Matter of Armando Gerstel, Inc.
| Decision Date | 24 October 1984 |
| Docket Number | Bankruptcy No. 83-02044-BKC-JAG,84-0217-BKC-JAG-A and 84-0231-BKC-JAG-A.,Adv. No. 84-0231-BKC-JAG-A |
| Citation | 43 BR 925 |
| Parties | In the Matter of ARMANDO GERSTEL, INC., Debtor. EFRAIM ROSEN, INC., a corporation, Plaintiff, v. Jeanette E. TAVORMINA, etc., et al., Defendants. GOODHART, ROSNER & GREEN, P.A., a Florida professional association, Counterclaimant/Crossclaimant, v. EFRAIM ROSEN, INC., Plaintiff, and Jeanette E. Tavormina, etc., et al., Defendants/Crossdefendants, and Additional Parties/Crossdefendants. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
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Irving M. Wolff, Holland & Knight, Miami, Fla., for Goodhart.
Robert G. Hewitt, Harper & Hewitt, Miami, Fla., for Tavormina, trustee.
Britton, Cohen, Cassel, Kaufman & Schantz, P.A., Miami, Fla., for Efraim Rosen, Nachman Rosen, American Credit Indem. and Ba-Bar Diamond Co.
Jerry M. Markowitz, Miami, Fla., for Herris.
Maurice Rosen, N. Miami, Fla., for Public Ins. Consultants.
Hauser & Metsch, Miami, Fla., for Aquatic Co.
Richard Phillips, Schatzman & Schatzman, Coral Gables, Fla., for Evvco Enterprises, Inc.
Angelo Ali, Miami, Fla., for Lillian Kaufman and Bueche Girod Corp.
Phillips & Phillips, P.A., Paul S. Berger, Miami, Fla., for Florence R. Semet.
Tralins & Potash, N. Miami, Fla., for Michael Landy.
Billy Tarnove, Fort Lauderdale, Fla., for Irving Halpern.
Armando Oliveros, Jr., Miami, Fla., for Fausto Villar.
Lawrence Fuller, David Rosner, pro se.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
The above adversary proceedings involve numerous questions of fact and law regarding the amount, validity and priority of various claims to $1,500,000 plus accrued interest constituting the proceeds of settlement of a pre-bankruptcy lawsuit by the debtor against Jewelers Mutual Insurance Company ("Jewelers"). They were tried together on July 11, and 12, 1984 and have been effectively consolidated pursuant to Bankruptcy Rule 7042. Because of the effective consolidation and inseparability of the claims, these adversary proceedings are being formally consolidated by separate order, these Findings of Fact and Conclusions of Law are applicable to both adversary proceedings as so consolidated, and a single judgment is being entered separately hereupon.
The facts are not substantially disputed. On July 23, 1981 the jewelry business of the debtor, Armando Gerstel, Inc. ("Gerstel") was robbed by an armed assailant. The following day Gerstel hired the law firm of Goodhart, Rosner & Green, P.A. (formerly Goodhart & Rosner, P.A., "Goodhart"), Irving Herris, who is both an attorney and a certified public accounting service for the debtor ("Herris"), and Public Insurance Consultants, Inc., a public insurance adjusting firm ("Adjustors"). All three performed services in connection with Gerstel's claim for the robbery loss under its insurance policy with Jewelers and the police investigation of the robbery.
After a few weeks of preparation of the proof of loss, a claim was made with Jewelers for about $2,100,000.00, constituting the policy limits less the deductible. Jewelers denied Gerstel's claim on grounds that there was a material misrepresentation in the insurance application, that there was no actual robbery, and that the claim was excessive, so in October 1981 Goodhart filed suit for the debtor against Jewelers and its insurance agent, Michael Wexler ("Wexler"), seeking the policy limits, additional damages for essentially business interruption and bad faith, and statutory attorneys' fees under section 627.428, Florida Statutes.
In June 1983 as trial approached, Gerstel agreed to settle with Jewelers and Wexler for a combined amount of $1,500,000.00. The state court approved the settlement on June 23, 1983, but because of various third party claims to the settlement proceeds, which claims form the substance of these adversary proceedings, the proceeds were placed in an escrow agreement under the state court's order and supervision.
On November 9, 1983, before any of the claims against the proceeds could be finally resolved by the state court, Gerstel commenced this case under Chapter 7 of the Bankruptcy Code. Jeanette E. Tavormina was appointed trustee ("trustee"), and on February 9, 1984 this Court directed that the settlement proceeds be delivered to the trustee, with all liens and claims against the proceeds to attach to the funds so transferred. These adversary proceedings require the determination of the amount, validity and priority of the various claims.
