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Bergantzel v. Mlynarik11/16/2000
Appeal from the Iowa District Court for Pottawattamie County, Kathleen A. Kilnoski, District Associate Judge, and Keith E. Burgett, Judge.
Discretionary review of small claims judgment allowing plaintiff's claim for a contingent fee arising out of settlement of personal injury action.
REVERSED AND REMANDED.
Considered en banc.
The appellee, Terri Bergantzel, brought a small claims action against the appellant, Jan Mlynarik, to recover a contingent fee based on Bergantzel's assistance in negotiating a settlement of Mlynarik's personal injury claim. We granted discretionary review of the district court's affirmance of the small claims judgment allowing such a fee. Because Bergantzel is not a licensed attorney, we hold that the contingent fee contract is against public policy and may not be enforced. Accordingly, we reverse and remand for dismissal of Bergantzel's action.
I. Scope of Review.
The scope of review of a small claims action depends upon the nature of the case. See Credit Bureau Enters., Inc. v. Pelo, 608 N.W.2d 20, 23 (Iowa 2000). The claim in the case before us is for breach of contract, a law action. See Rogers v. Webb, 558 N.W.2d 155, 156 (Iowa 1997). Therefore, our review is for correction of errors of law. See id. The trial court's findings of fact "are binding if supported by substantial evidence." Land O'Lakes, Inc. v. Hanig, 610 N.W.2d 518, 522 (Iowa 2000). In the present appeal, Mlynarik does not challenge the trial court's findings of fact, but rather claims that the court incorrectly applied the law in determining that the contract was enforceable under these circumstances. This court is not bound by the trial court's "legal conclusions and application of legal principles." Id.
II. Background Facts and Proceedings.
The trial court found the following facts. The defendant in this action, Jan Mlynarik, was seriously injured in a motor vehicle accident. He entered into a written contract with the plaintiff, Terri Bergantzel, under which Bergantzel was to "assist in the negotiation with the insurance companies and attorney, if necessary, in the settlement of [Mlynarik's] claim" resulting from the accident. In consideration for this assistance, Bergantzel was to receive fifteen percent of the amount recovered after payment of doctors' bills. The contract stated that Bergantzel was not an attorney and that the payment to her was to cover her expenses only. In the event that the services of an attorney were required, the contract provided that Bergantzel would "either pay for the consultation with an attorney or, if the attorney fees exceed the fifteen percent, [would] forfeit all claims to the settlement money."
It is undisputed that, pursuant to this agreement, Bergantzel negotiated a settlement with the tortfeasor's insurance carrier for the limits of the tortfeasor's policy—$100,000. Her work included locating witnesses, preparing affidavits, making long-distance phone calls, obtaining Mlynarik's medical and school records, obtaining a physician's opinion letter, and communicating with the insurance company. For her work, Mlynarik paid Bergantzel slightly over $12,000, which was fifteen percent of the recovery after medical expenses were deducted.
Bergantzel then undertook similar efforts to negotiate a settlement with Mlynarik's underinsured motorist (UIM) carrier. Bergantzel obtained a settlement offer from the insurance company for $35,000. She told Mlynarik that if he wanted a larger recovery, he would need to hire an attorney. Mlynarik decided to consult with an attorney and entered into a contingent fee agreement with attorney Randall Shanks. Shanks success
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