Court Opinion

ID: 7012239
Source: CourtListenerOpinion
Date Created: 2022-07-24 04:10:51.131151+00
Date Added: 2024-06-11T16:10:16.026493
License: Public Domain

Mr. PRESIDING JUSTICE DIERINGER dissenting: I respectfully dissent from the majority opinion for several reasons. Throughout the proceeding in tire trial court, Earle Friedlander denied that he was a fiduciary and trustee of the partnership as a surviving partner. It was not until the case came to the Appellate Court that he finally admitted the fiduciary relationship. He made a motion in the trial court, asking the court to order that the estate had no interest in the proceeds of the partnership. The motion was denied by the late Judge James Corcoran. Friedlander then took a change of venue from Judge Corcoran, and the case was assigned to another judge. Friedlander refused to recognize the rights of the estate in contingent fee contracts, although it is well settled law. Little v. Caldwell (Sup. Ct. of Calif., 1894), 101 Cal. 553, 36 P. 107; Durham v. Lathrop (1900), 95 Ill.App. 429, citing the Little case; Denver v. Roane (1878), 99 U.S. 355, 25 L.Ed. 476 and In re Mondale and Johnson (1968), 437 P.2d 636, 150 Mont. 534 (Sup. Ct. of Montana). There can be no question that as the surviving partner, Earle Fried-lander occupied a fiduciary relationship to Barbera’s estate. (Jackson v. Jackson (1951), 343 Ill.App. 31; Altschuler v. Altschuler (1951), 410 Ill. 169.) As a result he was under a duty to account to the executor of the deceased partner for all monies received by him from the partnership (Uniform Partnership Act, Ill. Rev. Stat. 1967, ch. 106%, sec. 43; Witkowsky v. Affeld (1918), 283 Ill. 557.) Chapter 3, Section 189, of the Illinois Revised Statutes, relating to administration of estates, also provides that a surviving partner must account to the executor of a deceased partner. He was also under a corollary duty to keep clear and distinct records or have all doubts and obscurities resolved against him. Nonnast v. Northern Trust Co. (1940), 374 Ill. 248; Perry on Trusts and Trustees, 7th Ed., § 821, p. 1397: It is uncontroverted that upon Barbera’s death, Friedlander failed to keep any records which would indicate the amount of time spent on partnership cases. Friedlander testified as follows: “Q. Very well, now, Mr. Friedlander, following the date of Mr. Barbera’s death, did you keep any records in your office which would indicate in any way the amount of time spent by the various attorneys hired by you on the A-cases [cases opened before Barbera’s death], the B-cases [cases opened after Barbera’s death] and Mr. Barbera’s personal cases? A. Individually, no. You mean if I settled an A-case, who spent the time on the A-case or something like that? Q. I am asking if you have any records in which you would divide this time. A. I have no way of knowing that. Q. You have no such record, is that correct? A. No.” As a result of this failure, a review of the record shows an almost incomprehensible hodge-podge of testimony concerning the financial records of the partnership. None of these is a substitute for the accountings required under Section 43 of the Uniform Partnership Act, nor do they form an adequate basis for the judgment reached by the trial court. Friedlander first filed a statement showing that Barbera’s interest in the capital assets of the partnership as of the date of his death was $63,418.36. Later he filed an adjusted accounting showing the amount due the executor from the capital assets totaled $57,153.40. The capital account consisted of cash on hand, books, furniture and other physical assets. There were 741 cases pending which eventually yielded gross revenues and recovery of advances made of $498,401.80. Friedlander claimed expenses for the collection of this money of either $417,464.77 or $426,137.94 during the four and one-half years following Barbera’s death. The records are not adequate to be sure which figure is correct. However, the trial court accepted and allowed the larger figure, which to me is incredible. After Barbera’s death, Friedlander continued the practice of law in the same suite, and the record shows the number of new cases in each of those years was approximately the same as the number of cases opened per year before Barbera’s death in 1965. In 1961 the partnership opened 231 law cases; in 1962, 232; in 1963, 239; in 1964, 148; and in 1965, 204. In 1966 Friedlander opened 234 law cases and 97 Industrial Commission cases. In 1967 he opened 224 law cases and 94 Industrial Commission cases. In 1968 he opened 201 law cases and 74 Industrial Commission cases. The exact figures for the years 1969 and 1970 are not in the record. During that period of time he employed four attorneys, secretaries and lay people to handle the business. He says the office expense