McCoy v. Gas Engine & Power Co.

The defendant corporation, on or about the 22d day of May, 1906, retained the defendant Joseph A. Flannery, an attorney and counselor at law, to perform certain legal services. The contract of retainer was in writing, in form as follows:

•‘Matter of Claim of Gas Engine & Power Company for Damages under Chapter 634, Laws of 1905.

“We hereby retain Joseph A. «-Flannery, attorney, to represent us in the above-entitled proceeding, and for his services and expenses agree to pay-said Flannery 25 per cent, of any award and interest recovered, up to and including $50,000. If said award and interest amounts to more than $50,000 and less than $100,000, said Flannery is to receive 33% per cent, of the full amount recovered. If said award and interest amounts to $100,000 and less than $150,000, said Flannery is to receive 40 per cent, of the full amount recovered. If said award amounts to $150,000 or over, said Flannery is to receive one-half of the full amount recovered. It being understood and agreed that said Flannery is to pay all expenses of every kind whatsoever, including expert witness fees, surveyors’ fees, engineers’ fees, etc. Said fee is not to be paid until said award is paid.

“Dated New York, May 22, 1906.”

The defendant Flannery, pursuant to this contract of retainer, conducted proceedings on behalf of the corporation before the board of assessors of the city of New York, resulting in an award to the defendant corporation of $306,000, no part of which award has yet been paid. This action was instituted by the plaintiff, as a stockholder of the defendant corporation, to set aside the foregoing contract of retainer on the ground that the same is unconscionable, and on the further ground that the contract is in violation of section 74 of the Code of Civil Procedure.

There have been two trials of the action. The first trial resulted in a judgment at the Special Term setting aside the contract on both grounds, and awarding Flannery $15,000 for his services. We reversed that judgment (McCoy v. Gas Engine & Power Co., 135 App. Div. 771 , 119 N. Y. Supp. 864 ), because the plaintiff had not demanded that the corporation bring the action, and had failed to allege any facts constituting an excuse for not making such demand.

[1] All parties have appealed from this judgment; but the defendant corporation asks in its brief, and asked upon the oral argument, that the judgment be affirmed. Manifestly so much of the judgment as dismisses the complaint upon the authority of our former decision must be affirmed.

[2] We are also of opinion that the learned Special Term was right in deciding that the contract of retainer violated section 74 of the Code of Civil Procedure. That section, as it existed at the time the contract was executed, prohibited an attorney or counsel from promising or giving, or procuring to be promised or given, “a valuable consideration to any person, as an inducement to placing, or in consideration of having placed, in his hands, or in the hands of another person, a demand of any kind, for the purpose of bringing an action thereon.” That section has since been amended so as to extend its inhibition to special proceedings. See section 274 of the Penal Law (Consol. Laws 1909, c. 40). It is undoubtedly true, as conceded by the parties to this action, that the promise contained in the last paragraph of the contract of retainer, whereby Flannery agreed “to pay all expenses of every kind whatsoever,” was the promise of a valuable consideration to the corporation as an inducement for the placing of the claim in his hands.

[3] The appellant Flannery contends, however, that his retainer did not violate the terms of former section 74 of the Code of Civil Procedure, because the prosecution of the corporation’s claim before the board of assessors was not the prosecution of an action, and because" the parties to the retainer did not contemplate the bringing of an action. It is true that the prosecution of the claim before the board of assessors was not the prosecution of an action. If the legal effect of the retainer was that Flannery was merely under obligation to prosecute that claim before the board of assessors, then we should reverse the judgment in so far as it holds his contract a violation of

[4] The language of the retainer was chosen by Flannery, and in case of ambiguity would, in accordance with well-known canons of construction, be construed most strongly against him. An examination of the agreement shows that the amount of the contingent fée to be paid was based entirely upon the amount of the damages recovered by the corporation, and not upon the amount awarded. Thus Flannery is to receive 25 per cent, of any award and' interest “recovered,” up to and including $50,000. If the award is more than $50,000 and less than $100,000, he is to receive “33% per cent, of the full amount recovered.” If the award and interest amount to $100,000 and less than $150,000, he is to receive “40 per cent, of the full amount recovered.” If the award amounts to $150,000 or over, he is to receive “one-half of the full amount recovered.” Thus in each instance the contract carefully distinguishes between the amount of the award that may be made and the amount of it that may be recovered, and bases the fee exclusively upon the amount of the recovery. It further provides that Flannery’s fee is not to be paid until the award is paid.

[5] The judgment appealed from, in addition to fixing the value of Flannery’s fees at $30,000, provides that the sum so fixed is to be a lien upon the award, and that Flannery shall, at the option of the defendant corporation, perform without additional compensation any future services necessary in the collection of the award. We are of opinion that the Supreme Court has no power to rescind a contract at the instance of the defendant corporation, and provide that Flannery, the other party to the contract, must perform additional services after such rescission.

The power of the court would seem to be exhausted with the rescission of the contract and the fixing of the value of the services, and it therefore follows that the judgment should be modified, by striking out the provision requiring the performance of future services on Flannery’s part, and by fixing the value of the services as heretofore performed, on the evidence adduced, at the sum of $30,000, and, as so modified, the judgment should be affirmed, without costs. All concur.