Opinion
Rehearing Denied March 12, 1964.
For Opinion on Hearing, see 39 Cal.Rptr. 914, 394 P.2d 730.
Edward Sumner, Kenny, Morris & Ibanez and Robert W. Kenny, Los Angeles, for appellants.
Stanley Mosk, Atty. Gen., Richard S. L. Roddis and Arthur C. DeGoede, Deputy Attys. Gen., for respondent.
LILLIE, Justice.
This is another chapter in the seemingly endless litigation involving Pacific Mutual Life Insurance Company of California, described in several reported decisions as the 'old company.' It is an appeal from an order denying appellants any attorneys' fees for services assertedly contributing to the success of the appeal in McConnell v. Pacific Mutual Life Ins. Co., 205 Cal.App.2d 469, 24 Cal.Rptr. 5 (referred to hereinafter as the 'prior opinion'). It is conceded, indeed the trial court expressly found, that as a result of that decision the claimants concerned will receive interest in the approximate sum of $1,186,223 instead of $299,160--an increase of $887,063. Appellants not only contend that the order appealed from should be reversed, but they also ask this court to award counsel fees in a sum equal to a reasonable percentage of the above net gain now realizable by the 'known' claimants, some 3500 in number, to which group appellants belong.
The 'missing' or 'unknown' claimants (about 1300 in number) were represented by the state controller. As indicated in the next paragraph, their interest is very much smaller than that of the 'known' claimants.
The question of interest payments was, as the prior opinion points out, precipitated by the filing of a petition by the insurance commissioner, as liquidator, in which he requested the superior court for instructions. Shortly theretofor he had finally come into possession of funds needed for such payments (if found to be due) after certain procedures had been carried out which previously were given court approval. (Pacific Mut. Life Ins. Co. of California v. McConnell, 44 Cal.2d 715, 285 P.2d 636.) After reference to the history of the insolvency proceedings (see Caminetti v. The Pac. Mutual L. Ins. Co., 22 Cal.2d 344, 351, 139 P.2d 908; Caminetti v. Pacific Mut. Life Ins. Co., 22 Cal.2d 77, 136 P.2d 779, and Caminetti v. Pacific Mut. Life Inc. Co., 23 Cal.2d 94, 142 P.2d 741), the petition alleged the following facts (as summarized in the prior opinion): 'No payment has been made on any of the allowed claims [totaling $782,263.15] except the payment made with the letter of September 15, 1946. Of the 4,895 claimants so paid, 1,387 did not cash their checks [aggregating about $30,000.00] and have not been located. The commissioner now has funds which will probably be available to pay interest if interest is owed. However, no income taxes have been paid on the eight million dollars received for the stock. The commissioner has taken the position that no tax is due, but he cannot safely dispose of the funds until tax questions have been finally determined. Thus the commissioner desires that the question of interest be adjudicated, but that he not be required to The prior opinion then summarizes the subsequent events: 'The superior court issued an order to show cause, in response to which appearances were made by the State Controller, representing the 1,387 missing claimants, and attorneys representing a stockholders' protective committee and the old company. Two other attorneys representing stockholders appeared at the hearing and talked. No pleading was filed by anyone which controverted any of the allegations of the commissioner's petition. No evidence was offered on behalf of any party. After hearing the arguments of counsel the court made the order which is the subject of the present appeals. * * * The commissioner has appealed from this order for the purpose of obtaining an appellate court decision, but he maintains neutrality as to how the issues shall be decided. The old company, the controller, and two claimants, Neblett and Pearson, have taken separate appeals.' (205 Cal.App.2d p. 475, 24 Cal.Rptr. p. 9.)
Other background facts, understandably not mentioned in the prior opinion, are set forth in the trial court's findings in this proceeding: On various dates during October and November, 1960, separate notices of appeal were filed by the commissioner, by the controller, and by Neblett and Pearson (appellants herein). The commissioner and the controller each requested the inclusion in the record on appeal of the memoranda of law filed by each in the trial court. Neblett and Pearson knew of the above requests. On October 5, 1961, the commissioner filed in the appellate court a 'Statement and Waiver of Opening Brief' wherein it was declared that 'he remains a disinterested party' (adhering to a similar position taken below) and for that reason 'waives filing an Opening Brief but reserves the right to file a Reply Brief.' On October 6 (the next day) the opening brief of the controller was filed. Therein he declared himself 'an interested party herein, appearing as statutory custodian of escheatable and presumptively abandoned personal property and also on behalf of all unknown claimants to principal and interest payments.'
