Opinion
No. 6786.
January 31, 1979. Rehearing Denied March 29, 1979.
APPEAL FROM 28TH JUDICIAL DISTRICT COURT, PARISH OF LaSALLE, STATE OF LOUISIANA, HONORABLE HUGHES, J.
Love, Rigby, Dehan, Love McDaniel, Kenneth Rigby, Shreveport, for defendant-appellant.
William Henry Sanders, Jena, for plaintiffs-appellees.
Before CULPEPPER, FORET, CUTRER, SWIFT and STOKER, JJ.
The issue on appeal in this case is whether an attorney at law has a special privilege for the amount of his professional fees, under LSA-R.S. 9:5001, where the suit is settled by a compromise agreement, and judgment is rendered dismissing the client's suit.
The present case originated as a suit for damages for personal injuries by the plaintiff, J. C. Calk, against the alleged defendant tort feasors, General Electric Company, et al. Commercial National Bank in Shreveport held a prior judgment against J. C. Calk for the balance due on a promissory note. See 207 So.2d 578. The judgment was revived under LSA-C.C. Article 3547. Under its judgment, the bank seized Calk's interest in the personal injury suit.
Before the personal injury case was tried, J. C. Calk and his attorney, William Henry Sanders, and the seizing creditor, Commercial National Bank in Shreveport, agreed to settle the claims of Calk against the alleged tort feasors for the sum of $2,000 cash. Calk and his attorney and the bank agreed further that the $2,000 be placed in the registry of the court for a determination by the court as to their respective rights to the funds.
The trial judge held that Calk's attorney has a special privilege on the funds under LSA-R.S. 9:5001, and, accordingly, judgment was rendered ordering the clerk of court to issue a check in the sum of $2,000 payable to Calk's attorney, William Henry Sanders. The seizing creditor, Commercial National Bank, appealed.
LSA-R.S. 9:5001 provides:
"A special privilege is hereby granted to attorneys at law for the amount of their professional fees on all judgments obtained by them, and on the property recovered thereby, either as plaintiff or defendant, to take rank as a first privilege thereon."
The language of this statute refers only to the granting of the first privilege in favor of an attorney for his professional fees on "judgments" and "on property recovered thereby", and makes no mention of a compromise entered into before judgment on the merits. Because this provision creates a privilege or lien, it is in derogation of common rights. Therefore, it should be strictly construed and cannot be extended by analogy or implication. State ex rel. Maitrejean v. Demarest, 229 La. 300, 85 So.2d 522 at 523 (La. 1956).
Our holding is supported by several cases. Smith v. Vicksburg S. R. R.R., 112 La. 985, 36 So. 826 (1904); American Bank Trust Company v. Byron, 347 So.2d 850 (La.App. 2d Cir. 1977), and Madonia v. Meyer Wetmore, 9 La.App. 71, 119 So. 96 (Orl. 1928). Additionally, this position is expressed as dicta in other cases. Livaccari v. Demarest, 352 So.2d 792 (La.App. 4th Cir. 1977), and Davis Finance Securities Company, Inc. v. O'Neal, 160 So. 463 (Orl.Ct. of La.App. 1935).
In oral reasons dictated at the conclusion of the hearing, the trial judge expressed the view that since the compromise agreement resulted in a judgment of dismissal, the judgment of dismissal should be construed as a "judgment" under LSA-R.S. 9:5001, and the attorney's privilege for his fees should attach to the funds received in the compromise settlement. As stated above, the jurisprudential rule is well settled that statutes creating a lien must be strictly construed and cannot be extended by implication. Additionally, the above cited jurisprudence supports our holding that the attorney has no privilege for his fee where the suit is settled by compromise without a judgment on the merits in favor of the plaintiff.
We have also considered the possible effect of LSA-R.S. 37:218. That statute protects an attorney who has entered into a contingent fee contract by providing that it is lawful to stipulate that the attorney's permission is necessary for any compromise, release, or discontinuance of the lawsuit. Any such compromise, release, or discontinuance of the lawsuit without the attorney's permission is null, if the contract contains such a stipulation, is in writing, and is properly recorded. Although this statute was originally enacted by Act No. 124 of 1906 as an additional paragraph to the present LSA-R.S. 9:5001, the two provisions are separate and distinct and do not overlap. Davis Finance Security Company v. O'Neal, supra, and Roberts v. Hanover Insurance Company, 338 So.2d 158 (La.App. 2d Cir. 1976). The purpose of this statute is to allow an attorney to acquire an interest in the subject matter of the lawsuit and thereby to prevent clients from depriving an attorney of a fee by compromising a suit before judgment. State v. Nix, 135 La. 811, 66 So. 230 (1914). However, it does not give the attorney a lien right.
For the reasons assigned, the judgment appealed is reversed and set aside. It is now ordered, adjudged and decreed that there be judgment herein in favor of Commercial National Bank against J. C. Calk ordering the clerk of court of LaSalle Parish to issue a check in the sum of $2,000.00, payable to Commercial National Bank, for the funds placed in the registry of the court in these proceedings. All costs in the trial and appellate courts are assessed against J. C. Calk.
REVERSED AND RENDERED.
FORET and STOKER, JJ., dissent and assign written reasons.
The issue on appeal in this case is whether an attorney at law has a special privilege for the amount of his professional fees, under LSA-R.S. 9:5001 where the suit is settled by a compromise agreement, and a consent judgment is rendered dismissing his client's suit. The trial court concluded that that attorney did have a special privilege under 9:5001.
