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[U] Buck Capital Management Corp. v. AF&L, Inc.

Superior Court of Pennsylvania

March 7, 2014



Appeal from the Order Entered January 17, 2013 in the Court of Common Pleas of Allegheny County Civil Division at No(s): GD No. 04-011408




In these consolidated appeals, Sikov and Love, P.A. (Law Firm) appeals, and Joyce A. Buck (Buck) cross appeals, from the order entered on January 17, 2013, but dated January 16, 2013. That order addressed Law Firm's "Motion To Impose an Attorney's Charging Lien." We affirm in part, vacate in part, and remand with instructions.

The trial court summarized the background underlying this matter as follows.

By [o]rder of [c]ourt dated December 16, 2013, [the trial court] … granted, in part, a "Motion to Impose an Attorney's Charging Lien" submitted on behalf of [Law Firm]. The motion arose as the result of an entry of a non-jury verdict and order of [c]ourt entered on December 18, 2009 in resolution of a claim brought by Buck Capital Management Corporation and Joyce Buck (hereinafter, "Buck") against AF&L, Inc. and AF&L Insurance Company [(]"AF&L"). In that underlying matter, Buck sought to enforce the terms of an insurance marketing agreement pursuant to which Buck, as a general agent for AF&L, would market long-term care insurance within the Commonwealth of Pennsylvania and engage in direct sales of that product. Premiums due periodically from the insureds in consideration for that product were paid either to AF&L directly or to AF&L through Buck. As premiums were received by AF&L, commissions were to be paid by AF&L to Buck. Although AF&L terminated the agency authority of Buck in or around June 2000, such that Buck could no longer generate commissions through new sales, Buck nonetheless remained entitled to commissions on premiums received by AF&L upon renewal of policies sold by Buck.
To a point, AF&L honored its continuing obligation to award commissions on the renewal of policies that Buck had originally secured. AF&L did not, however, increase the commissions paid to Buck proportionate with increases in premiums charged to renewing customers whom Buck had secured for AF&L. Accordingly, in or around September 2002, Buck retained legal counsel to pursue an increase in commissions. Original counsel filed a praecipe for writ of summons on Buck's behalf on or about June 2, 2004 and, in 2006, filed a complaint, and an amended complaint. There was some subsequent activity on the docket, but, becoming dissatisfied with original counsel, Buck disengaged from that counsel and retained the services of Attorney Seymour Sikov, a member of [Law Firm]. On June 11, 2008, original counsel entered a praecipe to withdraw his appearance and Sikov entered a praecipe for appearance.
Subsequent to Sikov's entry of appearance, Buck and Sikov each signed a six-page "Hourly Fee/Contingency Fee Agreement" that had been prepared by Attorney Sikov or [Law Firm]. The terms of that agreement explicitly addressed the fees, costs or reimbursements for which Buck would be responsible to Attorney Sikov. Those terms stated:
a. Attorney Sikov and Buck agree that the most equitable basis for a fee to be paid to Attorney Sikov and to his law firm in this particular matter will be, basically, on a contingency fee basis, Attorney Sikov to receive thirty-three and one-third (33 1/3%) percent of all monies which he recovers from the defendant, or either of them, in the action presently pending at No. G.D. 04-011408 in the Offices of the Prothonotary of Allegheny [County], Pennsylvania, Attorney Sikov, also to be reimbursed separately, and as billed to Buck, for any and all expenses and costs that Attorney Sikov incurs in the handling of the aforementioned law suit to include, but not limited to, costs of court reporters for transcribing the taking of depositions either for discovery purposes or for use at trial, the cost of obtaining expert witnesses, if necessary, to properly prosecute Buck's claim against AF&L, as well as any other expenses lawfully incurred by Attorney Sikov;
b. Inasmuch as Attorney Silvestri[1] has indicated in correspondence to Attorney Sikov, once Attorney Sikov took over the handling of the claims of Buck, that he, Attorney Silvestri, may be claiming fees for work allegedly performed by him on matters of Buck, Buck will initially deposit a retainer fee with Attorney Sikov in the amount of $2, 500.00 with Attorney Sikov to be paid for his time spent particularly and directly in opposing the claims of Attorney Silvestri for the reasons set forth in a letter sent to Attorney Silvestri by Attorney Sikov dated June 12, 2008, at Attorney Sikov's hourly rate of $250.00. Of course, reimbursement of all expenses incurred by Attorney Sikov in defending against any claims of Attorney Silvestri are the obligation of Buck and will be paid by Buck;
c. Should Attorney Sikov not be successful in obtaining payment of any sums of money due Buck from AF&L, whether because of an unfavorable result in the law suit, or because AF&L goes into bankruptcy and has no funds to pay the claims of Buck, Attorney Sikov would not be entitled to any fees other than those to be paid to him upon sums of money being actually received from AF&L either prior to going into bankruptcy or from assets in the bankrupt estate of AF&L.
