Holly Castle, Individually and as next friend of Emily Castle, a minor child, and Jana Clark v. David Dorris Logging, Inc. ( 2013 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
JANUARY 24, 2013 Session
HOLLY CASTLE, INDIVIDUALLY, AND AS NEXT FRIEND OF EMILY CASTLE, A
MINOR CHILD; AND JANA CLARK v.
DAVID DORRIS LOGGING, INC., ET AL.
Direct Appeal from the Circuit Court for Shelby County
No. CT-001806-07, Div. IV Gina C. Higgins, Judge
No. W2012-00917-COA-R3-CV - Filed February 11, 2013
This case involves a post-trial dispute between one party to a personal injury case and their
former counsel. After a jury verdict was entered in favor of Appellants, their former law firm
filed an attorney lien and a motion to recover its attorney fees in the trial court. Appellants
asserted that the trial court lacked jurisdiction to consider the former firm’s motion. The trial
court disagreed and awarded the former firm its full requested fee. Appellants appeal both
the award of attorney fees to its former law firm, and also the trial court’s denial of
Appellants’ request to release funds held by the clerk. We conclude that the trial court lacked
jurisdiction to consider the post-trial dispute and reverse the award of attorneys fees in this
case. However, we affirm the trial court’s denial of the motion to release funds. Reversed in
part, affirmed in part, and remanded.
Tenn. R. App. P. 3. Appeal as of Right; Judgment of the Circuit Court Reversed in
Part, Affirmed in Part and Remanded
J. S TEVEN S TAFFORD, J., delivered the opinion of the Court, in which A LAN E. H IGHERS,
P.J.,W.S., and D AVID R. F ARMER, J., joined.
R. Sadler Bailey, Memphis, Tennessee, for the appellants, Holly Castle and Jana Clark.
Martin Zummach, Southhaven, Mississippi, for the appellee, Horne & Wells, PLLC.
OPINION
I. Background
Plaintiffs/Appellants Holly Castle, Emily Castle, and Jana Clark (collectively,
“Appellants”) were involved in a car accident with Defendants David Dorris Logging, Inc.,
and David Dorris, (collectively, “Defendants”) on May 9, 2006. The Defendants stipulated
to liability and a jury returned a verdict for the Appellants in the total amount of $350,000.00.
Shortly after the jury verdict, Appellants fired their law firm, Appellee Horne and Wells,
PLLC (“Horne and Wells”). The jury verdict was reduced to judgment on October 25, 2011.
On October, 26, 2011, Appellants’ new attorney entered a notice of appearance in the case.
On the same day, Horne and Wells filed a notice of attorney lien on the jury verdict. Before
hiring Horne and Wells, Appellants had previously fired attorney Ronald Krelstein in 2008.
Mr. Krelstein also filed a notice of attorney lien in this case. Mr. Krelstein later filed a
separate action to recover his attorney fees with regard to this litigation.1
On November 18, 2011, new counsel for the Appellants filed a Motion for New Trial,
or, in the alternative, for Additur, arguing that the jury’s verdict was against the weight of
the evidence introduced at trial. On November 22, 2011, Defendants entered into a consent
order, awarding Appellants their discretionary costs. On December 12, 2011, Defendants
filed a response to Appellants’ Motion for New Trial, denying that the jury’s verdict was
against the weight of the evidence. On December 30, 2011, counsel for Horne and Wells
notified the Appellants’ newly retained counsel that it intended to file a motion to recover
attorney fees and costs. According to the briefs, the matter was set for hearing, but was later
removed from the docket when Appellants’ counsel informed Horne and Wells that he
believed seeking attorney fees in such a manner was improper pursuant to Starks v.
Browning, 20 S.W.3d 645 (Tenn. Ct. App. 1999), discussed in detail below.
On January 3, 2012, the trial court denied Appellants’ Motion for New Trial, or, in
the alternative, for Additur. On the same day, the trial court entered a Consent Order, under
which the full amount of damages awarded to the Appellants would be paid to the Shelby
County Circuit Court Clerk pending resolution of all claims for damages, whether claimed
by the Appellants’ former counsel or others. The order notes that both Horne and Wells and
Mr. Krelstein had filed attorney liens regarding the funds paid into the Court Clerk. The order
also refers to other claims on the funds, concerning loans entered into by Appellants, which
are not the subject of this appeal.2 The order states:
1
Mr. Krelstein filed a brief in this matter fully agreeing with Horne and Wells’ position in this case.
