Title: Palfy v. Rice
Citation: 473 P.2d 606
Docket Number: 1095, 1114
State: Alaska
Issuer: Alaska Supreme Court
Date: August 14, 1970

473 P.2d 606 (1970) Fern PALFY, Appellant, v. Julian C. RICE, Appellee. Julian C. RICE, Cross-Appellant, v. Fern PALFY, Cross-Appellee. Nos. 1095, 1114. Supreme Court of Alaska. August 14, 1970. *607 Warren A. Taylor, Fairbanks, for appellant. Edward A. Merdes, of Merdes Schaible, Staley &amp; DeLisio, Fairbanks, for appellee. Before BONEY, C.J., DIMOND, RABINOWITZ and CONNOR, JJ., and STEWART, Superior Court Judge. DIMOND, Justice. Mrs. Fern Palfy brought this action against Julian Rice to recover $60,000, representing two $30,000 loans made by Mrs. Palfy to business enterprises represented by Rice. The case was tried by the court without a jury. Judgment was entered in Rice's favor, and Mrs. Palfy brought this appeal. A cross-appeal was taken by Rice, confined solely to the issue of the attorney's fees allowed by the superior court. In March 1962 Rice obtained from Mrs. Palfy a $30,000 loan for a trucking business, the Alaska Valdez Transport Company,[1] which Rice represented as the company's attorney. A promissory note for that amount, together with interest, was given to Mrs. Palfy. It was signed by Tom Jatzeck, individually and as president of A.V.T. The loan was secured by a chattel mortgage on certain trucking equipment of A.V.T. The business did not meet with success and the note was not paid. Mrs. Palfy commenced foreclosure proceedings with *608 respect to the chattel mortgage and later abandoned them. Subsequently, A.V.T. assigned to Mrs. Palfy its operating rights from the Interstate Commerce Commission and the Alaska Public Service Commission, and transferred certain of its property to Mrs. Palfy. Mrs. Palfy sued Rice, rather than A.V.T., for the $30,000. The theory of her action was misrepresentation; she alleged that Rice, her attorney, had induced her to make the $30,000 loan by misrepresenting the solvency and financial condition of A.V.T. On this point the trial judge made these particular findings: As to this aspect of the A.V.T. loan, Mrs. Palfy asserts that the trial judge erred in failing to reach the conclusion that the loan transaction was conducted in an attorney-client relationship, and in not finding that Rice, as Mrs. Palfy's attorney, had breached his fiduciary duty of dealing with her with the utmost good faith and honesty. We accept the legal proposition urged by Mrs. Palfy, that an attorney has a duty in dealing with his client to exercise the utmost good faith, integrity, fairness, and fidelity, and that business dealings between an attorney and his client are subject to close scrutiny by the courts when a client alleges a breach of the fiduciary relationship by the attorney. This is indeed the law.[2] The question here is whether an attorney-client relation existed between Mrs. Palfy and Rice with respect to the A.V.T. transaction and if so, whether Rice violated the standard of conduct expected of an attorney in these circumstances. Rice acknowledged that between January 1960 and March 1962 he had done some legal work for Mrs. Palfy's husband, such as handling real estate transactions and collections. He had also probated the estate of Mr. Palfy's first wife and had advised him with regard to a tax assessment. At the time Rice obtained the $30,000 *609 loan from Mrs. Palfy for the A.V.T. enterprise, he had in his possession a check in the amount of $30,000 from Dr. Weston, representing partial payment of a debt owing from Weston to the Palfys. Rice deposited Dr. Weston's check, and Mrs. Palfy sent him another check for $30,000 as a loan for A.V.T. At the time Rice talked to Mrs. Palfy on the telephone about the $30,000 loan, he made it clear to her that he was representing A.V.T. Mrs. Palfy testified to this, as did Rice. The findings of a trial court will not be disturbed on appeal unless they are clearly erroneous.[3] A finding is not clearly erroneous unless from a review of the entire record we are left with a "definite and firm conviction that a mistake has been made."[4] Appellant in this case has failed to point out where the findings of the superior court are clearly erroneous, and our independent review of the record has not left us with a definite and firm conviction that a mistake has been made. Appellant points to evidence and testimony, particularly that of Mrs. Palfy, which could tend to show that Mrs. Palfy thought that Rice was acting as her attorney. However, there was other evidence, relied upon by the superior court in making its findings, tending to show that Rice was not acting as her attorney. This is exactly the type of situation in which the "clearly erroneous" rule is designed to operate. Where there is conflicting testimony, the trial court is in a better position than we are to evaluate and resolve the conflict in view of the trial court's opportunity to hear and observe the witnesses in person and judge their credibility. We do not have this opportunity. That is why we shall not set aside a trial judge's findings except when they are "clearly erroneous."