94 N.Y.S. 1153 | N.Y. App. Div. | 1905
The petitioners are attorneys and counselors at law and as such, brought an action for one Watkins, a stockholder of the American Grass Twine Company, on behalf of himself and all other stockholders similarly situated, against, one Mills, a director of the corporation, the corporation itself being also made a party defendant,, to recover certain dividends alleged to have been wrongfully paid by the directors out of the capital of the corporation. Other actions of a similar nature were also commenced against each of the other directors, in which the corporation was named as a defendant.
After the commencement of the actions-the full amount of the’ dividends claimed to have been illegally paid was, together with the interest thereon, repaid by the defendant Mills and some of the other directors to the corporation, These attorneys claim a lien, Under section 66 of the Code of Civil Procedure, upon the fund
The sole question presented, therefore, is whether the petitioners are entitled to the relief asked. ■ I am of the opinion that they are. The American Grass Twine Company is a Delaware corporation, and under the statutes of that State had the right to recover dividends illegally paid. (Laws of Delaware of 1901, chap. 167, § 35 ; Laws of Delaware of 1903, chap. 394, § 35.) It was requested by Watkins, on the 27th of October, 1904, to bring an action against the directors for this purpose, which it failed and neglected to do, whereupon Watkins brought the actions above stated.
In the action brought against Mills the summons was served on the corporation on the 3d, and on him on the 6tli of December, 1904. The complaint was verified December twenty-third and served on the following day, but a few hours before the service was made the defendant Mills and some of the other directors paid to the corporation $642,767.49. In a letter inclosing the check iu payment of this sum (which was signed by' the defendant Mills and-one Howland, a former director) it was stated that the payment was made “ In consequence of the information derived from your Executive Committee to the effect that at the Committee’s meeting on the 7th day of December, there was presented a claim by a stockholder of the American Grass Twine Company, that, while we were directors of the Company, certain dividends had been paid in excess of the net earnings of the Company, we have caused an investigation into the facts to be made by our counsel, who has advised us that the claim appears to-be well founded in fact, and that the following dividends were open to the objection mentioned.” The stockholder’s claim presented at the meeting referred to in the letter was the one made by the plaintiff, and for which lié subsequently brought an action against Mills and the other directors. This
These and the other uncontradicted facts set out in the moving papers irresistibly lead to the conclusion that this large sum of money was repaid to the corporation by reason of the actions instituted by Watkins to recover the same from the directors. This being so, it seems to me that the petitioners, as Watkins’ attorneys, are entitled to a lien upon the fund paid for the services rendered by them.
The statute gives an attorney a lien upon his client’s cause of .action and the proceeds thereof, and provides that the. compensation may be determined and the lien enforced by petition. Section 66 of the Code of Civil Procedure provides as follows: “¡From the commencement of an action or • special proceeding, or the service of an answer containing a counterclaim, the attorney who appears for a party has a lien upon his client’s cause of action, claim, or counterclaim, which attaches to a verdict, report, decision, judgment or final order in his' client’s favor and the proceeds thereof, in whosoever hands they may come; and the lien cannot be affected by any settlement between the parties before or after judgment, or final order. The court, upon the petition of the client or attorney, may determine and enforce the lien.” But it is ¡said this section of the Code of Civil Procedure is not applicable to the petitioners because- they did not
The rule is well settled that when one successfully conducts a litigation for the benefit of another, the fund recovered will be subjected to the expenses incurred. (Woodruff v. N. Y., L. E. & W. R. R. Co., 129 N. Y. 27; Matter of Application of Holden, 126 id. 589.)
In Trustees v. Greenough {supra) a bondholder of a railroad company brought an action on behalf of himself and other bondholders similarly situated to prevent the trustees of the corporation from wasting certain corporate property and to set aside an alleged, fraudulent conveyance. It was held, the. action having been successful, that the iffaintiff was entitled to be reimbursed either out of the fund itself or by proportional contribution from those who accepted the benefit of his efforts.
In Meeker v. Winthrop Iron Co. (17 Fed. Rep. 48) a suit was brought by minority stockholders to have a lease declared forfeited and to recover certain property. It was held, the plaintiffs having been successful, that they were entitled to be reimbursed for all proper expenditures incurred, including attorneys’ and counsel fees.
In Central Railroad v. Pettus (113 U. S. 116) certain unsecured creditors of a railroad corporation instituted a proceeding on behalf of themselves and other creditors of the same class to establish a
In Grant v. Lookout Mountain Co. (93 Tenn. 691) action was brought by minority stockholders to enjoin a proposed sale by the corporation of its real estate and personal property upon the ground that the same was ultra vires and fraudulent. The action was successful and the question was there presented, as here, whether the attorneys for the plaintiffs had a lien upon the property recovered, it was held that they did. The court, in'delivering the opinion,, said: “We are, therefore, of opinion that this record shows that through the intervention of these minority stockholders the property of the corporation has been preserved, protected and, indeed, recovered after it had been illegally conveyed away, and that such recovery inuring to the benefit of the corporation the.suit was, to-
The section of our Code of Civil Procedure above referred to which gives an attorney a lien is a remedial statute and should receive a liberal construction. Its purpose is to furnish a summary and inexpensive method of determining and enforcing the rights of attorneys to compensation. (Fischer-Hansen v. Brooklyn Heights R. R. Co., 173 N. Y. 492.) It provides that an attorney may proceed by petition, and this method of procedure has been approved in Matter of King (168 N. Y. 53) and is to be preferred to an action. (Corbit v. Watson, 88 App. Div. 467; Smith v. Acker Process Co., 102 id. 170.)
The fund in question was sufficiently under the control of the court to enable it to declare a lien thereon, and I am of the opinion, upon principle and authority alike, that the petitioners were entitled to have their compensation determined and a lien therefor declared on such fund.
For these reasons the order appealed from should be reversed, with ten dollars costs and disbursements, and the application granted, with ten dollars costs.
Hatch, J., concurred.
Order affirmed, with ten dollars costs and disbursements.
Note.—The rest of the cases of this term will be found in the next volume, 107 App. Div.— [Rep.