Goldstick v. Kusmiersky

Citations: 593 F. Supp. 639; 1984 U.S. Dist. LEXIS 23858Docket: 83 C 2290

Court: District Court, N.D. Illinois; September 5, 1984; Federal District Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Phillip C. Goldstick and Joseph W. Smith filed a lawsuit against John Kusmiersky, U.S. Managers Realty, Inc., and ICM Realty to collect attorneys' fees owed for legal work performed on the Meadow property. All defendants sought summary judgment under Fed. R. Civ. P. Rule 56. The court denied the motions for summary judgment against Kusmiersky and U.S. Managers, but granted it for ICM.

The case involves the tax reduction efforts undertaken by Goldstick and Smith related to the Meadow property, initially owned by Walter Kassuba. In 1969, Kassuba entered into a sale-leaseback with ICM, which placed ICM in the position of landowner while Kassuba retained ownership of the improvements. The lease obligated Kassuba to pay maintenance expenses, including real estate taxes, and to make escrow deposits for contested tax liabilities. After Kassuba declared bankruptcy, Kusmiersky attempted to manage the property by acquiring the improvements through land trusts and obtaining an assignment of the lease.

ICM subsequently amended the lease with similar tax provisions and provided non-recourse loans to the land trusts, which were secured by various interests in the property. U.S. Managers, controlled by Kusmiersky, was tasked with managing the property, and engaged Randy Strassburg to help reduce tax liabilities. Strassburg hired Goldstick to assist with the tax reduction, leading to a successful decrease of back taxes by $872,374.30 by November 1977. Goldstick and Smith's fee was based on a percentage of this tax reduction, but they have yet to receive payment for their services.

On June 30, 1978, Ted Netzky acquired interests in a property from the Land Trusts and Community Associates, with U.S. Managers managing the property. Prior to closing, Netzky stipulated that he would not finalize the deal without a release from Goldstick concerning any claims for attorneys' fees. This led to significant negotiations at the closing, including ICM's proposal to pay Goldstick a reduced fee contingent on property profits, which Goldstick rejected. After discussions involving ICM representatives and Kusmiersky, who was abroad, Goldstick eventually signed the release, allowing the closing to proceed, despite ambiguity about whether back taxes were settled before or after the closing.

Smith, one of the plaintiffs, is pursuing claims against Kusmiersky and U.S. Managers based on three theories: breach of contract (express or implied) and promissory estoppel. Both defendants have moved for summary judgment, challenging Smith's capacity to sue, as Goldstick has not joined the claims. They argue that a single partner cannot sue for partnership assets without the others. Smith counters that, during a dissolution, any partner can liquidate assets. Under Illinois law, while typically all partners must join in such actions, a partner can act alone to wind up affairs in a dissolved partnership. Therefore, Smith has the right to sue for the partnership asset (the fee).

Regarding the express contract claim, Smith cites a September 5, 1975, letter as the agreement basis, but acknowledges that Goldstick's subsequent September 19 revision altered terms without consent from Kusmiersky and U.S. Managers, complicating claims of a complete agreement.

Kusmiersky and U.S. Managers assert they had an oral agreement with Goldstick that included a contingency releasing them from liability for fees if they lost their interest in the Property before the payment of back taxes. Smith, however, argues that the contingency stipulates no fee would be owed if their interest ceased before the completion of work for tax reduction. Both parties' arguments are supported by the evidence presented.

Key supporting evidence for Kusmiersky and U.S. Managers includes:
1. A letter from U.S. Managers dated September 5 indicates that fees would become due only when a title insurance policy was obtained that showed no exceptions for delinquent taxes.
2. It is customary for fees related to tax reductions to be paid upon the payment of taxes.
3. Kusmiersky's prior arrangement with Strassburg included a provision stating no fee was due if the property was abandoned.
4. Kusmiersky claimed the September 5 letter intended to modify the fee calculation while maintaining the original terms of the Strassburg agreement.

Conversely, evidence supporting Smith's interpretation includes:
1. The September 5 letter could also imply immediate payment after the tax reduction was obtained.
2. A letter from Goldstick indicated that payment would be due after notice of the reduced tax bill.
3. Smith testified that Goldstick indicated the fee was due upon completion of the work.
4. The letters clarify that the back tax arrangement is separate from the Strassburg agreement.
5. Testimony suggests the back taxes might have been paid prior to closing.

