Coughlin v. SeRine

• Decision Date: 31 March 1987
• Docket Number: No. 86-1569,86-1569
• Citation: 507 N.E.2d 505,107 Ill.Dec. 592,154 Ill.App.3d 510
• Parties: , 107 Ill.Dec. 592 Terrance J. COUGHLIN, Plaintiff-Appellee, v. Dennis A. SeRINE, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

Page 505

507 N.E.2d 505

154 Ill.App.3d 510, 107 Ill.Dec. 592

Terrance J. COUGHLIN, Plaintiff-Appellee, v. Dennis A. SeRINE, Defendant-Appellant.

No. 86-1569.

Appellate Court of Illinois First District, Second Division.

March 31, 1987.

Rehearing Denied April 22, 1987.

Arnold H. Landis, Chicago, for defendant-appellant.

Carl M. Walsh, Terrance J. Coughlin, Chicago, for plaintiff-appellee.

Justice HARTMAN delivered the opinion of the court:

Defendant-counterplaintiff appeals the dismissal for failure to state a cause of action of his five-count, second amended counterclaim.

On September 18, 1984, Dennis SeRine, defendant and counterplaintiff, met with attorney Terrance Coughlin, plaintiff and counterdefendant, and engaged him for representation with respect to a stock redemption agreement between SeRine and Richard Mandell and Republic Service Bureau, Inc. ("Republic"). The stock redemption agreement provided that SeRine was to be paid $1,200,000 in periodic payments over a five year period. In consideration for those payments, SeRine agreed to transfer his 50% ownership interest in Republic to Mandell and entered into a non-competition restrictive covenant lasting for the five year payment period and applying to any state where Republic "conducted or conducts business."

SeRine apparently employed Coughlin in order to determine his rights and obligations under the contract. SeRine sought to preserve his right to the remaining $700,000 in payments under the contract which had been partially performed, but sought to avoid the covenant not to compete. SeRine paid Coughlin an initial retainer of $2,000 against which he would be billed for reasonable and necessary work at the rate of $125 per hour for inside office work and $150 per hour for work performed by Coughlin outside his office. On September 20, 1984, Coughlin allegedly mailed a letter to SeRine setting out the terms of the retainer agreement. The letter contained a clause providing for a bonus for Coughlin to be agreed upon by the parties if his employment resulted in a satisfactory solution for SeRine. Coughlin alleged that $25,000 was agreed upon in a telephone conversation between SeRine and himself on September 24, 1984, as the amount of the bonus.

Coughlin performed legal services on behalf of SeRine and in February 1985, SeRine and Republic entered into a settlement agreement whereby the non-competition clause was rescinded and SeRine granted Republic the right to prepay the balance of the contract for $450,000 rather than the $600,000 then owed. Coughlin alleged that he vigorously pursued SeRine's interests resulting in the settlement agreement. Coughlin invoiced SeRine for his fees and SeRine paid Coughlin the full amount of $10,500.

Coughlin thereafter sought payment of the alleged $25,000 bonus; SeRine refused to pay. On May 13, 1985, Coughlin sued SeRine for breach of contract and for quantum meruit and received an attorney's lien against a $50,000 payment from the stock redemption agreement which was deposited in escrow. On June 21, 1985, SeRine answered the complaint and filed a counterclaim seeking recovery of unnecessary fees already paid by SeRine to Coughlin punitive damages, and release of Coughlin's attorney's lien.

On July 3, 1985, Coughlin filed a section 2-615 (Ill.Rev.Stat.1985, ch. 110, par. 2-615) motion to dismiss the counterclaim for failure to state a cause of action, which was granted on October 4, 1985, with SeRine given 28 days to file an amended counterclaim. On October 28, 1985, SeRine filed an amended counterclaim, to which Coughlin asserted a new section 2-615 motion to dismiss. This motion was granted with leave to file a second amended counterclaim. A second amended counterclaim, essentially a repetition of the preceding pleading, was filed sounding in professional malpractice, breach of fiduciary duty, accounting, breach of contract and fraud, in separate counts and all related to the alleged charging by Coughlin of excessive fees. Coughlin filed yet another section 2-615 motion to dismiss, which was granted by the circuit court, after receiving written memoranda and hearing oral arguments. The order contained language to the effect that there was no just reason to delay enforcement or appeal from the order. On May 23, 1986, SeRine filed a motion for clarification of the dismissal order and a new counterclaim, this time seeking a declaratory ruling that the attorney's lien was invalid and unenforceable and that the escrowed property was not subject to the lien. SeRine sought an order commanding the release of the escrowed property held subject to the attorney's lien. Coughlin answered the counterclaim on June 3, 1986, and opposed the motion for clarification. Thereafter, on June 11, 1986, SeRine filed his notice of appeal to this court. Coughlin's original complaint and SeRine's subsequent counterclaim remain pending below. It is not claimed that the pending counterclaim was intended to replace the second amended counterclaim.

