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# 39 - Attorney Liens in Marital Dissolution Cases (Oregon Law)

Monograph # 39                                             (Revised March, 2009) Ver 3.4

ATTORNEY LIENS IN MARITAL DISSOLUTION CASES (Oregon Law)

© Lawrence D. Gorin, Attorney at Law, Portland, Oregon

Overview and general discussion

    “An attorney has a lien upon actions, suits and proceedings after the commencement thereof, and judgments, orders and awards entered therein in the client’s favor and the proceeds thereof to the extent of fees and compensation specially agreed upon with the client, or if there is no agreement, for the reasonable value of the services of the attorney.”  ORS 87.445.

    ORS 87.445 creates an attorney’s “charging” lien (in contrast to the “retaining” or “possessory” lien created by ORS 87.430).

    A “charging lien” is the equitable right of an attorney to have his or her fees for services rendered to a client in a particular action secured by the judgment or recovery in the action in which the attorney’s services were rendered.  Crawford v. Crane, 204 Or 60, 62, 282 P2d 348 (1955).  By its very nature, a charging lien applies when the attorney rendered services in pursuing the action that produced the judgment for the client’s benefit.  See Potter v. Schlesser Co., Inc., 335 Or 209, 214, 63 P3d 1172 (2003).

    The underlying purpose of an attorney’s charging lien is to allow the attorney to secure payment of the attorney’s fee in the particular litigation by satisfying it from the fund created by the attorney's efforts.  However, where the attorney’s services do not create any proceeds but consist solely of defending a title or interest already held by the client, there is no basis for an attorney’s charging lien.  Desmond v. Socha, 327 NYS2d 178 (App Div 1971).  

    Such is the case when the court undertakes to divide property incident to an action for dissolution of marriage.  The court is simply distributing between the spouses that which they already own.  To achieve an equitable distribution and eliminate disparity that might otherwise occur when one spouse receives property having greater value than the other, an “equalizing judgment” for a specified sum of money is typically used.  In doing so, however, the spouse in whose favor the equalizing judgment (money award) is made is not obtaining anything that he or she did not already possess.  Rather, to the extent of the money award made, the recipient spouse is merely retaining that spouse’s one-half in the marital estate, albeit in the form of money rather than other tangible property.  Although the nature of the property is thus converted from realty into dollars, the recipient spouse’s one-half interest in the marital estate remains the same.  In essence, there has been no gain nor have the efforts of the recipient spouse’s attorney resulted in the creation of a fund of money against which the attorney may assert a charging lien.  See Theroux v. Theroux, 536 NYS2d 151 (App Div 1988).  

    Notwithstanding the foregoing, many Oregon family law lawyers believe that when the dissolution judgment contains a property division money award or makes a specific allocation of specified real or personal property, the recipient spouse’s attorney may then lawfully assert a claim of lien for attorney fees on the money award or on the real or personal property, ostensibly pursuant to ORS 87.450, 87.455 and 87.460.  And in the absence of objection and a challenge being made by the client to this arguably unlawful and improper tactic, it routinely seems to work quite well.

[NOTE:  While this article explains the procedural aspects of Oregon’s attorney lien laws, the author nonetheless questions the use of such liens in marital dissolution cases.]

Lien on a judgment vs. lien on an action

    Distinction needs to be made between an attorney’s lien upon “actions, suits and proceedings” and an attorney’s lien on “judgments, orders and awards” entered therein in the client’s favor.

    Certain types of legal actions, most notably actions for personal injury damages, have money value, at least potentially, from the time the cause of action accrues.  If the monetary value ultimately materializes in favor of the injured party (as would occur, for example, upon defendant’s agreeing to pay money to the injured party (the plaintiff) to settle the claim in exchange for dismissal of the action), an attorney representing the injured party has a lien on the action at least to the extent of “fees and compensation specially agreed upon with the client, or if there is no agreement, for the reasonable value of the services of the attorney.”  ORS 87.445.  See also Potter v. Schlesser Co., Inc., 335 Or 209, 63 P3d 1172 (2003) (“value of the action” was at least $12,000, the settlement amount that defendant paid to plaintiff; plaintiff’s attorney has a lien to the extent of that value).

    In contrast, an action for dissolution of marriage (unlike a personal injury lawsuit or a breach of contract lawsuit, etc.) does not have any inherent or intrinsic monetary “value.”  In essence, a marital dissolution action simply seeks a judgment declaring the marriage as dissolved, all else being incidental thereto.  Unlike other types of legal actions, an action for dissolution of marriage cannot be compromised and dismissed upon defendant’s paying to plaintiff an agreed-upon sum of money, thereby “making the whole thing go away.” Lastly, in contrast to other types of legal proceedings, attorney fees in marital dissolution cases are not based on contingency fee agreements entitling the lawyer to a specified percentage of the “recovery” made by the client.

