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No. 2--03--1329

PRESIDING JUSTICE O'MALLEY delivered the opinion of the court:

In 1997, plaintiff, York Woods Community Association (plaintiff or the UnincorporatedAssociation) retained defendants, Walter J. O'Brien II (O'Brien) and O'Brien & Associates, PC(collectively, defendants), to incorporate the association. Defendants did so, creating a not-for-profitcorporation also named the York Woods Community Association (New YWCA). The incorporationof the New YWCA led to two lawsuits in which individual York Woods homeowners challenged thevalidity of the New YWCA. The New YWCA prevailed in both suits. The cases were consolidatedon appeal, and we reversed, holding that the New YWCA had not been validly incorporated. SeeScott v. York Woods Community Ass'n, 329 Ill. App. 3d 492 (2002). Following our decision,plaintiff sued defendants for legal malpractice, breach of contract, and breach of fiduciary duty. Defendants moved for summary judgment pursuant to section 2--1005 of the Code of Civil Procedure(Code) (735 ILCS 5/2--1005 (West 2002)), arguing that plaintiff lacked standing, that no attorney-client relationship existed, and that plaintiff's complaint was barred by the statute of limitations. Thetrial court found that issues of fact precluded summary judgment on timeliness grounds, but agreedthat plaintiff lacked standing, and granted summary judgment to defendants. Plaintiff appealed, anddefendants cross-appealed the statute of limitations ruling. We reverse and remand, holding thatplaintiff had standing to sue defendants and that its complaint was timely.

In our opinion in Scott, we set out the background of this case in full detail. See Scott, 329Ill. App. 3d at 493-98. Thus, we set out only a brief account here. In 1962, the private developerof the York Woods residential community recorded a "Declaration of Protective Covenants"(Declaration), which provided for the creation of "an Illinois not-for-profit corporation to be knownas the York Woods Community Association." An association called the York Woods CommunityAssociation (Old YWCA) was incorporated in 1963 and functioned pursuant to the Declaration.

In 1988, the Illinois Secretary of State dissolved the Old YWCA, apparently for neglectingto timely file an annual report. No homeowner, officer, or board member knew of the dissolutionuntil 1997. Between 1988 and 1997, however, the Old YWCA continued operating, with no changein business practices, as the Unincorporated Association.

In 1997, O'Brien, who had just started working for the Unincorporated Association,discovered that the Old YWCA had been dissolved. He informed two board members, JosephLizzadro and Stewart Ward, of his discovery, and they instructed him to file articles of incorporation. O'Brien did so, and on August 28, 1997, the articles were recorded. The new not-for-profitcorporation was also called the York Woods Community Association (New YWCA).

On January 15, 1998, Timothy Mlsna, a resident of York Woods, filed a lawsuit against theNew YWCA, challenging certain amendments that had been made to the Declaration in 1989.

On January 20, 1998, at an annual association meeting, Lizzadro, Ward, and O'Brien disclosedto the homeowners that the New YWCA had been incorporated. They informed the homeownersthat they needed to decide whether to approve the incorporation. A vote was taken, and a simplemajority of those voting, but not a majority of all homeowners, voted to approve the incorporation. From this point forward, the homeowners apparently were divided as to which association, theUnincorporated Association or the New YWCA, was the valid homeowners' association. Bothcontinued to operate with separate boards. In February 1998, Mlsna was elected to the board of theUnincorporated Association. He believed that the New YWCA had not been validly formed, and hecommunicated this belief to O'Brien and the homeowners.

On July 15, 1999, the New YWCA filed a counterclaim in the Mlsna litigation, seeking adeclaration that the New YWCA was properly incorporated and had succeeded to the Old YWCA'spowers. That same day, Mlsna amended his complaint, seeking a declaration that the New YWCAwas not a valid not-for-profit corporation and that it could not succeed to the powers of the OldYWCA. The New YWCA moved for summary judgment, which the court granted in part. The caseproceeded to trial and the New YWCA prevailed.

In June 2000, two other York Woods residents, Harold Scott and Peter Spelson, filed acomplaint against the New YWCA, also alleging that the New YWCA had not been validlyincorporated. The New YWCA moved for summary judgment, and the court granted the motion.

