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Codo, Bonds, Zumstein & Konzel. v. Fdic





Appeal from the Circuit Court of Will County; the Hon. Herman Haase, Judge, presiding.


The defendant, Federal Deposit Insurance Corporation (FDIC), appeals from an order of the trial court granting a partial summary judgment, awarding fees, and enforcing an attorney's lien for the plaintiffs, Codo, Bonds, Zumstein & Konzelman, P.C. (the law firm). The FDIC argues that the trial court did not have jurisdiction to enforce the attorney's lien and that the court erred in granting the law firm's motion for summary judgment. We affirm.

In January of 1979 Alex J. Waitkoss (Waitkoss), an Illinois resident, executed two promissory notes for a total of $135,000, in favor of the Elgin National Bank (Elgin), located in Elgin, Illinois. Payment on the notes was due February 28, 1979. The First Trust Bank of Lakefield, Minnesota (the bank), through a participation agreement, advanced the loan proceeds to Waitkoss through Elgin. Waitkoss subsequently defaulted on the promissory notes.

In February of 1982, when it appeared that Elgin was not fulfilling its obligation to collect from Waitkoss, the bank retained the law firm to collect on the notes. Under a contingency agreement with the bank, the law firm was to receive one-third of all proceeds collected. The law firm commenced proceedings to collect from Waitkoss.

In March of 1983 the bank and Waitkoss reached a settlement on the outstanding debt, without the law firm's direct participation in the negotiations. That agreement was memorialized in a promissory note for $274,500. According to the affidavit of Douglas Kratz, then the president of the bank, prior to the settlement with Waitkoss he had a conversation with law firm attorney Bruce Konzelman. In that conversation he and Konzelman agreed that the law firm would reduce the contingency-fee agreement from one-third because the settlement would be reached without the law firm's assistance. However, according to the affidavit, the parties never reached a final agreement as to the reduced figure.

On July 19, 1983, the law firm served a notice of attorney's lien on Waitkoss, placing a claim on any money paid by him to the bank.

The law firm filed the present action against the bank and Waitkoss on April 19, 1985, in the circuit court of Will County. Waitkoss had been making regular payments to the bank on his settlement note. The law firm alleged that the bank failed to remit to the law firm funds owed on the contingency-fee contract for the collections from Waitkoss.

On May 30, 1985, the bank was declared insolvent. Under Minnesota law, the FDIC was appointed as a State receiver for the bank. On June 20, 1985, the FDIC was granted leave to intervene in the law firm's Will County suit.

On October 11, 1985, the law firm moved for partial summary judgment, both on the two counts of their complaint which asked for attorney fees and for enforcement of their attorney's lien, and on a previously filed petition to enforce their attorney's lien. The trial court granted the motion on November 15, 1985. The court found that the law firm had an enforceable attorney's lien, that there was no triable issue of fact as to the alleged reduction of the contingency-fee agreement, and that, as a matter of law, the law firm was entitled to the fees set forth in the agreement. The FDIC brought this appeal.

On appeal the FDIC raises essentially two issues: (1) whether the trial court had subject matter jurisdiction to hear the cause; and (2) whether the trial court erred in granting summary judgment as to the attorney's lien and the attorney fees.

As to its first issue, the FDIC contends that, because of public policy, full faith and credit, and comity, Illinois is required to recognize the exclusive jurisdiction of the Minnesota courts given the Minnesota receivership. We disagree and will discuss in turn each of the above contentions, as well as conflict-of-law rules which we find to be dispositive of the issue.

• 1 Essentially, the issue before us is whether Minnesota law providing for exclusive jurisdiction in Minnesota should apply or whether Illinois may take jurisdiction under its own law for enforcement of an attorney's lien. Illinois courts have applied the rule that in conflict-of-law situations the law of the State with the most significant contacts should apply. (Ingersoll v. Klein (1970), 46 Ill.2d 42, 262 N.E.2d 593; Ford v. Newman (1978), 64 Ill. App.3d 528, 381 N.E.2d 392.) This test provides that the parties' rights will be determined by the law of the State having the most significant relationship to the transaction and the parties. Champagnie v. W.E. O'Neil Construction Co. (1979), 77 Ill. App.3d 136, 395 N.E.2d 990.

• 2 Clearly, Illinois has the most significant contacts to this case. The original loan was negotiated and made in Illinois; both the law firm and Waitkoss are residents of Illinois; the contingency-fee contract was performed in Illinois; and the site of the debt is in Illinois. Minnesota's only relevant contacts to the litigation are that the receivership and the insolvent bank are located there, as is a portion of the debt already paid by Waitkoss to the bank. Therefore, under the most-significant-contacts test, Illinois law allowing Illinois jurisdiction for enforcement of the law firm's attorney's lien should apply.

We additionally examine each of the FDIC's contentions. The FDIC initially argues that the receivership laws of both Minnesota and Illinois reflect a strong public policy favoring the exclusive jurisdiction of the receivership court to adjudicate claims against the assets of a failed State bank. Minnesota law provides that if a receiver rejects a claim against the receivership, the action must be brought in the county where the bank had its principal place of business prior to liquidation. (Minn. Stat. sec. 49.24, par. 5 (1984).) Similarly, Illinois' bankruptcy law provides that the court in the county in which the bank is ...

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