Dockery v. McLellan

May 22, 1896
Reporters:
, ,
Before:
Pinney
Pinney, J.

1. The contract and contemporaneous assignment are in clear and explicit terms. At the time they were executed, Grant, in whose name the contracts with the city stood, had already pledged them to the Security Savings Bank as collateral for a large sum obtained and used in carrying on the work of paving during the previous year, and in his own lumbering operations as well. McLellan was unable to raise his half of the necessary money in order to carry on the paving to completion. For that reason, *387Grant was likely to exclude him from tbe benefits of wbat were believed to be very profitable contracts, in which both parties were equally interested; and the bank claimed the right, as against McLellan, to hold, the contracts, and the advantages they secured, for previous advances. The evidence abundantly shows that what McLellan most needed was money in order to carry out the contracts. He had no litigation pending, so far as appears, with any one, nor does any seem to have b,een then contemplated. The contract does not appear to have been the subject of much negotiation. The defendant voluntarily made the offer, which the plaintiff accepted. The compensation was not only contingent, but, if profits were obtained, uncertain in amount;, and if the plaintiff failed to secure to McLellan his interest in the contracts with the city, he ‍​​‌​‌‌​​‌‌​​​​‌​​​‌‌​‌​‌‌‌​‌‌​‌‌‌‌‌​‌‌​​​​​‌​​‌​‌‌‌​‌‌​​‌‌​​‌​‌​‌‌​​‌​‌​​​​‌​‌​​‌​‌‌​​​‌​‌​‌‌‌‌​‍was to receive no compensation whatever, and he could have, in any event, no moré than one third of McLellan1 s share in the profits. It was not a contract for security, in any proper sense of the word. It was for one third of McLellan’’s share of the profits, or it was for nothing at all. The contract and assignment contain nothing that would authorize the court to construe the transaction as a mere security for a reasonable compensation.

2. It was insisted in defense that the agreement was that the plaintiff was to furnish the necessary money to McLellan, and not merely to render his services in procuring the necessary loans, and that the plaintiff so represented, promised, and agreed, and that the contracts were signed by McLellan upon the faith of such representations and promises, and that they constituted the real consideration for the contract and assignment. But this defense wholly fails, for the contract shows, as stated, an entirely different agreement; and there is no proof of fraud or any unfair practice in the execution of these instruments, and there has been no application to reform or correct them on the ground of mutual *388mistake. The recital of the contract is that McLellan “ desires to protect his interest in said partnership [of Grant & McLéllom], and so arrange his interest in said partnership that the same may be used as collateral for loans to continue such paving, and desires the services of the party of the second part [Dochery] to protect his interest therein and secure locms to prosecute such work.” The agreement is that the plaintiff was “ to use his best efforts to protect the interest of the party of the first part, McLellan, in said paving contracts and to secure the necessary loans to continue said paving; and, if he fails to secure for the party of the first part his interest in said partnership, he shall receive no compensation for his services.” If he succeeded, for his services he was to have “ one third of all profits which may belong to the said party of the first part, from said paving.” The language of the contract is too clear and explicit to admi t of any difficulty or doubt.

3. The contract and assignment were not champertous. An attorney may contract to render services in the conduct of a suit for a fee contingent upon his success therein, and such fee may be a stipulated percentage or share of the amount that may be recovered, where he does not undertake to pay any part of the expenses of the litigation. Allard v. Lamirande, 29 Wis. 502; Kelly v. Kelly, 86 Wis. 170, 172; Taylor v. Bemiss, 110 U. S. 42, 45; Fowler v. Gallan, 102 N. Y. 395, 397. Here the plaintiff was not to pay any expense in accomplishing ‍​​‌​‌‌​​‌‌​​​​‌​​​‌‌​‌​‌‌‌​‌‌​‌‌‌‌‌​‌‌​​​​​‌​​‌​‌‌‌​‌‌​​‌‌​​‌​‌​‌‌​​‌​‌​​​​‌​‌​​‌​‌‌​​​‌​‌​‌‌‌‌​‍the desired object.

