York v. Gaasland Co.

• Decision Date: 28 November 1952
• Docket Number: No. 32221,32221
• Citation: 41 Wn.2d 540,250 P.2d 967
• Court: Washington Supreme Court
• Parties: YORK, v. GAASLAND CO., Inc.

Page 540

41 Wn.2d 540

250 P.2d 967

YORK, v. GAASLAND CO., Inc.

No. 32221.

Supreme Court of Washington, Department 2.

Nov. 28, 1952.

Brown & Millhouse, Bellingham, for appellant.

C. R. Burks and John A. Kellogg, Bellingham, for respondent.

HAMLEY, Justice.

This is an action to recover compensation for services rendered in obtaining government contracts and locating needed construction materials.

Plaintiff, William York, is an experienced 'expediter' who is acquainted with government officials in Washington, D. C. Defendant, Gaasland Company, Inc., is a corporation which was engaged in construction work for the Federal government in Alaska. The suit came to trial on the second amended complaint. This pleading set out five causes of action, only the first, second and fourth or which are involved on this appeal.

The first cause of action pertains to an alleged contingent fee contract. Under this contract, according to the complaint, defendant agreed to pay plaintiff ten thousand dollars if plaintiff could secure for defendant a government contract for immediate construction of a certain road in Alaska. The second cause of action relates to alleged services performed by plaintiff in obtaining, for defendant, government contracts for the construction of three airstrips in Alaska. The fourth cause of action involves alleged services performed by plaintiff in locating a large quantity of pipes and fittings needed by defendant's subcontractor on the Alaska work. With respect to the second and fourth causes of action, the demand is not for the recovery of agreed compensation, but for the reasonable value of the services, alleged to be fifteen hundred and one thousand dollars, respectively.

The jury returned a verdict for plaintiff in the sum of two thousand dollars on the first cause of action, one thousand dollars on the second cause of action, and five hundred dollars on the fourth cause of action. Judgment was entered accordingly, and defendant appeals.

Concerning the first cause of action, the assignments of error present several questions, one being whether the contingent fee arrangement sued upon is contrary to public policy and unenforcible.

Respondent's version of the facts pertinent to a consideration of this question may be briefly stated. In the spring of 1950, Gaasland Company, Inc., was engaged in performing a four-million-dollar construction contract for the United States government near Naknek, Alaska. Officers of the corporation believed that the construction of a certain eighteen-mile road between Naknek and King Salmon, Alaska, at a cost of about five hundred thousand dollars, would be beneficial to the corporation as well as the government. They therefore made an effort to obtain inclusion of this work in the corporation's contract with the government, but were initially unsuccessful.

On April 15, 1950, at a conference held in Bellingham, Washington, Roy Gaasland, president of the corporation, acting on behalf of the corporation, orally promised to pay William York ten thousand dollars if the latter could get the road work added to the contract. It was understood that nothing would be paid if York failed. The parties contemplated that York would attempt to obtain the contract through solicitation and persuasion of responsible government officials in Washington, D. C.

Pursuant to this understanding, York spent twelve days in Washington, D. C., in late April and early May, 1950, and returned there again for a few days later in May. He conferred with many government officials and military officers and succeeded in enlisting the interest of two Pentagon generals and a top official in the department of the interior. He was finally told by the latter official that the corporation would get the road contract, provided it submitted a bid within reason, and the Alaska highway commission could arrange for the appropriation. This ended York's work on the road matter. He had received one thousand dollars from the corporation as an advance for expenses, two hundred fourteen dollars of which had been spent in entertaining government officials and military officers at various luncheons, dinners and cocktail parties. The contract covering the road work was awarded to the corporation late in September, 1950.

