Opinion ID: 854139
Heading Depth: 3
Heading Rank: 3

Heading: An attorney's inherent agency power in court proceedings

Text: Inherent agency power is a term used ... to indicate the power of an agent which is derived not from authority, apparent authority or estoppel, but solely from the agency relation and exists for the protection of persons harmed by or dealing with a servant or other agent. RESTATEMENT (SECOND) OF AGENCY § 8A (1958). Although not using the term inherent agency power, Indiana courts have applied the concept of the inherent power of an agent, usually a general agent, and most typically a general agent of an insurer: A general agent is one who is authorized to transact all the business of his principal, or all his business of some particular kind, or at some particular place. The principal will be bound by the acts of a general agent, if the latter acted within the usual and ordinary scope of the business in which he was employed, notwithstanding he may have violated the private instructions which the principal may have given him, provided the person dealing with such agent was ignorant of such violation and that the agent exceeded his authority. Farm Bureau Mut. Ins. Co. v. Coffin, 136 Ind.App. 12, 16, 186 N.E.2d 180, 182 (1962) (quoting Cruzan v. Smith, 41 Ind. 288, 297 (1872) (internal quotation marks and citation omitted)). [7] The reason for this rule is that if one of two innocent parties must suffer due to a betrayal of trusteither the principal or the third partythe loss should fall on the party who is most at fault. Because the principal puts the agent in a position of trust, the principal should bear the loss. Id. at 18, 186 N.E.2d at 183 (citations omitted). The agent remains liable to the principal in accordance with the terms of their agreement. RESTATEMENT (SECOND) OF AGENCY § 8A cmt. c (1958). Special agents, in contrast, do not as a general proposition carry inherent agency power. A special agent is one authorized to do one or more specific acts but not to conduct business generally for the principal. As to special agents, the general rule is that: [t]he principal is not bound by the acts of a special agent, if he exceeds the limits of his authority. And it is the duty of every person who deals with a special agent to ascertain the extent of the agent's authority before dealing with him. If this is neglected, such person will deal at his peril, and the principal will not be bound by any act which exceeds the particular authority given. Farm Bureau Mut. Ins. Co., 136 Ind.App. at 16, 186 N.E.2d at 182-83 (quoting Cruzan, 41 Ind. at 298) (internal quotation marks and citation omitted); RESTATEMENT (SECOND) OF AGENCY § 161A (1958). See also Allegheny Mut. Cas. Co. v. Franklin, 513 N.E.2d 658, 659 (Ind.Ct.App.1987). In this case, neither Liberty Mutual nor the attorney appears to be a general agent of the employer. Neither party was authorized to transact all the business for H & M. Both Liberty Mutual and the attorney were agents only with respect to pursuing the workers' compensation lien. However, attorneys present a unique circumstance where, although they are special agents, some inherent power is found. This stems from a line of Indiana cases that recognize the power of an attorney to bind the client to the attorney's actions in court. It is derived from the need for structural integrity of court procedures and the protection of third parties who rely on the finality of those procedures. Both considerations require that an attorney have the power to bind the client in court. This reasoning has led to the longstanding general rule in Indiana that: An attorney may without express authority, bind his client by agreement that judgment may be taken against him, and that, too, though the attorney know that his client has a good defense to said action. If [the attorney] acts contrary to the express directions of his client, or to his injury, the client must look to the attorney for redress. Thompson v. Pershing, 86 Ind. 303, 310 (1882). See also Ferrara v. Genduso, 214 Ind. 99, 101, 14 N.E.2d 580, 581 (1938) (counsel did not follow the client's instructions, did not inform the client that the cause was set for trial, and agreed that judgment should be entered in favor of the opposing party without the client's consent; judgment affirmed by this Court); Hudson v. Allison, 