Alexander, Ausmus Harris, for respondent.
An attorney does not have a lien upon proceeds of a settlement made with his client by other party before suit is instituted unless notice in writing of percentage contract is given other party by said attorney. Sec. 1338, R.S. Mo., 1939; Young v. Renshaw, 102 Mo. App. 173 ; Franklin v. Local Finance Company, 136 S.W.2d 112 , 234 Mo. App. 973 . Missouri Courts will not permit one party to a transaction to invoke the strict provision of a Statute when to do so would work a fraud upon another party (Denying the invoking of the Statute of Frauds) (See Carlin v. Bacon, 322 Mo. 435 , 16 S.W.2d 46 , 69 A.L.R. 1). Where one party intentionally and fraudulently procures the breach of a contract existing between two other parties, the procurer of the breach is liable for both compensatory and punitive damages. F.C. Church Shoe Company v. Turner, 218 Mo. App. 516 , 279 S.W. 232 ; Clarkson v. Laiblan, 216 S.W. 1029; 84 A.L.R. 43-100. Under the Missouri law a contingent fee contract of the type involved here is valid and enforceable regardless of the Statutory Section 13338, R.S. Mo., 1939. See Duke v. Harper, 66 Mo. 51 .Wm. H. Becker and Wm. H. Norton for appellant.
(1) The court erred in sustaining defendant's motion to dismiss and in holding plaintiff's first amended petition did not state facts sufficient to constitute a cause of action. The facts stated in the first amended petition stated a cause of action against the defendent for plaintiff's contingent fee in the amount of Three Hundred Sixty-six Dollars and Sixty-six Cents ($366.66). R.S. Mo. Ann., 1939, Secs. 13337 and 13338; Abbott v. Marion Mining Company, 164 S.W. 563, 255 Mo. 378 ; Brookshire v. Metropolitian Life Insurance Company, (Mo. App.) 56 S.W.2d 817; Barthels v. Garrels, 227 S.W. 910 , 206 Mo. App. 199 ; Abbott v. United Railways Company of St. Louis, 138 Mo. App. 530 , 119 S.W. 964; Simpson et al. v. Federal Lead Company, 187 S.W. 1123; Miner v. Fick, 196 N.W. 194 .
APPEAL FROM BOONE COUNTY CIRCUIT COURT
Appellant, an attorney at law, filed his petition to recover contingent attorney's fees from the respondent for services in a claim which, it is alleged, respondent had settled directly with appellant's client. The trial court sustained a motion to dismiss the cause on the ground that the petition failed to state facts sufficient to constitute a cause of action. The plaintiff has appealed.
The petition, in the nature of a bill in equity, is lengthy, but it is necessary to consider all of its material allegations. They are, in substance, as follows:
The appellant has been a duly licensed attorney since 1931; he was in the naval service of the United States from October 12, 1942, to September 27, 1945; the defendant is a foreign corporation, engaged in life, accident and health insurance business; in January, 1942, W.T. Bradley, the insured under one of defendant's policies, employed plaintiff to collect indemnity under said policy for disability resulting from disease. Bradley agreed to pay plaintiff the reasonable and customary contingent fee of one-third of the money so collected; that pursuant to said agreement plaintiff diligently performed his part of the contract, and in October, 1942, had secured an offer of settlement from the defendant in the sum of $1250; on October 12, 1942, plaintiff, pursuant to his voluntary application, was commissioned in the United States Navy and ordered to active duty; he continued to represent said Bradley in said claim, and so advised defendant through its attorney, and also advised defendant likewise that plaintiff was so employed on said contingent fee contract, all of which defendant well knew at all such times. For the purpose of defrauding plaintiff of his fee, and wrongfully relieving itself of responsibility therefor, defendant, taking advantage of plaintiff's absence in the armed services
of the United States, wrongfully and fraudulently settled said claim with said Bradley without notice to the plaintiff, for $1100, which was paid directly to Bradley, of which plaintiff was entitled to $366.66, as such fee. For the purposes aforesaid, defendant fraudulently procured from said Bradley his signed written statement and agreement, which stated that plaintiff had advised Bradley by letter that plaintiff was leaving October 10, 1942, to join the army, and that Bradley would have to retain other counsel, and that he, Bradley, had not retained other counsel, and desired to settle said claim with the defendant, and would hold defendant harmless for the payment of attorney's fees to plaintiff, or to any other attorney, and would indemnify defendant against any claims therefor. The said settlement agreement was composed and prepared by the defendant, and falsely stated that plaintiff had told Bradley that the latter would have to retain other counsel, — the truth being that plaintiff had written Bradley September 28, 1942, that plaintiff would leave for the navy October 10, and that plaintiff would refer the matter to an associate counsel during plaintiff's absence and did, with consent of Bradley, secure an associate counsel to act for and in behalf of Bradley with the defendant, all of which was known to the defendant through its counsel at the time of said settlement. The fraudulent negotiations resulting in said settlement were thereafter performed not by the defendant's counsel, but by the defendant's adjuster, especially assigned for such fraudulent design. Bradley was not aware of the contents of the agreement signed by him and fraudulently procured by the defendant, as aforesaid, but was fraudulently induced to sign the same upon the false and fraudulent representations of the defendant and the defendant's said agent that said statement was merely