Hansbrough v. D.W. Standrod & Co.

• Decision Date: 24 September 1926
• Citation: 43 Idaho 119,249 P. 897
• Parties: G. F. HANSBROUGH, Respondent, v. D. W. STANDROD & COMPANY, a Corporation, and E. W. PORTER, Commissioner of Finance of the State of Idaho, Appellants
• Court: Idaho Supreme Court

249 P. 897

43 Idaho 119

G. F. HANSBROUGH, Respondent, v. D. W. STANDROD & COMPANY, a Corporation, and E. W. PORTER, Commissioner of Finance of the State of Idaho, Appellants

Supreme Court of Idaho

September 24, 1926

BANKS AND BANKING-INSOLVENT BANK-ATTORNEY AND CLIENT-ATTORNEY'S LIEN FOR SERVICES-ORDER OF PREFERENCE-APPLICATION OF STATUTORY PROVISIONS-CHOICE OF REMEDIES.

1. That through attorney's efforts bank acquired notes and stock and promised to credit his fee on his note to it, was not sufficient to raise a trust, so as to make its debt to him one due by it as trustee, within Sess. Laws 1921, chap. 42 sec. 13, subd. 2, as to order of payment of debts of bank liquidated by commissioner.

2. Services by attorney to bank prior to its closing, not being expenses of liquidation, are not within Sess. Laws 1921 chap. 42, sec. 13, subd. 1, as to order of payment of debts of bank liquidated by commissioner.

3. Under statute, attorney has lien on property received by his client in settlement of action instituted by him for it.

4. Attorney's lien can be discharged only by payment express agreement backed by consideration, or laches, and so is not lost by client's unkept promise to pay fee already due by crediting attorney's note.

5. So long as no one is injured by delay, attorney is entitled to full period of limitations for asserting his lien without losing it by laches.

6. Attorney's lien on notes given to client and on stock, certificates of which were assigned to it as collateral therefor in settlement of action, while lost as to the notes, was not lost as to the stock by surrender with his consent of notes and certificates and issuance, in lieu thereof, of certificates for same stock direct to client.

7. Liens on any particular property of bank being liquidated by commissioner, recognized by Sess. Laws 1921, chap. 42, sec. 13, subd. 6, are to extent of proceeds of sale of lien property, to be paid without regard to declared preferences or priorities.

8. Under Sess. Laws 1921, chap. 42, sec. 11, as to liquidation of bank by commissioner, on rejection by commissioner of claim of one having lien, claimant could foreclose lien by suit against bank, or appeal directly from commissioner, and thereby have adjudicated every issue incident to foreclosure action.

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

Action to enforce attorney's lien. Judgment for plaintiff. Affirmed in part and reversed in part, and remanded with instructions.

Judgment affirmed in part and reversed in part and case remanded with instructions.

Roy L. Black, for Appellants.

Even where actual money is deposited or placed in a bank and afterward a claim is made that it was placed there in trust the proof must be exceptionally clear that the trust was actually created before declaring it a trust and permitting the creditor a preference right of payment. (Fralick v. Coeur d'Alene Bank & Trust Co., 36 Idaho 108, 210 P. 586; Mutual Accident Assn. v. Jacobs, 141 Ill. 261, 31 N.E. 414; Wetherell v. O'Brien, 140 Ill. 146, 33 Am. St. 221, 29 N.E. 904; Woodhouse v. Crandall, 197 Ill. 104, 64 N.E. 292, 58 L. R. A. 385; Kaesmeyer v. Smith, 22 Idaho 1, 123 P. 943, 43 L. R. A., N. S., 100; Dearborn v. Washington Sav. Bank, 13 Wash. 345, 42 P. 1107; State v. Dickerson, 71 Kan. 769, 81 P. 497; Lamro State Bank v. Farmers' State Bank, 34 S.D. 417, 148 N.W. 851.)

Respondent had an attorney's lien on specific property or money which came into the hands of the commissioner of finance, and his lien must be enforced against the specific property he recovered by the suit, or if that property has been converted into cash he must show the particular proceeds of that property are in the hands of the commissioner of finance as a part of the assets of the said bank.

He cannot have an attorney's lien on the mass of the assets unless he shows that the assets contain the money which is the proceeds of the property or money recovered by him in the suit for which he claimed the attorney's lien for his fee. (C. S., sec. 6576; Osborne v. Waters, 92 Ark. 388, 123 S.W. 374; 2 Thornton on Attorneys-at-law, sec. 636; Casey v. March, 30 Tex. 180; 2 R. C. L., pp. 1069-1078; Fralick v. Coeur d'Alene Bank & Trust Co., 35 Idaho 749, 27 A. L. R. 110, 208 P. 835; Brown v. Erwin, 89 W.Va. 113, 108 S.E. 605; Johnson on Liens, sec. 166; Irvine v. Stevenson, 183 Ky. 305, 209 S.W. 7; Lyle v. Bach, 93 S.W. 608; Thompson v. Thompson, 23 Ky. Law Rep. 1535, 65 S.W. 475; Hatfield v. Richmond, 177 Ky. 183, 197 S.W. 654.)

