Bank of Boston v. Haufler

• Decision Date: 30 August 1985
• Citation: 482 N.E.2d 542,20 Mass.App.Ct. 668
• Parties: BANK OF BOSTON v. Robert C. HAUFLER (and a companion case 1 ).
• Court: Appeals Court of Massachusetts

Page 542

482 N.E.2d 542

20 Mass.App.Ct. 668

BANK OF BOSTON v. Robert C. HAUFLER (and a companion case ¹).

Appeals Court of Massachusetts Suffolk.

Argued March 13, 1984.

Decided Aug. 30, 1985.

Brian E. Meade, Hanover, for Robert C. Haufler, Sr.

Charles S. Kelly, Norwell, for Elizabeth Haufler & others.

Francis J. Sally, Boston (James E. O'Connell, Jr., Boston, with him), for Bank of New England.

Robert B. Carpenter, Boston, for Bank of Boston.

Before ARMSTRONG, PERRETTA and KASS, JJ.

ARMSTRONG, Justice.

These cases involve the appeals, consolidated in this court, of several parties from judgments entered in the Superior Court disposing of claims to (and totaling substantially in excess of) a portion of the proceeds paid by the Commonwealth to attorneys for Robert C. Haufler as a result of a land taking at Columbia Point in Boston. The proceeds, paid September 27, 1978, amounted to $1,511,040. On September 29, 1978, Haufler, two creditor-claimants, and Haufler's attorneys entered into a stipulation, approved by the court, which provided for the payment of attorneys' and expert witnesses' fees and for the payment of half the balance to Haufler's partner. ² The other half of the balance ("the fund") was to be retained by Haufler's attorneys as escrow agent. Later settlements amounting to $265,000, offset in part by accumulated interest, left the fund on February 10, 1981, at $358,804.39. The judgments appealed from principally concern the disposition of that sum.

The chronology, generally crucial to determining priorities of liens, is as follows. Haufler commenced his land damage action in 1969. See Haufler v. Commonwealth, 372 Mass. 527, 362 N.E.2d 916 (1977). On January 23, 1976, the Bank of Boston ³ sued Haufler to establish his indebtedness on a promissory note for $151,000. On August 17, 1976, the Bank of New England ⁴ sued Haufler to establish his indebtedness on several promissory notes and guarantees. On August 18 the court issued a temporary order in the Bank of New England's action restraining Haufler and his agents and attorneys from disposing of his interest in the proceeds of the land damage action to the extent of $300,000. On September 16 a preliminary injunction to the same effect was entered, with the amount increased to $400,000. A year later, on November 25, 1977, the Bank of Boston obtained an order enjoining Haufler, his agents and attorneys from disposing of the proceeds of the land damage action to the extent of $230,000. The Bank of Boston had also sought to enjoin the Commonwealth in like manner (the complaint had a count in the nature of a statutory bill to reach and apply, see G.L. c. 214, § 3 ); the judge declined to enjoin the Commonwealth, and the Bank of Boston filed an interlocutory appeal.

On April 5, 1978, the court entered a judgment for the Bank of Boston for $234,785.21, plus costs. ⁵ On April 10, 1978, a stipulated judgment was entered in the land damage action, and on September 22, 1978, the Commonwealth paid Haufler's attorneys pursuant thereto. On September 29, 1978, the two banks appeared before a single justice of the Supreme Judicial Court in a further attempt to obtain priority in the land damage proceeds. The Bank of Boston sought and was granted a writ of execution (Mass.R.Civ.P. 69, 365 Mass. 836 [1974] ) in the amount of its judgment (plus costs). The Bank of New England sought and obtained a writ of attachment on trustee process (Mass.R.Civ.P. 4.2, 365 Mass. 740 [1974] ) against Haufler's attorneys. The Bank of Boston delivered its writ to the sheriff shortly before the sheriff received that of the Bank of New England. The sheriff served the writs on Haufler's attorneys in the order received, at 4:20 P.M. and 4:21 P.M., on September 29, 1978. Four months later in First Natl. Bank of Boston v. Haufler, 377 Mass. 209, 385 N.E.2d 970 (1979), the Supreme Judicial Court ruled that, in light of the Commonwealth's payment to Haufler's attorneys, the issue raised by the Bank of Boston's appeal from the judge's order denying injunctive relief against the Commonwealth was moot. ⁶

Thereafter trial was held in respect of the Bank of New England's claim against Haufler. Joined with it for trial were claims by several persons who alleged that Haufler had made assignments to them of interests in the land damage recovery. These included Haufler's wife (who claimed twenty per cent of Haufler's interest), his daughter (ten percent), his daughter and son-in-law (ten percent), two business associates named Vazza and Mahoney (twenty percent), and one Stewart, a real estate broker not otherwise associated with Haufler ($30,000). The jury found against each of the assignment claimants except Stewart (the latter not being involved in this appeal), and a judgment was entered accordingly. ⁷ The jury found for the Bank of New England in the amount of $561,899.12, and judgment entered for the bank in that amount, plus interest and costs from the date of the complaint. ⁸ By separate order the judge ruled that the Bank of Boston, based on its execution of September 29, 1978, had the prior claim to the fund held by Haufler's attorneys to the extent of its April 5, 1978, judgment ($234,785.21). Applying the remainder of the fund to the debt owed the Bank of New England, and after subtracting from each a pro rata share of the attorneys' compensation for holding and investing the fund ($7,820), the escrow fund was ordered distributed to the two banks in the following amounts: Bank of Boston, $229,554.16, and Bank of New England, $121,430.23.

