MASON against RING

MASON against RING. Court of Appeals; March Term, 1861. Attorney and Client.—Endue Influence.—Judgment on Referee’s Report. The rule that transactions between attorney and client, by which the former is benefited, will be set aside upon an action brought for the purpose, unless clearly shown by the attorney to have been either just and fair, or purely voluntary on the part of his client, applies to every relation which pre-supposes an ascendant or controlling influence by one party on the mind of the other. (Per Selden, J.) So long, therefore, as the influence exists, the rule applies, although the strict technical relation may have terminated. A deed or instrument, given in such case, as a compensation for services rendered, will, however, be allowed to stand as security for what is actually due. The negligence of the attorney, who is the creditor in such a case, in making his entries of charges against his client, and the loose state of his accounts, though these raise a presumption against his claim, are not conclusive. The finding of the judge in the judgment entered upon the report of a referee to whom it'has been referred to take an account, and adopted as the basis of the judgment, may be construed by the language of the report. Appeal from a judgment. This action was brought by J ames Mason against James J. Ring. Upon Ms death, Zebedee Ring was substituted as a defendant, both in Ms personal capacity as heir, and as the administrator of the estate of James J., deceased. The object of the action was to set aside a conveyance of land wMch the plaintiff had previously made to the decedent, and which was intended as a compensation for the decedent’s services and disbursements as attorney and counsel, and in other capacities as agent of the plaintiff, during a period of about thirteen years. The plaintiff sued not only to have the conveyance, which transferred forty-five lots of land, set aside ; but also to have the accounting and settlement upon which it was based, opened, and the accounts between the parties taken anew. On the trial, the plaintiff proved gome errors in the accounts; and the court, after determining the principles upon which the accounting should be taken, ordered a reference to take and state the account. The referee reported that “ there was due “ from the decedent to the plaintiff, in January, 1856, the sum “ of thirty-six thousand seven hundred and ninety-nine dollars “ and fifty-five cents, irrespective of, and without taking into “ consideration the sum of twelve thousand dollars due to the “ decedent for costs and counsel fees, &c., which said sum is “ still due and unpaid.” Further, that he had “ taken an ae- “ count of all the costs, counsel fees, and other just charges of “ James J. Ring (the decedent) against the plaintiff, for profes- “ sional services rendered on his account, and have inquired, as “ directed by said order, and do report, that twelve thousand “ dollars is a just and proper allowance and compensation for such services.” And he further reported that, allowing the decedent credit for the said twelve thousand dollars, and charging him with the other sum, and computing interest on the balance, there was due from the decedent’s estate to the plaintiff, twenty-nine thousand six hundred and forty-five dollars and eighty cents. Upon the coming in of the report, the cause being brought on for hearing, the court confirmed the report, and ordered the conveyance to be set aside and declared void, and the possession of the land to be delivered up to the plaintiff, and that the plaintiff recover the amount reported due to him. Other provisions of the judgment it is not necessary to state. The accounts taken before the referee contained a very large number of transactions in respect to the care of the plaintiff’s property, and disbursements on various personal accounts, the expenses of managing his farm, of building, and many other matters. From final judgment in superior court, setting aside the conveyance as above stated, the defendant appealed to the court of appeals. Tracy, Powers & Tallmadge, for the appellants. Henry A. Cram, for the respondent. I. Where dealings occur between parties who have stood in the confidential relation towards each other of principal and agent, trustee and cestui que trust, guardian and ward, attorney or solicitor and client, to prevent the application to such dealings of those principles of protection extended by the courts to the parties to the relations reposing confidence, it is necessary, not only that the relation, but the influence arising therefrom, should have ceased (Wright v. Proud, 13 Ves., 138; Lady Sanderson’s Case, cited in Morse v. Proud, 12 Ves., 372; Holman v. Laynes, 18 Jurist, 839). II. The confidential relation of attorney and client does not necessarily terminate on the termination of litigation conducted by the attorney. The existence of a litigation is in nowise necessary to the existence of the relation, nor does the relation necessarily terminate on the termination of a litigation which originated it (Goddard v. Carlisle, 9 Price, 169). Where an attorney has been the general agent and manager and adviser of the client, these propositions acquire additional force. III. When an attorney holds in his hands moneys of his client unaccounted for, the relation still subsists (Gibson v. Jeyes, 6 Ves., 266; Hatch v. Hatch, 9 Ves., 292). IV. Where the relation is shown to have existed, the relation and its influence will be presumed to continue during subsequent transactions, in the absence of any evidence to the contrary (Carter v. Palmer, 1 