Court Opinion

ID: 9549498
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:19:43.0641+00
Date Added: 2024-06-11T15:20:24.923132
License: Public Domain

LOPEZ, Judge (concurring in part knd dissenting in part.). I concur in part and dissent in part with the majority opinion. 1. I agree with the two issues summarily disposed of in the majority opinion and I agree with the decision on costs. 2. I disagree with the majority opinion on the issue between Katz and the Sutin firm on attorneys’ fees. Under this point Katz challenges the court’s findings number 8, 9, 11, 12, 13, 14, 15, 16, and 17 and conclusions of law numbers 11 and 12. The challenged findings and conclusions provide as follows: 8. There were no offers of settlement. What could have been deemed a developing offer was destroyed by Katz filing a grievance with the Real Estate Commission. 9. The award in the first trial was a net to Katz of approximately $25,000. In addition, Thayer assisted in removing from Katz the liability of the existing contracts. The combined award netted to Katz approximately $148,000. * * * * * * 11. The Thayer law firm expended the amount of time at the prevailing rates of $60 an hour to earn the fees charged. This Comet, however, must balance those fees earned with the amount of the award in both cases. 12. The issues were extensively treated during the first trial, intermittently over a period of several months. 13. The ultimate issue upon which Katz prevailed was ultimately determined by the Appellate Court. It was a departure from the standard Rule that rescission would not be obtained unless the seller was put in status quo ante. This was the theory presented by the Thayer firm on behalf of Katz. 14. The fees charged by Thayer, the less-experienced attorneys, clerks, etc., were well within the prevailing rates charged at the time they were assessed. 15. Thayer is highly experienced in the law and obtains ability and skill in the top 10 percent of the legal community in Albuquerque. 16. The average rate of inflation from the onset of initial contact between Katz and Thayer has been 8-10% per year. 17. The Court of Appeals has previously addressed and decided the issue of bankruptcy. Conclusions of Law: 11. The Norman Thayer law firm has a valid charging lien in accordance with the ruling of the Court of Appeals. 12. Norman Thayer is entitled to reasonable attorney’s fees in the amount of $25,000.00 including tax, to be paid by Katz. The standard followed by the Court in awarding attorney’s fees in Johnsen v. Fryar, N.M. Bar Bulletin, November 6, 1980. Katz requested the trial court as follows: Ms. Katz requested the court to find that Ms. Katz’s bankruptcy discharged the underlying attorneys’ fee debt to the Sutin firm; and that the subsequent reversal of the trial court’s judgment constituted an eradication of the judgment to which the lien attached. [Katz’s Requested Findings of Fact Nos. 27 and 28, Tr. 108] Ms. Katz further requested the trial court to find that subsequent to the entry of the first trial court judgment, Ms. Katz filed her Petition in Bankruptcy and obtained a discharge of the $70,000.00 attorneys’ fee debt to the Sutin firm. Ms. Katz further requested findings that following this discharge, the Court of Appeals set aside the previous judgment entered in favor of Ms. Katz; and because the charging lien had attached to a specific judgment that was destroyed by the reversal of the original judgment; any request by the Sutin firm for a claim of a charging lien against any judgment hereafter granted Katz should be denied. [Katz’s Requested Findings of Fact Nos. 29, 30, 31, 35, 36, 48, 49 and 51, Tr. 108-111] The trial court, prior to trial, ruled that the standards set forth in Johnsen v. Fryar, 96 N.M. 323, 630 P.2d 275 (Ct.App.1980) applied to an award of attorneys’ fees for the benefit of the Sutin firm. This ruling, contained in a letter to counsel, prompted Katz to request that the trial court find and conclude that the Sutin firm did not meet the standard of reasonableness established in Fryar and that in fact, the forfeiture of the Stepnoski contract occurred partially as a result of the negligence and inattention of the Sutin firm. [Katz’s Requested Conclusions Nos. 29, 31, 32, 33, 34, 37 and 38, Tr. 108-110] Instead, the trial court found that the Sutin firm met the Fryar standard for determining reasonableness of attorneys’ fees. Further, Judge Sanchez ruled that