author: JUSTICE EGAN

text:
    SAMUEL M. SORKIN, Plaintiff-Appellant, v. BLACKMAN, KALLICK & COMPANY, LTD., et al., Defendants-Appellees.
    First District (2nd Division)
    No. 1—88—0782
    Opinion filed June 20, 1989.

      Kahn, Robinson & Curley, of Chicago (C. Philip Curley and Alan F. Curley, of counsel), for appellant.
    Laner, Muchin & Dombrow, of Chicago (Michael J. Ranallo and Neil P. Stern, of counsel), for appellees.
   JUSTICE EGAN

delivered the opinion of the court:

This case involves the recurring problem arising from a complaint alleging damages as a result of a tort which the defendant claims is not a tort but an alleged breach of contract. The sole issue concerns the applicability of Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill. 2d 69, 435 N.E.2d 443, and the subsequent case of Morrow v. L.A. Goldschmidt Associates, Inc. (1986), 112 Ill. 2d 87, 492 N.E.2d 181.

Since this appeal is from an order dismissing the complaint, the following recitation of facts is based on the allegations of that complaint.

Samuel Sorkin, the plaintiff, is a certified public accountant. The defendant Blackman, Kallick & Company, Ltd. (Blackman), is a public accounting firm with offices in Cook County, Illinois. The individual defendants are some of the partners of Blackman and each allegedly participated in the management decisions for the firm relevant to this lawsuit. Defendant Blackman Kallick Bartelstein (BKB) is a partnership and public accounting and business consulting firm which maintains an office in and does business in Cook County, Illinois. BKB was formed in October 1986 when Blackman merged with another public accounting firm, Landau and Bartelstein. As a result of the merger, BKB assumed all liabilities of Blackman and thus is its successor in interest.

On July 17, 1984, after meeting with the principals of Blackman, the plaintiff agreed to join the firm in return for a 15% equity partnership to be announced by June 15, 1985, and granted no later than October 15, 1985. The agreement is reflected in an exchange of letters between Sorkin and the defendant Irving L. Blackman.

In reliance on the agreement to grant him an equity interest in the firm, he terminated his position with Coopers & Lybrand, a large accounting firm, at its Columbus, Ohio, office, and moved his family to Chicago. He also told his family, friends, colleagues, business associates and clients that he was going to become an equity partner in the firm. (He does not allege that the defendants told others of their purported promise or that the defendants were aware that the plaintiff had done so.)

The plaintiff began working at Blackman on September 14, 1984, as director of tax services. Although he performed his obligations under the agreement, he was told in June 1985 that Blackman was “changing the deal” and that his partnership would not be announced at that time. He was given a raise by the firm in July, but he was not told whether he would be made a partner on October 1, 1985, as promised. He was not made a partner on October 1,1985.

In December 1985, Blackman told the plaintiff that it still might make him a partner; and in reliance on this representation, he remained at Blackman through the 1986 tax season. However, in April 1986, immediately after the tax season, Blackman told the plaintiff that it would never grant him an equity partnership, and as a result, the plaintiff left the firm in December of 1986.

On May 22, 1987, the plaintiff filed a five-count complaint against the defendants based on their refusal to make him an equity partner. Count I alleges breach of contract. Count II is brought against the individual defendants for alleged interference with the agreement between him and Blackman. Count IV alleges fraud. Count V seeks recovery from Blackman and BKB for unpaid vacation pay and reimbursement for certain expenses. All of these counts are still pending in the trial court and are not an issue in this appeal.

Count III, .titled “Willful and Wanton Damage to Reputation,” was brought against all the defendants and seeks $500,000 compensatory and $250,000 punitive damages for the harm suffered by the plaintiff to his personal reputation, professional goodwill and standing in the business and public accounting communities as a result of the defendants’ failure to make him an equity partner.

The complaint alleges that the defendants’ conduct toward the plaintiff “was unreasonable and without justification, constituted willful and wanton misconduct on their part and as such is an independent and willful tort.” The defendants “were conscious of their conduct and knew that that conduct would naturally and probably result in injury to the plaintiff’s reputation and standing within the business and public accounting communities.” “The defendants’ conduct was aggravated by inducing the plaintiff to move to Chicago and fraudulent by the continuous representation” that he still might be made a partner even though the defendants had no intention of doing so. As a proximate result of this “willful and wanton misconduct,” the plaintiff was “subjected to ridicule and embarrassment within the business and public accounting communities and suffered loss of reputation.”

The defendants answered counts I, IV and V and moved to dismiss counts II and III pursuant to section 2 — 615 of the Illinois Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 615). The trial court heard argument and granted the motion to strike count II with leave to amend, which the plaintiff has since done. The court dismissed count 111 without leave to amend for failure to state a claim. Therefore, all of the factual allegations of count III are taken as true; and we will disregard the arguments that the defendants vigorously deny the allegations of the complaint and that the plaintiff was denied partnership because of certain deficiencies in performance.

The defendant asserts that count III was properly dismissed because it seeks tort damages for what amounts to a breach of contract. The trial judge agreed, and his dismissal was based principally on his interpretation of Morrow v. L.A. Goldschmidt Associates, Inc. (1986), 112 Ill. 2d 87, 492 N.E.2d 181. The plaintiff argues that Morrow supports his position.

