TWIN SEWER & WATER v. Midwest Bank & Trust

• Decision Date: 29 October 1999
• Docket Number: No. 1-98-2407, No. 1-99-0695.
• Citation: 720 N.E.2d 636,308 Ill. App.3d 662,242 Ill.Dec. 15
• Parties: TWIN SEWER AND WATER, INC., Mario DeBartolo and Marilyn DeBartolo, Plaintiffs, v. MIDWEST BANK AND TRUST COMPANY and Sherri Clementi, a/k/a Sherri Balaskovits, Defendants. Davidson Goldstein Mandell and Menkes, Petitioners-Appellees, v. Twin Sewer and Water, Inc., Mario DeBartolo and Marilyn DeBartolo, Respondents-Appellants.
• Court: United States Appellate Court of Illinois

720 N.E.2d 636

308 Ill. App.3d 662

242 Ill.Dec. 15

TWIN SEWER AND WATER, INC., Mario DeBartolo and Marilyn DeBartolo, Plaintiffs, v. MIDWEST BANK AND TRUST COMPANY and Sherri Clementi, a/k/a Sherri Balaskovits, Defendants.

Davidson Goldstein Mandell and Menkes, Petitioners-Appellees, v. Twin Sewer and Water, Inc., Mario DeBartolo and Marilyn DeBartolo, Respondents-Appellants.

Nos. 1-98-2407, 1-99-0695.

Appellate Court of Illinois, First District, Sixth Division.

October 29, 1999.

Donald F. Spak, Hamblet, Casey, Oremus & Vacin, Chicago, for Appellants.

Bruce Menkes, Catherine A. Van Horn, Davidson Madell and Menkes, Chicago, for Appellees.

Justice BUCKLEY delivered the opinion of the court:

Davidson Goldstein Mandell & Menkes (Davidson Goldstein) served as legal counsel to plaintiffs, Twin Sewer & Water, Incorporated, and Mario and Marilyn DeBartolo, in these consolidated cases. On March 5, 1998, Davidson Goldstein filed a motion to withdraw as plaintiffs' counsel. After the circuit court granted leave to withdraw, Davidson Goldstein asserted a retaining lien over plaintiffs' documents to insure payment of allegedly outstanding legal fees. On March 30, 1998, Davidson Goldstein filed a petition for a summary proceeding alleging the existence of both statutory and common-law liens. On May 18, 1998, the circuit court entered an order requiring plaintiffs to deposit $40,000 with the clerk of the circuit court of Cook County as security for attorney fees owed to Davidson Goldstein. Plaintiffs then filed this interlocutory appeal pursuant to Supreme Court Rule 307(a) (166 Ill.2d R. 307(a)) and maintain the following: (1) the circuit court did not have subject matter jurisdiction to consider Davidson Goldstein's petition for adjudication of the retaining lien; (2) Davidson Goldstein waived its retaining lien by representing to the trial court that it would turn over its case files to Twin Sewer's new attorneys; and (3) the trial court erred in adjudicating Davidson Goldstein's claim for attorney fees over Twin Sewer's objection, and in the absence of pleadings or a hearing. For the reasons set forth below, we reverse the judgment of the circuit court.

FACTS

Davidson Goldstein represented plaintiffs in three consolidated chancery lawsuits currently pending in the circuit court of Cook County. On March 5, 1998, Davidson Goldstein filed a motion seeking leave to withdraw its appearance on behalf of plaintiffs. On March 10, 1998, at the hearing on the motion to withdraw, defendant Sherri Clementi's (Clementi) counsel objected to the withdrawal on the ground that Davidson Goldstein had not yet complied with various discovery requests and orders. The trial court granted Davidson Goldstein leave to withdraw but conditioned withdrawal on compliance with prior document production requests by March 24, 1998.

On March 30, 1998, Davidson Goldstein filed a petition for a summary proceeding to adjudicate liens, which alleged the existence of both a statutory lien under the Attorneys Lien Act (the Act) (770 ILCS 5/0.01 et seq. (West 1992)), and a common law retaining lien. Specifically, the petition stated that Davidson Goldstein's withdrawal as counsel of record was effective as of March 24, 1998, and requested that the trial court adjudicate the firm's retaining lien so as to allow release of the case files. Clementi again objected to Davidson Goldstein's withdrawal and presented a motion for sanctions pursuant to Supreme Court Rule 219(c) (166 Ill.2d R. 219(c)), arguing that the documents subject to the March 10 order had not yet been submitted for copying. As a result, on April 1, 1998, the trial court ordered Davidson Goldstein to submit the documents for copying at Clementi's expense, and that upon submission of the documents for copying, Davidson Goldstein could withdraw as plaintiffs' counsel. According to the record, Davidson Goldstein complied with this order on April 1, 1998. The court's order also gave plaintiffs' new counsel leave to appear by April 17, 1998.