[5] In addition to finding that appellant and appellee were not in a fiduciary relationship, the superior court found that the presence or absence of a fiduciary relationship was not important, because appellee had made a full and fair disclosure of A.V.T.'s financial condition to appellant, and appellee acted fairly and in good faith throughout the transaction. Again, appellant has failed to point out where this finding of the superior court is clearly erroneous. Appellee made it clear to Mrs. Palfy that he was representing A.V.T. There was testimony indicating that appellee consulted an accountant about A.V.T.'s financial condition and that he conveyed *610 the accountant's analysis to Mrs. Palfy. The loan was secured by a chattel mortgage. When it appeared that Mrs. Palfy's investment might be in jeopardy because of the failure of the trucking business, A.V.T. conveyed some of its property to Mrs. Palfy and, in addition, assigned its Interstate Commerce Commission and Alaska Public Service Commission operating rights to Mrs. Palfy. This evidence is consistent with the findings of the superior court. To the extent that there is evidence in the record which conflicts with or detracts from any of this evidence, the superior court resolved the conflict in favor of appellee. From our review of the record, we cannot say that there is a clear case of the trial judge having made a mistake. In the Spring of 1962 Rice requested and obtained from Mrs. Palfy a loan of $30,000 to start a fisheries operation in Valdez. Rice had several partners in the fisheries venture, including his law partner, Mr. Emmal, and Mr. Jatzeck of A.V.T. The partnership was named Prince William Sound Fisheries, and will be referred to in this opinion as the Partnership. In May 1962, the Partnership entered into a contract with the First Bank of Valdez for the purchase of a cannery building, including fixtures and equipment. Pursuant to this agreement, the bank relinquished its claim to real property and tidelands surrounding the building which might subsequently become available for purchase from the United States or the state of Alaska. The Partnership made improvements and repairs to their newly purchased building, but due to unforeseeable economic conditions the business failed. Negotiations were undertaken with Mrs. Palfy concerning the $30,000 which she had loaned. As a result of these negotiations Mrs. Palfy executed an agreement releasing Rice from his obligation to repay the loan. In return Rice assigned to Mrs. Palfy all rights he had in the Partnership's contract with the First Bank of Valdez and all rights he had in the cannery building, its equipment and fixtures. Mrs. Palfy executed this agreement on the advice of Mr. Emmal, then acting as her counsel. Rice and Emmal had previously dissolved their law partnership. Emmal and Jatzeck had previously transferred their interests in the fisheries venture to Rice in consideration for his assuming the debts. However, apparently to make certain that she had obtained all of the Partnership's interest in the contract and the cannery, Mrs. Palfy subsequently obtained from each of the members of the Partnership releases identical to that entered into with Rice. The cannery and its equipment were subsequently destroyed by the earthquake and tidal wave of 1964. Mrs. Palfy received other tidelands from the state based upon prior use as a result of alleging under oath that she had title to the cannery property. To substantiate her claim Mrs. Palfy used the release agreements she had obtained from Rice and the other members of the Partnership. Appellant also used the release agreements to establish her title in the destroyed cannery as the basis for a $181,000 Small Business Administration disaster loan. Mrs. Palfy's contention here is that the release agreement she entered into with Rice was ineffective because it was not supported by consideration. The gist of her argument is that the rights transferred by Rice to her under the release agreement were valueless, that they could not reasonably be believed to be of value, and therefore that the release agreement should fail for insufficient consideration. The superior court's findings with respect to this issue were: Again, the resolution of this issue on appeal calls for application of the "clearly erroneous" standard of review.