudgment on the pleadings pursuant to section 2-615(e) of theCode of Civil Procedure (Code) (735 ILCS 5/2-615(e) (West 1996)). On November 30, 2000, the circuit court granted defendants'motion, without prejudice, and allowed plaintiffs leave to filean amended complaint. Plaintiffs filed their two-count amendedcomplaint on December 28, 2000, alleging fraud and breach offiduciary duty. No allegation was made nor relief sought againstCrigler in the amended complaint.

Thereafter, defendants Sheir and Crigler filed their motionto dismiss plaintiffs' amended complaint pursuant to sections 2-615(a),(b),(c), and (d), and section 2-619(a)(9) of the Code. Inthe motion, defendants argued as follows: since the amendedcomplaint was unverified it should be dismissed pursuant tosection 2-615(b); Crigler should be dismissed from the actionpursuant to sections 2-615(b),(c), and (d) of the Code, since noallegation was made nor relief sought against Crigler in theamended complaint; the fraud claim as to D2 Trucking should bedismissed pursuant to sections 2-615(b),(c), and (d) of the Code;the fraud claim as to Cwikla should be dismissed pursuant tosection 2-619(a)(9) of the Code; and the breach of fiduciary dutyclaim should be dismissed pursuant to section 2-619(a)(9) of theCode.

On May 15, 2001, after briefing and oral argument, thecircuit court granted defendants' motion to dismiss plaintiffs'amended complaint, with prejudice. On June 7, 2001, plaintiffsfiled a notice of appeal from the orders entered on November 30,2000, and May 15, 2001. On August 21, 2001, defendant Sheirfiled a motion for summary judgment on count II (attorney fees)of his counterclaim. The plaintiffs' appeal from the May 15,2001, order was dismissed by this court on October 10, 2001, forwant of jurisdiction as a consequence of the pendency of Sheir'sunresolved counterclaim for attorney fees.

On November 28, 2001, the circuit court entered judgment oncount II of Sheir's counterclaim in his favor and againstplaintiffs in the amount of $20,609.70. On the same date, Sheirvoluntarily dismissed count I (indemnification) of hiscounterclaim. On December 3, 2001, plaintiffs filed their noticeof appeal seeking relief from the circuit court's orders of May15, 2001, and November 28, 2001.

ANALYSIS

I. Breach of Contract

Plaintiffs first contend that the circuit court erred indismissing their breach of contract claim. We find that pursuantto the Foxcroft rule (Foxcroft Townhome Owners Ass'n v. HoffmanRosner Corp., 96 Ill. 2d 150, 154, 449 N.E.2d 125 (1983)),plaintiffs have waived objection to the circuit court's orderdismissing the breach of contract claim. The decision inFoxcroft stands for the proposition that "[w]hen a complaint isamended, without reference to the earlier allegations, it isexpected that these allegations are no longer at issue."Foxcroft, 96 Ill. 2d at 154. The Foxcroft rule applies "not onlyto factual allegations, but also to theories of recovery." Bilutv. Northwestern University, 296 Ill. App. 3d 42, 46, 692 N.E.2d1327 (1998), citing Foxcroft, 96 Ill. 2d at 155.

In the instant case, the record shows that plaintiffs pled abreach of contract claim in their original three-count complaint. However, after the circuit court granted defendants' motion todismiss and thereafter allowed plaintiffs leave to file anamended complaint, plaintiffs failed to reallege the breach ofcontract claim in their two-count amended complaint. Therefore,since the amended complaint did not replead the breach ofcontract claim, it did not serve to preserve this claim forreview. Corsi v. Corsi, 302 Ill. App. 3d 519, 524, 706 N.E.2d 956(1998). Consequently, the plaintiffs have waived objection todismissal of the previous breach of contract count. See Tabora v.Gottlieb Memorial Hospital, 279 Ill. App. 3d 108, 113, 664 N.E.2d267 (1996); Abrams v. Watchtower Bible & Tract Society, 306 Ill.App. 3d 1006, 1014, 715 N.E.2d 798 (1999); Zawadzka v. CatholicBishop, 337 Ill. App. 3d 66, 69, 785 N.E.2d 71 (2003).

