Thomas v. Turner's Adm'r

12 S.E. 149, 87 Va. 1, 1890 Va. LEXIS 85

• Court: Supreme Court of Virginia
• Decided: November 6, 1890
• Status: Published

Opinions

Lewis, P.

(after stating the case), delivered the opinion of the court.

Tested by the equitable and wisely-established-rule which applies to such cases, it is very clear that the decree upholding the transaction in question is erroneous. According to that rule all dealings between attorney and client for the benefit of the former, are not only regarded with jealousy and closely scrutinized, but they are presumptively invalid, on the ground of constructive fraud; and that presumption can be overcome only by the clearest and most satisfactory evidence.- The rule is founded in public policy, and operates independently of any ingredient of actual fraud, or of the age or capacity of the client, being intended as a protection to the client against the strong influence to which the confidential relation naturally gives rise.

■ It is the duty of an attorney to give to his client the benefit of his best judgment, advice, and exertions, and it would be a just reproach to the law if he were.permitted to bring his own personal interest into conflict with that duty by securing a benefit to himself through the influence which the relation implies. All transactions between the parties, to be upheld in a court of equity must be uberrima fides, and the onus is on the attorney to show, not only that no undue influence was used, or advantage taken, but that he gave his client all the information and advice as against himself that was necessary to enable him to act understandingly. He must show, in other words, (1) that the transaction was perfectly fair; (2) that it was entered into by the client freely; and (3) that it was entered into with such a full understanding of the nature and extent of his rights, as to enable the client to thoroughly comprehend the scope and effect of it. Or as Lord Eldon tersely puts it in the famous case of Huguenin v. Baseley, 14 Ves., 273, the transaction must be shown to have been the “ pure, voluntary, and well-understood act” of the client’s mind, otherwise a court of equity will undo it, as having been unduly obtained. And in the later case of Smith v. Kay, 7 H. L. Cas., 750, Lord Crannorth remarked that there is no branch of its jurisdiction which a court of equity is more ready to exercise than this.

Before entering on the business of his client, an attorney may contract for the measure of his compensation, and a contract then made will stand on the same footing as any contract between other persons competent to contract. This is now settled by the statute. Code, sec. 3201. But a contract for compensation made after the fiduciary relation has commenced, and while it continues, will not be upheld in equity, unless it be shown not only to be reasonable, but that it was entered into under the'circumstances just mentioned. Indeed, the established rule, broadly stated, is, that an attorney who occupies a security or other benefit from his client, must show that the client had the information and advice which he presumably would have received, and that he is not worse off than he presumably would have been, if he had consulted a competent adviser, who had no selfish end in view. And e°specially is this so -when the transaction is connected with the subject-matter of litigation, as then the confidence reposed and the influence of the relation place the client most in the power of his attorney, Gray v. Emmons, 5 Mich., 533; Dickinson v. Bradford, 59 Ala., 581; Planters Bank v. Hornberger, 4 Cald., 531; McMahan v. Smith, 6 Heisk., 167 ; Evans v. Ellis, 5 Denio, 640; Wistar’s Appeal, 54 Pa. St., 60; Jennings v. McConnel, 17 Ill., 148; Brock v. Barnes, 40 Barb., 521; Yeamans v. James, 27 Kans., 195; Stockton v. Ford, 11 How., 232; 2 Pom. Eq., sec. 960; 2 Lead. Cas. Eq. (4th ed.), 1217, notes to Huguenin v. Baseley.

In Brock v. Barnes, where a security was taken by the attorney from his client, the court used this language: “ If the instrument be deemed to provide a remuneration for past services, then the services must be proved; and further, that there existed at the time of giving it, if not a legal, binding indebtedness, at least a just and moral obligátion to pay; and still further, that the instrument was fully understood by the client, and was made in pursuance of, and in accordance with, a well-considered, definite, and settled purpose. The paper itself, having been executed by a client to his attorney, affords no presumption on these points.”

This may sometimes bear hardly on the attorney, but the hardship is one to which he exposes himself by dealing for his own advantage with one whose interests intrusted to his care he is bound to protect, and over whom he presumably has an influence that may be abused.

The rule is well expressed by Mr. Justice Story, who says: “ The situation of an attorney or solicitor puts it in his power to avail himself, not only of the necessities of his client, but of his good nature, liberality, and credulity, to obtain undue advantages, bargains, and gratuities., Hence, the law, with a • wise providence, not only watches over the transactions of parties in this predicament, but it often interposes to declare transactions void, which between other persons would be held unobjectionable. It does not,” he adds, “so much consider the bearing or hardship of its doctrine upon particular cases, as it does the importance of preventing a general public mischief, which may be brought about by means, secret and inaccessible to judicial scrutiny, from the dangerous influences arising from the confidential relation of the parties.” 1 Story Eq., sec. 310.