The court notes it is not the appropriate time to weigh evidence on a Rule 56 motion and does not determine the persuasiveness of the arguments. Therefore, summary judgment cannot be granted to Kusmiersky and U.S. Managers on the express contract claim. Regarding the implied contract claim, the existence of an express contract is disputed, making dismissal of the implied contract claim premature.

Defendants argue that Smith cannot establish promissory estoppel because the statements made by Kusmiersky and Baker regarding payment for fees were not clear commitments but rather vague assurances. Evidence provided includes Smith's recollections of conversations where he was told he would be paid for his work, which Kusmiersky disputes. Smith invested a year of effort into the work and submitted a bill for services related to back taxes, which was promptly paid, suggesting that there were indeed more substantial promises made. This evidence supports an inference that the promises offered by Baker and Kusmiersky were more than mere assurances, allowing Smith's claim to proceed.

Additionally, Smith claims ICM is liable for fees based on several theories: that Kusmiersky acted as ICM's agent in forming a contract with Goldstick; an oral contract at closing; estoppel from denying liability due to a promise made; and liability under an implied contract. ICM seeks summary judgment, arguing that even if an agreement existed, Kusmiersky lacked the authority to bind ICM. ICM's evidence includes agreements with Land Trusts that limit its obligations. Smith counters with actions indicating ICM's involvement, such as financial support for tax reduction efforts, examination of bills prior to payment, and discussions regarding fee adjustments with Kusmiersky. These actions may suggest that Kusmiersky had the authority to bind ICM, warranting further examination.

Smith's claims regarding implied agency are dismissed as unpersuasive, with the court emphasizing that ICM, as a lender, had a significant interest in overseeing Kusmiersky's use of the $1.5 million loan for property-related expenses. The argument that ICM could be held liable to third parties due to Kusmiersky's non-recourse loan is deemed legally unfounded. Summary judgment is granted to ICM on this claim.

Regarding the alleged oral contract, ICM contends that no enforceable contract exists because not all essential terms were agreed upon at closing, and the statute of frauds would bar any potential oral contract. The evidence indicates that the parties did not finalize whether the payment of the fee would depend on the property's financial success, with this term left for future negotiation. Thus, without an enforceable contract, ICM is granted judgment on this claim as well.

In relation to promissory estoppel, ICM argues it is inapplicable because its statements were not clear promises to pay, Smith did not detrimentally rely on them, and any claim is barred by the statute of frauds. The court finds that Smith has not provided evidence of an unambiguous promise from ICM to pay without contingencies. Testimony indicates ICM representatives expressed a willingness to "work it out," but this does not support the existence of a noncontingent promise. Additionally, post-closing actions show inconsistency with Smith's claims, reinforcing that ICM did not agree to pay fees without a contingency based on the property's profitability.

Smith's promissory estoppel claim against ICM is undermined by the lack of clarity in ICM's statement to "work it out" in the future, which does not constitute an unequivocal promise. ICM contends that the plaintiffs cannot pursue a claim based on an implied-in-law contract because there is an existing express contract with Kusmiersky and U.S. Managers. Courts generally disregard implied contracts when an express agreement exists between the parties, particularly regarding liability for benefits conferred to a non-party. However, ambiguity surrounding the existence of an express agreement due to disagreements on material terms prevents the dismissal of the claim against ICM. Nonetheless, ICM is entitled to summary judgment on the implied contract claim because it is not liable under that theory, regardless of the existence of a contract with U.S. Managers and Kusmiersky.

The determination of whether an implied-in-law contract should be imposed hinges on avoiding unjust enrichment, which requires consideration of the circumstances under which services were rendered. Simply receiving a benefit is insufficient to impose liability for restitution; inequity must be present. Smith's arguments regarding unjust enrichment do not substantiate a claim against ICM for attorneys’ fees. Illinois law states that the "owner of real property" is personally liable for real estate taxes as of January 1 of the tax year. The definition of "owner" focuses on who benefits from and bears the burdens of ownership, not merely the holder of legal title. In this case, while ICM held legal title to the property, it did not assume the benefits or burdens due to the sale-leaseback arrangement, which instead conferred these to the lessee, Community Associates. Consequently, based on the interpretation in Chicago Title, ICM is not personally liable for the real estate taxes, and any increase in equity from tax reductions would be irrelevant in a simple financing context.

