Cahn v. Fisher

• Court: Arizona Court of Appeals
• Writing for the Court: LANKFORD; VOSS, P.J., and BROOKS
• Citation: Cahn v. Fisher, 805 P.2d 1040, 167 Ariz. 219 (Ariz. App. 1990)
• Decision Date: 12 July 1990
• Docket Number: No. 1,CA-CV,1
• Parties: Harry CAHN and Conrad R. Blain dba Cahn and Blain, Plaintiffs-Appellees, v. H. Richmond FISHER and Jane Doe Fisher; Francis P. Smith and Jane Doe Smith; dba Fisher and Smith, Defendants-Appellants. 89-167.

Page 1040

805 P.2d 1040

167 Ariz. 219

Harry CAHN and Conrad R. Blain dba Cahn and Blain, Plaintiffs-Appellees, v. H. Richmond FISHER and Jane Doe Fisher; Francis P. Smith and Jane Doe Smith; dba Fisher and Smith, Defendants-Appellants.

No. 1 CA-CV 89-167.

Court of Appeals of Arizona Division 1, Department D.

July 12, 1990.

Review Denied March 5, 1991.

[167 Ariz. 220] Fisher and Smith by Daniel J. Terrell, Francis P. Smith, Phoenix, for defendants-appellants.

Stanley M. Hammerman, Phoenix, for plaintiffs-appellees.

OPINION

LANKFORD, Judge.

In this appeal, two lawyers challenge a summary judgment holding the defendant lawyers liable for the cost of deposition transcripts ordered by the lawyers from the plaintiff court reporters.

The lawyers claim that because they merely acted as agents for their client, and because they disclosed that they acted only in a representative capacity for an identified principal, only the client is responsible for the court reporters' charges.

The court reporters, on the other hand, claim that they contracted directly with the lawyers, who are therefore legally obligated to pay.

The superior court granted summary judgment for the court reporters in the amount of the invoices for the three transcripts involved, $579.95, plus costs and attorney's fees incurred by the court reporters in pursuing their claim. We affirm and issue this opinion to clarify lawyers' personal liability for expenses incurred on behalf of their clients.

I.

We view the evidence and inferences which can reasonably be drawn from the evidence in the light most favorable to the appellant on an appeal from a summary judgment. State ex rel. Corbin v. Challenge, Inc., 151 Ariz. 20, 725 P.2d 727 (App.1986).

The appellant lawyers represented Pamela J. and James A. Schmillen in a litigated matter. In the course of this representation, the lawyers ordered three deposition transcripts from appellees Cahn and Blain. Although there is no direct evidence that the lawyers informed the court reporters that the lawyers were acting as agents in ordering the transcripts, or that the lawyers identified their principals to the court reporters, this fact might reasonably be inferred under the circumstances. The invoices were apparently for copies of depositions, suggesting that the court reporters had the caption of the case identifying the lawyers' clients when the lawyers ordered the transcripts. See Petrando v. Barry, 4 Ill.App.2d 319, 124 N.E.2d 85 (1955) (printer's knowledge of principal's identity could be inferred from cover of briefs). After the lawyers placed these orders, their clients filed for bankruptcy.

The court reporters billed $579.95 for the transcripts. The lawyers did not pay.

The court reporters filed a complaint in superior court against the lawyers seeking payment. The lawyers filed both an answer and a motion to dismiss for failure to state a claim and failure to join a necessary party. The court reporters responded to the motion to dismiss and filed a motion for summary judgment. The summary judgment motion asserted that the lawyers were responsible for the charges because they ordered the transcripts, and because the reporters intended to extend credit to the lawyers and not their clients. The reporters also offered an affidavit of a court reporter not involved in the lawsuit stating conclusorily that it is the "custom and usage" of court reporters in Maricopa County to bill and extend credit to lawyers and not to their clients.

The superior court denied the lawyers' motion to dismiss and granted the reporters' motion for summary judgment. The lawyers appeal. We affirm.

II.

