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FIFTH DIVISION

September 27, 2002

JUSTICE QUINN delivered the opinion of the court:

Plaintiff, Safeway Insurance Company (Safeway), brought this actionfor breach of fiduciary duties against All Pro Insurance Agency, Inc.,(All Pro), and two individuals, defendant Louis T. Daddono and defendantKenneth Khano. The trial court dismissed the counts against theindividual defendants but granted Safeway leave to amend. Finally, thetrial court dismissed Safeway's fifth amended complaint against Daddonoand Khano individually with prejudice. Safeway now appeals.

On appeal, Safeway argues that the trial court erred in dismissingits complaint where the complaint adequately stated a cause of actionagainst Daddono and Khano for violation of the Illinois Insurance Code(215 ILCS 5/508.1 (West 1996)) and breach of fiduciary duty.

For the reasons that follow, we hold that the trial court correctlygranted Daddono's and Khano's motions to dismiss.

I. BACKGROUND

Safeway is an insurance company licensed to issue automobileinsurance policies in the State of Illinois. All Pro was an insurancefirm registered as an insurance producer in the State of Illinois. As aninsurance producer, All Pro would act as an agent or broker in solicitinginsureds for insurance companies and would, in turn, receive a percentageof all paid premiums as a commission. Louis T. Daddono and Kenneth Khanowere licensed insurance producers in the State of Illinois and were thesole shareholders of All Pro.

On May 1, 1996, Safeway and All Pro entered into a written contractthat authorized All Pro to sell Safeway's insurance policies to thepublic. The contract provided that All Pro would receive 20% of all paidpremiums as commission for the sales.

Pursuant to section 508.1 of the Illinois Insurance Code (215 ILCS5/508.1 (West 1996)), all money received by a producer for selling orrenewing insurance policies was to be held by the producer in a fiduciarycapacity for the benefit of the insurer. This account is commonlyreferred to as a premium fund trust account, or "PFTA." In accordancewith the statute, All Pro set up and maintained such an account at NorthBank.

On July 18, 1997, Safeway filed suit against All Pro, and Daddono andKhano individually. The complaint alleged counts in breach of contract,fraud and conversion. The trial court dismissed the counts pled againstDaddono and Khano individually and granted Safeway leave to amend. In itsfifth amended complaint, Safeway alleged All Pro, Daddono and Khanoviolated the Insurance Code and breached fiduciary duties to Safeway bymisappropriating, mishandling and/or withholding from Safeway premiumscollected on Safeway policies. Safeway alleged that Daddono and Khanowere individually liable as they were the sole shareholders and officersof All Pro and were the only signators on All Pro's PFTA.

Specifically, the fifth amended complaint alleged that All Pro,Daddono and Khano withheld premiums, allowed the balance in the PFTA to beless than the amount deposited less lawful withdrawals, allowed the PFTAto have a negative balance on four specific dates, misappropriatedfiduciary funds, acted in a financially irresponsible manner, commingledfunds, failed to maintain cash receipts, failed to maintain a cashdisbursement register, failed to document in writing commissions withdrawnfrom the PFTA, failed to support PFTA journal entries with receipts, andfailed to maintain books and record for seven years. The fifth amendedcomplaint alleged that Safeway sustained money damages in the amount of$22,079.

The trial court dismissed Safeway's fifth amended complaint as toDaddono and Khano with prejudice. In the same order, the trial courtgranted All Pro's motion to dismiss and granted Safeway 28 days to "attachthe missing exhibits to the fifth amended complaint." Safeway now timelyappeals the judgment as to Daddono and Khano individually.

II. ANALYSIS

Safeway argues that the trial court erred in dismissing its fifthamended complaint where the complaint adequately stated a cause of actionagainst Daddono and Khano individually for violations of the IllinoisInsurance Code and breach of fiduciary duty. Safeway additionally arguesthat it is proper to plead against Daddono and Khano in the alternative.

We review a dismissal under section 2-615 of the Code of CourtProcedure (735 ILCS 5/2-615 (West 1996)) de novo. Neade v. Portes, 193Ill. 2d 433, 439 (2000). We take as true all well-pled facts andreasonable inferences therefrom and consider only those facts in thepleading and included in attached exhibits. Weatherman v. Gary-WheatonBank of Fox Valley, 186 Ill. 2d 472, 491 (1999). We will not affirmdismissal of a complaint unless it is clear that a plaintiff cannot provea set of facts that will entitle him to the relief sought. Board ofDirectors of Bloomfield Club Recreation Ass'n v. The Hoffman Group, Inc.,186 Ill. 2d 419, 424 (1999). However, legal conclusions and factualconclusions that are unsupported by allegations of specific facts will bedisregarded in ruling on a motion to dismiss. Cummings v. City ofWaterloo, 289 Ill. App. 3d 474, 479 (1997).

