## Facts

- Raul Gutierrez retained attorney Phil Saenz on a contingent-fee agreement for a serious personal-injury claim.
- Saenz, having limited experience, orally associated the two-lawyer firm Cazares & Tosdal as co-counsel in exchange for one-half of Saenz’s contingent fee.
- The arrangement was premised on Roy Cazares providing the firm’s substantive legal services; Saenz maintained client contact; Thomas Tosdal performed little or no work.
- After about two and a half years, the Cazares & Tosdal partnership dissolved but treated the Gutierrez matter as a partnership asset.
- Cazares was appointed a municipal court judge, making him legally unable to continue practicing law or working on the case.
- Tosdal offered to take over, but Saenz declined and instead retained other counsel and a research attorney to complete the matter.
- Saenz later settled the case for about $1.1 million, generating a contingent fee of roughly $366,000, and paid substitute counsel and research assistance from that fee.
- After settlement, Saenz offered Cazares a payment for the prior work; Cazares and Tosdal demanded enforcement of the original 50/50 fee split and sued for breach.
- A referee awarded Cazares and Tosdal one-half of Saenz’s contingent fee; Saenz appealed.

## Issues

1. Whether the association agreement obligated Saenz to pay Cazares & Tosdal one-half of the contingent fee despite Cazares’s later legal incapacity to continue performance.
2. Whether Cazares’s judicial appointment discharged the association agreement under impossibility/incapacity or frustration of purpose principles.
3. If the agreement was discharged, whether and how Cazares and Tosdal could recover for services already rendered (quantum meruit).

## Decision

- The court reversed the award enforcing the 50/50 contingent-fee split.
- The court held the association agreement was discharged when Cazares became legally incapable of performing, because the parties contemplated that Cazares would perform substantial services.
- The court held Cazares and Tosdal were not entitled to one-half of the contingent fee under the contract terms.
- The court remanded for determination of quantum meruit compensation for the reasonable value of services performed before Cazares’s incapacity, prorated by reference to the original contract price.

## Legal Principles

- When a co-counsel association is materially based on the personal services of a specific attorney, that attorney’s subsequent legal incapacity may discharge the parties’ contractual obligations.
- Discharge for incapacity/frustration prevents enforcement of the original fee-split as though full performance occurred.
- After discharge, the firm/attorney that performed before incapacity may recover in quantum meruit for the reasonable value of services actually rendered, measured on a prorated basis against the contemplated contingent compensation.
- A lawyer who associated counsel for the personal participation of a particular attorney is not required to accept substitution by another firm member where the agreement and course of dealing show the personal-services premise.

## Conclusion

The court treated the fee-splitting association as a personal-services contract dependent on Cazares’s continued participation; his judicial appointment discharged the agreement, barring enforcement of the 50/50 contingent-fee division and limiting recovery to prorated quantum meruit for pre-incapacity work.


Cazares v. Saenz, 208 Cal. App. 3d 279, 256 Cal. Rptr. 209 (Ct. App. 1989)