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Lustig v. Horn

June 09, 2000


Appeal from the Circuit Court of Cook County. No. 98 M2 399 Honorable Consuelo E. Bedoya, Judge Presiding.

The opinion of the court was delivered by: Justice Hartman

Plaintiff Sheldon M. Lustig (Lustig), an attorney, brought suit for breach of contract against defendant Isaac Horn (Horn), seeking to recover compensation from Horn for work performed by Lustig and other attorneys in his law firm, Lustig & Associates. Lustig also sought compensation from Horn for the fees and costs incurred by Lustig and his firm in collecting the money owed Lustig by Horn. Horn counterclaimed for declaratory judgment, alleging, inter alia, that his retainer agreement with Lustig was void. Following a bench trial, the circuit court awarded Lustig $6,410.03. Horn appeals, claiming that the retainer agreement drafted by Lustig was void and unenforceable.

On February 17, 1998, Lustig brought suit, sounding in breach of contract and account stated, alleging that Horn failed to pay for legal services provided by Lustig's firm. In his complaint, Lustig alleged that Horn had entered into a retainer agreement with his law firm for legal services, that he and his firm had performed their obligations under the contract, and that Horn owed a balance of $21,095.32 in attorney fees. Lustig also sought "one (1%) percent per month, plus attorneys fees and costs incurred in bringing this suit." Attached to Lustig's verified complaint was a billing statement and a document entitled, "Retainer Agreement," dated January 19, 1996, and signed by both Lustig and Horn.

The retainer agreement, in pertinent part, stated that Horn "retains and employs" Lustig for representation "with regard to a mortgage foreclosure action." The retainer agreement further stated in paragraph 3:

"BILLING. Client agrees to pay all statements within ten (10) days after billing, that any statement remaining unpaid more than thirty (30) days will be subject to a one (1%) percent per month late charge and that in the event of default in payment Client will pay reasonable attorney's fees and costs incurred in collecting said amount which may be due, whether by suit or arbitration. Client authorizes Attorney or his agent to obtain and/or exchange credit reports and information on Client. Client authorizes Attorney to withdraw from any Client funds in his possession, fees and costs which have been billed to Client. Any statement not objected to in writing within thirty days from presentment will be deemed accepted and approved by Client." (Emphasis added.)

In his answer, Horn admitted that he had signed the retainer agreement and further admitted that he had accepted Lustig's legal services. Nevertheless, he denied that he owed the amount claimed. Horn also counterclaimed for declaratory judgment, alleging, inter alia, that the retainer agreement provision allowing for interest on unpaid bills, withdrawal of client funds and recovery of costs and fees relating to the collection of unpaid bills effectively "bar[red] a client from ever being able to exercise a right to contest the amount of attorney's fees claimed by the attorney *** without incurring a potential penalty of additional attorney's fees by reason of exercising the client's right to complain that the original amount of attorney's fees claimed by the attorney are unreasonable." Characterizing the retainer agreement as "oppressive," Horn sought a declaratory judgment that paragraph 3 of the retainer agreement was "void and unenforceable."

The evidence presented at trial revealed that, sometime in early 1996, Horn met with Lustig and asked him for his assistance regarding legal matters. Horn explained to Lustig that, in 1993 and 1994, he was living at 8034 N. Kenton Avenue in Skokie, Illinois, a building he owned, and was working at the Chicago Mercantile Exchange as a trader. As a result of an automobile accident in October 1993, Horn took medical leave from his job. Unable to make the mortgage payments on his home and afraid he would lose it, in July 1994, Horn sold his residence to a local real estate broker, Manijeh Bayzaee, with the agreement that Bayzaee would, after one year, sell the building back to Horn, for which Horn would pay her an additional $25,000.*fn1

As part of his agreement with Bayzaee, Horn continued to live in an apartment in the building, paying Bayzaee rent, while Bayzaee was to pay Horn monthly mortgage payments. Bayzaee, however, refused to sell back the building to Horn, and she never made any mortgage payments to him. Horn was unable to make rent payments to her and stopped paying his rent in July 1995. In September 1995, Bayzaee sought an order of possession and eviction against Horn, which was entered on January 31, 1996.

Horn, shortly thereafter, requested legal representation from Lustig regarding the order of eviction and Bayzaee's default on her mortgage. At one of their first meetings, Horn's brother-in-law, Alan Israel, also met with Lustig and, because Horn had little money, promised to pay the legal costs. However, Israel never signed a guarantee and began "backing away" from his initial promise to guarantee Horn's payment of fees. As a result, Lustig required Horn to execute the retainer agreement.

Lustig's representation of Horn involved several distinct, but related, issues. First, as a result of Bayzaee's default on the mortgage, Lustig represented Horn in a mortgage foreclosure against Bayzaee. Second, Lustig undertook an investigation of Bayzaee and her conduct to determine if she had violated any real estate laws. Third, because Horn indicated that he had never received the earnest money from sale of the building to Bayzaee, Lustig investigated the whereabouts of those missing funds, focusing on Jerome Zelden, Horn's previous attorney. Finally, Lustig attempted to forestall the eviction proceeding against Horn, who was still living in his apartment in the building.

According to Lustig, Horn was kept abreast of all the work being done in these cases. Despite his impoverished circumstances, Horn urged Lustig, and other members of the law firm, to continue their vigorous representation. As a result of the differing lines of representation and investigation, the legal fees and costs mounted. For instance, in an attempt to prevent eviction, Lustig filed on behalf of Horn two motions for temporary injunction, one in the eviction case, which was denied, and another in the mortgage foreclosure case, which was also denied.*fn2 Horn also asked Lustig to investigate thoroughly any broker misconduct and report it to the proper authorities.*fn3 According to Lustig, this "aggressive" approach was undertaken at Horn's urging.

Investigations into the missing earnest money involved "great difficulty" because Horn's previous attorney had died and many documents were missing. Likewise, the mortgage foreclosure required "extensive" third party discovery to determine the extent of Bayzaee's misconduct, involved numerous court dates and was sharply opposed and unusually contentious. Ultimately, however, Horn was successful in the mortgage foreclosure, obtaining a judgment of $53,358.40.*fn4

Despite Lustig's success in obtaining a judgment for Horn in the foreclosure case, Horn had not been paying his legal bills. According to Lustig, with the exception of an $18,000 payment, Horn did not pay any bills sent to him by Lustig. Although Lustig attempted to "maximize" the amount of attorney's fees and costs recovered in the foreclosure case, he nevertheless advised Horn that he "would be responsible directly for all fees and costs that were incurred." According to Lustig, Horn owed him and his firm $25,223.86 in fees and costs for the foreclosure litigation; $4,261.50 in fees and costs for the eviction case; $2,996.50 in fees and costs for the earnest money investigation; and $1,011.82 in fees and costs for the broker's license investigation. In all, Lustig claimed $33,493.68 in fees and costs, exclusive of any interest or "collection" fees and costs.*fn5

Disputing the legal fees billed by Lustig, Horn claimed that, although he approved of Lustig's actions at the time, he was unaware of the increasing fees and costs. He further testified that Lustig had promised to limit his fees and costs to the amount of attorney fees awarded by the circuit court in the foreclosure case. Although Horn stipulated at trial that he had signed the retainer agreement and was not incompetent at the time, he testified that Lustig never explained that document to him and was not present when Horn signed it. Horn further denied that it was his intention to "go after" Bayzaee's broker's ...

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