The matter proceeded to a bench trial before the Honorable Judith F. Olson, and yielded a November 25, 2009 non-jury verdict in favor of Buck and against AF&L in the amount of $73, 325.56 for renewal commissions together with interest on that sum in the amount of $16, 093.10 for the period of December 2001 through December 2008, for a total of $89, 418.66. Judge Olson additionally awarded Buck $2, 548.96 for commissions that had been charged back to Buck, together with interest on that principal amount for the period of January 2001 through December 2008, for a total of $3, 734.24. The full amount awarded to Buck was $93, 152.91.
In response to a motion for post-trial relief filed by Buck, Judge Olson issued an amended non-jury verdict and order of court on December 18, 2009, which was docketed on December 21, 2009. The amended verdict and order preserved the calculation of damages set forth in the original verdict[, ] $93, 152.91, [and] clarified the rationale of the [c]ourt's decision. In that same order, Judge Olson denied the motion for post-trial relief that AF&L had presented.
Buck subsequently entered judgment on the $93, 152.91 non-jury verdict. A timely appeal by AF&L followed. In a memorandum opinion issued on November 22, 2011, the Pennsylvania Superior Court affirmed the verdict and order of the lower court.[2] AF&L applied unsuccessfully to the Superior Court for reconsideration and thereafter petitioned the Pennsylvania Supreme Court for allowance of appeal. That [] petition was denied by order dated July 18, 2012.[3] The order denying the petition for allowance of appeal was docketed with the Allegheny County Department of Court Records on August 13, 2012. On that same date, the Department of Court Records received the record that had been returned from the Superior Court. Also on that date, Sikov filed the Motion to Impose an Attorney's Charging Lien. Sikov's motion was heard by Judge Timothy Patrick O'Reilly, sitting as the Motion[s] Judge. Following argument, Judge O'Reilly issued a rule to show cause why a charging lien should not be imposed, directed that an answer be filed, and further directed that the parties engage in discovery through depositions and thereafter submit briefs in support of their respective positions.
A date for argument before the Motions Judge was set for January 4, 2013. On that date, the matter came before [Judge McCarthy]. Following argument, each party provided the [c]ourt, and exchanged with one another, proposed findings of fact and conclusions of law. At argument, in addition to the charging lien as set forth in the August 2012 motion, Sikov requested leave to file a claim against Buck for attorney's fees incurred in the course of preparing, filing, presenting and arguing the claim for the imposition of an attorney's charging lien, as well as a claim for punitive damages.
By Order dated January 16, 2013, [the trial court] denied the request to file for additional fees and damages. The underlying Motion to Impose an Attorney's Charging Lien was, however, granted in part. The payments in question were to be made proportionately to Sikov and Buck based upon an attorney fee of thirty-three and one-third (33 1/3%) percent of the total of the commissions due Buck for each of the years from October 1, 2009 through August 13, 2012. It was further ordered that an affidavit in support of the calculation of commissions and interest would be supplied to the respective counsel for the parties under the signature of John J. Hare, Esquire, counsel for AF&L, or such other qualified and authorized individual as may be designated by AF&L, which Affidavit was also be filed with the Department of Court Records.
Attorney Hare had prepared the calculation for distribution of the sums due under the verdict issued by Judge Olson and that had been escrowed with the Allegheny County Department of Court Records and were subsequently released upon the parties' consent on or about October 25, 2012. Consistent with that prior distribution, payment of any commissions due Buck and Sikov proportionately through October 1, 2009 were deemed to have been paid in full.
The January 16, 2013 disposition further noted that, notwithstanding that increased premium payments from policyholders procured by Buck were received by AF&L subsequent to August 13, 2012 and may continue to be received by AF&L into the future, AF&L was not required to pay to Sikov any premium or portion of premium or any portion of commissions paid or payable to Buck, or claimed by Buck, or any interest thereon, which are attributable to premium payments made by policy holders subsequent to August 13, 2012.
On February 5, 201[3], Buck filed a petition seeking modification of the January 16, 2013 Order, principally requesting clarification of the Order, but also disputing the August 13, 2012 termination date assigned to Sikov's charging lien. Buck urged an earlier termination date. Buck disputed, as well, whether the calculation of premiums and commissions should be provided by Hare rather than Buck. ...

