Opinion
2-23-0219
06-20-2024
JON V. PALMQUIST, Plaintiff-Appellant and Cross-Appellee, v. KATHLEEN LIVINGSTON, CINDY ANDREZEJEWSKI, and LIBERTY MC, LLC, d/b/a Keller Williams, North Shore West, Defendants-Appellees and Cross- Appellants.
This order was filed under Supreme Court Rule 23(b) and is not precedent except in the limited circumstances allowed under Rule 23(e)(1).
Appeal from the Circuit Court of Lake County. No. 19-AR-972 Honorable Donna-Jo R. Vorderstrasse, Judge, Presiding.
PRESIDING JUSTICE McLAREN delivered the judgment of the court. Justices Schostok and Birkett concurred in the judgment.
ORDER
McLAREN PRESIDING JUSTICE
¶ 1 Held: The trial court properly capped attorney fees pursuant to a provision in a lease agreement, granted judgment in tenant's favor regarding landlord's failure to mitigate damages by insisting that prospective new tenants' son co-sign on the lease; granted judgment in favor of real estate defendants on landlord's claim of tortious interference of a contract where landlord failed to show that defendants induced tenant to breach her lease, and granted judgment in favor of real estate defendants on landlord's claim of a violation of the Real Estate Licensing Act of 2000 where the landlord failed to show how the alleged violation caused actual damages; the trial court erred by denying real estate defendants' motion for sanctions where landlord and his counsel filed pleadings that had no basis in fact or law. Trial court is affirmed in part, reversed in part, and cause is remanded.
¶ 2 This case arises from a landlord-tenant dispute. Plaintiff, Jon V. Palmquist, sought unpaid rent, attorney fees and costs from his former tenant, Kathleen Livingston, who breached her lease when she moved out of Palmquist's duplex because she bought a home. Livingston admitted the breach but asserted that Palmquist failed to mitigate damages. Palmquist also sought recovery for damages from Livingston's real estate agent, defendant Cindy Andrzejewski, and her brokerage firm, defendant Liberty MC, LLC, d/b/a/ Keller Williams North Shore West (Liberty), for tortious interference with a business relationship and violation of the Real Estate Licensing Act of 2000 (225 ILCS 454/1-1 et seq. (West 2020). After cross-motions for summary judgment, the trial court determined that Palmquist was entitled to $6,050.18 from Livingston. The court also granted judgment in favor of Andrzejewski and Liberty but denied their motion for sanctions.
¶ 3 Palmquist appeals, arguing that the trial court erred when it 1) capped attorney fees relating to Livingston's breach of the lease, 2) denied his motion to amend his second amended complaint, 3) denied his motion for sanctions against Andrzejewski and Liberty, 4) denied judgment in his favor and granted judgment in Livingston's favor regarding his failure to mitigate damages, 5) granted judgment in favor of Andrzejewski and Liberty on his claim of tortious interference with a contract, and 6) granted judgment in favor of Andrzejewski and Liberty on his claim of violation of the Real Estate Licensing Act of 2000.
¶ 4 Andrzejewski and Liberty cross-appeal arguing that the trial court erred when it denied their motion for sanctions. For the following reasons we affirm in part, reverse, in part, and remand for further proceedings.
¶ 5 I. BACKGROUND
¶ 6 The following facts are taken from the record, including depositions and other evidentiary materials attached to the cross-motions for summary judgment. We will supplement the facts as necessary in our analysis.
¶ 7 On August 28, 2016, Livingston entered into a written lease agreement with Palmquist to rent a duplex on North First Street in Libertyville (the premises), for $1900 a month. The term of the lease ran from September 1, 2016, through August 31, 2017. Livingston provided Palmquist with a $1900 security deposit. Livingston and Palmquist renewed the lease twice; from September 1, 2017, through April 30, 2018, and May 1, 2018, through April 30, 2019. The monthly rent increased to $1920 and $1935, respectively.
¶ 8 In May or June of 2018, Livingston sought the assistance of Andrzejewski to look for a home to purchase. Livingston found Andrzejewski through a search on the internet. Livingston told Andrzejewski that she was currently renting. On July 29, 2018, Livingston tendered an offer to purchase a home in Libertyville. The following day, Livingston's offer was accepted. On August 16, 2018, Livingston notified Palmquist that she would be moving out of the premises. On August 29, 2018, Livingston closed on the home in Libertyville, for which Liberty received a $7550 commission, and Andrzejewski received a portion of said commission. On August 30, 2018, Livingston returned the keys to the premises to Palmquist, paid rent for the month of August, and moved out of the premises. Livingston understood that she breached the lease. At the time of the breach the monthly rent was $1935, and the lease was to expire on April 30, 2019.
¶ 9 Livingston referred Palmquist to Andrzejewski to assist in finding a new tenant. Unfortunately, the arrangement did not work out, and Palmquist listed the premises with real estate agent Diane Miller. Miller showed the property approximately 37 times and accepted rental application from two prospective sets of tenants. Palmquist did not rent the property for the remaining term of the lease (eight months). Palmquist claimed that he was not able to find a tenant who satisfied his financial criteria and that it was difficult to find a tenant in the late fall and early winter. In May 2019, the month immediately following the expiration of Livingston's lease, Palmquist found a tenant.
