Fanchon & Marco v. Leahy

• Decision Date: 04 May 1943
• Docket Number: 37801
• Parties: Fanchon & Marco, Inc., Fanchon & Marco Enterprises, Inc., and Fanchon & Marco Service Corporation, v. John S. Leahy, Lambert E. Walther, and Harold F. Hecker, Appellants
• Court: Missouri Supreme Court

173 S.W.2d 417

351 Mo. 428

Fanchon & Marco, Inc., Fanchon & Marco Enterprises, Inc., and Fanchon & Marco Service Corporation, v. John S. Leahy, Lambert E. Walther, and Harold F. Hecker, Appellants

No. 37801

Supreme Court of Missouri

May 4, 1943

Rehearing Denied July 6, 1943. Motion to Transfer to Banc Overruled July 20, 1943.

Appeal from Circuit Court of City of St. Louis; Hon. Joseph J Ward, Judge.

Reversed and remanded (with directions).

Rassieur & Rassieur and Wm. O'Herin for appellants.

(1) In an equity suit this Court necessarily reviews the entire record, disregarding any incompetent evidence admitted by the court below and makes its judgment and decree conform to what the court deems equitable and just as to all parties rightfully in court, rendering such judgment as in equity and good conscience the pleadings and evidence may authorize. Hardwood v. Toms, 130 Mo. 225; Schenkmeyer v Altheimer, 327 Mo. 666; Henson v. Perry Co. S. & L. Assn., 300 S.W. 1037; In re Condemnation Spring Valley Park, 57 S.W.2d 752. (2) The evidence in this case does not show that the relation of attorney and client existed as between plaintiff Fanchon & Marco, Inc., and defendants in February, 1934, as alleged in plaintiffs' petition. This relationship can be created only by a contract of employment, express or implied, and commences only when such a contract has been entered into. 1 Thornton on Attorneys, p. 230, sec. 134; State v. Hedgepeth, 125 Mo. 14, 28 S.W. 160; Francisco v. Dove, 231 Ill. 402, 83 N.E. 205; Caldwell v. Bigger, 90 P. 1095, 76 Kan. 49; Dentzel v. City, etc., R. Co., 90 Md. 434, 45 A. 201; Bazzell v. Bennett, 191 S.W. 876. (3) In the absence of the relationship of attorney and client the duties and obligations of the professional relationship are not imposed upon an attorney. Therefore, defendant Leahy was under no obligation to advise plaintiff Fanchon & Marco, Inc., of any interest he had with Snyder. Jenkins v. Einstein, 13 Fed. Cas. 460, Case No. 7265, 3 Biss. 128; Tanere v. Reynolds, 35 Minn. 476, 29 N.W. 171; Hyer v. Little, 20 N.J.Eq. 443; Tatom v. White, 95 N.C. 453; 1 Thornton on Attorneys, p. 275, sec. 153; Adams v. Schmidt, 68 N.J.Eq. 168, 60 A. 345; 7 C. J. S., p. 967, sec. 127. (4) An attorney who has fully performed his contract is entitled to the stipulated fee, notwithstanding acts or omissions of the attorney not affecting the character or quality of the attorney's services. 7 C. J. S., p. 1059, sec. 183, p. 1021, sec. 164. (5) If defendant Leahy's failure to inform plaintiff Fanchon & Marco, Inc., that he was interested with Snyder had been a violation of professional duty under the contract of employment pleaded to procure the leases and incorporate the lease-holding companies, such misconduct in that matter could not affect the right of defendants to compensation for services rendered by them in subsequent employments by corporations in which Fanchon & Marco, Inc., was a stockholder or in subsequent direct employments of them by Fanchon & Marco, Inc. Rippey v. Wilson, 280 Mich. 233, 273 N.W. 552; Currie v. Cowles, 6 Bosw. 452; Davis v. Smith, 48 Vt. 52; Richardson v. Richardson, 100 Mich. 364, 59 N.W. 178; Tropwall's Admx. v. Byrd's Admr., 22 Ark. 10; Nugent v. Moody, 271 S.W. 266; 7 C. J. S., p. 967, sec. 24, p. 1026, sec. 167. (6) As part of the agreement of December 3, 1936, defendants relinquished their rights under their contract of April 4-17, 1935, and transferred to plaintiffs $ 8,000 Central Properties bonds on which plaintiff Fanchon & Marco, Inc., subsequently received a dividend. To maintain this action to set aside the settlement agreement of December 3, 1936, plaintiffs were obligated to restore the rights surrendered under the prior contract and to return the bonds and dividend thereon. 12 C. J. S., "Cancellation of Instruments," sec. 57, p. 1042; Davidson v. Gould, 187 S.W. 591; First Methodist Church v. Berryman, 303 Mo. 475; Townsend v. Shipley, 239 P. 787; Head v. Moore, 232 S.W. 362. (7) A party who desires to rescind a contract upon the ground of fraud must at once announce his purpose and adhere to it. If he be silent and continue to treat the property as his own, he will be held to have waived the objection and shall be conclusively bound by the contract as if the mistake or fraud had not occurred. Grymes v. Sanders, 93 U.S. 55, 23 L.Ed. 798; Harrison v. Ala. Midland Ry. Co., 40 So. 394; Elgin v. Snyder, 118 P. 280; Dellinger v. Gillespie, 24 S.E. 538; Brown v. Walker Lbr. Co., 122 S.E. 670; Galveston C. C. Co. v. Galveston, etc., Ry. Co., 284 F. 137, affirmed 287 F. 1021. (8) To entitle a client to set aside an agreement with his attorney it must be shown that the client has suffered some injury through the alleged abuse of confidence. 6 C. J., sec. 211, p. 687; Kisling v. Shaw, 33 Cal. 425; Goode v. King, 189 Ark. 1093, 76 S.W.2d 300; Howard v. Rayner, 94 S.W.2d 111; State ex rel. v. Fidelity & Dep. Co., 94 Mo.App. 184; Kirchoff v. Bernstein, 92 Ore. 378, 181 P. 746; Estate of Mallory, 99 Cal.App. 96. (9) The fraud relied upon by plaintiff as ground for rescinding the settlement contract is that defendant Leahy had concealed from plaintiff the fact that he had been interested with Snyder. Even if defendants had been the attorneys for plaintiff in February, 1934, or had become such by reason of plaintiff coming into the enterprise, the contract of settlement, made in December, 1936, could not be rescinded by plaintiff on the ground that defendant Leahy had concealed from plaintiff the fact that he had been interested with Snyder unless the alleged misrepresentation by concealment was a material matter of inducement in the making of the settlement contract and that plaintiff did not at the time of making the settlement have knowledge of the alleged misrepresentation and made the settlement contract in reliance upon the negative misrepresentation by concealment that Leahy had no such interest. 27 C. J., sec. 176 (5), p. 48, sec. 179 (8), p. 49; sec. 194, p. 59; Anderson v. McPike, 86 Mo. 293; Conklin v. Mo. Pac. R. Co., 331 Mo. 734; Davis v. Ins. Co., 81 Mo.App. 264; Maupin v. Prov. L. & A. Co., 75 S.W.2d 593.