Section 508.1 of the Illinois Insurance Code (215 ILCS 5/508.1 (West1996) (now 215 ILCS 5/500-115 (West Supp. 2001)) stated in pertinent part:

"Any money which an insurance producer *** receives for*** policies of insurance shall be held in a fiduciarycapacity, and shall not be misappropriated, converted orimproperly withheld. Any insurance company which deliversto any insurance producer in this State a policy orcontract for insurance pursuant to the application orrequest of an insurance producer, authorizes such producerto collect or receive on its behalf payment of any premiumwhich is due on such policy or contract for insurance***."

215 I LCS 5/508.1 (West 1996).

Thus, insurance producers act as fiduciaries in holding the collectedpremiums in trust for the benefit of the insurer. See Lincoln TowersInsurance Agency, Inc. v. Boozell, 291 Ill. App. 3d 965, 971 (1997). Illinois courts have noted that the purpose of section 508.1 is "toprotect a consumer who pays the agent from any further liability for thepremium if the independent producer fails to remit to the insurer." Scottv. Assurance Co. of America, 253 Ill. App. 3d 813, 817 (1993)

The gist of Safeway's argument on appeal is that according to thisprovision All Pro had a duty to hold monies received from insureds in afiduciary capacity. Safeway alleges that because Daddono and Khano werethe sole signators on the PFTA account and the sole shareholders of AllPro, they had a duty as well and are individually liable for anymisappropriations from All Pro's PFTA. Safeway asserts that the fiduciaryduty can be imposed upon Daddono and Khano individually by "piercing thecorporate veil." Safeway directs our attention to case law holding thatwhile corporate status generally shields corporate officers andshareholders from liability from corporate debts and obligations, thisprotection does not shield corporate officers from their own wrongdoing. Veteran Supply Co. v. Swaw, 192 Ill. App. 3d 286 (1989).

Safeway likens the case at bar to Veteran Supply Co. In that casethe facts were not in dispute. The plaintiff sold goods to Brother's PizzaPub, Inc. (Brother's). In payment, five checks were drawn on Brother'scorporate checking account and were sent to and received by the plaintiff.Four of the checks totaling $1,728.60 were signed by the defendant ToddSwaw, a corporate officer. One check in the amount of $400 was signed byRichard Swaw, an authorized signatory of the corporation. After thechecks were returned to the plaintiff stamped "NSF," the plaintiff, by itsattorney, made written demands for payment within 30 days. The demandswere made by certified mail on the defendants individually at theirresidences, not on the corporation. The amounts were never paid. When thedefendants signed the checks and issued them to the plaintiff, they knewthat there were insufficient funds to cover the checks and that they hadthe intent to defraud.

In that case, to recover under the applicable deceptive practicesstatute, the plaintiff had to show (1) that the defendants delivered acheck to obtain personal property; (2) that the defendants knew at thetime that the account was insufficient to pay the check; (3) that thedefendants acted with the intent to defraud; and (4) that the defendantfailed to pay on demand. Veteran Supply Co., 192 Ill. App. 3d at 288; 720ILCS 5/17-1a (West 1996). We acknowledged that a corporate officer may beliable for the negligence of the corporation, fraud, trespass to realty,wilfully inducing breach of contract, and conversion. Veteran Supply Co.,192 Ill. App. 3d at 290-91. The record evinced that plaintiff's well-pledfacts established defendants' liability under the terms of the statute. Therefore, we held that defendants, corporate officers, who signed andissued checks with intent to defraud, were personally liable to thesupplier regardless of whether they received property for their own use. Veteran Supply Co., 192 Ill. App. 3d at 291.

Safeway also relies on National Acceptance Co. of America v. PinturaCorp., 94 Ill. App. 3d 703 (1981). In National, we held that a corporateofficer could be held individually liable for conversion committed onbehalf of and for the sole benefit of the corporation. We held that "acorporate officer's individual liability for conversion committed by himpersonally in behalf of the corporation is established in the same manneras his liability for any other tort; by proof of active participation inthe conversion. Inasmuch as the parties stipulated that defendant Nietoendorsed and deposited some checks, and directed the same as to otherchecks, we find that his active participation was shown sufficiently torender him individually liable in conversion of those funds." National,94 Ill. App. 3d at 707.

Both Veteran Supply Co. and National are clearly distinguishablefrom the case at bar. First, the deceptive practices statute at issue inVeteran Supply Co. is clearly not applicable to the case at bar. Second,this court upheld finding corporate officers personally liable in VeteranSupply Co. where plaintiff's well-plead facts established that theofficers' conduct fell within the purview of the statute. Likewise, therecord in National established proof of the corporate officer's activeparticipation in the conversion. In the case at bar, Safeway's fifthamended complaint is void any specific allegations of how Daddono or Khanois personally responsible for, or actively participated in, All Pro'salleged misappropriations. As defendant Khano's brief aptly asserts,defendants are not arguing with the well- established principle that acorporate officer cannot commit a tort as agent for the corporation andescape liability by using the corporation as a shield. Instead, theymaintain, and we agree, that Safeway has failed to set forth facts thatestablish Daddono and/or Khano individually owed or breached a fiduciaryduty to Safeway.