However, Mr. Krelstein was never made a party to this case in the trial court or on appeal pursuant to
Tennessee Rules of Civil Procedure 19(e) (allowing for the addition of parties upon motion by the parties
or the Court). Thus, Mr. Krelstein is not a party to this appeal.
2
The loans entered into by Appellants are not at issue on appeal. According to counsel for
Appellants at oral argument, those loans have now been satisfied. The record contains a consent order
(continued...)
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IT IS, THEREFORE, ORDERED, ADJUDGED, AND
DECREED that all funds necessary for the Defendants to satisfy
the Judgments ($200,000.00 for Holly Castle and $150,000.00
for Jana Clark plus post-judgement interest) will be paid into an
interest-bearing account, until the disputes between and among
the various parties making claim to the Judgment proceeds are
resolved and further Orders of this Court are entered directing
distribution of the funds.
The order was signed by counsel for Appellants, Defendants, Horne and Wells, and Mr.
Krelstein. The Defendants paid the owed amounts into the registry of the Circuit Court Clerk
and a Satisfaction of Judgment was entered on January 11, 2012.3
On January 20, 2012, Horne and Wells filed its Motion to Recover Attorneys Fees and
Costs. Horne and Wells attached its contract for legal services with the Appellants to the
motion, which contract indicates that Horne and Wells was to receive forty percent of the
total recovery if the case went to trial. Appellants filed a response in opposition on January
25, 2012, arguing that the motion was improper and that the trial court did not have
jurisdiction to consider a dispute between one party to a lawsuit and its own attorney.
On January 27, 2012, the trial court orally ruled that it had jurisdiction to hear the
dispute between Appellants and Horne and Wells regarding the attorney fee dispute. The trial
court further directed Horne and Wells to provide documentation showing the amount of time
spent working on the case in order to award Horne and Wells a reasonable attorney fee. On
February 1, 2012, Horne and Wells filed several affidavits concerning its work on the case,
as well as the affidavits of other attorneys concerning the reasonableness of the requested fee.
On February 7, 2012, counsel for the Appellants informed the trial court that he
intended to file motions soon, but that a hearing on the motion for attorneys fees had not yet
been set. The trial court informed counsel for the Appellants that it intended to file an order
ruling on the attorney fee motion the following day. Accordingly, Appellants filed a Motion
for Recusal, a Motion to Release Funds, and a Motion for Interlocutory Appeal on February
7, 2012. On February 8, 2012, the trial court entered an order granting Horne and Wells’ an
2
(...continued)
entered by the parties disbursing $44,262.50 to Harwood Investment Group, LLC, on January 3, 2012.
3
After the Defendants paid the jury verdict into the Circuit Court Clerk, the Defendants no longer
participated in this litigation and are not a party to this appeal.
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award for attorney fees in the amount of $144,115.45. The trial court specifically relied on
the consent order providing that funds would only be disbursed upon order of the trial court
to conclude that it had jurisdiction over the dispute. The trial court then directed Horne and
Wells to provide some documentation “that no other claims are made in objection to the
attorney fees alleged by Horne and Wells [], to be due and owing in the amount of
$144,115.45, other than those objections already presented by [Appellants] in response to the
original motion.” Horne and Wells complied by filing a “Statement of Interest” from both
Mr. Krelstein and attorneys for the Defendants, in which they stated that they claimed no
interest in and did not dispute Horne and Wells’ $144,115.45 attorney fee award.
On February 16, 2012, Horne and Wells filed a response to the Appellants’ pending
motions. On February 24, 2012, a hearing was held on all pending motions. The trial court
orally denied the motion to recuse and the motion to release funds. The trial court ordered
additional briefing on the issue of whether a jury trial was required to award attorney fees.
Ultimately, the trial court entered an order on March 20, 2012 denying Appellants’ recusal
motion, motion to release funds, and request for jury trial. The trial court entered another
order on March 21, 2012 awarding Horne and Wells its full requested attorney fees.
