Moss Company LLC v. Donnie Ray Moss ( 2023 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
MOSS COMPANY, LLC, UNPUBLISHED
March 23, 2023
Plaintiff-Appellant,
V No. 360892
Wayne Circuit Court
DONNIE RAY MOSS, LC No. 21-006317-CB
Defendant/Third-Party Plaintiff-
Appellee,
and
SHIRLEY WALLER,
Defendant/Third-Party Plaintiff,
and
ROBERT BEAR and DANIEL FERGUSON,
Third-Party Defendants-Appellants,
and
SCHENK & BRUETSCH PLC,
Appellee.
Before: CAVANAGH, P.J., and MARKEY and BORRELLO, JJ.
PER CURIAM.
Plaintiff, Moss Company, LLC, and third-party defendants, Robert Bear and Daniel
Ferguson, appeal by leave granted an order imposing an attorney charging lien in favor of appellee
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Schenk & Bruetsch, PLC (S&B).1 We affirm in part, vacate in part, and remand for further
proceedings consistent with this opinion.
I. FACTS
Moss Company was formed in 2016 and is a demolition contractor performing work in
Detroit. Its three members were Bear, Ferguson, and defendant Donnie Ray Moss. In March 2021,
a dispute arose between Donnie Ray and the other two members of the company. Moss Company
retained appellee S&B and filed a lawsuit against Donnie Ray.2 The complaint alleged that Donnie
Ray had broken into the company’s office, stolen company assets, diverted the company’s
receivables into his own private account, and locked the company’s agents out of “its most critical
platform”—its profile within Detroit’s vendor portal, maintained by the Oracle System.
Moss Company asserted that Donnie Ray had complete control over the company’s profile
in Detroit’s vendor portal, and was directing the company’s “receivables” into a secret bank
account. Ferguson testified in an affidavit that “[t]he Company’s profile within the Oracle System
is its most important asset.” Moss Company used Detroit’s vendor portal to submit payment
requests and work-progress details, and to receive payments from Detroit. Ferguson stated, “The
Company cannot begin to perform [its] work until it has control of its profile within the Oracle
System because the Company will have no way of submitting work progress reports” and “[m]ore
importantly, the Company will not be able to receive payment because it doesn’t control the Oracle
System.” According to Ferguson, without access to the Oracle System, “its vendors will not be
paid, . . . the Company will be destroyed because of its [$2,000,000] bonding obligation,” and
Moss Company would be “unable to continue [its] work in the demolition industry.”
Along with the complaint, appellee S&B filed on behalf of Moss Company an ex parte
motion for a temporary restraining order against Donnie Ray. Donnie Ray in turn filed a third-
party complaint against Bear and Ferguson, alleging fraud and accusing them of diverting assets
from the company for their own personal gain. Appellee S&B also represented Bear and Ferguson
in that third-party case.
The trial court issued a preliminary injunction on July 15, 2021, prohibiting Donnie Ray
from holding himself out as an agent or officer of Moss Company and from accessing Moss
Company’s vendor profile or other accounts. The court also ordered him to “immediately turnover
all login credentials and passwords” needed for Detroit’s vendor profile. Later, in a stipulated
order dated January 11, 2022, Donnie Ray (1) admitted that he violated the preliminary injunction
by diverting $10,461.44 from Moss Company accounts to himself and others, (2) admitted to being
in contempt of court, (3) agreed to repay the funds he took from Moss Company, and (4) agreed
to pay $2,040.50 in Moss Company’s attorney fees to S&B.
1
Moss Co, LLC v Donnie Ray Moss, unpublished order of the Court of Appeals, entered June 13,
2022 (Docket No. 360892).
2
Shirley Waller, Moss Company’s former secretary, was a named defendant and third-party
plaintiff but was ultimately dismissed by stipulation of the parties and is not a party to this appeal.
