Dempsey v. Pink

• Decision Date: 16 January 1939
• Docket Number: No. 156.,156.
• Citation: 101 F.2d 72
• Parties: DEMPSEY v. PINK, Superintendent of Insurance.
• Court: U.S. Court of Appeals — Second Circuit

101 F.2d 72 (1939)

DEMPSEY v. PINK, Superintendent of Insurance.

No. 156.

Circuit Court of Appeals, Second Circuit.

January 16, 1939.

Lee, Bond, Swan & Donoghue, of New York City (S. Wallace Dempsey and Bruce Fuller, both of Washington, D. C., of counsel), for appellant.

Edward F. Keenan, of New York City (J. Paul Brennan and J. Francis Lynch, both of New York City, of counsel), for appellee.

Before MANTON, AUGUSTUS N. HAND, and CHASE, Circuit Judges.

CHASE, Circuit Judge.

The defendant, the Superintendent of Insurance for the State of New York, is liquidating the National Surety Company, a New York corporation, pursuant to the provisions of the New York Insurance Law. Consol.Laws N.Y. c. 28. He took possession of it on April 29, 1933, for rehabilitation and on June 1, 1934, it having been found to be insolvent, he began its liquidation.

The plaintiff is an attorney-at-law who was and is a resident of the State of Maryland and who performed legal services for the corporation in two unrelated matters before it was taken over by the defendant. That his services were beneficial to the corporation and that it was bound to compensate him in accordance with its agreements with him are both admitted.

This bill in equity was brought to establish a right to preferential payment on the ground in the one instance that the plaintiff was entitled to an equitable lien upon funds in the hands of the defendant to the extent of the amount admittedly due him for prior services to the corporation; and in the other that he was entitled not only to a lien but to one for charges in excess of the sum already paid him by the defendant and which the defendant insists he accepted in full settlement for that work. On a former appeal from a decree denying a motion for summary judgment and dismissing the bill for lack of jurisdiction, we upheld the denial of a summary judgment but reversed as to jurisdiction and remanded for trial. Dempsey v. Pink, 2 Cir., 92 F. 2d 572. This appeal is from a decree dismissing the bill on the merits.

The National Surety Company had issued its bond to the United States to the amount of $325,000 to secure the payment to the government of income taxes for the year 1928 which were assessed against the Southern Kansas Company. It employed the appellant as its attorney to protect its interests as the obligor on the bond and he did so with such success that the actual liability of the corporation was determined at $250,665.02 less than the principal amount of its bond. Appellant's fee for such services has been fixed at $25,000 and admittedly is allowable in that amount as a general claim against the estate of the corporation in liquidation. Apparently the general claims will not be paid in full and unless the appellant is entitled to a lien he must be content with his ratable share.

In order to have the benefit of a lien upon any fund in the hands of the liquidator, the appellant must show that there is a res to which a lien may attach. He has attempted to do that by insisting that his efforts brought about a saving to the corporation to the extent of the amount above mentioned. It is clear that there was a substantial reduction in the corporation's potential liability on its bond but it is equally clear that the appellant's services were not the means by which anything was brought into the corporation to increase its property.

The nearest approach to proof of a fund identifiable as the fruit of the appellant's services is found in the argument that under New York law the corporation was required, as indeed it was, N.Y.Ins.Law, Sec. 86, to set up a contingent reserve for such bonds as the one issued and the duty of the Superintendent of Insurance to see that it did so. From this the argument follows that both are now estopped from denying that they did perform their duty. And so it must be presumed that a fund was created which, when the maximum possible obligation on the bond was reduced, was released from the reserve. This amount so released, so it is urged, is the sum which the appellant recovered and the res to which his lien attached. Aside from the rather nebulous way in which it is attempted to give this so-called recovery an identity, there is nothing whatever to show that, assuming that a reserve was set up as the law required, there was any change made in it as a result of what the plaintiff did. Such a reserve would be not for this bond alone but for any others for which it was equally required. We cannot assume gratuitously that there was any separate reserve for this bond or that any property was actually released to the corporation from the reserve because it became possible to settle its liability under the bond for less than its face amount. Without that, there can be no res to which any lien may attach in favor of the appellant and we need not deal with the usual right of an attorney to a lien, either statutory or otherwise, upon what he actually recovers for his client. Nor was there any...