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The attorney's lien shows up in real estate transactions either in the form of a filed or recorded notice claiming such lien or as a secret lien. This article will focus the nature of the attorney's lien, typical arenas in which it appears and defenses to its enforcement. It should go without saying that if such a lien is claimed that a dispute already exists between the judgment creditor and their attorney. The role of the title insurance agent and/or escrow agent needs to be such that the course navigated does not get them entangled into these problems. The scope of the investigation will include primarily statutes and cases from the states of Colorado, Idaho, Montana, North Dakota, South Dakota, Utah and Wyoming. Areas where an attorney's lien may exist outside of real estate will not be considered.
NATURE OF THE LIEN
Retaining lien. Some states have statutes or utilize a common law concept allowing attorneys the right to a general lien on all papers and other property that may come into their hands for the outstanding balance of all fees owing on any matter. Colorado is such a state having a statute with such a broad scope. See CRSA §12-5-120. Other states have taken a narrower view allowing the lien to exist, but only to the extent that compensation is due arising from the matter upon which the lien is claimed. Some states only have a statutory scheme in place, the common law being abrogated in favor of a statutory enactment. In those states, no lien can exist apart from the statute.
By its very nature, the retaining lien is passive in nature and is not enforceable by foreclosure and sale. See Frazee v. Frazee, (Idaho 1983) 660 P.2d 928. The lien allows the attorney to retain papers and documents of his client in his possession to remain there until the debt has been paid. The typical situation where a title company sees such a lien is when an attorney retains a deed in favor of client from an ex-spouse to insure that his fees are paid. If the attorney relinquishes custody of the documents, the lien is lost.
Charging lien. An attorney's charging lien arises from state statute allowing an attorney to claim a lien upon the cause of action and any the judgment or verdict arising out of the cause of action and the proceeds thereof, if so provided by statute.
In the case of Ross v. Scannell, (Wash. 1982) 97 Wash.2d 598, 647 P.2d 1004), the Court provided a brief outline of which states have adopted the various schemes discussed above and otherwise herein, the pertinent portion of the opinion providing:
Many states either do not statutorily recognize attorneys' liens or only recognize the general or retaining lien1. The statutory provisions of the states recognizing charging liens on judgments vary. A few states specifically allow the lien to attach to real property2. Others provide for a charging lien on the client's cause of action or judgment and any proceeds therefrom or property recovered3. Five states, including Washington, recognize a charging lien upon the judgment only4.
1 Arizona, California, Connecticut, Delaware, Florida, Hawaii, Kansas, Louisiana, Maine, Maryland, Michigan, Mississippi, Missouri, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, Vermont, West Virginia, and Wyoming.
2 Ala.Code tit., § 34-3-61 (1967); Ga.Code Ann. § 9-613 (1973); Minn.Stat.Ann. § 481.13 (West 1971); Or.Rev.Stat. §§ 87.445, .490 (1979).
3 Ark.Stat.Ann. § 25-301 (1962); Idaho Code § 3-205 (1979); Ill.Ann.Stat. ch. 13, § 14 (Smith-Hurd 1963); Mass.Gen. Laws Ann. ch. 221, § 50 (West 1958); Mont.Code Ann. § 37-61-420 (1981); Nev.Rev.Stat. § 18.015 (1979); N.H.Rev.Stat.Ann. § 311.13 (1966); N.J.Stat.Ann. § 2A:13-5 (West 1952); N.Y.Jud.Law § 475 (McKinney 1968); R.I.Gen.Laws §§ 9-3-1, 9-3-2 (1970); Tenn.Code Ann. § 23-2- 102 (1980); Utah Code Ann. § 78-51-41 (1977); Va.Code § 54-70 (1978); Wis.Stat.Ann. § 256-36 (West 1971).
4 Alaska Stat. § 34.35.430 (1981); Ind.Code Ann. § 33-1-3-1 (Burns 1975); Iowa Code Ann. § 610.18 (West 1975); Ky.Rev.Stat. § 376.460 (Supp.1980).
Commencement of the lien. The statutory charging lien arises from the commencement of lawsuit. If no litigation is commenced, then no charging lien arises. It is not uncommon that in a judgment that the prevailing party is awarded attorney fees.
