Freihofner v Freihofner
2005 NY Slip Op 51210(U)
Decided on August 1, 2005
Supreme Court, Westchester County
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.
Freihofner v Freihofner
Decided on August 1, 2005
Supreme Court, Westchester County
Lisa Freihofner, Plaintiff,
Gregory Freihofner, Defendant.
Rita Warner, Esq.
950 Third Avenue
New York, New York 10022
Neil Fredman, Esq.
Fredman & Kosan 333 Westchester Avenue
White Plains, New York 10604
Michele Bermel, Esq.
39 Garden Ridge
Chappaqua, New York 10514
Joseph R. Miano, Esq.
Miano & Colangelo
245 Main Street
White Plains, New York 10601
William J. Giacomo, J.
As explained by our State's highest Court, "[t]he underlying purpose" of the law governing attorney charging liens, "at both common law and now, by statute, is to protect an attorney against the knavery of his client" (Matter of City of New York [United States-Coblentz], 5 NY2d 300,307-308 , cert. denied sub nom. United States v. Coblentz, 363 U.S. 841 ). Our Courts have the inherent authority "to protect one of its own officers against collusion and fraud" designed to defeat a valid charging lien (National Exhibition Company v. Crane, 167 NY 505,508 ).
In this matrimonial action, plaintiff's former counsel, Joseph R. Miano, Esq., of the law firm of Miano & Colangelo (hereinafter "Miano"), executed an agreement settling a motion to fix his firm's charging lien (the Stipulation), pursuant to which that lien was to be secured by the payment into an escrow account of certain equitable distribution funds received by plaintiff. Claiming that plaintiff has violated the Stipulation, Miano moves for a civil contempt adjudication against her.[FN1] Based upon this [*2]Court's analysis, it agrees with Miano that a contempt adjudication is warranted.[FN2]
I. FACTUAL BACKGROUND
Miano began representing plaintiff on or about March 27, 2001. Over the course of the next three years the relationship between attorney and client gradually deteriorated to the point that on January 8, 2004 Miano moved by order to show cause to be relieved as plaintiff's counsel and for the fixing of his charging lien in the amount of $103,844.00 (the Withdrawal Motion).[FN3] Shortly thereafter, plaintiff retained the firm of Coblence & Warner, now the firm of Warner Partners (the Warner Firm), and a consent to change attorneys was signed by plaintiff and Miano which was subject to the execution of a written agreement confirming plaintiff's consent to a charging lien.
Thereafter, on January 26, 2004, the parties did execute that written agreement, in the form of the Stipulation. However, before doing so, there was an extensive on-the-record discussion between Special Referee James Montagnino, to whom this action was assigned for trial of all issues, and Kenneth E. Warner, Esq., of the Warner Firm, concerning plaintiff's proposal to describe the lien as "provisional".[FN4] Following the Special Referee's [*3]determination that the term "provisional" was inappropriate and potentially confusing, plaintiff agreed to delete it from the Stipulation.
Thus, to the extent relevant, in its final form the Stipulation provided that:
"1. The Miano firm shall have a  charging lien in the amount of $95,389, not on the merits, pending the hearing and determination of the firm's entitlement to a charging lien and the amount thereof and without prejudice to the arguments of plaintiff contesting said firm's claim for entitlement to fees. 2. Pending the hearing and determination of the Miano firm's claim for a charging lien, or other written agreement between the parties hereto, any funds that come within the  lien shall be held by plaintiff's incoming attorneys in escrow." (Miano Affid., Exh.C, p.2 [emphasis added]).[FN5]
Upon the execution of the Stipulation by the Warner Firm and Miano, the Withdrawal Motion was settled. Thereafter, the Stipulation was "So Ordered" by Special Referee Montagnino.
As explained by the Special Referee during the January 26, 2004 proceeding, at which plaintiff was present (Miano Affirm., Exh.D, p.1), under the Stipulation: "There are no conditions to the lien. What that means is Mrs. Freihofner doesn't get paid equitable distribution unless the first $95,000 is put in escrow to protect Mr. Miano. That is what it means." (Id., p.15 [emphasis added]).
Through her incoming counsel, plaintiff agreed with the Special Referee's interpretation, as is evident from the following
portion of the colloquy between the Special Referee and Mr. Warner: [*4]
"THE COURT: I think that is what I said. There is no condition that needs to be met for the lien to exist. MR. WARNER: Correct. THE COURT: In other words, at the close of business this afternoon there will be a charging lien in place in ninety-five thousand some odd dollars. MR. WARNER: Absolutely correct. THE COURT: Now, that doesn't mean Mrs. Freihofner owes Mr. Miano $95,000. It means he is protected up to that amount from the proceeds of equitable distribution. MR. WARNER: Absolutely correct. * * *
THE COURT: I want to make sure we are making it clear on the record it is a charging lien. MR. WARNER: Yes. THE COURT: And that means there are certain ramifications to - MR. WARNER: Right. Correct. THE COURT: -to the disbursement of equitable distribution in derogation of the lien." (Id., p.10,13 [emphasis added]).
