Court Opinion

ID: 8654942
Source: CourtListenerOpinion
Date Created: 2022-11-24 21:14:58.367987+00
Date Added: 2024-06-11T16:56:39.963129
License: Public Domain

McCARTY, J.,
after tbe foregoing statement of tbe case, delivered tbe opinion of tbe court.
In addition to tbe facts found by tbe referee, tbe record shows that tbe demand of tbe Western Loan & Savings Company against Berg in tbe foreclosure suit was about. $350, and that tbe value of tbe property sought to be foreclosed was about $450. When tbe contract under consideration was made, Berg was insolvent, and tbe case was pending in this court on appeal, and certain necessary expenses growing out of tbe appeal, and for which Berg was responsible, were due and unpaid; and, as found by tbe referee, tbe compensation of defendant for services rendered and to be rendered by him in tbe case on appeal bad not been fixed or agreed upon. In another action, in which tbe validity of this same contract was involved, tbe trial court found, which finding was adopted by the referee, that tbe services thus rendered by tbe defendant were reasonably worth tbe sum of $100, and that tbe costs and disbursements for which Berg was liable amounted to $100. It will thus be seen that these sums, together with that sued for by plaintiff in the foreclosure proceedings, exceeded in amount tbe value of tbe property by $100, Berg’s accrued costs and tbe amount involved in tbe suit being equal to tbe value of tbe property. It is therefore plain that tbe only means by which tbe accused could realize anything out of tbe litigation by virtue of bis contract was to either entirely defeat or materially reduce tbe claim made against bis client by tbe Western Loan & Savings Company. True, tbe record shows that, after Berg bad filed bis answer in tbe foreclosure proceedings and tbe issues were made up, tbe Western Loan & Savings Company offered to compromise for $13Y.50, but there is no evidence that tbe defendant herein, through corrupt motives or otherwise, or at all, advised bis client Bejg to reject tbe offer. And it appears from tbe record in this case that Berg, when be discovered that tbe claim of tbe Western Loan & Savings Company and tbe costs of tbe litigation would *342exceed tbe value of tbe property involved, went to Jones, bis attorney, and requested bim to take tbe property and to save bim (Berg) harmless from all costs as well as any deficiency judgment that might be rendered against him. Jones at first declined to accept tbe proposition tiras made by Berg, but, after repeated requests on tbe part of Berg, Jones entered into tbe contract in question. - Jones’ testimony on this point, which is not disputed, in part is as follows: “He came into my office and wanted me to do something like it (referring to tbe contract). . . . He said the printers were pressing him for money, . . . and wanted to know if he couldn’t utilize tbe lot. Q. How much did he claim the lot was worth ? A. $450. . . . He wanted to know if I couldn’t take the place. I said no; I told bim I would rather not have anything to do with it. The third time he brought Gasberg, his friend, in with bim. I told him I would arrange to sell the place, and we would use the funds in tbe expenses that were being incurred and account to him at the close of the litigation.” On cross-examination he further testified respecting this transaction: “He [referring to Berg] came to me two or three times. I refused to have anything to do with it twice, and tbe third time I told him that I would sign that contract. Then he wanted my wife to sign it, and I got her to sign it afterwards. ... I expected to account to Berg after everything was settled up.” Berg was present during the investigation of tbe matter before tbe referee, but the re-lators did not call him to the stand to deny the testimony of Jones; therefore we must accept Jones’ version of the facts and circumstances leading up to and surrounding tbe making of tbe contract as true.
Tbe questions upon ■which this proceeding is based were litigated in a court having jurisdiction of the subject-matter and the parties to the action, and that court held that the contract in question was inequitable and set it aside, but it also held that Jones was entitled to recover a quantum meruit for bis services, thereby in effect holding that Jones was not guilty of deceit, actual fraud, or of corruption in making the *343contract; otherwise Jones could not have recovered upon any theory. The relators offered no evidence to prove tbe charge under consideration, except the written contract, the mere execution of which, they contend, was sufficient to convict the accused of unprofessional conduct. When an attorney seeks to enforce a contract of this character entered into between himself and client after their fiduciary relations have commenced a court will invariably scrutinize the transaction in the most searching manner, and unless it is made to appear affirmatively that the attorney has acted in the utmost good faith, and that the contract is in every respect equitable, and in no way detrimental to the interests of the client, will not -only refuse to grant relief upon it, but will on application of the client, do as was done with the contract under consideration- — -rescind and set it aside. So jealously does the law guard the interests of the client in his dealings with his attorney, after the relation of attorney and client has been created, that it casts upon the attorney the burden of proving the bona fides of the transaction. In Weeks on Attorneys (2 Ed.), section 121, the author says:
“While the relation of attorney and client continues, the court will carefully scrutinize the dealings and contracts between them, and guard the client’s rights against every attempt by the attorney to secure an advantage to himself at the expense of the client. Nor is it necessary in such case for the client to show actual, or, as it is sometimes called, active fraud, in order to obtain relief; but the law will presume in his favor so soon as the confidential relation is shown to have existed at the time of the transaction complained of. This rule has its foundation on principles of public policy, and is adhered to by the courts with severity.” (3 Am. & Eng. Enc. Law [2 Ed.], 332, 334; 6 Cyc. 862; 1 Story, Eq. Jur., section 310; Burnham v. Heselton, 82 Me. 495, 20 Atl. 80, 9 L. R. A. 90; Bingham v. Sheldon [Sup.], 91 N. Y. Supp. 911; Myers v. Lu-*344zerne County [C. C.], 124 Fed. 436; Klein v. Borchert [Minn.], 95 N. W. 215; Goldberg v. Goldstein [Sup.], 84 N. Y. Supp. 782.)