Typically, judgments provide for an award of attorney fees. These awards do not necessarily represent the entire amount to which the attorney is entitled under their retainer agreement. Attorneys must then be creative to make sure that they get the fees that they are entitled while the assets are available to pay their bills. An award of such attorney fees in the judgment runs in favor of the party to the action and not to the attorney who got the party to that point. In states where the attorney must file a separate action to enforce the lien, it has been held that it is improper for the Court to direct that the attorney fees be paid directly by the losing party to the attorney for the prevailing party. In a case where the trial court ordered that the losing party should pay attorney fees directly to the attorney of the prevailing party, the Utah Court held in McDonald v. McDonald (Utah App. 1993) 866 P.2d 1253, that ". . . although an attorney is entitled to a lien in an action in which he has participated, his interest is simply that: a lien, not a judgment. Accordingly, it was error for the trial court to award Mr. Guyon a judgment against Mr. McDonald for the amount of his attorney fees."
The debtor must have an opportunity to challenge the amounts owing in favor of the attorney just as with any other obligation. Simply stated, just because an attorney files a lien for a specific amount does not mean that in adjudicating the lien that the entire claimed amount will be awarded by the Court.
EXTENT OF THE LIEN
The charging lien only extends to attorney fees arising out of the litigation for which the judgment was received. In other words, it does not run for general account balances or for services other than those directly arising from the litigation. In censuring a licensed attorney, the Court held in People v. Mills, (Colo. 1993), 861 P.2d 708 that: "The respondent could not have asserted a valid charging lien on the entire $4,079.83 because an attorney's rights to a charging lien extends "only to attorney fees for those professional services rendered in obtaining the judgment and not for unrelated services" Estate of Benney, [(Colo. 1990),]790 P.2d at 323. Thus, the amount of any charging lien to which the respondent was entitled was only approximately $500."
It is axiomatic that before the lien can be properly asserted that there must exist a debt that remains unpaid and that the debt falls under the statute creating the charging lien. In the case Cole v. Kunzler, (Idaho App. 1989) 768 P.2d 815, 115 Idaho 552, in identifying the elements for an attorney lien to exist held: "Not specifically mentioned among those requisites, but patently indispensable to the assertion of the charging lien, is the fundamental necessity that there exist a debt owed by the client to the attorney for the attorney's efforts with respect to the fund against which the lien is asserted."
The lien exists separate and apart from the order awarding fees under the judgment upon which the attorney lien is based. In the Idaho case of Jarman v. Hale, (Idaho App. 1986), 731 P.2d 813, the attorney for the prevailing party in a civil rights case asserted a lien for an amount greater than the amount awarded at the trial. The Court held:
As noted above, this Court heard the appeal in Hale v. Walsh, Idaho (App.1986), [747 P.2d 1288,] . . . and held that the Hales were entitled under 42 U.S.C. § 1988 to an award of reasonable attorney fees incurred in the trial and appeal of that action. The amount of that award is to be determined by the trial judge on remand of that action. The determination of fees in that action is a separate and distinct matter from the determination of fees between the Hales and Jarman in this action. Any award made by the court in the § 1983 suit will not govern the amount of any fees due from the Hales to Jarman unless the Hales and Jarman had agreed to be bound by that award.
We think it would be more appropriate for the determination to be made first in this action as to what the contractual agreement was between the Hales and Jarman, if any, for the payment of Jarman's fees and costs in the § 1983 action. The contractual agreement for fees reached by these parties and the amount of fees paid and owing under that contract would be factors to be considered in setting the fee award in the § 1983 action. See Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983); Shields v. Martin, 109 Idaho 132, 706 P.2d 21 (1985).
