Hafter v. Farkas

• Decision Date: 31 May 1974
• Docket Number: No. 828,Docket 73-2829.,828
• Citation: 498 F.2d 587
• Parties: Jerome HAFTER, Appellant, v. Ruth FARKAS and Jonathan Farkas, Appellees.
• Court: U.S. Court of Appeals — Second Circuit

498 F.2d 587 (1974)

Jerome HAFTER, Appellant, v. Ruth FARKAS and Jonathan Farkas, Appellees.

No. 828, Docket 73-2829.

United States Court of Appeals, Second Circuit.

Argued April 4, 1974.

Decided May 31, 1974.

Harry R. Schwartz, New York City, for appellant.

Emanuele J. Sutera, New York City (Grubbs & Sutera, New York City, of counsel), for appellees.

Before HAYS and OAKES, Circuit Judges, and CHRISTENSEN, District Judge.^*

PER CURIAM:

In order to appreciate some of the more extraordinary aspects of this appeal, it is first necessary to recount chronologically the legal proceedings that have resulted in the waste of this court's time, a waste solely attributable to the unprofessional attitude and conduct of appellant's counsel herein. We go to the length we do here, although the appeal involves only the sum of $1,034, because this case involves some important considerations in relation to attorneys' obligations to their clients.

On May 3, 1973, a judgment was issued in favor of Jerome Hafter and against Ruth and Jonathan Farkas by the clerk of the United States District Court for the Southern District of New York as approved by Judge Levet in the sum of $1,034. This judgment was the result of a jury verdict in the same amount rendered after a two-day trial before Judge Levet; Hafter's cause of action apparently sounded in tort with jurisdiction being based on diversity of citizenship of the parties. A notice of appeal was filed by Hafter's counsel, Harry R. Schwartz, Esq., but that appeal was not perfected and on July 2, 1973, Mr. Schwartz wrote a letter to the Farkas' counsel requesting that a check be made out to him as attorney. Mr. Schwartz also stated that he was not proceeding with the appeal and enclosed a "satisfaction of judgment" form which he had himself executed. Although the record is not clear, sometime in early July of 1973, a draft in the sum of $1,070.00, which included interest to that date, was issued by the Farkas' insurance company payable to Jerome Hafter and Mr. Schwartz as attorney. By letter of July 11, 1973, Mr. Schwartz returned this draft, which he referred to as a "check," alleging that it should have been made out solely to him in accordance with his letter of July 2, 1973. Another draft payable to the same parties was sent to Mr. Schwartz on July 17, 1973, and this draft was likewise returned by Mr. Schwartz for the same reasons as stated in his letter of July 11, 1973. On July 19, 1973, after consultation with the judgment clerk in the Southern District and an official of the Judicial Conference of the State of New York, both of whom advised that the procedure followed by appellees was accepted practice, appellees' attorney filed the satisfaction of judgment originally executed by Mr. Schwartz. Following the filing, Mr. Schwartz by letter continued to protest the manner in which the judgment had been satisfied. On August 30, 1973, he obtained, on what as far as we can tell was an ex parte basis, an order signed by a district judge, who had so far as appears no other connection with the case, which declared the satisfaction of judgment null and void. Mr. Schwartz' motion was apparently made pursuant to Fed.R.Civ.P. 69(a), and, as a proceeding supplementary to and in aid of judgment, might well have been referred to the judge who presided at trial.

In any event, after the entry of this order, Schwartz returned yet another draft which had been issued by appellees' insuror on August 13, 1973. Appellees' counsel came before Judge Levet with the problem by way of a motion made pursuant to Fed.R.Civ.P. 69(a), and on October 17, 1973, Judge Levet signed an order staying execution proceedings which Schwartz had initiated by application to the sheriff of New York County. After hearing both parties, Judge Levet granted appellees' motion and ordered Schwartz to accept a certified check made out to Jerome Hafter and Schwartz as attorney in satisfaction of the judgment and to secure the vacation of the state execution. It is from this order, which is appealable by a party as a matter of right, see O'Keefe v. Landow, 289 F.2d 465 (2d Cir. 1961), that Schwartz, apparently without the knowledge of his client, Jerome Hafter, appeals. Schwartz conceded on oral argument that his client had not authorized him to ask or insist that the check in satisfaction be made out only to the attorney as Schwartz so insistently demanded.

