Court Opinion

ID: 3984568
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:40:50.847028+00
Date Added: 2024-06-11T09:36:35.502810
License: Public Domain

I dissent. The legal relationships of the parties to this litigation were definitely fixed by contracts admitted *Page 443 
and proved. They were partners upon the terms fixed by themselves. All disparities that may have existed between them in eminence, virtue, or merit were adjusted by their own voluntary agreements, and that subject is not open to further inquiry. The partnership co-operated harmoniously for four years, during which time a large volume of "pending and unfinished business" accumulated with the firm. No matter how or by whom the employment or business was attracted, it belonged to the firm. It was something of substance and value, recognized as a partnership asset, and about which the partners had the legal right to contract. When the partnership was dissolved, the partners agreed that the pending and unfinished business should be wound up and completed by the partners and the fees arising therefrom divided between them according to their respective shares in the partnership. An additional and important feature of the agreement of dissolution was the undertaking of Mr. Dickson to individually perform the services in the completion of the mining business on hand. This is undisputed. On this subject appellants say in their reply brief:
"There is no dispute as to the fact that Mr. Dickson, when he retired from the partnership, agreed that he, personally, would carry on, conduct and finish all mining litigation pending in the office of said former partnership at the time of his withdrawal."
The Conkling-Silver King Case, the subject of controversy, was admittedly "mining litigation," and it was litigation pending and unfinished with the partnership at the time of dissolution. The action was in the federal court, against the Silver King Coalition Mining Company, to recover for ores alleged to have been taken from the plaintiff's ground. The partnership represented the defendant. At the first trial, in 1912, the defendant had judgment. Plaintiff appealed to the Circuit Court of Appeals, where the judgment was reversed and the cause remanded to the trial court for an accounting. The accounting was had in 1917, and judgment rendered thereon against defendant. Thereafter the defendant appealed to the Circuit Court of Appeals and lost. At this time the defendant company made a futile effort to compromise the controversy by offering a sum less than the judgment *Page 444 
against it, and in connection therewith paid their attorneys for services rendered up to that time. Failing to compromise the matter, the company, through Messrs. Dickson and Ellis, reinforced by the aid of Mr. Marioneaux, who was separately and independently employed, pursued the litigation further to the Supreme Court of the United States by writ of certiorari, where a favorable judgment for defendant was finally had. For the services rendered in the proceedings before the Supreme Court of the United States the appellants received $42,000, which is the main bone of contention in this action.
Pursuant to the dissolution agreement, the partners wound up and completed a large volume of business and divided the fees arising therefrom, amounting to many thousands of dollars, among themselves amicably and according to the basis agreed upon. It is significant that in the Conkling-Silver King Case, the very item now in dispute, the fees for taking the defendant's appeal to the Circuit Court of Appeals, which was taken long after the dissolution of the partnership, were divided with Schulder without question according to their agreement, notwithstanding he personally rendered no services whatever in the proceedings.
Bearing upon the question of what was understood and intended by the partners in their agreement for the disposition of their pending and unfinished business is the letter of Dickson to Schulder, dated March 14, 1919, in which he writes:
"The only other business that I know of in which I may have aught to do, which was pending in the office at the time of my retirement from the firm, is the case of Conkling MiningCompany v. Silver King. The attorneys for the Silver King may apply to the Supreme Court for a writ of certiorari. If the writ is granted and I argue the case in that court you will receive one fourth of the fees therefrom."
Tested by the usual judicial standards, I think the foregoing facts establish in a most convincing and satisfactory manner that the business in dispute was firm business within the meaning and intent of the contract. The objections urged against this conclusion are, in my judgment, readily answerable. It is repeatedly asserted that Schulder performed no *Page 445 
part of the services in the matter in controversy. The express agreement of Dickson to personally conduct, carry on, and finish "all mining litigation pending in the office" disposes of that. It is said that "it quite conclusively appears from the testimony of Mr. W.W. Armstrong and that of W. Mont Ferry, president and vice president, respectively, of the mining company, at the date of the affirmance of the judgment by the Circuit Court, that Schulder was not employed by that company to represent it in this litigation," and evidence is quoted to the effect that no individual employment of Schulder was made at that time, but that arrangements were made through Mr. Ellis for the employment of associate counsel; that the firm of Dickson, Ellis  Schulder were attorneys for the company from the time of its organization and to the best knowledge and belief of the witness continued to the day of the trial. Schulder never claimed or pretended that he was individually employed by the mining company. His claim rests upon the employment of the partnership, and that employment, even to the day of trial, was affirmed by the testimony of Mr. Armstrong.
