Schoenherr v. Van Meter

• Decision Date: 13 July 1915
• Citation: 215 N.Y. 548,109 N.E. 625
• Parties: SCHOENHERR, v. VAN METER et al.
• Court: New York Court of Appeals Court of Appeals

215 N.Y. 548

109 N.E. 625

SCHOENHERR,

v.VAN METER et al.

Court of Appeals of New York.

July 13, 1915.

Appeal from Supreme Court, Appellate Division, Second Department.

Action by Henry Schoenherr against Witam K. Van Meter, as trustee of the Brooklyn Consolidated Drug Company, and others. From a judgment of the Appellate Division affirming a judgment dismissing the complaint on the merits (158 App. Div. 907, 143 N.Y.Supp. 1143), plaintiff appeals. Reversed.

Henry Schoenherr, of Brooklyn, for appellant.

Charles A. Decker, of New York City, for respondent.

CARDOZO.

The plaintiff is a member of the bar. He brings this action to impress a lien on property of the Brooklyn Consolidated Drug Company, recovered through his services. One Wischerth, the treasurer and general manager, had misappropriated the property of the corporation and owed it upwards of $26,000. The plaintiff was retained by a director to compel the delinquent officer to account. The director refused to be personally liable for the fees. he agreed, however, that the plaintiff should have a lien on the cause of action and on any property recovered. this agreement was found by the trial court, and the finding has been unanimously affirmed.

[1][2] Under the retainer, an action was brought to compel Wischerth to account for his official conduct in the management and disposition of the funds and property committed to his charge, to compel him to pay over the moneys found due upon such accounting, or the value of any property misappropriated to his own use, or lost or wasted by the violation of his duty. That is an action which a director has the right to maintain. General Corp. Law, §§ 90, 91, formerly Code Civ. Proc. § 1781; Miller v. Quincy, 179 N.Y. 294, 72 N.E. 116. After the action was begun, Wischerth gave to the corporation money and other property of value in discharge of his liability. The finding, unanimously affirmed, is that the money was paid and the property delivered as a result of the director's action and by reason of the services rendered by the plaintiff therein. The finding also is that the value of the services is $1,000. The corporation, appropriating the benefit of the services, refuses to compensate the plaintiff, and resists his effort to establish a lien on the proceeds of the suit.

We think the lien should be sustained. We assume, in accordance with our decision in Matter of Meighan, 106 App.Div. 558, 94 N.Y.Supp. 1153, and Id., 182 N.Y. 558, 75 N.E. 1131, that the statutory lien created by section 475 of the Judiciary Law (Consol.Laws, c. 30) for the benefit of an attorney is not enforceable under such conditions. That case was a proceeding by petition under the statute. The court held that, in a suit by a stockholder for the benefit of a corporation, the statutory lien of the attorney does not attach to the money paid to the corporation perforce of the judgment. This case presents a very different situation. We are not dealing now with a statutory lien to be enforced in a statutory proceeding. We are dealing with a lien independent of statute, to be enforced in a plenary suit in equity. The director who was the plaintiff in the accounting suit might have paid the attorney with his own money. If he had done so, he would have had a lien for his own reimbursement on the property recovered to the use of the corporation as a result of his action. The rule is that a trust fund must bear the expenses of its administration, and that a trustee who conducts a litigation to protect the subject of the trust, has a charge on the fund for expenses incurred in the performance of his duties. Woodruff v. N.Y., L.E. & W.R.R. Co., 129 N.Y. 27, 29 N.E. 251;Meddaugh v. Wilson, 151 U.S. 333, 343, 14 Sup.Ct. 356, 38 L.Ed. 183;Central R.R. & B. Co. of Ga. v. Pettus, 113 U.S. 116, 5 Sup.Ct. 387, 28 L.Ed. 915. The law which imposes on a director the duty to hold a delinquent officer to account ( Miller v. Quincy, supra ) does not deny him indemnity for the expenses of the accounting. The lien enforceable by this plaintiff is not, therefore, the statutory lien of an attorney. It is a contractual lien,acquired by succession to the potential lien of the plaintiff in the action for an accounting. The plaintiff in that action,instead of paying the attorney with his own money,and seeking reimbursement out of the fund, chose another and for himself a safer course. He refused to assume personal liability for the attorney's services, but agreed that the attorney should have a lien on the cause of action and its proceeds. that was a lawful contract. It was a contract for the transfer to the attorney of the equitable lien of the trustee. New v. Nicoll, 73 N.Y. 127, 131, 29 Am.Rep. 111. A trustee, who is unwilling to assume personal liability for services essential to the protection...