F.S. & P. Coal Co. v. Inter-Mountain Coals, Inc.

• Decision Date: 23 February 1988
• Docket Number: INTER-MOUNTAIN,No. 17430,17430
• Citation: 366 S.E.2d 638,179 W.Va. 190
• Court: West Virginia Supreme Court
• Parties: F.S. & P. COAL COMPANY v.COALS, INC.

Page 638

366 S.E.2d 638

179 W.Va. 190

F.S. & P. COAL COMPANY v. INTER-MOUNTAIN COALS, INC.

No. 17430.

Supreme Court of Appeals of

West Virginia.

Feb. 23, 1988.

Syllabus by the Court

1. "The law favors and encourages the resolution of controversies by contracts of compromise and settlements rather than by litigation and it is the policy of the law to uphold such contracts if they are fairly made and not in contravention of some law or public policy." Syl.Pt. 2, Sanders v. Roselawn Memorial Garden, Inc., 152 W.Va. 91, 159 S.E.2d 784 (1968).

2. "A court has inherent power to do all things that are reasonably necessary for the administration of justice within the scope of its jurisdiction." Syl.Pt. 3, Shields v. Romine, 122 W.Va. 639, 13 S.E.2d 16 (1940).

J.M. Tully, Summersville, for appellant.

Callaghan & Ruckman, Summersville, for appellee.

NEELY, Justice:

In December 1979, the appellant, F.S. & P. Coal Company, Inc., agreed to sell coal to the appellee, Inter-Mountain Coals, Inc. with payment based upon sampling and quality testing. In accord with that agreement, F.S. & P. Coal Company shipped 2,690.95 tons of coal to Inter-Mountain Coals, Inc. Apparently this shipment was combined by the appellee with coal from other sources. The appellee analyzed a total shipment of 6,072.45 tons of coal and from that analysis offered payment of $7,800 less than the amount claimed due by the appellant.

The appellant then instituted a $10,000 suit in Nicholas County Circuit Court to recover the difference due, plus interest, on the contract. Apparently the dispute between the parties centered on the co-mingling of coal for shipment and the quality of the coal as determined by sampling and analysis. The appellee denied all allegations and counterclaimed for $780.38. Before trial, an offer of settlement was made by Inter-Mountain Coals, Inc., by which it would pay F.S. & P. Coal Company, Inc. $5,000 in full and complete settlement of the case. This offer was accepted by F.S. & P. Coal Company, Inc.

Meanwhile, F.S. & P. Coal Company, Inc. had severe financial difficulties. The Internal Revenue Service asserted a lien against the settlement proceeds and judgment creditors of F.S. & P. Coal Company, Inc. also asserted claims by way of suggestion. In order to avoid additional liability, Inter-Mountain Coals, Inc. made a motion for interpleader to bring in these other parties. A hearing was held on 9 February 1983 at which Inter-Mountain Coals, Inc. offered to pay the five thousand dollars in settlement proceeds to its creditors.

At the interpleader hearing the following parties were represented by counsel: F.S. & P. Coal Company, Inc.; Inter-Mountain Coals, Inc.; Independent Explosives, Inc.; George R. Minner and Elsie Louise Minner; and, the Internal Revenue Service. Counsel for Inter-Mountain Coals, Inc. and F.S. & P Coal Company, Inc. stated clearly on the record that the parties had settled their dispute. There was no dispute or disagreement about settlement per se. The only question before the Court was who was entitled to the proceeds of the settlement. Both Independent Explosives, Inc. and Mr. and Mrs. Minner claimed liens by virtue of judgments against F.S. & P. Coal Company, Inc. The Internal Revenue Service had given its standard notice of lien. Mr. Tully, counsel for F.S. & P. Coal Company, Inc., claimed a lien for attorney's fees that amounted to fifty percent of the settlement proceeds. The court took the question of the priority of liens under advisement, including the question of the reasonableness of the attorney's fee.

This matter was under consideration by the court from the time of the creditors' hearing until 17 June 1985, when the court rendered a decision. The court ruled that based on the priority of liens, the settlement should be paid to the Internal Revenue Service after Mr. Tully was paid his attorney's fee. The court ruled that the $5,000 settlement agreement was binding, but that Mr. Tully's fifty percent contingent fee was "excessive." The court then reduced Mr. Tully's fee to 33 1/3 percent or $1,660.00. Because of this decision, F.S. & P. Coal Company, Inc. declined to agree to an order memorializing the court's decision and, instead, filed a motion to schedule the matter for trial. In response to this motion Inter-Mountain Coals, Inc. filed a motion to compel entry of an order confirming the settlement.