The fact that the mining company, when attempting to compromise with its adversary, obtained a statement of account from the partnership for services rendered to date and paid it, is urged as a circumstance tending to show a termination of employment. The facts justify no such inference. Nothing whatever was said or done indicating an intention to dismiss the attorneys from their employment. On the other hand, it was clearly the intent to pursue the litigation if the compromise failed. And when the compromise did fail, the legal proceedings went forward absolutely without any new employment of the attorneys who had previously acted.
It is next urged that the business in question was not firm business, because, as between attorney and client, the authority of the attorney ceases when judgment is entered, especially as to the attorney for the defeated party; that therefore the employment of the firm ceased when judgment was rendered against the mining company. Of course, there is no *Page 446 
controversy here between attorney and client. The question under consideration involves the rights of partners as between themselves. The relation of a client to his attorney differs in its nature from the relation of one partner to another, and the relationships are governed by legal and equitable principles appropriate to each. A rule of law applicable to one does not necessarily apply to the other. The principle of good faith is the basis of the internal law of partnership.
"The utmost good faith is due from every member of a partnership towards every other member; and if any dispute arises between partners touching any transaction by which one seeks to benefit himself at the expense of the firm, he will be required to show not only that he has law on his side but that his conduct will bear to be tried by the highest standard of honor." Lindley on Partnership, 364.
A client has the right to discharge his attorney at any time, either with or without cause. 6 C.J. 676. But one who has made a contract with a partnership for legal services cannot, after the death of one partner, make a new contract with the surviving partner for the same services, to the detriment of the estate of the deceased partner. Clifton v. Clark, 83 Miss. 446,36 So. 251, 66 L.R.A. 821, 102 Am. St. Rep. 458, 1 Ann. Cas. 396. Nor is a surviving partner of a partnership between lawyers, dissolved by the death of one member, permitted to make gain for himself at the expense of the estate of his deceased partner, by consenting to the termination of a contract of employment with the partnership, and making another relation to the same subject-matter, in the profits of which he alone is to participate. Little v. Caldwell, 101 Cal. 553, 36 P. 107, 40 Am. St. Rep. 89. The legal rules applicable to the relation of attorney and client do not control the relations of partners as between themselves. The latter relationship is one of mutual trust and confidence and imposes upon the members of the firm the obligation of acting with the utmost good faith toward each other. 30 Cyc. 438. Accordingly, their dealings with each other are governed by purely equitable principles.
That the parties themselves did not intend or understand *Page 447 
that the unfinished business with which they were dealing should be circumscribed by the strict legal rules relating to attorney and client is very plainly indicated by the practical construction placed upon the contract by themselves. It is admitted that the partners themselves recognized and treated the Conkling-Silver King Case as unfinished firm business, subject to their contract of dissolution, by voluntarily sharing with each other the fees earned on the defendant's appeal to the Circuit Court of Appeals, which was taken long after the partnership was dissolved, and in which Schulder performed no part of the service. If at common law the authority of the attorney for the defeated party is terminated by the entry of judgment, was not the authority of the firm of lawyers here involved terminated by the entry of judgment in the first instance against their client? Yet, they went forward with the appeal and treated the matter as unfinished firm business within the meaning of their contract. Does the "obligation to perfect fairness and good faith," which extends not only to persons who are actually partners but to persons who have dissolved partnership but not completely wound up and settled partnership affairs (Lindley, Partnership, 364), permit appellants to now claim an interpretation of their contract directly contrary to that previously placed upon it by themselves?
The letter from Dickson to Schulder is a direct, express, and unequivocal admission of the very fact in controversy. It states in words that the item in dispute was pending in the office at the time of dissolution. To make positive that the item of business was understood to be within the contract of the partners, it is stated that if the certiorari was granted and the case argued that Schulder would receive his share of the fee.
