Davenport v. Waggoner , 49 S.D. 592 ( 1926 )

CAMPBELL, J.

In June, 1915, the defendants, practicing attorneys in Sioux ¡Falls, entered into a contract with one C. whereby they agreed to prosecute to final conclusion a claim for damages for personal injury against the Wisconsin Granite Company upon a contingent fee, their compensation to be a sum equal to 50 per cent of the ultimate recovery; necessary expenses being first deducted. Thereafter, and in September, 19x5, the defendants entered into a subsidiary contract with one Egan, who was also at that time a practicing attorney in Sioux Palls, which contract recites defendants’ previous agreement with C., and provides that the said Egan should assist defendants in preparation and trial of said case, and that his compensation should be the one-half part of such attorneys’ fees as might be received by the defendants by virtue of their contract with C. The contract between defendants and Egan was made with the knowledge and approval of 'C. It is admitted by all parties that both contracts contemplated no fee or compensation to the attorneys, excepting a fee contingent upon ultimate success and recovery and proportionate to the amount thereof, without regard to the actual or reasonable value of services which might be rendered by said attorneys. It is further admitted by all that such contracts contemplated that the attorneys thereby retained should continue to render services in the matter to and including the final determination of C’s. case.

By virtue of these contracts Egan and the defendants prepared the case for trial, and tried the same in the lower court, where they secured a judgment for C. in the sum of $5,000. From this judgment the defendant corporation appealed to this court. Pending such appeal, after the filing of printed briefs, but before oral argument thereof, in April, 1916, Egan was disbarred. Subsequent to said disbarment, the defendants alone continued to givd the case of O. such attention as it required, including oral argument of the same in this court, appearance in this court in opposition to application for rehearing, etc., with the result that the decision of the lower court in the C. case was here affirmed, and rehearing denied. Clinkscales v. Wisconsin Granite Co., 160 N. W. 843, 38 S. D. 205. Thereafter said judgment was paid, and the defendants, pursuant to their contract with C., received repayment of certain expenses advanced 'by them, and the sum of approximately $2,553 as a contingent attorneys’ fee pursuant to their contract with C.

When defendants received this money, they promptly notified Egan of that fact, and he went to their office. Defendants told Egan that, in view of his disbarment before the case was completed, they felt there should be an adjustment between them whereby they should receive somewhat more than one-half of the total fee. Egan flatly refused to discuss, or consider, any such proposition, and stated that, if he could not have one-half of the total fee, he would take nothing, and that he would fallow! them (the defendants) what the equity of the case was.

Under these circumstances, and within an hour or two after leaving defendant’s office, Egan instituted an action against them wherein his amended complaint set out the contracts above referred to, alleged performance upon his part of the contract between himself and defendants, and sought to recover pursuant to the terms of said contract, setting up as the measure of hisi recovery certain expense money advanced by him, plus one-half of the amount received by defendants as attorneys’ fees. In other words, his complaint was based squarely upon the contract between himself and defendants, treating said contract as fully performed upon his part, and seeking full recovery according to the: terms thereof. The trial court in that action directed a verdict in favor of Egan, from which the defendants appealed, and the case was reversed in this court. Egan v. Waggoner et al., 170 N. W. 142, 41 S. D. 239.

Subsequent to the decision in Egan v. Waggoner, the present plaintiff, Danvenport, being Egan’s trustee in bankruptcy, became the party plaintiff and the complaint 'was again amended, which second amended complaint sets up the contracts of employment hereinbefore referred to; specifies what services were performed in the C. case by Egan, and what services were performed therein by defendants after Egan’s disbarment; sets out the receiving of the fee of $2,553 by defendants; and alleges that the reasonable value of the services performed -by Egan in the earning of said fee as compared with the services performed by defendants was $2,000; and seeks recovery for said $2,000, plus the sum of $73 expense money advanced by Egan. In other words, plaintiff no longer seeks to recover according to his contract, but seeks an amount considerably greater than he could have received by complete performance of the contract, apparently proceeding upon some theory of quantum meruit, but endeavoring to adopt as the measure of recovery, not the actual and reasonable value of services rendered by him, but the contingent or speculative fee of $2,553 actually received, and claiming to recover such proportion thereof as the services rendered by himself before disbarment 'bear, according to his views, to the entire services rendered by himself and the defendants, both 'before and' after his disbarment, from the beginning to the end of the C. case.

The case was tried below upon this second amended complaint, and was submitted to the jury by the learned trial judge upon a third and still different theory. He directed the jury, in subs'anee, to assume that the total fee of $2,553, which was finally received by defendants, represented the reasonable value of all legal services rendered both by Egan and by the defendants, and upon that basis directed the jury to apportion said sum of $2,553 into two parts, and determine how much was earned by Egan and the defendants prior to Egan’s disbarment, and how much was earned by the defendants alone after Egan’s disbarment. Then as to the first portion so found to be earned jointly by Egan and defendants, instead of directing a division thereof as sought by the second amended complaint in the proportion which the jury might find 'the value of the services of Egan bore to the válue of the services of defendants, the learned trial judge here departed from any theory of quantum meruit as pleaded in the second amended complaint, and returned to the contract between Eg'an and the defendants, and directed the jury to find for plaintiff for the one-half of such part of the total fee of $2,5.53 as they deteremined under the previous instruction to have been earned prior to Egan’s disbarment.

The jury found that of the total fee received $1,500 was earned by the defendants alone after Egan was disbarred, and thereupon defendants’ motion for judgment notwithstanding was denied, and judgment /was entered in favor of plaintiff for one-half of the fee apportioned by the jury to the period prior to Egan’s disbarment, plus certain expense money advanced, amounting in all to $612, from which judgment the defendants now appeal.