On October 21, after a hearing following notice to the commissioner, the controller and the old company's stockholders (none of which parties objected), Neblett and Pearson were given permission to augment the record upon the following representations, among others: Until informed that the commissioner was taking the position that he was a disinterested party, it had been assumed that an opening brief would be filed by the commissioner to protect the rights of all claimants affected by the order appealed from; in order that all claims be represented, 'it is now the intention of declarant [Robert W. Kenny] and Edward Sumner, as attorneys for William H. Neblett and Tyson A. Pearson, to file a joint appellants' brief on behalf of all claimants if this court grants an order augmenting the record.'
Thereafter the opening brief of Neblett and Pearson was filed. After stating that the controller's return had been on behalf 'of the missing claimants' and after reference to the 'disinterested party' status of the commissioner, the brief went on to say that it was being filed 'by the claimants Neblett and Pearson on behalf of all 'known' claimants.' In this connection, it was urged that a 'differentiation' existed between the 'known' and the 'unknown' claimants under the order appealed from. Thus, it was therein decreed that '[T]he fact that the Liquidator was unable to locate some 1,387 approved claimants or to make payment to them is the responsibility of such claimants, and they may not be allowed interest on such dividends during the period of delay for which they are responsible, however, they are entitled to interest upon the unpaid balance of their claim just as are the other approved claimants who were actually paid.' The brief accordingly asserts that '[S]ince the class of 'known' claimants represented by these appellants cannot be chargeable for any delay, they On January 17, 1962, the brief of the old company was filed. Among other things, it was therein urged that the propriety of controller's appearance on appeal as a 'party aggrieved' was questionable, citing Estate of Nepogodin, 134 Cal.App.2d 161, 285 P.2d 672. That case holds that even the possession of property by the state, with a possibility of escheat, does not make the state a 'party aggrieved' for the purpose of appeal.
Upon the filing of closing briefs by the controller and counsel for Neblett and Pearson, the matter was orally argued before Division Three of this court. A deputy attorney general, representing the commissioner, participated in the argument. Following the rendition of its decision by Division Three, the old company petitioned the Supreme Court for a hearing. Again the propriety of the controller's appearance on appeal was questioned; in contrast, however, the old company conceded that Neblett and Pearson were entitled to object to the ruling below with respect to their own individual claims 'and not as representatives of the entire class as was evidently accepted by the District Court of Appeal.' Thereafter answering briefs were filed by the controller and Neblett and Pearson to the old company's petition (for hearing). Such petition was denied without a dissenting vote. Two weeks later, the present proceeding was initiated.
The trial court's order in the present proceeding denying appellants any attorneys' fees was predicated upon certain findings of fact and conclusions of law. First, '[W]hen a statutory officer in charge of a fund, without advocacy, fairly and impartially presents to the Court the issues determinative of the proper participation in and disposition of the fund, a claimant who intervenes on the successful side is not entitled to an award of counsel fees from the fund'; from this it was concluded that '[T]he question is not one of discretion of the Court for as a matter of law a court is without power to award such intervener counsel fees.' Second, '[T]he participation of Petitioners [Neblett and Pearson] was not necessary to a full and proper presentation of the questions involved and the authorities applicable thereto.' Third, the standing of the controller to appeal was never raised until after the decision of the District Court of Appeal--the old company so contending in its petition for hearing by the Supreme Court. Fourth, the commissioner was neutral at all times--in this further connection, the trial court refused to adopt appellants' requested conclusion of law that, 'On appeal the Commissioner was the trustee of a dry trust with no further duty to perform except to deliver the trust property to the ultimate beneficiary,' and therefore (and also by reason of his express waiver) 'he had no standing to appeal as a party aggrieved.' Fifth, and again as to the commissioner, the inclusion of his trial memorandum of law in the clerk's transcript sufficed to bring the authorities therein cited and discussed to the attention of the reviewing court, even though he filed no brief on appeal. Sixth, even if appellants were entitled to counsel fees, the award could not be a percentage of the increase resulting to 'known' claimants from the successful appeal but only a lump sum not to exceed $7,500.00.
