California Supreme Court Jan 14, 1901 No. S.F. No. 1451.Published
Before: Chipman
Synopsis
The facts are stated in the opinion.
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CHIPMAN, C.
Action, for services as attorney at law rendered defendant by Joseph Bothschild, Esq., plaintiff’s assignor. Defendant denied the alleged indebtedness, and as a separata answer alleged that the firm of Christy & Wise, composed of John H. Wise (defendant) and Harry E. Wise, was the owner of a promissory note for nine thousand seven hundred and sixty dollars, made by one James Murphy and one E. Smalley; that said Bothschild represented to said firm that he could collect the money due on said note, whereupon it was agreed between Bothschild and Christy & Wise that said firm should pay said Bothschild fifty dollars, which was then paid, and “should, when the money due on said note was collected, and only out of the proceeds of the collection of said note, and not otherwise, further pay said Bothschild the sum of five hundred dollars, as fee in and for the collection of the money due on said note, by suit or otherwise”; that Bothschild commenced suit on said note, but failed to collect the same or any part thereof, and has abandoned all attempt to collect the said note; that said unsuccessful attempt to collect said note was the only service performed by said Bothschild for said firm or for defendant. The cause was tried by a jury and plaintiff had a verdict for one thousand dollars. The appeal is from the judgment and from the order denying motion for new trial.
The evidence of plaintiff tended to show that plaintiff’s assignor performed services in relation to the collection of the note referred to in the answer, which were of the value of one thousand dollars; also services in relation to an accounting between Wise and Murphy and Smalley, or the “Yellowstone Saloon,” as the place is called, the sale of one-half interest in which was the consideration for the note; also services in relation to the sale of certain goods by Wise to Wise and Murphy. Some evidence was given as to the amount of work done by Bothschild in relation to the accounting, and in the matter of the sale of goods by Wise to Murphy and Smalley. Mr. Bothschild testified that his services in each of the two latter matters were reasonably worth two hundred and fifty dollars, and this is undisputed by the evidence, as is also his estimate of the value of his services, to wit, one thousand dollars, for bringing the suit on the note.
The principal question in controversy arises in regard to the .agreement to collect the note. The testimony tended to show that when he undertook the business it was with the understanding that it was an ordinary case on promissory note, to which there was no valid defense, and that Mr. Eothschild' was ■employed because he had information about Murphy’s business and property, from which he was assured h'e could collect the judgment when obtained. I think it fairly inferable from the evidence that when the agreement presently to be stated was entered into, Eothschild understood from what Wise told him, -or led him to believe, that the case would not be litigated. With this understanding Eothschild signed and gave to Wise the following paper:
“San Francisco, Dec. 9th, 1895.
“Deceived of Mr. John H. Wise a note for nine thousand seven hundred and sixty ($9,760.00) dollars, dated April 15th, 1895, payable six months after date with interest thereon at the rate of 8 per cent per annum. Said John H. Wise to pay upon demand the sum of fifty ($50.00) dollars for court costs and the sum of five hundred ($500.00) dollars as a fee upon collection •of the same.
“(Signed) JOSEPH EOTHSCHILD.”
On December 14, 1895, Mr. Eothschild filed a complaint in the action on the note referred to in the receipt, and on January 11, 1896, the defendants in that action filed an answer. The note was payable to D. H. Whittemore or order, indorsed to Christy & Wise by Whittemore, and by them indorsed to John H. Wise, who brought the action and is defendant here.