Appellants timely appealed.4
II. Issues Presented
1. Whether the trial court erred in retaining jurisdiction over Horne and Wells’ Motion
to Recover and Receive Attorney Fees pursuant to Starks v. Browning, 20 S.W.3d
645 (Tenn. Ct. App. 1999) and then subsequently granting Horne and Wells’ motion?
2. Whether the trial court erred in denying Appellants’ motion for jury trial?
3. Whether the trial court erred in denying Appellants’ motion for release of funds?
4. Whether the trial court erred in denying Appellants’ motion for recusal?
III. Analysis
A. Subject Matter Jurisdiction
Appellants’ first argue that the trial court erred in retaining jurisdiction over the fee
4
We note that nothing in the record suggests that the trial court ever entered an order denying
Appellants’ Motion for Interlocutory Appeal. However, after the trial court entered the orders on March 20
& 21, 2012, no issues remained pending in the trial court. Thus, the trial court’s ruling was final and
appealable, and the issue of an interlocutory appeal became moot. Accordingly, we conclude that, despite
the trial court’s failure to enter an order on that motion, this Court has jurisdiction to consider this appeal.
See Tenn. R. App. 13.
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dispute between Appellants and Horne and Wells based on Horne and Wells’ attorney lien.
Subject matter jurisdiction implicates a court’s power to adjudicate a particular case or
controversy. Osborn v. Marr, 127 S.W.3d 737, 739 (Tenn. 2004); Earls v. Mendoza, No.
W2010-01878-COA-R3-CV, 2011 WL 3481007, at *5 (Tenn. Ct. App. Aug. 10, 2011). “In
the absence of subject-matter jurisdiction, a court cannot enter a valid, enforceable order.”
Earls, 2011 WL 3481007, at *5 (citing Brown v. Brown, 281 S.W.2d 492, 497 (Tenn.
1955)). When subject matter jurisdiction is questioned, we must ascertain whether the
Tennessee Constitution, the Tennessee General Assembly, or the common law have
conferred upon the court the power to adjudicate the case before it. Id. (citing Staats v.
McKinnon, 206 S.W.3d 532, 542 (Tenn. Ct. App. 2006)). “Since a determination of whether
subject matter jurisdiction exists is a question of law, our standard of review is de novo,
without a presumption of correctness.” Northland Ins. Co. v. State, 33 S.W.3d 727, 729
(Tenn. 2000).
Attorney liens are governed by Tennessee Code Annotated Section 23-2-102, which
provides that: “Attorneys and solicitors of record who begin a suit shall have a lien upon the
plaintiff's or complainant's right of action from the date of the filing of the suit.” This lien
attaches to any proceeds flowing from a judgment, as long as the lawyer worked to secure
the judgment for the client. See Butler v. GMAC, 203 Tenn. 366, 370–71, 313 S.W.2d, 260,
262 (Tenn. 1958).
This Court explained the purpose and historical background of attorney liens in Starks
v. Browning, 20 S.W.3d 645 (Tenn. Ct. App. 1999):
The relationship between a client and an attorney is
essentially contractual. See Alexander v. Inman, 974 S.W.2d
689, 694 (Tenn. 1998); In re Ellis, 822 S.W.2d 602, 607 (Tenn.
Ct. App. 1991). In its most basic terms, this contract involves
the exchange of competent legal services in return for an
agreement to pay a reasonable fee. The attorney is obligated to
exercise the utmost good faith in the discharge of his or her
duties to represent the client. See Crawford v. Logan, 656
S.W.2d 360, 364 (Tenn. 1983); Fitch v. Midland Bank & Trust
Co., 737 S.W.2d 785, 789 (Tenn. Ct. App. 1987). If the attorney
discharges his or her duties appropriately, he or she is entitled to
the reasonable, agreed-upon compensation without regard to the
actual benefit the services might have been to the client. See
Spofford v. Rose, 145 Tenn. 583, 611, 237 S.W. 68, 76 (1922);
Bills v. Polk, 72 Tenn. 494, 496 (1880); Adams v. Mellen, 618
S.W.2d 485, 488 (Tenn. Ct. App. 1981).
