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Court Determines if Charging Lien Exists if Favor of Former Lawyer


A Probate Lawyer said that from the records, the genesis of this litigation arose when a lawyer was representing a corporation in regard to its purchase of the premises pursuant to a written contract. The contract was dated and was an “all cash deal.” The court notes that unlike contracts in another County, the real estate contract is actually dated. The transaction was scheduled on a specific date but did not when allegedly the seller became disenchanted with the terms and upset that the lawyer was representing his sister in regard to her interest in this transaction and their mother’s estate. The owner’s sister, sometime later apparently issued a power of attorney in favor of the lawyer. Why this was relevant is a mystery in that the seller is the owner individually and not an estate. Also the seller had his own independent counsel in negotiating the contract of sale to the corporation. In any case it is conceded that the seller refused to close title as scheduled. A litigation commenced to compel specific performance. This resulted in the order of the Supreme Court, directing the seller to honor the contract and close title within thirty days of the order. In spite of achieving the legal goal for which the lawyer had been directed to commence the litigation, for some reason the corporation did not seek to enforce the judgment and compel the seller to close.

As Estate Lawyer said that later on, the corporation notified the lawyer that his services would no longer be needed to complete the closing with the seller. A second lawyer became the attorney for the corporation in regard to the purchase. At the closing of title, a written escrow agreement was entered into between the former lawyer and the principal of the corporation. The agreement directed the second lawyer to hold the sum of $10,000.00 in escrow pending resolution of the former lawyer’s claim for the legal fees incurred in representing the corporation in the contract negotiations and subsequent litigation. The agreement recites that Schwartz is asserting a “charging lien” in regard to the services he rendered on behalf of the corporation.

A Nassau County Probate Lawyer said the issues presented are; whether or not a Charging Lien Exist in Favor of the former lawyer? Whether or not retainer agreement is required?

The law recognizes two categories of liens that an attorney may assert. There is a general or retaining lien which arose at common law and applied to papers or property of the client in the possession of the attorney. A retaining lien applies to any amount due the attorney for professional services rendered to the client with respect to any matter. For instance, the former lawyer might have been able to assert a retaining lien in regard to the contract, closing, the subsequent litigation and any other files of the corporation on which he was working. However, he did not. A charging lien applies only to the proceeds obtained from a particular piece of litigation and may be enforced to obtain the reasonable value of the legal services and disbursements incurred in that lawsuit.

A Staten Island Probate Lawyer said the escrow agreement and the Supreme Court action filed by the former lawyer both refer to his only asserting a “charging lien” and not a “retaining lien.” Charging liens are recognized by statute. Judiciary Law section 475 “attorney’s lien in action, special or proceeding” provides; “From the commencement of an action, special or other proceeding in any court, or the service of an answer containing a counterclaim, the attorney who appears for a party has a lien upon his client’s cause of action, claim or counterclaim, which attaches to a verdict,report, determination, decision, judgment or final order in his client’s favor, and the proceeds thereof in whatever hands they may come; and the lien cannot be affected by any settlement between the parties before or after judgment, final order or determination. The court upon the petition of the client or attorney may determine and enforce the lien.”

Because the former lawyer commenced an action for specific performance in Supreme Court, and was successful in obtaining that relief, the statute would seem to permit him to assert a “charging lien” in regard to the litigation only. No charging lien would exist for the fees claimed due in regard to negotiating the purchase of the real property as that is not work performed in regard to the litigation. It should be noted in that Supreme Court action that the lawyer only sought specific performance and did not seek the alternative relief of money damages.

The above being said, there is a major problem with claiming a statutory charging lien. There is no money awarded in an action for specific performance. The theory supporting the existence of the charging lien is that the lawyer’s labor created a fund from which the client will be compensated by the defendant or some third party. “In other worlds, the litigation or settlement must result in more than the mere entry of a judgment on behalf of a client; there must be proceeds from the litigation upon which the lien can affix.” That there is no fund generated in this specific performance litigation against which to assert the charging lien is further supported by the fact that the corporation was the purchaser seeking to compel transfer of title to it and would be paying the seller monies to complete the transaction and not receiving any funds. However, the parties by agreement created a “charging lien” where none existed in favor of Schwartz for his work in obtaining a judgment of specific performance.

As to the issue of retainer agreement, the court held that the former lawyer was not required to have a written retainer with the corporation for either the real estate transaction or the subsequent litigation. He is entitled to prove his allegation that he is entitled to legal fees based on “quantum meruit.” In order to recover on a theory of quantum meruit, he, as the attorney, must establish (1) the services were performed in good faith; (2) the corporation as the person to whom they were rendered accepted the services; (3) there was an expectation of compensation by the attorney; and (4) the reasonable value of the services allegedly rendered.

Applying the Rules of Professional Conduct to the facts of this case, it must be concluded that no engagement letter or written retainer was required for the work the lawyer performed for the corporation in regard to the subject transactions. That work fell within exceptions (a) and (b) of Rule section 1215.2 in that the anticipated fee for the real estate transaction is based on past dealings of the parties and, based on the testimony of the parties. Further, the terms and conditions of the relationship had been established by the parties over a several year period involving numerous other real estate purchases and sales. It is uncontroverted that the transaction did not close and that the reasons were the actions of the seller and not the corporation. The lawyer is not entitled to be paid for any services in regard to the real estate transaction aspect of the purchase by the corporation.

As noted, the Rules of Professional Conduct do not provide for any financial penalty for failure to have an engagement letter or written retainer with the client. This means the lawyer is entitled to be paid based on quantum meruit for his litigation services.

If you are in need of legal assistance with matters relating to estate, estate administration, probate and the likes, Stephen Bilkis & Associates, with offices throughout New York, offers the services of its Richmond County Estate Litigation Lawyers, or its New York Estate Attorneys who can aid you and are willing to defend your rights.

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