Fuller v. Stonewall Cas. Co. of W. Va., 15665

CourtSupreme Court of West Virginia
Citation172 W.Va. 193,304 S.E.2d 347
Docket NumberNo. 15665,15665
Parties, 36 UCC Rep.Serv. 684 Hershel FULLER, Plaintiff Below, Richard G. Rundle, etc., Appellant v. STONEWALL CASUALTY CO. OF W. VA., etc.
Decision Date22 June 1983

4. A loss payee under a fire insurance policy is ordinarily looked upon to have a separate contractual right with the insurer. By reason of this contractual right, a lienholder who is named as loss payee on an insurance policy is entitled to the insurance proceeds to the extent of the amount of his debt which is independent of the claim of other lien or judgment creditors. A mortgagee or lienholder has no claim to the benefit of a fire insurance policy unless he has been named loss-payee or the policy has otherwise been assigned to him. Thus, an attorney's lien does not have priority to funds obtained by a loss payee, who is not represented by the attorney claiming such lien.

5. Where a guarantor pays to the creditor the debt on behalf of the principal obligor, he is ordinarily entitled to be subrogated to the rights of the creditor as against the principal obligor and accrue to such security as has been taken by the creditor from the principal obligor.

6. "Subrogation, being a creation of equity, will not be allowed except where the subrogee has a clear case of right and no injustice will be done to another." Syllabus, Buskirk v. State-Planters' Bank & Trust Co., 113 W.Va. 764, 169 S.E. 738 (1933).

7. "Subrogation, as a general rule, will not be decreed until the entire debt, the security for which the subrogee seeks, has been paid." Syllabus Point 2, Price v. Lovins, 117 W.Va. 624, 187 S.E. 318 (1936).

8. The provisions of W.Va.Code, 46-9-310, are not available for an attorney's lien.

Richard G. Rundle, Pineville, for appellant.

James C. Lyons, Pineville, for Stonewall Cas. Co., etc.

G. David Brumfield, Ballard & Brumfield, Welch, for First Nat. Bank of Bluefield and Yeager Ford Sales, Inc.

MILLER, Justice:

The primary issue on this appeal is whether an attorney's lien, for services rendered Hershel Fuller purchased a truck in 1979 from Yeager Ford Sales, Inc. (hereinafter Yeager Ford) and executed a security agreement which was subsequently assigned to the First National Bank of Bluefield (hereinafter Bank). The terms of the agreement required Fuller to secure automobile insurance which he obtained from Stonewall Casualty Company. The Bank was made a loss payee under the policy. Thereafter, the truck was destroyed by fire and Stonewall Casualty refused to settle the claim.

to a client for collecting proceeds under the provisions of an automobile casualty policy, is superior to the rights of the client's chattel mortgage lienholder to whom loss is payable under a loss payee clause of the insurance policy. The Circuit Court of Wyoming County held that the attorney's lien was not superior. We affirm, in part, and reverse, in part.

Fuller retained Attorney Richard Rundle on a twenty-five percent contingency fee basis and a suit was instituted against Stonewall Casualty. The attorney asserts that neither the Bank nor Yeager Ford assisted or offered to help in the suit to collect on the policy, although they monitored the litigation and appeared at various hearings.

The litigation terminated with Stonewall Casualty agreeing to pay $6,500 in settlement of the claim. At a distribution hearing, the circuit court allocated $2,480.01 of the proceeds to the Bank, and $3,832.83 to Yeager Ford based on the fact that it had made payments on behalf of Fuller when he ceased his installment payments after the truck was destroyed by the fire. This left $187.19 of the proceeds available for the attorney.

The attorney maintains that Yeager Ford had no lien, judgment nor legal claim against Fuller for the destroyed truck and, therefore, was not entitled to any of the insurance proceeds. He also contends that his attorney's lien should not be subordinate to the Bank's claim.

I. CLAIM OF THE BANK

We have sanctioned the use and enforceability of charging liens by attorneys in this jurisdiction. 1 In Syllabus Point 1 of [172 W.Va. 196] Fisher v. Mylius, 62 W.Va. 19, 57 S.E. 276 (1907), we said:

"An attorney has a lien, on a judgment obtained by him for his client, for his services in the case, the amount whereof is fixed by special contract, although payment thereof cannot be had under the terms of the contract until the money is actually recovered, and no money can be had under an execution on the judgment." 2

