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HOME INS. CO. v. GIGI FASHIONS

May 16, 1967

The HOME INSURANCE COMPANY and the Northern Insurance Company of New York, Plaintiffs,
v.
GIGI FASHIONS, INC., et al., Defendants



The opinion of the court was delivered by: WORTENDYKE

 WORTENDYKE, District Judge.

 The following facts are not in dispute. On March 2, 1963 the insured entered into an Agreement with Andrew K. Knox & Company, public insurance adjusters, by the provisions of which insured retained Knox to adjust the insured's loss with its fire insurers and assigned to Knox, as compensation for its services, 10% of the amount which Knox might secure from the insurers in satisfaction of the insured's claims under its policies. As a result of Knox's efforts, a settlement offer of $29,990 was obtained from the insurers by the adjuster; but this offer was rejected by the insured. Sometime thereafter the insured retained Lum, Biunno & Tompkins and Richard R. Stout, attorneys at law of New Jersey, to institute and prosecute an action to recover for the insured's damages under the provisions of the fire insurance policies. In retaining these attorneys to institute that action the insured entered into a Contingent Fee Agreement with the attorneys which provided that their fee for services in connection with the action should be computed at 33 1/3% of any amount which they might recover for the insured by way of judgment in or settlement of the litigation. The attorneys accordingly instituted such an action in the Law Division of the New Jersey Superior Court on July 24, 1964, and on May 18, 1965 effected a settlement thereof for the sum of $32,000, which was deposited with the Clerk of this Court at or prior to the time of the commencement of the present (interpleader) action.

 Various creditors of the insured recovered judgments against the insured in courts of New Jersey and caused execution to be levied upon the insured's right, title and interest in the fire insurance policies, and in the insured's cause of action against the insurers for recovery thereon. Norman Mesnikoff, Esq., was appointed Receiver (of the insured) In Aid Of Execution under N.J.S.A. 2A:17-66. Each of these judgment creditors has been named as a defendant in this interpleader action and, together with the Receiver In Aid Of Execution, the attorneys for the insured in the State Court litigation, and Knox, have filed claims herein. On April 6, 1966 defendant-claimant, Alvin Yale Milberg qualified as Trustee in Bankruptcy of the insured. He had previously qualified as Receiver of the insured in an insolvency proceeding in the New Jersey Superior Court, Chancery Division.

 By appropriate motion the claimant-defendants seek this Court's determination of the order of priority of their respective claims against the fund on deposit in the Registry of this Court.

 CLAIM OF ATTORNEYS

 These attorneys claim the sum of $10,666.67 as representing one-third of the sum of $32,000 paid in settlement of the litigation which they concededly instituted and prosecuted in the New Jersey Superior Court in accordance with the terms of their retainer agreement with the insured. They claim an attorneys' lien under the provisions of N.J.S.A. 2A:13-5 and also at common law.

 The statute relied upon provides in pertinent part as follows:

 
"2A:13-5 Lien For Services

 Respecting attorneys' liens, it is stated, Visconti v. M.E.M. Machinery Corp., 7 N.J.Super. 271, 274-275, 73 A.2d 74, 75 (App.Div.1950), that * * *

 
"At common law, an attorney has two liens: one general, the other special. His general lien is his right to retain possession of documents and other property of his client until he is paid whatever is due him for professional services. His special or charging lien arises only when judgment in favor of his client is entered; the lien is a charge against the judgment for services in that particular suit or cause of action. * * * The attorney is also protected in our State by a statute which grants a lien in his favor."

 That statute, in its present form, is that relied upon by the attorneys in this case, and therefore affords the sole ...


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