¶ 10 In late October 2018 James and Mary Pat Wisner, a couple in their late 60s who had been married since 1970, submitted a rental application to Palmquist. The Wisners sought to rent the property beginning November 15, 2018, for $1935 a month. As stated in the rental application Mary Pat was a landscape architect in Libertyville who had worked for her current employer for 10 years and earned approximately $5000 a month. Mary Pat provided Palmquist with her W-2 to verify her monthly income. A credit report indicated that Mary Pat had a credit score of 610. James had his own marketing firm. He initially stated on the rental application that he earned an average of $14,000 a month. However, he later told Palmquist that he lost two of his major clients so the $14,000 per month average income that he reported on the rental application was no longer accurate. James had a credit score of 685. Palmquist explained that the Wisners did not meet his requirements because James misreported his monthly income on the application, his monthly income had been reduced, neither James nor Mary Pat had a credit score in the 700s, and they recently gave a deed in lieu of foreclosure to their lender. Palmquist offered to lease the premises to the Wisners if their son co-signed the lease. The Wisner's declined Palmquist's offer. On July 20, 2019, almost three months after Livingston's lease expired, Palmquist rented the property to tenants with credit scores below 700. The new tenants had a co-signer.
¶ 11 In April 2019 a second application was submitted by three prospective tenants. This application was pulled because the premises only accommodated two parking spaces and each of the three prospective tenants had a car.
¶ 12 In November 2019 Palmquist filed a one-count complaint against Livingston alleging breach of residential lease, seeking damages in the amount of $21,656.94, plus attorney fees and costs. In February 2020 Palmquist filed an amended complaint against Livingston seeking damages in the amount of $21,450.39, plus attorney fees and costs.
¶ 13 Livingston filed an answer and counterclaim seeking a full refund of her $1900 security deposit from Palmquist. Livingston alleged that she left the property in good clean condition.
¶ 14 In July 2020 Palmquist moved for summary judgment arguing, in part, that Livingston was responsible for all of Palmquist's attorney fees, expenses, and costs related to her breach of the lease. Livingston responded to Palmquist's motion for summary judgment admitting that 1) she breached the lease by not paying rent after August 31, 2018; 2) the lease was set to expire on April 30, 2019; 3) the monthly rent was $1935; and 4) she tendered possession of the premises to Palmquist on August 31, 2018. Livingston asserted, however, that Palmquist failed to mitigate damages, she was entitled $1900 credit for her security deposit, Palmquist failed to provide a reasonable computation of damages, and the lease capped attorney fees and costs at $2500. Livingston asked the court to enter partial summary judgment in Palmquist's favor on the issue of breach of the lease and to deny his motion regarding damages.
¶ 15 On September 23, 2020, the trial court granted Palmquist's motion for summary judgment, in part, ruling that Livingston breached the lease. The court denied Palmquist's motion, in part, ruling that genuine issues of material fact existed regarding the condition of the premises when Livingston vacated the premises and whether Palmquist took reasonable efforts to mitigate damages. The court also determined that attorney fees, costs, and expenses of the prevailing party were capped at $2500 pursuant to the lease.
¶ 16 In October 2020 Palmquist through his attorney, Susan S. Barron, filed a motion for leave to amend instanter his first amended complaint for joinder of necessary parties. The court granted the motion. Palmquist filed a "Second Amended Complaint" against Livingston for breach of lease (Count I), and now against Andrzejewski and Liberty for tortious interference of contract (count II) and Violation of the Real Estate Licensing Act of 2000 (count III). As to all counts Palmquist sought damages in the amount of $21,450.39. As to count II only, Palmquist sought punitive damages against Andrzejewski and Liberty in the amount of $64,351.17.
¶ 17 In August 2021 Andrzej ewski and Liberty moved to strike Palmquist's request for punitive damages. In October 2021 the trial court granted the motion, "without prejudice to [refile] with new allegations."
¶ 18 In July 2021 Andrzejewski and Liberty filed their answer to Palmquist's complaint, along with affirmative defenses. The affirmative defenses asserted that 1) Palmquist failed to mitigate damages, 2) Andrzejewski and Liberty were not responsible for inducing Livingston into breaching the lease, and 3) count III was barred by the statute of limitations.
¶ 19 On September 2, 2022, Andrzejewski and Liberty filed a motion to quash Palmquist's subpoenas, for a protective order, and for Rule 219 discovery sanctions (motion to quash). Palmquist filed his response to Andrzejewski and Liberty's motion to quash. Palmquist's response included a request for Rule 137 sanctions against Andrzejewski and Liberty's attorney for violations of Illinois Rules of Professional Conduct, Rules 3.3 (a)(1) and 8.4(d) and (g), contained in their motion to quash. The court granted Andrzejewski and Liberty's motion and quashed Palmquist's subpoena for bank records and ordered Palmquist to destroy all copies of the bank records. The trial court denied Palmquist's motion for Rule 137 sanctions (Ill. S.Ct. R. 137 (eff. Jan. 1, 2018)).
¶ 20 On September 12, 2022, Palmquist moved to amend his second amended complaint pursuant to section 2-616 of the Code of Civil Procedure (Code) (735 ILCS 5/2-616 (West 2022)). Palmquist sought punitive damages against Andrzejewski and Liberty alleging he learned through recent discovery that 1) Andrzejewski falsely represented to him that in August 2018 she was a licensed realtor in Illinois, and 2) Andrzejewski's sponsoring broker at the time, GSP2 LLC, was a defunct limited liability corporation. Palmquist, therefore, alleged that Andrzejewski practiced real estate without a license and without valid sponsorship. The trial court denied Palmquist's motion to amend.