    If a dissolution action results in a judgment that includes a property division money award, the attorney for the judgment creditor (i.e., the attorney for the party in whose favor the money award was made) would have a basis on which to assert a lien, pursuant to ORS 87.450, on the money judgment.  But such a lien is NOT a “lien on the action” pursuant to ORS 87.445.  Indeed, as stated earlier, the action itself, i.e., a lawsuit for dissolution of marriage, has no monetary value.  Claiming a lien on an action that has no monetary value would be a futile act.

Judgments in favor of the attorney’s client

    The statutory scheme of ORS 87.445 et seq implements the policy that allows money an attorney has obtained for a client’s benefit to be subjected to a lien by the attorney for payment of the attorney’s fees.  See Willhite v. Biff’s Seafood Restaurant, Inc., 124 Or App 360, 363-364, 862 P2d 580 (1993).

    In an action for dissolution of marriage, an attorney’s claim of lien applies only to money or property gained or obtained by the client as a result of a judgment rendered in the client’s favor.  

    “Since the charging lien attaches to the judgment, verdict or decision in favor of the client, it should then be apparent that the party losing the case would not have a lien.  Thus in a case where the wife is awarded title to the land, the attorney for the husband would not be able to perfect a claim of an attorney’s lien against the wife’s land.  By the same token, if the client loses the litigation, there is no judgment to which the lien can attach.  The attorney must look to other means to satisfy the obligations owed by the client.”

Arlen B. Taylor, “The Attorney’s Lien And Its Impact On Real Estate Transactions,” Internet article from Stewart Title Co. (and well worth reading).   http://www.stewart.com/page.jsp?pageID=786

    It is erroneously believed by some family law lawyers that the charging lien established by ORS 87.445 applies to all property in which the client has an ownership interest at the time the dissolution proceeding is commenced.  Based on this erroneous belief, some lawyers routinely cause a Notice of Claim of Lien to be recorded with the county recorder’s office as to all property owned by the client, doing so immediately after filing the petition for dissolution of marriage.  The apparent belief is that the claim of lien will then remain as a lawful encumbrance on the property, even if the property is ultimately awarded by the dissolution judgment to the opposing party.  This view is, of course, incorrect, and the lawyers who engage in this practice do not understand the applicable law

Understanding the statutory scheme

    As used in ORS 87.445 the reference to “judgments” entered in the client’s favor refers to three specific types of judgments.  As explained in Rockwood Water Dist. v. Steve Smith Contracting, 80 Or App 136, 139, 720 P2d 1332, rev den 302 Or 35 (1986):  

    “When ORS 87.445 through ORS 87.490 are read together, it is apparent that the legislature deemed that a lien described in ORS 87.445 would be on one of three kinds of judgments: (1) ‘for a sum of money only,’ ORS 87.450(1);  (2) ‘for the possession, award or transfer of personal property,’ ORS 87.455(1); or  (3) ‘for the possession, award or conveyance of real property.’ ORS 87.460(1).”  80 Or App at 139.  

    Under each of the foregoing statutes, the claim of lien is undertaken by the filing or recording, as appropriate, of a "Notice of Claim of Lien for Attorney Fees,” as discussed in the following section of this article.

Contents and form of Notice of Claim of Attorney’s Lien

    ORS 87.470 details the required contents of a notice of claim of attorney’s lien.   Specifically, whether the judgment against which the attorney claims a lien is a judgment for “a sum of money only” under ORS 87.450, or for personal property under ORS 87.455, or for real property under ORS 87.460, the attorney must file a Notice of Claim of Lien for Attorney Fees.  ORS 87.470 requires that the notice be in the form of a statement in writing verified by the oath of the attorney and must contain:
    (1) A statement of the attorney’s demand, including the amount of the fee or compensation of the attorney;
    (2) The name of the case in which the judgment was entered, the date on which the judgment was entered in the register, and a description of the real or personal property which is to be awarded, transferred or conveyed to the client under the judgment;
    (3) A statement that the amount claimed is a true and bona fide existing debt as of the date of the filing of the notice of claim of lien; and
    (4) The date on which payment was due to the attorney for professional services to the client.

Three types of judgments against which an attorney’s lien may be claimed

A.  ORS 87.450 - Judgment for “a sum of money only”
    “When an attorney claims a lien under ORS 87.445, if the judgment is for a sum of money only, the attorney must file a notice of claim of lien with the clerk of the court that entered the judgment within three years after the judgment is entered”  ORS 87.450(1).

