Monarch Life Ins. Co. v. Elam

• Decision Date: 09 November 1990
• Docket Number: No. 89-7106,89-7106
• Citation: 286 U.S. App. D.C. 396,918 F.2d 201
• Parties: , 18 Fed.R.Serv.3d 855 MONARCH LIFE INSURANCE COMPANY v. Martha S. ELAM, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 201

918 F.2d 201

286 U.S.App.D.C. 396, 18 Fed.R.Serv.3d 855

MONARCH LIFE INSURANCE COMPANY v. Martha S. ELAM, Appellant.

No. 89-7106.

United States Court of Appeals District of Columbia Circuit.

Argued Sept. 29, 1990.

Decided Nov. 9, 1990.

Richard S. Schrager, with whom Howard M. Rensin was on the brief, for appellant.

James L. Nolan, for appellee.

Before BUCKLEY, WILLIAMS, and D.H. GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge STEPHEN F. WILLIAMS.

STEPHEN F. WILLIAMS, Circuit Judge:

Martha S. Elam sued Sonya Steele for personal injuries in federal district court here in the District of Columbia. On October 26, 1988, the parties arrived at a settlement under which Steele's insurer, Government Employees Insurance Company, agreed to pay Elam $19,000. This case concerns the validity and priority of competing claims to the proceeds of the settlement. The main contenders are Monarch Life Insurance Company, asserting an August 1988 judgment against Elam, and Elam's attorney, claiming under a contingent fee agreement with Elam entitling him to one third of any recovery in the litigation against Steele.

On October 25, 1988, the day before the Elam/Steele settlement, Monarch filed a certified copy of its judgment with the federal district court in the District, where the Elam/Steele suit was pending. That court issued a writ of "Attachment on Judgment" the same day. On October 27, 1988, Monarch had its attachment served on Government Employees Insurance Company, Elam's debtor under the Elam/Steele settlement.

Monarch then filed a motion for judgment in condemnation of the attached property with the federal district court in the District, and Elam filed the sole opposition, asserting the claims of her attorney and of certain assignees. On March 21, 1989, the court entered an order and judgment granting Monarch's motion. Elam appeals.

District of Columbia law is unclear on two issues governing the status of the attorney's claim. Rather than resolve those issues ourselves, we certify them to the District of Columbia Court of Appeals.

* * *

We must first dispose of claims raised by Elam on behalf of certain medical care providers ¹ for whose benefit she had previously executed a series of "Assignment and Authorization" agreements. Under these agreements she authorized her attorney to pay from the proceeds of any recovery against Steele amounts equal to their charges for services in connection with her injury. ² So far as appears, however, none of these assignees intervened or participated in any way in the attachment proceedings of the district court.

As to these possible claimants (but not as to Elam's attorney), Monarch argues that under District law Elam cannot assert others' interests in the property as a defense.. Although anyone claiming an interest in attached property has a right to intervene, Daniels v. Solomon, 11 App.D.C. 163, 171 (1897), a right now codified at D.C.Code Ann. Sec. 16-554 (1981), the District of Columbia courts have held that a debtor whose bank accounts are attached cannot assert in defense that the funds are in fact held by the debtor as trustee for another. Reynolds v. Smith, 7 Mackey 27, 38 (D.C.1888); Gay v. Peoples Hardware Co., 221 A.2d 923, 924 (D.C.App.1966). "Such defense can be made only by intervention in the cause by the principal or cestui que trust." Id. at 924-25. Presumably the court believed that any enhanced protection for absent creditors was not enough to justify the delays and complications that would flow from allowing the debtor to raise such objections. In addition, it may have regarded it as unfair for the attaching creditor's claim to be jeopardized by that of an absent third party who would not be bound, i.e., could still claim the property, if the attaching creditor won. Reynolds and Gay involved bank accounts, but nothing in them suggests that the District rule would be different for other forms of indebtedness. Thus, Elam's defense that part of the attached debt is owned by others, or not by herself, must fail. ³

* * *

Elam argues that because Monarch's writ of attachment was issued the day before the Elam/Steele settlement, the garnishment was ineffective and void. It is true that the District of Columbia requires that a fund be "actually due and ascertainable in amount in order to be subject to condemnation." Cummings General Tire Co. v. Volpe Constr. Co., 230 A.2d 712, 714 (D.C.App.1967). But Sec. 16-546 of the D.C.Code, made applicable by Rule 69(a) of the Federal Rules of Civil Procedure, provides that "[a]n attachment shall be levied upon credits of the defendant, in the hands of a garnishee, by serving the garnishee with a copy of the writ of attachment...." D.C.Code Ann. Sec. 16-546 (1981) (emphasis added). As Elam supplies no argument for finding that Congress meant "issuance" of the writ of attachment when it spoke of "serving" it, we have no basis for looking beyond the apparently plain meaning of the statute. Thus, in the absence of any other claims of procedural defects, we find Monarch's garnishment of the settlement proceeds valid.