¶ 21 On November 9, 2022, all parties moved for summary judgment. As to count I, Palmquist argued that he took all reasonable efforts to mitigate damages. Palmquist attached an affidavit wherein he averred that the Wisners "did not meet the income verification, credit scores and other issues, regarding the creditability of their application to meet the criteria to rent the Premises." He argued that a reasonable computation of his damages was $21,450.39 plus attorney fees. Regarding his claims against Andrzejewski and Liberty, Palmquist alleged that Andrzejewski was not a broker for Liberty, rather Andrzejewski's sponsoring broker was a defunct LLC named GSP2. He argued that these alleged facts 1) established tortious interference with the lease, and 2) a violation of the Real Estate Licensing Act of 2000.
¶ 22 In Livingston's motion for summary judgment she argued that Palmquist failed to mitigate damages when he refused to rent to the Wisners and she asked the court to enter judgment against her and in favor of Palmquist in the amount of $7,102.10, which included $2500 for attorney fees, expenses, and costs.
¶ 23 In Palmquist's response to Livingston's motion for summary judgment, he argued that he reasonably attempted to mitigate damages, his requirement that the Wisners' son co-sign the lease was reasonable, and the reasonable computation of his damages was $21,450.39 plus attorney fees.
¶ 24 Livingston replied to Palmquist's response to her motion for summary judgment, arguing that Palmquist unreasonably rejected the Wisners as tenants as Mary Pat's monthly income alone could have covered the $1935 monthly rent.
¶ 25 In Andrzejewski and Liberty's motion for summary judgment, they argued that 1) Palmquist could not prove the inducement or causation elements of tortious interference with a contract; 2) even if Palmquist could prove all the elements of tortious interference with a contract, Andrzejewski and Liberty were privileged to interfere by virtue of their duties to their client Livingston; 3) Palmquist's claim of a violation of the Real Estate Licensing Act of 2000 was barred by the two-year statute of limitations; and 4) Palmquist could not prove his claim of a violation of the Real Estate Licensing Act of 2000.
¶ 26 On January 30, 2023, the trial court denied Palmquist's motion for summary judgment with respect to count I against Livingston. The trial court granted Livingston's motion in part, stating that Palmquist "failed to mitigate his damages by not renting to the Wisners and as such, [his] damages are cut off as of November 15, 2018, the date the Wisners would have taken possession of the premises and commenced their lease." The trial court denied Livingston's motion in part, finding that "the amount of damages incurred by [Palmquist] up to November 15, 2018, remains in dispute."
¶ 27 The trial court also granted Andrzejewski and Liberty's motion for summary judgment in its entirety. Regarding the tortious interference claim, the trial court reasoned that 1) Palmquist had "not demonstrated any evidence that [Andrzejewski and Liberty] *** intentionally interfered in the contractual relationship between [Palmquist and Livingston]," and 2) Palmquist did not prove that "anything [Andrzejewski and Liberty] did was the cause of the breach of the lease." Regarding the claim of a violation of the Real Estate Licensing Act of 2000, the court reasoned that 1) "there was no duty to [Palmquist]," and 2) Andrzejewski's licensure had "no connection, bottom line, to any kind of damages." The trial court also stated:
"Now, there were allegations in the second amended complaint that sounded as if there was going to be more information about this relationship between Andrzejewski and Livingston, as if there might be more information that was questionable or that there was a plan or that there was some kind of a solicitation."
¶ 28 On February 27, 2023, Andrzejewski and Liberty moved for sanctions pursuant to Rule 137 against Palmquist and his counsel arguing that 1) they pursued a claim that was plainly barred by the statute of limitations; 2) the claims were frivolous because they had no factual basis, the statute that the claims relied on explicitly barred private causes of action, and Palmquist's grievances had nothing to do with lost rent; and 3) counsel had been sanctioned numerous times in the past for filing frivolous pleadings.
¶ 29 On February 28, 2023, Palmquist filed a motion to reconsider.
¶ 30 On April 24, 2023, the trial court denied Andrzejewski and Liberty's motion for sanctions without a hearing, over their objection. The trial court stated that "it was unnecessary to hear argument or conduct an evidentiary hearing as it was very familiar with this case."
¶ 31 The trial court denied Palmquist's motion to reconsider on April 27, 2023.
¶ 32 After conducting an evidentiary hearing on damages, the trial court determined the measure of damages by Livingston to Palmquist from the date of the breach through November 15, 2018, the date the Wisners sought possession of the premises, less $1900 credit to Livingston for her security deposit, totaled $6050.18, which included $2500 for attorney fees and costs.
¶ 33 Palmquist filed a timely notice of appeal, and Andrzejewski and Liberty filed a timely notice of cross-appeal.
¶ 34 II. ANALYSIS
¶ 35 A. Case Against Livingston
¶ 36 Palmquist argues that the trial court erred when it capped attorney fees, costs, and expenses at $2500. Livingston counters that Palmquist's argument ignores the clear and unambiguous language of the lease, as modified by the rider. We agree with Livingston.
¶ 37 We note that Livingston raised her argument that the lease limited recovery of attorney fees, expenses, and costs to $2500, in her response to Palmquist's motion for summary judgment. It appears that the trial court treated Livingston's response as a cross-motion for summary judgment.
¶ 38 Where parties file cross-motions for summary judgment, they concede that no material questions of fact exist and that only a question of law exists that the court can decide based on the record. Best Buy Stores, L.P. v. Department of Revenue, 2020 IL App (1st) 191680, ¶ 12. However, the mere filing of cross-motions for summary judgment does not conclusively establish that there is no issue of material fact, nor was the trial court obligated to enter summary judgment for either party. Id.