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The courts may decline to enforce an attorney's fee
contract only (1) when the attorney did not negotiate the contract
in good faith, see Alexander v. Inman, 974 S.W.2d at 693–94,
(2) when the contract provides for an unreasonable fee, see
White v. McBride, 937 S.W.2d 796, 800–01 (Tenn. 1996), or (3)
when the attorney has otherwise breached his or her fiduciary
obligations to the client and this breach has prejudiced the
client's interests. See Crawford v. Logan, 656 S.W.2d at 365;
Alexander v. Inman, 903 S.W.2d 686, 694 (Tenn. Ct. App.
1995); Coleman v. Moody, 52 Tenn.App. 138, 155, 372 S.W.2d
306, 311–314 (1963).
Two types of attorney's liens exist today either by the
common law or by statute. The first type of lien is a retaining
lien. A retaining lien is a possessory lien, see Andrew Hall &
Assocs. v. Ghanem, 679 So. 2d 60, 61 (Fla. Dist. Ct. App. 1996);
In re Coronet Ins. Co., 298 Ill.App.3d 411, 232 Ill. Dec. 507,
698 N.E.2d 598, 601 (1998); Panarello v. Panarello, 245
N.J.Super. 318, 585 A.2d 428, 430 (Ch. Div. 1990), that permits
a lawyer to retain a client's books, papers, securities, or money
coming into his or her possession during the course of the
representation until the attorney and client have settled their fee
dispute or until the client has otherwise posted appropriate
security for the outstanding fee. See McDonald, Shea & Co. v.
Charleston, C. & C. Railroad, 93 Tenn. 281, 293, 24 S.W. 252,
255–56 (1893); Brown & Reid v. Bigley, 3 Tenn. Ch. (Cooper)
618, 621 (1878); Hunt v. McClanahan, 48 Tenn. (1 Heisk.)
503, 506–07 (1870) . . . .
The second type of lien, a charging lien, is based on a
lawyer's equitable right to have the fees and costs due for the
lawyer's services in a particular action secured by the judgment
or recovery in that action. See Southern v. Beeler, 183 Tenn.
272, 301–02, 195 S.W.2d 857, 870 (1946); Keith v. Fitzhugh,
83 Tenn. 49, 50 (1885); see also Bennett v. Weitz, 220
Mich.App. 295, 559 N.W.2d 354, 355 (1997); Mack v. Moore,
107 N.C.App. 87, 418 S.E.2d 685, 688 (1992); Shaffer v.
Charleston Area Med. Ctr., Inc., 199 W.Va. 428, 485 S.E.2d
12, 20–21 (1997). Unlike a retaining lien, a charging lien is not
limited to the property in the attorney's possession. See Brauer
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v. Hotel Assocs., Inc., 192 A.2d at 834. It attaches to any
proceeds flowing from a judgment, as long as the lawyer worked
to secure that judgment for the client. See Butler v. GMAC, 203
Tenn. 366, 370–71, 313 S.W.2d 260, 262 (1958); see also
Crolley v. O'Hare Int'l Bank, 346 N.W.2d 156, 159
(Minn.1984).
Both retaining and charging lien rights may be waived or
forfeited in a variety of ways. They may be lost if a lawyer fails
to represent his or her client's interests faithfully, honestly, and
consistently or fails to discharge his or her duties with the
utmost faith. See First Nat'l Bank of Cincinnati v. Pepper, 454
F.2d 626, 633 (2d Cir.1972); Western Life Ins. Co. v. Nanney,
296 F. Supp. 432, 441 (E.D. Tenn. 1969); People ex rel.
MacFarlane v. Harthun, 195 Colo. 38, 581 P.2d 716, 718
(1978). Accordingly, a client may assert an affirmative defense
or counterclaim based on professional negligence in response to
a lawyer's action to enforce a charging lien. See Paramount
Eng'g Group, Inc. v. Oakland Lakes, Ltd., 685 So. 2d 11, 12
(Fla.Dist.Ct.App.1996); Jarman v. Hale, 112 Idaho 270, 731
P.2d 813, 814 (App. 1986); Coughlin v. SeRine, 154 Ill.App.3d
510, 107 Ill. Dec. 592, 507 N.E.2d 505, 508 (1987); Neylan v.
