65 F. 359 | U.S. Circuit Court for the District of Eastern Tennessee | 1895
Lead Opinion
(orally). No more delicate duty is ever imposed upon the court than an inquiry into the conduct of counsel. The court and the bar, in common with every right-thinking citizen, recognize the very great importance of the exercise of the utmost good faith in the relations which exist between client and attorney.
The petitioners, H. W. Bartol and others, holders of bonds secured
The Bartol petition contains the following statement and application to the court:
“Said allowance to said Claris & Brown is a gross fraud upon their rights, which no court of conscience would countenance, and that the conduct of said Clark & Brown, as shown by the record in this case, constitutes a breach of professional ethics, which cannot be too severely condemned, and which, your petitioners respectfully represent, merits the judicial notice of this honorable court.”
In view of this application to the court, this court, at a former day, made the following order:
“It appearing to the court that on the 18th day of October, 1894, H. W. Bartol and others filed their petition in this cause, wherein various charges are made, reflecting upon the good faith and professional conduct of C. D. Clark and Foster V. Brown, practicing attorneys and solicitors of this court, and invoking the order of the court in respect thereto, and said solicitors appearing in open court, and moving that an order be made, setting said petition in this cause for hearing, particularly as to the matters aforesaid, it is, on said motion, ordered by the court that this cause and said petition, so far as the matters therein alleged affect said solicitors, be, and the same are hereby, set down for hearing on Monday, the 31st day of December, 1894, on the pleadings and such proof as the parties, or any of them, may adduce on the hearing; and either party may take proof at the office of the clerk of this court at any time, Sunday excepted, before the 31st day of December, 1894, and proof so taken, and the record in the case, may he used in evidence on the hearing. The clerk of this court will immediately furnish J. H. Barr, Estp, of the firm of Barr & McAdoo, the resident solicitors for the petitioners, with a copy of this order.”
The charge thus made, affecting the professional honor of Messrs. Clark & Brown, is a very grave one, and the petition seeks to support it fry averments which, are matters of record. It must, in considering this very grave charge, be first noticed that Messrs. Clark & Brown were first retained to represent the interests of the trustee in the several mortgages sought to be foreclosed, not earlier than the 3d day of September, 1892. At that time the attitude of the pleadings was substantially this: Some time before, one Davis, claiming to be the owner of a large amount of defaulted coupons, secured
“Chattanooga, Tenn., Aug. 30th, 1892.
“Messrs. Turner, McClure & Rolston, New York City — Gentlemen: Your Telegram is received, and we answer the same briefly. In addition to the answer, we desire to state the situation a little more fully. You, of course, understand the Davis case, and what has taken place in that We have, as a fact, been rendering Mr. Baxter such assistance as he called on us for, since his bill was brought, which we believe is tho only one of the two suits which is legally and properly brought. Neither Tames nor the Union Railway have offered any objection to foreclosure under your bill, and, as we understand, they do not desire to do so, but, on the contrary, are anxious to see the properly brought to a sale thereunder; and, this being so, it seems to us that, we are free to take up the litigation where we find it, as left by Mr. Baxter, and carry it io a termination with you, if you desire, and will be very glad indeed to serve you in this or any other particular. Now, we have filed in the two cases, or, ral her, under the style of the two cases, a claim for Tames himself, which is a general debt, except about $1,500, of which he claims ought to be allowed as operating expenses, because recently advanced by him to pa.y employes’ wages, which, of course, will only be allowed by the court, or insisted upon by us, in case he brings himself within the rules which would entitle him to the same. You remember that, under Davis’ amended bill, it is sought to sell the Union Depot property; but your bill, as we understand, is only for the sale of the Union Railway property. Now, these are the facts, and we put them before you; and, if you think there is no difficulty in our way, please say so, and we a,re ready for your service. If, however, there is anything in the situation, on account of which yon think it best for some one else to represent you, please feel free to act accordingly, and without thinking for a moment that your action would be in any way unpleasant to us, assuring you it would not.
“Yours, truly, Clark & Brown.”