ICM's potential reversion does not establish a distinction from a financing arrangement, as Illinois law dictates that landlords are not liable for tenant improvements made voluntarily unless otherwise agreed. In the case at hand, the attempts by Kusmiersky and U.S. Managers to reduce back taxes are likened to tenant improvements, since reducing tax liability enhances property equity. Consequently, ICM is not unjustly enriched by not bearing costs associated with these improvements. Smith's claims regarding implied unjust enrichment fail, and motions for summary judgment by Kusmiersky and U.S. Managers are denied, as there are no material factual disputes and ICM is entitled to judgment on all plaintiffs' claims.

In a motion for reconsideration, defendants argue that Joseph Smith lacks the capacity to sue on behalf of the dissolved Goldstick partnership and that the court did not adequately consider a conversation suggesting an oral contract relieving them of attorney fee liability. The court refutes the first argument, citing the Uniform Partnership Act, which allows a partner to sue for partnership debts post-dissolution, supported by case law from other jurisdictions. The court argues that a restrictive interpretation of the Act would be illogical. While acknowledging the relevance of Slaboszewski v. Johnson, the court maintains that the Act grants Smith the authority to sue. Regarding the second argument, the court instructs defendants to revisit the summary judgment standard previously articulated.

All reasonable factual inferences must favor the non-movants, specifically Goldstick, preventing the court from granting summary judgment for the defendants at this stage. The defendants seek to prioritize a single piece of evidence, disregarding other evidence that may lead to a different conclusion, which is not permissible under the standards of summary judgment as set forth in First National Bank Co. of Clinton, Illinois v. Insurance Co. of North America. The court denies the defendants' motion to reconsider, allowing the case to proceed to trial.

Key points include:
- The factual basis for the motion is drawn from party submissions, with all reasonable inferences favoring the non-movant.
- Discrepancies regarding the characterization of a transaction as a financing arrangement are noted, as well as the lack of involvement from other primary financiers.
- Correspondence between parties, specifically letters dated September 5 and September 19, 1975, outlines the terms of a contemplated agreement.
- Testimony suggests that there may have been an offer to pay fees regardless of property performance, and the refusal of payment is linked to business relationships.
- The interpretation of language regarding delinquent taxes can support Smith's position, indicating that the title company’s validation of tax reductions may trigger fee obligations.
- The letters clarify that agreements regarding back taxes are separate from another arrangement.
- Defendants challenge Smith's testimony as hearsay, but it may be admissible to illustrate Goldstick's understanding of the agreement.
- Smith's assertion that ICM directly paid fees to Goldstick lacks supporting evidence.
- Five of Smith's evidential claims are dismissed, while the last pertains to assurances of payment that do not substantiate his claims.
- The court finds it unnecessary to address ICM's additional arguments regarding plaintiffs’ claims and potential procedural bars.
- The legal terminology surrounding lease arrangements indicates that various forms of net leases confer economic ownership attributes to the lessee.

Under the amended Lease, the lessee was granted an initial 30-year term with options for up to 69 additional years. The lessor's ultimate benefit, barring default—which parallels a mortgage scenario—would be the diminished present value of benefits expected to be realized in 30 to 99 years. This present value would significantly fall short of the $250,000 or more in fees that Smith would require ICM to pay immediately, leading to unjust enrichment for Smith rather than ICM, given their lack of a direct relationship. The court has previously rejected Smith's agency theory. ICM Realty, originally a defendant, was granted summary judgment. Additionally, while both Kusmiersky and Goldstick testified similarly regarding an alleged oral agreement, the court noted that it is not compelled to accept such evidence when credibility is questioned, as highlighted by Smith's concerns about Goldstick's ongoing business ties with Kusmiersky, along with other objective factors supporting Smith's argument.