A discussion of the issue appropriately begins with Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill. 2d 69, 435 N.E.2d 443. In that case the plaintiff purchased a grain storage tank from the defendant. When a crack subsequently developed in the tank, the plaintiff sued under the tort theories of strict liability and negligence, seeking damages for the cost of repair and for the loss of the use of the tank. The court affirmed the dismissal of the strict liability and negligence counts, noting that the complaint alleged only a qualitative defect in the product itself and did not allege that the defective product caused physical injury or damage to persons or other property. The court held that recovery for purely economic loss is more appropriately governed by contract rather than tort principles and defined “economic loss” thus:

“ ‘Economic loss’ has been defined as ‘damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits — without any claim of personal injury or damage to other property ***’ (Note, Economic Loss in Products Liability Jurisprudence, 66 Colum. L. Rev. 917, 918 (1966) (Economic Loss)) as well as ‘the diminution in the value of the product because it is inferior in quality and does not work for the general purposes for which it was manufactured and sold.’ (Comment, Manufacturers’ Liability to Remote Purchasers for ‘Economic Loss’ Damages — Tort or Contract? 114 U. Pa. L. Rev. 539, 541 (1966).)” 91 Ill. 2d at 82.

The court drew a distinction between disappointed expectations, which cause only economic harm and for which the remedy lies in contract, and physical injury to person or property, which causes noneconomic harm for which a tort cause of action is available:

“When the defect is of a qualitative nature and the harm relates to the consumer’s expectation that a product is of a particular quality so that it is fit for ordinary use, contract, rather than tort, law provides the appropriate set of rules for recovery. (E.g., Pennsylvania Glass Sand Corp. v. Caterpillar Tractor Co. (3rd Cir. 1981), 652 F.2d 1165, 1169, 1172-73.)” 91 Ill. 2d at 88.

This distinction was continued in Morrow v. L.A. Goldschmidt Associates, Inc. (1986), 112 Ill. 2d 87, 492 N.E.2d 181, the case upon which the trial court relied and both sides cite in support of their respective positions. In Morrow, purchasers of four townhouses which were designed, constructed and sold by the defendants brought suit against the defendants for breaches of express warranty and an implied warranty of habitability based on the alleged defects. The supreme court affirmed the trial court’s dismissal of the counts alleging willful and wanton misconduct. Relying on Moorman, the Morrow court stated that since the gist of the plaintiffs’ complaint was that they did not receive the benefit of the bargain, any harm would be appropriately remedied by an action for breach of contract. Said another way, there must be noneconomic loss “above and beyond disappointed expectations” in order to state a cause of action in tort. (112 Ill. 2d at 98.) Since the plaintiffs did not allege any allegation of physical injury or damage to other property, the court would not impose tort liability even where the breach of contract was willful and wanton.

A divergence of views arose in this State’s appellate districts over the applicable breadth of Moorman. It would unjustifiably lengthen this opinion to discuss those conflicting views since they are exhaustively discussed and analyzed by the first appellate district in Rosos Litho Supply Corp. v. Hansen (1984), 123 Ill. App. 3d 290, 462 N.E.2d 566, and by the second appellate district in Bates & Rogers Construction Corp. v. North Shore Sanitary District (1984), 128 Ill. App. 3d 962, 471 N.E.2d 915, aff’d on other grounds (1985), 109 Ill. 2d 225, 486 N.E.2d 902. In any event, the plaintiff here does not dispute the applicability of Moorman or Morrow to an employment agreement. (A recent opinion of the Appellate Court, First District, has held that Moorman does apply to employment agreements. (Werblood v. Columbia College (1989), 180 Ill. App. 3d 967, 536 N.E.2d 750.)) It is his contention that he meets the requirements of Moorman in that he alleges non-economic loss.

The heart of the plaintiff’s argument is set out as follows:

“[The complaint] alleges non-economic harm suffered as a result of defendant’s conduct and, therefore, states a cause of action in tort. There are also sufficient allegations of aggravating circumstances such that punitive damages are recoverable.”

He concedes implicity that if the complaint does not allege any non-economic loss the complaint must fall. The non-economic loss upon which he bases his claim is “damage to reputation or good will.” For support he refers to the special concurring opinion in Moorman. We do not believe that that opinion may be read as a pronouncement that such damages are non-economic losses. The thrust of that opinion, which, it must be kept in mind, involved a products liability action and was not the view of the other six justices, was that the determination of whether a loss is economic or non-economic should not depend on whether there was physical harm.

Our research has disclosed only one case involving a definition of “non-economic loss.” (Donovan v. Rapid Ray’s Printing & Copying, Inc. (1978), 93 Misc. 2d 750, 403 N.Y.S.2d 407.) In that case a statute granted a cause of action but excluded recovery for non-economic loss. The statute defined “non-economic loss” as “pain and suffering and similar non-monetary detriment.” Donovan, 93 Misc. 2d at__, 403 N.Y.S.2d at 409.

The Illinois legislature has defined the term in the Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 1702) as follows:

“(a) ‘Economic loss’ means all pecuniary harm for which damages are recoverable.
(b) ‘Non-economic loss’ means loss of consortium and all non-pecuniary harm for which damages are recoverable, including, without limitation, damages for pain and suffering, inconvenience, disfigurement, and physical impairment.”

In CMO Graphics, Inc. v. CNA Insurance Co. (1983), 115 Ill. App. 3d 491, 450 N.E.2d 860, the appellate court held, without comment, that lost goodwill was an economic loss.

