Wilson v. Lynch & Lynch Co., L.P.A. , 99 Ohio App. 3d 760 ( 1994 )

This opinion will address the merits of two appeals, each of which has been taken from a separate final judgment of the Geauga County Court of Common Pleas. Prior to being heard, both appeals were placed upon this court's accelerated calendar docket and were consolidated for purposes of briefing and disposition.

In the first appeal, App. No. 93-G-1804, appellant Neil R. Wilson seeks the reversal of the trial court's decision granting summary judgment in favor of appellees, Sandra Davis ("Davis"), Edna Best and Robert Best ("Bests"), Matthew Lynch ("Lynch"), and Lynch Lynch Co., L.P.A.

In the second, App. No. 93-G-1814, appellees seek review of the court's judgment denying their motion for attorney fees.¹

Prior to accepting an appointment as a judge in February 1989, appellant was a practicing attorney in Lake County, Ohio. For approximately three of those earlier years, appellant represented Sandra Davis and the Bests in certain matters pertaining to the administration of the estate of Walter Best. In November 1988, Davis and the Bests decided to hire a second attorney, Lynch, to assist appellant in bringing an action against the executor of the estate. Approximately one month later, in addition to entering into a contingent fee agreement with Davis and the Bests, Lynch entered into an agreement with appellant as to the splitting of any contingent fee which might result from any action to reduce the amount of attorney and executor fees previously paid to the current executor of the estate. The terms and enforceability of this latter agreement are in dispute.

Upon receiving the judicial appointment, appellant terminated his representation of Davis and the Bests on February 3, 1989, and sent them a final bill for his hourly services. Davis and the Bests paid this bill. As a result, Lynch became sole counsel in the action against the executor.

In November 1990, Lynch negotiated a settlement of that action, under the terms of which the Bests and Davis received the sum of $350,000. However, while Lynch informed appellant of the settlement, he refused to pay appellant one-fourth of the contingent fee which appellant believed was still owed to him.

In July 1992, after voluntarily dismissing his first action against appellees, appellant filed the instant action in the Cuyahoga County Court of Common Pleas.² In both his original and amended complaints, appellant asserted claims sounding in breach of contract and fraud. The former claim was predicated upon the following allegations: (1) in December 1988, appellant had entered into a fee agreement with appellees; (2) this agreement was designed to compensate him for past legal services and future legal services pertaining to the estate; and (3) appellees had refused to pay him his share in accordance with the agreement. After the action had been transferred to Geauga County, appellees moved for summary judgment as to both claims.

As grounds for this motion, appellees primarily argued that any agreement between the parties concerning the payment of a contingent fee to appellant was unenforceable because appellant had not rendered any services subsequent to the date that he became a judge, i.e., the agreement was unenforceable because of a lack of consideration.

In his response to appellees' motion, appellant maintained that at the time Lynch was added as co-counsel, Davis and the Bests had agreed to pay appellant a part of any contingent fee which would be paid to Lynch from any recovery in the action against the executor.

Appellant further argued that this arrangement had constituted a novation of his original fee agreement with Davis and the Bests. According to appellant, the original agreement had consisted of an "understanding" in which Davis and the Bests had agreed to pay him a "fee" for "unbilled legal services" from any recovery obtained by appellant from the executor. In making this argument, appellant did not allege any specifics as to the original "fee," nor was this "fee" designated as a contingent fee.

After appellees had filed a reply brief to appellant's brief in opposition, the trial court issued its decision granting summary judgment in favor of appellees as to both the contract and fraud claims. Approximately two weeks later, appellees moved for attorney fees, arguing that appellant had engaged in frivolous conduct by bringing the action. As part of this motion, appellees requested that a hearing be held on the motion. Once appellant had responded, the trial court denied the motion without a hearing.

I In App. No. 93-G-1804, appellant has raised one assignment of error for review. Under this assignment, he contends that the trial court erred in granting summary judgment as to both the contract and fraud claims in his amended complaint because the evidentiary materials attached to his response were sufficient to raise a factual issue as to whether consideration existed for the alleged novation. This argument lacks merit.

Prior to addressing the merits of this argument, this court would note that under the contract claim in his amended complaint, appellant specifically referred to only one agreement between the parties. Accordingly, in moving for summary judgment, appellees did not attempt to distinguish between any alleged agreement involving only appellant and Lynch, or, any alleged agreement involving only appellant, Davis, and the Bests. Instead, appellees essentially argued that appellant was not entitled to recover a fee from any of them.

