Burns v. Stewart

• Decision Date: 28 May 1971
• Docket Number: No. 42610,42610
• Citation: 290 Minn. 289,188 N.W.2d 760
• Parties: Thos. F. BURNS, Appellant, v. LaRue Y. STEWART (Donna Rae Johnson, as admrx. c.t.a. of the estate of Harriet LaRue Y. Stewart, substituted for LaRue Y. Stewart), Respondent.
• Court: Minnesota Supreme Court

Page 760

188 N.W.2d 760

290 Minn. 289

Thos. F. BURNS, Appellant, v. LaRue Y. STEWART (Donna Rae Johnson, as admrx. c.t.a. of the estate of Harriet LaRue Y. Stewart, substituted for LaRue Y. Stewart), Respondent.

No. 42610.

Supreme Court of Minnesota.

May 28, 1971.

Syllabus by the Court

1. Where a husband deserts his wife and departs from the state, taking with him extensive joint assets of the marriage, a contingent fee arrangement between the wife and her attorney to recover her equitable share of such assets is not void as against public policy.

2. Since such fee arrangement is not void as against public policy, a lawyer who is dismissed by his client, before funds are recovered under such agreement but after substantial services have been performed, should not be precluded from recovering for the reasonable value of his services.

Thos. F. Burns, pro se, and Alan Schunk, Minneapolis, for appellant.

Patrick F. Sullivan and Donna Rae Johnson, St. Paul, for respondent.

Heard before KNUTSON, C.J., and MURPHY, PETERSON, KELLY, and ODDEN, JJ.

OPINION

DONALD C. ODDEN, Justice. ^*

This matter is before the court on an appeal from a judgment dismissing plaintiff-appellant's claim for the reasonable value of attorney's services rendered on behalf of LaRue Y. Stewart. ¹ The dismissal was predicated on the trial court's conclusion that plaintiff had been retained in what amounted to a contingent fee arrangement in a divorce matter, such that under decisions of this court no recovery was permissible. We disagree.

The record presented contains evidence indicating that the basic facts of the dispute are as follows: LaRue Y. Stewart and Richard B. Stewart were married in November 1953 at Kansas City, Missouri. Shortly thereafter, they moved to St. Paul, Minnesota, where they purchased a home, obtained employment, and became domiciled.

In 1957, they discussed and mutually agreed to borrow $1,000 to purchase stock in a new corporation. They eventually did borrow said amount, both signing a personal note to repay the same. It was also agreed that Mrs. Stewart would continue her employment to help repay the $1,000 because the investment was, at the time of purchase, highly speculative. The note was eventually paid in full and the couple continued to purchase more stock under the same arrangement; that is, she continued to work to help defray their living expenses and repay loans upon which they were mutually obligated. In 1959, they discussed and mutually agreed to invest in the commodities market. By selling some of their stocks and using part of their accumulated savings, they invested and reinvested in such markets up to 1962, by which time they had accumulated a substantial net worth in excess of $200,000. During this time it was agreed between them that all purchases of securities were mutual and joint in that both Mrs. Stewart and her husband would have equal rights and liabilities with respect to the proceeds, profits, or losses. It was further agreed between them that they would have equal rights in the profits from their efforts whether profits were derived from investments, sales of such investments, or otherwise.

In early 1962, Mr. Stewart, for reasons known only to him, surreptitiously departed his wife's company and abode and left the state, leaving no forwarding address, taking with him all of their securities and liquid assets, and leaving Mrs. Stewart financially destitute. After consultation with, and representation by, at least two other St. Paul attorneys, both of whom she dismissed, Mrs. Stewart eventually, in 1964, retained Thomas F. Burns, plaintiff and appellant herein, to represent her in her plight.

It appears that plaintiff and Mrs. Stewart engaged in extensive discussions concerning what should be done since Mr. Stewart could not be located and Mrs. Stewart was financially unable to pay for extensive legal and investigative services. It was known, at that time, that Mr. Stewart had attempted to obtain a Nevada divorce and there was uncertainty as to whether it had been concluded, or, if it had, uncertainty as to its validity.

In January 1965, plaintiff and Mrs. Stewart entered into two retainer agreements, one which in substance provided for a fee of $400 for plaintiff's services in obtaining against Mr. Stewart a Minnesota divorce, in which action only the homestead in Ramsey County, its contents, and other inconsequential personal property would be involved; and another which in substance provided for a fee equal to 25 percent of any amount of the personal property Mrs. Stewart might recover from her husband in any state except Minnesota. Both retainer contracts were drawn at approximately the same time and were executed by both parties on the same date. Mrs. Stewart sold stock to obtain $1,500, which she advanced to plaintiff pursuant to the second retainer agreement for expenses, costs, and disbursements.

