Nichols v. Nichols

• Citation: 2009 OK 43,222 P.3d 1049
• Decision Date: 23 June 2009
• Docket Number: No. 103,950.,103,950.
• Parties: Gayle L. NICHOLS, Plaintiff/Appellant v. Orville B. NICHOLS II, Defendant and Riggs, Abney, Neal, Turpen, Orbison & Lewis, Inc., Defendant/Appellee.
• Court: Supreme Court of Oklahoma

222 P.3d 1049 2009 OK 43 Gayle L. NICHOLS, Plaintiff/Appellant
v.
Orville B. NICHOLS II, Defendant and
Riggs, Abney, Neal, Turpen, Orbison & Lewis, Inc., Defendant/Appellee. No. 103,950. Supreme Court of Oklahoma. June 23, 2009. Rehearing Denied February 1, 2010.

[222 P.3d 1051]

ON CERTIORARI TO THE COURT OF CIVIL APPEALS, DIV 3

¶ 0 In post-divorce proceedings a law firm seeks an adjudication of its interest in a counsel-fee award the trial court made payable to the former client. The District Court, Tulsa County, Russell P. Hass, Judge, declared the law firm has a lien upon the award. The Court of Civil Appeals reversed that disposition. On certiorari granted upon the law firm's petition.

THE COURT OF CIVIL APPEALS' OPINION IS VACATED, THE TRIAL COURT'S ORDER IS AFFIRMED AND THE CAUSE IS REMANDED FOR FURTHER PROCEEDINGS TO BE CONSISTENT WITH TODAY'S PRONOUNCEMENT

Anthony P. Sutton, Sutton, Davis & Staggs, P.A., Tulsa, OK, for Plaintiff/Appellant.

Richard T. Garren, Sharon K. Weaver, Riggs, Abney, Neal, Turpen, Orbison & Lewis, Inc., Tulsa, OK, for Defendant/Appellee.¹

[222 P.3d 1052]

OPALA, J.

¶ 1 The dispositive issue on certiorari is whether the Court of Civil Appeals erred in reversing the trial court's order. We answer in the affirmative.

I THE ANATOMY OF LITIGATION

¶ 2 Riggs, Abney, Neal, Turpen, Orbison and Lewis (Law Firm) represented Gayle Nichols (wife or client) in her divorce case. After the divorce was granted, Law Firm filed on behalf of its client an amended application for an attorney's fee and costs in the total amount of $151,991.12.² In June 1999 the trial court awarded to the wife for her attorney's fee and costs the amount of $37,383.38 for the discharge of her liability to legal counsel.³ The award was made to the wife by the following words:

* * *[T]he Court, having heard the testimony of Plaintiff and Defendant's respective counsel, having reviewed the verified pleadings, hearing arguments and stipulation of counsel and being fully advised in the premises finds and ORDERS judgment for the Plaintiff for attorney fees of $34,784.50 and costs in the amount of $2,598.88 for a total judgment in the sum of $37,383.38. * * *

IT IS FURTHER ORDERED, ADJUDGED AND DECREED by the Court that the Plaintiff is awarded a judgment against the Defendant, ORVILLE B. NICHOLS, II, for her attorney fees and costs in the total sum of Thirty Seven Thousand Three Hundred Eighty Three and Thirty Eight One Hundredths Dollars ($37,383.38) all for which execution may issue.

Law Firm later withdrew from representation because of a dispute over the counsel fee.⁴ It originally gave notice of its attorney's lien upon the entry of appearance and later upon its application to withdraw.

¶ 3 In February 2000 the wife filed a voluntary bankruptcy and obtained a discharge on September 12 of that year.⁵ She listed on her bankruptcy schedule Law Firm's claim for an attorney's fee and costs as an unsecured debt.

¶ 4 In June 2004 the wife renewed⁶ the counsel-fee award and brought proceedings against her husband to collect that award. On 10 March 2005, shortly after learning about the wife's collection efforts but before any money had come into her hands, Law Firm moved to enforce its charging lien. Law Firm claimed that (a) it had a valid and enforceable lien upon the award as well as a prior claim to all funds that may come into the wife's hands by her collection efforts; (b) the efficacy of the lien is subject to the time limit set by the attorney's lien statute, 5 O.S.2001 § 8,⁷ and the lien may be enforced within one year after the attorney becomes

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aware that the party to whom the judgment is granted attempts to compromise or settle the judgment without the consent of counsel; and (c) it timely complied with the § 8 time limit by the 10 March 2005 filing of its motion to enforce the lien. Law Firm claims that on 7 March 2005 it was informed by husband's counsel of wife's collection efforts.⁸ The wife countered that Law Firm's charging lien is unenforceable because the underlying obligation for the attorney's fee is barred by laches, the running of the statute of limitations found in 12 O.S.2001 § 95⁹ and her discharge in bankruptcy.

¶ 5 The trial court initially made a finding of fact that the bankruptcy trustee had abandoned any claim the bankrupt might have to the counsel-fee award.¹⁰ This finding was incorporated in its decisional disposition holding that Law Firm had an enforceable charging lien in the fee award. Wife brought an appeal from the trial court's order.

