APPEAL from the Circuit Court of Cook County; the Hon. DANIEL
A. COVELLI, Judge, presiding.
MR. PRESIDING JUSTICE EGAN DELIVERED THE OPINION OF THE COURT:
In 1969, the Illinois Legislature amended section 26 of the Revenue Act of 1939. (Ill. Rev. Stat. 1969, ch. 120, par. 507.) The amendment provided for a use tax upon the lessee of previously exempt property. Assessment notices totaling almost $17 million were issued by the assessor of Cook County. Thereafter, two separate class-action suits were filed in the circuit court attacking the amendment's constitutionality. The first was Leader v. Cullerton, which was filed by attorney Lowell J. Myers on March 18, 1970. The second suit was Chicago Title & Trust Company v. Cullerton, which was filed by the firm of D'Ancona, Pflaum, Wyatt & Riskind (hereafter the D'Ancona firm) and thereafter consolidated with the Leader case. Additional parties intervened, represented by the firm of Arvey, Hodes & Mantynband (hereafter the Arvey firm).
On June 28, 1971, Judge Daniel A. Covelli declared the amended taxing statute unconstitutional but allowed the county taxing authorities to collect the taxes pursuant to the Act during the pending appeal of his order, provided that such taxes were segregated and retained in a special fund. He also held that the case was a proper class action and retained jurisdiction for the purpose of determining the distribution of the special fund and reasonable attorneys' fees. The county filed a notice of appeal to the supreme court on July 15, 1971.
On July 19, 1971, Lowell Myers mailed a copy of the decree to each taxpayer listed in the county tax book. He included a letter that, in part, suggested that each taxpayer should immediately contact its attorney. Subsequently, 70 separate taxpayers made payments totaling $4,785,883.25 into the special fund. Several of the companies endorsed their checks to the county specifying that the payments were made subject to Judge Covelli's decree. Among those paying were the objectors: Continental Illinois National Bank & Trust Company of Chicago, United Airlines, Inc., Kelly Springfield Company, and Holiday Inns, Inc., represented by one law firm (hereafter this group of objectors will be referred to as "Continental Bank"); Quinlan and Tyson, as agents, and Chandler's, Inc., represented by another law firm; and Addressograph-Multigraph Corporation (hereafter Addressograph), represented by a third law firm. On August 27, 1971, the supreme court denied the county's motion to modify the decree by eliminating the provisions which created the trust fund. The attorneys for the objectors did not actively participate in the appeal in any way, but a member of the firm representing Continental Bank was present at the hearing on the county's motion to modify the decree.
On December 11, 1972, the supreme court rendered an opinion in these consolidated cases and another original action which had been filed in the supreme court, holding that the statute was unconstitutional and that the case was a proper class action. (Dee-El Garage, Inc. v. Korzen, 53 Ill.2d 1, 289 N.E.2d 431.) On December 21, the attorneys representing the plaintiffs (hereafter the "petitioners") filed a petition for fees seeking 25% of the amount of the segregated funds. Objections and answers were filed and after a hearing the court fixed reasonable attorney's fees at 15% of the special fund to be divided equally between the lawyers. The objectors have appealed from the award of 15% and the petitioners have cross-appealed from the order denying their claim for 25%. The other 63 taxpayers have not appealed and the order is final as to them.
The objectors contend that the petitioners are not entitled to any fees from their clients or, alternatively, that the award of 15% is grossly excessive. The objectors rely on three cases in support of their argument that the petitioners are not entitled to any fee: Hoffman v. Lehnhausen, 48 Ill.2d 323, 269 N.E.2d 465; Rosemont Building Supply, Inc. v. Illinois Highway Trust Authority, 51 Ill.2d 126, 281 N.E.2d 338; and Doran v. Cullerton, 51 Ill.2d 553, 283 N.E.2d 865. In Hoffman, the court declared a homestead exemption unconstitutional. In Rosemont, the Highway Trust Authority Act was declared unconstitutional because it created a State debt in excess of $250,000 without a referendum. The trial court sought to require the individual defendants in their capacity as elected State officials to pay the plaintiffs' attorneys' fees. In Doran, the court found that the homestead exemption did not violate the 1970 constitution. All three cases denied attorney's fees on the ground that no tax money had been collected and, therefore, that there was no fund created by the plaintiffs.
The objectors argue that these cases are applicable because, they say, there is no fund here "brought into court by the efforts of petitioning attorneys nor a fund created for the benefit of the entire class." The answer to the objectors' argument is that the fund was in fact brought into court by the efforts of the petitioners, and the class did benefit from its creation. It was Myers who filed the original complaint, later joined by the other petitioners, long before the original action of Dee-El Garage v. Korzen was filed in the supreme court. If the trial court had upheld the constitutionality of the Act, it would have had little reason to create a fund.
The objectors, along with 63 other taxpayers, paid into the fund; 110 others did not pay. Those that did not, assuming they received notice, gambled on the outcome of the case in the supreme court. If the case had been reversed, those who had not paid would have been subject to penalties and interest and perhaps loss of their leases. It is also fairly arguable that, even if they paid the county or township under protest and the decree was affirmed, they would have lost the entire payment. (Cf. Weil-McLain Co. v. Collins, 395 Ill. 503, 71 N.E.2d 91; People ex rel. Herlihy Mid-Continent Co. v. Nudelman, 370 Ill. 237, 18 N.E.2d 225; People ex rel. City of Highland Park v. McKibbin, 380 Ill. 447, 44 N.E.2d 449; 32 I.L.P. Revenue § 237 (1957).) The objectors knew that the trust fund was made subject to attorneys' fees by the terms of the decree before they made any payments into it. They did not seek to intervene nor to withdraw from the class. The petitioners prepared the decree which preserved and protected the fund.
• 1 In Flynn v. Kucharski, 59 Ill.2d 61, a taxpayer filed a class action which successfully challenged the constitutionality of the method of tax collection in effect in Cook County. The result was that tax money previously paid to township collectors was required to be paid to the county collector. The fund which was created during the litigation was tax money and, regardless of the outcome of the suit, would remain tax money to be disbursed for public purposes by either the township or the county. The plaintiffs petitioned for fees and the objectors cited two of the cases cited by the objectors here, Hoffman v. Lehnhausen and Rosemont Building Supply, Inc. v. Illinois Highway Trust Authority. The supreme court, in distinguishing those cases and upholding the allowance of fees, perforce impliedly held that the fund had been created through the efforts of the plaintiffs. We see no difference between the efforts of the plaintiffs in the Flynn case from those in this case with respect to the creation of the fund.
All of the objectors now before us minimize the benefits accruing to their clients by the creation of the fund. In the trial court, however, the written objections before Judge Covelli by Continental Bank stated:
"The intervening taxpayers made their payments under this protective order in order to avoid the imposition of interest or penalties in the event the leasehold use tax should be upheld."
At the hearing, Continental Bank's attorney said:
"That lease [Continental Bank] is a valuable lease. * * * I think our lease is a 198-year lease. Anyhow, we did not want to take any risk of losing it; neither did United or Flying Tiger want to lose their hangar's lease from the City of Chicago. They thought discretion the better part of valor to pay the taxes, and to avoid any possibility of a default under their leases. The same goes for my other client, Kelly ...