Next, we have reviewed the record, contentions and authority cited by the parties on the question of whether Jarman can have an attorney's charging lien against the judgment entered in the § 1983 action. We are persuaded that such a lien is available to Jarman under the provisions of I.C. § 3-205. Therefore, we agree with the district court that Jarman has a valid claim of lien in an amount not to exceed $27,768.21. However, there can be no adjudication that Jarman has a valid lien in any amount until it is first determined that some amount is owing from the Hales to Jarman in addition to those fees already paid. If there is an amount of fees and costs due from the Hales under a contract then that contract amount will determine the amount of the lien. If the trier of the facts determines there was no contract fixing fees, Jarman may nevertheless be entitled to recover under a quantum meruit theory. Again the amount of the lien would equal the additional fees awarded, if any.
[A subsequent appeal exists on issues relating to intentional infliction of emotional distress by reason of filing of attorney lien, see Jarman v. Hale, (Idaho App. 1992) 842 P.2d 288, 122 Idaho 952.]
The charging lien is a statutory creature and only exists when the attorney comes under the umbrella of its coverage. In situations not covered by the statute creating the charging lien, no other lien exists for the attorney. Consider the case of Laurence J. Rich & Associates v. First Interstate Mortgage Company of Colorado, (Colo. App. 1990) 807 P.2d 1199 where the plaintiff performed services for a land developer over the course of the development of certain real property. These services included services from the obtaining of permits through consultation on construction and obtaining of a loan from defendant. When the developer failed to pay plaintiff, a mechanic's lien was recorded against the land. Foreclosure of the lien was sought by plaintiff. In dismissing the claim of plaintiff, the Court held that their claim was not within the purview of the charging lien or retaining lien statutes in place in Colorado, further that the mechanic lien statute, although exhaustive to whom it grants its relief, does not include attorneys. See Sorseth v. Brown, Raymond & Rissler, (Wyo. 1991) 805 P.2d 284, where in filing a "legal lien" with the statement which refers to the mechanic lien statute, but the firm sent a notice letter to the client instead referring to the attorney lien statute.
The lien exists by reason of the statute and no other. When an attorney wishes to assert the lien as between the attorney and client, a notice must be given to the client. From the earliest decisions, the courts have consistently held that before the lien is asserted between the attorney and the client that notice must be given. If the attorney was to protect rights in and to proceeds that are going to be generated from the losing party or third parties, notice must be afforded in a manner that reasonably leads such persons to the claim being made of a lien.
There are situations where no notice needs to be filed or recorded to have a valid lien. The statute granting the attorney lien is initiated when the attorney begins commences work on the case and runs in favor of the attorney as a result of a judgment recovered. A judgment creditor of the successful party could not attach the judgment without having notice of the attorney lien by reason of the statute. Consider the case of Salle v. Howe, (Colo. App. 1990), 793 P.2d 628. In this case the Court held:
There are circumstances under which a party is, in effect, charged with notice of the lien claim as a matter of law. In Collins v. Thuringer, 92 Colo. 433, 21 P.2d 709 (1933), our supreme court determined that one who garnished a judgment debtor to secure funds owed to him by a judgment creditor did not have priority over the lien of the attorney for the judgment creditor. The basis for the court's decision was that a garnishor could not acquire more rights in the judgment than the judgment creditor had, and the judgment creditor's rights were subject to the attorney's lien. Thus, the garnishor was deemed to occupy no better position than a purchaser with notice even though notice of the lien had not been filed.
The attorney's lien is then a lien upon a lien and runs from commencement of work remaining hidden. A third person dealing with the judgment would be charged with notice based upon the statute that the potential for such a lien could exist. If the attorney wishes to assert the lien to allow notice to third persons and thereby specifically charge them with notice where none exists in the public records, a claim of lien is then recorded or filed. But, barring such a precautionary notice directed to persons entitled to deal with the record and take without notice of such claims, everyone is on notice of the attorney lien based upon the statute.
The Colorado case of Cottonwood Hill, Inc. v. Ansay, (Colo.App. 1989) 782 P.2d 1207, makes it clear that when interests of third parties are involved that record notice must be afforded to enforce an attorney's lien. In that case the lower court ordered specific performance on an option to purchase the land, determining how obligations were to be paid. Inadvertently, the intervener's deed of trust was mistakenly released in the public record in preparation of the court ordered closing. To remedy this situation, the intervener demanded that borrower execute a replacement deed of trust. This deed of trust was recorded some 14 days before the successful attorney in the specific performance litigation recorded its lien.
