In re Garcia, Bankruptcy No. 86-02645G

CourtUnited States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania
Writing for the CourtBRUCE FOX
Citation69 BR 522
PartiesIn re Oswald GARCIA, Debtor. The NEW WORLD MARKETING CORP., Plaintiff, v. Oswald GARCIA, Defendant.
Docket NumberAdv. No. 86-1273G.,Bankruptcy No. 86-02645G
Decision Date27 January 1987

69 B.R. 522 (1987)

In re Oswald GARCIA, Debtor.
The NEW WORLD MARKETING CORP., Plaintiff,
v.
Oswald GARCIA, Defendant.

Bankruptcy No. 86-02645G, Adv. No. 86-1273G.

United States Bankruptcy Court, E.D. Pennsylvania.

January 27, 1987.


69 BR 523

Edward C. Toole, Jr., Clark, Ladner, Fortenbaugh & Young, Philadelphia, Pa., for objector, Joseph A. Eagan.

Penelope A. Davidoff, Phillips & Phelan, Philadelphia, Pa., for plaintiff, The New World Marketing Corp.

Richard B. Perlman, Norristown, Pa., for debtor/defendant, Oswald Garcia.

OPINION

BRUCE FOX, Bankruptcy Judge:

The narrow issue in this adversary proceeding concerns the interrelationship of Fed.R.Civ.P. 45(d) and the Pennsylvania common law attorney's "retaining lien." Plaintiff New World Marketing Corporation has subpoenaed debtor's non-bankruptcy counsel to attend a deposition at which time original documents in the attorney's possession are sought to be examined. The attorney, Clark Ladner, Fortenbaugh & Young ("Clark Ladner"),1 has objected to the production of these documents by asserting a "charging lien."2 A brief recitation of relevant facts is necessary.

I.

Plaintiff and the debtor entered into an agreement whereby the debtor would sell books on consignment for the benefit of the plaintiff. In 1985, plaintiff brought suit against the debtor in state court seeking both the return of any unsold books as well as the proceeds due it from the sales, estimated at approximately $226,000.00. The debtor retained Clark Ladner who raised various defenses and counterclaims on the debtor's behalf.

In May 1986, the debtor filed a voluntary petition in bankruptcy and listed Clark Ladner as an unsecured creditor owed approximately $5,500.00. Plaintiff was listed as a contingent/disputed unsecured creditor in the amount of $300,000.00. Plaintiff filed an unsecured proof of claim in the approximate amount of $226,000.00. An objection to this proof of claim was filed.

Plaintiff, in October 1986, filed this adversary proceeding pursuant to 11 U.S.C. § 727(a) objecting to the debtor's discharge. Plaintiff's complaint in this court alleges that the debtor made undisclosed payments in favor of his wife's secured creditors, failed to disclose on his schedules the existence of a bank account and the existence of his counterclaim and also overstated the amount claimed by another disputed/contingent unsecured creditor. Plaintiff believes that if it proves these allegations, then debtor's discharge must be denied by virtue of 11 U.S.C. § 727(a)(2)(A), and (a)(4)(A). The debtor denies that he has violated section 727(a).

In the course of discovery, in connection with the objection to its proof of claim as well as the adversary proceeding, plaintiff sought to review original documents in the possession of Clark Ladner. The firm asserts that the debtor owes it approximately $5,000.00 and that it has a retaining lien on the documents in its possession unless plaintiff pays the fee owed or provides "adequate protection" for the payment of such fee. Clark Ladner believes that the subpoena should be quashed. Plaintiff asserts that it is entitled to discover, under the bankruptcy rules of procedure, all relevant, non-privileged documents in the firm's possession.

II.

The Third Circuit has recognized the existence of Pennsylvania's common law retaining lien in favor of attorneys. "The

69 BR 524
common law general retaining lien permits the attorney to retain money, papers or other property in his possession to secure payment of costs and fees, not only in a particular case, but arising out of other professional businesses as well." Novings v. E.I. DuPont de Nemours & Co., 809 F.2d 212, 218 (3d Cir.1987); accord, United States v. Fidelity Philadelphia Trust Co., 459 F.2d 771, 775 (3d Cir.1972).3 The purpose of the retaining lien is to provide the attorney with a means to secure the payment of fees due from his client. However, the lien is purely a possessory lien
The retaining lien is a mere right of the attorney to retain the papers, etc. of his client in his possession until his claim is satisfied; it confers no further rights and is valuable to the attorney in proportion to the extent that such retention by him will embarrass the client, that is to say, he cannot sell said paper, under process to foreclose his lien, as may a pledgee or mortgagee in other cases, but his lien extends only to the right to retain such papers until his debt is paid.

In re Professional Hockey Antitrust Litigation, 371 F.Supp. 742, 747 (E.D.Pa.1974), quoting Smyth v. Fidelity Deposit Co., 125 Pa.Super. 597, 190 A. 398, 401, aff'd per curiam, 326 Pa. 391, 192 A. 640 (1937).

Before the passage of the Bankruptcy Code in 1978, it had been held that the retaining lien is not voided...

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1 practice notes
  • In re Athos Steel and Aluminum, Inc., Bankruptcy No. 86-01486.
    • United States
    • United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania
    • January 27, 1987
    ...and $84,999.00; (b) seven companies reported the salary as between $85,000.00 and $99,999.00; and (c) four companies reported the 69 BR 522 salary as between $100,000.00 and $114,999.00. For the 22 companies with gross annual sales between $10 million and $15.9 million: (a) two companies re......
1 cases
  • In re Athos Steel and Aluminum, Inc., Bankruptcy No. 86-01486.
    • United States
    • United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania
    • January 27, 1987
    ...and $84,999.00; (b) seven companies reported the salary as between $85,000.00 and $99,999.00; and (c) four companies reported the 69 BR 522 salary as between $100,000.00 and $114,999.00. For the 22 companies with gross annual sales between $10 million and $15.9 million: (a) two companies re......

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