Country Mut. Ins. Co. v. Birner

• Decision Date: 17 December 1997
• Docket Number: No. 3-97-0139,3-97-0139
• Citation: 228 Ill.Dec. 161,688 N.E.2d 859,293 Ill.App.3d 452
• Parties: , 228 Ill.Dec. 161 COUNTRY MUTUAL INSURANCE COMPANY, Plaintiff-Appellant, v. Donald BIRNER and American Family Mutual Insurance Company, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 859

688 N.E.2d 859

293 Ill.App.3d 452, 228 Ill.Dec. 161

COUNTRY MUTUAL INSURANCE COMPANY, Plaintiff-Appellant, v. Donald BIRNER and American Family Mutual Insurance Company Defendants-Appellees.

No. 3-97-0139.

Appellate Court of Illinois Third District.

Dec. 17, 1997.

Robert H. Jennetten, Michael J. Holt (argued), Quinn, Johnston, Henderson & Pretorius, Chtd., Peoria, for County Mut. Ins. Co.

Donald K. Birner (argued), Thomas & Birner, Pekin, for Donald Birner.

Kevin M. Miller, Hinshaw & Culbertson, Peoria, Stephen R. Swofford, Christine L. Olson, Bruce Carmen (argued), Hinshaw & Culbertson, Chicago, for American Mut. Ins. Co.

Presiding Justice LYTTON delivered the opinion of the court:

Attorney Donald Birner filed a personal injury suit on behalf of his client, Teresa Perrine, and subsequently obtained a settlement from the tortfeasor's insurance carrier, American Family Mutual Insurance Company. The settlement included payment of the full amount due to Perrine's insurance company, Country Mutual Insurance Company, as subrogee. Country Mutual refused to pay Birner for his services. Birner filed a small claims action. Country Mutual responded by filing suit for declaratory judgment against Birner and American Family, obtained a default arbitration award against American Family and requested that the court confirm the arbitration award. The two cases were consolidated in the circuit court. The trial judge found in favor of Birner and American Family and against Country Mutual. We affirm.

The claims between the parties were decided pursuant to motions for summary judgment. 735 ILCS 5/2--1005 (West 1994). A motion for summary judgment should be granted only when the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. 735 ILCS 5/2--1005 (West 1996); Wells v. Enloe, 282 Ill.App.3d 586, 589, 218 Ill.Dec. 425, 428, 669 N.E.2d 368, 371 (1996). When reviewing an order granting summary judgment, this court conducts a de novo review. Jewish Hospital of St. Louis v. Boatmen's National Bank of Belleville, 261 Ill.App.3d 750, 755, 199 Ill.Dec. 276, 281, 633 N.E.2d 1267, 1272 (1994).

On November 23, 1993, Teresa Perrine was injured in an automobile accident with a car driven by Trina Leeds. Perrine's car was insured by Country Mutual, while Leeds' vehicle was insured by American Family. Country Mutual paid her medical bills, which totalled $4400.80.

On April 7, 1994, Country Mutual sent a letter advising American Family about the payment of Perrine's medical bills, and claiming a subrogation lien. Over the next sixteen months, the companies exchanged correspondence about the subrogation claim.

On November 8, 1995, Perrine retained attorney Donald Birner pursuant to a contingency fee agreement. The next day Country Mutual sent Birner a letter, which stated in pertinent part,

"Country Mutual Insurance Company's policy provides for the right of recovery of all medical payments made on behalf of [Teresa Perrine] * * *. Country Mutual Insurance is exercising this right of recovery by pursuing it's recovery through inter-company arbitration. We are asking you to not include payments Country Mutual Insurance Company has made in any personal injury settlement."

A similar letter was sent by Country Mutual to Birner one week later.

On November 9, 1995, Birner filed suit in the circuit court Tazewell County, naming Perrine and her husband as plaintiffs and Trina Leeds as defendant. The complaint requested, among other things, recovery of the same medical expenses that Country Mutual's had paid on Perrine's behalf.

On that same day, November 9, 1995, Country Mutual initiated the arbitration process by mailing a petition with the Conference of Casualty Insurance Companies (CCIC) arbitration program. The petition named American Family as the respondent. Under the terms of the CCIC program, American Family was obliged to answer the petition in the arbitration proceedings on or before December 22, 1995. American Family did not file an answer.

On January 12, 1996, Birner wrote to Country Mutual, advising that he was involved in negotiations with American Family. Birner requested that Country Mutual reconsider its refusal to pay him for recover of the subrogation lien.