a formal release of his claim under the policy, and that plaintiff was no longer his attorney, nor had any interest in the amount paid in said settlement. The defendant and its said agent at the time knew of the falsity of said representations. Pending the present action said Bradley has died; that he was insolvent at all times mentioned and at the time of his death, and left no assets out of which the plaintiff might recover his fee, nor at any time after plaintiff learned of said settlement did Bradley have assets or property out of which plaintiff could enforce payment thereof. Prior and up to October, 1942, plaintiff had exchanged correspondence with defendant, submitting proofs of loss and demanding monthly payments therefor to Bradley on said policy claim, and had received defendant's drafts for same payable to Bradley, and, also, defendant had sent its adjuster to confer with the plaintiff regarding a possible settlement of the claim. Upon leaving for the navy, plaintiff engaged an attorney who continued negotiations. Having full confidence in the integrity of the defendant's
counsel, the plaintiff did not serve a formal written notice of his fee contract on the defendant. The petition avers that at law and in equity, the plaintiff is entitled to $366.66 as his said contingent fee by virtue of said settlement, and that because of the fraudulent conduct of the defendant, it should pay plaintiff punitive damages. The last paragraph of the petition reads as follows:
"13. That at all times herein mentioned the defendant had full actual knowledge that the plaintiff was retained and still acting as the attorney for the said Bradley in connection with the claim of said Bradley, and that at all times had actual knowledge of the contract of the said Bradley to pay to the plaintiff a contingent fee of one-third of any sums recovered from the defendant".
The prayer of the petition is that the agreement of settlement between Bradley and defendant be declared null and void, and that defendant be declared and adjudged to be indebted to plaintiff in the sum of $366.66; that punitive damages of $1000 be awarded plaintiff, and for general relief.
Appellant claims he has stated a cause of action under Section 13337, R.S. Mo., 1939. This statute provides for an attorney's lien for his compensation "from and after the commencement of an action or the service of an answer", and attaches such lien to the client's cause of action or counterclaim and to the verdict, report, decision or judgment in the client's favor, and the proceeds in whosesoever hands they may become, and regardless of settlement by the parties before or after judgment. Appellant contends that under the facts alleged he had, in effect, "commenced an action". We cannot agree that this statute can be so construed, and hold that it cannot be applied to appellant's petition. The "commencement" of an action is defined by Section 23, Laws of Missouri, 1943, page 365.
Appellant next argues that his petition shows compliance with Section 13338, R.S. Mo., 1939. This section has to do only with contingent fee contracts, and authorizes such agreements, including fee percentage of the proceeds of any settlement of the client's cause of action before or after suit or judgment, or whether or not any action shall be commenced, and provides that if the attorney shall serve the defendant or proposed defendant with a notice in writing that he has such a fee contract, stating the interest he has in the claim or cause of action, then from the date of such notice the attorney shall have a lien on the proceeds of any settlement of such claim or cause of action for such portion stated, and such lien cannot be then defeated by any settlement between the client and the defendant before or after any suit brought or judgment therein. Any such defendant settling such claim "after notice served as herein provided", before
or after any suit brought, without the attorney's consent, is made liable by that statute to the attorney to the extent of his lien.
The latter section, it will be noted, requires a notice to be served in writing upon the defendant of the existence of the contingent fee contract and stating the interest claimed thereby in the cause of action, before such contract shall become a lien, and before the defendant's liability in respect to it arises . Appellant contends that since no notice would have been required if there had in fact been a suit instituted, that no notice in writing should be necessary under this section after the defendant had made monthly payments through the plaintiff, had carried on negotiations and offered settlement through the plaintiff as attorney for the claimant. Suffice it to say, that even under such circumstances the Legislature has not seen fit to create any attorney's lien as against a proposed defendant for fees based on a contingent contract and before suit unless and until the attorney has served upon defendant a notice in writing, and that such lien exists only "from the date of such notice", and the liability of the defendant pertaining thereto arises only "after notice served as herein provided" (Sec. 13338). Whatever right the attorney may have to perfect a lien, it is not perfected or brought into existence under that section until the written notice has been served. Mere knowledge on defendant's part that there was a contingent agreement between the plaintiff and his client Bradley for a one-third contingent fee did not meet the statutory requirements. Cases cited by appellant wherein the manner of service of a written notice is in dispute, and where the contingent contract in written form was actually exhibited to or brought to the attention of the defendant, or where there was a suit pending, are not in point.