Nor is the rule confined to the case of attorney and client, but applies as well to that of administrator and legatee, guardian and ward, trustee and cestui que trust, and, indeed, to all the variety of relations in which influence or dominion may be exercised by one person over another. Davis v. Strange's Ex’or, 86 Va., 793; Fishburne v. Ferguson, 84 Va., 87, 113; In the often cited case of Gibson v. Jeyes, 6 Ves., 266, the Lord Chancellor, in delivering judgment, said: “It is asked, where is that rule to be found? I answer, in that great rule of the court, that he, who bargains in matter of advantage with a person placing confidence in him, is bound to show that a reasonable' use has been made of that confidence; a rule applying to trustees, attorneys, or any one else.”- Nor is this rule affected by the statute above mentioned, the object of which was, simply, to make the fees of an attorney a lawful subject-matter of contract. And as the rule is founded on the influence which the relation originates, it will ■operate as long as the influence continues, although the relation itself has ceased. Wood v. Downes, 18 Ves., 120; Henry v. Raimen, 25 Pa. St., 354; Sedgwick v. Taylor, 84 Va., 820; Weeks, Attorneys, sec. 268, note.

These principles are well illustrated by the case of Statham v. Ferguson, 25 Gratt., 28. In that case the widow of a decedent and his administrators and a number of the heirs-at-law and next of kin, united in a deed whereby the widow agreed to accept, in lieu of her interest in the estate, the provision made for her in a certain paper writing intended by the decedent as his will, but probate of which had been refused, because of its defective attestation. Before the deed, which was prepared by the counsel of the administrators, was read to her, she was told ■what her rights were under the intended will, and what they were by law independently of it. She was also told that by executing the deed she would sustain a considerable loss. She answered she was aware of that, and after the deed was read she expressed herself as satisfied, and signed it. She soon afterwards, however, instituted a suit to set it aside, and the court being satisfied that she had executed it hastily and without any definite idea of the value of the estate, or of the effect of the deed upon her interest, declared it invalid.

“It was the duty of the administrators,” said the court, “ invested as they were by law with the title to the whole personal estate, and standing as they did in the confidential relation in which they stood towards her, to take care that before she made a donation of her estate, or a large portion of it, to themselves, as she did, she should be fully informed of her rights on. the subject, and the effect of her act, or at least should have ample time and opportunity to consult counsel and advise with disinterested friends; and they should have advised her to avail herself of those advantages. That uberrima fides, which the law expects and exacts of persons standing in such a confidential relation to another, required them to do so. Instead of doing so, if they did not advise and encourage, they, at least by their acts, facilitated the preparation and execution of the deed, when they must have known that she had not the necessary information and proper advice to enable her to act wisely and discreetly in so important a transaction.”

These remarks apply with peculiar force to the present case, not only because the case in its facts resembles the present, but because here, when the contract was executed, the appellee held to the appellant a relation that was doubly confidential; that is, he was not only her adviser and attorney, but he was the administrator d. b. n. with the will annexed, and she the principal legatee. True, he says the litigation had ended, and that the relation of attorney and client had ceased; but nothing is clearer from the record, than that if the relation had ceased, the influence growing out of it had not. The contract was executed, if not before, certainly only a few days after, the order of this court was certified down to the circuit court. Moreover, it appears that he was retained by her as general counsel, before the litigation commenced, and it does not appear that that relation had been either dissolved or suspended. But be that as it may, the relation of administrator and legatee was subsisting at the time and continues to the present time.

Then, was the contract made voluntarily? Did the appellee fully and candidly explain to the appellant the nature and extent of her rights? And did she thoroughly comprehend the scope and effect of her act? All of these questions we are constrained to answer in the negative. Indeed, the case seems to have been treated in the circuit court as though the onus was on her to prove actual fraud, which, as we have seen, is exactly the reverse of the true rule relating to such transactions.

There is no proof of any contract for a fee, or of any suggestion of an assignment, or other security, prior to her appearance before the appellee, in obedience to his summons, when the contract, which he had previously prepared, was produced and read to her. At that time she had just emerged from a litigation which had threatened her all, and which had been successfully conducted for her by the appellee. She was, moreover, an ignorant woman, unused to the transaction of legal business. Nothing, therefore, was more natural than that there should have been the fullest confidence reposed, on the one side, and the strongest influence, on the other, which was no doubt heightened or intensified by a sense of relief and gratitude which the result produced.