The complaint says that the defendants knew that their conduct would result in “injury to the [the] plaintiff’s reputation and standing within the business and public accounting communities.” It also says that the plaintiff “was subjected to ridicule and embarrassment within the business and public communities and suffered loss of reputation.” Those are allegations that the harm done to the plaintiff caused his ability to make money to be diminished and, in our judgment, are allegations of economic loss. Therefore, if for no other reason, the plaintiff’s argument must fall; and so must the complaint.

There is another aspect of the plaintiff’s argument that should be addressed. He contends that the defendants’ conduct was unreasonable and without justification, constituted willful and wanton misconduct on their part and as such is an independent and willful tort. The precedential underpinning of the plaintiff’s claim that there is a separate tort called aggravated negligence is the appellate court opinion in Morrow v. L.A. Goldschmidt Associates, Inc. (1984), 126 Ill. App. 3d 1089, 468 N.E.2d 414. We agree the appellate court did so hold; but we do not agree with the plaintiff’s assertion that the supreme court reversal was on other grounds, thus leaving the appellate court’s holding untouched. The appellate court in Mucklow v. John Marshall Law School (1988), 176 Ill. App. 3d 886, 531 N.E.2d 941, has construed the supreme court’s opinion in Morrow to be a rejection of the appellate court’s holding that there existed a separate tort of willful and wanton misconduct. If there be any doubt in the matter, it is our judgment that the trial court was correct in Morrow in holding that willful and wanton misconduct was not an independent tort. Willful and wanton misconduct affects the amount of damages and is not a separate tort.

We interpret the complaint to allege that the plaintiff entered into an employment agreement with the defendants. Part of the consideration for that agreement was the defendants’ promise to make him an equity partner on or before October 1, 1985. The defendant did not keep its agreement on October 1 but told the plaintiff in December 1985 that it “still might make him a partner as earlier agreed.” In his reliance on the representation that Blackman might make him a partner, the plaintiff remained working for the defendants. In April 1986 the defendants told him they would never make him a partner. He continued to work for the defendants for another nine months. In reliance on the agreement to make him an equity partner, the plaintiff had told his family, friends and business clients he was going to be made a partner. The defendants’ conduct was fraudulent by the continuous representation even after October 1985 that the plaintiff “might” still be made a partner when the defendants had no intention of doing so.

Candor compels us to identify this count for what it is: a hybrid created by a combination of the fraud count and the breach of contract count by which the plaintiff seeks to vault over the obstacles in his path that exist in those counts. To illustrate, generally, to establish fraud the plaintiff must prove that -the defendants misrepresented an existing or past fact; a promise to do something in the future is insufficient to establish fraud. An exception exists where the false promise or representation of future conduct is alleged to be the scheme employed to accomplish the fraud. (Steinberg v. Chicago Medical School (1977), 69 Ill. 2d 320, 371 N.E.2d 634.) We are constrained to note, as we believe the plaintiff has recognized, that there may be difficulty in proving that the defendants made misrepresentations which were part of a preexisting scheme to defraud. See Donnelly v. Washington National Insurance Co. (1985), 136 Ill. App. 3d 78, 482 N.E.2d 424.

With respect to the breach of contract count, the general law is that punitive damages are not recoverable (Wallace v. Prudential Insurance Co. (1973), 12 Ill. App. 3d 623, 299 N.E.2d 344) and any compensatory damages are limited to those which are the natural and probable consequences of the breach as the parties contemplated. (Kalal v. Goldblatt Brothers, Inc. (1977), 53 Ill. App. 3d 109, 368 N.E.2d 671.) There is authority that damages to business reputation are not recoverable in a breach of contract action. (Chrysler Corp. v. E. Shavitz & Sons (7th Cir. 1976), 536 F.2d 743.) Interestingly, the plaintiff does not plead such damages in the breach of contract count. That omission is understandable. Although we recognize the right to plead in the alternative, by pleading that the damage to his reputation was a natural and probable consequence of the breach as the parties contemplated, the plaintiff would be undercutting his claim that he met the requirements of Morrow that the damages were “above and beyond disappointed expectations.” Morrow, 112 Ill. 2d at 98.

The bar to punitive damages in contract cases is excepted where the breach also constitutes a separate tort. The plaintiff again argues that the separate tort in this case is “aggravated negligence.” We have already expressed the view that willful misconduct is not a separate tort as, we contend, the supreme court did also in Morrow, but we will add some other observations. In his reply brief the plaintiff maintains that count III should be “properly analyzed as stating a cause of action for simple negligence entitling plaintiff to compensatory damages, which further alleges that defendants acted recklessly and with conscious disregard for plaintiff’s personal and property rights.” This is a seeming departure from his argument based on the appellate court opinion in Morrow. His new argument is nonetheless understandable, because it is the law that punitive damages may not be recovered in the absence of actual or compensatory damages. (Tonchen v. All-Steel Equipment, Inc. (1973), 13 Ill. App. 3d 454, 300 N.E.2d 616.) That rule denying punitive damages in the absence of actual damages illustrates the untenability of the appellate court’s holding in Morrow that there is a separate and independent tort of aggravated negligence. In any event, we reject the plaintiff’s argument that he alleges simple negligence.

In sum, the observations of the supreme court in Morrow are appropriate here (Morrow, 112 Ill. 2d at 98):

“Simply characterizing a breach of contract as ‘willful and wanton’ does not change the fact that plaintiffs are only seeking recovery for harm to a contract-like interest. We cannot agree that a breach of contract becomes a tort just because the breach was willful and wanton.”

