In re McCrory Stores Corporation
| Decision Date | 25 March 1937 |
| Citation | 19 F. Supp. 691 |
| Parties | In re McCRORY STORES CORPORATION. |
| Court | U.S. District Court — Southern District of New York |
Rosenberg, Goldmark & Colin, of New York City, for trustee.
Ernst, Gale, Bernays & Falk, of New York City, pro se.
Root, Clark, Buckner & Ballantine, of New York City (John M. Harlan and Leslie H. Arps, both of New York City, of counsel), for Chain Store Products Corporation.
The question is whether attorneys who have prosecuted two separate claims in behalf of a client against an estate in course of reorganization under section 77B of the Bankruptcy Act (11 U.S.C.A. § 207), and who have been paid in full for services in prosecuting one of the claims, have an attorney's lien against that claim for unpaid compensation in respect to services in prosecuting the other claim.
McCrory Stores Corporation was adjudicated bankrupt in January, 1933. In July, 1934, the case was converted into one for reorganization under section 77B of the Bankruptcy Act. Chain Store Products Corporation had several claims against the McCrory Company and engaged Ernst, Gale & Bernays as attorneys to realize on them. The attorneys caused proofs of claim to be filed. For present purposes there is no need to mention the original character of the claims or to follow the claims in their later evolution. Suffice it to say that by December 31, 1935, the Chain Store concern had two claims against the McCrory Company: the one was an ordinary claim for goods sold and delivered prior to bankruptcy, which claim had already been allowed at $16,086.55; the other was a claim on an option to purchase new shares of stock in the McCrory Company in event of reorganization. The claims had had no common origin and had never been set forth in a single proof of claim.
For all services rendered prior to December 31, 1935, the attorneys had been paid in full by the client. From that time forward they rendered no services in connection with the claim for goods sold and delivered; no further services on that claim were required. A controversy having later arisen between the client and the McCrory Company over the number of shares of new stock covered by the option, the attorneys rendered services beneficial to the client in that controversy. The client drew down the new shares to which it was entitled, without detainer or claim of lien by the attorneys. A difference of opinion as to the value of these final services having developed, the attorneys gave notice of an attorney's lien against the claim for goods sold and delivered. Thereupon the client made application, on notice to the attorneys, for an order directing payment to it of the proceeds of the claim without deduction. The claim was ripe for payment, and the only question was whether the attorneys had a lien against it. The special master to whom the matter was referred took the view that for services rendered in prosecuting the claim for the new stock the attorneys had no lien on the claim for goods sold and delivered. I am of the same opinion.
The attorneys' lien given by the New York Judiciary Law (Consol.Laws, c. 30), § 4751, may be availed of by an attorney who files and prosecutes a proof of claim for a creditor in a bankruptcy proceeding in this district. In re Baxter & Co., 154 F. 22 (C.C.A.2); In re United Cigar Stores Co. of America, 9 F.Supp. 149 (D.C.N.Y.). The lien being a matter of substantive law created by a statute of New York, the bounds placed on it by authoritative decisions of the New York courts are bounds on it here. The statutory lien is the same as the attorney's charging lien at common law, except that by force of the statute the lien attaches to the client's cause of action or claim from commencement of suit instead of merely on the cause of action or claim when reduced to judgment. Matter of Heinsheimer, 214 N.Y. 361, 108 N.E. 636, Ann.Cas.1916E, 384. The theory is that the attorney by skill and labor has produced the recovery and hence should have a lien on it for his pay. It is the rule that the lien covers only the amount owing to the attorney for services rendered in the particular suit. Matter of Heinsheimer, supra. If, then, an attorney prosecutes a number of suits for a client, the lien given him by law on the recovery in any one suit is only for his compensation in that suit, not for his compensation in all of them. Williams v. Ingersoll, 89 N.Y. 508.
Where an attorney files several proofs of claim for one client in a bankruptcy proceeding, the claims being on independent...
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