The majority proposes to reverse the trial court for the reason that a statutory provision creating a privilege or lien is in derogation of common rights, and therefore should be strictly construed and cannot be extended by analogy or implication.
In my view of the case, the majority places too narrow an interpretation of the word "judgment" as contained in 9:5001. In particular, I feel that the provisions of Civil Code Article 3078, under the title "OF TRANSACTION OR COMPROMISE" bear on this case. Article 3078 is as follows:
"Transactions have, between the interested parties, a force equal to the authority of things adjudged. They cannot be attacked on account of any error in law or any lesion. But an error in calculation may always be corrected."
The cases in the jurisprudence are legion holding that a compromise agreement, freely made, has the dignity and force of a definitive judgment so far as it definitely and irrevocably fixes rights and liabilities of parties thereto as relating to the subject matter dealt with. Jackson v. U.S. Fidelity Guaranty Co., 199 So. 419 (La.App. 2 Cir. 1940); even where no suit was pending when the compromise was effected. Beck v. Continental Casualty Co., 145 So. 810 (La.App. 2 Cir. 1933). Some of the later cases holding that a transaction or compromise, voluntarily entered into, has the force of a definitive and final judgment are Benson v. Metropolitan Cas. Ins. Co. of New York, 79 So.2d 345 (La.App. 2 Cir. 1955); Hancock v. Lincoln American Life Insurance Co., 278 So.2d 561 (La.App. 1 Cir. 1973), writ denied, La., 281 So.2d 754; Oil Purchasers, Inc. v. Kuehling, 334 So.2d 420 (La.S.Ct. 1976).
For the reasons I have mentioned above, I am of the opinion that since a transaction or compromise such as in this case has the authority of a thing adjudged, and is in fact a definitive judgment according to the jurisprudence, that the word "judgments" in 9:5001 applies to a transaction or compromise freely entered into between the parties involved, and dealing with the very issue in dispute.
In a recent case of Board of Trustees, etc. v. All Taxpayers, 361 So.2d 292 (La.App. 1 Cir. 1978), the court stated as follows:
"Under the common law, there are two kinds of attorneys' liens: (1) a charging lien, the right to compensation for services from the funds or judgment which the attorney has recovered for the client because of his professional services rendered and (2) a retaining lien, the right to retain possession of a client's documents, money, etc., until paid for his professional services. 7 C.J.S. Attorney and Client § 207 et seq. (1937).
The right of retention has also been recognized in the civil law and extended to mandataries or administrators of affairs for expenses incurred on behalf of another. Planiol, Civil Law Treatise (An English Translation by the Louisiana State Law Institute), vol. 2, no. 2514 et seq.
Louisiana has provided for both the charging lien and retaining lien under LSA-R.S. 9:5001 and LSA-C.C. arts. 3022 and 3023.[1] LSA-R.S. 9:5001 embodies
[1] LSA-C.C. Art. 3022: "The principal ought to reimburse the expenses and charges which the agent has incurred in the execution of the mandate, and pay his commission where one has been stipulated. "If there be no fault imputable to the agent, the principal can not dispense with this reimbursement and payment, even if the affair has not succeeded; nor can he reduce the amount of reimbursement, under pretense that the charges and expenses ought to have been less." LSA-C.C. Art. 3023: "The mandatary has a right to retain out of the property of the principal in his hands, a sufficient amount to satisfy his expenses and costs. "He may even retain, by way of offset, what the principal owes him, provided the debt be liquidated."
the same characteristics and effects as that of a charging lien in the common law and under LSA-C.C. arts. 3022 and 3023 interpreted in pari materia by the court in Butchers' Union, supra, establishes
[2] Butchers' Union Slaughter-House Live-Stock Landing Co. v. Crescent City Live-Stock Landing Slaughter-House Co., 41 La.Ann. 355, 6 So. 508 (1889).
the retaining lien for the attorneys' fees."
There is no question that in this case the funds involved have not been distributed, but are deposited in the registry of the court pending the outcome herein. Therefore, Civil Code Article 3023 should be given effect in applying the principle of the retaining lien of the mandatary.
I am further of the opinion that the seizing creditor, the bank, acquired no greater right in the funds obtained from the settlement of the case than its judgment debtor had. Certainly the judgment debtor, under the contingent fee contract which he entered into with his attorney, had no right whatsoever to the forty per cent of the settlement. This is Hornbook law. Inasmuch as the client had no right to the forty per cent, then I fail to see how a seizing creditor, seizing the client's cause of action, could acquire a greater right to the cause of action and the funds derived therefrom than the judgment debtor had.
I should like to note, in conclusion, the recent Supreme Court case of Saucier v. Hayes Dairy Products, Inc. and the Hartford Group Insurance Company, Supreme Court Docket No. 61,652, decision rendered December 15, 1978. The thrust of Saucier is that attorneys who enter into valid contingent fee contracts, drawn and recorded in conformity with LSA-R.S. 37:218, as was done in the case at bar, should be protected. The Court stated that such contracts promote the distribution of needed legal services by reducing the risk of financial loss to clients and making legal services available to those without means.
For the above and foregoing reasons, I respectfully dissent.
STOKER, Judge, dissenting.
I respectfully dissent from the majority holding in this case. In my view a compromise settlement is a judgment for the purposes LSA-R.S. 9:5001 as set forth by Judge Foret in his dissent. Where a client gains a judgment, it results from services performed by his attorney. Therefore, it matters not that it results from a compromise agreement or results from a ruling by a court and the rendering and signing of a judgment.
For the above and foregoing reasons, I respectfully dissent.