Case ID: us-ct-cl_11/html/0724-01.html
Source: Caselaw Access Project
Author: {"author": "Nott, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

JOHNSON’S CASE.
    A. F. Gardner, assignee of R. G. Johnson, v. The United States.
    
      On the assignee’s Motion.
    
    
      After suit brought in this court, the clamant becomes bankrupt, but his assignee in bankruptcy does not assert his right to be admitted to prosecute in his own name. The claimant continues to prosecute, and enters into an agreement with his attorneys that they shall bear the expense, and receive 50 per cent, of the recovery. After judgment, and while an appeal is pending, the assignee comes in and is substituted as party claimant. He then seeks to change the attorneys, attacking at the same time their contract with the bankrupt as illegal and void, and objecting to their having a lien, therefoi-. The attorneys show that they have made large advances on the faith of the contract in the prosecution of the suit.
    
    
      I. A new party joined in a suit, having a distinct or adverse interest, may appear by his own attorney ; but where an executor, administrator, or assignee succeeds the original claimant he takes the suit as he finds it, and can only change the attorneys on the usual terms.
    II. The lien usually assured to the original attorney in orders of substitution does not create a right. It merely protects a right if there be one. If a contract between the attorney and the party be void, the order does not make it Valid. It merely protects valid rights if they exist.
    III. Where an assignee in bankruptcy suffers the bankrupt to continue to prosecute a suit in his own name, and he agrees with^his attorneys that they shall bear the expenses and share in the recovery, and the bankrupt subsequently comes in and, being substituted as pa.rty claimant, seeks to change the attorneys, he must elect whether he will ratify the bankrupt’s agreement or refund to the attorneys their disbursements made on the faith of it.
    
      The Reporters’ statement of the motion:
    The suit here was brought by the bankrupt before his insolvency, but the agreement with his attorneys assigning to them 50 per cent, of the claim was not made until after his assignment in bankruptcy. The following are the motion papers, which with the opinion of the court show the facts:
    “An order having heretofore been made in this case, on the application of P. Phillips to be entered as attorney of record for A. F. Gardner, assignee in bankruptcy, that the said motion be granted on condition that the costs and expenditures incurred by Bartley & Jenner, the attorneys of Johnson, in the prosecution of said case, and that the judgment in behalf of the claimant shall be held subject to a lien in favor of said Bartley & Jenner for such amount as may ha.ve been agreed to be paid to them by said Johnson for services in said case.
    “blow comes the said A. F. Gardner, assignee aforesaid, by P. Phillips, his attorney, and moves the court to set aside so much of said order as requires the payment of expenditures made by said Bartley & Jenner, and also declares a lien on the judgment for the amount agreed to be paid to them by said Johnson.
    “P. PHILLIPS,
    
      “Attorney of A. R. Gardner.
    
    “May 29, 1876.”
    
      “ A. F. Gardner, assignee or E. G. ]
    
    Johnson, ! At chambers, May 25, vs. f 1876. “The United States. j
    “The court having heretofore ordered, on the application of P. Phillips to be admitted as attorney of record for Gardner, assignee in bankruptcy, that the said application should be granted upon payment first being made to Bartley & Jenner of all disbursements incurred by them in the prosecution of the suit;
    “And the court having further ordered that said Bartley & Jenner should have a lien upon the judgment in the case for such contingent fees as have been agreed upon between said Bartley & Jenner and said E. G. Johnson:
    “ It is now ordered that said Bartley & Jenner produce before the judge at chambers, on the 27th day of May instant, at 10.30 a. in., proof of their disbursements and of their agreement with said Johnson for contingent fees.
    “ Due notice to be given.
    “O. 0. NOTT,
    
      11 Judge.
    
    “A. F. Gardner, assignee in bank- 1 ruptcy E. G. Johnson, !
    
      vs. f
    United States, )
    
    “This 27th May, 1876, according to notice, appeared before Judge Nott, at chambers, at half past 10 o’clock, Mr. Phillips, on behalf of Gardner, assignee. Also appeared Mr. Jenner and Mr. Frederick Speed, of the firm of Adam & Speed.
    “Mr. Jenner produced account of expenses,paid to commissioner and others, of $189.49. Mr. Phillips admitted that the amount paid was correct, according to the rule allowed by law.
    “Mr. Jenner stated that he could not produce the agreement, as he had some time ago delivered it to Adam & Speed. Mr. Speed was then asked about the agreement, and said he had thought he had brought it with him, but was mistaken.
    “ He was then questioned as to its contents, and said that the agreement was executed by Johnson after the first report of the commissioner, in March, 1875; that it was made in favor of. Adam & Speed and Bartley & Jenner; that the rate of compensation was 50 per cent., and by the terms of the agreement the attorneys were to pay all the expense of the litigation.
    
      “On this evidence, and that of a certified copy of document showing that Johnson had been declared a bankrupt on the 27th October, 186S, Mr. Phillips asked for a determination of the question whether the assignee should now be called on to pay these expenses, and to admit a lien on the judgment of the 50 per cent, as agreed, as stated by Mr. Speed.
    “Mr. Speed also said that their firms had rights under some former contracts, which he had never seen, and of which, therefore, he could not speak.
    “P. PHILIPS.
    “S. E. JENNER,
    “ Of Bartley & Jenner.
    
    “FREDERIC SPEED.”
    “Gardner, assig-nee, 1 vs. > At chambers. The United States. )
    “ On the statement hereto annexed, and after hearing counsel for and against a revision of the order to substitute P. Phillips, esq., as attorney of record for the claimant, it is ordered that such application be put down for argument on the law docket.
    “ C. 0. NOTT,
    
      u Judge, at Chambers.”
    
      Mr. P. Phillips for the motion.
    
      Mr. 8. E. Jenner opposed.
   Nott, J.,

delivered the opinion of the court:

Subsequent to judgment in this case, and while it was pending upon appeal, the assignee in bankruptcy of the former claimant came in and had himself substituted as party claimant. After the judgment was affirmed, he moved in this court to have a new attorney admitted as his attorney of record in the case.

Where a new party having a distinct, collateral, or adverse interest is joined in a suit, undoubtedly he is entitled to appear by his own attorney as distinct from any prior attorney appearing for another co-claimant or co-defendant; but where an executor, administrator, or assignee succeeds the original claimant in the action, he takes the suit as he finds it. Stow's Case, (5 C. Gis. R., p. 362; 9 id., p. 98; 19 Wall., p. 13.) He is but a representative, and has no greater rights than had he whom he represents. Nothing is changed but the person. The existing pleadings are his pleadings, and the existing attorneys are his attorneys. Therefore, this motion of the assignee was treated by the court as an ordinary motion of a party to change his attorneys and was granted on the usual terms. On a settle-mént of the disbursements at chambers it appeared that the former attorneys relied upon a contract assigning to them a contingent interest in the recovery, by way of compensation for their services as attorneys in the suit; and that this contract had been entered into between them and the original claimant, the bankrupt, after his assignment in bankruptcy, though before the assignee was substituted as claimant, and before the disbursements had been made by the attorneys. By that agreement it also appeared that the attorneys undertook to bear all the expenses of the suit. The new attorney thereupon moved to set aside the order of substitution as previously entered, and for an order allowing a change of attorneys without terms; i. e., without a lien, and without the repayment of the former attorney’s disbursements. The ground for this motion was that a contract made by a bankrupt, transferring a portion of a claim in suit belonging to the estate, is void. It was also contended that this court is without power to pass upon the validity of any such contract, and that the terms imposed by the order of substitution are beyond the jurisdiction of the court.

This court has never undertaken to pass upon the validity of nor to enforce any such contract. The authority asserted by this court in Carver’s Motion, (7 C. Cls. R., p. 499,) and sustained by the Supreme Court in Desmare’s Mandamus, (9 C. Cls. R., p.1,) was simply to maintain the just and equitable rights of attorneys, and assure to them a subsisting lien upon a valid contract, if they had one. A party has a right to change his attorney at pleasure, but not to destroy the rights of an attorney who, as in this case, may have borne the entire burden of the prosecution or defense. The terms in such orders merely seek to protect that which the attorney has, and do not seek to create a right which he has not. If an express agreement for compensation is void, it will not be made valid by the order of substitution. The lien given by that order relates only to subsisting valid rights, such as may arise out of a valid express agreement or out,of an implied contract for services rendered.

But in the motion now before the court there is this embarrassing complication, viz: If the express agreement is valid, the former attorneys should not be re-imbursed the expenses which they thereby agreed to bear in consideration of the contingent interest in the recovery. If, on the contrary, no such valid agreement exists, the claimant should not be allowed to take the case out of their hands without refunding to them the necessary disbursements which they have made.

On looking into the bankrupt law and the American decisions relating to it, we find it far from settled whether such a contract is operative or a nullity. “ The assignee shall, ifherequires it, he admitted to prosecute” a pending action “ in his own name.” (Rev. Stat., § 5047.) But the words of the statute are clearly permissive. The assignee is not bound to encumber the estate with the costs of what he deems the prosecution of a worthless suit. But if he neglects to be 11 admitted to prosecute the action,” does he not surrender its control to the existing party % The title or property in the chose in action may have passed to the assignee, but nevertheless, if the bankrupt may continue to prosecute the suit, may he not, as the implied agent of the assignee, dispose of the cause of action in good faith to such an extent as will insure the prosecution of the suit? These are questions which this court cannot undertake to decide.

Yet it is clear that the order which has been entered should be modified. The former attorneys are not entitled to have the contract protected as valid and to receive the disbursements which that contract provides shall be borne by themselves. Clearly they cannot have both. It is equally manifest that the assignee in bankruptcy is not entitled to say that the former attorneys must bear the disbursements because they agreed to do so, and to say in the same breath that the same agreement should not be protected because it is void. We are inclined to think that it rests with the assignee to elect whether he will ratify this agreement and by adopting its terms accept its benefits, or whether he will ignore it as illegal and refund the disbursements before alluded to, as though no such contract existed. On his making this election an order of substitution upon the terms indicated by this opinion will be allowed.

Richardson, J., was absent when this decision was announced.