Wilson v. Wallace

Plaintiff, a member of the firm of Wilson & Wagner, of Washington, D. C., income tax experts, and an assignee of said firm, filed his complaint for the reasonable value of services alleged to have been performed by the copartnership for defendant, under an alleged contract in writing, in defending the latter in certain proceedings initiated by the government to collect a tax and penalties aggregating $2,147,065.27. At the close of plaintiff’s case in chief the defendant moved for a nonsuit on the ground that the facts proved by plaintiff were not sufficient to justify a judgment in his favor, in that they showed “that there was no written contract entered into between the parties hereto for the employment of the plaintiff, and certainly no written contract for the payment of money to him, and that, therefore, his action is barred by the statute of limitations”. Prom an order granting said motion and from the judgment entered thereon plaintiff appeals.

It is contended by appellant that certain letters and telegrams introduced evidence the written contract of employment; that while no express promise to pay for the services to be rendered is in writing, the law implies such a promise as an integral part of the written contract of employment; that the contract is one founded upon an instrument in writing within the meaning of subdivision 1 of section 337 of the Code of Civil Procedure, and that the action is not

March 20, 1925, defendant wired plaintiff’s firm that he had received a statement showing additional tax and penalty assessed which he thought was settled two years previously, and in addition said: “Am forwarding copies by aeroplane mail stop please advise fully immediately.” The copies referred to were forwarded as stated, in a letter addressed to plaintiff which reads, in part: “March 20, 1925. . . . My dear Bob: You can imagine how greatly surprised I was today to receive notice of additional tax for the year 1918, per copies enclosed. However, I feel sure this notice is incorrect and confident that you closed the matter when I paid some $114,000 during 1923, but I shall feel relieved to receive a telegram stating your ideas. I have not acknowledged receipt of the report, assuming that thirty days are allowed to present protest, and also awaiting your advice as to whether to sign it or have you handle it there. . . . W. J. Wallace.” Upon receipt of defendant’s telegram plaintiff wired in return as follows: “Statute of limitations has expired against your eighteen and nineteen assessments except on allegation of fraud stop fraud claim untenable ... we will investigate fully and wire further Monday don’t worry.” March 23, 1925, plaintiff again wired defendant as follows: “Walker and I just had encouraging interview with chief of section in control of case stop forwarding protest for signature upon return will have formal hearing before Solicitor internal revenue.” Upon receipt of above wire defendant wired plaintiff; “ . . . am at loss to understand need of formal hearing if statute of limitations has expired stop please explain stop will be glad to have additional information when you obtain same Harry or I will be glad to leave on short notice if you need either or both of us.” Plaintiff replied with a wire dated March 24, 1925, reading as follows: “Statute has expired but commissioner may make assessments any time upon alleged fraud stop department claims income should have been returned for stock received on basis intrinsic value company assets and therefore technical fraud exists stop satisfactory informal meeting with solicitor today must proceed with formal hearing which will be arranged within few days stop certain of indefinite delay in event

March 24, 1925, a letter marked personal was sent by plaintiff to defendant, reading in part as follows: “Just as a suggestion it might be well for you to reach an understanding with Mr. Bauer with respect to the matters covered by sundry other letters of this date, perhaps similar to the arrangement you had with him when the controversy with the department arose in 1922. . . . While we are confident of the ultimate success of our efforts, the matter is obviously one not to be trifled with and demands the closest and most careful consideration possible. I might mention, in this connection, that I can conceive of no one better qualified to handle this particular subject than our Mr. Walker, who with the writer is devoting full attention to the case. It is impossible, of course, at this time to estimate the amount of compensation and expense that may be involved, but we do think that you might well now come to an understanding with Mr. Bauer. We assume that neither you nor he wishes us to let any stone unturned in the endeavor to bring about an entirely satisfactory disposition of the Department’s contentions.” The Mr. Bauer referred to is Mr. Harry J. Bauer, referred to in one of the defendant’s telegrams as “Harry”, who was counsel for defendant and also associated with him in a business deal which gave rise to the eoptroversy with the government in 1922, referred to in the letter, and which was settled with the government on the basis of a value of $28.50 per share for the stock of the Wallace Refineries, which was received by defendant. Later someone in the department found that in connection with the determination of the tax liabilities of the Wallace Refineries the underlying assets were valued on a basis which gave to the stock a much higher value than $28.50 per share in 1918, and out of this the claim for- additional assessment and penalties developed.

On March 24, 1925, plaintiff sent another letter to defendant which explained how the additional tax and penalties came to be assessed, and told of meetings had with various officials in the department in regard to the matter. This letter also said, in regard to the conference concerning the

The evidence shows that defendant executed and acknowledged this power of attorney before a notary public on April 1, 1925, and signed and verified the protest sent him by plaintiff on March 31st. Both power of attorney and protest were sent plaintiff by defendant in a letter dated

Various other letters and telegrams thereafter passed between the parties relative to the progress of the case, in one of which, dated April 20, 1925, defendant wrote plaintiff the following: “Just a personal note to let you know how much I appreciate the conversation we had over the telephone last night regarding my tax matters. . . . Tour assurance that it will all be adjusted satisfactorily is a great help to me and I know you are more capable of handling the situation than anyone; would like to talk to you regarding some other matters which this ease has brought . ... ” Finally, on August 17, 1925, plaintiff wired defendant’s secretary: “Tour telegram received on return from brief vacation. Glad to inform you we have now seen solicitor’s favorable opinion which is final”; to which defendant wired his reply as follows: “I am pleased to receive information contained in your wire Miss Heron stop expect to make special trip east in early fall when I can express more personally to you my appreciate [sic] of your services.”

