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Palmer v. Taylor

California Court of Appeals, Sixth District
Aug 6, 2009
No. H032957 (Cal. Ct. App. Aug. 6, 2009)

Opinion


WILLIAM PALMER, Plaintiff and Respondent, v. CHRIS LUSBY TAYLOR, Defendant and Appellant. H032957 California Court of Appeal, Sixth District August 6, 2009

NOT TO BE PUBLISHED

Santa Clara County Super. Ct. No. CV004984

Mihara, J.

Plaintiff William Palmer entered into a contingency fee agreement with defendant Chris Lusby Taylor under which Palmer agreed to serve as Taylor’s attorney in an action against Intel Corporation (Intel) seeking the return of Taylor’s Intel stock that Intel had transferred to the State of California (the State) as unclaimed property. Taylor and Palmer agreed that Palmer would be compensated for his services with a contingency fee of 35 percent. Palmer filed an action against Intel on Taylor’s behalf. Palmer thereafter negotiated a settlement between Taylor and Intel under which Taylor agreed to assign to Intel certain accounts held by the State in Taylor’s name, and Intel agreed to make two separate deliveries of Intel restricted stock to Taylor. After Intel made the first delivery of restricted stock to Taylor, Taylor transferred to Palmer unrestricted Intel stock equivalent to 35 percent of this first delivery. However, after Intel made the second delivery of restricted stock to Taylor, Taylor refused to compensate Palmer any further.

Palmer filed this action against Taylor to recover his fees. Originally, Palmer’s action alleged breach of contract, but Taylor voided the contingency fee agreement under Business and Professions Code section 6147 due to the absence of certain recitals in the fee agreement. Palmer’s action thereafter proceeded on a single cause of action for quantum meruit. The action was tried to the court. The court found that Palmer was entitled to recover an additional $55,000 from Taylor. Taylor appeals and claims that the trial court’s decision conflicts with Alderman v. Hamilton (1988) 205 Cal.App.3d 1033 (Alderman). We find Alderman distinguishable and affirm the trial court’s judgment.

I. Factual Background

Taylor was employed by Intel from 1977 to 1983, and he acquired some Intel stock through Intel’s employee stock participation plan (SPP). In 1991, Intel transferred Taylor’s SPP stock, which amounted to 1,632 shares, to the State as unclaimed property. In 1995, Taylor learned that his SPP Intel stock had been transferred to the State as unclaimed property and sold by the State. Taylor believed that Intel was liable to him for the difference between the value of the stock at the time of the transfer and the then-current value of the stock. He did not claim the funds held by the State from its sale of his Intel stock because he thought that doing so might prejudice his claim against Intel. Taylor was also concerned that claiming the funds might have adverse capital gains tax consequences.

Taylor asked Palmer to pursue his claim against Intel. Taylor told Palmer that he wanted to “reverse the process” and “get his stock back from Intel.” Taylor asked Palmer to “compel Intel to go get the cash from California and give him his stock back.” Taylor testified that he never asked Palmer to recoup his funds held by the State. In late 2000, Palmer and Taylor executed a contingency fee agreement. This agreement provided that the “legal services to be provided by Attorney to Client are as follows: Representation of Client with respect to enforcement, litigation, and collection of payments and shares of stock allegedly owed by Intel Corporation.” The agreement provided for attorney’s fees. “The amount Attorney will receive for attorney’s fees under this Agreement will be thirty-five percent (35%).... [¶] If payment of all or any part of the amount to be received is deferred (such as in the case of an annuity, structured settlement, or periodic payment), the ‘total amount received,’ for purposes of calculating the attorney’s fees, will be the initial lump-sum payment plus the present value, as of the time of the settlement... of the payments to be received thereafter.”

Palmer filed an action against Intel on Taylor’s behalf in March 2001. In July 2001, Palmer learned from Taylor that Taylor had known for more than five years that his Intel stock had been transferred to the State. Palmer immediately realized that Intel was very likely to prevail in Taylor’s action against it due to the running of the statute of limitations. Had Palmer been aware of this fact at the outset, he might not have undertaken to represent Taylor. In late 2001, Palmer’s investigator located a second State account in which the State was holding an additional $90,000 in funds for Taylor from the State’s sale of Taylor’s Intel SPP stock. This account was difficult to find because Taylor’s name had been misspelled.