This, indeed, is manifest from the record. The contract itself shows it, especially that clause wherein she declares her belief that without his counsel and management, all would have ■been lost. And other instances of his influence, not to say ascendancy, over her are shown by the evidence. Thus, he himself testifies that he told her, when he sent for her to sign the contract, that she must give him the income on the whole personal fund, during her life, if the court should not approve a payment of five thousand dollars out of the principal as to her infant son, otherwise he would not be satisfied, which no doubt strongly influenced her to sign the contract, and to ask the court, as she did, to confirm it. Then her remark, after the contract was signed, which he also mentions in his deposition, namely, that he had “not been as hard on her as she' expected,” is not a little suggestive of a situation of dependence.

To the same purport is the evidence of W. C. Fitzpatrick, the appellee’s son, who says he heard her say, as the contract sets forth, that if she had employed any other attorney, she believed she would not have gotten anything. The same witness also says that while she was in the room, where the contract was signed, she was reminded (he does not say by whom) that she had repeatedly declared if she got “ Bob’s Creek ” farm, she would be willing to give Mr. Fitzpatrick (the appellee) all the rest, and that she replied, she would do so then “ if he required it,” but “ she hoped he would not be too hard on her.” He also says she seemed .“ very gratefulall of which, to say nothing of any other evidence in the case, shows very clearly that the contract, instead of being an act of rational consideration, an act of pure volition uninfluenced,was rather the impulsive, hasty, and unadvised act of one who, to use the surprisingly apt language of the appellee’s own counsel, was under a “generous thraldom of gratitude” to the attorney whom she regarded as her “ deliverer.” In other words, she was subject to the influence originated by a confidential relation.

It is argued she had a right to be generous, and so she had, and she evidently meant to be; but that, instead of helping the appellee’s case, is a strong circumstance against it. The learned counsel seemed to have forgotten that it was as much, the appellee’s duty to put her on her guard against her own generous inclinations as against himself. A disinterested, competent adviser, had such a one been consulted, presumably would have done so, and, in view of his large personal interest in the matter, and her ignorance and inexperience, he ought to have recommended to her to seek such advice; for, as was well said in Doswell v. Anderson, 1 P. & H., 185, when the . interest and duty of a fiduciary are placed in opposite scales, we need no law books to teach us which will preponderate. Independent advice, it is true, was not essential to the validity of the contract, but, as a precaution against undue influence, it is always proper, and would have been especially so in the present case.

There is no principle of equity, therefore, upon which the contract in question can be made to stand. The rule we have mentioned was intended to prevent it; or, in other words, to shut the door as well against the temptation of an attorney to take advantage of the unguarded generosity as of the actual necessities of his client. Hence, it matters not that the evidence shows, in a general way, that the contract was read and explained to the appellant, and that she expressing herself as satisfied, afterwards signed it, or rather affixed her mark to it. To support the transaction it was for the appellee to show that the instrument was executed without a speck of imposition or undue influence, and that it was the result of a well-considered, definite, and settled purpose on her part. And by undue influence in this connection is not meant an actual influence consciously and designedly exerted, but the influence which naturally springs from a confidential relation.

“The question,” said Lord Eldon, in Huguenin v. Baseley, “is not whether she [the party subject to influence] knew what she was doing, had done, or proposed to do, but how the intention was produced; whether all that care and providence was placed around her, as against those who advised her, which from their situation and relation with respect to her,, they were bound to exert on her behalf.”

That there was any independent advice in the present case can hardly be pretended. The justice of the peace, whose certificate of acknowledgment is appended to the contract, was called in, not by the appellant, but by the appellee, and was called in, as in his deposition he says he thought, merely to take her acknowledgment. He was not asked to act, and did not undertake to act, and, perhaps, was not competent to act, as her adviser, and, moreover, says he understood the contract %s the appellant swears she did. The instrument is quite a long one, and perhaps somewhat obscure, which is an additional reason why independent advice should have been recommended by the. appellee, especially as he had prepared the contract himself without previous consultation with the appellant. Her husband, it is true, was present when the contract was signed; but he was as ignorant as she, and no doubt quite as much in need of advice respecting a transaction of such importance.