Moser, 400 N.W.2d 538, 540 (Iowa 1987).
Starks, 20 S.W.3d at 650–51.
Appellants do not dispute that Horne and Wells filed a proper attorney charging lien
in this case. Instead, they argue that the trial court lacked subject matter jurisdiction to
consider a dispute between a party and its own attorneys based on the specific circumstances
in this case. Both parties agree that the case of Starks v. Browning, 20 S.W.3d 645 (Tenn.
Ct. App. 1999), is directly on point and is controlling in this case. However, each party
argues that application of Starks supports its position. Therefore, we first turn to consider the
facts in Starks.
In Starks, the plaintiff and the defendant entered into a post-trial settlement agreement
for substantially less than the jury verdict awarded to the plaintiff. The plaintiff asserted that
her attorneys were negligent in inducing her to accept the settlement. Accordingly, plaintiff’s
original attorneys moved to withdraw and to assert an attorney lien on the settlement.
Plaintiff retained new counsel, who indicated that he would be willing to pay the disputed
amount into an escrow account. From our review of the opinion, there is no indication in the
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opinion whether the new attorney ever deposited the funds into an escrow account. Instead,
the trial court entered an order directing the new attorney to pay the fees and expenses
allegedly owed to the original attorneys to the Circuit Court Clerk. The new attorney
complied and deposited the funds with the Circuit Court Clerk. A malpractice action against
the original attorneys was later filed in another court. After a hearing, the trial court in the
underlying action eventually awarded the original attorneys their full fee pursuant to the
client’s contract. The plaintiff appealed, arguing that “the mere establishment of the lien does
not amount to an adjudication of the rights between her and [her original attorneys].” The
Court of Appeals agreed, stating:
While a charging lien serves to secure an attorney's fees,
it does not function as an adjudication of the rights between the
lawyer and his or her client. See Pierce v. Lawrence, 84 Tenn.
572, 577–78, 1 S.W. 204, 205–06 (1886). A trial court may
declare the existence of an attorney's lien in the suit out of which
the dispute regarding the attorney's fee arose, but ordinarily an
attorney, not being a party to the proceeding, may not obtain a
judgment with respect to his or her fee in that action. See State
v. Edgefield & Kentucky R.R., 63 Tenn. 92, 97 (1874); Perkins
v. Perkins, 56 Tenn. (9 Heisk.) 95, 97–98 (1871). Once the court
declares the existence of the attorney's lien in the underlying
litigation, the lien becomes an equitable charge on any recovery
the client receives in the litigation.
After a court has declared an attorney's lien, the lawyer
may then commence a separate proceeding in a court of
competent jurisdiction to enforce his or her contractual right to
a fee. See Keith v. Fitzhugh, 83 Tenn. 49, 50 (1885); McCamy
v. Key, 71 Tenn. 247, 250–51 (1879); Brown & Reid v. Bigley,
3 Tenn. Ch. at 626; Fain v. Inman, 53 Tenn. (6 Heisk.) 5, 12
(1871). In this separate suit, the issues relating to the attorney's
entitlement to the fee and costs secured by the lien and to the
attorney’s professional negligence may be litigated. See Perkins
v. Perkins, 56 Tenn. at 97–98; Palmer v. Palmer, 562 S.W.2d
833, 839 (Tenn. Ct. App. 1977); Manson v. Stacker, 36 S.W.
188, 190–91 (Tenn. Ch. App. 1896); Brown & Reid v. Bigley,
3 Tenn. Ch. at 626. This separate proceeding offers the client,
now in the posture of a defendant, an opportunity to present
defenses to the attorney's claim for a fee, including defenses that
the attorney is not entitled to a fee because of professional
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negligence or some other basis. See First Nat'l Bank of
Cincinnati v. Pepper, 454 F.2d 626 at 633; Western Life Ins.
Co. v. Nanney, 296 F.Supp. at 441.
Starks, 20 S.W.3d at 652–53 (footnote omitted). Thus, the Appellants argue that the trial
court in this case likewise erred in adjudicating the rights between Appellants and Horne and
Wells.