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On February 10, 2022, Moss Company, Bear, and Ferguson (collectively appellants),
decided to terminate their relationship with appellee S&B and moved to substitute attorney Sanford
A. Schulman. Appellants asserted a breakdown in the attorney-client relationship involving a fee
dispute and stated that S&B refused to stipulate to substitution of counsel unless appellants would
agree to a number of provisions, including that: (1) S&B was terminated without cause, (2)
appellants needed to “control the costs of litigation” and “hired replacement counsel on a flat fee
basis,” (3) but for S&B’s efforts, Moss Company “would not have any income from its contracts
with the City of Detroit,” and (4) Moss Company owed S&B $42,524.60. Appellants further
reported that S&B was seeking an attorney charging lien and argued that such liens generally attach
to funds or judgments obtained through the attorney’s services, not to real property, and that “an
attorney-lien should not be used as a replacement for litigating a fee dispute nor should it be used
to delay substitution of counsel.”
Appellee S&B did not object to the substitution of counsel, but argued that the key issue in
appellants’ case was to regain control of Moss Company’s access to Detroit’s vendor portal, and
that, because S&B’s litigation efforts directly resulted in orders restoring Moss Company’s control
over Detroit’s vendor portal, S&B was entitled to a common-law charging lien on those funds.
S&B attached to its response a proposed order setting forth a charging lien of $55,295.40 to be
attached to any proceeds due to Moss Company from Detroit.3 In support, S&B submitted billing
invoices, the retainer agreement between appellants and S&B, and affidavits attesting to the
accuracy of the outstanding invoices.
At a March 3, 2022 hearing, Schulman, representing appellants, expressed appellants’
frustration with S&B’s services, and further stated that “the point is [appellants are] just not able
to bear the fees that’s been coming without, with what does not look like an early resolution, but
I’m hoping to get it to where it needs to go.” The trial court remarked that Schulman’s substitution
was “welcome” and “no problem,” and that the issue here was “the lien.” Schulman reiterated that
he was “trying to use [appellants’] finances effectively because that’s the point, they cannot handle
anymore,” and that he would try “to resolve [the case] using an economic approach as opposed to
what’s extremely expensive.” Schulman added that an “appropriate lien if any” should focus on
“what the property [was] about,” and not “on prospective assets of the City of Detroit’s contract.”
He also stated that any lien should be based on the trial court’s determination of a reasonable
amount after an evidentiary hearing.
Appellee S&B argued again that as a direct result of its litigation efforts, Moss Company
was able to regain control of its profile within Detroit’s vendor portal, which allowed it to work
and be paid. S&B maintained that “[t]hose funds are subject to an order of this Court” and “are
very much within . . . the Court’s jurisdiction.” S&B stated that, but for its efforts, Moss Company
“wouldn’t exist and I’d ask the Court to impose a charging lien in its order . . . .”
Donnie Ray, through counsel, did not object to the substitution of counsel or the lien, but
asked that the lien “only come out of Mr. Bear and Mr. Ferguson’s profits, because our position is
3
This amount comprised $42,966.15 in final invoices Moss Company owed: $6,315 Moss
Company owed on behalf of Bear, and $6,014.25 for the time incurred in addressing appellants’
motion for substitution.
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that just as Bear is trying to screw [S&B], he screwed [Donnie Ray], and I think the proofs are
going to show that.” Appellee S&B commented that it understood Donnie Ray’s position, but
because Moss Company was indebted to S&B, S&B should be paid before any funds were
disbursed to any members of the company.
The trial court granted the motion to substitute counsel and also granted the charging lien,
explaining as follows:
The Court pursuant to [George v Sandor M Gelman, PC, 201 Mich App
474; 506 NW2d 583 (1993)] is going to grant the attorney a charging lien. . . .
The Court does believe that [Donnie Ray’s counsel] is correct that that
amount should come from any portion of any profits ultimately from Bear and
Ferguson and not just off the top from the general corporate profits.
The trial court clarified that it was setting a specific amount for the lien of “[$]55,295.40 and if
there’s a challenge to that number we’ll have an evidentiary hearing, but that’s the number until
such time as we have a hearing.” The court acknowledged receipt of S&B’s proofs, noting that
S&B “attached the hours,” and the “hourly rate” did not “shock the conscience, [and] there are
some costs and such and the 55 is the number.”
Appellee S&B had already prepared a proposed order and asserted that it needed only to
add some language regarding how the fees would be assessed among the members of Moss
Company. The trial court agreed, stating, “Yeah, the Court doesn’t have a problem with [the
proposed order], so long as that other language is finessed in there and given an opportunity for
[Donnie Ray’s counsel] and [Schulman] to review it.”