In January 2002, Taylor and Intel entered into a confidential settlement agreement negotiated by Palmer. Intel agreed to make two deliveries of Intel restricted shares to Taylor. The number of restricted shares in the first delivery would be determined by dividing $315,000 by the value of Intel shares on a particular date. The number of restricted shares in the second delivery would be determined by dividing the amount of money that Intel received from the two accounts held by the State in Taylor’s name (which Taylor assigned to Intel) by the value of Intel shares on a particular date. Taylor agreed to dismiss his action against Intel with prejudice.

Intel insisted that Taylor transfer the funds in the State accounts to Intel because Intel viewed retention of the funds in the accounts and acquisition of the stock as a “double recovery.” Taylor understood that the settlement required him to assign his interest in the State accounts to Intel so that Intel could convert those funds into Intel restricted stock. Taylor was disappointed in the settlement agreement, but he believed that it was “better than nothing.” Taylor told Palmer that he was not concerned about the restricted nature of the stock because he intended to “hold onto the stock long term.”

In February 2002, pursuant to the stipulation of Taylor and Intel, the court dismissed the Taylor/Intel action and ordered the State to disburse the approximately $380,000 it held from the sale of Taylor’s Intel stock to Intel. Intel made the first delivery of Intel restricted shares to Taylor in March 2002. This delivery was 9,093 restricted shares. Palmer notified Taylor that his 35 percent contingency fee for this portion was 3,182 shares, and Taylor transferred that number of unrestricted Intel shares to Palmer. These unrestricted shares were worth $110,250 at that time. In May 2002, Intel made the second delivery of Intel restricted shares to Taylor. This second delivery was 10,902 restricted shares.

The restriction on the shares precluded Taylor from selling or otherwise disposing of the stock for a one-year period. Taylor’s expert testified at trial that restricted shares that cannot be transferred for one year are worth 35 percent less than unrestricted shares.

Palmer believed that he was “being thoughtful” to Taylor by accepting stock rather than cash.

Palmer wanted his contingency fee in cash for the second delivery of stock. Taylor refused to compensate Palmer at all for the second delivery of Intel restricted shares. Taylor asserted that he had never intended to pay anything to Palmer for the second delivery of Intel shares. He believed that, because these shares were acquired with funds from the State accounts, they were outside the scope of the fee agreement. Taylor’s position was that he owed Palmer a contingency fee on only the difference between the value of the Intel stock he received and the value of the State accounts. The market price of Intel shares dropped by half during the one year that the restricted shares were unsaleable.

II. Procedural Background

In September 2003, Palmer filed an action against Taylor alleging breach of contract and numerous other causes of action. Taylor filed a demurrer, which was sustained with leave to amend. Palmer amended the complaint in June 2004. Taylor filed an answer in August 2004. In December 2004, Taylor moved for judgment on the pleadings based in part on his claim that the contingency fee agreement was void for failure to comply with Business and Professions Code section 6147. His motion was granted, but Palmer was granted leave to amend.

Business and Professions Code section 6147 provides: “Failure to comply with any provision of this section renders the agreement voidable at the option of the plaintiff, and the attorney shall thereupon be entitled to collect a reasonable fee.” (Bus. & Prof. Code, § 6147, subd. (b).)

In January 2005, Palmer filed a second amended complaint alleging all of the original causes of action plus a cause of action for quantum meruit. The quantum meruit cause of action alleged that Palmer was entitled to a reasonable fee if the contingency fee agreement was found to be defective or voidable. Palmer alleged that a reasonable fee would be $800,000.