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

If a bank receives money or property which it agrees to credit on the note of the party from whom it is received, it is a trust fund and does not belong to the bank and is a preferred claim against all the assets of the bank. (Peak v. Ellicott, 30 Kan. 156, 46 Am. Rep. 90, 1 P. 499; Independent Dist. of Boyer v. King, 80 Iowa 497, 45 N.W. 908; Glennon v. Harris, 149 Ala. 236, 13 Ann. Cas. 1163, 42 So. 1003, 9 L. R. A., N. S., 214; Anderson v. Pacific Bank, 112 Cal. 598, 53 Am. St. 228, 44 P. 1063, 32 L. R. A. 479.)

The right of the beneficiary of a trust to pursue a fund and impress on it the character of a trust is based on the principle that it is the beneficiary's property, and not upon any right of lien against the wrongdoer's general estate, whether the property sought to be recovered is in the form in which the beneficiary deposited it or is in a substituted form. (Heidelbach v. Campbell, 95 Wash. 661, 164 P. 247.)

Under C. S., sec. 6576, from the time of the commencement of an action an attorney has a lien on the 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, 161 P. 1026, 2 A. L. R. 251; Kerns v. Water Power Co., 24 Idaho 525, 135 P. 70; Fralick v. Coeur d'Alene Bank, 35 Idaho 749, 208 P. 835, 27 A. L. R. 110.)

An attorney's lien on his client's cause of action operates as security and if there is a settlement entered into between the parties in disregard of it, and to the prejudice of plaintiff's attorney by reason of the insolvency of his client or for other sufficient cause, the court will interfere and protect its officer by vacating the satisfaction of the judgment and permitting execution to issue for the enforcement of the judgment to the extent of the lien or by following the proceeds into the hands of third parties who received them before or after judgment impressed with the lien. (Taylor v. St. Louis Transit Co., 198 Mo. 715, 97 S.W. 155; Poole v. Blecha, 131 N.Y. 200, 30 N.E. 53; Bailey v. Murphy, 136 N.Y. 50, 32 N.E. 627; Lee v. Vacuum Oil Co., 126 N.Y. 579, 27 N.E. 1018; Peri v. New York Cent. H. & R. R. Co., 152 N.Y. 521, 46 N.E. 849; Miller v. Houston, 27 Colo. App. 89, 146 P. 786.)

Under a statute like the Idaho statute the attorney bringing the suit has a lien on his client's cause of action which cannot be defeated by settlement of the parties. (Hubbard v. Ellithorpe, 135 Iowa 259, 124 Am. St. 271, 112 N.W. 796; Northrup v. Hayward, 102 Minn. 307, 12 Ann. Cas. 341, 113 N.W. 701; Deasman v. Butler Bros., 118 Minn. 198, Ann. Cas. 1913E, 642, 136 N.W. 747; O'Connor v. St. Louis Transit Co., 198 Mo. 622, 8 Ann. Cas. 703, and note, 115 Am. St. 495; Keeler v. Keeler, 51 Hun, 505, 4 N.Y.S. 580.)

To constitute a waiver there must be some element of waiver, or intention to waive. A lien is not waived by acquiescence in the assignment of the judgment. (In re King, 168 N.Y. 53, 60 N.E. 1054; Farmer v. Stillwater Co., 108 Minn. 41, 121 N.W. 418; Hutchinson v. Worthington, 7 App. D. C. 548; Kinsey v. Stewart, 14 Tex. 457.)

T. BAILEY LEE, District Judge. Wm. E. Lee, C. J., and Budge and Givens, JJ., concur.

OPINION

T. BAILEY LEE, District Judge.

--On November 24, 1921, Swauger Brothers, a copartnership consisting of F. P., F. A. and O. H. Swauger, was indebted to D. W. Standrod & Co., a banking corporation, hereinafter for convenience termed the bank, in an aggregate sum of $ 52,000, besides interest, evidenced by their individual promissory notes secured by four chattel mortgages covering sheep and other personalty.

Being advised that John W. and Cecilia M. Swauger, father and mother of said copartners, had, as pretended and fraudulent mortgagees of said property, seized the whole thereof and advertised the same for sale, the bank directed respondent, G. F. Hansbrough, a practicing attorney, to institute an action enjoining such interference and to foreclose its then due mortgage.

Suit was promptly brought and full injunctive relief attained. However, before the case was tried, the bank, without its attorney's knowledge or consent, effected a satisfactory settlement with the debtors. Under the terms of the settlement, a corporation, Swauger Land & Live Stock Company was organized with a capital stock of $ 250,000, shares being of the par value of one dollar each. To this corporation was transferred all the property originally mortgaged the bank as well as some additional property. One-third of the stock, in an amount of approximately $ 82,000, was issued to F. P., F. A. and O. H. Swauger, who took up the original notes, giving the bank in settlement their new notes totaling $ 67,555, and delivering the bank their stock as collateral. Having heard of the settlement respondent visited the bank, discussed the matter with its officers, particularly C. W. Berryman, president, and W. F. Berryman, cashier, and was by them assured that the settlement was satisfactory to all parties; that he would be taken care of and his fee credited upon his note formerly executed the bank, but then held by the...