II COCA'S OPINION AND THE PARTIES' CERTIORARI ARGUMENTS The Court of Civil Appeals' Reversal

¶ 6 The Court of Civil Appeals (COCA) reversed the trial court's order. Its decision rests on the view that the charging lien was barred by the running of the statute of limitations on the underlying debt to the Law Firm. COCA reasons that because Law Firm's action to enforce its charging lien was filed more than five years after the firm's last date of representation, the underlying debt for the attorney's fee that the lien secured was barred by the five-year statute of limitations for written contracts in 12 O.S. 2001 § 95¹¹ and the lien provisions of 42 O.S.2001 § 23,¹² rather than the one-year limitation period of 5 O.S.2001 § 8. Because its reversal was based solely on a time bar, COCA did not deal with any other challenges to the trial court's decision.

The Parties' Certiorari Arguments

¶ 7 Law Firm argues COCA erred in applying to the claim the statute of limitations in 12 O.S.2001 § 95 and the general lien provisions of 42 O.S.2001 § 23 in concluding that its charging lien was unenforceable. According to Law Firm (a) these statutes are not applicable to an attorney's charging lien; (b) the Legislature carved out of the general lien statute the category of attorneys' charging liens and provided in 5 O.S.2001 §§ 6¹³

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and 8 a specific method for their enforcement; and (c) its motion to enforce the lien was timely brought.

¶ 8 Wife counters that COCA correctly determined (a) the provisions of 5 O.S.2001 § 8 do not create an exception to the generally applicable statute of limitations and (b) the attorney's charging lien stands extinguished when the claim for the underlying debt becomes time barred.

¶ 9 We granted certiorari on Law Firm's quest for corrective relief and now vacate COCA's opinion, affirm the trial court's disposition on a theory different from that on which it was rested below and, for the reasons to be stated, remand the cause for further proceedings to be consistent with today's pronouncement.

¶ 10 An appellate court has a common-law duty to affirm a trial judge's decision if it can be supported by any applicable legal theory.¹⁴ We need not reach for discussion Law Firm's lien theory. Another analysis is fully explanatory of Law Firm's rights and provides ample basis for the trial court's disposition.

III

THE COUNSEL-FEE AWARD IN FAVOR OF THE WIFE (AND ANY MONEY THAT COMES INTO HER HANDS IN PAYMENT OF THAT AWARD) IS IMPRESSED BY OPERATION OF LAW BY A CONSTRUCTIVE TRUST FOR THE BENEFIT OF THE SERVICE-RENDERING LAW FIRM

A.

Law Firm Has A Beneficial Interest In the Constructive Trust Impressed By Operation of Law On the Counsel-Fee Award

¶ 11 When an award for an attorney's fee is made directly to the client who is a party,¹⁵ a constructive trust attaches eo instante by operation of law to the award¹⁶ for the benefit of the lawyer who performed the services for which compensation is allowed. The legal entitlement to the award goes to the client, but the beneficial interest is created in favor of the lawyer. The client stands as a constructive trustee and the lawyer as a constructive beneficiary (cestui que trust).¹⁷ It is the dual title—the splitting

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of title into legal and equitable components—that creates the constructive trust. If money for satisfaction of the counsel-fee award comes into the hands of a constructive trustee it stands impressed eo instante in trustee's hands with the earmarks of the trust res.

¶ 12 The application of constructive-trust law to a counsel-fee award operates to protect the ethical restraints upon legal practitioners. These restraints prohibit a lawyer from sharing fees with nonlawyers and disallows a nonlawyer's attempt to lay claim to an attorney's fee.¹⁸

¶ 13 The constructive trust arises here from the wording of the counsel-fee award and the attorney-client relationship. When the wife was awarded an attorney's fee, she then stood as a constructive trustee of the award for the benefit of the Law Firm by operation of law. An ethical conflict would have arisen in violation of law if she were declared the sole beneficiary of that award. This is so because such declaration would constitute a legally impermissible award of an attorney's fee to a nonlawyer. In short, the imposition of a constructive trust in favor of the service-rendering lawyer assures the award's conformity to applicable law.

B. Limitations Had No Impact On Law Firm's Interest In The Counsel-Fee Award

¶ 14 COCA's pronouncement that Law Firm's right in the fee award was unenforceable rested on a charging lien's analysis, not on a constructive-trust theory. The continuing trust character of the award operates against the running of any limitation in favor of the wife until she (qua constructive trustee) has clearly repudiated the trust and the repudiation has been brought to the attention of the trust beneficiary.¹⁹

¶ 15 We cannot tell from this record whether there has ever been a repudiation of the trust which would trigger the running of a statute of limitations, if any be applicable. If a repudiation did indeed occur when wife's counsel informed Law Firm by letter that it had no viable claim to the counsel-fee award and demanded that the lawsuit be withdrawn, it had no effect on the running of any applicable statute of limitations. This is so because it occurred during...