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Mccracken v. Olson Cos.





Appeal from the Circuit Court of Cook County; the Hon. Dean M. Trafelet, Judge, presiding.


Plaintiff brought this action to recover attorney fees pursuant to a written contract. The fees were sought to be recovered from an officer/director of the corporation with whom plaintiff had entered into a contract for services. Following a bench trial, judgment was entered in favor of plaintiff and against both the corporation and the individual officer/director. The trial court's judgment against defendant officer/director was entered on the theories of piercing the corporate veil, guarantee, and ratification. An appeal has been taken from the judgment against the individual officer/director of the corporation.

We affirm.

In January 1976 plaintiff, a Chicago attorney specializing in real estate tax, was retained to represent defendant corporation, Olson Companies, Inc. (OCI), in all matters pertaining to the assessment and real estate taxes of a certain property known as the Lake Tower Inn. The Lake Tower Inn property was acquired by OCI in partnership with another corporation in 1974, with OCI retaining 80% interest in the property.

OCI is a Minnesota corporation licensed to do business in Illinois. The corporation was formed in 1972 by defendant Kenneth P. Olson (Olson), a businessman involved in 17 corporations and partnerships with assets of over $75 million in five different States. Olson was, at all times, the sole shareholder, president, and director of OCI.

In 1974 OCI began to experience financial difficulties as a result of a rise in interest rates. At that time Olson proposed to the banks and mortgage holders to which OCI was indebted a plan which would allow the corporation to pay off its outstanding loans by liquidating all its real estate holdings. The Lake Tower Inn property was among those affected by Olson's proposal.

Some time before December 22, 1975, Olson negotiated a comprehensive financing agreement involving the sale and lease of the Lake Tower Inn with Fred Seed, a personal friend. This arrangement, which included Seed's personal guarantee of a $2.2 million mortgage, granted Olson Motor Lodges, Inc. (OML), the right to lease and operate the hotel, as well as the option to purchase the premises upon written notice of the exercise of the option before December 31, 1980. OML, an Illinois corporation, was one of Olson's many business ventures. Up until December 29, 1975, Olson had been the sole shareholder, president, and director of OML. Thereafter, the capital stock of OML was held by Olson as custodian for the benefit of his children. Under the Minnesota Uniform Gift to Minors Act (Minn. Stat. 1984, sec. 527.01 et seq.), however, Olson continued to retain full discretionary control of the stock.

On December 22, 1975, Olson, purporting to act on behalf of OML and OCI, executed the lease and option agreement after directing the trustee of the Lake Tower Inn property (the Chicago Title & Trust Company) to execute the mortgage documents. The beneficial interest of the land trust was not, however, assigned to Seed by Olson until January 16, 1976. OML began, at that point in time, to lease and operate the hotel pursuant to the agreed arrangement. In February 1981 the Lake Tower Inn was sold to another party after OML allegedly failed to obtain new financing so that it could exercise its option by December 31, 1980.

Plaintiff claims to have first been contacted by Olson to discuss the possibility of a reduction in the real estate taxes of the Lake Tower Inn property sometime around January 29, 1976. Having executed the financing package on the sale of the property to Seed on December 22, 1975, Olson already knew of the plan for OML to take over the operation of the hotel with an option to purchase. Among other things, an attorney-fee arrangement was discussed at this time. Following their phone conversation, plaintiff drafted a letter to OCI setting the terms of the proposed legal representation. The letter specifically noted that plaintiff was being granted the authority to represent OCI in all matters pertaining to the assessments of real estate taxes on the Lake Tower Inn property for the years 1975 through 1979. Also set forth in the letter were details regarding the compensation to be paid for the contemplated legal representations. Upon receiving the letter, OCI executed the agreement through Edward Kocourek, the vice-president and secretary of defendant corporation.

Plaintiff subsequently performed the services required by the agreement, obtaining a reduction in the assessed valuation of the property for 1975 and for the 1976 quadrennial assessment. Fee statements were sent by plaintiff to OCI to the attention of Kocourek. Plaintiff claimed fees in the amount of $46,800. As of the time of the trial, defendant had paid plaintiff $18,500 of that sum, leaving a total of $28,300 of the debt still remaining to be paid.

In March 1977, Edward Kocourek resigned from his post at OCI. Plaintiff maintains that he not only had frequent conversations with Kocourek prior to the latter's resignation, but also that he contacted Olson personally on several occasions during this time in order to relate to him his concern for the unpaid fees. Olson denies ever having had any contact with plaintiff while Kocourek was the acting vice-president and secretary of defendant corporation. He also denies ever being aware that plaintiff had been handling any tax matters for OCI or, for that matter, that an agreement had been entered into with him to provide such services. He does, however, acknowledge that Kocourek informed him that somebody was working on the property's tax assessment and valuation.

According to Olson, the first time he came into contact with plaintiff was on May 9, 1978, when the latter threatened to file suit if Olson did not tender the remaining balance still owed him in attorney fees. Olson then informed plaintiff that OML was unable to tender the full amount, that it would nonetheless try to make partial payments, and that, unless OML obtained refinancing in order to be able to exercise its options to purchase, the property would end up being sold to another party. He further claims to have informed plaintiff that, in the event the property was purchased by OML, all monies owed plaintiff would be tendered. Plaintiff allegedly proceeded to make a notation of this for his file, writing down the payment structure.

Plaintiff, however, testified that Olson told him that the filing of a lawsuit would ruin his chances to refinance and that he would personally guarantee the amount due plaintiff in exchange for the latter's forebearance to bring suit. Plaintiff agreed to this proposal and drew up a memorandum committing their oral agreement to writing. Olson then put his initials to said document.

Upon weighing all of the documentary and testimonial evidence, the trial court held in favor of plaintiff, finding that (1) Olson personally exercised ownership and control of OCI and OML, and that there were such unity of interest and ownership among Olson, OCI, and OML that separate identities of the parties did not exist; (2) the professional services rendered by plaintiff to defendant were not only satisfactory but also financially benefited Olson individually, as well as those entities over which he exercised complete control; (3) Olson ratified the contract for plaintiff's professional services by accepting the benefits thereof; and (4) Olson personally guaranteed ...

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