Seligson, Morris & Neuburger v. Fairbanks Whitney Corp.

• Decision Date: 01 April 1965
• Citation: 257 N.Y.S.2d 706,22 A.D.2d 625
• Court: New York Supreme Court — Appellate Division
• Parties: SELIGSON, MORRIS & NEUBURGER, Plaintiff-Respondent, v. FAIRBANKS WHITNEY CORPORATION, Defendant-Appellant.

Page 706

257 N.Y.S.2d 706

22 A.D.2d 625

SELIGSON, MORRIS & NEUBURGER, Plaintiff-Respondent, v. FAIRBANKS WHITNEY CORPORATION, Defendant-Appellant.

Supreme Court, Appellate Division, First Department.

April 1, 1965.

Samuel M. Lane, New York City, of counsel (Preben Jensen and Peter Brown, New York City, with him on the brief; (Casey, Lane & Mittendorf, New York City, attorneys), for appellant.

Milton Pollack, New York City, for respondent.

Before BREITEL, J. P., and VALENTE, McNALLY, STEVENS and EAGER, JJ.

BREITEL, Justice Presiding.

Plaintiffs, a law firm, have recovered a judgment upon a jury trial verdict for $228,000 for legal services concededly rendered by them to defendant. The dispute related solely to the quantum of recovery, defendant urging that the contingent percentage compensation provision of a written retainer agreement was not applicable to the particular services rendered. Defendant at all times conceded liability to pay for the services rendered.

On this appeal defendant does not question the sufficiency or adequacy of the evidence to support the verdict. Nor does it contend that the verdict exceeds the compensation which would be due if the written retainer agreement were found to apply to the particular services. It argues, however, that certain errors were committed upon the trial which rendered it unfair and that therefore they are entitled to a new trial.

There were no errors, and certainly none that was prejudicial. The judgment should be affirmed.

Involved in the retainer were efforts by a new management group in control of defendant Fairbanks Whitney Corporation, a corporation which had undergone serious internal and external vicissitudes while known as the Penn-Texas Corporation, to recover, in specie or by way of damages, three parcels of improved real property originally owned by subsidiaries of the corporation and improvidently transferred under sale-leaseback arrangements to certain outside interests. The improvidence in the transfer was associated with substantial charges of corruption, conflicts of interest, and suspected kickbacks.

The written retainer agreement, prepared by plaintiff lawyers, concededly covered the three parcels of real property, each of which was severally identified as being formerly the property of each of three wholly owned subsidiaries of the corporation. The lawyers were expressly retained to represent the corporation and the subsidiaries 'in the assertion and prosecution of the said claims' and the taking of appropriate steps, including the bringing of civil actions. The retainer agreement provided for compensation by way of a retainer fee of $1,250 per month with additional retainer fees to be mutually agreed upon after the commencement of the taking of depositions. About these provisions there is no dispute; contradictory contentions exist only with respect to the still further provision for a contingent percentage compensation, which reads as follows:

'An amount equal to 10% of the aggregate of the amounts, considerations or other benefits, present or future, received or realized by Penn-Texas Corporation and its said subsidiaries in and by such civil action or actions, by judgment, settlement or otherwise, or by or as a result of any other steps or proceedings which we may take in connection with the said claims.'

Defendant's contentions related exclusively to whether this contingent fee provision applied also to the legal services rendered in connection with the property parcel owned by the subsidiary Pratt & Whitney. The occasion for the dispute is that with respect to this particular parcel a special kind of negotiation was utilized by defendant and the retained lawyers with the persons and the corporation to whom this property had been transferred. Because of the transferee's own involvement in impending public financing it was especially vulnerable to public scandal with respect to these allegedly improvident transfers. It was therefore thought, and the thought turned out to be quite correct, that indirect negotiations initially withholding public exposure would be more effective in bringing about a settlement than otherwise. Because of these distinguishing circumstances, defendant has contended that these special, and evidently successful, maneuvers were not intended to be covered by the contingent fee provision.

