North Valley Bank v. Mcgloin

• Decision Date: 09 December 2010
• Docket Number: No. 09CA2559.,09CA2559.
• Citation: 251 P.3d 1250
• Parties: NORTH VALLEY BANK, a Colorado corporation, Plaintiff–Appellant,v.McGLOIN, DAVENPORT, SEVERSON AND SNOW, PROFESSIONAL CORPORATION, a Colorado corporation, Defendant–Appellee.
• Court: Colorado Court of Appeals

251 P.3d 1250

NORTH VALLEY BANK, a Colorado corporation, Plaintiff–Appellant,

v.McGLOIN, DAVENPORT, SEVERSON AND SNOW, PROFESSIONAL CORPORATION, a Colorado corporation, Defendant–Appellee.

No. 09CA2559.

Colorado Court of Appeals, Div. I.

Dec. 9, 2010.

Hatch Jacobs, LLC, Robert W. Hatch, II, Brian T. Ray, Denver, Colorado, for Plaintiff–Appellant.McGloin, Davenport, Severson and Snow, Professional Corporation, Krista L. Tushar, Kyle W. Davenport, Denver, Colorado, for Defendant–Appellee.Opinion by Judge BERNARD.

This case presents the issue whether a statutory attorney's lien on a judgment takes priority over a previously perfected security interest. We hold that it does because (1) Colorado's statute plainly states that an attorney's lien in such circumstances is a “first lien”; (2) Colorado's version of the Uniform Commercial Code (UCC) does not govern the attorney's lien; and (3) the UCC cannot be applied to determine the relative priority of the attorney's lien and the perfected security interest. By reaching these conclusions, we affirm the trial court's judgment.

I. Background

The facts in this case are undisputed. Plaintiff, North Valley Bank (the bank), made loans of $100,000 to BLR Construction Company, LLC (the contractor). In exchange, the contractor signed notes granting the bank a security interest in the contractor's accounts receivable and in all proceeds of these accounts. The bank perfected the security interest by filing its UCC–1 financing statement with the Colorado Secretary of State.

The contractor was later hired by Custom Landscapes of Colorado, Inc. (the landscaper) to work on a project financed by the State of Colorado. The contractor worked on the project, and billed the landscaper for $53,145, treating this amount in its records as an account receivable. The landscaper did not pay, and the contractor retained defendant, McGloin, Davenport, Severson and Snow, Professional Corporation (the attorneys), to assist in the collection of the debt.

The attorneys, on the contractor's behalf, sued the landscaper, alleging breach of contract, open account, and unjust enrichment.

The attorneys also filed notice of an attorney's lien under section 12–5–119, C.R.S.2010, against any award that the contractor might receive as a result of the lawsuit. The bank then contacted the attorneys and informed them that it had a perfected security interest in any money that the contractor might be awarded in the lawsuit.

During the litigation of the case, the landscaper joined the State as a defendant. Eventually, the trial court entered judgment in favor of the contractor and against the State, finding that it was liable to the contractor for $51,402.

The State sent a check for this amount to the attorneys. They kept $41,381 as reimbursement for legal services and $3,000 as a retainer against any future services they might render for the contractor. They forwarded $7,021 to the contractor.

The bank, relying on its perfected security interest, claimed the entire award. The attorneys disagreed, stating that their attorney's lien was superior.

The bank then filed this case against the attorneys, raising claims for replevin, conversion, and declaratory relief. After a bench trial, the trial court determined that the attorney's lien was superior to the bank's perfected security interest. The trial court also held that, under the UCC, the money awarded to the contractor in its lawsuit was a general intangible, rather than an account receivable. Thus, the court reasoned, the award was a general intangible that was not subject to the bank's security interest. The court then entered judgment in the attorneys' favor.

II. Does the Attorney's Lien Have Priority over the Bank's Perfected Security Interest?

The bank contends that the trial court erred when it held that the attorney's lien was superior to the bank's perfected security interest. We disagree, because we conclude that the trial court correctly interpreted and applied the attorney's lien statute, section 12–5–119.