It was at that point that the Warner Firm was deemed to have substituted as plaintiff's counsel.
While the action was still not fully resolved, and in particular, during the course of custody litigation before Special Referee Montagnino, plaintiff moved for certain relief, including an interim award of counsel fees in the amount of $125,000 (the Fee Motion). On August 5, 2004 the Special Referee rendered a bench decision on plaintiff's applications. As to the Fee Motion, the Special Referee stated:
"With regard to the application for interim counsel fees, this application is granted to the limited extent that defendant [*5]is directed to pay to plaintiff as an advance on equitable distribution the sum of $100,000, payable within fifteen days of today's date. While the equitable distribution trial has been completed, there are additional documents that need to be submitted. And in addition, the post-trial memoranda of respective counsel have yet to be received. And, therefore, this Court is unable at this time to make a final determination on equitable distribution. Nonetheless, it is clear, based upon the evidence adduced thus far, that an award of an advance of $100,000 to plaintiff is a reasonable way of dealing with plaintiff's need for liquid funds in order to be able to continue this litigation. The specific reason for which the Court has not granted an outright award of counsel fees is that it appears from the litigation that has taken place thus far, at least as regards the custodial issues, that there is a serious question as to who is ultimately responsible for the litigation costs in this particular matter. It would be inappropriate at this time for the Court to make any comment with regard to who should ultimately be required to shoulder this burden. And so as an accommodation, the Court has made the instant directive that defendant advance certain monies in equitable distribution in order to allow plaintiff to continue to be represented in this proceeding." (Miano Affid., Exh.H, p.8-10 [emphasis added]).
Defendant timely paid the $100,000 to plaintiff, who, in turn, paid the money to the Warner Firm.[FN6] [*6]
Subsequently, Miano learned that while that payment had been made to the Warner Firm, none of the monies were placed in escrow. Contending that plaintiff violated the Stipulation, he filed the instant motion, seeking "to enforce [his] firm's rights under a certain charging lien and/or to hold the Plaintiff in contempt of Court for violation of same" (id., par.2). Plaintiff opposed the motion on several grounds, and upon consideration of the conflicting positions asserted by her and Miano, Justice W. Denis Donovan directed that a hearing be conducted by this Court.
At the contempt hearing, the parties stipulated to all of the material facts and agreed that only issues of law needed to be determined by this Court. Having reviewed the papers, the stipulated facts and the controlling law, the Court turns to a discussion of the legal issues raised.
Because he is seeking a contempt adjudication, Miano must establish that plaintiff violated a clear and unequivocal court order, thereby prejudicing his rights in this litigation (Goldsmith v. Goldsmith, 261 AD2d 576,577 [2d Dept. 1999]). The burden is on Miano to establish each of the elements of civil contempt (Beverina v. West, 257 AD2d 957,957 [3d Dept. 1999]). Plaintiff attacks Miano's evidentiary showing on several grounds.
A. STANDINGAs an initial matter, plaintiff asserts that Miano lacks standing to seek contempt relief in the underlying matrimonial action. In particular, plaintiff maintains that "[t]he remedy [of [*7]contempt] is available as a matter of law only to an 'aggrieved spouse' under the Domestic Relations Law, not to an attorney seeking to collect a fee, a basic principle of matrimonial law that Mr. Miano simply ignores" (Warner Supp. Affirm., p.3, n.1 [italics in original]). Clearly, plaintiff is wrong, for three reasons.
First, Miano's application is not founded upon the Domestic Relations Law. Of course, under DRL §245, the statute to which plaintiff refers:
"Where a spouse, in an action for divorce, separation, annulment or declaration of nullity of a void marriage, ... makes default in paying any sum of money as required by the judgment or order directing the payment thereof, ... the aggrieved spouse may make application pursuant to the provisions of section seven hundred fifty-six of the judiciary law to punish the defaulting spouse for contempt ... ." (Emphasis added).
Here, however, Miano moves for a contempt adjudication under Judiciary Law §753 (hereinafter "Section 753"), not DRL §245. Thus, even if only a "spouse" may rely upon DRL §245, that is of no relevance to the instant motion.
