Jorge v. Rosen

• Decision Date: 26 March 1968
• Docket Number: No. 67-453,67-453
• Citation: 208 So.2d 644
• Court: Florida District Court of Appeals
• Parties: Severiano JORGE and Josephine Jorge, his wife, Appellants, v. Jerald ROSEN and Irving Herris, d/b/a Herris & Rosen, Appellees.

Page 644

208 So.2d 644

Severiano JORGE and Josephine Jorge, his wife, Appellants, v. Jerald ROSEN and Irving Herris, d/b/a Herris & Rosen, Appellees.

No. 67-453.

District Court of Appeal of Florida, Third District.

March 26, 1968.

Rehearing Denied April 23, 1968.

Shutts & Bowen and Thomas H. Anderson and Philip Newcomm, Miami, for appellants.

Podhurst & Orseck, Rollins & Peeples, Miami, for appellees.

Before CHARLES CARROLL, C. J., and PEARSON and BARKDULL, JJ.

BARKDULL, Judge.

Appellants, defendants in the trial court, appeal from an adverse final order in a chancery action upholding a contingent fee agreement and requiring payment thereunder.

The principal question involved in this cause is the validity of a written contingent fee agreement entered into between the appellees as accountants for the appellants. The appellants are Cuban nationals who fled Cuba in 1960 as a result of the Castro takeover, and established residence in this country. In connection with their affairs in this country, they had employed the accounting firm to handle various aspects of their income tax reports with the Federal Government. In 1964, the accountants were requested by the appellants or their agent to render an opinion as to whether or not the appellants could offset, against income earned in the United States, losses sustained in Cuba as a result of expropriation of property (both business and personal) by the Cuban Government. This opinion was requested in addition to other work that was being performed by the accountants for the appellants. Following a review of the problem and the applicable laws, regulations, and decisions thereto pertaining, the accountants rendered an opinion that there was a possibility of recovery if the claim loss could be established, bearing in mind the problem of having to use secondary evidence to establish the value and the problem incident as to whether the loss was a personal casualty loss or a business loss. They were unable to advise as to which level of the Internal Revenue Service or the courts they would have to resort to in order to establish the allowable loss. They rendered a statement for $1,500.00 for preparing this opinion.

The appellant, Severiano Jorge, was concerned about this fee and the amount of any fees that would be due for prosecuting the claim and any litigation that might be involved, particularly in view of the fact that he had just experienced five years of protracted litigation on the west coast, and he was not desirous of incurring expenses if he did not receive any benefits. It was therefore suggested that a contingent fee agreement be entered into, which agreement was ultimately prepared by counsel for the appellants and signed in his office. By their execution of the agreement, the accountants waived their claim for $1,500.00 for services rendered in rendering their opinion in respect to the expropriation. The agreement, in part, read as follows:

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'3. Herris & Rosen will render all necessary services for the prosecution of said claims through the administrative procedures of the Treasury Department, in consideration of which the Jorges agree to pay them a sum equal to 20% Of any money refunded to the Jorges as the result of the filing and prosecution of claims for refund for the years 1960, 1961 1962 and 1963 on taxes which were paid or to be paid by the Jorges by April 15, 1964 and 20% Of the amount which the Jorges may receive as a credit on future Federal Income Taxes as a result of services performed by Herris & Rosen in establishing the losses for which the above mentioned claims for refund are filed and which losses may be carried forward by the Jorges to future tax returns resulting in benefits which are presently undeterminable. This sum shall constitute full compensation for all services rendered and to be rendered herein.'

Thereafter, the claim for loss was filed and ultimately allowed by the Federal Government to the extent of $1,550,000.00. During the interval between the filing of the claim and the ultimate allowance of same, the Internal Revenue Code was changed and recognized such expropriation losses as valid deductions. § 165, Internal Revenue Code of 1954, as amended by Public Law 88-348, 88 Congress 2nd Sess., approved June 30, 1964, 78 Stat. 237.

Upon the receipt of the refund, the appellants paid the appellees 20% Of the tax saved, in accordance with the terms of the contract. As a result of the establishment of the loss, the appellants saved certain Federal Income taxes on their returns for the years 1964 and 1965. The payment of 20% Of the savings having been refused following a demand, the appellees instituted the instant action seeking to establish the validity of the contract and to collect the monies due for the years 1964 and 1965. The appellants filed an answer and counterclaim seeking a declaration that the contract was void and for the return of monies already paid in excess of a reasonable fee. Following issue being joined, the matter came on for final hearing. The chancellor found the agreement to be a valid and binding contract, and ordered payment thereunder and established that the appellees were entitled to recover, in the future, 20% Of the amount of any Federal Income taxes saved by the appellants as a result of the establishment of the expropriation loss. This appeal ensued. The appellants have preserved several points for review, raising the question of the fiduciary relationship between the parties and the burden of proof in connection therewith; the reasonableness of the contingency fee provided in the agreement; and, lastly, that the agreement was unenforceable because of an Internal Revenue Service regulation.

We find that the parties were in a fiduciary relationship (See: Bolles v. O'Brien, 63 Fla. 342, 59 So. 133; Gould v. State, 99 Fla. 662, 127 So. 309, 69 A.L.R. 699; Whittle v. Ellis, Fla.App.1960, 122 So.2d 237, 81 A.L.R.2d 1415; Cafritz v. Corporation Audit Co., Dist.Ct. of D.C.1945, 60 F.Supp. 627; Gammel v. Earnest & Earnest, 245 Minn. 249, 72 N.W.2d 364; 1 Am.Jur.2d Accounts, §§ 15, 18; 3 F.L.P., Certified Public Accountants, § 21), but we find that the appellants did not rely...