Lee v. Vacuum Oil Co.

This is an appeal from an order of the general term, substantially affirming an order of the special term, which vacated the satisfaction of a judgment given upon a settlement of the cause of action in a suit to recover damages for the negligent killing of the plaintiff’s intestate by the defendant.' The motion was originally made on behalf of the plaintiff and also her attorneys, and the satisfaction of the judgment was vacated by the special term absolutely, so far- as the attorneys were concerned, and as to the plaintiff, upon the condition that she should, within ten days, repay to the defendant the sum of $1,000 received by her on the settlement of .the action and release all claims to the further sum of $3,500, which had been deposited with the Eochester Safe & Deposit Company to her credit, as security for the costs and claims of her attorneys.

The undisputed facts show that the action was prosecuted bj the plaintiff as administratrix to recover damages for the death of her husband, occasioned by the alleged negligence of the defendant, and resulted in a judgment for the plaintiff, in June, 1887, of about $6,000 damages and costs. This judgment, on appeal to the general term, was affirmed in that court and the defendant appealed from that affirmance to this court. In August, 1890, while this latter appeal was pending, the plaintiff applied to the defendant for a settlement of the action, and, after some negotiation, an agreement was reached between the parties whereby the defendant agreed to pay the plaintiff the sum of $4,500, $1,-000 in cash, and the further sum of $3,500 to be deposited to the plaintiff’s credit in the Bochester Safe & Deposit Company, to be drawn by her after procuring and delivering to the defendant a release by her attorneys of all claims against such judgment, or the cause of action represented thereby. Immediate notice of this settlement was given to the plaintiff’s attorneys by the defendant, and they were also notified to present a statement of their claims on such judgment and cause of action to defendant. After several months delay such a statement was made and presented, whereby it appeared that such attorneys made claims for costs, counsel fees and money loaned, aggregating about $3,000. Under the instructions of the plaintiff the defendant declined to pay this sum, but offered to pay any advances made by them, together with $1,500, in addition thereto, and their disbursements. This offer was declined, whereupon this motion was made. It was founded upon an affidavit of one of plaintiff’s attorneys, giving a statement of the proceedings in the action and a history of his firm’s transactions with the plaintiff; and an affidavit of the plaintiff, dated December 9, 1890, imputing fraud and misrepresentation to the defendant in effecting the settlement, and giving what purported to be a history of the negotiation for such settlement. Proof was also made of the service of notice by plaintiff’s attorneys on defendant, on January, 1889, of the existence of a lien in their favor on several causes of action against the defendant, including that of the plaintiff’s and upon any verdicts, reports, decisions or judgments rendered, or to be rendered therein, for their services as attorneys for the plaintiffs therein, and forbidding any settlement of such actions, or any payments thereon, except to said attorneys or to their order.

A copy of a stipulation signed by the plaintiff, entitled in the

The defendant produced a number of affidavits made by its president, secretary, attorneys and others, containing proof tending to show that its conduct, in respect to the settlement of the action, was fair and honorable, and offering to rescind the settlement and to cancel the discharge of the judgment upon the return of -the money paid by them to the plaintiff. An affidavit made by the plaintiff on December 31,1890, retracting all statements contained in her moving affidavit, tending to show any misrepresentation or unfair practice on the part of the defendant or its officers or agents in effecting said settlement, was also presented to the court.

' We have carefully read the evidence presented on the hearing intended to support the charge that the settlement was induced by fraud or misrepresentation on the part of the defendant and its agents, practiced upon the. plaintiff, and we are of the opinion that it fails to sustain such a charge. If there were statements in the plaintiff’s original affidavit which tended to support such a charge, they were wholly retracted by the subsequent affidavit made by her, and left the case, substantially, destitute of any proof upon which an imputation of fraud could justly be predicated.

The defendant, on the argument of the original motion, voluntarily offered to rescind the agreement for a settlement and to cancel the satisfaction of the judgment, if the plaintiff would restore the defendant to the position which it occupied before the settlement was made. This offer was unnoticed by the plaintiff’s attorneys, and the argument of the motion proceeded. We think this offer embraced all of the relief to which the plaintiff was then entitled, and . upon the neglect of the plaintiff to accept it her motion should have been denied.

