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GOLDSTICK v. KUSMIERSKY

July 24, 1984

PHILLIP C. GOLDSTICK AND JOSEPH W. SMITH, PLAINTIFFS,
v.
JOHN KUSMIERSKY, U.S. MANAGERS REALTY, INC. AND ICM REALTY, DEFENDANTS.



The opinion of the court was delivered by: Shadur, District Judge.

  MEMORANDUM OPINION AND ORDER

Phillip Goldstick ("Goldstick") and Joseph Smith ("Smith") sue John Kusmiersky ("Kusmiersky"), U.S. Managers Realty, Inc. ("U.S. Managers") and ICM Realty ("ICM") to collect attorneys' fees owed to the Goldstick & Smith law partnership (now in dissolution). All defendants have moved under Fed.R.Civ.P. ("Rule") 56 for summary judgment on all counts in the Second Amended Complaint (the "Complaint"). For the reasons stated in this memorandum opinion and order, those motions are denied in their entirety as to Kusmiersky and U.S. Managers and granted in their entirety as to ICM.

Facts*fn1

This dispute arises out of work Goldstick & Smith did to reduce taxes on real estate known as the Meadow property (the "Property"). Analysis of the dispute requires an understanding of each defendant's interest in the Property.

Walter Kassuba ("Kassuba") originally owned both the land and the apartment building improvements on the Property. In an effort to raise capital in 1969, he entered into a sale-leaseback transaction with ICM under the "Lease" (Harney Aff. Ex. A).*fn2 That placed ICM in the land ownership position, with Kassuba continuing to own the improvements. Lease Art. 4 obligated Kassuba:

    1. to pay all expenses of maintaining the
  Property, including real estate taxes;
    2. if he contested tax liability, to make
  escrow tax deposits to cover taxes, interest and
  penalties; and
    3. not to allow the land to be sold for
  nonpayment of taxes.

If Kassuba attempted to reduce any tax liability, ICM promised to cooperate — but without cost to ICM.

Kassuba later declared bankruptcy. In 1975 Kusmiersky tried to extricate the Property from the Kassuba bankruptcy and to revitalize it by:

    1. buying the improvements through two land
  trusts (the "Land Trusts") under which Central
  National Bank was Trustee and Community
  Associates, a limited partnership in which
  Kusmiersky is the general partner, owned the
  beneficial interest (Kusmiersky Dep. 7-9); and

2. obtaining an assignment of the Lease.

ICM then:

    1. entered into an amended Lease (Harney Aff.
  Ex. B, Art. 4) containing real estate tax
  provisions virtually identical to those in the
  original Lease;
    2. in order to finance the operating expenses
  of the Property, made non-recourse loans to the
  Land Trusts (Kusmiersky Dep. Exs. 2 and 3),
  secured by security interests in the
  improvements, proceeds, occupancy leases and the
  Lease; and
    3. entered into an agreement with the Land
  Trusts (Pl.Ex. 11) as to how the monies loaned by
  ICM were to be spent.

Both Land Trusts entered into an agreement with U.S. Managers, another Kusmiersky-controlled entity, to manage the Property (Baker Dep. I 17-18).

In conjunction with Kusmiersky's acquisition of the Property and other Kassuba properties, U.S. Managers engaged Randy Strassburg ("Strassburg") to attempt to reduce current tax liabilities on those properties (see documents designated as Baker Dep. Ex. 19). Strassburg then engaged Goldstick to work on the current reduction on the Property.

Sometime in 1975 Kusmiersky approached Goldstick about the reduction of back tax liabilities for the Property. Although doubt exists as to whether an express agreement was reached in that respect,*fn3 Goldstick & Smith (mostly through Smith's efforts) did do the work on back taxes. By November 1977 they had obtained a back tax reduction of $872,374.30 (Pl.Ex. 19). According to all the evidence submitted on the current motion, the Goldstick & Smith fee was based upon a percentage of the tax reduction obtained. To date Goldstick & Smith have not been paid any fee for their efforts in getting the $872,374.30 reduction.

On June 30, 1978 Ted Netzky ("Netzky") acquired the Land Trusts' and Community Associates' interests in the Property. U.S. Managers continued to manage the Property. Before the June 30 closing Netzky had said he would not close the deal without getting a release from Goldstick for any claim against either Netzky or the Property for the attorneys' fees (Baker Dep. I 83-84). That produced a flurry of activity at the closing:

    1. ICM gave Goldstick a written proposal to pay
  Goldstick a reduced amount ($250,000 plus
  interest) over a period of years, but only if the
  Property turned enough of a profit to pay the fee
  (Goldstick Ex. 2).
    2. Goldstick refused to sign that proposal
  because he would not accept an arrangement
  contingent on profits from the Property
  (Goldstick Dep. I 41-47).
    3. After some discussion with ICM
  representatives Thomas Davis ("Davis") and
  Anthony Harney ("Harney"), Goldstick insisted on
  talking with Kusmiersky, who was in Japan.
    4. After Kusmiersky had talked with Davis and
  Baker, he convinced Goldstick to sign the release
  Netzky had demanded. In essence Kusmiersky
  assured Goldstick the ICM representatives were
  honorable people and could be trusted to work out
  some arrangement to pay the fees (Kusmiersky Dep.
  55-58).
    5. Goldstick signed the release and allowed the
  closing to proceed.

