Laybourn v. Bray Shifflet , 214 S.W. 630 ( 1919 )

I am unable to agree with the majority in the disposition made of this appeal. The rule that a party is entitled to have submitted to the jury trying his case every material issue raised by his pleadings and the evidence, and that the failure of the court to so submit such issue when duly requested is a serious and reversible error, is too fundamental to require citation of authorities in its support. In his first amended original answer appellant, Laybourn, alleged:

"(7) That during the progress of said preliminary development of said cause, on demurrers and otherwise, in about May, 1911, said Bray became dissatisfied with their said contingent compensation, and upon said Bray's expressing a fear that he would never receive anything for his work, and would incur considerable expense under said contingent fee arrangement, on account of said demurrers being sustained, and at his solicitation, defendant guaranteed him that he should not lose anything on account of said contract, whereupon, on or about ______ day of May, 1911, said Bray charged this defendant, so he has since been informed, with the sum of $500 as attorneys' fees, making an entry of that amount on his books, and afterwards, on or about the 30th day of September, 1912, after said cause had been tried, said Bray called defendant's attention to said charge of $500 and another charge of $500 which he claimed they had also charged him in connection with said litigation.

"(8) That under said original fee arrangements of one-third above $2,000 recovery said attorneys would have been entitled to about $850, provided and in case the judgment rendered in said cause in defendant's favor against said Spaulding Manufacturing Company on or about September 28, 1912, had been sustained and affirmed by the higher court, it being specially provided in said original contract of employment that said contingent fee of one-third above $2,000 recovery should be payable when all litigation growing out of said matters was ended.

"(9) That this defendant was induced by the misleading, false, and fraudulent representations, statements, and conduct of the said Bray to employ him as his attorney to continue the said Bray in his employ as his attorney in said matter, and to enter into the contract of date September 30, 1912, substantially copied in plaintiff's pleadings, and to execute the note mentioned therein and the renewal note substantially copied in plaintiff's pleadings of September 30, 1913, to the Merchants' National Bank of Grinnell, in this: * * *

"(e) That said contract of date September 30, 1912, was executed a day or two after the return of said verdict, said Bray taking advantage of the condition of defendant's mind, produced by such an apparently splendid result over his offer to confess judgment in the sum of $1,500, to induce this defendant to enter into such contract and agree to pay even more than would have been due under such original fee arrangement in case said judgment should have been upheld by the Iowa courts, said Bray overreaching and misleading this defendant in regard to said proposed compensation, holding out and representing to him that said offer to confess judgment for $1,500 would in fact have been a good and proper settlement of said matters under the law and facts of said case, defendant being ignorant of the law of said cause and dependent entirely upon said Bray for correct and proper advice as to same, he being a practicing attorney and claiming special knowledge of the law and the effect given to certain facts by the law.

"(f) That said contract was so entered into upon the definite and positive assurance of the said Bray that the record of said case was in such condition as to insure affirmance of said judgment and that said judgment would be affirmed and upheld by the higher courts, and defendant fully protected thereunder, not only in the amount of about $4,124.13, which had been sustained as a credit in defendant's favor against said company in said suit, but also in said sum of $295.87, and interest so recovered over against them, said Bray stating and claiming to defendant that there was nothing in the record of the trial of said cause to cause a reversal, he claiming to be specially learned in the law and versed in the proceedings of the higher courts of the said state of Iowa, defendant knowing nothing of such things except as stated to him by said Bray, and said Bray intending thereby to secure unjust advantage of defendant as hereinafter more fully shown. * * *

"(i) Defendant further shows that he has reason to believe, and does believe, based upon the above-stated facts and the acts and conduct of said Bray in connection with said matters, that he purposely induced defendant to execute said written contract of date September 30, 1912, without making to defendant that full, complete, and honest revelation of all facts known to him that might influence defendant in continuing said employment, and with the then purpose and intention to be retained as attorney for said Spaulding Manufacturing Company, knowing that defendant had employed and relied upon him as being independent of any and all of the influences of said company, and that said Bray feared that on a revelation of his connection with said company to defendant he would seek to avoid paying said compensation, the said Bray thereby intending by having this defendant so bound by said written contract a negotiable note therein mentioned to enforce collection of same, notwithstanding any such dissatisfaction on the part of defendant or his efforts to avoid such payment, plaintiff soon thereafter transferring said note to the Merchants' National Bank of Grinnell, Iowa. * * *

"(o) That if defendant had known at the time of the execution of said contract of date September 30, 1912, and at the time of the renewal of the note therein mentioned, the facts hereinbefore stated, of the adverse interests and influences affecting plaintiffs, and of their lack of good faith in representing and advising him, he would not have entered into such contract nor further continued them as his attorneys.

