Am. Auto. Ins. Co. v. Niebuhr

• Decision Date: 01 November 1938
• Citation: 124 N.J.Eq. 372,2 A.2d 46
• Parties: AMERICAN AUTOMOBILE INS. CO. v. NIEBUHR et al.
• Court: New Jersey Court of Chancery

2 A.2d 46

124 N.J.Eq. 372

AMERICAN AUTOMOBILE INS. CO.

v. NIEBUHR et al.

Court of Chancery of New Jersey.

Nov. 1, 1938.

Syllabus by the Court.

1. At common law an attorney has two liens, a general lion or right to retain possession of documents and other property of his client until he is paid whatever is due him for professional services, and a special or charging lien against the judgment in favor of his client for compensation for services in that particular suit or cause of action.

2. When there is brought into Chancery for distribution a fund on which an attorney claims a lien under R.S. 2:20-7 for services in another court, Chancery has jurisdiction to determine the validity of the claim and to enforce the lien by payment out of the fund.

3. When attorney and client have not agreed upon the fee, the amount for which the lien is given is the reasonable value of the attorney's services; when the amount is fixed by contract, the lien secures compensation in accordance with the contract.

4. The statutory lien does not arise until an action at law is begun but it secures compensation for services of the attorney under his retainer, in respect to the particular cause of action, performed before the suit was started as well as afterward.

5. When a cause of action is reduced to judgment the incident of the old debt will be carried forward to prevent the inequitable destruction of a right, privilege or exemption; reduction of the debt to judgment will not deprive the creditor of his right to resort to a fund or security.

6. An attorney, after instituting suit in the Circuit Court for his client, consented to the substitution of another attorney but reserved his right of lien under R.S. 2:20-7. The attorney recovered judgment against his former client for the amount due under his contract of retainer for services in connection with the cause of action for which he had instituted the Circuit Court suit. The judgment included taxed costs and carried interest. Held, that the amount of the judgment including costs and interest, was secured by the attorney's lien and should be paid out of the fund produced by the Circuit Court action.

7. The attorney, before resorting to his lien, need not first exhaust his remedies on his judgment and on the appeal bond.

Bill of interpleader by the American Automobile Insurance Company against F. Elmer Niebuhr and others.

Decree in accordance with opinion.

Salvatore Muti, of Newark, for defendant Niebuhr.

Gaetano M. Belfatto, of Newark, for defendant Sassadeck.

BIGELOW, Vice Chancellor.

Defendant Sassadeck, having been struck by an automobile driven by one Mrs. Rasmussen, engaged the defendant Niebuhr, an attorney at law, to prosecute and adjust his claim for damages and agreed that the attorney should retain for his services one-third of any verdict or settlement. Niebuhr, as Sassadeck's lawyer, began suit against Mr. and Mrs. Rasmussen in the Essex Circuit Court and then, three weeks later, consented to the substitution of another attorney for Sassadeck, but reserved his right of lien under R.S. 2:20-7. In the fall of 1936, complainant, as insurer of the Rasmussens, agreed upon a settlement of the damage suit for $7,500, paid Sassadeck $6,400 of this sum and retained $1,100 to meet possible liens of Niebuhr and other attorneys and of a hospital.

Meanwhile, August 20, 1936, Niebuhr recovered in the District Court of the Second Judicial District of Essex County judgment against Sassadeck for $529, based on the contract of retainer already mentioned. Judgment was affirmed. Niebuhr v. Sassadeck, 190 A. 783, 15 N.J.Misc. 285; Id., 120 N.J.L. 183, 198 A. 841.

Complainant filed this bill of interpleader and paid into court $1,100, the sum retained on the settlement of the damage suit. The claim of the hospital has since been satisfied out of the fund and the other defendants, except Niebuhr and Sassadeck. have disclaimed. Both claimants have proceeded on the assumption that their rights are as if the Rasmussens were complainants instead of the insurance company.

It is, of course, clear that Sassadeck is indebted to Niebuhr for $529; so much is established by his judgment. But that is not enough to entitle Niebuhr to a decree in his favor. It must appear that he has title or lien, be it legal or equitable, to or upon the fund in court.

At common law, an attorney has two liens: One general, the other special. His general lien is his right to retain possession of documents and other property of his client until he is paid whatever is due him for professional services. His special or charging lien arises only when judgment in favor of his client is entered; the lien is a charge against the judgment for services in that particular suit or cause of action. Delaney v. Husband, 64 N.J.L. 275, 45 A. 265. Neither of these liens is available to Niebuhr for he has never had possession of the fund in court and so cannot enforce his general lien against it; and the suit which resulted in the fund was settled and not pressed to judgment and hence he has no charging lien.

Niebuhr argues that the agreement for a contingent fee gave him an equitable lien on the money realized. Whether such an agreement has that effect depends on the terms of the contract and the particular circumstances of the case. Weller v. Jersey City, etc., R. Co., 66 N.J.Eq. 11, 57 A. 730; Id., 68 N.J.Eq. 659, 61 A. 459, 6 Ann.Cas. 442; Wilson v. Seeber, 72 N.J. Eq. 523, 66 A. 909; Metropolitan Life Ins. Co. v. Poliakoff, 123 N.J.Eq. 524, 525, 198 A. 852. I pass over this question since I am satisfied that Niebuhr has a lien by statute, R.S. 2:20-7.

It has been held that an attorney's action on the statute to recover his fee from his client's opponent, after settlement of the principal suit, must be prosecuted on petition in the court in which the principal suit was pending. "Inasmuch as the proceeding is purely statutory, the plaintiff being without remedy except by the provisions of the statute, he is obliged to go to the forum designated by the statute." Simon v. Globe Indemnity Co., 154 A. 238, 9 N.J.Misc. 392. But when there is brought into Chancery for distribution a fund on which an attorney claims the statutory lien for services in another court, Chancery has...