II. Fraud Claim

Plaintiffs next contend that in count I of their amendedcomplaint they pled a viable fraud claim against Sheir on theground that Sheir misrepresented the financial status of D2Trucking during negotiations of the termination agreement when heindicated that the trucking company had no outstandingliabilities or debts, thereby concealing the $40,000 check heissued to Crigler. In response, Sheir asserts that count I ofplaintiffs' amended complaint fails to allege a cause of actionfor fraud.

Defendants Sheir and Crigler's motion specified thatdismissal of count I as to D2 Trucking was brought pursuant tosections 2-615(b),(c), and (d) of the Code, and that dismissal ofcount I as to Cwikla was brought pursuant to section 2-619(a)(9)of the Code. The trial court granted defendants' motion todismiss without stating whether it granted the motion based onsection 2-615 or section 2-619 grounds. We will proceed underthe assumption that the trial court dismissed count I pursuant tothe sections of the Code specified by defendants in their motionto dismiss. However, we will review the dismissal of the fraudcount as to Cwikla under both sections of the Code.

Our review of a dismissal under both sections is de novo (Inre Chicago Flood Litigation, 176 Ill. 2d 179, 189, 680 N.E.2d 265(1997)), and under both sections we accept all well-pled facts astrue and draw all reasonable inferences in favor of the plaintiff(Doe v. Chicago Board of Education, 339 Ill. App. 3d 848, 853,791 N.E.2d 1283 (2003)); the analysis, however, differs.

A significant difference between the two motions is that asection 2-615 motion is based on the pleadings rather than on theunderlying facts. Barber-Colman Co. v. A & K Midwest InsulationCo., 236 Ill. App. 3d 1065, 1068, 603 N.E.2d 1215 (1992). Asection 2-615 motion challenges a complaint for failing to statea cause of action, while a section 2-619(a)(9) motion admits thelegal sufficiency of the complaint but asserts that it is barredby some affirmative matter. Caruth v. Quinley, 333 Ill. App. 3d94, 97, 775 N.E.2d 224 (2002).

A section 2-615 motion attacks the legal sufficiency of thecomplaint by alleging defects on the face of the complaint. VanHorne v. Muller, 185 Ill. 2d 299, 305, 705 N.E.2d 898 (1998). Inruling on a section 2-615 motion, the court may not consideraffidavits, products of discovery, documentary evidence notincorporated into the pleadings as exhibits, or other evidentiarymaterials. Barber-Colman Co., 236 Ill. App. 3d at 1068. Areviewing court will affirm dismissal of a cause of action on thepleadings only if the court determines that no set of facts canbe proven which would entitle the plaintiff to the relief sought.Board of Directors of Bloomfield Club Recreation Ass'n v. TheHoffman Group, Inc., 186 Ill. 2d 419, 424, 712 N.E.2d 330 (1999).

In comparison, a section 2-619(a)(9) motion assumes a causeof action has been stated, but asserts that the claim is defeatedby some affirmative matter that avoids the legal effect of ordefeats the claim. Kedzie & 103rd Currency Exchange, Inc. v.Hodge, 156 Ill. 2d 112, 115, 619 N.E.2d 732 (1993). An"affirmative matter" in a section 2-619(a)(9) motion is somethingin the nature of a defense that negates the cause of actioncompletely or refutes crucial conclusions of law or conclusionsof material fact contained in or inferred from the complaint.Illinois Graphics Co. v. Nickum, 159 Ill. 2d 469, 486, 639 N.E.2d1282 (1994); see, e.g., Epstein v. Chicago Board of Education,178 Ill. 2d 370, 383, 687 N.E.2d 1042 (1997) (immunity from suitas an affirmative matter); Glisson v. City of Marion, 188 Ill. 2d211, 220, 720 N.E.2d 1034 (1999) (lack of standing as anaffirmative matter); Edelman, Combs & Latturner v. Hinshaw &Culbertson, 338 Ill. App. 3d 156, 164, 788 N.E.2d 740 (2003) (indefamation action, issue of privilege as an affirmative defense). An affirmative matter encompasses any defense other than anegation of the essential allegations of the plaintiff's cause ofaction. Palumbo Bros., Inc. v. Wagner, 293 Ill. App. 3d 756, 760,688 N.E.2d 837 (1997). If a cause of action is dismissedpursuant to a section 2-619(a)(9) motion, the question on appealis whether there is a genuine issue of material fact and whetherdefendant is entitled to judgment as a matter of law. IllinoisGraphics Co., 159 Ill. 2d at 494.

