Cuyahoga County Board of Commissioners v. Maloof Properties, Ltd.

[Cite as Cuyahoga Cty. Bd. of Commrs. v. Maloof Properties, Ltd., 197 Ohio App.3d 712, 2012-Ohio-470.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 96816
CUYAHOGA COUNTY BOARD OF
COMMISSIONERS,
APPELLEE,
v.
MALOOF PROPERTIES LTD. ET AL.,
APPELLEES; KEHOE, APPELLANT.
JUDGMENT:
REVERSED AND REMANDED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Probate Division
Case No. 06 ADV 0121135
BEFORE: Kilbane, J., Sweeney, P.J., and Jones, J.
RELEASED AND JOURNALIZED: February 9, 2012
ATTORNEYS:
Joseph D. Carney & Associates, L.L.C., and Joseph D. Carney; and Nicole M.
Loucks, for appellee Maloof Properties, Ltd.
Dinsmore & Shohl and Sarah Sparks Herron, for appellee Ohio National Life Ins.
Co.
Kehoe & Associates, L.L.C., and Robert D. Kehoe; and Joseph J. Jerse, for
appellant.
MARY EILEEN KILBANE, Judge.
{¶ 1} Defendant, Robert D. Kehoe, d.b.a. Kehoe & Associates, L.L.C. (“Kehoe”),
appeals from the judgment of the probate court that denied his charging lien over funds
obtained in an appropriation action. For the reasons set forth below, we reverse the
judgment and remand the cause for further proceedings.
{¶ 2} On December 21, 2006, the Cuyahoga Board of County Commissioners filed
a complaint for appropriation for a temporary easement over property located at 19801
Holland Road, Brook Park, Ohio, and owned by Maloof Properties, Ltd. (“Maloof”).
{¶ 3} On May 13, 2007, Maloof and National Originators filed a satisfaction of
mortgage with full release that indicated that Maloof had fully complied with the terms of
its $1.8 million mortgage on the parcel. On June 1, 2007, the county made an initial
distribution of funds on deposit in the amount of $10,500 to Maloof.
{¶ 4} On April 2, 2008, Kehoe became counsel of record for Maloof. The matter
was scheduled for trial on November 17, 2008. In preparation for trial, Kehoe filed a
notice of filing expert reports and witness list, deposed numerous witnesses, and prepared
a trial brief. On November 17, 2008, following the first day of trial, Kehoe sought
permission to withdraw from representation “based upon an ethical imperative,” and a
mistrial was declared the following day.
{¶ 5} Court proceedings resumed in early 2009, and Maloof obtained new counsel.
On July 10, 2009, Ohio National Life Insurance Company (“Ohio National Life”) filed a
third-party motion to intervene in the action, alleging that on June 6, 2006, Maloof
obtained a mortgage on the parcel from Ohio National Life in the amount of $1.95
million. Under the terms of this mortgage, Ohio National Life is entitled to the proceeds
from any appropriation action concerning the parcel, and Maloof specifically authorized
payment of any appropriation proceeds directly to Ohio National Life. The mortgage
and an assignment of proceeds were filed with the Cuyahoga County recorder on June 6,
2006. The trial court granted Ohio National Life’s motion to intervene as a third-party
defendant. Ohio National Life then filed an answer seeking recovery of $8,839.76 from
the funds distributed to Maloof in 2007.
{¶ 6} The matter was set for trial on July 24, 2009. On that date, Kehoe filed a
notice of its charging lien, in which it set forth a first priority attorney’s lien on any
settlement or judgment proceeds. On July 28, 2009, the jury determined that the value
of the county’s temporary easement over the subject parcel and interest in fee simple for
highway purposes was $32,050.
{¶ 7} On February 1, 2011, Ohio National Life filed a motion for an order of
distribution of the appropriation proceeds, arguing that by virtue of its mortgage, it was
the “owner” of the parcel pursuant to R.C. 163.01(E). Ohio National Life served a copy
of its motion upon appellant, Kehoe. Following a hearing on April 18, 2011, the trial
court granted Ohio National Life’s motion and awarded it $22,210.24, the remaining
balance due on the appropriation award. On that same day, the trial court issued an
order distributing the appropriation funds to Ohio National Life.
{¶ 8} The following day, Kehoe filed a motion for reconsideration and relief
from judgment, seeking distribution of the appropriation award, based upon his charging
lien. Kehoe complained that he was not provided with advance notice of the hearing,
that on the day of the hearing a court employee telephoned his office to advise them of
the hearing and to inquire as to whether anyone from Kehoe’s office would attend, and
that a short time later, the same employee telephoned again to advise that the firm’s
attendance would not be necessary.