The general rule regarding the priority of an attorney's lien is that in the absence of some statute, 3 the lien of an attorney ordinarily takes effect at the time of the commencement of the attorney's services. Hanna Paint Mfg. Co. v. Rodey An attorney's charging lien attaches only to a judgment or fund of money that the client is entitled to receive and which the attorney procured through his efforts, as evidenced by the following Syllabus Points of Schmertz v. Hammond, 51 W.Va. 408, 41 S.E. 184 (1902):

Dickason, Sloan, Akin & Robb, 298 F.2d 371 (10th Cir.1962); Ingalls Iron Works Company v. Fehlhaber Corporation, 337 F.Supp. 1085 (S.D.N.Y.1972); Great American Insurance Company v. Department of Revenue, State of Illinois, 226 F.Supp. 512 (N.D.Ill., E.D.1963); T. Harlan & Co. v. Bennett, Robbins & Thomas, 127 Ky. 572, 106 S.W. 287 (1907); St. Joseph's Hospital v. Quinn, 241 Md. 371, 216 A.2d 732, 25 A.L.R.3d 849 (1966); Myers v. Miller, 134 Neb. 824, 279 N.W. 778, 117 A.L.R. 977 (1938); 7 Am.Jur.2d Attorneys at Law § 332 (1980).

"4. An attorney has no lien upon a fund which he is not instrumental in creating, and which never came to his hands.

"5. An attorney's special lien for pay for his services out of a fund in court exists only where his client is entitled to participate in that fund. He cannot claim it out of a fund decreed to go to a party under a right adverse to that of the party represented by the attorney. Such party cannot be compelled to pay for the services of an attorney rendered against him.

"6. Where a fund in court arising from a sale of property is consumed by a prior lien, the attorney representing a junior demand has no lien upon that fund for his services."

This is also the general rule elsewhere. In Re Shirley Duke Assoc., 611 F.2d 15 (2nd Cir.1979); Lyman v. Campbell, 182 F.2d 700 (D.C.Cir.1950); Conroy v. Conroy, 392 So.2d 934 (Fla.App.1980); Covington v. Rhodes, 38 N.C.App. 61, 247 S.E.2d 305 (1978).

In the present case, the Bank was named as loss payee on the insurance policy that covered the truck for the fire loss. A loss payee under a fire insurance policy is ordinarily looked upon to have a separate contractual right with the insurer. Fire Association of Philadelphia v. Ward, 130 W.Va. 200, 42 S.E.2d 713 (1947); Fayetteville Building and Loan Association v. Mutual Fire Insurance Company of West Virginia, 105 W.Va. 147, 141 S.E. 634 (1928); 5A Appleman, Insurance Law and Practice § 3401 (1970); 43 Am.Jur.2d Insurance § 194 (1969). By reason of this contractual right, a lienholder who is named as loss payee on an insurance policy is entitled to the insurance proceeds to the extent of the amount of his debt which is independent of the claim of other lien or judgment creditors. E.g., Calvert Fire Insurance Company v. Environs Development Corporation, 601 F.2d 851 (5th Cir.1979) ; City of Newark v. Central & Lafayette Realty Company, Inc., 150 N.J.Super. 18, 374 A.2d 504 (1977); St. Louis County National Bank v. Maryland Casualty Company, 564 S.W.2d 920 (Mo.App.1978). In Calvert Fire Insurance Company v. Environs Development Corporation, supra, at 858, the court expressed the rule as follows: "[A] mortgagee or lienholder has no claim to the benefit of a fire insurance policy unless he has been named loss-payee or the policy has otherwise been assigned to him." This rule has been specifically applied in several cases involving an attorney's lien where the attorney did not represent the loss payee. E.g., Sureck v. United States Fidelity and Guaranty Company, 353 F.Supp. 807 (W.D.Ark.1973); Leiden v. General Motors Acceptance Corporation, 136 Ga.App. 268, 220 S.E.2d 716 (1975); Howard, Singer & Meehan v. Clayton Federal Savings and Loan Association, 578 S.W.2d 56 (Mo.App.1978). See also 5A Appleman, Insurance Law and Practice § 3404 (1970).

Based on this law, we conclude that the circuit court was correct in determining that the Bank was entitled to the insurance proceeds independent of the attorney's lien. 4

II. CLAIM OF YEAGER FORD

Yeager Ford maintains that the payment it received from the insurance proceeds was proper because it had paid the Bank when Fuller defaulted on his installment purchase contract. Yeager Ford points to the fact that it guaranteed Fuller's commercial paper when it was assigned to the Bank. 5 We are aware of general law to the effect that where a guarantor pays to the creditor the debt on behalf of the principal obligor, he is ordinarily entitled to be subrogated to the rights of the creditor as against the principal obligor and accrue to such...

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