Appellant further contends that defendant is estopped to claim lack of notice because of its alleged fraud, deceit and collusion. Estoppel is not specifically pleaded. It will be noted that the petition alleges no fraud, deceit or collusion on the part of the client Bradley, but alleges that Bradley was not aware of the contents and conditions of the settlement agreement, and signed the same while relying on the alleged misrepresentations by the defendant. There was, therefore, no collusion. If Bradley was acting in good faith, he had the right to settle his claim with defendant as he saw fit. He had not even agreed not to do so in the contingent fee contract alleged. Franklyn v. Local Finance Co., 234 Mo. App. 973 , 136 S.W.2d 112 . The defendant also certainly had a right to settle the claim directly with Bradley before suit and without written notice of plaintiff's lien, unless its alleged conduct, as contended by appellant, estops it from denying receipt of the statutory notice in writing.
It must be borne in mind that it is plaintiff's burden to plead all of the elements essential to his cause of action. He seeks to recover as
for a lien for attorney's fees created by Section 13338. Prior to the enactment of that statute an attorney had no such remedy or lien as that statute provides. Noell v. Mo. Pac. Railroad Co., 335 Mo. 687 , 695, 74 S.W.2d 7 . There are three parties concerned in such a lien and its enforcement. The attorney, the client and the debtor each has his rights. If the statute is followed, such rights are protected. If the debtor, without statutory authority, assumes that the lien is perfected, and withholds from the client or claimant part of the settlement funds for the purpose of the alleged claim for fees, the debtor may lay himself liable to the claimant who may question the fee contract or insist on the right to make his own accounting to his attorney. If, however, the written statutory notice is served on the debtor, he can, with impunity, withhold from the claimant the amount of the fee out of the proceeds of the settlement in accordance with the fee contract.
Can any conduct wholly and solely on the debtor's part supply one of the vital elements required by the statute, namely, the written notice of the contract and lien, to be served on the debtor, and thereby estop itself from denying the written statutory notice, and thereby, likewise, bind the claimant to the creation of the lien? The possibilities under such a theory only emphasizes the wisdom of the Legislature in expressly giving rise to such a lien before suit on the giving of the notice in writing, and in creating the liability of the proposed defendant respecting such lien only "after notice served as herein provided". We conclude that the conduct of the defendant, as alleged, does not estop it from denying that the statutory written notice of lien was served, and does not supply the absence of such statutory requirement in the petition.
Further contention is made that the petition presents a cause of action for fraudulent and wrongful procurement of a breach of appellant's contract with his client. If Bradley had a right, in good faith, to settle the claim with defendant, which the petition disclosed that he did, and if defendant, in the absence of any notice of an attorney's lien by the bringing of an action or the serving of a written notice, required by the statute, had a right to settle it with him, the fact that Bradley then did not pay the plaintiff as per agreement was not a breach of the contract between Bradley and plaintiff for which the law will hold defendant liable even though defendant knew plaintiff's contingent contract existed, and the terms thereof. To give rise to any such liability defendant's conduct must be wrongful.
"No liability for procuring a breach of contract exists where the breach is caused by the exercise of an absolute right, that is, an act which a man has a definite legal right to do without any qualification", 84 A.L.R. 63.
We believe that it was to protect the attorney in similar circumstances that the statutory lien was provided for by the Legislature, of which the plaintiff did not avail himself. Furthermore, such a theory would call for an action for damages for the breach, whereas the petition here is based on the theory of a lien for a fixed fee out of funds wrongfully disposed of, and for punitive damages only.
Appellant also presents the theory that an action is stated for damages for fraudulently defeating plaintiff's common law "retaining lien" by placing the proceeds of his lien beyond his possession. The common law lien known as an attorney's "retaining lien" authorizes the attorney to retain in his possession to secure any fees due him by his client, all documents, money or other property of his client. 6 C.J. p. 766; 5 Am. Juris. p. 388, Sec. 209. There is no allegation in the petition that at the time of the settlement any such documents or money, belonging to Bradley, were in plaintiff's possession of which he was deprived by the alleged conduct of the defendant. Nor is the petition based on any such cause of action.
Finally, appellant pleads in his petition that at law and in equity and in good conscience plaintiff is entitled to be paid his contingent fee by the defendant by reason of the settlement made with Bradley. In Baucke v. Adams, 188 S.W.2d 355 , 368, we said:
"The law is, as it should be, zealous in the protection of an attorney respecting his compensation for services rendered. Such is the purpose of the statutory provisions therefor. Sections 13337 and 13338, R.S. Mo., 1939. When, however, an attorney seeks to establish his lien and to exact the penalty from others for alleged deforcement of such lien or for defrauding him thereof, it is his burden, not only to prove his authorized employment, but that the acts and conduct of the parties whom he seeks to hold liable were in violation of his rights and wrongfully defrauded him thereof. Walsh v. Walsh, 285 Mo. 181 , 205, 226 S.W. 236 , 242; Woosley v. Wells, (Mo. Sup.) 281 S.W. 695, 700".
We believe under the facts pleaded here that the court has no authority to enlarge upon the lien rights as fixed by the statutes in question, nor to create or extend the liability of third parties respecting the statutory attorney's lien. Equity follows the law.
In our opinion the court did not err in sustaining the motion to dismiss on the ground that the petition failed to state facts sufficient to constitute a cause of action. The judgment is affirmed. Bland, J., concurs. Cave, P.J., not participating.