Oppenheim v. Pemberton

OPINION OF THE COURT

Casey, J.

At issue on this appeal is the validity of a notice of pendency filed by plaintiffs, who are attorneys, in one of their actions against various parties concerning legal fees allegedly due and owing them as a result of their representation of defendants Dennis Pemberton and Dagny Management Corporation. On behalf of their clients, plaintiffs commenced actions against defendant Dolphin Development Corporation and two other corporations seeking, inter alia, specific performance of a contract for the sale of certain real property in Sullivan County. An agreement to settle the actions was negotiated, but a dispute between plaintiffs and their clients arose before the settlement was effectuated, and plaintiffs were discharged. The clients retained another attorney, and the papers necessary to effectuate the settlement were executed, including a stipulation to discontinue the underlying action and cancel the notice of pendency that had been filed therein. When plaintiffs discovered that the underlying action had been settled and the notice of pendency canceled, they moved to vacate the stipulation. Supreme Court denied the motion and we affirmed (Pemberton v Dolphin Dev. Corp., 134 AD2d 23; see also, Dagny Mgt. Corp. v Dolphin Dev. Corp., 136 AD2d 880, appeal dismissed 72 NY2d 854).

Having received no compensation from their former clients, plaintiffs commenced two actions against virtually everyone connected with the transactions which arose out of the settlement. In the first action, plaintiffs seek to recover money damages based upon allegations that the various defendants therein conspired to effectuate the settlement in such a manner as to destroy plaintiffs’ attorney’s lien. In the second action, which is the one at issue herein, plaintiffs seek to have their attorney’s lien determined and enforced. A notice of pendency against the property transferred and to be transferred as a result of the settlement agreement was filed by plaintiffs in the second action. The order on appeal denied the motion of various defendants to cancel the notice of pendency and to discharge the bond and undertaking, which was filed by one of the defendants pursuant to CPLR 6515.

Defendants contend that in Pemberton v Dolphin Dev. Corp. (134 AD2d 23, supra) we held that a notice of pendency is not an available remedy to an attorney seeking to enforce his charging lien. This contention is incorrect. In Pemberton, the attorneys (plaintiffs herein) sought to revive the action settled by their former client and to reinstate the canceled notice of pendency in that action for the purpose of providing security or leverage in their counsel fees dispute with their former client. We held that Supreme Court properly denied the attorneys’ motion, noting that the attorneys had an available remedy in the form of either a special proceeding to determine and enforce their charging lien pursuant to Judiciary Law § 475 or a plenary action in equity (supra, at 25-26). We did not hold that a notice of pendency could never be used by an attorney in a proceeding to enforce his charging lien.

CPLR 6501 authorizes the filing of a notice of pendency "in any action * * * in which the judgment demanded would affect the title to, or the possession, use or enjoyment of, real property”. Upon a motion for cancellation of a notice of pendency, "the court essentially is limited to reviewing the pleading to ascertain whether the action falls within the scope of CPLR 6501” (5303 Realty Corp. v O & Y Equity Corp., 64 NY2d 313, 320). In the case at bar, plaintiffs’ demand for relief seeks a declaration that they have an interest in the subject real property, but we must examine the entire complaint in the second action to determine the true nature of that action (supra, at 323). In undertaking this examination, we are constrained by the following general principle: "The same considerations that require strict compliance with the procedural prerequisites also mandate a narrow interpretation in reviewing whether an action is one affecting 'the title to, or the possession, use or enjoyment of, real property’ (CPLR 6501). Thus, a court is not to investigate the underlying transaction in determining whether a complaint comes within the scope of CPLR 6501. Instead, in accordance with historical practice, the court’s analysis is to be limited to the pleading’s face” (supra, at 321).

The interest in real property claimed by plaintiffs is founded upon their attorney’s charging lien. Judiciary Law § 475 provides that an attorney who appears for a party in an action has a lien upon his or her client’s claim which attaches to a determination in the client’s favor and to the resulting proceeds wherever they are, and the lien cannot be affected by any settlement between the parties (Matter of Gutchess, 90 AD2d 663, 664). The lien applies only to proceeds created through the attorney’s efforts (Greenberg, Cantor & Reiss v State of New York, 128 AD2d 939, 940, lv denied 70 NY2d 605). Thus, in order to determine whether plaintiffs’ second action is one which affects the title to real property within the meaning of CPLR 6501, we must determine whether the subject real property constituted the "proceeds” of the settlement of the actions commenced by plaintiffs on their clients’ behalf (see, Matter of Desmond v Socha, 38 AD2d 22, 24, affd 31 NY2d 687), and this latter determination must be made solely upon a review of plaintiffs’ complaint (see, 5303 Realty Corp. v O & Y Equity Corp., supra, at 320-321).

According to plaintiffs’ complaint in the second action, the settlement resulted in a two-part transfer of real property. Certain real property was conveyed by Dolphin to defendant Treasure Lake Associates, which was not a party to the underlying actions and was not represented by plaintiffs, and Dolphin agreed to convey certain additional real property to Treasure Lake at a later date. Plaintiffs’ complaint further alleges that as a part of the settlement Treasure Lake paid plaintiffs’ clients the sum of $75,000, or the equivalent thereof, in noncash consideration and agreed that plaintiffs’ clients would have a 40% interest in the conveyance of the additional real property. In contrast to West v Bacon (13 App Div 371, mod on other grounds 164 NY 425), relied upon by plaintiffs, the settlement herein did not result in the acquisition by plaintiffs’ clients of either title or possession of real property. Instead, the clients received $75,000 in cash or noncash consideration and an interest in the agreement whereby Dolphin was to convey certain additional real property to Treasure Lake. Plaintiffs’ lien attached to the cash or noncash consideration received by their clients and to the clients’ interest in Dolphin’s agreement to convey certain additional property to Treasure Lake, but the lien could not attach to the real property since there is no allegation in the complaint that plaintiffs’ clients received any interest in the real property itself as a result of the settlement (see, Kauffman v Simis, 156 App Div 208). Accordingly, there was no basis for the filing of the notice of pendency, and the motion of the various defendants seeking to cancel the notice of pendency and discharge the bond and undertaking should have been granted.