For these reasons we hold that the trial court did not err in dismissing the complaint and holding that no set of facts could be pleaded to establish a cause of action under the theory advanced in count III; and the judgment of the circuit court is affirmed.

In light of our holding we need not discuss the other grounds advanced by the defendants to support dismissal.

Judgment affirmed.

BILANDIC, P.J., and SCARIANO, J., concur.

       Justice Egan participated in the decision of this case prior to his assignment to the sixth division.


source: Caselaw Access Project

license: Public Domain

text:
      In re ESTATE OF FRANCIS H. WAGNER, Deceased (Norma E. Wagner, Adm’r with the Will Annexed of Francis H. Wagner, Petitioner-Appellant, v. Federal Deposit Insurance Corporation et al., Respondents-Appellees).
    First District (2nd Division)
    No. 1—88—1583
    Opinion filed June 20, 1989.
    Gardner, Carton & Douglas, of Chicago (Quin R. Frazer, Todd G. Frank, and Mary Beth Cyze, of counsel), for appellant.
    Mayer, Brown & Platt, of Chicago (George N. Vurdelja, Jr., and Patricia Brosterhous, of counsel), for appellees.
   JUSTICE EGAN

delivered the opinion of the court:

The petitioner, Norma E. Wagner, the widow of Francis H. Wagner, became the administrator with the will annexed of her husband’s estate. Among the claims made against the estate were those of the Internal Revenue Service (IRS) for certain income tax deficiencies. Since she and her husband had filed joint returns for the years questioned by the IRS, she paid some of them, as well as claims from the Illinois Department of Revenue. She did not file any claim individually for contribution from the estate. She did, however, file a declaratory judgment complaint against the estate in her capacity of administrator seeking a ruling that would permit her to recover individually as a third-class claimant for payments that she had made and might be required to make in the future to the IRS and as a sixth-class claimant for payments made or to be made to the Illinois Department of Revenue.

The Federal Deposit Insurance Corporation (FDIC), a seventh-class claimant against the estate, filed a response to the declaratory judgment complaint. Although entitled a “response,” since it raises only questions of law and seeks dismissal of the complaint, we deem it to be a motion to dismiss pursuant to section 2 — 619 of the Code of Civil Procedure (the Code) (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 619). One part of the response alleged that the complaint was insufficient in form in that it did not have certain documents attached. That part of the response would be brought under section 2 — 615 of the Code (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 615); but that argument is not an issue here, although the respondent has made a passing reference to it.

The trial court dismissed the complaint, ostensibly on the ground that it constituted a claim and was filed too late. Since the complaint was dismissed on the pleadings, the well-pleaded allegations will be taken as true, contrary to the respondent’s argument. (Fitzgerald v. Chicago Title & Trust Co. (1978), 72 Ill. 2d 179, 380 N.E.2d 790.) The petitioner and Francis Wagner had been married for 32 years at the time of his death on May 24, 1985; and throughout their marriage they had always filed joint tax returns. She contributed little or no income during their marriage, and she did not concern herself with her husband’s business arrangements. She always signed the joint income tax returns prepared by her husband’s accountant without material knowledge of the facts presented in them. The income tax returns for the years ending December 31, 1971-1976, were audited by the IRS regarding the deductibility of certain investments made by her husband. Additionally, the income tax returns for the years ending December 31, 1977, 1978 and 1980 as well as subsequent years were audited with respect to the deductibility of her husband’s interest in a particular company.

Her husband died in May 1985; and on November 4, 1985, the IRS assessed tax deficiencies totalling $361,000 after disallowing various deductions and credits arising from her husband’s investments as reflected in the 1972 and 1975 joint returns.

In 1986, she paid $46,754.15 of her own money to the IRS as a result of other deficiencies for the years 1977 and 1978 and $9,102.33 to the Illinois Department of Revenue for deficiencies for the years 1975 and 1976. The estate was unable to pay Mr. Wagner’s debt to the IRS because the estate was illiquid and insolvent and, as a result, the IRS proceeded to seize certain of Mrs. Wagner’s assets, including her home, in order to satisfy Mr. Wagner’s debts to the IRS. Under the Internal Revenue Code persons filing a joint return are subject to joint and several liability for a deficiency resulting from that joint return.

The petition legally concluded that Mrs. Wagner was entitled to contribution for any payment that she might make in excess of her fair share and that her fair share was zero. It further legally concluded that she was entitled to contribution through subrogation and that she was subrogated to the rights of the IRS and the Illinois Department of Revenue.

This appeal is brought by the petitioner in her capacity as administrator of the estate and not individually. The respondent agrees that the petitioner would have been entitled to contribution if she had filed a claim in time. The petitioner concedes that she did not file the claim within the statutory time requirement. She argues that, since she stands in the shoes of the IRS and since the IRS recognizes no Illinois statutory restrictions in advancing its claims, neither need she. The respondent does not agree that the petitioner is subrogated to the position of the IRS. Whether the petitioner is so subrogated is the principal issue in the case.

