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06/28/94 HELLER FINANCIAL v. JOHNS-BYRNE COMPANY

June 28, 1994

HELLER FINANCIAL, INC., A DELAWARE CORPORATION, PLAINTIFF-APPELLEE,
v.
JOHNS-BYRNE COMPANY, AN ILLINOIS CORPORATION, DEFENDANT-APPELLANT.



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. THE HONORABLE KENNETH J. GILLIS, JUDGE PRESIDING.

Petition for Leave to Appeal Denied December 6, 1994.

Scariano, DiVITO, McCORMICK

The opinion of the court was delivered by: Scariano

JUSTICE SCARIANO delivered the opinion of the court:

This appeal is actually the second one taken by the parties in this action. In the first appeal, Heller Financial, Inc. v. Johns-Byrne Company (1992), 246 Ill. App. 3d 754, 617 N.E.2d 1, 186 Ill. Dec. 762, this court affirmed a partial summary judgment in favor of plaintiff, Heller Financial, Inc.; that judgment, however, did not resolve the full amount of damages due plaintiff from defendant Johns-Byrne Company.

This action began in 1985, when Microdot Lithoplate Company entered into an agreement to lease printing equipment from P.C. Leasing Corporation, the performance of which was guaranteed in writing by defendant. P.C. later assigned its rights in the various agreements to plaintiff.

In July 1989, Microdot defaulted on the lease agreement, and as permitted by the instrument, plaintiff accelerated the payments due under the lease, demanding approximately $132,000 from Microdot or defendant. After attempts to sell the equipment failed, plaintiff filed suit against defendant to recover the full amount due under the lease. It sought, in addition, interest, penalties, attorneys fees and costs. Defendant asserted a variety of affirmative defenses to plaintiff's right to recovery, which included an alleged breach of the duty to mitigate, a charge that the contract was unconscionable, a purported waiver of plaintiff's rights under the agreement and finally, the frustration of a potential sale of the equipment by imposing unreasonable conditions on that sale. Most of these claims were struck by the court pursuant to plaintiff's motion.

Plaintiff then moved for summary judgment on the ground that the guaranty agreement rendered defendant unconditionally liable for any amount owing under the lease. In its motion, it sought interest on the amount owed at a rate of 5% as permitted by section 2 of the Interest Act. (Ill. Rev. Stat. 1991, ch. 17, par. 6402 now codified at 815 ILCS 205/2 (West 1992).) On October 17, 1990, Judge Willard Lassers granted partial summary judgment and entered an order therefor in favor of plaintiff with regard to defendant's liability arising from the agreement, stating from the bench that "there [was] no question * * * [that] there is liability for something. Now how much remains to be determined."

Before the court resolved that question, however, defendant again interposed three affirmative defenses which merely restated those which had not been previously stricken, and two new affirmative defenses or, alternatively, counterclaims. The first new claim maintainedthat plaintiff was seeking damages in excess of those it had actually suffered, and the other asserted that the lease was a security agreement governed by Article 9 of the Illinois Uniform Commercial Code (Ill. Rev. Stat. 1991, ch. 26, par. 9-101 et seq. now codified at 810 ILCS 5/9-101 et seq. (West 1992)); thus, as a sale of secured equipment, which was how defendant characterized plaintiff's acceleration of the lease payments, it had to be commercially reasonable.

On January 8, 1991, after accepting memoranda from the parties and entertaining their arguments at a hearing, Judge Lassers entered an additional partial summary judgment on this claim in plaintiff's favor in the amount of $31,797.05. His order also provided:

"that the remaining issues raised by defendant's objections to plaintiff's claim, including the proper present value discount, the proper credit for proceeds from the sale of the equipment and attorneys' fees and costs, be determined by a trial court at a future date."

The court explained that the purpose of its ruling was to arrive at the amount that was "unequivocally due and leave for the trier of fact the question of whether there may be additional sums due * * *."

