Dunlop v. McGehee's ( 1924 )

Christian, J.,

delivered the opinion of the court.

This was a chancery suit brought in the Circuit Court of Buckingham county by Jno. W. McGehee, executor of H. W. McGehee, to settle the partnership theretofore existing among H. W. McGehee, deceased, A. H. Gilliam, Cameron Dunlop, W. K. & J. L. Payne, under the style and name of H. W. McGehee and Company, and distribute the assets among the parties entitled to the same. This partnership was formed by parol agreement in 1915 to buy and sell tobacco; the cash capital was $10,000.00; McGehee was to furnish $2,500.00 of the said capital; Gilliam, $2,500.00; Dunlop, $2,500.00; and the two Paynes, $2,500.00. Bach partner furnished his share of the capital except Gilliam, who conducted the business with Dunlop, but McGehee furnished his share of the capital and was credited by $5,000.00 on the books of the concern.

There was never any distribution of profits or accounting among the partners, except Gilliam withdrew part of his share of the profits for his services in the management of the business.

McGehee lived in South Carolina and never took active part in the business, and upon his death in 1919 the partnership was dissolved, but the surviving partners, Dunlop and Gilliam, continued to conduct the' business and used its assets until this. suit was instituted. In the interim between the death of McGehee' and the winding up of the partnership, Gilliam had become indebted to Dunlop. Such proceedings were had in the suit that resulted in the ascertainment of the net worth of the partnership; the character of its assets and the sale of its real estate, the proceeds of which were brought into the court for distribution. Said assets and liabilities of the concern, as well as the interests of the partners, respectively, were shown on its books kept under the direction of Gilliam and *Dunlop.

No exception was taken to the decree establishing the interest of the partnérs among themselves except as to the input of McGehee. It appeared upon the' books of the concern that McGehee had put into the concern $5,000.00, but Dunlop testified that $2,500.00. of McGehee’s input of capital should be credited to Gilliam, as McGehee had agreed to pay in Gilliam’s share of the capital as a loan to Gilliam, whereas Gilliam testified that McGehee agreed with him, Gilliam, that he would pay into the concern $5,000.00 as his and Gilliam’s shares of the capital, and in view of McGehee’s absence from Virginia, and Gilliam’s representation of him, Gilliam should have one-half of his, MeGehee’s, profits from the concern for his services aforesaid.

Gilliam purchased and prepared the tobacco while Dunlop marketed same for the partnership.

The court accepted the books of the partnership as the correct record of the interest of the partners inter se, and decreed McGehee’s executor $5,000.00 of the original capital, and one-fourth of the profits. From this decree Dunlop and the Paynes appealed. The books of a partnership are prima facie correct, and the partners (especially the active ones) are presumed to know their contents, which Dunlop, from the evidence, clearly did know, and he and the Paynes are estopped now, after the death of McGehee, and their acquiescence in the credit of $5,000.00 of the capital of the partnership to McGehee on its books for nearly six years, to have said entry changed in order that Dunlop might have $2,500.00 thereof applied on a debt which he claims Gilliam owes him. This adjudication is clearly right (even conceding that the appellants have a right to contest the contract between McGehee and Gilliam to which they were not parties) and must be affirmed.

The second decree appealed from was the allowance by the court of a fee of $2,000.00 to the attorneys of McGehee’s executor, payable out of the partnership funds. This brings before us sharply the question of the jurisdiction of courts of chancery to allow fees to counsel. An erroneous conception on this subject seems to prevail with many of the profession in that if the allowance of a fee out of money or property under the control of the court is claimed in the bill, petition, or other proceeding, of which the parties interested shall have due notice, then the court has plenary power to allow the same. Va. Code 1919, section 3430. This section does not enlarge the powers of courts of chancery over the subject of fees to counsel, but is intended to put parties on notice and give them an opportunity to be heard upon the claim.

There is one class of cases where courts are constantly called on to make allowances out of funds under their control, not only for counsel’s fees, but indeed for other expenses imposed upon parties by litigation. This class mostly consists of cases where trustees or other fiduciaries, or infants, or other person under disability, are parties. In these cases allowances are made for the counsel’s fees of such parties and for other proper expenses, but they are paid out of the party’s own funds. The action of the court is invoked in such cases, either because the party is under disability, and unable himself personally to contract for necessary services and to pay for them, or because, though under no disability, the fund which he might rightfully apply and should apply to pay such fees and other expenses is not in his actual possession, but is under the control and in the custody of the court, whose instrument he is for the proper conservation and administration of said fund. There is little difficulty as to the propriety of proper allowances in all such cases, and had an allowance to counsel for McGehee’s executor been made under this principle of equity, payable out of the funds of his decedent, no question as to its legality could arise. Trustees v. Greenough, 105 U. S. 536, 26 L. Ed. 1157; Col. Guy’s Address, Va. Bar Association Reports, 1889, page 164. But to give the court aid in passing upon the quantum of the fee, the fiduciary should have entered into a contract with his counsel.

