Bartlett v. Pacific Nat. Bank

Decision Date01 May 1952
Citation244 P.2d 91,110 Cal.App.2d 683
CourtCalifornia Court of Appeals Court of Appeals
PartiesBARTLETT v. PACIFIC NAT. BANK. Civ. 14943.

Cooley, Crowley & Gaither, San Francisco, for appellant.

Scott Elder, San Francisco, Warren Olney, III, Berkeley, for respondent.

BRAY, Justice.

Defendant appeals from a judgment in favor of plaintiff for $14,693.42 plus interest thereon at 7 per cent per annum from July 31, 1946, and costs.

Questions Presented.

1. Does the contract for attorney's fees provide a lien?

2. Were the escrowed bonds those of the corporation?

3. Sufficiency of the findings.

4. Statute of limitations.

5. Rule of damages.


This litigation is based on a contract entered into by Provident Irrigation District Bondholders Protective Committee and Provident Land Corporation with plaintiff, an attorney at law. The Provident Irrigation District had defaulted its bonds. The committee had been formed by certain bondholders and held certain bonds. The corporation was thereafter formed and title to most of these bonds was transferred to it. On May 7, 1936, plaintiff wrote a letter addressed to both the committee and the corporation, giving a statement of the suits and procedures on behalf of the bondholders which Bartlett recommended be brought to enforce the rights of the bondholders. Then follows the clause upon which this action is based:

'My compensation for this work is to be retainer of $500.00 payable now, and one-fourth of all money recovered for the Committee and/or Corporation, whether by legal action or by compromise acceptable to the Committee and/or Corporation, and shall be payable upon receipt of the money by them. * * *

'Summarizing the costs:

'Retainer of $500.00 payable now.

'One-fourth of the money recovered with or without litigation.

'Actual necessary expenses, estimated at $1000.00.'