Later, with an order entered on April 30, 1991, the court amended its January 8, 1991 order, with which it recalculated the amount owed plaintiff. It deducted the present value discount of the accelerated lease payments at a 13% interest rate and it added the statutory minimum pre-judgment interest rate of 5% for the term during which the sum was owing. It accordingly entered a judgment in the amount of $29,754.28 plus post-judgment interest which judgment amount was in lieu of the one entered on January 8, 1991. By this order the court also certified its order under Supreme Court Rule 304(a) (134 Ill. 2d R. 304(a)), after which defendant appealed the partial summary judgment, and which we affirmed. Heller Financial, Inc. v. Johns-Byrne Company (1992), 246 Ill. App. 3d 754, 617 N.E.2d 1, 186 Ill. Dec. 762.

While the appeal was pending, Judge Kenneth Gillis, to whom the case had been assigned for trial, heard evidence relating to those issues which remained unresolved in the summary judgment proceedings, the parties having stipulated to a number of them: (1) that the total undiscounted amount owed under the lease was $114,513; (2) that plaintiff gave proper notice of the intent to accelerate the lease on October 19, 1989; (3) that the present value of the amount owed, using a discount rate of 13%, was $104,110.58. Before beginning trial on the remaining matters, the litigants also orally stipulated that any amount to which plaintiff was entitled would be reduced by a set-off of $89,000, which was theamount to be credited to defendant as a result of the sale of the printing equipment.

According to plaintiff, the remaining issues to be tried were the legal fees and costs to which it was entitled pursuant to the "fee-shifting" clause in the lease and the amount of interest which had accrued on the outstanding rental payments; and in order to determine this amount the court would be called upon to construe a clause in the lease which provided that the interest rate on any debt would be the highest one allowed by law. Plaintiff argued before the court that since it customarily charged 1.5% per month on its receivables, the proper rate of interest under the lease should be that rate annualized, or 18%.

To prove the reasonableness of its fee petition, plaintiff presented the testimony of John Payne, one of its vice presidents, who oversaw the corporation's relationship with its outside counsel, and the billing summaries submitted each month to plaintiff for the prosecution of the instant action, which, when totalled, showed that plaintiff had paid to its legal representatives nearly $80,000. The summaries were admitted into evidence without objection.

Payne recalled that as a part of his duties, he reviewed the statements each month prior to giving his approval for payment. If he considered a charge to be improper or excessive, he would seek a reduction of the amount owed. He also stated that the corporation's general counsel had to agree with his assessment as to the reasonableness of a bill before it could be paid. Finally, Payne opined that based on his broad experience in overseeing various, and what he termed "major," law firms in Chicago, the amount billed by plaintiff's attorneys in this action was reasonable in view of the extensive services they provided.

Nathan H. Dardick, who was the lead counsel and a name partner in the law firm hired by plaintiff to represent it in this action, testified to his long and varied experience at the bar. He also gave an overview of the qualifications of the other attorneys and paralegals who worked with him on the case. He described for the court how he prepared the monthly billing summary which he sent to plaintiff, explaining that the summary was a compilation of the time sheets of the individual attorneys or paralegals who worked on the file. He attested to scrutinizing each charge made to his client before allowing it to be added to the monthly invoice. Next, he described for the court the difficulty he encountered in bringing this case to a Conclusion. He suggested that the reason the fees were so high in what should have been a relatively garden-variety collection action, was due to the "roadblocks" put up by defendant in its effort to frustrate plaintiff's attempt to secure what it was owed.

He explained his strategy with respect to the interest rate to which plaintiff contended it was entitled under the lease. He maintained that he fixed the rate at 5% in the motions for summary judgment, in memoranda and at hearings before Judge Lassers, to ensure that he could secure at least a partial summary judgment. He reasoned that defendant could not disagree with this rate since it was provided by statute, but, he insisted that the use of that rate before Judge Lassers was never intended to forego any additional interest which would be due to plaintiff under the "highest legal interest rate" clause of the lease.

Defendant countered Dardick's testimony by offering that of Terrence Coughlin, a private practitioner who served on the Chicago Bar Association's professional fees committee. He had been its vice chairman and later chairman in 1984 through 1986. The committee fields and investigates complaints from clients concerning alleged excessive fees charged by their attorneys. It also serves as an arbiter to resolve fee ...


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