Kuehn v. Syracuse Rapid Transit Railway Co. , 93 N.Y.S. 883 ( 1905 )

Spring, J. (dissenting):

The plaintiff was permanently injured October 29, 1903, while a passenger on one of the cars of 'the defendant in a collision with another of defendant’s cars. The trial of the action to recover the injuries thus sustained was commehced April 14, 1904,- and early in its progress, the counsel for the defendant informed the court that' he desired to present the written stipulation of the plaintiff settling and discontinuing the action. During the heated and intermittent arguments succeeding this statement it developed that the plaintiff had settled the case with the agents of the defendant for $2,500 in addition to the physicians’ bills which he had incurred and that the plaintiff had signed a formal stipulation settling and discontinuing the action and providing that an order to that effect might be entered at any time by either party without notice. The settlement was made without the knowledge of the counsel for the plaintiff and, quite naturally, they were considerably surprised and angered over the matter.

They insisted that it was necessary for the defendant to plead the settlement as it operated the same as a release or payment while the counsel for the defendant urged that he was entitled to such an order on the stipulation ending the litigation. The counsel for the plaintiff claimed that they had a lien on the cause of action and a right to continue the same for the purpose of establishing the amount to which their lien attached. The application of defendant’s counsel for an order of discontinuance was denied and the trial proceeded.

The plaintiff was not present the first day of the trial and his counsel had no opportunity to consult with him in reference to the settlement until after the adjournment. On the succeeding day the plaintiff was in court and his counsel claimed that the stipulation and settlement were accomplished by fraudulent statements and representations to their client and insisted that he had a right to have that question passed upon before the order of discontinuance was entered.

No motion was made by the counsel for defendant for an adjournment to enable it to procure an order discontinuing the action or for any other purpose. The defendant’s counsel remained through the trial devoting their energies, however, mainly to a fruitless attempt to get in evidence the stipulation 'and agreement of settlement.

The counsel for the defendant at the close of the evidence offered to pay the plaintiff’s attorneys the amount of their lien and tendered them $1,500, which they declined to receive, insisting that their client’s interest had been jeopardized by a collusive settlement. The jury rendered a verdict for $7,500.

The foregoing summary of what-occurred during the trial is essen- ' tial to a proper comprehension- of the order appealed from.

After the verdict, and on the eighteenth day of April, an order was granted requiring the plaintiff to show cause why an order should not be entered setting aside' the verdict on the ground that the action had .been settled and its discontinuance stipulated by the parties. This order was based upon affidavits showing the alleged adjustment and the execution of the stipulation and settlement agreement by the parties. The order was returnable On the nineteenth, and the plaintiff’s counsel appeared and tendered back $500 which had been paid to the plaintiff pursuant to the terms-of the compromise agreement, which the defendant' declined to accept. Thereupon, against the protest of the defendant, the plaintiff’s counsel read in opposition to the motion affidavits setting forth how the adjustment was-accomplished, and from which they claimed their client had been imposed upon and induced to settle his cause of action by reason of'fraudulent representations and’ Under a misapprehension. The' defendant’s. counsel requested the privilege of filing answering affidavits, 'which was refused.

There are two or three principles which we think are deducible from this series of events. - In the first place the parties had' a right to compromise the action. (Fischer-Hansen v. Brooklyn Heights R. R. Co., 173 N. Y. 492 ; Smith v. Acker Process Co., 102 App. Div. 170.)

If the settlement was honestly and fairly made, the rights of the attorneys are not paramount to those of-their client, and they cannot be heard to repudiate the'settlement. They may have a lien 'on the cause of action, and if necessary to enable them to secure- the compensation to which they -are entitled, the adjustment will not be •operative against them. The Cause, of action, however, belonged to -tlie client, and if the latter is able to meet his obligation to his attor-, ' neys, the action will not be continued for the purpose of enforcing their lien, which is a mere incident to the litigation. Primarily the settlement of the'parties ends the law suit. In Fischer-Hansen v. Brooklyn Heights R. R. Co. (173 N. Y. 492, supra) the court used this language (at p. 500): “ A cause of action is not the property of the attorney, but of the client. The attorney owns no part of it, for a lien does not give a right to property, but a. charge upon it. As it is merely incidental and for the purpose of security only, it would not be reasonable to hold that the Legislature intended it should be the means of blocking an honest and genuine adjustment •of controversies. We think the lien is subject to the right of the ■client to settle in good faith, without regard to the wish of the attorney, and we so held in the Peri case,^* where we declared that ‘ the existence of the lien does not permit the plaintiff's attorney to stand in the way of a settlement.’ The right of the parties to thus settle is absolute, and the settlement determines the cause of action and liquidates the claim.”

If, however, the settlement was collusively made and with the purpose of depriving the attorneys of their compensation, the court will withhold its sanction of the adjustment, although ordinarily anxious to ratify an honest settlement of a pending action. (National Exhibition Co. v. Crane, 167 N. Y. 505.)

A settlement made at the instigation of attorneys for the defendant without the knowledge of the attorneys for the plaintiff, and without making suitable and sure provision for their compensation, ought not to be encouraged and is viewed with suspicion. As was said in Peri v. New York Central R. R. Co. (152 N. Y. 521, 528) : “ The settlement of a litigation ought, in fairness, to be made with full knowledge of plaintiff’s attorney, and under conditions protecting his lawful lien. If he seeks to take an unfair advantage of a desire to settle, he is, as an officer of the court, under its constant scrutiny 'and control, and will be confined in. his lien to his taxable costs and such additional amount as he may be able to duly establish by agreement, express or implied.”

