Court Opinion

ID: 4227316
Source: CourtListenerOpinion
Date Created: 2017-12-11 08:07:54.468899+00
Date Added: 2024-06-11T14:42:51.856910
License: Public Domain

STATE OF MICHIGAN

                           COURT OF APPEALS

ROBERT FORD,                                                       UNPUBLISHED
                                                                   December 7, 2017
              Plaintiff,

V                                                                  No. 332473
                                                                   Oakland Circuit Court
WOODWARD TAP, INC., doing business as                              LC No. 12-128348-NS
SOUTH,

              Defendant-Cross Plaintiff,
and

RONALD TALLEY,

              Defendant-Cross Defendant,
and

RASOR LAW FIRM, P.L.L.C.,

              Appellant,
and

JONATHAN MARKO,

              Appellee.

Before: GLEICHER, P.J., and GADOLA and O’BRIEN, JJ.

PER CURIAM.

       Appellant, nonparty Rasor Law Firm, appeals as of right the trial court’s order denying
appellant’s motion to terminate a charging lien filed by appellee, nonparty Jonathan Marko, and
granting appellee an equitable lien on a portion of the appellant’s settlement proceeds from the
underlying case. We reverse.

        This case arises from the legal representation of plaintiff in the underlying action. The
case was referred to appellee, who at the time was an employee of appellant. Appellee
undertook the representation of plaintiff as an employee of appellant. Appellee stated that he
“litigated the case from the beginning,” and performed such tasks as investigating the claim,

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taking depositions, and “[e]ngaging in settlement discussions with defense attorneys at junctures
throughout the life of the case.” According to appellee, he also “research[ed], draft[ed], and
file[d] numerous motions including motions in limine, motions for spoliation of evidence, [and
a] motion to declare witnesses unavailable.” Appellee also stated that he successfully defended
against a motion for summary judgment and argued an appeal before this Court.1

        According to appellee, he had a fee-splitting agreement with appellant under which he
received “25% of money generated on firm clients, and 40% of money generated on personal
clients.” Appellee stated that “[b]eginning October 1, 2015, [appellant] intentionally refused to
remit all the monies due to [appellee] pursuant to the fee splitting agreement.” Appellee
characterized his not being paid as a constructive discharge and left appellant’s employment.
Shortly thereafter, another of appellant’s attorneys took over the underlying case until it was
settled. After the settlement, appellee then sent appellant an e-mail stating that he was asserting
a charging lien on the settlement for “attorney fees and expenses.”

        Appellant moved the trial court to terminate the lien. In response, appellee argued that
even if he was not entitled to a charging lien, he was, at the very least, entitled to an equitable
lien. The trial court denied appellant’s motion, finding that appellee was entitled to an equitable
lien on “40% of the net attorney fees to be paid to [appellant] from the settlement proceeds in the
instant underlying action.” The trial court, citing Warren Tool Co v Stephenson, 11 Mich. App.
274; 161 NW2d 133 (1968), stated that Michigan law has “long established that an equitable lien
can be created between parties when they agree that a clearly identified fund secures an
obligation.” It reasoned that appellee was entitled to an equitable lien on the settlement proceeds
because, based on the parties’ fee-splitting agreement, the settlement proceeds were an
identifiable fund that secured appellee’s obligation to work on the underlying case. The trial
court further explained that “neither client approval nor a direct relationship with the client is
necessary” to establish an equitable lien. Based on its finding of an equitable lien, the trial court
declined to address whether appellee had a charging lien.
       On appeal, appellant argues that the trial court erred by finding that an equitable lien was
authorized in this case. We agree. “Whether a lien is authorized in a particular case is a question
of law,” which we review de novo. Ypsilanti Charter Twp v Kircher, 281 Mich. App. 251, 281;
761 NW2d 761 (2008).
        It is well established in Michigan jurisprudence that “[a]n equitable lien cannot be
imposed . . . if the proponent has an adequate remedy at law.” In re Estate of Moukalled, 269
Mich. App. 708, 719; 714 NW2d 400, 407 (2006), citing Yedinak v Yedinak, 383 Mich. 409, 415,
175 NW2d 706 (1970); Ashbaugh v Sinclair, 300 Mich. 673, 677, 2 NW2d 810 (1942). Here, the
trial court failed to address whether appellee had an adequate remedy at law. However, our
review of the record made it clear that he does. At trial and on appeal, appellee made numerous
references to his “contract” with appellant and to appellant’s “contractual” obligations to
appellee. The trial court apparently agreed with appellee that the parties’ had a contract, but the

1
  See Ford v Woodward Tap, Inc, unpublished opinion per curiam of the Court of Appeals,
issued October 21, 2014 (Docket No. 316694).

