Potter v. Ajax Mining Co.

After stating the facts, Miner, J. delivered the opinion of the court. Plaintiff’s attorneys base their right to have the order for the dismissal of the action set aside and the case tried upon the issues joined between the parties, under Sec. 135, Rev. Stat. 1898. This section provides that: ‘ ‘ The compensation of an attorney and counselor for his services is governed by agreement, express or implied, which is not restrained by law. From the commencement — 429 — of an action or the service of an answer containing a counterclaim, the attorney who appears for a party has a lien upon his client’s cause of action or counterclaim, which attaches to a verdict, report, decision, or judgment in his client’s favor, and the proceeds thereof in whosesoever hands they may come; and can not be affected by any settlement between the parties before or after judgment.7’ The appellant claims that this contention is erroneous, and that the statute did not affect the plaintiff’s case, or create the lien of plaintiff’s attorneys, because the act was not retroactive under a proper consideration of the statute, and of Section 2490 Rev. Stat., which provides that no part of the Revised Statutes is retroactive unless expressly so declared. The contract in question was made on July 23, 1897. This action was commenced October 11, 1897. The statute giving an attorney’s lien was passed and became operative January 1, 1898. The action was dismissed by the plaintiff, through the settlement he made with the defendant March 9, 1898. The judgment appealed from was rendered March 28, 1898. In the case of Sandberg v. The Victor Gold and Silver Mining Company (decided at the September term of this court, 1898), we held that prior to the enactment of Section 136, Rev. Stat. 1898, there was no attorney’s lien for fees on a cause of action before judgment, but that the court would not aid a party in cheating and defrauding his attorney out of his costs and fees; and in Victor Gold and Silver Mining Co v. National Bank of the Republic (decided at the same term), we held that attorneys have a lien upon the judgment for costs advanced by them, and that the judgment being for costs imported notice of the lien. Sec. 135, Rev. Stat, 1898, is a copy of Sec. 66, Code — 430 — of Civil Procedure of the State of New York for 1879. In Astrand v. Brooklyn Heights Ry. Co., 53 N. Y. Supp., 294, it is held that the case of Coughlin v. R. R. Co., 71 N. Y., 445, holding that there could be no lien on nonassignable causes of action that did not survive, was before the amendment of 1879, above referred to, and that such statute covers and includes all causes of action, contract and tort alike, and those that do not survive. We believe this holding to be correct. The language of Sec. 135, if applicable to this case, is comprehensive, and creates a direct lien in favor of the attorney upon his client’s cause of action, whatever form it may assume in the entire course of litigation, and entitles the attorney to follow the proceeds without regard to any settlement, before or after the judgment. It being a statutory lien every one must take notice of it, and any one settling with the client, without the knowledge of the attorney, does so .at his own risk. In common fairness to an attorney, no settlement should be made by the party where an attorney has an interest, without full knowledge of the attorney, and under such conditions as will protect his lien. The attorney being an officer of the court, is under its control, and no unfair demands on his part should be permitted by the court. Under the statute the attorney is entitled to such legal fees and allowances as he can establish by agreement with his client, which is not restrained by lawThis agreement, however, does not deprive the party of the right to control the management of his case and determine when the litigation shall cease, providing he is able and willing to satisfy the just claim of his attorney. So, also, under Sec. 135, the cause of action, although for an injury to the person, which would not survive to the administrator at common law was assignable and the — 431 — subject of a contract, sucb as was made in this case. Peri v. R. R. Co., 152 N. Y., 521; Astrand v. Brooklyn Heights R. Co., 53 N. Y. Supp., 294; Lee v. Vacuum Oil Co., 126 N. Y., 579. As held in Santi Peri v. N. Y. C. & H. R. R. Co., 152 N. Y., 521, this statutory attorney’s lien operates as a security and lien upon the cause of action which attaches to the .judgment, and if a settlement is made by the parties without the consent or knowledge of the attorney having a lien and in prejudice of his rights, or by reason of the insolvency of his client, or other sufficient cause, the court will interfere and protect the officer by vacating the satisfaction of judgment and by placing the parties in the same situation they were in .before, for the purpose of satisfying the lien of the attorney, under the statute, and the action may be prosecuted by the attorney, for his benefit, under his lien. O'Brien v. Metropolitan