In order to state a claim for common law fraud, a plaintiffmust allege that any misrepresentations were: (1) a falsestatement of material fact; (2) known or believed to be false bythe party making them; (3) intended to induce the other party toact; (4) acted upon by the other party in reliance upon the truthof the representations; and (5) damaging to the other party as aresult. Talbert v. Home Savings of America, 265 Ill. App. 3d 376,381-82, 638 N.E.2d 354 (1994); Hart v. Boehmer Chevrolet Sales,Inc., 337 Ill. App. 3d 742, 751, 787 N.E.2d 350 (2003); Connickv. Suzuki Motor Co., 174 Ill. 2d 482, 496, 675 N.E.2d 584 (1996). The elements of fraud must be proven by clear and convincingevidence. In re Application of Rosewell, 106 Ill. 2d 311, 318-19,478 N.E.2d 343 (1985).

In count I (fraud) of the amended complaint, plaintiffsalleged, inter alia, that Sheir knowingly misrepresented thefinancial condition of D2 Trucking by failing to disclose that hehad caused the trucking company to loan $40,000 to Crigler; thatSheir made the false representation for the purpose of inducingCwikla to purchase Sheir's stock in D2 Trucking; and that inreliance upon Sheir's false representation, Cwikla purchased thestock from Sheir for the sum of $40,000.

These factual allegations fail to state a cause of actionsounding in fraud as to D2 Trucking. In order to establishfraud, it must be alleged and proved, inter alia, that thestatement must have been made for the purpose of inducing theother party to act, and the reliance by the person to whom thestatement is made must lead to his injury. Here, there is nosuch reliance pleaded in count I of the amended complaint as itrelates to D2 Trucking. Count I is concerned solely with thetransfer of stock from Sheir to Cwikla for the sum of $40,000. No statement was made to D2 Trucking for the purpose of inducingthe trucking company to act in reliance on such statement inregard to the stock transfer. Thus, the record supports thetrial court's section 2-615 dismissal of count I as to D2Trucking.

However, the allegations in count I set forth a sufficientcause of action sounding in fraud as to Cwikla and against Sheirthat should not have been dismissed pursuant to either section 2-615 or section 2-619(a)(9) of the Code. There is a high standardof specificity required for pleading claims of fraud. Board ofEducation v. A, C & S, Inc., 131 Ill. 2d 428, 457, 546 N.E.2d 580(1989). The facts must be pleaded with sufficient specificity,particularity, and certainty to apprise the opposing party ofwhat he is called upon to answer. Board of Education, 131 Ill. 2dat 457. The pleadings must contain specific allegations of factsfrom which fraud is the necessary or probable inference,including what misrepresentations were made, when they were made,who made the misrepresentations, and to whom they were made.Board of Education, 131 Ill. 2d at 457; Connick, 174 Ill. 2d at496-97.

In the instant case, plaintiffs met the specificity requiredand Sheir was well apprised of the claims made against him. Plaintiffs sufficiently alleged that Sheir made false statementsof material fact, knew they were false, and intended for Cwiklato rely on the statements, causing Cwikla to suffer damage as aresult of his reliance. Accordingly, count I as to Cwikla andagainst Sheir contained factual allegations sufficient toestablish a cause of action for fraudulent misrepresentation.

