Opinion
Rehearing Denied June 23, 1930
Hearing Granted by Supreme Court July 24, 1930
Appeal from Superior Court, San Diego County; S.M. Marsh, Judge.
Action by F.L. Anderson against Mabel E. Eaton. From a judgment for defendant, plaintiff appeals.
Reversed. COUNSEL
Clarence Harden, of San Diego, for appellant.
Crouch & Sanders, of San Diego, for respondent.
OPINION
CARY, P.J.
Plaintiff, a Los Angeles attorney, brought this action to recover from defendant one-third of the amount defendant received through the settlement of a death claim arising from the death of her son, and plaintiff appeals from a judgment rendered in favor of defendant.
Defendant’s son, in the course of his employment by the San Diego Consolidated Gas & Electric Company, hereafter referred to as the gas company, met his death as the result of the negligence of the employees of the Benson Lumber Company, hereafter referred to as the lumber company. Fidelity & Casualty Company of New York, hereafter referred to as fidelity company, was the compensation insurance carrier for the gas company. Federal Mutual Liability Insurance Company, hereinafter referred to as federal company, was on a policy of public liability insurance carried by the lumber company. Plaintiff was on a retainer from the fidelity company, but was also engaged in private practice.
The court found the employment of plaintiff by defendant on a contingent fee basis of one-third of the amount recovered by defendant and that defendant had received $3,100 in settlement of the claim. It further found that plaintiff, as attorney for the fidelity company, represented an interest adverse to defendant; that in procuring the contract of employment plaintiff was guilty of fraud in that he failed to inform defendant that his appearance before the Industrial Accident Commission, as representing the compensation insurance carrier, would be adverse to his duties as her counsel; that he told her there would be no contest made by the compensation insurance carrier and that she need employ no counsel other than himself; that he cautioned defendant to keep secret from the referee his employment as her attorney; that he failed to inform her that it was his duty to the fidelity company to favor a settlement of her claim against the lumber company for a small amount rather than run the risk of litigation which might result in no recovery; that the adverse employment of plaintiff was neither know by nor explained to defendant. Upon these findings of fact the court concluded that the contract for plaintiff’s employment was against public policy and void.
Appellant’s first contention is that the findings regarding fraud are without support in the evidence. This necessitates a statement of the additional evidence before the trial court.
Plaintiff, preparatory to the hearing before the Industrial Accident Commission, contacted defendant to find out to what extent she was dependent upon her son, and in the course of his conversation stated there would be no contest by the fidelity company of her right to compensation, and stated further that since the death was caused by the negligence of the lumber company she had a right of action against that company for a much larger sum than she could hope to secure through the award of the accident commission. A written agreement resulted, whereby defendant employed plaintiff to represent her in her claim against the lumber company on a contingent fee basis of one-third of any amount paid to defendant in settlement of her claim against the lumber company. Defendant understood that plaintiff was representing the fidelity company and was informed that the fidelity company had the right to proceed directly against the lumber company, independently of any action she might bring, but probably would not if she herself would do so, and that if she received, for example, $2,000 from the lumber company and the commission awarded her $500 compensation against the fidelity company she would have nothing coming from the latter, since she would have received more from a third party than the liability of the fidelity company.
Several hearings before the referee were held, the fidelity company at no time disputing its liability, but the referee considering primarily what other persons beside defendant were dependent upon the deceased. At one of these hearings defendant was represented by her own counsel, a Mr. Tyler. An award was finally made to defendant. Meanwhile plaintiff conducted negotiations with the claim agent of the Federal company, which, up to the time when defendant discharged him, had resulted in an offer by it of $4,750 in settlement of defendant’s claim against the lumber company.
At this point matters took a new turn. The claim agent for the Federal company advised defendant that her fee contract with plaintiff was void because plaintiff represented the fidelity company, the interests of which were adverse to those of defendant. Discontinuing his negotiations with plaintiff the Federal company claim agent made a direct offer to defendant to settle for $3,100, which, it may be noted in passing, is approximately two-thirds of the $4,750 theretofore offered defendant through her counsel, and further agreed in writing with defendant to pay all attorney’s fees which might be due plaintiff. Defendant accepted this sum in full settlement and wrote to plaintiff stating that she desired to cancel her arrangements with him, that he was discharged, and offering to pay plaintiff a reasonable fee for his services to date, but made no mention of the settlement. Plaintiff replied that he felt he was entitled to a one-third of the amount he had induced the Federal company to offer in settlement. Later plaintiff was informed by the Federal company that a settlement had been effected, whereupon plaintiff wrote defendant suggesting that he was willing to accept a smaller amount in liquidation of his fee, and suggested that she mail him a check for what she thought was right and he would either accept or reject it. Defendant not replying to either of these communications, this action was instituted.
