Opinion ID: 12452
Heading Depth: 3
Heading Rank: 1

Heading: Nursery Associates' Interest in Marre's Damages

Text: 38 With respect to the $215,000 in damages awarded to Marre, we held above that the government could set off the entire amount against Marre's tax liabilities, as the government's right of setoff is superior to both Marre's interest and his attorneys' derivative interest in that award. Because Nursery Associates' interest in Marre's damages is also merely derivative of Marre's interest, we likewise conclude that the government's right of setoff is superior to Nursery Associates' interest in the damages. See Cohen, 389 F.2d at 692. 17 39 Our analysis regarding Nursery Associates' interest in Marre's damages does not end here, however. With the litigation over the legitimacy of Marre's tax assessments currently pending in the district court below, there remains the possibility that the district court could invalidate the government's tax assessments. To that end, we must also consider whether Nursery Associates' interest in the $215,000 damage award is superior to the interests of Marre and his attorneys. As between Nursery Associates and Marre, Nursery Associates' interest in the entire amount of the award is superior to Marre's interest. The turnover order's mandate that Marre turn over to Nursery Associates any and all benefits or items of value that result from the present law suit was clear and unequivocal. Hence, the district court erred in awarding Nursery Associates only half of Marre's recovery. 40 Likewise, as between Nursery Associates and Marre's attorneys, Nursery Associates' interest in that portion of the $215,000 in damages that was awarded to the attorneys under the contingency agreement--$161,250 less $107,500, or $53,750--is also superior to the interest of Marre's attorneys. An attorney's right to compensation pursuant to a contingency fee agreement is a property right determined under applicable state law. Augustson v. Linea Aerea Nacional-Chile S.A., 76 F.3d 658, 662 (5th Cir.1996). Under Texas law, a contingency fee agreement is generally considered to be an executory contract. 18 See Lee v. Cherry, 812 S.W.2d 361, 363 (Tex.App.--Hous. [14th Dist.] 1991, reh'g of writ overruled); Brenan v. LaMotte, 441 S.W.2d 626, 630 (Tex.Civ.App.San Antonio 1969, no writ); White v. Brookline Trust Co., 371 S.W.2d 597, 600 (Tex.Civ.App.Amarillo 1963, writ ref'd n.r.e.); Carroll, 168 S.W.2d at 240. Therefore, as a general rule, an attorney does not receive a legal or equitable interest pursuant to a contingency fee contract until the contingency actually occurs. 19 In re Willis, 143 B.R. at 431. Once the contingency occurs, the attorney has a lien on the judgment or settlement securing his services, and an attorney's lien is paramount to the rights of the parties in the suit, and is superior to other liens on the money or property involved, subsequent in point of time. Id. at 432 (citations omitted). 41 Nursery Associates obtained its turnover order from the state court on March 16, 1993, while appeal was pending in Marre I--before the contingency occurred. Because the contingency fee contract between Marre and his attorneys was still executory at the time Nursery Associates obtained its turnover order, Nursery Associates' interest in the fees is superior to the interest held by Urquhart & Hassell. Thus, Nursery Associates' interest in the entire $215,000, including the $53,750 in attorneys' fees awarded out of the damages, is superior to the interests of both Marre and his attorneys. 20 42