Trial Court Opinion, 4/19/2013, at 1-6.

Before the trial court ruled on Buck's petition for modification, Law Firm filed a notice of appeal on February 12, 2013. Buck filed a notice of appeal on February 22, 2013. The trial court directed the parties to comply with Pa.R.A.P. 1925(b), and the parties subsequently filed Pa.R.A.P. 1925(b) statements. The court then issued an opinion in response to those statements.

We first will address Law Firm's second issue. In its opinion, the trial court suggested that the parties should have filed post-trial motions and that they, therefore, prematurely filed their notices of appeal. Id. at 7-8. Law Firm argues that the parties were not required to file post-trial motions, essentially because no trial occurred regarding Law Firm's "Motion to Impose an Attorney's Charging Lien." We agree with Law Firm.

"A motion for post-trial relief may be filed following a trial by jury or a trial by a judge without a jury[.]" Note to Pa.R.C.P. 227.1(c). "A motion for post-trial relief may not be filed to orders disposing of preliminary objections, motions for judgment on the pleadings or for summary judgment, motions relating to discovery or other proceedings which do not constitute a trial." Id. (citation omitted) (emphasis added). The proceedings that occurred in connection to Law Firm's "Motion to Impose an Attorney's Charging Lien" did not constitute a trial. Accordingly, the parties were not required to file post-trial motions; indeed, they were not permitted to file such motions.

Under its first issue, Law Firm contends that the trial court erred by rejecting Law Firm's claim that its attorney's charging lien should attach to future payments Buck receives from AF&L for commissions due to her.

[O]ur Supreme Court [has] set forth the [following] five conditions which must be met before a charging lien will be recognized and applied:
[I]t must appear (1) that there is a fund in court or otherwise applicable for distribution on equitable principles, (2) that the services of the attorney operated substantially or primarily to secure the fund out of which he seeks to be paid, (3) that it was agreed that counsel look to the fund rather than the client for his compensation, (4) that the lien claimed is limited to costs, fees or other disbursements incurred in the litigation by which the fund was raised and (5) that there are equitable considerations which necessitate the recognition and application of the charging lien.

Shenango Systems Solutions, Inc. v. Micros-Systems, Inc., 887 A.2d 772, 774 (Pa.Super. 2005) (quoting Recht v. Urban Redevelopment Authority, 168 A.2d 134, 138-39 (Pa. 1961)).

Regarding the first condition, in its opinion, the trial court initially concluded that Law Firm "sufficiently established each of the elements necessary to evoke an attorney's equitable charging lien against the fund on deposit with the Department of Court Records. … And, by virtue of the supersedeas bond, there was a fund available for distribution."[4] Trial Court Opinion, 4/19/2013, at 9. However, as to Law Firm's attempt to attach its lien to future payments due to Buck from AF&L, the court observed as follows.

Further, before a charging lien can be recognized and applied, it must appear that there is a fund in court or otherwise applicable for distribution on equitable principles. There currently is no fund as to future commissions. The lack of a current fund and the uncertainty of any commitment to expand the attorney fee to include a percentage of all future commissions precluded equitable inference by the [c]ourt as to counsel fees arguably chargeable against future commissions.

Id. at 12.