On April 17, 1998, plaintiffs' current counsel filed his substitute appearance. Then, at a hearing on April 22, 1998, he stated on the record that he was appearing for plaintiffs. As part of the proceedings on April 22, 1998, plaintiffs raised objections to Davidson Goldstein's lien adjudication petition. They claimed that Davidson Goldstein waived its retaining lien by making an appointment allowing plaintiffs' new counsel to examine the retained files and also by filing a petition asserting the retaining lien. In addition, plaintiffs also argued that it would be inequitable to allow them to pursue the retaining lien. The court responded by stating:

"[I]n fairness to the DeBartolos and to Twin Sewer & Water and in the overall interest of moving this case along without prejudice to your lien adjudication or ordering them to turn over to pay the law firm, I think that counsel should have that to file in order for him to proceed on the three cases."

Davidson Goldstein informed the court that plaintiffs owed approximately $50,000 in attorney fees. When the court asked Davidson Goldstein how much plaintiffs had already paid, it said it did not know. Plaintiffs' new counsel then questioned the amount set forth by Davidson Goldstein, but the court stated:

"I think as a practical matter, I think that [Davidson Goldstein] should prepare to turn over these files to the new attorney because, after all, they still need to have representation with regard to the merits of the case. And I don't want to get sidetracked into large delays on this case because of this question of fees."

The court ultimately entered an order on April 22, 1998, allowing Davidson Goldstein leave to respond to plaintiffs' objections to lien adjudication and arranged for Davidson Goldstein to provide plaintiffs' new counsel with a full set of its billing invoices in this litigation.

On May 18, 1998, another hearing was held. At the hearing, Davidson Goldstein informed the court that it had complied with all requested discovery. Plaintiffs' new counsel, however, pointed out that not all billing invoices had been provided. Even though Davidson Goldstein stated that plaintiffs owed at least $42,000 in unpaid attorney fees, plaintiffs' new counsel disputed this amount, arguing that not all of the billing invoices were produced and there were questions as to the propriety of some of the charges.

At the conclusion of the hearing, the court granted Davidson Goldstein's lien adjudication petition and stated:

"I'm ordering that [the plaintiffs] pay into the Clerk of the Circuit Court of Cook County the amount of 100% of the claimed amount owed. That would be $40,000 that the court has been told about here today. And this is without prejudice to an adjudication of the amount of this money.

But I think that under the Upgrade Corporation case * * * I think that this would be one way to go about this."

The trial court then requested that Davidson Goldstein turn over the case files within three days of receipt of the notice of deposit, and the court set discovery and briefing schedules on the issue of fees. Twin Sewer filed a motion to strike the petition on May 18, 1998, and then filed a motion to reconsider the May 18 order on June 11, 1998. The court denied both motions on June 25, 1998, and this timely interlocutory appeal followed.

ANALYSIS

I

Plaintiffs first contend that the circuit court lacked subject matter jurisdiction over Davidson Goldstein's petition for adjudication of the retaining lien. They argue that the circuit court incorrectly interpreted Upgrade Corp. v. Michigan Carton Co., 87 Ill.App.3d 662, 43 Ill.Dec. 159, 410 N.E.2d 159 (1980). Davidson Goldstein, on the other hand, argues that the circuit court correctly interpreted Upgrade and had the inherent authority to adjudicate the retaining lien because the documents at issue were necessary to the pending underlying litigation.

An attorney who withdraws from a case for a justifiable cause or is terminated without cause may recover compensation for services rendered. See Upgrade Corp., 87 Ill.App.3d at 664, 43 Ill.Dec. 159, 410 N.E.2d at 160. The measure of the lawyer's recovery lies in quantum meruit for the services actually rendered. See 7A C.J.S. Attorney & Client §§ 290-91, at 540-45 (1980).

Two types of liens may be asserted to obtain payment of outstanding attorney fees. A charging or special lien attaches only to the proceeds recovered in the underlying litigation, while the retaining or general lien attaches to property belonging to the client, which the attorney received during representation. Upgrade, 87 Ill.App.3d at 664,43 Ill.Dec. 159,410 N.E.2d at 161, citing Sanders v. Seelye, 128 Ill. 631, 21 N.E. 601 (1889); see 7A C.J.S. Attorney & Client § 358, at 711-13 (1980). While the Act allows active enforcement as to "any verdict, judgment or order entered and to any money or property which may be recovered, on account of such suits, claims, demands or causes of action, from and after the time of service of the notice" (770 ILCS 5/1 (West 1993)), the retaining lien has long been recognized under Illinois common law as a possessory lien in favor of an attorney for his fees (Sanders, 128 Ill. 631, 21 N.E. 601). Specifically, the retaining lien exists "`on all papers or documents of the client placed in the attorney's hands in his professional character or in the course of his employment. * * * [It is] the attorney's right to retain possession of property belonging to his client which comes into his hands * * * until his charges are paid.'" Jovan v. Starr, 87 Ill.App.2d 350, 354-55, 231 N.E.2d 637, 639 (1967), quoting Sanders, 128 Ill. at 637-38, 21 N.E. at 603, and Needham v. Voliva, 191 Ill.App. 256, 258 (1915), respective. In other words, "the retaining lien is a method of holding the client's property hostage until fees are paid." S. Kanwit, Attorneys' Liens: When Can You Retain a Client's Files?, 79 Ill. B.J....