HOUGE v. Patrick H. Ford, Appellant.

Reset A A Font size: Print

District Court of Appeal, Second District, Division 1, California.

Norman O. HOUGE, Plaintiff and Respondent, v. Patrick H. FORD, Helen Smith, individually and as Trustee of the Estate of Carl Hugo Johanson, deceased, Defendants.* Patrick H. Ford, Appellant.

Civ. 20460.

Decided: November 29, 1954

MacBeth & Ford, Norman MacBeth, Los Angeles, for appellant. Harry A. Daugherty, Lyman A. Garber, Beverly Hills, for respondent.

Appellant, an attorney, seeks reversal of an adverse judgment in a declaratory relief action brought against him in the court below by his client. There is little dispute concerning the facts, but the conclusions flowing therefrom present the problem at issue. For purpose of convenience, we shall generally refer to the parties as the client and the attorney.

On February 6, 1941, the client retained the attorney on a contingent fee basis for the purpose of ‘Drawing contracts and taking other necessary legal steps to protect or collect legacy of client under estate of Carl Hugo Johanson now pending in L. A. Superior Court’. The written contract executed on that date provided for a fee of 40 percent ‘of the amount recovered, preserved or protected by the legal services rendered’ and gave the attorney a lien upon all of the client's papers in his possession and ‘upon any judgment obtained or to be obtained in this matter’ as security for the fee.

A period of nine years passed before any tangible result was achieved, but during that period the attorney faithfully performed negotiations and properly exerted all necessary effort on behalf of the client. He conducted a one-day trial, and although the trial court indicated an unfavorable conclusion from the bench, the attorney was able to prevail ultimately and to have his proposed findings and judgment signed. An appeal from that judgment was taken but dismissed. The attorney thus obtained a final distribution of the estate, in which his client obtained both the right to participate as a beneficiary in the income of a testamentary trust which owned certain glove patents and approximately 51 percent of the stock of the Panama Glove Co., a corporation, and a 79% remainder interest in the stock of the Panama Glove Co. on termination of the trust. The trust was to terminate on the death of the sole surviving trustee, one Helen Smith. A stipulation leading to the closing of the estate was dated March 6, 1950.

On that date at the request of the attorney the client executed an assignment, which recited that ‘For value received, pursuant to written contract dated February 6, 1941, the undersigned, Norman O. Houge, hereby assigns, sets over, and transfers to Patrick H. Ford, forty (40) percent of all his right, title, and interest in and to the corpus and beneficial right in the trust created by the Will of Carl Johanson (L.A. Superior Court, Probate No. 191032) of which Helen Smith is now the trustee.’

Somewhat over $1,000 has been received by the attorney in fees to date. The client became dissatisfied with the sums distributed to him, and attempted to persuade the attorney to take legal action to compel the trustee to increase the income of the beneficiaries of the trust. It was alleged that the trustee, Miss Smith, controlled the Panama Glove Company and had taken no action to cause it to declare any dividends, which, had they been issued, would have come into the trust estate. For some two years, the client urged the attorney to seek an accounting from Miss Smith and, if necessary, to petition for her removal as trustee. The attorney, on the other hand, was reluctant to take such action, contending the proceeding would be unmeritorious because it would seriously diminish the small income being produced by the trust if the trustee used trust income to defend her actions. Ultimately the client insisted the attorney was obligated under their contractual relationship to proceed as he directed, but the attorney maintained then, and still does, that the legacy was fully vested by the decree of final distribution, that the contract of 1941 was therefore fully performed, and that he had no further responsibility or duty to the client. The client brought a declaratory relief suit, and prevailed in the court below. This appeal by the attorney followed.

Appellant has been unreservedly critical of the trial court's views, expressed in its memorandum opinion, concerning the contingent fee contract. The court unfortunately did comment that here the attorney ‘might conceivably receive an amount far in excess of the value of the services actually rendered’.

Measured strictly by standard professional rates, many successful contingency cases result in higher than normal legal fees. But that is not a fair test of the propriety of compensation where payment, if any, is dependent upon success. The attorney, under such a contract, may devote years of dedicated personal service, and receive nothing. He may also be underpaid, or he may be fortunate enough to be overpaid. Such uncertainty is implicit in a contingent fee contract, but it does not render the contract necessarily suspect or unfair. On the contrary, the existence of this recognized form of contract, which many lawyers use in appropriate types of cases, frequently enables a client to obtain competent legal representation although unable or unwilling to pay a cash retainer.

We cannot hold that merely because this was a contingent fee contract it was inequitable or oppressive. The issue is not the validity of the original contract, which we do not question, but performance under the contract.

The appellant next attacks the finding of the trial court that the assignment was invalid for failure of consideration and points out an inconsistency in a memorandum opinion in which the trial judge referred to only a partial failure of consideration. However, the law is clear that comments of a court, either orally from the bench or in a written memorandum, do not preclude the making and signing of contrary or conflicting findings of fact and conclusions of law. Fisk v. Casey, 119 Cal. 643, 645, 51 P. 1077; Magarian v. Moser, 5 Cal.App.2d 208, 210, 42 P.2d 385. ‘* * * it is settled’, said the court in Lord v. Katz, 54 Cal.App.2d 363, at page 367, 128 P.2d 907, at page 909, ‘that inconsistencies between the written opinion of a trial judge or his antecedent expressions and the findings of fact cannot be considered by an appellate court.’

