Van Dale v. Karon

Action begun September 9, 1938, by Adrian Van Dale against Morris Karon and Philip Weinberg, partners engaged in the practice of law, to set aside a written contract and to recover money paid as attorney fees thereunder. From a judgment in favor of the plaintiff, the defendants appeal.

Van Dale held four insurance policies issued by the Prudential Insurance Company, all containing disability clauses. In September, 1932, Van Dale claimed to be permanently and totally disabled and entitled to disability payments under the policies. A dispute arose as to the extent of his disability. The company paid the benefits from September, 1932, to December, 1933, and then discontinued them, claiming that Van Dale was able to, work. Van Dale then made a settlement with the company in which he agreed to accept $5,110, cancel two of the policies, and eliminate the disability clauses from the others. Becoming dissatisfied with this arrangement, he consulted the defendants. The defendant Weinberg drew a retainer contract which was signed by Van Dale and his wife. It was dated October 24, 1935, and reads:

"We, Mr. and Mrs. Adrian Van Dale . . . hereby retain Shockley, Mattison Weinberg as our attorneys and Mr. Morris Karon, of the firm of Gold McCann, as of counsel to represent us in our claims against the Prudential Insurance Company of America arising out of their effecting an alleged settlement with Mr. Van Dale during the month of January, 1934, relating to his permanent disability insurance policies.

"We agree to pay our attorneys and counsel as attorney fees one third of any sum or sums obtained in settlement or suit on the above claims. We also agree to pay all costs and disbursements incurred arising out of these claims, either in suit or in settlement.

"It is expressly understood that unless some collection is made, no fees are to be paid and that no settlement will be made without our written consent.

"ADRIAN VAN DALE.     (Seal)
"PEARL VAN DALE.      (Seal)

"PHILIP WEINBERG."

As attorneys for Van Dale the defendants began an action against the Prudential Company, charging fraud in obtaining the settlement. During the trial of that action it was stipulated that no question of damages was to be submitted to the jury, and that if Van Dale was entitled to recover, the damages were to be the total amount due as disability benefits up to that time. Van Dale recovered a judgment for $3,916. It was also adjudged that he was permanently disabled within the meaning of the policies, and that the settlement agreement was void. The judgment was affirmed inVan Dale v. Prudential Insurance Co. (1937) 225 Wis. 281274 N.W. 153. Under this judgment, two policies were reinstated, one paying $50 per month for life, and another paying $11 per month until such time as the face of the policy is paid out.

The decision of the supreme court was handed down in June, 1937. In August the Prudential Company paid the judgment. It, however, refused to pay monthly disability benefits which had accrued since the date of the judgment. Karon and Weinberg commenced another action on behalf of Van Dale and recovered $4,620. From the proceeds of each judgment the defendants deducted one third as attorney fees before paying the balance to Van Dale. When Van Dale received the second payment in December, 1937, Karon drew a contract and Van Dale signed it. This writing, which was dated December 17, 1937, reads as follows:

"I, Adrian Van Dale, of Wauwatosa, Wisconsin, agree to pay to my attorneys, Philip Weinberg and Morris Karon, as attorneys' fees, one third of any sum or sums obtained from or paid by the Prudential Insurance Company of America to Adrian Van Dale for disability compensation on Policy No. 5485245 (the $5,000 policy with $50 per month disability compensation) issued by the Prudential Insurance Company of America. This is a modification of my retainer agreement with my attorneys, dated October 24, 1935.

"ADRIAN VAN DALE. (Seal)
"In presence of:
    "MORRIS KARON, Witness."

Thereafter, the parties made an arrangement with the Prudential Company for the mailing of checks to the offices of Karon and Weinberg. From January to August, 1938, checks were forwarded from the attorneys' offices, and each month Van Dale gave the defendants his check for $16.66. In August, Van Dale consulted an attorney who advised him that under the original retainer contract he was not obligated to pay fees out of the disability benefits accruing after the second judgment. Van Dale then commenced this action to have the modification agreement set aside and to recover payments which he had already made pursuant thereto.

Defendants contend that the modification contract was entered into at the request of Van Dale, who wished them to waive their right to one third of the $11 monthly payments on the policy providing therefor. Van Dale contends that the contract was signed by him at the request of Karon; that Karon refused to deliver the proceeds of the second judgment until he signed it; and that its purpose was to compel him to pay one third of each $50 benefit, rather than to evidence a waiver by the attorneys of their right to receive fees out of the $11 monthly benefits. At the trial the defendants declared that they would stand upon their rights under the original contract, and they consented to have the modification agreement regarded as a nullity.

