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First and Second Department Rules

The indictment charged the defendant with three counts of grand larceny in the second degree in stealing $46,500 from the estate, in stealing $16,500 from a husband and in stealing $2,500 from an attorney. The jury convicted the defendant of the third count but acquitted him of the first two counts. The Appellate Division affirmed, without opinion. The appeal is by leave of a Justice of the Appellate Division.

Larceny is committed when one wrongfully takes or withholds property from an owner thereof with intent to deprive the owner of it or appropriate it to himself or with such intent takes or withholds another’s property by common law larceny by trespassory taking. Property means money thing in action or any article, substance or thing of value and an owner is defined as a person who has a right to possession thereof superior to that of the taker or withholder. While the statute itself does not require proof that the defendant intended to deprive the specific true owner of his property, but rather requires proof only of the fact that the defendant intended to deprive another, the People in this case explicitly limited their claim on the third count to the concept that defendant stole specifically from the attorney. By reason of the order, it was claimed, $2,500 of the money held in the defendant’s attorney’s account became the property of the attorney and he became the owner of that $2,500 within the meaning of the foregoing statutes. Nothing in the order or in statute, rule or decision sustains that concept.

An understanding of the effect of the order requires review of the rights and obligations of an attorney with respect to fees and to money held in so-called special accounts. With but two exceptions the rendition of services by an attorney gives rise to nothing more than a contract claim, express or implied, by the attorney against his client. The two exceptions are the attorney’s retaining and charging liens. The first entitles the attorney to retain all papers, securities or money belonging to the client which come into his possession in the course of his professional employment until the amount of his fee is fixed by agreement or by litigation and is paid. While it is possessory, it has no bearing on this case because the attorney never had possession of the proceeds of the action and in any event never asserted such a lien. The second entitled the attorney at common law to a lien upon the judgment only, but has been expanded by statute to give a lien upon the client’s cause of action from the commencement of the action, which attaches to the judgment and the proceeds of the judgment and cannot be affected by settlement between the parties.

When by the retainer agreement the client expressly assigns a portion of the cause of action proceeds to his attorney the attorney acquires at the time the agreement is signed a vested property interest which cannot subsequently be disturbed by the client or anyone claiming through or against the client. Absent express language of assignment, however, the attorney has no ownership or immediate right to possession and must obtain enforcement of his lien by appropriate order of the court in which the action is pending. Bribery was not involved.

An attorney’s charging lien may be lost if he voluntarily withdraws or is discharged for misconduct, among other ways. Generally, however, if an attorney is discharged without cause he will be allowed a charging lien upon the proceeds of the lawsuit, the amount to be determined on a quantum merit basis at the conclusion of the case, and his fees will be made a charge included within the fees to which the incoming criminal attorney will be entitled.

In the instant case, however, there is no evidence that the attorney retainer agreement contained language of express assignment which would have given him a property interest in the action. The order of substitution, moreover, did not allow him a charging lien. Rather it expressly referred the questions of the attorney’s right to both a fee and a lien to the Trial Justice, taking that course presumably because of the claim of malpractice on the attorney’s part. The order of April 7, 1975, however, while it determined that the attorney was entitled as former attorney for petitioner to a fee of $2,500, directed that that amount be charged against the counsel fees due to the defendant’s firm, and authorized the administrator to withdraw and pay that amount to attorney, contained neither any determination of the attorney’s right to a lien nor any direction for enforcement by the attorney of his right to the money, although the attorney was a party to the proceeding and the order recites that it was made on consent.

While there can be a larcenous taking from a lienor who has the object of his lien in his possession, here the attorney never had possession of the settlement proceeds and his right to a charging lien put in issue by the malpractice action and in the substitution proceeding has never been adjudicated to have continued after the substitution. It follows that all that he had, and all that the April 7, 1975 order adjudged him to have, was a contract right to recover a fee, not any property or owner interest superior to that of the defendant in the proceeds of settlement of the malpractice action. The People’s argument, which the dissent accepts, that the attorney was the owner of the money rather than a creditor of the defendant’s is wide of the mark. The owner of the money was not the defendant and not the attorney, but was the husband as administrator, subject to the husband’s obligation to pay for the services of each. The order of April 7, 1975 did no more than authorize the husband to pay the attorney, without specifying any particular time for payment. The defendant could, perhaps, have been properly charged with having stolen the $2,500 referred to in the third count from the husband, but the order in question did not give the attorney the property or make him the owner of the $2,500 within the meaning of the Penal Law.

