Court Opinion

ID: 3019628
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:21:21.853332+00
Date Added: 2024-06-11T12:46:32.889700
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT

                                 No. 96-4137

Joan Valentine Mohamed, f/k/a
                            *
Joan Valentine Kerr,        *
                            *
            Plaintiff-Appellee,
                            *
                            *
         v.                 *
                            * Appeal from the United
States
UNUM Life Insurance Company,* aDistrict Court for the
Maine corporation,          * District of Minnesota.
                            *
                  Defendant,*
                            *
Kevin Scott Kerr, Ivan S. Kerr,
                            *
Estate of,                  *
                            *
    Defendants-Appellants. *

                       Submitted:        June 9, 1997

                                       Filed: November 14, 1997

Before MURPHY and HEANEY, Circuit Judges, and BOGUE,1
District Judge.

      1
       The Honorable Andrew W. Bogue, United States District Judge for the District
of South Dakota, sitting by designation.
HEANEY, Circuit Judge.

    The Estate of Ivan S. Kerr (“the estate”) appeals
from a district court order directing the attorney
representing Joan Valentine Mohamed (“Mohamed”) in an
insurance policy dispute (“the UNUM matter”) to return a
portion of fees he received to the estate. The district
court originally ordered payment of the insurance
proceeds to Mohamed, from which her attorney received
$93,000. Following the reversal of the district court’s
original order by the Eighth Circuit Court of Appeals,
the district court ordered the attorney to return
$62,763.09.   The estate argues that McCullough should
return all of the $93,000 he received for representing
Mohamed in the UNUM matter.     We modify the   district
court’s order and remand with instructions.

                            I.
    This matter is before us for the fourth time. The
lengthy history of this case began with an action to
collect life insurance proceeds in Hennepin County
District Court (“the UNUM matter”). The parties removed
the case to federal district court where the court
awarded Mohamed $279,012.86 in insurance proceeds on July
11, 1994. On July 21st, the Clerk of Court released a
check payable to Mohamed in that amount.

    Previously, on November 10, 1993, Mohamed sent a
proposed representation agreement (“first agreement”) to
her attorney, Mark McCullough. The agreement provided
different levels of compensation under three different
scenarios. Under the first scenario, McCullough would
receive between $20,000 and $25,000 in the event that

                            2
Mohamed received between $250,000 and $260,000 from the
estate before December 13, 1993. (Appellants’ App. at
73.) The second scenario contemplated payment of “[u]p
to $50,000" to McCullough, provided Mohamed received
$200,000 from the life insurance policy following the
pre-trial proceedings. Id. The third scenario provided
a one-third contingency fee following a lengthy trial.
Id. On November 11th,

                           3
McCullough responded in writing that the fee agreement
was acceptable and that he was “certain [Mohamed and
McCullough] can be flexible and fair in the event
different scenarios arise.” (Court’s Exhibit 2.)

    Following the district court’s July 11th order,
Mohamed and McCullough entered into another agreement
(“second agreement”) under which McCullough received
$93,000.   The agreement provided that $8,000 of that
amount created a trust to cover McCullough’s fees for
representing Mohamed in the closing of Ivan Kerr’s
estate. (Appellant’s App. at 32.) Additionally, if the
net value of Ivan Kerr’s estate exceeded $50,000,
McCullough would receive twenty-five percent of the
proceeds received by Mohamed over $25,000 in addition to
the $8,000 in trust.    Further, the parties considered
Mohamed’s bill for McCullough’s prior services on an
unrelated case, Mohamed v. My Tyme (“My Tyme case”), to
be paid in full. Id. Finally, the agreement provided
that Mohamed was to pay McCullough at the rate of $60 per
hour plus costs, on a monthly basis, for future legal
services on the My Tyme case, and fifteen percent of any
recovery over the $11,000 Mohamed had already received in
relation to the My Tyme litigation. Id.

