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No. 2--05--0097

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT

Plaintiffs, Ron and Lisa Kelley, Kelley Partners, Inc., Guy Mullen, and Mullen Enterprises,Inc., appeal the trial court's order dismissing their complaint against defendants, Michael J. Carboneand Michael J. Carbone & Associates, Inc. Plaintiffs contend that the trial court erred in ruling thatdefendants owed them no duty. We reverse and remand.

Plaintiffs' third amended complaint alleges the following facts. Plaintiffs leased businessproperties from Triad Randall Lake, L.L.C. (Triad). The Kelley plaintiffs operated an Oil Worksbusiness while the Mullen plaintiffs operated a car wash facility on an adjacent parcel. Each leaseprovided that after five years the lessees would have an option to purchase the property pursuant toa formula set out in the lease. While the formula is somewhat complex, for present purposes it issufficient to note that the purchase price was based on an appraisal performed by defendants. Theleases referred to defendants by name as the appraisers.

Defendants' initial appraisal stated that it was prepared for Todd Surta, president of Triad, andit certified that it met the Uniform Standards of Professional Appraisal Practice (USPAP). It alsoprovided that it was to "be used by the client to support possible future purchase agreements betweenthe client and the current lessee of the subject property."

Plaintiffs exercised their options to purchase the properties. Thereafter, they sued defendantsfor negligent misrepresentation. Plaintiffs alleged that the appraisal did not in fact conform to theUSPAP. Plaintiffs alleged numerous specific mistakes. Plaintiffs contended that, as a result of theseerrors, they paid higher prices for the properties.

Defendants moved to dismiss the third amended complaint. They argued that they owed noduty to plaintiffs, who were not their clients. The trial court agreed and dismissed the complaint withprejudice. Plaintiffs timely appeal.

Defendants moved to dismiss the complaint pursuant to section 2--615 of the Code of CivilProcedure (735 ILCS 5/2-615 (West 2004)). Such a motion challenges only the complaint's legalsufficiency. Jarvis v. South Oak Dodge, Inc., 201 Ill. 2d 81, 85 (2002). "The critical inquiry iswhether the allegations of the complaint, when considered in a light most favorable to the plaintiff,are sufficient to state a cause of action upon which relief may be granted." Jarvis, 201 Ill. 2d at 86. In ruling on a section 2--615 motion, a court must accept as true all well-pleaded facts in thecomplaint and draw all reasonable inferences favorable to the pleader. American National Bank &Trust Co. v. City of Chicago, 192 Ill. 2d 274, 279 (2000). A cause of action should not be dismissedon the pleadings unless it appears that no set of facts can be proved that will entitle the plaintiff torecover. Loftus v. Mingo, 158 Ill. App. 3d 733, 738 (1987). We review de novo the dismissal of acomplaint under section 2--615. Jarvis, 201 Ill. 2d at 86.

Plaintiffs contend that their complaint states a cause of action for negligent misrepresentation. They maintain that defendants owed them a duty despite the lack of contractual privity. Plaintiffs alsocontend that an action for negligent misrepresentation is an exception to the Moorman rule thatpurely economic damages are not recoverable in tort. See Moorman Manufacturing Co. v. NationalTank Co., 91 Ill. 2d 69 (1982). Defendants agree that plaintiffs could maintain a cause of action fornegligent misrepresentation despite the lack of contractual privity and that such an action is anexception to the Moorman economic-loss doctrine. However, they contend that plaintiffs' complaintdoes not allege that defendants owed them a duty under the facts of this case.

To plead a cause of action for negligence, a plaintiff must allege the existence of a duty owedby the defendant to the plaintiff, a breach of that duty, and an injury proximately caused by the breach. Kirwan v. Lincolnshire-Riverwoods Fire Protection District, 349 Ill. App. 3d 150, 155 (2004). Theexistence of a duty is a question of law to be decided by the court. Downs v. Steel & Craft Builders,Inc., 358 Ill. App. 3d 201, 204 (2005). For a duty to exist, the plaintiff and the defendant must standin such a relationship that the law imposes upon the defendant an obligation of reasonable conductfor the plaintiff's benefit. Kopka v. Kamensky & Rubenstein, 354 Ill. App. 3d 930, 934 (2004).

In Rozny v. Marnul, 43 Ill. 2d 54 (1969), the supreme court formally abandoned the conceptof privity of contract in actions for negligent misrepresentation. Thus, a defendant in the business ofsupplying information may owe a duty to a plaintiff despite the fact that the plaintiff was not thedefendant's client. Accordingly, tort liability is to be measured "by the scope of the duty owed ratherthan the artificial concepts of privity [of contract]." Rozny, 43 Ill. 2d at 62. However, liability islimited to the person or the limited group of persons for whose benefit and guidance the informationis intended. Rozny, 43 Ill. 2d at 66-67; Restatement (Second) of Torts