There is another class of cases where allowances are made for a party’s counsel, not out of the party’s own funds, but out of the funds of others, or out of a fund in which others are interested. While there is no statute limiting the powers and discretion of English chancery courts in the matter of allowance of fees as in our State, some limitation upon the extent of their powers and discretion may be safely stated as well settled in the English practice, and indicated in the utterances we have from our own appellate court. This practice arises from the power of courts of equity over the matter of awarding costs. Chief among these are two species of costs, to-wit, “costs as between solicitor and client” and “costs as between party and party.” 3 Dan. Chy. Pr. 1580.

In eases of “costs as between solicitor and client” the principle is “to allow the party as -many of the charges, which he would be compelled to pay his. own solicitor, as fair justice to the other party will permit.”' 3 Dan. Chy. Pr. 1680. Thus it will be seen that extra costs are not awarded to the attorney who has no connection with the suit except as attorney, or consideration from the court except through his contraetural relation with his client, and the .court awards extra costs to the litigant to enable Mm to discharge his contract obligation to his attorney. It is true that the amount of an attorney’s compensation is fixed by the amount involved in the litigation, yet, if his duty to his client enures to the benefit of another, the law does not justify the court in forcing the relation of attorney and client upon the beneficiary. Stanton v. Hatfield, 1 Keen, 358. It is sometimes the practice of attorneys to make no contract with their client, whose interest is frequently smali, to bring tbe suit, and he expects tbe judge to allow bina out of the fund often a larger sum than tbe client’s interest justifies, thus making tbe court, under tbe guise of tbe allowance of extra costs to tbe' litigant, make a contract for tbe attorney with strangers or force an attorney upon tbe litigant without bis consent.

It will be observed that there is no power vested in a court of equity in tbe English practice to-decree fees to counsel as extra costs, but where a party has taken advantage of services of counsel of an active party in tbe litigation, tbe court may allow tbe party as many of tbe charges to pay bis own counsel as fair justice to tbe other party will permit. Tbe relation of attorney and client is a matter of contract, expressed or implied, and tbe courts are not authorized to make contracts for persons sui juris, but to construe and enforce tbe same. Tbe principles of allowance of costs between solicitor and client do not apply to this case, as appellants have derived no benefit from tbe services of appellee’s counsel, therefore cannot be compelled to contribute to bis charges. Besides, tbe appellants were represented by their own counsel and no ease can be found in this jurisdiction where tbe appellate court has sustained tbe allowance of a fee to counsel of one party, out of tbe funds of another, who was represented by counsel of bis own selection. McCormick v. Elsea and others, 107 Va. 472, 59 S. E. 411; Stuart v. Hoffman, 108 Va. 309, 61 S. E. 757; McClanahan’s Admr. v. N. & W. Ry. Co., 122 Va. 705, 96 S. E. 469.

Tbe principle of “costs as between party and party,” as applied in tbe English practice, means that where tbe interest of tbe party whose fund sought to be charged are antagonistic to tbe party for whose benefit the suit is prosecuted, no allowance for counsel fees can be made.

In Virginia the matter of costs between “party and party” is regulated by statute, and no allowance to counsel other than the legally taxed attorney’s fee can be charged against the fund of the antagonistic party. Bank of Charlottesville v. Manoni, 76 Va. 802-808; Stovall v. Hardy, 1 Va. Dec. 342-349; McCormick v. Elsea, 107 Va. 472, 59 S. E. 411.

The appellants interests were antagonistic to those of the appellee. They derived no benefit from the services of counsel for appellee, and were represented by counsel of their own. . Therefore there is no rule of law or equity which would authorize the court to allow out of their funds any part of the compensation to appellee’s counsel. This part of the second decree will have to be reversed and the cause remanded to the Circuit Court of Buckingham for further proceedings in accordance with this opinion.

As appellee has substantially prevailed in this appeal he will be accorded his.costs in this court.

Affirmed in part, reversed in part„