Second, an attorney seeking to establish his entitlement to fees or to enforce his charging lien is permitted to do so within the matrimonial action in which he represented one of the parties. In Frankel v. Frankel (2 NY3d 601 ), this State's highest Court, interpreting DRL §237(a), ruled that an attorney discharged without cause may seek counsel fees from the monied spouse in the underlying matrimonial action (id., at 606).[FN7] Certainly, if an attorney discharged without cause may move within the matrimonial action for an initial award of counsel fees, no reason exists why he should be barred from seeking to enforce an order securing his charging lien in the same action.
Indeed, that Miano may seek enforcement of the Stipulation in the matrimonial action is further supported by Judiciary Law §475 (hereinafter "Section 475"), which provides in relevant part:
"From the commencement of an action ... the attorney who appears for a party has a lien upon his client's cause of action, claim or counterclaim, which attaches to a verdict, report, determination, decision, judgment or [*8]final order in his client's favor, and the proceeds thereof in whatever hands they may come; and the lien cannot be affected by any settlement between the parties before or after judgment, final order or determination. The court upon the petition of the client or attorney may determine and enforce the lien." (Emphasis added).
As is well settled, an attorney is not "relegated solely to the commencement of a plenary action to fix and enforce [an] attorneys' lien ... since Judiciary Law § 475, which establishes a statutory attorneys' lien, permits enforcement of the lien either by way of motion in the main action or by plenary action" (Miller v. Kassatly, 216 AD2d 260,260-261 [1st Dept. 1995] [Trial Court "properly directed entry of a money judgment in favor of plaintiff's former counsel ... without necessity of a separate plenary action, for attorneys' fees owed in connection with [former counsel's] representation of the plaintiff in the underlying matrimonial action, because the plaintiff, while represented by counsel, consented to the amount of the attorneys' lien at issue in a written stipulation so ordered by the court"] [emphasis added]).
Third, Miano comes within the protections of Section 753, and thus may move for contempt relief in the matrimonial action. To the extent relevant, Section 753 provides that:
"A court of record has power to punish, by fine and imprisonment, or either, a neglect or violation of duty, or other misconduct, by which a right or remedy of a party to a civil action or special proceeding, pending in the court may be defeated, impaired, impeded, or prejudiced, in any of the following cases:
3. A party to the action or special proceeding, an attorney, counsellor, or other person, for the non-payment of a sum of money, ordered or adjudged by the court to be paid, in a case where by law execution can not be awarded for the collection of such sum except as otherwise specifically provided by the civil practice law and rules; or for any other disobedience to a lawful mandate of the court." (Judiciary Law §753[A] [emphasis added]).
Under this statute, any person may seek relief as long as he is an "aggrieved party" (In re Lieberman, 238 App. Div. 305,307 [1st Dept. 1933] [A civil contempt proceeding "may be prosecuted by the aggrieved party only"]; In re Ball, 94 Misc. 112,115 [Surr. Ct. Kings Co. 1916]; see also State v. Unique Ideas, Inc., 44 NY2d 345,349, n.1  ["A fine imposed for civil contempt is payable to the 'aggrieved party'"]).
An "aggrieved party" is one who is "'the moving party,' 'the injured party,' or 'the complaining party'" in a contempt proceeding (In re Ball, supra , 94 Misc., at 114). Here, since Miano is complaining that he has been injured by plaintiff's violation of the escrow provision of the Stipulation, he is an aggrieved party who has standing to seek a contempt adjudication against her pursuant to Section 753.
Of course, since Section 753 is a civil contempt statute, relief sought under it is requested by motion brought in the action which gave rise to the order violated (Pitt v. Davison, 37 NY 235,240 ; Jewelers' Mercantile Agency v. Rothschild, 155 NY 255,256  [An application for a civil contempt adjudication is a "proceeding ... taken in an action in which the [contemnor] ha[s] not obeyed the judgment"]). Consequently, Miano has standing to bring his contempt motion against plaintiff in the underlying divorce action.
B. EXISTENCE AND CLARITY OF ORDER
The first two elements that Miano must establish on his motion are that there was a lawful judicial order in effect, and that it "express[ed] an unequivocal mandate" requiring plaintiff's compliance (McCain v. Dinkins, 84 NY2d 216,226 ). In this case, the Stipulation was a mandate which will support a contempt adjudication because, as is not disputed, it was in effect as of January 26, 2004, when it was signed by Miano for his firm and him, and by Mr. Warner for his firm and plaintiff, and was "so ordered" by the Special Referee (see Fuerst v. Fuerst, 131 AD2d 426,427 [2d Dept. 1987] ["The court's 'so order[ing]' the stipulation without objection, pursuant to the request of the father's attorney, dispensed with the necessity for a written order to be served with notice of entry"]; see also South Park Associates v. 230 Park South Apartments, Inc., 3 Misc 3d 1111[A], 787 NYS2d 681 [Sup. Ct. NY Co. 2004] ["A 'so ordered' stipulation, as a court order, is one form of order enforceable by CPLR §5104"]).