On March 4, 2022 appellee S&B submitted a proposed order providing as follows:
The Court finds as follows:
1. Moss Company, LLC, Robert Bear, and Daniel Ferguson III have requested that
Schenk & Bruetsch PLC withdraw from its representation of them in this matter
because it is more economical for them to hire a new attorney than to pay S&B’s
invoices.
2. S&B’s termination was without cause.
3. Through S&B’s efforts, Moss Company regained control of its “most important
asset”—its vendor profile within the City of Detroit’s Oracle vendor/supplier
portal. This allowed Moss Company to begin performing its contracts with the City
and receive payment.
4. Moss Company, LLC owes S&B $55,295.40 in legal fees and expenses.
5. S&B is entitled to an attorney’s charging lien against any funds that Moss
Company, LLC receives, or is set to receive, from the City of Detroit.
In light of the above factual findings,
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IT IS ORDERED that Sanford Schulman is substituted in as counsel in
place of Schenk & Bruetsch, PLC . . . .
IT IS FURTHER ORDERED that Schenk & Bruetsch PLC is entitled to an
attorney’s charging lien of $55,295.40 against any funds possessed by or owed to
Moss Company, LLC from the City of Detroit. No money shall be disbursed to
Moss Company or from Moss Company’s accounts without first satisfying this
charging lien.
IT IS FURTHER ORDERED that the allocation of Schenk & Bruetsch
PLC’s fees, as between the members of Moss Company, shall be determined by the
Court as stated on the record.
Appellants filed objections to entry of the order, alleging that the trial court never made the
factual findings thus recited, that the court lacked authority to enforce a charging lien against
nonparty Detroit, and that the order failed to include a provision allowing appellants to demand an
evidentiary hearing challenging the amount of the lien, as the trial court had stated at the hearing.
Appellants provided their own proposed order which granted substitution of counsel, stated that
appellee would retain a lien on any recovery in the lawsuit in favor of Moss Company, and that
appellants could object to the reasonableness of the fees and costs, and request an evidentiary
hearing. Appellee S&B responded that the trial court already approved S&B’s proposed order
during the March 3, 2022 hearing, and thus that it should be entered.
Donnie Ray also filed objections, adopting appellants’ objections and adding that the
proposed order failed to include language reflecting the trial court’s earlier oral statement that the
lien should be paid “from any portion of any profits ultimately from Bear and Ferguson, and not
just off the top from the general corporate profits.”
At the hearing on the objections held on March 24, 2022, the trial court told S&B that “it
looks like there’s a few things that have been slid into this order that I don’t know that we really
talked about or, I mean I didn’t make a finding, I don’t know.” S&B maintained that “every issue
that is in that proposed order was addressed in the briefing, and the Court approved the exact
proposed order” at the hearing on March 3, 2022. Appellee S&B also asserted that the findings of
fact in the proposed order were consistent with the trial court’s rulings and the evidence presented.
Appellants argued the trial court actually “made no findings except a substitution [of counsel], a
lien, and the preservation” of appellants’ interest. Ultimately, the trial court stated, “[w]ell the
Court’s had an opportunity to review the motion, the original motion, the objection thereto, the
order, and the Court is going to enter the order as proposed by [S&B].”
The next day, the trial court entered S&B’s proposed order as it was submitted. This appeal
followed.
II. ANALYSIS
Appellants first argue that the trial court erred in imposing the charging lien because Detroit
was a third-party vendor, not a party to the case, and the court had no operational jurisdiction to
impose a charging lien over funds that may be earned from a nonparty. We agree.
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This Court reviews a trial court’s decision to impose an attorney charging lien for an abuse
of discretion. Polen v Melonakos, 222 Mich App 20, 24; 564 NW2d 467 (1997). An abuse of
discretion occurs when the trial court’s decision falls outside the range of reasonable and principled
outcomes. Nahshal v Fremont Ins Co, 324 Mich App 696, 710; 922 NW2d 662 (2018) (citation
omitted).