In addition, count I as to Cwikla should not have beendismissed pursuant to section 2-619(a)(9) of the Code. Sheircontends that Cwikla's answers to interrogatories and hisresponses to a request to admit facts amounted to an affirmativematter which negated plaintiffs' fraud claim. Specifically,Sheir asserts that Cwikla's answers and responses establishedthat Cwikla had access to the same financial records anddocuments to which Sheir had access and therefore Cwikla'sreliance on Sheir's alleged misrepresentations regarding the$40,000 check was unjustified.

It is true that in order to sustain an action for fraudulentmisrepresentation, a plaintiff's reliance on the truth of adefendant's false statement of material fact must have beenjustified. Neptuno Treuhand-Und Verwaltungsgesellschaft Mbh v.Arbor, 295 Ill. App. 3d 567, 575, 692 N.E.2d 812 (1998). However, Sheir's contention that Cwikla's answers tointerrogatories and his responses to a request to admit factsestablish unjustifiable reliance as a matter of law overlooks thefact that our courts have held that justifiable reliance is aquestion of fact to be determined by the finder of fact and notby the trial court as a matter of law. Sims v. Tezak, 296 Ill.App. 3d 503, 511, 694 N.E.2d 1015 (1998); Schrager v. NorthCommunity Bank, 328 Ill. App. 3d 696, 709, 767 N.E.2d 376 (2002).

On the present record, the question remains whether Cwikla'sreliance on Sheir's alleged misrepresentations regarding the$40,000 check was justified. Here, the defendants' motion didnot defeat the plaintiffs' fraud claim as to Cwikla, as thealleged affirmative matter was nothing more than evidence offeredto contest an ultimate fact in the case, namely, whether Cwikla'sreliance was justified. Therefore, the plaintiffs' cause ofaction sounding in fraud as to Cwikla and against Sheir wasincorrectly dismissed pursuant to section 2-619(a)(9) of theCode.

III. Breach of Fiduciary Duty

Plaintiffs next maintain that in count II of their amendedcomplaint, they properly pled a claim for breach of fiduciaryduty. Illinois is a fact-pleading jurisdiction that requires aplaintiff to present a legally and factually sufficientcomplaint. Anderson v. Vanden Dorpel, 172 Ill. 2d 399, 408, 667N.E.2d 1296 (1996). At the pleading stage, a plaintiff is notrequired to prove his or her case, but must allege sufficientfacts to state all the elements of the asserted cause of action.Inland Real Estate Corp. v. Tower Construction Co., 174 Ill. App.3d 421, 433, 528 N.E.2d 421 (1988). In order to plead a cause ofaction for breach of fiduciary duty, a complaint must allegethat: (1) a fiduciary duty exists; (2) the fiduciary duty wasbreached; and (3) such breach proximately caused the injury ofwhich the plaintiff complains. Neade v. Portes, 193 Ill. 2d 433,444, 739 N.E.2d 496 (2000); Prime Leasing, Inc. v. Kendig, 332Ill. App. 3d 300, 313, 773 N.E.2d 84 (2002). Count II inplaintiffs' amended complaint sufficiently alleges all threeelements.

The first element is satisfied, because as a director of D2Trucking, Sheir had a fiduciary relationship with D2 Trucking andits shareholders. See Wencordic Enterprises, Inc. v. Berenson,158 Ill. App. 3d 913, 917, 511 N.E.2d 907 (1987) (concluding thata director of a corporation has a fiduciary relationship with thecorporation and its shareholders). The second element issatisfied based upon plaintiffs' allegation that Sheir violatedhis fiduciary duty to D2 Trucking by using his position as acompany officer to divert corporate funds from D2 Trucking to hismother-in-law, for his benefit and to the financial detriment ofD2 Trucking. See Smith-Shrader Co., Inc. v. Smith, 136 Ill. App.3d 571, 577, 483 N.E.2d 283 (1985) (stating that officers anddirectors of a corporation cannot actively exploit theirpositions within the corporation for their own personal benefit);Dowd & Dowd, Ltd. v. Gleason, 284 Ill. App. 3d 915, 926, 672N.E.2d 854 (1996); aff'd in part & rev'd in part on othergrounds, 181 Ill. 2d 460, 693 N.E.2d 358 (1998) (concluding thatas a fiduciary, a corporate officer owes, at the very minimum, anobligation to deal honestly and fairly with his corporation). Lastly, the third element was satisfied based upon plaintiffs'allegation that Sheir breached his fiduciary duty to D2 Truckingby diverting corporate funds to himself when he issued a companycheck to his mother-in-law in the amount of $40,000 and therebyinjured D2 Trucking's ability to function. Therefore, weconclude that count II in plaintiffs' amended complaintsufficiently states a cause of action against Sheir for breach offiduciary duty owed to D2 Trucking, but not as to Cwikla.

