Schroeder v. Schaefer

• Decision Date: 09 December 1970
• Citation: 477 P.2d 720,91 Adv.Sh. 945,258 Or. 444
• Parties: W. F. SCHROEDER and D. S. Denning, Jr., S. Ben Dunlap, Herbert W. Rettig and Richard Rosenberry, Respondents, v. Elizabeth Rose SCHAEFER and Dennis Schaefer, Appellants.
• Court: Oregon Supreme Court

Page 720

477 P.2d 720

258 Or. 444

W. F. SCHROEDER and D. S. Denning, Jr., S. Ben Dunlap, Herbert W. Rettig and Richard Rosenberry, Respondents, v. Elizabeth Rose SCHAEFER and Dennis Schaefer, Appellants.

Supreme Court of Oregon.

Argued and Submitted at Pendleton May 4, 1970.

Decided Dec. 9, 1970.

Harold A. Fabre, Pendleton, argued the cause for appellants. On the brief were Fabre & Ehlers, Pendleton.

W. F. Schroeder, Vale, argued the cause for respondents. With him on the brief were D. S. Denning, Jr., Vale, Or., S. Ben Dunlap, Herbert W. Rettig, and Richard Rosenberry, Caldwell, Idaho.

Before McALLISTER, P.J., and SLOAN, ^* O'CONNELL, DENECKE, HOLMAN, TONGUE and HOWELL, JJ.

HOLMAN, Justice.

This was a suit brought to secure a judgment on a contract for attorneys' fees and to foreclose an attorney's lien on real property. Defendants have appealed from a decree of the trial court awarding judgment to plaintiffs in the sum of $31,275 and foreclosing the lien in that amount upon the real property of defendants.

The defendant Elizabeth Rose Schaefer was the youngest daughter of Tom Bailey, who died a resident of Idaho and who left an estate in both Idaho and Oregon. The defendant Dennis Schaefer is her husband. Mr. Bailey and his wife had executed identical wills, without any disclaimer that they were reciprocal, which left all of their property to the other, and to their five living children and the descendants of a deceased child in six equal shares upon the death of the survivor. Mrs. Bailey predeceased Mr. Bailey. Subsequent to her death, Mr. Bailey executed a new will in which he left to Mrs. Schaefer extensive Oregon real estate which constituted the largest part of his estate. The balance was left to his heirs in six equal shares as before.

Some of the heirs instituted a suit against the executrix and the Schaefers to invalidate the will. This suit subsequently became two suits: one asserting a breach by Mr. Bailey of a contract between him and his wife to leave wills treating the children equally; and the other asserting that Mr. Bailey was mentally incapacitated at the time of the execution of the will.

The will had been drawn by Dunlap, Rettig and Rosenberry, a firm of Idaho lawyers who are among the plaintiffs in the present case. They represented the executrix in the probate of the will in Idaho. Ancillary probate was commenced in Oregon by the same executrix in which she was represented by an Oregon lawyer. The litigation to invalidate the will was also commenced in Oregon, presumably, because this was the situs of the real property which was the subject of the specific devise to Mrs. Schaefer.

In the meantime, the Idaho firm of attorneys had been representing Mr. and Mrs. Schaefer in various matters. Mr. and Mrs. Bailey had deeded to Mrs. Schaefer other property in Idaho in which they reserved a life estate. The Idaho firm brought a statutory proceeding to establish the death of the Baileys and to clear Mrs. Schaefer's title to the property. They were negotiating a lease for the Schaefers on part of this property. They represented them also in an action on a check which the Schaefers had received from one of Mrs. Schaefer's brothers and which represented the purchase price of some horses belonging to Mrs. Schaefer. Admittedly, an attorney-client relationship existed between the Idaho firm and the Schaefers at the time of the commencement of the litigation to invalidate the will.

After the litigation concerning the will was filed, the Idaho attorneys informed the Schaefers of it, and told them that they, together with the lawyer for the Oregon estate, were representing the executrix in the defense of the litigation. The Schaefers, by telephone, asked the Idaho firm to do whatever was necessary to protect their interests. No agreement was made at that time, however, concerning fees. Shortly thereafter, the Idaho firm wrote to the Schaefers and suggested the hiring of the other plaintiffs, Schroeder and Denning, a firm of Oregon lawyers, to represent the Schaefers in the will litigation in Oregon. The Schaefers acceded to this, and a fee was subsequently negotiated by the Idaho firm which was to be paid by the Schaefers to the Oregon firm. The fee was contingent upon the successful defense of the specific devise and was 25% Of the value of the Oregon real estate specifically devised to Mrs. Schaefer, plus 25% Of the income she actually received therefrom during the periods of probate and litigation. The Oregon and Idaho firms had an agreement that any fee which was received for the defense of the law suits by the Oregon firm would be divided equally between them.