A. Principles of Statutory Interpretation

When interpreting a statute, “it is our duty to ‘effectuate the intent and purpose of the General Assembly.’ ” Hurtado v. Brady, 165 P.3d 871, 873 (Colo.App.2007)(quoting CLPF–Parkridge One, L.P. v. Harwell Invs., Inc., 105 P.3d 658, 660 (Colo.2005)). “[W]e look first to the language of the statute itself to determine the legislative intent.” People v. McCullough, 6 P.3d 774, 778 (Colo.2000). If the plain language of the statute is clear and unambiguous, “it is unnecessary to resort to rules of statutory construction.” Id. We will not “presume that the legislature used language ‘idly and with no intent that meaning should be given to its language.’ ” People v. J.J.H., 17 P.3d 159, 162 (Colo.2001)(quoting McMillin v. State, 158 Colo. 183, 188, 405 P.2d 672, 674 (1965)). Instead, we will “presume [ ] that the General Assembly meant what it clearly said.” Griffin v. S.W. Devanney & Co., 775 P.2d 555, 559 (Colo.1989). Statutory interpretation raises questions of law that we review de novo. Hurtado, 165 P.3d at 873.

We are also guided by our supreme court's statement in ITT Diversified Credit Corp. v. Couch, 669 P.2d 1355, 1361 (Colo.1983):

Before a statute creating a lien in favor of the state for unpaid sales taxes will be construed as giving such a lien priority over a mortgage, security interest, or other contractual lien which was perfected at the time the lien came into existence, the legislative intent that such priority be given must clearly appear from the language of the statute.

The caution inherent in this language is based on the general rule that the priority of liens and other interests is normally determined by “first in time, first in right.” See Town of Avon v. Weststar Bank, 151 P.3d 631, 635 (Colo.App.2006)(under the UCC, the “priority of competing liens is subject to the general rule of ‘first in time, first in right’ ”). Exceptions to the general rule must be clearly expressed. This is so because

where the language [of a tax lien] is not direct, positive, and specific, it cannot be held to create a lien on land for taxes which is superior to antecedent [e]ncumbrances. Such a construction would unjustly destroy the security; it would annul the most solemn contracts; it would take one man's property to pay another man's debt, for the citizen who takes the [e]ncumbrance antecedent to the levy acquires a vested interest in the property, which can only be taken away from him by the exercise of some power which has been directly conferred by a legislative act.

Gifford v. Callaway, 8 Colo.App. 359, 366, 46 P. 626, 628–29 (1896).

Although the statutory lien in question here is not a tax lien, we conclude that the language from ITT Diversified Credit Corp. is instructive, and we will apply it in resolving this case. It recognizes the importance of pre-existing security interests and other liens. Further, it indicates that, before such interests lose their priority to a subsequent statutory lien, the legislature's intent to give the statutory lien priority must be plainly evident in the language of the statute creating the lien.

B. Attorney's Liens

In Colorado, there is no common law right to an attorney's lien. Rather, the right to an attorney's lien is created by statute. People v. Brown, 840 P.2d 1085, 1087 (Colo.1992).

There are two varieties of attorney's liens. The first is the “charging lien.” As pertinent here, a charging lien gives an attorney a lien on any judgment that “the attorney obtained or assisted in obtaining in favor of the client.” In re Estate of Benney, 790 P.2d 319, 322 (Colo.1990). The purpose of the charging lien is to “satisfy the attorney's equitable claim for services rendered to the client.” Id. If the charging lien attaches to a judgment, it only includes the attorney's fees and other professional services generated in obtaining the judgment. It does not include fees or costs for legal services unrelated to the judgment. Id. at 323.

Section 12–5–119 creates the charging lien in Colorado. The statute, first adopted by the legislature in 1903, states:

All attorneys- and counselors-at-law shall have a lien on any money, property, choses in action, or claims and demands in their hands, on any judgment they may have obtained or assisted in obtaining, in whole or in part, and on any and all claims and demands in suit for any fees or balance of fees due or to become due from any client. In the case of demands in suit and in the case of judgments obtained in whole or in part by any attorney, such attorney may file with the clerk of the court wherein such cause is pending, notice of his claim as lienor, setting forth specifically the agreement of compensation between such attorney and his client, which notice, duly entered of record, shall be notice to all persons and to all parties, including the judgment creditor, to all persons in the case against whom a demand exists, and to all persons claiming by, through, or under any person having a demand in suit or having obtained a judgment that the attorney whose appearance is thus entered has a first lien on such demand in suit or on such judgment for the amount of his fees.

(Emphasis supplied.)

The charging lien automatically attaches “immediately” when a judgment is obtained, and the attorney does not need to take any further steps to enforce the lien against his or her client. However, to enforce the lien against third parties, proper notice must be given. People ex rel. MacFarlane v. Harthun, 195 Colo. 38, 41–42, 581 P.2d 716, 717 (1978). This case involves a charging lien.

The second variety is called the “retaining lien.” The retaining lien allows an attorney to maintain possession of a client's papers until the client pays his or her bill for any legal services that the attorney performed. Benney, 790 P.2d at 322. Section 12–5–120, C.R.S.2010, creates the retaining lien.

One difference between charging...