CAMDEN NAT. BANK v. SS Navigation Co., Docket: Oxf-09-250

• Decision Date: 01 April 2010
• Docket Number: Docket: Oxf-09-250
• Citation: 2010 ME 29,991 A.2d 800
• Parties: CAMDEN NATIONAL BANK v. STEAMSHIP NAVIGATION CO. et al.
• Court: Maine Supreme Court

991 A.2d 800
2010 ME 29

CAMDEN NATIONAL BANK
v.
STEAMSHIP NAVIGATION CO. et al.

Docket: Oxf-09-250

Supreme Judicial Court of Maine.

Argued: January 13, 2010.

Decided: April 1, 2010.

Janet T. Mills, Attorney General, Lucinda E. White, Asst. Atty. Gen., Christopher C. Taub, Asst. Atty. Gen. (orally), Augusta, ME, for the State of Maine.

Daniel G. Lilley, Esq., Karen E. Wolfram, Esq. (orally), Daniel G. Lilley Law Offices, P.A., Portland, ME, for Daniel G. Lilley, P.A., and the Steamship Navigation Company.

Richard L. O'Meara, Esq., Murray, Plumb & Murray, Portland, ME, for amicus curiae Maine Trial Lawyers Association.

Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, MEAD, and JABAR, JJ.

991 A.2d 801

Majority: SAUFLEY, C.J., and ALEXANDER, LEVY, and MEAD, JJ.

Dissent: JABAR, J.

MEAD, J.

¶ 1 The State of Maine appeals, and Steamship Navigation Company (Steamship) cross-appeals, from the judgment of the Superior Court (Oxford County, Wheeler, J.) finding that Daniel G. Lilley, P.A. (Lilley) had perfected an attorney lien and was entitled to 35% of Steamship's "gross recovery" from a separate lawsuit. As we find no error in the trial court's conclusion that Lilley had perfected an attorney lien, we affirm that aspect of the judgment. However, we conclude that Lilley's contingent fee should have been based upon the net recovery by Steamship in its action against Camden National Bank (Bank), not the total jury award plus interest, and we vacate that portion of the judgment.

I. BACKGROUND

¶ 2 Steamship and the Bank have been involved in litigation concerning a series of events in their lending relationship since 2001. During that time, Steamship and the State were also involved in litigation regarding environmental violations at Steamship's property in the Town of Warren. Once the underlying claims between Steamship and the Bank were resolved, the Bank instituted this interpleader action to determine the priority of Steamship's creditors, which included both Lilley and the State. Viewed in the light most favorable to Lilley as the prevailing party, see Garrison City Broad., Inc. v. York Obstetrics & Gynecology, P.A., 2009 ME 124, ¶ 13, 985 A.2d 465, 469, the record supports the following facts.

A. Prior Litigation Between Steamship and the Bank

¶ 3 In April 2001, Steamship filed a complaint, which included tort and contract claims, against the Bank. Three weeks later, the Bank brought a foreclosure action against Steamship. At that time, a law firm other than Lilley represented Steamship.

¶ 4 Steamship's motion to dismiss the foreclosure action was denied. The court (Perkins, J.) agreed with the Bank that its claims in the foreclosure action were not compulsory counterclaims to Steamship's lawsuit pursuant to M.R. Civ. P. 13(a). However, the two cases were "consolidated pursuant to M.R. Civ. P. 42(a) for the purposes of discovery" due to "the overlap in parties and issues." Steamship then attempted to incorporate its tort and contract claims into the foreclosure action as counterclaims, but the court (Delahanty, J.) dismissed them with prejudice.

¶ 5 Lilley joined the other law firm in its representation of Steamship in January 2002 and signed a contingent fee agreement (2002 Agreement) with them. In December 2002, a summary judgment was entered against Steamship in the foreclosure action. On one of the Bank's foreclosure claims, the court specified that the amount of attorney fees and costs would not be determined until Steamship's tort and contract action was resolved. For the Bank's other claims, the court allowed the Bank to wait for the resolution of Steamship's action before filing a claim for attorney fees and costs. The Bank subsequently obtained a deficiency judgment against Steamship.