{¶ 9} In opposition, Ohio National Life noted that Kehoe was no longer
representing Maloof at the time of the final award, so Kehoe did not create the fund at the
center of the parties’ dispute. Ohio National Life also insisted that its rights were
superior to Kehoe’s under the express terms of its recorded mortgage, and that Kehoe had
delayed 22 months in seeking his charging lien.
{¶ 10} The trial court denied Kehoe’s motion for reconsideration and distribution.
He now appeals, assigning two errors for our review.
Assignment of Error No. I
The trial court erred in distributing funds where the Appellant law
firm did not receive notice of a hearing on distribution, was prepared to
appear on short notice but was told its attendance was not necessary, and
distribution to an insurance company ordered without a record being made.
{¶ 11} In this assignment of error, Kehoe complains that the trial court erred in
distributing funds to Ohio National Life because the law firm did not receive notice of the
hearing on distribution of funds.
{¶ 12} We review for abuse of discretion. Garrett v. Sandusky, 6th Dist. No.
E-03-024, 2004-Ohio-2582; Minor Child of Zentack v. Strong, 83 Ohio App.3d 332,
334-335, 614 N.E.2d 1106 (8th Dist.1992).
{¶ 13} Under 2 Restatement of Law 2d, Agency, Section 464(e) (1958),
[a]n attorney of record who has obtained a judgment has a security interest
therein, as security for his fees in the case and for proper payments made
and liabilities incurred during the course of the proceedings.
{¶ 14} This security interest, deemed a “charging lien,” is a lien upon a judgment
or other monies awarded to a client, or former client, for work previously performed by
the attorney. Petty v. Kroger Food & Pharmacy, 165 Ohio App.3d 16,
2005-Ohio-6641, 844 N.E.2d 869 (10th Dist.); see also Hill Hardman Oldfield, L.L.C. v.
Gilbert, 190 Ohio App.3d 743, 2010-Ohio-5733, 944 N.E.2d 264 (9th Dist.); First Bank
of Marietta v. Roslovic & Partners, Inc., 10th Dist. No. 03AP-332, 2004-Ohio-2717,
2004 WL 1172885.
{¶ 15} As described in the seminal case of Cohen v. Goldberger, 109 Ohio St. 22,
141 N.E. 656 (1923), paragraph one of the syllabus,
[t]he right of an attorney to payment of fees earned in the prosecution of
litigation to judgment, though usually denominated a lien, rests on the
equity of such attorney to be paid out of the judgment by him obtained, and
is upheld on the theory that his services and skill created the fund.
{¶ 16} Courts have strictly applied the requisites spelled out in the syllabus of
Cohen, noting that this interpretation is preferable to a “but for” test, which would allow
even minimal or remote contribution to justify a charging lien. Kroger Food &
Pharmacy at 16, 844 N.E.2d 869.
{¶ 17} This standard does not, however, in our view, preclude counsel retained
earlier in the litigation from recovering upon a charging lien simply because such counsel
has been discharged as of the date of the judgment, so long as counsel can demonstrate
the significance his contribution has to that judgment. See Exact Software NA v. Infocon
Sys., Inc., N.D. Ohio No. 3:03CV7183, 2011 WL 5008421 (Oct. 19, 2011).
{¶ 18} We also note that charging liens are generally superior to the claims of
the client’s other creditors. Goldberger, 109 Ohio St. 22, 141 N.E. 656, paragraph two
of the syllabus. Indeed, charging liens have been recognized as having a “superpriority”
that is superior even to federal tax liens. See Reed & Steven v. HIP Health Plan of
Florida, Inc., 81 F.Supp.2d 1335 (S.D.Fla.1999). An attorney to whom an interest in
the proceeds of a judgment has been assigned may enforce his interest against the
judgment debtor if he has notified the judgment debtor of his interest. In re Simms
Constr. Serv. Co., Inc., 311 B.R. 479 (6th Cir.2004). The Simms court stated:
In allowing for enforcement by notice to the judgment debtor, Ohio
law parallels the requirement articulated in the Restatement of the Law
Governing Lawyers, i.e., that “the lien becomes binding on a third party
when the party has notice of the lien.” Restatement (Third) of the Law
Governing Lawyers §43 (2000); see also Restatement (Second) of Agency
§ 464 cmt. n (1958) (“Unless the judgment is for costs only, the right [of
the attorney to be paid from the proceeds of the judgment] exists only if the
attorney gives notification of his intent to enforce it * * * to the judgment
debtor * * *.”).
{¶ 19} Similarly, in Goldberger, the court explained that recognizing the
creditor’s claim as superior to that of the attorney
would put aside entirely the question of [the attorneys’] interest in, or lien
upon, the fund produced by their skill and labor, and would result in taking
from them that which had thus been procured * * * probably leaving
without remuneration of any sort the attorneys but for whose efforts,
presumably, the fund would not have been procured or made available for
the payment of the creditors either of the firm or the individuals composing
it. The mere statement of that proposition discloses its inequity.