It is conceded that appellants' right to counsel fees is governed by the equitable rule 'which permits surcharging a common fund with the expenses of its protection or recovery, including counsel fees.' (Estate of Stauffer, 53 Cal.2d 124, 132, 346 P.2d 748, 752.) The above principle has been invoked in stockholders' derivative suits (In re Cal. Mutual Bldg. & Loan Assn. of San Jose, 68 Cal.App.2d 82, 155 P.2d 876) and by interveners in such suits. (Mann v. Superior Court of Los Angeles County, 53 Cal.App.2d 272, 127 P.2d 970.) It was also invoked in In re Pacific Coast Bldg.-Loan Assn. of Los Angeles, 15 Cal.2d 155, 99 P.2d 261, where two shareholders appeared 'by invitation of the court' after the Paramount Pictures, Inc. v. Sparling,
It is clear that the trial court grounded its order upon the facts and the law of the Pacific Coast case--indeed, certain of the key findings and conclusions of law are couched in the language of that decision. The question for determination, therefore, is whether the situation at bar is a substantially different one; if so, appellants' appearance was arguably necessary to establish in some measure the rights of themselves (and claimants in their class) and they are entitled to counsel fees. Preliminarily, the Pacific Coast case is no authority for an inexorable rule that the mere possession of funds by a statutory officer requires the disallowance of fees in litigation of this kind. It was there pointed out that the two shareholders intervened on the successful side; too, counsel for the public official impartially and adequately presented the legal issues to the trial court 'and the proceedings would have followed the same course if appellants had not appeared.' (15 Cal.2d 155, 159, 99 P.2d 261, 263.) In the present case, however, the claimants achieved only a limited success in the trial court. The subsequent appeal was vigorously contested by the adversary of the public official in the court below; thereafter, say appellants, they 'carried the burden' of that appeal since the statutory officer 'stood aside' (after his appeal was perfected) and limited his participation therein to a clerk's transcript and a brief oral argument. Respondent's reply to this latter assertion is that the clerk's transcript contained a statement of the facts and the law of sufficient adequacy to acquaint the court with all the issues. He further contends that the briefs filed by the controller supplied the advocacy, forbidden to him as a neutral party, which fully protected appellants' rights and those of all 'known claimants.'
We are not particularly impressed with appellants' argument that respondent commissioner did not remain completely neutral at all levels of the instant litigation; in that connection, the charge that his counsel at oral argument took an adversary position to that of the claimants is sufficiently answered by the statement in the prior opinion that commissioner 'maintains neutrality as to how the issues shall be decided.' (205 Cal.App.2d p. 475, 24 Cal.Rptr. p. 9.) We are While the appellate proceedings were commenced by the commissioner, we are confronted with the crucial question whether he also controlled the subsequent prosecution of that appeal in sufficient measure to defeat the claims of these appellants for an allowance of fees. Under the holding in the Pacific Coast case, supra, there must be a concurrence of these two factors: 'Appellants appeared by invitation of the court, but they did not commence nor control the proceeding.' (15 Cal.2d 155, 159, 99 P.2d 261, 263.) Appellants' position on the prior appeal is somewhat unique. Ordinarily, of course, an intervener takes a case entirely as he finds it; if, he comes into the case to join a plaintiff, he must recognize that the plaintiff has made himself liable to his counsel for legal services and has had to carry the brunt of all the expenses involved prior to such joinder. 'In a case of this character, as in any case, the plaintiff must be permitted through his counsel to dominate and control the suit to its conclusion, unfettered by the views of the interveners * * *. Of necessity some counsel in the case must determine these and other problems, and where there are several counsel some one must be the absolute master of the litigation. Hence counsel for an intervener may not participate in the presentation of the main case save as counsel for plaintiff may consent or the court otherwise order.' (Mann v. Superior Court of Los Angeles County, supra, 53 Cal.App.2d 272, 280-281, 127 P.2d 970, 974.) In the present case, respondent commissioner as a neutral party could not, and did not, become the 'absolute master of the litigation.' Counsel in complete mastery of appellate litigation do not, as was done by counsel for respondent commissioner, content themselves with the filing of a clerk's transcript, the effect of which is to leave to this court the burden of making an independent search of the record to uncover error. They do not (albeit impliedly) assign to another litigant, in this case the controller, the responsibility of filing printed briefs properly presenting the issues on appeal. In this latter connection, respondent argues that all the issues (presumably involving all the claimants) were fully covered in the controller's briefs. But the latter's opening brief was expressly limited to the 'unknown' claimants; and, as noted earlier, the claims of these unknown claimants represented only a very small percentage of the claims outstanding--as of 1946, $30,000 out of $782,263.
Parenthetically, this would hardly meet the requirement that the public official has 'adequately' presented the issues of fact and of law. (Paramount Pictures, Inc. v. Sparling, supra, 122 Cal.App.2d 221, 226-227, 264 P.2d 648;) 'Adequate' has been defined as 'fully competent' and 'fully sufficient.' (People v. Kiser, 112 Cal.App.2d Supp. 903, 905, 245 P.2d 1125.)
