West v. Jayne
| Decision Date | 15 April 1992 |
| Docket Number | No. 90-1859,90-1859 |
| Citation | 484 N.W.2d 186 |
| Parties | George WEST, Appellee, v. Steven C. JAYNE, Appellant. |
| Court | Iowa Supreme Court |
Carlton G. Salmons of Austin, Gaudineer, Austin, Salmons & Swanson, Des Moines, for appellant.
Toby Swanson of Toby Swanson, P.C., Des Moines, and Emil Trott, Jr., Des Moines, for appellee.
Considered by McGIVERIN, C.J., and SCHULTZ, CARTER, LAVORATO, and ANDREASEN, JJ.
A suspended lawyer, George West, brings a breach of contract suit against a former associate lawyer, Steven C. Jayne, seeking damages for a percentage of fees collected by Jayne and for punitive damages. The trial court awarded West a judgment for most of the fees he sought but refused to award him punitive damages. Jayne appeals and challenges the trial court's award of damages. West cross-appeals claiming he is entitled to more actual damages plus punitive damages. We affirm as modified.
West obtained a law degree and his license to practice law in 1955. In 1957, he entered the private practice of law. West's law practice included personal injury litigation and workers' compensation.
Jayne graduated from law school in 1978 and obtained his license to practice law in June 1979. On July 1, 1979, he was hired by West as his associate. The oral agreement between West and Jayne was that Jayne agreed to provide legal services to West and West agreed to:
a. Provide Jayne with secretarial assistance, office space, utilities, equipment, supplies, and such other support necessary to engage in the practice of law.
b. Pay Jayne a weekly sum of money ... which on July 3, 1985 was $350 a week.
c. Pay Jayne one-third of any fee collected by Jayne pursuant to a contingent fee agreement in the processing of any claim referred by West to Jayne.
d. Pay Jayne two-thirds of any fee collected by Jayne pursuant to a contingent fee in the processing of any claim where Jayne was the referral source.
e. Pay Jayne one-third of any fee collected by West in the processing of any claim referred by Jayne to West.
In 1979, Jayne had no clientele of his own and relied upon clients provided by West. In 1982, Jayne's total compensation exceeded $55,000; in 1983, it exceeded $53,000; and in 1984, it exceeded $61,000. During these years, the vast majority of Jayne's income came from his salary and referrals from West. In 1984, by agreement of both parties and in anticipation of an expanded case load, a third lawyer was brought into the firm as an employee of West and was given a salary of $500 per week. This employee started doing the majority of per hour, or noncontingency fee work previously performed by Jayne.
In 1984, a complaint was filed with the Committee on Professional Ethics and Conduct of the Iowa State Bar Association against George West. As a result, on May 21, 1986, this court suspended West's license to practice law for one year. Committee on Professional Ethics v. West, 387 N.W.2d 338 (Iowa 1986). West's license has never been reinstated. The incidents that led to West's suspension were not related to the contingent fee cases in dispute in this case.
Meanwhile, on July 3, 1985, West paid Jayne the last $350 weekly salary under their oral contract. The parties disagree on the reason Jayne's weekly salary was discontinued. West claims that Jayne's refusal to work on some real estate matters justified the discontinuance of Jayne's weekly salary. West further maintains that he had discussed the discontinuance of Jayne's salary with Jayne several times prior to July 3. In contrast, Jayne claims that West told him for the first time on July 3 that West was having cash flow problems and could no longer afford to pay Jayne's weekly salary. Jayne also denies his refusal to work on the real estate matters.
Jayne continued to work in the office with West until October 1985. Jayne did not share with West the $22,500 in fees that he recovered between July 3, 1985, the date Jayne alleges West breached the contract, and October 31, 1985, the date Jayne moved out of the office. Jayne moved out of the office without giving notice to West and took the files of over sixty cases which were pending. These cases were primarily contingent fee cases for which Jayne obtained written authorization from the clients for his continued representation. In these cases, Jayne later recovered fees in the amount of $283,321. Jayne neither paid West any portions of the recovered fees nor any of the recovered costs that West advanced to clients.
West and Jayne both accused the other of breach of contract and claimed damages. The trial court concluded that if West breached the contract, Jayne waived the breach. It found that Jayne had breached the contract by failing to pay West sums to which he was entitled. The court further found that Jayne collected fees in the amount of $305,822 under the contract. After adjustments for amounts West owed Jayne, the court held that West was entitled to recover $126,453.98 from Jayne.