Before that issue need be addressed, we must first consider the respondent’s motion to dismiss the appeal on the ground that the petitioner, as administrator, is not a party aggrieved by the court’s order and, therefore, lacks standing to bring this appeal. The case principally relied upon by the respondent is In re Estate of Tingos (1979), 72 Ill. App. 3d 703, 390 N.E.2d 1349. In that case, an executor appealed from an order requiring him to make partial distribution of the estate’s assets to two heirs and legatees. The executor contended that the order was in error because it failed to require a refunding bond. The appellate court dismissed the appeal, making the following observation:

“The vast majority of cases in other States hold that an executor generally has no right to appeal from an order granting or denying partial distribution. (See Annot., 16 A.L.R.3d 1274, 1277, and numerous cases cited at 2378-80 (1967).) The rationale behind the rule is said to be that since the executor is in essence a stakeholder, he is not a party aggrieved by the partial distribution order and is not bound to litigate the conflicting claims of beneficiaries and creditors at the expense of the estate. (16 A.L.R.Sd 1274, 1277.) In addition, in the absence of fraud, the court will protect an executor or administrator who distributes assets pursuant to court order (16 A.L.R.Sd 1274, 1277; accord, e.g., Bosnak v. Murphy (1960), 28 Ill. App. 2d 110, 170 N.E.2d 640), and therefore the executor has no interest in that regard.” Tingos, 72 Ill. App. 3d at 711.

The petitioner seeks to distinguish Tingos because this case does not involve a distribution order. This is a distinction without a difference. Indeed, the rationale of Tingos is even more compelling in this case since no distribution was sought. At least in a case ordering distribution, the assets of the estate are diminished. In this case, the only thing sought was a declaration that one claimant was to have preference over another. How that should be of any concern of the administrator escapes us.

The annotation in 129 A.L.R. 922 (1940) includes many appeals by administrators of orders dealing with their personal claims. All the cases stand for the general principle that an administrator may not appeal in his representative capacity from an order affecting his personal rights as an heir or legatee. (See, e.g., Dickey v. Herbin (1959), 250 N.C. 321, 108 S.E.2d 632; In re Estate of Wakefield (1968), 258 Cal. App. 2d 274, 65 Cal. Rptr. 664; In re Estate of Mc-Cabe (1970), 11 Ariz. App. 555, 466 P.2d 774.) Our research has disclosed only one Illinois case dealing with the right to maintain an appeal by an executor who also has a personal interest in the estate. (Teel v. Mills (1904), 117 Ill. App. 97.) In that case, the appellate court upheld the right of the executor to maintain the appeal because the subject matter under consideration was the executor’s final report to which exceptions were taken. That case does not support the petitioner’s position here.

Under the Probate Act of 1975 (the Probate Act) (Ill. Rev. Stat. 1987, ch. 110½, par. 18 — 12), with certain exceptions not pertinent here, all claims against an estate must be filed -within six months of the issuance of letters of office; claims which are not timely filed within the statutory period are barred. (Ill. Rev. Stat. 1987, ch. 110½, par. 18 — 12.) If the executor or administrator has a claim against the estate, he must file his claim as other persons; and the court may appoint a special administrator to appeal and defend for the estate. The court may permit the special administrator to prosecute or defend an appeal from the allowance or disallowance of the claim. (Ill. Rev. Stat. 1987, ch. 110½, par. 18 — 8.) The circuit court of Cook County has promulgated a rule requiring an administrator filing a personal claim to apply to the probate judge at the time of filing his claim for the appointment or waiver of a special administrator to appear and defend for the estate. (Cir. Ct. Cook County R. 12.10(b) (1987).) In our view, the declaratory judgment action filed by the petitioner was a “claim” within the meaning of the Probate Act, and it was solely for the personal benefit of the petitioner. We are not persuaded to hold otherwise, because, as the petitioner argues, the estate would be paying no more to her than it would be required to pay to the IRS and the State of Illinois. It seems apparent that the statute and the circuit court rule were designed to avoid the very situation that exists in this case — the use of estate assets to finance a claim for the personal benefit of an administrator or executor.

The petitioner also advances the argument that is set out in its reply brief as follows:

“One exception to the In re Estate of Tingos standard is where compliance with an order might subject the administrator or executor to personal liability. [Citation.] Had appellant followed the Circuit Court Order, which denied the Petition Seeking Declaratory Judgment, there remained doubt in the mind of the Administrator as to whether she would upon distribution in fact be paying the correct parties, and if not, whether she as Administrator would be subject to personal liability.”

The case cited in support of the petitioner’s position that she might be subjected to personal liability is Graf v. Engebretson (1938), 66 S.D. 45, 278 N.W. 28. That case is from a jurisdiction whose holdings were not accepted by this court in Tingos. Moreover, as Tingos pointed out, it is the law of this State that one who distributes assets pursuant to court order will be protected in the absence of fraud. (Bosnak v. Murphy (1960), 28 Ill. App. 2d 110, 170 N.E.2d 640, cited in Tingos, 72 Ill. App. 3d at 711.) For these reasons, we hold that the petitioner, as administrator, is not an aggrieved party and has no standing to bring this appeal; and the appeal is dismissed.

Appeal dismissed.

BILANDIC, P.J., and SCARIANO, J., concur.