    The estate appealed the district court’s July 11th
order awarding the insurance proceeds to Mohamed on
August 4, 1994 and filed an untimely motion for a stay on
August 5th. The district court denied the motion for a
stay on September 6, 1994.     We summarily affirmed the
district court’s denial of the stay. Mohamed v. Kerr,
No. 94-2953 MNMI, slip op. (8th Cir. Oct. 27, 1994).

                            4
    On April 27, 1995, we reversed the district court’s
July 11th order and remanded the case for entry of
judgment in favor of the estate.    Mohamed v. Kerr, 53
F.3d 911, 917 (8th Cir. 1995) (“Mohamed II”).        The
district court entered judgment for the estate pursuant
to Mohamed II on May 18, 1995, and ordered Mohamed to
return the full proceeds of the life insurance policy to
the Clerk of Court. The district court’s order expressly
reserved ruling on the estate’s motion seeking to compel
McCullough to

                           5
return fees paid to him for his work in the UNUM matter.
On July 5, 1995 and on several subsequent occasions,
Mohamed filed voluntary petitions for bankruptcy. Based
on Mohamed’s bankruptcy filings, the district court
ordered a stay of all proceedings against Mohamed’s
assets pursuant to 11 U.S.C. § 362(a)(2) on July 31,
1995.

    On July 13, 1995, the district court denied a motion
by the estate to force McCullough to return any payment
he received for representing Mohamed in the UNUM matter.
On August 2, 1996, we reversed the district court and
remanded the case for a determination of what portion of
the $93,000 retained by McCullough represented a
contingency fee payment. Mohamed v. Kerr, 91 F.3d 1124,
1127 (8th Cir. 1996) (“Mohamed III”).

    On remand, the district court determined that the
first agreement represented the parties’ agreement with
respect to fees, and that the second agreement between
Mohamed and her counsel supplemented the first agreement.
Based on the second agreement and other evidence
presented, the district court determined that $50,000
represented a contingency fee in the original dispute
over insurance proceeds. The court further found that of
the remaining $43,000, McCullough had earned $8,000 for
work associated with the Ivan Kerr estate; $4,236.61 for
the work on the My Tyme case prior to the second
agreement; and an additional $18,000 for work on the My
Tyme case performed after the agreement, including the
percentage owed to McCullough for a recovery above
$11,000 as specified in the agreement.       The district
court found that the remaining $12,763.09 of the $93,000

                            6
paid to McCullough, being unearned by counsel, belonged
to Mohamed and subject to return to the estate.       The
district court then ordered that the contingency amount
of $50,000 and the remaining $12,763.09, together with
interest, be paid by McCullough to the estate.        The
estate challenges the district court’s determination that
$50,000 represents the contingency portion of the $93,000
and assert that McCullough received the entire $93,000 as
a

                            7
contingency payment for the UNUM matter. We modify the
district court’s order and remand with instructions.

                          II.

    Under Minnesota law, we review de novo whether a
contract is ambiguous. Maurice Sunderland Architecture,
Inc. v. Simon, 5 F.3d 334, 337 (8th Cir. 1993) (citation
omitted). If a contract is unambiguous, we review the
district court’s interpretation de novo. Id. (citation
omitted). If the contract is ambiguous, the meaning of
the contract becomes a question of fact, id. (citation
omitted); and we reject the district court’s findings of
fact only if they are clearly erroneous. Friends of the
Boundary Waters v. Thomas, 53 F.3d 881, 885 (8th Cir.
1995) (citation omitted).

