Houge v. Ford

• Decision Date: 24 June 1955
• Citation: 285 P.2d 257,44 Cal.2d 706
• Court: California Supreme Court
• Parties: Norman O. HOUGE, Plaintiff and Respondent, v. Patrick H. FORD, Helen Smith, individually and as Trustee of the Estate of Carl Hugo Johanson, deceased, Defendants. Patrick H. Ford, Appellant. L. A. 23250.

Page 257

285 P.2d 257

44 Cal.2d 706

Norman O. HOUGE, Plaintiff and Respondent, v. Patrick H. FORD, Helen Smith, individually and as Trustee of the Estate of Carl Hugo Johanson, deceased, Defendants Patrick H. Ford, Appellant.

L. A. 23250.

Supreme Court of California, In Bank.

June 24, 1955.

Rehearing Denied July 20, 1955.

Patrick H. Ford, Los Angeles, in pro. per., Macbeth & Ford and Moira D. Ford, Los Angeles, for appellant.

Harry A. Daugherty and Lyman A. Garber, Beverly Hills, for respondent.

SPENCE, Justice.

Defendant Ford, an attorney, appeals from an adverse judgment in a declaratory relief action brought by plaintiff, his former client, for the purpose of settling controverted claims relative to a contingent fee contract, which was followed by an assignment. The trial court construed the original contract in line with plaintiff's contention that defendant had failed to complete the agreed legal services; and upon that basis, it concluded that the contract and the assignment were of no further force and effect. Defendant maintains that the court erred in its construction of the parties' contract, and in its adjudication that the above-mentioned instruments were of no further force and effect. The record supports defendant's position.

Carl Hugo Johanson died in 1939. The residue of his estate consisting primarily of stock in the Panama Glove Company, a corporation, and certain patents and contracts relating thereto was bequeathed in trust to his widow, his attorney Oscar Houge, and his 'faithful employee' Helen Smith. The will directed the trustees to keep the income from the securities and the income 'from patents and (related) contracts' in separate accounts. The income from the securities was to be paid 50% to the testator's widow, 35% to Miss Smith, and 15% to one Weber, another employee, 'as long as he continued to work for the Glove Company.' The patent income was to be paid 50% to the testator's widow, 20% to Miss Smith, 5% to Weber, and 25% to the attorney Oscar Houge. Upon the death of the testator's widow, two-thirds of such portion of the income which she was entitled to receive under the trust was to be paid to the remaining beneficiaries in certain proportions.

The trust was to terminate on the death of both the testator's widow and Miss Smith. At that time the corpus was to be distributed, with one-third going to the testator's church. As to the remaining two-thirds of the corpus, the will provided for distribution as follows: To Oscar Houge during his lifetime an undivided 25% in all the patents and contracts relating thereto in the trust estate; but if at the time of distribution of the trust estate, he should not be living, then said 25% should go to 'his son, Norman O. Houge (plaintiff herein), provided he is still engaged in devoting his time to the successful operation of the promotion of the sale and operation of the machinery and equipment and methods described in said patents'; and as to 'all the rest, residue and remainder of the trust estate not specifically heretofore distributed,' 21% was to go to a named beneficiary and 'the rest * * * to Norman O. Houge provided he is still engaged in working for the businesses of the trust estate and promoting its best interests.'

Plaintiff anticipated that he would be called into military service, and he voluntarily quit his employment in the trust's business. Then fearing that he might not secure re-employment there, plaintiff discussed with defendant the effect of such absence from the business on his interests under the will and the possibility of a forfeiture because of his failure to meet the employment condition. Defendant advised plaintiff that it would probably be necessary to take legal action to protect plaintiff's interest in the trust estate. Accordingly, the parties on February 6, 1941, entered into the following 'attorney and client' contract: 'The undersigned client (plaintiff) hereby employs the undersigned attorney (defendant) to render legal service in connection with the following matter, to wit: Drawing contracts and taking other necessary legal steps to protect or collect legacy of client under estate of Carl Hugo Johanson now pending in L.A. Superior Court. As consideration the client agrees to pay said attorney a fee as follows: * * * Contingent: Forty (40) percent of the amount recovered, preserved or protected by the legal services rendered. * * * Attorney is vested with authority to compromise and settle this matter, in his discretion, except that no settlement shall be made for less than $10,000.00.'

On February 18, 1941, nine days after the above contract was signed, the testator's widow, Mrs. Johanson, died. In March, 1941, plaintiff was drafted into the Army. Upon his discharge, he was refused further employment in the trust's business. In October, 1944, plaintiff's father, Oscar Houge, died. Oscar Houge had been the executor of the Johanson will, as well as a trustee and a life-income beneficiary of the trust estate. In 1946, the subsequently appointed administrator with the will annexed submitted a final account and petition for distribution in the Johanson estate, wherein attempt was made to eliminate plaintiff from taking any distributive share therein because of his failure to meet the condition of continuous employment in the trust's business. On plaintiff's behalf, defendant filed objections, and the issue of plaintiff's alleged forfeiture of his legacy went to a contested trial in 1947. While the trial court indicated from the bench an unfavorable ruling on plaintiff's claim, defendant was able ultimately to obtain a decision in plaintiff's favor upon the signing of the findings and conclusions.

The decree of distribution in the Johanson estate was entered in 1948, vesting plaintiff's interest in the trust free of the employment condition and giving plaintiff a twofold status: (1) as an income beneficiary of the trust; and (2) as a remainderman of the corpus of the trust, upon its termination. The Johanson will had not given plaintiff a share in the trust income, but apparently his claim thereto was successfully advanced by defendant following the death of Mrs. Johanson and Oscar Houge, two of the life-income beneficiaries, with plaintiff succeeding to the share of his deceased father as such income beneficiary. An appeal was taken from the 1948 decree by Helen Smith, the surviving trustee, and then dismissed. Thus in early 1950 the decree, establishing plaintiff's distributive rights in both the income and corpus of the trust estate, became final nine years after the execution of the 1941 contract by plaintiff and defendant. The trust was then to continue, but to terminate upon the death of Helen Smith, the sole surviving trustee. On March 6, 1950, a stipulation leading to the closing of the Johanson estate was signed.

On this same last-mentioned date March 6, 1950 plaintiff, at defendant's request, executed the following assignment: 'For Value Received, pursuant to written contract dated February 6, 1941, the undersigned, Norman O. Houge, hereby assigns, sets over, and transfers to Patrick H. Ford, forty (40) percent of his right, title, and interest in and to the corpus and beneficial right in the trust created by the Will of Carl Johanson (L.A. Superior Court, Probate No. 191032) of which Helen Smith is now the trustee.' By virtue of this assignment, defendant has received to date approximately $1,000.

Sometime in 1951 plaintiff became dissatisfied with the sums distributed to him out of the patent income, and he attempted to persuade defendant to take some legal action to compel the trustee to increase the amount of income distributed to the beneficiaries of the trust. In particular, plaintiff assailed the trustee's failure to cause the Glove Company, which was controlled by the trust, to declare dividends, which, if issued, would have come into the trust estate. Accordingly, plaintiff urged defendant to seek an accounting from the trustee and, if necessary, to petition for her removal. Defendant advised against such action, contending that it would be unwise in that it would seriously diminish the small income then being produced by the trust if the trustee used trust income to defend herself. Ultimately, in November, 1952, in discussing the matter with defendant, plaintiff cited their contractual arrangement and insisted that defendant was thereby...