When it is shown that the contract is based upon an adequate consideration from the attorney and no advantage has been taken of the client, and nothing done which would in any result prejudicially to the client’s interests, but that the entire transaction has been open and nothing withheld or concealed from him, and that he acted freely and with a full understanding of the probable consequences of his acts, such contracts, notwithstanding they are looked upon with disfavor by the courts, have been upheld. (Bristol v. Dann et al., 12 Wend. 142, 27 Am. Dec. 122; Alwood v. Mansfield et al., 59 Ill. 496; Baker v. First Nat. Bank, 77 Ia. 616, 42 N. W. 452; Davis v. Stith [Ky.], 11 S. W. 810; 3 Am. & Eng. Enc. Law, 337 )Lytte v. State, 17 Ark. 608; Bentinck v. Franklin, 38 Tex. 458; Hassell v. Van Houten, 39 N. J. Eq. 105.) While the law implies constructive fraud on the part of the attorney in such cases, and places upon him the burden of proving the good faith of the transaction on his part, we do not understand that the presumption is ever carried to the extent of holding that the attorney is guilty of actual fraud, deceit, and unprofessional conduct because of the mere making of such a contract. Because a contract of this kind may he inequitable or against public policy, it does not necessarily follow that the attorney making it must be deemed guilty of gross unprofessional conduct. And before a court will proceed to punish summarily an attorney for a breach of unprofessional' duty of the character here complained of, it must first be shown, hy evidence other than the mere making of the contract, that the attorney acted dishonestly and with corrupt motives, and has willfully misled and taken an unfair advantage of his client. In Barker’s Case, 49 N. H. 195, the accused, who was an attorney at law, was proceeded against for alleged unprofessional conduct, and the court, in the course of the opinion, tersely, and, as we think correctly states the doctrine as follows:
*345“The true doctrine is expressed in Bacon’s Abr. Attorney, H, thus: Attorneys are officers of court, and liable to be punished in a summary way, either by attachment, or by having their names stricken out of the roll of attorneys, for any ill practice attended with fraud and corruption, and committed against the obvious rule of justice and common honesty ; but the court will not easily be prevailed on to proceed in this manner, if it appears that the matter complained of was rather owing to neglect or accident than design, or if the party injured has other remedy provided by act of parliament or action at law; and this doctrine is recognized in Bryant’s Case, 24 N. H. 149. Tested by these rules, we think the court is not called upon to exercise its summary power in this case, for we think it is not clearly shown that fraud was practiced by the attorney to obtain payment of this -bill.”
Farther on, in the same opinion, the court observes:
“The court is fully impressed with the importance of its interposition to check any/fxaudulent or corrupt practice by an officer of the court, and a member of a profession so highly honored and trusted, and which exercises such a vast influence in the affairs of men; but at the same time we feel that, in view of the very grave effects of exerting this power upon the professional standing and character of the person who may be 'subject to it, it ought to be exercised with great caution, and only when the court is fully satisfied that the fraudulent or corrupt conduct is proved. Such proof, we think, is not furnished in this case, and therefore the complaint must be dismissed.”
-While we recognize, as hereinbefore stated, the general doctrine which holds that an attorney cannot make a valid purchase of pending litigation from his client, yet we do not feel that the contract under consideration was so obnoxious and *346so against public policy tbat the making of it, under the circumstances, was such a breach of professional duty on the part of defendant as would warrant this court in imposing a penalty therefor.
The proceedings are therefore dismissed.
BARTCH, C. J., and RITCHIE, District Judge, concur.