As to amount, none of the claims seems seriously disputed. Although some question was raised regarding the outstanding amount of the claim of Aquatic Company, N.V. ("Aquatic"), testimony at trial resolved to the satisfaction of the Court that the $200,000.00 sought under an assignment is unpaid and accordingly valid in amount.
As to validity and priority of the various claims, the resolution is not so simple. Myriad pleadings and arguments have been raised by the various parties. The Court has carefully considered each. Some require little or no discussion, but those that the Court finds require substantive treatment will be dealt with hereinafter in the context of each claim or type of claim.
The foremost claim to be dealt with is that of Goodhart for an attorneys' charging lien. Goodhart commenced services for Gerstel on July 24, 1981, the day after the robbery, pursuant to a contingent fee contract calling for a fee of forty percent of any recovery. Once the claim was denied, the parties proceeded through the state court litigation based upon that contract. Accordingly the Court finds that the agreement was valid and enforceable according to its terms.
Unsurprisingly in view of the fact those terms result in a total fee of $600,000.00 based upon the $1,500,000.00 recovery, Goodhart's charging lien claim has been subjected to every conceivable kind of attack by the other claimants. Few of them merit serious discussion, and the Court does not find that Goodhart's conduct in representing the debtor against certain of the other claimants gives rise to any estoppel or equitable subordination. On the contrary, but for those services there may never have been a fund for the claimants to litigate over now. Rather than any conduct of counsel, the Court regards certain legal arguments as raising the principal issues concerning the Goodhart charging lien.
The first issue is the validity and effect of the lien itself. As to this issue, the Court finds the law clear and dispositive. The law to be applied is that of the State of Florida. In re Diplomat Electric, Inc., 499 F.2d 342 (5th Cir.1974); United States v. Transocean Air Lines, Inc., 356 F.2d 702 (5th Cir.1966). This Court has applied Florida law in similar circumstances in the past. In re Hanson Dredging, Inc., 15 B.R. 79 (Bkrtcy.S.D.Fla.1981).
Under Florida law, an express or implied contract that an attorney is to be paid out of recovery through prosecution of the client's claim creates an equitable lien upon the judgment and its proceeds. United States v. Transocean Air Lines, Inc., supra at 705; In re Hanson Dredging, Inc., supra at 82. Such equitable liens developed in order to avoid legal proceedings to collect the fee and to protect the confidential nature of the attorney-client relationship. See Worley v. Phillips, 264 So.2d 42 (Fla. 2d DCA 1972). See also Sinclair, Louis, etc. v. Baucom, 428 So.2d 1383 (Fla.1983).
Because the lien is based upon the common law rather than statute, the only apparent requirement to perfect the lien is timely notice. Sinclair, Louis, etc. v. Baucom, Id. at 1385. Some claimants have argued that although Goodhart commenced the representation on July 24, 1981 pursuant to a written agreement that same date which expressly provided for a charging lien, because a written attorneys' charging lien was not actually filed of record in the state court proceedings until August 5, 1983, after approval of the settlement, it was not timely.
The Court disagrees. In the first place, under Florida law notice may be implied from public records which should lead a prudent man to inquire as to the extent of the attorneys' lien. Randall v. Archer, 5 Fla. 438, 444 (1854). Goodhart's filing of suit provided such notice in October 1981 at the latest. Further, virtually every claimant dealt with Goodhart as the debtor's attorney in some manner or another, thus providing them with actual notice of the representation. There is no suggestion that anyone was misled by any lack of actual knowledge, although indeed most if not all had such actual knowledge.
Regardless, the notice provision is concerned essentially with the time at which the lien is perfected and thus attaches to the fruits of the judgment. That can occur under Florida law at any time during the period that the funds and the parties are under the court's jurisdiction and control. Winn v. City of Cocoa, 75 So.2d 909 (Fla.1954); Scott v. Kirtley, 113 Fla. 637, 152 So. 721 (1933). See Webster v. Sweat, 65 F.2d 109 (5th Cir.1933). Once the lien attaches, however, it relates back in time and takes effect from the date of the attorney's first commencement of services. Matter of TLC of Lake Wales, Inc., 13 B.R. 593, 595 (Bkrptcy M.D.Fla.1981); Miles v. Katz, 405 So.2d 750, 752 (Fla. 4th DCA 1981).
Accordingly, the Court finds that there was ample notice of the Goodhart lien, actual and constructive, but that in any event the written filing of the claim of lien while the property was in custody of the state court was timely. The Goodhart charging lien attached and relates back to the commencement of services on July 24, 1981. Because no one claims a lien which could have attached prior to that date, Goodhart's attorneys' charging lien is in a first priority position.
The final issue as to the Goodhart lien is whether it is enforceable according...
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