Walsh v. Brousseau, 27008-7-I

• Decision Date: 09 September 1991
• Docket Number: No. 27008-7-I,27008-7-I
• Citation: 815 P.2d 828,62 Wn.App. 739
• Parties: Roger C. WALSH, Respondent, v. Robert L. BROUSSEAU and Jane Fisher Brousseau, individually and the marital community composed thereof, Appellants.
• Court: Washington Court of Appeals

Page 739

62 Wn.App. 739

815 P.2d 828

Roger C. WALSH, Respondent, v. Robert L. BROUSSEAU and Jane Fisher Brousseau, individually and the marital community composed thereof, Appellants.

No. 27008-7-I.

Court of Appeals of Washington Division 1.

Sept. 9, 1991.

Reconsideration Denied Oct. 22, 1991.

James Bittner, Seattle, for appellants.

Robert Rohan, Seattle, for respondent.

COLEMAN, Chief Judge.

Robert and Jan Brousseau appeal the order granting Roger Walsh's motion for summary judgment, arguing that the trial court erroneously (1) granted the motion for summary judgment when there was a genuine issue of material fact, (2) held that the contract was enforceable, and (3) ordered payments under the promissory note to be accelerated. We affirm.

After 32 years of practicing law, Roger Walsh decided to retire. In the summer of 1978, he began negotiating with one of his associates, Robert Brousseau, regarding the sale of his practice. Eventually, they executed an agreement under which, for $125,000, Walsh sold Brousseau his business assets, including "the good will of the business as a going concern, together with all fixtures, furniture, equipment, library, accounts, files, office supplies and stationery[.]" Walsh also sold Brousseau his office and trust accounts and accounts receivable for $62,819.67. The Brousseaus signed two promissory notes obligating them to payments totaling $2,281.56 per month.

In 1981, after buying Walsh's practice, Brousseau netted approximately $212,000, compared to the $22,000 he earned in 1978 while still an associate of Walsh. By 1986, however, Brousseau fell behind in his monthly payments to Walsh. Walsh agreed to reduce Brousseau's monthly payment to $1,000 per month. The parties executed an amendment to the original sale agreement, and the Brousseaus signed a new promissory note for $89,811.04, which was the total amount owing under the original two promissory notes. Brousseau also agreed to pay Walsh's future bar association dues and his medical insurance premiums during the life of the agreement.

Brousseau fell behind in his payments again in 1988. In March 1989, Brousseau told Walsh that he did not intend to make any more payments. Furthermore, Brousseau claimed that the agreement for the sale of good will of Walsh's law practice was unenforceable.

In January 1989 Walsh filed a complaint against the Brousseaus for the money, including interest, due under the original two promissory notes or, in the alternative, the money due under the substitute note. Walsh also asked for sums equal to his medical insurance premiums and bar association dues for life. Finally, he asked to recover his accounting fees and costs, attorney fees and costs, and any other relief the court deemed just and equitable.

On July 19, 1990, Walsh moved for summary judgment. After arguments were heard on August 9, 1990, the trial court granted his motion. The Brousseaus were ordered to pay $55,069.79 as principal, $1,710 in interest to the date of the judgment (the statutory rate of interest after the judgment), $2,701 in attorney fees, and $322.91 in costs. On August 15, 1990, the Brousseaus moved for reconsideration of the order of summary judgment. The motion was denied on August 29, 1990. This appeal followed.

We first consider whether there was a genuine issue of material fact that should have precluded the trial court's order granting Walsh's motion for summary judgment.

Brousseau argues that there is a dispute of fact regarding whether or not good will was an item of sale in the purchase and sale agreement. He refers to Walsh's motion for summary judgment in which it was stated that

Walsh and Brousseau had never discussed good will as a part of the sale of the assets of the law practice. Their accountants had discussed it as part of the tax considerations of the sale, and Brousseau's accountant had suggested how much of the sales price was allocated to good will.

There is no question, however, that good will was an item included in the sale: numerous references are made to good will in the agreement. Rather, the issue is whether the sale of good will under the contract was a violation of public policy that rendered the contract unenforceable. Therefore, there is no genuine issue of material fact that should have precluded summary judgment. ¹

Next, we consider whether the contract for the sale of the good will of Walsh's law practice violated public policy and, therefore, whether it was unenforceable.

Under the rules of professional conduct,

[a] lawyer shall not give anything of value to a person for recommending the lawyer's services, except that a lawyer may pay the reasonable cost of advertising or written communication permitted by this rule and may pay the usual charges of a not-for-profit lawyer referral service or other legal service organization.

