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09/28/89 Joseph E. Mchugh, v. Richard Olsen

September 28, 1989





545 N.E.2d 379, 189 Ill. App. 3d 508, 136 Ill. Dec. 855 1989.IL.1534

Appeal from the Circuit Court of Cook County; the Hon. John G. Laurie, Judge, presiding.


JUSTICE McMORROW delivered the opinion of the court. JIGANTI, P.J., and LINN, J., concur.


Plaintiff appeals from an order of the circuit court awarding him $4,100 plus costs as compensation for legal services he rendered to the various named defendants, both jointly and severally (hereinafter Olsen). Plaintiff contends that the trial court erred in not awarding him the $10,000 fee he requested, based either on a quantum meruit theory or an account stated theory.

This cause of action is based upon services performed in connection with three real estate transactions occurring between November 1985 and January 1986. It is undisputed that plaintiff, who had been practicing law for 25 years and concentrated his practice in real estate acquisitions, syndications and tax shelter investments, performed all the legal services for Olsen and the limited partnerships he formed in connection with these three real estate transactions. The dispute arises over the value of these services. Both parties agree that there was no express written contract for payment and that plaintiff agreed to discount the cost of his services because Olsen had been a friend of plaintiff's son. However, they disagreed about the terms of the informal agreement for payment.

Olsen testified that he first sought plaintiff's legal services in 1983 and at that time plaintiff indicated that he would charge no more than $100 per hour. Plaintiff provided legal services involving real estate transactions for Olsen on at least two occasions prior to the three transactions which are the subject of the case at bar. On those two occasions plaintiff sent Olsen a bill for his services upon the completion of that work. The bills stated the number of hours spent in connection with the work performed and the total amount due. According to these figures plaintiff's services were billed at a rate of $75 per hour on the first transaction and $88 per hour on the second transaction. Olsen paid these accounts in full.

Olsen further testified that when he contacted plaintiff in October 1985 in regard to the three real estate transactions which are the subject matter of this suit, he believed that the informal agreement for billing at about $100 per hour would still be honored. Thus, when he, in March 1986, received plaintiff's bill which had no accounting for time spent, he was of the opinion that the charge was unreasonable and refused to pay it.

Plaintiff, however, testified that he never proposed to Olsen an hourly rate for services. Instead, plaintiff testified that it had always been his policy to charge Olsen on the basis of the value of his services, and that he calculated the value of his services by factoring in his time spent, the complexity of the issues involved, and the typical costs of maintaining his practice. Plaintiff argues that he utilized this same method of billing when he billed Olsen $10,000 for the legal services he performed in connection with the three real estate transactions involved here. Specifically, he argues that he engaged in extensive negotiations with a savings and loan association regarding its loan commitment and that he prepared and reviewed numerous documents, including loan, wrap-around mortgage, assignment, escrow, and partnership agreement documents. Plaintiff states that the three transactions handled by him for Olsen involved real property valued at over $1.7 million. He also argues that his $10,000 fee, which took into account a 40% discount, was the reasonable value of his services based upon the time spent on these matters, the complexity of the transactions and the experience and legal knowledge that was necessary to successfully complete these transactions.

In an attempt to establish the value of his services, plaintiff introduced into evidence extensive testimony regarding the transactions and the services he performed. He established that two of the transactions involved the purchase of property by limited partnerships, while the third transaction involved the refinancing of property previously purchased by Olsen.

With regard to the first transaction, Olsen, the sole general partner, sought investors to form a limited partnership to purchase rental property at 1519-27 West Farwell in Chicago. After obtaining a commitment for financing through a lender, Olsen sought plaintiff's services to draft the limited partnership agreement and prepare or review all documents necessary to close the purchase of the property in the name of the limited partnership, Farwell Partnership. Plaintiff performed all the necessary legal services, and the closing on this property took place in November 1985.

The second transaction involved the refinancing of rental property located at 1346-66 West Jarvis in Chicago. Olsen had previously purchased the property and requested plaintiff's advice in reviewing the documents necessary for refinancing the property with a different lender.

The third transaction involved the purchase of another rental property, 1500-04 West Farwell, by another group of investors organized by Olsen to form a second limited partnership. In this case Olsen already owned the property but wished to transfer ownership of the property to the newly formed limited partnership, of which he was the sole general partner. The second and third transactions, which were originally ...

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