This letter is important and valuable as evidence. It is not depended upon as a contract. The contract of the parties was established by uncontradicted evidence independent of the letter. It is therefore no objection to say that there was no present consideration for the letter. But it is said that — *Page 448 
"The reasons that induced Judge Dickson to make the statement are fully explained in his testimony. No good purpose could or would be accomplished by stating those reasons here. It is sufficient to say that the reasons that impelled the statement did not exist at the time of the institution of this action or at the time of the trial."
The matter stated in the letter is so directly pertinent to the particular question in dispute that I think it important to examine into any explanation which could justify the rather sweeping assertion that the statements made were "wholly without probative value in determining the rights of the parties."
The "explanation" of Mr. Dickson, as contained in appellants' abstract, is as follows:
"I made that statement. The circumstances have changed. The letter of Mr. Schulder in reply to that is one thing, and the fact that the firm was paid up for all business it had done for the Silver King prior to the time when the second writ of certiorari was applied for is another thing and the fact that I was relieved of fear with respect to the boy is another thing. Now, when I wrote that letter I expected to do just as I had been doing, for the reasons I have given you. Little Dickson died on the 6th of February, 1920. This statement made by me relative to the payment of one-fourth of the fees in the Conkling Case was not made upon the condition the little boy would continue to live. I didn't think about that at all; I expected the boy would live. The circumstances were altered before that by Schulder's letter, in which he said I needn't account to him for anything else I personally did. That was one reason. Of course, after the little boy died, I was relieved of the fear that I had theretofore had. As I said before, all other considerations aside, after the little boy was taken, I never would have divided another dollar with Mr. Schulder." (The boy referred to was the son of Schulder and Dickson's daughter. The parents had been divorced and the custody of the child awarded to its mother. Mr. Dickson testified that it was his desire to take his daughter and the child to California to live, and that he feared Schulder would object.)
In estimating the worth of this "explanation," it is well to bear in mind the only real controversy under consideration; that the parties entered into a copartnership upon specic terms; that they dissolved the partnership by mutual agreement and contracted with each other to wind up their pending and unfinished business and divide the fees arising *Page 449 
therefrom according to their respective interests in the former partnership are all settled facts in this case, either conceded or proved beyond dispute by evidence independent of the letter. The decision here turns upon the question of whether the particular item in controversy was business pending and unfinished with the firm at the time of dissolution within the meaning and intent of the contract of dissolution. The letter of Mr. Dickson is a plain admission of the fact that the item in dispute was such business. There is nothing in the "explanation" which refers to or explains away this feature of the letter. Mr. Dickson does not pretend that the statements made in the letter were not true; he merely asserts that his general attitude towards Schulder had changed to the extent that "all other considerations aside, after the little boy was taken, I never would have divided another dollar with Mr. Schulder." If this disposes of the evidentiary effect of the letter and renders it "wholly without probative value," why by the same token does it not destroy and nullify his whole contract made at dissolution for sharing the fees from the firm's unfinished business? The "explanation" does not pretend to show why the particular fee in the Conkling-Silver King Case was not subject to division; it attempts to justify the witness in his resolution not to divide any fee whatever with Schulder. (Of course, this position could not be maintained. Notwithstanding the alleged reasons advanced for not "sharing another dollar with Schulder," which had equal application to all unsettled items, as well as to the Conkling-Silver King item, the majority opinions affirm the decree of the trial court which requires Dickson to account for fees in at least nine cases.) The witness in his supposed "explanation" did not differentiate the Conkling-Silver King Case from any other firm business. What he said applied equally to all unsettled partnership items. In short, the probative value of the letter consisted in its being an admission against interest of one of the litigants that the Conkling-Silver King Case was unfinished firm business and subject to the contract for division. As proof of that fact it stands undenied and unimpaired by any explanation. *Page 450 
