DocketNumber: No. 41, 2011
Citation Numbers: 36 A.3d 336, 2012 Del. LEXIS 32, 2012 WL 172179
Judges: Berger, Holland, Jacobs, Ridgely, Steele
Filed Date: 1/23/2012
Status: Precedential
Modified Date: 10/26/2024
Nanticoke Memorial Hospital filed a $160,958 hospital lien for the cost of Maria Acosta’s medical treatment resulting from a car accident on July 11, 2003. The law firm of Doroshow, Pasquale, Krawitz, & Bhaya represented Acosta in a personal injury claim against the tortfeasor who caused her injuries. Nationwide Assurance Company paid $19,671.49 to settle her claim. Nanticoke argues that its hospital lien attaches to the entirety of Acosta’s recovery. Doroshow contends that the hospital lien does not attach until the attorney’s fees have been deducted from the settlement fund. The Superior Court
I. FACTUAL AND PROCEDURAL HISTORY
On July 11, 2003, Maria Acosta suffered serious injuries resulting from an automobile accident in Sussex County, Delaware. Nanticoke Memorial Hospital treated Acosta for injuries resulting from the accident and charged $160,958 for its services. Because Acosta could not pay the bill, Nanticoke filed a Notice of Hospital Lien with the Sussex County Prothonotary on August 13, 2003. Nanticoke filed the lien pursuant to 25 Del. C. § 4301 et seq. in the amount of $160,958 against any recovery or judgment obtained by Acosta arising from the automobile accident. On August 14, 2003, the Superior Court formally recorded the lien as a public record.
Acosta retained the law firm of Doro-show, Pasquale, Krawitz & Bhaya to represent her interests in a personal injury action arising from the accident. The contingent fee agreement between Acosta and Doroshow provided that the law firm would receive 40 percent of any recovery plus costs. To settle Acosta’s claims resulting from the accident, Nationwide Assurance Company paid $4,585 in January 2004 and $15,086.49 in February 2007. Nationwide made the checks payable to both Doroshow and Acosta. From the total $19,671.49 settlement, Doroshow deducted $8,052.02 in attorney’s fees and costs and placed the balance in an IOLTA escrow account.
On March 26, 2009, Doroshow filed an interpleader complaint against Acosta and Nanticoke, seeking permission to release the amount of $11,619.47 in Doroshow’s IOLTA account to the Superior Court for distribution. According to the complaint, Acosta has never given Doroshow permission to release the funds in the IOLTA escrow account to Nanticoke.
Acosta, then a pro se defendant in the interpleader action, wrote a letter to the Sussex County Prothonotary on April 23, 2009, as a form of answer in response to the interpleader complaint. Acosta wrote, “I also dispute section eleven. It states that I was aware that my lawyer had told me that the money was going to be given to me, would have to be negotiated with Nanticoke. I have to say that this is not true.”
On June 19, 2009, Nanticoke filed an answer to Doroshow’s interpleader complaint, a counterclaim against Doroshow, and a cross claim against Acosta. Nanti-coke’s counterclaim sought a declaratory judgment that Nanticoke was entitled to the full recovery of the funds Doroshow received on behalf of its client Maria Acosta. Its cross claim contended that Acosta was not entitled to distribution of any of the funds at issue.
The Superior Court judge held a hearing and later entered an order, on January 3, 2011, in favor of Nanticoke. Despite notice, Acosta did not appear for the inter-pleader hearing. Her failure to appear should surprise no one — as only Doroshow and Nanticoke had an economic interest in the outcome. The order states that “the full recovery received from Nationwide Assurance Company by plaintiff Doroshow, on behalf of Defendant Acosta, in the sum of $19,671.49 shall be paid to Defendant
II. DISCUSSION
A. Delaware common law recognizes an attorney’s charging lien.
The threshold issue is whether legal authority supports an attorney’s charging lien. We find that the right of an attorney to a charging lien is well established at common law. In A Treatise on Attorneys at Law, Thornton defines an attorney’s charging lien as “the right of an attorney at law to recover compensation for his services from a fund recovered by his aid, and also the right to be protected by the court to the end that such recovery might be effected.”
The attorney’s charging lien has a long common law tradition.