    As we noted in Mohamed III, a person who, to comply
with a judgment of a court, confers a benefit on another
person or has property taken by the judgment is entitled
to restitution if the judgment is reversed or vacated if
restitution is equitable. 91 F.3d at 1126; see Atlantic
Coast Line R.R. v. Florida, 295 U.S. 301, 309 (1935).
Equity is not served, however, by restitution from a
third party who received proceeds of the judgment in good
faith as payment of a debt. Mohamed III, 91 F.3d at 1126
(citations omitted). Therefore, the proper inquiry is
whether McCullough was a good-faith payee when he
received a portion of the proceeds from the district
court’s first order. If McCullough accepted the proceeds
as payment of a fee contingent on the judgment, then it
is equitable to require McCullough to return the payment
as restitution upon reversal.      See id.   Whether the

                            8
payment   to   McCullough constituted  payment   of  a
contingency fee turns on the agreement between Mohamed
and her counsel.
    The district court determined that although it did
not address the issue of costs, the first agreement
between the parties constituted the parties’ agreement
with respect to fees. While we agree with the district
court that the parties intended the first agreement to
address fees, that agreement does not provide for the
scenario under

                          9
which the case was resolved.      Mohamed owed a $50,000
contingency fee if she recovered $200,000 after the pre-
trial stage of the action.     (Appellant’s App. at 73.)
Likewise, Mohamed owed a one-third contingency fee if she
recovered after a “[l]engthy [t]rial.”       Id.   As it
happened, Mohamed recovered more than $200,000 after the
proceedings had moved well beyond pre-trial, but far
short of a “lengthy trial.”     Therefore, the events of
this case do not fit neatly within any scenario described
in the first agreement.

     We note that the parties agreed to be “flexible and
fair” if a different scenario arose. See Court’s Exhibit
2.    We conclude that the parties’ second agreement
modified the first agreement, because the resolution of
the UNUM matter did not fit squarely within the scenarios
described in the first agreement and the language of the
second agreement is unambiguous. The second agreement
states that the “attorney’s fees and costs on the Mohamed
v. UNUM case, which resulted in a gross recovery of
$279,012.86, shall be $93,000.00.” (Appellant’s App. at
32.)    In calculating McCullough’s fees, the agreement
provides for the creation of an $8,000 trust for future
fees and the forgiveness of McCullough’s fees previously
earned in the My Tyme case, which the district court
found to be $4,236.91.       We hold that although the
contract clearly states that the $93,000 McCullough
received was a contingency payment for his representation
in the UNUM matter, McCullough released Mohamed’s
obligations of $8,000 in future fees and $4,236.91 in
fees for prior representation in the My Tyme case as a
good-faith payee.

                           10
    The district court interpreted the second agreement
as providing McCullough with a $50,000 contingency fee
and an $8,000 trust for work relating to Ivan Kerr’s
estate, forgiving fees earned on My Tyme, and leaving the
balance of money belonging to the estate to pay fees for
future work on My Tyme and other fees owed under the
agreement.    We disagree with the district court’s
interpretation for three reasons.      First, the second
agreement clearly states that the money McCullough
received was for the fees and costs of the UNUM
representation. Second, the agreement specifically

                           11
provided a trust for future fees and costs for
representing Mohamed in the closing of Ivan Kerr’s
estate, but it did not provide such a trust for future My
Tyme fees and costs, nor did the agreement include a
statement that the parties intended those fees and costs
to be paid out of the $93,000. Third, the contingency
arrangements for the My Tyme case and the closing of Ivan
Kerr’s estate under the second agreement had the
potential to exceed the balance of what the district
court considered to be money belonging to the estate. We
believe the parties intended those fees and costs to be
paid out of proceeds received in those matters.

    McCullough is entitled to retain $12,236.91 as a
payment taken in good faith and the estate is entitled
to the return of the remaining $80,763.09. We agree with
the remainder of the district court’s order, including
the determination that McCullough must pay interest on
the amount owed to the estate by McCullough calculated
from October 25, 1996 at the legal rate under 28 U.S.C.
§ 1961.

                          III.

    For the foregoing reasons, we modify the order of the
district court and remand the matter with instructions to
direct McCullough to return $80,763.09 plus interest to
the estate.

    A true copy.

        Attest.

                           12
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

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