Evans v. Cameron

360 N.W.2d 25, 121 Wis. 2d 421, 51 A.L.R. 4th 1213, 1985 Wisc. LEXIS 2101

• Court: Wisconsin Supreme Court
• Decided: January 3, 1985
• Docket: 83-2148
• Status: Published

Opinions

DAY, J.

This is a review of a published decision of the court of appeals¹ reversing an order of the circuit court for Barron county, Honorable Harry F. Gundersen, circuit judge for Burnett county presiding, granting a motion to dismiss plaintiff’s complaint made under sec. 802.06(2) (f), Stats., 1981-82,² for failure to state a claim. The issue on review is: Should the complaint against Attorney Howard Cameron and his law firm, alleging that Patricia Evans followed his advice and lied while under oath at the first meeting of creditors in a bankruptcy proceeding and that she suffered damages as a result thereof, be dismissed for failure to state a claim upon which relief can be granted?

We hold that the complaint should be dismissed for failure to state claim upon which relief can be granted. We therefore reverse the decision of the court of appeals and reinstate the order of the circuit court.

The complaint set out the following allegations which are relevant to this review:

“2. That the defendant Howard Cameron is an attorney licensed to practice law in the State of Wisconsin who resides in Rice Lake, Barron County, Wisconsin.

“3. That the firm of Cameron, Shervey, Thrasher & Doyle, Ltd., is a Wisconsin service corporation . . . . When matters complained of herein occurred, defendant Howard Cameron was, upon information and belief, a shareholder in said service corporation.

“4. That in the month of December, 1979, the plaintiff [Patricia Evans] conferred with the defendant Howard Cameron in his office at the offices of Cameron, Shervey, Thrasher & Doyle, Ltd., in Rice Lake, Wisconsin, regarding bankruptcy. At that time, the plaintiff indicated that she was desirous of filing a bankruptcy and she indicated that she had approximately $10,000.00 in cash which she wondered whether she could protect if she filed bankruptcy. The plaintiff was informed by Attorney Cameron that if she were to say that she gave that money to her mother, that she would be able to keep the money and no one would care.

“5. That again on June 2, 1980, the plaintiff asked the defendant, Howard Cameron, what to do in case the matter of the $10,000.00 cash came up at the hearing of the first meeting of creditors and she was advised that she need not worry, that it had been decided that she was to say she had given the money to her mother and that it would not be a matter of contention anyway.

“6. That upon the advise [sic] of said attorney, the plaintiff did so answer at the first meeting of creditors on June 2,1980.

“7. As a result of her answers on that date, and as a result of the bankruptcy trustee’s investigation which showed that that amount of money had never been given to plaintiff’s mother by plaintiff, plaintiff is now undergoing investigation and possible prosecution for perjury.

“8. Plaintiff has suffered a great deal of mental and emotional distress and she has been required to retain counsel to represent her in the defense of the aforestated perjury.

“9. Furthermore, the bankruptcy petition of the plaintiff was dismissed.

‘TO. That all of these damages have been the result of the wrongful and illegal advise [sic] given to the plaintiff by Attorney Cameron.

“11. That as a result of this wrongful and illegal advise [sic] by her counsel, plaintiff is entitled not only to actual and compensatory damages, but to punitive damages as well.

“WHEREFORE, plaintiff demands judgment against the defendants jointly and severally in the amount of $100,000.00 and, in addition thereto, demands punitive damages in the sum of $200,000.00 plus her costs, disbursements and attorney’s fees, as well as any other relief which is just and appropriate under the circumstances.”³

In its memorandum opinion of September 20, 1983, the circuit court held that the motion to dismiss should be granted on the basis that, if the allegations are assumed true for purposes of the motion, the parties stood in pari delicto. The circuit court filed an order consistent with that opinion on September 30, 1983.

In its opinion of May 22, 1984, the court of appeals reversed the order of the circuit court. The court of appeals stated that the complaint should be reinstated because, assuming that the allegations are true for purposes of the motion, Ms. Evans’ rights against Mr. Cameron and his law firm stem from his agreement to provide legal advice and because her complaint makes allegations that, if proven, could result in relief being granted. Evans, 119 Wis. 2d at 377. This court accepted this review to determine whether Ms. Evans’ complaint against Mr. Cameron and his firm, alleging that Ms. Evans suffered damage as a result of following Mr. Cameron’s advice to lie under oath at the first meeting of creditors in the bankruptcy proceeding, stated a claim upon which relief could be granted.