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trial court erred by finding that this contract authorized an equitable lien in this case because
appellee had an adequate remedy at law. Indeed, if appellee was not granted an equitable lien, he
could nonetheless collect the full amount of what he was allegedly owed by bringing a cause of
action against appellant for breach of contract. Because appellee has an adequate remedy at law,
the trial court erred by concluding that an equitable lien was authorized.
        Appellee argues that a breach of contract action would not provide him with an adequate
remedy because he “would be forced to incur costly litigation and long delays to vindicate his
legal claims.” However, we do not see how this affects the adequacy of appellee’s remedy.
While litigating a claim is certainly inconvenient, it may be necessary in this case to determine
whether appellant and appellee had a contract, what the terms of that contract were, and whether
appellant violated those terms.
        Appellee also argues that pursuing a breach of contract action would be an inadequate
remedy “given [appellant’s] solvency issues.” Appellee does not contend that appellant is
insolvent; he only asserts that his legal remedy would be inadequate because appellant was
having difficulty meeting certain financial obligations. Appellee cites no authority for the
proposition that his legal remedy would be inadequate because appellant, a solvent party, failed
to timely pay some of its bills. See Liggett Rest Group, Inc v City of Pontiac, 260 Mich. App.
127, 138; 676 NW2d 633 (2003). (“This Court will not search for law to sustain a party's
position where that party neglects to cite any supporting authority for its claim.”). And when
considering only appellant’s financial condition, as appellant does in his argument, there is
authority to support that appellee would have a complete remedy at law so long as appellant was
solvent.2 See Maclean v Fitzsimons, 80 Mich. 336, 344; 45 N.W. 145 (1890) (“The bill does not
allege that Beattie is insolvent; and, if not, [the complainant] has a complete remedy against him
as the maker of the notes.”). While we understand appellee’s concern, there is nothing in the
record before us to warrant the conclusion that appellee would be unable to collect in full any
damages that may be awarded to him from a favorable judgment for breach of contract against
appellant. Therefore, appellee failed to establish that his legal remedy would be inadequate.3

2
  We emphasize that our decision should not be taken out of context. Equity grants a court
“broad power to fashion relief as the circumstances require,” Madugula v Taub, 496 Mich. 685,
712; 853 NW2d 75 (2014), and we acknowledge that a party’s solvency is not necessarily
determinative of an opposing party’s equitable claim. However, appellee’s argument is that he is
entitled to equitable relief based solely on appellant’s financial condition, and on the record
before us, we have no basis to conclude that a legal action against appellant, a solvent party,
would not provide appellee with a complete and adequate legal remedy.
3
  Relying on Warren Tool, 11 Mich. App. at 297, appellee also argues that he should be granted an
equitable lien because it would provide him with “a more complete remedy.” However, we have
no reason to conclude that an equitable lien would provide appellee with “a more complete
remedy” than would a breach of contract claim. If appellee is entitled to a portion of the attorney
fees from the underlying case, then he would be able to recover the same amount in an action for
breach of contract as he would from his asserted equitable lien. And as we stated, we have no

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        Further, both the trial court and appellee rely heavily on this Court’s decision in Warren
Tool to argue that appellee is entitled to an equitable lien. However, the facts of Warren Tool are
starkly different from the ones now before us, and to the extent that Warren Tool provides any
guidance, we believe that it supports our conclusion that appellee has an adequate remedy at law.
         In Warren Tool, the plaintiffs sought to hold the defendants personally liable “for the
diversion of certain funds which [the defendants’ defunct company] Stephenson Industries
agreed to use to pay for work performed by [the] plaintiffs.” Warren Tool, 11 Mich. App. at 276.
Stephenson Industries accepted a bid from the plaintiffs to work on a project for Highway
Products, Inc. (Highway), but the defendants refused the plaintiffs’ request to assign them the
Highway account. Id. at 277. Instead, in a letter to plaintiffs, “Stephenson Industries suggested
an alternative security arrangement” in which Stephenson Industries promised payment to the
plaintiffs from a check that Stephenson Industries would receive from Highway for order number
19064, which was the order that the plaintiffs were to fill. Id. at 277-278. In a second letter,
Stephenson Industries indicated that it sent a letter to its bank “asking them to disburse our
receipts from Highway Products, Inc., on their purchase orders 19064 . . . in favor of your
company.” Id. at 278. Thereafter, the plaintiffs began and completed the work. Id. However,
when the check from Highway for order 19064 was obtained by one of the defendants, the
former president of Stephenson Industries, he took the check, had it certified at the issuing bank,
took it to another bank and exchanged it for eight cashier’s checks, and then disbursed the
cashier’s checks between himself and his brother-in-law. Id. at 278-279. Afterwards,
Stephenson Industries went bankrupt, and the plaintiffs filed suit seeking to hold the defendants
personally liable. Id. The trial court ruled that the plaintiffs could not prove their claims against
the defendants and “terminated with a judgment of no cause of action.” Id. at 280. On appeal,
the plaintiffs argued that they had an equitable lien on the money from the check from Highway
for order 19064, and that the defendants “who participated in the destruction of that property
interest [were] personally liable for” conversion. Id. This Court held that, based on the facts
before it, the plaintiffs likely could have established that (1) they had an equitable lien on the
money from the identified check and (2) the defendants were liable for conversion when they
“deliberately obliterated [the] plaintiffs’ interest in the check.” Id. at 296-300. Accordingly, this
Court remanded the case for a new trial to determine whether the defendants were personally
liable to the plaintiffs for conversion. Id. at 303.
        In the case now before us, any apparent inequities faced by appellee are clearly far less
than those faced by the plaintiffs in Warren Tool. The Warren Tool Court emphasized that it
was holding that the plaintiffs could likely establish an equitable lien based on the severity of the
inequity, namely the defendants’ intentional act of converting the check promised to the
plaintiffs as security for their work.4 The Warren Tool Court also explained that, had the