Moreover, as is also not contested by plaintiff, the Stipulation was unequivocal in its terms, since it clearly required that until there was a determination of Miano's claim for a charging lien, any funds that come within the lien "shall be held by plaintiff's incoming attorneys in escrow". In addition, as noted above, plaintiff, through her incoming counsel, acknowledged that she understood that under the [*10]Stipulation, she "doesn't get paid equitable distribution unless the first $95,000 is put in escrow to protect Mr. Miano". Thus, these two elements of the contempt standard have been satisfied by Miano (see Coan v. Coan, 86 AD2d 640,642 [2d Dept. 1982], appeal dismissed 57 NY2d 608  [Court order which "in clear, plain and unconditional language, made [a] stipulation binding upon all parties and ordered each of the parties to comply with the stipulation", supported contempt adjudication]).
Next, Miano must prove that plaintiff "had actual knowledge of [the] terms" of the Stipulation (Graham v. Graham, 152 AD2d 653,654 [2d Dept. 1989]). Plaintiff does not deny that she had knowledge of the Stipulation, nor could she, since she was present in court on January 26, 2004 when it was addressed by the Special Referee and the Warner Firm. Thus, this aspect of the contempt showing has been made by Miano.
Of course, Miano must also establish that plaintiff "disobeyed" the Stipulation (McCain v. Dinkins, supra , 84 NY2d, at 226). That burden has been met here based upon the stipulated facts that the Special Referee granted the Fee Motion to the limited extent of directing defendant to pay plaintiff $100,000 as an advance on equitable distribution, and that upon plaintiff's receipt of that payment and her forwarding of the money to incoming counsel, rather than placing the first $95,389 in escrow, the entire sum was utilized by the Warner Firm as a fee payment to itself. Since that advance equitable distribution payment was subject to the charging lien, the failure to deposit the funds in the escrow account constituted a violation of the Stipulation (cf. Matter of Avalon East, Inc. v. Monaghan, 43 Misc2d 401,407 [Sup. Ct. NY Co. 1964] [Escrowee held in contempt for violating order requiring him to pay funds to party after he "had been willfully derelict in his duty as escrowee in turning the escrow funds over to his client before fulfillment of the condition imposed" by the parties' agreement]).
Seeking to avoid that conclusion, plaintiff offers two arguments. Neither of them is persuasive.
First, plaintiff asserts that the $100,000 payment ordered by the Special Referee on the Fee Motion was not equitable distribution, but rather was a counsel fee to be paid to incoming counsel. In support of that position, she relies upon the Special Referee's statement that the advanced payment he ordered was a "reasonable way of dealing with plaintiff's need for liquid funds in order to be able to continue this litigation".
However facially appealing this argument may be, it is self-serving and defeated by the remainder of the Special Referee's remarks as to the nature of the payment he authorized. Specifically, he said that he was directing defendant to pay to [*11]plaintiff "an advance on equitable distribution" and that he had "not granted an outright award of counsel fees". It could not be more clear from the language employed by the Special Referee that the payment directed by him constituted equitable distribution in advance of a final determination of the action, and not a counsel fee award (cf. Haser v. Haser, 271 AD2d 253,255 [1st Dept. 2000] [Trial Court "should have exercised its discretion to look behind the parties' self-serving definition of 'additional child support' in the settlement agreement" and recognized "that the payments provided for [in the relevant provision] truly represent[ed] plaintiff's distributive share of defendant's medical license", which was subject to former counsel's charging lien]).
Second, plaintiff contends that there was no violation of the Stipulation because "it is established law that a charging lien attaches to a 'recovery' in a case", while at bar, "[n]o 'recovery' or 'proceeds' are involved" (Warner Affirm., par.5). As viewed by plaintiff, this case "deal[s] only with a pendente lite 'advance'- i.e., a conditional award" (ibid.).
As an initial matter, this argument is disingenuous, since it is wholly contrary to the position taken by plaintiff at the January 26, 2004 proceeding before the Special Referee. Then, as noted above, Mr. Warner characterized as "Absolutely correct", the Special Referee's interpretation that there was no condition that had to be met for Miano's lien to exist and that as of January 26, 2004 there was "a charging lien in place in ninety-five thousand some odd dollars".
Moreover, plaintiff's assertion that a charging lien attaches only to a recovery at the conclusion of an action is not supported by Section 475. Under that provision, a charging lien comes into existence "[f]rom the commencement of an action", and it attaches to, inter alia, any "determination, decision, judgment or final order in [the] client's favor, and the proceeds thereof in whatever hands they may come".