We may, for the purpose of this discussion, assume that the plaintiff showed a case for rescission upon the condition that she restored the money received by her on the settlement. This condition, however, could not be disregarded, and without restoration no rescission could lawfully be had. The rule is elementary that a party cannot rescind a contract for fraud without acting promptly on discovery of the fraud and restoring whatever has been received upon it. Masson v. Bovet, 1 Den., 69 .

This principle was applied in the case of Gould v. The Cayuga

The excuse made by the plaintiff’s attorneys that it was impossible for her to repay the money received on settlement, because she had spent it, is too groundless to require discussion. At least, the plaintiff’s attorneys could have joined their client in releasing the moneys deposited from the operation of their lien; but they expressed no willingness to do even this, and the motion was pressed regardless of the principle requiring restoration to be made. The substitute for a restoration ordered by the general" term was totally inadequate to satisfy the requirements of the rule. It depended, if a new trial was had, upon the contingency of a final judgment for the plaintiff; and in case the defendant succeeded on such new trial it left the money paid in the possession of the plaintiff, and its loss by the defendant unavoidable.

We are, therefore, of the opinion, that the plaintiff failed to show a case entitling her to a rescission and a cancellation of the satisfaction of judgment. •

It is claimed, however, that the plaintiff’s attorneys stand in a better position in regard to relief from the satisfaction of the judgment than the plaintiff does, by reason of their alleged lien for costs and agreed compensation, and that they, having moved on their own behalf, are entitled to rescind the contract, although such relief be denied to the plaintiff.

We are of the opinion that the exigence of such a lien in favor of the attorneys does not confer a right on them to stand in the way of a settlement of an action which is desired by the parties and which does not prejudice any right of the attorneys. We do not think that such an agreement deprives a party of the right to control the management of his own case, and to determine when the litigation shall cease, and how far it shall be extended. The client still remains the lawful owner of the cause of action and is not bound to continue the litigation for the benefit of his attorneys when he judges it prudent to stop, provided lie is willing and able to satisfy his attorneys’ just claims. In fact the lien, under the agreement, was intended for and operates only as a security for the attorney’s legal claims, and, unless those are prejudiced by the client’s contract, she has unrestricted control of the subject of the action and the terms upon which a settlement shall be effected. Pulver v. Harris, 52 N. Y, 73 ; Coughlin v. N. Y. C. & H. R. R. R. Co., 71 id., 448.

If it were permitted to the plaintiff’s attorneys to continue the action for any purpose, it could be done only at their own expense and for the sole purpose of collecting their claims against the plaintiff. Randall v. Van Wagenen, 115 N. Y., 532 ; 26 N.Y. State Rep., 438. The right of recovery in such a case would be limited by the extent of their lien, and we are unable to see how they would be benefited by being permitted to prosecute such an ac

It seems to us that the plaintiff’s attorneys have no grievance to complain of, or injuries to be redressed by the courts. The provision of an ample fund created by the parties, to secure the attorneys’ claims, is a complete refutation of the theory that the settlement was intended to defraud them, and their case is thus placed outside of the authorities holding that settlements made for such purposes will be set aside. Randall v. Van Wagenen, supra.

We know of no case which authorizes an attorney to continue a litigation for his own benefit at the expense of his client after sufficient provision for the satisfaction of his just claims is made by the parties.

The laches of the attorneys in making an attempt to rescind the agreement of settlement, would also seem to furnish sufficient reason why the motion in question should be denied. They were informed of the terms of the agreement qf settlement in August, immediately after it was made, and raised no objection thereto until nearly four months after that time. In the meantime the plaintiff had expended the money received by her on the settlement, and had become unable to return that sum to the defendant. The attorneys had also treated with the defendant in regard to the payment of their claims against the plaintiff, and manifested no dissatisfaction with the settlement until after they found that their charges against the plaintiff were to be subjected to discussion and investigation. We do not think that they acted with that promptness which" the rule governing the rescission of contracts requires.

We are, therefore, of the opinion that the orders of the general and special terms should be reversed and the motion denied. This proceeding having been instituted by the plaintiff’s attorneys for their own benefit, they should be charged with the costs of their unsuccessful efforts.

The fact that the judgment in the original action cannot, on account of errors in the record, be supported in this court, affords an additional reason why the settlement of the action heretofore made should in the interest of all parties be held to be a valid contract.

The orders of the general and special terms should, therefore, be reversed and the motion denied, with costs in all courts to be paid by plaintiff’s attorneys.

All concur.