Karras v. Alpha Corp.

• Decision Date: 30 November 1994
• Docket Number: No. 18748,18748
• Citation: 528 N.W.2d 397
• Parties: Chris KARRAS, Plaintiff and Appellant, v. ALPHA CORPORATION, Defendant. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 397

528 N.W.2d 397

Chris KARRAS, Plaintiff and Appellant, v. ALPHA CORPORATION, Defendant.

No. 18748.

Supreme Court of South Dakota.

Considered on Briefs Nov. 30, 1994.

Decided March 1, 1995.

Chris Karras, pro se.

Michael J. Schaffer and Michael A. Hauck of Davenport, Evans, Hurwitz & Smith, Sioux Falls, for appellee Scott G. Hoy.

MILLER, Chief Justice.

Appellant Chris Karras appeals the trial court's declaration that his former attorney had an enforceable attorney's lien on certain settlement proceeds paid to Karras by Alpha Corporation. He contends that the trial court, which presided over the original litigation between Karras and Alpha Corporation, lacked jurisdiction to decide the validity of the attorney's lien, asserting that a separate action is required. He also claims that the lien was not valid and enforceable because his former attorney withdrew as counsel of record before the settlement was finalized. We affirm.

FACTS

In July of 1988, Scott Hoy began representing Karras in trademark litigation against Alpha Corporation. ^* Hoy received a $7,500 retainer from Karras. Under their fee agreement, Hoy billed Karras $80 per hour, plus taxes and costs. The agreement further provided that "fees over and above $7500 will be paid first out of any recovery made on your behalf; if there is no recovery, fees will not be charged in excess of $7500."

When Karras' trademark case came up for trial, the trial judge bifurcated the issues of trademark ownership and damages. The jury found for Karras on the issue of trademark ownership. The jury awarded no compensatory damages, but granted Karras $50,000 in punitive damages. Following trial, Hoy served an attorney's lien on the attorney for Alpha Corporation. The attorney's lien provided in pertinent part: "You will hereby take notice that the undersigned claims an attorney's lien on the amount of $30,000.00 for services rendered in the trial of this matter from the proceeds of the judgment from the time of filing."

The trial court subsequently struck the award of punitive damages and Karras appealed to this court. We reversed and remanded for a new trial. Time Out v. Karras, 469 N.W.2d 380 (S.D.1991).

Hoy continued to represent Karras in preparation for the retrial. Prior to the scheduled trial date, Alpha indicated it would settle the trademark infringement claim for $75,000. Contrary to Hoy's recommendations, Karras refused the settlement offer. Two months later, Hoy moved to withdraw as Karras' attorney due to differences with his client regarding the proper handling of the case. The trial court found good cause existed for Hoy's withdrawal and granted his motion.

Karras then hired attorney Steven M. Johnson to represent him in the retrial. Johnson agreed to represent Karras under a fee arrangement for one-third of any recovery in excess of the $75,000 which had previously been offered. Johnson ultimately negotiated a settlement with Alpha whereby it agreed to pay Karras $125,000 as settlement of the trademark infringement claim. Of this amount, $60,000 was payable immediately. Also, pursuant to the agreement, Alpha signed a promissory note dated March 13, 1994, agreeing to pay the $65,000 balance, plus interest, in approximately equal installments in March, 1993 and March, 1994. By letter dated March 12, 1992, to Alpha Corporation's attorney, Hoy waived any claim to the first installment of $60,000, but reasserted the continued existence of his lien on later settlement payments.

Pursuant to a stipulation for dismissal filed by Alpha Corporation and Karras, the trial court entered a judgment of dismissal of the trademark infringement action on March 13, 1992.

On March 4, 1993, when the second installment date was approaching, Hoy filed a motion with the trial judge who had presided over the trademark litigation. The purpose of this motion was to obtain a determination of his attorney's lien on the remaining installments due under the note. (In a separate federal tax lien foreclosure action filed by the United States of America against Karras, the 1993 and 1994 installments were deposited by Alpha Corporation with the Clerk of the United States District Court for the District of South Dakota, Southern Division, to determine the priority of the various claims to the monies.)

The trial court allowed discovery and held a hearing on Hoy's motion. In findings of fact and conclusions of law, the trial court concluded that it had continuing jurisdiction to determine the amount and validity of Hoy's attorney's lien against the proceeds of the settlement agreement between Karras and Alpha Corporation. The trial court found that the fee agreement between Hoy and Karras did not involve a contingent fee, although it did provide that fees over $7,500 would not be charged if no recovery was made. The trial court further found that Hoy's fees for representing Karras in the trademark litigation prior to his withdrawal were $31,079 and that these fees were fair and reasonable for the work Hoy had performed in connection with this litigation. The trial court concluded that Hoy had properly perfected his attorney's lien pursuant to SDCL 16-18-21, and that he held a valid and enforceable lien in the amount of $31,079.00, plus interest against the settlement installments payable to Karras from Alpha Corporation under the promissory note.

Karras appeals.

ISSUE I

WHETHER THE TRIAL COURT WHICH ADJUDICATED THE UNDERLYING ACTION HAD JURISDICTION TO DETERMINE THE AMOUNT AND VALIDITY OF THE ATTORNEY'S LIEN FILED BY KARRAS' FORMER ATTORNEY.

Karras argues that the trial court lacked jurisdiction over Hoy's motion to determine his attorney's lien. Karras contends that Hoy could only recover fees due through a separate action in quantum meruit. We disagree.

First, quantum meruit is not the only remedy available to Hoy. Quantum meruit is "an equitable doctrine, based on the concept that no one who benefits by the labor and materials of another should be unjustly enriched thereby; under those circumstances, the law implies a promise to pay a reasonable amount for the labor and materials furnished, even absent a specific contract therefor." Black's Law Dictionary 1243 (6th ed.1990). However, South Dakota law explicitly allows an attorney to recover fees by operation of an attorney's lien. SDCL 16-18-21 provides:

An attorney and counselor at law has a lien for a general balance of compensation in and for each case upon:

. . . . .

(3) Money due his client in the hands of the adverse party or attorney of such party, in an action or proceeding in which the attorney claiming the lien was employed, from the time of giving notice in writing to such adverse party or attorney of such party, if the money is in the possession or under the control of such attorney, which notice shall state the amount claimed and in general terms for what services[.] (Emphasis added.)

It is undisputed that Hoy gave notice of his claim for compensation to the attorney for Alpha Corporation, and that the Alpha Corporation attorney understood this claim to extend not only to judgments, but also to all "money due," including settlement...