The answer admitted the execution of the note, but alleged that it was without consideration, and that Wise took it with ■full knowledge of that fact; that the consideration was a half interest in the Yellowstone Saloon, its fixtures and stock of merchandise, which Christy & Wise had agreed to sell and transfer to Murphy and Smalley, the makers of the note; that Christy & Wise neglected and refused to make the transfer -of the saloon, and on Hovember 8, 1895, Murphy and Smalley notified Christy & Wise that they had rescinded said contract ■of purchase and declined to pay said note; that it was agreed between Christy & Wise and Murphy and Smalley that' the
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note was to be paid from the income of the saloon, and not otherwise, of which Christy & Wise had full knowledge; that John H. and Harry E. Wise falsely represented to the makers -of the note at the time of said purchase that the daily receipts of 'the saloon were one hundred dollars per day, whereas they, were but thirty-five dollars per day, and that one McCallum, who they represented was an experienced saloon-keeper, had agreed to buy the other half of the saloon and could bring in much business, etc., all of which was alleged to be false; other false and fraudulent representations were set up in the answer, on account of which and the failure on the part of Christy & Wise to keep their contract Murphy and Smalley had, in November, 1895, rescinded and notified Christy & Wise that they would not pay said note.
The trial of that action commenced on December 10, 1896, and lasted several days, and on February 25, 1897, the court made its findings in favor of defendants in the action and judgment followed for defendants. The evidence is that Wise directed Rothschild to take an appeal to the supreme court, and the latter gave the usual notice and prepared the transcript, comprising three hundred and forty pages of typewritten matter. Wise paid the reporter for this work. Plaintiff testified: “I then made a demand on Mr. Wise for five hundred dollars in that matter and he declined to pay it, and I never received a cent.” Rothschild’s connection with the case then ceased, and what became of the appeal is not disclosed.
It appears without conflict that upon the filing of the answer to the suit on the promissory note Rothschild had knowledge of the nature of the defense set up; an assistant in his office devoted several days to looking up questions of law likely to arise under the issues presented by the answer; the case was not tried for nearly a year after issue of fact was joined. There is no question but that Rothschild knew, or had reason to know, that the defense set up to the note would defeat payment if it prevailed, and that in any event it meant litigation, which he had not contemplated when h'e entered into the agreement with Wise. He testified: “I had a conversation with Mr. J. H. Wise about it [the answer] and he told me it was not true. These things could be disproved—they could not prove
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it.” He testified that he received the note “on the terms set out in the receipt” and continued in the case until after the trial; that after the trial “I asked him [Wise] what he proposed to do about it, and he said he would take the case to the supreme court.”
“Q. You had not said a word about changing this agreement? A. Hot a word at all.
“Q. After you had received that transcript and put him to that expense, that was the first time you suggested that you would not go on with the case? A. I did nothing of the ldnd. I told him to pay the five hundred dollars.
“Q. Was that the first intimation that you gave that you were not going on? A. After the trial—I never bothered him during the trial because I did not have time.
“Q. You never bothered him during the year 1896? A. Hot at all.
“Q. You never bothered him for a month after the trial, did you ? A. Oh, I do not know the time. Some time after the trial I asked him for five hundred dollars and he declined to pay it.
“Q. That was the first time there was any change in the terms of the agreement? A. I do not know what you mean by ‘change.’ The first time I ever asked him for money was after the trial. I signed an agreement to do certain things. He never agreed to do anything.
“Q. Didn’t you receive the note on these terms? A. X suppose so; yes.
“Q. ' Well, was not that the agreement? A. I do not know. I do not see how you can pin a man down to an agreement if he [Wise] did not sign it. I was willing to trust him. I did not ask him for any writing. I was willing to take it that way. The receipt merely recites the terms, and Mr. Wise had a doubt about the propriety of turning over a nine thousand dollar note, and I had to satisfy him that I was perfectly responsible.”
At another part of his testimony he testified: “I went on because John H. Wise told me these allegations [referring to the answer] were not true—he could prove they were not true.”
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Again he testified: “Q. How, Hr. Bothschild, did yon inform Mr. Wise in any way that yon would not go- on with the ■case on these terms? A. Ho, sir.
“Q. Yon never fold him that, did yon? A. Ho, sir.
“Q. You went on through the year 1896 ? A. Yes.
“Q. Under this agreement? A. Yes.
“Q. You tried the case under this agreement? A. Ho, I did not.
“Q. Did you tell him that you would not continue under the agreement ? A. Ho, sir.
“Q. Did you ask him for any other agreement? A. Ho, sir.
