COLLEY v. SAPP et al.

COLLEY v. SAPP et al.
1914 OK 220
142 P. 1193
44 Okla. 16
Case Number: 3040
Decided: 05/12/1914
Supreme Court of Oklahoma

COLLEY
v.
SAPP et al.

Syllabus

¶0 Action by Edward Sapp and Hiram W. Curry against William E. Colley. Judgment for plaintiffs, and defendant brings error. Reversed and remanded.
The court considered on rehearing its decision to reverse the judgment of the District Court of Tulsa (Oklahoma), which entered judgment in favor of plaintiff attorneys in an action against defendant client for services rendered.
The client hired the attorney to file a derivative action in federal court on behalf of a corporation in which the client held certain stock. The result of the action was the cancellation of certain unauthorized liens, but there was no monetary recovery. The federal granted the client certain attorney fees and the attorneys filed an action seeking the balance of fees due after deducting such credit along with a certain sum paid by the client at the commencement of the action. Judgment entered in favor of the attorneys and the client sought review. The judgment was reversed and the court remanded the matter. On rehearing, the court denied the attorneys' petition, holding that there was a presumption in favor of the order as entered by the federal court and that the federal court had the authority to enter the order for fees. The court reasoned that while the attorneys' representation was successful, it did not result in the bringing of any fund into court or the recovery of property subject to distribution. The court concluded that the attorneys' representation allowed compensation for the full extent of services that were beneficial to the corporation. The court denied the attorney's petition and ordered that its original order reversing and remanding the matter would stand.
The circumstances to be considered in determining the compensation to be recovered by an attorney are the amount and character of the services rendered, the labor, time, and trouble involved, the character and importance of the litigation in which the services were rendered, the amount of money or the value of the property to be affected, the professional skill and experience called for, the character and standing in their profession of the attorneys. The result secured by the services of the attorneys may be considered as an important element in determining their value.
Wherever a corporation itself is directly injured, as where corporate property or franchises have been taken or wrongfully dealt with and the action is to undo fraud and breaches of trust already committed and restore to the corporation assets thereby wasted, so that the corporation is primarily interested and the right of action is directly in it, a stockholder, who has properly been permitted in such case to bring an action, which the corporation ought to have brought, for the direct and immediate benefit of the corporation itself, and not of such stockholder, is entitled to reimbursement out of corporate assets for all his proper expenses, including reasonable attorneys' fees in such of his efforts as resulted in benefits to the corporation.

On Rehearing September 1, 1914. Second Rehearing Denied September 22, 1914.

Error from District Court, Tulsa County; L. M. Poe, Judge.

THACKER, C.

¶1 We think still that the language of plaintiffs' petition, as quoted in the original opinion, shows that this is an action for a balance after allowing defendant a credit of just what the federal court allowed the plaintiffs plus $ 500 paid the plaintiffs by the defendant about the time of the commencement of the action in that court. We are unable to construe plaintiffs' petition otherwise than as, by implication at least, admitting that defendant is entitled to such credit allowance according and subject to the terms of the order of the federal court making the same. We refer to the language of the petition, quoted in our original opinion as carrying this implication, as in effect admitting the existence and validity of the order and that plaintiffs are accepting beneficiaries.

¶2 In the petition for rehearing, it is stated:

"As appears from the evidence in this case, much of the efforts of Curry and Sapp on behalf of the New York Zinc Company, while successful, did not result in the bringing of any fund into court nor the recovery of property, but the cancellation, merely, of unauthorized liens. The federal court, therefore, in making the allowance, could not make any allowance and did not make any allowance for services beneficial to the New York Zinc Company that did not result in recovery of property or the bringing of a fund into court for distribution, but these services were performed and Colley had agreed to pay for them. It is clear, therefore, that the measure of their recovery against Colley is not determined by the measure of their recovery Colley was entitled to as against the New York Zinc Company for benefits conferred by the employment of counsel."

¶3 We deem it unnecessary to determine whether the cancellation of a lien, a judgment, and other claims by the action in the federal court, in that case, operated as a "recovery of property" within the rule to which such question relates; but the order imports the existence of facts authorizing the court to make the same, especially as against the accepting beneficiaries.

