Greenberger, Krauss & Tenebaum v. Catalfo

10/31/97

1-96-1417)
1-96-1418)
1-96-1481)
1-96-1482) Cons.

GREENBERGER, KRAUSS & TENENBAUM (Now Known as )
Schwartz, Cooper, Greenberger, and Krauss), )
)
Plaintiff-Appellee, ) Appeal from the
) Circuit Court of
v. ) Cook County.
)
BETTY CATALFO, )
)
Defendant-Appellant. )
------------------------------------------------)
JAMES J. MOYLAN and ASSOCIATES, LTD., )
)
Plaintiff-Appellee, )
)
v. )
)
BETTY CATALFO, )
)
Defendant-Appellant. )
------------------------------------------------)
GREENBERGER, KRAUSS & TENENBAUM (Now Known as )
Schwartz, Cooper, Greenberger, and Krauss), )
)
Plaintiff-Appellant, )
)
v. )
)
BETTY CATALFO, )
)
Defendant-Appellee. )
------------------------------------------------)
JAMES J. MOYLAN and ASSOCIATES, LTD., )
)
Plaintiff-Appellant, ) Honorable
) Wayne D. Rhine,
v. ) Judge Presiding.
)
BETTY CATALFO, )
)
Defendant-Appellee. )

PRESIDING JUSTICE HARTMAN delivered the opinion of the court:
Plaintiffs, the law firms of Greenberger, Krauss & Tenenbaum
and James J. Moylan and Associates, Ltd., sued defendant, Betty
Catalfo (Betty), for attorneys' fees she incurred during their
representation of Betty's son, Anthony Catalfo (Anthony), in
several related legal matters. A jury found for plaintiffs and
awarded Stephen Senderowitz, of the Greenberger firm, $37,678 in
attorneys' fees, and James Moylan $22,634 in attorneys' fees. On
appeal, Betty argues that plaintiffs' claims are barred by the
statute of frauds (740 ILCS 80/1 (West 1994)), and contends that
the circuit court committed errors before and during trial, which
prejudiced her and warrant a new trial. In their cross-appeal,
plaintiffs dispute the circuit court's denial of their joint motion
for prejudgment interest on their original fee award, as well as
attorney's fees.
Plaintiffs' separate complaints alleged that they each were
retained by Betty to represent Anthony after he and another trader
made a series of improper trades at the Chicago Board of Trade
(CBOT), which caused millions of dollars in losses to others. They
alleged that Betty promised to pay each for the legal services they
rendered on behalf of her son, which she later refused to honor.
Count I of each complaint set forth a claim for breach of contract;
count II of both sought damages for an account stated; and each
count III stated a claim for quantum meruit. In her answers, Betty
admitted paying plaintiffs a retainer fee, but denied promising to
pay the remainder of Anthony's legal bills; however, she did not
set forth the statute of frauds as an affirmative defense in these
pleadings.
The circuit court granted Betty's motion to consolidate the
two cases for discovery and trial. After the parties completed
discovery, Betty moved to continue the trial and for summary
judgment, asserting that defendants could not recover from her
based upon application of the statute of frauds. The court denied
Betty's summary judgment motion and scheduled the case for trial.
Betty thereafter filed affirmative defenses, invoking the statute
of frauds. She twice moved to continue the trial, claiming she had
recently undergone dental work that prevented her from traveling to
Chicago from her home in New York, supported by a letter and an
unsworn affidavit from her prosthodontist, noting that she could
not travel for twelve to sixteen weeks. The court granted her
first motion for continuance on that basis from a trial set for
October 5, 1995; however, it denied her second motion and set the
case for trial, after speaking by long distance telephone with both
Betty and her doctor. The court placed on the record the fact that
Betty was able to communicate and be understood and that the doctor
thought her problem was essentially cosmetic. The trial was held
on December 7, 1995, in her absence.