On January 22, 1996, American Family tendered two settlement checks to Birner. Check # 16007 was made payable to the Perrines, Birner and Country Company in the amount of the subrogation lien, $4400.80. Check # 16008 was made payable to the Perrines and Birner in the amount of $11,099.20. Check # 16008 was negotiated, while # 16007 was retained by Birner. After receiving these checks, the Perrines executed a release of all claims against Trina Leeds. The case against Leeds was dismissed with prejudice on January 30, 1996.

On March 5, 1996, Birner filed a small claims action in the circuit court of Tazewell County, seeking one-third of the $4400.80 subrogation payment, under the common fund doctrine. On April 30, 1996, Country Mutual filed a suit for declaratory judgment against Birner and American Family, claiming that it was entitled to rely on arbitration proceedings with respect to its arbitration claim. Country Companies also claimed that American Family had improperly compromised Country Mutual's subrogation rights by issuing a check that also named the Perrines and Birner as payees.

At the time that these lawsuits were filed, the arbitration case was still pending before the CCIC. On January 25, 1996, CCIC had written to American Family, indicating that in light of the company's failure to file an answer in the arbitration case, the case would be decided on the basis of information contained in Country Company's petition. However, not until May 6, 1996, after the settlement checks had been issued, the case against Leeds was dismissed and the lawsuits over Birner's fees had been filed, did CCIC actually mail an award letter in favor of Country Mutual and against American Family.

On October 6, 1996, the circuit court considered the parties motions for summary judgment. 735 ILCS 5/2--1005 (West 1996). After hearing the arguments of the parties, the court granted summary judgment in favor of Birner and against Country Mutual.

On November 9, 1996, Country Mutual filed a motion in the circuit court to confirm the CCIC arbitration award, pursuant to the Illinois Arbitration Act. After Country Mutual and American Family filed motions for summary judgment, the trial judge ruled that check # 16007 satisfied American Family's obligations under the lien and CCIC proceedings. The judge also ruled that under the rules of the CCIC, once the underlying lawsuit was settled, Country Mutual had an obligation to notify CCIC so the arbitration proceeding could be removed from the docket, but Country Mutual failed to so. The judge refused to confirm the arbitration award.

On appeal, Country Mutual raises three issues: (1) whether Birner was entitled to payment under the common fund doctrine; (2) whether the court erred in finding that settlement check # 16007 satisfied Country Mutual's rights and American Family's obligations under the subrogation lien; and (3) whether the circuit court erred in refusing to confirm the arbitration award.

I.

Under the well established "common fund doctrine," a lawyer who recovers a common fund for the benefit of persons other than his client is entitled to a reasonable attorney's fee from the fund as a whole. Boeing Co. v. Van Gemert, 444 U.S. 472, 478, 100 S.Ct. 745, 749, 62 L.Ed.2d 676, 681 (1980); Wolff v. Ampacet Corp., 284 Ill.App.3d 824, 827-28, 220 Ill.Dec. 601, 603, 673 N.E.2d 745, 747 (1996). The underlying justification for this rule is that if the costs of litigation were not spread among the beneficiaries of the fund, some beneficiaries would be unjustly enriched by the attorney's efforts. Wolff, 284 Ill.App.3d at 828, 220 Ill.Dec. at 603, 673 N.E.2d at 747.

To be entitled to fees under the fund doctrine, an attorney must show (1) the fund was created as the result of legal services performed by the attorney, (2) the subrogee did not participate in the creation of the fund, and (3) that the subrogee benefitted out of the fund that was created. Meyers v. Hablutzel, 236 Ill.App.3d 705, 707, 177 Ill.Dec. 310, 312, 603 N.E.2d 91, 93 (1992); McGee v. Oldham, 267 Ill.App.3d 396, 399, 204 Ill.Dec. 734, 736, 642 N.E.2d 196, 198 (1994). When these conditions exist, equity requires that fees and expenses incurred in creating the fund be apportioned among those who benefit from its creation. McGee, 267 Ill.App.3d at 399, 204 Ill.Dec. at 736-37, 642 N.E.2d at 198-99. In this case, the trial court correctly concluded that the conditions permitting an equitable apportionment were satisfied.

Nevertheless, Country Mutual asserts that under the principles enunciated Tenney v. American Family Mutual Insurance Co., 128 Ill.App.3d 121, 83 Ill.Dec. 251, 470 N.E.2d 6 (1984), it should not be required to pay Birner. In Tenney, the subrogee "expressly notified [the attorney] that he was not to collect the subrogation claim." Tenney, 128 Ill.App.3d at 122, 83 Ill.Dec. at 252, 470 N.E.2d at 7. During the circuit court proceedings in Tenney, the attorney testified that he was aware subrogee did not want him to collect the subrogation claim and would not pay him if he did so. Tenney, 128...