Shotwell v. Dixon — 66 A.D. 123

Majority

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Samuel H. Shotwell, Appellant, v. Baltie H. Dixon and Others, Defendants; Byron D. Brown, Individually and as Assignee of Baltie H. Dixon and George E. Wilkins, and Others, Respondents.

Headnote

Restitution of money by an attorney of an adverse party—when compelled, where it has been received by him under a misinterpretation of an order of the court.

In an action brought by a judgment creditor to have adjudged fraudulent certain transfers made by his judgment debtors, the plaintiff obtained a judgment at the Trial Term setting aside the transfers, but this judgment was subsequently reversed and judgment absolute was rendered in favor of the defendants. The Appellate Division, on an appeal from an order granting the defendants an extra allowance, reduced it to “five per cent on plaintiff’s judgment.” An execution was thereafter issued and there was collected and paid to the defendants’ attorneys for their additional allowance five per cent on the value of the transfers which were set aside by the judgment obtained by the plaintiff at Trial Term, instead of five per cent on the amount of the judgment on which the plaintiff brought his action. The defendants’ attorneys did not pay over such money to their clients, but credited it to them on their indebtedness for professional services. Subsequently the Appellate Division made an order construing its former order reducing the additional allowance by stating that it meant an allowance of five per cent based on the amount of the judgment upon which the plaintiff brought his action. Thereafter the plaintiff made a demand upon the defendants’ attorneys for a return of the amount of the additional allowance improperly collected on the execution and, this demand not having been complied with, made a motion to require them to pay over such sum to the plaintiff.

Held,, that although the money was collected by the defendants’ attorneys without wrong intent on their part, through a misinterpretation of the order of the court, they should be compelled to make restitution of such money, especially as it had never been turned over to their clients.

Appeal by the plaintiff, Samuel H. Shotwell, from an order of the Supreme Court, made at the Fulton Special Term and entered in the office of the clerk of the county of Fultpn on the 7th day of June, 1901, denying the plaintiff’s motion to compel the attorneys for certain defendants in the action to refund to the plaintiff money illegally collected by them under an execution.

This action was brought by the plaintiff, who had recovered a judgment for $977.30 against Dixon and Wilkins, to have adjudged fraudulent certain transfers made by them previous to their general assignment. The plaintiff prevailed at the Trial Term.

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The Appellate Division reversed the judgment and the Court of Appeals affirmed the order of the Appellate Division, and ordered judgment absolute for the appealing defendants, with costs.

On July 28, 1900, the Special Term made an order granting an' additional allowance- of $650 to the defendants, Byron D. Brown, Walter W. Dixon, Edward S. Oliilds and Firmer W. Brown, who, on July thirtieth, entered judgment in their favor for .$1,149.11 costs, which included the $650 additional allowance, and on August 1, 1900, issued execution therefor. On September 4, 1900, the Appellate Division modified the order of the Special Term by reducing the allowance to five per cent on plaintiff’s judgment,, and thereafter, on the execution in the ‘hands of the sheriff, an indorsement was made, “ within execution reduced to $1,114.95 on July 30th, 1900.” On about December 29, 1900, the plaintiff paid to the sheriff $1,169.04, the amount of the execution, with costs and sheriff’s fees, and on December 31, 1900, the sheriff paid to one of the attorneys for the defendants the amount collected on the execution, less sheriff’s fees, and within two or three days thereafter the attorney receiving the same paid to each of the other two attorneys appearing severally for the defendants their respective shares of the additional allowance collected on the execution. The amount of the additional allowance thus collected and paid to the attorneys was $627.34, being five per cent on $12,546.71 claimed by defendants’ attorneys to be the amount of the transfers set aside by the judgment which the plaintiff obtained at the Trial Term, instead of five per cent on $977.30, the amount of plaintiff’s judgment on .which he had brought his action, and on which the order of the Appellate Division required the computation for an allowance of five per cent to be made. The excess thus erroneously collected was $578.48 besides interest. Each of the three attorneys representing the defendants settled with his clients by crediting to them on the client’s indebtedness for professional services the proportionate share of the additional allowance which he had received. On March 5,. 1901, on motion made by the plaintiff, who insisted that the order of September 4, 1900, made by the Appellate Division, reducing the allowance to five per cent on plaintiff’s judgment, meant an allowance of five per cent on $977.30, the amount of plaintiff’s judgment as set out in the complaint, the Appellate Division

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amended its order of September 4, 1900, so as to specify that its allowance was five per cent on $977.30.