       Justice Egan participated in the decision of this case prior to his assignment to the sixth division.


author: JUSTICE SCARIANO

text:
    THOMAS R. MEITES et al., d/b/a Meites, Frackman & Mulder, Plaintiffs-Appellants, v. THE CITY OF CHICAGO et al., Defendants-Appellees.
    First District (2nd Division)
    No. 1—88—2410
    Opinion filed June 20, 1989.
    Arnold M. Flamm and Matthew A. Flamm, both of Orlikoff & Flamm, of Chicago, for appellants.
    Judson H. Miner, Corporation Counsel, of Chicago (Ruth M. Moscovitch and L. Anita Richardson, Assistant Corporation Counsel, of counsel), for appellees.
   JUSTICE SCARIANO

delivered the opinion of the court:

This appeal arises from an unsuccessful challenge in the circuit court to the City of Chicago’s transaction tax as imposed on online database searches on the Nexis/Lexis computerized legal library system operated by Mead Data Central, Inc. Plaintiff appeals, raising the following issues on appeal: (1) whether the Chicago transaction tax ordinance authorizes the imposition of tax on all charges made for the use of a computer and its software, including database search charges; and (2) whether such a tax is a tax upon occupations, in violation of section 6(e) of article VII of the Illinois Constitution.

Plaintiff, a law partnership, subscribes to the Lexis/Nexis databases maintained by Mead. It is challenging the City of Chicago’s collection of a transaction tax on charges billed for database searches, arguing that the transaction tax ordinance does not authorize the tax on such charges and that the city’s Department of Revenue’s Ruling No. 9, which interprets the ordinance, is overly broad and invalid.

Count I of plaintiff’s amended complaint alleges that the Chicago transaction tax ordinance is not broad enough to cover the imposition of the tax upon charges made for online database searches where those charges are not time based. Count II, which plaintiff subsequently dismissed, asserts a violation of equal protection. Count III alleges that if the transaction tax ordinance does cover charges for online database searches, it is unconstitutional as a tax on occupations. The city filed two separate motions to strike and dismiss; one based on section 2 — 615 of the Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 615), and the other on section 2 — 619 (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 619). On May 11, 1988, the trial judge filed a memorandum of decision, indicating his intention to grant the city’s motions, and on May 26, 1988, he entered such an order. On August 1, 1988, the trial court denied plaintiff’s motion for reconsideration, in which it argued that Chicago Health Clubs, Inc. v. Picur (1988), 124 Ill. 2d 1, 528 N.E.2d 978, decided while this case was pending, renders the ordinance unconstitutional as applied to online database searches. This appeal followed.

The transaction tax ordinance provides in pertinent part as follows:

“There is hereby imposed and shall immediately accrue and be collected a tax, *** on *** [transactions consummated in the City of Chicago involving the lease or rental of any personal property ***.
* * *
The ultimate incidence of and liability for payment of such tax shall be borne by the lessee.
* * *
*** [T]he lease or rental of any personal property shall include but not be limited to leased time on equipment not otherwise itself rented, such as leased time for use of calculators, computers, computer software ***, whether said leased time is fully or partially utilized. This includes but is not limited to the usage of a computer under a time-share agreement.” (Chicago Municipal Code §200.1 — 2A.)

Ruling No. 9 interprets this ordinance as authorizing the collection of a transaction tax on “all lease or rental charges associated with the usage of the computer and its software in the City of Chicago.” The ruling also provides that “[separately stated optional charges not for the use of the computer, its software or other personal property used in the city, shall not be subject to the Chicago Transaction Tax. An example would be separately stated maintenance charges which are optional.”

In ruling in favor of the city, the trial judge stated as follows:

“[T]he court is of the opinion that the [cjity’s analysis is correct when it asserts that the term leased time with reference to the equipment is a description of a lease without possession where use is charged. Hence, the conclusion that can properly be drawn [is] that a lease charge may be either a flat fee or can vary with time. The charges made by Mead are for the use of its computer databases for connect and search charges. .
There is a connection or inter-relation between connect time and searches. A search requires connect time and therefore both become part of the total charge made to the subscriber.”

Plaintiff does not dispute the city’s right to impose the transaction tax on “connect time,” defined by Mead as “each unit of time that [subscriber is in contact with MDC’s central computer, beginning with the transmission of an identification number and ending when connection with the computer is terminated.” Plaintiff does object to the city’s collection of the tax on charges made for online database searches, defined as “each execution of a command by [subscriber that requests information to be located or retrieved from a file.” Search charges are a flat fee for each request for information from Mead’s database without reference to the amount of time involved, and connect time is a charge based solely on the time customers are connected to Mead’s central computer. Plaintiff emphasizes that the two charges are billed separately. It asserts that the ordinance authorizes a tax on charges for leased time on a computer, and not, as the city suggests, on charges for the use of a computer.

The parties dispute whether a time-sharing agreement is involved here. Plaintiff claims that even if this is a time-sharing agreement, the tax cannot be collected on search charges. It maintains that the ordinance taxes charges made for time-sharing agreements “only to the extent that those charges are attributable to leased time.” The. city contends that this is a time-sharing agreement and that the tax is proper because the ordinance applies to any “usage of a computer under a time-sharing agreement.”

