Graham v. Dubuque Speciality Mach. Works
| Decision Date | 21 January 1908 |
| Parties | WILLIAM GRAHAM, Appellant, v. THE DUBUQUE SPECIALTY MACHINE WORKS, PATRICK J. LEE, TIMOTHY DILLON, THE TELEGRAPH, JOSEPH B. POWERS, JAMES BISHOP, Clerk of District Court of Delaware county, Iowa and JOHN C. CROCKETT, Clerk of the Supreme Court of Iowa |
| Court | Iowa Supreme Court |
REHEARING DENIED, TUESDAY, MAY 12, 1908.
Appeal from Delaware District Court.--HON. FRANKLIN C. PLATT, Judge.
ACTION for compensation of services rendered as an attorney. From an allowance of less than claimed, plaintiff appeals. Thereafter the defendants appealed.--Modified and affirmed.
Modified and affirmed.
Yoran Arnold & Yoran and Andrew P. Gibbs, for appellant.
Hurd Lenehan & Kiesel, for appellees.
After Dillon v. Lee, 110 Iowa 156, 81 N.W. 245, had been determined in this court, the defendants Timothy Dillon and The Telegraph by its manager P. J. Quigly engaged the services of plaintiff to prosecute another suit against Lee for the benefit of the Dubuque Specialty Machine Works. As the corporation declined to sue, an action was brought in the name of Dillon and The Telegraph as shareholders and resulted in recovery as prayed in this court. See The Telegraph v. Lee, 125 Iowa 17, 98 N.W. 364. A few days later plaintiff was advised of a cause of action the corporation had against one Loetscher and engaged by the same stockholders to prosecute the same. Again, recovery was had in accordance with the prayer of the petition. See The Telegraph v. Loetscher, 127 Iowa 383, 101 N.W. 773. Both judgments have been paid, and in this action plaintiff seeks to recover for his services in obtaining them, and to have his attorney's liens established against the proceeds of said judgments. His right to compensation is not denied by the defendants, but the record is such that the amount and basis of recovery are in controversy. The petition is in two counts, one on a quantum meruit and the other on written agreements in which plaintiff undertook to bring the action and "prosecute such action to final judgment in the Supreme Court if necessary, in the name of the plaintiffs as stockholders, for the benefit of the corporation, the directors of the corporation having neglected and refused to bring the action, and that said Graham shall receive as compensation for his services the following amounts: These were signed by the several parties after final judgments had been recovered, and some four and one-half years subsequent to the original employment.
The plaintiff contends that in executing these memoranda the original arrangement in parol was merely reduced to writing, while the defendants deny this, and say that their design was to enable their attorney by procuring excessive fees in these cases to recoup for them the costs and expenses incurred by Dillon and The Telegraph in the first suit brought against Lee. It will be enough to say, without reviewing the evidence, that we are not inclined to join defendants in attributing to the parties to these agreements motives in making them alike dishonorable, and, if entertained, equally reprehensible to clients and attorney. The writings are strong corroboration of plaintiff's testimony that they embodied the conditions as agreed upon orally at the time of his engagement to prosecute the actions and in view of the circumstances disclosed, as well as the finding of the trial court, we reach the conclusion that such was the arrangement made between them.
No relief against Dillon or The Telegraph is claimed in the petition. Payment for the services of attorney from the amounts recovered in behalf of the corporation was contemplated in the employment, and the sole remaining inquiry concerns the amount of compensation which should be allowed. It will be found from an examination of the decisions mentioned that in each the action was based on a breach of trust, i. e., the officers of the Dubuque Specialty Machine Works, in disregard of their relation and obligation to it, had appropriated to their own use money belonging to that corporation, and the sum of $ 3,016.65 was recovered from Lee and $ 6,031 from Loetscher. If these contracts were to be enforced, plaintiff would be entitled to $ 4,523.82. The district court established attorney's liens in his favor for $ 1,800. There was evidence tending to show that, as a contingent fee, that stipulated was reasonable; also, that regardless of the contingency the services actually rendered were reasonably worth one-half of the amount recovered; and other evidence that reasonable compensation would be much less than the amount allowed. Several questions arise: (1) Can the fund be charged with anything more than reasonable compensation for services rendered, that is can the contingency of failure be taken into account, in fixing such compensation? (2) If so, is the agreement of the stockholders binding on the corporation? (3) If not, what is reasonable compensation for the services necessarily rendered?
I. The validity of the employment of counsel on a contingent fee has long been recognized by this court (Wallace v. Railway, 112 Iowa 565), though there is a conflict of authority on the subject. See Boardman v. Thompson, 25 Iowa 487; Davis v. Webber, 66 Ark. 190 (49 S.W. 822, 45 L. R. A. 196, 74 Am. St. Rep. 81); cases collected in note to Shirk v. Neible, 156 Ind. 66 (59 N.E. 281, 83 Am. St. Rep. 150); and note to Smith v. Hogan, 1 A. & E. Ann. Cas. 299. But the suing stockholders had no right to enter into a contract in behalf of the corporation. Morelock v. Westminster Water Co (Md.), 4 A. 404. No such authority had been delegated to them, and the relation of agency was not to be implied from their relative situations. They did not bring the suit as agents of the corporation "but simply in order to set in motion the judicial machinery," and were permitted to do so not owing to any direct interest they had, but "solely to prevent an otherwise failure of justice." Appellants argue, however, that receiving the proceeds of the judgments by the corporation was a ratification of his employment. The action was instituted for the benefit of the corporation, and the relief could have been granted to no other, so that, in collecting the judgments, it was merely taking what had been decreed as belonging to it. The principle on which the stockholders' right to maintain an action in such cases is based will be found perspicuously expressed in 3 Pomeroy, Eq. Jur. section 1095:
Wherever a cause of action exists primarily in behalf of the corporation against directors, officers, and others for wrongful dealing with corporate property, or wrongful exercise of corporate franchises, so that the remedy should regularly be obtained through a suit by and in the name of the corporation, and the...
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