Priority of the Attorney’s Charging Lien
May 31, 2017 § 5 Comments
It is an ancient principle of the common law, and has long been recognized in Mississippi law, that attorneys have a lien on judgments and decrees obtained through the attorney’s successful representation. Where that lien falls in order of priority was the issue in a recent case.
Bar-Til, Inc. won a judgment for more than $205,000 against Superior Asphalt in chancery court. Instead of appealing, Superior interpled the money into the registry of the court while Bar-Til appealed the trial court’s denial of punitive damages. The chancellor granted the interpleader and entered a judgment declaring the judgment satisfied in full.
After the COA affirmed the denial of punitive damages, a scramble ensued among several creditors of Bar-Til, all of whom claimed a right to some of the funds. Some were judgment creditors. One was the McRae law Firm, which had successfully represented Bar-Til.
The interpled funds were insufficient to satisfy all of the claimants in full, so the chancellor apportioned the funds among them, including McRae, in a way that he deemed equitable.
Bar-Til appealed, arguing that McRae’s fees had priority, and that the chancellor erred by not recognizing the priority, and by not recognizing priorities or not of the other liens.
In Bar-Til, Inc. v. Superior Asphalt, et al., handed down May 9, 2017, the COA reversed and remanded. On the issue of priority of liens, Judge Greenlee wrote for the court:
¶10. Mississippi has long recognized an attorney’s right to have a lien on judgments and decrees procured through an attorney’s efforts on behalf of his client. An attorney has a “paramount lien on the money decree which he [has] obtained.” Collins v. Schneider, 187 Miss. 1, 192 So. 20, 23 (1939). “[A]n attorney’s lien on judgments and decrees obtained by [him] for fees on account of services rendered, belongs to the family of implied common law liens, and is firmly engrafted on the common law.” Id. A charging lien attaches when the attorney does “successfully pursue the [lawsuit] to conclusion and obtain a final judgment from which there [is] no appeal.” Tyson v. Moore, 613 So. 2d 817, 826 (Miss. 1992). At that point, “[the attorney’s] entitlement to a fee is vested.” In Collins, the Mississippi Supreme Court held that the attorney had a priority lien on funds held in the lower court’s register where “[t]he evidence conclusively show[ed] that nothing would have been recovered on the original cause of action . . . had it not been for [the attorney’s] labor, zeal[,] and skill in the investigation and vigorous prosecution of that suit to a successful conclusion.” Collins, 192 So. at 22.
¶11. In Indianola Tractor Co. v. Tankesley, 337 So. 2d 705, 706 (Miss. 1976), the Mississippi Supreme Court affirmed a trial court’s acknowledgment of a plaintiff’s attorney’s lien on the proceeds of a successful garnishment action. In ordering disbursement of the judgment, the law firm was listed first in priority. Id. The court cited to Chattanooga Sewer Pipe Works v. Dumler, 153 Miss. 276, 120 So. 2d 450, 453 (1929), in which the Supreme Court reiterated that “[i]t has been uniformly held by this [C]ourt that an attorney has a lien on the funds of his client for the services rendered in the proceeding by which the money was collected.”
¶12. Our appellate courts have noted since 1939 the absence in Mississippi of a “statute fixing or regulating the lien of an attorney, or the enforcement thereof.” Collins, 192 So. at 22. Consistent with common-law principles, multiple states statutorily mandate the priority of attorney’s fees, including Oregon, New York, California, Arkansas, Massachusetts, Alabama, and Georgia. For example, Alabama’s statute provides:
Upon actions and judgments for money, [attorneys] shall have a lien superior to all liens but tax liens, and no person shall be at liberty to satisfy the action or judgment, until the lien or claim of the attorney for his or her fees is fully satisfied; and attorneys-at-law shall have the same right and power over action or judgment to enforce their liens as their clients had or may have for the amount due thereon to them.
Ala. Code § 34-3-61(b). These statutes codify the equitable principle long recognized at common law that attorneys deserve payment for their successful services. The United States Court of Appeals for the Fifth Circuit, applying Mississippi law, held in American Fidelity that one of the rationales for not granting a law firm priority to retainage funds was that the law firm’s services had not been the cause of the release of the funds, therefore resulting in no injustice in not giving the law firm priority. We have the opposite situation at hand. Here, the services of the law firm—including seven years’ representation and over $16,000 in expenses—directly resulted in the judgment against Superior Asphalt.
¶13. Garnishees have the statutory right to compel interpleader. Miss. Code Ann. § 11-35-41 (Rev. 2004). This right protects the garnishee from double liability on the same judgment. The charging lien, protecting the attorney’s right to the fruits of his labor, and the right to interplead, protecting the garnishee from double liability, should not intersect with each other in such a way that frustrates one or the other right. If we were to adopt the approach that the contingency is not triggered in this circumstance, then practically—or rather, impractically—a plaintiff’s attorney working for a contingency fee would need to research standing garnishment claims in all eighty-two Mississippi counties prior to determining whether to accept a case. Any case that may result in an interpleader may be too risky to pursue. As the Mississippi Supreme Court explained in 1939, “it would be most inequitable and unjust for [the other claimants to the judgment] to be allowed to ‘ride free’ on the facts of this case.” Collins, 192 So. at 23.
