Summary
holding attorney for board lacked authority absent statute or express resolution of board to settle claim for damages
Summary of this case from City of Roanoke v. T. of WestlakeOpinion
Docket No. 48149.
Decided April 10, 1981.
Ryan, Unwin Archbold, for plaintiff.
Robert E. Murphy and Frank A. O'Boyle, Jr., for defendant.
This lawsuit arose out of a dispute between plaintiff's decedent and the defendant board. Hettie Presnell claimed that after the defendant board had widened the street in front of property she formerly owned in Garden City, defendant agreed to pay her $9,500 for damages resulting from the change in grade to her property. For reasons immaterial to this appeal, the money was never paid. Hettie Presnell then filed suit against the board for breach of contract and inverse condemnation. Since Hettie Presnell died prior to the trial date, her son, Thomas Presnell, personal respresentative of Hettie Presnell's estate, became plaintiff in the action.
On the date set for trial, and following a settlement conference, the parties entered into a settlement agreement on the record in open court. The terms of the agreement were that defendant would pay plaintiff $5,000 for damages plus $1,200 interest, for a total of $6,200.
The terms of the settlement agreement were brought before the Wayne County Board of County Road Commissioners at its next meeting, two days later, by defendant's managing director. The board determined that, since Hettie Presnell had sold her property to new owners to whom the board might also be liable, it could not legally expend public funds to settle with plaintiff. It therefore refused to ratify the settlement placed on the record in open court.
On October 15, 1979, a hearing was held on plaintiff's motion for entry of judgment. The defendant board argued that, since its attorney was without authority to enter into the settlement agreement and since the defendant board had refused to ratify the agreement, the agreement was not binding. The trial court stated that it specifically remembered defendant's counsel telling it that he had the authority to settle for the amount of the settlement. Defense counsel responded that he had received such authorization from the board's managing director, Mr. O'Rourke, but added that Mr. O'Rourke's authorization was invalid because as a matter of law, defense counsel needed the entire board's authorization. The trial court concluded that the settlement agreement was binding and entered the consent judgment, from which defendant appeals as of right.
As a general rule, the "[c]ompromise of pending controversies are [sic] favored by the courts and will only be voided on satisfactory evidence of mistake, fraud or unconscionable advantage". Pedder v Kalish, 26 Mich. App. 655, 658; 182 N.W.2d 739 (1970). As another general rule, it has been said that an "attorney who has the conduct of a lawsuit is presumed to have authority to act on his client's behalf". Jackson v Wayne Circuit Judge, 341 Mich. 55, 59; 67 N.W.2d 471 (1954). This general rule, however, has not been extended to permit an attorney to compromise a client's claim absent specific authority from the client to do so. In Henderson v Great Atlantic Pacific Tea Co, 374 Mich. 142, 147; 132 N.W.2d 75 (1965), the Michigan Supreme Court stated the rule as follows:
"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 N.W. 740 (1886)], Fetz v Leyendecker, 157 Mich. 355 [122 N.W. 100 (1909)], Peoples State Bank v Bloch, 249 Mich. 99 [ 227 N.W. 778 (1929)], and most recently in Wells v United Savings Bank of Tecumseh, 286 Mich. 619 [ 282 N.W. 844 (1938)]." (Footnote deleted.)
The question on appeal is whether the general rule for setting aside compromises and settlements, as enunciated in Pedder v Kalish, supra, should apply to the facts of this case. The Wayne County Board of County Road Commissioners is a "body corporate", and it derives its powers from the Legislature. MCL 224.9; MSA 9.109 provides that:
"(1) The board of county road commissioners shall constitute and be a body corporate with the right of making and using a common seal and altering the same. A majority of the members of the board shall constitute a quorum for the transaction of business. * * *
"(2) The board shall annually appoint 1 member as chairperson to serve during the pleasure of the board. The board of county road commissioners shall act as an administrative board only and the function of the board shall be limited to the formulation of policy and the performance of official duties imposed by law * * *.
"(3) * * * The board shall be known as the board of county road commissioners * * * and * * * may sue and be sued * * *."