Now, that letter indicates that Clark & Brown assumed that the New York counsel were familiar with the state of the pleadings, and. the situation of the case as it then stood. They say:
“You, of course, understand the Davis case, and what has taken place in that. We have, in fact, been rendering Mr. Baxter such assistance as he railed upon us for, since his bill was brought, which, we believe, is the only one of the two suits which is legally and properly brought.”
They then spoke of the fact that neither James nor the Union Railway Company objected to the foreclosure under the hill of the Farmers’ Loan & Trust Company, and did not desire to do so, but
“This being so, it seems to us we are free to take up the litigation where we find it left by Mr. Baxter, and carry it on to a termination with you, if you desire, and will be very glad to serve you in this or any other particular.”
But they stated further in this letter that they had filed a claim for James, which was a general debt, except about $1,500, which he claimed ought to be allowed as operating expenses, because recently-advanced by him to pay employes’ wages, which, of course, would be allowed as a prior claim, in case James brought himself within the rules which would entitle him to the same. They conclude their letter as follows:
“Now, these are the facts, and we put them before you. If you think' there is no difficulty in our way, please say so, and we are ready for your service. If, however, there is anything in the situation, on account of which you think it best for some one else to represent you, please feel free to act accordingly, without thinking for a moment that your action would be in any way unpleasant to us, assuring you that it would not”
The New York counsel of the Farmers’ Loan & Trust Company wrote their reply to this letter September 1,1892. This letter could not have been received earlier than September 3, 1892. The reply was as follows:
“We have received your letter of August 30th. We understand from it that you are acting for Mr. James in the claim, of which, perhaps, $1,500 or more may be for money advanced or borrowed by him for operating expenses, etc., to pay employes’ wages, but that you do not claim priority to the mortgage debt, except for the special money so advanced or borrowed. We see no impropriety in allowing the $1,500, or a little more, if necessary, as operating expenses, with the lien prior to the mortgage, provided the facts are such as to justify it; and, as the balance of Mr James’ claim does not ask priority, we do not see that there can be any antagonism between your position, as acting for Mr. James, and your position as acting for the Farmers’ Loan & Trust Company. We are .glad, therefore, to believe that there is nothing in your letter which militates against the position of your telegram to us.”
Now, it will be observed that the letter of Clark & Brown does not go into all the details. It does not explicitly state that they had theretofore filed a petition for the Union Depot Company, setting up a claim against the Union Railway Company for rent. It does not state that Mr. James had or claimed title to several lots over which the railroad had been constructed, and was negotiating the sale of such lots to the receiver. Neither do they mention the fact that they had been representing the railway company in suits brought against it for damages for personal injuries. It is now asserted that the failure to state these details amounts to a failure to give full notice to the New York counsel, and is therefore such unprofessional conduct as merits the disapprobation of the court. The fact that such a question is now made shows that it would have been better, had Messrs. Clark & Brown, or Mr. Brown, (who seems to have conducted the correspondence and litigation,) more fully stated the circumstances affecting their attitude, by stating the pendency of the sale of the lots to the receiver, the claim of the Union Depot Company, and the fact that they represented the de
Now, as to this claim of the Union Depot Company against the Union Railway Company, it is not mentioned in this petition. No complaint is made that Clark & Brown said nothing about the fact that they had at one time represented the Union Depot Company in a claim adverse 'to the Union Railway Company. That Clark & Brown said nothing about this pending claim is possibly due, in part, to the fact that they assumed that the New York counsel knew the state of the pleadings, or that they had been informed by Mr. Baxter of the pendency of that claim, and in part to the fact that they did not anticipate proceeding further with the claim. And so with respect to the fact that they were representing this railway company in these damage suits. They might well assume that, whatever the damage suits were, if they resulted in judgments, they would be preferred, under the Tennessee statutes, to the mortgage. This is the well-settled law in Tennessee, and is not controverted by any one. The inquiry was, “Are you in a situation to represent the Farmers’ Loan & Trust Company?” So far as these pending damage suits were concerned, they were in such, situation, for their defense of these suits was in the interest of the mortgagees. Now, talcing these matters up one at a time: These claims of James & Co. and of James we shall treat together, as they were linked together in the mind of Mr. Brown when he wrote this letter, when he stated that about $1,500 was claimed for James as a preference. O. E. James was the James of the firm of James & Co., and, when Mr. Brown mentioned the claim of James, he doubtless included the firm claim with the individual claim of James. Now, with respect to what they said about the James claims. We think they dealt with the utmost fairness. They gave to their correspondents full information with respect to their attitude towards the James claim;
Now, that brings us to the claim in respect to the land. We have observed that it might have been better to have stated the character of that pending matter to the New York counsel. Yet, at the same time, we repeat that that could hardly be regarded as a claim conflicting with mortgage creditors; for, if the railroad company did not own that property,, the question of whether they should own it was to- be determined finally by the court. It would be a question for the receiver, in the first instance, representing all persons; and, in the second instance, it must be confirmed by the court, and the interests of all would be protected, — the receiver, in such matters, standing for the general interests of creditors.
