GOSTIN v. STATE FARM INSURANCE COMPANY

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District Court of Appeal, Fourth District, California.

Irwin GOSTIN and Louis S. Katz, Plaintiffs and Respondents, v. STATE FARM INSURANCE COMPANY, Defendant and Appellant.

Civ. 7207.

Decided: September 30, 1963

Oakes & Horton and Burch, Gregory & Platt, San Diego, for defendant and appellant. Gostin & Katz, San Diego, for plaintiffs and respondents.

The plaintiffs, respondents herein, are attorneys at law; entered into a ‘Retainer Agreement’ with a man named Cook, who retained them to prosecute his personal injury claim for damages; contend that this agreement provided for payment of a contingency fee; advised the defendant insurance company, appellant herein, which was the insurer of the person against whom the subject claim was to be made, that they had been retained to represent Cook; were discharged by Cook; notified the defendant company that, under their agreement aforesaid, they intended to enforce a lien in their favor upon one-third of any amount paid to Cook in settlement of the latter's claim; and brought this action against Cook and the insurance company to recover an amount equal to one-third of $4370 being the sum subsequently paid by the insurance company to Cook in settlement of the latter's claim. Cook was not served and did not appear in the action. Judgment for $1,456.66 was rendered in favor of the plaintiffs against the defendant insurance company, from which the latter appealed.

The ‘Retainer Agreement’ is in writing; is unilateral, being signed by the client Cook, alone; recited that in consideration of the legal services to be rendered by the plaintiffs in the prosecution of his claim, he appointed them as his attorneys, and stated, ‘I * * * do set over and assign to them a lien of 33 1/3% of any and all amounts recovered by compromise * * *’; and contains other provisions not material to the decision at hand. The agreement is unique in that it does not expressly provide for the payment of any attorney's fees; does not purport to assign to the attorneys a 1/3 interest in any compromise recovery; but is limited to the creation of a lien. No principal obligation is expressly stated therein to secure the payment of which the lien is set over and assigned.

No evidence was introduced at the trial. It was there agreed, in substance, that the allegations of the complaint not denied by the answers should be found to be true; that the court should make findings accordingly; and that its decision would be based thereon. The court found the facts to be as hereinbefore stated, including the execution of the subject agreement; by an ambiguously phrased finding interpreted in favor of the judgment, found that the plaintiffs had performed services of a legal nature for Cook, although the undenied allegations in the complaint did not support such a finding; did not find that Cook had agreed to pay the plaintiffs an attorney's fee, either in a stated amount or a percentage of his recovery; did not find that the plaintiffs' discharge by Cook was wrongful, the formers' allegation to this effect in their complaint being denied by the answer; and, as a conclusion of law, determined that the plaintiffs were entitled to recover from the insurance company one-third of the settlement amount which it had paid to Cook.

The obvious question presented by the foregoing recital of facts and circumstances is whether the findings of fact made by the court support its conclusion of law in the premises.

It is settled in California that an attorney's lien against the prospective recovery of a client upon his claim, to secure the payment of a contingency fee for services to be rendered in connection therewith, may be created by contract (Haupt v. Charlie's Kosher Market, 17 Cal.2d 843, 845, 112 P.2d 627; Wagner v. Sariotti, 56 Cal.App.2d 693, 697, 133 P.2d 430; Tracy v. Ringole, 87 Cal.App. 549, 551, 262 P. 73); is a charging lien (Tracy v. Ringole, supra, 87 Cal.App. 549, 551, 262 P. 73); constitutes an equitable assignment pro tanto of the client's claim and his right to recover thereon as security (Haupt v. Charlie's Kosher Market, supra, 17 Cal.2d 843, 845, 112 P.2d 627; Wagner v. Sariotti, supra, 56 Cal.App.2d 693, 697–698, 133 P.2d 430); vests in the attorney an equitable interest in the client's recovery as security (Jones v. Martin, 41 Cal.2d 23, 27, 256 P.2d 905); or, more correctly stated, entitles the attorney to any available equitable remedy necessary to effect payment of his fee for services rendered in connection with his client's claim out of any recovery upon that claim. (City of Los Angeles v. Knapp, 7 Cal.2d 168, 174, 60 P.2d 127; Tracy v. Ringole, supra, 87 Cal.App. 549, 551, 262 P. 73.) To this end the law provides that the client's debtor, who has notice of the lien, will not be discharged from his obligation in the premises by subsequent performance rendered to the client, unless the attorney has waived or is estopped to assert his lien. (Jones v. Martin, supra, 41 Cal.2d 23, 27–28, 256 P.2d 905.)

