Gostin v. State Farm Ins. Co.

• Decision Date: 24 January 1964
• Citation: 36 Cal.Rptr. 596,224 Cal.App.2d 319
• Parties: Irwin GOSTIN and Louis S. Katz, Plaintiffs and Respondents, v. STATE FARM INSURANCE COMPANY, Defendant and Appellant. Civ. 7207.
• Court: California Court of Appeals Court of Appeals

Page 596

36 Cal.Rptr. 596

224 Cal.App.2d 319

Irwin GOSTIN and Louis S. Katz, Plaintiffs and Respondents, v. STATE FARM INSURANCE COMPANY, Defendant and Appellant.

Civ. 7207.

District Court of Appeal, Fourth District, California.

Jan. 24, 1964.

Hearing Denied March 18, 1964.

Oakes & Horton and Burch, Gregory & Platt, San Diego, for defendant and appellant.

Gostin & Katz, San Diego, for plaintiffs and respondents.

COUGHLIN, Justice.

The plaintiffs, respondents herein, are attorneys at law; entered into a 'Retainer Agreement' with a man named Cook, who retained them to prosecute his personal injury claim for damages; contend that this agreement provided for payment of a contingency fee; advised the defendant insurance company, appellant herein, which was the insurer of the person against whom the subject claim was to be made, that they had been retained to represent Cook; were discharged by Cook; notified the defendant company that, under their agreement aforesaid, they intended to enforce a lien in their favor upon one-third of any amount paid to Cook in settlement of the latter's claim; and brought this action against Cook and the insurance company to recover an amount equal to one-third of $4370, being the sum subsequently paid by the insurance company to Cook in settlement of the latter's claim. Cook was not served and did not appear in the action. Judgment for $1,456.66 was rendered in favor of the plaintiffs against the defendant insurance company, and the latter has appealed.

The 'Retainer Agreement' is in writing; was signed by the client Cook, alone; recited that in consideration of the legal services to be rendered by the plaintiffs in the prosecution of his claim, he appointed them as his attorneys, and stated, 'I, * * * do set over and assign to them a lien of 33 1/3% percent of any and all amounts recovered by compromise * * *'; and contains other provisions not material to the decision at hand. The agreement does not expressly provide for the payment of any attorney's fees; on its face does not assign to the attorneys a one-third interest in any compromise recovery; but appears to be limited to the creation of a lien.

No evidence was introduced at the trial. It was there agreed, in substance, that the allegations of the complaint not denied by the answer were true; that the court should make findings accordingly; and that its decision would be based thereon. The court found the facts to be as hereinbefore stated, including the execution of the subject agreement; did not find that Cook had agreed to pay the plaintiffs an attorney's fee, or that they were to receive a fee, either in a stated amount or a percentage of his recovery; did not find that the discharge of plaintiffs by Cook was wrongful, the formers' allegation to this effect in their complaint being denied by the answer; and, as a conclusion of law, determined that the plaintiffs were entitled to recover from the insurance company one-third of the settlement amount which it had paid to Cook.

The obvious question presented by the foregoing recital of facts and circumstances is whether the findings of fact made by the court support its conclusion of law in the premises.

The plaintiffs assert that they performed services of a legal nature for Cook until they were discharged, and that the court found accordingly. The finding in question stated:

'Plaintiffs notified defendant insurance carrier that they were representing LEROY COOK for all purposes in connection with his claim for personal injuries and performed services of a legal nature on behalf of said LEROY COOK and expended costs on his behalf.'

The finding as made determines only that the plaintiffs notified the defendant that they had rendered services for Cook, and not that they actually had rendered such services. Even though the plaintiffs' interpretation thereof be accepted, nevertheless, the finding must be rejected by this court as the allegations of their complaint with respect to the rendition of services were denied by the answer, and were not among those allegations which the parties at the time of trial had agreed were true. Under these circumstances, the finding is without support in the evidence.

It is settled in California that an attorney's lien against the prospective recovery of a client upon his claim, to secure the payment of a contingency fee for services to be rendered in connection therewith, may be created by contract. (Haupt v. Charlie's Kosher Market, 17 Cal.2d 843, 845, 112 P.2d 627; Wagner v. Sariotti, 56 Cal.App.2d 693, 697, 133 P.2d 430; Tracy v. Ringole, 87 Cal.App. 549, 551, 262 P. 73.) The effect of such a contract, or its counterparts by which the client agrees that the attorney, as a fee in the premises, shall have a percentage of whatever amount is recovered, has been characterized as creating a charging lien (Tracy v. Ringole, supra, 87 Cal.App. 549, 551, 262 P. 73); as constituting an equitable assignment pro tanto of the client's claim and his right to recover thereon as security (Haupt v. Charlie's Kosher Market, supra, 17 Cal.2d 843, 845, 112 P.2d 627; Wagner v. Sariotti, supra, 56 Cal.App.2d 693, 697-698, 133 P.2d 430); as vesting in the attorney an equitable interest in the client's recovery as security (Jones v. Martin, 41 Cal.2d 23, 27, 256 P.2d 905); or, more correctly stated, as entitling the attorney to any available equitable remedy necessary to effect payment of his fee for services rendered in connection with his client's claim out of any recovery upon that claim. (City of Los Angeles v. Knapp, 7 Cal.2d 168, 174, 60 P.2d 127; Tracy v. Ringole, supra, 87 Cal.App. 549, 551, 262 P. 73.) To this end the law provides that the client's debtor, who has notice of the lien, will not be discharged from his obligation in the premises by subsequent performance rendered to the client, unless the attorney has waived or is estopped to assert his lien. (Jones v. Martin, supra, 41 Cal.2d 23, 27-28, 256 P.2d 905.)

In all instances, the purpose of the attorney's lien is to secure to him the payment of his fee out of any recovery upon the claim of his client in connection with which he agreed to render or has rendered services. (Wagner v. Sariotti, supra, 56 Cal.App.2d 693, 697, 133 P.2d 430; Tracy v. Ringole, supra, 87 Cal.App. 549, 551, 262 P. 73.)

In the ordinary contingency fee agreement, the amount of the fee to be paid is agreed upon; may be a specified sum; or may be a percentage of the recovery....