[6] Mrs. Palfy points to certain evidence and contends that it supports inferences which conflict with the findings of the superior court. To the extent that any conflict does exist with the evidence relied upon and enumerated by the superior court in its findings, the superior court resolved the conflict in favor of Rice. From our review of Mrs. Palfy's contentions and from our independent review of the record, we are unable to conclude that the superior court's findings are clearly erroneous. Therefore, the superior court did not commit reversible error in finding that the release agreement between Mrs. Palfy and Rice was supported by consideration. Mrs. Palfy alleges that the superior court erred in refusing to admit into evidence an unexecuted bill of sale on which Rice was shown to be an officer of A.V.T. While cross-examining Rice, Mrs. Palfy's counsel moved to introduce the unexecuted bill of sale into evidence. The bill of sale, undated except for the year 1962, is typed on "Rice and Emmal, Attorneys at Law" stationery, and contains unsigned signature blanks for Julian C. Rice indicated to be Secretary of A.V.T., and William B. Emmal indicated to be the Vice-President of A.V.T. When shown the bill of sale, Rice testified that he did not remember it. Rice objected to entry of the bill of sale into evidence, and the objection was sustained. However, the court indicated that Mrs. Palfy could lay more foundation and then offer the bill of sale into evidence again. The court's suggestion was not followed, and no further effort was *612 made by Mrs. Palfy to place the bill of sale into evidence. For evidence to be admissible, there must be proof of circumstances which make a material proposition asserted relevant to some issue in the case.[7] Where writings are concerned, "one of the commonest and most obvious of these circumstances on which relevancy may depend is the authorship of the writing."[8] [Emphasis added.] Here the proposition asserted was that Rice was an officer of A.V.T., which was indicated by what appeared on the unexecuted bill of sale. But there was no showing of the identity of the author of this instrument, or how whoever did prepare it reached the conclusion that Rice was Secretary of A.V.T. The fact that the bill of sale was typed on "Rice and Emmal, Attorneys at Law" stationery is not sufficient to establish that it was authored by Rice, or by anyone else in a position to know whether Rice was an officer of A.V.T. The trial court was correct in ruling that the bill of sale was not admissible. Mrs. Palfy was given the opportunity to offer further proof of relevancy, but did not avail herself of it. There was no error here. At the trial appellant attempted to introduce into evidence a deposition of William Jacobson. Jacobson is an accountant who had worked on the books of A.V.T. at about the time Mr. Rice asked Mrs. Palfy to loan $30,000 to A.V.T. Jacobson testified in his deposition that at that time A.V.T. was operating at a loss. An objection to the introduction of the deposition was sustained on the ground that it had not been shown that the witness, Jacobson, was unavailable. Civil Rule 26(d) provides: Appellant contends that subsection [e] of this rule, the "exceptional circumstances" provision, should have been employed by the superior court to allow the deposition into evidence. The circumstances surrounding Jacobson's failure to be present at the trial are as follows: Mrs. Palfy's counsel stated that he had heard that Jacobson was not in town. After denying introduction of the deposition, the court gave counsel an opportunity to contact Jacobson. There was no showing of what efforts were made *613 to get in touch with Jacobson and ascertain his whereabouts. Apparently no attempt was made to subpoena him. These are not "exceptional circumstances" which would permit use of the deposition under Civil Rule 26(d) (3) [e].[9] There was no showing of due diligence on the part of appellee in attempting to secure Jacobson's presence at the trial.[10] Furthermore, the testimony contained in the deposition was merely cumulative with other evidence concerning A.V.T.'s financial condition. There was no error in excluding the deposition. The superior court, after finding for Rice on all counts, awarded him attorney's fees in the amount of $3,700. Rice moved for reconsideration of the award of attorney's fees, but this motion was denied. He then filed a cross-appeal raising only the issue of attorney's fees. Since Rice prevailed, but did not recover a money judgment, the court was authorized to award him attorney's fees "in its discretion, in a reasonable amount."[11] As indicated by the rule, the matter of awarding attorney's fees is committed to the discretion of the trial court. We shall interfere with the exercise of that discretion only where it has been abused.[12] An abuse of discretion is established where it appears that the trial court's determination as to attorney's fees was manifestly unreasonable.