¶ 39 Summary judgment is appropriate if the pleadings, depositions, affidavits, and other admissions on file establish that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2020); Cohen v. Chicago Park District, 2017 IL 121800, ¶ 17. The purpose of summary judgment is not to try a question of fact, but rather to determine whether one exists. Robidoux v. Oliphant, 201 Ill.2d 324, 335 (2002). "In determining whether a genuine issue of material fact exists, the court must construe the pleadings, depositions, admissions, and affidavits strictly against the movant and liberally in favor of the nonmovant." West Bend Mutual Insurance Co. v. DJW-Ridgeway Building Consultants, Inc., 2015 IL App (2d) 140441, ¶ 20. We review de novo a trial court's order to grant or deny a motion for summary judgment. Galarza v. Direct Auto Insurance Co., 2023 IL 129031, ¶ 36. We also review de novo the interpretation of a contract. Zahdan v. Frontline Business Enterprise, Inc., 2024 IL App (1st) 221351, ¶ 31.
¶ 40 As with all contracts, the primary objective is to determine and give effect to the intent of the parties at the time they entered into the contract. Clanton v. Oakbrook Healthcare Centre, Ltd., 2023 IL 129067, ¶ 30. "In the absence of an ambiguity, the intention of the parties at the time the contract was entered into must be ascertained by the language utilized in the contract itself. Id.
¶ 41 Livingston maintained that paragraph S of rider 1 to the lease capped attorney fees, expenses, and costs at $2500. Paragraph S of Rider 1, which expressly modified the lease, provided:
"The losing party shall pay all costs, expenses and reasonable attorney fees, not to exceed Twenty-Five Hundred dollars ($2,500) incurred or expended by the prevailing party due to the losing party's breach of the covenants and agreements of the Lease Agreement."
¶ 42 Here, Palmquist acknowledges that "the capping of attorney fees to $2500 is definitely a term of the [operative] lease." However, Palmquist urges us to ignore the relevant lease term, contending that because Livingston materially breached the lease, she cannot take advantage of any term that benefits her. Palmquist's disingenuous argument ignores the plain and unambiguous language of the contract, which we may not do. Rather, the lease, including the rider, must be considered as a whole, giving effect to every word, clause, and sentence. Standlee v. Bostedt, 2019 IL App (2d) 180325, ¶ 55. Therefore, we determine that the trial court properly ruled that attorney fees, costs, and expenses of the prevailing party were capped at $2500 pursuant to the lease.
¶ 43 Palmquist cites MHM Services, Inc. v. Assurance Co. of America, 2012 IL App (1st) 112171. In MHMServices an insured sought $2.5 million from an insurer and the trial court ruled that the insured breached the notice clause of the insurance contract and was, therefore, not entitled to any insurance proceeds. The appellate court affirmed reasoning, "[t]he rule of law is that a party seeking to enforce a contract has the burden of proving it has substantially complied with all material terms of the agreement." MHM Services, 2012 IL App (1st) 112171, ¶ 48. Here, Livingston is the defendant, and not the plaintiff. Livingston seeks no damages from Palmquist but seeks only to limit the damages that Palmquist can recover. Therefore, MHM Services is distinguishable and not controlling.
¶ 44 Next, Palmquist argues that the trial court erred when it denied his motion for summary judgment and granted partial judgment in Livingston's favor on the issue of Palmquist's failure to mitigate damages.
¶ 45 Section 9-213.1 of the Code provides that "a landlord or his or her agent shall take reasonable measures to mitigate the damages recoverable against a defaulting lessee." 735 ILCS 5/9-213.1 (West 2018). The purpose of section 9-213.1 of the Code "is to require a landlord to undertake reasonable efforts to relet the premises after a defaulting tenant departs, rather than allowing the premises to stand vacant and then attempting to collect the lost rent in the form of damages." Danada Square, LLC v. KFC National Management Co., 392 Ill.App.3d 598, 609 (2009). The landlord bears the burden of proving that it complied with the statutory duty of mitigation. Id. at 608. "If a landlord cannot show that it took reasonable steps to mitigate its damages, the damages that it would otherwise recover are reduced, and 'losses which reasonably could have been avoided are not recoverable.'" Id. (quoting St. George Chicago, Inc. v. George J. Murges &Associates, Ltd., 296 Ill.App.3d 285, 293 (1998)).
¶ 46 Our decision in Danada Square, is instructive. In Danada Square, we held that the trial court properly ruled that a landlord failed to mitigate damages by insisting that a "60-day-out" provision be included in a potential tenant's lease. Danada Square, 392 Ill.App.3d at 609. The parties had agreed to a stipulated bench trial and had the trial court consider documents submitted in support of the cross-motions for summary judgment including affidavits, excerpts from discovery depositions, and correspondence. Id. at 601. We noted that, although the issue of the question of whether a landlord has met its duty to mitigate its damages is generally a question of fact, where the only evidence presented is documentary and thus the trial court is not engaged in credibility determinations, our review of the trial court's decision is de novo. Id. at 607, 608. In affirming the trial court's decision, we noted that there was a ready, willing, and able tenant that was willing to lease the premises, but that the landlord's refusal to remove the "60-day out" from the proposed lease amounted to a breach of the landlord's duty to mitigate damages. Id. at 609.
¶ 47 Similarly, here, the record shows that at the end of October 2018, the Wisners applied to rent the premises at issue beginning November 15, 2018, for $1935 per month. Mary Pat's credit score was 610 and James' credit scores were 670 and 685. Mary Pat earned $5000 a month as a landscape architect. James operated his own marketing firm. Palmquist testified in his deposition that he asked the Wisners to have their son co-sign on the lease because the Wisners credit scores were not in the 700s, James had not verified his income, and they had given their lender a deed in lieu of foreclosure. The Wisners refused, and Palmquist did not find a tenant until May 2018, after Livingston's lease expired.