Davis and Harney testified they never reached agreement with Goldstick on whether he would get paid fees without regard to the Property's performance (Harney Dep. 72; Davis Dep. 67-68).*fn4 It is unclear whether the back taxes (as reduced) were paid before or after June 30, 1978 (Baker Dep. II 23; Kuntz Dep. 21-22; Kusmiersky Dep. 45).

After the closing Goldstick went to New York to talk with ICM representatives in an attempt to negotiate further for payment of the fees. No agreement was reached.

         Plaintiffs' Claims Against Kusmiersky and U.S.
                            Managers

Smith asserts three different theories to support recovery of fees from Kusmiersky and U.S. Managers:

    1. breach of an express written or oral
  contract;

2. breach of a contract implied in law; and

3. promissory estoppel.

Both Kusmiersky and U.S. Managers have moved for summary judgment on all Smith's claims.

Each argument will be considered in turn. But before turning to the merits, this Court must examine the question of Smith's capacity to sue at all.

Goldstick has refused to join in the claims against Kusmiersky and U.S. Managers,*fn5 and they argue one partner alone may not sue to collect a partnership asset. Smith retorts that when a partnership is in dissolution any one partner has that capacity. Under Rule 17(b), this Court must look to Illinois state law to decide that question.

Ordinarily all partners to a partnership must join in an action to collect a partnership asset. 29 I.L.P. Partnership § 172, at 371. But when a partnership has been dissolved for any reason, any one partner can wind up the partnership affairs and collect the partnership assets. 29 I.L.P. Partnership § 242, at 424; Heartt v. Walsh, 75 Ill. 200, 202 (1874); Ill.Rev.Stat. ch. 106 1/2, § 35(1)(a). That ability to collect partnership assets must include the individual partner's right to sue to collect such assets. See Slaboszewski v. Johnson, 11 Ill. App.2d 241, 136 N.E.2d 560 (1st Dist. 1956) (deceased partner's estate need not be joined as a plaintiff in suit by surviving partners to collect partnership asset). Hence Smith as a former partner has the capacity to sue to collect the partnership asset, the fee, in winding up the partnership affairs.

1. Express Contract

Initially Smith asserted the September 5, 1975 Letter embodied the parties' agreement. But in light of Goldstick's September 19 redraft of that letter, which changed some of the terms and to which Kusmiersky and U.S. Managers did not expressly consent, it certainly cannot be said as a matter of law either letter — or the letters in conjunction — represent a complete integration of the parties' agreement.

Kusmiersky and U.S. Managers contend they had an oral agreement with Goldstick, including a contingency that released both of them from liability for fees if they ceased to have an interest in the Property before payment of the back taxes that remained after Goldstick & Smith reduced the amount of tax liability. Smith argues the contingency was different: No fee would be due from Kusmiersky and U.S. Managers if their interest in the Property ceased before completion of the work involved in getting the tax reduction.

Both arguments have support in the record presented to this Court. In support of defendants' contention are the following items:

    1. U.S. Managers' September 5 letter says the
  fee "will be due and payable only when the
  Kusmiersky affiliate, vested with title, can
  obtain from Pioneer National Title Insurance
  Company a policy of title insurance reflecting no
  exception for the delinquent taxes involved."
  Maybe that can be construed as referring to
  actual issuance of the title policy in that form,
  which would occur only after the back taxes (as
  reduced) had actually been paid.*fn6 In other
  words, such a title policy would show exceptions
  for unpaid taxes unless such taxes were paid or
  disposed of to the satisfaction of the title
  company (Kusmiersky-U.S. Managers R.Mem.Ex. 1,
  Schedule B II).
    2. Fees for reducing taxes are customarily paid
  when taxes are paid (Smith Dep. 118-19).
    3. Kusmiersky's arrangement with Strassburg for
  reducing current tax liabilities contained a
  provision that said no fee would be due if the real
  estate were abandoned to the lender (Baker Dep.Ex.
  19; Nov. 24, 1975 letter).*fn7
    4. Kusmiersky testified the September 5 Letter
  was to change the calculation of the amount of
  money to be paid as the fee, but left the rest of
  the Strassburg agreement intact (Kusmiersky Dep.
  30-31).

Conversely, several items of evidence support Smith's version of the contingency:

    1. As n. 6 reflects, the September 5, 1975
  Letter can also fairly be read as calling for
  payment as soon as the lawyers ...

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