* * *

This leads us to the claim of Elam's attorney, which raises issues we are unable to resolve at this time. As a preliminary matter, we note that the attorney filed no motion in his own name asserting a claim to the settlement proceeds. His claim was raised solely in Elam's motion. As the lawyer was present in fact throughout every stage of the proceedings below (though not as a named party), and as the claims against the settlement fund were so large that Elam has no real substantive interest in it, the lawyer might well be regarded as a de facto intervenor, and Reynolds and Gay would not apply. As Monarch did not raise the issue on appeal, however, we do not address it. Carducci v. Regan, 714 F.2d 171, 177 (D.C.Cir.1983). Monarch's vague, arguable references to the point in the district court proceedings do not, of course, preserve the issue on appeal. See id. at 175-76.

Thus we reach Monarch's two central attacks on the attorney's asserted lien: first, that the language of the agreement creating the obligation is inadequate to support a lien, and, second, that even a valid lien could operate only against a judgment, not a settlement.

Charging liens in favor of attorneys rest on the judgment that as the recovery would not come into being without the lawyer's skill and effort, the lien is not only in the interest of claimants but in that of their creditors as well. See, e.g., Cetenko v. United California Bank, 30 Cal.3d 528, 179 Cal.Rptr. 902, 907, 638 P.2d 1299, 1304 (1982). Thus it can be viewed as an extension of the principle underlying a mechanic's lien. See Coughlin v. New York C. & H. R.R. Co., 71 N.Y. 443 (1877). Unlike many jurisdictions, see, e.g., Md.Bus.Occ.Code Ann. Sec. 10-501 (1989); N.J.Stat.Ann. Sec. 2A:13-5 (West 1987), the District of Columbia has no statute creating such a lien, see Continental Casualty Co. v. Kelly, 70 App.D.C. 320, 106 F.2d 841, 843 (1939). It does, however, recognize a common law lien. See, e.g., Lyman v. Campbell, 87 App.D.C. 44, 182 F.2d 700 (1950).

In return for her attorney's efforts in prosecuting her personal injury claim, Elam agreed to pay him "a sum equal to 33 1/3% ( 1/3) of any sum I shall recover as a result of this accident." Monarch argues that this cannot create a "charging lien" in favor of the lawyer. The argument appears to have two elements. The first is Monarch's suggestion that such language fails to "clearly import an intention ... to make the fund liable for the attorney's fee." Brief for Appellee at 11. The second is an argument, seemingly derived from some policy notion rather than any inference of intent, that an agreement creating a personal right against the client can never create a charging lien. See Brief for Appellee at 10 (noting that the amount due "could conceivably come from other Elam funds, and not necessarily the actual money received from GEICO"). The two theories coalesce in Monarch's view that language such as that of Elam's agreement cannot create a charging lien. ⁴

Monarch's argument relies principally on this court's 1914 decision in Thurston v. Bullowa, 42 App.D.C. 18 (1914). There the court, then the highest of the District, ⁵ held that an oral agreement for compensation in "an amount of at least equal to one third of what would be recovered ...", id. at 21, failed to create a charging lien. The court relied entirely on the seemingly inapposite case of Nutt v. Knut, 200 U.S. 12, 26 S.Ct. 216, 50 L.Ed. 348 (1906), which held that a similarly worded fee agreement, covering a claim against the United States, created a valid obligation in favor of the attorney even though it was invalid (under a statute) insofar as it assigned part of the claim against the United States. Nonetheless, if this were the end of the story, Thurston would probably require us to rule for Monarch.

Later District cases, however, raise a strong doubt as to whether the Thurston rule remains valid. In Kellogg v. Winchell, 51 App.D.C. 17, 273 F. 745 (1921), an attorney sought to intervene when his client attempted to dismiss the suit filed at the client's behest. The contingent fee agreement "provided that [the lawyer] was to receive for his services a sum equal to 50 per cent. of any amount obtained by his client." Id. at 18, 273 F. 745 (emphasis added). The D.C. Court of Appeals held that the contingent fee agreement vested the lawyer "with an interest in the cause of action" sufficient to support his intervention. Id. at 20, 273 F. 745. The court invoked a "trend of the modern decisions of the court ... to protect the right of the attorney to receive compensation for his services." Id. at 19, 273 F. 745. To explain finding a "grant" in the agreement's language, it said that "[w]hile there are no words of grant in the contract, it is a 'principle even of the common law that words of covenant may be...