Horne and Wells, however, argues that the trial court properly awarded its fee because
the case-at-bar falls within the exception to the general rule expressed in Starks. Indeed, the
Court in Starks did note one exception to the general rule that a fee dispute must be
commenced in a separate lawsuit:
This exception applies to cases in which the money or property
upon which the lien is to be enforced comes within the control
of the court in the case in which the services were rendered.
When the court is able to exert jurisdiction directly over the
funds or property, the attorney need not resort to a separate suit
to enforce his or her lien.
Id. at 653 (citing State v. Edgefield & Kentucky R.R., 63 Tenn. at 97; Palmer v. Palmer, 562
S.W.2d at 839).
Horne and Wells argues that, because the parties agreed to pay the damages into the
registry of the Circuit Court Clerk, the money “c[a]me within the control of the court in
which the services were rendered.” Starks, 20 S.W.3d at 653. Thus, Horne and Wells asserts
that, by obtaining control over the funds at issue through the agreement of the parties, “the
court [was] able to exert jurisdiction over the funds or property.” Id. To support this
argument, Horne and Wells rely on the Tennessee Supreme Court case of Schmitt v. Smith,
118 S.W.3d 348 (Tenn. 2003). The Court in Schmitt applied the exception in Starks to hold
that the trial court had jurisdiction to consider the fee dispute between a client and her/his
attorney regarding a divorce action. The Schmitt Court noted that the Starks Court refused
to apply the exception in that case because “the lien involved a post-judgment dispute
between the attorneys and the client over legal fees and expenses.” However, the Court
concluded that the present case was different:
We have here a divorce action in which the trial court
adjudicated the distribution of the marital property owned by
[husband and wife]. The residence that was the subject of [the
attorney] lien was included in the marital property ultimately
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divided by the trial court. As such, the property upon which the
lien was to be enforced, the house, was within the control of the
trial court. . . . Therefore, we hold that the trial court properly
adjudicated the attorney's lien in this case.
Id. at 354. The Court further held that the trial court retained jurisdiction over the property
despite the entry of a final judgment on the divorce because, at the time the lien was filed,
a petition was pending in the trial court to force the sale of the property at issue. Therefore,
“the subject of the lien was still within the jurisdiction of the trial court.” Id. at 355.
In contrast, Appellants argue that the facts presented in this case do not fall within the
“narrow” exception outlined in Starks and applied in Schmitt. See Starks, 20 S.W.3d at 653.
As argued by Appellants, in Starks, as in the instant appeal, the funds at issue were the result
of personal injury lawsuit. The Court of Appeals concluded that the trial court correctly
granted the lien in favor of the original attorneys, but that the trial court erred in awarding
the attorneys the fees that were in dispute. The Court explained:
The facts of this case do not fall within the narrow
confines of the exception to the general requirement that a
lawyer must file a separate suit against his or her client to collect
a disputed fee. The October 7, 1997 order directing [plaintiff] to
pay $51,091.99 into court was not part of the underlying
litigation between [plaintiff] and [the original defendants] and
was entered after that litigation had been concluded. Rather, the
order was part of the post-judgment dispute between the
[original attorneys] and [plaintiff] over legal fees and expenses.
Accordingly, because the settlement proceeds were never
brought under the control of the trial court during the
underlying litigation, the [original attorneys] should have filed
a separate action against [plaintiff] for its fee rather than
attempting to obtain it in this case.
Starks, 20 S.W.3d at 653. Appellants argue that the situation presented in this case is highly
analogous to the facts in Starks, and thus, this Court must likewise conclude that the trial
court lacked jurisdiction. Appellants point out that, as in Starks, the trial court here did not
gain control over the funds “during the underlying litigation,” but only during the post-
judgment dispute regarding the attorney fees in this case. Appellants further distinguish the
facts in this case from the case relied on by Horne and Wells, Schmitt v. Smith. According
to Appellants, the Schmitt trial court retained jurisdiction to award the original attorneys their
fee only because the property upon which the lien was based, a piece of real property jointly
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owned by the parties, came within the control of the court in the underlying litigation. Indeed,
Tennessee Code Annotated Section 36-4-121 authorizes courts with divorce jurisdiction,
upon request of either party in a divorce action, to equitably divide or distribute the marital
property. Thus, a trial court having jurisdiction over a divorce also has jurisdiction over the
property at issue in the divorce during the underlying litigation. In contrast, Appellants argue
that the funds at issue, like the funds in Starks, were not subject to the control of the trial
court during the underlying litigation; instead, they assert that the consent order placing the
funds with the court “was entered after that litigation had been concluded[, and that ] . . . the
order was part of the post-judgment dispute between [Horne and Wells] and [Appellants]
over legal fees and expenses.” Starks, 20 S.W.3d at 653.