However, in his brief in opposition to appellees' motion, appellant asserted that when Lynch was added as co-counsel, three separate agreements existed among the parties: (1) an agreement between Lynch, Davis, and the Bests as to the contingent fee Lynch would receive for bringing a successful action against the executor; (2) an agreement between Lynch and appellant concerning the splitting of the contingency fee; (3) an agreement between appellant, Davis, and the Bests providing that appellant would receive one fourth of any contingent fee paid to Lynch in consideration for the unbilled legal services which appellant had rendered in relation to the estate. Appellant further asserted in his brief that he was entitled to recovery under both the second and third agreements.

Although appellant did not specifically refer to three separate agreements in his amended complaint, his allegations were still sufficient to place appellees on notice that his contract claim was predicated upon two different "theories" of relief. As was noted above, appellant alleged under his contract claim that appellees had agreed to pay him a portion of the contingent fee to compensate him for both past legal services and future legal services. Thus, in deciding whether summary judgment should have been granted on the contract claim, this court will address both theories.

In moving for summary judgment as to the contract claim, appellees' position was that the basic fee-splitting arrangement had lacked consideration in two respects: (1) appellant did not render any subsequent legal services against the fiduciary; and (2) past services did not constitute consideration.

Although appellees did not attempt to distinguish between the three separate agreements alleged by appellant, their first argument was relevant to the issue of whether the alleged agreement between Lynch and appellant was enforceable. In turn, their second argument was relevant to the issue of the validity of the alleged agreement between appellant, Davis, and the Bests.

Appellant argued in his response to the summary judgment motion that forgiveness of the unspecified fee for the past "unbilled legal services" constituted legally sufficient consideration for the novation which provided a payment of twenty-five percent of any contingent fee collected by Lynch. In support of this argument, he attached his own affidavit to his brief in opposition. This document set forth a chronological statement of the sequence of events:

"2. Affiant had a long-standing attorney-client relationship with Defendants Edna Best, Robert Best and Sandra Best (hereinafter referred to as ``the Best family') in a wide range of legal matters including financial and legal advice, individual estate planning and the preparation of documents pertaining thereto;

"3. One of the legal matters for which the Best family consulted [appellant] pertained to their dissatisfaction with the handling of the Estate of Walter Best by the Estate's fiduciary;

"4. An understanding existed between [appellant] and the Best family that when monies were recouped from or on behalf of the fiduciary of the Estate of Walter Best as a result of the fiduciary's misfeasance or malfeasance, [appellant] would be entitled to a fee from that specific recovery for unbilled legalservices provided to the Best family over a period of yearspertaining to the estate;

"* * *

"7. The letters of 12-01-88 and 12-15-88 constitute a contract containing three separate and distinct agreements;

"8. One of the agreements was a novation of the oral contract [appellant] had with the Best Family regarding payment of legalfees on a contingent fee basis for the recovery of fundswrongfully paid to the fiduciary of the Estate of Walter Best * * *." (Emphasis added.)

Considered as a whole, the averments in appellant's affidavit alleged that at some unspecified point prior to the date upon which Lynch was retained as co-counsel, he had reached "an understanding" with Davis and the Bests that should actual litigation result over the issue of excess executor and attorney fees, he would be paid a fee³ from the recovery for "unbilled legal services."

Section four of appellant's affidavit makes it clear that the only source for fees for these "unbilled services" would be money recouped from the fiduciary in this regard. Further, it is evident that these past "unbilled services" were of a general nature in relation to the estate, rather than services or litigation specifically relating to the issue of a reduction of any excess executor and attorney fees charged by the fiduciary.

Appellant's averments further alleged that after it became apparent that appellant might be appointed to the bench and thus would not be able to continue to represent Davis and the Bests in that action, that these same appellees had subsequently agreed, in the alleged unwritten novation, to pay appellant acontingent fee for these "unbilled" legal services from any recovery generated by Lynch against the fiduciary. Appellant described this as a novation of an earlier fee agreement, the consideration for which was the forgiveness of any fee due for the earlier "unbilled legal services."

In relation to the issue of Lynch's individual liability, this court would first note that even if valid, any such contract or novation which appellant had with the Bests and Davis would not extend and be enforceable against Lynch solely on the basis of the above underlying debt. Appellant's debtors as to those earlier "unpaid legal services" were the Bests and Davis, not Lynch.

Any claim to be made directly against Lynch by appellant had to result from an agreement between Lynch and appellant which had to be supported by independent consideration of some kind. As to this particular prong of appellant's contract claim, appellee Lynch did not contest the existence of a fee-splitting agreement between himself and appellant; instead, he asserted that the consideration of appellant's future services as co-counsel was contemplated but never provided. Thus, this agreement was no longer enforceable because appellant did not render any compensable services as co-counsel with Lynch after this agreement was reached.