Dru. & W., 722; Lewis v. J. A., 4 Ed. Ch., 599; Austin v. Chambers, 6 Cl. & F., 1; Goddard v. Carlisle, 9 Price, 169). Y. Throwing out of view the still more rigid rule as to gifts for services, hereafter referred to, the court must apply to all such dealings as those between attorney and client in that case, the rule recognized and reiterated in all the English and American cases, and repeated by Lord-Chancellor Cbanwobth in one of the latest English cases in the House of Lords (Savery v. King, 35 L. & Eq., 101), in the following language: “ Where “ a solicitor purchases or obtains a benefit from his client, a “ court of equity expects him to be able to show that he has “ taken no advantage of his professional position; that the client “ was so dealing with him as to be free from the influence “ which a solicitor must necessarily possess, and that the solicitor “ has done as much to protect his client’s, interest as he would “ have done when dealing on his behalf with a stranger.” If the professional man fails to show this by affirmative proof, the transaction cannot stand—it is presumptively unfair and void. The fact being found that a dealing beneficial to an attorney has taken place, during the continuance of the influence of the relation, the conclusion of law is, that the dealing is void, unless the additional affirmative fact is also found that the client was emancipated, and they dealt at arm’s length, and the attorney had done as much to protect his client’s interest, as he would have done when dealing on his behalf with a stranger (Thompson v. Judge, 3 Drew., 306; Gibson v. Jeyes, (3 Ves., 266; Holman v. Loynes, 18 Jurist, 839; Judge Hoffman, in Howell v. Ranson, 1 N. Y. Leg. Obs., 10; Howell v. Ransom, 11 Paige, 538; Berrien v. McLane, 1 Hoffm., 421; Evan v. Ellis, 5 Denio, 640; 2 Sch. & L., 493; Edwards v. Meyrick, 2 Hare Ch., 61). VI. In the case of gifts, a more rigid rule applies. They are absolutely void if made while the connection of attorney and client, or the influence created by or springing from it, subsists. And by gifts are here embraced, not only pure gifts, but also all transfers in consideration of services (Walmsby v. Booth, 2 Atk., 27; Sanderson v. Glass, 2 Id., 225; Strachan v. Brandon, 1 Eden, 303; Welles v. Middleton, 1 Cox Cases; S. C. in House of Lords, 4 Brown's Cases, 245; Hatch v. Hatch, 9 Ves., 292; Newman v. Payne, 2 Ves., 198; Purcell v. McNamara, 14 Ves., 91; Huguenen v. Baseley, 14 Ves., 273; Hylton v. Hylton, 9 Ves., 547; Wood v. Downes, 18 Ves., 120; Holman v. Loynes, 18 Jurist, 839; Thompson v. Judge, 3 Drew., 306; Kenny v. Brown, 3 Ridgway, Parliamentary Cases, 462; Berrien v. McLean, 1 Hoffm., 421). VII. A gift or purchase of the subject-matter of the litigation during the relationship, is doubly void (Lord Thurlow in Hale v. Hallet, 1 Cox Cases, 134; Wood v. Downes, 18 Ves., 120; Berrien v. McLean, 1 Hoffm., 421). VIII. The foregoing doctrines of the English courts have been adopted by our courts. If they have been modified at all by the Code, it is only in a point immaterial to this case, viz: in permitting contracts made before, or in the creation of the professional relation, that before would have been illegal; such as contracts for compensation out of the subject-matter of litigation : even this has been denied by the courts (Barry v. Whitney, 3 Sand. Sup. Ct., 696; Starr v. Vanderheyden, 9 Johns., 253; Matter of Bleakley, 5 Paige, 311; Evans v. Ellis, 5 Denio, 640; affirming Ellis v. Messervie, 11 Paige, 467; Merritt v. Lambert, 10 Paige, 352; S. C. affirmed in court of errors under name of Wallis v. Lambert, 2 Denio, 607; Howell v. Ranson, 11 Paige, 538; S. C. before Hoffman, J., 1 Leg. Obs., 10; Ford v. Harrington, 16 N. Y., 285). The same doctrines are .maintained in the civil law. See Pothier (Traite des Ponations entre vifs, § 1). IX. The facts established by the evidence in this case show the existence of the confidential relation in full force up to the time of these transactions. X. A case of gross mistake and error, amounting to fraud, was made out, and the plaintiff was entitled to have the whole account opened and taken de novo (1 Story Eg. Jurisp., §§ 523, 527; Mathews v. Wolwyn, 4 Ves., 125; Newman v. Payne, 2 Ves. Jr., 189; Beaumont v. Roultbee, 5 Ves., 485; Story Eg. Pl., § 800; Barrow v. Rhinelander, 1 Johns. Ch., 550; Blaygrave v. Routh, 2 Kay & J., 522; Purcell v. McNamara, 14 Ves., 91; Lady Ormand v. Hutchinson, 13 Ves., 47; Lewis v. Morgan, 5 Price, 42; Jenkins v. Gould, 3 Russ Ch., 385; Coleman v. Millersh, 2 MnY. & G. Ch., 809). XI. The judge was right in setting aside the deed of the forty-five lots; because, 1st. It was made under the influence of the professional relation, and, therefore, as a gift, absolutely void. 2. Because applying to it only the general presumption and rule the courts apply to all dealings between attorney and client, beneficial to the attorney, viz : that they are fraudulent and void, unless the attorney, by affirmative proof, show's their fairness, and that no advantage has been taken, they cannot be sustained ; because, {a) Ho such affirmative proof has been given, '(b) It conveyed property for "services—the value of the property being four-fold the value of the services, (c) Ho account of these services had been rendered. (<ü) The attorney, at the time of the gift, by his accounts, falsely represented to the client that he was indebted to the client, on their money transactions, in the sum of one thousand two hundred and fifty-eight dollars and forty-nine cents, when, in truth, he owed the client thirty-six thousand seven hundred and ninety-nine