"(p) That said original contingent fee arrangement was abrogated by the arrangement by which defendant guaranteed and agreed to guarantee plaintiffs against loss, in about May, 1912, and by the fixed charge of $500 then made against him and the subsequent definite charge of an additional $500 made by them against him, and said entire fee arrangement was then charged without consideration into said enlarged contract and note of September 30, 1912.

"(q) That said contracts and notes mentioned in said last contract, as well also as renewal of one of said notes, having been so procured, without said Bray making that complete and full statement of facts that is required of an attorney dealing with a client and by the fraud and deception of plaintiffs, are invalid and of no force or effect against defendant, and plaintiffs, having so deceived, misled, overreached, and defrauded defendant in said matter, are not entitled to recover against him on account of the matters affected thereby."

It may be that the pleader was of the opinion that, in addition to his allegations showing the execution of a new contract providing for increased compensation while the confidential relation of attorney and client existed between the contracting parties, he must also show that positive, affirmative fraud entered into its formation. The above excerpts from the amended original answer unquestionably show a state of facts to which the doctrine of uberrima fides applies, and therefore as to this issue the allegations of fraud should be considered as surplusage. In reply to this pleading the appellee alleged that the contract of September 30th was not as favorable to them as the first contract. This allegation was denied by appellant's supplemental answer. In my opinion these pleadings clearly and definitely present the issue of utmost good faith, which I insist was not fairly, if at all, presented by the court's charge. Considering the two contracts in the light of undisputed facts disclosed by the record, the second contract, dated September 30, 1912, while the confidential relation existed, and had existed for more than three years, is unquestionably more favorable to appellees than the first contract, dated March 13, 1909. The contract of March 13, 1909, provides for a contingent fee. By its terms it bound appellant, Laybourn, to pay appellees one-third of whatever sum might be collected for him over and above $2,000. While no amount was actually collected as the result of the litigation, Laybourn was permitted to retain $4,124 of the funds already in his hands held by him as an agent of the Spaulding Company. This being the fact, he would have owed appellees, under the first contract, only the sum of $708, with interest from the date the judgment in such case became final. The second contract provides for a fee certain of $1,000, $500 paid by note, the remaining $500 to be paid upon the expiration of the statutory period for appeal. It further provides for $100 additional fee in the event of an appeal and $200 more should the judgment be reversed by the Supreme Court of Iowa. The majority opinion states that from the facts shown by the record there was additional work required after the employment. I do not think this finding is sustained by the record. The testimony of Bray shows that a suit was first filed June 22, 1910, by the original law firm of Boyd Bray, with appellant as plaintiff, against the Spaulding Company, and that on August 22, 1910, Spaulding sued appellant, both actions being in effect for accounting. Bray testified:

"Up to the time our firm changed from Boyd Bray to Bray Shifflet neither of said actions had been tried, but several demurrers and motions had been filed and argued. The action brought by W. A. Laybourn against the Spaulding Manufacturing Company was dismissed on the 9th day of January, 1912, by plaintiff. This action was taken after a conversation between Mr. Laybourn and myself wherein I said to him that in my opinion it would be easier to defend the action which the Spaulding Manufacturing Company had brought against him than to prosecute the action which he had brought against the Spaulding Manufacturing Company, both of which actions involved the same transaction. Mr. Laybourn stated to me, in substance, that he entertained the same view that I did with respect to the matter and told me to dismiss the action which he had brought."

While it is true that the judgment in Laybourn's favor was appealed to the Supreme Court, appellees evidently knew this would be done before the second contract was entered into, and they did not testify that when the first contract was made it was not contemplated that the case might not be appealed to the Supreme Court. Their compensation under the second contract would be $1,300, a difference in their favor of nearly $600, and in addition under the first contract their fee was contingent, while under the second it was absolute. Even though the amount of compensation provided in each contract were the same, the fact that the last contract provided for an absolute fee would make it far more favorable to appellees than the first. The evidence of Bray quoted above shows that it would be easier to defend against the action of Spaulding than to prosecute for Laybourn as plaintiff. If any additional labor was required, it was that of changing the petition in Laybourn's action against Spaulding into an answer in the other case — a duty which could have been easily performed by a competent stenographer. The extent of their services would be less by this change. The case had been pending for more than two years when the second contract was entered into, and we should presume that appellees, being diligent and competent attorneys, had their case fully briefed and prepared for trial. Aside from the stenographic work, no other services were required except in the trial of the case and the prosecution of the appeal, and these services were, of course, contemplated at the time of the execution of the original contract in 1909. The law is that such a contract is presumptively without consideration and void, and the burden rests upon the attorney to show that the new contract was fairly made, was reasonable, that no advantage was taken by reason of the confidential relations existing between them, and that the client entered into it with full knowledge. Waterbury v. City of Laredo, 68 Tex. 565, 5 S.W. 81; Kahle v. Plummer, 74 S.W. 786; 2 R.C.L. "Attorneys at Law," §§ 42, 120.