In support of this argument, appellees emphasize that any "services" actually performed by appellant were only those which any attorney would be legally bound to do upon withdrawal from a case, pursuant to DR 2-110(A)(2) of the Code of Professional Responsibility.

In response to this argument, appellant asserted that the agreement between himself and Lynch was still enforceable because, even though he did not perform any work on the action against the executor before he withdrew from the case, he had always been ready to assist or cooperate with Lynch in pursuing the action against the executor.

However, R.C. 4705.01 specifically states that a judge cannot engage in the practice of law during his tenure on the bench. Therefore, even if Lynch had sought appellant's assistance while negotiating the settlement to the action, appellant could not have provided such assistance beyond that contemplated under DR 2-110(A)(2). Under such circumstances, appellant's assertion that he "stood ready to help" would not constitute sufficient consideration supporting the agreement between himself and Lynch.

In relation to the issue of Lynch's liability, this court would note that appellant did not advance any theory in reference to Lynch's status as holder of the money in question. His only claims against Lynch sounded in fraud and contract. If appellant had remained as co-counsel of record long enough to have rendered some legal services and to have maintained some responsibility for the case, there would be no real issue that appellant and Lynch would have had a valid and enforceable legal contract between them to split the fee. DR 2-107(A).

Case law in Ohio and elsewhere supports the proposition that because of its nature, a contingent fee arrangement need not have the same proportionate relationship to the work actually performed as would an hourly fee.

That was not the case, as appellant never functioned as co-counsel and, in fact, voluntarily withdrew from the case long before any recovery was generated; therefore, no obligation existed on Lynch's part to share the contingent fee under appellant's theory of a fee-splitting agreement. We see a distinct difference between no work being done and some work being done. Thus, the portion of the summary judgment referencing Lynch's liability on the contract is affirmed.

As to the alleged agreement between appellant, Davis, and the Bests, appellees primarily maintained that appellant's evidentiary materials had not been sufficient to raise a factual issue as to the existence of the pre-novation "understanding" or "agreement" contract concerning the payment of a fee for unbilled legal services.

Specifically, appellees contended that for the purpose of responding to a summary judgment motion, appellant's averments in his affidavit had not been sufficient to establish that the existence of the pre-novation "understanding" or "agreement" rose to the level of a contract. That was because the averments did not establish one of the basic requirements necessary for a contract — consideration.

Based upon this, appellees further argued that although appellant's reference to past "unbilled legal services" might have raised a factual issue as to whether the services had been rendered, it did not raise an issue as to whether these services created a legal debt upon which a novation could be predicated,⁴ to wit: it did not establish that these services had value.

As a general proposition, this court would agree that the mere fact that appellant rendered "unbilled legal services" did not necessarily mean that Davis and the Bests were originally indebted to him, i.e., gratuitously rendered services cannot later be magically transformed into consideration for a new debt.

Like a general contract, a contract of novation must be supported by sufficient consideration to be enforceable. 18 Ohio Jurisprudence 3d (1980) 213, Contracts, Section 290. The courts of this state have consistently held that if one party is already indebted to the second party, the release or forgiveness of that prior debt constitutes sufficient consideration to support a novation. See, e.g., McGlothin v. Huffman (1994),94 Ohio App.3d 240, 640 N.E.2d 598.

Thus, if appellant's affidavit were sufficient to raise a factual issue as to whether Davis and the Bests had been indebted to him for these "unbilled legal services," summary judgment would not have been appropriate.

As was noted above, appellant averred in his affidavit that at some point prior to the addition of Lynch as co-counsel, an "understanding" had been reached between himself, Davis, and the Bests that they would pay him a fee for the "unbilled legal services" he had rendered through the years in relation to the estate. When interpreted in a light most favorable to appellant, this averment was sufficient to raise a factual issue as to the existence of both offer and acceptance. Moreover, this court would agree that appellant's reference to "unbilled services" raised an issue as to whether such "unbilled legal services" were performed as claimed.

Nevertheless, our review of the relevant case law in this state indicates that in order to establish that the "unbilled legal services" constituted a debt, such that its forgiveness constituted consideration sufficient to support the novation, appellant also had to show that the "fee" contemplated in theoriginal agreement was reasonable in light of the "unbilled legal services" rendered. In reviewing appellant's evidentiary materials, we conclude that appellant failed to carry his burden as to this factual issue in responding to appellees' summary judgment motion.