Moylan and Senderowitz testified at trial that their
representation of Anthony began in October 1992, shortly after his
first and only day as a futures trader in the United States
Treasury Bond pit at CBOT. He deposited approximately $30,000 of
his own money into a trading account, and a clearing broker agreed
to cover his transactions, which was limited to trading the amount
of his deposit. Although this amount would have allowed him to
make about 10 trades, he and his friend, Darrell Zimmerman, placed
hundreds of trades valued at millions of dollars, far beyond their
authorized limits. Anthony made more than $1.5 million in profits
that day, but Zimmerman lost money, and the clearing broker had to
pay more than $9.5 million to cover the trades.
Several criminal, civil, and administrative actions were
brought against Anthony and Zimmerman. The brokerage house
initiated an arbitration proceeding, seeking to recover its loss.
The CBOT brought a disciplinary action for violation of its rules.
The Commodities Futures Trading Commission began investigating the
case in anticipation of federal administrative action. Lastly,
after a federal criminal investigation, a federal grand jury
indicted Anthony for committing commodity fraud and wire fraud.
At trial of the instant consolidated cases, evidence was
adduced revealing that after the trading spree occurred, Moylan,
who specializes in securities and commodities law, received a
telephone call from an attorney and former colleague named Jerry
Martin, whose partner, John Sutter, was an attorney for the Catalfo
family. Martin asked Moylan to represent Anthony. Sutter then
called Moylan, represented himself as Anthony's attorney, and
promised that Anthony would be in touch with Moylan. Because
Moylan specialized in civil matters, he asked Senderowitz, who was
experienced in commodity criminal litigation, to assist him. A few
days later, both attorneys met with Anthony, who signed separate
written representation and fee agreements, in which Anthony agreed
to pay each attorney a $10,000 retainer. Without written
representation authority signed by Anthony, neither attorney could
appear on his behalf before the administrative bodies or courts.
The attorneys soon learned that Anthony could not pay the
retainer fees. They advised him that they could not represent him.
Anthony then told plaintiffs that his mother, Betty, who lived in
New York, would retain them and would pay the attorneys' fees. In
November 1992, Senderowitz went to New York and met with Betty,
over a period of seven hours, in Sutter's office, and at her home.
She asked for the details relating to the case. She inquired about
his and Moylan's qualifications and experience. Senderowitz asked
about her ability to pay attorneys' fees. He told her that she
would have to give each attorney a retainer check if she wanted
them to represent Anthony, as well as future payment arrangements
that would be needed to proceed further. Betty agreed and gave
Senderowitz two checks, one payable to him and the other to Moylan,
each in the amount of $10,000. She assured Senderowitz that she
had sufficient assets to cover attorneys' fees.
Plaintiffs worked on Anthony's case and, after their billing
amount exceeded the retainer fees, they began sending Anthony
monthly billing statements; he was living with his mother and they
believed he would give her the bill, but they received no response
from either party. The attorneys represented Anthony at the
arbitration hearing in April 1993, at which Anthony and Zimmerman
were found jointly liable for $9.5 million to the brokerage house.
In June, Moylan issued a final billing statement to Anthony and
Betty in the amount of $22,634.10, and Senderowitz sent a final
bill to them for $37,678.77.
Moylan and Senderowitz testified that they each spoke with
Betty numerous times during this period of representation. Moylan
had at least three conversations with Betty, during which he
explained the status of the case and the strategies he was
considering. During these conversations, Betty assured him she
would pay for his services. When Senderowitz met Betty in New
York, she asked him to keep her informed, and he later wrote her a
detailed letter explaining the progression of the case. He also
spoke with her by telephone on several other occasions. Moylan did
not ask Betty to sign a written agreement because she was not his
client, and he did not want "to put a chill on that relationship by
turning it into some kind of commercial relationship." He sent
Anthony the billing statements rather than Betty because he was the
client and he did not want to breach the attorney-client privilege
with Anthony. Anthony was living with Betty most of this time.
Likewise, Senderowitz felt no need to obtain a written agreement
from Betty because she was not his client, and he knew she could
afford to pay him. Senderowitz generally did not ask his civil law
clients to sign retainer agreements, although he usually did so
with his criminal law clients.