There is no theory of law which would justify any such recovery as was asked by respondent in this second amended complaint 'whereby respondent sought to recover a considerably larger amount than he could possibly have received if he had fully and completely performed his contract.

The contract between respondent and appellants, while subsidiary to- the contract between appellants and C., was nevertheless in its essential nature a contingent fee contract as the same is ordinarily understood, by virtue of which Egan was to render certain personal services as an attorney to the final conclusion of the C. case, and was to receive as full compensation a share of the recovery in such case. A contingent fee contract of this sort, while it is a contract for personal services, is of a somewhat peculiar nature. In the event of ultimate failure, the attorney will receive nothing for his services. In the event of ultimate success, he may, and very probably will, receive considerably more than the actual and reasonable value of such services; that is, the amount which would be charged by attorneys of similar standing in the same locality for an equivalent amount of time and work of the same sort-in a case of the same nature, where the client was to pay for services rendered whether he was ultimately successful or. not. The contract is entire and not divisible, and is speculative in its nature. By reason of the fact that, if successful he may receive considerably .more than the actual value of services rendered the attorney is willing' to accept the risk that he may be unsuccessful and receive nothing. As pointed out by Mr. Justice Lamar (Counsel v. Cummings, 32 S. Ct. 83, 222 U. S. 263, 56 L. ed. 192), the agreement is that compensation will be paid for ultimate success, not for the actual value of services rendered.

By the decision on the former appeal (Egan v. Wag-goner, supra) the following propositions at least have been established between the parties, and have become'the law of the case upon this appeal: First, that 'the contract between Egan and appellants was terminated by the disbarment of Egan; second, that upon such disbarment Egan was left in the same position with regard to this contract as though he had voluntarily, wrongfully, so far as appellants are concerned, and without any just cause, abandoned the same; third, that at the time of said disbarment he had not substantially performed said contract upon his part, and was not entitled to invoke the rule of substantial performance and thereby recover upon the contract.

Accepting the law of the case as established on the former appeal, and bearing in mind the essential nature of a contingent fee contract, the question is whether or not an attorney, who has partly, but not substantially, performed a contract for the rendition of personal services, for a compensation payable only in the event of final and successful termination, who has willfully and intentionally abandoned said contract without cause before completion, can recover for services rendered prior to such abandonment, and, if so, upon what basis?

The trial court, by its instructions tO' the jury, allowed recovery on the contract for the part performance and endeavored' to apportion the consideration in the contract to' the part performed. This was manifestly improper. The contract 'was one entire contract, and was not subject to being thus divided. So far as Egan was concerned, he was employed, not by the client c^f appellants, but by the appellants themselves; their client thereto consenting. His employment was to assist them by the rendition of personal services until the final termination of the 'C. case, upon a contingent fee, and such contract was entire and not severable or divisible, and, having abandoned said contract before the C. case was terminated, without just cause, as settled by the former appeal, we believe the sounder rule to be that by such abandonment he forfeited all right to payment for any services previously rendered. See Fry v. Miles 59 A. 246, 71 N. J. Law, 293; Troy v. Hall, 47 So. 1035, 157 Ala. 592; Cahill v. Baird, 70 P. 1061, 7 Cal. Unrep. 61; Holmes v. Evans, 29 N. E. 233, 129 N. Y. 140; Matheny v. Farley, 66 S. E. 1060, 66 W. Va. 680; Dempsey v. Dorrance, 132 S. W. 33, 151 Mo. App. 429; Crye v. O’Neal (Tex. Civ. App.) 135 S. W. 253.

Respondent in his brief on this appeal appears to have abandoned any contention for recovery upon the measure of damages set out in the second amended complaint, but now seeks to sustain the theory upon which the learned trial judge submitted the matter to the jury and entered judgment by contending that Egan and appellants, upon entering into the contract here involved, became parties to a joint enterprise, and that Egan, having severed his connection with the enterprise, is nevertheless entitled to recover for his one-half of the services rendered up to the date he ceased to act. Conceding the applicability of a theory of joint enterprise or joint adventure, Egan, by virtue of the decision on the former appeal, must stand in the position of having willfully, wrongfully, and intentionally abandoned the joint enterprise, and we believe the rule to be that, where one party to a joint adventure willfully and wrongfully abandons the same, the other parties are not liable to him for any profits subsequently made by them. In the instant case, at the time Egan abandoned the enterprise, no profits had been earned or had accrued. Neither Egan nor appellants could at that time have collected any money whatever from C. No profit could accrue to the enterprise until and unless the C. case was carried beyond its then stage, and was carried to a final and successful conclusion. This was done subsequently by the appellants, but Egan, having voluntarily and wrongfully abandoned the speculative enterprise at a time when there was no profit in it, and might never be a profit, and certainly could never be a profit, unless the enterprise was carried to a successful conclusion, cannot thereafter come in and claim to share in a subsequent profit which would never have come into existence but for the services subsequently rendered by appellants. Egan’s rights must be measured as of the time of his abandonment. He cannot abandon the admittedly speculative single, and indivisible enterprise at a stage when there is no present value in it, avoid all its further risks and burdens, stand by while other parties proceed therewith, and render it subsequently profitable, and then come in for a share of the subsequently accrued profit. See Denver v. Roane, 99 U. S. 355, 25 L. ed. 476.

The judgment and order appealed from are reversed.

MISER, Circuit Judge sitting in lieu of SHERWOOD, J.