We agree. A judgment on the jury verdict was entered on October 25, 2011. A Motion
for New Trial was denied on January 3, 2012. The funds at issue did not come within control
of the Court until the Motion for New Trial was denied on January 3, 2012 pursuant to the
consent order signed by the parties. Despite arguments to the contrary, this case simply does
not fall within the “narrow” exception expressed in Starks because the funds at issue were
not within the trial court’s control during the underlying litigation. Indeed, during the
underlying litigation there were no funds at issue because the Defendants had not yet been
ordered to pay damages to the Appellants until the order on the jury verdict was entered. In
contrast in Schmitt, the property at issue was within the trial court’s jurisdiction from the
inception of the underlying litigation because it constituted marital property subject to
equitable division pursuant to Tennessee Code Annotated Section 36-4-121. Thus, in this
case, the funds at issue were not within the control of the trial court “during the underlying
litigation,” and the trial court therefore, had no jurisdiction to award Horne and Wells its
alleged fee in this case.
Horne and Wells argues, however, that the facts in Starks are distinguishable because
the plaintiff in Starks never agreed to submit the settlement proceeds to the court pending
resolution of the disputes. In this case the damages represent a jury verdict, the entirety of
which was paid directly to the Circuit Court Clerk by the original Defendants. In contrast,
in Starks, the funds represented a settlement that was forwarded to the plaintiff’s new
attorney, who agreed to pay the disputed funds into an escrow account and was later ordered
by the court to pay only the amount allegedly owed to the original attorneys to the Circuit
Court Clerk. In short, Horne and Wells argues that the jurisdiction of the trial court over the
dispute at issue rests upon the consent order allowing the funds to be paid into the court and
held until all disputes were resolved. Indeed, in its brief, Horne and Wells asserts that
“perhaps most damaging to the [Appellants’] position to the contrary, [Appellants] expressly
consented to the court’s continued jurisdiction over the funds in that Consent Order[.]”
Defendants in this case were clearly entitled to deposit the amount representing the jury
verdict with the Circuit Court Clerk pursuant to Rule 67.01 of the Tennessee Rules of Civil
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Procedure. Rule 67.01 provides:
In an action in which any part of the relief sought is a judgment
for a sum of money or the disposition of a sum of money or the
disposition of any other thing capable of delivery, a party upon
notice to every other party and by leave of court may deposit
with the court all or any part of such sum or thing.
Therefore, the trial court clearly had jurisdiction pursuant to Rule 67.01 to allow Defendants
to deposit the funds at issue with the Circuit Court Clerk pending resolution of all pending
disputes. Although the deposit of the funds was clearly authorized by the above rule, nothing
in Rule 67.01 confers jurisdiction on the trial court to consider a post-trial dispute between
one party and its own attorney. Horne and Wells cites no cases in which the simple act of
taking advantage of the procedure available in Rule 67.01 was found to have conferred
jurisdiction on the trial court to resolve a post-trial dispute between one party and its own
attorney. Our research has likewise failed to reveal such a case. Nor does the fact that the
parties agreed that the funds should remain in the court pending resolution of all disputes and
“further [o]rders of the Court” confer jurisdiction on the trial court in this case. Indeed, it
is well-settled that the court does not gain jurisdiction through the consent of the parties.