Notably, in identifying the types of favorable outcomes to which the charging lien attaches, the Legislature did not employ language limiting the attachment to those procedural results that may occur only at the conclusion of an action or proceeding, as argued by plaintiff. Instead, by not using the word "final" when it included determinations and decisions to which a charging lien will attach, the Legislature made plain its intent that even an interim determination would suffice, as long as it resulted in the creation of proceeds in an "identifiable fund" (see City of Troy v. Capital District Sports, Inc., 305 AD2d 715,716 [3d Dept. 2003] [Charging lien "attaches only when proceeds in an identifiable fund are created by the attorney's efforts in that [*12]action or proceeding"]).[FN8]
Here, that condition was met when the Special Referee rendered a decision granting the Fee Motion to the extent of directing defendant to make an advance equitable distribution payment to plaintiff. Under Section 475 Miano's charging lien attached to that decision and the proceeds of it, namely, the first $95,389 of the $100,000 paid to plaintiff by defendant. Thus, it has been proven, "with reasonable certainty" (Matter of McCormick v. Axelrod, 59 NY2d 574,583 ), that when plaintiff paid the $100,000 to the Warner Firm without ensuring that the monies were placed in escrow, she violated the Stipulation.[FN9]
Finally, it is Miano's burden to prove that plaintiff's violation of the Stipulation was calculated to or actually did defeat, impair, impede, or prejudice his rights or remedies in the litigation (Clinton Corner H.D.F.C. v. Lavergne, 279 AD2d 339,341 [1st Dept. 2001]). Plaintiff maintains that no prejudice has been established, because there will be other monies that she will receive when the parties' marital property is equitably distributed at the conclusion of the matrimonial action. The [*13]Court does not agree, for two reasons.
First, no proof was offered by plaintiff as to the amount of money, if any, that she will be entitled to receive as equitable distribution, above the $100,000 that was advanced to her as directed by the Special Referee. Certainly, it would be inappropriate for the Court to speculate as to the existence of any such funds. Absent such proof, the Court cannot determine that Miano's charging lien remains secured as he and plaintiff agreed when they settled the Withdrawal Motion by executing the Stipulation.
Second, by failing to deposit the first $95,389 into an escrow account, and instead paying that money to her incoming counsel, plaintiff deprived Miano of funds that would have secured his charging lien to the maximum that he would be claiming, as set forth in the Stipulation. Since he was entitled to that security as soon as there were any equitable distribution proceeds available to plaintiff, by paying the $100,000 directly to the Warner Firm as counsel fees, plaintiff defeated, impeded, impaired and prejudiced Miano's rights in the litigation (see Goldsmith v. Goldsmith, supra , 261 AD2d, at 577-578 [In divorce action in which the Trial Court issued a temporary restraining order prohibiting the defendant from transferring, selling, pledging, or otherwise encumbering any assets in his possession, he was properly held in civil contempt when, one month later, he "executed a confession of judgment in favor of a friend who had allegedly loaned him money to pay attorneys' fees", since by doing so, he "prejudiced the plaintiff by elevating this individual's claim over her right to equitable distribution of the parties' cooperative apartment"]). Therefore, Miano has also met this aspect of his burden of proof.
Summing up her position, plaintiff asserts that "[her] arguments ... separately and collectively, are conclusive on the lack of merit in Mr. Miano's motion" (Warner Affirm., par.9). Thus, she contends that she "need not address the question of wilfulness" (ibid.).
In fact, there is no requirement that Miano establish wilfulness on plaintiff's part. Rather, to the extent that this element is relevant to contempt applications in matrimonial litigation, it is solely with respect to the violation of a Family Court support order, where a wilful violation must be found (see Farkas v. Farkas, 201 AD2d 440,441 [1st Dept. 1994] ["[C]ontempt is also appropriate for willful non-compliance with a support order"], citing Family Court Act §454).
As is well-recognized, "[i]ntent or willfulness is not required to hold a party in contempt for disobeying a court order" (Yalkowsky v. Yalkowsky, 93 AD2d 834,835 [2d Dept. 1983]). Put another way, "[i]t is not necessary that such disobedience be [*14]deliberate; rather, the mere act of disobedience, regardless of its motive, is sufficient to sustain a finding of civil contempt if such disobedience defeats, impairs, impedes or prejudices the rights of a party" (Great Neck Pennysaver, Inc. v. Central Nassau Publications, Inc., 65 AD2d 616,616-617 [2d Dept. 1978]; Matter of Bonnie H., 145 AD2d 830,832 [3d Dept. 1988], appeal dismissed 74 NY2d 650  [same]). Thus, in this case, a civil contempt adjudication is supported by the determination that plaintiff violated the Stipulation, and that by doing so, she defeated, impaired, impeded or prejudiced Miano's rights thereunder.
