Beagles v. Robertson

115 S.W. 1042, 135 Mo. App. 306, 1909 Mo. App. LEXIS 606

Opinion

GOODE, J.

(after stating the facts). — We have stated fully the substance of the pleadings in this case because, as it went off on a demurrer to plaintiff’s evidence, in order to determine whether or not a prima facie case was established on the issues of fact between the parties, it is essential to know on what facts issues were joined and what were either admitted or stated alike by both parties. Both alleged the money in controversy came into defendant’s hands in his capacity of attorney for plaintiff in certain litigation. The petition charges a breach of defendant’s duty as attorney, in that he compromised the litigation without the knowledge or authority of plaintiff and caused a decree to be entered against plaintiff’s interest and right. It further states that as part of the settlement, defendant received a check for fl,250 for plaintiff, on ■which defendant collected' the money and retained it, though the same rightfully belonged to plaintiff. The petition may be regarded as denying defendant’s right to retain the money for two reasons; because it was paid to him for plaintiff and in equity and good conscience, belongs to the latter; and because, further, whatever lien on the money for his fees or right to re-' tain the whole in payment of his fees, defendant otherwise might have possessed, does not exist because of his breach of duty as attorney; in other words, his failure to comply with his implied contract with plaintiff to attend faithfully to the latter’s interest. The contract of employment between the parties was not disclosed in the petition, but was copied in the answer, and the effect of the answer is that under its terms defendant was entitled to retain the sum in controversy for his compensation, not only in the case referred to in the petition against Locke and Atkinson, but also in two other cases mentioned in the contract. As to the compromise of the Locke and Atkinson case, which the petition charges was done without authority from plaintiff, the answer pleads both that plaintiff knew of and consented to the compromise at the time it was made, and had received certain proceeds from it since, to-wit: two annuities. That is to say, the answer pleads both original authority to defendant to enter into the compromise and ratification of it after it was made. Facts are stated in the answer going to show the value of what plaintiff received under the compromise settlement amounted to $5,873.40, and that hence the $1,-250 retained by defendant was less than one-fourth of the former sum and within the amount the contract of employment authorized him to retain. Many allegations of an abusive character are made against defendant in the reply; but as far as his right to enter into the compromise or settlement is concerned, these aver-ments do not go beyond those of the petition. The replication, though it states the details more fully than does the petition, like the latter pleading, charges the compromise was made without authority from plaintiff and in fraud of his rights. As to the contract between plaintiff and defendant employing the latter as attorney, the reply states facts intended to nullify it; perhaps on the ground that its execution by plaintiff was induced by duress on the part of defendant, and certainly on the ground that it was obtained by. fraud, and abuse of the confidential relationship of attorney and client. The replication also asserts said contract was void because it prohibited plaintiff from settling the litigation if he desired, without the consent of Robertson. Thus, it will be seen defendant founds his claim of right to retain the money in his hands as a fee, on the contract between him and plaintiff, and plaintiff attacks this right on the ground that the contract was procured (a) by duress, (b) by fraud, (c) that it was void as against public policy, and (e) that it was breached by defendant in compromising the suit against Atkinson and Locke without authority from plaintiff and in fraud of plaintiffs rights. As to the other cases besides the one against Atkinson and Locke, the replication says plaintiff had not earned over twenty-five dollars in them. Hence the conclusion to be drawn from the entire replication is this: defendant is entitled to no fee in the Atkinson and Locke, cases and only twenty-five dollars in the other cases.

If the contract between plaintiff and defendant was properly entered into it was not illegal, but on the contrary was expressly authorized by a statute of the State. This statute says, in effect, that in all suits in equity and actions at law, it shall be lawful for an attorney, either before or after a suit is brought, to contract with his client for a certain percentage of the proceeds of the' client’s suit or action or the settlement of it, either before the institution of the action or at any stage thereafter. [Laws 1901, p. 46, Ann. Stat. Mo. 1906, sec. 4937-2.] Said statute gives an attorney a lien on the proceeds realized by a judgment or settlement, on notice to the adverse party; but in the case before us, the contract itself, by its very words, created a lien in favor of the defendant on the proceeds of the compromise.

