Opinion ID: 1980772
Heading Depth: 1
Heading Rank: 4

Heading: The Relationship Between the Parties as Affecting Sexton's Defenses

Text: Sexton argues that its obligation cannot be separated from XL Disposal's agreement to pay Blair for legal services. In effect, Sexton says it stepped into XL Disposal's shoes and assumed a direct contractual obligation to Blair. Therefore, Sexton says it can challenge the legality of XL Disposal's agreement to pay Blair as, for example, one for excessive legal fees, though it was not a party to it. That particular argument is premised on the role this court plays in policing attorney discipline in Illinois. The court is duty-bound to guard against the collection of excessive legal fees, both contingent and fixed. (See In re Teichner (1984), 104 Ill.2d 150, 161, 83 Ill.Dec. 552, 470 N.E.2d 972; see generally 107 Ill.2d R. 2-106 (prohibiting the collection of an illegal or excessive fee).) Sexton is implicitly relying on the notion that that duty should not be any less because the fee issue happens not to arise in a more familiar context like a disciplinary proceeding. It bears noting that Sexton did, in fact, file a complaint with the Attorney Registration and Disciplinary Commission against Blair on the fee issue, but no action was taken against Blair and the investigation was closed. Blair argues that Sexton's obligation is distinct from his previous agreement with XL Disposal. That is, Sexton's promise to pay Blair was but a component of its contract payment to XL Disposal for the Laflin Street facility assets. It makes no difference, Blair says, that the consideration was in the form of monthly payments directed to him. To support the respective contentions, the parties point to the different language of the asset sale contract and the addendum. The asset sale contract obligated Sexton to assume the liability of XL Disposal as to XL Disposal's agreement with Blair. But the addendum states only that Sexton had agreed to pay Blair and to be bound by all the terms and conditions of XL Disposal's agreement with him, though the amount was modified. In short, the parties see the case as turning on whether the phrase assume the liability in the asset sale contract means more than the phrase agree[] to pay in the addendum. The point certainly figures in the disposition of this case. However, what must first be settled is Blair's status with respect to the asset sale contract between XL Disposal and Sexton. As already noted, the addendum stating Sexton's promise to Blair, whatever its nature, was made a contract term. The term conferred upon Blair, who was not a party to XL Disposal's and Sexton's contract, a direct benefit: monthly payments from Sexton. That made Blair a third-party beneficiary of the asset sale agreement. Third-party beneficiary status is determined against the contract and the circumstances surrounding the parties at the time of its execution. ( Carson Pirie Scott & Co. v. Parrett (1931), 346 Ill. 252, 258, 178 N.E. 498.) Illinois follows the intent to benefit rule; that is, third-party beneficiary status is a matter of divining whether the contracting parties intended to confer a benefit upon a nonparty to their agreement. (See, e.g., Bates & Rogers Construction Corp. v. Greeley & Hansen (1985), 109 Ill.2d 225, 232, 93 Ill.Dec. 369, 486 N.E.2d 902; see generally J. Calamari & J. Perillo, Contracts §§ 17-3, 17-4, at 693-702 (3d ed. 1987) (noting that the intent to benefit test avoids the distinction between donee and creditor beneficiaries); see also Restatement (Second) of Contracts § 302 (1981).) The asset sale contract and the addendum it incorporates as a term plainly show Blair to be an intendedas opposed to an incidental third-party beneficiary of the asset sale contract between XL Disposal and Sexton. That makes Sexton the promisor with respect to Blair and XL Disposal the promisee. By way of its counterclaim, Sexton sought to end the payments to Blair and to recover payments made. The question in this appealwhether Sexton's counterclaim can survive Blair's section 2-619 motion to dismisstakes the form of what defenses Sexton, as promisor, may assert against Blair, the intended third-party beneficiary. The counterclaim's alleged bases were, again, in substance, the affirmative defenses Sexton had raised in answer to XL Disposal's complaint. The first of the grounds depended upon XL Disposal's relationship with Blair: that XL Disposal's agreement to pay Blair was fraudulent; that it involved excessive legal fees; and that the payments were part of an illegal lobbying contract or constituted a perpetual one. But Sexton also looked to its own relationship with Blair: Sexton alleged that Blair was really being paid for lobbying efforts as Sexton's attorney and that the arrangement involved excessive fees and was otherwise a perpetual contract.