The parties recognize that, when AF&L appealed the judgment that followed Judge Olson's verdict, AF&L filed a supersedeas bond in the amount of $111, 783.59. Law Firm's Brief at 10; Buck's Brief at 6. Thus, a fund existed upon which a charging lien could attach. This fund, however, is substantially depleted now because, in an order entered on September 26, 2012, [5] Judge Hertzberg released $62, 101.94 to Buck and $31, 050.97 to Law Firm.[6] Nothing about this fund suggests that it was intended to allow AF&L to continue to deposit into it future payments AF&L may owe to Buck.

In an attempt to convince this Court that its charging lien should attach to these future payments from AF&L to Buck, Law Firm directs our attention to our Supreme Court's decision in Silverstein v. Hirst, 103 A.2d 734 (Pa. 1954). The Court summarized that case as follows.

In June, 1948, Isadore Hirst, the owner of a number of theatrical businesses, discontinued gratuitous payments he previously had been making to plaintiffs, his sisters. Having obtained a divorce at about the same time, he married one Betty Palmer on June 11, 1948, while very ill. He died December 28, 1948, not having left his sickbed.
Plaintiff-Weinstein consulted with a New York attorney, who then forwarded the matter to the firm of Orlow & Orlow, of which Abram Orlow and Lena Orlow, his wife, were the partners. Both plaintiffs then engaged their services, with Abram Orlow apparently giving the matter his personal attention, although Lena Orlow was also present at consultations and was consulted and dealt with after the death of Abram Orlow in April, 1950.
It was plaintiffs' purpose to obtain resumption of the gratuities and to ascertain their positions and rights in Isadore Hirst's estate, as well as in trusts which he had established. It was orally agreed that plaintiffs pay a contingent fee of 15% of all money received, and Abram Orlow thereupon sent a letter to the New York attorney, stating, inter alia: "I agreed with them * * * that we were to share in the extent of 15% for any amount recovered made in their behalf at any time hereafter." …
Although Abram Orlow made demands upon attorneys for Isadore Hirst, no money was obtained during the lifetime of Isadore Hirst. He was equally unsuccessful in his attempts to learn the details of certain inter vivos trusts set up by Isadore Hirst.
Upon the death of Isadore Hirst six months later, it was ascertained that he had set up two inter vivos trusts. Under one of these, dated May, 1944, he had provided for Betty Palmer for life, but declared that this trust for her would terminate if she should make any claims against his estate. The other trust, dated September, 1946, provided for certain income to plaintiffs and for payments of portions of the corpus to them upon the death or resignation of the trustees.
Betty Palmer Hirst attacked the validity of the 1946 trust insofar as her standing as a widow was concerned. In turn, plaintiffs, through their attorneys, raised the question of the effect of the forfeiture clause in the 1944 trust, and also, by reason of his illness, questioned the validity of Hirst's second marriage. All of these disputes threatened the security of the businesses and the corpus of the trusts and estate, and would have reduced the value thereof from $300, 000 to $150, 000.
After considerable negotiation and contention between the attorneys, their claims were settled and resulted in a deed of trust, dated May 27, 1949, and executed by the various parties, wherein the various claimants were the settlors and these defendants, [Joseph] Hirst and [Jay] Hornick, were trustees. As a result thereof, plaintiffs were given portions of the income and shares of the corpus were given to their respective legatees or heirs[.] The deed of trust provided that plaintiffs payments be made to Orlow & Orlow, Esqrs., on their behalf.
Thereafter Abram Orlow received the distribution payments of plaintiff[s], deducted 15% from each, and paid the balance to them. Abram Orlow having died in April, 1950, Lena Orlow, as surviving partner, continued to receive the payments for a further period of more than eight months. Plaintiffs then discharged her as their attorney and directed that all payments by defendants be made directly to them without deductions.

Silverstein, 103 A.2d at 736.

The plaintiff-sisters filed a bill in equity against Hirst and Hornick (the trustees) wherein the plaintiff-sisters sought to require the trustees to pay distributions from the trust to them, rather than to Lena Orlow. The trial court "held that there was a contingent fee contract requiring payment to Orlow & Orlow of 15% of all money received, whether before or after the death of Isadore Hirst, and that Orlows had a charging lien on all monies payable to plaintiffs under the deed of trust." Id.

On appeal, our Supreme Court affirmed the trial court's decree. In so doing, the Court reasoned as follows.