Plaintiff thereafter commenced an action for divorce in Mrs. Stewart's behalf, serving Mr. Stewart by publication. On June 22, 1965, default judgment was entered in Ramsey County, awarding Mrs. Stewart a divorce, possession of, and complete ownership of the homestead, the household furniture and furnishings therein, and all personal property of Mrs. Stewart then in her possession. Since personal service upon Mr. Stewart had not been obtained, the court reserved to itself jurisdiction over permanent alimony, attorney's fees, and costs.

In the meantime, plaintiff, in some way not divulged in the record, located Mr. Stewart in Los Angeles, California. A law firm in Los Angeles was retained through plaintiff's efforts to represent Mrs. Stewart. Its agreement with plaintiff was that it was to receive 10 percent of any recovery from Mr. Stewart, which 10 percent was to be deducted from plaintiff's 25 percent.

Plaintiff prepared pleadings and did exhaustive research which he sent to California counsel. Eventually a lawsuit was initiated in California against Mr. Stewart. During this period, plaintiff engaged in settlement negotiations with a Minnesota attorney who had been engaged by Mr. Stewart. Shortly thereafter, Mrs. Stewart terminated the attorney-client relationship with plaintiff but retained the services of the California attorneys who had been brought into the case by plaintiff and by then were involved in litigation against Mr. Stewart. The record is unclear, but either following trial or during trial in California a settlement agreement was reached granting Mrs. Stewart the amount of $45,360. Of this amount, California counsel retained 12 1/2 percent as their fee and retained an additional 12 1/2 percent in trust for plaintiff, pending resolution of the fee dispute between him and Mrs. Stewart.

Plaintiff then commenced suit in Ramsey County against Mrs. Stewart seeking the reasonable value of legal services rendered in Mrs. Stewart's behalf, yet unpaid. Mrs. Stewart denied she was indebted to plaintiff and counterclaimed for damages, alleging incompetent representation and demanding punitive damages for abuse of process relating to plaintiff's garnishment of her bank account. Trial was commenced on November 12, 1969, and the following day plaintiff rested his case provisionally on the question of liability, with leave to reopen should the court determine that he had a valid claim against Mrs. Stewart. She moved for dismissal. After being advised that she was withdrawing her counterclaim, the lower court entered an order for judgment, dismissing plaintiff's cause of action pursuant to Rule 41.02(2), Rules of Civil Procedure, and ordering judgment for the defendant with costs. The trial judge in his memorandum cites Baskerville v. Baskerville, 246 Minn. 496, 75 N.W.2d 762, as authority for his order.

While this appeal was pending, Donna Rae Johnson, as administratrix, obtained from the district court an order directing plaintiff to authorize California counsel to release to her the funds which were being retained in trust, or, in the alternative, to obtain, in an amount twice that of said funds, a bond to be filed with the clerk of court. Subsequently, plaintiff moved to set aside this order on the basis that the court lacked jurisdiction to order disposition of moneys the situs of which was in California, and further that only the probate court of Ramsey County or the probate court in California could have jurisdiction over the subject matter. The lower court refused to rule on this motion and, with consent of the parties, directed that the question be presented to this court for consideration.

1. One issue to be resolved here is: Where an attorney has entered into two separate retainer contracts with a woman client whose husband has deserted her, one to procure for a fee certain a divorce and adjudication of her rights respecting the marriage property located in Minnesota, and the other to procure a fee contingent upon the amount of recovery of her interest in personal property which the deserting husband had removed from the state, may such attorney, after being discharged by his client, maintain an action to recover the reasonable value of legal services rendered, or does the fee arrangement constitute a fee contingent upon the amount of alimony and property awarded to the wife so as to be void as against public policy?

The fundamental law of this state concerning contingent fee arrangements in divorce actions is set forth in Klampe v. Klampe, 137 Minn. 227, 163 N.W. 295, and Baskerville v. Baskerville, 246 Minn. 496, 75 N.W.2d 762.

In the Klampe case, the attorney and client entered into a contract whereby the attorney was to receive a contingent fee of 50 percent of any properties or moneys obtained by settlement or by action for his client in a then-pending divorce proceeding. This court said:

'The court will not lend its aid to enforce a contract between an attorney and his client for fees that savors of oppression or that is against public policy. As ...