The two cases contesting the validity of the will were subsequently consolidated for trial. They were tried in two days' time in Malheur County, Oregon, and resulted in the will's being upheld. Thereafter, there was a lapse of a long period of time during which both the Idaho and Oregon firms attempted to secure the distribution of Mr. Bailey's Oregon estate and to exempt the income of the specifically devised real property from the cost of administration and the taxes upon the estate. In June 1967, prior to the settlement of the estate, a new arrangement was entered into between the Oregon attorneys and the Schaefers for the dollar value of the fees which would be paid to the Oregon firm for the successful defense of the litigation. It set the fees at $31,275, which was 25% Of the value at which the Oregon real estate devised to Mrs. Schaefer was appraised in Mr. Bailey's estate. It also set a specific amount for the work thus far done in attempting to salvage the income from the devised property and in attempting to secure an order of distribution. It set an hourly fee for further services in this connection. The Oregon lawyers waived any interest in the income from the specifically devised property accruing during litigation or probate. All sums have been paid under that agreement except for the amount of $31,275.

Defendants contend the original agreement with the Oregon lawyers for fees was not valid. They claim that the Idaho attorneys made misrepresentations to them and failed to disclose relevant information to them. They also claim the fee was exorbitant.

We will dispose of some of the issues summarily. First, there is no basis in the evidence for the defendants' contention that the seriousness of the litigation was overemphasized to them. Neither do we believe there is any basis for the defendants' complaint that the possibility of a set fee, rather than of a contingent fee, was not discussed with them. The Idaho attorneys and the defendants were aware, because of the past dealings between them, that the defendants were familiar with the set and contingent methods of hiring attorneys. The evidence also indicates that defendants were without ready funds with which to pay a set fee of the size that could be anticipated for the type of litigation involved. We conclude also that the amount of the fee alone is not per se unconscionable.

Defendants' other contentions concerning misrepresentation and withholding information are not so easily disposed of. Defendants contend the fee was represented to them as being under that normally required in cases of this kind by the provisions of the Oregon State Bar Schedule of Minimum Fees and that this representation was not true. In addition, they also assert they were not told by the Idaho firm that it had a 50% Interest in the fee they were negotiating for the Oregon firm.

All agree that at the time of the negotiations, the relationship of attorney and client existed between the defendants and the Idaho firm. Such a relationship existed not only because of unrelated business but because the Idaho firm had undertaken to protect the Schaefers' interest in the present case. The Oregon attorneys had no part in negotiating with the defendants for the fee. After consulting with the Idaho firm concerning a fee which they considered to be reasonable, the Oregon lawyers left to the Idaho firm all negotiations with the defendants concerning compensation.

Before considering the evidence, we will review the law relative to a lawyer's duty to a client when advising the client concerning a subject matter in which the lawyer has an interest. The following language from Allstate Insurance Company v. Keller, 17 Ill.App.2d 44, 149 N.E.2d 482, 486 (1958) is appropriate:

'* * * (A)n attorney is required to disclose to his client all facts and circumstances within his knowledge, which, in his honest judgment, might be likely to affect the performance of his duty for that client. * * * A client may presume from an attorney's failure to disclose matters material to his employment that the attorney has no interest which will interfere with his devotion to the cause confided in him, or betray his judgment * * *.'

Also, the following language is found in canon number six of the American Bar Association Canons of Professional Ethics:

'It is unprofessional to represent conflicting interests, except by express consent of all concerned given after a full disclosure of the facts * * *.'

While the illustration given in the canon concerns the attorney acting for the conflicting interest of a third party, the language is equally applicable where the lawyer is acting in his own interests.

The majority rule is that a fee contract may be made between an attorney and his then-client. However, in such circumstances, the lawyer has the burden of showing that he used no undue influence, made no misrepresentation, and that he gave his client all of the information necessary to a fair decision by the client. See cases cited in Annotation entitled Validity and Effect of Contract for Attorneys' Compensation made after Inception of Attorney-Client Relationship, 13 A.L.R.3d 701, 731 (1967). It is clear that if misrepresentations were made as to the propriety or usualness of the fee, or if the Idaho firm did...