Opinion
No. CX-95-2195
Filed May 14, 1996.
Appeal from the District Court, Crow Wing County, File No. C4951561.
John E. Daubney, (for Respondents)
Joseph J. Dudley, Jr., Brent G. Eilefson, (for Appellants)
Considered and decided by Amundson, Presiding Judge, Crippen, Judge, and Willis, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1994).
Unpublished Opinion
Attorney argues that the district court erred by removing an attorney's lien from a former client's lien against real property awarded under a dissolution decree. We reverse.
Facts
The marriage of Mary Jean and Ray Kroiss was dissolved by a decree entered in July 1991. During the dissolution proceedings, wife retained appellant attorney Joan Lucas, but discharged her in January 1991. Lucas claimed that, at the date of her termination, wife owed $11,000 in legal fees.
These fees were owed in part to Dudley Smith and in part to Buchmeier Lucas. Lucas was formerly associated with Dudley Smith.
The dissolution decree listed as marital property: the homestead, two lots adjacent to the homestead, and substantial additional real property in Crow Wing County, including eight condominium units. The record shows that title to all of the property, except the homestead, was held by Ray Kroiss Homes, Inc., a corporation owned solely by husband.
Lucas obtained a copy of the dissolution decree, which reflected a total property division of $567,901.60 to husband and $259,488 to wife. Part of wife's property award included liens, valued at $118,000, against the eight condominium units, which liens were payable upon the sale of each unit. On September 23, 1991, Lucas filed with the Crow Wing County Recorder an attorney's lien against wife's lien interests in the condominium units and sent notice of intent to claim an attorney's lien to wife on October 8, 1991.
On November 14, 1991, the Kroisses stipulated to an order amending the dissolution decree. The stipulation vacated the original property division and awarded all marital real estate to husband (individually) except for the parties' homestead. While the decree awarded all right, title, and interest in the condominium units to husband individually, the record reflects that wife quitclaimed her lien interests in the condominium units to Ray Kroiss Homes, Inc.
In February 1995, respondents husband and Ray Kroiss Homes, Inc., sued to have Lucas's lien dismissed, claiming that it was filed "against real estate not owned by Mary Jean Kroiss or awarded to her by Court Order" and that the lien was not properly filed. The district court removed the attorney's lien, finding that the court "had no jurisdiction to attach an attorney's lien against a corporation that was not a party to the underlying dissolution action."
Decision
At the outset, we disagree that the question before us is whether the district court had "jurisdiction to attach an attorney's lien against a corporation that was not a party to the underlying dissolution action." Framing the issue that way essentially would allow husband to contest the dissolution court's characterization of the corporate assets as marital property and to challenge the property division ordered by the dissolution court. These issues were properly reviewable in an appeal from the dissolution judgment and decree. Although the parties subsequently stipulated to an amended decree, husband did not appeal from the judgment or move for amended findings on either the dissolution court's characterization of the corporate assets as marital property or the division of property.
Husband's appeal from the judgment in October 1991 was voluntarily dismissed. That appeal did not raise issues involving the dissolution court's characterization of the corporate assets or the property division.
Therefore, we perceive two issues for our consideration: (1) Did Lucas properly file notice of the attorney's lien, and (2) did the lien survive the parties' subsequent stipulation that vacated the property division and wife's lien interests against the condominium units?
1. Improper filing: There is no dispute that Lucas filed notice of the attorney's lien with the Crow Wing County Recorder. Because the essential facts regarding filing are undisputed, the issue presented is a question of law reviewed de novo by an appellate court. Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989).
Notice of an attorney's lien against a "client's interest in real estate involved in or affected by the action or proceeding" must be filed with the appropriate county recorder or registrar of titles. Minn. Stat. 481.13(4) (1994). An attorney's lien against a client's interest in personal property, however, "shall be filed in the same manner as provided by law for the filing of a security interest." Id.; cf. Minn. Stat. § 336.9-401(1)(d) (1994) (providing that a security interest in personal property must be filed with the secretary of state).
Husband contends that if wife received anything, she received an interest in corporate stock. We disagree. The record is clear that the dissolution court treated real property held in the name of husband's wholly-owned corporation as marital property and that the dissolution court treated the corporation as husband's alter ego for purposes of making a property division in the dissolution action. The court thus awarded to wife a lien against certain marital real estate held in the name of husband's wholly-owned corporation. Husband has waived his right to object to the court's characterization of the real property, and his claim that wife received corporate stock is without support in the record.
In a recent decision, Granse Assoc. v. Kimm, 529 N.W.2d 6, 8 (Minn. App. 1995), review denied (Minn. Apr. 27, 1995), this court held that a husband's marital lien on the homestead "was personal property rather than an interest in real property." Under Granse, then, we must view wife's liens on the condominium units as personal property. We conclude, however, that Lucas's failure to file notice of the attorney's lien with the secretary of state is not fatal.
In certain instances, a lien against personal property must be filed with the secretary of state. See generally Minn. Stat. § 336.9-401(1) (a)-(d). But, in all cases,
[a] filing which is made in good faith in an improper place or not in all of the places required by this section is nevertheless effective with regard to any collateral as to which the filing complied with the requirements of this article and is also effective with regard to collateral covered by the financing statement against any person who has knowledge of the contents of such financing statement.