Safeway's fifth amended complaint contains the following allegations. Safeway alleges that Daddono and Khano were the sole shareholders andofficers of All Pro. A corporate officer is not normally liable on acontract made by his corporation, even if he is the sole stockholder. Baird & Warner, Inc. v. Addison Industrial Park, Inc., 70 Ill. App. 3d 59,67 (1979). So that allegation, alone, does not establish liability. Thatallegation alone also does not impart "active participation" in anymisappropriation. Safeway next alleges that following execution of thecontract, Daddono and Khano "collected premiums for selling Safeway'sinsurance policies to the public." However, the contract specificallyprovides that the producer, All Pro Insurance Agency, collects premiumsfor selling the policies. There are no facts pled that Daddono or Khanopersonally sold Safeway's insurance policies or that Daddono and Khanocollected premiums for personal accounts.

Safeway next alleges that "Safeway was required to forward Daddonoand Khano a monthly statement of account" and that they in turn wererequired to remit to Safeway the amount shown on the statement within 45days. Safeway additionally alleges that it forwarded the monthlystatements of March 1997 through May 1997 to Daddono and Khano. However,again, the contract provides that Safeway was required to provide All Prowith a monthly statement and All Pro was required to remit the statementamount. Also, while the complaint refers to the specific statements from1997 that Safeway alleges it forwarded to Daddono and Khano, thosestatements were not attached to the fifth amended complaint and weretherefore not considered below.

Safeway next alleges that Daddono and Khano "maintained the bankingaccounts" as proof that they were individually involved inmisappropriation. However, the record reveals that the name on the account is "All Pro Insurance Agency, Inc, Premium Trust Fund Account." While it is true that Daddono and Khano were signators on thecorporation's account, that alone does not impart individual liability onDaddono and Khano. Safeway does not provide, nor can we locate, any caselaw that holds as such. The fact that they were both signators on theaccount also does not support a conclusion that Daddono or Khanoindividually maintained the PFTA. The record reveals that the PFTAaccount had three individual signators listed, Louis T. Daddono, KennethKhano and Louis Daddono, and only one signature was required for accounttransactions. Most importantly, Safeway, other than realleging the same12 actions to Daddono, Khano and All Pro separately, fails to designatewhich individual undertook which misappropriation activity. Safeway hasnot alleged that Daddono or Khano individually deposited and withdrewfunds from the PFTA in an inappropriate manner.

The well-pled facts in this case establish that Safeway entered intoa contract with All Pro. All Pro is a licensed insurance producer in theState of Illinois. All Pro, pursuant to section 508.1 of the IllinoisInsurance Code (215 ILCS 5/508.1 (West 1996)) established and maintaineda PFTA. All Pro sold Safeway insurance policies according to the parties'contractual agreement and was required to remit net premiums to Safeway. These facts do not establish a cause of action against Daddono and Khanoindividually. Under Illinois law, a party must allege facts stating theelements of the cause of action; allegations of legal conclusions aresimply not enough. La Salle National Bank v. City Suites, Inc., 325 Ill.App. 3d 780, 790 (2001). Safeway has failed to do so in this case.

Still, Safeway maintains that "the propriety of holding Daddono andKhano individually liable for violations of 215 ILCS 5/508.1 is buttressedin this case by the provisions of the Illinois Insurance Code itself." Safeway points to section 499.1 of the Illinois Insurance Code, whichrequires registered insurance producer firms to "appoint one or morelicensed insurance producers who are officers, directors, or partners inthe firm to be responsible for the firm's compliance with the insurancelaws." 215 ILCS 5/499.1 (West 1996) now 215 ILCS 5/500-30(c) (West Supp.2001). Safeway argues that this requirement evinces the legislature'sintent to avoid shielding corporate officers from individual financialresponsibility.

We note that this is the entirety of Safeway's argument. Safeway hasutilized the statute's provision in a general public policy argument buthas failed to directly apply it to the facts at hand. While the statutedoes evince an intention for individual responsibility, it specificallyprovides that the responsibility is to be borne by the designatedindividual. The bottom line is that Safeway has failed to allege, eitherin its fifth amended complaint or in its brief on appeal, that eitherDaddono or Khano was that appointed individual under the statute. Safewayboldly asserts in its reply brief that the "proposed Sixth AmendedComplaint extinguishes this issue by alleging that Daddono was in fact theSection 499.1 designee." However, Safeway does not explain why it wasunable to provide that allegation in the fifth amended complaint or at anypoint prior. In addition, as we discuss below, it is not appropriate forthis court to allow Safeway to amend the complaint under the facts of thiscase.

