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Gray v. Joseph J. Brunetti Construction Co.

decided: April 24, 1959.


Author: Kalodner

Before BIGGS, Chief Judge and McLAUGHLIN and KALODNER, Circuit Judges.

KALODNER, Circuit Judge.

Defendant, Joseph J. Brunetti Construction Co., Inc., a New Jersey corporation, engaged in construction of apartment houses, appeals from a judgment rendered by the District Court of New Jersey in favor of plaintiff, Thomas Gray, Washington, D.C. attorney and resident of Virginia.

The judgment was in an action based on a written contract for legal services entered into by the parties which provided for payment of a fixed fee of $12,000, not in controversy, and a contingent fee of $13,000.

The case is one in federal court by reason of diversity. It was tried to a jury. At the conclusion of plaintiff's case both parties moved for a directed verdict. Defendant's motion was denied; decision on plaintiff's motion was reserved. At the conclusion of defense testimony, the Court withdrew the case from the jury on the ground that construction of the contract was for the Court. At the same time it stated that it would treat the parties' earlier motions as motions for judgment. Subsequently the Court held*fn1 that defendant was not entitled to a directed verdict but that plaintiff was entitled to a judgment for the contingent fee, reserving, however, the right of the defendant to introduce evidence to the Court, sitting in equity and without a jury, for the purpose of determining the reasonableness of the contingent fee arrangement.

Thereafter, defendant submitted proof as to the reasonableness of the $13,000 contingent fee, and, after consideration, the Court entered judgment for plaintiff for $7,500, holding that sum to be reasonable.*fn2

Defendant's appeal is based on these grounds: the District Court erred (1) in its construction of the contract; (2) in allowing plaintiff a $7,500 contingent fee and (3) in refusing to permit the jury to construe the contract and determine the issues.

These facts are undisputed:

Brunetti was engaged in the construction of apartment house projects which were financed by mortgages insured by the Federal Housing Administration ("F.H.A."), known as the "Title 608 program." Prior to May 27, 1955, the date of the retainer agreement here involved, F.H.A. launched investigations of its mortgage loans to builders and instituted proceedings against some of them to (1) "roll back" rents and/or procure refunds of past rental payments to tenants, (2) obtain refund of "windfall" profits, and (3) effect repayment of loans between parent and subsidiary building and operating companies. Defendant was aware of the action taken by F.H.A. with respect to other so-called 608 builders and consulted its local counsel, Walter Van Riper concerning its own situation Joseph J. Brunetti, president of defendant, and its sole stockholder, had testified before the Senate Banking and Currency Committee with respect to its operations under the 608 program. Defendant felt that it would be advantageous to engage Washington, D.C. counsel to assist Van Riper in an anticipated dispute with F.H.A. and sought the services of plaintiff, who had been employed as one of counsel by F.H.A. for some thirteen years during 1938 to 1946 and 1948 to 1953, and was at the time in private practice, specializing in housing law and F.H.A. matters. Plaintiff, in response to Brunetti's request, came to Newark, New Jersey in the latter part of April or early in May, 1955 and conferred with Mr. Brunetti, Monroe Bober, defendant's secretary, Van Riper and a Mr. Apfel, defendant's accountant. In mid-May, in response to Bober's summons, plaintiff came to Newark for a conference in Van Riper's office with those earlier mentioned and was at that time retained as "behind-the-scenes" Washington counsel for defendant. Subsequently plaintiff and Mr. Brunetti met and agreed upon the terms and scope of plaintiff's representation. Later, plaintiff and Bober drafted a letter dated May 27, 1955, memorializing the oral agreement, which was signed by plaintiff and Mr. Brunetti, in behalf of defendant, on May 31st.

Subsequently, Van Riper actively represented defendant in its dispute and negotiations with F.H.A. In accordance with the intentions of the parties, plaintiff remained in the background but throughout informed defendant and Van Riper, via telephone and letters, of developments with respect to activities of F.H.A. in 608 situations generally, and specifically advised them in connection with their negotiations with F.H.A. Conferences were held between defendant's representatives and plaintiff in his Washington office and in New Jersey. In September, 1955 plaintiff advised defendant with respect to demands made by F.H.A. that directors and officers of several of its subsidiaries resign to make way for F.H.A. appointees. In November, 1956 F.H.A. wrote defendant demanding, in settlement of its various claims, payment of $90,000 in reduction of mortgages of its subsidiaries. Indicative of the "behind-the-scenes" activity of plaintiff is the fact that, according to defendant, he informed it of the F.H.A. letter "a few days before that letter was mailed."*fn3 Later, in December, 1956, plaintiff advised defendant and Van Riper to make the settlement proposed by F.H.A. and "of certain other things which were more important in our making of a decision".*fn4 Defendant made the settlement and plaintiff then demanded payment of his $13,000 contingent fee. Defendant refused to pay and plaintiff brought suit.

The letter constituting the contract on which plaintiff's suit was based reads as follows:

"Joseph J. Brunetti Construction Co., Inc.

"95 Essex Street, Maywood, New Jersey

"May 27, 1955

"Mr. Thomas Gray

"1720 'Eye' Street, N.W.

"Washington 6, D.C.

"Dear Sir:

"This letter is written to confirm the oral understanding reached between yourself and the writer with respect to your professional services.

"You are to be retained by us to assist our counsel and ourselves in properly preparing and defending ourselves against any action of the Federal Housing Administration or its agents, or any agency of government acting in behalf of the Federal Housing Administration, in attempting to:

"A. Roll back rents and/or cause a refund of past rents to tenants.

"B. Cause a refunding of profits (FHA terminology 'windfalls').

"C. Cause loans between parent and subsidiary corporations to be repaid.

"D. Be successful in any other action, no matter what the allegation in accomplishing A, B, or C.

"It is understood that you will devote all the time required to assist both ourselves and our ...

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