Krippner v. Matz

287 N.W. 19, 205 Minn. 497, 1939 Minn. LEXIS 797

• Court: Supreme Court of Minnesota
• Decided: June 30, 1939
• Docket: No. 31,920.
• Status: Published

Opinions

Julius J. Olson, Justice.

Defendants appeal from a judgment entered for intervener in the amount of $1,758.51, pursuant to findings by the court, and having as its background the following facts:

Seven negligence actions arose out of an accident taking place September 6, 1931, at a highway crossing when the automobiles driven by defendants came into collision causing injuries to their respective guest passengers. Five of these cases came into the hands •of attorneys other than intervener. The total amount of damages claimed by them was $58,500. Intervener was retained in the other two cases, i. e., Charlotte Krippner and the present plaintiff, Caroline Krippner. Caroline sought to recover $10,000, her sister Charlotte, $2,500. (Defendant Krippner is Caroline’s brother-in-law, and Charlotte is his wife.) Each of defendants carried liability insurance with coverage limited to $10,000 for injuries to any one person, total coverage in any one accident, $20,000.

Pursuant to intervener’s employment, he commenced an action for Caroline on October 7, 1931. (He also brought an action for Charlotte, but only Caroline’s claim is presently involved.) His contract with Caroline provided that he was to receive — •

“as compensation for the services” to be rendered “twenty-five per cent (25%) of any sums received m settlement of said claim against the two defendants if settlement was made before the trial of this action and thirty-three and one-third per cent (33-1/3%) of any sums recovered in this action or received in settlement of any verdict recovered in this action” (Italics supplied.)

The seven cases were all placed on the March, 1932, calendar for trial. The five first mentioned were consolidated for trial and ■were actually being tried when on the third day thereof a settlement was reached. Under the terms thereof the five plaintiffs were paid $13,650 by the insurance carriers, of which sum the insurer for defendant Matz contributed $6,525 and Krippner’s insurer $7,125.

Prior thereto, on November 21, 1931, plaintiff Caroline had executed a written dismissal “insofar as it affects or relates to Peter Krippner.” This dismissal was “with prejudice and on the merits, but without costs. The suit is to stand in all respects against Cecelia Matz as if originally brought against her alone.” This instrument was procured at her home in Cedar Rapids, Iowa.

On the day of settlement, March 16, 1932, a second dismissal was entered into under the terms of which plaintiff,—

“for a valuable consideration, including, among other things, the consummation this day of settlements of five cases on trial in the above court, in which [naming parties] are plaintiffs and the above named” [present defendants] “are defendants, it is hereby stipulated and agreed that the above entitled action may be, and the same hereby is, forever dismissed upon the merits and without costs and disbursements to any party.”

This settlement was consummated at the courthouse where the five cases were then on trial. It came about because of the possibility of Peter Krippner being held to greater liability than his insurance coverage. Obviously neither defendants, their counsel, nor anyone else could predict what a jury might do in respect of which defendant was to be held liable. Either or both might be so held. There was real danger lurking, and it is easily conceivable that defendants and their counsel were seeking to find a safe way out of the difficulty. No money passed to either of the Krippner women. The insurance carriers refused to make the mentioned settlement unless all seven cases were disposed of. Hence it follows that the Krippner ladies surrendered their respective claims to make the settlement of the five cases possible of accomplishment. While the Krippner ladies were not informed of the amount included in the settlement nor of the policy limits nor had they consulted their lawyer about the affair, yet it clearly appears that an effort was made to get in touch with him; but, he being out of town and the settlement being urgent, it was accomplished in his absence and without his knowledge or consent. There is no claim of deceit or fraud having been practiced nor was any finding made or asked for to that effect.

Intervener promptly petitioned the court to set aside the dismissals, ascertain the amount due him under his contract, and enforce his statutory lien. The court over defendants’ objections granted the motion to set aside the dismissals and proceeded to hear the evidence offered.

Intervener’s claim is based solely upon the ground that the settlement was made without his knowledge or consent; that under the attorney’s lien statute he has an absolute right to recover under his contingent fee contract the 25 per cent therein provided. He asserts that the measure of his damages is the stipulated percentage of the value of his client’s cause as of the time of settlement. In his own language his claim is thus stated: “Now, [in] this proceeding, if I have any right at all, I have a right on an express contract.” The court was of opinion that “the value of the [inter-vener’s] contract must be .determined on the amount and extent of the defendants’ liability” to plaintiff. Defendants’ claim, urged throughout, was that the “attorney’s compensation is his percentage of the amount for which the case was settled. There is no other test.” Consequently, they say, by reason of plaintiff’s voluntary relinquishment of her claim there was and is no basis for the application of the rule for which intervener contends, hence that no recovery can be had.

The court adopted intervener’s views and found that the plaintiff’s cause of action at time of settlement “was worth to exceed the sum of $5,000, and that it was worth to the defendants and to the insurers of the defendants, the sum of $5,000 to secure the dismissal of said actions.” The court awarded him $1,250 with interest and costs, in all $1,758.51, the face of the judgment here for review.