54 Ind. 215, 216 (1876); Guydon v. Taylor, 115 Ind. App. 685, 690, 60 N.E.2d 750, 751 (1945); Wilkie v. Reynolds, 34 Ind.App. 527, 530-31, 72 N.E. 179, 181 (1904); Devenbaugh v. Nifer, 3 Ind.App. 379, 382, 29 N.E. 923, 924 (1892). Although the theoretical underpinnings of this rule are not always fully explained, and on occasion are set forth in terms slightly at variance with standard agency doctrines, [8] these cases uniformly bind the client to an in court agreement by the attorney and remit the client to any recovery that may be available from the attorney. [9] This distinction between in court consents and out of court agreements is also found in Indiana statutory law at least since the civil code of 1881 and currently embodied in Indiana Code § 34-1-60-5: An attorney has authority, until discharged or superseded by another ... [t]o bind his client in an action or special proceeding, by his agreement, filed with the clerk, or entered upon the minutes of the court, and not otherwise. Although the statute perpetuates the archaic term minutes of the court today it presumably refers to the transcript and chronological case summary and, in the context of an ADR, whatever memorializes that proceeding. This rule is followed in many, but certainly not all jurisdictions. See, e.g., Eida v. Stoddard, 111 N.H. 123, 276 A.2d 12 (1971); De Charette v. St. Matthews Bank & Trust Co., 214 Ky. 400, 283 S.W. 410 (1926); Turner v. Turner, 241 Miss. 444, 130 So.2d 871 (1961). See generally 7A C.J.S. Attorney & Client, § 200, n. 56 (1980). [10] Its origins can be traced at least to the House of Lords where the speaker, directing his comments to the validity of a consent decree, stated: Where a decree is made by consent of counsel, there lies not an appeal or re-hearing, though the party did not really give his consent; but his remedy is against his counsel.... [11] Bradish v. Gee, Amb., 229 (1754). See also Downing v. Cage, 1 Eq.Ab. 165 (1699). The cases in Indiana and elsewhere recite the content of this rule, but frequently do not explain the reason for it. Indeed one rarely encounters a rule that is so commonly cited and yet so infrequently explained. When the rationale is stated, it emerges as one of necessity. The Supreme Court of South Carolina explained: It is true that attorneys, under their general authority as such, have no [power to release a lien]; but there is a wide and clear distinction between the acts of attorneys under their general authority in matters not in court, and the acts of attorneys in the conduct and progress of a suit in court.... Upon this distinction, in large measure, rest the certainty, verity, and finality of every judgment of a court. Litigants must necessarily be held bound by the acts of their attorneys in the conduct of a cause in court, in the absence, of course, of fraud. Alma Lumber Co. v. Beecham, 47 S.C. 393, 25 S.E. 285, 286 (1896). See also Parr v. Chicago, B & Q. R.R. Co., 194 Mo.App. 416, 184 S.W. 1169, 1170 (1916). A variant on this theme is that in court the client speaks through the attorney who is deemed the same as the client. There is full power on the part of the counsel to represent the client [in court].... Williams v. Simmons, 79 Ga. 649, 7 S.E. 133, 135 (1888); Singleton v. Bunge Corp., 364 So.2d 1321, 1325 (La.Ct. App.1978). The reason behind this rule stems from the setting of an in court proceeding and the unique role of an attorney-agent in that setting. Proceedings in court transpire before a neutral arbiter in a formal and regulated atmosphere, where those present expect legally sanctioned action or resolution of some kind. A rule that did not enable an attorney to bind a client to in court action would impede the efficiency and finality of courtroom proceedings and permit stop and go disruption of the court's calender. Of course the attorney is free, and obligated, to disclaim authority if it does not exist. But in the absence of such a disclaimer, an attorney's actions in court are binding on the client. In contrast to court proceedings, when an attorney represents a client out of court, custom does not create an expectation of settlement or compromise without the client's signing off. Gravens, 666 N.E.2d at 966 (as in most insurance settlements, both parties understood that there would be no settlement without a release signed by the [client]).