Benjamin v. Koeppel

• Decision Date: 02 May 1995
• Citation: 650 N.E.2d 829,85 N.Y.2d 549,626 N.Y.S.2d 982
• Court: New York Court of Appeals Court of Appeals
• Parties: , 650 N.E.2d 829 Donald A. BENJAMIN, Respondent, v. Adolph KOEPPEL, Defendant, and Koeppel, Del Casino & Martone, P.C., et al., Appellants.

Page 982

626 N.Y.S.2d 982

85 N.Y.2d 549, 650 N.E.2d 829

Donald A. BENJAMIN, Respondent, v. Adolph KOEPPEL, Defendant and Koeppel, Del Casino & Martone, P.C., et al., Appellants.

Court of Appeals of New York.

May 2, 1995.

[85 N.Y.2d 550] Reisman, Peirez, Reisman & Calica, Garden City (Robert M. Calica and E. Christopher Murray, of counsel), for appellants.

[85 N.Y.2d 551] Field, Lomenzo & Turret, P.C., New York City (Ira A. Turret, of counsel), for respondent.

OPINION OF THE COURT

TITONE, Judge.

Can an attorney who has not complied with Judiciary Law § 468-a's registration requirements nonetheless recover payment for professional legal services rendered during the period of noncompliance? Concluding that the public policies underlying the State's attorney-registration system do not furnish a reason to nullify otherwise valid contractual obligations, we hold that the failure to register does not preclude an attorney's recovery of professional fees.

Plaintiff was admitted to the Bar in 1958 after complying with the applicable educational, examination and character requirements. However, he did not register with the Office of Court Administration (OCA) when the mandatory registration rules were enacted in 1981 (L.1981, ch. 714). Plaintiff, who apparently had not maintained a law office during the intervening 10 years, registered for the first time in April 1991, after the present action was commenced. At that time, he paid all of his delinquent fees.

The present action arose out of an incident in which plaintiff referred a potential client with a real property tax matter to defendant law firm, Koeppel, Del Casino & Martone, P.C. The firm, in turn, agreed to pay plaintiff one third of any fees it earned. According to the submissions before the court, plaintiff's participation included interviewing the client, evaluating the case, discussing the matter with firm attorneys and attending a meeting between the client and a firm partner. The firm successfully completed the real estate matter for the client. Thereafter, plaintiff requested that the successor firm, defendant Koeppel, Martone & Leistman, pay him the agreed-upon share of the firm's fee. When his request was refused, plaintiff brought the present action.

On cross motions for summary judgment, the Supreme Court granted plaintiff the relief he sought and awarded him damages against the law-firm defendants. In so ruling, the court rejected defendants' contention that plaintiff should not be permitted to recover a fee because of his failure to register as required by Judiciary Law § 468-a. The court also rejected defendant's effort to avoid payment on the ground that plaintiff had not earned a one-third fee, noting that papers prepared in connection with the client's real estate matter showed that plaintiff had performed at least "some services." The Appellate Division agreed with Supreme Court's analysis and affirmed the judgment. Defendants then took a further appeal by leave of this Court.

Defendants do not dispute the facial validity of their agreement to pay plaintiff a third of any fee they obtained in connection with the real estate matter that plaintiff had referred. Instead, they argue that the agreement is unenforceable because it involves compensation for professional services and because payment for such services to plaintiff, as an unregistered attorney, would violate public policy. In support, defendants rely heavily on Galbreath-Ruffin Corp. v. 40th & 3rd Corp., 19 N.Y.2d 354, 364, 280 N.Y.S.2d 126, 227 N.E.2d 30, in which this Court stated that noncompliance with a regulatory statute could " 'affect the legality of [a] business.' " For the reasons that follow, we reject defendants' effort to apply that principle to this situation.

"Illegal contracts are, as a general rule, unenforceable" (Lloyd Capital Corp. v. Pat Henchar, Inc., 80 N.Y.2d 124, 127, 589 N.Y.S.2d 396, 603 N.E.2d 246). However, the violation of a statute that is merely malum prohibitum will not necessarily render a contract illegal and unenforceable (id.). "If the statute does not provide expressly that its violation will deprive the parties of their right to sue on the contract, and the denial of relief is wholly out of proportion to the requirements of public policy * * * the right to recover will not be denied" (Rosasco Creameries v. Cohen, 276 N.Y. 274, 278, 11 N.E.2d 908).

