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Susan Ball and Jan Witteried v. Cherie Kotter

March 22, 2012

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



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

MEMORANDUM OPINION AND ORDER

Plaintiffs Susan Ball and Jan Witteried ("Plaintiffs") sued Defendants Cherie Kotter, the Kotter Family Trust, and Hope Geldes, alleging breach of fiduciary duty by a real estate broker and legal malpractice. In an order entered on October 18, 2010 [141], this Court granted Defendant Geldes's motion for summary judgment and dismissed her from the case. The Court concluded, however, that disputed issues of material fact precluded the entry of summary judgment on Plaintiffs' claim against Defendants Kotter and the Kotter Family Trust (collectively, "Kotter"). Before the Court are cross motions by the remaining parties for reconsideration of the Court's order denying summary judgment as to the claim against Kotter and renewed cross motions for summary judgment [152, 161], as well as the parties' pretrial motions [163, 165-171, 173-74, 176-77]. For the reasons set forth below, the Court grants Kotter's cross motion for reconsideration and for summary judgment [152], denies Plaintiffs' cross motion for reconsideration and for summary judgment [161], and denies the parties' pretrial motions [163, 165-171, 173-74, 176-77] as moot.

I. Background

A. Factual Background*fn1

In July of 2006, Donald Hedstrom decided to purchase two condominium units in Lake Point Tower in Chicago, Illinois -- units 4705 and 1518. Cherie Kotter, Hedstrom's ex-wife and his companion at the time of his death, was his real estate agent for both transactions. Hedstrom also retained attorney Hope Geldes to represent him in both transactions.

On July 26, 2006, in response to Geldes's attempts to reach Hedstrom, Kotter wrote Geldes an e-mail in which she stated that Hedstrom would be taking title to the two units "in another name," and that he would let Kotter know the proper way to prepare the deed. In this e-mail, Kotter stated that Hedstrom "cannot hear over a phone so I will be answering all questions for him." (Geldes Resp. to Pls' SOF ¶ 4.)

On July 31, 2006, Geldes sent a contract modification letter to the attorney of the seller of unit 4705. In her letter, Geldes wrote that "[a]t closing, title for Unit shall be conveyed by warranty deed to Mr. Donald Hedstrom." (Geldes Resp. to Pls' SOF ¶ 5.) Geldes sent a similar letter to the attorney for the seller of unit 1518, also stating that "[a]t closing, title for Unit shall be conveyed by warranty deed to Mr. Donald Hedstrom." (Pls' Resp. to Geldes Mot. for Summary Judgment, Ex. 2.) Geldes sent a copy of both letters to Kotter and Hedstrom by e-mail.

In response to the modification letters, Hedstrom sent Geldes a strongly-worded e-mail instructing Geldes to title both units in his and Kotter's names jointly. Hedstrom stated that he had written in at least four different documents that the two units would be jointly owned by Kotter and himself. If Geldes refused to title the units according to his instructions, Hedstrom stated, he would have to find another lawyer. On August 1, 2006, Geldes responded to Hedstrom's e-mail with an e-mail of her own, sent to both Hedstrom and Kotter. In this e-mail, Geldes stated that Kotter had asked Geldes to discuss with Kotter and Hedstrom the options for taking title jointly, including owning as joint tenants with right of survivorship, tenants in common, or setting up a living trust. Shortly thereafter, Kotter e-mailed Geldes directly -- without including Hedstrom -- and stated that unit 4705 was to be titled to Hedstrom and Kotter as "joint tenants with rights of survivorship." (Pls' Amend. Resp. to Geldes SOF ¶ 12.) That same day, Geldes sent a revised modification letter to the seller's attorney for unit 4705 in which Geldes stated that, "[a]t closing, title for Unit shall be conveyed by warranty deed to Mr. Donald

C. Hedstrom and Ms. Cherie S. Kotter, as joint tenants with right of survivorship." (Pls' Amend. Resp. to Geldes SOF ¶ 13.)*fn2 Again, Geldes sent a copy of the letter to Hedstrom and Kotter by e-mail.

Geldes testified that at some point after she sent the revised modification letter, she had a telephone conversation with Hedstrom directly, during which she explained the possible title options for the two units and the legal effect of each option. According to Geldes, during this conversation, Hedstrom explicitly told Geldes that he wanted both units titled with Kotter and Hedstrom as joint tenants, with a right of survivorship. Geldes testified that Hedstrom said that he wanted the units titled in this way because he wanted to take care of Kotter and he wanted to ensure that the two units would pass to Kotter upon his death as he was leaving several other properties that he owned to his children. (Pls' Amend. Resp. to Geldes's SOF ¶ 15.) Plaintiffs object to all of this testimony based on the Illinois Dead-Man's Act, and claim that it directly conflicts with the disposition of unit 4705 in Hedstrom's will.

Geldes, Kotter, and Hedstrom all attended the closing for unit 4705. The deed for the unit, as prepared by the seller's attorney, identified the "Grantee[s]" as Hedstrom and Kotter, and it listed four options as to how the unit could be jointly titled to them. (Pls' Amend. Resp. to Geldes SOF ¶ 16.) Following the deed's instructions to "Strike Inapplicable," 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." (Pls' Amend. Resp. to Geldes SOF ¶ 17.) Although Plaintiffs' object to this testimony based on the Illinois Dead-Man's Act, Geldes testified that she made the changes to the deed in front of Kotter and Hedstrom, and that Hedstrom verbally assented to the handwritten changes as they were being made. (Pls' Amend. Resp. to Geldes's SOF ¶ 18.) The deed was recorded and identified the title as jointly held with rights of survivorship.

