Hansbrough v. D.W. Standrod & Co., 5147

• Decision Date: 05 April 1930
• Docket Number: 5147
• Citation: 286 P. 923,49 Idaho 216
• Court: Idaho Supreme Court
• Parties: G. F. HANSBROUGH, Respondent, v. D. W. STANDROD & COMPANY, a Defunct Banking Corporation of the State of Idaho et al., Defendants, and E. W. PORTER, Commissioner of Finance of the State of Idaho, UNITED STATES FIDELITY & GUARANTY COMPANY, a Corporation, and FEDERAL RESERVE BANK OF SAN FRANCISCO, a Corporation, Appellants

286 P. 923

49 Idaho 216

G. F. HANSBROUGH, Respondent, v. D. W. STANDROD & COMPANY, a Defunct Banking Corporation of the State of Idaho et al., Defendants, and E. W. PORTER, Commissioner of Finance of the State of Idaho, UNITED STATES FIDELITY & GUARANTY COMPANY, a Corporation, and FEDERAL RESERVE BANK OF SAN FRANCISCO, a Corporation, Appellants

No. 5147

Supreme Court of Idaho

April 5, 1930

ATTORNEY AND CLIENT - ATTORNEY'S LIEN - ENFORCEMENT-FAILURE TO ASSERT-STATUTE OF LIMITATIONS-SALE OF PROPERTY-CONVERSION-RIGHT OF ACTION OF LIENHOLDER.

1. Commissioner of finance was not liable to holder of attorney's lien on stock which bank becoming insolvent had pledged, where his act had not affected rights of parties.

2. Person with lien, though he has neither possession nor right to possession, can secure damages for injuries to his security.

3. Sale of property by possessor or appropriation is injury for which lienholder may maintain action.

4. Transfer of property, such as corporate stock as security for antecedent debt, does not render transferee bona fide purchaser.

5. Taking new note when stock collateral is deposited without extension of time does not furnish consideration to make lender bona fide purchaser.

6. General rule is bona fide purchaser, without actual or constructive notice, takes property such as corporate stock free from any lien.

7. Attorney's lien is entitled to as much protection as any other lien having similar status.

8. Holder of attorney's lien on stock which bank pledged for pre-existing debt continued though pledgee had no notice of lien.

9. Statute of limitations did not begin to run against attorney's lien until pledgee sold property on which lien was claimed.

10. Holder of attorney's lien was not barred by laches from prosecuting action for destroying lien, though he failed to assert his lien until pledgee had accepted pledge.

11. That holder of attorney's lien did not assert lien until property on which lien was claimed was in hands of pledgee did not estop holder from asserting lien, pledgee not having changed its position.

12. Holder of attorney's lien could sue pledgee on lien though he had assigned interest in judgment granting lien on general assets of pledgor to pledgee.

13. To enforce attorney's lien where pledgee sold stock subject to lien, value of stock had to be alleged and proved.

14. There was no presumption that stock was worth par value where it appeared it had been sold for less than par value.

APPEAL from the District Court of the Sixth Judicial District, for Bingham County. Hon. Ralph W. Adair, Judge.

Action to enforce attorneys' lien. Judgment for plaintiff. Reversed and remanded.

Judgment reversed, with directions and cause remanded. Costs to appellants. Petition for rehearing denied.

John W Jones and Guy Stevens, for Appellants Porter et al.

E. W Porter, Commissioner of Finance did not (a) claim any right to the property in defiance of any right of another, (b) never did anything with the property, (c) never took it into his possession, (d) never used it, (e) never claimed dominion over it, and (f) never received anything for it.

There was no conversion of the property by him and his motion for nonsuit should have been sustained, and judgment should have been in his favor.

"Conversion in the sense of the law of trover, consists either in the appropriation of the property of another, or in its destruction, or in exercising dominion over it in defiance of the owner's rights, or in withholding the possession from him under an adverse claim of title, and all who aid, command, assist or participate in the commission of such unlawful acts are liable. " (Western Maryland Dairy v. Maryland Wrecking & E. Co., 146 Md. 318, 126 A. 135.)

"It is true conversion may be either direct or constructive. It may, therefore, be proved directly or by inference. When the plaintiffs fail in proving an actual conversion, it will be necessary for them to give evidence of a demand and refusal having been made at a time when the defendant had the power to give up the goods. Demand and refusal are only evidence of a prior conversion, which may be explained and rebutted by evidence to the contrary. But there cannot be an effective demand and refusal, unless the defendant had at the time both the possession of the goods and the means of delivering them up. Unless these conditions exist at the time of the demand and refusal, it was not within the power of the party to deliver up or detain the property demanded."

Merrill & Merrill, for Appellant Federal Reserve Bank of San Francisco.

The statute upon which this action is predicated (C. S., sec. 6576), confers no right upon the plaintiff to follow into the hands of an innocent third party the subject of the attorney's lien, where such property has come to the third party without notice of the lien in the usual course of business and for a valuable consideration. (C. S., sec. 6576; Goodrich v. McDonald, 112 N.Y. 157, 19 N.E. 649.)