After the entry of the order of March 5, 1901, a demand was made upon two of the* attorneys for a return to the plaintiff of $578.43, claimed" to have been improperly collected on the execution, and the demand not having been complied with, the plaintiff gave notice of a motion to be made at a Special Term requiring the attorneys to return to the plaintiff the sum of. $578.43, and from the order denying such motion this appeal is taken.

N. M. Banker and Horton D. Wright for the appellant.

Clarence W. Smith, R. P. Anibal and D. H. McFalls, for the respondents.

I think the court erred in denying the plaintiff’s motion to compel the attorneys to restore to the plaintiff the allowance of costs collected by them in excess of the sum to which, under the order of this court, they were entitled. While I do not doubt that the money was collected by them in good faith, through a misinterpretation of the order of this court, the absence of any wrongful purpose on their part cannot relieve them from their duty to make restitution. The order modifying the order of the Special Term by reducing the allowance to five per cent on the pilaintiff’s judgment clearly had reference to his judgment of $977.30 set forth in his complaint in this action. He had no other judgment. The money erroneously collected by the attorneys was never, in fact, paid over by them to their clients, but was credited by them to their clients on indebtedness to them for professional services. It was money to which neither the attorneys nor their clients had at any time any legal right. The power of the court to compel restitution to the plaintiff is not denied, but it is urged by the counsel that the facts do not justify the exercise of such power. I think otherwise. The case is in principle unlike those where money has been collected by an attorney on a judgment in law deemed to be valid and a settlement has been had with his client before the reversal of the judgment. There the client has a legal right to the money. Here there was no such right, and the presumption that the attorney

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had knowledge of that fact is conclusive. The acquisition of the money under such' circumstances is wrongful in fact, though not in intent, and furnishes proper ground for an order for its restoration. An essential distinction exists, between the facts of this case and those in Langley v. Warner ( 3 N. Y. 327 ) and Butcher v. Henning ( 90 Hun, 565 ), cited by the defendants’ counsel.. In the former, the money was collected by the attorney from the plaintiffs on a judgment and after its receipt by him there was a settlement between him and his client. Thereafter the judgment was reversed and an execution against the client on the judgment of reversal having been returned unsatisfied the plaintiff brought suit to recover from the attorney. The court said: “ "Walsh (the plaintiff in the action in which judgment was recovered) had a perfect title to the money when it was collected.” “Ho 'one was bound to presume that the judgment of a court of competent jurisdiction was erroneous and would be reversed. The legal presumption was the other way — that the judgment was right and would be affirmed.” The court further said: “We are referred t© cases where money paid to an agent has been recovered back from him, notwithstanding the fact that he had given his principal credit for the money in account. But they are all cases where the principal had no right to. the money at the time it was paid to the agent; while here the principal had a perfect right to the money at the time his agent received it. The distinction is obvious.” In Butcher v. Henning the facts were the same as in Langley v. Warner. There the defendant had a right to receive the money when it was paid to him, and the court simply held that on a reversal of the judgment an action will not lie against the attorney to recover the money, where, by agreement between him and. his client, he had retained it in payment of a debt from the client. There the moneys were collected by the attorneys on judgments which the law deemed to be valid, and the clients had a legal right to such moneys. Here, as I have said, the attorneys received money which they are deemed to have known to belong to the plaintiff and not to their clients. This case is similar in all its important features to Moulton v. Bennett ( 18 Wend. 586 ), where the attorney had improperly taxed costs and received them under a misapprehension of his client’s right to them. The costs were voluntarily

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paid to the attorney, who paid out of them sixty dollars for counsel fees and had paid over sixty-five dollars to his client, but the attorney was ordered by the court to refund. The principle there announced is here applicable.

While we cannot impute wrong intent in the receipt of the money, we must impute legal error which calls for restitution.

The order appealed from should be reversed and the motion granted.

All concurred. Order to be settled by Edwards, J.

Order reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs.

Cases cited

Langley v. Warner 3 N. Y. 327 N.Y. p. 126