It is taken for granted the stipulation in the contract between plaintiff and defendant, that plaintiff would accept no compromise which was not agreeable to defendant, was void because against public policy. On this assumption the invalidity of the entire contract is argued, and an authority from Ncav York is cited as peculiarly in point on the proposition for the alleged reason that our Attorney’s Lien Act was copied from a New York statute. The first section of our Act was derived from New York (Taylor v. Transit Co., 198 Mo. 715, 725); but the second section, which provides for notice of the lien to be given by the attorney to the adversary party, whereby the latter is prevented from settling the cause to the attorney’s detriment, is an en- ¡argument of the New York statute, and goes far toward rendering settlements impossible without the attorney’s consent, though it does not do this entirely. However, it indicates the policy of the State is to allow an attorney a right in respect of settlements of causes wherein his fee is contingent. The Snyder judgment was not unanimous, though the judges divided on the question of whether a term in an agreement between attorney and client for contingent compensation to the former, that the litigation should not be compromised without the attorney’s consent, was against public policy and not on the question of whether, if it was, the whole agreement would he nullified. The latter point has been determined contrary to the New York decision, and in favor of the view that such a term might be separated from the remainder of the contract and, therefore, will not vitiate the whole. [Potter v. Ajax Mining Co., 22 Utah 273, 291.] The precise point has never arisen in this State, hut in Peltz v. Eichele, 62 Mo. 171, 178, the Supreme Court held a stipulation in a contract for the sale of the factory, stock and good-will of a dealer in matches, against the seller’s engaging in the manufacture of matches any where for five years, was a divisible stipulation, and even if void, innocuous to the other parts of the contract. That ruling is in point. More influential is the decision given in Lipscomb v. Adams, 198 Mo. 530, that an agreement in such a contract as we are dealing with, that the client would make no compromise unless the attorney consented to it, is not necessarily against public policy and void; and that whether it will be or not, is dependent on the particulars of the case. The court said public policy was uncertain and fluctuating and under its influence the law of contracts for attorney’s fees had undergone changes in modern times; that contingent fees were once unlawful, but had come to be approved as helpful to litigants, because, without them, many persons with meritorious causes could not procure attorneys; further, that an agreement restricting the right to compromise Avas often a protection to the client. Though the court prescribed no general rule, it distinctly held a stipulation by a litigant not to compromise without the consent of the attorneys whom she had employed on contingent compensation, was valid, and not opposed to public policy; held this, too, in view of facts no more favorable to the validity of the agreement than Ave have here. Therefore we will íoIIoav the case as a precedent and decide the stipulation between these parties Avas not invalid as a legal conclusion; and neither do the facts even tend to impeach the good faith of defendant in making it, or to prqve it was adverse to plaintiff’s welfare. In Taylor v. Transit Co., supra, a like stipulation was in the contract which was upheld, but nothing was said about the stipulation, it not being brought forward as in destr action of the contract.

The facts on Avhich possibly plaintiff intended to found a charge of duress by defendant in obtaining plaintiff’s signature to the instrument, though they might be sufficient, if proved, to influence a court of equity to set the instrument aside as having been induced by unfair means, fall short of showing duress. These averments, whether they savor of fraud or duress, were wholly unsupported by proof; for even the plaintiff’s testimony discloses nothing in Robertson’s behavior indicating a purpose to take advantage of an exigency of the case to coerce plaintiff into signing the contract. The statute authorizes attorneys and clients to enter into contracts for a contingent. compensation to the attorney, either before or after a legal proceeding is instituted; but plaintiff’s .counsel insists, nevertheless, that- an attorney can be given nothing under such a contract until he has proved affirmatively, the client was not induced to agree by fraud or improper practice which would constitute an abuse of the con fidential relation of the parties. Bargains between attorneys and clients, especially those where property is acquired by the attorney by gift or purchase, are jealously watched; and in such cases the attorney has been compelled, usually, to establish the bona fides of the transaction as the condition on which it would be permitted to stand. [Barrett v. Ball, 101 Mo. 288; Weeks, Attorneys (2 Ed.), sec. 273.] It may be the same rule has been applied in suits' to enforce contracts not authorized by statute for contingent compensation to an attorney; though we do not recall any reported decision wherein an attorney seeking to enforce such an agreement, was held- to be bound, in order to make out his case in chief, to assume the burden of proving he had not induced his client to enter' into the agreement by fraud, or an abuse of confidence; unless, perchance, the sum stipulated looked like an exorbitant charge for the services alleged. We find a case of controlling authority wherein the opinion appears to take the opposite view of the law. [Thrasher v. Greene County, 105 Mo. 244.] We need not go into what the rule is when the contract is unauthorized by statute. Our statute empowers attorneys and clients to make such arrangements at.any stage of litigation. To hold this statute warrants an attorney to make a contract with his client about his fee, but will not permit him to get judgment on the contract or derive any benefit from it, except on an affirmative showing that he did not procure it by fraud, would be a strange interpretation and add new clauses to the Statute. If an attorney must prove this in the first instance, he must allege it in declaring on the contract — a rule we are unwilling to countenance. As the plaintiff admitted signing the contract, it was for him to prove his averments regarding the unfair methods practiced to induce him to do so. It follows from what has been said that, as the' contract was admitted, as it was not void for illegality, and as there was no evidence whatever adduced which tended to fas ten fraud on the defendant in connection with its execution, the court below was justified in treating it as valid, and as constituting the measure of the rights of the respective parties. Though in form this is a suit for money had and received and not one on a special contract, nevertheless a special contract having been established, the rights of the parties were to be determined in accordance with it. [Fox v. Car Co., 16 Mo. App. 122; Mansur v. Botts, 80 Mo. 651, 656.]