However, even if a wilfulness finding was necessary, it would be supported on the facts stipulated to by the parties at the contempt hearing. Specifically, plaintiff's act of transferring the $100,000 that she received from defendant as a fee payment to her incoming counsel, after those funds were released to her as an advance on her equitable distribution, was a wilful and intentional violation of the Stipulation. Indeed, any argument by her to the contrary would be meritless, especially in view of her agreement at the January 26, 2004 proceeding before the Special Referee, through her counsel, that she "doesn't get paid equitable distribution unless the first $95,000 is put in escrow to protect Mr. Miano". Therefore, even if wilfulness is an element of this civil contempt, Miano has met his burden of proof in that regard.
III. ADJUDICATION AND PENALTY
Based upon this Court's analysis, it concludes that plaintiff is guilty of civil contempt for wilfully violating the so-ordered Stipulation by failing to place the first $95,389 that she received from defendant as an advance on her equitable distribution in escrow, to be held by her incoming counsel. Thus, the only remaining issue is what punishment to impose for that act of contempt.
At the contempt hearing, the question was raised whether the remedy of disgorgement was available, i.e., whether the Warner Firm could be ordered to return the money paid by plaintiff and place it in escrow as required under the Stipulation. The Warner Firm argues that such a remedy is not available "because the motion is without merit and should not be granted" and because no jurisdiction has been acquired over it on the motion (Warner Supp. Affirm., par.4).
As relates to the merits of a disgorgement application, the Warner Firm's position is problematic. Certainly, there is authority supporting the view that an attorney cannot be forced to disgorge fees if he was not discharged for cause or had not committed an act which was a breach of his fiduciary duty (see Grutman Katz Greene & Humphrey v. Goldman, 251 AD2d 7,8 [1st Dept. 1998]). In this case since there is no issue of discharge of the Warner Firm, it may only be compelled to disgorge the [*15]funds paid to it by plaintiff if it breached a fiduciary duty to Miano.
Of course, it is settled law that "[a]n escrow agent not only has a contractual duty to follow the escrow agreement, but additionally becomes a trustee of anyone with a beneficial interest in the trust with the duty not to deliver the escrow to anyone except upon strict compliance with the conditions imposed" (Takayama v. Schaefer, 240 AD2d 21,25 [2d Dept. 1998] [internal quotations and citations omitted]). Thus, when the Warner Firm signed the Stipulation, binding itself to hold in escrow any funds that came within Miano's lien, it "assumed a fiduciary duty with respect to [Miano]", because he has "a beneficial interest in the escrow account" (see D'Agostino v. Schoonmaker, 270 AD2d 693,694 [3d Dept. 2000]). By accepting the funds from the advance equitable distribution payment and applying them to plaintiff's outstanding legal fee bill, rather than depositing the money into an escrow account, the Warner Firm breached its fiduciary duty to Miano. Consequently, disgorgement of the fees is a possible remedy, albeit not on this motion.
Here, as the Warner Firm correctly argues, there is no personal jurisdiction over it for the purposes of this motion. Since the motion before this Court seeks relief only from plaintiff, and was not served upon the Warner Firm, personal jurisdiction was not acquired over the firm (cf. Michael N. G. v. Elsa R., 233 AD2d 264,266 [1st Dept. 1996] [Court lacked jurisdiction to punish party where he "was not properly served with notice of the contempt proceeding in accordance with Judiciary Law §756"]). Consequently, on this motion, Miano may not obtain disgorgement of the funds from the Warner Firm.
That being true, the Court must focus upon other relief that is available to Miano. First, since it is clear that Miano is not yet entitled to recover any particular sum of money from plaintiff pursuant to his charging lien, he has not established a monetary loss. For that reason, Miano is entitled to only the statutory fine in the amount of $250.00 (Judiciary Law §773).[FN10]
But, of course, Miano is entitled to have plaintiff deposit into an escrow account the sum of $95,389 which she received when she was paid the equitable distribution advance by defendant as ordered by the Special Referee. Under Judiciary Law §774, "[w]here the misconduct proved consists of an omission to perform an act or duty, which is yet in the power of the offender to [*16]perform, he shall be imprisoned only until he has performed it, and paid the fine imposed". Here, since plaintiff's misconduct consists of her failure to make that deposit, and she may still do so, she may be imprisoned until she has performed that act.
Obviously hoping to avoid that penalty, plaintiff states:
"Suffice it to say that plaintiff does not begin to have the money necessary to put $100,000 in escrow, because that entire sum, as soon as it was received, was used by plaintiff for the very purpose it was awarded- payment of ongoing legal expenses ... . (Warner Affirm., par.9).