If the third party has notice or was involved sufficiently in the financial affairs of the client of the attorney, the third party may have notice of the attorneys right to claim a lien. In the case of Board of County Commissioners of the County of Adams v. Berkeley Village, (Colo. App. 1978) 580 P.2d 1251, the Court held that the client was in financial difficulty and that attorneys represented clients in obtaining the very award that was being assigned to the bank. The Court was unable to find that the bank was a good faith purchase for value who took without notice of the possible claim by the attorneys on the award.
The lien is chargeable against any person who, at the time notice of intent to claim a lien is given, holds monies or property which become proceeds of a judgment to be entered in the future. The right to collect upon the attorney's lien cannot exceed the amount of the judgment in favor of the client. Also, the lien follows the proceeds. In the case In re: Marriage of Smith, (Colo. App. 1984), 687 P.2d 519, the husband was given notice of the claim of a lien by the attorney's for the wife. To avoid having to pay the money to the attorney, the husband paid the wife prior to the entry of the judgment. The Court held that the ". . . husband cannot avoid enforcement of this claim for payment by transfer of property in anticipation of the approval of the settlement agreement by the final decree."
The attorney claimed its priority prior to the replacement deed of trust based upon the entry of the judgment of the lower court. The Court held that the Colorado statute requires that before an attorney can enforce the attorney lien against third parties that record notice must be given based upon the statute. The Court also held that the attorney's lien does not relate back in priority to the time that work was commenced on the case when dealing with third persons. The Court elaborated on this ruling by citing the constructive notice statute, holding ". . . [t]his statute has been construed to give priority to recorded documents affecting title to real property except between the parties thereto and such as have notice thereof." In this case, the intervener claimed no notice until the recording of the lien in question.
The attorney also asserted that since the lien was recorded, the attorney lien moved ahead in priority. The attorney's were, of course, from the litigation, aware of the deed of trust in favor of intervener. For equitable reasons, the Court allowed an equitable mortgage to exist. The deed of trust was not released by intervener, but instead by defendants attorney. The Court held that: "An equitable lien is good against all persons who acquire an interest with knowledge or notice of the lien."
This last case is distinguishable from the case In re: Estate of Benney (Colo. App. 1988) 771 P.2d 7, where an attorney in the probate action filed a lien against all monies obtained in favor of the husband, and later the state of Colorado filed its lien based upon providing an attorney for the husband in a criminal proceeding which resulted in his being convicted of first degree murder of the decedent. The lower court allowed the payment of the state's claim. The husband's attorneys claimed priority based upon the date of filing of their lien versus that of the state, which was filed six weeks later. The Court held that the lien of the husband's attorney ran from the commencement of services to perfect the husband's claim in the probate proceeding charged persons with notice from the time of its filing. The attorney's lien on a judgment for efforts expended in procuring the very right obtained and for which the state asserts its third party claim must be superior. At the time of the entry of the order in favor of the husband, the favorable ruling was already burdened with the lien in favor of the attorney for the husband.
PROCEEDINGS TO PERFECT LIEN
Proceedings must be initiated in order to perfect the claim of lien by the attorney. It is inherent in our legal system that the party being charged with the obligation to pay must have an opportunity to be heard. Two paths are typically found - filing of a motion in the action where the judgment or verdict was entered, or filing a separate action. In Utah, a separate action must be filed to enforce the lien. See UCA §78-51-41. The opposite is true in most other states.
Notice. It is inherent in the statutes of each state relating to attorney's liens that notice arises from the effect of the statute itself needs to be considered, that notice must be given to the obligated party and any adverse party from whom the attorney believes that moneys or other properties will become available, and notice given to third persons in whom the moneys or other properties may ultimately reside.
Notice to the obligated party. It is axiomatic that notice must be given to the party charged with not paying the attorney fees.