As the contract gave the defendant a lien on the sum collected, he may lawfully hold such portion of the sum as his fee would amount to under the contract, if he performed the obligation assumed by him; and this is conceded. But plaintiff says defendant failed, to perform his duty as attorney, and broke the obligation assumed in the contract of employment, by settling the litigation with Atkinson and Locke without plaintiff’s consent and contrary to his instructions. Plaintiff swore that far from authorizing the settlement, he had told Robertson to make no compromise; and if this is true, the arrangement with Atkinson and Locke could not have stood a moment against a motion filed during the term to set aside the decree or a bill in equity filed afterwards. And if plaintiff had repudiated the settlement, very likely defendant’s conduct in making it, would have been cause for refusing him the compensation to which his contract entitled him for faithful performance of his duty. If plaintiff was dissatisfied, adequate remedies were available by which to retrieve his rights. [Walker v. Bolton, 53 Mo. 405; State v. Clifford, 129 Mo. 492.] He invoked none, but instead sought benefits under the settlement after he had known its terms for more than two years; as probably he had received benefits before; for. an evasive reply is made to the averment of the answer that plaintiff had received an annuity under the settlement for two years. The replication said “plaintiff has never received such an annuity for seven and one-tenth years” — i. e.. the entire period of plaintiff’s expectance of life as stated in the answer.' Whether plaintiff accepted the amount as it fell due, or did other acts of ratification, he has ratified the settlement by this action wherein lie is trying to recover a portion of the proceeds. “One of the most unequivocal methods of showing a ratification of an agent’s act, is the bringing of an action at law based on the act.” [Mechem, Agency, sec. 151.] And ratification was implied prima facie, of an unauthorized consignment of goods for sale by an agent from the owner suing the agent for the-price of the goods. [Frank v. Jenkins, 22 Ohio St. 597.] And. again, the abandonment by a plaintiff of his suit, in consequence of his agent’s having compromised it, Avas held to ratify the compromise. [Hart v. Cooper, 41 N. H. 111.] Plaintiff learned of the compromise the day it was made; and although he swore defendant referred him to his son John Beagles, for the terms of the settlement, he soon saw the. writing in Avhich the terms were set forth. His attorney had this writing at the trial of the present suit, and previously it had been in the hands of another of plaintiff’s attorneys. Besides, a decree according to the stipulations Avas spread on the court records. Plaintiff neither does nor can assert he was left in ignorance of the terms of the compromise, as a reason why his conduct should not constitute ratification. An agent’s unauthorized act if ratified, becomes as binding and effective as if done under original authority. [Semple v. Atkinson, 64 Mo. 504; Bay v. Truesdell, 92 Mo. App. 377; Clark & Skyles, Agency, sec. 149a; Mechem, Agency, sec. 167; 1 Am. and Eng. Ency. Law (2 Ed.), p. 1213.] This rule has been enforced in cases in which the precise question was whether or not a compromise of a principal’s demand or cause of action, entered into by an attorney or other agent without authority, was impliedly ratified by the principal by accepting the fruits of the compromise. [Strasser v. Conklin, 54 Wis. 102; Lowenstein v. McIntosh, 37 Barb. (N. Y.) 251; Hauss v. Niblack, 80 Ind. 407; Hoar v. Industrial Ben. Assn., 71 Hun (N. Y.) 554; Tooker v. Sloan, 30 N. J. Eq. 394; Higginbotham v. May, 90 Va. 233.] In the case first-cited the court said no rule of law was more firmly established than the rule that one who, with full knowledge of the facts, accepts the avails of an unauthorized treaty made in his behalf by another, ratifies such treaty and is bound by its terms as fully as he would have been if he had negotiated it himself. The following excerpts will be found in the texts of the cited treatises. “The acceptance of a compromise by the principal is a ratification of the settlement made in his behalf and he is bound thereby.” [1 Am. and Eng. Ency. Law (2 Ed.), p. 1201.] “The voluntary acceptance of the avails of a compromise made by an agent, will ratify. the compromise.” [Mechem, Agency, sec. 149.]