Plaintiff's plea entirely misses the point.
It was not her right in the first instance to use the equitable distribution advance for the payment of any legal fees to the Warner Firm, unless and until the escrow requirement of the Stipulation was satisfied. Moreover, because the Special Referee specifically explained to her, and the Warner Firm, that the Fee Motion was granted solely to the extent that an advance payment of equitable distribution was to be made to her by defendant, plaintiff was on notice that under the Stipulation, the escrow requirement had been triggered.
At that point, plaintiff had two legal options. First, she could have made the escrow deposit in full compliance with the Stipulation. Second, through her new counsel, she could easily have sought clarification from the Special Referee as to whether the advance payment of equitable distribution on the Fee Motion was exempt from the escrow requirement.[FN11]
Obviously, the Warner Firm had no interest in pursuing the second approach, since it bore the potential that the Special Referee would conclude that the deposit had to be made under the Stipulation. Thus, it is hardly surprising that no such application was made. Instead, as soon as plaintiff received a $100,000 check payable to her "and paid it over to [the Warner Firm]" (Warner Supp. Affirm., par.2), that firm took that payment in partial satisfaction of its outstanding legal bill.[FN12] Whether [*17]the Warner Firm ever discussed the potential consequences of that use of the money has not been addressed before this Court.[FN13]
Having pursued the course that exposed her to a contempt adjudication, plaintiff cannot now be heard to complain that she does not have the money to place into an escrow account to secure Miano's charging lien as required under the Stipulation. Thus, the Court agrees with Miano that plaintiff must be required to pay $95,389 into escrow, although not "immediately" as he urges (Miano Affid., par.24). Instead, the Court concludes that plaintiff should be given a reasonable amount of time to make the escrow deposit, which shall be a purge condition. Considering the circumstances involved in this case, the Court determines that a 90-day period is reasonable. At the conclusion of that period, plaintiff shall either purge the contempt by paying the fine and making that escrow deposit in full, or pursuant to Judiciary Law §774(1) she shall be incarcerated until such time as she makes the escrow deposit and pays the fine as ordered.
WHEREFORE, it is
ORDERED that the motion is granted to the extent set forth below; and it is further
ORDERED AND ADJUDGED that plaintiff Lisa Freihofner is guilty of civil contempt of court for her wilful violation of the so-ordered stipulation executed by plaintiff and the law firm of Miano & Colangelo on January 26, 2004 by failing to deposit $95,389 that she received as an advance equitable distribution payment into an escrow account maintained by the Warner Partners law firm; and it is further
ORDERED AND ADJUDGED that said civil contempt was calculated to and did actually defeat, impair, impede and prejudice the rights of Joseph R. Miano, Esq. and the law firm of Miano & Colangelo herein; and it is further [*18]
ORDERED AND ADJUDGED that for that civil contempt, plaintiff is fined in the amount of $250.00, which she shall pay to Joseph R. Miano, Esq. and the law firm of Miano & Colangelo; and it is further
ORDERED that plaintiff will be purged of this civil contempt if, by no later than 2:00 p.m. on November 1, 2005 she pays the fine in the amount of $250.00 to Joseph R. Miano, Esq. and the law firm of Miano & Colangelo, and deposits $95,389 into an escrow account maintained by the Warner Partners law firm as required by the so-ordered stipulation executed by plaintiff and the law firm of Miano & Colangelo on January 26, 2004; and it is further
ORDERED that plaintiff shall appear before this Court on November 2, 2005 at 9:30 a.m. to offer proof that she has purged herself of this civil contempt as set forth above; and it is further
ORDERED that if plaintiff fails to purge herself of this civil contempt as set forth above, then at 9:30 a.m. on November 2, 2005 she shall be committed to the custody of the Westchester County Commissioner of Corrections to be incarcerated at the Westchester County Jail until she has offered proof to this Court that she has fully satisfied the purge conditions as set forth above; and it is further
ORDERED that if plaintiff fails to appear before this Court on November 2, 2005 at 9:30 a.m. a bench warrant shall be issued for her arrest.
The foregoing shall constitute the decision and order of the Court.
Dated: White Plains, New York
August 1, 2005
HON. WILLIAM J. GIACOMO, J.S.C.
Footnote 1: In his supporting papers, Miano also sought to have this Court fix the amount of his lien and direct plaintiff to immediately pay it in full. Plaintiff objected to this relief on the ground that it was not identified in Miano's order to show cause which brought on this motion. In light of plaintiff's objection to this application (without addressing its merits) the Court has not considered it (see Arriaga v. Michael Laub Co., 233 AD2d 244,245 [1st Dept. 1996]).