In contending that this oral agreement for a contingent fee is contrary to public policy and unenforcible, appellant relies upon Executive Order No. 9001, promulgated by the president of the United States on December 27, 1941. This order contains the following provision:

'5. Every contract entered into pursuant to this order shall contain a warranty by the contractor in substantially the following terms:

'The contract warrants that he has not employed any person to solicit or secure this contract upon any agreement for a commission, percentage, brokerage, or contingent fee. Breach of this warranty shall give the Government the right to annul the contract, or, in its discretion, to deduct from the contract price or consideration the amount of such commission, percentage, brokerage, or contingent fees. This warranty shall not apply to commissions payable by contractors upon contracts or sales secured or made through bona fide established commercial or selling agencies maintained by the contractor for the purpose of securing business.' Par. 5, Title II, Executive Order No. 9001, as amended, 6 Fed.Reg. 6787, 50 U.S.C.A.Appendix, § 611 note.

Respondent, on the other hand, calls our attention to the fact that a warranty almost identical with that prescribed in Executive Order No. 9001 was considered in Hall v. Anderson, 18 Wash.2d 625, 140 P.2d 266, 148 A.L.R. 760, and was held not to vitiate a contingent fee agreement of this general nature.

In the Hall case the question arose on a demurrer to the complaint. The complaint alleged that, on April 8, 1941, the defendant had submitted the lowest and best bid for the construction of a hospital at Fort Lewis, but that officers of the United States had threatened to refuse to award the contract to the defendant. On April 14, 1941, the defendant therefore arranged to have his attorney go to Washington, D. C., and by legal means urge and persuade the war department to award the contract to the defendant. The defendant agreed to pay the plaintiff's expenses and, as attorney's fees and compensation, a sum equivalent to one-half of one per cent of the amount of the contract. The plaintiff went to Washington, D. C., on this mission, and the contract was awarded to the defendant on May 8, 1941. This government contract contained a warranty almost identical with that set out in Executive Order No. 9001, although Executive Order No. 9001 was not issued until more than eight months later.

Holding that the law strikes down only those contracts which contemplate the use of secret, sinister influences, we said:

'* * * It will not do to hold that public policy forbids one to employ an agent to represent him in dealing with the government when, as far as the facts show, the employment contemplates an appeal to the government agency on the merits, as distinguished from the use of some species of direct or oblique personal influence. * * *

'* * * we see nothing in the terms of the contract pleaded, or in its tendency, or in the means to be employed in its execution, which requires the performance of acts corrupt in themselves. The contract could conceivably have been lawfully performed without engaging in any act or practice which was contrary to the public morals or the public welfare. * * *' 18 Wash.2d at pages 634-635, 140 P.2d at pages 270-271.

In the earlier case of Goodier v. Hamilton, 172 Wash. 60, 19 P.2d 392, which apparently was not cited by either counsel in the Hall case, and was not referred to in the latter opinion, we held unenforcible an agreement to pay an insurance agent one thousand dollars if the latter would take the defendant to an attorney who could secure a certificate of convenience and necessity from the state department of public works. There was no evidence that the parties contemplated improper means to obtain the authorization, or that such means were used. Nevertheless, we affirmed a judgment for the defendants, saying:

'* * * However, the agreement of the parties is of such a nature that such means might have been used. It is within the realm of contemplation that a contract of this nature would readily suggest to one desirous of securing a highly compensatory result, to employ means which the law, good morals, and public policy do not sanction. To anticipate and prevent a subversion of a proper administration of justice, the law should make it impossible for any such temptation to be carried into fruition, by condemning a contract that contains the germ of possible corruption.' 172 Wash. at page 63, 19 P.2d at page 394.

The criterion in both the Hall case and the Goodier case was the same: If the contract is inherently corrupt, it is void as a matter of law. In determining whether or not a contract is inherently corrupt, however, we seem to have applied a less stringent test in the Hall case than in the earlier Goodier case. In the Hall case we stated that a contract was not inherently corrupt if it 'could conceivably have been lawfully performed', while in the Goodier case we held that a contract should be condemned if it 'contains the germ of possible corruption.' However, in view of what is said below, we are not here called upon to determine which of these two...