Levy, Simon & Co. v. Brown ( 1878 )

Chalmers, J.,

delivered the opinion of the court.

This is a suit on an injunction-bond, which originated under the following circumstances : Levy, Simon & Co. (afterwards Levy, Scheur & Co.), of New Orleans, placed in the hands ofH. H. Miller, a lawyer of Vicksburg, a claim for collection against the estate of Isaac Lowenhaupt, deceased. Suit was promptly brought, and resulted in the recovery of a judgment against Catherine Lowenhaupt, executrix of said estate, for $2,020.87. An execution on this judgment having been returned nulla bona, Miller caused writs of garnishment to be issued, which were served on Bodenheim & Co. and Louis Hoffman. Judgment by default was obtained against Hoffman, which was subsequently reversed, on appeal, in this court, and the writ quashed for some informality. Bodenheim & Co. answered the writ served on them, admitting'an indebtedness to the estate of Lowenhaupt greater than the judgment against the principal debtor, and, therefore, judgment was entered against them as garnishees. Some months afterwards, Bodenheim & Co. filed their bill in the Chancery Court of Warren County, enjoining an execution which had been issued on this judgment, and setting forth that they had discovered, since the rendition of said judgment, that they had been mistaken in answering that they were indebted to the estate of Lowen-haupt, and had now ascertained that their note, which they supposed was payable to Catherine Lowenhaupt as executrix, was really payable to said Catherine individually, and that she claimed that the same was her separate property. They prayed that Levy, Simon & Co. and the said Catherine might be compelled to interplead and settle the true ownership of said note, and that, pending said litigation, the execution of the judgment against themselves might be enjoined. The injunction-bond now in suit was tendered with the bill, and the writ granted and served on Miller as the attorney of Levy, Simon & Co.

Miller notified his clients of the ¡tendency of this new proceeding, and of his attention to it. By their silence and acquiescence they recognized his authority to represent them, so that there is no ground for doubting that, as to the new litigation, his employment was as complete as in the original suit. Before the filing of any answer or other pleading by him, however, a written agreement of compromise and settlement of the injunction suit was entered into between all the parties thereto, to wit, Miller as the representative of Levy, Simon & Co., Mrs. Catherine Lowenhaupt, Bodenheim & Co., and Isaac Brown and Joseph Bazinsky, the two latter being the sureties on the injunction-bond, and the defendants in the present litigation. By this arrangement, the injunction proceedings were to be dismissed, and all liability on .the bond to be released and discharged, in consideration of which, Brown, one of the sureties, was to pay to Miller, within ninety days, $713, to be credited on the judgments held'by his clients; and it was further agreed that Brown should realize, as rapidly as possible, upon certain collaterals which had been placed in his hands by Bodenheim & Co., and should apply the proceeds to the ex-tinguishment, in full, of said judgments, and then pay over the excess, if any, to Mrs. Lowenhaupt. This agreement was carried out. The bill for injunction was dismissed ; a written release was given by Miller to the sureties on the bond ; the money agreed to be paid was by the sureties paid to Miller.

Miller died, without having communicated to his clients any information of these transactions. Several months after his death, Levy, Simon & Co. brought this suit against Brown and Bazinsky, the sureties on the injunction-bond, seeking to recover from them the penalty thereof, which had become apparently due by the dismissal of the bill. Plaintiffs had no knowledge of the facts above detailed until they were disclosed by the pleas here interposed. Do these facts constitute a defence to this action?

This depends upon whether Miller, the attorney of plaintiffs, bjr reason of his general authority as such, had the power to make the compromise and release the sureties on the injunction-bond without the knowledge or assent of his clients. The case, therefore, involves a consideration of the powers of attorneys in dealing with claims in their hands for collection or suit.

In England, it is broadly laid down that the attorney is the general agent of his clients in all matters that may be deemed likely to arise in the progress of the cause or the collection of the claim, and hence it is held that he may compromise by accepting less than the full sum due ; or, where the demand is for the price of goods sold, by receiving back the goods in satisfaction. If he acts without the instructions of his client, he will not be liable to him if his acts have been boná fide, and marked with reasonable care and skill. If he acts in violation of express instructions, he will be liable to his client; but the latter will be bound by his action, so far as the opposite party is concerned, unless that party was cognizant of the violated instructions. Cheron v. Parrott, 14 C. B. (n. s.) 74; Fray v. Voules, 1 El. & El. 839; Prestwick v. Poley, 18 C. B. (n. s.) 806 ; Strauss v. Francis, L. R. 1 Q. B. 379.

In the elaborate note to Story on Agency, sect. 24, and also in Wharton on Agency, sect. 592, it is said that the American rule is the same as the English. If these learned authors mean to say that a majority of the American courts recognize an inherent right in the attorney to compromise the original demand placed in his hand, so as to receive in full satisfaction less than the amount due, or to substitute claims upon other parties, or to take property in satisfaction of a money demand, or to release any security existing when he received the claim, we cannot agree with .them. That there are cases going to this extent is true, but we think that the decided weight of authority in this country is the other way. Unquestionably, such a rule has been repeatedly repudiated by this court. Holker v. Parker, 7 Cranch, 436; Abbe v. Rood, 6 McLean, 106; Derwort v. Loomer, 21 Cow. 245; Nolan v. Jackson, 16 Ill. 272; Doub v. Barnes, 1 Md. Ch. 127; Langdon v. Potter, 13 Mass. 320; Davidson v. Rozier, 28 Mo. 287; Filby v. Miller, 25 Pa. St. 264; Vail v. Jackson, 15 Vt. 314; Lockhart v. Wyatt, 10 Ala. 231; Jones v. Ransom, 3 Ind. 327; Stackhouse v. Reese, 15 Iowa, 122; Succession of Weigel, 18 La. An. 49; Maddox v. Bevan, 39 Md. 485; Smith’s Heirs v. Dixon et al., 3 Metc. (Ky.) 438.