The lawyers advance five arguments on appeal. First, they contend that under agency law, a lawyer as agent for a disclosed principal is not liable on contracts entered into on behalf of his or her client. Second, they contend that the formation of a contract cannot be proved by custom and usage. Third, the lawyers argue that a lawyer cannot be legally responsible for the client's expenses because the lawyer cannot ethically agree to pay a client's expenses. Fourth, the lawyers contend that their clients are indispensable parties to this action and thus that the superior court should have granted the lawyers' motion to dismiss. Fifth, the lawyers argue, for the first time on appeal, that an oral contract for payment of a client's expenses is unenforceable under the statute of frauds. See A.R.S. § 44-101. However, a party cannot raise new theories on appeal to seek reversal of a summary judgment. Sullins v. Third and Catalina Constr. Partnership, 124 Ariz. 114, 120, 602 P.2d 495, 501 (App.1979). We therefore decline to address the appellants' fifth contention.

A.

The lawyers argue that agency law protects an agent from liability on a contract entered into on behalf of a disclosed principal. It is true that, "[u]nless otherwise agreed, a person making or purporting to make a contract with another as agent for a disclosed principal does not become a party to the contract." Restatement (Second) of Agency § 320 (1958). Disclosure of the principal requires that the agent give the other party both "notice that the agent is acting for a principal and of the principal's identity." Id. at comment a; Mahan v. First Nat'l Bank, 139 Ariz. 138, 677 P.2d 301 (App.1984). The burden of proving that the principal was disclosed rests with the agent. Mahan, supra.

It is also true that a lawyer is the agent of his or her client. Green Acres Trust v. London, 142 Ariz. 12, 688 P.2d 658 (App.1983), vacated in part on other grounds 141 Ariz. 609, 688 P.2d 617 (1984). As such, the rules of agency law generally apply. Id.; Balmer v. Gagnon, 19 Ariz.App. 55, 504 P.2d 1278 (1973). Among other things, an agent may employ other agents on behalf of the principal without becoming personally liable. See Christensen, O'Connor, Garrison & Havelka v. State, Dep't. of Revenue, 97 Wash.2d 764, 649 P.2d 839 (1982) (applying this analysis to lawyers who employed other lawyers and draftsmen to provide services for the disclosed client).

It is undisputed that the lawyers ordered the transcripts. The burden fell to the lawyers to show that they acted solely as agent for their disclosed clients.

Reasonable inferences can be drawn that the court reporters were aware that the lawyers were ordering the transcripts not for themselves but on behalf of their clients, and that the reporters were aware of the clients' identities. Under these circumstances, agency law precludes a judgment resting on the theory that lawyers are generally liable on a contract with court reporters. See Morgan v. Krook, 36 Ariz. 133, 283 P. 287 (1929) (affirming judgment for defendant lawyer).

Some courts have reached the contrary conclusion despite their acceptance of the rule that the agent is not liable on a contract entered into on behalf of a disclosed principal. These courts theorize that because the attorney is in charge of the litigation, he or she is directly responsible for payment of expenses incurred in connection with it. E.g., Burt v. Gahan, 351 Mass. 340, 342-343, 220 N.E.2d 817, 818-19 (1966). These courts also rely on the notion that the lawyers' liability is an "equitable" result. Id.

We disagree that there is one rule of law for principals and agents generally, and another for principals and agents who happen to be lawyers and their clients. There is no sound reason for such a distinction. The idea that lawyers are "in charge" of the client's business is no less true of many other agents, who may exercise a great degree of control over their principals' affairs.

B.

While the lawyers ordinarily would not be bound under agency law to a contract entered into on behalf of their disclosed principals, the parties to the contract were certainly free to agree otherwise. The parties were free to bargain away the general rule and agree that the agent would be liable. Murphy v. Cain, 711 S.W.2d 302 (Tex.Civ.App.1986).

In this case, the court reporters attempted to show that "custom and usage" between court reporters and lawyers is that the lawyers are directly liable for the reporters' fees. Court reporters might also be able to establish such liability by proof of a course of dealing between the parties. See Theuerkauf v. Sutton, 102 Wis.2d 176, 306 N.W.2d 651 (1981).

The lawyers argued below that the conclusory affidavit offered by the reporters was insufficient to show custom and usage. However, they abandoned that argument on appeal and we therefore decline to consider the sufficiency of the affidavit.

The lawyers do argue that custom and usage cannot be used to prove an acceptance, citing Contempo Constr. Co. v. Mountain States Tel. & Tel. Co., 153 Ariz. 279, 736 P.2d 13 (App.1987). The lawyers characterize the issue here as their acceptance of the reporters' offer to extend credit for the transcripts.

The difficulty with this argument is that the issue here is not one of contract formation. There is no doubt that a contract was entered into between the lawyers and the...