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Ball v. Kotter

October 18, 2010

SUSAN BALL AND JAN WITTERIED, ADMINISTRATORS OF THE ESTATE OF DONALD HEDSTROM, PLAINTIFFS,
v.
CHERIE KOTTER, THE KOTTER FAMILY TRUST, AND HOPE GELDES, DEFENDANTS.



The opinion of the court was delivered by: Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

This matter is before the Court on cross-motions for summary judgment filed by the parties. Defendant Hope Geldes ("Geldes") and Defendant Cherie Kotter ("Kotter") each moved for summary judgment against Plaintiffs [43, 47]; Plaintiffs have done the same against each Defendant [105, 106]. For the reasons set forth below, Defendant Geldes' motion [43] is granted and Plaintiffs' cross motion against Geldes [106] is denied. Defendant Kotter's motion [47] and Plaintiffs' cross motion against Kotter [105] are both denied.

I. Background

Shortly before his death, Donald Hedstrom ("Hedstrom") purchased two condominiums in Chicago's Lake Point Tower. Kotter (who was Hedstrom's ex-wife and companion at the time of his death) was Hedstrom's real estate agent and Geldes was his real estate attorney for both transactions. Although Hedstrom paid for both of the units, at the closings one of the units was titled to the Kotter Family Trust (of which Kotter is the sole trustee and sole beneficiary) and the other was titled to Hedstrom and Kotter "as joint tenants with right of survivorship." Upon Hedstrom's death, Kotter gained sole ownership of the second unit as well.

Plaintiffs Susan Ball and Jan Witteried, as administrators of Hedstrom's estate, filed a two-count complaint, alleging breach of fiduciary duty by a real estate broker (Count I) and legal malpractice (Count II).*fn1 Plaintiffs contend that the admissible evidence in this case shows that the properties were titled in a manner contrary to Hedstrom's intent. Plaintiffs argue that Defendant Geldes committed malpractice in her representation of Hedstrom, in part because she failed to disclose that she also represented Kotter in the transactions. Plaintiffs contend that Kotter breached her fiduciary duty to Hedstrom by using her position to personally benefit at Hedstrom's expense. Together, Plaintiffs argue, by breaching their duties to Hedstrom, Defendants deprived the estate of a legal interest in real property worth more than $1 million.

The Court takes the relevant facts primarily from the parties' Local Rule ("L.R.") 56.1 statements.*fn2 In July of 2006, Hedstrom decided to purchase Unit 4705 and Unit 1518 in Chicago's Lake Point Tower. As stated above, Defendant Kotter was Hedstrom's ex-wife and companion at the time of his death, and also served as Hedstrom's real estate agent for the purchase of both of the Units.

On July 26, 2006, Hedstrom retained Defendant Geldes to be his attorney for the purchase of both of the Units. Geldes sent Hedstrom two retainer letters (one for each property), both dated July 26, 2006, which memorialized their relationship and set out the scope of the representation and Geldes' fees. The letters were directed to Hedstrom alone. Hedstrom signed the letters on July 30, 2006 and returned them to Geldes. (Ex. 1 to Affidavit of Hope Geldes, attached to Geldes' memorandum in support of her motion for summary judgment ("Geldes Affidavit") [51]).

During the morning of July 26, Kotter e-mailed Geldes and told her that "He is taking title in another name. He will let me know the proper way to prepare the deed. [.] Don can not hear over a phone so I will be answering all questions for him." (Geldes Response to Plaintiffs' Statement of Additional Facts ("Geldes Resp. Pl. SOAF") [118] at ¶ 1). At around this time, Kotter also told Geldes that Hedstrom would be unavailable during the week of August 1 due to heart surgery that he was undergoing. (Id. at ¶ 2).

On July 31, 2006, Geldes sent letters to attorneys for the sellers of both Units. The letters both stated that "at closing, title for the Unit shall be conveyed by warranty deed to Mr. Donald Hedstrom." (Geldes' Response to Plaintiff's Statement of Material Facts ("Geldes Resp. Pl. SOF") [117] at ¶¶ 5, 18). Both Hedstrom and Kotter were copied on the letters via e-mail.*fn3 The same day, Hedstrom sent a strongly-worded e-mail to Geldes, which stated in part: "I have written in at least 4 documents that these 2 properties will be jointly owned by Cherie Kotter and me." Hedstrom directed Geldes to "[p]lease comply or I wll [sic] have to get another attorney." (Geldes Affidavit at Ex. 2).

The next day (August 1), Geldes responded to Hedstrom's e-mail, adding Kotter in the "Cc" field. The e-mail explained that "Cherie [Kotter] had asked me to discuss with you both, whether you wanted to own it as joint tenants with right of survivorship, tenants in common or set up a living trust." Kotter responded to Geldes' e-mail a few minutes later, directing Geldes to "put deed to [Unit 4705] in the names of Don C. Hedstrom and Cherie S. Kotter as joint tenants with rights of survivorship." Kotter did not include Hedstrom in this response e-mail. (Id. at Ex. 4). However, Kotter testified in her deposition that she discussed with Hedstrom how Unit 4705 was to be deeded and that Hedstrom used the specific words "joint tenancy with right of survivorship" to describe how he wanted the property titled between Kotter and himself. (Geldes Resp. Pl. SOF ¶ 10).