¶4 The statement that the federal court "did not make any allowance for services beneficial to the New York Zinc Company that did not result in the recovery of property or the bringing of a fund into court for distribution," and that "the measure of the recovery Colley was entitled to as against the New York Zinc Company for benefits conferred by the employment of counsel" was not determinable by that court, is certainly not warranted by the terms of the order. The further statement that the federal court could not make such allowance does not seem material, if we are correct in construing plaintiffs' petition as demanding only a balance after in effect admitting such allowance according to its terms; but we are unable to agree to this statement. It should be borne in mind that the New York Zinc Company, against which the order was made and which was a party defendant in that action, is not complaining of the order, and, for aught we know, may have assented to it. The plaintiffs, who upon the trial of the present case and since that time have denied that they are bound by the terms of the order as we have construed the same, asked the federal court in their own right for, and are accepting beneficiaries of, that order, the defendant being the only other beneficiary. The plaintiffs do not appear to have questioned the order, or the power of the federal court to make same, in that court or in that case. The power of the federal court to make the order in question, if the facts warrant, is, we assume, beyond question. None of the parties to or attorneys in the federal court case appear to have there questioned either the power of the court to make the order or its rightfulness in any respect material to this case; and we do not think plaintiffs can be heard to question the same here.

¶5 Assuming, in deference to plaintiffs' contention in this respect and merely for the purpose of discussing the same, that it is material to inquire whether the federal court might properly have made the order in question under the facts in that case, so as to be in full of all services beneficial to the New York Zinc Company, we come now to that question. In support of their contention that the federal court could not and did not "make any allowance beneficial to the New York Zinc Company that did not result in recovery of property or the bringing of a fund into court for distribution," the plaintiffs have directed our attention to and we have examined the following cases: Forrester v. Boston & M. Consol. Copper & Silver Min. Co., 29 Mont. 397,

¶6 In Forrester v. Boston & M. Consol. Copper & Silver Min. Co., supra, it is said:

"The authorities are unanimous in holding that the plaintiffs are entitled to recover a reasonable attorneys' fee, and for the purpose of determining the amount of such fee the following rule has been laid down: 'The circumstances to be considered in determining the compensation to be recovered are the amount and character of the services rendered, the labor, time, and trouble involved, the character and importance of the litigation in which the services were rendered, the amount of money or the value of the property to be affected, the professional skill and experience called for, the character and standing in their profession of the attorneys. * * * The result secured by the services of the attorneys may be considered as an important element in determining their value.' 3 Enc. Law, 4-20; 4 Cyc. 994."

¶7 One of the best considered of the above-cited cases, one upon which the plaintiffs especially rely, is that of Alexander v. Atlanta & W. P. R. Co., supra. We do not think that case sustains their contention. While it is true that in that case it is stated that after an examination of numerous cases the court had found none in which, in the absence of statute and when no property has been brought under the control of the court and no fund has been brought into court for distribution, such fees have been allowed, we think it nevertheless appears from that case that the reason of this rule lies alone in the following language used by that court:

"The court has nothing within its grasp to dispose of which furnishes it the opportunity and imposes upon it the duty of recognizing and giving effect to substantial equities and existing rights."

¶8 It thus appears that the awarding of such fees against the corporation, for the benefit of which a stockholder has sued, is denied because the court has no appropriate means and therefore no duty of enforcing payment of same, and not because the stockholder holder is not otherwise rightfully entitled to be reimbursed or compensated for his expenses, including attorney's fees. We think that case clearly shows that wherever the corporation itself is directly injured, as where corporate property or franchises have been taken or wrongfully dealt with and the action is to undo fraud and breaches of trust already committed and restore to the corporation assets thereby wasted, so that the corporation is primarily interested and the right of action is directly in it, a stockholder, who has properly been permitted in such case to bring an action, which the corporation ought to have brought, for the direct and immediate benefit of the corporation itself, and not of such stockholder, is entitled to reimbursement out of corporate assets for all his proper expenses, including reasonable attorneys' fees in such of his efforts as resulted in benefits to the corporation. In other words, we think that case shows that the right to such allowances as attorneys' fees arises out of the fact that both the suing stockholder and his attorney are regarded as representing the corporation itself in such cases. The fact that their efforts were successful is material and necessary to show that they may properly be so regarded as representing the corporation. The fact that there are funds in hand or property within control of the court is only important as giving the court the opportunity and imposing upon it the duty of recognizing and giving effect to the rights and equities arising out of the expenditures of the stockholder and the services of his attorney in such a case, and is in no sense a basis of the right to reimbursement or compensation or the measure of the value of the same.

¶9 The presumption must be in favor of the order as made by the federal court. We are unable to say there was absence of any essential to the right of any beneficiary to this order or the power of the court to make the same.

¶10 For the reasons stated, we are of opinion that the petition should be denied, and that there should be adherence to our original opinion.

¶11 By the Court: It is so ordered.