Rule 69(a) establishes that the "procedure on execution, in proceedings supplementary to and in aid of a judgment . . . shall be in accordance with the practice and procedure of the state in which the district court is held. . . ." Schwartz' claim is that, under New York practice and procedure, he cannot be forced to accept in satisfaction of judgment a certified check payable to his client and himself as attorney, where he as attorney without authority asks for payment to himself.

We start with a few basic premises. In New York, as elsewhere, in addition to his other duties and obligations, a lawyer is bound to conduct himself as a fiduciary or trustee occupying the highest position of trust and confidence, so that, in all his relations with his client, it is his duty to exercise and maintain the utmost good faith, honesty, integrity, fairness and fidelity. In re Trybom's Estate, 168 Misc. 484, 6 N.Y.S.2d 29 (Surr.Ct.1938); Krohe v. Goldman, 167 Misc. 930, 4 N.Y.S.2d 851 (N.Y.C.Mun.Ct.1938). See In re Kelly, 23 N.Y.2d 368, 296 N.Y.S.2d 937, 244 N.E.2d 456 (1968). This fiduciary or trust relationship precludes the attorney from having personal interests antagonistic to those of the client or from obtaining personal advantage or profit out of the relationship without the knowledge or consent of the client. Broderick's Case, 104 N.H. 175, 181 A.2d 647 (1962); In re Goldstein, 7 Terry 450, 85 A.2d 361 (Del.1951). Thus, merely the bringing of the instant appeal without disclosure to the client that he was doing so could well be deemed to constitute a breach of that relationship. See In re Babcock, 230 App.Div. 323, 243 N. Y.S. 489 (1930).¹

Upon the collection or receipt of property or funds for the benefit of the client it is the duty of the attorney to notify the client promptly and, absent some contrary understanding—here the attorney does not claim any—to pay or remit the same to the client less only proper fees and disbursements as soon as reasonably possible. In re Babcock, supra; In re Langfur, 227 App.Div. 468, 238 N.Y.S. 498 (1932).² Money collected by an attorney and not paid over is ordinarily held as a trustee rather than as a debtor. In re Peltz, 23 App.Div.2d 173, 259 N.Y.S.2d 522 (1965); In re Powers, 235 App.Div. 382, 257 N.Y.S. 113 (1932); In re Babcock, supra. The funds cannot be used for the attorney's own purposes. In re Simons, 211 App. Div. 659, 208 N.Y.S. 51 (1925).

In addition to these general principles, as set forth in New York case law, the New York Civil Practice Law and Rules (CPLR) expresses the will of the New York legislature in this area. Although no provision of the CPLR deals directly with the narrow question presented here —whether a certified check payable to the plaintiff and his attorney as attorney is sufficient to require the plaintiff to execute a satisfaction of judgment—CPLR § 5020, bearing on satisfaction-pieces, is quite relevant. That provision requires that a person entitled to enforce a judgment, including the attorney of record if within five years of the judgment's being rendered, must execute a satisfaction piece when he receives satisfaction for the judgment. The Supplementary Practice Commentary to § 5020 states that it is

wiser whenever possible to have the satisfaction piece executed by the judgment creditor himself. The only thing the judgment debtor should ascertain is whether the creditor\'s attorney has any lien on the proceeds. If the remotest doubt exists about that, the judgment debtor may reasonably insist that the satisfaction piece be executed by both creditor and attorney, or executed by one and endorsed with an approval by the other.

CPLR § 5020, Practice Commentary (McKinney's Cum.Ann.Pocket Part 1973-1974, at...