Whether the assignment fails for want of consideration is a difficult problem. Ordinarily a written instrument is presumptive evidence of a consideration, Civ.Code, § 1614. But the relationship between attorney and client is one of strict fiduciary and confidential nature, Bradner v. Vasquez, 43 Cal.2d 147, 272 P.2d 11, and therefore the transaction is presumed to be entered into without sufficient consideration. Civ.Code, § 2235. The burden of proof rests upon the attorney to overcome the presumption that there was no consideration for the assignment. Lady v. Worthingham, 57 Cal.App.2d 557, 561, 135 P.2d 205. We do not believe the burden was met here, but whether it was or not is not determinative of the fundamental issue involved.

The assignment and the original contract cannot be divorced or considered independently. Although executed at an interval of nine years, they are clearly an integral part of one transaction, and so recognized by both parties. The instrument itself states it is executed ‘pursuant to written contract dated February 6, 1941’. And the attorney, when testifying on his own behalf in the trial, stated the client ‘was merely doing what he had agreed to do in the 1941 contract’, and again, ‘I do not claim I was entering into any different contract. He was merely doing an act which he was required to do by the February 6, 1941 contract which is recited right in the assignment.’

The basic question with which we are here concerned, then, is not the validity of the assignment, which is merely a means of paying to or collecting by the attorney of that which may become due him under the contract, but of ascertaining and defining the rights of the parties under the contract. If the contract continues to be effective, then the assignment is valid; if the contract falls, the assignment will collapse with it.

As hereinabove indicated, the contract related the attorney was engaged ‘to protect or collect legacy’, and this was done, insists the attorney, when the decree of distribution was signed. The client's interest was then protected against forfeiture. On the other hand, the trial judge held that under the terms of the contract the legacy was not collected by the decree of distribution, that the attorney had a continuing duty to collect the annual income, and that he failed to satisfy that responsibility. We agree with the court's determination.

The fact that the words ‘protect or collect’ are used in the disjunctive is not conclusive. There are many cases in which the word ‘or’ is read as ‘and’ when necessary to achieve an intelligible meaning. Arnold v. Hopkins, 203 Cal. 553, 563, 265 P. 223; Abbey v. Board of Directors, 58 Cal.App. 757, 209 P. 709; Heidlebaugh v. Miller, 126 Cal.App.2d 35, 271 P.2d 557.

While the client may have been concerned with possible forfeiture of his interest in the estate, certainly it may not be said that he sought moral or legal vindication in the form of a court decree. He wanted financial return, and was willing to yield 40 percent of it in the form of attorney's fees. It was the collection of money from the estate that was the ultimate conclusion desired, and it was this duty of collection that devolved upon the attorney.

If the attorney's work were ocnsidered to be complete upon signing of the decree of distribution, and if further proceedings were essential in order to translate the decree into tangible return in the hands of the client, the attorney's theory here would compel the client to be indebted to him for 40 percent and then engage him or other counsel at a cost of additional fees out of the remaining 60 percent. Such a result would be clearly inequitable. Dalzell v. State Bar, 6 Cal.2d 433, 57 P.2d 1300.

Appellant maintains the action demanded of him by the client was unmeritorious. Certainly, an attorney is under no obligation to undertake litigation which is devoid of merit. If he refuses to do so, he may not be divested arbitrarily of all his contractual rights with his client without cause. Zurich General Accident & Liability Ins. Co. v. Kinsler, 12 Cal.2d 98, 81 P.2d 913. However the client always has the right to control the objectives to be attained. Salopek v. Schoemann, 20 Cal.2d 150, 124 P.2d 21. In this instance we cannot construe the insistence upon an accounting and explanation from the trustee to be whimsical or capricious. On the contrary, under the circumstances related, the need for such proceeding would appear to be a reasonable correlative phase of the collecting process.

The contention of the attorney that the contract cannot be terminated because of the impossibility of restoring the status quo is not tenable. He apparently considers this a rescission action. This was, however, a suit to declare future rights under the contract. The court did not find or make an order based on invalidity of the instrument. On the contrary, finding XII reads in part: ‘That the Contingent Fee Contract, Exhibit A of plaintiff's Complaint remained in full force from its execution to the present time.’ The court's conclusion of law was that the contract ‘was breached by defendant Ford and is of no further force and effect’. Having breached the contract, as found by the court, all future rights of the attorney thereunder are terminated. De La Falaise v. Gaumont-British Picture Corp., 39 Cal.App.2d 461, 468, 103 P.2d 447. No evidence was presented at the trial that the attorney is unpaid for any sums collected pursuant to the contract, that is, that anything is due and owing for past services. Therefore judgment for the client was proper.

The judgment is affirmed.

MOSK, Justice pro tem.

WHITE, P. J., and DRAPEAU, J., concur.