A 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.” George v Sandor M Gelman, PC,
201 Mich App 474, 476; 506 NW2d 583 (1993). It “creates a lien on a judgment, settlement, or
other money recovered as a result of the attorney’s services.” Id. Such “liens automatically attach
to funds or a money judgment recovered through the attorney’s services.” Id. at 477-478. “The
ability to enforce an attorney’s charging lien is ancillary to a trial court’s exercise of jurisdiction
over the cases before it.” Souden v Souden, 303 Mich App 406, 412; 844 NW2d 151 (2013).
Appellee S&B asserts that the charging lien at issue was proper because S&B’s litigation
efforts directly resulted in the recovery of login and password information that Moss Company
needed to gain access to Detroit’s vendor profile in order to perform work for, and receive payment
from, Detroit. Because S&B’s litigation services directly resulted in Moss Company’s receiving
payments from Detroit, S&B argues that the charging lien over such proceeds was appropriate.
S&B also maintains that Detroit was not merely an unrelated third-party vendor, but was seriously
involved in the facts underlying this case because its vendor portal was Moss Company’s most
important asset.
Appellee S&B’s arguments are not persuasive. The trial court imposed the charging lien
against “any funds possessed by or owed to” Moss Company from Detroit. Such an order would
be appropriate if this were a contract dispute between Moss Company and Detroit, and if S&B’s
services resulted in a money judgment against Detroit. But that is not the situation here. As noted,
a charging lien attaches to “a judgment, settlement, or other money recovered as a result of the
attorney’s services.” George, 201 Mich App 476. No such money was recovered here. S&B’s
litigation services resulted in orders directing the return of login and password information needed
for Moss Company to access Detroit’s vendor portal and continue its demolition work for that
customer. This “recovery” of Moss Company’s mechanism through which it collects money from
its demolition contracts with Detroit does not qualify as “other money recovered” for the purposes
of a charging lien. While Moss Company undoubtedly needed the login and password information
to resume its demolition work, the funds Moss Company derives from Detroit are actually earned
through its demolition work, not through gaining access to Detroit’s vendor portal. Further, Detroit
was not a party and Moss Company’s demolition work for Detroit was not at issue in this case.
Accordingly, imposing a charging lien against “any funds possessed by or owed to” Moss
Company from Detroit was improper.
This Court considered a similar situation in Dunn v Bennett, 303 Mich App 767; 846 NW2d
75 (2013). In that case, a taxpayer engaged counsel in response to a tax lien the IRS imposed on
the taxpayer’s real property. Id. at 769-770. After two years of litigation, the attorney reached a
settlement with the IRS under which the property was sold. Id. at 769. The IRS was paid out of
the proceeds of the sale, with the taxpayer retaining the excess proceeds from the sale. Id. When
the attorney was not satisfied with the compensation the taxpayer paid for his legal services, the
attorney sought a charging lien over the proceeds that the taxpayer received from the sale of the
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property. Id. at 770, 778. This Court noted that a charging lien generally attaches to the judgment
or recovery in a particular suit. And with regard to the client’s proceeds from the sale of the
property, this Court stated, “We do not view this as a ‘recovery’ to which a charging lien may be
attached.” Id. at 778. Although this Court did not elaborate, if the client’s share of proceeds from
the sale of real property in Dunn were too far attenuated from the “recovery” in that case, it follows
that the proceeds earned by Moss Company through its current or future demolition work for
Detroit are also too far attenuated to be deemed a “recovery” here.
For these reasons, we conclude that the trial court abused its discretion by imposing a
charging lien that attached to “any funds possessed by or owed to” Moss Company from Detroit.
It was unreasonable to attach an attorney charging lien on funds that were not part of any money
judgment, settlement, or any “other money” actually recovered by S&B’s work, and that were so
far removed from litigation in which Detroit was not a party, and Moss Company’s demolition
work for Detroit was not an issue.
Appellants next argue that the trial court erred in issuing an order containing findings of
fact that were made without discussion or proofs of any kind. Appellants additionally object that
the trial court’s order failed to include a provision allowing appellants to challenge the lien amount
and request an evidentiary hearing, on the ground that those omissions were contrary to the trial
court’s oral ruling on March 3, 2022. We find these arguments unpersuasive.