Trusting people with money and properties would surely test their honesty. If you are a victim of deceit and you want to get back what was taken from you, the Queens County Grand Larceny Lawyer or the Queens County Petit Larceny Attorney will best represent you. Stephen Bilkis and Associates can also recommend the Queens County Criminal Lawyer to help you convict the person who betrayed your trust.

Contrary to the theory of the Trial Judge, the fact that the proceeds of the settlement had been deposited in defendant’s attorney’s account make them trust funds and as such a subject larcenous taking. The Rules of the First, Second and Fourth Departments require that criminal attorneys practicing in those departments not commingle clients’ funds and deposit them in a separate special account and the First and Second Department Rules also require that the proceeds of settlement of a personal injury or wrongful death action be deposited in such an account. Nothing in those rules, however, establishes a trust interest in those funds in anyone other than the client.

The only other pertinent regulation is the Code of Professional Responsibility which mandates that all funds of clients paid to a lawyer or law firm shall be deposited in one or more identifiable bank accounts and that the attorney shall promptly pay or deliver to the client as requested by a client the funds in the possession of the lawyer which the client is entitled to receive. Those provisions have been applied many times to discipline an attorney who draws upon his special account to such extent that its balance is reduced to less than his clients’ interest in it. It is not, however, violated by the failure to pay money to a third person to whom the client is obligated. Here, there is, as already noted, no evidence of any assignment to the attorney and the charging lien to which he was originally entitled, called into question upon substitution because of his claimed malpractice, has never been adjudicated in his favor.

Many reasons can be articulated for not escalating the failure to meet a contractual obligation into a criminal offense. Not the least of these is the question of when payment is due under an order such as that of the Surrogate’s Court in this case which authorized but did not direct payment and included no specific provision with respect to the time of payment. If acts of that type are to constitute criminal offenses, it should be through adoption by the Legislature of a specific statute. On the facts of this case, the defendant’s depletion of his attorney’s account without paying the attorney’s $2,500 therefrom did not constitute larceny from him. Since that was the theory on which the People proceeded the defendant’s motion for dismissal of the third count should have been granted. For the foregoing reasons, the order of the Appellate Division should be reversed and the third count of the indictment dismissed.

The dissenting judge cannot accept the majority’s holding today that an attorney who has been entrusted with funds which he knows do not belong to him cannot be held to have committed a larceny when, in violation of a court order, he appropriates such funds to his personal use. Nor does he accept the legal premise upon which the majority bases its decision that the attorney was not the owner of the misappropriated funds merely because he failed to establish a specific lien upon them.

An order was entered in Surrogate’s Court amending the limited letters of administration of the husband, administrator of the estate of the wife, allowing him to compromise an action for medical malpractice. The order also provided that the administrator be permitted to withdraw and pay out the amount of $2,500 to the attorney representing the fee to which he is entitled as former attorney for the petitioner. The funds thus withdrawn from the estate eventually fell into the hands of the defendant. These funds were withdrawn from the estate and turned over to the defendant for one reason and one reason only to pay them to the attorney. As is indisputably clear from the plain language of the court’s order, the moneys withdrawn were not the property of either the husband or the defendant. The court merely allowed the husband, and through him the defendant, to obtain temporary custody of the fee to which the attorney, in the words of the court, is entitled. Indeed, one can only wonder what clearer language the court could have used to express its intention that these funds, once withdrawn from the estate, should become the property of the attorney.

Moreover, this property was not a mere debt owed to the attorney; it was a specific fund of money which the court decreed belonged to the attorney and directed payment to him. Thus, this is not a case where merely an inchoate debt was owed. Instead, it involves the larcenous taking of identifiable property, misappropriated by an attorney who had been directed by the court to pay the attorney $2,500 from the amount authorized to be withdrawn from estate funds.

Had the defendant merely retained this money in a special account, segregating it from funds available for his personal use, perhaps his argument that he merely delayed payment would have some validity. It is undisputed, however, that he did not so segregate these funds. He simply took the attorney’s fee, which he knew did not belong to him, and used it for his own purposes. This is grand larceny, and has been long recognized as such by the courts of the State.