Time-sharing agreements have been defined as follows:

“A time-sharing computer network consists of a central computer, which stores programs and performs all calculations, and user terminals. Individual users access the central computer through telephone connections and terminals located in their own offices. Typically, users pay some monthly fee for access privileges plus an hourly rate for time actually spent utilizing the central computer.” Flip Mortgage Corp. v. McElhone (4th Cir. 1988), 841 F.2d 531, 533 n.l.
“A time-sharing company is one that installs a terminal facility in the customer’s business location; the terminal is connected to the time-sharing company’s computer system via telephone communication lines. The end-user can then time-share the computer system by means of the remote terminal for a fee.” Telex Corp. v. International Business Machines Corp. (N.D. Okla. 1973), 367 F Supp. 258, 273, aff’d in part, rev’d on other grounds (10th Cir. 1975), 510 F.2d 894.
“One witness testified, ‘Time sharing is a system of using a computer whereby a user has a terminal of some capability, some small, some large, and the terminal is hooked to the computer via telephone line at some remote distance, and this allows the user to access the computer through the telephone lines and through his terminal.’ ” (Greyhound Computer Corp. v. International Business Machines Corp. (9th Cir. 1977), 559 F.2d 488, 494 n.9.)

Plaintiff asserts that the ordinance does not define time-sharing agreements, that the definition is not self-evident, and that this court cannot rely on definitions from earlier decisions, because databases are continually developing and their functions are becoming more complex. The trial court made no finding on this question, nor is it necessary for us to do so in order to decide this case.

The city argues that the Department of Revenue’s interpretation of the ordinance is to be considered persuasive authority unless it is “clearly erroneous, arbitrary, or unreasonable.” (Mitee Racers, Inc. v. Carnival-Amusement Safety Board (1987), 152 Ill. App. 3d 812, 816-17, 504 N.E.2d 1298.) Additionally, the city notes that according to Mead, usage of the computer system is composed of both access to the system and the operations performed by the time-sharing user after the system is accessed. The city maintains that accessing Mead's system “without proceeding to use the system to search for and retrieve information is of no practical value and a waste of resources.” Thus, it urges, access and usage of a computer system is “a single, unitary transaction.”

Although the concept of “leased time on equipment not otherwise itself rented" is not well defined, it could reasonably include usage of a computer and its software, and thus Rule No. 9 is not “erroneous, arbitrary or unreasonable.” Nor is the trial judge’s ruling that “the charges made by Mead are for the use of its computer databases for connect and search charges.” Plaintiff cites no authority for its contention that the tax cannot be applied to charges that are not time based, and we decline to so hold.

Plaintiff next argues that charges for searches are fees for a service rendered by Mead, and a tax on that service is a tax on occupations, prohibited by article VII, section 6(e), of the Illinois Constitution. Alternatively, plaintiff asserts that under Chicago Health Clubs, Inc. v. Picur (1988), 124 Ill. 2d 1, 528 N.E.2d 978, it is not necessary to find that searches are services to find that the tax is one on occupations.

In Webster v. City of Chicago (1985), 132 Ill. App. 3d 666, 478 N.E. 2d 446, the court rejected plaintiffs’ argument that the transaction tax violates article VII, section 6, of the Illinois Constitution, which provides in part as follows:

“Except as limited by this Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs including, but not limited to, the power *** to tax ***.
* * *
A home rule unit shall have only the power that the General Assembly may provide by law *** to license for revenue or impose taxes upon or measured by income or earnings or upon occupations.” (Ill. Const. 1970, art. VII, §§6(a), (e).)

Plaintiffs contended that the transaction tax is prohibited by section 6(e), because the leasing of personal property is a service and any tax on services is an impermissible tax on occupations. Webster, 132 Ill. App. 3d at 668.

The Webster court noted that the supreme court has defined “services” as “all ‘sales’ transactions other than sales of tangible property,” and that, during the constitutional convention debates on section 6(e), the delegates indicated that a tax on service providers, such as doctors, lawyers, repairmen and beauticians, was prohibited. (132 Ill. App. 3d at 668.) The court held that the transaction tax is “akin” to a use tax, because the consumer is paying for the use and temporary transfer of possession of tangible property, and therefore, is not an invalid service tax. 132 Ill. App. 3d at 669.

The court then addressed the plaintiffs’ contention that, even if leasing were not held to be a service, the tax was invalid, because the practical operation of the tax was to tax the occupation of leasing. The court noted that the lessor was required to collect the tax and remit it to the city, and ruled that this factor did not make the transaction tax a tax on occupations, as the tax was imposed on the lessee, and it provided for fines and penalties against the lessee for failing to pay the tax. “Furthermore, nothing in the history of 6(e) evidences an intent to prevent a tax on temporary transfers of personal property. The [transaction tax] is not a tax on occupations.” 132 Ill. App. 3d at 669.

In Webster, plaintiff lessees were engaged in renting automobiles and formal clothing. Courts have also ruled that the transaction tax is not an occupation tax when applied to drivers of leased taxicabs (Wellington v. City of Chicago (1986), 144 Ill. App. 3d 774, 494 N.E.2d 603) and self-service laundromats (Katz v. City of Chicago (1988), 177 Ill. App. 3d 305, 532 N.E.2d 322). However, the supreme court has found other taxes to be taxes on occupations, such as a service tax (Commercial National Bank v. City of Chicago (1982), 89 Ill. 2d 45, 432 N.E.2d 227) and a municipal utility tax (Waukegan Community Unit School District No. 60 v. City of Waukegan (1983), 95 Ill. 2d 244, 447 N.E.2d 345). In each of those cases, the court first found that the sale of service taxes involved were prohibited by section 6(e). The court applied the practical operation and effect test to prevent an evasion of the constitutional prohibition against taxes on occupations by the taxing body’s use of “magic words.”