dollars and fifty-five cents, (e) The attorney had never rendered any account of his money transactions (see remarks of Lord Eldon, in Montesquieu v. Sandy, 18 Ves., 302). (f) That the settlement and the deed of the forty-five lots, being of the same date, are to be considered as one transaction, and when the settlement is aside, it carries with it the deed, (g) The consideration of the deed of the forty-five lots was the invalid gifts and wills made pendente lite. [MAJORITY — Selden, J. James, J.] Selden, J. It is not sought by this appeal to disturb the finding of the judge at special term, in respect to the state of accounts between the plaintiff and the defendant’s intestate, so far as those accounts have been properly investigated. What is claimed on the part of the appellants is : First. That the deed of the forty-five lots was, in all respects and to all intents, just, fair, and legal, and should have been adjudged to be valid. Second. That if it be considered that the relations between the parties were such as to affect the validity of the deed, it was, nevertheless, erroneous to set it aside absolutely, without compensation to the intestate for his services as agent and general manager of the estate of the plaintiff for many years, and without any inquiry as to the value of those services. The superior court, notwithstanding the premises conveyed by the deed in question constituted part of the subject-matter of the suits which the intestate had conducted, did not proceed, in setting aside the deed, in any degree upon the law of champerty or maintenance, but upon the general rule that transactions between attorney and client, by which the former is benefitted, will be set aside, unless clearly shown by the attorney to have been either just and fair, or purely voluntary on the part of the client. It is insisted by the appellant’s counsel that this rule does not apply, as the relation of attorney and client had ceased long before the giving of the deed; the last of the suits in which the intestate was engaged having finally terminated in April, 1855, while the deed was not executed until January, 1856. The rule, however, is not so limited as the counsel seem to suppose. It applies to every relation which presupposes an ascendant or controlling influence by one party on the mind of the other; such, for instance, as that of guardian and ward; trustees and cestui qui trust, &c. The foundation of the rule is the influence arising from the relation. So long, therefore, as the influence exists, the rule of course applies. It is apparent that in many cases the influence acquired during the existence of the relation may extend more or less after the period of its termination. The authorities show that when this is the case, the transaction will be scrutinized with the same jealousy as if the relation had continued. In the language of Lord Eldon, in Wood v. Downes (18 Ves., 119): “ It is “ not denied in any case that if the relation had completely “ ceased—if the influence can be rationally supposed also to “ cease—a client may be generous to his attorney or counsel as “ to any other person, but it must go so far.” It was found by the judge before whom the case was tried, that the deed “ was executed under the influence of the confi- “ dential relations, and of the relation of attorney and client, “ theretofore subsisting between the said plaintiff and the said “ James R. Ring.” Under this finding, the position of the case is precisely the same as if the deed had been given before the litigation was ended. It was not executed as a gift, but, as the judge has found, as a compensation for professional and other services previously rendered. In such cases the courts will not set aside a transaction, if it appears clearly to have been in all respects just and fair, or if the action of the client seems to have been entirely voluntary, that is, without any disturbing influence growing out of the relation. But such an influence is uniformly suspected. It is not necessary for the client to establish it by proof aliunde. The presumption is in his favor, since it was not essential, in order to justify the court in setting aside the deed, that the judge should find, as an affirmative fact, that it was obtained by fraud or undue influence. The law presumes such influence from the relation which is found substantially to have existed between the parties. This presumption would, no doubt, be repelled in a case where the court could see, from the character and conduct of the parties, that there was no reason 'to impute to the attorney any undue ascendency over the mind of his client. But that can hardly be said in the present case. The action of the court, therefore, in setting aside the deed, after having found as a fact that it was executed under the infiuence of the previous relation, was in accordance with the principles which have been generally applied to such transactions. It does not follow, however, that the judgment is to be, in all respects, affirmed. Upon general principles of equity, a deed or instrument of any sort given, in such a case, as a compensation for services rendered, will be allowed to stand as security for what is actually due. It is contended, on the part of the appellants, that the intestate was entitled to a compensation for his services as the general managing agent of the plaintiff for a long period, and that no allowance whatever is made by the judgment of the superior court for those services. / The judge has found that, from the year 1844 to the year 1856, the intestate took charge of all the affairs and property of the said