¶ 6 In the fall of 2004, it was agreed that the other law firm would be released from its representation, and Lilley executed a new contingent fee agreement (2004 Agreement) with Steamship. Pursuant to the 2004 Agreement, Lilley would be paid

991 A.2d 802

"35% ... for settlement or trial (not to include appeal) of gross recovery." (Emphasis omitted.) It also stated that the contingent fee would be based upon "actual collection of judgment or settlement" and paid "via direct deduction from funds received in trust."¹

¶ 7 In September 2004, a jury awarded Steamship $1,500,000 in its action against the Bank. We affirmed the judgment on appeal. S.S. Navigation Co. v. Camden Nat'l Bank, 2006 ME 11, ¶¶ 7-10, 889 A.2d 1014, 1017-18.

¶ 8 In September 2006, the court (1) denied Steamship's motion to set aside the foreclosure judgment; (2) set off the Bank's deficiency judgment resulting from the foreclosure action against Steamship's jury award, leaving a balance of $638,290.66 owing to Steamship; and (3) calculated the costs, expenses, and accrued interest on both parties' judgments. On appeal, we affirmed each aspect of the court's judgment. Camden Nat'l Bank v. Dunican, Mem-07-84 (May 8, 2007).

B. The Current Interpleader Action

¶ 9 Following the court's set off of the Bank's deficiency judgment against Steamship's jury award, the Bank filed this interpleader action. It requested that the court allow it to pay its net obligation through the court, which would halt the accrual of interest, and determine the priority of Steamship's creditors, including Lilley and the State. In August 2007, the court (Wheeler, J.) (1) denied Steamship's motion to dismiss the interpleader action; (2) authorized the Bank to make payment to the court; and (3) determined that the Bank should pay $638,290.66 plus the post-judgment interest that had accrued on the full amount of the $1,500,000 judgment. The Bank subsequently paid $739,000.38 to the court (the interpleader fund).²

¶ 10 Following a trial on the interpleader action, the court determined that (1) Lilley had established a valid attorney lien as to "35% of the gross Steamship recovery," (2) attorney fees in that amount would be reasonable, and (3) the attorney lien had first priority. Also, the court denied Steamship's motion for judgment as a matter of law against the State, which claimed that the State had not perfected its lien against Steamship. The State's appeal and Steamship's cross-appeal followed.

II. DISCUSSION

A. Perfection of Lilley's Attorney Lien

¶ 11 In its appeal, the State initially argued that an attorney lien should be held to the same perfection standards as other types of liens, and it contended Lilley had not satisfied these requirements. The State has since taken the position that we need not address the perfection issue if we find that Lilley's lien should have been based on 35% of the interpleader fund, rather than 35% of Steamship's jury award plus interest. We find no error in the trial court's conclusion that Lilley had established and perfected an attorney lien, and we affirm that portion of the judgment. See Libner v. Me. County Comm'rs' Ass'n, 2004 ME 39, ¶¶ 10-11, 845 A.2d 570, 573; Newbert v. Cunningham, 50 Me. 231, 232-33 (1863).

B. The Set Off

¶ 12 Before discussing the calculation of Lilley's contingent fee, we note

991 A.2d 803

that, functionally, the Bank's deficiency judgment and Steamship's jury award were part of a single recovery. Although the Bank's foreclosure action and Steamship's tort/contract action were not fully consolidated, they were consolidated for discovery due to the recognition that there was an "overlap in parties and issues." The cases were also brought together to calculate the Bank's attorney fees. In its previous appeals, Steamship did not assert error in the denial of its motion to dismiss the Bank's foreclosure action and the dismissal of its counterclaims in that action. In this unusual circumstance, we approved the set off, Camden Nat'l Bank, Mem-07-84, even though a request for a set off must ordinarily be adequately pleaded to give notice to the other party, which does not appear to have occurred here.³ See FDIC v. Notis, 602 A.2d 1164, 1165-66 (Me.1992). Therefore, in determining Lilley's contingent fee, we continue to treat the set off as if it had been pleaded as a claim or counterclaim in either the foreclosure...