Regardless of whether it is called a "body politic" or a "body corporate", the Board of County Road Commissioners is a municipal corporation, and many of the rules and attributes associated with corporations also apply to municipal corporations.
"A municipal corporation is a body politic created by organizing the inhabitants of a prescribed area, under the authority of the legislature, into a corporation with all the usual attributes of a corporate entity, but endowed with a public character by virtue of having been invested by the legislative with subordinate legislative powers to administer local and internal affairs of the community * * *." 56 Am Jur 2d, Municipal Corporations, Counties, and Other Political Subdivisions, § 4, p 73.
Because MCL 224.9, confers on the board the power to sue or be sued, the board also has the implied power to compromise or settle claims arising out of a subject matter concerning which it has the general power to contract. 56 Am Jur 2d, Municipal Corporations, Counties, and Other Political Subdivisions, § 806, p 808.
The dispositive question is who is authorized to compromise a claim in favor or against the public body. Since there is a scarcity of law on this point in Michigan, we turn to the authorities on the law of municipal corporations. In 17 McQuillin, Municipal Corporations (1967 rev vol), § 48.18, pp 124-126, it is stated:
"To be legal and binding the compromise must be made by the duly authorized corporate officers. In municipal corporations proper, where the representative form of government prevails, and the corporators or inhabitants choose officers to represent and act for them in all matters which concern the interests of the corporation, the power of compromise usually exists in the mayor or the governing legislative body, generally denominated the common council. Other officers are without authority to compromise, unless authorized by law. * * *
"In counties and other civil subdivisions * * * the power of compromise usually exists in the representative boards, variously designated as courts, commissioners, supervisors and boards." (Emphasis added.)
Concerning the ability of municipal corporation attorneys and other municipal officers to compromise claims, a general rule may be stated:
"A law officer of a municipal corporation has as a general rule no authority to compromise a claim or a pending action, in the absence of statutory authorization. Thus, it has been held that a county attorney, a corporation counsel of a city, or a city attorney, has no authority to compromise a claim without permission of the municipality." (Footnotes ommitted.) 56 Am Jur 2d, Municipal Corporations, Counties, and Other Political Subdivisions, § 812, p 811.
Since a municipal corporation has many of the attributes of a regular public or private corporation, general rules pertaining to corporate law also aid our inquiry. In 2 Fletcher, Cyc Corporations (perm ed, 1969 rev vol), § 700, p 931, the author states:
"The manager of a corporation has no authority, by virtue of his office alone, to adjust or settle any disputed claims against his corporation, unless such authority may be implied from a previous cause of conduct or dealing."
In 56 Am Jur 2d, Municipal Corporations, Counties, and Other Political Subdivisions, § 276, p 327, it is stated:
"The general rule, with regard to municipal officers, is that they have only such powers as are expressly granted by statute or by sovereign authority or those which are necessarily to be implied from those granted."
Applying the foregoing principles of law to the facts in the instant case, we are of the opinion that the trial court erred in entering the consent judgment after the Wayne County Board of County Road Commissioners failed to ratify the tentative settlement that had been placed on the record in open court. By statute, the board is given the authority to sue and be sued and, by implication, to compromise and settle actions. Even then, to be binding, the settlement must be ratified by the whole board, sitting together as an entity. There is no indication on the record that Mr. O'Rourke, the board's managing director, had the authority, either by statute or by resolution of the board, to compromise and settle claims. Likewise, there is no indication that Mr. O'Boyle, the board's attorney, had such authority. In short, the action of defendant's employee, Mr. O'Rourke, in making a representation that plaintiff's claim could be settled for $5,000, has not been "shown to have been authorized by the defendant commission and was, therefore, not binding on it". Kleiman v Wayne Board of County Road Comm'rs, 336 Mich. 602, 605; 58 N.W.2d 816 (1953). In addition to a lack of evidence to support a finding that Mr. O'Rourke had the actual authority, express or implied, to bind the board, plaintiff has presented no evidence from which we could conclude Mr. O'Rourke had the apparent authority to do so.
Reversed.
No costs, a matter of public issue being involved.