Skelton v. Spencer

BISTLINE, Justice,

dissenting.

I cannot agree with the majority that the three separate claims of Rigby & Thatcher can properly be brought and pursued to judgment in this single particular enforcement of lien proceeding. To help clarify these rather involved proceedings, I will briefly explain the nature of the three separate claims as they appear to me:

1.Removal of executor (Civil No. 4193, Bonneville County, Magistrate Division). As to the removal of the executor and ratification of the children’s disclaimers, Rigby & Thatcher had, prior to the exchange of letters re fees with Spencer, filed a petition in the probate proceeding seeking the bank’s removal as executor and seeking ratification of the disclaimers. The petition included a prayer for alternative relief, to-wit, that the bank be compelled to bring a shareholder’s suit against the Commission Co. These matters were unresolved when the present litigation, seeking enforcement of the attorney’s claim of lien, was heard and determined.

2. Pending suit against the bank and the two Skeltons (Civil No. 13674, Seventh Judicial District; Supreme Court No. 9899). Spencer initiated this action in 1964 against the bank and the two Skeltons, alleging that her husband’s partnership interest in the Idaho Livestock Auction Co. had been sold for an under-value figure. She sought either rescission or damages. This Court had reversed the dismissal and remanded. Spencer v. Spencer, 91 Idaho 880, 434 P.2d 98 (1967). Trial was set for May 1, 1973, but a settlement was reached without going to trial.

3. Potential suit against Commission Co. Mrs. Spencer wanted to obtain some return from her ownership of stock in the Idaho Livestock Commission Co., an Idaho corporation, and apparently agreed that Rigby & Thatcher would try to compel the bank to bring a shareholder’s action for rents and dividends. However, no suit was ever brought against the Commission Co., other than the petition in the probate proceeding to alternatively compel the bank to bring a shareholder’s action. No mention was ever made of any separate suit to compel the Commission Co. to buy the stock held by Mrs. Spencer. "

As noted by the majority, the settlement that was achieved before trial in Civil No. 13674 resolved both that action and also the Commission Co. dispute, except that Spencer reserved all her claims against the bank. With regard to the majority’s discussion of the terms of those agreements, however, I would emphasize that the $150,000 the Commission Co. agreed to pay Mrs. Spencer was both for her stock and for the covenant not to sue, and that no allocation was made between the two. As stated in the agreement:

“WHEREAS, the parties of this agreement recognize and agree that a stockholders suit for the pursuit of any other claim against Second Party, its stockholders, officers, agents, servants or employees would be expensive, time consuming and would dissipate assets of the said estate and that it is in the best interest of all concerned that Second Party or its nominee acquire said 1271/2 shares of the capital stock of Second Party, and that First Party be paid for said stock as hereinafter provided for.

“NOW, THEREFORE, it is agreed by and between First Party and Second Party as follows:

“For and in consideration of the premises, and of the payment by Second Party to First Party of the sum of Twenty-Five Thousand Dollars ($25,000.00), receipt of which is hereby acknowledged, First Party does hereby sell, assign, and transfer to Second Party said 127'/2 shares of the capital stock of Second Party, free of all liens and encumbrances, and does further covenant and agree that First Party shall not sue or bring action against Second Party or against the following additional parties . . . concerning the subject of this agreement or any other claim now existing, except for breach by Second Party of this agreement or of a separate agreement of this date executed by First Party and Floyd E. Skelton.”

The agreement provided for the payment of an additional $125,000 once Spencer had delivered the stock and provided other specified assurances that the agreement was valid and binding. Thus this agreement was both a sales agreement and a covenant not to sue.

With this background, the proper place to begin an analysis of this case is with an examination of the authority for an attorney’s charging lien. It is a creature of statute. I.C. § 3-205 provides:

“The measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties, which is not restrained by law. From the commencement of an action, 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 or counterclaim, which attaches to a verdict, report, decision or judgment in his client’s favor and the proceeds thereof in whosoever hands they may come; and cannot be affected by any settlement between the parties before or after judgment.” (Emphasis added.)

By the explicit language of the statute such a lien is limited to those claims placed in litigation. Furthermore, nothing in the statute provides for recovering for services rendered in any other cause or transaction, even though such cause or transaction occurs at the same time as the litigated claim, or is related to the litigated claim. The lien does not extend to the client’s assets, generally, and a “cause of action,” other than the one to which the attorney’s lien may be said to attach directly, is simply another asset.