Taylor again demurred, and his demurrer was primarily sustained with leave to amend. In May 2005, Palmer filed a third amended complaint. In August 2005, Taylor’s demurrer to the third amended complaint was primarily sustained with leave to amend, but overruled as to the quantum meruit cause of action. In September 2005, Palmer filed a fourth amended complaint. Taylor’s demurrer was primarily sustained with leave to amend, except that it was overruled as to the quantum meruit cause of action. Palmer apparently chose not to amend and proceeded solely on the quantum meruit cause of action. Taylor filed an answer in February 2006. In February 2007, the parties’ cross-motions for summary judgment were denied. The case proceeded to a court trial.

Palmer testified at trial that the Taylor/Intel action was a complex action that required the high level of skill that Palmer possessed. Palmer asserted that he obtained a successful result for Taylor in a weak case against heavy odds. He also made valiant attempts to settle the action short of litigation and ensured that the final settlement preserved Taylor’s rights against the State, which Palmer separately litigated in federal court under a separate fee agreement. Palmer valued his services to Taylor at $257,705 and credited the $110,250 value of the Intel shares that he had received against this amount. Thus, he sought to recover $147,455 on his quantum meruit cause of action.

Palmer testified at trial that, at $400 per hour, the 839 hours he expended on Taylor’s action against Intel were worth $358,440. However, Palmer admitted that he had generally charged $350 per hour at that time.

On cross-examination, this colloquy occurred. “Q [by Taylor’s trial counsel] Now, if Mr. Lusby Taylor wanted to keep his funds with the State, Intel in your understanding would have merely taken its own money, 315, bought the equivalent shares on a date certain and transferred those over; correct? [¶] A [by Palmer] Correct.” However, Palmer also testified: “If he wanted his shares back from Intel, he had a choice. He could go claim the money, in which [case] there would be no new shares, or he could settle the lawsuit and get the shares.”

At the close of Palmer’s case, Taylor sought nonsuit on the ground that, under Alderman, the fee agreement did not extend to the funds held by the State, so Palmer was not entitled to recover fees based on the conversion of those funds into Intel stock. Taylor also contended that he had not benefitted from Palmer’s work regarding the State funds. The court denied the nonsuit motion.

In December 2007, the trial court issued a proposed statement of decision. The court noted that the “measure of recovery” in a quantum meruit action is “the reasonable value of the services rendered provided that they are of direct benefit to the defendant.” Palmer was also required to prove that Taylor “accept[ed] and retain[ed] the benefit with full appreciation of the facts, under circumstances making it inequitable for him to retain the benefit without payment of its reasonable value.” The court accepted Taylor’s contention that he had only benefitted from the first stock delivery, and that Palmer had failed to adequately explain to Taylor the consequences of the settlement. Nevertheless, since Taylor had received a benefit from the first delivery of stock, Palmer was entitled to a reasonable fee for securing that benefit. The court accepted that Palmer had expended 736.3 hours at $350 per hour, but it concluded that this would result in an excessive fee. The court determined that a reasonable fee was $55,000 more than the amount that Taylor had already compensated Palmer. Taylor filed objections to the proposed statement of decision. The trial court thereafter issued a statement of decision that was essentially identical to its proposed statement of decision. In March 2008, the court entered judgment for Palmer in the amount of $55,000, plus costs. Taylor filed a timely notice of appeal.

III. Analysis

Taylor’s sole appellate contention is that the trial court “misapplied” Alderman. He claims that Alderman “stands for the proposition that clients have an ‘absolute right’ to affirm, and then later void, at any time, an attorney fee agreement voidable by the client under Section 6147 regardless of whether all legal services are specified in the Fee Agreement.”

In Alderman, the attorney entered into a contingency fee agreement with the clients to represent them in a “ ‘possible defense of will contest by distant relatives and/or challenge to joint tenancy deed.’ ” (Alderman, supra, 205 Cal.App.3d at p. 1036.) The fee agreement violated Business and Professions Code section 6147. The attorney settled the will contest. No litigation was ever initiated regarding the joint tenancy deed, and the attorney spent less than an hour addressing that issue. The property was sold without incident. The clients agreed to compensate the attorney under the fee agreement for his work on the will contest, but they resisted his request for $27,750 in fees on the joint tenancy deed issue. (Alderman, at p. 1036.) The trial court found that the attorney was not entitled to any fees on the joint tenancy deed issue. (Alderman, at p. 1035.)