Geldes attested that shortly after receiving Kotter's instruction to title Unit 4705 to both Hedstrom and Kotter as joint tenants with the right of survivorship, Geldes had a phone conversation directly with Hedstrom in which she explained the possible title options for the Properties and the legal effect of each. (Geldes Affidavit at ¶¶ 11--15). Hedstrom explicitly told Geldes that he wanted both Properties titled with Kotter and Hedstrom as joint tenants, with a right of survivorship, because he wanted to take care of Kotter and he wanted to ensure that the Properties would pass to Kotter upon his death as he was leaving several other properties that he owned to his children. (Id. at ¶ 15).

Later that same day (still August 1), Geldes drafted a revised attorney modification letter to the seller's attorney for Unit 4705. The letter reflected Kotter's instructions in that it stated that at the closing for Property 4705, the title for the Property "shall be conveyed by warranty deed to Mr. Donald C. Hedstrom and Ms. Cherie S. Kotter, as joint tenants with right of survivorship." (Id. at Ex. 5) (emphasis in original). Geldes copied both Kotter and Hedstrom by e-mail when she sent the modification letter to the seller's attorney. (Id.; Plaintiffs' Amended Response to Defendant Geldes' Statement of Material Facts ("Pl. Resp. Geldes' SOF") [104] at ¶ 13).

Hedstrom, Kotter, and Geldes all attended the closing for Unit 4705. The deed prepared by the seller's attorney for Unit 4705 identified the "Grantees" as Hedstrom and Kotter and it contained four options regarding how the property could be jointly titled to them. (Geldes Affidavit at Ex. 6). Above the four options, the phrase "strike inapplicable" was printed. (Id.). At the closing, Kotter and Hedstrom looked on as Geldes drew lines through the options "as tenants in common," "not as tenants in common nor joint tenants, but as tenancy in the entirety," and "statutory fee simple," and handwrote in the phrase "with right of survivorship" after the phrase "not tenants in common but as joint tenants." (Pl. Resp. Geldes' SOF at ¶ 17). Geldes testified that Hedstrom verbally assented to each handwritten change. (Geldes Affidavit at ¶ 18). The deed to Unit 4705 was properly recorded and identified that the title was jointly held by Hedstrom and Kotter, with rights of survivorship.

On August 4, 2006, Geldes sent an attorney modification letter for the other unit, Unit 1518, again copying both Hedstrom and Kotter by e-mail. The letter for Unit 1518 indicated that at the closing "title for Unit shall be conveyed by warranty deed to Mr. Donald Hedstrom and Cherie S. Kotter, as joint tenants with right of survivorship." (Id. at Ex. 5). However, shortly before the closing of Property 1518, on September 14, 2006, Kotter sent an e-mail to Geldes informing her that Property 1518 was not to be titled jointly, but was to be titled to the Kotter Family Trust. (Id. at Ex. 7; Pl. Resp. Geldes' SOF at ¶ 21).*fn4 Kotter also told Geldes that Hedstrom would be unable to attend the closing for Unit 1518 and requested that Geldes draft a power of attorney giving Kotter power to assign Hedstrom's rights to Unit 1518 to the Kotter Family Trust. Geldes drafted the power of attorney.*fn5 The power of attorney reads in part "[s]uch power shall include *** assigning said property to the Kotter Family Trust *** and giving and granting unto Cherie Kotter, said ATTORNEY, full power and authority to do so." (Ex. 10 to Geldes Affidavit).

Geldes attested that she called Hedstrom to confirm the change of plan and left him a voicemail regarding Kotter's requested change. (Geldes Affidavit at ¶ 20). Geldes also faxed Hedstrom a copy of the power of attorney and sent Hedstrom and Kotter an e-mail explaining the effect that the power of attorney would have. (Id.). The September 18 e-mail reads in part: "The power of attorney assigns the rights under the contract to the Kotter Family Trust. The Kotter Family Trust will own the property not Don and Cherie as joint tenants." (Id. at Ex. 9). Hedstrom never called Geldes back to confirm the change orally, and he never responded to the e-mail. However, Hedstrom executed the power of attorney before a witness and a notary public. (Ex. 10 to Geldes Affidavit; Pl. Resp. Geldes' SOF at ¶ 31). There is no dispute that it is Hedstrom's signature on the power of attorney. (Id.).

Kotter testified that it was Hedstrom's idea for him to assign title to Property 1518 to the Kotter Family Trust because Hedstrom wanted to use the tax savings that would be available to her by doing a Section 1031 exchange with Unit 1518 based upon the sale of some other property owned by the Kotter Family Trust in Indiana. (Pl. Resp. Geldes' SOF at ¶¶ 28, 29; see 26 U.S.C. § 1031). Kotter retained a second lawyer, Mark Ewing, to prepare documents related to the Section 1031 exchange. (Plaintiffs' "Reply" to Geldes Resp. Pl. SOF at ¶ 26).

Kotter and Geldes attended the closing for Unit 1518; Hedstrom did not. At the closing, Unit 1518 was titled to the Kotter Family Trust. Kotter received a real estate brokerage commission for the purchase of the two units and used those commissions to buy furniture and to remodel the units. (Plaintiffs' Response to Kotter's ...


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