Minn. Stat. § 336.9-401(2). We note that Lucas's notice of intent to claim an attorney's lien adequately identified the property to which the attorney's lien attached. This description was sufficient to "provide general notice or warning" to wife or a subsequent purchaser that the condominium units were encumbered by Lucas's lien. Cf. Production Credit Ass'n v. Bartos, 430 N.W.2d 238, 241 (Minn. App. 1988) (holding that "a financing statement is adequate to perfect a security interest if it `reasonably identifies' the type of collateral in a way that would `reasonably induce' subsequent creditors to investigate further").
Even if Lucas improperly filed the attorney's lien with the county recorder, Mary Kroiss had actual notice of the attorney's lien by Lucas's letter dated October 8, 1991, and respondents have not asserted that Lucas filed the attorney's lien in bad faith. See id. at 242 (upholding priority of party's security interest even though financing statement was improperly filed with county recorder rather than secretary of state because party's improper filing was made in good faith and opposing party had notice of competing security interest).
Lucas's filing satisfied the statute's goal of notice.
While we conclude that wife's liens were personal property, they arose from and affected real estate awarded to husband in the dissolution. As a practical matter, Lucas's filing of the attorney's lien with the county recorder was a more effective means of satisfying the statute's objective:
[A person] tracing the history of title to land would not expect to examine records in the office of the Secretary of State. The traditional and appropriate location for such a search is the office of the county recorder in the county where the land is located.
In re Shuster, 784 F.2d 883, 884-85 (8th Cir. 1986).
Therefore, we conclude that Lucas's improper filing does not defeat her lien.
2. Validity of attorney's lien: Determining the validity of a lien necessarily requires the district court to construe statutory requirements in light of relevant facts. Court rulings on mixed questions of law and fact are not binding on an appellate court, but are subject to independent review. Meyering v. Wessels, 383 N.W.2d 670, 672 (Minn. 1986).
An attorney may establish a lien for compensation
[u]pon the cause of action from the time of the service of the summons therein, or the commencement of the proceeding, and upon the interest of the attorney's client in any money or property involved in or affected by any action or proceeding in which the attorney may have been employed, from the commencement of the action or proceeding * * *.
An attorney's lien is "a hold or claim on the property as security for a debt or charge." Boline v. Doty, 345 N.W.2d 285, 288 (Minn. App. 1984). The lien statute exists to prohibit a party from reaping the benefits of an attorney's services without paying for them. Id. Although the dissolution decree noted that title to the condominium units was held by Ray Kroiss Homes, Inc., the dissolution court specifically found that the eight condominium units were marital property and awarded them to husband (individually), subject to liens in favor of wife. See Minn. Stat. § 518.58, subd. 1 (1994) (providing dissolution court with authority to make an equitable property division between the parties). Husband does not challenge the award of corporate assets to himself, but he argues that the attorney's lien could not attach to assets of Ray Kroiss Homes, Inc., because Ray Kroiss Homes, Inc., was not a party to the dissolution.
Husband ignores the fact that the dissolution decree specifically refers to the corporation and lists its holdings as part of husband's assets. Moreover, husband fails to acknowledge that wife held liens against the condominium units from July 1991 until November 1991. He does not claim that during this time period her lien interests were exempt from attachment by her creditors. In fact, husband effectively recorded notice of wife's lien interests in the eight condominium units with the Crow Wing County Recorder by filing a certified copy of the judgment and decree on July 29, 1991.
The record shows that wife held lien interests in "property involved in or affected by [the] action or proceeding" for which the attorney rendered services. See Minn. Stat. § 481.13, subd. 1. Lucas timely filed the attorney's lien on September 17, 1991, while wife held the lien interests, and sent notice of the attorney's lien to wife on October 8, 1991, several weeks before the Kroisses stipulated to an amendment of the decree.
The Kroisses' subsequent stipulation to amendment of the dissolution decree had no effect on Lucas's attorney's lien. In McDonald v. Johnson, the supreme court held that an attorney's lien, which attached to a lump-sum payment awarded in a dissolution decree, could not be eliminated by the parties' subsequent stipulation that vacated the lump-sum payment. 229 Minn. 119, 124, 38 N.W.2d 196, 199 (1949). The court stated:
The lien having attached thereto, the subsequent stipulation of the parties and order of the court eliminating the lump-sum payment could not nullify [attorneys'] rights and interest therein.
Id.; see also Granse, 529 N.W.2d at 9 (holding that creditor's interest in debtor's lien interest survives parties' subsequent modification of dissolution decree that eliminates debtor's lien interest); Williams v. Dow Chem. Co., 415 N.W.2d 20, 26 (Minn. App. 1987) (concluding that, once established, the lien persists until it is satisfied).
Further, wife's subsequent quitclaim to Ray Kroiss Homes, Inc., had no effect on the attorney's lien because a "quitclaim deed [can] only transfer the interest held by the grantor." See Weber v. Eisentrager, 498 N.W.2d 460, 464 (Minn. 1993) (recognizing the axiom that one can only convey what one has). Because we conclude that Lucas's lien was in place and valid, wife was unable to transfer her lien interests free of the attorney's lien.
Ray Kroiss Homes, Inc., took wife's lien interests, subject to Lucas's attorney's lien. Similarly, the amended decree awarded all right, title, and interest in the eight condominium units to husband individually, "subject to all existing encumbrances thereon in favor of anyone save [wife]." There is no argument that Ray Kroiss Homes, Inc., or husband lacked notice of the attorney's lien; therefore, we conclude that Lucas's lien is valid.
Reversed.