We have carefully scrutinized the record and have concluded that there is no evidence upon which findings of actual fraud could have been predicated. In fact, the court in its oral decision expressly absolved plaintiff from all intentional wrongdoing.
Defendant argues that even though no actual fraud were shown, the plaintiff had voluntarily placed himself in a position which as an officer of the court he should never be permitted to occupy, and that with due regard to the upholding of the high sense of honor and fidelity to the client that is imposed upon the profession, this court should declare the entire transaction contrary to public policy and void. That the courts should not give countenance to any situation, whereby an attorney might at one and the same time represent parties with adverse interests, is clear. But we do not feel that this principle is applicable under the facts in the case at bar. It is a matter of common knowledge that persons carrying automobile insurance, when the insurance company admits its liability and willingness to settle, frequently employ the attorney for that same insurance company as their own attorney, to collect from some third person damages resulting from the same accident. It is also a matter of common knowledge that persons carrying fire insurance, when the insurance company admits its liability and willingness to settle, frequently employ the attorney for that same insurance company as their own attorney to collect damages from some third person by whose act the fire originated. We have not been informed that the propriety of an attorney’s accepting such employment has been questioned, and yet if defendant’s position be correct, it might be said that in all such cases counsel owes a duty to his insurance company to reduce the amount of claimant’s recovery to the minimum, and since that is so, then any contract between the claimant and the insurance company’s counsel for a fee for services in representing that claimant against a third person to collect damages for the act insured against, would be void. A mere statement of these situations serves to indicate the absence of sound foundation to defendant’s contention. In the case at bar not a scintilla of evidence is presented to show that the fidelity company either resisted or intended to resist defendant’s claim for compensation. Clearly, it was to the interest of the fidelity company that a recovery be had against the lumber company, at least to the extent of the fidelity company’s compensation liability, and as clearly it was to the interest of plaintiff to procure the greatest amount possible from the lumber company for the defendant, since the size of his fee depended upon the size of such recovery.
We have carefully examined our own decisions on the subject, and find none where the facts are similar to those now under consideration. In the following cases the attorney was held disqualified to represent the second client because of adverse interest: Weidekind v. Tuolumne Water Co., 74 Cal. 386, 19 P. 173, 5 Am.St.Rep. 445; In re Cowdery, 69 Cal. 32, 10 P. 47, 58 Am.Rep. 545; Adams v. Woods, 8 Cal. 306. And in the following no disqualification was held to exist: McCabe v. Healy, 138 Cal. 81, 70 P. 1008; Perkins v. West Coast Lumber Co., 129 Cal. 427, 62 P. 57; Jones v. Lamont, 118 Cal. 499, 50 P. 766, 62 Am.St.Rep. 251; Estate of Kafitz, 51 Cal.App. 325, 196 P. 790, and Gaver v. Early, 58 Cal.App. 725, 209 P. 390. An interesting note on the question is to be found in 51 A.L.R. 1307. On page 1312 are cited a number of cases, the facts in many of which appear stronger from the client’s standpoint than those now presented, and yet in which it was held no adverse interest existed. In the case of Hunter v. Troup, 315 Ill. 293, 146 N.E. 321, the client sought to defeat the attorney’s right to compensation on the ground that the attorney had an adverse interest. The court there held that where an attorney discloses all facts which he honestly conceives to be material to his employment, yet fails to disclose some fact which by the court may be deemed material to such employment, and such concealment is not fraudulent, the attorney is not by reason thereof barred from receiving compensation for his services.
Defendant also cites cases to the effect that where an attorney solicits business, that fact bars him from receiving compensation, but no facts are shown here which justify the application of such rule.
The judgment is reversed.
We concur: MARKS, J.; BARNARD, J.