JAMES BROWN v. MILTON GRIMES

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Court of Appeal, Second District, California.

JAMES L. BROWN, Plaintiff and Appellant, v. MILTON C. GRIMES, Defendant and Respondent.

B216650

Decided: January 27, 2011

The Quisenberry Law Firm, John N. Quisenberry;  Esner, Chang & Ellis, Stuart B. Esner for Plaintiff and Appellant. Munger, Tolles & Olson, Paul J. Watford and Jenny M. Jiang for Defendant and Respondent.

MOSK, J.

I concur:

KRIEGLER, J.

Grimes v. Brown

B216650

Armstrong, J.

Concurring Opinion

I concur in all of my colleagues' analysis except for the conclusion that Brown's breach of a condition not found in the written fee-sharing agreement to pay

Ross for services rendered discharged Grimes from his duty to perform under the agreement.

The problem with my colleagues' argument is that Grimes, not Brown, is guilty of breaching the fee-sharing agreement.   Grimes was obligated to handle and settle the cases and collect the fees.   The clients paid Grimes, and Grimes was then to pay Brown an amount equivalent to 40 percent of the fees less expenses.  “Grimes would then pay certain expenses and have the contractual obligation to send Brown and the Ammons firm the amounts owed them.”   (Opinion, p. 4.) This is what Grimes did with the first 13 cases that settled.   He negotiated the settlements, collected the fees and “As contemplated by the parties, Grimes, after receiving the distributions, sent Brown his 40 percent share of the fees---$1,342,000--- for the cases then settled.”  (Opinion, p. 5.). By paying this sum to Brown, Grimes discharged his contractual obligation to Brown insofar as the 13 settlements were concerned.   Grimes did not distribute any part of the $1,342,000 fees to Ross or insist that Brown was obligated to pay some of the fees to Ross under an implied term of the fee-sharing agreement.  (Ross was not a party to the agreement and his name was not included in the agreement.)

For the subsequent 53 cases that settled, Grimes, as he did with the thirteen settlements, collected the fees generated by the settlements and divided the fees according to the fee-sharing agreement.   Grimes kept his 40 percent share but withheld Browns'40 percent share, which was approximately $3,791,605.69.   Failure to distribute Brown's share was a breach of the fee-sharing agreement.   Grimes' excuse for this breach of the agreement was Ross's threatening demand for a share of the settlement fees as a reward for presenting the cases to Brown and Grimes and for working on the cases as an administrator.   Grimes believed that it was Brown's obligation to pay Ross, but Brown was adamant he had not agreed pay Ross a fee.

The situation among Grimes, Brown and Ross became tense and

Ross threatened suit.   Because of the threatened suit by Ross, and potential liabilities and fees connected with it, Grimes deposited in his trust account, over Brown's objections, Brown's share of the fees as calculated by Grimes.   Grimes deposited $3,791,605.69 into the trust account to be paid to Brown when the Ross dispute was settled.   Brown did not settle with Ross, and as long as Brown did not settle with Ross, Grimes would not release the fees to Brown, although the money belonged to Brown.   Depositing Brown's share of the fees into the trust was also a breach of the fee-sharing agreement.   The money belonging to Brown remained in Grimes' trust account.

Subsequently, Ross sued Grimes and Brown.   Grimes settled with Ross on the eve of trial.   Grimes did not contribute any of his funds to the settlement.   Instead, in breach of the fee-sharing agreement and without obtaining Brown's consent, he used $2,000,000 of Brown's funds held in Grime's trust account to fund the settlement.   Judgment in favor of Brown was entered on a complaint filed by Ross. As stated in paragraph 7 of the judgment:  “All claims previously asserted by Mr. Ross against defendant Milton C. Grimes are dismissed with prejudice pursuant to the terms of the settlement agreement reached between Mr. Grimes and Mr. Ross.” After the payment to Ross, approximately $1,791,605 remained in the trust account.   Although Grimes had no legal claim to the balance, he appropriated without Brown's consent all that remained in the trust account, thereby receiving considerably more of the total settlements than he bargained for.

Ross, as part of the Grimes-Ross settlement, accepted the $2,000,000 in full payment of his claims against Grimes and Brown.   Since the settlement and judgment extinguished Ross' claim against Brown, the implied “contract” condition that Brown pay Ross for his services was satisfied and the remaining balance, under the breach of contract analysis, should have been distributed to Brown.

ARMSTRONG, J.