Culhane v. Anderson

• Decision Date: 31 January 1927
• Docket Number: No. 7341.,7341.
• Citation: 17 F.2d 559
• Parties: CULHANE et al. v. ANDERSON et al.
• Court: U.S. Court of Appeals — Eighth Circuit

17 F.2d 559 (1927)

CULHANE et al. v. ANDERSON et al.

No. 7341.

Circuit Court of Appeals, Eighth Circuit.

January 31, 1927.

M. E. Culhane, of Minneapolis, Minn. (Frank L. Weaver and William M. Giller, both of Omaha, Neb., on the brief), for appellants.

T. J. McGuire and A. C. R. Swenson, both of Omaha, Neb. (O. S. Spillman, of Pierce, Neb., and C. H. Kubat, Mulfinger & Webb, Crofoot, Fraser, Connolly & Stryker, and Ritchie, Canaday & Swenson, all of Omaha, Neb., on the brief), for appellees.

Before STONE and LEWIS, Circuit Judges, and SYMES, District Judge.

STONE, Circuit Judge.

On September 3, 1921, a receiver was appointed by Judge Woodrough, in the district of Nebraska, for the Brictson Manufacturing Company, in a cause entitled H. E. Close et al. v. Brictson Manufacturing Company This court determined (280 F. 297) that the trial court should not have appointed a receiver and ordered restoration of the property, taken by the receiver. The trial court refused to comply with the mandate of this court therein and the subsequent confusion and trouble, into which this case has become entangled, is clearly traceable thereto. Later, mandamus from this court to secure such compliance was authorized. 284 F. 484. In the meantime, legal confusion has arisen which has made it difficult to return this property.

These appellants are the attorneys of the Brictson Manufacturing Company and have been such throughout this litigation and much other litigation against that company in various courts. April 24, 1925, they filed this ancillary pleading in the receivership suit. Therein, they set out an outline of their various services as counsel for the Brictson Manufacturing Company; that they have expended money for such client, which has not been entirely repaid, and that they have received no pay for their services. They claim "a lien upon the assets of the Brictson Manufacturing Company in the hands of Ralph M. West as receiver for their fees as such attorneys, as well as their costs and disbursements as hereinbefore set forth." Besides prayers for process and general relief, they pray an order "directing Ralph M. West, as receiver of the Brictson Manufacturing Company to deliver to these petitioners the assets of the Brictson Manufacturing Company in his hands or at least sufficient thereof to enable these petitioners to protect their lien for the amount justly due them for their services, costs and disbursements as more fully is set forth in the foregoing petition."

To this petition, motions to dismiss were filed by various parties. One of these motions was filed by the trustees appointed by a state court in Nebraska in a proceeding to dissolve the above company and wind up its affairs. All of these motions were based upon the two grounds: (1) That the court was without jurisdiction to grant the relief sought; and (2) that the facts pleaded were insufficient to sustain recovery thereunder. The trial court (Judge Munger) sustained the jurisdiction of the court, but found the facts insufficient. Therefore he dismissed the petition, "but without prejudice to a new and independent action or suit by the petitioners for recovery of the amount claimed to be due them in said petition." From that order, this appeal is brought.

A motion in the nature of diminution of the record is filed, is opposed and, we think, should be granted. As the matter covered by the motion consists of two orders made by the trial court herein, of which certified copies are presented here, we will treat these copies as complying with the requests of the motion and as part of the record before us.

The first question presented here for appellant is stated as being "Have appellants a lien on or a right to have their services and costs as attorneys paid out of the assets and property of the Brictson Manufacturing Company in the hands of Ralph M. West as receiver?"

The theory of appellants is not that they are entitled to allowances against the funds in receivership and preferential payment thereof. While such allowances and preferences are sometimes permissible, they must usually find a basis in the acquirement or preservation of the property in receivership or some pre-existing lien or contract (Burroughs v. Toxaway Co. C. C. A. 185 F. 435 4th Circuit; Haehnlen v. Drayton C. C. A. 192 F. 300 3d Circuit; Miers v. Columbia Mutual Bldg., etc., Association C. C. 166 F. 781; Barker v. Southern B. & L. Association C. C. 181 F. 638; Kimball v. Atlantic States Life Ins. Co. D. C. 223 F. 463), and such allowances to the counsel for defendant are rarely proper (Atkinson & Co. v. Aldrich-Clisbee Co. D. C. 248 F. 134; Barker v. Southern B. & L. Association C. C. 181 F. 636).

The first matter to be noted is that neither this lien, nor the claim upon which it is based, existed at the time this property came into the possession of the receiver, after his appointment and qualification as such. The fees were earned and the disbursements by appellants made after the receiver had possession. If there is a lien, as claimed, it came into existence while the receiver was in possession and it attached to property so in his possession. In short, the situation is not that of property coming to a receiver burdened with a lien but of a lien arising and attaching to property already in full possession of a receiver.

Another matter to be borne in mind is that the federal courts recognize liens allowed by the laws of the states. Central Railroad v. Pettus, 113 U. S. 116, 127, 5 S. Ct. 387, 28 L. Ed. 915. The state of Nebraska has a statute defining and regulating attorneys' liens (Comp. Stat. 1922, § 267), which is as follows:

"An attorney has a lien for a general balance of compensation upon any papers of his client which have come into his possession in the course of his professional employment; upon money in his hands belonging to his client, and in the hands of the adverse party in an action or proceeding in which the attorney was employed from the time of giving notice of that lien to that party."

Considering the two above matters, the question before us is, does the above state statute give a lien upon property in the hands of a receiver of a federal court for services rendered the defendant?

The above-quoted statute gives the lien upon definite specific things: (1) Upon papers of the client coming into his possession in the course of his professional employment; (2) upon money in his hands belonging to his client; and (3) upon money "in the hands of the adverse party in an action or proceeding in which the attorney was employed." The funds upon which appellants seek to fasten this lien are not now and never have been in their possession. Therefore, appellants must and do rely upon the provision that such are "in the hands of the adverse party in an action or proceeding in which the attorney was employed." There is no question of the employment of appellants by the Brictson Manufacturing Company and, it may be added parenthetically, of the fidelity and efficiency of their service. The question is whether a receiver, appointed in a federal court, is an "adverse party" within the meaning of the Nebraska statute. We have no decision of the Nebraska Supreme Court, construing this statute, to guide us. Whether such receiver...