“Findings of fact by the trial court may not be set aside unless clearly erroneous. In the
application of this principle, regard shall be given to the special opportunity of the trial court to
judge the credibility of the witnesses who appeared before it.” MCR 2.613(C). “A finding is
clearly erroneous when this Court is left with a definite and firm conviction that a mistake has been
made.” Johnson Family Ltd Partnership v White Pine Wireless, LLC, 281 Mich App 364, 387;
761 NW2d 353 (2008). This Court reviews for an abuse of discretion a trial court’s decision on
whether to conduct an evidentiary hearing to determine the reasonableness of attorney fees.
Kernen v Homestead Dev Co, 252 Mich App 689, 691; 653 NW2d 634 (2002). If there is a
sufficient record to review the issue, an evidentiary hearing is not required. Id.As noted, the order at issue recited that appellants terminated their relationship with
appellee S&B only because it was more economical for appellants to hire new counsel, and that
S&B’s litigation efforts resulted in Moss Company’s regaining access to Detroit’s vendor portal,
which was Moss Company’s most important asset. Appellants emphasize that at the March 24,
2022 hearing on objections to S&B’s proposed order, the trial court commented, “a few things
have been slid into this order that I don’t know that we really talked about or, I mean I didn’t make
a finding, I don’t know;” and then the next day the trial court entered the order exactly as it was
proposed by S&B. However, despite the trial court’s comment, each of the trial court’s findings
of fact was discussed and argued in the briefs and orally at two hearings, and S&B offered
documentation in support of the amount it requested. The trial court’s findings of fact were thus
based on sufficient evidence presented on the record, and so were not clearly erroneous.
Next, appellants argue that the amount of the attorney lien should have been determined
through “an evidentiary hearing, with testimony, exhibits, and the safe guards of due process,” and
thus the trial court abused its discretion by failing to include a provision in the order allowing
appellants to challenge the amount of the lien through an evidentiary hearing.
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As noted, at the March 3, 2022 hearing, the trial court set the specific amount for the lien
at $55,295.40, then added, “if there’s a challenge to that number we’ll have an evidentiary hearing,
but that’s the number until such time as we have a hearing.” And the court acknowledged receipt
of S&B’s proofs as to the amount while opining that the “hourly rate” did not “shock the
conscience, then stated that, in the event of a challenge, there would be an evidentiary hearing.
Schulman responded, “I’ll discuss it with [appellants] about the figure, I haven’t really, I just got
their numbers the day before.” As S&B points out, weeks passed, and neither appellants nor their
counsel ever requested an evidentiary hearing, or otherwise challenged the lien amount, and never
offered any evidence to rebut S&B’s proofs in that regard. The trial court stated that it had taken
advantage of the “opportunity to review” the proposed order, the objections, and the motions,
before it entered its order. “[A] court speaks through its written orders and judgments, not through
its oral pronouncements.” In re Contempt of Henry, 282 Mich App 656, 678; 765 NW2d 44(2009). Thus, to the extent that the trial court’s oral statement regarding appellants’ prerogative
to challenge the amount of the lien in an evidentiary hearing varied from the written order, the
latter controls. See Cassidy v Cassidy, 318 Mich App 463, 509; 899 NW2d 65 (2017).
In summary, we conclude that the trial court’s findings of fact were not clearly erroneous,
but were instead based on the evidence presented. Further, because appellants had sufficient time
to challenge the lien amount, present their own evidence, and request an evidentiary hearing, but
never did, and because the trial court had a reasonable basis for calculating the amount, we
conclude that the trial court did not abuse its discretion by declining to include a provision in the
order expressly allowing appellants to challenge the lien amount. However, because the trial court
erred by granting S&B a charging lien that attached to funds that nonparty Detroit possessed or
owed to Moss Company, we vacate that facet of the order and remand this case with instructions
to the trial court to issue an amended order granting a charging lien that attaches only to the
proceeds of any actual recovery from the pending case between appellants and Donnie Ray.
Affirmed in part, vacated in part, and remanded for further proceedings consistent with this
opinion. We do not retain jurisdiction.
/s/ Mark J. Cavanagh
/s/ Jane E. Markey
/s/ Stephen L. Borrello
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