Nacht v. Nathan Manufacturing Co.

Shearn, J.:

This is a special proceeding instituted by the attorneys for the plaintiff to determine and enforce their hen pursuant to section 475 of the Judiciary Law (Consol. Laws, chap. 30; Laws of 1909, chap. 35), the action having been settled behind the backs of the attorneys by a corporation which had insured the defendant against liabihty.

On October 29, 1918, Morris Nacht, whose son had been killed by the negligence of the defendant, retained the petitioners to institute and maintain legal proceedings to recover damages for the death of his son and agreed to pay the petitioners for their services fifty per cent of any settlement or recovery had in such proceedings, and on the same day the petitioners notified the defendant in writing that they had been retained and intended to institute suit unless the matter was settled. On October 31, 1918, a representative of the Travelers Insurance Company informed the petitioners that his company had insured the defendant and requested that no further proceedings be taken pending investigation, stating that as soon as the investigation was completed he would take up the case with the petitioners with a view of adjustment. On November 2, 1918, the petitioners procured letters of administration to be duly issued to Morris Nacht, and an action was commenced against defendant on that day by the service of a summons. The defendant subsequently appeared in the action. On November 8, 1918, the insurance company negotiated a settlement of the case without notice to the petitioners, and on November 15, 1918, an order was entered authorizing the settlement for $1,100, of which $100 was for attorneys’ fees. The proceedings authorizing the settlement were conducted by attorneys who were admittedly paid by the insurance company. Thereupon these proceedings were begun and an order entered adjudging that the petitioners have a lien upon the cause of action. The learned justice at Special Term, however, disregarded the provision of the written agreement of retainer, which fixed the attorneys’ compensation at fifty per cent of the settlement, and limited their hen “ to the extent of the reasonable value of the services rendered by the petitioners up to the time of the settlement of the cause of action herein,” which he fixed summarily at $150.

Upon the motion an attempt was made to show that the plaintiff did not know the character and provisions of the retainer agreement when he signed it. Nothing but hearsay was adduced to support this charge, and no affidavit of the plaintiff was submitted to establish it. On the other hand, the petitioners filed an affidavit of the brother of the plaintiff, a physician, and an affidavit of the sister-in-law of the plaintiff, which tended strongly to show that the charge, made against the attorneys on hearsay, was unfounded. The justice at Special Term must have found that the claim of deception was unproved, for, otherwise, he would have -disallowed any lien. Whatever one’s views may be of these fifty per cent contingent retainer agreements in negligence cases, their legality has been settled. (Morehouse v. Brooklyn Heights Railroad Co., 185 N. Y. 520; Matter of Weber, 102 Misc. Rep. 635.) Both the defendant and insurance company knew that the petitioners had a lien upon the cause of action for their services. The mere fact that they did not know the amount of the lien did not permit them to disregard the lien. When they effected a settlement, with full knowledge of the existence of a lien, it was incumbent upon them to ascertain the amount of the lien. Knowing that there was a lien, they could not avoid it simply by refusing to ascertain its amount.

Two grounds are advanced in support of the court’s action in disregarding the written agreement of retainer. One is that it was executed by Morris Nacht as an individual and not as administrator. I can find no substance in this claim, for the action is for the benefit of the next of kin, that is, the father, Morris Nacht, who executed the contract. It is next contended that the petitioners could not enforce their retainer agreement if they were discharged by their client (Martin v. Camp, 219 N. Y. 170), and that the petitioners were discharged. The only evidence of a discharge consists of the fact that the plaintiff, who was apparently willing to cheat his attorneys out of their agreed fee, after accepting the benefit of their services in procuring his appointment as administrator and in instituting an action in his behalf and investigating his right to recover, consented to have a firm of attorneys, paid by the insurance company, conduct the proceedings in the Surrogate’s Court authorizing the settlement. The plaintiff never informed the petitioners that they were discharged and the petitioners had no knowledge that their services were no longer required until the case was settled. I do not see how this can be seriously claimed to amount to a discharge and have the effect of nullifying a legal binding contract.

We have, therefore, a situation where (1) the petitioners were duly retained under a written agreement; (2) the petitioners performed services pursuant to the agreement; (3) by the Judiciary Law the petitioners had a valid lien upon the cause of action to the extent provided in the agreement; (4) the defendant and the insurance company had actual notice that the petitioners had a lien upon the cause of action, and (5) with such knowledge the action was settled without the petitioners’ knowledge and while they were still acting as the plaintiff’s attorneys. Under these circumstances, unless the plain provisions of the law are to be disregarded, I do not see any justification for refusing to secure the petitioners their lien.

The order should be modified by determining and establishing the petitioners’ lien at five hundred dollars, and directing the defendant to pay the same, together with ten dollars costs of the motion, and, as modified, the order should be affirmed, with ten dollars costs and disbursements to the appellants.

Clarke, P. J., Smith and Page, JJ., concurred, Dowling, J., dissented.