It is quite generally held, however, even by those courts which deny to the attorney the right to compromise a claim placed in his hand, that he has full control over the litigation necessary to insure its collection, and in the conduct and progress of it may take such action as he deems proper. The reason for the distinction is obvious : the owner of the claim must always be the proper judge of its value, and of the terms upon which he is willing to extinguish it, or to release any of the securities by which it was protected when he placed it in the hands of the attorney ; and the latter, therefore, must consult him before taking any step which is likely to produce these results. But the client cannot know as well as his lawyer the steps necessary to insure its collection, or estimate so accurately the value of the legal securities which may be evolved in the course of the litigation. It is because of his ignorance of these matters that he employs an attorney, and submits to his superior judgment the conduct of the litigation.

To impose upon the attorney the necessity of consulting with his client whenever propositions are made to him with regard to these matters, which in his judgment are advantageous, would so embarrass and thwart him as in a great measure to destroy his usefulness; hence it is that the courts quite generally concede to the attorney unlimited authority over the conduct of the litigation, including the power to control all legal process, and to compromise or 'release all attachment or other liens which have accrued in the progress of the cause, as collateral thereto, and not belonging to the original demand. Commissioners v. Younger, 29 Cal. 147; Phillips v. Rounds, 33 Me. 357; Gaillard v. Smart, 6 Cow. 385; Ford v. Williams, 13 N. Y. 577; Pierce v. Strickland, 2 Story, 292; Monson v. Hawley, 30 Conn. 51; Moulton v. Bowker, 115 Mass. 36; Gordon v. Coolidge, 1 Sumn. 536; Jenney v. Delesdernier, 20 Me. 183. Some of the cases cited extend to the attorney a wider latitude than could be sanctioned in this State, where, by a series of adjudications, his authority has been confined within narrower limits. ■ Thus, it has been held that he cannot release a levy on personalty (Banks v. Evans, 10 Smed. & M. 35); nor grant a stay of execution (Reynolds v. Ingersoll, 11 Smed. & M. 249) ; nor assign a judgment to a stranger, who has paid to him the amount due on it (Walk. 431; we do not commit ourselves to an indorsement of this decision to its full extent) : nor compromise in any manner tlie.claim placed in his hands ( Fitch v. Scott, 3 How. 314) ; nor receive any thing save lawful money in satisfaction of -it (Garvin v. Lowry, 7 Smed. & M. 24). All of these decisions relate to. the dealings of the attorney with the original claim placed in his hands, and the liens which, by operation of law, follow upon its reduction to judgment. They are believed to .announce a rule more stringent than that which prevails elsewhere, in so far as they deny authority to release levies and stay executions. But even if we concede that the principle inculcated by them would forbid the release by the attorney of any security acquired during the litigation, either against the original debtor or against any person who may have made, himself liable for the debt, and if we admit that the attorney is compelled to maintain inviolate and unimpaired both the claim placed in his hand and the liability of all who have become answerable for it, this does not necessitate a repudiation of. the act of the attorney in this case ; and while we are not called upon to depart from the principle of these decisions, neither do we propose to extend it further. The bond here sued upon was not given in any proceeding against the original debtor, Lowenhaupt, nor had these defendants in any manner made themselves liable for his engagements.

In releasing them, therefore, the attorney was neither diminishing the original value of the claim placed in his hands, nor extinguishing any security which had accrued to his clients in the litigation with their debtor.

Their judgment against that debtor, as well as their judgment against the garnished debtors of that debtor, stand yet in full force and unimpaired. The garnishees had filed a bill which, upon its face, afforded good ground of injunction, and which, if established, would have resulted in a vacation of the judgment against themselves. To avoid the doubtful result of this litigation, the attorney of plaintiffs agreed that if the sureties on the bond would pay to him for his clients a certain sum, to be credited upon the judgments which he had obtained against the garnishees, and would devote to the same end the collaterals which had by the garnishees been placed in their hands to save them from loss, he would release and discharge the bond executed by them. Mrs. Lowenhaupt agreed to postpone her claim to that of plaintiffs. Bodenheim & Co. agreed to dismiss their bill. All this was carried out in good faith. Now, when years have elapsed, when Bodenheim & Co. have become insolvent, when the col-laterals which were placed in the hands of the defendants to indemnify and protect them have either been collected or proven worthless,' this suit is brought to assert against defendants a liability on their bond, which became absolute by reason of the dismissal of the bill in accordance with the agreement made with plaintiffs’ lawyer. It is true that plaintiffs had no knowledge of this agreement; but it is also true that but for the agreement the bill would not have been dismissed, and the absolute liability would not have accrued. Plaintiffs cannot take advantage of the dismissal of the bill, induced by. their attorney, and repudiate the release of the sureties on the injunction-bond, which was the price of said dismissal.

Our conclusion is, that the agreement entered into bj Miller was within the scope of his authority, and therefore obligatory on his clients.

Judgment affirmed.