Burnett, Stern & Liberman for respondents.

(1) This court, in reviewing an equity case, considers the case de novo, but nevertheless gives due deference to the finding and judgment of the chancellor and usually defers to the decision of the chancellor on controverted questions of fact determined from the oral testimony of witnesses appearing before him, unless the chancellor's findings clearly appear to be erroneous or unsupported by sufficient evidence. Bank of Brimson v. Graham, 335 Mo. 1196, 76 S.W.2d 376; Hendrix v. Goldman, 92 S.W.2d 733; Naslund v. Moon Motor Car Co., 345 Mo. 465, 134 S.W.2d 102; Kingston v. Mitchell, 117 S.W.2d 226. (2) The evidence conclusively established the relationship of attorney and client between the defendants and Fanchon & Marco, Inc. (3) An attorney owes an absolute duty to his client to inform him of any personal interest he may have and to make a clear, complete and accurate disclosure of all material information or facts concerning the subject matter of the employment. Laughlin v. Boatmen's Natl. Bank of St. Louis, 163 S.W.2d 761; 7 C. J. S., p. 975, sec. 125; Moffett Bros. Partnership Estate v. Moffett, 345 Mo. 741, 137 S.W.2d 507; In re Conrad, 340 Mo. 582, 105 S.W.2d 1; Fiske v. Buder, 125 F.2d 841; Francis v. Turner, 67 S.W.2d 211; Palm's Adm'rs. v. Howard, 112 S.W. 110; Bryant v. Lewis, 27 S.W.2d 604; Miller v. Lloyd, 181 Ill.App. 230. (4) The breach of his professional duties by Leahy was serious and necessarily prejudicial to his client, and therefore it deprives him of any right of compensation. In an action which involves only the right of an attorney to compensation, the attorney cannot require the court to weigh with fine scales the extent to which his derelictions damaged his client. In re Polansky, 41 F.2d 547; In re Thomasson's Estate, 347 Mo. 748, 148 S.W.2d 757; Laughlin v. Boatmen's Natl. Bank of St. Louis, 163 S.W.2d 761; Clark v. Millsap, 242 P. 918; Faber v. Enkema, 231 N.W. 410; Robertson v. Hirsch, 177 N.E. 676; Duffy v. Colonial Trust Co., 287 Pa. 348, 135 A. 204; Mechem on Agency (2 Ed.), sec. 1588; Restatement of the Law of Agency, sec. 469; Witte v. Storm, 236 Mo. 470; Harrison v. Craven, 188 Mo. 590; Paul v. Minneapolis Threshing Machine Co., 87 Mo.App. 647; Lamdin v. Broadway Surface Advertising Corp., 272 N.Y. 33, 5 N.E.2d 66. (5) The defense of waiver or ratification or estoppel is not available to an attorney unless he establishes knowledge by his client of his breach of professional duties and of his rights by reason thereof. 2 R. C. L., p. 966, sec. 42; Morton v. Forsee, 249 Mo. 409; Thompson v. Stearns, 195 S.W. 47; Thruston v. Nashville & American Trust Co., 32 F.Supp. 929; Thompson v. Park Savs. Bank, 96 F.2d 544; Bruun v. Hanson, 103 F.2d 685. (6) The credit given to the defendants in the decree for the dividends paid on the Central Properties bonds and for their value as shown by the evidence is the equivalent of restitution. Peak v. Peak, 228 Mo. 536; Custer v. Shackelford, 225 S.W. 450.

OPINION

Hyde, J.

This is an action in equity seeking to cancel notes held by defendants aggregating $ 42,800.00, to enjoin suits commenced on three of these notes totaling $ 600.00, and to have judgment for $ 42,200.00 paid to defendants, all for attorney's fees. The court entered a decree canceling the notes and entering a money judgment for the net amount of principal and interest of $ 33,500.63. (Being $ 32,200.00 principal, less $ 1,323.09 credit for value of bonds received by plaintiffs, plus $ 2,623.72 interest.) Defendants have appealed.

Plaintiff Fanchon & Marco, Inc., alleges that defendants were employed by it...