¶ 48 On this record we determine that Palmquist failed to mitigate damages by insisting that the Wisners' son co-sign on the lease. The evidence shows that, in October 2018, the Wisners were ready, willing, and able to enter into a lease beginning on November 15, 2018. But Palmquist refused to proceed without a cosigner. Although Palmquist was "entitled to exercise [his] business judgment in this manner," he cannot compel Livingston to bear the costs of his decision when those costs could have been avoided altogether by accepting the Wisners as tenants without requiring a cosigner. See Danada Square, 392 Ill.App.3d at 609.
¶ 49 Palmquist maintains that the trial court erred because it did not require Livingston to prove that the $1935 monthly rent was capable of being paid by Mary Pat, whose monthly income was only $5000, and the Winsers' joint monthly debt totaled $3057. However, Palmquist ignores that it was his burden to prove that he complied with the statutory duty of mitigation. Id. at 608. Further, when explaining his reasons for requiring a co-signer in his deposition, Palmquist did not mention the Wisners' joint monthly debt. Accordingly, we affirm the trial court's order granting partial summary judgment in favor of Livingston on the issue of Palmquist's failure to mitigate damages.
¶ 50 B. Case Against Andrzejewski and Liberty
¶ 51 Palmquist argues that the trial court erred in denying his September 12, 2022, motion to amend his second amended complaint to add new allegations and request punitive damages against Andrzejewski and Liberty pursuant to section 616(c) of the Code. Palmquist contends that the trial court lacked jurisdiction to deny his motion to amend because on October 6, 2021, the court struck Palmquist's request for punitive damages "without prejudice to refiling with new allegations." Palmquist, therefore, argues that after 30 days of entry of its October 6, 2021, order, the trial court lost jurisdiction to modify or vacate said order. We reject this argument as it has no basis in law.
¶ 52 Palmquist cites Beck v. Stepp, 144 Ill.2d 232 (1991), abrogated on other grounds by Kingbrook, Inc. v. Pupurs, 202 Ill.2d 24, 30-33 (2002), to support his argument. In Beck, the court granted the defendant's motion for summary judgment. Id. at 237. More than four months later the trial court amended the order nunc pro tunc to deny the motion for summary judgment. Id. at 236. The Illinois Supreme Court explained that "[i]n general, a trial court loses jurisdiction to vacate or modify its judgment 30 days after entry of judgment *** unless a timely post-judgment motion is filed." Id. at 238. However, this rule applies only to final and appealable orders. Brewer v. National R.R. Passenger Corp., 165 Ill.2d 100, 105 (1996). See also Berry v. Chade Fashions, Inc., 383 Ill.App.3d 1005, 1010 (2008). Here, the trial court's October 6, 2021, order striking Palmquist's request for punitive damages "without prejudice to refile with new allegations," was neither final nor appealable as it did not determine the litigation on the merits so that the only step remaining would be to proceed with the execution of the judgment. See Town &Country Utilities, Inc. v. Illinois Pollution Control Board, 225 Ill.2d 103, 118 (2007). Therefore, Beck is distinguishable, and the trial court did not lose jurisdiction 30 days after that order.
¶ 53 Palmquist also contends that the trial court erred when it denied his request to amend his second amended complaint because his amended complaint would have conformed the pleadings to the proofs pursuant to section 616(c) of the Code. He urges us to review the court's decision to deny his request de novo. However, we review a trial court's ruling whether to allow a party to amend a complaint for an abuse of discretion. Scheffler v. Commonwealth Edison Co., 2011 IL 110166, ¶ 69. An abuse of discretion occurs where the trial court's decision is arbitrary, fanciful, or unreasonable, or where no reasonable person would agree with the position taken by the trial court. Brown v. Illinois State Police, 2021 IL 126153, ¶ 49.
¶ 54 Here, the record does not contain Palmquist's proposed amended complaint. Our supreme court held in Kirk v. Michael Reese Hospital &Medical Center, 117 Ill.2d 507, 521 (1987), that "[t]he plaintiff's proposed amended complaint does not appear in the record; the plaintiff's failure to make it a part of the record waives his right to have this court review the trial court's denial of his motion." Accordingly, by failing to include the amended complaint in the record on appeal, Palmquist has forfeited his right to have us review the trial court's denial of his motion for leave to amend his complaint. Id. at 521.
¶ 55 Further, absent forfeiture, Palmquist's motion to amend failed to allege facts that support an award of punitive damages. Punitive damages are not favored under Illinois law and are reserved for those instances where there is a need to punish the offender and discourage the offender and others from acting in a similar manner in the future. Loitz v. Remington Arms Co. Inc., 138 Ill.2d 404, 414 (1990). The degree of malfeasance allowing for punitive damages is high, and they may only be awarded for conduct that is "outrageous" and "committed with an evil motive or a reckless indifference to the rights of others." Tri-G, Inc. v. Burke, Bosselman, &Weaver, 222 Ill.2d 218, 264 (2006). In other words, punitive damages may not be "awarded for acts that constitute ordinary negligence, such as mere inadvertence, mistake, and errors of judgment." Fogt v. 1-800-Pack-Rat, LLC, 2017 IL App (1st) 150383, ¶ 83.
