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Falconer v. Adams (4/6/01) sp-5384
Falconer v. Adams (4/6/01) sp-5384
Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
CHARLIE N. FALCONER, )
) Supreme Court No. S-9290
Appellant, )
) Superior Court No.
v. ) 4FA-94-245 CI
)
DONALD F. ADAMS, ) O P I N I O N
)
Appellee. ) [No. 5384 - April 6, 2001]
______________________________)
Appeal from the Superior Court of the State of
Alaska, Fourth Judicial District, Fairbanks,
Ralph R. Beistline, Judge.
Appearances: Michael W. Flanigan, Walther &
Flanigan, Anchorage, for Appellant. Clifford
W. Holst, Joan Unger, Anchorage, for Appellee.
Before: Matthews, Chief Justice, Eastaugh,
Fabe, Bryner, and Carpeneti, Justices.
MATTHEWS, Chief Justice.
I. INTRODUCTION
Charlie Falconer sued Karla Taylor-Welch and Donald Adams
because of a motor vehicle accident. Falconer obtained a verdict
against Taylor-Welch, but Adams was exonerated and was awarded
attorney's fees and costs. The question before us is whether Adams
or Falconer's attorney who has a lien on Falconer's judgment
against Taylor-Welch is entitled to the judgment proceeds. We
conclude that because Adams is not a party to Falconer's judgment
against Taylor-Welch, the attorney's lien has priority.
II. FACTS AND PROCEEDINGS
On February 3, 1992, Karla Taylor-Welch was driving a
vehicle that rear-ended a stopped vehicle driven by Charlie
Falconer. Falconer sued Taylor-Welch and a third driver, Donald
Adams, who had allegedly forced Falconer to stop. A jury found
that Taylor-Welch was negligent and that Adams was not negligent.
Falconer's attorney filed a notice of an attorney's lien for
attorney's fees and costs of $18,583 on any judgment in favor of
Falconer. The trial court awarded attorney's fees and costs to
Adams against Falconer for $10,623.25. After complex post-verdict
proceedings, including an appeal, [Fn. 1] a judgment of $13,873 was
entered against Taylor-Welch in favor of Falconer.
Adams and Falconer disputed who was entitled to the
Taylor-Welch judgment proceeds. The trial court initially ruled
that Falconer's attorney had first priority. But after Adams filed
a motion for reconsideration, the court ruled that Adams had
priority. Falconer appeals.
III. STANDARD OF REVIEW
The question of priority is a legal one, to which we
apply our independent judgment. [Fn. 2] We will "adopt the rule of
law that is most persuasive in light of precedent, reason, and
policy." [Fn. 3]
IV. DISCUSSION
Falconer argues that the attorney's lien has priority
over Adams's claim both under AS 34.35.430 [Fn. 4] and the "common
fund" doctrine. Adams contends that AS 34.35.430(b) gives him
priority over the attorney's lien and that the common fund doctrine
is inapplicable. Because we conclude that the attorney's lien has
priority under AS 34.35.430, we do not resolve the common fund
doctrine argument.
Adams argues that AS 34.35.430(b) subordinates the
attorney's lien to his claim. Falconer responds that Adams is a
judgment creditor who needed to garnish the judgment in favor of
Falconer before the attorney's lien attached, rather than a party
whose rights supercede the attorney's lien.
Subsection .430(b) speaks of "the parties to the action
or proceeding" and is thus broad enough to subordinate an
attorney's lien to the rights of any other party to the case. But
we have interpreted this subsection more narrowly to apply only to
the rights of the party paying the proceeds against which the lien
is asserted. We so held as to settlement proceeds in Williams v.
Utility Equipment, Inc. [Fn. 5]
In Williams, Leslie Williams filed products liability
claims against Utility Equipment, Kodiak Motors, and Service
Manufacturers. [Fn. 6] Before trial, Williams settled with Service
and Kodiak. [Fn. 7] A jury found for Utility Equipment, and the
court awarded attorney's fees to Utility Equipment. [Fn. 8]
Williams's attorneys still held some of the settlement proceeds in
their possession and thus had a lien on those proceeds under AS
34.35.430(a)(2). [Fn. 9] Utility Equipment argued that this lien
was subordinate to its rights to court-awarded fees against
Williams under subsection .430(b). [Fn. 10] We concluded that
subsection .430(b) could only benefit the parties responsible for
paying the funds on which the lien was asserted. [Fn. 11] We
therefore held "that this section is properly interpreted to apply
only to the parties actually involved in each settlement. Utility
Equipment was not a party to either pretrial settlement, and
therefore is not entitled to priority under AS 34.35.430(b)." [Fn.
12]
At common law it was a much disputed question whether an
attorney's lien should be subordinated to an offsetting judgment.
[Fn. 13] But the debate only applied to "mutual" judgments: "To
be mutual, they must be due to and from the same persons in the
same capacity." [Fn. 14] Where mutuality was lacking, there was no
debate; the authorities agreed that the lien of the attorney had
priority. [Fn. 15]
Language in attorney's lien statutes in other states with
similar subordination clauses has been interpreted to apply to set-
offs. [Fn. 16] One commentator observed of the Oregon statute --
on which AS 34.35.430 is based [Fn. 17] -- that "[i]t seems that,
from the language of the statute, the right of set-off between the
parties would be superior to the rights of the attorney." [Fn. 18]
Based on this background, it seems that subsection
.430(b) of the statute should be limited to cases of set-offs of
mutual debts. It was meant to resolve the "ancient judicial
controversy" in favor of the party holding the right of set-off.
