79 Cal. App. 3d 1 | Cal. Ct. App. | 1978
Opinion
Defendants, E. A. and Geraldine Metcalf, appeal from an order which granted plaintiff’s motion to tax defendants’ costs, thereby disallowing a substantial portion of the attorney’s fees claimed by defendants.
Haley filed an answer in the condemnation action and represented defendants until November 10, 1975, at which time defendants released Haley as their attorneys and paid the firm $1,000 for work performed prior to that date.
On March 15, 1976, plaintiff filed a notice of abandonment of the condemnation action. Since defendants had not notified plaintiff of the termination of their relationship with Haley, plaintiff served the notice of abandonment of the action upon Haley. Haley then notified defendants that plaintiff was abandoning the action. Haley also advised defendants of their rights and defendants requested that Haley pursue these rights on their behalf.
On April 15, 1976, acting on behalf of defendants, Haley filed a motion for an order setting aside part of the abandonment so that defendants could establish a loss of rental income, allegedly caused by the pendency of the condemnation action.
On April 28, 1976, Haley also filed a motion for leave to file a cross-complaint in inverse condemnation whereby defendants sought compensation for their lost rental income.
Plaintiff opposed both motions, and following a hearing on May 11, 1976, both motions were denied. On May 20, 1976, a judgment dismissing the condemnation action was entered. The judgment provided that defendants should recover their costs of suit.
The matter was heard on July 7, 1976, at which time a representative of the Haley firm testified that defendants had paid Haley $1,000 on November 10, 1975, for services rendered as of that date and had discharged Haley as of that date. He further testified that, thereafter, he spent 24.75 hours on the two motions which were heard on May 11, 1976, and 5.17 hours in opposing the motion to tax costs. Plaintiff argued that since the Haley firm, initially, had been employed on a contingent fee basis, defendants were not obligated to pay Haley any sum when the condemnation action was abandoned. Plaintiff also contended that the services rendered by Haley in connection with the two motions heard on May 11,1976, were not reasonably and necessarily performed in order to protect defendants’ interests in ,the condemnation action, since that action had been previously abandoned by plaintiff and defendants’ claim for rental loss was recoverable in a separate action in inverse condemnation. Plaintiff also pointed out that defendants had in fact commenced such an inverse condemnation action against plaintiff.
On July 27, 1976, the court rendered its order granting plaintiff’s motion to tax costs, thereby disallowing all of the attorney’s fees claimed by defendants with the exception of the sum of $206.67, representing the attorney’s fees incurred in opposing plaintiff’s motion to tax costs. Defendants have appealed from this order.
Defendants first contend that the trial court erred in denying them recovery of the $1,000 which they paid the Haley firm on November 10, 1975. They point out that, in support of their memorandum of costs and disbursements, they filed a declaration by a representative of Haley in which it was averred that prior to November 10, 1975, Haley had reviewed the case with a real estate broker, had prepared an answer on behalf of defendants, had inspected the real property which plaintiff was seeking to condemn, and had reviewed the income and expense records on the property. Defendants assert that plaintiff made no attempt in the trial court to establish that these services were not reasonably worth the sum of $1,000. They point out that former section
Plaintiff has cited three California cases in support of its position. In the first of these decisions, City of Long Beach v. O’Donnell (1928) 91 Cal.App. 760 [267 P. 585], a condemnation action was dismissed after the plaintiff city abandoned same, and the defendants then sought to recover attorney’s fees allegedly incurred in defending the action. The trial court disallowed any recovery of attorney’s fees on the ground that defendants’ attorneys had been employed on a contingent fee arrangement whereby they were to receive 20 to 30 percent of the value of the property when it was condemned. The appellate court affirmed the order of the trial court, noting that the object of section 1255a was to reimburse a defendant for attorney’s fees which he had paid or to indemnify him for such fees for which he had become liable. The court held that, since the contingency on which the attorney’s fees were payable, i.e., the condemnation of the defendants’ property, had never occurred, the defendants had incurred no liability for the legal services rendered by their attorneys. Even though the defendants and their attorneys had not anticipated the possibility that the condemnation action would be abandoned, the court nevertheless held that the attorneys could not proceed under the contingent fee agreement and then attempt to repudiate it and collect an attorney’s fee once the action was abandoned.
Finally, in Franklin-McKinley Sch. Dist. v. Lester (1963) 223 Cal.App.2d 347 [35 Cal.Rptr. 727], this court stated, “The decision in the instant case is squarely in accord with City of Long Beach v. O’Donnell, 91 Cal.App. 760 [267 P. 585], and City of Los Angeles v. Welsh, 10 Cal.App.2d 441 [52 P.2d 296]. [¶] The rule of these two decisions is stated as follows: ‘The object of the provision in Code of Civil Procedure § 1255a as to recovery of attorneys’ fees is to reimbruse [szc] the defendant for fees he has paid, or to indemnify him for such fees as he may have become liable for, provided the fees so paid or incurred are reasonable. Therefore, where the agreement between the defendant and his attorney is for a contingent fee and the contingency has not occurred, a claim for counsel fees is not justified despite the fact that the agreement did not specifically consider the possibility that there might be an abandonment of the condemnation suit.’ (17 Cal.Jur.2d 780-781.)” (Pp. 348-349.)