In reaching this conclusion, it is important to remember that the original agreement did not specify a contingent fee. An attorney seeking the recovery of attorney fees in a noncontingent fee situation must demonstrate that the value of the services rendered bears some relationship to the resulting fee. Put another way, in order to carry his burden of proof, the attorney must present some evidence that these "unbilled legal services" had value sufficient to constitute consideration for the client's promise to pay. The attorney must establish the "fairness and reasonableness" of the fee. Hermann, Cahn Schneider v. Viny (1987), 42 Ohio App.3d 132, 537 N.E.2d 236;Fox Assoc. Co., L.P.A. v. Purdon (1989), 44 Ohio St.3d 69,541 N.E.2d 448; DR 2-106, Code of Professional Responsibility.

In relation to the issue of which party has the burden of establishing a fee's fairness and reasonableness, the Sixth Appellate District has held:

"1. Prior to employment and the formation of the fiduciary relationship between attorney and client, compensation for services rendered by the attorney may be fixed by contract; and, in the absence of fraud or overreaching, the contract will be enforced without the attorney showing it is fair and reasonable.

"2. After the establishment of the fiduciary relationship between attorney and client, the attorney has the burden to establish the fairness and reasonableness of his fee." Jacobs v.Holston (1980), 70 Ohio App.2d 55, 434 N.E.2d 738, paragraphs one and two of the syllabus.

In its determination that the burden of establishing the reasonableness of a fee switches to the attorney if a fiduciary relationship between the attorney and the client has already been established, the Jacobs court cited to both the common law and the Code of Professional Responsibility. In relation to the latter, the court stated that "a court of law should not lend its support to the enforcement of a contract which may violate a Supreme Court Disciplinary Rule."Id., 70 Ohio App.2d at 60, 434 N.E.2d at 742.

In Jacobs, the plaintiff-attorney was granted summary judgment on his claim for attorney fees. On appeal, the Sixth Appellate District held that summary judgment was warranted because the attorney had not submitted any materials showing the reasonableness of the fee. The court emphasized that a mere conclusory statement in the attorney's affidavit was not sufficient to raise a factual issue as to this point. See, also,Franken v. Ungaro (June 18, 1988), Mahoning App. No. 86 C.A. 181, unreported, 1988 WL 67522.

In interpreting Civ.R. 56, this court has held that in responding to a defendant's motion for summary judgment, a plaintiff must submit evidentiary material as to each factual issue upon which he will have the burden of proof at trial.Pasqualone v. Strauss (Dec. 17, 1993), Lake App. No. 92-L-174, unreported, 1993 WL 548468, citing Wing v. Anchor Media, Ltd. ofTexas (1991), 59 Ohio St.3d 108, 570 N.E.2d 1095.

Given that an attorney must submit evidential material tending to show the reasonableness of his fee in order to be granted summary judgment, it follows under Pasqualone that an attorney must satisfy this same burden in responding to a defendant's summary judgment motion.

In this case, appellant's evidentiary materials indicated that a fiduciary relationship existed between himself, Davis, and the Bests when the underlying pre-novation fee agreement was reached. However, appellant failed to designate in his materials the value of a single specific instance of a legal service rendered or legal expertise provided under the original agreement. A general recitation of "[p]hone conversations, research, file review, meetings, * * *" without offering some corresponding claim as to value was simply inadequate to raise a factual issue as to whether such a fee in relation to such services was "fair and reasonable," thus constituting legal consideration which would establish a debt.⁵

In any other type of noncontingent fee dispute, appellant would have had to put forth an itemized list of services rendered and time spent before the client would have been required to present evidence challenging the fairness and reasonableness of the fee claimed. No merchant suing on an account would survive a summary judgment exercise with the statement, "I sold them some merchandise of unknown quantity and value for which they owe me some money. I know it was like the other merchandise I sell, but I can't specifically remember what it was." This ability to only "generally" recollect, rather than tospecifically recollect even one instance, is insufficient to establish a debt.

In summation, this court concludes that although appellant may have presented sufficient materials to raise a factual issue as to the existence of the prior "unbilled legal services," he did not carry the simple burden on the issue of whether thevalue of such "unbilled legal services" was sufficient to create a debt, the forgiveness of which would constitute sufficient consideration for a subsequent novation. Under such circumstances, the trial court did not err in granting summary judgment in favor of Davis and the Bests as to the contract claim.

