Johnson v. Tesky

• Decision Date: 26 April 1982
• Docket Number: No. 34505,34505
• Citation: 643 P.2d 1344,57 Or.App. 133
• Parties: Eleanor JOHNSON, Respondent, v. V. Joyce TESKY, Appellant. ; CA 19408.
• Court: Oregon Court of Appeals

Page 1344

643 P.2d 1344

57 Or.App. 133

Eleanor JOHNSON, Respondent, v. V. Joyce TESKY, Appellant.

No. 34505; CA 19408.

Court of Appeals of Oregon.

Argued and Submitted July 17, 1981.

Decided April 26, 1982.

Larry A. Brisbee, Hillsboro, argued the cause and filed the briefs for appellant.

Robert H. McSweeny, Beaverton, argued the cause for respondent. On the brief were Robert J. Miller, and Blyth, Porcelli, Moomaw & Miller, Beaverton.

Before BUTTLER, P. J., JOSEPH, C. J., and WARREN, J.

WARREN, Judge.

Plaintiff brought this action for damages which she suffered in a motor vehicle accident allegedly caused by defendant's negligence. In her supplemental answer, defendant contends that a settlement agreement was entered into between the attorneys for the parties and that plaintiff is bound by that agreement. The trial court determined, in a separate proceeding, that plaintiff had not authorized her attorneys to settle and that her claim could, therefore, go to trial. Plaintiff was awarded $55,000 in the subsequent jury trial. Defendant appeals.

Plaintiff and defendant were involved in a motor vehicle accident on August 24, 1976. In September, plaintiff retained an attorney, Miller, to pursue her claim for injuries arising out of the accident; Miller's associate was involved in the case as well. Those attorneys negotiated on her behalf with defendant's insurer and later with defendant's attorney. Plaintiff admits that she authorized her attorneys to conduct settlement negotiations but maintains that she did not authorize them to bind her to a final figure; it was her understanding that she would not be bound until she signed a release or accepted a check.

In late 1977, plaintiff filed the present litigation. Negotiations continued between the attorneys, but defendant did not increase her original settlement offer of $1500, and trial was scheduled for July 18, 1979. On July 5, Miller's associate spoke by telephone with a secretary for defendant's attorney. There is disagreement over what was said. Plaintiff's attorney testified that he told the secretary that he believed that plaintiff would settle for $1500 and asked that a check and release be prepared. The secretary testified that he flatly stated that plaintiff would settle for $1500. This conflict as to what was said is of no significance, because in subsequent communications between Miller, defendant's attorney and her insurance adjuster it became clear that all attorneys understood that a settlement had been reached, and the case was removed from the trial court docket.

On July 18, defendant's attorney sent Miller a confirming letter, which included a release, a stipulated order of dismissal and a check naming as payees plaintiff, Miller and the Department of Human Resources, which had a lien. On September 7, Miller mailed the check and release to plaintiff for her signature. On September 14, plaintiff returned the check and release to Miller, indicating that she wanted to go through with the trial. Miller did not inform defendant of plaintiff's rejection until October 4. Defendant subsequently filed the supplemental answer raising the defense of settlement. On November 5, 1980, a trial was held, first to the court on the supplemental answer and then to a jury on plaintiff's injury claim.

The only issue on appeal is whether plaintiff is bound by the settlement agreement. Defendant advances three theories: (1) plaintiff's attorneys had actual authority to settle; (2) plaintiff's attorneys had apparent authority to settle, thereby estopping plaintiff from denying the attorneys' authority; and (3) in the alternative, if there was no actual or apparent authority, plaintiff ratified the unauthorized agreement. The initial question is the scope of our review. Defendant characterizes her supplemental answer as a suit for specific performance of the settlement agreement and contends that we must, therefore, review de novo. We reject her characterization of this phase of the litigation. Defendant's supplemental answer, settlement, is a legal defense. We treat this as an appeal in an action at law. ¹

In her first assignment, defendant contends that the trial court erred in finding that plaintiff's attorneys were without authority to settle her claim. It has been held that an attorney does not have authority arising merely from his employment to settle his client's claim. Galbraith v. Monarch Gold Co., 160 Or. 282, 294, 84 P.2d 1110 (1938). Similarly, authority to negotiate with the opposing party does not, by itself, imply the power to reach a binding agreement; the client's express authorization is necessary. ² The trial court, as trier of fact, determined that plaintiff had not given her attorneys the necessary authorization, and there is evidence in the record to support that conclusion.

In her second assignment, defendant contends that, even if plaintiff did not authorize her attorneys to settle, she should be estopped to disavow the agreement. Although plaintiff's attorneys lacked actual settlement authority, whether they had apparent settlement authority is a closer question. The client-attorney relationship is one of principal and agent. Lehman v. Knott, 100 Or. 240, 246, 187 P. 1109 (1920). Apparent authority to do an act (settle) is created when the principal's conduct, reasonably interpreted, causes a third person mistakenly to believe that the agent has actual authority. Jones v. Nunley, 274 Or. 591, 595, 547 P.2d 616 (1976). The practical difference between actual and apparent settlement authority is that, while in both instances the client is bound, in the latter case he may seek a remedy against his attorney for breach of contract. See Miotk v. Rudy, 4 Kan.App.2d 296, 605 P.2d 587, 589 (Kan.App.1980).

Galbraith v. Monarch Gold Co., supra, indicates that employment does not itself create apparent authority to settle. The weight of authority supports this conclusion as well. Annot., 30 A.L.R.2d 944 (1953); but see Cohen v. Goldman, 85 R.I. 434, 132 A.2d 414 (1957); Folsom v. Miller, 102 Ga.App. 232, 116 S.E.2d 1 (1960). Another authority states this rule in a slightly different manner: if the client has not held out his attorney as having "any other or greater power than an attorney authorized to take charge of litigation for a client commonly has," apparent authority does not exist. 7A C.J.S., Attorney & Client § 214 (1980). This case differs from Galbraith only in that here there...