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Central Standard Life Ins. Co. v. Gardner

JULY 9, 1962.

CENTRAL STANDARD LIFE INSURANCE COMPANY, ETC., PLAINTIFF-APPELLANT,

v.

RAY P. GARDNER, ET AL., DEFENDANTS-APPELLEES.



Appeal from the Superior Court of Cook County; the Hon. SAMUEL B. EPSTEIN, Judge, presiding. Affirmed.

MR. JUSTICE ENGLISH DELIVERED THE OPINION OF THE COURT.

Plaintiff, as successor trustee of a trust created through a reinsurance contract, sought court approval of the administration of the trust by itself and its predecessor trustee. At the conclusion of the litigation, fees were awarded to attorneys who performed services for two different classes of policyholder defendants. Plaintiff has appealed from those orders.

In 1929 a reinsurance agreement was entered into between Illinois Bankers Life Assurance Company (a legal reserve stock company) and Illinois Bankers Life Assurance Association (a mutual assessment association) pursuant to which the assets of the Association were turned over to the Company in trust for the policy-holding members of the Association. Plaintiff became successor trustee by assumption of assets and liabilities of the Company under a second reinsurance agreement in 1951.

In 1953 complaint was filed by the successor trustee for approval of the trust account covering the entire period of its administration, and for authorization to make certain increases in assessment rates. For reasons not now important, the policyholder beneficiaries of the trust were divided into two classes and designated in the complaint as Class I and Class II defendants.

An order was entered in 1954 appointing Attorney Edward L.S. Arkema to represent Class I defendants. Arkema's services involved his spending 2,667 1/2 hours in the various phases of this litigation: before the master, the chancellor, the Appellate Court and the Supreme Court. There were hearings which resulted in five master's reports, six decrees, two appeals to the Appellate Court and one to the Supreme Court. He was allowed $30,000 on account, and later, by one of the orders appealed from, he was awarded an additional fee of $25,000.

The record discloses that plaintiff made no substantial objection to Arkema's fees in the trial court, and its brief concedes that he made a particularly valuable contribution to the fund through his services relating to the sale of certain mineral interests belonging to the trust. Objection is now made to the award of the final $25,000 on the ground that it is excessive, since Arkema did not carry the primary responsibility in the appeal above referred to, and since the Class I defendants profited only slightly by reason of this litigation.

It is basic that a point not made in the trial court cannot be urged on appeal. (Dirksmeyer v. Barnes, 2 Ill. App.2d 496, 509, 119 N.E.2d 813.) On the merits of the question, however, we believe that the fee was fully justified and see no basis for finding it excessive. The order allowing the Arkema fee is, therefore, affirmed.

The complaint named Robert J. Clendenin (among others) as a defendant to represent the Class II defendants, and he filed his appearance as such. Early in the litigation, the master reported that Clendenin sufficiently represented the Class II defendants and, on motion of plaintiff, the court, in a decree entered in 1954, found that "the second class is properly and adequately represented by Robert J. Clendenin." Thereafter, the other defendants named as representatives of the class did not participate actively in the litigation. In 1955, when it became apparent that the volume of work would be too heavy for a single lawyer, the court granted leave to Winston, Strawn, Black and Towner (now Winston, Strawn, Smith and Patterson) to file their appearance as additional counsel for the Class II defendants theretofore represented by Clendenin. Throughout the rest of the litigation, Clendenin and the Winston, Strawn firm performed legal services jointly on behalf of the Class II defendants, and plaintiff raised no question as to the authority for their so acting.

Plaintiff has made the preliminary point in this court, however, that these attorneys gratuitously undertook to represent Class II defendants without any court appointment or authority sufficient to support the allowance of fees from the trust fund. We believe that the facts above recited indicate that they did have such authority and that they exercised it with the full knowledge and consent of both plaintiff and the court. A formal order of appointment was unnecessary under the circumstances.

Another point raised by plaintiff at the threshold of this controversy is that the hearing on fees to be allowed the attorneys for Class II defendants was held without proper notice. The statement is made in plaintiff's brief that notice and a copy of the petition for fees were not served on its attorney until late in the afternoon of May 23, 1960 for a hearing to be held on May 24. This seems to have stemmed from the confusion which arose when the notice of the motion for fees was not filed in court with the petition. It appears incontrovertible now, however, that notice and a copy of the petition were served on counsel for plaintiff on May 19, 1960. Furthermore, at the hearing plaintiff's attorney made no point of improper notice.

Arkema was in Europe on May 24, but another attorney was present on his behalf and made no objection to the conduct of the hearing. When Arkema returned a few weeks later, he stated to the court his objection to the allowance of any fees to the attorneys for Class II defendants, and the chancellor permitted his statement to stand as an offer of proof.

We find that the fee hearings were held on due notice.

In 1941 Clendenin was appointed to the office of General Counsel of Illinois Bankers Life Assurance Company (the original trustee of the trust in question) and served in that capacity for about ten years at a salary of $6,000 per year. Previously he had also performed legal services for the Company from time to time. As General Counsel he regularly attended meetings of the board of directors.

Because of this prior relationship with the Company, trustee, plaintiff contends that Clendenin's representation of the policyholder beneficiaries was improper and that he is, therefore, prohibited by law and the canons of ethics from receiving any fee whatsoever.

The canon on conflicting interests is Canon 6 of the American Bar Association, and the part relied on by plaintiff provides:

"The obligation to represent the client with undivided fidelity and not to divulge his secrets or confidences forbids also the subsequent acceptance of retainers or employment from others in matters adversely affecting any interest of ...


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