Footnote 2: The following papers numbered 1 to 14 were read on this motion. PAPERS NUMBERED Order to Show Cause/Affidavit 1-2 Affirmation in Opposition 11 Reply Affirmation 13 Supplemental Affirmation 14 Exhibits 3-10,12
Footnote 3: As explained by Miano, "[t]he amount of the lien sought was $89,660.00 in legal fees, an additional $6,455.00 to Gerald DeFeo, CPA, (for which both the client and this office are jointly and severally liable) and $7,729.00 in miscellaneous disbursements actually made by this firm" (Miano Affid., par.7).
Footnote 4: Although Miano was not present for that proceeding, he had discussed his view of the term "provisional" with Mr. Warner by telephone shortly before, and Mr. Warner expressed Miano's position to the Special Referee.
Footnote 5: As they originally appear in the Stipulation, these paragraphs are numbered three and four. In addition, the word "provisional" appeared in the bracketed spaces in the Stipulation as it was originally proposed by plaintiff.
Footnote 6: At the contempt hearing ordered in this case, this Court directed the Warner Firm to submit a letter explaining how the money was received by it, i.e., from plaintiff or directly from defendant. The Warner Firm submitted a paper it designated as a "SUPPLEMENTAL AFFIRMATION IN OPPOSITION TO MIANO MOTION" which not only admitted that defendant's $100,000 check, which was written to plaintiff as payee, "was paid over to us by plaintiff in partial payment of our outstanding bills for legal services" (Warner Supp. Affirm., par.2), but which also set forth a series of arguments in further support of plaintiff's position. Because no further arguments were authorized, this Court could simply ignore the Supplemental Affirmation to the extent that it offered any statements other than the one requested by the Court, since in that respect it constitutes an unauthorized sur-reply (see Matter of Kushaqua Estates, Inc. v. Bonded Concrete, Inc., 215 AD2d 993,994 [3d Dept. 1995] ["Supreme Court could properly refuse to consider respondents' surreply which not only was submitted without permission from the court, but was not restricted to the issues raised in petitioner's reply affidavit and contained new factual information"]). In the exercise of this Court's discretion, however, it has considered the Supplemental Affirmation. As is apparent, Miano has not been prejudiced by this Court's decision to do so.
Footnote 7: DRL §237 provides statutory authority for an award of counsel fees and expenses in a matrimonial action.
Footnote 8: Even if plaintiff's argument is intended to be that the lien may attach to a fund created only at the conclusion of the action, under the facts involved at bar that position is without relevance. The Court is aware that a charging lien has been deemed to "affect only the postjudgment property of the client" (see Natole v. Natole, 295 AD2d 706,708 [3d Dept. 2002]). Here, however, the parties, by their stipulation, agreed that any monies that were subject to the charging lien would be placed in escrow. Among the monies that may be affected by a charging lien are those received as equitable distribution in a matrimonial action (cf. Haser v. Haser, supra , 271 AD2d, at 255 [Party's distributive award was subject to charging lien]).
Footnote 9: Equally unavailing is plaintiff's contention that defendant was required to ensure that the $100,000 payment was deposited into the escrow account, and not her, and that as a consequence, only he has liability to Miano if there has been any violation of the Stipulation. Without reaching the issue of defendant's obligation to Miano, which is not before this Court, it is nonetheless beyond credible dispute that even if defendant is liable, his financial responsibility would be joint with plaintiff, and not sole and exclusive. Thus, Miano was within his rights to seek this relief as to plaintiff alone.
Footnote 10: Notably, although Miano was represented by counsel from another office at the contempt hearing, he has not set forth any evidence in support of a claim for legal expenses incurred on this motion, nor does his application include any request for payment of such expenses.
Footnote 11: Although it appears that the Special Referee did not recall the Stipulation when he ruled on the Fee Motion, that is of no significance to this motion, since the burden was upon plaintiff and the Warner Firm to ensure her compliance with the Stipulation, and not upon the Special Referee.
Footnote 12: As explained by the Warner Firm, even after receiving the $100,000 payment, "because of all of the work in this case, our firm is still owed hundreds of thousands of dollars more, still unpaid" (Warner Affirm., par.9 [emphasis added]).
Footnote 13: That there were potential adverse consequences to this use of the money was actually addressed by the Special Referee at the January 26, 2004 proceeding. Then, as noted above, during a colloquy with Mr. Warner, the Special Referee admonished plaintiff and her counsel that "there are certain ramifications to -to the disbursement of equitable distribution in derogation of the lien". Given that potential for adverse "ramifications", an argument could certainly be made that the interests of plaintiff and the Warner Firm were actually in conflict when plaintiff received the advance payment of equitable distribution from defendant.