Kuhn v. Princess Lida of Thurn & Taxis

• Decision Date: 16 May 1941
• Docket Number: No. 7506.,7506.
• Citation: 119 F.2d 704
• Parties: KUHN v. PRINCESS LIDA OF THURN & TAXIS.
• Court: U.S. Court of Appeals — Third Circuit

119 F.2d 704 (1941)

KUHN v. PRINCESS LIDA OF THURN & TAXIS.

No. 7506.

Circuit Court of Appeals, Third Circuit.

April 9, 1941.

As Amended on Denial of Rehearing May 16, 1941.

Charles H. Sachs, of Pittsburgh, Pa., for appellant.

John C. Bane, Jr., of Pittsburgh, Pa., and Norman W. Schur, of New York City, for appellee.

Before BIGGS, JONES, and GOODRICH, Circuit Judges.

JONES, Circuit Judge.

The plaintiff, an attorney, sued the defendant in the court below upon a quantum meruit for the recovery of compensation for professional services rendered by him in connection with a review by the Board of Tax Appeals of a deficiency assessment against the defendant for income taxes. The case was tried to the court without a jury.

From the findings of fact made, the learned trial judge concluded that $8,500 represented reasonable compensation for the services of the plaintiff, who also claimed reimbursement for unpaid expenses in the amount of $306.65. The expense item was not disputed. Accordingly, the court entered judgment for the plaintiff in the sum of $8,806.65, from which the defendant took the present appeal. The question involved is whether the trial court erred in the amount at which it fixed the plaintiff's compensation.

The appellee reminds us that we are not at liberty to disturb findings of fact made by the trial court unless they are unsupported by evidence or are otherwise clearly erroneous. Rule 52(a), 28 U.S.C.A. following section 723c. The reason for the rule rests in large part upon the fact that the trial judge who hears the witnesses testify and observes their demeanor upon the stand is better qualified to appraise the credibility of their testimony and to resolve the conflicts therein. So long, therefore, as a finding of fact is supported by evidence and is not clearly erroneous, it is to be accepted on appeal as verity.

The rule does not operate, however, to entrench with like finality the inferences or conclusions drawn by the trial court from its fact findings. And so, while accepting the facts competently found by the trial court as correct, an appellate court remains free to draw the ultimate inferences and conclusions which, in its opinion, the findings reasonably induce. Such was the law prior to the promulgation of the Rules of Civil Procedure. Brown v. United States, 3 Cir., 95 F.2d 487, 490; Dunn v. Trefry, 1 Cir., 260 F. 147, 148. The new Rules have worked no change in this regard, or with respect to the ultimate conclusions in jury-waived cases in particular. Cf. Ætna Life Insurance Co. v. Kepler, 8 Cir., 116 F.2d 1, 5. See also 3 Moore, Federal Practice, p. 3115, et seq., and notes of the Advisory Committee on Rule 52(a). The sufficiency of the evidence to sustain a trial court's conclusion or finding of an ultimate fact remains appropriate matter for an appellate court's consideration. State Farm Mutual Automobile Insurance Co. v. Bonacci et al., 8 Cir., 111 F.2d 412, 415. Where the evidentiary facts are not in conflict or dispute, the conclusions to be drawn therefrom are for the appellate court upon review of the trial court's action. Cf. United States v. South Georgia Railway Co., 5 Cir., 107 F.2d 3, and United States v. Mitchell, 8 Cir., 104 F.2d 343, 346. An incorrect conclusion by a trial court qualifies as a "clearly erroneous" finding, for the correction whereof on appeal Rule 52(a) specifically provides.