In determining the priority of the Bank of Boston's execution lien over the Bank of New England's attachment lien by trustee process, the judge did not discuss the question whether the earlier injunctions granted to both banks had created liens before the creation of the execution and attachment liens. ⁹ The Bank of Boston, relying on William J. McCarthy Co. v. Rendle, 222 Mass. 405, 111 N.E. 39 (1916) (see also Wilson v. Central Vermont Ry., 239 Mass. 80, 131 N.E. 169 [1921], and Massachusetts Elec. Co. v. Athol One, Inc., 391 Mass. 685, 462 N.E.2d 1370 [1984] ), argues that no lien could attach as long as the proceeds were held by the Commonwealth because the Commonwealth could not be made subject to the injunction. That is true as far as it goes, but it does not preclude the attachment of a lien after the Commonwealth paid the proceeds to Haufler's attorneys on September 27, 1978. Haufler's attorneys were subject to the injunctions which had been obtained by both banks, either because they were expressly enjoined (as in the injunction obtained by the Bank of New England) or because their holding the moneys as Haufler's attorneys was tantamount to Haufler's holding the money himself (he being subject to the injunction). The injunctions for both banks, running against one in possession of the proceeds, "charged [the proceeds] with an equity for the security of the [banks]", Snyder v. Smith, 185 Mass. 58, 62, 69 N.E. 1089 (1904), or, in other words, constituted an equitable attachment of the proceeds. Id. at 61-62, 69 N.E. 1089. See also Gay v. Ray, 195 Mass. 8, 14-16, 80 N.E. 693 (1907); McCarthy v. Rogers, 295 Mass. 245, 246-247, 3 N.E.2d 787 (1936); Gulda v. Second Nat. Bank of Boston, 323 Mass. 100, 104, 80 N.E.2d 12 (1948); Salvucci v. Sheehan, 349 Mass. 659, 661-662, 212 N.E.2d 243 (1965); Madden v. Madden, 359 Mass. 356, 364, 269 N.E.2d 89, cert. denied, 404 U.S. 854, 92 S.Ct. 95, 30 L.Ed.2d 94 (1971). Nolan, Equitable Remedies § 382, at 460-462 (1975 & Supp.1985). The equitable liens thus created were prior in time to the execution and attachment liens of September 29, 1978, and were therefore better in right. See Meteor Prod. Co. v. Societe D'Electro-Chemie et D'Electro-Metallurgie, 263 Mass. 543, 548, 161 N.E. 875 (1928); Goodspeed's Book Shop, Inc. v. State Street Bank & Trust Co., 8 Mass.App. 147, 149, 391 N.E.2d 1262 (1979). Being more than enough to exhaust the fund to which all the liens applied, the equitable liens governed disposition of that fund to the exclusion of the later-created liens.

The Bank of New England argues that it has a prior claim to the fund over that of the Bank of Boston because the injunction on which its lien is based was issued on September 16, 1976, over a year before an injunction was issued in favor of the Bank of Boston. An injunction by itself, however, does not operate to create a lien on property held by one (in this case, the Commonwealth) not subject to the injunction. The earliest the lien could attach to the proceeds was when the Commonwealth paid them over to Haufler's attorneys, who were then subject to the two injunctions. Cf. In re Fader Motor Co., 245 A.2d 156, 159 (Del.Ch.1968). The rule generally accepted is that liens already in place attach to after-acquired property at the same time and that none of the liens has priority over the others (with respect to such property) on the basis of its earlier creation. In re Luftman, 245 F.Supp. 723, 725 (S.D.N.Y.1965). United States v. Fleming, 474 F.Supp. 904, 908 (S.D.N.Y.1979). In re Estate of Clausen, 258 Iowa 324, 329-330, 139 N.W.2d 196 (1965). Hulbert v. Hulbert, 216 N.Y. 430, 440, 111 N.E. 70 (1916). Zink v. James River Nat. Bank, 58 N.D. 1, 10-13, 224 N.W. 901 (1929). Murphy v. Connolly, 81 S.D. 644, 651-652, 140 N.W.2d 394 (1966). Annot., 67 A.L.R. 1301 (1930). 49 C.J.S. Judgments § 484b, at 924 (1947). 46 Am.Jur.2d Judgments § 284, at 494 (1969). Applying that principle, we hold that the fund, after payment of the amount allowed for the services of Haufler's attorneys in holding and investing it, is to be applied to the judgments of the two banks in proportion to the amounts of their respective liens (the liens in each case being less than the judgments they secure). ¹⁰

A final question is raised by the Bank of Boston concerning the judge's refusal to award it attorneys' fees beyond those awarded under the terms of a...