Fee disputes involving persons who have failed to comply with licensing or registration requirements have spawned their own body of case law (see, e.g., Lloyd Capital Corp. v. Pat Henchar, Inc., supra; Richards Conditioning Corp. v. Oleet, 21 N.Y.2d 895, 289 N.Y.S.2d 411, 236 N.E.2d 639; Rosasco Creameries v. Cohen, supra; Johnston v. Dahlgren, 166 N.Y. 354, 59 N.E. 987; People ex rel. Nechamcus v. Warden, 144 N.Y. 529, 39 N.E. 686; see also, B & F Bldg. Corp. v. Liebig, 76 N.Y.2d 689, 563 N.Y.S.2d 40, 564 N.E.2d 650; Charlebois v. Weller Assocs., 72 N.Y.2d 587, 535 N.Y.S.2d 356, 531 N.E.2d 1288). Galbreath-Ruffin (supra, at 363-364, 280 N.Y.S.2d 126, 227 N.E.2d 30, quoting Silinsky v. Lustig, 118 Misc. 298, 299, 192 N.Y.S. 837) established one of the key controlling principles in this area: " '[W]here the procuring of a license is merely for the purpose of raising revenue it would seem that acts performed without securing a license would be valid. But where the statute looks beyond the question of revenue and has for its purpose the protection of public health or morals or the prevention of fraud, a non-compliance with its terms would affect the legality of the business' " (accord, Richards Conditioning Corp. v. Oleet, supra; see, e.g., Charlebois v. Weller Assocs., supra, at 592, 535 N.Y.S.2d 356, 531 N.E.2d 1288). Two other important tenets that have emerged from the case law are that fee forfeitures are disfavored and that such forfeitures may be particularly inappropriate where there are other regulatory sanctions for noncompliance (Lloyd Capital Corp. v. Pat Henchar, Inc., supra, at 128, 589 N.Y.S.2d 396, 603 N.E.2d 246; Charlebois v. Weller Assocs., supra, at 595, 535 N.Y.S.2d 356, 531 N.E.2d 1288; see also, Rosasco Creameries v. Cohen, supra, at 279-280, 11 N.E.2d 908). As this Court stated in Charlebois v. Weller Assocs. (supra, at 595, 535 N.Y.S.2d 356, 531 N.E.2d 1288), the courts are especially skeptical of efforts by clients or customers to use public policy "as a sword for personal gain rather than a shield for the public good."

Application of these precepts leads to a favorable conclusion for this plaintiff. Initially, there is sound reason to doubt the assumption that Judiciary Law § 468-a's registration requirements constitute a licensing scheme analogous to the licensing scheme for engineers that was considered in Charlebois v. Weller Assocs. (supra), the licensing scheme for real estate brokers that was considered in Galbreath-Ruffin Corp. v. 40th & 3rd Corp. (supra) and the licensing scheme for milk dealers that was considered in Rosasco Creameries v. Cohen (supra). One working definition of a "license" is "[a] permit, granted by an appropriate governmental body * * * to a person, firm, or corporation to pursue some occupation or to carry on some business subject to regulation" (Black's Law Dictionary 829 [5th ed]. In this State, a person is authorized to practice law if that person has been admitted to practice and has taken the requisite oath (see, Judiciary Law § 478; see also, §§ 466, 476-a[1][b]. Admission is governed by Judiciary Law § 90, which refers only to certification by the State Board of Law Examiners, consideration by the Appellate Division of the applicant's general fitness and character and compliance with the Court of Appeals and Appellate Division rules "relating to the admission of attorneys." Importantly, neither section 90 nor the statute authorizing admitted attorneys to practice law mentions section 468-a's registration requirement. Moreover, the responsibility for regulating and disciplining admitted attorneys is vested in the Department of the Appellate Division, not OCA, the entity that administers the registration system (see, Judiciary Law § 90[2]. Thus, the registration system does not have the critical earmarks of a licensing or regulatory scheme.

In any event, even if treated as an ancillary licensing or regulatory mechanism, the attorney registration system more closely resembles a revenue-raising measure than a program for "the protection of public health or morals or the prevention of fraud" (Galbreath-Ruffin Corp. v. 40th & 3rd Corp., supra, at 364, 280 N.Y.S.2d 126, 227 N.E.2d 30). When section 468-a was first enacted, its stated purpose was to "generate $1,750,000 in estimated [annual] fee revenues," which were to be used in part to defer certain of OCA's administrative costs and in part to fund the new Lawyers' Fund for Client Protection that was created to compensate clients injured by attorney misconduct (Mem in Support of S6709-C and A8709-C, Bill Jacket, L.1981, ch. 714). In approving the measure, then Governor Hugh L. Carey stressed that the statute was necessary because New York was "the only state which does not require payment of a statutory license fee" and because attorneys were the only profession not "subject to some fee requirement" (Governor's Approval Mem, 1981 NY Legis Ann, at 378). According to its sponsor, the legislation requiring the filing of a registration statement and the payment of a fee "simply and adequately compensates State government for processing the regulation of the profession" (Mem of Senator W.T. Smith, 1981 NY Legis Ann, at 377).

The subsequent amendments to the statute only serve to underscore Judiciary Law § 468-a's essential purpose...