The trial court found that the defendants had received as attorney fees one third of the money paid under the judgments; that under the original retainer contract that was all the compensation they were entitled to receive, and that it was reasonable and adequate considering the services rendered; and that the modification agreement of December 17, 1937, was drawn by Karon under the mistaken belief that he was entitled to receive one third of the benefit payments accruing after the second judgment. The plaintiff was granted a recovery of the amounts he had paid as fees out of the benefits accruing under the policies after the second judgment, and judgment was entered canceling both the retainer and the modification contracts, the former because it was fully performed and the latter because it had been entered into by mistake. The following opinion was filed May 9, 1939: The contract under which the defendants were employed by the plaintiff retained the defendants "to represent us in our claims against the Prudential Insurance Company of America arising out of their effecting an alleged settlement with Mr. Van Dale during the month of January, 1934, relating to his permanent-disability insurance policies." It was agreed that the defendants were to be paid "one third of any sum or sums obtained in settlement or suit on the above claims." It was expressly agreed that "unless some collection is made" no fees were to be paid.

The facts show that at the time plaintiff enlisted the services of the defendants he had parted with his claim to benefits under the insurance policies, and that until the settlement he had made with the insurance company was set aside it was impossible to have the advantages he was desirous of securing. The contingent-fee contract was fairly entered into. The trial court did not find fraud and there is no evidence on which such a finding could be based. The amount of compensation flowing to the defendants under the contract does not result in an unreasonable or unconscionable exaction. The language employed, the circumstances in which plaintiff was when he began negotiations with defendant, the transactions between the plaintiff and defendants following the making of the contract disclose an intention to engage defendants under a contingent-fee contract according them as their fee one third of what their services produced for Van Dale. The reasonableness of the arrangement appears from the fact that a one-third contingent-fee contract is an accepted method of fixing compensation in such circumstances as are present in this case.

Plaintiff had settled with his insurer, had been paid a substantial sum, and had signed a release of his claim against the insurance company. He sought the services of defendants in his effort to re-establish his right to the two policies and two group certificates covered in the release he had signed; to secure recognition of the fact of his total disability entitling him under the provisions of the insurance contracts to $50 per month for life and $11.01 per month on a $2,000 policy until it was paid out; and to benefits under two other policies which expired in sixty months; and to be relieved of premiums. The result of the actions begun and successfully carried on is that the defendants obtained for plaintiff a judgment vacating the release, restoring the policies and establishing the plaintiff's right to disability compensation.

The finding of fact and the conclusion that defendants induced plaintiff to sign the modification and that defendants were mistaken in their belief that they were entitled to "fees upon future disability payments . . . were made in error as to the true and correct construction and meaning of said contract of October 24, 1935," is not supported by evidence. The plaintiff says "my wife and I were satisfied to pay one third of whatever I would get," and with respect to the modification agreement his testimony does not differ materially from that of the defendants as to how and why it came into existence. The defendants say it was done to relieve the plaintiff of any obligation to pay to them one third of the $11.01 monthly benefit. It is true that had a different method been employed it might have made it plainer that the defendants were releasing their claim on the $11.01 benefit. Although the modification does not appear to be a waiver, it is evident from the testimony of all concerned that the real purpose was to evidence the willingness of the defendants to accept only one third of the $50 payments, instead of one third of both as the original contract provided. The negative way in which defendants expressed their willingness to do the thing agreed upon does not destroy the effect, since it is certain that no waiver of the one third of each $50 was intended, and that the parties had agreed upon a waiver of the rest. The plaintiff paid one third of each $50 benefit for several months and then decided he would like to be relieved of that obligation too. He admits that he wanted the one third waived on both the $50 and the $11.01 payments. "As to what Mr. Karon said, he said no, they won the case, otherwise. I would not receive that $50, or that $11.01 check a month. He did agree to waive the one third on the $11.01 checks on December 17, 1937. I wanted him to waive the one third on the $50 checks also, but he refused to do so."

The original contract entitled the defendants to one third of the avails of the litigation in contesting the settlement which the plaintiff had made with the insurance company. The benefits in question flow from the judgment in favor of the plaintiff which was secured by the defendants. There are cases cited in both briefs in which contingent-fee contracts have been so construed. Metropolitan Life Ins. Co. v.Poliakoff (1938), 123 N.J. Eq. 524, 198. Atl. 852; Johnsonv. Cofer (Tex.Civ.App. 1938), 113 S.W.2d 963. It appears that plaintiff began this action moved by an afterthought resulting from a desire to avoid an obligation he was ready enough to assume when he wanted the defendants to represent him in his efforts to set aside the settlement he had made with the insurance company. It is considered that the facts established by the evidence require a judgment in defendants' favor.

By the Court. — The judgment of the circuit court is reversed, and cause remanded with directions to award defendants judgment dismissing plaintiff's complaint.

A motion for a rehearing was denied, with $25 costs, on June 21, 1939.