    NOTE and CAVEAT:  A “judgment for a sum of money only” as used in ORS 87.450 does not apply to a judgment or order for the payment of money for the support of any person under ORS 107.095, 107.105, 108.120, 109.155, 419B.400 or 419C.590.  ORS 87.450(4).  Consequently, a claim of lien for unpaid attorney fees may not lawfully asserted judgments rendered in the client’s favor for child or spousal support.  This is in contrast to a property division money judgment in favor of the lawyer’s client, which is fair game for the claim of an attorney’s lien.  

    Upon filing the “notice of claim of lien” with the clerk of the court that entered the money judgment, the clerk then enters the notice in the register of the court and in the separate record maintained by the court administrator under ORS 18.075.  The attorney filing the notice must also send a copy forthwith to the attorney’s client at the client’s last known address, doing so by registered or certified mail  ORS 87.450(2).  

    A lien under ORS 87.445 on a judgment for a sum of money only remains a lien on the judgment until the judgment remedies for the judgment expire under ORS 18.180 to 18.192.  

    Legal effect of attorney’s lien on a money judgment.   If an attorney’s notice of claim of lien has been properly filed with the court on a judgment that awarded the attorney’s client a sum of money (other than a judgment for child or spousal support money), the parties to the case do not have the right to satisfy the judgment (and cause the court records to reflect the judgment as being satisfied) until the attorney’s lien, and the claim of the attorney for fees based thereon, is satisfied in full (or otherwise released by the attorney).  ORS 87.475(2).  Consequently, a judgment debtor who wants the court records to show the judgment debt as being satisfied would be well-advised to avoid paying the judgment debt directly to the judgment creditor since any satisfaction of judgment given by the judgment creditor will not eliminate the attorney’s lien claim, which will continue to remain viable.

    As a practical matter, a judgment debtor who wants to assure that the court records show the judgment debt as being satisfied has two options.  First, the judgment debtor may pay the full amount of the judgment debt to the clerk of the court and, upon payment being made, full satisfaction of the judgment will be then be entered into the case record.  The judgment debtor will thereby be released from any further liability for the judgment debt.  ORS 87.475(3).  From the proceeds paid into court, the court administrator will then disburse to the attorney the amount of the attorney’s claimed lien, thereby terminating the lien and removing it from the court record, with the remaining balance of funds (if any) being paid over to the judgment creditor.

    As explained in O'Meara and Cullick, 200 Or App 562, 116 P3d 236 (2005), “The clear language of the statute [ORS 87.475] * * * indicates that once the judgment debtor pays the judgment amount into court, the judgment debtor’s responsibility with regard to the attorney’s lien [claimed by the judgment creditor’s attorney] is terminated.”  The balance of the proceeds paid into court, if any, will then be disbursed to the judgment creditor in full or partial satisfaction (depending on the amount involved) of the judgment debt.

    Alternatively, the judgment debtor can pay directly to the judgment creditor’s attorney such sum as the attorney is willing to accept in exchange for the attorney’s written release of the attorney’s lien claim (or in exchange for the attorney’s signed satisfaction of lien).  The judgment debtor may then pay the remainder of the judgment debt to the judgment creditor in exchange for the judgment creditor’s written satisfaction of judgment.  The written release of lien (or written satisfaction document), signed by attorney, together with the satisfaction of judgment signed by the judgment creditor, would then be filed with the court, thereby removing the attorney’s lien from the court record and allowing the judgment debt to be noted in the court record as fully satisfied.

    The attorney’s claim of lien against the judgment (and the amount actually payable to the client thereunder) is coextensive with that of the client.  As stated in ORS 87.480, “Attorneys have the same right and power over actions, suits, proceedings, judgments, orders and awards to enforce their liens as their clients have for the amount due thereon to them.”  Thus, in the case of a money judgment rendered in the client’s favor, the amount that the attorney can claim as a lien against the judgment can be no greater than the amount to which the client is actually entitled to receive from the judgment debtor.  See Willhite v. Biff’s Seafood Restaurant, Inc., 124 Or App 360, 363, 862 P2d 580 (1993)  (personal injury plaintiff’s attorney’s lien attached only to that portion of judgment remaining after defendant’s liability insurer had reimbursed plaintiff’s insurer for personal injury protection (PIP) benefits already paid to plaintiff).

B.  ORS 87.455 - Judgment for possession of  personal property
    “When an attorney claims a lien under ORS 87.445, if the judgment is for the possession, award or transfer of personal property, the attorney must file a notice of claim of lien not later than one year after entry of the judgment * * *.”  ORS 87.455(1).  