Notice to the judgment debtor. If a judgment debtor is to be charged with notice of an attorney's lien, notice must be given prior to the settlement of such claim. In the case of Boston & Colorado Smelting Co. v. Pless (Colorado 1886) 10 P. 652, 9 Colo. 112, the Court held:
While this lien attaches to the judgment at once upon its recovery, as between attorney and client, so that nothing more is necessary prior to the enforcement thereof against the latter by proper action, we are inclined to the opinion that, to hold the judgment debtor for the creditor's attorney's fees, the former must be notified of the attorney's intention to take advantage of the statute. If, without knowledge of this intention, either through a formal notice, or through credible information derived in some other way, the debtor make[s] a bona fide settlement of the judgment with the creditor, by payment or otherwise, the attorney cannot look to the former for his unpaid fee.
TIME TO ENFORCE THE LIEN
An attorney in bringing an action on the unpaid debt for the purpose of perfecting the lien must do so within a reasonable period of time. Such an action must be brought within a reasonable time after the lien is filed of record. This requirement is consistent with other liens such as mechanic liens. In the case of Renfro v. Nixon, (Idaho, 1935), 45 P.2d 595, 55 Idaho 532, the Court considered the issue of laches as a bar to an attorney's right to have a satisfaction of judgment set aside. In discussing the issue, the Court considered various cases ranging from one year to eight years citing Neill v. Van Wagenen, 54 N.Y. Super. Ct. 477, where eight years was too long, Winans v. Mason, 33 Barb. (N.Y.) 522, where seven years was too long, Howitt v. Merrill, 1 N.Y.S. 894, appeal dismissed 113 NY 630, 20 N.E. 868, held that a delay of five years was too long, but in Seattle v. Krutz, 78 Wash. 553, 139 P. 498, one year was held not too long.
From an underwriting perspective, finding an attorney's lien where no action has been filed to enforce the lien or no motion has been filed in the original case, a reasonable period would probably be between four and six years after which enforcement would be unlikely to be allowed. None of the states under consideration have a specific statute to rely upon in this situation. General statutes of limitation for actions based upon debt or actions on contracts that affect real property may provide some guidance, but outside of that defense, laches becomes the chief defense to such a claim of lien.
LIEN RUNS TO THE PREVAILING PARTY
Since the charging lien attaches to the judgment, verdict or decision in favor of the client, it should then be apparent that the party losing the case would not have a lien. Thus in a case where the wife is awarded title to the land, the attorney for the husband would not be able to perfect a claim of an attorney's lien against the wife's land.
By the same token, if the client loses the litigation, there is no judgment to which the lien can attach. The attorney must look to other means to satisfy the obligations owed by the client.
AGREEMENT TO PAY ATTORNEY LIEN OUT OF SPECIFIC ASSETS
It is very possible that a client and an attorney may enter into an agreement that the attorney is to be paid in a specific manner or out of specific assets. You would typically expect that in real estate transactions that such agreement would be evidenced by a mortgage on the land, an assignment or pledge of a collateral interest in a note secured by a mortgage, or conveyance of an interest in specific lands. It is just as likely that the client will want the security interest of the attorney in lands to be secret or not otherwise appearing on the public records. In accepting such a hidden interest, the attorney is accepting the risks inherent with collection of his lien and/or enforcement of such unrecorded interest.
An attorney claiming such an interest in the land is in no better position that any other party to liquidates their claim substituting statutory rights for a specific lien or interest in land. They may well have waived their statutory rights in favor of taking a specific type of recovery. The purpose of attorney lien statutes is to protect the attorney establishing a statutory mechanism for them to recover compensation. An attorney charting their own course and then having it fail is in no better position than any other person who makes a business decision that goes bad.
An attorney's lien cannot be created where either no agreement existed or the situation was not contemplated by the agreement. In the Utah case of Phillips v. Smith, (Utah 1989), 768 P.2d 449, the retainer agreement between the parties did not contemplate the substitution of counsel. The Court held: "Under the statute, an attorney's lien can arise only out of the "agreement, express or implied" between the lawyer and the client. Therefore, the statutory lien is only as good as the underlying agreement regarding compensation. Cf. Bishop v. Parker, 103 Utah 145, 151, 134 P.2d 180 (1943) (applying the predecessor to section 78-51-41)."