The committee and the corporation accepted this proposition. It is conceded that it thereby became a binding contract. It will not be necessary to detail the services rendered by plaintiff under said contract as plaintiff obtained a judgment for said services in the sum of $33,150, against the committee and the corporation. See Provident Land Corp. v. Bartlett, 72 Cal.App.2d 672, 165 P.2d 469. 1 There is a conflict in the evidence as to most of the facts from now on. There is substantial evidence to support the court's findings resolving this conflict in plaintiff's favor. About 1940 the corporation made an arrangement to get a loan from the R.F.C. enabling the district to discharge its bonded indebtedness. The R.F.C. was to purchase the bonds for 20 cents on the dollar par value. To accomplish this an escrow was set up with defendant bank by which the bonds were deposited to be delivered to the R.F.C. on receipt for the corporation of the agreed sum. George H. McKaig was president of the corporation and also one of the members of the committee. On September 28, 1939, the corporation transmitted to defendant bank 511 bonds authorizing it to deliver the bonds to McKaig's order on receipt for the corporation of a sum equivalent to 15 per cent of their par value. McKaig, the same day, wrote the bank directing it to deliver these bonds to the R.F.C. or the district upon receipt by the bank for McKaig of a sum equivalent to 20 per cent of their par value. Bartlett learned of the intended R.F.C. purchase and on April 30, 1940, wrote a letter to defendant 'as agent and escrow holder,' in which he referred to the contract of May 7, 1936, and set forth the portion thereof hereinbefore quoted. He referred to the deposit of bonds with defendant and the intended loan from the R.F.C. Plaintiff then referred to the services he had rendered and the fact that defendant held in escrow bonds of the par value of $570,000 and would receive from the R.F.C. 20 per cent thereof, or $114,000; that under plaintiff's contract he was entitled to one-fourth thereof and that therefore, upon the receipt of the money by defendant, $28,500 would belong to him. He then referred to certain detached coupons in the escrow for which the R.F.C. was to pay the par value of $13,000, one-fourth of which, or $3250, would also belong to plaintiff, making his one-fourth of all moneys to be received by defendant under said escrow $31,750. He added: 'Your liability to account to me will arise by virtue of my contract of employment with the depositors of securities with you, and my services performed thereunder, as recited above, payment to you as agent of the depositors of the bonds and coupons, and this notice of my ownership of one-fourth of the moneys so received by you.' Plaintiff then referred to Elliott v. Leopard Mining Co., 52 Cal. 355, 'in which the circumstances were almost precisely similar, which states a universally accepted proposition of law.' At the same time plaintiff sent a similar notice to the Bank of America and to the R.F.C. as to funds which might pass through their hands. Defendant's trust officer replied by letter, stating that the bank was merely an escrow holder, that any deviation from its instructions would expose it to liability to the depositors and that it could not assume such responsibility, and that it was advised that the Elliott case did not compel it to do so. It then invited plaintiff to discuss the matter personally. On May 17, 1940, plaintiff and the trust officer met in the latter's office. Plaintiff testified that he understood the trust officer to say that the bank would start an interpleader action to determine plaintiff's right to any of the money it might receive. May 22nd, plaintiff wrote the bank to that effect. May 24th, the bank replied that although the matter of an interpleader action had been discussed, there had been no commitment to file such action. On the contrary, plaintiff had been advised that the bank would be governed entirely by its counsel's advice. 'As yet, we do not know what course we will be advised to pursue.' September 19, 1940, the R.F.C. notified plaintiff that pursuant to his request the Federal Reserve Bank (acting for the R.F.C.) would withhold $31,750 from the purchase price of any bonds. In the meantime the bank consulted one of its firm of attorneys. The attorney knew that plaintiff was claiming an equitable interest in the money to be received. At first he indicated to the trust officer that it might be necessary to interplead. Then on May 24th the attorney advised the trust officer to the effect that the bank might have to consider carefully plaintiff's claim of an equitable interest in the proceeds from the bonds and advised that the bank refuse payment of the proceeds to the bondholders, thereby precipitating an interpleader action. However, McKaig and the corporation were anxious that the proceeds be distributed to the bondholders as soon as received by the bank. So on September 6th an agreement between the bank, McKaig and the corporation was entered into in which after stating that plaintiff had notified the bank that he had an 'equitable interest' in the bond proceeds and was entitled to be paid thereunder $31,750, the bank agreed to pay to the bondholders all proceeds from the bonds when and as received, and McKaig and the corporation agreed to indemnify the bank against all claims. In addition the corporation agreed to deposit with the bank before such payment by the bank should be made, $28,000 as security for the indemnity promise of McKaig and the bank. The corporation also agreed to institute proper legal proceedings to determine the validity of plaintiff's claims. (This resulted in the Bartlett case.) The bank learned that the R.F.C. was to withhold $31,750. The bank's attorney advised the bank that to be fully protected it must insist that a fund of $31,750 be available for payment of any judgment plaintiff might obtain, and that the fact that the R.F.C. had a fund, while intended to, did not necessarily provide protection for the bank. Later, it was agreed between the bank, McKaig and the corporation that the bank would pay the bondholders upon receipt of the bond proceeds the full amount thereof 'less the $31,750 retained by the' R.F.C. Between September 20 and October 8, 1940, the bank paid out (other than to Bartlett) all of the money received by it from the R.F.C. with respect to the 511 bonds. It also paid out the $28,000 above mentioned. It apparently relied upon the fact that the Federal Reserve Bank withheld from the moneys paid by it to the bank $31,750. This amount the Federal Reserve Bank paid to defendant for plaintiff July 31, 1946, upon his giving the former a release of all claims against the R.F.C.

Going back to 1940, plaintiff was served in the Bartlett case. Sometime between October 4th and 21st he and his attorney talked to the trust officer in the latter's office. Plaintiff claims he told the trust officer that it would be necessary for plaintiff to join the bank in that action as a defendant, 'in order to be able to collect the money that was coming to me; that $31,750 was being withheld by the R.F.C., but that my claim might prove to be larger than that, and in any event interest would certainly accrue on it before the matter was determined, and that the bank--I would hold the bank responsible for the other amount, and I would have to make the bank a defendant in the action unless I received assurance from the bank that they would withhold sufficient funds to meet whatever judgment in excess of the $31,750 might be obtained. And * * * [the trust officer] said, 'The bank is holding money enough to protect you.' 'Well,' I said, 'how much?' He said, 'Plenty, we are holding plenty." The trust officer then suggested that plaintiff take the matter up with its attorneys. Plaintiff then saw another member of the firm and told him 'that I didn't want to sue the bank if I had the assurance that the bank was holding out enough money...

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