In re Level Club

• Citation: 46 F.2d 1002
• Parties: In re LEVEL CLUB, Inc.
• Decision Date: 03 February 1931
• Court: U.S. District Court — Southern District of New York

46 F.2d 1002 (1931)

In re LEVEL CLUB, Inc.

District Court, S. D. New York.

February 3, 1931.

Jenks & Rogers, of New York City, for Level Club, Inc. (Gustavus A. Rogers, of New York City, of counsel), in support of motions Nos. 1, 2, 3, and 4, and in opposition to motion No. 5.

Joseph Krinsky, of New York City, for petitioning creditors, in opposition to motions Nos. 1, 2, 3, and 4, and in support of motion No. 5.

Levy, Kraus & Leman (by J. L. Kraus, 2d), of New York City, for Irving Trust Co., in opposition to motions Nos. 1, 2, 3, and 4, and in support of motion No. 5.

WOOLSEY, District Judge.

I deny the motions (1) to vacate the adjudication, (2) to vacate the receivership order, (3) to vacate the order for examinations under section 21a, and (4) to dismiss the petition in bankruptcy.

I grant the motion to vacate the order extending bankrupt's time to answer.

I. The result of all these motions, except the motion to vacate the order appointing a receiver, is entirely dependent on the result of the motion to set aside the adjudication.

The relevant facts regarding that motion are as follows:

On November 21, 1930, the secretary of the Level Club was served with a subpœna and petition for involuntary bankruptcy.

Without consulting the board of governors of the club, the secretary communicated with William W. Conrad, Esq., who is a member of the club, and also of the law firm of Conrad, Rubin & Lesser.

The secretary inquired of Mr. Conrad whether the papers served on him constituted an adjudication in bankruptcy or merely the institution of a proceeding for that purpose. Mr. Conrad advised the secretary that the papers merely involved steps looking to such adjudication, and asked whether he should appear for the club and consent to an adjudication. The secretary instructed him to do so and he followed the instructions.

It is the adjudication thus secured that the first motion here involved seeks to have vacated on the ground that the board of governors never passed any resolution agreeing to such adjudication, as it is claimed would be necessary in the case of a voluntary bankruptcy.

II. The moving party, who is now represented by a new firm of lawyers, seems, for the purpose of this motion, to forget that an involuntary petition in bankruptcy is a proceeding by third parties against the bankrupt in invitum like any other proceeding, and, therefore, that there are parties other than the bankrupt to be considered.

Furthermore, as in all cases, there is here involved the court itself, which must keep a watchful eye on its processes and on the successive steps in litigations pending before it.

The administration of justice would be reduced to chaos if, whenever an attorney had a new idea in regard to a step which had been taken by his client in a litigation, he could get it reversed, not because any fraud was involved, but because he or his clients had changed their minds.

Such never was and never can be the law.

Considered steps in a litigation taken by a member of the bar of a court are binding on his client unless fraud be shown. The apparent authority of attorneys in any proceeding before the court is plenary so far as the court and the opposing parties are concerned, for necessarily it must be adequate to all the exigencies of litigation. To be agents with such authority is one of the reasons for the existence of the Bar.

In Tatum v. Maloney, 226 App. Div. 62, 234 N. Y. S. 614, Mr. Justice Merrell, in writing the opinion of the court which involved a question of the effect of a general appearance in Mississippi by a firm of attorneys, said at pages 67, 68 of 226 App. Div., 234 N. Y. S. 614, 619:

"The defendants admit that they personally authorized the Mississippi attorneys to appear specially, and that they paid said attorneys for their services. Subsequently the Mississippi attorneys appeared generally and ultimately judgment was rendered in the circuit court of Mississippi against the defendants appellants. It is admitted by the defendants appellants that they authorized an appeal to be taken to the Supreme Court of Mississippi from the judgment of the circuit court of that state, and it is the undisputed fact that the Supreme Court of Mississippi affirmed the judgment of the trial court. I think there is no disputed question of fact here. As to whether or not the Mississippi attorneys had secret instructions from the defendants appellants, and as to what the instructions were, the plaintiff is, of course, ignorant. The defendants do not deny such instructions, and, therefore, there is no issue thereon. Having employed the Mississippi firm of attorneys to represent the defendants, I think the defendants should be bound by the action of their said attorneys, upon the court's overruling their special appearance, in appearing generally in the action and asking leave to defend upon the merits. Although the attorneys may have exceeded their authority, I think the defendants should be bound by their acts. As was said by Boardman, J., in Palen v. Starr, 7 Hun, 422, at pages 423, 424: `It will not do to allow proceedings regularly had by attorneys, lawfully appearing for the respective parties, to be questioned by their clients for want of specific authority in the absence of fraud.'

"In Matter of Maxwell, 66 Hun, 151, at page 156, 21 N. Y. S. 209, 212, Presiding Justice Mayham, writing for the General Term, Third Department, Putnam and Herrick, JJ., concurring, said: `The court must repose confidence in the authority assumed to be exercised by the attorneys, who are its officers. And when an attorney duly appears in open court or by a proper notice of retainer in the absence of fraud or collusion, he must be deemed as representing his client, who must be bound by his acts in the regular line of his duty.' Here there was no allegation of fraud on the part of the attorneys appearing generally for the defendants. They were employed by the defendants, who had notice of all proceedings in the Mississippi action."

Mr. Justice Proskauer, concurring in the same case, said at page 68 of 228 App. Div., 234 N. Y. S. 614, 620:

"The defendant having retained the Mississippi attorney was bound by the action of these attorneys in the conduct of the litigation, even though they exceeded the limitation placed upon their authority. Palen v. Starr, 7 Hun, 422; Matter of Maxwell, 66 Hun, 151, 21 N. Y. S. 209; Butcher v. Quinn, 86 App. Div. 391, 83 N. Y. S. 700; Ferguson v. Crawford, 70 N. Y. 253, 258, 261, 26 Am. Rep. 589. The situation in this respect is entirely different from the one which exists in cases like Famobrosis Society v. Royal Benefit Society, 166 App. Div. 593, 152 N. Y. S. 84, where the attorney's appearance was wholly unauthorized or where fraud was involved."

The decisions are many in which an affirmative act by an attorney, such as securing an extension of time to answer or appear, or the removal to a federal court of a case, which is subsequently remanded to the state court, is held to constitute, though unintentionally, a general appearance from which his client cannot escape. For example, see Hupfeld v. Automaton Piano Co. (C. C.) 66 F. 788, 789, per Lacombe, J., and Farmer v. National Life Association of Hartford, Connecticut, 138 N. Y. 265, 271, 33 N. E. 1075, and cases there cited.

It is obvious that, in the absence of clearly established fraud, an intentional act of an attorney in a litigation — such as the appearance and consent to an adjudication here involved — cannot be set aside. If there is any dispute as to whether such an act by an attorney in a litigated case was authorized, it is a matter which must be dealt with between the attorney and his client, for it involves their private relations only and not their relations to the Court or to the opposing parties.

But quite aside from the general principle involved, a...