In their respective answers to Ms. Evans’ complaint, both Mr. Cameron and his law firm deny any allegations of wrongdoing. However, to determine if a complaint should be dismissed for failure to state a claim upon which relief can be granted pursuant to a motion under sec. 802.06(2) (f), Stats., the facts pled are taken as admitted. No inference can be reached in respect to the ultimte facts alleged until resolved by judge or jury. Anderson v. Continental Ins. Co., 85 Wis. 2d 675, 683, 271 N.W.2d 368 (1978). The purpose of the motion to dismiss for failure to state a claim is to test the legal sufficiency of the complaint. Anderson, 85 Wis. 2d at 683. Since pleadings are to be liberally construed, a claim will be dismissed only if “it is quite clear that under no conditions can the plaintiff recover.” Morgan v. Pennsylvania General Ins. Co., 87 Wis. 2d 723, 731, 275 N.W.2d 660 (1974), quoting, Clausen and Lowe, The New Wisconsin Rules of Civil Procedure, Chapters 801-803, 59 Marq. L. Rev. 1, 54 (1976).

In pari delicto potior est conditio defendentis is a doctrine which states that in the case of equal fault, the position of the defendant is stronger. Feld & Sons v. Pechner, Dorfman, Etc., 312 Pa. Super. 125, 139 n. 8 (1983), review denied, 470 A.2d 525 (1984); Clemens v. Clemens, 28 Wis. 637, 654 (1871). The doctrine of in pari delicto is an application of the principle of public policy that “[n]o court will lend its aid to a man who founds his cause of action upon an immoral or illegal act.” Clemens, 28 Wis. at 654, quoting, Lord Mansfield in Holman v. Johnson, 1 Cowper, 341.

The doctrine of in pari delicto is subject to qualifications.

“And indeed in cases where both parties are in delicto concurring in an illegal act, it does not always follow that they stand in pari delicto; for there may be, and often are, very different degrees in their guilt. One party may act under circumstances of oppression, imposition, hardship, undue influence, or great inequality of condition or age; so that his guilt may be far less in degree than that of his associate in the offense. And besides, there may be on the part of the court itself a necessity of supporting the public interests or public policy in many cases, however reprehensible the acts of the parties may be.” Feld & Sons v. Pechner, Dorfman, Etc., 312 Pa. Super. at 131 (1983), quoting, Story Equity Jurisprudence § 423 (14th ed. 1918).

It is clear that Ms. Evans was in delicto. Her act of lying while under oath in the bankruptcy proceeding was both immoral and illegal. At issue is whether the allegations of her complaint, if accepted as true for purposes of this motion, place her in pari delicto with Mr. Cameron requiring dismissal of her complaint. We conclude that those allegations do place Ms. Evans in pari delicto with Mr. Cameron.

Ms. Evans has not alleged any circumstances of oppression, imposition, hardship, undue influence, great inequality of condition or the like. Instead Ms. Evans argues that a client has the right to rely on the advice of the attorney. In the circumstances of this case, this argument is not persuasive.

There may be circumstances in which the advice given by an attorney is so complex that the client would be unaware of the wrongfulness involved in following that advice. In such circumstances, more weight may be given to the influence an attorney will have over the client and the amount of reliance which the client can justifiably place in the attorney. The wrongfulness of lying while under oath, however, is apparent. Absent some allegation of special circumstances constituting an exception to the rule of in pari delicto independent of the attorney-client relationship, the client’s deliberate act of lying under oath places that client in pari delicto with the attorney who advised that client to lie.

Given that Ms. Evans and Mr. Cameron would be in pari delicto if the allegations of the complaint, assumed true merely for purposes of this motion, are proven, the second point of concern is whether “there may be on the part of the court itself a necessity of supporting the public interests or public policy . . . however reprehensible the acts of the parties may be.” We conclude that no such overriding public policy interest exists in this case. Although the public interest is served by discouraging attorney misconduct, it would be inappropriate to promote that interest by removing the damage to those who deliberately and willfully lie under oath in bankruptcy proceedings. A court should not encourage others to commit illegal acts upon their lawyer’s advice by allowing the perpetrators to believe that a suit against the attorney will allow them to obtain relief from any damage they might suffer if caught. The attorney’s misconduct of advising clients to perform illegal acts should be discouraged by the threat of attorney disciplinary action.

The only other case which we have discovered which presents the same issue as that presented here reaches the same conclusion. In Feld & Sons v. Pechner, Dorfman, Etc., the plaintiffs sought compensatory and punitive damages from the defendant law firm for professional malpractice. The plaintiffs allegedly suffered damages as a result of following the advice of the law firm to commit perjury, falsify exhibits and offer a potential witness against them a bribe in proceedings before the National Labor Relations Board. Feld & Sons, 312 Pa. Super. at 127. The Superior Court of Pennsylvania upheld the trial court’s dismissal of the complaint on demurrer with modification to allow the plaintiffs to seek recovery of legal fees paid to the defendants.⁴ Feld & Sons, 312 Pa. Super. 127-128.

Because the Pennsylvania court sought to avoid the public policy determinations involved in the doctrine of in pari delicto, it did not rely upon that doctrine. Instead that court upheld the dismissal of the complaint based upon the more general principle that no court will lend its aid to a person who grounds his action upon an immoral or illegal act. Feld & Sons, 312 Pa. Super. at 137-138.