There is, however, little reason to suppose that it was also
intended to change a rule about which there was no debate, namely
that an attorney's lien would prevail over a debt that was not
mutual.
This case is not about a set-off or a mutual debt. Set-
offs exist between two parties each of whom owes an ascertained
amount to the other. [Fn. 19] Likewise, as noted above, mutual
debts "must be due to and from the same persons in the same
capacity." [Fn. 20] Here, neither definition is satisfied, for
Adams wants to apply the proceeds from Falconer's judgment against
Taylor-Welch to his own judgment against Falconer.
The authorities discussed above confirm the correctness
of our holding in Williams that subsection .430(b) only applies to
the parties actually involved in a particular settlement. They
also warrant the extension of the Williams holding to the facts of
this case. Thus a fair reading of this statute is that "rights
existing between the parties" refers to each plaintiff's rights
vis-a-vis each defendant's rights. The statute's use of "between"
supports reading the statute as applying to two-party relationships
rather than multi-party situations, for which "among" would have
been a more fitting word choice. Each judgment should be
considered its own "action or proceeding" for purposes of section
.430. Under this reading Adams is not a party to Falconer's
judgment against Taylor-Welch. Limiting subsection .430(b) to
mutual or off-setting rights also comports with the general
objective of section .430. [Fn. 21] There is no reason to treat
this situation differently than if Falconer had brought separate
suits against Taylor-Welch and Adams, in which case Adams would
clearly be required to garnish the Taylor-Welch judgment before the
attorney's lien was perfected in order to have priority. Based on
the foregoing, we hold that, for the purposes of attorney lien
priority under subsection .430(b), each judgment between each set
of parties in a multiple-party case should be treated as if it
arose in a separate action or proceeding.
V. CONCLUSION
Because AS 34.35.430(b) does not apply to Adams, as he is
not a party to the judgment between Falconer and Taylor-Welch, the
attorney's lien has priority. We therefore REVERSE the trial
court's decision and REMAND for proceedings consistent with this
opinion.
FOOTNOTES
Footnote 1:
See Falconer v. Adams, 974 P.2d 406 (Alaska 1999).
Footnote 2:
See Donnybrook Bldg. Supply Co. v. Alaska Nat'l Bank of the
North, 736 P.2d 1147, 1149 (Alaska 1987).
Footnote 3:
Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).
Footnote 4:
AS 34.35.430 provides as follows:
(a) An attorney has a lien for
compensation, whether specially agreed upon or
implied, as provided in this section
(1) first, upon the papers of the client
that have come into the possession of the
attorney in the course of the professional
employment;
(2) second, upon money in the possession
of the attorney belonging to the client;
(3) third, upon money in the possession
of the adverse party in an action or
proceeding in which the attorney is employed,
from the giving of notice of the lien to that
party;
(4) fourth, upon a judgment to the extent
of the costs included in the judgment or, if
there is a special agreement, to the extent of
the compensation specially agreed on, from the
giving of notice of the lien to the party
against whom the judgment is given and filing
the original with the clerk where the judgment
is entered and docketed.
(b) This lien is, however, subordinate to
the rights existing between the parties to the
action or proceeding.
Footnote 5:
837 P.2d 1112 (Alaska 1992).
Footnote 6:
See id. at 1113.
Footnote 7:
See id. at 1114.
Footnote 8:
See id. at 1115.
Footnote 9:
See id. at 1117.
Footnote 10:
See id. at 1115.
Footnote 11:
See id. at 1118.
Footnote 12:
Id.
Footnote 13:
See Beecher v. Vogt Mfg. Co., 125 N.E.
831, 832 (N.Y. 1920) (Cardozo, J.) ("The case
revives the smouldering fires of an ancient
judicial controversy. The beginnings may be
traced to England. When judgment was to be
set off against judgment, the King's Bench
stood out for the superior right of its
attorneys, and maintained the lien for costs.
The Common Pleas took the opposite view, and
held the right of set-off superior to the
lien.").
Footnote 14:
Id. at 833.
Footnote 15:
See, e.g., Alexander v. Clarkson, 164 P.
294, 296 (Kan. 1917) (observing that when
"judgments are not mutual, the ordinary rule
seems to be, and ought to be, that a bona fide
assignee, especially where the element of
priority is involved, is protected").
Footnote 16:
See, e.g., LaFleur v. Schiff, 58 N.W.2d
320, 322-24 (Minn. 1953) (noting that the
language "this lien is subordinate to the
rights existing between the parties to the
action or proceeding," was included in the
Minnesota attorney's lien statute to ensure
that set-offs between parties were not
subordinated to attorneys' similar liens).
Footnote 17:
See Phillips v. Jones, 355 P.2d 166, 170-
71 (Alaska 1960).
Footnote 18:
B. Duval Isaminger, Attorney's Liens, 14
Or. L. Rev. 536, 547 (1935).
Footnote 19:
See Black's Law Dictionary 1538 (rev. 4th
ed. 1968).
Footnote 20:
Beecher, 125 N.E. at 833.
Footnote 21:
See Phillips, 355 P.2d at 172
("[A]ttorney lien statutes are to be regarded
as remedial and should be liberally construed
in aid of the object sought by the
legislature, which is to furnish security to
attorneys for their efforts by giving them a
lien upon the subject of the action.").
