Schmitt v. Smith
| Decision Date | 27 November 2001 |
| Docket Number | W2000-01726-COA-R3-CV |
| Parties | JOAN C. SCHMITT v. JAMES CHARLES SMITH |
| Court | Tennessee Court of Appeals |
This dispute arises from an action to enforce an attorney's lien in a divorce action. Appellant contends that a separate suit is required to enforce the lien, and, further, that the lien was lost through the attorney's failure to have it noted in the final judgment. Appellant also submits that the trial court erred in issuing injunctive relief without notice, hearing or bond against proceeds of marital property against which the lien was filed. We hold that the attorney's lien was lost due to failure to note it in the final judgment or by a timely Rule 59.04 motion to alter or amend the judgment. We further hold that the Rule 65.07 exception to the requirements of injunctive relief in some domestic relations cases does not apply to the case at bar, where, although the original suit was a divorce action, the issue presented for resolution is essentially based on contract.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Vacated; and Remanded
James F. Schaeffer, Jr., Memphis, Tennessee, for the appellant, Joan C. Schmitt.
Mitzi C. Johnson, Memphis, Tennessee, for the appellee, S. Denise McCrary.
DAVID R. FARMER, J., delivered the opinion of the court, in which W. FRANK CRAWFORD, P.J., W.S., and JOHN EVERETT WILLIAMS, SP. J., joined.
On April 15, 1998, Joan C. Schmitt ("Schmitt") filed a complaint for absolute divorce against James Smith ("Smith"). She was represented in this action by attorney Karen McCarthy. Smith counter-claimed and after considerable discovery, motions for injunctive relieve, motions for the dissolution of injunctive relief, battles over custody of the couple's minor child, motions to compel discovery, and other disputes, a hearing before the divorce referee was held on January 7, 1999. Schmitt appealed the ruling on January 11, 1999. An order on divorce referee ruling was entered on February 5, 1999. Following further discovery, a consent order of personal property division was entered on February 23, 1999. An order granting continuance was entered on February 26, 1999.
Karen McCarthy withdrew from representation of Schmitt due to McCarthy's family obligations. On March 19, 1999, Schmitt executed an employment agreement retaining S. Denise McCrary ("McCrary") as counsel. On March 23, 1999, a consent order substituting counsel was entered. The parties reached partial agreement on September 15, 1999. McCrary filed a notice of attorney's lien on October 1, 1999, for $20,909.61 for fees owed by Schmitt through September 28, 1999. On November 2, 1999, the court entered a consent interim decree which reserved, among other issues, the issue of attorney's fees. The final decree, entered on November 29, 1999, incorporated by reference the interim decree, which required the marital home to be sold. The final decree ordered the parties to pay their own attorney's fees. No mention or notation was made of McCrary's lien in the final decree.
Defendant Smith filed a petition to require sale of the marital residence on February 3, 2000. On February 28, 2000, McCrary file a notice of amended attorney's lien of $28,831 and a petition to enforce attorney's lien. On the same day, the trial court issued a temporary restraining order enjoining distribution of any proceeds from the sale of the marital home. No bond was required. On March 10, 2000, Schmitt filed a motion to dissolve the injunction on the grounds that she had not been given a hearing within 15 days, and that no bond had been required as stipulated in Tenn. R. Civ. P. 65.03. The injunction was modified on May 23, 2000, placing $50,000 in escrow pending further orders. On April 25, 2000, Schmitt filed a response to McCrary's petition and demanded a jury trial to try the issues. She also denied that the divorce action was the proper action for McCrary to enforce her lien for attorney's fees. The trial court entered an order on petition to enforce attorney's lien on June 13, 2000, awarding McCrary a total judgment of $37,332.
Issues
The issues raised by Schmitt in this appeal, as we perceive them, are:
1. Whether the trial court erred in permitting McCrary's petition to enforce attorney's lien to proceed in the original action for divorce, rather than requiring enforcement in a separate proceeding.
2. Whether the trial court erred in permitting McCrary to pursue her petition to enforce attorney's lien where McCrary had failed to preserve or otherwise determine the attorney's lien in the final decree.
3. Whether the trial court erred in issuing injunctive relief upon the filing by McCrary of her petition to enforce attorney's lien.
4. Whether the trial court erred in failing to provide Schmitt with a jury trial.
5. Whether the trial court erred in terminating a line of questioning intended to identify the issues in controversy during McCrary's representation of Schmitt.
McCrary raises one additional issue:
Whether the trial court erred in failing to award Petitioner McCrary her entire attorney's fee. (Total judgment of $45,409.16 was demanded; $37,332.00 was awarded.)
