Diamond Soda Water Manufacturing Company, Appellant, v. J. N. Hegeman & Company, Respondent

Diamond Soda Water Manufacturing Company, Appellant, v. J. N. Hegeman & Company, Respondent. An attorney as such is not authorized to compromise a claim — a client is bound by a settlement 'made by Ms attorney witMn his apparent authority. An attorney, as such, has no authority to compromise the rights of a client outside of his conduct of the action, or to accept less than full consideration for the claim sought to be enforced therein, or to release his client’s rights or subject him to a new cause of action. When the client constitutes the attorney his agent to settle and compromise the action, the client is bound by the act of the attorney to theextent of the authority conferred and of such authority as the person with whom he deals has a right to believe him possessed. In such a case, if the attorney makes a settlement within the apparent scope of his authority, his client is bound thereby and cannot subsequently shield himself behind a restriction placed by him upon the attorney’s authority, of which the party dealing with him had no notice and no reason to believe that it existed. Where the defendant, in an action brought to recover the purchase price of a machine sold by the plaintiff to the defendant, authorizes his attorney to effect a settlement of the action by paying the plaintiff a sum, not exceeding $150, the fact that the attorney, in violation of this restriction, makes a settlement of ' the action by agreeing to pay the plaintiff $150 and to return the machine, does not entitle the defendant to repudiate, such settlement, when it appears that the plaintiff had no knowledge of this restriction on the attorney’s authority, and was justified, from the previous negotiations between the parties, in believing that the defendant was willing to return the machine. Appeal by the plaintiff, the Diamond Soda Water Manufacturing Company, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 31st day of January, 1902, upon the dismissal of the complaint by direction of the court after a trial at the New York Trial Term, and also from an order bearing date the 28th day of January, 1902, and entered in said clerk’s office, denying the plaintiff’s motion for a new trial made upon the minutes. Emanuel Jacobus, for the appellant. Gilbert Ray Hawes, for the respondent. [MAJORITY — Hatch, J.:] Hatch, J.: From the complaint in the action it appears that the plaintiff, in' May, 1900, commenced an action against the defendant to recover the purchase price of a carbonating machine or apparatus which had previously been sold by the plaintiff to the defendant and for which there was claimed to be due at the time of the commencement of the action the sum of $500, with interest. Issue was joined therein by the service of an answer, and thereafter, and in January,, 1901, the action was settled and the same was discontinued. Thereafter a dispute arose as to the terms of the settlement, and thereupon the plaintiff brought this action to recover the value of the-machine which it is claimed by the terms of the settlement was to-be delivered to it. The whole point in the controversy between these parties relates not so much to what were the terms of the settlement, as to the authority of the plaintiff’s attorney to make it. The evidence given upon the trial and the correspondence between the attorneys for the respective parties clearly show that Welch,, the attorney for the defendant, in making the settlement for his. client, agreed to pay to the plaintiff the sum of $150 and return the machine. Of this fact there can be no reasonable doubt. The defendant paid the $150 pursuant to the terms of settlement, but-refused to deliver the machine, claiming that Welch was not. authorized to make any other terms of settlement than the payment-of $150; that he exceeded his authority in agreeing to return the machine 'and that the defendants were not bound thereby. Upon... the present trial the plaintiff called as a witness George W. Hopping, the president of the defendant, who testified that Welch was authorized to settle the lawsuit, and upon cross-examination he stated the terms of his authority to be to settle by paying not exceeding $150. Further testimony was given and correspondence introduced showing the terms of the settlement which in fact was made by Welch with the-plaintiff , and this required -that the machine should be returned. When the plaintiff rested, the defendant moved to dismiss the complaint, and the plaintiff asked to go to the jury upon the question as to the authority of Welch to make the settlement, to which he agreed, and also as to the value of the machine. The request was denied, the court granted the motion to dismiss the complaint, and from the judgment entered thereon the plaintiff appeals. It may be conceded that an attorney as such has no authority to compromise the rights of his client outside of his conduct of the action, or to accept less than full consideration for the claim - sought to be enforced therein, or release his client’s rights, or subject him to a new cause of action. (Lewis v. Duane, 141 N. Y. 302.) When, however, the client constitutes the attorney his agent to settle and compromise the action, then the client is bound by the act of the attorney to tlié extent of the authority conferred, and of such authority as the person with whom he deals has a right to. believe him possessed, and if the party acts thereon and would sustain loss therefrom if such authority be denied such person is justified in dealing upon the belief that the. agent possesses the authority to the full extent to which he is held out as possessing. (Walsh v. Hartford Fire Ins. Co., 73 N. Y. 5.) Upon making a settlement, within the apparent scope of his authority, the principal whom he represents is bound thereby and cannot subsequently shelter himself behind a restriction upon the authority of the agent, of which the party dealing had no notice or reason to believe existed, and which was not disclosed at the time of the transaction. (Peru Steel & Iron Co. v. Whipple File & Steel Mfg. Co., 109 Mass. 464.) Prior to the bringing of the first action, the'defendant being dissatisfied with the machine, wrote the plaintiff that they had the same at Ho. 9 East Fifty-ninth street, and stated that it would be necessary for. the, defendant to take the machine there, and on May 4, 1900, the defendant wrote plaintiff’s attorney, also prior to bringing the •action, that the machine was in the cellar at No. 9 East Fifty-ninth street, had been held subject to the plaintiff’s order for a year or more; that defendant moved from such premises on May first, leaving the machine subject to the plaintiff’s risk; that by communicating with a person in charge of the building, plaintiff would be able to obtain entrance to No. 9 East Fifty-ninth street whenever it was ready to take the machine away. It is clear from this correspondence that the defendant desired the plaintiff to take the machine; indeed that defendant had left it, subject io the order of- the plaintiff, and desired to exercise no further control over it, or retain it in its possession. Under such circumstances the plaintiff had every reason-to believe that, when the defendant -constituted Welch its agent to settle the controversy, he was authorized to make an arrangement respecting the disposition Of the machine, the purchase price of which was the subject of the action. tSuch question, if not conclusive upon the defendant, at least presented a question of fact for a jury as to the extent of Welch’s authority. If he had authority to settle, then it follows that plaintiff was entitled to recover the value of the machine in the event it was not .returned. Upon th'ese questions the plaintiff asked to go to the jury, and we think it was error to- refuse his request. It follows that the judgment and order should be reversed and a new trial granted, with costs to the appellant to abide the event. Van Brunt, P. J., Pattebsox, Utgbaham and Laughlie, JJ., concurred. Judgment and order reversed, new trial ordered, costs to appellant to abide event.