After Senderowitz and Moylan finished testifying, plaintiffs
introduced evidence of the retainer fees Betty paid, their billing
statements, and the letter Senderowitz wrote to Betty. The court
read to the jury an admission by Betty that it was she who paid
other attorneys to represent Anthony at his criminal trial and the
appeal from his criminal conviction. The defense presented no
testimony, but introduced several exhibits before resting its case.
The circuit court denied the parties' motions for a directed
verdict and submitted the case to the jury, which returned a
verdict in favor of plaintiffs, awarding Moylan $22,634.10, and
Senderowitz $37,678.77. As to each plaintiff, the jury was asked
to answer a special interrogatory: "Do you find that the agreement
between the plaintiff *** and the defendant Betty Catalfo was the
promise to pay the debt of another person?" to which the jury
answered "no" in each case. The court thereafter severed the two
cases and entered a separate judgment for each plaintiff. Betty
unsuccessfully moved for judgment notwithstanding the verdict, or
a new trial, pursuant to section 2-1202 of the Code of Civil
Procedure. 735 ILCS 5/2-1202 (West 1994). The court also denied
plaintiffs' post-trial motion for pre-judgment interest, attorney's
fees, and costs incurred in litigating the case. The parties
appeal and cross-appeal the denials of their motions.
Betty's notice of appeal also seeks review of the circuit
court's denial of her summary judgment motion; however, after a
subsequent evidentiary trial, a previous order denying a motion for
summary judgment is neither appealable nor reviewable on appeal,
since the denial of the motion is merged into the trial
proceedings. Costa v. Keystone Steel & Wire Co., 267 Ill. App. 3d
683, 688, 642 N.E.2d 908 (1994); Cedric Spring & Associates, Inc.
v. N.E.I. Corp., 81 Ill. App. 3d 1031, 1033, 402 N.E.2d 352 (1980).
Consideration of her appeal, therefore, will be limited to the
circuit court's order denying her post-trial motions.
I
Betty argues first that the circuit court erred in denying her
post-trial motions because plaintiffs' claims against her are
unenforceable under the statute of frauds. When reviewing the
denial of a motion for judgment notwithstanding the verdict, the
evidence must be assessed in the light most favorable to the
opponent, and a determination made as to whether it so
overwhelmingly favors the moving party that no contrary verdict
could stand. Pedrick v. Peoria & Eastern Railroad Co., 37 Ill. 2d 494, 510, 229 N.E.2d 504 (1967); Hollembaek v. Dominick's Finer
Foods, Inc., 137 Ill. App. 3d 773, 780, 484 N.E.2d 1237 (1985). In
ruling on such a motion, the court may not weigh the evidence or
the credibility of the witnesses; rather, it may only consider
evidence, and inferences drawn from it, in the light most favorable
to the party resisting the motion. Maple v. Gustafson, 151 Ill. 2d 445, 453, 603 N.E.2d 508 (1992). The court may not enter a
judgment notwithstanding the verdict "if there is any evidence ***
demonstrating a substantial factual dispute, or where the
assessment of credibility of the witnesses or the determination
regarding conflicting evidence is decisive to the outcome." Maple,
151 Ill. 2d at 454.
The statute of frauds provides that a party may not bring an
action based on one's promise to pay the debts of another unless
that promise is in writing. 740 ILCS 80/1 (West 1994). A promise
to pay for the debt of another, which is not both written and
signed by the promisor, has been held unenforceable either at law
or in equity. Hartbarger v. SCA Services, Inc., 200 Ill. App. 3d
1000, 1015, 558 N.E.2d 596 (1990) (Hartbarger); Brown & Shinitzky
Chartered v. Dentinger, 118 Ill. App. 3d 517, 520, 455 N.E.2d 128
(1983) (Brown).
The phrase "promise to pay the debt of another" has been
defined as an "undertaking by a person not before liable, for the
purpose of securing or performing the same duty for which the
original debtor continues to be liable." Hartbarger, 200 Ill. App.