Mlsna, Scott, and Spelson appealed, and we consolidated their appeals. We reversed bothtrial courts, holding that the New YWCA was not a valid not-for-profit corporation and that it couldnot succeed to the powers of the Old YWCA. See Scott, 329 Ill. App. 3d at 498-99. We reasonedthat, when the Unincorporated Association attempted to incorporate, it did not comply with section102.35(a) of the General Not For Profit Corporation Act of 1986 (the Act) (805 ILCS 105/101.01et seq. (West 1996)). Section 102.35(a) of the Act requires that, to become a not-for-profitcorporation, an unincorporated association must first obtain authorization from its members by thesame procedure it uses for amendments to the fundamental agreement (in this case, the Declaration). Second, the association must file articles of incorporation reflecting that this required vote had beenobtained. See 805 ILCS 105/102.35(a) (West 1996). The record revealed that (1) theUnincorporated Association did not obtain a two-thirds majority authorization, as required by theDeclaration's amendment procedure, and (2) the articles were filed before the vote had been obtained. Thus, the New YWCA was never validly incorporated. See Scott, 329 Ill. App. 3d at 499. Weconcluded:

"[T]he [New YWCA] is not a valid corporation under the Act. *** We need notsettle exactly what the homeowners may do as an unincorporated association. However, theDeclaration still gives each homeowner the right to enforce the Declaration's covenants. Also, because the Declaration requires an incorporated homeowners' association, anunincorporated homeowners' association may exist only as long as is reasonably needed toincorporate a new association lawfully." Scott, 329 Ill. App. 3d at 500.

In July 2002, plaintiff, using the name York Woods Community Association, filed the presentlawsuit against defendants, alleging legal malpractice, breach of contract, and breach of fiduciaryduty. All three counts were based on O'Brien's failed attempt at incorporating the New YWCA. Thecomplaint alleged that the Unincorporated Association had an attorney-client relationship withdefendants and that defendants breached their duty to exercise reasonable care by, inter alia, failingto properly incorporate the New YWCA. It alleged as damages the fees paid to defendants, increasedinsurance costs, and the costs incurred by Mlsna in challenging the New YWCA.

Defendants moved for summary judgment. They argued that (1) plaintiff lacked standing tobring the action, (2) there was no attorney-client relationship between plaintiff and defendants, and(3) the complaint was barred by the statute of limitations. The court first found that issues of factprecluded summary judgment on timeliness grounds, but ultimately granted summary judgment todefendants, finding that plaintiff lacked standing. In its ruling, the court stated:

"[T]he end result is that we have a plaintiff, the York Woods Condominium [sic]Association, that the appellate court has already ruled is not legally incorporated. And thisis not the same entity that traveled down the road from 1963 onward.

*** I can only conclude that it is a new association, and therefore would lackstanding to sue Mr. O'Brien as an attorney for the legal work that he provided to the olderassociation that he alleged was legal and later found by the appellate court not to be legallyincorporated."

Plaintiff appealed, and defendants cross-appealed the statute of limitations ruling. We review thegrant of summary judgment de novo. Travelers Insurance Co. v. Eljer Manufacturing, Inc., 197 Ill.2d 278, 292 (2001). A motion for summary judgment is properly granted only when the pleadings,depositions, admissions, and affidavits on file reveal that there is no genuine issue as to any materialfact and that the moving party is entitled to judgment as a matter of law. Travelers Insurance, 197Ill. 2d at 292. In considering a summary judgment motion, the court has a duty to construe theevidence strictly against the movant and liberally in favor of the nonmoving party. TravelersInsurance, 197 Ill. 2d at 292.

A. Standing

"The doctrine of standing requires that a party have a real interest in the action brought andits outcome." Bridgestone/Firestone, Inc. v. Aldridge, 179 Ill. 2d 141, 147 (1997). Plaintiff arguesthat the trial court misconstrued the facts of the case and erred in finding that plaintiff lacked standingto sue defendants. We agree.

As previously discussed, the Old YWCA was dissolved in 1988 and became theUnincorporated Association. In 1997, the Unincorporated Association retained defendants toreincorporate it. O'Brien attempted to do so, creating the New YWCA. We determined in Scott thatthe New YWCA was not a valid corporation because the Unincorporated Association did not complywith the requirements of the Act. Scott, 329 Ill. App. 3d at 499. In so holding, we recognized thecontinuing existence of the Unincorporated Association. See Scott, 329 Ill. App. 3d at 500.

Now, the Unincorporated Association has sued defendants for legal malpractice. As theUnincorporated Association is clearly the entity that retained defendants, it has standing to sue them. It appears that the trial court, in finding that plaintiff lacked standing, erroneously believed thatplaintiff was actually the New YWCA, an entity that we held had not been validly incorporated.

Defendants first respond that plaintiff was not validly formed pursuant to the Declaration,which requires a not-for-profit corporation. According to defendants, because plaintiff is not a not-for-profit corporation, it lacks standing. This argument misses the point. The fact that plaintiff is notincorporated pursuant to the Declaration is immaterial for the purposes of standing. In order to havestanding, plaintiff needs only a real interest in the action and the capacity to sue. Both of theserequirements are met. First, plaintiff is the entity that retained defendants. Second, as anunincorporated association, plaintiff has the ability to bring a lawsuit in its name. See 735 ILCS5/2--209.1 (West 2002).