On appeal, Jayne claims the trial court erred (1) in its determination of the issue of West's breach; (2) in awarding damages largely earned after West's suspension; and (3) in finding Jayne's conduct was not legally excused. On cross-appeal, West claims the trial court erred in failing to allow West's recovery on one case and to include costs West advanced to clients. He also contends the trial court erred by dismissing his claim for punitive damages.
I. West's breach of contract. On appeal, Jayne urges that the trial court erred on the issue of whether West breached the contract by discontinuing the weekly payments to Jayne. Jayne urges that the court erred (1) in failing to decide the issue of breach; (2) in deciding the issue of waiver which was not raised; and (3) in awarding West damages after West breached the contract. We address these issues in turn.
The trial court did not specifically rule in its opinion or in response to a posttrial motion whether or not West breached the parties' contract. Jayne's position is that West could not sue for breach of a contract which he repudiated first by a prior breach. Stated otherwise, Jayne maintains that because West terminated Jayne's weekly salary, West cannot collect his contractual percentage of the recoveries in the contingent fees cases, including those cases in which the work was almost completed on July 3, 1985. We do not agree with Jayne's contention.
Assuming without deciding that West did breach the contract by refusing to pay Jayne's weekly salary, West's failure to pay did not permit Jayne to annul the contract and retain all of the benefits for performance already completed by West. At most, West's failure to pay is a partial breach which does not deprive West of his contractual rights. 6 Arthur L. Corbin, Corbin on Contracts § 1253 (1962). In Pirkl v. Northwestern Mut. Ins. Ass'n, 348 N.W.2d 633, 636-37 (Iowa 1984), we stated:
The fact that a certain performance is required on the part of one of the contracting parties does not necessarily render it a condition precedent to the enforcement of any performance on the part of the other party to the agreement. Union Story Trust & Sav. Bank v. Sayer, 332 N.W.2d 316, 322 (Iowa 1983). In the Sayer case, we said:
[I]n order to predicate the discharge of one of the contracting parties upon breach of condition by the other, the party claiming discharge must show the condition breached constituted the entire agreed exchange by the other party, or was expressly recognized in the bargain as a condition for the other's performance.
In this case, the record reveals that Jayne's weekly salary comprised a minor portion of Jayne's compensation. Jayne's weekly salary was not a condition that constituted the entire agreed upon exchange by the parties, nor did it go to the whole of the contract.
A breach of an agreement by a business associate, whether or not committed in bad faith, ordinarily does not cause an associate to lose the right to share in the profits. See Engel v. Vernon, 215 N.W.2d 506, 515 (Iowa 1974). West produced many clients who were referred to Jayne. Furthermore, West invested significantly in Jayne's work by paying all of the overhead expenses. For the foregoing reasons, we must reject Jayne's contention that West's failure to pay him a weekly salary deprives West of any rights under the contract.
Our determination that West can collect his contractual share of the contingent fee cases does not deprive Jayne of a remedy. Jayne could have attempted to enforce his weekly salary payment or attempted to seek damages for the unpaid salary. Our review of Jayne's appellate brief, trial brief, and posttrial motions indicates that Jayne did not seek damages for West's termination of his weekly salary. Jayne's consistent position was to seek nullification of any obligation on his part to pay West the appropriate percentages of the contingent fees. Consequently, Jayne was not prejudiced by the trial court's failure to rule on whether or not West breached the contract. Likewise, he was not prejudiced by the trial court deciding the issue of waiver. Even if we assume that West breached the contract first, we find no error in the trial court's award of damages.
II. Effect of West's suspension. On appeal, Jayne claims that the trial court improperly awarded West damages. The thrust of Jayne's contention is that West is prohibited from earning fees or deriving any income from the practice of law after his May 26, 1986, suspension. He further argues that West's suspension annuls any legal obligation between them for the amount West claims Jayne owes him. Jayne argues that if West is entitled to any damages, he should have "no more than his hourly rate for seven hours spent on cases producing a fee before his suspension ... and maybe his 18 hours on all cases which produced a fee after his suspension...." In considering Jayne's contentions, it is important to note that the dispute in this case is between...
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