3d at 1015. Such a promise is within the scope of the statute of
frauds unless it is part of an original and independent agreement
and is based upon new consideration. In the absence of such an
agreement and consideration, the promise is collateral, and is void
unless in writing. Moshier v. Kitchell & Arnold, 87 Ill. 18, 20
(1877) (Moshier); Brown, 118 Ill. App. 3d at 519.
Plaintiffs argue that Betty's promise is outside the scope of
the statute because it is an original, rather than a collateral,
promise. Whether a promise is original and independent is a
question for the trier of fact. Moshier, 87 Ill. at 21. In the
present case, the undisputed evidence at trial entitled the jury to
believe that Anthony and plaintiffs first entered into an agreement
for legal representation and payment of fees, but plaintiffs almost
immediately learned that Anthony could not pay for such
representation and told him they could not perform their
contractual services unless they were paid. It was then that
Anthony referred them to his mother, Betty, who was informed of
this impasse. As earlier recounted, following a lengthy interview,
during which Senderowitz discussed with her the case, plaintiffs'
proposed representation, including their qualifications, and the
projected fee expenses to be incurred by their representation,
Betty expressed her willingness to have plaintiffs represent
Anthony, to pay those expenses, and revealed the adequacy of her
assets to pay their bills. After speaking with Betty, Senderowitz
verified with Betty's business attorney, Sutter, her ability to pay
for the legal services to be rendered. Betty issued two $10,000
retainer fee checks, one made out to Moylan and the other to
Senderowitz. There is no evidence in the record of Betty having
represented to plaintiffs that she would pay their fees only if
Anthony did not or could not, as would be the case in a surety or
guaranty situation.
The issue of whether a promise is collateral or original
involves the intent of the parties, which requires an analysis of
the facts and circumstances in each case. Here, after learning
that Anthony could not pay the fees to be incurred by plaintiffs'
representation of him, they advised him that they could not perform
their part of the agreement. It was only after a new arrangement
with Betty, described above, in which plaintiffs and Betty sought
information about each other's "qualifications and ability to
perform legal representation and the ability to pay" for it, that
plaintiffs embarked upon defending Anthony. The factfinder was
entitled to conclude that this agreement was not Betty's promise to
pay the debt of Anthony, but a promise to pay a debt she had then
originally incurred. The jury specifically answered a special
interrogatory to that effect. This conclusion is bolstered by the
fact that Betty also paid other attorneys for legal representation
in Anthony's criminal matters.
Betty's reliance upon Moshier in this regard is misplaced.
There, an attorney who was responsible for representing a client
formed a new law firm. After services were performed by the
attorney, the newly formed law firm sought payment of fees from the
client. Because the new law firm had no fee agreement with any
party in the case, unlike the present case, its claim for fees was
found unenforceable. Here, the evidence shows a refusal to go
forward under the agreement with Anthony and a new agreement with
Betty, with the payment by her of retainers and her promise to pay
future fee incurment.
Also to be considered as one of the pertinent circumstances is
the personal relationship between the parties. In several
jurisdictions, courts have held that the statute of frauds did not
bar enforcement of a parent's oral promise to pay for an attorneys'
representation of an adult child. See Annotation, Applicability of
Statute of Frauds to Promise to Pay for Legal Services Furnished to
Another, 84 A.L.R. 4th 994, 1021-24 (1991). Among the cases set
forth in this annotation is Pomeroy v. Paterson, 40 Ill. App. 275
(1891), holding that a jury instruction was properly refused which
asserted that when an attorney was initially employed by a son,
whose father had no further interest than that of a parent, the
son's antecedent agreement rendered unenforceable any oral promise
by the father to pay for the services. The court also held, by
implication, that a new arrangement, based upon the father's credit
when shown by the evidence, would support a verdict awarding
attorney's fees upon the father's oral promise.
The doctrine of complete performance also applies here. The
doctrine provides that where one party completely performs a
contract, the contract is enforceable and the statute of frauds may
not be used as a defense to enforcement. Meyer v. Logue, 100 Ill.