In addition to appellant's breach-of-contract claim, appellees also moved for summary judgment as to his claim of fraud. While appellant testified to his belief that Lynch had engaged in fraudulent behavior, he was unable to testify to or present any evidentiary material setting forth the elements of fraud. Thus, he failed to demonstrate that any of the appellees had engaged in fraudulent behavior. In fact, appellant's affidavit did not contain any averment as to this particular claim.⁶

Despite appellant's protests to the contrary, we do not perceive the trial court's analysis to have been a "weighing of the evidence." Rather we see it as a matter of determining the sufficiency of appellant's submissions, particularly in light ofWing. Did appellant establish that legal services were rendered in the original fee arrangement and that those services had value such that they created a debt, the forgiveness of which would have constituted consideration for the subsequent novation? We think not. Thus, we do not agree that the trial judge acted as a factfinder, but rather pursued his proper role here as a determiner of the law.

Pursuant to the foregoing analysis, this court concludes that appellant's evidentiary material was insufficient to withstand summary judgment on the breach-of-contract claim, as well as the fraud claim. Thus, the decision of the trial court is affirmed.

II In App. No. 93-G-1814, appellees have raised one assignment of error for consideration. Under this assignment, appellees contend that the trial court erred in failing to hold an evidentiary hearing prior to ruling upon their motion for attorney fees. Specifically, they maintain that under R.C. 2323.51(B), the trial court was required to hold an oral hearing on the motion.

R.C. 2323.51(B)(1) provides that a trial court may award reasonable attorney fees to any party that was adversely affected by frivolous conduct during the course of an action. Subsection (B)(2) of the statute then states that such an award can be made only if the court does all of the following: (a) sets a date for a hearing on the motion for attorney fees; (b) gives notice of the hearing date to the parties and counsel; and (c) conducts the hearing and allows the parties the opportunity to present evidence on the matter.

In interpreting these requirements, this court has emphasized that R.C. 2323.51(B)(1) does not state that a hearing must be held whenever a motion for fees has been timely filed; instead, the statute provides that an award "may be made" if the procedural requirements have been met. Based upon this reasoning, we have held that a hearing is not required when the trial court denies the motion on its face. Cregar v. Ohio EdisonCo. (Jan. 11, 1991), Trumbull App. No. 89-T-4316, unreported, 1991 WL 1579. This holding was evidently predicated upon the proposition that if the motion is based solely upon facts which are already known by the trial court, a hearing is not needed if the court has determined that the facts do not support a finding of frivolous conduct, as a matter of law.

As grounds for their motion in this case, appellees maintained that the filing of the instant action constituted frivolous conduct because appellant's claims were not warranted under the existing law. This type of argument was clearly one which the trial court could fully review without benefit of a hearing. Thus, pursuant to the foregoing authority, appellees' sole assignment is without merit.

III Pursuant to the foregoing analysis, the judgments of the trial court in case Nos. 93-G-1804 and 93-G-1814 are affirmed.

Judgments affirmed.

JOSEPH E. MAHONEY, J., concurs.

FORD, P.J., concurs in part and dissents in part.

¹ For the sake of clarity, Wilson will be referred to as "appellant" throughout this opinion, even though he is the appellee in App. No. 93-G-1814. The Bests, Davis, Lynch, and the company will be referred to collectively as "appellees." If it is necessary to refer to the Bests, Davis, or Lynch individually, their proper names will be used.

² Prior to rendering its final judgments in this case, the trial court ordered that the record in the first action between the parties be incorporated into the record of this case. Thus, not only were the various filings in the first action before the trial court when it granted summary judgment in favor of appellees in this case, but those filings are a part of the entire record before this court. Our review of these documents indicates that the first action, which was brought in Geauga County, was voluntarily dismissed by appellant approximately one month before the instant action was filed in Cuyahoga County.

³ This section of the affidavit specifies only a "fee," not a "contingent fee."

⁴ In replying to appellant's brief in opposition to the summary judgment motion, appellees did not contest the fact that appellant, Davis, and the Bests had entered into a fee agreement at the time that Lynch was added as co-counsel. In fact, appellees' evidentiary materials implicitly supported the existence of this particular agreement, in that Lynch did not deny that he had initially set aside one fourth of the contingent fee to give to appellant.

However, appellees argued that the consideration for this agreement was to have been appellant's participation as co-counsel in the litigation, i.e., appellees denied that this agreement was a novation.

⁵ The only reference to the specifics of these unknown legal services is found in appellant's deposition of November 29, 1991 at pages 111-112:

"Q. Okay. Can you tell me what those services were that you say you recollect that you did — performed during this period that are not reflected on the invoices?

"A. I can't remember specifically now.

"Q. Can you remember generally?

"A. Phone conversations, research, file review, meetings. You know, there were — there were a lot of them showing up on the billing statements, but I think there were — they were not showing up on the billing statements, too, I mean, I just wasn't billing everything here during this period of time."

⁶ Appellant's depositions have many references to appellant's opinion that fraudulent behavior was involved. However, he never sets out the elements of fraud.