“Q. Did you ever speak to him on any occasion about another agreement? A. 1 could not do it, because I was in the middle of a trial. I never knew the true state of the facte.”
Mr. Bothschild seems to have been of the impression that his receipt to Wise was not a contract because Wise did not sign it. This is an erroneous view of the receipt. It was an agreement on Mr. Bothschildte part to take the case on the terms proposed by him, and Wise became bound by it when he delivered the note to Bothschild under that agreement. It was not necessary for Wise to sign it. He acted under it and this was sufficient to bind him. The serious question is, Could Mr. Bothschild go forward under his contract and try the case after he knew it was to be seriously litigated, and might be defeated, without informing Mr. Wise that this new |>hase of the matter would involve labor not previously contemplated, and that he would require a larger contingent fee or would require some fee in the event of failure to obtain judgment? Upon the face of the agreement the fee was contingent; that agreement was not changed by Mr. Bothschild, nor attempted to be changed until after the trial and judgment had gone against his client. Mr. Bothschild did nothing and said nothing which would lead Mr. Wis'e to suppose that any change was to be made in the contract of employment.
It is true Wise told him the allegations of the answer were untrue and he could prove them to be so, and that the def end-ants in that action could not prove what they had alleged. Mr. Wise may have so thought and so believed, and whether he did
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or not it was Mr. Bothschild’s duty to inform him that the answer so changed the matter from its original aspect that a new agreement would have to be made as to his compensation. Saying nothing and doing nothing to indicate an unwillingness to continue as he had begun, Mr. Eothschild must be held to have continued under the only agreement then existing between the parties.
Upon this phase of the case there is no conflict in the evidence. By his own testimony we think Mr. Eothschild has shown that he ought not to have recovered for services in the case brought against Murphy and Smalley.
In the conversation which preceded the signing of the receipt there was nothing said about paying any fee in the event the suit was litigated; it was assumed by both parties that it would not be litigated. But there is nothing in the evidence which would warrant the assumption that Wise willfully or fraudulently deceived Eothschild in this regard; and if he did so, still, as soon as the fact came to Bothschild’s knowledge (as it did when he was served with the answer), he should have promptly rescinded or.demanded some different arrangement. He could not proceed with the case as though the contract was still in force, with a mental reservation that he would repudiate it or rescind it after the trial should his client be cast in the suit. To justify such a course would be to allow fraud to be met by fraud, and this the law will not allow.
Bespondent contends with much confidence that he should recover in this action because recovery on the note was prevented by Wise. The facts on which this claim rests were all brought to Mr. Bothschild’s attention in the answer of Murphy and Smalley to Wise’s suit against them and in the course of the preparation for trial. Even though Wise gave him every assurance that he could overcome this defense, it did not change the fact that the contract of employment still bound Mr. Eothschild and continued to do so until modified, superseded by another, or rescinded. Mr. Eothschild had good cause for rescinding the contract or for refusing to proceed under it, but it was too late to rescind after it had been performed.
Under the facts in the case as they now appear, we are unable to discover any ground upon which the present action on
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quantum meruit
can rest as to the matter of the suit against Murphy and Smalley.
The verdict was general, and we cannot, therefore, determine what part of the one thousand dollars awarded plaintiff was for services other than those in the matter last above mentioned.
The cause should be remanded for a new trial, and we advise that the judgment and order be reversed.
Cooper, C., and Smith, C., concurred.
For the reasons given in the foregoing opinion the judgment and order are reversed and the cause remanded for a new trial.
McFarland, J., Henshaw, J., Temple, J.
AI Brief
AI-generated · verify before citing
Holding. An attorney who continues to perform services under a contingent fee contract after discovering that the case will be litigated is bound by the original agreement and cannot recover on a quantum meruit basis for those services.
Issues
Whether an attorney may recover on quantum meruit for services performed under a contingent fee contract after the scope of work increased due to litigation.
Whether an attorney who fails to rescind or modify a contract upon discovering new facts is bound by the original terms.