In all instances, the purpose of the attorney's lien is to secure to him the payment of his fee out of any recovery upon the claim of his client, in connection with which he rendered or agreed to render services. (Wagner v. Sariotti, supra, 56 Cal.App.2d 693, 697, 133 P.2d 430; Tracy v. Ringole, supra, 87 Cal.App. 549, 551, 262 P. 73.)

In the ordinary contingency fee agreement, the parties agree upon the fee to be paid. Although the client has a right to discharge an attorney retained pursuant to such an agreement at anytime (Salopek v. Schoemann, 20 Cal.2d 150, 155, 124 P.2d 21), where he does so without legal cause he is obligated to pay the full amount of the agreed fee, even though the attorney does not, perforce of such discharge, complete the services contemplated. (Jones v. Martin, supra, 41 Cal.2d 23, 27, 256 P.2d 905; Salopek v. Schoemann, supra, 20 Cal.2d 150, 155, 124 P.2d 21.) On the other hand, where the discharge is for sufficient cause the attorney is entitled to recover only the value of the services actually rendered. (Salopek v. Schoemann, supra, 20 Cal.2d 150, 153, 124 P.2d 21.) In either event, the attorney may enforce a lien created by his contract of employment. (Salopek v. Schoemann, supra, 20 Cal.2d 150, 156, 124 P.2d 21.)

A consideration of the foregoing principles dictates the conclusion that, regardless of other factors, unless the attorney has rendered services to his client under an agreement to pay him a fee, or has agreed to do so for such a fee, or has rendered services under circumstances by virtue of which the law implies an agreement to pay him a reasonable fee, he is not entitled to obtain any part of the recovery upon the claim of his client which he was retained to prosecute. Unless the attorney is entitled to a fee for services rendered, or which he agreed to render, there is no obligation in his favor which can be the subject of an action to enforce performance thereof through the media of a lien upon the claim of his client, or the latter's right to recover thereon.

In the instant case, under the facts as found by the trial court, the client, Cook, did not expressly agree to pay the plaintiff 33 1/3% of any compromise recovery upon his claim. The evidence does not support a finding that the plaintiffs rendered any services to Cook in connection with that claim, and there is no finding with respect to the reasonable value of any such services which would support a legally implied agreement to pay the amount awarded by the judgment herein. As a consequence, there was no obligation the performance of which could be enforced by applying equitable remedies to the lien created by the ‘Retainer Agreement’ at hand.

The defendant contends that, in any event, the plaintiffs were required to show that their discharge was wrongful, as a condition precedent to recovery in the instant action. There is no merit to this contention. An averment that an attorney had been discharged by his client without legal cause is negative in character; even though assumed to be necessary to a complaint by the former to enforce a lien against the claim of the latter, it would not constitute a part of the substantive cause of action relied upon; and, under such circumstances, the attorney would not have the burden of proving such. (Melone v. Ruffino, 129 Cal. 514, 519, 62 P. 93; Craddock v. O'Brien, 104 Cal. 217, 220, 37 P. 896; Hosang v. Minor, 205 Cal.App.2d 269, 274, 22 Cal.Rptr. 794.)

We make no determination with respect to the propriety or availability of a showing that the client, Cook, in fact agreed to pay the plaintiffs a contingency fee to secure which he set over and assigned the lien referred to in the ‘Retainer Agreement.’ Our conclusion is based upon the pleadings, proof and findings at hand; does not foreclose a determination on a retrial of the matter, upon proper pleadings and proof, that the plaintiffs are entitled to a fee which was secured by the lien created by their written retainer agreement; nor deprive them of the remedies available under the law to recover the amount of any fee secured by such a lien.

The judgment is reversed.

COUGHLIN, Justice.

GRIFFIN, P. J., and GERALD BROWN, J., concur.

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