the issue upon which Ms. Katz ultimately prevailed, rescission, was a departure from the standard rule that rescission is unobtainable without putting the seller in status quo ante and that the Sutin firm had presented this in the trial court on behalf of Ms. Katz. [Court’s Findings, Nos. 8, 9, 11, 12, 13, 14, 15, 16; Conclusions of Law, Nos. 11 and 12; Tr. 139-140 Challenged, Point L] Ms. Katz requested the Court to find that the Sutin firm refused to represent her on appeal. Ms. Katz also requested the court to find that because of the subsequent reversal by this court, the Sutin firm was not successful in representing her. Thus, because no fruits of the Sutin firm’s efforts existed, the firm is not entitled to a charging lien on any subsequent judgment obtained by Katz. [Katz Requested Findings Nos. 32, 33, 36, 40, 45, 46, 49 and 51, Tr. 109-111] Katz argues that Sutin is not entitled to its attorney’s fees because (1) the debt was discharged in bankruptcy and the charging lien was destroyed upon this court’s reversal in Robison I; (2) the new judgment is not a “fund” recovered through Sutin’s aid; and (3) Sutin failed to meet the requirements of Johnsen v. Fryar. Sutin argues that the only issue raised by Katz on the first appeal was the reasonableness of attorney’s fees. Katz did not challenge the validity or priority of Sutin’s fees and lien. Accordingly, this court remanded and ordered the trial court to determine whether the fees were reasonable. Robison I, 94 N.M. at 322, 610 P.2d 201. Sutin further contends that because this court remanded for consideration of reasonableness of the fees, the trial court was without jurisdiction to determine the effect of Katz’s bankruptcy. Sutin also argues that because Katz admitted the validity of the lien in Robison I, she is now estopped from denying it. Sutin also argues that this court determined the effect of Katz’s bankruptcy when it stated as follows: Although appellant Katz filed a petition in bankruptcy in federal court in Albuquerque on November 16,1978, those proceedings do not bar our consideration of this appeal, since the trustee in bankruptcy abandoned the assets connected with this appeal on December 21, 1978. Although a determination of bankruptcy is pending in federal court, a state court may consider claims involving property which has been abandoned by the trustee in bankruptcy. Vybiral v. Schildhauer, 144 Neb. 114, 12 N.W.2d 660 (1944). Katz is the proper party to pursue this appeal; because, when a trustee in bankruptcy abandons an asset, the property or right reverts to the bankrupt. Abo Land Co. v. Tenorio, 26 N.M. 258, 191 P. 141 (1920). The court may determine Katz’ assets and liabilities with respect to the subject matter of this suit, as both assets and liabilities have been abandoned by the trustee in bankruptcy. A trustee who abandons an asset also abandons any liabilities that accompany it. In re Polumbo, 271 F.Supp. 640 (W.D.Va.1967). 94 N.M. at 317, 610 P.2d 201. Finally, Sutin argues that because this court considered the bankruptcy issue with respect to the charging lien, the issue is res judicata and law of the case. In oral argument Sutin conceded that the charging lien is based on the first judgment and not on the second. A. Whether Katz’ Debt to Sutin was Discharged in Bankruptcy. Katz’s judgment in the original action was $26,000, to which Sutin filed and attached a $49,000 attorney’s charging lien. On November 13, 1978, Katz filed a bankruptcy petition, listing on the schedule of debts $70,000 as an estimated amount owed Sutin. Katz was adjudged bankrupt on May 9, 1979. The bankruptcy proceedings were conducted pursuant to the Bankruptcy Code. The Bankruptcy Reform Act was enacted during this time, but applies to petition filed after October 1, 1979. See Bankruptcy Reform Act, Pub.L. 95-598 § 402 (1978). Katz’ petition was filed in November 1978. Under the Bankruptcy Code, “[a] discharge, being personal in character, releases the bankrupt’s personal liability only. It follows, therefore, that a valid lien on property of the bankrupt existing at the time of adjudication in bankruptcy, which is not voided by the Bankruptcy Act, may be enforced notwithstanding discharge of the bankrupt.” 