I quite disagree with Mr. Justice FRICK that the case ofLittle v. Caldwell, 101 Cal. 553, 36 P. 107, 40 Am. St. Rep. 89, supports the legal conclusions reached by him in his concurring opinion. To my understanding the case cited stands for the very contrary. The facts were that a firm of lawyers had a contract for a contingent fee of 15 per cent. in certain litigation. The first trial resulted in a judgment adverse to their clients. Pending appeal, one of the partners died. Thereafter the clients, being unable to advance the necessary costs of the litigation, entered into a new agreement with the surviving partner whereby, in consideration of his advancing the necessary expenses, the fee was increased from 15 per cent. to 60 per cent. of the amount recovered. The litigation was prosecuted to a successful conclusion and the surviving partner received a fee of $12,000. He refused to account to the representatives of his deceased partner for more than $100, and was sued in equity for an accounting. The trial court sustained a demurrer to the complaint and dismissed the action. Upon appeal the Supreme Court said that the partnership contract was such "that upon the death of one member of the firm the client may elect to consider the employment as terminated (citing cases). This would be the rule in controversies between the client and surviving members of the firm, where such election was properly made by the client; but the option to declare the contract terminated for such a cause is with the client, and if he does not do so, but is willing to intrust the survivor with the further management of the litigation in which the firm was employed, the survivor is bound to complete the unfinished contract for the benefit of the partnership; and, unless it was otherwise agreed upon between the partners, he would not be entitled to compensation from the partnership or from the estate of his deceased partner, for his services in doing so." The court said that the "surviving partner occupies the position of a trustee in relation to the unsettled and unfinished business of the firm," and that "he is not permitted to make gain for himself at the expense of the estate of the deceased partner by consenting to the extinguishment of a contract belonging *Page 451 
to the partnership, and the substitution therefor of another relating to the same subject-matter, and in the profits of which he alone is to participate. Whatever may be the effect of such new or substituted contract as between the immediate parties to it, a court of equity, in settling the accounts of the partnership, will not treat it as an entire extinguishment of the original contract, or deny the right of the representatives of the deceased partner to an equitable participation in the profits realized from the latter contract, and which may be regarded, so far as concerns the partnership, as only a modification of the former contract. This rule is particularly applicable in the settlement of the partnership accounts of attorneys at law, when the firm has been dissolved by the death of one member, and wherein contracts not fully performed often constitute a large part of the assets of the partnership, and which it is the duty of the survivor as far as possible to complete and preserve for the benefit of the firm." The court further stated that the contract in question "is still to be viewed by a court of equity as an asset of the partnership."
And treating the new contract as a mere modification of the old one, made for a special purpose and consideration, and upon the express grounds that the partnership would lose no rights thereby and that no principle of equity would be violated, the court held that the surviving partner would be permitted to retain the increased amount of the compensation by reason of the increased personal risk which he assumed, but that he must account to the plaintiff for one half of the 15 per cent., provided for in the partnership contract.
As between the partners the full right of the deceased partner was preserved and enforced, notwithstanding the legal right of the client to terminate the employment, and the fact that a new contract of employment was made with the surviving partner. The case to me is clearly authority for the view that equity will prevent a partner, after dissolution, from entering into any contract for his own benefit, relating to unfinished partnership business, if his copartner as such is in anywise injured thereby. *Page 452 
The judgment of the trial court is reversed by the majority upon the ultimate finding of fact that the item in controversy was a fee earned, not from partnership business, but from a new and distinct employment of appellants after the dissolution. I have endeavored to show that equity will not permit such an employment, but aside from this consideration I submit that there is no evidence in the record which supports such a finding. Although all of the persons who could have participated in making a contract seem to have been either present in court or easily accessible, the only witness who approached the precise question was Mr. Ferry, the vice president of the Silver King Company, and he stated that it was difficult for him to answer as to whether there was a new and distinct employment of attorneys in the case in controversy, because he did not know. No other evidence on the precise question was produced. It seems to me that "grounds, more relevant than this," should be required to overturn the findings on the subject by the trial court.
In view of the equitable principles which control the relationship of partners as between themselves, I have no difficulty in concluding that the facts and circumstances of this case amply justified the trial court in his findings and judgment. Indeed, the practical construction placed by the parties themselves upon their agreement by voluntarily sharing with each other the fees from numerous other items of business, precisely in the same category with the item in question, and the direct and unqualified admission of the very fact in dispute by Judge Dickson, are obstacles to a contrary finding which to me are insurmountable.
I think the judgment should be affirmed.