Klauder v. Cregar

• Decision Date: 25 June 1937
• Docket Number: 169
• Citation: 327 Pa. 1,192 A. 667
• Parties: Klauder, Appellant, v. Cregar et al
• Court: Pennsylvania Supreme Court

192 A. 667

327 Pa. 1

Klauder, Appellant, v. Cregar et al

No. 169

Supreme Court of Pennsylvania

June 25, 1937

Argued April 23, 1937

Appeal, No. 169, Jan. T., 1937, from judgment of C.P. No. 3 Phila. Co., June T., 1933, No. 235, in case of George C Klauder v. S. Henry Cregar, Jr., and Pennsylvania Manufacturers Assn. Cas. Ins. Co. Judgment for individual defendant affirmed; judgment for corporate defendant reversed and new trial awarded.

Trespass for maliciously inducing breach of contract. Before HEILIGMAN, J.

The opinion of the Supreme Court states the facts.

Compulsory nonsuit entered. Motion to take it off refused. Plaintiff appealed.

Error assigned was dismissal of motion to remove nonsuit.

Judgment for defendant, S. Henry Cregar, Jr., is affirmed. Judgment for Pennsylvania Manufacturers Association Casualty Insurance Company is reversed and a new trial awarded.

Samuel Kagle, with him Harry A. Mackey, for appellant.

Thomas Raeburn White, with him Algernon R. Clapp, of White & Clapp, for appellees.

Before KEPHART, C.J., SCHAFFER, DREW, LINN, STERN and BARNES, JJ.

OPINION

MR. JUSTICE SCHAFFER:

The husband of Kathryn G. Burgess was killed by an automobile operated by S. Henry Cregar, Jr. Cregar was insured against financial liability for such an occurrence by Pennsylvania Manufacturers Association Casualty Insurance Company. The widow concluded to bring an action against him to recover damages for her husband's death and to accomplish this purpose she retained George C. Klauder, Esq., executing to him a power of attorney authorizing him to institute and maintain the action. In the power of attorney was the following provision: "I do hereby agree that out of whatever sum is secured either by my said attorney or by me from the above defendants [sic], either by way of settlement or verdict, the expenses of this suit, including the fees of witnesses, shall be first paid in full, and of the balance so received remaining after the payment of expenses of suit, the said George C. Klauder for and in consideration of the professional services to be rendered by him in the institution, prosecution and general conduct of the said case, shall retain or be entitled to one-half part thereof." It will be noticed that the giver of the power retained to herself the right to settle with the alleged tort-feasor.

The action was brought by the attorney, and while it was pending, and before trial, the plaintiff herself settled with the defendant for the sum of $5,000. She did not pay her attorney.

Upon learning that the settlement had been made the attorney brought this action against Cregar and the insurance company, alleging that they had maliciously interfered with performance of the contract between him and his client and induced her to break the contract to his injury and damage. On the trial of the case at the close of plaintiff's evidence, the court entered a compulsory nonsuit, which it subsequently declined to remove, with the result that we have this appeal by plaintiff.

At the outset of a review of the pleadings, the testimony and the governing legal principles entering into the case, it is opportune to remark that "a contract confers certain rights on the person with whom it is made, and not only binds the parties to it by the obligation entered into, but also imposes on all the world the duty of respecting that contractual obligation. . . . If one maliciously interferes in a contract between two parties, and induces one of them to break that contract to the injury of the other, the party injured can maintain an action against the wrongdoer": Caskie v. Phila. Rapid Transit Co., 321 Pa. 157, 159, 184 A. 17. An agreement between an attorney and a client on a contingent fee basis is a legal and valid contract and as such is entitled to the protection of the law: Williams v. Phila., 208 Pa. 282, 57 A. 578.