Id. at 657-658.
{¶ 20} Finally, we note that a party’s former attorney is permitted to intervene in
an action in order to pursue a charging lien. See Fire Protection Resources, Inc. v.
Johnson Fire Protection Co., 72 Ohio App.3d 205, 594 N.E.2d 146 (6th Dist.1991);
Kroger Food & Pharmacy, 165 Ohio App.3d 16, 2005-Ohio-6641, 844 N.E.2d 869 (10th
Dist.); Minor Child of Zentack v. Strong, 83 Ohio App.3d 332, 334-335, 614 N.E.2d 1106(8th Dist.1992). Alternatively, a law firm has been permitted to assert a charging lien
by motion. See Roslovic & Partners, 2004-Ohio-2717, ¶ 44.
{¶ 21} In this matter, we note that Kehoe undertook extensive preparation for the
trial that began on November 17, 2008. It is undisputed that in undertaking his trial
preparation, Kehoe retained experts, obtained their reports, deposed numerous witnesses,
and prepared a trial brief. It is also undisputed that following the first day of trial,
Kehoe was forced to withdraw from representation “based upon an ethical imperative,”
and a mistrial was declared the following day. Moreover, according to Kehoe, successor
counsel used the materials he had prepared and obtained at the trial scheduled for July 24,
2009, and “followed the ‘blueprint’ that Kehoe created for the case, using the pleadings,
trial brief, jury charges, voir dire, transcript, exhibits, exhibit binders, photographs, poster
boards, experts, and examination outlines for witnesses that testified at trial * * *.”
{¶ 22} On the rescheduled trial date, July 24, 2009, Kehoe filed a notice of
charging lien, in which it set forth a first priority attorney’s charging lien on any
settlement or judgment proceeds. The parties were therefore on notice of the charging
lien on that date. Later, in February 2010, Ohio National Life filed a motion for an
order of distribution of the appropriation proceeds, arguing that by virtue of its mortgage
on the subject parcel, it was the “owner” of the parcel pursuant to R.C. 163.01(E). It is
undisputed, however, that Ohio National Life did not create the fund at issue.
{¶ 23} The hearing proceeded without Kehoe, and immediately thereafter, the
trial court issued an order distributing the appropriation funds to Ohio National Life.
Kehoe filed a motion for reconsideration on the following day, and according to this
motion, Kehoe did not receive notice of the court’s hearing on the matter, but a court
employee called the firm to advise it of the hearing and inquire whether anyone from the
firm would attend. Shortly thereafter, the employee called back and advised that the
firm’s attendance was not necessary.
{¶ 24} From the foregoing, we conclude that the trial court abused its discretion in
this matter. On this record, it is unrefuted that Kehoe’s efforts contributed to the
ultimate judgment rendered in favor of Maloof. In addition, Kehoe provided notice of
his charging lien to Maloof’s mortgagee, Ohio National Life, and it is clear that under
Ohio law, a proper charging lien takes priority over the claims of such creditors. We
therefore conclude that the trial court erred in failing to grant Kehoe an opportunity to be
heard on the matter of his charging lien and an opportunity to demonstrate the extent to
which his efforts helped produce the fund at issue.
{¶ 25} Further, although Ohio National Life insists that the matter has become
moot, since the funds were distributed immediately following the hearing and Kehoe did
not file a motion for a stay of execution, we note that Kehoe was simply not given an
opportunity to seek a stay, because the trial court entered an order distributing the funds
immediately following the hearing that excluded him and his firm. Kehoe neither
acquiesced in the judgment nor abandoned the right to appellate review. Cleveland Hts.
v. Lewis, 129 Ohio St.3d 389, 2011-Ohio-2673, 953 N.E.2d 278 (8th Dist.).
{¶ 26} In accordance with the foregoing, the judgment is reversed and the matter
is remanded for a new hearing in order for Kehoe to be given an opportunity to present
his claim for attorney fees from the funds that it helped to create in this matter. The
remaining assignment of error and Ohio National Life’s assignments of error submitted
pursuant to R.C. 2505.22,1 dispute the validity of the charging lien and are moot.
Judgment reversed
and cause remanded.
SWEENEY, P.J., and JONES, J., concur.
1. R.C. 2505.22, provides:
In connection with an appeal of a final order, judgment, or decree of a court,
assignments of error may be filed by an appellee who does not appeal, which
assignments shall be passed upon by a reviewing court before the final order,
judgment, or decree is reversed in whole or in part. The time within which assignments
of error by an appellee may be filed shall be fixed by rule of court.