Nonetheless, the majority, without even discussing the literal terms of this statute, attempts to justify its holding by resorting to various cases from other jurisdictions. The majority uses In Re Abruzzo’s Estate, 139 Misc. 559, 249 N.Y.S. 72 (1931), as illustrative of their position. The relevant question in that case was whether the attorneys were to be limited in their recovery to the value of the services rendered in connection with the accounting proceeding alone, or whether the lien would also attach to other services in connection with the estate that led to the accounting proceeding. The attorneys in that case had participated in the probate of the will, taken part in two aborted construction proceedings and a successful construction proceeding, and finally in the compulsory accounting which terminated the lawsuit. Each of those steps necessarily followed from the other, and, as stated by that court, a holding denying compensation for all these services “would be little short of an absurdity, since it might result in permitting a recovery for services performed in connection with the accounting proceeding, while denying it in the far more difficult proceeding for a construction of the will which, if not successfully prosecuted, would have precluded the possibility of any recovery by the client on' the accounting.” Id. at 78. The attorneys in that case were faced with a will that their clients challenged; each action they took was in the vertical progression of steps necessary to challenge that will, and in reality all these steps were simply one overall proceeding.

That is not the situation in the present case, however. First, here we have an award of $5,450, supposedly as earned fee in the probate proceeding, which service was totally unrelated to the litigation in the present case. That suit involved an attempt to remove the bank as executor, and to ratify the disclaimers of the heirs. Neither settlement agreement mentioned or was in any way connected with this endeav- or. In fact, both agreements specifically reserved any action Mrs. Skelton might wish to pursue against the bank. Nor was this endeavor part of the contingent fee agreement. Nor was this issue in any way necessary to a culmination or settlement of these other two possible suits, as shown by the fact that this matter was still unresolved when this appeal was brought.

The purpose of a charging lien in favor of an attorney is expressed in Speiser as follows:

“It is founded on the equity of an attorney to be paid his fees and disbursements out of the judgment he has obtained. It was created to protect the rights of an attorney unable to get possession against a client who seeks to avoid payment for services.” 2 Speiser on Attorneys Fees § 16.14 at 381 (1973) (footnotes omitted).

“[T]he agent responsible for the creation of an asset . . . should have security for payment of his fees out of the very monies which would not exist but for his services. It is regarded as an equitable assignment to the attorney of the funds produced by his efforts.” Spinello v. Spinello, 70 Misc.2d 521, 334 N.Y.S.2d 70, 76 (S.Ct.1972). Rigby & Thatcher here have no claim to a lien for the probate matter, for the sum recovered bears no relationship to the matter. To extend the lien to this extent is to pervert the very purpose of the lien, /. e., to protect an attorney’s fee in a recovered fund.

It must be remembered that the provision for a lien is a special provision where the attorney has recovered a fund for his client. In other cases the attorney is not left without a remedy, but must pursue his claim as any other aggrieved creditor. Secondly, the purported total settlement of all claims, from which the trial court awarded Rigby & Thatcher a percentage fee, included both a sum paid for the value of the stock owned by Spencer and the value of her covenant not to sue. I cannot read into I.C. § 3-205 any provision that a lien attaches to the proceeds of a sale of a client’s property. Such a sale is not a “cause of action or counterclaim” within the language of the statute. It would be unreasonable to hold that under this statute an attorney who handles the sale of a client’s real estate would have a lien attaching to his fee for selling that real estate, yet the majority upholds the giving of a lien to Rigby & Thatcher on the sale of Spencer’s stock. Since no allocation was made in the agreement between the value of the stock and the covenant not to sue, it is not proper to validate the whole or any part of that sum in this lien enforcement proceeding.

Aside from Abruzzo, annotations and texts, the majority cites three additional cases to support its holding. None of those cases, however, bear a resemblance to this case. In United States v. Preston, 232 F.2d 77 (9th Cir. 1956), the attorney, at the request of his client, advanced $468.19 as expenses in one suit, the Eleuteria case. The district court ordered this sum paid from monies deposited in the court’s registry from the allotment proceeding, a technically different suit. The court on appeal presumed that the Eleuteria case was in reality a part of the allotment proceeding, that the expenditure in that case was necessary and proper to fully effectuate the judgment of allotment. On this basis the court held that the district court was within its equitable powers to order the $468.19 paid out of the trust funds obtained from the allotment proceeding. Obviously this presumption, that all of the actions taken by the attorneys were necessary and proper to effectuate a final judgment in the principal suit, does not hold in the present case.

In Spinello v. Spinello, 70 Misc.2d 521, 334 N.Y.S.2d 70 (S.Ct.1972), the second case cited by the majority, the court held that the lien attached to “the preliminary legal work necessarily entailed in the bringing of” the proceeding. Id. at 78. Again, this work could best be described as the “vertical” steps necessary to bring an action, while in the present case there are separate “horizontal” proceedings.