In his statement of claim plaintiff bases his right to recover on the following allegations: "Plaintiff avers that in order to effect and exact such unfair, unjust, unreasonable and unconscionable settlement, defendants in concert with each other and with full knowledge of the valid and existing agreement between the plaintiff and the said Kathryn G. Burgess, and of plaintiff's valuable rights thereunder, intentionally, wrongfully and maliciously intending to injure plaintiff and deprive him of his fee as attorney, attempted and successfully induced, procured and enticed the said Kathryn G. Burgess by means of the unfair and improper statements, arguments and persuasions aforesaid to breach and violate her contract with plaintiff and to effect such settlement without plaintiff's knowledge or consent of which settlement plaintiff was to receive and did receive no portion whatsoever. Plaintiff avers that defendants by their malicious inducement and procurement of the breach of contract as aforesaid, have deprived plaintiff of the advantages, benefits, interests and profits under said contract and his interest in the claim of the said Kathryn G. Burgess in her own right, and on behalf of her minor children, to which plaintiff was entitled under said contract resulting in a large pecuniary loss to plaintiff."

The statement of claim lays the damages on "the value of his aforesaid contract," which it is averred is $7,500 and claims this sum as compensatory damages and in addition claims punitive damages in a like sum. As we understand the case as presented in the court below and to us, the claims for damages as set forth in the statement of claim are abandoned and what is now sought is a recovery of one-half the sum which Mrs. Burgess received in settlement, $2,500.

Just what took place when the settlement was made was thus told by Mrs. Burgess. She testified that a representative of the insurance company named Watkins called to see her and told her that Cregar had asked him to come to see whether she would settle the case. She said that Watkins did not give his true name. She informed him that she could not settle the case as she had engaged Mr. Klauder as her attorney. To this Watkins replied, "That is what is wrong with you people, you run and get a lawyer before you stop to see Mr. Cregar." She informed him that she had signed a power of attorney to Mr. Klauder and that he was to get half of what she would receive from the suit. At this interview she added she would not settle without seeing her attorney. Subsequently Watkins called again at her home and inquired whether she would accept a settlement. She told him she would not, as she had engaged Mr. Klauder as her attorney and signed a power of attorney to him. Watkins then stated to her that if she would settle out of court, the power of attorney she had signed with Mr. Klauder was not any good, "That I would not have to pay him if I would settle out of court." After this statement, she told Watkins she would have to talk the matter over with her brother. This she did. Watkins, accompanied by another representative of the insurance company named Gunnigan, called upon her a third time, asked if she would make settlement and was told that she did not know what to do. They offered her $4,500 and her brother, who was present, replied, "Make it $5,000 and she will take it." She acquiesced in this. To her inquiry as to what should be done about Mr. Klauder, they told her that she did not have to pay him if she settled out of court. She then particularly inquired of Gunnigan as to what she should do about Mr. Klauder and he said, "Never mind, we will take care of that." She was also told by Watkins that she did not have to let Klauder know about the settlement and she did not inform him that it had been made. Previously she had told him that there had been an offer of settlement. The settlement was effected by the insurance company drawing its check to Cregar and he drawing his check to plaintiff. Mrs. Burgess said she did not pay Mr. Klauder because she was told by the representative of the insurance company that she did not have to pay him.

It is argued by appellee that although the statement of claim avers that defendants had made settlement with the client for $5,000, there is no averment or proof that defendants had prevented her from paying or induced or persuaded her not to pay one-half of that sum to plaintiff, nor is any claim for one-half that sum made in the statement. While it is true it was not shown that defendants had prevented or directly induced Mrs. Burgess not to pay her attorney, the insurance company's representatives effectively brought about this result, after being informed by her that she had agreed to pay him one-half of the recovery, by stating to her that the power of attorney was not any good and that she would not have to pay him if she settled out of court and that they would take care of him and that she did not have to inform him of the settlement. There can be no question that these statements brought about the breach of her contract with Mr Klauder and resulted in his not being paid. While it is true there is no specific claim in the statement for the $2,500, there is a claim for the value of the contract to plaintiff and while that is fixed at an extravagant figure we think it sufficiently covers the sum which he was entitled to receive, one-half of the settlement: Scranton Axle...