plaintiff, paid his bills, managed his property, and supplied him with money from time to time. Of course, thus considering the circumstances and the risk incurred, the intestate was entitled to a compensation, and even a liberal compensation for services of so general and handsome a nature. It is said that he was negligent in making his entries, and that the account of his receipts and expenditures were left in a loose and disorderly manner. This was, no doubt, highly censurable, and should subject him to unfavorable presumptions and influences in taking the account. But could this inattention to details cancel the obligations of the plaintiff to reward him for years of devotion to the plaintiff’s interests, and for the personal sacrifice made at a time when the plaintiff’s means of remuneration were entirely uncertain ? I think not. No actual fraud is imputed to the intestate by the finding of the judge ; and it is expressly found, that he is charged in the accounts with the amounts and sums received by him “ from all sources ” on account of the plaintiff. I can see, therefore, no just principle upon which he or his representatives can be denied all compensation for his services. If, then, it should clearly appear, upon an examination of the case, that the only allowance made to the intestate was for his professional services as attorney and counsel, and that nothing has been allowed for his onerous and continued services as agent and manager of the plaintiff’s affairs, the judgment should be opened in order that a proper provision in that respect may be made. It is said by the respondent’s counsel that the allowance of twelve thousand dollars made by the supreme court, was intended not merely as a compensation for the costs, counsel fees, and professional services of the intestate, but for all other services and charges whatsoever. If we look at the finding of the judge below, this may be a just inference from the language used. That language is, “ that “ twelve thousand dollars is a just and proper allowance and compensation for the said services of the said James J. Ring, “ hereinbefore mentioned, and for all costs, counsel fees, and “ other just charges that he was entitled to,” &c. This language is comprehensive enough to include the services of Hr. Ring as agent; but rightly to interpret it, it became necessary to look into the previous history of the case. This sum of twelve thousand dollars was taken from the report of the referee, appointed to take and state an account between the parties. By the order of the reference, the referee was directed to “ take an acount of all costs, counsel fees, and other “just charges of the said James J. Ring against the plaintiff, “ for professional services rendered on his account; and to in- “ quire and report what sum would be a just and proper allow- “ anee and compensation for such services.” The order is entirely silent as to any compensation for services, as agent or general manager for the plaintiff. The inquiry is strictly limited to charges for professional services. The language of the referee’s report is equally definite ; he says, he has taken an account of “ all the, costs, counsel fees, “ and other just charges of James J. Ring against the said “ plaintiff, for professional services rendered on his account; “ and that $12,000 is a just and proper allowance and compen- “ sation for such service.” There can be no pretence, therefore, that anything was actually included in this sum of $12,000 as a compensation for services, other than professional. This report was confirmed; of course, then, the inference is, when the judge adopts this sum of $12,000, that he does not arrive at it from any original investigation of his own, but takes it from the report of the referee, especially as the finding of the judge is in the precise language of the order of reference, and of the report, as far as it goes. It omits, it is true, the phrase “for professional services.” How, whether this omission was accidental, as I should be led to infer, or was intentional, the result must be the same. As the referee expressly found that the $12,000 was a just compensation for professional services alone, and as this report. was confirmed, it is clear that no allowance has in fact been' made for any other services. If, then, the omission to direct any inquiry on the subject of services, other than professional, or to provide a compensation for such services, in the final judgment, occurred through inadvertence, it should of course be corrected. But if, on the other hand, the judge came to the conclusion that the intestate was not entitled to compensation for such services, and therefore omitted to make any provision on the subject, this, in my judgment, was clearly erroneous. Ho such conclusion could legitimately follow from the facts found by him. For twelve year’s the intestate not only took the entire charge of the defendant’s affairs, even to the most minute daily expenditures, but made very considerable advances from his own means for the support of the .plaintiff and his family, at a period too, when it was entirely uncertain whether the plaintiff would ever be able to reimburse him. The intestate has been deprived by the judgment of the court of all extra compensations, through the sense of justice, or the generosity of the plaintiff; and there seems to be no just reason why he or his representatives should not receive a reasonable allowance for his twelve years’ service. The judgment of the superior court should be opened, and the proceedings should be remitted, in order that inquiry may be made as to the services