1A Colliers on Bankruptcy, § 17.29 (14th ed. 1978), see also In re Rand Mining Co., 71 F.Supp. 724, 727 (S.D.Cal.1947). Charging liens are recognized as a valid lien in New Mexico. See Prichard v. Fulmer, 22 N.M. 134,159 P. 39 (1916). The Sutin lien was not specifically discharged in bankruptcy. Therefore, while the underlying debt was discharged, the charging lien survived bankruptcy. The question then becomes whether the lien on Katz’s judgment (or the judgment itself) survived this court’s remand in Robison I. The question also remains whether Katz can raise this issue on the second appeal. I would hold that the reversal of a judgment operates to make the original judgment void, as if never rendered. O’Brien v. Great Northern Railroad Company, 148 Mont. 429, 421 P.2d 710 (1966), cert. denied, 387 U.S. 920, 87 S.Ct. 2034, 18 L.Ed.2d 974 (1967). As a result of the reversal of Katz’s judgment, any rights to proceeds from that judgment were immediately extinguished and lien rights secured by that judgment were also void. A lien operates to secure the payment of a debt and is simply a charge upon property for the payment or discharge of a trial debt. It is a quantified right which the law recognizes to secure payment of a debt, the payment of which may only be satisfied out of a particular thing to which the lien has attached. Swanson v. Graham, 27 Wash.2d 590, 179 P.2d 288 (1947). Since a lien does not attach to abstract rights, but only to some designated property, a lien continues in existence only so long as the property to which it attaches continues in existence. Therefore a lien is also destroyed upon the destruction of property to which it attached. United States v. Salerno, 222 F.Supp. 664 (D.Nev.1963), modified on other grounds, in Mutual Life Insurance Company of New York v. United States, 343 F.2d 71 (9th Cir.1965). Upon reversal of Katz’s judgment by this court in Robison I the lien attached thereto the judgment was destroyed. Therefore, although the charging lien followed the $26,000.00 judgment when it was abandoned by the Bankruptcy Court, that lien was extinguished by this Court. Furthermore, under the Bankruptcy Code, once the underlying debt was discharged, there was no basis for creating a new charging lien on the second judgment. See 1A Colliers on Bankruptcy § 17.30 (14th ed. 1978). Thus, according to the Federal District Court’s discharge in bankruptcy “[a]ll creditors whose debts are discharged by this order ... are enjoined from instituting or continuing any action or employing any process to collect such debts as personal liabilities of the above-named bankrupt.” Sutin argues, however, that we need never determine whether Katz’s bankruptcy barred a second lien because Katz admitted validity of the lien in the first appeal. Sutin continues, suggesting that principles of res judicata, law of the case and estoppel bar Katz from now arguing discharge in bankruptcy. The trial court apparently agreed with this position, finding “17. The Court of Appeals has previously addressed and decided the issue of bankruptcy.” Sutin’s reliance on this court’s discussion of bankruptcy in Robison I is overstated. Pursuant to Campbell’s motion to dismiss for lack of jurisdiction this court stated that “[although a determination of bankruptcy is pending in federal court, a state court may consider claims involving property which has been abandoned by the trustee in bankruptcy.” 94 N.M. at 317, 610 P.2d 201 (citation omitted). Sutin and the trial court apparently construe this mention of bankruptcy to preclude further discussion of bankruptcy. Res judicata and law of the case are not such broad concepts. We choose to review these issues on the second appeal. B. Whether the Second Judgment was a “Fund” Recovered Through Sutin’s Aid We need not discuss this point because the parties agree that the charging lien is not based on the second, but on the first, judgment. C. Whether the Trial Court Properly Followed the Fryar Standard Sutin concedes that the standards of Fryar do not apply to this case. Based upon the authorities I have reviewed and the facts and circumstances of this case, I would hold that the trial court’s findings of fact regarding attorneys’ fees and charging lien or liens are not supported by substantial evidence. Furthermore, the trial court’s conclusions of law regarding attorneys’ fees and charging lien or liens are not supported by law. I therefore conclude and would hold that the charging lien for attorneys’ fees is void, and that Sutin is not entitled to recover any attorneys’ fees. 3. Except where consistent with the following, I disagree with the majority opinion regarding