A hearing was held on the motion to schedule the matter for trial and the motion to enter Inter-Mountain's proposed order on 12 November 1985. At this hearing the court ruled that the parties had settled their dispute and that F.S. & P. Coal Company, Inc. was now bound to accept the $5,000 settlement. The court then entered a final order.

Following the entry of the court's order of 12 November 1985, F.S. & P. Coal Company, Inc. moved to reconsider. Inter-Mountain Coals, Inc. paid into court the $5,000 and moved for an order dismissing the case. Another hearing was held on 21 February 1986 and the court upheld its earlier ruling approving the settlement between the parties and, because the $5,000 had been paid into court, dismissed the case with prejudice.

On appeal to this court, appellant asserts that the circuit court erred in holding that the parties had entered into a binding settlement agreement and that the court erred in summarily reducing the attorney's fee. Appellant requests that the court's order dismissing the case be vacated, the fifty percent contingent fee be reinstated, and the appellant be awarded interest on the amount of the proceeds from the time of the settlement agreement until the money was tendered. After reviewing the record we affirm.

I

There is no evidence in the record to contradict the circuit court's ruling that the compromise and settlement agreement entered into by the parties was a valid and binding contract of settlement. The compromise was entered into after both sides had an opportunity to conduct discovery and was fairly made between competent parties through their respective counsel. The settlement does not contravene any law or any public policy. In fact, public policy favors enforcing settlements. "The law favors and encourages the resolution of controversies by contracts of compromise and settlements rather than by litigation and it is the policy of the law to uphold such contracts if they are fairly made and not in contravention of some law or public policy." Syl.Pt. 2, Sanders v. Roselawn Memorial Garden, Inc., 152 W.Va. 91, 159 S.E.2d 784 (1968); State ex rel. Vapor Corporation v. Narick, 173 W.Va. 770, 320 S.E.2d 345 (1984); Board of Education of Monongalia County v. Starcher, 176 W.Va. 388, 343 S.E.2d 673 (1986).

The appellant contends that the settlement agreement was abrogated by the appellee's failure to make the agreed payment in a timely fashion. However, there is no evidence in the record that this occurred. The letter written by F.S. & P. Coal, Inc.'s attorney, Mr. Tully, accepting the offer of settlement on 20 October 1982 had no conditions precedent concerning when the money was to be paid. Furthermore, the unconditional aspect of the settlement was again confirmed at the interpleader hearing on 9 February 1983. The only issues discussed at that hearing were the priority of liens and the amount of Mr. Tully's fee. Both parties confirmed the settlement on the record.

II

Appellant asserts that the trial court erred in summarily reducing the attorney's fee from 50 percent to 33 1/3 percent when the appellant understood in advance the percentage fee and considered the fee deserved. We note, however, that the trial court did not reduce the fee to 33 1/3 percent because of fairness to the client; the court was apparently motivated by the objections made by the creditors, including the Internal Revenue Service, which thought that the contingency fee was unreasonable.

The appellant asserts that the court had no right to interfere with the private, bargained-for contract between attorney and client that promised fifty percent of the settlement as a fee. Furthermore, the appellant asserts that the Internal Revenue Service had no right to contest the fee agreement between attorney and client. Nonetheless, we find the circuit court had express authority and jurisdiction to set a reasonable fee.

In Allen v. United States, 606 F.2d 432, 435 (4th Cir.1979), the Fourth Circuit succinctly restated the general principles of a court's supervisory jurisdiction over contingent fee contracts for services rendered in cases before them:

Because contingency fee agreements are of special concern to the courts and are not to be enforced on the same basis as are ordinary commercial contracts, Spilker v. Hankin, 188 F.2d 35, 39 (D.C.Cir.1951), courts have the power to monitor such contracts either through rule-making or on an ad hoc basis. Canon 13 of the Canons of Professional Ethics, promulgated by the American Bar Association, recognizes that the attorney is free to enter into such arrangements. The Canon, however, qualifies the right with the proviso that they are subject to the "supervision of the courts, as to their reasonableness." See Fitzgerald v. Freeman, 409 F.2d 427 (7th...