    If the attorney desires to claim a lien on personal property that was awarded to the attorney’s client by the judgment, a “Notice of Claim of Lien” must be filed not later than one year after entry of the judgment.  The notice is filed (1) with the recording officer of the county in which the judgment is rendered, (2) with the recording officer of the county, if known, in which the personal property is located and (3) with the recording officer of the county, if known, in which the attorney’s client resides.  The notice is then recorded by the county’s recording officer in a book called “index of liens upon chattels.”  ORS 87.455(1).

    There is no requirement that the notice of claim of lien also be filed with the court that rendered the dissolution judgment.  Indeed, doing so serves no purpose and may result in unanticipated and/or unforeseeable problems.  However, as a matter of courtesy (as well as providing some motivation for payment), a copy of the notice should be sent to the attorney’s client.

    Enforcing the lien on a judgment for personal property.  Pursuant to ORS 87.455(2), an attorney’s lien against personal property arising from a judgment in the client’s favor for the possession, award or transfer of such personal property must be foreclosed in the manner provided in ORS chapter 88 not later than one year after the notice of claim of lien has been filed.  However, ORS 87.455(3) allows the attorney and the client, by written agreement, to extend the period of time within which a lien must be foreclosed to two years after the notice of claim of lien is filed.  The agreement to extend a foreclosure period must contain the time and place of the filing of the notice of claim of lien by the attorney and must be filed with the recording officer with whom the notice of claim of lien was filed.

C.  ORS 87.460 - Judgment for possesion of real property
    “When an attorney claims a lien under ORS 87.445, if the judgment is for the possession, award or conveyance of real property, the attorney must file a notice of claim of lien not later than six months after entry of the judgment and disposition of any appeal of the judgment * * *.”  ORS 87.460(1).

    If a judgment rendered in the client’s favor is “for the possession, award or conveyance of real property,” the client’s attorney may claim a lien on such real property to the extent of attorney fees owing by the client to the attorney.  The attorney must file a “Notice of Claim of Lien” with the recording officer of the county in which the real property, or any part of it, is situated, and must do so within six months after entry of the judgment.  The recording officer then records the notice “in a book that shall be indexed in the same manner as the record of deeds and mortgages.”  ORS 87.460(1)..

    Filing a copy of the notice of claim of lien with the court that rendered the dissolution judgment is not required and serves no legal purpose.  Indeed, it may result in unanticipated and/or unforeseeable problems.  Lastly, although not legally required a copy of the notice of claim of lien should nonetheless be sent to the lawyer’s client (or, as may likely be the case at that point, the lawyer’s former client).

    Enforcing the lien on a judgment for real property.  Pursuant to ORS 87.460(2), an attorney’s lien against real property arising from a judgment in the client’s favor for the possession, award or conveyance of such real property must be foreclosed in the manner provided in ORS chapter 88 not later than one year after the notice of claim of lien has been filed.  However, ORS 87.460(3) allows the attorney and the client, by written agreement, to extend the period of time within which a lien must be foreclosed to two years after the notice of claim of lien is filed.  The agreement to extend a foreclosure period must contain the time and place of the filing of the notice of claim of lien by the attorney and must be filed with the recording officer with whom the notice of claim of lien was filed.

    Enforcement of the attorney’s claim of lien on the real property that was awarded to the client is accomplished by a foreclosure lawsuit in accordance with ORS 88.010.  This will result in a judgment directing that the client’s (or, more likely by that time, the ex-client’s) property be sold through a sheriff’s sale, as provided by law, in order to satisfy the debt owed by the client to the lawyer.  (And, contemporaneously with all of this occurring, the lawyer most likely will be on the receiving end of a letter from the Oregon State Bar Disciplinary Counsel, marked in red letters on the envelope as “PERSONAL AND CONFIDENTIAL,” advising of the bar complaint against the attorney that has been received and directing that a response be filed within 10 days, etc., etc.  Something a wise attorney might wish to avoid.)

Conclusion

    The intent of this article is to provide insight for Oregon family law practitioners on the often confusing topic of attorney liens and their proper use, and limitations, in marital dissolution proceedings.  Hopefully, readers will gain a better understanding of when and how to use this legal device to secure just compensation for their professional services.

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LAWRENCE D. GORIN
Attorney at Law
521 S.W. Clay St., Suite 205
Portland, Oregon  97201
Phone:  503-224-8884
Fax:    503-226-1321
E-mail:  LDGorin@pcez.com
http://ldgorin.justia.net/index.com