Defendants next respond that plaintiff has waived its argument that it may bring an action asan unincorporated association. Defendants assert that plaintiff raised this claim for the first time inits appellate brief and that prior to that point plaintiff argued only that it was the successor of the OldYWCA. This argument lacks merit. Plaintiff's complaint clearly identifies plaintiff as "anunincorporated association acting on its own behalf," and plaintiff asserted in its response todefendants' motion for summary judgment that it was bringing the lawsuit as an unincorporatedassociation.

B. Statute of Limitations

We now turn to defendants' cross-appeal. Defendants argue that the trial court erred indenying them summary judgment on the ground that the complaint was untimely. Plaintiff respondsthat the limitations period did not begin to run until April 2002, when we issued our decision in Scott,and hence, the complaint was timely. A suit for legal malpractice must be brought "within 2 yearsfrom the time the person bringing the action knew or reasonably should have known of the injury forwhich damages are sought." 735 ILCS 5/13--214.3(b) (West 2002). Under the Code, "the two-yearperiod does not necessarily begin the day the plaintiff suffers his injury; rather, the period starts whenthe plaintiff knows or should know facts that would cause him to believe that his injury waswrongfully caused." Romano v. Morrisroe, 326 Ill. App. 3d 26, 28 (2001). "The injury is not thenegligent act itself; it is something caused by the negligent act or omission for which the plaintiff mayseek damages." Romano, 326 Ill. App. 3d at 28. "No cause of action accrues without actualdamages, and damages are only speculative if their existence itself is uncertain." Romano, 326 Ill.App. 3d at 28. "Ordinarily, when a party becomes charged with such knowledge is a question of fact,and judgment should be entered as a matter of law only when the undisputed facts allow for only oneconclusion." Romano, 326 Ill. App. 3d at 28.

Defendants argue that the limitations period began to run in January 1998, when Mlsna filedhis complaint against the New YWCA. They assert that plaintiff was then on notice that it had beeninjured, because it had incurred attorney fees in relation to O'Brien's improper legal services. Theyrely on Palmros v. Barcelona, 284 Ill. App. 3d 642 (1996). There, we held that "[a]ttorney feesincurred as a proximate result of a lawyer's malpractice are damages that make a cause of actioncomplete and thus may start the running of the limitations period." Palmros, 284 Ill. App. 3d at 647. Initially, we note that it was Mlsna, not plaintiff, who sued the New YWCA in 1998. Whileit is true that Mlsna was a member of the board of the Unincorporated Association, and that plaintiffhere seeks to recover Mlsna's attorney fees, Mlsna and plaintiff nevertheless remain separate entities.

Even if it was plaintiff who incurred attorney fees in the Mlsna litigation, defendants' argumentstill fails. Palmros does not state that the mere incurrence of attorney fees automatically gives riseto a cause of action for legal malpractice. Rather, "the incurring of additional attorney fees maytrigger the running of the statute of limitations ***, but only where it is clear, at the time theadditional fees are incurred, that the fees are directly attributable to former counsel's neglect." Luceyv. Law Officers of Pretzel & Stouffer, Chartered, 301 Ill. App. 3d 349, 355 (1998).

Here, when attorney fees were incurred in the Mlsna litigation, it was not at all clear that thosefees were directly attributable to defendants' malpractice. At that point, the New YWCA had not yetbeen declared invalid. Thus, damages remained speculative, and no cause of action had accrued. SeeRomano, 326 Ill. App. 3d at 28. Rather, we agree with plaintiff that the limitations period did notbegin running until our decision in Scott. It was at that point that plaintiff learned that theincorporation of the New YWCA had failed and that O'Brien had potentially committed legalmalpractice. See Romano, 326 Ill. App. 3d at 31 ("a cause of action for legal malpractice rarely willaccrue prior to the entry of an adverse judgment *** [in] the underlying action in which the plaintiffhad become entangled due to the alleged negligence of his attorney"). In other words, theinvalidation of the New YWCA was the injury caused by O'Brien's negligent act for which plaintiffis seeking damages. See Romano, 326 Ill. App. 3d at 28. Plaintiff's malpractice action was filedwithin two years of the Scott decision and, hence, was timely.

We note, moreover, the strong policy rationale underlying our decision. Under defendants'argument, plaintiff would have been required to file a malpractice suit in 1998, the outcome of whichwould have been entirely dependent on the result in Scott. In Romano, we counseled against such"prophylactic malpractice cases," noting that they do not promote judicial economy. Romano, 326Ill. App. 3d at 32; see also Lucey, 301 Ill. App. 3d at 357. Here, had Scott been decided indefendants' favor, "the malpractice case would have spent over [four] years on a court docket,wasting judicial resources on a case in which no one was injured." Romano, 326 Ill. App. 3d at 32. We reiterate our admonition against such prophylactic malpractice cases.

The judgment of the circuit court of Du Page County is reversed, and the cause is remanded.

Reversed and remanded.

McLAREN and GILLERAN JOHNSON, JJ., concur.