As to the next cited case, Butler v. Breckinridge, 442 P.2d 313 (Okl.1967), as I read it that case does not even address the question of applying a lien to more than one suit.

Without belaboring the point by a further detailed summary, each of the cases cited in the annotations and texts is also clearly distinguishable from the present case. To illustrate, the quote from Speiser utilized by the majority cites three cases in addition to Abruzzo. Williams v. Kauderer, 5 Misc.2d 152, 165 N.Y.S.2d 560 (City Ct. 1957), did not involve fees for two actions, it stated only that in addition to the lien attaching to the proceeds of the judgment, it also attached to proceeds obtained by bringing a proceeding under a statute authorizing an order permitting the debtor to pay the sheriff or judgment debtor. In Re Paschal, 10 Wall. (U.S.) 483, 19 L.Ed. 992 (1871), dealt with a retaining lien, a lien attaching to monies already in the attorney’s hands, not a charging lien. Newbert v. Cunningham, 50 Me. 231 (1863), held only that the attorney’s lien extended to suits incidental to enforcing the judgment, that he could enforce his lien by bringing an action against the sheriff for not taking a sufficient replevin bond.

In summary, the courts have held that an attorney’s charging lien extends to services he performs that are necessary or incidental to the culmination of the suit which generates the fund, even if those services are not technically part of the principal suit. In so doing the courts have properly refused to elevate form over substance, but in none of those cases have the courts distorted the form and meaning of an attorney’s charging lien to the point that it is unrecognizable.

Today’s opinion, however, comes close to so doing. I cannot see how these three separate actions — one a probate proceeding, one a suit for rescission or damages, and one not a suit at all, but a sale of stock— can be said to be “suits incident to, or growing out of, the principal object of the employment,” as claimed by the majority of this Court. All three of these matters were not necessary to resolve the actual suit that was brought, and to which the lien, by stretching, may be said to attach. Indeed, this case more properly falls within the generally established rule that an attorney’s charging lien extends only to fees and disbursements rendered in the particular action in which they were incurred, and does not cover a general balance due the attorney, or charges rendered in other causes. See, e. g., Regan v. Marco M. Frisone, Inc., 54 A.D.2d 1125, 388 N.Y.S.2d 798 (1976); Collins v. Thuringer, 92 Colo. 433, 21 P.2d 709 (1933); S. Speiser, Attorneys’ Fees § 16.17 (1973); 7 Am.Jur.2d Attorneys at Law § 285 (1963); Anno, 97 A.L.R. 1133 (1935).

Rigby & Thatcher have thus in effect sought in this ancillary lien foreclosure proceeding to enforce all of their various claims for attorneys’ fees claimed against Spencer, even though in reality there are three separate claims.

At best, and as Spencer seems willing to concede, the lien might apply to the $37,500 collected in settlement of No. 13674 (and to whatever portion of the Commission Co. settlement was for the covenant not to sue rather than in payment for the stock). Thus I cannot see this as a claim brought solely in the original action to enforce a lien on that cause of action. Although summarily disposed of by the majority, I believe that the venue issue should control our disposition of this case.

Although I.R.C.P. 12(b)(3) as it first appeared in 1959 in connection with approved form No. 15 may have been thought to provide for dismissal for improper venue, the rule now reads that a motion challenging improper venue shall be considered as a motion for proper venue: “(3) improper venue, which motion shall state the grounds therefore and be considered as a motion for proper venue, but need not be accompanied by an affidavit .. . . ” I.R.C.P. 12(b)(3).

I.R.C.P. 40(e) provides:

“The judge or magistrate may grant a change of venue or change the place of trial to another county in any civil action as provided by statute, and the judge or magistrate must, on motion pursuant to Rule 12(b), change the venue of a trial when it appears by affidavit or other satisfactory proof:

“a. That the county designated in the complaint is not the proper county (Emphasis added.)

Since this is not an action solely to enforce a lien, this action “must be tried in the county in which the defendants, or some of them, reside, at the commencement of the action . . . . ” I.C. § 5-404. Since Spencer’s allegations that her residence was Twin Falls County are unopposed by Rigby & Thatcher, they must be accepted as true.

