People v. Keeffe

• Decision Date: 01 May 1980
• Citation: 428 N.Y.S.2d 446,405 N.E.2d 1012,50 N.Y.2d 149
• Parties: , 405 N.E.2d 1012 The PEOPLE of the State of New York, Respondent, v. John A. KEEFFE, Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 446

428 N.Y.S.2d 446

50 N.Y.2d 149, 405 N.E.2d 1012

The PEOPLE of the State of New York, Respondent, v. John A. KEEFFE, Appellant.

Court of Appeals of New York.

May 1, 1980.

Harold F. McGuire, Jr., and Arthur V. Nealon, New York City, for appellant.

Robert M. Morgenthau, Dist. Atty. (Carol Ethridge Gette and Robert M. Pitler, Asst. Dist. Attys., of counsel), for respondent.

OPINION OF THE COURT

MEYER, Judge.

Is an attorney who holds in his special account the proceeds of settlement of a personal injury action guilty of larceny when his withdrawals from the special account reduce its balance to less than the amount to which his predecessor attorney has been held entitled as his share of the fee? We hold that the predecessor attorney did not by reason of the order fixing the amount of his fee have "property" in or ownership of the money held by the successor attorney, as the terms "property" and "owner" are defined by section 155.00 of the Penal Law. We hold further that the fact that the proceeds were in a special or "attorney's" account did not make them trust funds held for the benefit of the outgoing attorney. We conclude, therefore, that the withdrawals by the successor attorney from the special account did not constitute a larceny and, accordingly, reverse and dismiss the indictment. Since the indictment is being dismissed, we do not pass upon the other claims of error advanced by defendant.

The indictment of defendant Keeffe is based upon a factual complex which begins with the death of Frieda Gracie, wife of Thomas Gracie, in 1966, leaving Mr. Gracie and a two-month-old son surviving her. Contending that the death of his wife was the result of medical malpractice, Thomas Gracie retained attorney Alfred D'Isernia, who obtained the issuance of limited letters as administrator to Mr. Gracie and commenced a malpractice action against the doctors and hospital claimed to have been responsible for Mrs. Gracie's death. Unsatisfied with the lack of progress of the lawsuit, Gracie in 1973 asked defendant Keeffe to take over the wrongful death action and in October, 1973 an order permitting substitution was made by the Queens County Surrogate. The question of D'Isernia's right to a fee and to a lien were left undecided and were referred to the Trial Judge. Keeffe thereafter brought suit on behalf of the administrator against D'Isernia for legal malpractice.

Late in 1974 the wrongful death action was tentatively settled by Keeffe for $120,000. In the compromise approval proceeding that followed, D'Isernia claimed a lien on the settlement proceeds for his fee. Ultimately it was agreed that the malpractice action against him would be dropped and that his share of the fee would be $2,500. An intermediate order was made April 7, 1975 providing in part that "the administrator be permitted to withdraw and pay out the amount of $2,500 to Alfred L. D'Isernia, Esq. representing the fee to which he is entitled as former attorney for the petitioner, and that said amount shall be charged against the balance of counsel fees due to the attorneys for the estate". The order made no other direction or provision with respect to D'Isernia fee, but did permit partial distributions to defendant Keeffe's law firm and to Thomas Gracie. Within a few days after the order settlement checks totaling $120,000 payable jointly to Gracie as administrator and defendant's law firm were received, indorsed and deposited in the firm's attorney's account.

A final decree was not entered in the Surrogate's Court until December, 1978. In the intervening period defendant Keeffe had made part of the distribution to Thomas Gracie provided for in the intermediate order but no payment at all to D'Isernia. The firm's attorney's account in which the $120,000 settlement proceeds had been deposited was, however, during that period depleted. Defendant claimed to have received authorization from Thomas Gracie to invest the remainder of the amount distributable to him in debentures of a real estate project in which defendant was a principal. With respect to the $2,500 fee due D'Isernia, defendant contended that the claim of another law firm, predecessor of D'Isernia, the absence of authorization by Gracie, and the absence of a final decree in the estate proceeding were the reasons why payment had not been made. Payment was in fact made to D'Isernia when the final decree was entered, which was, however, after return of the indictment of defendant in this proceeding.

The indictment charged defendant with three counts of grand larceny in the second degree in stealing $46,500 from the estate, in stealing $16,500 from Thomas Gracie and in stealing $2,500 from Alfred D'Isernia. The jury convicted defendant of the third count but acquitted him of the first two counts. The Appellate Division affirmed, without opinion, 72 A.D.2d 670, 420 N.Y.S.2d 526. The appeal is before us by leave of a Justice of the Appellate Division.

