Eaton v. Morse, 83-387

• Decision Date: 01 October 1984
• Docket Number: No. 83-387,83-387
• Citation: 687 P.2d 1004,212 Mont. 233,41 St.Rep. 1708
• Court: Montana Supreme Court
• Parties: Robert T. EATON, individually and d/b/a Eaton Construction, Plaintiff and Respondent, v. William R. MORSE, Defendant and Appellant.

Page 1004

687 P.2d 1004

212 Mont. 233

Robert T. EATON, individually and d/b/a Eaton Construction Plaintiff and Respondent, v. William R. MORSE, Defendant and Appellant.

No. 83-387.

Supreme Court of Montana.

Submitted June 19, 1984.

Decided Sept. 5, 1984.

Rehearing Denied Oct. 1, 1984.

Goetz, Madden & Dunn, James Goetz, argued, Bozeman, for defendant and appellant.

Gary L. Beiswanger, argued, Billings, for plaintiff and respondent.

MORRISON, Justice.

Judge Nat Allen of the Thirteenth Judicial District Court, sitting without a jury, entered a judgment awarding Robert T. Eaton money damages in the amount of $57,024.40 plus costs of $2,341.51 from William R. Morse. Morse appeals.

Robert T. Eaton filed a civil action against William R. Morse on October 6, 1981 seeking payment of $56,250. The complaint alleged that Morse fraudulently appropriated money for his own use from the settlement proceeds of the "Stran Steel" case in which Morse, a practicing attorney, represented Eaton. Eaton amended the complaint to plead treble damages. Morse's answer denied the essential allegations and his counterclaim alleged that Eaton received seventy-five percent of the settlement funds contrary to a prior written 50/50 attorney fee agreement. Morse claimed Eaton owed him $56,250 as legal fees and costs. Judge Allen's judgment favoring Eaton denied Morse's counterclaim and denied Eaton treble damages. Morse appeals and Eaton cross-appeals from the denial of treble damages.

Morse represented Eaton from 1970 until 1981 in a U.S. District Court civil action against National Steel Products Company, formerly known as Stran-Steel. The federal trial of the Stran-Steel case resulted in a verdict for Eaton of over $400,000. After an appeal to the Federal Ninth Circuit and thereafter a petition for certiorari to the U.S. Supreme Court, the case was ultimately remanded and, before retrial, settled for $225,000.

Morse handled the Stran-Steel matter for Eaton on a fifty percent contingent fee. While no written evidence of the initial agreement was produced at the trial by either party, there is no dispute that their initial written fee contract provided for a fifty percent attorney's fee after all expenses incurred by both Morse and Eaton had been paid.

The Eatons signed a formal authorization for Morse to settle for $225,000 on April 23, 1981. At the time of settlement, Eaton claims Morse and Eaton orally agreed to replace their 50 percent of net agreement with a percentage distribution of the gross settlement amount.

Morse and Eaton decided to cash the $225,000 settlement check directly from the bank in New York City. On the same day that Morse received the settlement check he and his wife drove to Denver, Colorado with Mr. and Mrs. Eaton. The two couples flew from Denver to New York City on May 10. Conflicting testimony obfuscates who insisted upon negotiating the check from the bank upon which it was drawn. Both Morse and Eaton implied an honest concern that Eaton's creditors would seize a major portion of the settlement. (Exhibits introduced at trial revealed Eaton was over $400,000 in debt. Security Bank in Billings had a $107,000 judgment against Eaton.) After receiving $225,000 cash from the bank, Eaton and Morse divided the money, placed it into their briefcases, and left immediately for Denver. Upon arrival in Denver, Morse delivered $12,500 cash to Eaton's wife, Darlene. This left Eaton and Morse each in possession of $112,500 cash.

The following day, while still in Denver, Morse purchased a certificate of deposit for $100,000 in the name of "Wm. R. Morse Office Trust Account" and Darlene Eaton purchased a similar $100,000 Certificate of Deposit in the names of her married daughters. Both certificates were for a term of 30 days, maturing June 12, 1981.

From this point, Eaton and Morse disagree.

Immediately after purchasing the certificates of deposit, the Eatons and Morses left Denver for Billings. The Eatons and the Morses each held, separately, $12,500 in cash of the Stran-Steel settlement. They drove as far as Sheridan, Wyoming. Eaton claims that about 9:00 a.m. on May 14, while Eaton and Morse were loading luggage in the car, that Morse presented Eaton with two handwritten and undated documents. One document was the revised attorney-client fee agreement which replaced the original fifty percent arrangement. This agreement provided that twenty-five percent of the Stran-Steel settlement proceeds went to Morse and the remaining seventy-five percent belonged to Eaton. The clear language of this revised fee agreement acknowledged: "that the above sums have been paid in full in cash from the sums paid over from the STRAN settlement." The document was written in Morse's handwriting and was undated. It was signed by both William R. Morse and Robert T. Eaton. The other handwritten agreement was a bilateral acknowledgement of full satisfaction between Morse and Eaton of all accounts other than Stran-Steel. Its terms provided that Morse received $10,000 "as payment in full for all legal services performed for matters other than the Stran-Steel case."