App. 3d 1039, 1043, 427 N.E.2d 1253 (1981); Mapes v. Kalva Corp.,
68 Ill. App. 3d 362, 368, 386 N.E.2d 148 (1979). The rationale for
this rule is that when one party performs all his obligations in
reasonable reliance on the contract, the other party will not be
permitted to utilize the statute of frauds to avoid her
obligations. The statute of frauds is inapplicable in such
circumstances, because a party's full performance constitutes
strong evidence that a contract existed. Meyer, 100 Ill. App. 3d
at 1043.
In the present case, plaintiffs' performance of their part of
the agreement under these facts proved the existence of a contract
with Betty for the payment of their services. Accordingly, the
circuit court was justified in denying Betty's motion for a
judgment notwithstanding the verdict.
II
Betty alternatively raises several claims of trial error,
arguing that she is entitled to a new trial. Betty does not assert
that either Moylan or Senderowitz did not perform their obligations
under their oral argeement with her, or that their work was
substandard, or that their fees or expenses exceeded their
agreement.
First, the circuit court is alleged to have abused its
discretion in denying defendant's efforts to continue the date of
trial. A motion for continuance is committed to the sound
discretion of the circuit judge and, unless there is an abuse of
that discretion, the decision will stand. Bethany Reformed Church
of Lynwood v. Hager, 68 Ill. App. 3d 509, 511, 386 N.E.2d 514
(1979); Sinram v. Nolan, 227 Ill. App. 3d 241, 243, 591 N.E.2d 128
(Sinram), appeal denied, 146 Ill. 2d 652, 602 N.E.2d 476 (1992).
When Betty's most recent motion for continuance was presented
in the case sub judice, the circuit judge telephoned both Betty and
her dentist to satisfy himself as to the bona fides of the medical
condition which she claimed prevented her travel to Chicago.
Following those telephone calls, the judge noted for the record
that he had "no trouble understanding Mrs. Catalfo" and that her
doctor gave the impression that "her problems were mostly cosmetic
in nature." Further, the court observed, "I don't know why she
couldn't travel." The court exercised its discretion and denied
Betty's motion for yet another continuance. That denial was not
arbitrary, was well within the court's sound discretion, and will
not be disturbed on appeal. Sinram, 227 Ill. App. 3d at 243.
Betty next claims that the jury's finding of an agency
relationship between Moylan and Senderowitz was against the
manifest weight of the evidence. Betty did not challenge their
relationship in the circuit court nor is there any record reference
to support her argument. Betty presented nothing to contradict the
proposition that Senderowitz contracted with Betty for both himself
and Moylan to represent her son. The evidence demonstrates that
when Senderowitz traveled to New York to meet with Betty, he was
also negotiating on Moylan's behalf. She was informed that the
various criminal, civil and administrative forums in which
Anthony's matters were pending required representation by more than
one attorney, with distinct but complementary areas of expertise.
That two separate retainer checks were issued by Betty to each of
the attorneys, upon the representations and negotiations of
Senderowitz, further manifests the agency affiliation between
Moylan and Senderowitz as well as contractual relationships between
each of them and Betty. There was no error.
Lastly, Betty identifies error in plaintiffs' introduction of
evidence regarding her ability to pay their legal fees. The record
shows that when Senderowitz went to New York to meet with Betty
regarding representation of her son, he advised her of what the
financial obligation might be and, at the same time, sought to
determine whether she had the financial resources to discharge that
commitment.
Senderowitz's testimony regarding Betty's wealth served to
link her agreement to hire Senderowitz and Moylan to represent her
son with Moylan and Senderowitz's willingness to accept the
engagement, based upon Senderowitz's assessment of her ability to
fulfill her financial obligations to them.
Moylan's reference to Betty's financial wherewithal also was
in the context of Anthony's numerous unprivileged statements to
construct a "defense" for his conduct, and in his assurance that
his mother had the financial resources to cover his commodity
trading losses, no matter how large. Nevertheless, the circuit
court ultimately barred this evidence. The verdict does not
reflect any amount awarded by the jury beyond that for which there
was proof, and the outcome of the trial was not affected.