Sheir contends that even if count II of the amendedcomplaint sufficiently stated a cause of action against him forbreach of fiduciary duty, the circuit court correctly dismissedthe claim because it was barred by specific provisions containedin the termination agreement and mutual release.

"A release is a contract whereby a party abandons a claim tothe person against whom the claim exists." InternationalInsurance Co. v. Sargent & Lundy, 242 Ill. App. 3d 614, 622, 609N.E.2d 842 (1993); Loberg v. Hallwood Realty Partners, 323 Ill.App. 3d 936, 941, 753 N.E.2d 1020 (2001). Parties in a fiduciaryrelationship owe one another a duty of full disclosure ofmaterial facts when making a settlement and obtaining a release.Golden v. McDermott, Will & Emery, 299 Ill. App. 3d 982, 988, 702N.E.2d 581 (1998). Therefore, a severance agreement arising outof a fiduciary relationship is voidable if one party withheldfacts that were material to the agreement. Golden, 299 Ill. App.3d at 990. A withheld fact is material if plaintiff would haveacted differently had he been aware of the withheld fact. Golden,299 Ill. App. 3d at 990-91.

Cwikla argues that had he known that Sheir had issued acompany check to his mother-in-law in the amount of $40,000, forSheir's own personal benefit, he would not have entered into themutual release and purchased Sheir's interest in D2 Trucking forthe agreed amount of $40,000. Thus, in view of Sheir's duty offull disclosure during the settlement negotiations, his failureto disclose his issuance of company check No. 4057, made payableto his mother-in-law in the amount of $40,000, was material tothe mutual release as well as the termination agreement. Thequestion of whether there was fraud in obtaining a release isgenerally one of fact. See Erickson v. Wagon Wheel Enterprises,Inc., 101 Ill. App. 2d 296, 303, 242 N.E.2d 622 (1968); Sexton v.Southwestern Auto Racing Association, Inc., 75 Ill. App. 3d 338,340, 394 N.E.2d 49 (1979).

The relevant provisions in the termination agreement andmutual release are insufficient to extinguish plaintiffs' breachof fiduciary duty claim. In addition, we hold that the circuitcourt erred by entering judgment in favor of Sheir on hiscounterclaim for attorney fees and costs in light of our remandto determine if the mutual release is voidable.

IV. Conclusion

Accordingly, we find that plaintiffs have waived review ofthe circuit court's November 30, 2000, order dismissing, withoutprejudice, the breach of contract claim in their originalcomplaint; we affirm that portion of the circuit court's May 15,2001, order dismissing the fraud claim as to D2 Trucking andagainst Sheir, and the breach of fiduciary duty claim as toCwikla and against Sheir.

We reverse that portion of the circuit court's May 15, 2001,order dismissing the fraud claim as to Cwikla and against Sheir,and the breach of fiduciary duty claim as to D2 Trucking andagainst Sheir; we reverse the circuit court's November 28, 2001,order granting summary judgment in favor of Sheir on hiscounterclaim for attorney fees, and we remand the cause forfurther proceedings consistent with this opinion.

Affirmed in part and reversed in part; cause remanded.

HOFFMAN, P.J., and SOUTH, J., concur.

1. Tom Sheir's surname has been variously spelled as:"Shire," "Sheir," and "Shier." The spelling "Sheir" will be usedthroughout this opinion because it is the spelling that is usedon the response brief filed by Sheir's attorney.