Morton & Co. v. Hallam

JUDGE PRYOR

delivered the opinion oe the court.

This appeal is prosecuted by John P. Morton & Co. and the Louisville and Nashville Railroad Company from a judgment of the Campbell Chancery Court in favor of the appellee, J. R. Hallam.

The actions were instituted to enforce a lien assorted by the appellee as an attorney at law for his fees- under a contract with John P. Morton & Co., who were his clients, in a litigation with the Louisville, Cincinnati and Lexington Railroad Company. The lien, as is alleged, existed on the stock of the Cincinnati and Lexington Railway Company that was created by the purchase, through a syndicate, of the Louisville, Cincinnati and Lexington Railroad Company, John P. Morton & Co. being one of the purchasers, and accepting for the debts against the old company stock in the new company, the Cincinnati and Lexington Railway Company. The old company, the Louisville, Cincinnati and Lexington Railroad Company, was largely indebted to the firm of John P. Morton & Co., and becoming insolvent, the appellee, J. R. Hallam, was employed, in conjunction with R. YY. Woolley and Bodley & Simrall, by the firm of JohnP. Morton & Co., to secure in some way, by suit, these large sums of money due the firm. They •entered into a written contract, by which they were to bring one or more suits, as, in their judgment, njigiit be proper, against the railroad company and others, and for their services the firm “ agreed to pay each of the three firms of attorneys a sum of money equal to the value of ten per cent, of any amount that shall hereafter be realized from or secured to us of said claims, whether by suit, compromise or otherwise.” This contract was entered into in December, 1874.

Certain actions were instituted under this contract in the courts of Jefferson county against the Louisville, Cincinnati and' Lexington Railroad Company, and judgments recovered for large sums of money, amounting, in the aggregate, to about one hundred and. thirty thousand dollars, including the interest. The indebtedness was evidenced by written obligations, and no controversy existed as to the right to a judgment except as to usury alleged to have been embraced in the transactions. In September, 1874, this corporation, or its' property, had been placed ip the hands of a receiver at the suit of one Douglas, then pending in the Louisville Chancery Court, for the benefit of the holders of certain mortgage bonds. The contract with the appellee was made in December following, and in the condition the railroad company was then, millions of dollars had to be paid by reason of liens before the unpreferred creditors could share in the proceeds of the railroad property. Upon a return of no property, John P. Morton & Co., through their counsel, had an attachment levied on the railroad property, including all the rights, franchises, &c., pertaining to it; and their suits being consolidated with that of Douglas and other actions, the road, together with its property, franchises, &c., was sold and purchased by a syndicate, of which the firm, of John P. Morton & Co. was a member. The attachment lien was inferior to other liens existing by mortgage, &c., for several millions of dollars, at the time the syndicate was formed and the purchase made, and it is evident that the stock accepted by the appellants, John P. Morton & Co., in the new enterprise, the Cincinnati and Lexington ..Railway Company, in lieu of its debts, was, at that time, of but little, if any, value.

That firm, instead of making their debts, had incurred a much greater liability by becoming bound, as purchasers of the old road, with several millions of dollars of liens, prior in law and equity to their purchase, and which had to be satisfied. They acquired no lien or preferred claim, by reason of the attachment levied on this railroad property, that placed them in any better condition than any unsecured creditor; but, on the contrary, were risking a loss of more money by entering into the syndicate and forming a new corporation, that in running the road might meet with the fate of the old corporation. The stock in the new corporation, the Cincinnati and Lexington Railway Company, was issued under the agreement between those who purchased the road, John P. Morton & Co. being among the number ; and the appellee, Hallam, as the attorney for that firm, had no interest in the stock, and was, in no manner, connected with the purchase. He had sued the appellant, on the contract of employment, in the Jefferson Court of Common Pleas in March, 1879, and appellant had procured this stock, and entered into the syndicate in the year 1877. under which the purchase was made. No lien was asserted by the appellee, or claim set up to this stock, until these actions were instituted in the Campbell Chancery Court in July, 1881.