Prejudice caused by this evidence, if any, was minimal.
III
In their cross-appeal, plaintiffs contest the circuit court's
denial of their joint motion for attorney's fees and pre-judgment
interest, which they sought as sanctions against Betty. Supreme
Court Rule 137 allows sanctions against parties and their attorneys
who sign documents that are "interposed for any improper purpose,
such as to harass or cause unnecessary delay or needless increase
in the cost of litigation." (155 Ill. 2d R. 137 (Rule 137)). Rule
137 is penal in nature and its provisions must be strictly
construed. In re Marriage of Adler, 271 Ill. App. 3d 469, 475, 648 N.E.2d 953 (1995). Whether Rule 137 sanctions will be imposed is
within the sound discretion of the circuit court and a decision
will not be reversed on appeal absent abuse. Olsen v. Staniak, 260
Ill. App. 3d 856, 863, 632 N.E.2d 168 (1994); Singer v. Brookman,
217 Ill. App. 3d 870, 879, 578 N.E.2d 1 (1991). In reviewing a
decision on a motion for sanctions, the court must examine whether
(1) the decision was supported by the record, (2) the decision was
based on valid reasons appropriate to the case; and (3) the
decision followed logically from application of the reasons stated.
Olsen, 260 Ill. App.3d at 863.
Plaintiffs cite three specific examples of Betty's conduct
warranting the imposition of Rule 137 sanctions. Citing Martinez
v. Gaimari, 271 Ill. App. 3d 879, 884, 649 N.E.2d 94 (1995),
plaintiffs assert that Betty should be sanctioned for failing to
attend a mandatory arbitration hearing. The Martinez decision did
not involve Rule 137 sanctions and, in Martinez, the circuit court
upheld the arbitrators' unanimous finding that defendant failed to
participate in the hearing in good faith and in a meaningful manner
(271 Ill. App. 3d at 880); a similar finding of bad faith is absent
in the instant case.
Next, plaintiffs charge Betty with failure to raise the
statute of frauds defense until the eve of trial. Failure to plead
the statute of frauds initially as an affirmative defense in the
original answer does not necessarily constitute waiver of that
defense. Mapes, 68 Ill. App. 3d at 366. Section 2-616(a) of the
Code of Civil Procedure (735 ILCS 5/2-616(a) (West 1994)) permits
the amendment of pleadings at any time before final judgment,
"changing the *** defense or adding new *** defenses." Further,
plaintiffs were not prejudiced by the amendment of the pleadings
because the circuit court continued the trial to allow them to
prepare for the new defense.
Plaintiffs also identify assertedly constant delays caused by
the defense. It is true that Betty filed at least three motions
for continuances and the circuit court granted the motions save the
most recent; however, when the court denied her last continuance
motion, defense counsel appeared ready for trial on the scheduled
date. It cannot be said that these motions caused such delay as to
merit sanctions under Rule 137. There was no error.
For the same reasons, the circuit court's denial of
plaintiffs' motion for prejudgment interest did not constitute an
abuse of discretion. The Interest Act, 815 ILCS 205/2 (West 1994),
provides for the award of interest when money is withheld by an
unreasonable and vexatious delay of payment. The circuit court's
decision granting or denying such an award is discretionary and
will not be reversed on appeal absent abuse. See Bank of Chicago
v. Park National Bank, 266 Ill. App. 3d 890, 900, 640 N.E.2d 1288
(1994). Here, plaintiffs offer no basis for being awarded this
interest other than defendant's alleged "incessant and fully
documented delaying tactics." Betty raised legitimate argument in
her summary judgment motion and at trial relating to the existence
and enforceability of an oral contract. Her actions did not cause
such vexatious or unreasonable delay of payment as to warrant the
reversal of the court's prejudgment interest denial.
For the foregoing reasons, the circuit court's order denying
Betty's motion for judgment notwithstanding the verdict is
affirmed, and its order denying plaintiffs' motion for attorneys'
fees and prejudgment interest also is affirmed.
Affirmed.
HOFFMAN and SOUTH, JJ., concur.