¶14. We also note that the third-party creditors can continue to pursue collection of any remaining funds owed them pursuant to their respective judgments against Bar-Til. But as to the law firm, if the charging lien has not attached and does not have priority, the law firm will only receive for its successful services what—if anything—is left after all of the garnishors have taken the first bite at the interpled funds.
¶15. Here, the monies would not be available for distribution to the garnishors had not Bar-Til’s right to the judgment first vested. Superior Asphalt surrendered the money in satisfaction of the judgment against it, with no further right of appeal. We find that Superior Asphalt’s deposit of the funds into the registry of the court, consistent with its right to protect itself from double liability, did not prevent the law firm’s charging lien from attaching to the interpled funds. The law firm is first in priority.
¶16. As to priority between H&E Equipment and MMC Materials, MMC Materials properly concedes that H&E Equipment has priority. Even though MMC Materials’ judgment against Bar-Til was obtained first in 2008, priority here is governed by our garnishment statutes. Mississippi Code Annotated section 11-35-24(1) (Rev. 2004) provides in part that “[w]here more than one garnishment has been issued against an employee of a garnishee, such garnishee shall comply with the garnishment with which he was first served.” H&E Equipment was first to serve Superior Asphalt with a writ of garnishment related to any funds owed by Superior Asphalt to Bar-Til.
To make a longish story shortish: (a) the lien of an attorney who has been successful in obtaining the judgment that resulted in the interpled funds has first priority among creditors; and (b) garnishors stand in order of filing after the first priority.
I write concerning the “priority of garnishors”, as I am not sure I understand this outcome, or, at least, its apparent breadth. The opinion cites the garnishment statute (§11-35-24(1)) as establishing priority between two creditors who appear to be judgment creditors, and that the first one to serve a garnishment has priority, even where another’s judgment is prior in time. It is possible the Bar-Til decision can be justified on the grounds that it involves money or an intangible, but that issue does not appear to have been discussed or considered. The decision seems to assume that the subjects of garnishment are outside the bounds of the lien of a judgment and the priorities applicable thereto. I am not sure this would apply in all circumstances.
The principal judgment statute provides as follows:
§11-7-191. Enrolled judgment as lien
A judgment so enrolled shall be a lien upon and bind all the property of the defendant within the county where so enrolled, from the rendition thereof, and shall have priority according to the order of such enrollment, in favor of the judgment creditor, his representatives or assigns, against the judgment debtor and all persons claiming the property under him after the rendition of the judgment. A judgment shall not be a lien on any property of the defendant thereto unless the same be enrolled. In counties having two (2) judicial districts, a judgment shall operate as a lien only in the district or districts in which it is enrolled. Any judgment for the purpose described in Section 85-3-52 shall not be a lien on any property in this state, real, personal or mixed, that is owned by a resident of this state, and shall not be enforced or satisfied against any such property. (Emphasis supplied).
The following section of the Code provides for how the priority of a judgment lien may be forfeited. Notably, it requires an affirmative action (written notice to the senior creditor(s)) by the junior creditor to accomplish the advancement of the junior judgment lien’s priority.
§ 11-7-193. How priority of lien forfeited
A junior judgment creditor may give written notice to any senior judgment creditor requiring him to execute his judgment; and if the senior judgment creditor, being so notified, shall fail, neglect or refuse to have execution issued, and levied within ten days from said notice for the satisfaction of his judgment, he shall lose his priority, and the junior judgment creditor may cause execution to issue on his judgment and to be levied on any of the property of the defendant, and the proceeds of a sale thereof shall be applied to the junior judgments so levied.
Another statute makes similar provision.
§ 11-33-53. Loss of priority
If the plaintiff in a prior attachment fail to enforce his judgment, after ten days written notice to do so by the plaintiff in a subsequent attachment, he shall lose his priority; but where the amount of the prior attachment shall be less than the value of the property, process may issue on the subsequent judgment against the sureties on the replevin bond for the difference between the amount of the prior attachment and the value of the property as shown in the officer’s return.
There is no reason for the existence of these statutes if the Legislature intended for the priority of a judgment, i.e., according to the time of its rendition and recording, not to matter or to simply apply only to real property.
According to the decision in William Iselin & Co., Inc. v. Delta Auction, 433 So. 2d 911, 915 (Miss. 1983)(Jimmy Robertson writing), Mississippi law has generally considered the lien of a judgment and its priority to apply to both real and personal property owned by the debtor located in the county(s) where the judgment is recorded. The case also reflects exceptions to the attachment of the judgment lien for intangible personal property and for money. I quote Iselin at some length.