RPC 7.2(c). In 1979, when the agreement between Brousseau and Walsh was entered, the related rule was as follows:

Except as permitted under CPR DR 2-103(C), a lawyer shall not compensate or give anything of value to a person or organization to recommend or secure his employment by a client, or as a reward for having made a recommendation resulting in his employment by a client.

CPR DR 2-103(B). In 1990 the House of Delegates of the American Bar Association adopted a rule allowing a lawyer or law firm to sell or purchase a law practice, including good will, under certain conditions including written notice to each of the seller's clients. The Washington Supreme Court has not yet adopted an analogous rule.

Few courts have addressed the validity of a contract for sale of good will of a law practice. See Annot., Validity of Contract for Sale of "Good Will" of Law Practice, 79 A.L.R.3d 1243, 1245 (1977). The leading case is Geffen v. Moss, 53 Cal.App.3d 215, 125 Cal.Rptr. 687, 79 A.L.R.3d 1232 (1975). Ralph Geffen, an attorney who had been appointed to serve as a United States magistrate, entered into a written agreement with another attorney, Russell Moss. Under the agreement, "Geffen agreed to sell and Moss to buy 'the physical assets, files and work in process' of Geffen's law practice." Geffen, 125 Cal.Rptr. at 688. Subject to approval by the respective clients, the purchase included "all cases and legal matters now pending in the above law practice except personal injury or wrongful death cases[.]" Geffen, 125 Cal.Rptr. at 688. The agreement also contained a clause stating that "Geffen expresses an intention to exert his influence for the continued welfare of the practice and to encourage present and former clients to utilize the legal services of the office in the future." Geffen, 125 Cal.Rptr. at 688. The parties did not use the term "good will" in the agreement.

No specific statute or California case compelled the Geffen court to hold that a purported sale of good will was contrary to public policy and therefore illegal. The Rules of Professional Conduct of the State Bar of California, however, prohibited "solicitation or obtaining of professional employment by any means of communication." Geffen, 125 Cal.Rptr. at 693. The rules also prohibited an attorney from paying another for soliciting or obtaining employment for him. Geffen, 125 Cal.Rptr. at 693.

The Geffen court considered the policy reasons against the sale of good will of a law practice. First, there is a danger that someone who is to be remunerated for referring clients to a particular attorney will not refer the client to the most competent attorney, but rather to the attorney who is compensating him. Geffen, 125 Cal.Rptr. at 693. Second, the relationship between attorneys and their clients is of a personal and confidential nature. Geffen, 125 Cal.Rptr. at 693. The relationship is not one that can be likened to that of a merchant and customer. Geffen, 125 Cal.Rptr.[815 P.2d 832] at 693. Considering these policy reasons behind the California rules of professional conduct, the Geffen court held that

[t]he attempted sale of the expectation of future patronage by former and current clients of a law office coupled with an agreement to encourage said clients to continue to patronize the purchaser of the physical assets of the office, under the facts of this case, may well be said to constitute an attempt to buy and sell the good will of a law practice as a going business, contrary to public policy, and that the portion of the agreement purporting to so do is invalid and unenforceable. ²

Geffen, 125 Cal.Rptr. at 693.

The agreement between Brousseau and Walsh stated that Walsh would "continue to make a positive effort to procure and assist in continuing business of the office" and, during the life of the agreement, would not "directly or indirectly, induce any of his former clients ... to patronize any other attorney or law firm other than the Purchaser." Additionally, Walsh agreed that

[if] requested by Purchaser [Brousseau], Seller shall introduce Purchaser to all clients, and other parties with whom Seller does business. Seller also agrees to make himself available in the future for reasonable consultation regarding clientele of the practice, both future and past.

The language of the agreement is ambiguous. However, to the extent that one could infer a duty to refer clients as part of the consideration for the sale, based upon the language that Walsh would "continue to make a positive effort to procure and assist in continuing business of the office", the agreement violates the rules of professional conduct in Washington in their present form. Our inquiry, however, does not end there. We must next consider whether the parties were in pari delicto. See Golberg v. Sanglier, 96 Wash.2d 874, 639 P.2d 1347, 647 P.2d 489 (1982).

The general rule of in pari delicto is that when the parties are of equal guilt, the defendant will prevail. Golberg, 96 Wash.2d at 882, 639 P.2d 1347. However, "[w]here the conduct of the party who seeks to enlist support of the doctrine...