In reviewing the dismissal of SeRine's second amended counterclaim, all well-pleaded facts and reasonable inferences taken therefrom must be taken as admitted and true. (City of Chicago v. Loitz (1975), 61 Ill.2d 92, 93, 329 N.E.2d 208; Rothe v. Maloney Cadillac, Inc. (1986), 142 Ill.App.3d 937, 939, 97 Ill.Dec. 61, 492 N.E.2d 497; Moroni v. Intrusion-Prepakt, Inc. (1960), 24 Ill.App.2d 534, 540-41, 165 N.E.2d 346.) We must determine whether those facts as stated are sufficient, as a matter of law, to support the cause of action and permit counterplaintiff to proceed to trial.

Count I of SeRine's second amended counterclaim sounds in attorney malpractice. The malpractice claimed is based upon unnecessary services, unauthorized services, demand of a bonus for which there was no agreement, and negligence. In order to state a cause of action for attorney malpractice the countercomplaint must plead: (1) the existence of an attorney-client relationship; (2) a duty arising from that relationship; (3) a breach of that duty; (4) causation; and (5) resulting damages. (Bartholomew v. Crockett (1985), 131 Ill.App.3d 456, 465, 86 Ill.Dec. 656, 475 N.E.2d 1035; Cook v. Gould (1982), 109 Ill.App.3d 311, 314, 64 Ill.Dec. 896, 440 N.E.2d 448.) Here, SeRine has alleged facts which satisfy each of these elements, asserting that: an attorney-client relationship existed with its accompanying duties; he was overcharged by Coughlin who was under a duty not to do so; Coughlin should not have accepted the employment if it was unfamiliar to him and would require more time to perform than considered normal; Coughlin billed him for more hours than should have been required to perform the work; and he was damaged by having paid more to Coughlin than should have been necessary.

SeRine relied on the Code of Professional Responsibility and on general malpractice case law in support of his action. (87 Ill.2d R. 2-106, 6-101; Brainerd v. Kates (1979), 68 Ill.App.3d 781, 25 Ill.Dec. 315, 386 N.E.2d 586, appeal denied (1979), 75 Ill.2d 589; Rogers v. Robson, Masters, Ryan, Brumund & Belom (1979), 74 Ill.App.3d 467, 30 Ill.Dec. 320, 392 N.E.2d 1365, aff'd (1980), 81 Ill.2d 201, 40 Ill.Dec. 816, 407 N.E.2d 47.) In Rogers the court stated (74 Ill.App.3d at 472-73, 30 Ill.Dec. 320, 392 N.E.2d 1365) "While it has been held in a disciplinary proceeding that the Code of Professional Responsibility is not binding on the court, the same decision recognizes that the Canons of Ethics contained in the Code constitute a safe guide for professional conduct and an attorney may be disciplined for not observing them. (In re Taylor (1977), 66 Ill.2d 567 , 363 N.E.2d 845.) It is true that the present action is one for malpractice and not a disciplinary proceeding, but it would be anomalous indeed to hold that professional standards of ethics are not relevant considerations in a tort action, but are in a disciplinary proceeding. Both malpractice actions and disciplinary proceedings involve conduct failing to adhere to certain minimum standards and we reject any suggestion that ethical standards are not relevant considerations in each."

An attorney obviously owes his client a duty not to overcharge; exorbitant, excessive or fraudulent fees can be challenged. (People v. Kinion (1983), 97 Ill.2d 322, 332, 73 Ill.Dec. 528, 454 N.E.2d 625; 87 Ill.2d R. 2-106.) This alleged breach, therefore, is cognizable as malpractice and actionable since it literally fits the action's definition. Accordingly, the circuit court must be held to have erred in dismissing count I of the second amended counterclaim.

Additionally, the circuit court also premised its dismissal on the fact that SeRine had already paid Coughlin for his services. The payment did not constitute a waiver of Coughlin's alleged breach of duty, especially where, as here, the client alleges that he was unaware of the breach. Drake v. Becker (1973), 14 Ill.App.3d 690, 697, 303 N.E.2d 212.

Count II of the second amended counterclaim alleges a breach of fiduciary duty. A fiduciary relationship exists as a matter of law between an attorney and his client and it is incumbent upon the attorney that he exercise the utmost good faith and fairness in dealing with the client. (Drake v. Becker, 14 Ill.App.3d at 696, 303 N.E.2d 212.) Count II of the second amended counterclaim alleged that Coughlin breached his fiduciary duty to SeRine by: billing SeRine for legal services which were unnecessary to the handling of SeRine's case, thereby unlawfully profiting; overcharging fees; and seeking a bonus not agreed upon. The cause of action for breach of fiduciary duty was adequately pleaded; its dismissal by the circuit court was error.

The circuit court dismissed SeRine's count IV sounding in breach of contract. The allegations for the cause of action assert the existence of a contract between Coughlin and SeRine with the agreement for payment set forth in the invoices submitted by the...