of the intestate, other than professional ; and the deed should be permitted to stand, until the inquiry is made, and the accounts are finally adjusted, with costs, subject to the award of the court, upon the final determination of the case. James, J. The judgment below was based on the sole ground that the deed, settlement and release were made, executed and delivered by the plaintiff, under the influence of the confidential relations existing between the parties, arising from their former relations of attorney and client. Such is the fair interpretation of the language in the finding of the judge at special term. The word “theretofore” in the finding can only have force by such construction: and this interpretation is sanctioned by the fact that the actual relation of attorney and client had ceased some nine months previous the execution of the deed. It is a rule of equity that while the relations of attorney and client subsist in their full vigor, 'the latter shall not derive any benefit to himself from the contracts or bounty or other negotiations of the former (Wood v. Downs, 18 Vesey, 126), and this doctrine is not limited to the rights or property in controversy, but may extend to the other contracts and transactions disconnected therefrom, when from the attendant circmnstances there is reason to presume that the attorney possessed some marked influence, ascendancy or other advantage over his client in respect to them (Edwards v. Meyrick, 2 Hare, 60-68). It is not necessary in such case to establish that there has been fraud or imposition on the client, nor on the other hand is the transaction necessarily void, Ipso facto/ but the burden of establishing its -fairness is thrown upon tire attorney. The reason of the rule is that the relation gives rise to great confidence between the parties, enables the attorney to exercise a strong influence over the actions of his client, puts it in his power to avail himself of his necessities, his good nature, liberality and credulity ; and hence the law not only watches over all the transactions of parties in this predicament, but often interposes to declare void transactions which, between other, parties would be held unobjectionable. But where the relation of attorney and client is completely dissolved, and the parties no longer under the antecedent influence, this rule ceases, and they stand upon the rights and duties common to all other persons (Gibson v. Jeyes, 6 Vesey, 277). It was shown in this case that the relation of attorney and client had ceased, and the confidential relations arising therefrom were broken off and dissolved some time before the deed in question was executed and delivered, and therefore there is no ground upon which the foregoing equity rule can be applied in this case. The plaintiff was of mature age, of sound mind, and sufficient capacity to fully understand and to appreciate all his rights; and the voluntary execution and delivery of the deed in question, as a compensation for Ring’s professional and other services, cannot, upon the facts established in this case, be attributed to the influence of the confidential relation theretofore existing between them, but rather to the performance of a previous agreement or understanding that Ring, if successful, should participate in a share of the profit of the litigation. It was insisted that the foregoing equity rule had been abrogated by the Code, § 303 ; such, however, is not the effect of the statute. Its object and purpose were to place the lawyer upon the same footing as other persons, free to make his engagements with his clients as they should agree; and, although extremely broad in language, it went no farther. It removed the restraint imposed by the statute of champerty and maintenance, permits contracts for services to be made between attorney and client before or on the creation of the professional relation, and payable out of the subject matter of the. litigation, or upon a division thereof, when recovered or otherwise, but in no wise affects the equity rule as to subsequent actions created or performed under the influence of that relation. Ro appeal was taken from that part of the judgment, which fixed the intestate’s indebtedness on the accounts at $36,799.55, and from the finding of the referee that Ring’s professional services were worth but $12,000, and therefore we make no inquiry as to those matters. The appeal was from that portion of the judgment which declared the deed of the forty-five lots void. For reasons herein given, we think that judgment erroneous, and should be reversed. The lots at the time of conveyance were valued at $45,000, and that was the estimate which the plaintiff himself placed upon the professional and other services of said intestate. That Ring rendered services, other than professional, of great value to the plaintiff, was clearly shown, and those services were not included in the estimate of the referee. We therefore think it proper that the plaintiff’s own estimate of Ring’s services should stand, and that the judgment of the court below should be reversed as to the forty-five lots ; said lots, however, to be made subject to the payment of the balanee found due on the accounting, with interest, but without costs to either party in this court or the court below. Judgment reversed, and the-proceedings remitted for further accounting as to services other than professional. The subsequent proceedings in the court below, upon the reference to ascertain the amount of such services, other than professional, for which the deed was allowed to stand as security, are reported in 10 Bosw., 598.