WAIVER OF LIEN
In cases where an attorney had custody of the deed running in favor of his client, but then delivered the deed subsequently claiming a lien, Courts have not been inclined to find that a lien remained on the lands of the client. Arguments can also be made where an attorney files a lien then subsequently receives and disburses funds arising from the judgment, but doesn't without fees or assert a lien.
ATTACHMENT OF LIEN AGAINST SPECIFIC TYPES OF PROPERTY
As noted in the opinion of the Court in Ross v. Scannell cited above, states have adopted various schemes for the attorney to recover on their liens. In the Idaho case of Skelton v. Spencer, (Idaho 1981) 625 P.2d 1072, the attorneys involved in the case handled the matter right up to the time that the matter was submitted for decision whereupon they were discharged. In reviewing the Idaho statute, the Court held:
The law is well settled that an attorney in asserting a charging lien is entitled to recover against sums which his efforts have brought forth. Variously phrased, the intent of the law on this point is to allow the attorney an interest in the fruits of his skill and labors. The lien secures his right to compensation for obtaining the recovery or "fund" for his client. Of course, where the attorney's efforts are sterile, there would be nothing against which the lien right could be asserted, but where he has produced a fund, he has an equitable interest therein recognized by the lien statute and relevant case law.
The Idaho Code speaks of the lien attaching to "a verdict, report, decision, or judgment in his client's favor and the proceeds thereof in whosoever hands they may come." I.C. § 3-205. Further, this interest cannot be defeated or affected "by any settlement between the parties before or after judgment." Id.. The monies paid into court in case no. 20500 were the product of the settlement brought forth by the efforts of Rigby & Thatcher. Previous Idaho law has recognized, consonant with the statutory language, the right of attorneys to seek a lien recovery against the settlement "proceeds ... in whosoever hands they ... come." Miller v. Monroe, 50 Idaho 726, 300 P. 362 (1931); Hansborough v. D. W. Stanrod & Co., 43 Idaho 119, 249 P. 897 (1926).
The hands that funds may come could well be monies held by an escrow agent in connection with an indemnity escrow.
In certain cases, the lien in favor of an attorney may be impressed against the land. The mere fact that the client owns land does not, however, give the attorney the right to file a lien without some agreement between the parties granting a voluntary lien. In other words, the real property in question must be directly involved in the litigation for which the lien is claimed. In a quiet title action, you might see such a lien after a favorable decision in favor of the plaintiff. In an action where the plaintiff is attempting to eject the owner of the land, a successful counterclaim by the defendant stopping that effort could give rise to such a lien. A mortgage foreclosure where the mortgagee ends up obtaining a sheriff's deed to the land may result in a properly recorded lien.
Of key importance to this discussion is whether an attorney can file a lien against the real property in the real property records. If no right to record a lien exists by virtue of state statute or the action had no relationship to real property, consideration needs to be made by the owner for claims as to slander of title. In those states allowing the attorney to follow the proceeds or property, a person dealing with the public record should give a liberal review of the case to determine whether any claim could exist that the action affects real property of the client. In divorce cases, it is very common to see attorney's liens recorded with attempts to perfect arguing the property settlement of the client where real property was distributed.
In Colorado where the charging lien statute has been extended to cover ". . . any . . . property . . . on any judgment they may have obtained or assisted in obtaining, in whole or in part, and on any and all claims and demands in suit for any fees or balance of fees due or to become due from any client. . . ." [CRS §12-5-119] Both the legislature and the courts have then taken a broad view as to what the attorney lien may attach. The nature of this interest can then vary state by state with a recognition by the courts that the interest is or may become a direct charge on real property. In the Colorado case of Dolan v. Flett, (Colo. App. 1978) 582 P.2d 694, the law firm was directly responsible in creating a large equity in real property by getting a deed of trust removed as a lien against the land. Their lien had been filed, but not reduced to judgment when the client's first deed of trust went into foreclosure. The issue became whether the law firm had a direct right to make a notice of intent to redeem the land from the forced sale. The Court held that the attorney " . . . Myles has a statutory charging lien on "any judgment" he obtained on Cavanaugh's behalf. Section 12-5-119, C.R.S. 1973. In Fillmore v. Wells, 10 Colo. 228, 15 P. 343, the court construed the phrase "any judgment" to mean the "fruits of (any) judgment," including the realty in which a client's "interest . . . is preserved." Here, the nullification of the deed of trust eliminated a sizeable encumbrance on Cavanaugh's property. This, in turn, preserved for Cavanaugh the value of the subject property in excess of what was lawfully due General American as holder of the first deed of trust."
