Mason v. Levy & Van Bourg

• Decision Date: 24 January 1978
• Citation: 77 Cal.App.3d 60,143 Cal.Rptr. 389
• Court: California Court of Appeals Court of Appeals
• Parties: James E. MASON, Plaintiff and Appellant, v. LEVY AND VAN BOURG, etc., et al., Defendants and Respondents. Civ. 17633.

Page 389

143 Cal.Rptr. 389

77 Cal.App.3d 60

James E. MASON, Plaintiff and Appellant, v. LEVY AND VAN BOURG, etc., et al., Defendants and Respondents.

Civ. 17633.

Court of Appeal, Fourth District, Division 2, California.

Jan. 24, 1978.

Golden, Neal & Shuffler and Kenneth J. Golden, Westminster, for plaintiff and appellant

Haight, Dickson, Brown, Bonesteel & Rigg and Roy G. Weatherup, Los Angeles, for defendants and respondents.

OPINION

MORRIS, Associate Justice.

This is an appeal from a judgment of dismissal entered when plaintiff, James E. Mason, chose not to amend his complaint again after the trial court had sustained for the second time a demurrer of defendants, Levy and Van Bourg, with leave to amend.

The complaint contains three counts. The first, for breach of contract, alleges that plaintiff and defendants, attorneys licensed to practice in California, entered into a written contract to transfer two cases pending in superior court to defendants "on a contingency referral basis." The contract document, a copy of which was incorporated in the complaint by reference, indicates that defendants were to be substituted in the place of plaintiff as attorney of record for Mr. Lawson, a party in the two pending cases, and that, by the agreement, plaintiff was to receive a percentage (varying according to the time and manner of recovery) of the 50 percent contingent fee that was being charged Mr. Lawson. The complaint alleges that, after receiving the cases, defendants failed to exercise their best efforts to either settle the cases or bring them to trial prior to the running of the applicable statute of limitations (Code Civ.Proc., § 583, subd. (b) ) despite plaintiff's numerous communications with defendants warning them of this danger; that offers of settlement approximating $300,000 were made by opposing counsel in the cases, and that as a result of defendants' conduct plaintiff lost his share of the fee that would otherwise have been recovered.

The second count, for fraud and misrepresentation, incorporates by reference the first count and further alleges that defendants fraudulently represented to plaintiff that the cases would be completed and concluded before the running of the statute of limitations and that defendants would obtain a stipulation from opposing counsel to extend the statute of limitations. As a result, it is alleged, plaintiff was unable to take any appropriate action to protect his interest in the cases.

The third count, for negligence, incorporates by reference the first and second counts, and alleges that had it not been for defendants' negligence, the cases would have been brought to trial and would have resulted beneficially to plaintiff, and thus plaintiff lost his share of the fee that would have been recovered.

Defendants' demurrer was sustained on the ground that the complaint failed to state facts sufficient to constitute a cause of action. The major point in defendants' supporting memorandum of points and authorities was that, under the authority of Fracasse v. Brent (1972) 6 Cal.3d 784, 100 Cal.Rptr. 385, 494 P.2d 9, a cause of action to recover compensation for services rendered under a contingent fee contract does not accrue until the occurrence of the stated contingency, i. e., in this case, recovery by settlement or trial. Plaintiff seeks to distinguish Fracasse on its facts and contends that in every contract there is an implied covenant of good faith and fair dealing that imposes upon each contracting party the duties to refrain from doing anything that would render performance of the contract impossible and to do everything that the contract presupposes that he will do to accomplish its purpose. Plaintiff argues that in this case that means defendants had a contractual obligation to use reasonable diligence to bring the cases to settlement or trial.

Assuming, without deciding, that the agreement between plaintiff and defendants is a contract, ¹ the import of Fracasse and reasons of public policy dictate that it not operate to impose upon defendants the duties suggested by plaintiff.

In Fracasse, an attorney who had been discharged, allegedly without cause, sought a declaration that the contingent fee contract he and the client had executed was valid and that he had a one-third interest in any money ultimately recovered in the client's action. The trial court sustained a general demurrer without leave to amend and the Supreme Court affirmed on the ground that the action was premature. Overruling a line of cases that had held that an attorney discharged without cause is entitled to the entire agreed fee, the court declared that an attorney discharged with or without cause is to be compensated in the amount of the reasonable value of his services rendered to the time of discharge, and that the cause of action for compensation for services rendered under a contingent fee contract does not accrue until the occurrence of the stated contingency.

Plaintiff seeks to distinguish Fracasse on the basis that that case involved an attorney suing his client under a contingent fee contract, while here one attorney is suing another attorney under an agreement between them as to how to divide the fee from a case, which it was contemplated would be either settled or tried. Plaintiff's point is well taken. While the language of the Fracasse opinion is broad enough to suggest that any action based on a contingent fee contract accrues only when the stated contingency occurs, the court's decision is clearly predicated on "the unique relationship between attorney and client" (Fracasse v. Brent, supra, 6 Cal.3d at p. 790, 100 Cal.Rptr. at p. 389, 494 P.2d at p. 13) and the holding relates to an attorney's action against his former client.

But that does not mean that Fracasse is totally inapposite. That case does suggest the legitimate expectations of an attorney from his client under a contingent fee contract: "(S)ince the attorney agreed initially to take his chances on recovering any fee whatever, we believe that the fact that the success of the litigation is no longer under his control is insufficient to justify imposing a new and more onerous burden on the client (i. e., an absolute obligation to pay his former attorney). Hence, we believe that the attorney's action for reasonable compensation accrues only when the contingency stated in the original agreement has occurred i. e., the client has had a recovery by settlement or judgment. It follows that the attorney will be denied compensation in the event such recovery is not obtained." (Id., at p. 792, 100 Cal.Rptr. at p. 390, 494 P.2d at p. 14.) Plaintiff, unable to recover from his former client under this law, seems to believe that, by a contract between himself and the successor attorneys, he can acquire a right to a portion of the recovery in the client's action and, because there is no attorney-client relationship between the contracting attorneys such as concerned the Fracasse court, can impose upon the successor attorneys an obligation to compensate him regardless of whether the contingency has occurred.

It is fundamental to the attorney-client relationship that an attorney have an undivided loyalty to his clients. (See ABA Code of Professional...