Thus, each of these three cases upon which plaintiff relies involved situations where, on the date when the condemnation action was abandoned by the condemning authority, the defendants and their attorneys were still operating under contingent fee agreements. The defendants in those cases had not agreed to pay their attorneys any fee unless and until a condemnation award was rendered in the defendants’ favor. Once the action was abandoned, it had become apparent that no such contingency was going to occur. The courts properly held that since the defendants and their attorneys had elected to operate on a contingent fee basis, they were bound by such arrangement and were not at liberty, after the action had been unexpectedly abandoned, to alter their contract and impose upon the plaintiff a liability for attorney’s fees which could never have been asserted against the defendants.
In this instance, had the defendants waited until after plaintiff filed its notice of abandonment before attempting to alter their contractual arrangement with their attorneys, the reasoning of the O’Donnell, Welsh and Lester cases would be controlling. But such is not the case. Here,
Parties to a contract are always at liberty to substitute a new contractual obligation for an old one as long as such change is supported by consideration. Section 1530 of the Civil Code defines “novation” as “the substitution of a new obligation for an existing one.” Section 1531 of the Civil Code provides, in pertinent part, that a novation is made “[b]y the substitution of a new obligation between the same parties, with intent to extinguish the old obligation . . . .” Although a novation must be supported by adequate consideration (Blumer v. Madden (1932) 128 Cal.App. 22, 24 [16 P.2d 319]), the required consideration is present when the original contract is partially executory on both sides, since both parties suffer a legal detriment through the mutual cancellation of executory contractual rights. (Bush v. Vernon (1955) 135 Cal.App.2d 33, 37 [286 P.2d 903].) Here, the factual situation was one where defendants, being desirous of terminating their contingency fee agreement with their attorneys, offered to assume a new obligation to pay the attorneys the reasonable value of the services thus far rendered in exchange for extinguishing their existing obligation to pay their attorneys one-third of the net difference between the condemnation award and the price which plaintiff had offered to pay for the property. The attorneys agreed to such proposal and accepted the fee of $ 1,000, and defendants were thereby released from the contingency fee agreement. There was adequate consideration for the novation: the attorneys were relinquishing their right to fees which might have been substantially greater, while
When the conduct of the parties is so analyzed, it becomes apparent that the instant case is distinguishable from the cases cited by plaintiff. In each of those cases, the defendants and their attorneys were still operating under binding contingency fee agreements when the condemnation actions were abandoned by the plaintiffs and dismissed. Once these events occurred, it was no longer possible for a novation to be accomplished relative to the manner in which the attorneys would be compensated for their services. As noted above, novations require consideration, and once the actions were abandoned and dismissed, the attorneys were no longer in any position to furnish consideration, consisting of the extinguishment of their right to receive a potentially higher fee under the contingency fee contract, in exchange for the defendants’ promise to pay them the reasonable value of the services they had rendered. Having rendered legal services on a contingent fee basis in actions which had been abandoned, the attorneys in those cases had already gambled and lost. Under such circumstances, any agreements by the defendants to compensate their attorneys for services previously rendered would have been purely gratuitous and were properly held not to be a cost for which the plaintiffs were liable.
This case is quite different. At a time when it appears that defendants and their attorneys had no reason to anticipate that plaintiff would abandon the action, defendants and the Haley firm each agreed to forego a potentially valuable provision of their original contract in order to create, by novation, a different method for the payment of attorney’s fees. When viewed in this light, defendants’ $1,000 payment to Haley cannot be deemed merely voluntary or gratuitous. It appears to us that it ought not to be treated in any different manner than if defendants had agreed, from the outset of their representation by Haley, to pay that firm the reasonable value of its services.
Since it appears that the three cases cited by plaintiff furnish the only basis for the trial court’s decision to deny defendants recovery of the $1,000 fee paid to Haley, we conclude that the trial court’s order must be reversed insofar as it disallows defendants’ recovery of such fee.
Plaintiff’s argument that defendants were not obligated to pay Haley for its legal services in preparing and filing the two post-abandonment motions is not persuasive. The parties’ agreed statement shows that after defendants and Haley agreed to cancel their contingent fee arrangement and defendants had paid Haley the reasonable value of the services previously rendered, plaintiff filed its notice of abandonment and that defendants thereafter requested Haley to pursue, on their behalf, whatever legal rights remained to them. Since this request was made after the extinguishment of the contingent fee arrangement, the request can only be construed as a promise by defendants to pay Haley the reasonable value of the legal services yet to be rendered.
Plaintiff’s remaining arguments are essentially an attempt to establish that defendants’ two post-abandonment motions were without merit and that the trial court was correct in denying them.
Defendants have furnished us with a convincing explanation of why they deemed it necessary, for the protection of their interests in the condemnation action, to file the motion to vacate part of the abandonment and the motion for leave to file a cross-complaint for lost rental income. It should be noted, also, that in Klopping v. City of Whittier, supra, 8 Cal.3d at page 58, it was held that a defendant who had allowed a condemnation action to go to judgment without asserting his claim for lost rental income was thereafter barred from asserting such claim in an inverse condemnation action. Plaintiff made no attempt in the trial court to demonstrate that the Haley firm devoted an undue amount of time to the preparation of the two post-abandonment motions or that Haley charged an unreasonable fee for such services. It would appear, therefore, that the trial court should have allowed defendants to recover the $1,800 attorney’s fee for the performance of such services.
The order appealed from is reversed insofar as it granted plaintiff’s motion to tax costs and, disallowed defendants’ claim for attorney’s fees in the amount of $2,800.
Taylor, P. J., and Kane, J., concurred.
Unless otherwise indicated, all statutory references herein are to the Code of Civil Procedure.