Apparently the first that plaintiff knew of the controversy between defendant and the government was upon the receipt of defendant’s telegram advising him of the additional tax and penalties and which asked him to “advise fully immediately”. If this stood alone, in view of the fact that defendant says it was his “understanding this entire matter was settled two years ago”, the request for advice might be taken to mean advice as to how it happened, by reason of his understanding, rather than the beginning of a new employment. Defendant’s letter transmitting to plaintiff the statement referred to in the telegram, however, has this very significant language: “I have not acknowledged receipt of the report, assuming that thirty days are allowed to present protest, and also awaiting your advice as to whether to sign it, or have you handle it there.” While it is possible to urge that defendant in the use of this language did not intend to leave it to the judgment of plaintiff whether he would handle the case but sought to ascertain if plaintiff proposed to handle it as a part of the former ease and on

¡ We. are not here concerned with the question whether if the case had been submitted on the merits, on the evidence introduced by plaintiff, the court could have properly found that there was no written contract, or any contract of employment. On a motion for nonsuit the court cannot weigh the evidence if it is conflicting, or choose between conflicting inferences that may be drawn from the same evidence, but “the evidence, and every inference that may be fairly drawn from it must be viewed in the light most favorable to plaintiff”. (Carter v. Canty, 181 Cal. 749 , 755 [ 186 Pac. 346 , 349].) “On such motion the evidence must be taken most strongly against the defendant, contradictory evidence must be disregarded and the motion denied if there is any substantial evidence to prove plaintiff’s case without passing on the sufficiency of such evidence.” (Grummet v. Fresno Glazed Cement Pipe Co., 181 Cal. 509 , 512 [ 185 Pac. 388 , 389 ].) The rules are the same whether the trial is by the court or by a jury (Grummet v. Fresno etc. Co., supra), and if, as seems to be the case here, two inferences may fairly be made from the plaintiff’s evidence, the trial court must take the one most favorable to plaintiff. (Globe Grain & Milling Co. v. Drenth, 36 Cal. App.

It appears.from the record that the complaint was filed more than two but less than four years after the alleged contract was made, and in consequence if the promise to pay plaintiff compensation for his services is required to be in writing the statute of limitations would affirmatively appear, on the face of -the record, to be a complete defense to his claim as a matter of law. Under such circumstances a motion for nonsuit is properly granted. (Vinson v. Los Angeles Pac. R. R. Co., 147 Cal. 479 [ 82 Pac. 53 ]; Beeson v. Schloss, 183 Cal. 618 [ 192 Pac. 292 ].) On this point respondent urges that such promise to pay compensation must be in writing, while appellant contends that, the contract of employment being proved by instruments in writing, the promise to pay compensation is necessarily implied by law and needs no proof extrinsic to the writings, and that in consequence the action is one founded upon an instrument in writing, within the meaning of subdivision 1 of section 337 of the Code of 'Civil Procedure, and was not barred at the date upon which the complaint was filed.

The case of McCarthy v. Mt. Tecarte L. & W. Co., 111 Cal. 328 [ 43 Pac. 956 ], is one in which a director of the defendant corporation sued for the reasonable value of his services as general manager and superintendent under a resolution of the board so appointing him, which resolution, however, made no reference to compensation for such services. The Supreme Court held that the cause of action was not barred by subdivision 1 of section 337, and in order to so hold the trial court must have found under the facts that the action was founded upon an instrument in writing. The opinion at page 340 contains this language: “But a cause of action is not upon a contract founded upon an instrument in writing, within the meaning of the code, merely because it is in some way remotely or indirectly connected with such an instrument, or because the instrument would

An interesting case is that of O’Brien v. King, 174 Cal. 769 [ 164 Pac. 631 ], which grew out of a loan of money evidenced by the following writing: “Received from Miss Hannah O’Brien, on June 21st, 1911, $450 (Four Hundred and Fifty Dollars) in U. S. Gold coin, at 5 per cent interest.” The question principally discussed in the opinion, and con

The writing in the O’Brien case disclosed a loan transaction. The law implied as an existing part of the written agreement a promise to repay the money, and the cause of action being based on a written agreement, i. e., a provision of it necessarily and directly implied by law, the agreement to repay was held to be within subdivision 1 of section 337, and not subdivision 1 of section 339 of the Code of Civil Procedure. As in our opinion the writings involved here, given the inferences favorable to plaintiff, may be said to create a written contract of employment between. appellant and respondent, the law steps in and necessarily directly implies a promise by respondent, as a part thereof, to pay for the services- rendered thereunder. Such an agreement, under the rule of the O’Brien case, as well as the cause of action based thereon, seems to be within the meaning of subdivision 1 of section 337 and so was not barred at the time the complaint was filed. In our opinion, therefore, the case should have been determined on the merits and the motion for nonsuit should not have been granted.

Judgment and order reversed.

Craig, Acting P. J., and Thompson (Ira F.), J., concurred.

A petition for a rehearing of this cause was denied by the District Court of Appeal on May 1, 1931, and a petition by respondent to have the cause heard in the Supreme Court, after judgment in the District Court of Appeal, was denied by the Supreme Court on June 4, 1931.