“‘Subject matter jurisdiction differs fundamentally from personal jurisdiction in that the latter
can be conferred by express or implied consent,’ while subject-matter jurisdiction cannot
be conferred ‘by appearance, plea, consent, silence, or waiver.’” Landers v. Jones, 872
S.W.2d 674, 675 (Tenn. 1994) (emphasis added). Thus, despite the parties’ apparent consent
to allow the trial court to hold the funds pending resolution of the dispute, the consent order
did not operate to confer jurisdiction on the trial court to consider the fee dispute between
the Appellants and Horne and Wells.
This decision does not leave Horne and Wells without a remedy to recover its alleged
attorney fee. As explained in Starks:
Holding that the trial court should not have entertained
the claim for legal fees and costs in the litigation between
[plaintiff] and [the defendants] will not deprive [the original
attorneys] of its opportunity to adjudicate its right to recover its
fees and expenses. [Plaintiff’s] pending malpractice action
provides the [original attorneys] with an avenue to counterclaim
for the unpaid attorney's fees and costs. If [plaintiff] does not
prevail with her malpractice claim and if the [the original
attorneys] can establish that it is entitled to the claimed
attorney’s fees and costs, then the trial court in that case will be
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able to enter a judgment accordingly.
Starks, 20 S.W.3d at 653. Indeed, it appears in this case that the Appellants have likewise
filed a legal malpractice action against Horne and Wells in another division of Shelby County
Circuit Court. Thus, Horne and Wells has a proper and convenient forum in which to bring
its action to recover attorney fees.
Based on the foregoing, we conclude that the trial court lacked subject matter
jurisdiction to award Horne and Wells its alleged attorney fee in this case. As such, the order
awarding Horne and Wells $144,115.45 in attorney fees is reversed and this cause is
remanded to the trial court for dismissal of Horne and Wells’ Motion to Recover Attorney
Fees. Although Appellants raise additional arguments regarding recusal of the trial judge and
the trial judge’s denial of jury trial in this case, Appellants indicated, both at oral argument
and in their brief, that such issues would be moot should this Court conclude that the trial
court lacked subject matter jurisdiction to award Horne and Wells its attorney fees.
Accordingly, the issues of the denial of both the jury trial and recusal motions are
pretermitted.
B. Motion to Release Funds
Appellants next argue that the trial court erred in denying its motion to release funds
when at least some portion of the funds held by the court clerk is not in dispute. At this time,
however, both Horne and Wells and Mr. Krelstein have pending attorney liens on the funds,
which have yet to be adjudicated by a court of competent jurisdiction. Accordingly, the
amount owed to both of the Appellants’ former law firms remains in dispute. The Consent
Order in this case clearly states that the funds will remain with the Circuit Court Clerk “until
the disputes between and among the various parties making claim to the Judgement proceeds
are resolved.” As such, this Court is reluctant to release funds for which the parties have
clearly agreed to remain with the Circuit Court Clerk pending resolution of the fee dispute
between Appellants and their former law firm. Therefore, the order denying Appellants’
Motion to Release Funds is affirmed. We note, however, that Horne and Wells, with the full
concurrence of Mr. Krelstein, acquiesced in its brief to the release of those funds that did not
represent any of Horne and Wells’ alleged fee and accrued interest. Thus, Horne and Wells
has conceded that a portion of the funds being held by the clerk is properly released to the
Appellants in this case. Horne and Wells, however, failed to assign a numerical value to the
amount of the funds that it did not dispute. Unfortunately, the disposition of this case
reversing the judgment of the trial court and directing Horne and Wells to file its suit in
another court leaves considerable remaining issues to be decided regarding the funds at issue.
Because Horne and Wells has conceded that at least a portion of the funds at issue are subject
to no dispute, we encourage the parties to come to a mutually satisfactory resolution of this
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issue on remand as soon as possible.
IV. Conclusion
The judgment of the Shelby County Circuit Court is reversed in part and affirmed in
part. This cause is remanded for dismissal of Appellee Horne and Wells, PLLC’s Motion to
Recover Attorney Fees and for all further proceedings as may be necessary and consistent
with this opinion. Costs of this appeal are taxed one-half to Appellants, Holly Castle, Emily
Castle, and Jana Clark, and their surety, and one-half to Appellees, Horne and Wells, PLLC,
for all of which execution may issue if necessary.
_________________________________
J. STEVEN STAFFORD, JUDGE
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