Larceny is committed when one wrongfully takes or withholds "property from an owner thereof" with intent to deprive the owner of it or appropriate it to himself (Penal Law, § 155.05, subd. 1), or with such intent takes or withholds another's property by "common law larceny by trespassory taking" (subd. 2). "Property" means "money * * * thing in action * * * or any article, substance or thing of value" (Penal Law, § 155.00, subd. 1) and an "owner" is defined by subdivision 5 of that section as a "person who has a right to possession thereof superior to that of the taker * * * or withholder." While the statute itself does not require proof that the defendant intended to deprive the specific true "owner" of his property, but rather requires proof only of the fact that the defendant intended to deprive "another" the People in this case explicitly limited their claim on the third count to the concept that defendant stole specifically from D'Isernia. By reason of the order of April 7, 1975, it was claimed, $2,500 of the money held in defendant's attorney's account became the "property" of D'Isernia and D'Isernia became the "owner" of that $2,500 within the meaning of the foregoing statutes. Nothing in the order or in statute, rule or decision sustains that concept.

An understanding of the effect of the order of April 7, 1975 ¹ requires review of the rights and obligations of an attorney with respect to fees and to money held in so-called "special" accounts. With but two exceptions the rendition of services by an attorney gives rise to nothing more than a contract claim, express or implied, by the attorney against his client. The two exceptions are the attorney's retaining and charging liens. The first entitles the attorney to retain all papers, securities or money belonging to the client which come into his possession in the course of his professional employment until the amount of his fee is fixed by agreement or by litigation and is paid (Matter of Cooper (McCauley), 291 N.Y. 255, 52 N.E.2d 421; Matter of Heinsheimer, 214 N.Y. 361, 108 N.E. 636; Matter of Desmond v. Socha, 38 A.D.2d 22, 327 N.Y.S.2d 178, aff'd 31 N.Y.2d 687, 337 N.Y.S.2d 261, 289 N.E.2d 181; see 3 N.Y.Jur. 545, Attorney & Client, §§ 128-130). While it is possessory it has no bearing on this case because D'Isernia never had possession of the proceeds of the action and in any event never asserted such a lien. The second entitled the attorney at common law to a lien upon the judgment only, but has been expanded by statute to give a lien upon the client's cause of action from the commencement of the action (or if a proper notice is served, prior to such commencement), which attaches to the judgment and the proceeds of the judgment and cannot be affected by settlement between the parties (Judiciary Law, §§ 475, 475-a; Matter of City of New York (USA-Coblentz), 5 N.Y.2d 300, 307, 184 N.Y.S.2d 585, 157 N.E.2d 587, cert. den. 363 U.S. 841, 80 S.Ct. 1606, 4 L.Ed.2d 1726; Fischer-Hansen v. Brooklyn Hgts. R. R. Co., 173 N.Y. 492, 66 N.E. 395; Goodrich v. McDonald, 112 N.Y. 157, 19 N.E. 649; see 3 N.Y.Jur. 556, Attorney & Client, § 135).

When by the retainer agreement the client expressly assigns a portion of the cause of action proceeds to his attorney the attorney acquires at the time the agreement is signed a vested property interest which cannot subsequently be disturbed by the client or anyone claiming through or against the client (Matter of City of New York (USA-Coblentz), supra, 5 N.Y.2d at pp. 307-308, 184 N.Y.S.2d 585, 157 N.E.2d 587). Absent express language of assignment, however, the attorney has no ownership or immediate right to possession (cf. Matter of Herlihy, 274 App.Div. 342, 83 N.Y.S.2d 707) and must obtain enforcement of his lien by appropriate order of the court in which the action is pending (Hovey v. Elliott, 118 N.Y. 124, 23 N.E. 475; Judiciary Law, § 475 ("The court upon the petition of the client or attorney may determine and enforce the lien")). Such an enforcement order may direct that the lien be satisfied out of money or property to which the lien attaches even though it is not in the possession or control of the attorney (Matter of Cooper (McCauley), supra, 291 N.Y. at p. 260, 52 N.E.2d 421; Goodrich v. McDonald, supra, 112 N.Y. at pp. 163-166, 19 N.E. 649).

An attorney's charging lien may be lost if he voluntarily withdraws or is discharged for misconduct, among other ways (Matter of Dunn, 205 N.Y. 398, 401, 98 N.E. 914; Fischer-Hansen v. Brooklyn Hgts. R. R. Co., supra, 173 N.Y. at p. 502, 66 N.E.2d 395; 3 N.Y.Jur. 587, 588, Attorney & Client, §§ 157, 158). Generally, however, if an attorney is discharged without cause he will be allowed a charging lien upon the proceeds of the lawsuit, the amount to be determined on a quantum meruit basis at the conclusion of the case (Matter of Shaad, 59 A.D.2d 1061, 399 N.Y.S.2d 822; Reubenbaum v. B. & H. Express, 6 A.D.2d 47, 174 N.Y.S.2d 287), and his fees will be made a charge included within the fees to...