But it does not follow because plaintiff ratified the settlement that he ratified the arrangement between Robertson, Grace Beagles and Atkinson and Locke, by which Robertson was to get $1,250 and keep it for his fee. Accordifig to plaintiff’s testimony he was no party to said arrangement; and Robertson’s right to retain the money was a question between plaintiff and Robertson and not between Robertson, plaintiff’s children and Atkinson and Locke, his adversaries in the suit. Yet plaintiff could not ratify the settlement without entitling defendant to compensation for services rendered in proportion to what was gained; for the contract of employment said that if the litigation with Atkinson and Locke was compromised, defendant was to “still have one-fourth so gained.” The position of plaintiff’s counsel is that, even though plaintiff accepted the benefits of the compromise, if the defendant entered into it without authority and did not protect plaintiff’s interests, but sacrificed them for the benefit of his children, then defendant should be denied com pensation on tbe ground that, instead of performing his obligation as an attorney, he breached it. This contention appears to be opposed to the fundamental doctrine of the law regarding the efféct of ratification of an unauthorized act; and especially its effect on the liability of the agent to the principal for the consequences of the act done without authority. As we have seen, ratification is equivalent to original author-ity; that is, it validates what would otherwise be an invalid act, and attaches to it those incidents and consequences it would have had if previously authorized. One of its consequences is to release the agent from responsibility, both to the party he dealt with and to his principal, for exceeding his powers. [Mechem, secs. 170, 171, 172; 1 Clark & Skyles, Agency, sec. 149, 11a, b, c and d, and sec. 385.] From the last cited treatise we quoted this text:

“Where an agent performs acts in excess of his authority or without any authority at all, he undertakes to do for another that which he has no authority to do and thereby incurs a liability either to third parties by reason of the unauthorized acts, or to the principal for any loss occasioned thereby. Therefore unless the agent is in some manner relieved he has put a heavy responsibility upon himself. But as we have seen that a subsequent ratification is equivalent to a prior authority, and -as the agent would be relieved from all liability where he had prior authority to do an act, so if the principal with full knowledge of all facts, ratifies the' agent’s unauthorized acts, the latter is released from liability thereon. By such ratification the principal takes upon himself all the responsibility for the acts or-contracts he has thus ratified, as he would have had had he previously authorized them; and he thereby releases the agent from all responsibility thereon, except in so far as the agent may have been responsible had the acts or contracts been previously authorized. Nor after ratification can the principal hold the assumed agent responsible for not haying performed the act in the manner he should have performed it, had he been authorized, because by the ratification he sanctions the act'as done.” [Clark & Skyles, Agency, sec. 149 A.]

Plaintiff’s counsel sa,y ratification did not preclude plaintiff from suing for money received by defendant for plaintiff’s use and point to a remark in the text work from which we have quoted, that after ratifying an agent’s act, the principal may recover money received by the agent for the use of the principal. No doubt he may if the agent has no lien on it or right to retain it for an indebtedness the plaintiff owes him. But what plaintiff’s counsel assert is that defendant, by acting without authority and against instructions, forfeited his right to any portion of the proceeds of the settlement. In effect,-this is nothing else than an attempt to ratify what defendant did without authority, yet hold him answerable for exceeding his authority; which according to all writers on the law of agency, and all the cases we have examined, cannot be done. A controlling decision on the very point is Beall v. January, 62 Mo. 434. That plaintiff had received as a broker -or commission merchant, consignments of goods to sell according to instructions given. He sold the goods and furnished statements of his doings to the defendant and on a settlement, the defendant executed promissory notes tó him. The action was on these notes, and the defense was fraud in their procurement and want of consideration. The averments in the answer charged both a breach of instructions in making the sales, and fraudulent misrepresentations in reporting the same, whereby the defendant was induced-to give the notes. As to these averments the opinion of the Supreme Court said, that if nothing more was alleged than selling against the defendant’s orders, as the defendant had afterwards ratified the sales, the answer would state no defense to the notes given for a balance due the agent; but as fraud in reporting the sales was charged against the broker, this was a defense. For other authorities in support of this doctrine we refer to the numerous cases cited in the notes to the text writers we have cited. Defendant cannot be held liable to plaintiff for entering, without authority, into a compromise which the defendant accepted; and he can no more be held liable by depriving him of his fee, than by a judgment for damages. Oh the pleadings and the evidence adduced by the plaintiff, the defendant was entitled to retáin his compensation out of the money he collected and the court was right in so holding.

A serious question might arise regarding the burden of proving what sum defendant was entitled to keep as compensation — whether the burden was on him to prove the amount in his hands did not exceed what he was entitled to retain, or on the plaintiff to prove it did. This point has not been raised and we have not examined it, because the reasons for which the propriety of the lower court’s ruling is assailed, relate solely to the contention that the court erred in not treating ■ defendant’s contract for compensation as presumptively fraudulent, and in refusing to impose on him the burden of showing affirmatively that no unfair means were employed to procure it.

The judgment is affirmed.

All concur.