Intervener’s rights and remedies are governed by statute, 1 Mason Minn. St. 1927, § 5695, which as far as here material reads:

“An attorney has a lien for his compensation whether the agreement therefor be express or implied: * * '

“3. Upon the cause of action from the time of the service of the summons therein, or the commencement of the proceeding, and upon the interest of his client in any money or property involved in or affected by any action or proceeding in which he may have been employed, from the commencement of said action or proceeding, * * *.”

Under subd. 6 it is provided that the lien “may be established, and the amount thereof determined, by the court, summarily, in the action or proceeding, on the application of the lien claimant or of any person or party interested in the property subject to such lien, * *

(Provision is also made for enforcing such lien by proceedings in equity for that purpose. But that is an alternative remedy and in no way limits the summary procedure quoted.)

This court has held that “the statute vests in the attorney a legal right to resort to the cause of action, or any settlement thereof without his consent, for his compensation.”' Davis v. G. N. Ry. Co. 128 Minn. 354, 358, 151 N. W. 128, 129. And in Miner v. C. B. & Q. R. Co. 147 Minn. 21, 23, 179 N. W. 483, 484, it was held that:

“The [attorney] intervener is interested in the original cause of action, by way of subrogation, to the extent necessary to protect his compensation.” The proceeding need not be an original or independent action, for “he is enforcing his statutory right in the plaintiff’s original cause of action, and is proceeding in the action which the plaintiff brought to enforce his cause of action.”

Our cases hold that the parties to a cause may settle their differences notwithstanding the attorney’s lien. In such event, however, the defendant is held liable to the attorney for the amount of his lien if settlement is made in disregard of the attorney’s rights. The defendant in any such case is bound to take notice of the attorney’s rights under his statutory lien. There are numerous cases upholding that view. Kubu v. Kabes, 142 Minn. 433, 437, 172 N. W. 496, 497, is illustrative, the court amongst other things saying:

“Although defendant had the right to make the settlement without consulting his [plaintiffs] attorney, and there was no purpose or design to defraud the attorney, for his own protection he was bound to guard against a possible second liability on the lien, precisely as he would in a transaction involving mortgaged property.”

To the same effect is Wildung v. Security Mtg. Co. 143 Minn. 251, 254, 173 N. W. 429, 430, where the court held that defendants — •

“were required to take notice of the lien rights which are given by the statute to attorneys, and for their own protection were bound to guard against a possible second liability under the lien, as they would be if the transaction involved mortgaged property.”

For an interesting and instructive history of our statute with citation of authorities bearing thereon, see Byram v. Miner (8 Cir.) 47 F. (2d) 112.

We are therefore of opinion and so hold that intervener’s lien under the statute was in full force and effect at the time of settlement and that the procedural steps taken by intervener are appropriate.

It has long been established law in this state, and elsewhere too,—

“that a client may, without the consent of his attorney, settle and compromise with his adversary all matters in litigation, in such manner and upon such terms as he may deem necessary for the protection of his interests. [Citing cases.] No vested right of the attorney is violated or impaired, and the rule applies notwithstanding an express agreement with the attorney that he will not settle or compromise without his consent or approval. [Citing cases.]” Southworth v. Rosendahl, 133 Minn. 447, 449, 158 N. W. 717, 718, 3 A. L. R. 468.

While there are authorities sustaining intervener’s position, referred to in the case just cited, these were considered but held (133 Minn. 450, 451, 158 N. W. 718, 3 A. L. R. 468) —

“not in harmony with the trend of our own decisions upon the subject. In Gammons v. Johnson, 69 Minn. 488, 72 N. W. 563, a case involving a settlement by the client without the consent of the attorney, it was held that the attorney was entitled to recover the reasonable value of his services but could not recover the agreed compensation. The contract there before the court was held void, as champertous, but that fact does not change the rule made the basis of the decision.”

“The right of a client to discharge his attorney at his election, with or without cause, is universally recognized by the authorities. [Citing authorities.] If the client has the right to terminate the relation of attorney and client at any time without cause, then the contract differs from an ordinary contract of employment in that one of the parties thereto may put an end to the same, whether agreeable to the other party or not. If the client has this right as an implied condition of the contract under the law, it follows as a natural consequence that he cannot be compelled to pay damages for exercising that right which his contract gives him.” Lawler v. Dunn, 145 Minn. 281, 284, 176 N. W. 989, 990.

And the opinion quotes with approval from Martin v. Camp, 219 N. Y. 170, 174, 175, 176, 114 N. E. 46, L. R. A. 1917F, 402, as follows [145 Minn. 284] :

“ 'In such a case the attorney may recover the reasonable value of the services which he has rendered but he cannot recover for damages for the breach, of contract. The discharge of the attorney by his client does not constitute a breach of the contract, because it is a term of such contract, implied from the peculiar relationship which the contract calls into existence, that the client may terminate the contract at any time with or without cause. * * * and it follows from this rule, by necessary implication, that if the client has the right to terminate the contract, he cannot be made liable in damages for doing that which under the contract he has a right to do. * * *

“ 'The rule secures to the attorney the right to recover the reasonable value of the services which he has rendered, and is well calculated to promote public confidence in the members of an hon orable profession whose relation to their clients is personal and confidential. * *’ ”

The court in its findings says that the evidence taken in the five cases on trial when the settlement was reached “established” defendants’ negligence; that the actual damages suffered by said plaintiffs—

“exceeded * * * the amount paid in settlement thereof, and that it was the duty of the insurance companies who were defending said actions to settle said actions * * * without requiring plaintiff [Caroline Krippner], as a condition [to] their making said settlement, to surrender her cause of action which was worth $5,000, but the insurers used the possibility of an excess recovery against Peter Krippner * * * to get the plaintiff to release her cause of action, by refusing to make this settlement unless plaintiff would release her cause of action.”