¶ 56 Here, Palmquist alleged in his motion to amend that he was entitled to punitive damages against Andrzejewski and Liberty because when Andrzejewski represented Livingston, Andrzejewski did not have a sponsored broker and therefore was not a properly licensed realtor. However, absent from Palmquist's motion to amend are allegations that Andrzejewski's lack of a proper sponsoring broker was anything more than ordinary negligence, mere inadvertence or an error in judgment. See Id. Further, nothing in Palmquist's motion alleges that Andrzejewski's acts or omissions constituted conduct that was "outrageous" and "committed with an evil motive or a reckless indifference to the rights of others." Tri-G, 222 Ill.2d at 264. Therefore, even if Palmquist had not forfeited this argument it would fail because his motion to amend did not allege facts that would have supported an award of punitive damages.
¶ 57 Next, Palmquist argues that the trial court erred when it denied his request for sanctions pursuant to Illinois Supreme Court Rule 137 (eff. Jan. 1, 2018). Palmquist maintained that Andrzejewski and Liberty's counsel repeatedly violated various Illinois Rules of Professional Conduct in their motion to quash subpoenas, for a protective order, and for discovery sanctions.
¶ 58 Rule 137 provides that the attorney's or party's signature on a pleading, motion, or other paper certifies "that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good-faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation." Ill. S.Ct. R. 137 (eff. Jan. 1, 2018). Appropriate sanctions against a party or counsel for a filing in violation of the rule may include an order to pay the other party's reasonable expenses, including attorney fees, incurred because of the filing. Id.
¶ 59 The rule is designed to discourage frivolous filings, not to punish parties for making losing arguments. Lake Environmental, Inc. v. Arnold, 2015 IL 118110, ¶ 15. Rule 137 is penal in nature and must be strictly construed, and courts should reserve sanctions for the most egregious cases. Patton v. Lee, 406 Ill.App.3d 195, 202 (2010). The party seeking to impose sanctions under Rule 137 bears the burden of establishing a violation of the rule. Technology Innovation Center, Inc. v. Advanced Multiuser Technologies Corp., 315 Ill.App.3d 238, 243 (2000). In evaluating whether sanctions are warranted under Rule 137, trial courts utilize an objective standard of what was reasonable under the circumstances at the time the alleged violation occurred rather than in hindsight. Sanchez v. City of Chicago, 352 Ill.App.3d 1015, 1020 (2004). A trial court's decision to pursuant to Rule 137 will not be disturbed absent an abuse of discretion. Lake Environmental, 2015 IL 118110, ¶ 16.
¶ 60 Palmquist's first claim for 137 sanctions against Andrzejewski and Liberty's counsel is the statement in the motion to quash that Palmquist's two-year statute of limitations "for his claims brought under [section 15-70(b) of] the Illinois Real Estate Licensing Act of 2000 [225 ILCS 454/15-70(b) (West 2020)] expired on September 1, 2020." Palmquist also argued that sanctions were warranted for counsel's footnote to the statement that asserted: "The Real Estate Defendants [Andrzejewski and Liberty] will move for Rule 137 sanctions once this case terminates." Palmquist labels this a "baseless threat." We determine that Palmquist's argument is baseless because counsel made a legal argument in support of his clients' successful motion to quash. Further, on appeal Andrzejewski and Liberty continue to argue that Palmquist allowed the statute of limitations to expire, and they have moved for Rule 137 sanctions against Palmquist and his counsel.
¶ 61 Palmquist also argues that Andrzejewski and Liberty's counsel should have been sanctioned for referring to his clients in pleadings collectively as "the Real Estate Defendants." Palmquist failed to establish that counsel referred to his clients in this manner for an improper purpose; rather, it appears that counsel used this term to describe his clients. See Ill. S.Ct. R. 341(f) (eff. Oct. 1., 2020) (stating that in appellate briefs "the parties shall be referred to as in the trial court *** or by using actual names or descriptive terms.") We note that the trial court referred to Andrzejewski and Liberty as "the Real Estate Defendants." Therefore, once again, Palmquist's argument is baseless.
¶ 62 Palmquist also maintained that counsel's statement that he served "hundreds" of written discovery requests was patently false and readily disproved. Yet, counsel listed 307 discovery requests that Palmquist served on Andrzejewski and Liberty. The record contains documents that show certificates of service for all the dates listed and Palmquist cites nothing in the record to support his argument.
¶ 63 Palmquist argues that counsel falsely stated that his counsel unethically communicated with a represented party and took Livingston's deposition twice. However, the record shows that counsel alleged that Palmquist's counsel called Liberty's managing broker during litigation. Palmquist cites nothing in the record disproving this allegation. Further, the record establishes that Palmquist did indeed depose Livingston twice. For these reasons, the trial court did not abuse its discretion when it denied Palmquist's motion for Rule 137 sanctions against counsel for Andrzejewski and Liberty.
¶ 64 Next, Palmquist contends that the trial court erred when it entered judgment in favor of Andrzejewski and Liberty regarding count II alleging tortious interference of a contract. To support a cause of action for tortious interference with a contractual relationship, a plaintiff must show: (1) that a valid and enforceable contract existed between the plaintiff and another party, (2) that the defendant was aware of that contractual relationship, (3) that the defendant intentionally and unjustifiably induced a breach of the contract, (4) that there was a subsequent breach of the contract by the other party that was caused by the defendant's wrongful conduct, and (5) that the plaintiff suffered damages. HPI Health Care Services, Inc. v. Mt. Vernon Hospital, Inc., 131 Ill.2d 145, 154-55 (1989). Moreover, establishing inducement requires some active persuasion, encouragement, or inciting that goes beyond merely providing information in a passive way. In re Estate of Albergo, 275 Ill.App.3d 439, 446 (1995).
