Herron v. State Farm Mutual Ins. Co.
| Decision Date | 22 December 1960 |
| Court | California Court of Appeals Court of Appeals |
| Parties | John Wynne HERRON, Fred R. Winn, and Mansfield Davis, Plaintiffs and Appellants, v. STATE FARM MUTUAL INSURANCE COMPANY, a Corporation, Anthony Caruso, Donald Halverson, and Donna Halverson, Defendants, State Farm Mutual Insurance Company, a Corporation, and Anthony Caruso, Respondent. Civ. 9870. |
Herron & Winn and Mansfield Davis, San Francisco, for appellants.
Bledsoe, Smith, Cathcart, Johnson & Phelps, San Francisco, for respondents.
Plaintiffs, John Wynne Herron, Fred R. Winn and Mansfield Davis, appeal from a judgment dismissing their complaint as to the respondents State Farm Mutual Insurance Company and Anthony Caruso after their demurrer to the second amended complaint was sustained without leave to amend.
The action is one based on alleged unjustifiable interference with the contractual rights between attorney and client. We shall first summarize the allegations of the complaint.
Appellants are attorneys at law. A Mr. and Mrs. Donald Halverson were injured in an automobile accident on May 11, 1958. Appellants entered into a contingent fee contract with the Halversons which provided in part that the Halversons could not settle their claim without the consent of the appellants. On May 22, 1958, appellants notified Anthony Caruso, State Farm Mutual Insurance Company's agent in Vallejo, and the insurance company that they were representing the Halversons. On June 6, 1958, both Mr. and Mrs. Halverson informed appellants that they did not wish to be represented by them. The letter from Mr. Halverson read in part: Mrs. Halverson stated in her letter that she signed the contract as the result of a misunderstanding and that therefore she did not desire to be represented by them. The Halversons then settled with the insurance company. This action was thereafter filed against the Halversons, State Farm Mutual and Caruso. It was alleged in the complaint that on or about June 1, 1958, Anthony Caruso and the insurance company induced the Halversons to discharge appellants as their attorneys by advising the Halversons that they did not need to continue to retain attorneys to represent them; that each had one year to file suit; that a settlement satisfactory to the Halversons would be made; that State Farm Mutual Insurance Company, by and through its agent, Anthony Caruso, agreed with the Halversons to deprive appellants of the benefit of the contract with the Halversons; that they assisted in the preparation of the letters notifying appellants of their discharge and advised that the letters be mailed; and that in doing these things Caruso and State Farm Mutual Insurance Company acted maliciously and caused appellants to lose the benefit of their contingent fee contract.
The principal question presented by this appeal is whether or not an attorney has a cause of action against third persons who maliciously interfere with the attorney's contingent fee agreement with his client. It is the contention of respondents that the trial court did not err in sustaining respondents' demurrer without leave to amend because appellants could not state a cause of action against respondents.
Appellant relies strongly on the case of Freed v. Manchester Service, Inc., 165 Cal.App.2d 186, at page 188, 331 P.2d 689, at page 690, in which the court said:
'It is well settled in California that an action will lie for inducing a breach of contract although the means employed were in themselves lawful, unless there is sufficient justification for such conduct. Imperial Ice Co. v. Rossier, 18 Cal.,2d 33, 35, 112 P.2d 631; Dominguez Estate Co. v. Los Angeles Turf Club, 119 Cal.App.2d 530, 541, 259 P.2d 962; Rest., Torts, sec. 766. Liability also exists for unjustifiable justifiable interference with contractual rights despite the fact that the contract is terminable at will. Speegle v. Board of Fire Underwriters, 29 Cal.2d 34, 39, 172 P.2d 867; Romano v. Wilbur Ellis & Co., 82 Cal.App.2d 670, 673, 186 P.2d 1012. Therefore, whether plaintiff's interest in the Gordon lease or his contract with Gordon was coupled with an interest or vested is immaterial and need not be considered. As stated at page 39 of 29 Cal.2d at page 870 of 172 P.2d in the Speegle case, supra, '[r]ecognizing that the fact that a contract is 'at the will of the parties, respectively does not make it one at the will of others' (citations).'
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'The cases establish no precise formula or standard by which a defendant's conduct is to be evaluated in order to determine whether it was justified. The courts and legal writers often speak in terms of a 'balancing of interests,' (see, e. g., Masoni v. Board of Trade of San Francisco, 119 Cal.App.2d 738, 742, 260 P.2d 205; 41 Harv.L.Rev. 728, 745). The Restatement of Torts, § 767, cited in many California cases (e. g., Imperial Ice Co. v. Rossier, supra, 18 Cal.2d at page 36, 112 P.2d at page 633; Hancock v. Burns, supra, 158 Cal.App.2d 794 , 323 P.2d 461; Masoni v. Board of Trade of San Francisco, supra, 119 Cal.App.2d at page 742, 260 P.2d at page 207), suggests that the following factors are pertinent when the question of justification is in issue:
Respondent in reply contends that the Freed case is distinguishable on its facts from the instant case because the Freed case involved a different kind of contract. Respondents state that the subject matter of the contract there in question was real property and a business conducted thereon, in particular a certain automobile wash rack facilities and the business of washing automobiles for profit; and the plaintiffattorney in that case could therefore acquire an interest in the subject matter of the contract prior to judgment. Respondents argue that the cause of action sought to be established in the instant case cannot apply to an attorney's contingent fee contract wherein the subject matter of the contract is the client's personal injuries. There are no decisions in California dealing with the precise question here involved, but respondent relies upon a number of decisions of outside jurisdictions.
The first of these is Tauro v. General Acc. Fire & Life Assur. Corp., 297 Mass. 234, 8 N.E.2d 773. The facts in that case were that an attorney brought action against the defendant insurance company and its local manager, alleging that he was employed by one Johnson to prosecute to trial or settlement a tort action arising out of personal injuries sustained in an automobile accident. Plaintiff had filed an action on behalf of Johnson and guaranteed payment of Johnson's doctor's bills and other bills. Plaintiff alleged that defendant insurance company, with knowledge of plaintiff's contract and action, 'wilfully and maliciously and with intent to deprive the plaintiff of the benefits, advantages and profits that the plaintiff would otherwise have made and received from his said employment, did with either actual ill will or purpose to harm or without legal justification, influence, persuade and induce the said * * * Johnson to settle his tort actions for an inadequate amount, although the defendant's assured was at the time represented by counsel employed by the defendant, and by reason of the said wilful and malicious acts of the defendant, the plaintiff wholly lost the benefits, advantages and profits of said contract with said * * * Johnson and lost the value of the services rendered under said employment, together with other damages.' Defendant's demurrer to the complaint was sustained and upon appeal it was held that the demurrer was properly sustained, the court stated at page 773 of 8 N.E.2D:
Also cited by respondents is Herbits v. Constitution Indemnity Co., 279 Mass. 539, 181 N.E. 723. In that case plaintiff's attorneys had entered into a contingent fee contract with a personal injury claimant and had rendered services in connection with the contract. Defendant insurance company settled the cause of action directly with plaintiff's client despite the fact that it knew of the existence of the contract and the...
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