On appeal, the Court of Appeal found that the clients “had an absolute right to void the contract before or after services were performed. [¶] Although the [clients] waived their right to void the entire contract by agreeing to pay the contingency fee relating to the will contest, the [clients] were free to and did exercise their absolute right to void the contract provision regarding the joint tenancy property. The [clients] exercised this right when they denied that the contract was enforceable and refused to pay any moneys to [the attorney] after the sale of the real property.” (Alderman, supra, 205 Cal.App.3d at p. 1038.)

Taylor maintains that the trial court erroneously “refus[ed] to apply the Alderman conclusion that a client has the right to void a fee agreement as to one set of legal services (the recovery of funds from Intel via the first stock transfer), but affirm it as to another set of legal services (recovery of State funds via the second stock transfer).” He contends that these were “two distinct sets of legal services. Palmer provided two different services to Lusby Taylor: 1) the pursuit of claims against Intel for its wrongful transfer of stock to the State; and 2) the return of the funds held by the State after the transfer of Lusby Taylor’s stock from Intel.” Since, in his view, the trial court found that this second set of services did not provide a basis for quantum meruit fees, Taylor contends that his payment of the contingency fee on the first set of services absolved him of any further liability.

The record provides no support for Taylor’s claim that Palmer was engaged to provide “two distinct sets of legal services.” The trial court found that here, unlike in Alderman, the fee agreement did not contemplate two separate sets of legal services. The record supports the trial court’s finding in this regard. Palmer agreed to provide and provided a single set of legal services aimed at the solitary goal of compelling Intel to provide to Taylor the stock that Intel had transferred to the State. Palmer’s legal services involved initiating litigation against Intel and negotiating a settlement agreement with Intel. This settlement agreement was the solitary remedy that Palmer achieved for Taylor, and it required Taylor to assign to Intel the State funds in order to recover any stock from Intel. Nothing in the record provides the slightest basis for parsing out services that related to Intel’s first delivery of stock to Taylor from those services related to Intel’s second delivery of stock. Just a single set of services was provided, directed at a single goal, and achieving a single remedy.

The fact that Palmer provided a single set of services to Taylor readily distinguishes this case from Alderman. In Alderman, the attorney provided two distinct sets of services, and it was undisputed that the distinct services relating to the joint property deed amounted to less than an hour of the attorney’s time. Here, Palmer provided a single set of services, and the two separate deliveries of stock by Intel could not be individually attributed to distinctive services provided by Palmer to Taylor. Consequently, this is not a case in which the client could selectively void the fee agreement, thereby picking and choosing which services the client wished to compensate by paying a contingency fee under the fee agreement, and which services the client wished to compensate with a “reasonable fee.” Business and Professions Code section 6147 contains no language suggesting that a contingency fee agreement may be selectively voided in this manner.

Taylor claims that Alderman should not be distinguished simply because the fee agreement in Alderman specified two separate sets of legal services. However, the specific language of the fee agreement is not the ground upon which we distinguish Alderman. Here, regardless of the language in the fee agreement, it is indisputable that Palmer simply was not engaged to provide, and did not provide, two separate sets of services, but a single set of services.

As Taylor presents no other challenge to the trial court’s decision, he has failed to establish any basis for reversing the trial court’s decision.

IV. Disposition

The judgment is affirmed.

WE CONCUR: Premo, Acting P. J., Elia, J.


Summaries of

Palmer v. Taylor

California Court of Appeals, Sixth District
Aug 6, 2009
No. H032957 (Cal. Ct. App. Aug. 6, 2009)
Case details for

Palmer v. Taylor

Case Details

Full title:WILLIAM PALMER, Plaintiff and Respondent, v. CHRIS LUSBY TAYLOR, Defendant…

Court:California Court of Appeals, Sixth District

Date published: Aug 6, 2009

Citations

No. H032957 (Cal. Ct. App. Aug. 6, 2009)