¶ 65 Here, Palmquist contends only that "no privilege existed[,] and the tortious interference was intentional and unjustified" because Andrzejewski was not authorized to practice real estate at the relevant time. Initially, we note that Andrzejewski and Liberty contend that Palmquist is barred from raising the issue of privilege because he failed to allege lack of privilege in his second amended complaint. However, the record indicates that Andrzejewski and Liberty raised the issue in their numerous pleadings in response to Palmquist's pleadings. Regardless, lack of privilege has no effect on the outcome of this case because Palmquist failed to establish inducement and causation.
¶ 66 Palmquist provided no evidence that Andrzejewski and Liberty induced Livingston to breach her lease. Palmquist points to no evidence that Livingston made her decision to buy a home and breach the lease based upon Andrzejewski and Liberty's inducement. Similarly, Palmquist failed to show how Andrzejewski and Liberty's alleged actions caused Livingston to breach her lease. Rather, the record shows that Livingston was determined to buy a home. Livingston testified during her deposition that she sought out Andrzejewski through a search on the internet and that if Andrzejewski had not helped her find a home she would have found another realtor. Livingston also testified that there was nothing stopping her from buying her home while still paying the rent due on the lease. Without any facts to establish inducement and causation, the trial court properly entered judgment in Andrzejewski and Liberty's favor on count II alleging tortious interference with a contract.
¶ 67 Palmquist also argues that the trial court erred when it entered judgment in favor of Andrzejewski and Liberty regarding count III alleging violation of section 15-25(a) of the Real Estate Licensing Act of 2000 (225 ILCS 454/15-25(a) (West 2020). Section 15-25(a) provided that "Licensees shall treat all customers honestly and shall not negligently or knowingly give them false information." Id. Palmquist contends count III of his second amended complaint "unequivocally" pleaded a cause of action under section 15-25(a) because Andrzejewski was not properly sponsored or licensed.
¶ 68 Assuming this is true, Palmquist failed to show or even allege how the alleged violation caused actual damages, as required by section 15-70(a) of the Real Estate Licensing Act of 2000. See id. § 15-70(a)) ("In any action brought under this Article 15, the court may, in its discretion, award only actual damages and court costs or grant injunctive relief, when appropriate."). Therefore, we agree with the trial court that Andrzejewski's licensure had "no connection, bottom line, to any kind of damages." Accordingly, the trial court properly granted judgment in favor of Andrzejewski and Liberty as to count III.
¶ 69 C. Andrzejewski and Liberty's Cross-Appeal
¶ 70 We now address Andrzejewski and Liberty's argument on cross appeal that the trial court erred when it denied their petition for sanctions. They maintain that Palmquist and his counsel violated Rule 137 by filing his complaint when he and counsel knew or should have known that the facts and the law did not support a cause of action for tortious interference of a contract or violation of the Real Estate Licensing Act of 2000. They urge us to reverse the trial court's order denying their petition for sanctions and to remand the case for a determination of the sanction amount. Based upon our review of the record, we agree with Andrzejewski and Liberty.
¶ 71 The purpose of Rule 137 is to prevent abuse of the judicial process by sanctioning parties "who file vexatious and harassing actions based upon unsupported allegations of fact or law." Dismuke v. Rand Cook Auto Sales, Inc., 378 Ill.App.3d 214, 217 (2007). Rule 137 mandates that a party "make reasonable investigation into the facts prior to filing" his pleading. Walsh v. Capital Engineering &Manufacturing Co., 312 Ill.App.3d 910, 914 (2000). A party's signature and that of his attorney on the pleading certifies that they have read it and that, "to the best of [their] knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good-faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose." Ill. S. C. R. 137 (eff. Jan. 1, 2018); see Baker v. Daniel S. Berger, Ltd., 323 Ill.App.3d 956, 963 (2001) (this rule is meant to penalize those parties who plead false or frivolous matters or seek to impose vexatious litigation, without sufficient legal or factual basis). If a party violates this rule, a court may impose an appropriate sanction, such as the payment of the other party's attorney fees and costs. See Walsh, 312 Ill.App.3d at 914; Ill. S. C. R. 137 (eff. Jan. 1, 2018).
¶ 72 The burden of proof lies with the party seeking to recover under Rule 137 and requires a showing that the opposing party plead statements which he knew or should have known were not true. See Miner v. Fashion Enterprises, Inc., 342 Ill.App.3d 405, 422 (2003). The inquiry is based on reasonableness, which is measured against an objective standard looking at the circumstances existing at the time the pleading was filed. See Walsh, 312 Ill.App.3d at 915 (citing Toland v. Davis, 295 Ill.App.3d 652, 656 (1998) (the "imposition of sanctions is not to be based on a subjective after-the-fact analysis or hindsight")); accord Baker, 323 Ill.App.3d at 963, 966. That the party who filed the pleading honestly believed his cause to be well grounded in fact or law is insufficient to defend against an alleged violation of Rule 137. See Walsh, 312 Ill.App.3d at 915; Baker, 323 Ill.App.3d at 963, 966. Ultimately, while our review of a trial court's decision regarding the imposition of Rule 137 sanctions follows an abuse of discretion standard and, thus, merits deference, "[t]his general rule does not preclude this court from independently reviewing the record and finding an abuse of discretion where the facts so warrant." Walsh, 312 Ill.App.3d at 914; accord Baker, 323 Ill.App.3d at 963.