[13] This was a factually complex case which required extensive preparation. Rice's counsel had been engaged in preparation of the case for over three and one-half years. The liability that Rice was subjected to, had Mrs. Palfy prevailed, was considerable. Numerous depositions were taken. Trial of the case took three weeks. In addition, Rice was obliged to commence and litigate a separate action in the federal district court in order to discover certain of Mrs. Palfy's records. In the light of these circumstances we believe that the $3,700 attorney's fees awarded was unreasonably low, and manifestly *614 so. There was an abuse of discretion in the amount awarded.[14] The case is remanded to the superior court with direction to redetermine its award of attorney's fees to Julian Rice against Mrs. Palfy. In all other respects the judgment is affirmed. [1] Alaska Valdez Trucking Company will be referred to in the opinion as A.V.T. [2] Littleton v. Kincaid, 179 F.2d 848, 857-858 (4th Cir.1950): McCargo v. Steele, 160 F. Supp. 7, 18 (W.D.Ark. 1958), aff'd 260 F.2d 753 (8th Cir.1958); United States v. Stringer, 124 F. Supp. 705, 714 (D.Alaska 1954), rev'd on other grounds, 233 F.2d 947 (9th Cir.1956). [3] Civ.R. 52(a); State v. Phillips, 470 P.2d 266, 268 (Alaska 1970); Paskvan v. Mesich, 455 P.2d 229, 232 (Alaska 1969); Knox v. Pickles, 451 P.2d 347, 349 (Alaska 1969); Anchorage Centennial Dev. Co. v. Van Wormer &amp; Rodrigues, Inc., 443 P.2d 596, 597 (Alaska 1968); Associated Eng'rs &amp; Con. v. H &amp; W Constr. Co., 438 P.2d 224, 228 (Alaska 1968); Stansberry v. Manson, 420 P.2d 449, 450 (Alaska 1966); Mercer v. Yutan Constr. Co., 420 P.2d 323, 326 n. 8 (Alaska 1966); Kenai Power Corp. v. Strandberg, 415 P.2d 659, 660 (Alaska 1966); Pearson v. Fairbanks Publishing Co., 413 P.2d 711, 715 (Alaska 1966); Stephenson v. Ketchikan Spruce Mills, Inc., 412 P.2d 496, 499 (Alaska 1966); Gilbert v. Sexton, 401 P.2d 300, 302 (Alaska 1965); Herning v. Wigger, 398 P.2d 1002, 1005 (Alaska 1965); Rizo v. Macbeth, 398 P.2d 209, 212 (Alaska 1965); Hamilton v. Lotto, 397 P.2d 980, 982 (Alaska 1965); Williams v. DeLay, 395 P.2d 839, 845 (Alaska 1964); Ogden v. State, 395 P.2d 371 (Alaska 1964); Preferred Gen. Agency of Alaska, Inc. v. Raffetto, 391 P.2d 951, 952-953 (Alaska 1964); Steward v. City of Anchorage, 391 P.2d 730, 731 (Alaska 1964); Monsma v. Williams, 385 P.2d 107, 110 (Alaska 1963); Smith v. Boen-Koon &amp; Egge-Cummins Constr. Co., 384 P.2d 283, 286 (Alaska 1963); George v. Willman, 379 P.2d 103, 106 (Alaska 1963); In re Kraft's Estate, 374 P.2d 413, 416 (Alaska 1962); Nordin v. Zimmer, 373 P.2d 738, 742 (Alaska 1962); Chirikoff Island Cattle Corp. v. Robinette, 372 P.2d 791, 792 (Alaska 1962). [4] State v. Phillips, 470 P.2d 266 (Alaska, June 5, 1970); Steward v. City of Anchorage, 391 P.2d 730, 731 (Alaska 1964). [5] State v. Phillips, supra n. 4; Fairbanks Publishing Co. v. Pitka, 445 P.2d 685, 687 (Alaska 1968). [6] Civ.R. 52(a) and cases cited in n. 3, 4 and 5. [7] Hartsfield v. Carolina Cas. Ins. Co., 451 P.2d 576, 578 (Alaska 1969). [8] McCormick, Evidence § 185, at 395 (1954). [9] See Otis Elevator Co. v. McLaney, 406 P.2d 7, 11 (Alaska 1965). [10] See Otis Elevator Co. v. McLaney, supra n. 9; McBride v. State, 368 P.2d 925, 927-928 (Alaska 1962) (diligence in attempting to locate a witness in a criminal trial). [11] Civ.R. 82(a) provides in part: Attorney's Fees. (a) Allowance to Prevailing Party as Costs. (1) Unless the court, in its discretion, otherwise directs, the following schedule of attorney's fees will be adhered to in fixing such fees for the party recovering any money judgment therein, as part of the costs of the action allowed by law: Should no recovery be had, attorney's fees for the prevailing party may be fixed by the court as a part of the costs of the action, in its discretion, in a reasonable amount. [12] Connelly v. Peede, 459 P.2d 362 (Alaska 1969); Dale v. Greater Anchorage Area Borough, 439 P.2d 790, 793 (Alaska 1968); Beaulieu v. Elliott, 434 P.2d 665, 678-679 (Alaska 1967); Albritton v. Estate of Larson, 428 P.2d 379, 383 (Alaska 1967); McDonough v. Lee, 420 P.2d 459, 461-465 (Alaska 1966); Kenai Power Corp. v. Strandberg, 415 P.2d 659, 660-661 (Alaska 1966); Patrick v. Sedwick, 413 P.2d 169, 178-179 (Alaska 1966); M-B Contracting Co. v. Davis, 399 P.2d 433, 437 (Alaska 1965); Alaska State Housing Authority v. Vincent, 396 P.2d 531, 532 n. 1 (Alaska 1964); Buza v. Columbia Lumber Co., 395 P.2d 511, 514 (Alaska 1964); Preferred Gen. Agency of Alaska, Inc. v. Raffetto, 391 P.2d 951, 954 (Alaska 1964). [13] Froelicher v. Hadley, 442 P.2d 51, 53 (Alaska 1968). [14] Cf. American Serv., Inc. v. Tundra Inv. Co., Inc., 473 P.2d 614 (Alaska 1970).