the accounting between Katz and the Campbells. This court ordered recision and an accounting on the Katz-Campbell contract. That order provided as follows: An accounting between Katz and Campbell is appropriate because of the complexity of the situation. Katz is entitled to the return of her Los Alamos house, her down-payment, and any other payments made on the property, including payments on underlying real estate contracts and mortgages, plus interest. From this should be deducted the fair rental value of the trailer park while it was in her possession, excluding the trailer space used by Campbell. Similarly, Campbell should be required to pay Katz the fair rental value of the Los Alamos house, excluding the apartment used by Katz, for the time Campbell was in possession of the house. Other rental adjustments may also be necessary. Lastly, the accounting should include payment to Campbell of the value of the original trailers sold or mortgaged by Katz. 94 N.M. at 320, 610 P.2d 201. Pursuant to that order the trial court accepted evidence and performed an accounting, awarding the following to Katz: 2. With reference to Katz, she is to receive from Campbell the following: A) Value of Los Alamos house, previous Conclusions of Law No. 7 $ 57,717.00 20,000.00 B) Down payment, Conclusion of Law No. 7. 2,774.97 C) Payment from Katz to Campbell on Real Estate Contract, Finding of Fact No. 67. 9,868.00 D) Sums of money borrowed by Katz to subsidize the mobile home park business 44,829.00 E) Other payments made on the mobile home park difference between gross income and net income Conclusions of Law Nos. 69, 70. 9.350.00 F) Rental value of Los Alamos house from date of Contract, July 29,1976, to date of sale by Campbell, May, 1979, excluding that portion occupied by Katz. Fair rental value was $275 per month X 34 months 144,538.97 G) 10% simple interest per annum, July 29, 1976 — present, i.e. 4 years, 9 months, $14,454 X 4 years = $57,816 + 9 months, $10,841 = 68.«57.00 Total $213,195.97 The court amended section (G) of the accounting by replacing 10 percent interest with the legal rate of 6 percent. See § 56-8-3 N.M.S.A.1978. The recomputed amount of interest due on the accounting was $22,608.22 for a total due Katz of $167,-147.21. Katz argues that the court erred in determining portions (E) and (F) of the amount due her. Katz predicates the argument that section (E) is erroneous on the court’s use of “Conclusions of law 69 and 70.” The trial court’s accounting refers to conclusions 69 and 70, however, only 14 conclusions were made. We must assume that the court and the parties are referring to findings of fact 69 and 70. Finding 69 provided that “Katz grossed $70,194.00 from the business.” Finding 70 provided that “Katz netted $25,265.00 from the business.” Subtracting finding 70, $25,-265.00, from finding 69, $70,194.00, results in a recovery by Katz of $44,929.00. The trial court made a mathematical error of $100.00 in finding that the difference between finding 69 and 70 was $44,829.00. The parties agree that evidence from the first and second trials was considered by the trial court in performing the accounting. Our duty on appeal is to determine whether the trial court’s findings are supported in the record by substantial evidence. Baker v. Benedict, 92 N.M. 283, 287, 587 P.2d 430 (1978). An examination of the evidence presented at the first and second trials reveals that there is substantial evidence in the record to support section (E). The trial court’s finding in section (E) was expressly based on its findings in the first trial. Finding 69, fixing gross income, is based on Katz’s exhibit from the first trial. The exhibit was introduced through Katz’s testimony. Finding 70, fixing net income, was arrived at by taking the gross income and subtracting the trailer park expenses. Katz and Campbell submitted evidence of various park expense. It was for the trial court, as the finder of fact, to consider the inconsistent claims and to determine which of them were recoverable. Lewis v. Bloom, 96 N.M. 63, 628 P.2d 308 (1981). Evidence in the record supports the court’s findings. Moreover, because evidence from both trials was used, it makes no difference that the court’s accounting was based in part on the figures arrived at during the first trial. Therefore, Katz’s objection that the second judgment was based on findings made in the first trial is without merit. Katz’s second