Under the more general doctrine used in Feld & Sons or the doctrine of in pari delicto, the result in the instant case is the same. Public policy determinations are implicit in the invocations of either equitable doctrines.

Ms. Evans relies upon Ford v. Harrington, 16 N.Y. 285 (1857) and Berman v. Coakley, 243 Mass. 348 (1923). In both Ford and Berman, the plaintiff sought restitution of property transferred to the attorney as a result of an illegal transaction entered into on the attorney’s advice. In both cases restitution was granted. These cases are distinguishable from the instant case. Ms. Evans has not alleged that Mr. Cameron has re* ceived any benefit at her expense. If an attorney has benefitted at the expense of a client who followed the advice of that attorney and committed an illegal act, the doctrine of in pari delicto is less apt to be applied. This is because of the greater possibility of undue influence if the attorney receives a benefit and because of policy to not allow an attorney to benefit from such misconduct.⁵

The court of appeals in reversing the order to dismiss relied primarily upon this court’s decision in Clemens v. Clemens, 28 Wis. 637 (1871). Evans, 119 Wis. 2d at 377. In Clemens, a father transferred land to his son in an attempt to defraud creditors. The father then brought an action against the son to recover the transferred property including homestead property which the father mistakenly transferred and which was exempt from creditors’ claims. Clemens, 28 Wis. at 641. This court reviewed the trial court’s determination that title to the mistakenly transferred homestead property should vest in the father.

This court affirmed the trial court’s decision for two reasons. First, the court held that a conveyance to defraud creditors, although invalid as to the creditors, was valid as between the parties. The rule of in pari delicto could not apply as to actions between those parties and the father, therefore, was “entitled to the same relief with respect to the east forty [homestead property], on the ground of mistake or fraud in its insertion in the deed, as if such had not been the character of the conveyance.” Clemens, 28 Wis. at 652.

Second, even if the father and son were in pari delicto as to the conveyance of the non-homestead property, “[t]he intention of the plaintiff [father] in conveying on forty acres to defraud his creditors, would by no means, either in law or in morals, justify the defendant [son] in practicing a gross fraud upon the plaintiff to procure from him the title of the other forty [homestead property], or in retaining title to it, if conveyed by mistake.” Clemens, 28 Wis. at 652-653.

Clemens is sufficiently distinguishable to make its particular holding inapplicable to the instant case. First, the complaint did not allege any mistake on the part of Ms. Evans. Second, Clemens involved a claim for restitution of property transferred under the contract. In this case Ms. Evans has not alleged that Mr. Cameron has received any benefit. Finally, Clemens involved a claim upon a contract which was valid except as to creditors. In the instant case, Ms. Evans’ damages are inseparable from her own illegal conduct. Although she allegedly had a contract with Mr. Cameron for furnishing legal advice, she had no right, under the contract or otherwise, to bring an action for damages which she suffered as a result of her own illegal conduct. Her damages did not stem from the alleged contract but from her own deliberate act.

Because the allegations in Evans’ complaint, if proven, would show the parties to be in pari delicto, “it is quite clear that under no conditions can the plaintiff recover.”

The decision of the court of appeals which reversed the order of the circuit court dismissing the complaint is reversed.⁶

BY THE COURT. — The decision of the Court of Appeals is reversed.

1 Evans v. Cameron, 119 Wis. 2d 376, 350 N.W.2d 728 (Ct. App. 1984).

2 “802.06 Defenses and objection; when and how presented; by pleading or motion; motion for judgment on the pleadings . . . (2) How Presented. Every defense, in law or fact, except the defense of improper venue, to a claim for relief in any pleading, whether a claim, counterclaim, cross-claim, or 3rd party claim shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion ... (f) failure to state a claim upon which relief can be granted. . . .”

3 We conclude that the only reasonable inference that can be drawn from the complaint is the one drawn by Ms. Evans’ own counsel in oral argument: Ms. Evans lied under oath when she made her statement at the first meeting of creditors.

4 In Feld & Sons, 312 Pa. Super. 125, 139 n. 8, 141 (1983), review denied, 470 A.2d 525 (1984), the Pennsylvania court interpreted Berman as standing for the proposition that an attorney may not keep money gotten from a client in violation of the attorney’s professional obligations. The Pennsylvania court therefore affirmed the order to dismiss with the exception that should the plaintiffs prove the allegations, the plaintiffs may recover any legal fees paid to the law firm. Since Evans has not alleged the payment of any fees to Cameron and his firm, this issue need not be reached in this case.

5 See Footnote 4.

6 Contrary to the statement in Justice Bablitch’s dissent that “the majority opinion denies Ms. Evans her day in court” (Dissenting op., p. 432, infra.), Ms. Evans has had three days in court; one in the trial court, one in the court of appeals, and one in this court. A majority of this court has agreed with the trial court that Ms. Evans’ complaint, which attempts to recover money for acting in a manner both immoral and illegal, has placed her in a position where under any rule of equity profiting by such conduct should not be permitted.