An attorney has a lien on the money recovered by his client for his bill of costs; if the money come to his hands, he may retain to the amount of his bill. He may stop it in transitu if he can lay hold of it. If he apply to the court, they will prevent its being paid over till his demand is satisfied. I am inclined to go farther, and to hold that, if the attorney gave notice to the defendant not to pay till his bill should be discharged, a payment by the defendant after such notice would be in his own wrong, and like paying a debt that has been assigned, after notice.6
The remarkable similarity between Lord Mansfield’s articulation of the attorney’s lien and the modern day version can be explained by the fact that many United States jurisdictions, including Delaware, follow Welsh.
In Wilkins v. Carmichael, Lord Mansfield described the continued development of the attorney’s charging lien: “[C]ourts both of law and equity have now carried it so far, that an attorney or solicitor may obtain an order to stop his client from receiving money recovered in a suit in which he has been employed for him, till his bill is paid.”
Three cases trace the doctrinal progression of an attorney’s charging lien in Dela
In Polin v. Delmarva Poultry Corporation, then Superior Court Judge Carey grappled with whether the attorney’s charging lien could only be enforced in a court of equity. First, Judge Carey cited Welsh and Wilkins as common law recognition of the attorney’s charging lien.
Di Loreto v. Tiber Holding Corporation is the most recent case recognizing the attorney’s charging lien. There, the DiLoretos were minority shareholders of Tiber, a closely held corporation. The Chancellor awarded DiLoreto specific performance of a mandatory buyback provision subject to certain setoffs in favor of Tiber against DiLoreto. The DiLoretos argued that their attorneys had charging liens against the judgment which took priority over the setoff. The Chancellor recognized the validity of an attorney’s charging lien at common law but did not actually hold that one had been established: “For all of these reasons, any charging lien plaintiffs attorneys may have successfully asserted should not, in these circumstances, be given priority over the setoff.”
The Supreme Court of Delaware, in a per curiam opinion, affirmed but on different grounds.
Because Delaware courts have chosen to follow the attorney’s charging lien established in English common law, we reaffirm the existence of an attorney’s right to assert a charging lien in Delaware. Doroshow provided Acosta legal services by representing her and achieving the Nationwide settlement. Because Doroshow represented Acosta on a contingent fee basis, the law firm had not been compensated before its work produced the funds. Therefore, Doroshow was entitled to assert an attorney’s charging lien against the settlement fund.
B. “Full and true consideration” is unambiguous because it is only subject to one reasonable interpretation — that the attorney’s charging lien attaches before the hospital lien.
Under 25 Del. C. § 4301, a charitable hospital shall have a lien on any amounts received as a result of a personal injury claim for reasonable treatment charges “to the extent of the full and true consideration paid or given to, or on behalf of, such injured person or his legal representative.”
Statutory interpretation presents a question of law that we review de novo.
Merriam Webster’s Dictionary provides nine different definitions of the word “true.” Two definitions are relevant to our analysis. True can be defined as “being that which is the case rather than what is manifest or assumed.”
Interpreting “true” to eliminate the attorney’s charging lien leads to an absurd result.
Because the $160,958 medical charges for Acosta’s treatment are significantly higher than the $19,671.49 recovery from Nationwide,
Furthermore, reading “true” to mean the client’s entire rightful recovery, would yield surplusage in the phrase “full and true” consideration. In Keeler v. Harford Mut. Ins. Co., we held that in order to determine the legislative intent of a statute, it is important “to give effect to
According to Merriam Webster’s Dictionary, “full” is defined as “containing as much or as many as is possible or normal.”
Finally, the statute states that the hospital lien will attach “to the extent of the full and true consideration paid or given to, or on behalf of, such injured person or his legal representative.”
Black’s Law Dictionary defines a legal representative as a lawful representative or a personal representative.
C. To the extent Di Loreto suggests that the existence of an attorney’s charging lien depends on the first in time, first in line rule, it is overruled.
Nanticoke cites Di Loreto v. Tiber Holding Corp. for the proposition that charging liens are prioritized with competing liens on a first in time, first in line basis.
In the 1934 case Royal Insurance Co. v. Simon, Louis Simon secured a judgment in Superior Court for $3,263.77. A variety of claimants, including Percy Green and Harry Price, asserted claims against Simon’s judgment. Chancellor Wolcott held that Percy Green, Simon’s attorney who conducted the suit, had a charging lien on the judgment that prevailed over the client and all other creditors: “If the question here were between Green and his client, Simon, the former’s claim to a charging lien would prevail. It prevails with equal effectiveness as against Simon’s attaching creditors.”
The key to understanding Royal Insurance is recognizing the two branch structure of the opinion.