4. The parties had met on but two or three occasions before, and there had not been any previous dealings or business relations between them. The defendant McLellan appears to have been a man of experience in business affairs, and he had been for many years a contractor in very large undertakings. There is nothing to show that he was deceived or overreached, or that he did not fully understand and appreciate the business in hand, in all its details. He *389understood that if he could obtain the means required on his part to carry out the paving contracts, and had some one to look after and protect his interest in them, he would receive a very large sain as his share of the profits. Failing in this, it was probable his interest would be lost. It was perhaps a matter of prudence, under all the ciroumstances, for him to make the contract he did. The parties stood to each other at arm’s end, and, there being neither fraud nor undue influence, it was competent for the plaintiff to make the contract; and the transaction having succeeded, and resulted so largely to defendant’s pecuniary advantage, instead of an entire loss, we do not see upon what ground he can resist the plaintiff’s claim for the stipulated one-third of his share of the profits.

It is said that this was a contract between attorney and client, and that the burden is on the plaintiff to satisfy the court that it was fair, just, and reasonable. It is not entirely clear that the services which the plaintiff was to render fall strictly within the line of professional duty. The plaintiff appears to have acted.in the capacity of a negotiator or promoter, rather than as an attorney stipulating for compensation contingent upon success. The plaintiff had not previously had charge or control of any of the defendant’s property, business, or affairs. There was no confidential relation existing between the parties at the time, and the technical relation of attorney and client did not then exist; and the circumstance that litigation might ensue, in order to protect the interests of MoLellan in the partnership or paving contracts, will not materially alter the rights of the parties. Before an attorney undertakes the business of his client, he may contract with reference to his services and the amount of his compensation, and even, as the cases cited show, for a contingent fee or reward, because no confidential relation then exists and the parties deal with each other at arm’s length; and the same is true after the relation of at*390torney and client has been dissolved. 1 Story, Eq. Jur. (13tb ed.), §§ 310, 313; Elmore ‍​​‌​‌‌​​‌‌​​​​‌​​​‌‌​‌​‌‌‌​‌‌​‌‌‌‌‌​‌‌​​​​​‌​​‌​‌‌‌​‌‌​​‌‌​​‌​‌​‌‌​​‌​‌​​​​‌​‌​​‌​‌‌​​​‌​‌​‌‌‌‌​‍v. Johnson, 143 Ill. 525; Edwards v. Meyrick, 2 Hare, 60, 68. An attorney, as such, is not under a general disability to make contracts. As was said by Lord EldoN in Gibson v. Jeyes, 6 Ves. 276: “It has been truly said, an attorney is not incapable of contracting with bis client. He may for a borse, an estate, etc. A trustee also may deal with bis cestui que trust; but the relation must be in some way dissolved, or, if not, tbe parties must be put so much at arm’s length that they agree to take the characters of purchaser and vendor, and you must examine whether all the duties of those characters have been performed.” Evidently, when the parties are standing upon an equal footing, they have a right to determine, each for himself, upon what terms the relation shall be formed, and such we understand to be the transaction in the present case; and, as no confidence can be said to have been first extended, it is difficult to say upon what ground the plaintiff is under the necessity of vindicating the fairness and reasonableness of the contract, as a condition of enforcing it.

In Taylor v. Bemiss, 110 U. S. 42, 45, a contract with an attorney to prosecute a claim before a government commission for a contingent fee was held not void, and that under the circumstances, the parties having agreed upon fifty per Pent.of the claim as a contingent fee, the court would not assume that it was extortionate. The court, adverting to considerations justifying such contracts, adds: “ This, however, does not remove the suspicion which naturally attaches to such contracts; and where it can be shown that they are obtained from the suitor by any undue influence of the attorney over the client, or that the compensation is clearly excessive, so as to amount to extortion, the court will, in a proper case, protect the party aggrieved.”