“The next argument advanced by the general creditors for affirmance is far more persuasive. It requires us to decide whether or not the judgment liens attached to the proceeds of the auction sale when they were deposited into the registry of the lower court. Under section 11-7-191 of the Miss. Code Ann. (1972), an enrolled judgment constitutes a lien on all property of the judgment defendant which is in the county where the judgment was enrolled. This section has been generally construed by this Court, with some exceptions, to mean that an enrolled judgment is a lien on both real and personal property owned or acquired by the judgment defendant. Motor Securities Co., Inc. v. B.M. Stevens Co., 225 Miss. 361, 83 So.2d 177 (1955).
However, notwithstanding the broad statutory language, our decisions have excepted intangible property, such as vouchers for the payment of money and the right to receive money, from being subject to a judgment lien without garnishment or other appropriate writ. See Simmons-Belk, Inc. v. May, 283 So.2d 592 (Miss. 1973) (promissory note); Bank of Monticello v. L.D. Powell Co., 159 Miss. 183, 130 So. 292 (1930) (decree allowing solicitor fee in partition cause was not subject to lien of enrolled judgment against the solicitor); R.F. Walden & Co. v. Yates, 111 Miss. 631, 71 So. 897 (1916) (voucher for payment of money); Bryan v. Henderson Supply Co., 107 Miss. 255, 65 So. 242 (1914) (choses in action).
In addition, our cases have also consistently held that money is not subject to an enrolled judgment lien absent a seizure of the money. McPhillips Constr. Co. v. Carter-Murphy Constr. Co., 227 So.2d 302 (Miss. 1969) (no lien established against overbids in amount of $1,502.70 paid into registry of court where judgment creditors never attempted to garnish or attach the overbids); Henry v. Alexander, 131 Miss. 588, 94 So. 846 (Miss. 1923) (lien on money begins from seizure and not from date of judgment); Cahn v. Person, 56 Miss. 360 (1879) (same). The Cahn case explained the rationale for distinguishing between money and intangible property from other personal property held by the defendant in the following language: “Money, under the statute, is liable to seizure under execution, but the lien begins from the seizure, and not from the date of the judgment. The law does not affix a lien to things so fugitive, which circulate as currency, and are so impossible to identify.” [Id. at 363].”
As noted, I can probably justify the Bar-Til decision on the grounds that the interpled funds were “money” or “intangible personal property”, but it seems to me an argument could be made that the case law was intended to cover “currency” and not other types of financial obligations which might not be “so fugitive.”
§ 11-35-1. When issued on judgment or decree
On the suggestion in writing by the plaintiff in a judgment or decree in any court upon which an execution may be issued, that any person, either natural or artificial, including the state, any county, municipality, school district, board or other political subdivision thereof, is indebted to the defendant therein, or has effects or property of the defendant in his, her or its possession, or knows of some other person who is indebted to the defendant, or who has effects or property of the defendant in his, her or its possession, it shall be the duty of the clerk of such court to issue a writ of garnishment, directed to the sheriff or proper officer, commanding him to summon such person, the state, county, municipality, school district, board or other political subdivision thereof, as the case may be, as garnishee to appear at the term of court to which the writs of garnishment may be returnable, to answer accordingly.
It seems to me that to the extent Bar-Til depends on the garnishment statute for its priorities and not the judgment statute and its interpretations, it is misleading and likely to lead to misapplications in the future. Garnishments aren’t only issued to reach “currency”, or “money” if you prefer; they can also be addressed to tangible personal property or, perhaps, “intangibles” which are not “so fugitive”. Upon seizure, the sheriff has a duty to apply the property seized to the judgments according to their priority (subject to advancement of position, as noted above). At least to the extent Bar-Til and the garnishment statute are cited to apply to all garnishments, I think that is incorrect, and the issue must be addressed to the judgment statute. It is one thing for the garnishee to have to respond and interplead to the first garnishment it is served with, but that does not finally decide the priority of the recovery in all cases – it seems to me. Thank you for letting me get this off my chest. I hope others have thoughts too.
Thanks for your comments. All I can add is that I think that this case is somewhat limited in its application. I always thought of the attorney’s lien as possessory — that is, it applied to assets in the possession and control of the lawyer, such as funds held in a trust account. This takes that a step further. It may be limited to its facts. If not, this will have quite a ripple effect.
Judge, I agree that the case is restricted largely to the attorneys’ lien issue which I personally believe the Court got right, and it is consistent with all the case law dealing with the priority of consensual security interests and other types of liens, such as attorneys’ liens, applying ahead of judgment liens. The point of my comment was about the discussion of the priority between the two judgment creditors after the satisfaction of the judgment lien, and the inadequate (in my opinion) discussion of that priority issue and the risk of future misapplication of that discussion, which, of course, appears to be essentially dicta. Thanks for the response and your blog. Best, JIM
Does this apply to us?
I think it does.