assignment of error is that the trial court erred in accounting for the rental value of the Los Alamos house. The house was duplex rental unit. In finding 2(F) the court found that the rental value of the house, excluding the amount occupied by Katz, was $275.00 per month. The term of Campbell’s occupation of the house was 34 months, for a total of $9,350.00. This portion of the accounting is confused by the fact that our mandate ordered return of the Los Alamos house to Katz, but Campbell had disposed of the property. In light of these facts the trial court ordered Campbell to pay Katz the value of the house at the time of contracting, plus six percent interest from the date of the contract. I would hold that the court properly performed this portion of the mandate. The value of the house, plus interest, most nearly places Katz in the economic position which she enjoyed prior to contracting. This is the purpose of rescission. The mandate also called for Campbell to account to Katz for the reasonable rental value of the house for the period that Campbell had possession of the house. Robison I, 94 N.M. at 320, 610 P.2d 201. Campbell was in possession for 34 months. The mandate further ordered that from this amount Campbell was to offset the reasonable rental value of the portion of the house which remained occupied by Katz. Katz occupied half of the dwelling for 30 months. The total rental value of the duplex was $550; $275 for each unit. Katz is entitled to $18,700.00, reduced by $8,250 for a total of $10,450.00. The trial court erred in excluding the four month period when Campbell was in possession of the duplex but Katz did not occupy any portion of the property. I agree with the order in the majority opinion to amend section (F) to reflect this recomputation. The next assignment of error in the accounting is section (A) of the Campbell offset. Section (A) provides as follows: A) Reasonable rental value of mobile home [park] while in possession of ■ Katz — approximate net income for 16 months of occupancy, Finding No. 70, $25,600; plus debt service of $2,295.50 per month X 16 months, $36,728.00; minus reasonable rental value of Campbell’s trailer space, $480.00 = $61,848.00 This court’s mandate ordered that Campbell was entitled to offset from the amount owed Katz “the fair rental value of the trailer park while it was in her [Katz’s] possession, excluding the trailer space used by Campbell.” Robison I, 94 N.M. at 320, 610 P.2d 201. Katz was also entitled to recover “payments on underlying real estate contracts and mortgages, plus interest.” Id. For the determination of the reasonable rental value of the trailer park the court relied on finding of fact 70 from the first trial. I have already stated that this finding is supported by substantial evidence. Accordingly, further discussion is not warranted. The mandate also provided that from the reasonable rental value of the trailer park was to be subtracted the value of the trailer space occupied by Campbell. The court found the value of the trailer space to be $480.00. This value was set by Campbell in their proposed findings during the first trial, and the record does not show that Katz objected to it. Findings not objected to become the facts upon which the case rests. Loco Credit Union v. Reed, 85 N.M. 729, 516 P.2d 1112 (1973). Accordingly, we must assume the $480.00 value to be correct. The final calculation at issue in section (A) is the propriety of Campbell’s offset of $36,728.00 in debt service. The mandate provided that Katz was entitled to recover “any other payments made on the property, including payments on underlying real estate contracts and mortgages, plus interest.” Robison I, 94 N.M. at 320, 610 P.2d 201. Rather than follow the mandate, however, the trial court erred permitting Campbell to offset a debt sérvice of $36,728.00. This figure should have been credited to Katz, to be paid by Campbell. In section (B) of the Campbell offset the court found that the three trailers transferred to Katz as part of the real estate contract had a value of $12,000.00. Katz contends that witnesses testified that the trailers were worth between $11,500.00 and $17,000.00, and that she paid off an indebtedness on the trailers of $7,831.01. She maintains that she is entitled to recover the value of the trailers plus payments made on the underlying debt. I agree that the trial court did not err in fixing the value of the trailers at $12,000.00. Evidence in the record supports this finding. The amount is within the range testified to by Katz’s own witnesses. Furthermore, to permit Katz $12,000.00 plus return of her debt relief would give the trailers a value of $19,000.00. to $25,000.00. Evidence in the record does not support this range of recovery. Accordingly, I would instruct the trial court to enter an order reflecting the following accounting: Katz is entitled to receive from Campbell the following: (A) Value of the Los Alamos house $ 57,717.00 (B) Down Payment 20,000.00 (C) Payment from Katz to Campbell on the real estate contract 2,774.97 (D) Money borrowed by Katz to subsidize the mobile home park business 9,868.00 (E) Other payments made on the mobile home park 44,829.00 (F) Reasonable rental value of the Los Alamos house excluding the portion occupied by Katz 10,450.00 (G) Debt service paid by Katz on the park for 16 months 36.728.00 (H) Six percent simple interest per annum four years 9 months 51.974.50 TOTAL $234,341.47 Campbell is entitled to offset the following: (A) Reasonable rental value of the mobile home park while in Katz’s possession minus value of the lot occupied by Campbell $25,120.00 (B) Value of three mobile homes included in the real estate contract, plus six percent interest 12,000.00 960.00 TOTAL $ 38,080.00 4. I disagree with the majority opinion with respect to its disposition between Katz and Robison. This court’s mandate in Robison I ordered that Katz could recover special damages against Robison only. 94 N.M. at 320, 610 P.2d 201. Special damages were defined as those damages “which are the actual, but not the necessary, result of the injury complained of, and which in fact follow it as a natural and proximate consequence in the particular case.” Id. Pursuant to the mandate, the trial court ordered Robison and Campbell to pay the following damages: The following are deemed consequential damages and must be shared by Robison with Campbell, even though they were included in the Katz-Campbell accounting: a) Sums of money borrowed by Katz to subsidize the mobile home park business. 9,868.00 b) Other payments made on the mobile home park, difference between gross income and net income to Katz, Conclusions of Law Nos. 69,70. 44,829.00 c) Rental value of Los Alamos house from date of contract, July 29,1976, to date of sale of Campbell, May, 1979 excluding that portion occupied by Katz. Fair rental value was $275 per month X 34 months = 9.350.00 64,047.00 d) Prorated interest at 10% for 4 years, 9 months 30.400.00 Total $94,447.00 We further held in Robison I that punitive damages were available. Punitive damages are intended to punish a wrongdoer, and could be recovered against Robison only if Katz proved special damages, and that Robison acted recklessly. The trial court, however, erred in assessing special damages against both Campbell and Robison. The mandate clearly ordered that these damages be assessed against Robison only. Furthermore, subsections (a), (b) and (c) were deemed special damages, yet these damages were part of the KatzCampbell accounting. Even the broadest reading of our mandate could not countenance this dual allocation of these damages. Because the trial court erred in determining special damages, I would remand and order the court to conduct a hearing to determine whether the evidence adduced at the prior trials warrants Katz’s recovery of special damages from Robison. Concomitant with the determination of special damages, the court must also consider whether, in light of any award of special damages, punitive damages can also be recovered. As a result, I believe the cause should be reversed and remanded for proceedings as follows: (A) I would reverse the trial court’s judgment regarding attorney’s fees, and order the court to deny the Sutin firm recovery of attorney’s fees, and to dissolve the order permitting a charging lien. (B) I would affirm in part and reverse in part the trial court’s accounting between Katz and the Campbells and, on remand, would order that the court modify the accounting as I have provided herein. (C) I would reverse the trial court’s order granting special and punitive damages and, on remand, would order that the court conduct a hearing which is consistent with this opinion. (D) Finally, I agree with the position of the majority reinstating Sam Campbell as a defendant, disposing of the Katz “cross-appeal” and in its decision on costs.