The second contract being presumptively void, the burden of proof was upon appellees —

"to show the fairness of the transaction, in that the compensation provided for does not exceed a fair and reasonable remuneration for the services which have been rendered, or which it was his duty to render. The attorney must show that the contract was free from all fraud, undue influence, and exorbitancy of demand, and it is usually held that by way of establishing its fairness the attorney should show that the contract was entered into by the client freely and with a full understanding as to his rights and as to the effect of the instrument, and that he gave his client full information and disinterested advice." 2 R.C.L. p. 1038, § 120.

It is provided by Vernon's Sayles' Civil Statutes, art. 1984a, that —

"Special issues shall be submitted distinctly and separately, and without being intermingled with each other so that each issue may be answered by the jury separately."

By referring to the charge it will be seen that the first paragraph is an abstract statement of the law governing the duty of attorneys generally to their clients. Admitting that this charge was proper, I insist that it should have been accompanied by a special issue presenting the point to the jury. Knight v. Southern Pacific R. R. Co., 41 Tex. 406; H., etc., Ry. Co. v. Hartnett, 48 S.W. 775; Dallas Hotel Co. v. Fox, 196 S.W. 647. Appellant requested the court to submit special issues Nos. (9) and (19), as follows:

"(9) Did, or not, plaintiff, in discussing with defendant the execution of the contract of September 30, 1912, conceal from defendant anything relative to said contract known to them to be material thereto from defendant's standpoint?"

"(19) Did plaintiffs exercise the utmost good faith and scrupulous fidelity toward defendant in connection with the execution of the contract of September 30, 1912?"

These issues, if submitted, would have pointedly directed the attention of the jury to the particular facts sustaining the defense of want of utmost good faith divorced from the issue of fraud. If given (which I doubt), this issue is so intermingled with the issue of fraud that I think it resulted in confusing the jury. The nearest approach to a submission of the issue is the fifth special issue, as follows:

"(5) Was the contract of September 30, 1912, reasonable and fairly made and entered into between the parties after an honest, full, and fair understanding of all material matters relating thereto?"

An analysis of this language by a trained legal mind might lead to the conclusion that it embraced the question of utmost good faith, but average jurors are not required to be, and generally are not, trained lawyers. Considered alone, this paragraph conveys the idea that it relates to the question of fraud rather than that of utmost good faith, and, intermingled as it is with charges and issues on fraud, I believe the jury so understood it. The second paragraph of the charge deals with the burden and quantum of proof upon issues of fraud. The third paragraph tells the jury that expressions of opinion do not constitute fraud. The fourth paragraph places the burden of proof as to the material allegations of their petition upon appellees. The first special issue submits the question of appellee's fraud in accepting employment of the Spaulding Company. The fourth issue submits the question of fraud in the formation of the last contract, and the sixth bears upon the issue of ratification by appellant of the alleged fraud of appellees in the formation of the first contract. In framing this issue the court may have intended to refer to the last contract, but it specifically mentioned "the contract of March 30, 1909," which is, to say the least, confusing. I think the effect of the fourth issue is to leave the impression upon the minds of the jurors that, unless Laybourn proved that Bray made misleading, false, and fraudulent representations and statements to him to induce him to sign the last contract, it was valid, when, as a matter of law, it was presumptively void, because made while the confidential relation of attorneys and client existed, and was unquestionably more favorable to the attorneys than the original contract of employment. All these things, when considered with the further fact that no charge was given placing the burden of proving the presumptively void contract to be a valid one upon appellees, should, I think, reverse the judgment, even though appellant neglected to ask a special charge as to the burden of proof upon this issue. For this reason I cannot assent to an affirmance, and believe that the judgment should be reversed under rule 62a (149 S.W. x), in order that the parties by their pleadings may eliminate the issue of fraud in the formation of the first and second contracts, and the case be tried presenting the issue of utmost good faith separately and distinctly to the jury.