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.
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
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.
1. entered into an amended Lease (Harney Aff.
Ex. B, Art. 4) containing real estate tax
provisions virtually identical to those in the
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
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
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
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.
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.
Smith asserts three different theories to support recovery
of fees from Kusmiersky and U.S. Managers:
1. breach of an express written or oral
2. breach of a contract implied in law; and
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
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
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.
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 ...