The question as to the necessity of proof to vindicate the fairness of transactions between attorney and client gener*391ally arises where the attorney, during his relation as such, purchases property of the client, and stipulates for advantages o*r benefits from him, and where his personal interest is brought in conflict with his professional duty. In the case of such transactions, in order to sustain them, the law is well settled that the attorney must show affirmatively either that he paid an adequate consideration, or that a gratuity was intended, and that to obtain it no advantage was taken of the confidential relations existing between him and his client, and that the transaction was honest and fair. Ford v. Harrington, 16 N. Y. 285; Fisher v. Bishop, 108 N. Y. 25. The ‍​​‌​‌‌​​‌‌​​​​‌​​​‌‌​‌​‌‌‌​‌‌​‌‌‌‌‌​‌‌​​​​​‌​​‌​‌‌‌​‌‌​​‌‌​​‌​‌​‌‌​​‌​‌​​​​‌​‌​​‌​‌‌​​​‌​‌​‌‌‌‌​‍difference in the various cases to be found consists mainly in the degree of suspicion attaching to each particular case, and the amount of evidence required to sustain the transaction.

At the time the contract was made the bank held the paving contracts as security for over $20,000, and did not recognize MeLellan as a party interested in them. G-rant and MeLellan had got upon bad terms, and Grant had notified MeLellan that he would have to get his share of the money somewhere, or cancel their partnership arrangements. The bank refused to make further advances, and Grant and MeLellan would have no business relations with each other, so that the whole business stopped. The evidence tends to show that the plaintiff, by making proper explanations and assurances, prevailed upon the bank to make some further advances. Other difficulties intervening, and the financial panic coming on, the plaintiff made efforts to secure the money elsewhere, but without avail. Finally he applied to the common council to obtain the five per cent, reserve fund on the contract, being $10,800. The application was successful, and the work was carried on to completion. The plaintiff got the Security Savings Bank to agree that it would not interfere with MeLellan‘s share of the profits if the matter was carried on and completed and the plaintiff *392would see that the money so received was not diverted from its proper purposes, but would look to Grant’s share for Grant’s individual indebtedness; and Grant in the meantime had agreed with the plaintiff to recognize McLellcm‘s interest, and not to interfere with his share of the-profits. “When it became necessary to settle up the business the defendant McLellcm repudiated his contracts with the plaintiff, and refused to recognize him as having any rights in the premises, and endeavored to sell and dispose of his share of the profits to other parties, to defeat the plaintiff’s claim. The defendant testified that the plaintiff agreed to furnish the necessary money; that he agreed with him, if he would raise the money and save his interest for him with Grant, he would give him one third of his share of the profits; and he claimed the plaintiff had not advanced or furnished any money. The trial court found that McLellan “ willingly, understanding^, and for a good and valuable consideration, and without fraud on the part of the plaintiff,” entered into the contract and assignment, and that he “ performed all of the conditions and requirements on his part.” It is evident that McLellan was in great danger of losing his entire interest under the paving contracts, and that the services rendered by the plaintiff sufficed to put his interest in a proper condition, so that he realized a large sum for ‍​​‌​‌‌​​‌‌​​​​‌​​​‌‌​‌​‌‌‌​‌‌​‌‌‌‌‌​‌‌​​​​​‌​​‌​‌‌‌​‌‌​​‌‌​​‌​‌​‌‌​​‌​‌​​​​‌​‌​​‌​‌‌​​​‌​‌​‌‌‌‌​‍profits. The finding of the circuit court appears to be sustained by the evidence. It is evident that the plaintiff acted in good faith, and his conduct appears fair, and that there was free volition and intelligent action on the part of the defendant.

But if we rest the case upon the basis that the relations of the plaintiff and defendant when the contract was made were strictly those of attorney and client and of a fiduciary character, the fairness of the contract is, we think, sufficiently vindicated. If the plaintiff was guilty of no fraud or undue influence, and if McLellcm, in making the contract, Avas moved only by the impulses of his own will, the trans*393action, though in the event favorable to the attorney and unfavorable to the client, cannot be assailed. Tragman v. Littlefield, 18 N. Y. Supp. 583, 584. As was said in Fowler v. Callan, 102 N. Y. 395, 397: “ Such contracts are of common occurrence, and, while their propriety has been vehemently debated, they are not illegal, and when fairly made are steadily enforced.”

After a careful consideration of the case, we do not see any ground upon which the defendant ought to be allowed to avoid his contract, and we think that the judgment of the circuit court should be affirmed.

By the Court.— The judgment of the circuit court is affirmed.