The decisions of this court interpreting the statute in question carry with them no justification for the contention that personal property, once subject to an attorney's lien, remains subject to such lien for all time until the fee is paid, even as against a stranger to the original litigation. (Taylor v. Taylor, 33 Idaho 445, 196 P. 211; Fralick v. Coeur d' Alene Bank etc. Co., 35 Idaho 749, 27 A. L. R. 110, 208 P. 835; Kerns v. Washington Water Power Co., 24 Idaho 525, 135 P. 70.)

This action could not be maintained because the lien involved is not a possessory lien, and plaintiff and his assignors had neither title nor right of possession. (Louisville Trust Co. v. Stockton, 75 F. 62, 21 C. C. A. 225; Union Stock Yards etc. Co. v. Mallory, Son & Zimmerman Co., 157 Ill. 554, 48 Am. St. 341, 41 N.E. 888; 3 Cyc. 2044, 2045, 2054.)

The complaint is fatally defective and the proof is fatally deficient in that the value of the stock upon which the lien is asserted was not alleged or proven. (Hansbrough v. D. W. Standrod & Co., 43 Idaho 119, 249 P. 897; Thomas v. D. W. Standrod & Co., 43 Idaho 157, 249 P. 900; Herrlich v. McDonald, 80 Cal. 460, 22 P. 298.)

If any conversion took place it occurred on October 23, 1923, when the stock in question was pledged by the Standrod Bank as its own property, free of liens, to secure its own debt to the Federal Reserve Bank. This conversion having taken place more than three years prior to the commencement of this action, subd. 3, sec. 6611, Idaho Comp. Stats. 1919, operates as a bar to the action. (Havird v. Lung, 19 Idaho 790, 115 P. 930; 24 Cal. Jur. 1036; Harpending v. Meyer, 55 Cal. 555; Dee v. Hyland, 3 Utah 308, 3 P. 388; Leavitt v. Shook, 47 Ore. 239, 83 P. 391; Lightfoot v. Davis, 198 N.Y. 261, 139 Am. St. 817, 19 Ann. Cas. 747, 91 N.E. 582, 29 L. R. A., N. S., 119; Bennett v. Meeker, 61 Mont. 307, 202 P. 203; Nielsen v. Hyland, 51 Utah 334, 170 P. 778.)

The statute of limitations began to run from the time when the action might properly have been commenced. This occurred when the Standrod Bank, exercising complete dominion over the Swauger stock, pledged it with the Reserve Bank to secure its own indebtedness, without notice to the Reserve Bank of any claim of lien thereon. (Pridgeon v. Greathouse, 1 Idaho 359; Canadian Mortgage Investment Co. v. Williamson, 32 Idaho 624, 186 P. 916; Rawleigh Medical Co. v. Atwater, 33 Idaho 399, 195 P. 545; Perkins v. Swain, 35 Idaho 485, 34 A. L. R. 894, 207 P. 585.)

A lien such as the one here alleged can be lost by the laches of the lienor, and in the case at bar was lost by the laches of plaintiff and his assignors. (Lee v. Vacuum Oil Co., 126 N.Y. 579, 27 N.E. 1018; Fillmore v. Wells, 10 Colo. 228, 3 Am. St. 567, 15 P. 343; 2 R. C. L. 1075; Colorado State Bank v. Davidson, 7 Colo. App. 91, 42 P. 687.)

The operation of an attorney's lien statute cannot be extended to reach property after it has passed out of the hands of the lienee into the hands of an innocent third party. A decision of the supreme court granting a lien on specific property, which decision is induced by the failure of the plaintiff to make a full disclosure of the essential facts, and therefore founded upon a false predicate, should not be used as a means of perpetuating the miscarriage of justice thus brought about. (Hansbrough v. D. W. Standrod & Co., supra.)

Thomas & Anderson, Hawley & Hawley, and G. F. Hansbrough, for Respondent.

The statute upon which this action is brought is C. S., sec. 6576. Under this statute it has been universally held that from the time of the commencement of an action an attorney has a lien on his client's cause of action and the proceeds thereof and may follow them into the hands of third parties. (Taylor v. Taylor, 33 Idaho 445, 196 P. 211; State v. National Surety Co., 29 Idaho 670-679, 2 A. L. R. 251, 161 P. 1026; Fralick v. Coeur d' Alene Bank etc. Co., 35 Idaho 749-754, 27 A. L. R. 110, 208 P. 835; Hansbrough v. D. W. Standrod & Co., 43 Idaho 119, 249 P. 897.)

This is also true even though the case is settled by the parties and does not go to trial. The attorney still has a lien upon the cause of action and the proceeds thereof.

Under the above statute no notice is required. The lien created thereby is a statutory lien of which all the world must take notice, and anyone settling with a plaintiff without the knowledge of his attorney, does so at his own risk. ( Walsh v. Hoskins, 53 Mont. 198, 162 P. 960; Peri v. New York Central etc. R. R. Co., 152 N.Y. 521, 46 N.E. 849, and cases there cited; Taylor v. St. Louis Transit Co., 198 Mo. 715, 97 S.W. 155; Whitwell v. Aurora, 139 Mo.App. 597, 123 S.W. 1045.)

Under the New York statute, sec. 66, Code Civ. Proc., which is identical with our statute No. 6576, it...