Where an adjustment is made without consulting with the plaintiff’s attorney, it would seem as if the orderly procedure is to require a motion or order to show cause upon notice to the attorney, at Special Term, for the discontinuance of the action. (Code Civ. Proc. § 55.) This course enables the attorney to assert his lien if any exist, and determine the mode to ascertain and provide for its payment. If no action of this kind is taken, the attorney may bring the matter to the attention of the court by petition, when the lien may be determined and enforced. (Code Civ. Proc. § 66 ; Matter of Fitzsimons, 174 N. Y. 15, 20; Peri v. New York Central. R. R. Co., 152 id. 521.)

The mere fact that the'settlement has been made without the knowledge or assent of plaintiff’s attorneys does not establish that' it'was collusively made. If honest between the parties, the lien of the attorneys attaches to the fund paid to their client as a result of the adjustment, and if that is not available the client must' reimburse his attorneys. If the attorneys are not able to obtain their compensation the action may be continued, not as a right of action between the parties, but for the benefit of the attorneys. (Fischer-Hansen v. Brooklyn Heights R. R. Co., 173 N. Y. 492, 499.) The continuance of the action for the purpose of insuring the payment of the attorneys’ lien is the last resort, for “ it authorizes the trial of a dead lawsuit in the interest of one who never owned the claim upon which it was founded.” (173 N. Y. 499, supra.)

In the light of these principles we will consider the appeal before us. The plaintiff’s counsel upon the trial insisted, as already noted,, upon the right to prosecute the action to fix their lien. They were not at that time entitled to' that relief. There was nothing indicating the’ extent of their lien, or that the settlement was fraudulently made or that the avails of the compromise were inadequate to extin■guish the lien, or that their client was unable to pay. Upon consultation with the plaintiff they then claimed the settlement was a fraud. This question the plaintiff had a right to have determined in some way. There was no request by either party for an adjournment to have the effect of the settlement determined, and as the matter was presented to the trial court it may be he was justified in continuing the trial, as each counsel was evidently bent on overreaching his opponent.

Passing that, however, after the verdict had been rendered and after a motion for a new trial on the grounds specified in section 999 of the Code of Civil Procedure had been made and denied, the defendant endeavored to obtain the formal order of discontinuance upon the stipulation and upon notice. The plaintiff accepted this challenge and presented affidavits tending in a measure to show that the alleged settlement was collusive, and that the plaintiff did not comprehend its purport. The plaintiff, therefore, elected to try the genuineness and validity of the compromise upon affidavits at Special Term. The defendant then requested the privilege of filing additional affidavits, which was denied. We think this decision was error. The parties selected the tribunal and the mode of procedure. The plaintiff had a right in some way to attack the fairness of the settlement if he claimed it was a fraud. No simpler way could be suggested than the mode adopted, only it should have preceded the trial. - The defendant in its application very properly limited its affidavits to the fact of the settlement, showing the execution of the papers which formed a part of the moving papers and its compliance therewith. A prima facie case was made that the parties had adjusted the litigation. When the plaintiff presented affidavits impeaching the validity of the settlement, the defendant ought to have been permitted to read counter affidavits in vindication of its fairness and openness. •

I do not assent to the claim that it was necessary for the defendant to set up this agreement and stipulation by supplemental answer. The plaintiff had the right to settle his casé, and did so.' He formally consented that either party might procure an order of discontinuance without notice. Upon this stipulation the defendant was entitled to its order, except that the rights of the plaintiff’s attorneys must be protected if necessary to do so. The question of the attorneys’ rights, however, are not here, for they are not asserting any lien. The object of a settlement is to get rid of litigation, not to raise a new issue for the jury to pass upon, and if the attorneys in this case had joined in the stipulation no one would claim that it was necessary for the defendant to set it lip as a defense to obtain the benefit ^accruing from it. Its execution by the attorneys does not add to its validity as between the parties themselves. The mere oral statement of the attorneys or the client that it was procured collusively does not impair the effect of the stipulation. Presumptively it was signed honestly and it remains a valid instrument until impeached in a lawful way. If attacked by either party the burden is upon him to show its invalidity. If the plaintiff has been overreached he must prove that fact. The instrument is good- until proven inoperative.

Upon a rehearing the court by a reference or in its own way could determine the validity of this settlement. If the determination is reached that it- is fairly and honorably made that ends the case so far as the parties are concerned. Whatever may be the extent of the, lien of the plaintiff’s attorneys they cannot bar the settlement. If necessary to protect the attorneys the court ■ could ascertain if it is necessary to continue the action for that purpose. The disposition of this, branch of the motion might depend upon a variety of circumstances, i. e., the extent of the compensation to which they are entitled, the financial status of the plaintiff, whether it was expected that the defendant would as part of the agreement attend to the payment of the attorneys for the plaintiff, etc. These matters could very properly be disposed of at Special Term. '

The order should be reversed, with ten dollars costs and disburseménts to the appellant, and the matter remitted to the Special Term tó be heard and disposed of.

Hiscock, J., concurred.

* Peri v. New York Central R. R. Co. (152 N. Y. 521).— [Rep.