Standard of Review
The issues raised in this appeal are matters of law. With respect to a trial court's legal conclusions, our review is de novo with no presumption of correctness. See Bell ex rel. Snyder v. Icard, Merrill, Cullis, Timm, Furen & Ginsburg, P.A., 986 S.W.2d 550, 554 (Tenn. 1999); Tenn. R. App. P. 13(d).
We first address the issue of whether the trial court erred in permitting McCrary's petition to enforce attorney's lien to proceed in the original action for divorce, rather than requiring enforcement in a separate proceeding.
The attorney-client relationship is essentially based on contract. Starks v. Browning, 20 S.W.3d 645, 650 (Tenn. Ct. App. 1999) (citing Alexander v. Inman, 974 S.W.2d 689, 694 (Tenn. 1998)). The attorney is bound to exercise good faith in providing competent legal services, while the client agrees to compensate the attorney with a reasonable fee. Id. (citing Crawford v. Logan, 656 S.W.2d 360, 364 (Tenn. 1983)). An attorney's lien secures the attorney's claim for these fees. Id. (citing Feissner v. Prince George's County, 282 Md. 413, 384 A.2d 742, 746 (1978)). Most states, including Tennessee, provide such a lien by statute. Id. (citing Charles W. Wolfram, Modern Legal Ethics 9.6.3, at 558 (1986)).
In Tennessee, attorneys have a lien on a plaintiff's cause of action in a suit which they are prosecuting. Section 23-2-102 of the Tennessee Code provides:
Attorneys and solicitors of record who begin a suit shall have a lien upon the plaintiff's or complainant's right of action from the date of the filing of the suit.
Tenn. Code Ann. 23-2-102 (1994). Section 23-2-103 provides a lien to attorneys who are substituted as plaintiff's counsel:
An attorney or solicitor who is employed to prosecute a suit that has already been brought in any court of record shall have a lien upon the plaintiff's right of action from the date of the attorney's or solicitor's employment in the case; provided, that the record of the case shall first be made to show such employment by notice upon the rule docket of such court, or a written memorandum filed with the papers in the case, or by notice served upon the defendant in the case.
Tenn. Code Ann. 23-2-103 (1994).
Although McCrary argues that she has an attorney's lien pursuant to section 23-2-102, any lien held by her in this case would clearly be pursuant to section 23-2-103, as the divorce action giving rise to the lien already had been brought before McCrary was substituted as counsel. While there is little case law interpreting 23-2-103, the analysis of the scope and application of the two sections should be the same in either case. See In re Pass, 258 B.R. 170, 172 (Bankr. E.D. Tenn. Jan. 31, 2001).
An attorney's lien may take the form of a retaining lien or a charging lien. Starks, 20 S.W.3d at 650. A retaining lien is a possessory lien over the client's property in the possession of the attorney. Id. (citing Andrew Hall & Assoc. v. Ghanem, 679 So.2d 60, 61 (Fla. Dist. Ct. App. 1996); In re Coronet Ins. Co., 698 N.E.2d 598, 601 (Ill. App. Ct. 1998); Panarello v. Panarello, 585 A.2d 428, 430 (N.J. Super. Ct. Ch. Div.1990)). It permits the attorney to retain such property until the fee dispute is settled or until the client has provided other security. Id. (). A retaining lien does not carry an independent right of action against the client that can be executed on. Id. (citing McDonald, Shea & Co., 24 S.W. at 255-56; Brown & Reid, 3 Tenn. Ch. at 621).
A charging lien, however, is one based on an equitable right to have fees and costs due for services in an action secured by the judgment or recovery in that action. Id. (citing Southern v. Beeler, 195 S.W.2d 857 (Tenn. 1946); Keith v. Fitzhugh, 83 Tenn. 49, 50 (1885)). It is not limited to property in the possession of the attorney, but attaches to any proceeds flowing from the judgment if the attorney worked to secure that judgment. Id. at 651 (citing Butler v. GMAC, 313 S.W.2d 260, 262 (Tenn. 1958)). Both types of attorney's liens may be waived or forfeited if the attorney fails in his obligation of good faith or does not represent the client's interests faithfully, honestly and consistently. Id. (citing First Nat'l Bank of Cincinnati v. Pepper, 454 F.2d 626, 633 (2d Cir. 1972); Western Life Ins. Co. v. Nanney, 296 F. Supp. 432, 441 (E.D. Tenn. 1969); People ex rel. MacFarlane v. Harthun, 581 P.2d 716, 718 (Colo. 1978)). In the case of an action to...
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