Safeway effectively admits to the insufficiency of its pleading inits reply brief. Safeway states that it "recognizes that there are flawsin the fifth amended complaint. The counts against the individualdefendants essentially repeat verbatim the allegations against thecorporation, and, as a result, contain allegations which are necessary tothe cause of action against the corporation, but not necessary to thecause of action against the individual defendants." Safeway faultsDaddono and Khano's response briefs for focusing on those flaws instead offocusing on the "substantive" deficiencies of the cause of action. Thatargument is ill-conceived. The very question on appeal from the dismissalof a complaint based on legal insufficiency is whether the allegations inthe complaint, when viewed in a light most favorable to the plaintiff, aresufficient to state a cause of action upon which relief can be granted. 735 ILCS 5/2-615 (West 2000). It is exactly the appellee's task on appealto point out the insufficiency of the complaint's allegations.

Safeway's proposed solution is for this court to permit amendment ofthe fifth amended complaint. While it is certainly within this court'sauthority to allow Safeway to amend under Supreme Court Rule 366 (134 Ill.2d R. 366), we find that it is not appropriate in this case. Cases inwhich we have utilized Rule 366 to permit amendment present unique factualscenarios. In Canel & Hale, Ltd. v. Tobin, 304 Ill. App. 3d 906, 914(1999), we allowed plaintiff leave to file a fourth amended complaintunder Rule 366 on the theory of quantum meruit. In that case the trialcourt had dismissed the quantum meruit claim in the third amendedcomplaint because plaintiff had failed to plead sufficient facts to allowthe court to determine whether plaintiff could recover. The opportunityto amend was proper where the trial court had improperly criticized the quantum meruit claim in the second complaint on the basis that it was toospecific, which resulted in plaintiff's abandonment of that claim. Canel& Hale, Ltd. v. Tobin, 304 Ill. App. 3d at 913-14; see also Johnson v.American Airlines, Inc., 278 Ill. App. 3d 624, 628 (1996) (due to theunique posture of this case, where plaintiffs could not have anticipatedour supreme court's ruling in Wolens v. American Airlines, Inc., 157Ill.2d 466 (1993), we exercised our power under Supreme Court Rule 366 andgranted plaintiffs leave to amend their complaints in order to repleadcommon law breach of contract counts that conformed with Wolens); see alsoStamp v. Touche Ross & Co., 263 Ill. App. 3d 1010 (1993) (plaintiff wasgranted leave to amend his complaint pursuant to Illinois Supreme CourtRule 366 where the climate in the trial court was inhospitable toplaintiff's theory of action and the opposing party virtually conceded thefactual sufficiency of the pleading with respect to that theory). In thecase at bar, Safeway has already been given six opportunities tosufficiently plead its cause of action before the trial court. It has notprovided us with any sound basis for allowing amendment under SupremeCourt Rule 366.

Finally, Safeway maintains that it was proper to plead againstDaddono and Khano in the alternative. Section 2-405(c) of the Code ofCivil Procedure provides:

"If the plaintiff is in doubt as to the person from whom he or she is entitled toredress, he or she may join two or more defendants, and state his or her claimagainst them in the alternative in the same count or plead separate counts in thealternative against different defendants, to the intent that the question which, ifany, of the defendants is liable, and to what extent, may be determined as between the parties."

735 ILCS 5/2-405(c) (West 2000).

However, as Daddono's brief correctly states, Safeway's fifth amendedcomplaint does not state it is pleading claims in the alternative againsteach of the defendants under section 2-405(c). 735 ILCS 5/2-405(c) (West2000).

Instead, Safeway's fifth amended complaint states its theory ofliability is based in "alternative liability" and cites Smith v. Eli Lilly& Co., 137 Ill. 2d 222 (1990). While Smith does provide that alternativeliability may apply when two or more defendants act tortiously toward aplaintiff who, through no fault of her own, cannot identify which one ofthe joined defendants caused the injury (Smith, 137 Ill. 2d at 235), wefind that this theory has no application to the case at bar. This theoryof liability is limited. Cases subsequently citing to Smith and the"alternative liability" theory have involved tort actions filed againstdrug manufactures where the plaintiff was unable to determine whichdefendant was the actual manufacturer of the drug. In this case, therecord establishes that Safeway had the bank records in its possession fora number of years. Therefore, Safeway could have easily have used thoserecords to determine which defendant endorsed the checks, and chose notto.

For the foregoing reasons, we affirm the decision of the trial court.

Affirmed.

CAMPBELL, P.J., and REID, J., concur.