Cadwallader v. New Amsterdam Cas. Co.

• Decision Date: 30 June 1959
• Citation: 152 A.2d 484,72 A.L.R.2d 1242,396 Pa. 582
• Parties: , 72 A.L.R.2d 1242 T. Sidney CADWALLADER v. NEW AMSTERDAM CASUALTY COMPANY, Appellant.
• Court: Pennsylvania Supreme Court

Page 484

152 A.2d 484

396 Pa. 582, 72 A.L.R.2d 1242

T. Sidney CADWALLADER v. NEW AMSTERDAM CASUALTY COMPANY, Appellant.

Supreme Court of Pennsylvania.

June 30, 1959.

Ralph S. Croskey, Norman R. Bradley, Philadelphia, for appellant.

Robert K. Greenfield, Folz, Bard, Kamsler, Goodis & Greenfield, Frederick Blumberg, Philadelphia, for appellee.

Before CHARLES ALVIN JONES, C. J., and BELL, MUSMANNO, BENJAMIN R. JONES, COHEN, BOK, and McBRIDE, JJ.

McBRIDE, Justice.

The plaintiff, T. Sidney Cadwallader, a lawyer, and David A. Clarke, a partner or associate, were both 'additional insureds' on a lawyer's protective policy. Under that policy defendant insurance company agreed (1) to pay whatever plaintiff might become obligated to pay resulting from any 'claim' made against him arising out of the performance of professional services as a lowyer and caused by any negligent act, error or omission for which he would be legally liable; ¹ (2) to defendant on his behalf any suit brought against him alleging such negligent act or omission and seeking damages on account thereof; ² (3) to pay all premiums on bonds required to be filed in connection therewith. ³ It was specifically provided that the policy would not apply to intentional misconduct. ⁴

The pleading consisted of a complaint and answer. At trial there was both documentary and oral testimony, at the end of which the Trial Judge gave binding instructions for the plaintiff. Defendant did not move for a new trial but, having presented a point for binding directions in its favor, did move for judgment n. o. v., which was refused and judgment for plaintiff was entered on the verdict.

It would appear that four corporations owned some 80 acres of land in Bucks County upon which was erected a sand and gravel plant. A portion of that land was condemned at the instance of the Highway Department of Pennsylvania. At that time Harry D. Mencher, a New York lawyer, had represented there four corporations. His Pennsylvania correspondent was Rodney T. Bonsall of Philadelphia. Cadwallader represented two persons who were mortgagees of the property, and in order to protect the interests of his clients in the condemnation award, requested that the appearances of Mencher and Bonsall, as attorneys for the owner corporations, be withdrawn and that he be permitted to act for all the parties interested in the proceedings. Mencher and Bonsall, having done work in the matter, indicated, in writing, their willingness to withdraw their appearances if Cadwallader would see to it that professional fees claimed by them, particularly from two of the real estate corporations, would be retained by him and not forwarded to the clients unless specifically released by them. Cadwallader, in writing, specifically agreed to withhold the sum of $34,486.17 ($30,000 of which was for Mencher and the balance for Bonsall) from the condemnation moneys which it was expected would pass through his hands until such fee claim had been satisfactorily adjusted. In consideration of this undertaking Mencher and Bonsall withdrew their appearances.

Bonsall filed no complaint. Mencher commenced suit in the United States Court for the Eastern District of Pennsylvania, setting up the agreement recited above and averring that the condemnation proceeding resulted in an award of not less than $200,000 which was paid over to Cadwallader but that Cadwallader, in violation of his agreement, paid out to the various clients represented by him, exclusive of his own fee, the full sum but did not retain, as he had agreed to do, the funds with which to pay Mencher. Having averred this failure Mencher went on to allege that there was an unlawful conspiracy and collusive arrangement between Cadwallader and his clients that they would maliciously circumvent the intent, design and effect of the escrow promise.

Upon receipt of a copy of this complaint, Cadwallader transmitted it to the insurance company and called upon it to defend him. Shortly thereafter the insurance company exercised its right under the policy to investigate the situation and sent an interviewer to see Cadwallader who furnished him with a detailed statement showing that the money was mistakenly and negligently forwarded to the clients in violation of the agreement. The insurance company then refused to defend Cadwallader and he was compelled to retain counsel to defend him in the federal court action. Thereafter, the federal court action was settled by the payment of $2,500 to Mencher. In addition, Cadwallader paid his counsel $2,500 for defending him and expended the sum of $50 for a bond in that litigation. The accuracy and fairness of these payments is not in dispute. Cadwallader then brought suit against the insurance company for the $5,050 which he had paid.

At the trial he offered in evidence the record admissions and in addition personally testified that although he had entered into the agreement not to disburse the funds received from the condemnation proceeding until notified by Mencher that the claims for fees had been suitably settled, the money had been inadvertently or carelessly paid out by his associate, Clarke, in the absence of Cadwallader from the office, because Clarke did not review the file and was not, at the time of payment, conscious of the agreement made by Cadwallader. He testified, as noted above, that this fact had been communicated to the insurance company prior to its decision not to defend him. In addition, Clarke testified in corroboration of Cadwallader. The insurance company introduced no evidence. This oral testimony therefore stands unrebutted. The trial judge directed a verdict in favor of the plaintiff.

It must be conceded at once that if the binding direction for plaintiff necessarily depends upon the oral testimony in the case, even though uncontradicted, it cannot be sustained. Nanty-Gio Borough v. American Surety Company, 309 Pa. 236, 163 A. 523; Satterwhite v. National Powder Company, 362 Pa. 133, 66 A.2d 278. It remains therefore to inquire whether the documentary evidence justified the action of the trial judge. In this connection, although the policy of insurance was not attached to the complaint, it was introduced in evidence and presents for our interpretation a purely legal question.

It is of course clear that if there be any ambiguity in the contract of insurance it must be resolved in favor of the insured since it was the insurer who wrote the contract. Armon v. Aetna Casualty & Surety Company, 369 Pa. 465, 87 A.2d 302; Sack v. Glens Falls Insurance Company, 356 Pa. 487, 52 A.2d 173. The insurance company, according to the terms of the protective policy, had a duty to defend 'claims made against the insured arising out of the performance of professional services for others * * * as a lawyer and caused by any negligent act, error or omission of the insured * * *.' It cannot seriously be contended that the breach did not arise out of the 'performance of professional services'. In paragraphs 1 to 16 of his complaint Mencher alleged that Cadwallader failed to retain control of the funds which came into his hands in his professional capacity as a lawyer representing clients and which he had agreed to hold in his own possession to assure performance by Mencher's clients of certain commitments. Cadwallader's undertaking of April 21, 1955 to retain the funds was set forth in paragraph 13 of the Mencher complaint. In paragraph 15, the omission to retain was recited as follows:

'Fifteenth: No part of the aforesaid sum of not less than $200,000. was retained in fact by the said defendant, T. Sidney Cadwallader, for the plaintiff as was agreed as aforesaid but was on the contrary paid over by him in full, less his own fee of $18,000., to and for the benefit of all the parties interested therein, except the plaintiff, in violation of the said writing and committment aforesaid; and of which amount the sum of $50,000. was delivered by him to said Harold Karp for redelivery to the Birnbaums; and which said $50,000. was received by the Birnbaums on or about September 23, 1955; and the Birnbaums have not paid nor indicated any willingness to pay the plaintiff the amount of his said claim although again duly demanded after September 23, 1955.' (Emphasis supplied.)

Had Mencher's complaint not gone on to allege an unlawful conspiracy and collusive arrangement it would have set forth a complete cause...