Under a similar statutory provision,¹ the Supreme Court of Montana held as follows:

“Where a defendant, in pursuance of the statute, moves for a change of place of trial upon a ground which entitles him to the change demanded as a matter of right, the court has no option but to grant the motion; its discretion is not invoked. Furthermore, when the movant’s papers present such a showing, the court has no right to pass upon any other question in the case. A defendant entitled to have his motion granted has the right to have all other judicial action in the cause determined in the district court of the proper county.” Johnson v. Clark, 131 Mont. 454, 311 P.2d 772, 776 (1957) (quoting State v. District Court, 74 Mont. 338, 240 P. 388, 390 (1925)).

In Brockman v. Brockman, 253 S.C. 528, 171 S.E.2d 862, 862 (1970), the court noted:

“We have held that where a motion is made for a change of venue on the ground that the named county is the residence of the defendant, and such is not disputed, then a question of law is presented and the decision in the matter is not addressed to the discretion of the trial judge.”

(1) when the county designated in the complaint is not the proper county.”

In Brockman, the action had been brought in Union County. The appellant, in support of his motion for a change of venue, filed an affidavit averring that he was a resident of Spartenburg County. Respondent made no showing disputing appellant’s affidavit. The court therefore held that appellant was entitled to trial in Spartenburg County as a matter of law, and ordered that the venue be changed. For other examples of cases holding that a transfer in situations such as this are mandatory, see State v. Sorrell, 18 Ariz.App. 558, 504 P.2d 499 (1973); Culligan Soft Water Service v. Berglund, 259 Iowa 660, 145 N.W.2d 604 (1966); American State Bank of Dickinson v. Hoffelt, 236 N.W.2d 895 (N.D.1975); Schroeder v. Schroeder, 74 Wash.2d 853, 447 P.2d 604 (1968); Andrews v. Cusin, 65 Wash.2d 205, 396 P.2d 155 (1964).

Moreover, if the defendant is entitled to a change of venue on any of the causes of action alleged in the complaint, then a motion for a change of venue must be granted as to all. Archer v. Superior Court, 202 Cal.App.2d 417, 21 Cal.Rptr. 48, 49 (1962). See Regents of the University of California v. Superior Court, 3 Cal.3d 529, 91 Cal.Rptr. 57, 476 P.2d 457, 460 n.8 (1970). As noted in Ah Fong v. Sternes, 21 P. 381, 382 (Cal.1889):

“Even if the complaint be regarded as stating two separate causes of action, upon one of which the defendant would be entitled to a change of venue, but not upon the other, the result would be the same. It is the plaintiff’s own doing that the complaint be so drawn. He cannot deprive the defendant of his right to a change of venue by the addition of something to the complaint. If this were not the rule, it would be very easy for a plaintiff to defeat the defendant’s right in the matter. All that plaintiff would have to do would be to add another cause of action to his complaint. It need not be a genuine cause of action, and it would not matter whether the two causes of action were properly united or not.”

The terms of I.R.C.P. 40(e) governing a change of venue are mandatory. Once an unrebutted showing is made that the defendant resides in a different county, the court must grant a request for a change of venue. Where Rigby & Thatcher have chosen to unite and pursue all of their claims in this particular action, and since the proper venue for some, if not all, of those claims is Twin Falls County, the trial court was bound to grant Spencer’s request for a change of venue. I would therefore reverse the judgment and remand with directions that the trial court order a change of venue to Twin Falls County.

In conclusion, I submit that my lack of participation in any of the previous cases which arose after the death of Mr. Spencer and which reached this Court on appeal may allow me to view the issues here in a more detached manner than is so with the other members of the Court. A narrow construction of I.C. § 3-205 would preclude Rigby & Thatcher from any claim of lien— for the simple reason that they were never attorneys appearing in the action which generated the fund against which they assert liens for their various claims. However, other than for Mrs. Spencer’s refusal to accept the money — which led to the suit generating the fund — their lien could and would have attached. I do not think it stretches the language and purpose of I.C. § 3-205 to allow the lien as against those funds directly attributable to the preceding action, which action led to the settlement, and would have led to their being paid if they had not been discharged. Very likely the previous suit which led to the settlement could have been reopened on Mrs. Spencer’s reneging and refusing to accept the agreed amount.

What I do apprehend is that the overly broad construction given to I.C. § 3-205 by the Court today may lead to the total loss of the remedial provisions of that statute. It is subject to being classified as special legislation which gives an attorney creditor vastly superior rights to those of a general non-attorney creditor — in particular, depriving the alleged debtor of any right to a jury trial.

On the other hand, where the claim of lien is overly broad as against the fund in question, a change of venue and a jury trial would place the Statute safely away from critical scrutiny.

1 . Mont.Code Ann. § 25-2-201 provides that “[t]he court or judge must, on motion, change the place of trial in the following cases: