Court Opinion

ID: 3414925
Source: CourtListenerOpinion
Date Created: 2016-07-05 19:42:33.355552+00
Date Added: 2024-06-11T13:58:08.155063
License: Public Domain

The opinion of the court ignores the established distinction between an actual assignment of an interest in a fund and a mere promise or agreement to pay out of the fund when it shall be collected or recovered. In order that there may be an equitable assignment creating an equitable property, there must be a specific fund, sum of money, or debt, actually existing or to become so in futuro, upon which the assignment may operate, and the agreement, direction for payment, or order, must be, in effect, an assignment of that fund or of some definite portion of it. (3 Pomeroy's Eq. Jur. (4th ed.) Sec. 1280; HibernianBanking Ass'n v. Davis, 295 Ill. 537; Cameron v. Boeger, 200 id. 84; Story v. Hull, 143 id. 506; Wyman v.Snyder, 112 id. 99). Conversely, a mere promise or executory agreement to pay a definite or ascertainable sum out of a particular fund when it shall be collected or recovered, does *Page 482 
not operate as an equitable assignment. (Trist v. Child, 21 Wall. 441; Christmas v. Russell, 14 id. 69; Rogers v.Hosack, 18 Wend. 319; Hibernian Banking Ass'n v. Davis, supra;Cameron v. Boeger, supra; Story v. Hull, supra; Wyman v.Snyder, supra). The retention of control by the promisor over the fund recovered precludes the existence of such an assignment. Lewis v. Canadian Pacific Railway Co.
39 Fed. 2d 834; Spellman v. Bankers' Trust Co. 6 F.2d 799;Thomas v. New York and Greenwood Lake Railway Co. 139 N.Y. 163;Williams v. Ingersoll, 89 id. 508; Story v.Hull, 143 Ill. 506.
Contracts similar to the one in controversy have been construed by this court. The agreement in the case ofCameron v. Boeger, 200 Ill. 84, provided that three attorneys should receive as compensation for their services in the prosecution of certain litigation one-third of whatever was "realized or obtained." It was held that the clients agreed to compensate the attorneys out of the proceeds of the litigation; that the agreement depended, for its performance, wholly upon the personal responsibility of the promisors, and hence that it did not operate as an equitable assignment. The cases of Story
v. Hull, 143 Ill. 506, and Wyman v. Snyder, 112 id. 99, cited in the majority opinion, are to the same effect. Neither supports the conclusion of the majority.
The decisions in Smith v. Young, 62 Ill. 210, and Fairbanks
v. Sargent, 117 N.Y. 320, are also relied upon to show the existence of an equitable assignment to the plaintiff in error. The bill in Smith v. Young charged that Ezekiel Smith, an attorney, made a contract with Young  VanKleek to collect a debt secured by land in LaSalle county; that he was to receive one-fifth of the proceeds, whether land or money, for his services; that Smith prosecuted a suit in chancery to a final decree; that he caused the land to be sold and a certificate of purchase to be issued to Young and that Young  VanKleek refused to recognize *Page 483 
his rights. The relief sought was a decree for an undivided one-fifth of the land, or, in case of redemption, for one-fifth of the proceeds. From the facts disclosed by the bill, it is apparent that the contract retaining Smith was an appropriation of a share of the proceeds of any recovery and not merely a personal agreement to pay a fee contingent upon collection.
Similarly, in the case of Fairbanks v. Sargent, supra, an equitable assignment was declared to exist in the subject matter of the recovery. Leland Fairbanks, an attorney, entered into a contract with Henry A. Underwood to collect a claim exceeding $100,000 against John J. Zabriskie. By the contract Fairbanks was to receive "one-third of whatever amount of money, securities, or property shall be collected, or in any way be realized or received, (whether on settlement or without settlement), on account of such of said claims as shall be put in suit." Pursuant to the agreement, Fairbanks instituted an action against Zabriskie. While the suit was pending Underwood assigned his claim to Henry W. Sargent as collateral security for a debt. Later, and without Fairbanks' knowledge, a settlement was made between Underwood and Zabriskie by which certain non-negotiable bonds having an aggregate par value of $20,000 were transferred to Sargent. Fairbanks then brought an action against Sargent to recover one-third of the bonds, or of their value. The New York Court of Appeals held that the agreement between Fairbanks and Zabriskie created an equitable assignment. (Fairbanks v. Sargent, 117 N.Y. 320; Fairbanks v.Sargent, 104 id. 108). In both decisions the court expressly recognized the distinction between an assignment of a part of a fund and a promise to pay out of the fund when created. "It is to be observed," the court said in its first decision, "that plaintiff's claim — grows wholly out of the interest transferred to him by force of his agreement. It is also important to notice that this contract does not contain a provision *Page 484 
by Underwood to pay plaintiff from the fund produced, or otherwise, but is an engagement that plaintiff shall have one-third of the proceeds of the collections in specie, or in such form as they shall be received from the debtor."
The agreement dated July 17, 1920, purports to be merely a commission and contract for services, leaving the matter of payment for such services to be subsequently arranged. In both the original and the supplementary agreements it is provided that if a recovery of the shares and the accumulated dividends thereon shall be effected, the certificates representing the shares shall be transferred to and issued in the name of Braun in order that he may have clear title. Likewise, it is stated that the dividends are to be collected for Braun. The supplementary agreement fixes the measure of compensation and requires the client, subject to a maximum limitation, to defray the expenses of the litigation. No portion of or interest in the subject matter is assigned to or set apart for the plaintiff in error. The contracting parties clearly intended that the sole right to the shares and the accumulated dividends should remain in Braun. The agreement that the plaintiff in error should receive as his compensation a designated percentage of the amount collected was nothing more than a promise by Braun that he would pay such compensation out of the amount recovered; and for the performance of the agreement, the plaintiff in error depended solely upon Braun's personal responsibility. Manifestly, the agreement to pay specified percentages out of such sums as eventually may be collected is not an actual appropriation or assignment of any distinct portion of these sums.
The majority of the court declares that, in making a contract such as is involved in the case at bar, the attorney "impliedly covenants to perform all advisable services diligently and in good faith to accomplish the desired result, in consideration for which, the client owning the cause of action, or the res, necessarily obligates himself (1) to hold *Page 485 
and preserve it subject to the services of the attorney and his right to share in the proceeds; (2) to convert it into the proceeds when they shall become available, and to divide them with the attorney in the proportions as agreed. Such a contract inevitably imposes upon the subject matter an implied or equitable lien or trust for the security and the ultimate compensation of the attorney." Referring to the plaintiff in error, it is further declared in the opinion of the majority, that "The alleged fact that his efforts there were finally prevented by the opposition of Mrs. Braun creates the presumption that they would have been successful in the absence of such prevention, (Foreman State Trust and Savings Bank v.Tauber, 348 Ill. 280), and so relieves the bill of any deficiency because recovery has not yet been achieved." The opinion of the majority concludes with the declaration that "It follows that the rights of complainant, and the relief in the different forms prayed for, could not be tested by demurrer without foreclosing him from his right to establish by proof the matters of fact alleged and which are extrinsic to the contract."
The first quotation, it is respectfully submitted, is not a correct statement of the law. With respect to the second, it may be observed that no such presumption of success arises, and that it cannot supply an inherent defect in the bill of complaint. Concerning the third, proofs without supporting allegations are unavailing, and the sufficiency of the bill of complaint to state a cause of action was properly tested by the demurrers of the defendants in error.
The judgment of the Appellate Court and the decree of the circuit court, in my opinion, should be affirmed.