Contrary to Eaton's testimony that the two handwritten agreements were drafted and signed on May 14 in Sheridan, Wyoming, Morse claimed that between May 14 and June 11, an endless argument continued with the Eatons regarding an equitable division of the Stran-Steel settlement. Morse further testified that in order "to get Eaton off his back," he drafted and executed the two handwritten documents on June 11, during their second trip to Denver to redeem their certificates of deposit.

Morse and Eaton agreed that on June 11, 1981 Eaton and his wife met Morse and his wife in Denver, Colorado. The following day Morse and Eaton redeemed their $100,000 certificates of deposit.

Following June 12, 1981 Eaton and his wife contend that they made repeated demands upon Morse for the payment of the additional $56,250 which they maintain Morse retained contrary to their revised agreement. The Eatons engaged a Billings attorney to draft a demand letter to collect that portion of the Stran-Steel settlement. Their efforts failed. The Eatons brought this action against Morse to recover the $56,250 portion of the Stran-Steel settlement which they contend is rightfully theirs and was never remitted to them.

ISSUES:

1. Whether the District Court erred in considering parol evidence to vary the terms of unambiguous written agreements.

2. Whether there exists, under the circumstances of this case, a fraud exception to the parol evidence rule.

3. Whether an agreement that is partially in writing and partially oral can be properly taken to have altered a written fifty percent attorney's contingency fee agreement.

4. Whether, in light of a number of clearly erroneous factual findings on the part of the District Court, the District Court's verbatim adoption of Plaintiff's proposed findings constitutes error.

5. Whether the District Court was clearly erroneous in resolving the dispute in credibility in favor of the Plaintiff.

6. Whether treble damages are warranted under section 37-61-406 and/or 37-61-407, MCA.

Clarification of the validity of the attorney fee contracts is fundamental to our discussion of parol evidence.

Appellant claims that the second revised fee agreement fails for lack of consideration; therefore, the original fifty percent contract is valid and eliminates respondent's action to recover the remaining portion of his alleged seventy-five percent share. We disagree.

Credible evidence substantiates that both appellant and respondent recognized and acknowledged that neither of them had an accurate record of the costs and expenses for their labor and work performed for the extended ten-year Stran-Steel litigation. There is evidence that both parties agreed to rescind their original fifty percent of net agreement and enter into the second fee contract, based on a gross 7 5/25 distribution because of the dispute over costs. The change from a net to a gross computation to eliminate the accounting problem is valid consideration for the second contract. Accounts between appellant and respondent which were in dispute were finally settled by the revised handwritten contract. Resolution of issues in dispute constitutes consideration in support of the second fee agreement. Ramsdell v. Clark (1897), 20 Mont. 103, 49 P. 598. Accordingly, we conclude that the second handwritten attorney fee agreement is a valid enforceable contract supported by the requisite elements, including consideration.

The most critical issue is whether the District Court erred in considering parol evidence to show that Eaton did not, in fact, receive the agreed upon cash payment from the settlement proceeds from Morse, which evidence contradicts the unambiguous terms of their written agreement in which Eaton acknowledges full payment of all sums in cash. Appellant's first three issues are consolidated in the parol evidence discussion.

Clarity of the issue warrants review of the entire text of the revised attorney fee agreement, handwritten by Morse and signed by both Morse and Eaton. The agreement reads:

"Come Now Wm. R. Morse and Robert T. Eaton and hereby enter into the following agreement:

"Whereas the parties hereto have previously entered into a written agreement for attorney fees and expenses in the case of Eaton v. STRAN-STEEL et al and companion cases, and

"Whereas a settlement has been reached in the STRAN-STEEL case in the amount of $225,000.00, and

"Whereas the parties hereto have found it necessary to adjust and revise their earlier agreements so as to reach agreement on the above STRAN-STEEL case settlement,

"Now Therefore the parties agree that the division of the proceeds of the STRAN-STEEL settlement of $225,000.00 shall be as follows: the total sum of $56,250.00 shall be paid to Wm. R. Morse, which sum shall apply to all expenses and costs expended by Wm. R. Morse, and shall also include...