Maksym v. Loesch

• Decision Date: 10 September 1991
• Docket Number: No. 90-2607,90-2607
• Citation: 937 F.2d 1237
• Parties: Walter P. MAKSYM, Jr., Plaintiff-Appellee, v. Dolores LOESCH, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1237

937 F.2d 1237

Walter P. MAKSYM, Jr., Plaintiff-Appellee, v. Dolores LOESCH, Defendant-Appellant.

No. 90-2607.

United States Court of Appeals Seventh Circuit.

Argued May 31, 1991.

Decided July 23, 1991.

Rehearing Denied Sept. 10, 1991.

Joseph M. Williams, St. Charles, Ill., for plaintiff-appellee.

William J. Harte, Herbert Stride, Stride & Associates, Chicago, Ill., for defendant-appellant.

Before CUDAHY, POSNER and RIPPLE, Circuit Judges.

POSNER, Circuit Judge.

This is a suit for breach of a contract between a lawyer and his client. Federal jurisdiction is based on diversity of citizenship, and Illinois law governs the substantive issues. The district judge granted summary judgment for the lawyer, awarding him $83,000 in damages (we round off all dollar figures to the nearest $1,000). The client's appeal raises some surprisingly fundamental issues concerning contracts for retaining lawyers.

Fred Loesch, a well-to-do businessman, died in 1978, survived by Dolores Loesch, who was his second wife and is the defendant and appellant in this case, and by two daughters by his first marriage. He left two wills, an earlier one leaving the estate to the daughters and a later one leaving it to Dolores. At Fred's wake, Dolores was served with process by the daughters, who had decided to contest the will. Shortly afterward she hired the plaintiff, attorney Walter Maksym, to be her "counsel in all matters relative to the estate of [Fred Loesch]." The contract retaining Maksym, which he drafted in the form of a letter from her to him, and which she signed, goes on to provide that, as compensation for "the customary legal services to be rendered to me as the personal representative of the above estate," Maksym shall be entitled to a fee of 2.5 percent "of the total fair market value of the probate estate." The first $5,000 of the fee is to be paid upon Dolores's appointment as executrix, and the rest in three subsequent installments ending when the estate is closed. The contract further provides "that in addition to the above services, additional and extraordinary compensation may be necessary for the following extraordinary services." A list follows which includes the defense of the will contest. For these additional services Dolores agrees to pay Maksym at a rate of $100 per hour over and above the 2.5 percent of the estate's value. Finally, the contract states that "if for any reason I [Dolores] shall not be successfully appointed as executor of the estate ..., any compensation for any of the above services rendered on my behalf shall then constitute a personal obligation of mine payable at the hourly rate provided for above, and may not constitute an obligation of the estate."

Maksym represented Dolores Loesch both in her individual capacity and as executrix of her husband's estate for three years in a variety of matters. These included the sale of businesses that Fred Loesch had owned, the defense of the will contest brought by the daughters, and the defense of Dolores against both a fraud suit brought by a customer of one of the businesses and a constructive-trust suit brought (and won) by the daughters, charging Dolores with embezzling assets of the estate.

In 1981 Dolores Loesch discharged Maksym because she thought he was moving too slowly in selling one of Fred's assets. She had paid Maksym only $10,000 toward his fee. For his services to the estate, the probate court awarded him $31,000 in 1986. It also set aside the second will, the will that left everything to Dolores, as having been procured by her use of improper influence over her husband, who was mentally incompetent when he signed the will. In re Estate of Loesch, 134 Ill.App.3d 766, 89 Ill.Dec. 680, 481 N.E.2d 32 (1985).

The estate was valued at almost a million dollars, which under the contract with Dolores made Maksym's fee for the "customary legal services" that he rendered to her in her capacity as executrix $24,000. To this he added his hourly billings for the extra services rendered (for example in the will contest)--$102,000--for a grand total of $126,000 to which he claimed entitlement under the contract. Dolores Loesch refused to pay, and in 1988 Maksym brought this suit in an Illinois state court, which Dolores, having become a citizen of Florida, removed to the federal district court in Chicago. Her defenses were twofold. First, the contract was unenforceable, because of fraud in either the execution or in the inducement, or on other grounds. Second, the contract did not extend to services that Maksym had rendered to Dolores in her personal capacity, as distinct from her capacity as executrix of Fred's estate. Therefore Maksym was limited to his alternative claim in quantum meruit for the value of those services--a claim that as it happened was (she argued) barred by the statute of limitations. The district judge rejected these defenses, finding this easier to do because Dolores's counsel had failed to comply with Rule 12(m) of the U.S. District Court for the Northern District of Illinois. That rule requires the party opposing a motion for summary judgment to state separately and with supporting documentation his disagreement with any factual assertions in the motion, on pain of having the asserted facts deemed admitted. Subtraction of the $10,000 that Maksym had received from Dolores and the $31,000 that he had received from the estate yielded (after minor adjustments) the $83,000 that the district court awarded him, precipitating this appeal.