At the same time, as already noted, it has never been disputed that plaintiff lawyers rendered services in connection with this accomplishment and that they were entitled to some additional compensation for such services. The benefits represented by the reacquisition of the property, subject to discounting for present value, were variously valued from $4,000,000 to $4,700,000, depending upon what proof is accepted. The economic occasion for the dispute was that a contingent percentage compensation would, in defendant's opinion, give plaintiffs an extraordinary and disproportionate award. Thus, there is little dispute over the nature of the services rendered or the great value of the benefits derived. Defendant also disputed whose services brought about the reacquisition.

Defendant cites three errors upon the trial. The first is that counsel for plaintiffs, over objection, elicited proof of settlement negotiations and that defendant had made an offer of settlement in the sum of $50,000 to cover the services rendered in connection with the Pratt & Whitney property. The second is that counsel in summation argued extensively on the basis of defendant's failure to produce a number of witnesses, all of whom were former officers, attorneys, or employees of defendant. The third is that although the court submitted to the jury the task of determining the meaning of the retainer agreement with respect to the alleged ambiguity whether the contingent fee provision covered the Pratt & Whitney transaction, it refused defendant's request that the jury be instructed that any ambiguity in the written retainer agreement should be construed against plaintiffs, the draftsmen of the agreement.

The first assignment of error is without basis. The reference to a settlement was first made by plaintiffs in their opening without objection. Indeed, defendant in its opening picked up the matter of settlement and sought to utilize it to defendant's advantage. It was only later, when testimony was elicited with respect to the settlement negotiations and the offer of settlement in the amount of $50,000, that objection was made. The objection was overruled, but still later plaintiffs' counsel voluntarily asked that the testimony relating to the $50,000 offer be stricken and that the jury then and there be instructed to disregard anything which had been brought to its attention with respect to those negotiations for settlement. Plaintiffs' motion was granted. If there had been any error it was cured by the withdrawal of the evidence and the instruction to the jury.

But there was no error. And the withdrawal of the evidence and the instruction were more than defendant was entitled to have. An offer of settlement made in attempt to compromise a disputed claim, as distinguished from admissions made in the course of negotiation, is not admissible for the public policy reason that an honest effort to buy one's peace should not be used as an admission of liability (Smith v. Satterlee, 130 N.Y. 677, 29 N.E. 225; Tennant v. Dudley, 144 N.Y. 504, 507, 39 N.E. 644, 645; but as for admissions of fact made during the course of compromise discussions see White v. Old Dominion S. S. Co., 102 N.Y. 660 , 6 N.E. 289). That is not the situation in this case. Here, liability was always and still is conceded (cf. Brice v. Bauer, 108 N.Y. 428, 433, 15 N.E. 695, 697). The only question in dispute was the applicability of the written retainer agreement and therefore the legal right to compensation in a certain but contingent amount for the services rendered by plaintiffs to defendant. The offer to pay $50,000 was therefore not an admission of anything that defendant was not admitting throughout the trial and does not still admit. Indeed, proof of such an offer was to defendant's advantage because it showed that defendant was not seeking to avoid an obligation to pay for services rendered but was disputing only the basis upon which compensation was to be made.

The second assignment of error, concerning argument by counsel for plaintiffs during summation upon the failure of defendant to call various witnesses with knowledge of the facts and who were former officers or employees, is equally without basis. The confusion is between argument by counsel and the instruction by a court to a jury as to the permissible inferences which may be drawn from the failure of a party to call witnesses. It is common, if not universal, practice for counsel for each side to argue to the jury upon the failure of the other side to produce available witnesses. This has nothing to do with the strong kind of inference which may be drawn from the failure of a party to call a witness under its control who has knowledge of the facts. It is only with regard to the latter kind of inference, because it is so strong, that the party may ask the trial judge to instruct the jury that for the failure to produce such witnesses the jury is entitled, if it wishes, to give the strongest weight to the evidence already in the case in favor of the other side and which has not been, but might have been, effectively contradicted or explained by the absent witnesses.

The rule is well established that counsel may comment on the failure of the adverse party to call a witness who is under his control and whose testimony he could be expected to produce if it were favorable to him (88 C.J.S. Trial § 184, pp. 362-363). This rule is applied, for example, where a plaintiff fails to call his own physician as a witness (Brotherton v. Barber Asphalt Paving Co., 177 App.Div. 791, 102 N.Y.S. 1089). Often the uncalled...