In the instant case, the trial court's conclusion as to what constituted reasonable compensation for the plaintiff's services rested upon no direct testimony of witnesses. Not only were the respective witnesses far apart in their estimates as to the value of the plaintiff's services but none of them approximated the amount arrived at by the trial judge. The plaintiff himself testified to $25,000 (the amount for which he sought recovery) as the value of his time and effort. And, of the two experts whom he produced, one testified to $25,000 and the other to $30,000. On the other hand, one of the defendant's experts fixed the value of the services at $1,500, while the other gave $2,000 as his estimate, the latter sum also covering some services contemporaneously performed by the plaintiff for the defendant's sons with respect to assessments for tax on income received by them from the same source as the defendant's.

It is also to be noted that one of the trial court's findings (No. 13) respecting the difficulty of the legal problem confronting the plaintiff, as defendant's counsel, rested not upon fact but upon matter of law. The relative importance of this finding is obvious. It undoubtedly influenced, in no small measure, the trial court's appraisal of the extent and value of the plaintiff's services. Consequently, if the particular finding rests upon an erroneous conception of the pertinent law, its effect was harmful. It is proper, therefore, upon appeal, for this court to say whether the legal question presented by the defendant's tax case was really as difficult as the trial court concluded it was and whether the extended services detailed by the plaintiff were justified under the circumstances. Before coming to the character and scope of the matter with which the plaintiff had to treat, it will be useful to limn the background of the plaintiff's employment by the defendant as disclosed by the trial court's findings and the admitted or undisputed facts otherwise appearing of record.

In 1933 the Commissioner of Internal Revenue assessed a deficiency tax against the defendant for the years 1913 to 1930, inclusive, in the aggregate principal sum of $52,393.42, and penalties of $13,930.22. The assessment was based upon income received by the defendant from certain alimony trusts established by her former husband, one Fitzgerald, a subject of Great Britain. The trusts, which were created by Fitzgerald on December 6, 1906, followed by one day the entry of a decree of separation, a mensa et thoro, by the High Court of Justice of Ireland in favor of the wife. In anticipation of a subsequent absolute divorce, which ensued in due course (July 26, 1907) by Act of Parliament, the income payments to the wife under the trust indenture were in discharge of the husband's present and future liability for the wife's support, the wife on her part expressly waiving all rights in her husband's property growing out of the marital relationship. The defendant remarried in November, 1911; her second husband died in January, 1918. Fitzgerald, the former husband and settlor of the alimony trusts, was living throughout the tax years in question.

Upon the defendant's receipt of notice of the assessment, she consulted Kuhn, the plaintiff, who was then connected with the tax department of the Bankers Trust Company of New York. She asked him to recommend counsel to represent her and, as a result of Kuhn's suggestion, E. C. Alvord, an attorney of Washington, D. C., was employed for that purpose. Kuhn made the arrangements for Alvord's employment and, with the latter's acquiescence, fixed the total compensation to be paid Alvord at $1,500. Thereupon Kuhn cabled the defendant that "Alvord will take case regardless outcome for fifteen hundred paid in advance. Feels risk of losing case remote". Kuhn also sent the defendant a letter confirming the cablegram. The defendant duly paid Alvord the $1,500 in advance and, thereafter, he represented her in the tax case until the spring of 1936, at which time the relationship of attorney and client between them was dissolved. Alvord turned over to Kuhn the data which he had in his possession relating to the defendant's tax case, including a citation of the decisions which he had examined. The defendant's petition to the Board of Tax Appeals, which Alvord had prepared and filed, for a review of the Commissioner's assessment was then pending. Thereupon (May, 1936) the defendant requested the plaintiff, who at that time was privately practicing law, to handle her case before the Board. The plaintiff asked for a fee of $1,500 for his services, which the defendant refused, saying that she would pay him $500. With nothing more done looking to agreement in the matter of the compensation to be paid the plaintiff, he undertook to represent the defendant.

The case came on for hearing before a member of the Board of Tax Appeals in Pittsburgh, Pennsylvania, on October 11, 1937. The hearing occupied an hour and ten minutes on that day and a few minutes on the succeeding day. On the first day the procedure consisted in its entirety of the substitution of an amended petition, some discussion between counsel and the Board member, and the orally adduced testimony of a...