Next, with respect to the claim of the Union Depot Company. Undoubtedly, if Clark & Brown expected to continue to prosecute that claim, and the loan and trust company was not aware of it, and if they had continued to prosecute it, there might be ground of complaint. But no subsequent step was ever taken by Clark & Brown, which operated to fasten any one of these claims upon the insolvent railway company or the fund. They did not, after their employment by the Farmers’ Loan & Trust Company, do anything, except confirm the report with reference to the James claim, which report contained a recommendation of the receiver that these lots should be purchased. The decree confirming the report of the master in these matters was guarded to a degree that Clark & Brown were hardly called upon to exercise. They were justified in confirming so much of that report as gave a preference to the extent of about $1,500, but instead of confirming it, and making it a first lien prior to the mortgages, they reserved the question of priority in the face of the decree; and to this day it has never been declared, nor have they sought to have it declared, a preferential claim, and, with reference to the purchase of these lots, it stands to-day as it stood then. The purchase has never been concluded. It has never been submitted to the court for its adoption, and no step was taken by them with a view to completing the sale to the receiver. This is, perhaps, explained by the facts testified to by Mr. Brown, Judge Shepherd,
Now, it is argued that it is doubtful whether the receiver’s counsel had sufficient authority to continue the services of Clark & Brown in the damage suits pending at the time the receiver was appointed. It strikes the court that it was wise to do so, as it is dangerous to take a case of that kind out of the hands of lawyers who have liad charge of it from its beginning, and Judge Shepherd’s known familiarity and large experience in this class of litigation is such that no one knew better than himself the impropriety of permitting Clark & Brown to retire from these cases. Whether that was true or not, the question as to whether Clark & Brown were entitled to a fee for the defense of the damage suits was a question they had a right to present, by filing (heir claim with the receiver, and they had a right to state The amount they claimed. It was the duty of the receiver to pass upon it. If he thought it was improper or excessive, it was his duty to resist it. They did file their claim, and they claimed compensation for services rendered before the appointment as well as after, stating the items and charges with great particularity. Now, with regard to the liability of the fund for services of counsel before appointment of receiier, Judge Jenkins, of the Eighth circuit, — one of the ablest of the circuit judges, — has held, as we learn, that counsel are within the six-months rule, and are entitled to same preference under some circumstances, especially if counsel have been engaged in defending claims entitled to priority. Whether or not this is the law, is not decided. It furnishes at least a strong reason for asserting a claim against the receiver. It was for the receiver to determine whether it should be contested or not. His failure to contest warrants no charge against Clark & Brown. The
Concurrence Opinion
I concur fully with Judge LUETON. In addition, I will state that the litigation out of which these questions arise has all been conducted before me, as judge. The case has been hotly contested from the beginning, and the attorneys of all parties have ably and zealously maintained in open court the interests of their respective clients. No quarter has been asked or given, so far. as I could see;, but all the attorneys, in my opinion, have been