A similar result was reached in the case of Downey State Bank v. Major-Blakeney Corporation, (Utah 1978) 578 P.2d 1286. It was argued that since the rights of the client had been foreclosed where no redemption was made, the attorneys assignee then had no right to redeem based upon the unadjudicated attorney's lien. The Court held that the assignee of the attorney simply had to follow the rule of procedure relating to redemptions by giving an affidavit asserting the lien and the balance owing. The Court upheld the claim by the assignee of the attorney to a right to redeem despite the failure of the client to redeem the land.
Thus, it can be seen that in states allowing the attorney's lien to attach to the judgment and to the proceeds and property affected, that it would be possible for an attorney to assert a lien against real property. In cases where the object of the case was the foreclosure of a mortgage, the successful bid and sheriff's deed in favor of the client would be a typical case where an attorney's lien would found to attach. In the same manner, a similar result would be had in real property related actions. In other states as outlined above in Ross v. Scannell, above, not having either a direct right to lien the land or a right to follow the proceeds or property, getting to the real property, if available, is a little more difficult.
EXEMPTION OF ASSETS
In the case of Chapman v. Wells, (North Dakota 1996) 557 N.W.2d 725, an attorney sought to have his client, Mary Wells, awarded one half of the 401K retirement plan of the husband. The employer of Bradley Wells, the husband, rolled his 401K into an IRA account. The domestic relations order entered directed that Mary Wells was to receive one half of the IRA. Mary Wells owed Chapman monies for legal fees when the complaint was filed. Mary Wells filed bankruptcy claiming the IRA as exempt and Chapman filed his attorney's lien. Under North Dakota law, an IRA is exempt up to $50,000. The fund at question was less than this amount. The Court determined that the IRA was exempt despite the existence of a statute which has as its object the granting of security to the attorney's for their efforts in favor of their client.
DISCHARGE OF DEBT IN BANKRUPTCY
In a case where the client subsequent to the successful conclusion of the action in which the attorney claimed a lien filed bankruptcy, the issue was raised as to whether the bankruptcy removed the lien when the personal obligation was discharged. In the case of In re: Marriage of Berkland, (Colo. App. 1988) 762 P.2d 779, no action was taken by the trustee in the bankruptcy to avoid the attorney lien, the Court held:
In order to exercise this avoidance power, however, the trustee was required to file an adversary proceeding under the Rules of Bankruptcy Procedure 7001. In re Storage Technology Corp., supra. Because the trustee failed to do so, Treece's attorney's lien survived the petitioner's discharge in bankruptcy. Thus, the tax refund proceeds are still subject to the lien, even though petitioner's personal obligation on the underlying debt was discharged. See In re Andrews, 22 B.R. 623 (Bankr.D.Del.1982); In re Adkins, 7 B.R. 325 (Bankr.S.D.Cal.1980).
Accordingly, the trial court erred in ruling that Treece's lien was discharged in bankruptcy because the court believed, incorrectly, that Treece, a statutory lien claimant, had to object to the discharge in order to preserve the lien. On the contrary, it was the petitioner or the trustee in bankruptcy who was required to take some affirmative act in order to avoid the lien. This was not done.
This ruling is consistent with other cases where by operation of the bankruptcy laws that a debt is discharged, but the lien remains, at least to the extent that it had attached prior to the filing of the bankruptcy petition. See Reichert v. Koch, (Mont. 1983) 655 P.2d 993, 202 Mont. 167, for a discussion of a situation involving the survival of a judgment lien following discharged.
The attorney's charging lien in those states allowing the lien can be a very real impediment to real property transactions. The practitioner is cautioned to view these liens with appropriate respect to the difficulties that failure to do so may cause.