Michigan Nat. Bank of Detroit v. Patmon, Docket No. 58667

• Decision Date: 06 January 1983
• Docket Number: Docket No. 58667
• Citation: 327 N.W.2d 355,119 Mich.App. 772
• Parties: MICHIGAN NATIONAL BANK OF DETROIT, Plaintiff-Appellant, v. Frederick PATMON, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 355

327 N.W.2d 355

119 Mich.App. 772

MICHIGAN NATIONAL BANK OF DETROIT, Plaintiff-Appellant, v. Frederick PATMON, Defendant-Appellee.

Docket No. 58667.

Court of Appeals of Michigan.

Submitted June 24, 1982.

Decided Sept. 23, 1982.

Released for Publication Jan. 6, 1983.

Kramer, Mellen, Wagner & Ishbia, P.C. (by Jeffrey A. Ishbia and Ben T. Liu), Southfield, for plaintiff-appellant.

Stanley R. Kirk, Detroit, for defendant-appellee.

Before CYNAR, P.J., and KAUFMAN and MAHINSKE ^*, JJ.

PER CURIAM.

In November of 1977, plaintiff commenced the present action against defendant for non-payment of two promissory notes. On April 27, 1981, the day scheduled for trial, the parties appeared in court through their attorneys and placed a consent judgment on the record. As stated to the trial court, the consent judgment provided that plaintiff's claim for $16,000, plus interest, would be dropped and a judgment entered against defendant for $7,500 at the statutory 12% interest rate. Defendant was to make an initial $1,000 payment on May 15, 1981. The remainder of the judgment was to be amortized at a set amount over 30 months, with the first monthly payment to be made on June 1, 1981. Defendant was to be permitted a 10-day grace period for payment, although plaintiff was not required to give notice of any delinquency. The consent provided that defendant could prepay without penalty, and that defendant was entitled to entry of a satisfaction of judgment upon completion of the required payments. The judgment was to articulate defendant's home address and social security number. Finally, defendant's separate cause of action against plaintiff was to be dismissed.

On May 22, 1981, the parties again appeared before the trial court on plaintiff's motion to settle and enter the consent judgment. Counsel for defendant indicated that defendant had withdrawn or revoked the authority that he "might have had" to settle the matter. The court ruled that defendant's revocation of his attorney's authority precluded entry of the consent judgment. On June 12, 1981, the court denied plaintiff's motion for reconsideration of its prior ruling. The court believed that the matter was one of discretion and concluded that justice would best be served by permitting defendant to proceed to trial. In opposing the motion, defendant argued that the consent entered on the record never had binding effect since it had not been reduced to a signed judgment, and that, in any event, defense counsel had exceeded his authority in entering into the consent agreement. Plaintiff appeals by leave granted.

Proper disposition of this matter requires us to consider two issues: (1) whether defense counsel had sufficient authority to enter into the consent agreement; and (2) assuming defense counsel had sufficient authority, whether defendant could withdraw that authority after a consent had been placed on the record.

In Henderson v. Great Atlantic & Pacific Tea Co., 374 Mich. 142, 132 N.W.2d 75 (1965), the Supreme Court held to the principle that an attorney may not compromise a client's cause of action absent special authority to do so.

"The principle which governs this case is set forth in 66 ALR 107 et seq., as supplemented in 30 ALR2d 944 et seq., as follows:

" 'The almost unanimous rule, laid down by the courts of the United States, both Federal and State, is that an attorney at law has no power, by virtue of his general retainer, to compromise his client's cause of action; but that precedent special authority or subsequent ratification is necessary to make such a compromise valid and binding on the client.' (Citing numerous cases.)

"The above rule has been adhered to in Michigan in Eaton v. Knowles, 61 Mich 625; 28 NW 740 (1886); Fetz v. Leyendecker, 157 Mich 355; 122 NW 100 (1909); Peoples State Bank v. Bloch, 249 Mich 99; 227 NW 778 (1929); and most recently in Wells v. United Savings Bank of Tecumseh, 286 Mich 619; 282 NW 844 (1938)." Id., 147, 132 N.W.2d 75. (Footnote omitted.)

See also Presnell v. Wayne Board of County Road Comm'rs, 105 Mich.App. 362, 306 N.W.2d 516 (1981).

Thus, although an attorney placed in charge of a lawsuit is presumed to have authority to act on his client's behalf, specific authority is needed to actually compromise a claim. Presnell v. Wayne Board of County Road Comm'rs, supra. In this regard, it has been held that a client's general instruction to an attorney "to do what you think is best" is insufficient to confer upon the attorney power to compromise a cause of action. Hartman v. Frontier City, Inc., 20 Mich.App. 274, 276-277, 174 N.W.2d 48 (1969).

In the instant case, the trial court apparently assumed that defense counsel had the initial requisite authority to settle the lawsuit, despite the fact that defendant bolstered his arguments below with the claim that specific precedent authority was lacking. However, the record below contains no evidence to indicate that such authority existed. Defense counsel's own comments in this regard were equivocal. At the May 22 hearing, he stated that defendant objected to inserting his home address and social security number in the judgment and to personally signing the pleadings. Counsel advised that defendant "has revoked the authority that I might have had in the matter". (Emphasis added.) The main thrust of defense counsel's argument, below and on appeal, is that defendant had the right to revoke any authority to settle prior to the actual signing of a consent judgment order. ¹ Defendant did not personally appear at any of the hearings to offer testimony as to the authority granted counsel, nor did the trial court conduct any inquiry into that aspect of the consent judgment.

Because the question of counsel's precedent authority to settle could be dispositive of this matter, we must remand for further evidentiary exploration into this issue. We remand specifically for the trial court to determine whether defense counsel had been given precedent special authority to compromise defendant's interests in this cause of action. The burden of proving such authority, of course, is upon plaintiff, the party claiming that authority existed. Peoples State Bank for Savings v. Bloch, 249 Mich. 99, 104, 227 N.W. 778 (1929). Obviously, pertinent to the trial court's determination will be the testimony of defense counsel, defendant and defendant's law partner, who was apparently present during the settlement negotiations.

The second issue for our consideration is one that will be relevant on remand should the trial court determine that defense counsel was given precedent authority to compromise defendant's interests--to wit, whether defendant had the right to withdraw that authority prior to the actual entry of an order of consent judgment. The trial court concluded that the right to revoke existed pursuant to City of Norton Shores v. Carr, 59 Mich.App. 561, 229 N.W.2d 848 (1975).

We believe the trial court's reliance upon City of Norton Shores v. Carr, supra, was...