Walsh v. Hoskins

MR. JUSTICE SMITH delivered the opinion of the court. This action was begun to recover judgment against the defendants for the sum of $1,000, with interest from June 20,1910; and to foreclose an alleged attorney’s lien upon certain papers and documents in the possession of the Farmers & Traders’ State Bank, of Billings, Montana. The complaint alleges that the plaintiff is an attorney at law; that on the first day of September, 1907, the defendant Omar Hoskins consulted and advised with him, and employed him to begin an action against the Montana Coal and Iron Company, a de facto corporation, and others; that in conformity with such employment plaintiff did begin such action in the district court of Carbon county; that the basis of the action was that Hoskins was the owner of 444 shares of stock in said corporation of the par value of $44,400; that the total capital stock was $2,000,000; it was claimed that 16,478 shares of the capital stock were issued without authority and without consideration, and that an indebtedness against the company to the amount of $99,134.58 was created without authority and without consideration; the object of the action was to cancel said stock certificates so issued without authority, to cancel said indebtedness, and to procure the conveyance of certain trust property to the corporation. That on the 1st day of February, 1910, the defendants Omar Hoskins and Maggie Hoskins employed plaintiff to commence another action against Elijah Smith and the Montana Coal and Iron Company, and pursuant to said employment plaintiff commenced an action in the district court of Yellowstone county; that the basis of the second action was that the said Hoskinses had Conveyed certain lands to the Montana Coal and Iron Company, and said company and Smith agreed to give Maggie Hoskins 250 shares of the capital stock of the company, of a par value of $25,000. That plaintiff performed a large amount of work in connection with said actions and the settlement thereof. That on or about the 20th day of June, 1910, the defendants Omar Hoskins and Maggie Hoskins entered into negotiations with one Moss to sell and transfer to him all of said stock and all claims against Smith and the coal company, and [361] all interest in the two actions, with authority to prosecute the same, for the sum of $23,000 to he paid as follows: $3,000 cash, and the balance in four equal installments due in three, six, nine and twelve, months; all papers were to be deposited in the Farmers & Traders’ State Bank to be delivered upon the payment to the bank of said balance of $20,000; plaintiff prepared all necessary papers to carry out the agreement; Moss paid the Hoskinses the sum of $3,000 and' thereupon all papers, certificates, agreements, etc., were delivered to plaintiff, who deposited the same in the bank aforesaid. Afterward Moss assigned and transferred to Smith and the coal company all of his interest in the property, having, in fact, been acting as agent for them, taking that method of settling the litigation. Prior to the consummation of the settlement, plaintiff and Hoskins had agreed that his fee should be $3,000, only $2,000 of which has been paid. It is further alleged that all payments except the last were duly made to the bank and sent to the Hoskinses, but that in order to defeat plaintiff’s claim for a lien, the last payment of $5,000 was made directly to the Hoskinses in the city of Portland, Oregon, which payment was made without the knowledge or consent of the plaintiff. He claims a lien upon all of the papers and documents in the bank. The latter institution has deposited the same in court. Smith and the Montana Coal and Iron Company interposed a general demurrer to the complaint, the demurrer was sustained, plaintiff declined to amend, and judgment was entered against him for costs, dismissing his complaint. He appeals from the judgment. The question involved is easily solved. Had all the money been paid into the bank in accordance with the terms of [1] the escrow agreement, plaintiff’s lien upon the papers would have been lost the moment the last payment was made, because he impliedly agreed to that arrangement and assisted in carrying it out. But while the papers and documents remained in the bank he had a lien thereon by virtue of section 6422, Revised Codes, which reads in part as follows: “From the commencement of an action * * * the attorney who appears for a party has a lien upon the client’s cause of action * * * [362] which attaches to a verdict, report, decision or judgment in his client’s favor and the proceeds thereof in whosever hands they may come; and cannot be affected by any settlement between the parties before or after judgment.” The security which the Hoskinses had for the payment of their money, by virtue of the escrow agreement, could be availed of for the benefit of the plaintiff at any time while it remained such security. To the extent of’ his claim he was subrogated to their rights. (Coombe v. Knox, 28 Mont. 202, 72 Pac. 641.) Assuming, then, that the plaintiff had a lien at one time, how was it ever lost? In accordance with the terms of the escrow agreement to which he was tacitly a party? No. That agreement has never been fully carried out. Instead thereof, the defendants, Smith and the coal company, for the alleged purpose of defrauding him, made the last payment directly to the Hoskinses, without his knowledge or consent. The effect of such conduct as this is exactly what the statute was intended to prevent. It was the intent of the lawmakers to protect attorneys from secret settlements with their clients, by which they would be defeated of their fees. The statute so declares in this plain language: “[The lien] cannot be affected by any settlement between the parties before or after judgment.” The attorney’s lien is one which a party, settling with his client, is bound to recognize, in so much as he has constructive notice of it. (Oishei v. Metropolitan Street Ry. Co., 110 App. Div. 709, 97 N. Y. Supp. 447; Peri v. New York Central & H. R. R. Co., 152 N. Y. 521, 46 N. E. 849.) We shall not determine to what extent plaintiff has a lien. The only question is whether the complaint states any cause of action as against Smith and the coal company, and we think it does. The judgment is reversed and the cause is remanded, with instructions to overrule the demurrer. Beversed and remanded. Mr. Chief Justice Brantly and Mr. Justice Holloway concur.