The court apparently put the insurance companies on trial. They are not parties. Are attorneys for insurance underwriters precluded from exercising the same rights as are freely granted and exercised by counsel for other litigants? True, the attorneys retained and paid by the underwriters appeared for defendants, but that was pursuant to the policy contracts so to do. Be that as it may, the theory adopted by the court as to intervener’s compensation seems utterly wrong. If the five plaintiffs received less than their actual damages, how can it be said that intervener is entitled to 25 per cent of $5,000? Who can tell at this stage what the “actual damages” of the five plaintiffs were? The court thinks they did not get enough. Who is to say now what would be adequate? If Caroline had settled for a nominal sum, say $100, could intervener nevertheless proceed as here and recover any such-sum as here allowed him ? This court in the case of Davis v. G. N. Ry. Co. 128 Minn. 35á, 359, 151 N. W. 128, 130, said: “We sustain the contention of defendant that the amount of the settlement must be taken as a basis from which to compute the attorneys’ fees.” And this seems to be the only practical rule to apply if we are to-hold, as has been heretofore held, that the client’s right to settle his cause upon such terms as to him seems best is absolute. Southworth v. Rosendahl, 133 Minn. 447, 158 N. W. 717, 3 A. L. R. 468.

The settlement is final and conclusive as to the parties. As such it must stand. The five plaintiffs who shared in the settlement have the undoubted right to retain what they received. The same is true respecting the attorneys’ fees incurred and paid by them more than seven years ago. Upon what basis then can a computation of intervener’s rights be made? Is it possible to reopen the settlement so that the sum paid for his client’s interest may be computed? Of course not. The settlement was in a lump sum (except as to a minor plaintiff whose portion was separately treated, the approval of the court being essential to a valid settlement). Undoubtedly their counsel have long ago settled the litigation, and the rights of all of them is a past and irrevocable event.

We think it is a misconception to attempt to force an agreement between an attorney and his client into the conventional modes of commercial contracts. While such a contract may have similar attributes, the agreement is, essentially, in a classification peculiar to itself. Such an agreement is permeated with the paramount relationship of attorney and client which necessarily affects the rights and duties of each. As we have seen, despite the agreement but as an incident to the relationship, a client has full power to discharge his attorney without cause at any time, being liable only in such event for the reasonable value of the services rendered. Lawler v. Dunn, supra. In addition, a client has the undoubted right, absent fraud or collusion, to settle his cause with his opponent without the consent of his attorney. Southworth v. Rosendahl, supra. And a stipulation in a contingent fee agreement requiring the consent of the attorney as a prerequisite to settlement is void as against public policy because it stifles settlement and removes control over the cause from the client. Davis v. G. N. Ry. Co. supra. The cause being that of the client, it necessarily follows, under the contract here involved and the facts here presented, that intervener is limited to a quantum meruit. If there had been an ascertained amount due to or paid to plaintiff, then clearly intervener’s right under his contract and the statutory lien given in aid thereof would entitle him to “25% of any sums received in settlement of said claim.” That is what was held in the Davis case and in many other cases, including Miner v. Payne, 150 Minn. 103, 184 N. W. 678, and Dell v. Marckel, 184 Minn. 147, 238 N. W. 1.

Here, as in the Southworth case (133 Minn. 452, 158 N. W. 719, 3 A. L. R. 468), intervener “cannot recover the agreed compensation.” He is “limited to the reasonable value” of his services, “which cannot be recovered in this action, for the complaint is not so framed. Yet the judgment to be rendered herein will not defeat a subsequent action therefor. Leonard v. Schall, 132 Minn. 446, 157 N. W. 723, 4 A. L. R. 1166.”

The meat of that decision is contained in the syllabus paragraphs of the court (133 Minn. 447-448, 158 N. W. 717, 3 A. L. R. 468) as follows:

“The relation of attorney and client does not preclude the latter from settling and compromising the matters in litigation in his own way, and without the knowledge or consent of the attorney, and by so doing he does not subject himself to the payment to the attorney of a contingent fee agreed upon in case of the successful outcome of the case.

“Where the client exercises his legal right to settle with his adversary, in good faith and without purpose to defraud the attorney out of his compensation, the latter may recover only the reasonable value of the services rendered by him down to the time of the settlement.”

It follows that the judgment must be reversed. Upon the pleadings and facts here appearing there can be no recovery.

So ordered.