for that period of time was $426,137.44. That the court should allow all of this expense to operate Friedlander’s business and charge it against the estate for the collection of the partnership cases is, I think, completely erroneous. The figures were based on rough estimates of Friedlander because there were no records to substantiate them. In any event, they were not chargeable to the estate because Friedlander charged a fee for his services in collecting monies from the partnership cases. A lawyer by the name of Leo Wykell testified, as an expert, that he was familiar with personal injury practice, and that a lawyer of Fried-lander’s ability would earn from $20,000 to $35,000 a year, yet Fried-lander testified that during the years 1966, 1967 and 1968, he averaged $200,000 per year in compensation settlements and $250,000 per year in common law settlements, and he has the audacity to ask the estate to maintain his office and his employees during that period of time while he is earning that kind of money. As further error, I point out that the record shows the ratio of expenses to gross revenue yields before Barbera’s death of partnership business is as follows: 1961 64.31 1962 51.90 1963 56.57 1964 57.22 1/65-9/65 69.03 yet the court allowed 86% of the gross revenue to overhead. It was error for the court to award both overhead and attorney’s fees of $86,666 to Friedlander. An attorney who receives a fee from a client may not make an additional charge for his overhead, as that has to be part of his fee. There is no basis for the award of $86,666 because Mr. Friedlander was collecting his own money as well as that of the estate, and he claims one-half of the proceeds. It becomes quite obvious he therefore cannot be paid for collecting his own money but only for the services rendered the estate, which would be one-half of $86,666, assuming that to be a fair figure. The Partnership Act provides that “a surviving partner is entitled to reasonable compensation for his services in winding up the partnership affairs.” The term "reasonable compensation” suggests that the amount of compensation be based upon the services actually performed. The record in this case fails to show much effort on his part. He testified he continued to spend 75% of his time on compensation cases opened after Barbera’s death and provided no affirmative evidence of the work done on partnership cases. In addition, he continued to open approximately the same number of law cases after Barbera’s death as were opened before his death. By no stretch of the imagination is he entitled to more than one-half of the fee set by the court. I cannot accept the statement of the majority that Friedlander was held by the trial court to the highest standard of accountability. In my opinion just the opposite is true. The trial court placed the burden of proof on the estate, whereas the burden is properly on the fiduciary. (Pidot v. Zenith Radio Corp. (1941), 308 Ill.App. 197; Knights of the Ku Klux Klan v. First National Bank (1928), 254 Ill.App. 264.) I cannot conceive of how a capital account of $57,000 could be reduced to $31,000 after the collection of an additional $498,401.80 of partnership assets. I think the correct figures and computations are as follows: Total Collections of Fees and Costs Advanced Not Including Advances Included in the Capital Account..........$451,983.43 Less Amounts Advanced Both by Partnership and Earle E. Friedlander and Not Recovered...................... 32,890.96 $419,092.47 Add Value of Capital Account at Date of Joseph Barbera’s Death............................................ 114,306.80 Total Interest of Partnership...........................$533,399.76 One-half of the partnership interest of $533,399.76 is $266,699.88, which belongs to the estate, and subtracting a fee of one-half of $86,666, or $43,333.33, leaves a net due the estate of $223,266.55. As I pointed out before, the charge of the overhead cannot be allowed if he is going to get his attorney’s fee. It appears to me that $223,266.55 is the correct amount in view of the capital assets and the collections made. As of this date Friedlander has not paid one penny to the estate, although a citation was issued against him. In my opinion his conduct is a flagrant violation of his capacity as a fiduciary and trustee, and such conduct has caused this litigation. He, therefore, should be charged with all costs and expenses to the estate, plus attorney’s fees and accountant’s fees and interest. I would enter an order against him for $223,266.55 and direct the Circuit Court to conduct a hearing as to appropriate expenses, fees, costs and interest to be added to said amount. Bogert, Trusts and Trustees, § 871; Knapp v. Edwards (1883), 57 Wis. 191, 15 N.W. 140; Nonnast v. Northern Trust Co. (1940), 374 Ill. 248, 261.