The appellants resided in the city oí Louisville, and so did the chief officers of the corporations made defendants to this action, and the right of the appellee to maintain his action is based upon the fact that the garnishee, or rather the Louisville and Nashville Railroad- Company, had been served in the county of Campbell, and that this corporation had purchased of John P. Morton & Co. the stock of the Cincinnati and Lexington Railway Company that had been assigned or issued to him by the syndicate creating this last company, and that having a lien, by reason of his services as attorney, on the property rights and franchises of the Louisville, Cincinnati and Lexington Railroad Company, the Louisville and Nashville. Railroad Company must be presumed to have had notice of his lien when it purchased the stock of John P. Morton & Co.; that the Louisville and Nashville Railroad Company had acquired stock in the new company on which he held a lien as an attorney, by reason of the judgment obtained against the old company. It is insisted by the appellees that the service of process on the station agent of the corporations was not a legal service, and by John P. Morton & Co., that the appellant had no right to prosecute this action against him to enforce the lien, until he first established a valid claim upon which to base his lien; and to do this, he was compelled to bring his suit where the defendant lived, in the absence of an actual service in the county where the action was instituted. His action in the Jefferson ■Court of Common Pleas on the original contract is still pending; and, by the judgment of the Campbell Chancery Court, the Louisville and Nashville Railroad Company is made to pay for having purchased subject to a lien that may be shown, when the action is tried in Jefferson county, never to have existed. It is said, however, that John P. Morton & Co. entered their appearance in Campbell county, and made no objection, or failed to take an exception to the action of the •chancellor in sustaining demurrers to their several defenses. The record is somewhat confused, and it is difficult to determine whether an objection was made or an exception reserved ; and, in view of the facts before us, it is only necessary to determine whether any lien existed in favor of the appellee on this stock sold the Louisville and Nashville Railroad Company by John P. Morton & Co. No personal judgment was rendered .against John P. Morton or the company; but a judgment rendered against the Louisville and Nashville Railroad Company, requiring the latter to pay the appellee about twenty thousand dollars, with interest from July, 1881, his part of the proceeds of the speculation made by Morton & Co. on the purchase of the road, upon the idea that, under the terms of the contract, the debt of John P. Morton & Co. was secured, by reason'of the services of his attorneys. This court, as the case is now prepared, will not undertake to pass on the merits of the controversy; and, as said in a former case (Simrall v. Morton, Manuscript Opinion, January Term, 1885), involving a like question upon the same contract, if John P. Morton embarked in this enterprise and abandoned these suits, without the consent of his attorneys, in that event the attorney would be entitled to a reasonable compensation for the services rendered.

What character of lien, assuming that a valid claim existed on the part of the appellee against Morton & Co., did the appellee have on the property and stocks, sold the appellant, the Louisville and Nashville Railroad Company? We have looked to the facts of this, record, and are unable to find any rule of law or equity, or statutory regulation, with regard to the fees of counsel,. that would create such a lien.

The action of Douglas, in the interest of bond-holders, as well as the actions of the appellants, Morton & Co., against the old or first-named corporation, had gone to judgment. Prom that judgment the appellee, as attorney, claims the lien originates. That judgment was to sell all the property rights and franchises of the' corporation. The sale was made, and the road purchased by the syndicate for eight hundred thousand dollars, and bonds executed for the purchase money. The purchasers took the property, subject to the liens of bond-holders, that amounted to several millions of dollars. All the creditors, including bond-holders, as well as John P. Morton & Co., looked to this judgment to satisfy their claims. The attachment by appellant was gone, in so far as it created any lien, because the property was sold to satisfy it. The bond-holders had priority, for the reason the sale was subject to their' lien. John P. Morton & Co., as well as the other creditors, could look to nothing else but this judgment of sale, or the bonds executed in pursuance of the judgment, to satisfy their demands, and when it clearly appears that the prior liens swallowed np all the purchase money, and there was nothing left to pay the claim of appellee’s client, what lien had the appellee, as attorney, by reason of the judgment, that could be enforced? If the stock John P. Morton & Co. obtained in the new corporation had, at the time it was issued, been worth what it called for in money, what lien would the attorney have as against a bona jide purchaser? The purchaser would look to the judgment, and that was satisfied; or if not, he would see that John P. Morton & Co. could derive no benefit from it, because of the preferred claims, and he certainly would not be required to investigate the result of the speculation entered into by the syndicate. Suppose that appellee’s client had been no party to the purchase, the attorney would have no lien as to third persons, because he must look alone to the judgment he had recovered; and that judgment being satisfied by the payment of other claims, he would be remediless as against a purchaser of the road or the stock. If it can be said that the attorney had any interest in this stock, -there was no notice, actual or constructive, to the Louisville and Nashville Railroad Company, of the existence of any lien, and when the purchase money was paid and the bond-holders satisfied, the Louisville and Nashville Railroad Company took, under the purchase, free of any lien the appellee may have had. How a lien can exist as to third parties, by reason of a judgment that is satisfied in full by the payment to creditors entitled to the fund as against the claim of the one asserting the lien, it is difficult to comprehend.

If John P. Morton & Co. got nothing by the judgment, the attorney could occupy no better position than Ms client.

The fact that appellee’s clients made by the purchase would affect them if the appellee, by his contract, was entitled to any part of what was made by the venture but when the rights of tona fide purchasers are concerned, it presents a different question.

There being no lien to assert against the appellant, the Louisville and Nashville Railroad Company, the-judgment below was erroneous, and is reversed, with directions to dismiss the petitions, as to both the appellants in both appeals, without prejudice.