The concluding clause of the contract, upon which much reliance was placed in the argument, is, indeed, in these words:

“ The said Emily B. Thomas willingly makes this agreement and assignment, and requests the court to ratify the same, it being much less than she was willing to give, and proposed to give, during the litigation.” But this, instead of removing the imputation of undue influence, is rather an additional evidence of it. Bridgeman v. Green, Wilm. 58, 71. In Twyne’s Case, 3 Co. 81a, cited in 2 Min. Inst. 603, one of the enumerated badges of fraud in that case was this: “that the deed contains that the gift was made honestly, truly, and bona fide;” for, said the court, " clausulas inconsuetutae semper inducunt suspicionem.”

It is very clear, therefore, in the light of these principles, that the contract in question cannot be upheld as “ the pure, voluntary act ” of the appellant’s mind.

But, apart from the question of undue influence and of her understanding of the contract, did she understand the nature and extent of her rights ? There is no evidence that she did, and we must, therefore, assume that she did not. The appellee, although he had been her counsel from the death of the testator, and was also the administrator of the estate, admits that he himself was not definitely informed on the subject; for in his deposition he says: “After she signed the contract * * I told her she was the richest person in the county; that she owned more land; that the personal estate would pay all the debts, the balance on Frank Turner’s legacy, all the costs of administration, including my fee as agreed on in the contract, and that I thought there would be a balance going to her of from $3,000 to $5,000; but as to that I could not speak de.finitely, it was mere surmise.”

On the other hand, the appellant contends that the balance ought to exceed $6,000, and this seems probable, although the exact amount does not appear from the record. Enough, however, does appear to show that under the contract, if sustained, the appellee’s compensation would exceed $10,000.

The result, therefore, was that, as the appellant was in the dark as to the nature and extent of her rights, it was impossible for her to comprehend the scope and effect of the contract, even had she construed it as the appellant did; and for this reason also the same must be declared invalid as to her, independently of the objections to its validity already considered.

We have carefully examined the case, and are of opinion that a decision could hardly be rendered more repugnant to public policy, or one the probable consequences of which would be more mischievous than would be a decision upholding this contract under the circumstances disclosed by the record. To uphold it would be to overturn or to ignore principles which are not only deeply rooted in the law, but which ought to be considered, if not sacred, at least immutable. In this connection we cannot do better than to quote the language of the supreme court in Stockton v. Ford, 11 How., 232, where it is said: “ There are few of tiie business relations of life involving a higher trust "and confidence than that of attorney and client, or, generally speaking, one more honorably and faithfully discharged; few more anxiously guarded by the law or governed by sterner principles of morality and justice; and it is the duty of the courts to administer them in a corresponding spirit, and to be watchful and industrious to see that confidence thus reposed shall not be used to the detriment of the party bestowing it.” ■ •

We have said nothing about the trustee not being a party to the contract, because it is not necessary to the decision of the case. It is right, however, to add that there is nothing in the present case affecting the moral character of the appellee, whose only fault has been that, in dealing with the appellant, he overlooked, or did not sufficiently attend to, the rule of equity, to which we have called attention, relating to dealings between persons standing, or who have lately stood, in a confidential relation.

Then the question is, the contract being invalid, what is the proper disposition to make of the case ?

The entire residuum of the estate was left by the testator in trust for the sole and separate use of the appellant for life, with power of appointment by will, and, in default of such appointment, to her heirs and next of kin. Her children, therefore, are only remotely and contingently interested, and one of them is an infant. The others, who are sui juris, assented to the contract, and have not appealed from the decree, although in- their depositions they say they thought the contract was for five thousand dollars only, to be paid out of the principal. In cases somewhat similar to the present it has been held that although the contract cannot be upheld, yet that it will be permitted to stand as a security for what is justly payable under an implied contract. The appellee has, confessedly, rendered valuable service, but there was no other contract for a fee than the one we have been considering. It is conceded, however, by all parties before the court that a fee of five thousand dollars would not be an extravagant one for the services rendered, although the appellee had the assistance throughout the litigation of an able attorney, Mr. Whitehead, who charged and has been paid seven hundred dollars.

We think a reasonable fee ought to be allowed for protecting the trust estate against the claims asserted against it, and that an allowance of five thousand dollars, to be paid out of the corpus of the estate, is reasonable and ample. The defence of the case in the circuit court involved considerable time and labor, although a stronger case for the application of the equitable doctrine relating to laches and stale demands could hardly be imagined. The estimates of the attorneys, who were examined as witnesses in the case on the subject of the appellee’s compensation, seem to have been based on the idea-of an employment on a contingent fee; but there was no Such employment, nor is that a proper basis upon which to ascertain what is justly due under an implied contract.

The decree, in so far as it is in conflict with this opinion, will, .therefore, be reversed, and the cause remanded for such further proceedings, not inconsistent therewith, as may be necessary in order to a final decree.