“ ‘[T]he practical operation of the entire ordinance, not just the simple declaration that the tax is on the purchaser, must be judged against the intent expressed by the delegates to the constitutional convention in determining whether the tax imposed by the ordinance falls within the proscription of section 6(e) of article VII.’ [Citation.] ‘The declaration that the tax *** is on the purchaser is *** not consistent with the constitutional restriction on taxes upon occupations but is an attempt to erode, diminish or evade the intent expressed in the constitutional convention.’ [Citation.] Viewed in their entirety the *** taxes at issue are, in practical operation, attempts to impose a tax upon [services] *** provided to the general public.” (Waukegan School, 95 Ill. 2d at 254-55.)

The supreme court has further stated that the practical-effect analysis is not appropriate when considering taxes that are not prohibited by section 6(e). Illinois Gasoline Dealers Association v. City of Chicago (1988), 119 Ill. 2d 391, 400, 519 N.E.2d 447.

Plaintiff claims that the supreme court changed the test to determine whether a tax was prohibited by section 6(e) in Chicago Health Clubs, Inc. v. Picur (1988), 124 Ill. 2d 1, 528 N.E.2d 978. In that case, the court struck down an amendment to the Chicago amusement tax which added health and racquetball clubs to the list of “amusements” for purposes of the tax, holding that it was an occupation tax, and stating:

“[I]n order to abide by [the constitutional restriction on occupation taxes] we must look to this ordinance’s practical operation and effect rather than only to a facial declaration contained therein. In doing so it becomes apparent that, although the tax may ostensibly fall on individuals receiving the clubs’ services, the tax truly is an ‘occupation’ tax within the meaning of 6(e). The clubs are not only responsible for collecting and remitting the tax to the city, but are also responsible for paying the tax to the city regardless of whether their patrons fail or refuse to remit the tax. Additionally, the health clubs are subject to some very substantial penalties for any delays in submitting the tax payments.” (Emphasis in original.) (124 Ill. 2d at 10.)

The court noted that it found the “same types of considerations” persuasive in determining that other taxes were de facto occupation taxes. (124 Ill. 2d at 10.) The court continued:

“The ordinance *** undoubtedly imposes numerous nonoccupational taxes, taxing activities which may in fact be offered by those engaged in a ‘hobby, diversion or occasional fund-raising enterprise,’ as defendants suggest. However, by defining ‘amusement’ to include ‘racquetball or health clubs,’ and by further establishing a tax on those clubs’ membership fees, the city has gone far beyond merely taxing particular activities [citation], and has imposed a tax unique to those types of commercial enterprises. Realistically viewed, it is clear that a tax on membership fees on health and racquetball club memberships is a tax on those occupations.” 124 Ill. 2d at 11-12.

The city had also argued that the tax was authorized by section 11 — 42—5 of the Illinois Municipal Code (Ill. Rev. Stat. 1985, ch. 24, par. 11 — 42—5), which provides that municipalities may tax amusements, but the court rejected the city’s contention that charges for “amusements” could be segregated from charges for services, such as nutritional instructions and diet counseling, provided by clubs, saying:

“The plain language of the amended ordinance *** does not distinguish between service and nonservice components of the entities remitting the tax, and there is nothing in the amended ordinance to support [the city’s] ‘theory’ that the tax applies to anything less than the gross receipts of health and racquetball clubs. Moreover, it seems simply impossible to fully segregate health club membership into amusement and nonamusement components.” Picur, 124 Ill. 2d at 15.

Plaintiff maintains that the Picur court applied the practical-effect analysis to determine whether a tax violated section 6(e), and that, therefore, “a tax may now qualify as a ‘tax on occupations’ even if it is not a ‘tax on services.’ ”

The city argues that Lexis/Nexis is a self-serve business and that Mead does not provide services to its lessees. It suggests that if Mead provided personnel to fill search requests and other inquiries submitted by its subscribers, then it would be providing a service. The city contends that plaintiff “is doing nothing more than leasing equipment and the time to use it,” and is not purchasing a service. The city also maintains that an occupational tax is a tax either intended and designed to regulate or control a particular occupation or designed to be levied on the privilege of engaging in a particular occupation (Forsberg v. City of Chicago (1986), 151 Ill. App. 3d 354, 502 N.E.2d 283) and that such is not the case here.

The city does not address plaintiff’s contention that Picur changed the standard for determining whether a tax is a tax on occupations. The trial court here held that Picur “may be interpreted as being consistent with prior case law effectively limiting the application of the ‘practical operation and effect’ test to ‘service taxes’ alone.” We agree.

In Picur, the court did apply the practical operation and effect test, but it did not state whether it was doing so because the tax was one on services, or if it was applying the test regardless of whether the tax was on services. In its decision the court referred to the services provided by health clubs, and it is reasonable to consider what health clubs provide as services. Thus, it is probable that the court assumed that the tax was on services. Because the supreme court did not expressly overrule the previous cases holding that the practical operation and effect test is applied only after a determination that a challenged tax is a service tax (Illinois Gasoline Dealers Association v. City of Chicago (1988), 119 Ill. 2d 391, 519 N.E.2d 447), and because Picur can be read as consistent with such holdings, we decline plaintiff’s invitation to recognize a new standard.

We hold that Mead does not perform a service by providing its subscribers with databases which the subscriber may use to do legal research. Because the transaction tax is not a service tax, it is not an impermissible tax on occupations.

For the foregoing reasons, the judgment of the circuit court of Cook County is affirmed.

Affirmed.

DiVITO and EGAN, JJ., concur.