¶ 73 Here, the trial court erred by refusing to impose sanctions for the filing of the second amended complaint. Count II of Palmquist's second amended complaint sought compensatory and punitive damages against the Andrzejewski and Liberty for tortious interference with a contract. Palmquist and counsel alleged that Andrzejewski and Liberty induced Livingston to breach the lease by referring her to a mortgage company, "but also [with] all of the agreements that they had with Defendant Livingston." However, before Palmquist filed his second amended complaint, Palmquist and his counsel knew through discovery that the facts did not confer a cause of action against Andrzejewski and Liberty for tortious interference with a contract. Palmquist and his counsel had already taken Livingston's deposition and received Andrzejewski and Liberty's response to a subpoena for records four months before Palmquist filed his second amended complaint. Therefore, Palmquist and his counsel had actual knowledge at the time they filed the second amended complaint that the only agreement in existence was a broker agreement between Livingston and Andrzejewski and Liberty. Palmquist never established that this or any other agreement induced Livingston to breach the lease. Rather, Palmquist abandoned this theory altogether in his motion for summary judgment and instead argued that Andrzejewski and Liberty were liable for tortious interference with a contract because of Andrzejewski's alleged violations of the Real Estate Licensing Act of 2000. Therefore, Palmquist and counsel knew that the facts and the law did not support a cause of action for tortious interference with a contract against Andrzejewski and Liberty.
¶ 74 In addition, regarding count III alleging violation of the Real Estate Licensing Act of 2000, Palmquist's motion for summary judgment argued only that Andrzejewski was not properly licensed, but Palmquist never alleged how the purported violation caused plaintiff damages. As such, Palmquist's motion for summary judgment was baseless and frivolous as it was not grounded in fact or law.
¶ 75 Finally, we determine that Palmquist's appeal from the trial court's judgment in Andrzejewski and Liberty's favor is frivolous and, as such, warrants sanctions pursuant to Illinois Supreme Court Rule 375. Ill. S.Ct. R. 375(b) (eff. Feb. 1, 1994). "The purpose of Rule 375(b) is to condemn and punish the abusive conduct of litigants and their attorneys who appear before us." In re Marriage of Lindell, 2023 IL App (2d) 220055, ¶ 25. An appeal is frivolous when "it is not reasonably well grounded in fact and not warranted by existing law or a good-faith argument for the extension, modification, or reversal of existing law." Ill. S.Ct. R. 375(b) (eff. Feb. 1, 1994). "In determining whether an appeal is frivolous, we apply an objective standard; the appeal is considered frivolous if it would not have been brought in good faith by a reasonable, prudent attorney." (Internal quotation marks omitted.) Thompson v. Buncik, 2011 IL App (2d) 100589, ¶ 21.
¶ 76 Palmquist cites no relevant authority for his arguments that the trial court erred by granting judgment in favor of Andrzejewski and Liberty on his claims of tortious interference of contract claim and violation of the Real Estate Licensing Act of 2000. Palmquist never addresses how he established the elements necessary for recovery. Indeed, Palmquist continues to argue that Andrzejewski's alleged lack of a valid sponsoring broker provides him with a cause of action against Andrzejewski and Liberty, but he fails to discuss causation or damages. In short, Palmquist and counsel have not made a good-faith argument that the judgment is incorrect, or the law should be changed.
¶ 77 We conclude that this appeal would not have been brought in good faith by a reasonable, prudent attorney and that "the primary purpose of the appeal *** is to delay, harass, or cause needless expense." Ill. S.Ct. R. 375(b) (eff. Feb. 1, 1994). Therefore, we determine that this appeal is frivolous. Illinois Supreme Court Rule 375(b) provides:
"A reviewing court may impose a sanction upon a party or an attorney for a party upon the motion of another party or parties, or on the reviewing court's own initiative where the court deems it appropriate. If the reviewing court initiates the sanction, it shall require the party or attorney, or both, to show cause why such a sanction should not be imposed before imposing the sanction." Id.
¶ 78 Accordingly, we order Palmquist and his appellate counsel to show cause why a sanction should not be imposed on the ground that this appeal is frivolous under the standard of Supreme Court Rule 375(b). Should Palmquist and his counsel fail to make such a showing, we shall consider this a basis for sanctions. See Kim v. Alvey, Inc., 322 Ill.App.3d 657, 674 (2001). We do not mean to discourage attorneys from zealously representing their clients or from bringing appeals that have arguable merit. However, this is not such an appeal.
¶ 79 Thus, we direct Palmquist and his counsel to file a brief or memorandum with this court, within 14 days of the date of this order, showing why we should not impose sanctions or attorney fees under Supreme Court Rule 375(b). Thereafter, if we decide that this appeal warrants sanctions, we shall order Andrzejewski and Liberty to file a statement of reasonable expenses and attorney fees incurred because of this appeal, to which Palmquist and his counsel will have an appropriate opportunity to respond. We will thereafter file an order determining the amount of sanctions that will be imposed. See Lindell, 2023 IL App (2d) 220055, ¶ 29.
¶ 80 We affirm the decision of the trial court in part, reverse in part, and remand for a hearing regarding the amount of sanctions Andrzejewski and Liberty are entitled for expenses incurred in the trial court as the result of the filing of counts II and III of Palmquist's second amended complaint and motion for summary judgment regarding those counts. Further, we direct Palmquist and his appellate counsel to file a brief or memorandum with this court, within 14 days of the date of this order, showing why we should not impose sanctions or attorney fees under Supreme Court Rule 375(b).
¶ 81 III. CONCLUSION
¶ 82 For the reasons stated, the judgment of the circuit court of Lake County is affirmed in part and reversed in part, and the cause is remanded.
¶ 83 Affirmed in part and reversed in part. Cause remanded.