Hernlund v. Town & Country Motors, Inc.

• Decision Date: 17 April 1924
• Docket Number: No. 23737.,23737.
• Citation: 198 N.W. 662,159 Minn. 125
• Court: Minnesota Supreme Court
• Parties: HERNLUND v. TOWN & COUNTRY MOTORS, Inc., et al.

159 Minn. 125

198 N.W. 662

HERNLUND

v.TOWN & COUNTRY MOTORS, Inc., et al.

No. 23737.

Supreme Court of Minnesota.

April 17, 1924.

Appeal from District Court, Hennepin County; Frank M. Nye, Judge.

Action by Mrs. J. Hernlund against the Town & County Motors, Inc., and others. From an order permanently enjoining defendants from filing a stipulation for dismissal, they appeal. Reversed, with directions.

Dibell J., dissenting.

Syllabus by the Court

Upon a release of the cause of action to which plaintiff's attorney had forged her signature, and, as a notary, falsely certified her acknowledgment, defendants innocently and in good faith paid $750 to the attorney and received a stipulation from him to enter judgment of dismissal with prejudice, but without costs. On plaintiff's motion the court permanently enjoined defendants from filing the stipulation and entering judgment thereon, without requiring a return of the money paid. Held, the attorney did not have implied authority to settle the cause of action.

But plaintiff seeking equitable relief must restore what defendants parted with in reliance upon the stipulation, under the rule that, when one of two innocent persons must suffer from the fraudulent act of a third, he by whose act the third person was enabled to perpetrate the fraud must bear the loss. Kingman, Cross, Morley & Cant, of Minneapolis, for appellants.

A. A. Tenner, of Minneapolis, for respondent.

HOLT, J.

The action was brought to recover for injuries sustained through the negligent operation of defendants' automobile. After the service of the summons, negotiations for a settlement were had between the attorneys of the parties which resulted in defendants paying to plaintiff's attorney $750 upon receiving, on February 8, 1922, a written instrument settling the cause of action and releasing defendants from any and all claims by reason of said automobile accident. This instrument purported to be signed by plaintiff, was witnessed by her attorney and one Anna Zagel, and duly acknowledged. At the same time the attorneys of the parties entered a written stipulation for dismissal of the action with prejudice, but without costs. More than a year later, on plaintiff's motion in the action, the court permanently enjoined defendants from filing the stipulation. No condition was imposed upon plaintiff. Defendants appeal from the order.

[1] It seems to be conceded that plaintiff's signature to the release was forged by her attorney, and that she had not authorized the settlement of the cause of action. We do not understand counsel to question the right of the court to set aside a stipulation for judgment of dismissal on the merits where the settlement of the cause of action was made without the client's authority. The law is well settled that an attorney does not have implied authority to settle or compromise the cause of action. Davis v. Severance, 49 Minn. 528, 52 N. W. 140;Burgraf v. Byrnes, 94 Minn. 418, 103 N. W. 215;Gibson v. Nelson, 111 Minn. 183, 126 N. W. 731,31 L. R. A. (N. S.) 523, 137 Am. St. Rep. 549. But the question here is: Should the court, as a condition precedent to granting the relief asked, have required plaintiff to restore to defendants what they paid her attorney?

It must be conceded that the release being a forgery is void, and could not avail as a defense in any suit brought against defendants upon the cause of action that plaintiff had against them for this automobile accident. But this motion for relief was not directed against the release. Plaintiff may fully protect herself against that instrument when defendants have occasion to offer it in evidence. The relief sought is against the stipulation and its use. The statute, section 4950, G. S. 1913, reads:

‘An attorney may bind his client, at any stage of an action or proceeding, by agreement made in open court or in presence of the clerk, and entered in the minutes by such clerk, or made in writing and signed by such attorney. During any proceeding or action the attorney may receive money claimed therein by his client, and within two years after judgment, upon payment thereof, may discharge the claim or acknowledge satisfaction of the judgment,’ etc.

The relief applied for and granted by the order concerned a stipulation by the attorneys in the action. The section of the statute quoted authorizes an attorney to bind his client by written stipulations. To set such stipulations aside the equitable powers of the court must be appealed to. The equities of the parties should be considered, and the rule stated in Burgess v. Bragaw, 49 Minn. 462, 52 N. W. 45, is applicable, namely:

‘Where one of two innocent persons must suffer from the fraudulent act of a third, he by whose act the third person was enabled to perpetrate the fraud must bear the loss.’

Plaintiff selected her attorney and intrusted him with her cause of action. She in a measure vouched for him to defendants. They had every reason to believe that the one so selected by her was honest and trustworthy and would account to her for the money paid to him. Under the statute he was authorized to enter stipulations in the action and receive money for her. Where business transactions of the present day are carried on through attorneys, each party proceeds upon the assumption that the attorney of the other in every written stipulation is strictly within the authority or direction given by his client. Defendants and their attorneys were entirely innocent of wrong. While the release, being a forgery, is a nullity, its production by plaintiff's attorney purporting to be executed and acknowledged by her acquits defendants of any charge of negligence. They did not rely merely upon the ‘say-so’ of the attorney. In principle, defendants ought not to be in a worse position because, in paying the money and accepting the stipulation, the inducement was the production by plaintiff's attorney of the forged release, than if it had been his untruthful representation by word of mouth that he had authority to settle the cause of action. That before plaintiff may have the stipulation set aside she should repay the money paid by defendants was decided in Wells v. Penfield, 70 Minn. 66, 72 N. W. 816. That case was not questioned in Gibson v. Nelson, supra, but cited with approval as to the authority of an attorney to stipulate for the dismissal of an action. Bray v. Doheny, 39 Minn. 355, 40 N. W. 262, and Rodgers v. United States Dominion Life Ins. Co., 127 Minn. 435, 149 N. W. 671, and cases therein cited, indicate the broad authority an attorney has to stipulate for judgment. That the client must repay what his attorney has received from the other party to the action as a condition to relief against a judgment entered upon an unauthorized stipulation was held in Dalton v. West End Street Railway, 159 Mass. 221, 34 N. E. 261,38 Am. St. Rep. 410.

The decisions, almost uniformly, seem to hold that where judgment has been entered for a plaintiff and his attorney without authority accepts less than the judgment in full satisfaction or compromise thereof, the judgment will be reinstated or the satisfaction set aside,...