The mere fact that the Legislature failed to adopt a provision of the Model Penal Code which might have more specifically proscribed the instant offense require a holding that the defendant’s conduct was not larceny under current law. The Legislature’s failure to enact this provision can have no bearing upon a case such as this where moneys from an identifiable fund of property, belonging to the victim, were misappropriated.

Contrary to the theory of the Trial Judge, the fact that the proceeds of the settlement had been deposited in defendant’s attorney’s account make them trust funds and as such a subject larcenous taking. The Rules of the First, Second and Fourth Departments require that criminal attorneys practicing in those departments not commingle clients’ funds and deposit them in a separate special account and the First and Second Department Rules also require that the proceeds of settlement of a personal injury or wrongful death action be deposited in such an account. Nothing in those rules, however, establishes a trust interest in those funds in anyone other than the client.

The only other pertinent regulation is the Code of Professional Responsibility which mandates that all funds of clients paid to a lawyer or law firm shall be deposited in one or more identifiable bank accounts and that the attorney shall promptly pay or deliver to the client as requested by a client the funds in the possession of the lawyer which the client is entitled to receive. Those provisions have been applied many times to discipline an attorney who draws upon his special account to such extent that its balance is reduced to less than his clients’ interest in it. It is not, however, violated by the failure to pay money to a third person to whom the client is obligated. Here, there is, as already noted, no evidence of any assignment to the attorney and the charging lien to which he was originally entitled, called into question upon substitution because of his claimed malpractice, has never been adjudicated in his favor.

Many reasons can be articulated for not escalating the failure to meet a contractual obligation into a criminal offense. Not the least of these is the question of when payment is due under an order such as that of the Surrogate’s Court in this case which authorized but did not direct payment and included no specific provision with respect to the time of payment. If acts of that type are to constitute criminal offenses, it should be through adoption by the Legislature of a specific statute. On the facts of this case, the defendant’s depletion of his attorney’s account without paying the attorney’s $2,500 therefrom did not constitute larceny from him. Since that was the theory on which the People proceeded the defendant’s motion for dismissal of the third count should have been granted. For the foregoing reasons, the order of the Appellate Division should be reversed and the third count of the indictment dismissed.

The dissenting judge cannot accept the majority’s holding today that an attorney who has been entrusted with funds which he knows do not belong to him cannot be held to have committed a larceny when, in violation of a court order, he appropriates such funds to his personal use. Nor does he accept the legal premise upon which the majority bases its decision that the attorney was not the owner of the misappropriated funds merely because he failed to establish a specific lien upon them.

An order was entered in Surrogate’s Court amending the limited letters of administration of the husband, administrator of the estate of the wife, allowing him to compromise an action for medical malpractice. The order also provided that the administrator be permitted to withdraw and pay out the amount of $2,500 to the attorney representing the fee to which he is entitled as former attorney for the petitioner. The funds thus withdrawn from the estate eventually fell into the hands of the defendant. These funds were withdrawn from the estate and turned over to the defendant for one reason and one reason only to pay them to the attorney. As is indisputably clear from the plain language of the court’s order, the moneys withdrawn were not the property of either the husband or the defendant. The court merely allowed the husband, and through him the defendant, to obtain temporary custody of the fee to which the attorney, in the words of the court, is entitled. Indeed, one can only wonder what clearer language the court could have used to express its intention that these funds, once withdrawn from the estate, should become the property of the attorney.

Moreover, this property was not a mere debt owed to the attorney; it was a specific fund of money which the court decreed belonged to the attorney and directed payment to him. Thus, this is not a case where merely an inchoate debt was owed. Instead, it involves the larcenous taking of identifiable property, misappropriated by an attorney who had been directed by the court to pay the attorney $2,500 from the amount authorized to be withdrawn from estate funds.

Had the defendant merely retained this money in a special account, segregating it from funds available for his personal use, perhaps his argument that he merely delayed payment would have some validity. It is undisputed, however, that he did not so segregate these funds. He simply took the attorney’s fee, which he knew did not belong to him, and used it for his own purposes. This is grand larceny, and has been long recognized as such by the courts of the State.

The mere fact that the Legislature failed to adopt a provision of the Model Penal Code which might have more specifically proscribed the instant offense require a holding that the defendant’s conduct was not larceny under current law. The Legislature’s failure to enact this provision can have no bearing upon a case such as this where moneys from an identifiable fund of property, belonging to the victim, were misappropriated.

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