reason to conclude that appellant would fail or be unable to pay appellee the full amount of any
potential award.
4
    In pertinent part, the Warren Tool Court explained as follows:
         The Highway check, upon its receipt, became the focus of considerable cogitation
         at Stephenson Industries,—should it be deposited in the bank or should it be
         diverted? When it was diverted, Stephenson Industries did more than breach an
         ordinary agreement to pay. It deliberately destroyed the specific security which

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defendants not taken action to deliberately extinguish the plaintiffs’ interest in the check and
instead “ignored or simply neglected” it, then “the result [of] that failure to deposit the check
would have constituted only a breach of contract” against Stephenson Industries, not the
defendants. Id. at 296. Such is the case here. If appellee is indeed entitled to 40% of the
settlement proceeds pursuant to the parties’ contract, and if appellant failed to take the proper
action to ensure that appellee received what he was contractually entitled to, then the result is a
breach of contract claim. And unlike in Warren Tool, appellee would receive a complete remedy
from appellant in a successful breach of contract action. Thus, Warren Tool supports our
conclusion that appellee is not entitled to an equitable lien because he has an adequate remedy at
law.
        Although the trial court did not rule on whether appellee was entitled to a charging lien,
we may “exercise our discretion to review the issue as a question of law for which the necessary
facts have been presented.” Aguirre v Dep’t of Corrections, 307 Mich. App. 315, 326; 859 NW2d
267 (2014). We choose to do so and conclude that appellee is not entitled to a charging lien.
      Attorney charging liens are recognized at common law. George v Sandor M Gelman,
PC, 201 Mich. App. 474, 477; 506 NW2d 583 (1993). This Court in George stated that
       [a]n attorney’s lien can be one of two kinds: (1) a general, retaining, or possessory
       lien, or (2) a special, particular, or charging lien. A general or retaining lien is the
       right to retain possession of all documents, money, or other property of the client
       until the fee for services is paid. The special or charging lien is an equitable right
       to have the fees and costs due for services secured out of the judgment or
       recovery in a particular suit. The attorney’s charging lien creates a lien on a
       judgment, settlement, or other money recovered as a result of the attorney’s
       services. [Id. at 476 (citation omitted).]

Attorney charging liens thus “automatically attach to funds or a money judgment recovered
through the attorney’s services.” Id. at 477. And while attorney charging liens are a specific
species of equitable liens, unlike equitable liens generally, they only “arise by reason of the
lawyer-client relationship.” Warren Tool, 11 Mich. App. at 284 n 5. “An attorney-client
relationship must be established by contract before an attorney is entitled to payment for services
rendered.” Plunkett & Cooney, PC v Capitol Bancorp Ltd, 212 Mich. App. 325, 329; 536 NW2d
886 (1995) (emphasis added).

       plaintiffs, pursuant to assurance from Stephenson Industries, had relied on for
       payment. Plaintiffs did not extend general credit to Stephenson Industries and
       then afterward extract a promise of security. The record so far made indicates
       there never would have been any performance by the plaintiffs but for the
       representation that the letter to the bank was more than the ordinary promise to
       pay, that it was, indeed, security. To hold that Stephenson Industries merely
       breached a contract when it intentionally extinguished the interest in property,
       choate or inchoate, which it had previously purported to dedicate to plaintiffs,
       would be to enshrine form and to ignore substance. [Warren Tool, 11 Mich. App.
       at 296-297 (citations omitted).]

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       Here, it is undisputed that only appellant had an attorney-client relationship established
by contract with plaintiff. Although appellee performed work for plaintiff’s case, he did not
have a separate contract with plaintiff; plaintiff’s contract was only with appellant. Appellee
could not assert an attorney’s charging lien because his attorney-client relationship with plaintiff
was not established by contract, so there was no basis for appellee to collect from plaintiff’s
settlement for his services. See Warren Tool, 11 Mich. App. at 284 n 5; Plunkett & Cooney, 212
Mich. App. at 329. If appellee is entitled to a portion of the settlement proceeds from the
underlying case, appellee’s remedy is against appellant for breach of contract. See Berke v
Murphy, 280 Mich. 633, 635-637; 274 N.W. 356 (1937) (holding that the plaintiff, an attorney,
was entitled to recovery on a breach of contract theory against the defendant, also an attorney,
where the defendant failed to pay the plaintiff a percentage of attorney fees that the defendant
agreed to pay the plaintiff in exchange for the plaintiff’s referring the case to the defendant).

       Reversed.

                                                             /s/ Elizabeth L. Gleicher
                                                             /s/ Michael F. Gadola
                                                             /s/ Colleen A. O'Brien

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