The titling of unit 1518 was more complex. On August 4, 2006, Geldes sent a revised modification letter to the seller's attorney, this time stating that, "[a]t 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." (Pls' Amend. Resp. to Geldes SOF ¶ 20.) Geldes sent a copy of this letter by e-mail to both Hedstrom and Kotter. On September 13, 2006, however, Kotter e-mailed Geldes instructing her that unit 1518 was to be titled to the Kotter Family Trust dated September 25, 1993. Kotter is the sole trustee and sole settlor of the Kotter Family Trust.*fn3

Geldes then prepared a power of attorney for Hedstrom to sign, with Kotter acting on his behalf.*fn4 The power of attorney stated that the power Hedstrom was giving to Kotter included "assigning [unit 1518] to the Kotter Family Trust dated September 25, 1993." (Pls' Resp. to Geldes Mot. for Summary Judgment, Ex. 2.) Geldes sent this version to Hedstrom by both e-mail and fax. In her e-mail to Hedstrom to which she attached the power of attorney, Geldes stated that, "[t]he 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." (Pls' Resp. to Geldes Mot. for Summary Judgment, Ex. 2.) Geldes called Hedstrom to confirm the change in the title for unit 1518 and left a voice message, but she never spoke to him about it directly.

Hedstrom signed the power of attorney, had it notarized, and it was faxed back to Geldes. As planned, Kotter attended the closing for unit 1518 and acted on Hedstrom's behalf. Unit 1518 was titled to the Kotter Family Trust dated September 25, 1993, and was properly recorded.

Kotter received a commission on the sale of both of the units and used the commissions to buy furniture and to remodel the units. Neither party asserts that Hedstrom lacked mental capacity, had impaired mental capacity, or was the subject of undue influence at any time. Further, Hedstrom had known for years that Kotter was a real estate agent.

On November 15, 2006, after he had closed on both units, Hedstrom executed a final will and living trust, which provided in part, "My condominium located at Unit No. 4705, Lake Point Towers, 505 North Lake Shore Drive, Chicago, Illinois 60611, shall be sold by my Trustee." (Geldes Resp. to Pls' SOF ¶ 14.) Unit 1518 is not referenced in Hedstrom's will or in any of his other estate planning documents. Upon Hedstrom's death, Plaintiffs attempted to sell unit 4705 as instructed in the will, but they were unsuccessful because of Kotter's claim to the property as Hedstrom's survivor.

B. Procedural Background

On March 19, 2008, Plaintiffs, Hedstrom's daughters and the administrators of his estate, sued Geldes and Kotter, alleging attorney malpractice and breach of fiduciary duty, respectively. Specifically as to Kotter, Plaintiffs assert that: (1) as Hedstrom's real estate broker, Kotter had a fiduciary duty to represent the interests of her client, (2) Kotter breached her fiduciary duty by using her position as a broker to take title to units 4705 and 1518 in her name and in the name of the Kotter Family Trust, and (3) as a result of the breach, she deprived Hedstrom's estate of a legal interest in property worth more than $1 million. Plaintiffs contend that the admissible evidence in this case shows that the units were titled in a manner contrary to Hedstrom's intent.

On October 18, 2010, the Court ruled on the parties' cross motions for summary judgment. [See 141.] Before it reached the merits of the parties' motions, the Court determined that the Illinois Dead-Man's Act barred evidence of conversations that Geldes and Kotter had with Hedstrom or events at which Hedstrom was present unless and until Plaintiffs introduce testimony concerning the same conversation or event. [141 at 11, 13.] Accordingly, in ruling on the parties' motions, the Court did not consider (1) Geldes's testimony that she confirmed in an August 1, 2006 phone conversation that Hedstrom intended to deed unit 4705 to both Hedstrom and Kotter as joint tenants with the right of survivorship, (2) his reasons for doing so, (3) or statements at the closing during which Hedstrom approved the changes to the deed. Nor did the Court consider Kotter's statements that (1) Hedstrom specifically instructed her to tell Geldes to title unit 4705 as "joint tenancy with right of survivorship," and (2) Hedstrom authorized her to communicate to Geldes that Hedstrom wanted unit 1518 to be titled in the name of the Kotter Family Trust.

The Court then granted Geldes's cross motion for summary judgment and denied Plaintiffs' cross motion against Geldes. [141 at 20.] The Court found that the absence in the record of expert testimony was fatal to Plaintiffs' claim against Geldes, and dismissed her from the case. As to Plaintiffs' claims against Kotter, the Court first determined that because Kotter was a self-interested fiduciary in the real estate deals, a presumption of fraud exists. The Court pointed out that the presumption is not conclusive and "may be rebutted by clear and convincing evidence of good faith," see Kirkruff v. Wisegarver, 697 N.E.2d 406, 411 (Ill. App. 4th Dist. 1998), but it concluded that unresolved factual disputes precluded summary judgment for either party. [141 at 23.]

In its order, the Court did not address how its grant of summary judgment in Geldes's favor affected the admissibility of Geldes's testimony under the Dead-Man's Act as to Plaintiffs' claim against Kotter. Nor did Kotter argue in her summary judgment filings that, notwithstanding the Dead-Man's Act, Geldes should be allowed to testify as to the communications that she ...


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