The theory upon which the so-called lien rests is variously stated. In some cases it is placed on the equity of an attorney to be paid his fees and expenses out of the judgment in the securing and therefore creation of which he had contributed of his services, skill and, in case of disbursements, of his money.46
There is no mention of a first in time, first in line rule or any timing based reasoning in this branch of the opinion.
Second and separately, Chancellor Wolcott considered Harry Price’s lien in relation to other creditors by applying the first in time concept: “Can Simon’s attaching creditors prevail over Price? It is to be noted that the attachments of the creditors (excepting three) are posterior to Price’s assignment.”
In this case, we must hold that Boro-show’s charging lien attaches before Nan-ticoke’s hospital lien, but because we do not sit as a superlegislature,
The factual scenario in this case highlights the need for the General Assembly to take action. To rectify this unfortunate situation, the General Assembly need only look to the statutes of other states. According to Doroshow’s and Nanticoke’s research, 41 states and the District of Columbia have hospital lien statutes. Of the 42 statutes, 31 states specifically address the issue of attorney’s fees for the injured person’s attorney. The statutes that refer to attorney’s fees can be divided into three categories: (1) the hospital lien is subject to the attorney’s lien;
The judgment of the Superior Court is reversed.
. Appellant’s Op. Br.App. A-6.
. Appellant’s Op. Br.App. A-15.
. 2 Edward Mark Thornton, A Treatise on Attorneys at Law % 578 (1914).
. Id. § 580.
. Id. § 579.
. Welsh v. Hole, 1 Doug. (Eng.) 238, 99 Eng. Rep. 155.
. Thornton, supra, § 579.
. Wilkins v. Carmichael, 1 Dougl. (Eng.) 101, 105.
. See Polin v. Delmarva Poultry Corporation, 188 A.2d 364 (Del.Super.Ct.1963).
. Royal Ins. Co. v. Simon, 174 A. 444 (Del. Ch.1934).
. Id. at 446.
. Id.
. Polin, 188 A.2d at 366.
. Id.
. Id.
. Di Loreto v. Tiber Holding Corp., No. 16564, 2001 WL 221001 at *5 (Del.Ch. Feb. 23, 2001) (emphasis added).
. Id. (“Royal Insurance provides the basis for how this Court must prioritize competing claims. Simply put, first in time equals first in line.”).
. The Supreme Court opinion is cited "DiLoreto” while the Court of Chancery opinion is cited "Di Loreto.” When referring to the party, we use the version without the space. When referring to the Court of Chancery opinion, we cite the case as published.
. DiLoreto v. Tiber Holding Corp., 804 A.2d 1055, 1056 (Del.2001).
. Id. at 1057 (“[T]he Court of Chancery examined all the circumstances of the fee arrangement, including the priority of the judgment, in refusing to recognize a charging lien. Clearly, there was no abuse of that discretion and accordingly we affirm.”).
. 25 Del. C. § 4301 ("Every charitable association, corporation or other institution maintaining a hospital in this State, supported in whole or in part by private charity, shall have a lien upon any and all claims or demands, all rights of action, suits, counterclaims of any person admitted to any such hospital and receiving treatment, care and maintenance therein which arise out of any personal inju-ríes received in any such accident which any such injured person may have, assert or maintain against any such other person or corporation for damages, compensation or other claim on account of such injuries for the amount of the reasonable charges of such hospital for all medical treatment, care and nursing and maintenance of such injured person while in such hospital to the extent of the full and true consideration paid or given to, or on behalf of, such injured person or his legal representative.”).
. Rapposelli v. State Farm Mut. Auto. Ins. Co., 988 A.2d 425, 427 (Del.2010).
. CML V, LLC v. Bax, 28 A.3d 1037, 1041 (Del.2011) (citing LeVan v. Independence Mall, Inc., 940 A.2d 929, 933 (Del.2007)).
. Eliason v. Englehart, 733 A.2d 944, 946 (Del.1999).
. Taylor v. Diamond State Port Corp., 14A.3d 536, 538 (Del.2011).
. Merriam Webster’s Collegiate Dictionary 1268 (10th ed. 1993).
. Id.
. Reddy v. PMA Ins. Co., 20 A.3d 1281, 1287-89 (Del.2011).
. Coastal Barge Corp. v. Coastal Zone Indus. Control Bd., 492 A.2d 1242, 1247 (Del. 1985).
. Moore v. Wilmington Hous. Auth., 619 A.2d 1166, 1173 (Del.1993).