We have approved strict enforcement of Rule 12(m) repeatedly. Appley v. West, 929 F.2d 1176, 1179 (7th Cir.1991) (per curiam); Skagen v. Sears, Roebuck &amp Co., 910 F.2d 1498, 1500 (7th Cir.1990); Bell, Boyd & Lloyd v. Tapy, 896 F.2d 1101, 1103 (7th Cir.1990); Herman v. City of Chicago, 870 F.2d 400, 404 (7th Cir.1989). Dolores Loesch's appellate counsel concedes that her trial counsel (who was from a different firm) failed to comply with the rule. The failure is puzzling. Not only is the attorney in question an experienced Chicago practitioner, but it was he who chose to litigate this case in federal court by removing it from the state court in which Maksym had filed it. At argument Loesch's appellate counsel told us that the reason for the failure to comply with the rule was that trial counsel had delegated the preparation of the memorandum in opposition to Maksym's motion for summary judgment to an inexperienced associate. Needless to say, that is no defense; the district judge was therefore on solid ground in deeming the facts that Maksym had asserted in the motion for summary judgment to be admitted.

Among those facts are that Dolores Loesch knew that she signed the contract to retain Maksym, that the contract provided for retention of Maksym as her counsel in both her capacity as executrix and her individual capacity, and that the $100 an hour billing rate in the contract was proper for a lawyer of Maksym's experience. The first admission scotches Mrs. Loesch's claim (a claim that is not a little ironic in light of the outcome of the will contest) that Maksym had slipped the contract in among a bunch of other papers without telling her what it was and that she signed it without knowing what it was, thinking it routine. Had he done this it would have been fraud, all right--fraud in the execution of the contract, Belleville National Bank v. Rose, 119 Ill.App.3d 56, 59, 74 Ill.Dec. 779, 781, 456 N.E.2d 281, 283 (1983); 1 E. Allan Farnsworth, Farnsworth on Contracts Sec. 4.10 at pp. 402-03 (1990). But the claim that he did this is barred by the violation of Rule 12(m). It is also inconsistent with the uncontested facts concerning when Maksym received the papers that he allegedly slipped the retainer agreement in among--it was after Mrs. Loesch signed it.

Of course, she might have known what she was signing yet have been induced to sign it by fraud. But of this there is no evidence. Her counsel tries to plug this gaping hole in his case by arguing that because lawyers are fiduciaries all contracts between lawyers and their present or even prospective clients are presumptively fraudulent if the lawyer benefits from the contract. As no one enters into a contract without hope of benefit, this argument if accepted would make all lawyers' contracts presumptively unenforceable. We should not lightly assume that the Illinois courts intend so fell a consequence of the fiduciary principle.

What is true is that a lawyer is a fiduciary of his client and that a fiduciary is presumptively barred from self-dealing at the expense of the person to whom he stands in a fiduciary relationship. For the application of this principle to lawyers, see Franciscan Sisters Health Care Corp. v. Dean, 95 Ill.2d 452, 465-66, 69 Ill.Dec. 960, 966, 448 N.E.2d 872, 878 (1983); In re Imming, 131 Ill.2d 239, 256, 137 Ill.Dec. 62, 69, 545 N.E.2d 715, 722 (1989); Anderson v. Sconza, 179 Ill.App.3d 202, 206, 128 Ill.Dec. 263, 266, 534 N.E.2d 445, 448 (1989); Coughlin v. SeRine, 154 Ill.App.3d 510, 515, 107 Ill.Dec. 592, 596, 507 N.E.2d 505, 509 (1987); Durr v. Beatty, 142 Ill.App.3d 443, 449, 96 Ill.Dec. 623, 628, 491 N.E.2d 902, 907 (1986). Had Maksym bought assets from Fred's estate at a profit to himself, or (as in the Franciscan Sisters case) drafted a will of which he was a beneficiary, he would have a lot of explaining to do. The presumption that self-dealing in the course of a fiduciary relationship is indeed a form of fraud--usually called "undue influence," perhaps to emphasize that fiduciaries are held to a higher standard than other contracting parties--can be rebutted, but the fiduciary must present clear and convincing evidence that the terms of the transaction were fully disclosed and that the transaction was supported by adequate consideration. Franciscan Sisters Health Care Corp. v. Dean, supra, 95 Ill.2d at 465, 69 Ill.Dec. at 966 448 N.E.2d at 878; Durr v. Beatty, supra, 142 Ill.App.3d at...