Ry. Co., 50 N. Y. Supp., 159; Sternburgh v. Miller, 42 N. Y. Supp., 333; Palmer v. Van Orden, 64 How. Pr. 79; Carpenter v. Meyers, 90 Mich., 209. So, also, at common law, without the intervention of the statute, it has long been the practice of courts to intervene to protect attorneys against settlements made by their clients to cheat them out of their costs. If an attorney has commenced an action and his client settles it with the opposite party before judgment, collusively, in fraud of his rights, and to deprive him of his costs, the court will permit the attorney to go on with the suit for the purpose of collecting his costs. Coughlin v. N. Y. C. & H. R. R. Co., 71 N. Y., 448; Randall v. Van Wagener, 115 N. Y., 531; Weeks v. Wayne County Judge, 73 Mich., 256. Where by agreement between attorney and client the attorney is to have a lien for his services to a certain — 432 — amount upon the judgment to be recovered, this constitutes an equitable assignment of the judgment which attaches to the judgment as soon as rendered. 1 Jones on Liens, Secs. 43, 62, 223, 224. Again it is held in Weeks et al. v. Wayne Circuit Judges, 73 Mich., 256, that in the absence of a statute ‘ ‘ an agreement between attorneys and their client that they are to be paid for their services rendered in the prosecution of a suit, and reimbursed for moneys advanced, from the proceeds of the judgment which should be obtained, operates as an assignment of the judgment to the attorneys to the extent of such claims, and until the same are paid the plaintiff can give no valid discharge of the judgment. The rule that courts look with favor upon a compromise and settlement made by the parties to a suit, only applies where all of the rights and interests of all of the parties concerned, both legal and equitable, have been respected, and in good faith observed.” To the same effect are, Carpenter v. Myers, 90 Mich., 209; Andrews v. Morse, 31 Am. Dec., 752; Weeks on Attorneys, 369; Hutchinson v. Howard, 15 Vt., 544, and Jones on Liens, Secs. 223, 224. IJpon full examination of the record we find that the settlement and dismissal of the action as shown by the proof, was collusive, fraudulent, and prejudicial to the rights of the attorneys for the plaintiff, and was made for the purpose of cheating and defrauding them out of their just compensation for services rendered and agreed to be rendered in that action, of which fact the Guaranty Company, through its attorney, had actual notice. The order setting aside and vacating the satisfaction and dismissal of the action so collusively and fraudulently obtained could properly be made' by the court under the common law to protect one of its officers from the fraud — 433 — of bis client. In permitting the attorneys to continue tbe prosecution of the case, so as to determine the amount of the lien for their compensation for services in the action, as agreed between them and their client, was a proper mode of reaching the amount of their compensation, without reference to the statute, - under the proof of fraud shown in this case. The attorneys were entitled to proceed to judgment under the rules established by courts to protect attorneys from dishonest clients. But the plaintiff in this case did not see fit to adopt the course of procedure so established. The attorneys for the plaintiff based their right to have the dismissal set aside and the' cause tried alone upon Section 135, Rev. Stat. This statute did not go into effect until Jan., 1898. It gave the attorneys certain rights, but was not remedial in its nature. It was not retroactive in its operation, and did not affect the' plaintiff’s cause of action or suit brought upon the contract made, before the statute became operative. At common law the rule was that a statute is never to be construed to operate retrospectively, unless such intention is clearly expressed in the act. Sec. 2490 Rev. Stat. expressly provides that no part of the Rev. Stat. is retroactive, unless expressly so declared. It is clear that the act applies to cases that might afterward be commenced, and not to contracts or causes ^of action previously commenced. Donahy v. Clapp, 12 Cushing, 440. If the statute had been operative upon the cause of action in question, a lien upon the plaintiff’s cause of action might have been created. The cause was tried upon the theory that the statute was retroactive and entitled the plaintiff to recover under its provisions. The court instructed the jury that the statute applied to this case, and that by its provisions the attorneys had a lien — 434 — upon plaintiff’s cause of action, which attached to the verdict, decision, or judgment, and that the settlement made did not affect the attorney’s lien upon the cause of action created by virtue of statute. We are of the opinion that the court erred in submitting the case to the jury upon this theory, and in giving such instruction. The case is reversed and remanded, with directions to the district court to vacate and set aside the judgment, and to grant a new trial. Defendant is entitled to costs.