Measured by accepted definitions of the term 'control,' it appears to us that appellants here controlled the prior appellate litigation as much, if not more, than the other appellants on that appeal. 'Control' Nor does the record at bar disclose any diminution in the above measure of control at the time of oral argument which, in many cases, is still a vital segment of the appellate process. The typewritten transcription of those proceedings supports appellants' claim that their counsel carried the laboring oar not only in the content of their arguments but also in the time devoted thereto. Counsel for the commissioner, when asked by the court at the commencement of the proceedings, whether he wished to make a statement on behalf of his client, replied 'not at this time.' Mr. Kenny (one of counsel for appellants) then addressed the court: 'I would like to speak for 10 minutes and Mr. Keneko (counsel for the controller) for 10 minutes, then we'll reserve 10 minutes for rebuttal and Mr. Sumner (also for appellants) will speak at that time.' After Mr. Kenny had concluded his argument, Mr. Keneko addressed the court: 'As Mr. Kenny pointed out I was going to have approximately 10 minutes but since he has covered most of the points we were proposing to present I'll try to cut down the time.' After explaining the reason for the appearance of the controller, Mr. Keneko had this to say: 'Now, our position is then that the unknown claimants are in the same position really as the known claimants that Mr. Kenny and Mr. Sumner are representing and for this reason we feel that the points presented by Mr. Kenny and to be presented by Mr. Sumner are sufficient.' After some brief additional remarks by Mr. Keneko, there was a brief statement by counsel for the commissioner, following which counsel for the old company and, finally, Mr. Sumner argued the cause.
In the above posture of the case, appellants ask this question: 'With the Commissioner 'neutral,' the Controller limited in his representation, can it reasonably be said that the [known] claimants did not need the vigorous participation provided by these appellants?' Our answer is that it cannot be reasonably so said, and that the several factors already discussed (and now again to be mentioned) clearly distinguish appellants' participation as intervenors from the rule of the Pacific Coast case. In that case there was complete success (in the trial court), while here there was only limited success; in that case there was an Having concluded that on the case as a whole the attorneys' efforts substantially benefited the class of claimants counsel undertook to represent, the reasonable value of such services should be determined on the same basis. Traditionally, of course, various factors must be considered in evaluating the amount of a reasonable fee: The nature of the litigation, its complexity, the nature and extent of the contest, the amount involved, the skill required, the professional standing of the attorneys (Dietrich v. Dietrich, 41 Cal.2d 497, 506, 261 P.2d 269) and the success or failure of their efforts. (6 Cal.Jur.2d 379, 380.) In the present matter, the amount involved is substantial (the net increase to the class involved being approximately $800,000), and the standing and ability of counsel are high. But the legal problems were not unduly complex, and counsel for appellants must concede that attorneys for the commissioner and the controller contributed must helpful service. We may not overlook the rendition of such assistance in determining the fee to be awarded. (United States v. Equitable Trust Co. of New York, 283 U.S. 738, 746, 51 S.Ct. 639, 642, 75 L.Ed. 1379.) While several non-California cases, cited by appellants, support their claim to a much higher fee (being a percentage in terms of the ratio of counsel fees to recovery) than that mentioned in the findings here, they are distinguishable either because of the length of the litigation or the complexity of the issues, including factual issues. There was, of course, no dispute as to the facts when appellants intervened in the present proceeding. We agree with respondent that liquidation proceedings by public officials have been given statutory authorization to the end that reduction in the assets of the estate by high expenses of administration be held to a minimum. The above policy consideration was given recognition in the Pacific Coast case: 'It does not take much imagination to conceive of a fund which would be properly administered by a statutory liquidator, and distributed among numerous conflicting claimants, but which could be wholly dissipated if each rival group treated the distribution as an adversary proceeding, and all produced private counsel to assert their priorities.' (15 Cal.2d 155, 160, 99 P.2d 261, 263.)
It has been suggested by appellants, in the event of a reversal, that this court fix the fee of their attorneys because, among other things, the present proceeding is concerned primarily with services on appeal. That we have authority so to do seems without question (Kirk v. Culley, 202 Cal. 501, 510, 261 P. 994); more recently, however, it has been deemed 'better practice' to remand the matter for determination in the trial court when there has been a 'misapprehension' as to the 'extent of the services' which were rendered (Arenson v. National Auto & Cas. Ins. Co., 48 Cal.2d 528, 540, 310 P.2d 961), and this is such a case. The trial court found, as stated earlier, that '[I]f, under the facts herein found, and the law applicable thereto, Petitioners are entitled to a reasonable attorneys' fee, and giving effect to the element of contingency involved, the reasonable value of the services of Petitioner did not exceed the sum of $7,500.00.' For reasons already discussed, we are in disagreement with the trial court as to certain of the facts found, more specifically, the nature and extent of the services rendered by counsel and the substantial benefit thereby conferred upon the class of claimants they undertook to represent. Expressly considering himself bound by 'the facts [therein] found,' and laboring under a misapprehension as to the applicable law, the Berry v. Chaplin,
The attempted appeal from the non-appealable minute order is dismissed; the subsequent formal order is reversed and the cause remanded for further proceedings consistent with the views herein expressed.
WOOD, P.J., and FOURT, J., concur.