. Stratton v. Am. Indep. Ins. Co., 2010 WL 3706617 at *13 (Del.Super. Sept. 16, 2010) (citing 2A Sutherland, Statutes & Statutory Construction, § 45:12 (7th ed. 2008)).
. This is not an uncommon occurrence when the injured person is indigent and the tortfeasor has limited liability insurance.
. Keeler v. Harford Mut. Ins. Co., 672 A.2d 1012, 1016 (Del.1996).
. Colonial Ins. Co. of Wisconsin v. Ayers, 772 A.2d 177, 181 (Del.2001) (citing General Motors Corp. v. Burgess, 545 A.2d 1186, 1191 (Del.1988) (internal citation omitted)).
. Merriam Webster's Collegiate Dictionary 471 (10th ed. 1993).
. 25 Del. C. § 4301 (emphasis added).
. Black’s Law Dictionary 915 (8th ed. 2004).
. Id. at 1328.
. Id.
. Ans. Br. at 17.
. Di Loreto v. Tiber Holding Corp., 2001 WL 221001 at *5 (Del.Ch. Feb. 23, 2001).
. Because the attorney’s charging lien had not been successfully established, it was not necessary for the Supreme Court to address the first in time, first in line rule. DiLoreto v. Tiber Holding Corp., 804 A.2d 1055, 1057 (Del.2001).
. Royal Ins. Co. v. Simon, 174 A. 444, 446 (Del.Ch. 1934).
. For young lawyers, the structure of the opinion can be just as important as the content in deciphering the meaning of a case.
. Royal Ins. Co., 174 A. at 446.
. Id.
. Id. at 447 (emphasis added).
. Delaware Solid Waste Auth. v. News-Journal Co., 480 A.2d 628, 634 (Del.1984).
. Reading the statute as prohibiting the attachment of an attorney's charging lien also leads to an irrational and inefficient equilibrium. If we were to adopt Nanticoke's position, lawyers faced with similar situations in the future would decline to represent injured plaintiffs because there would be no chance of recovery for the clients or the attorneys. With no attorneys to represent the injured victim, the hospital receives no compensation for its services, thereby defeating the purpose of the hospital lien statute.
. Alabama, Ala.Code § 35-11-370 (1991); Alaska, Alaska Stat. § 34.35.450-455 (2007); Colorado, Colo.Rev.Stat. § 38-27-101 (2007); Georgia, Ga.Code Ann. § 44-14-470 (2003); Hawaii, Haw.Rev.Stat. § 507-4 (2008); Indiana, Ind.Code. §§ 32-33-4-1, 2 (2002); Louisiana, La.Rev.Stat. Ann. § 9:4752 (2009); Maine, Me.Rev.Stat. Ann. Tit. 10 § 3411 (2009); Maryland, Md.Code Ann., Com. Law § 16-601 (2002); Massachusetts, Mass. Gen. Laws Ch. Ill, § 70A (2003); Minnesota, Minn.Stat. § 514.68 (2002); Missouri, Mo.Rev. Stat. § 430.250 (1992); Montana, Mont.Code Ann. § 71-3-1114 (2009); Nebraska, Neb.Rev. Stat. § 52-401 (2009); Nevada, Nev.Rev.Stat. § 108.590-600 (2000); New Mexico, N.M. Stat. § 48-8-1 (2003); New York, N.Y. Lien Law § 189 (McKinney 2007); Oklahoma, Okla. Stat. Tit. 42 § 43 (2001); Oregon, Or. Rev.Stat. § 87.555-.560 (2003); Rhode Island, R.I. Gen. Laws § 9-3-4 (2006); Tennessee, Tenn.Code Ann. § 29-22-101 (2002); Utah, Utah Code Ann. § 38-7-1 (2004); Vermont, Vt. Stat. Ann. Tit. 18, § 2251 (2007); Virginia, Va.Code Ann. §§ 8.01-66.2-66.3 (2001).
. Arkansas, Ark Code Ann. §§ 18-46-103, 104 (2004); Iowa, Iowa Code § 582.1A (1992); Kansas, Kan. Stat. Ann. § 65-406 (2008); South Dakota, S.D. Codified Laws §§ 44-12-1, 2 (2004); Wisconsin, Wis. Stat. § 779.80 (2001).
. Illinois, 770 III. Comp. Stat. 23/10 (2003); North Carolina, N.C. Gen Stat. § 44-50 (2000).
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