The cardinal rule in the interpretation of contracts is to ascertain the intention of the parties and to give effect to that intention if it can be done consistently with legal principles. * * * Contracts must receive a reasonable interpretation, according to the intention of the parties * * * if that intention can be ascertained from their language. * * * in order to ascertain that intention, the court may take into consideration the surrounding circumstances, the situation of the parties, the objects they apparently have in view, and the nature of the subject-matter of the agreement.
Application of the foregoing principles to the facts in the instant case leads to the definite conclusion that the parties formed a contingent fee contract that was to affect not only the gratuity payments but all sums received through the efforts of the attorneys. When they engaged Orlow & Orlow, plaintiffs desired and requested protection of all their rights. They continued consultations with the attorneys, and use of their services, after they knew that they could not require or obtain resumption of the gratuity payments or information regarding their status under the inter vivos trusts. They did so throughout the period of six months after Hirst's death, during which time Orlow & Orlow labored assiduously and successfully to assure them a share of the settlement. In addition, without objection they permitted receipt by Orlow & Orlow of payments from the date of the trust agreement until Abram Orlow's death in April, 1950, and by Lena Orlow thereafter until her discharge in 1951. They placed their own construction on the contingent fee agreement, to wit, that Orlow & Orlow be paid 15% of all funds received at any time.
It must be admitted that Orlow & Orlow had no 'retaining' lien. Such a lien is dependent upon possession by the attorney and binds only money, papers or other property in his hands. However, they do have a 'charging' lien, their services having contributed primarily to creating the fund, and there having been an agreement that the fee be paid from the fund. The right of an attorney to a charging lien upon a fund has been recognized by authorities generally for many years * * *. Based as it is upon justice and equitable principles, it is necessarily somewhat indefinite in its nature, but if the attorneys' services primarily aided in producing the fund, in fairness someone else ought not to be permitted to appropriate the fruits of their efforts, provided that by agreement with the client they are to look to the fund for compensation.
The proof here was definite that Orlow & Orlow not only established the plaintiffs' rights to share, but secured those rights irrevocably under the deed of trust of May 27, 1949.
What the plaintiffs ask is that we substitute our findings for those of the chancellor, which we cannot do since they are sustained by the evidence and approved by the court en banc. Therefore there can be no denial of the attorneys' right to a charging lien. For the same reason we cannot sustain plaintiffs' contention that Orlow & Orlow had no lien on the fund because it was not in their hands.

Id. at 737-38 (citations, quotation marks, and footnote omitted) (emphasis in original).

As this summary makes clear, the Supreme Court did not determine that the law firm in Silverstein had a charging lien on future payments due to the plaintiff-sisters. Rather, the Court held that the law firm had a charging lien on an existing fund that its services helped create: the trust.

Here, Law Firm's services helped create the fund that exists due to the supersedeas fund. However, there is no fund to capture future payment due to Buck from AF&L. Thus, a charging lien is not the proper means by which Law Firm can collect on any fees allegedly due to it from future payments from AF&L to Buck.[7] For these reasons, we affirm the portion of the trial court's order that disallowed Law Firm to attach a charging lien to these payments.

We now will turn our attention to Buck's appeal. Buck raises a number of issues and arguments; the nature of some of these issues and arguments is difficult to discern. Ultimately, however, Buck does not dispute that Law Firm is entitled to the portion of the fund, i.e., the supersedeas bond, it already has received. In fact, Buck suggests that Law Firm is entitled to its share (33.33%) of what remains of the supersedeas bond. Buck's Brief at 37-38.

Buck's primary concern seems to be that, in its order, the trial court utilized language which suggests that Law Firm's charging lien attaches to "Buck's earnings in the hands of AF[&]L prior to dispersal to Buck." Bucks' Brief at 27. We share Buck's concern.

In its order, the trial court makes several references to the charging lien attaching to money due to Buck but still in AF&L's possession. See, e.g., Trial Court Order, 1/17/2013, at 2 ("Accordingly, to the extent set forth below, the Attorney's Charging Lien is hereby imposed on behalf of [Law Firm] and against AF&L for any and all money presently in the possession of AF&L and that is due Buck, said funds representing commissions and interest thereon.") (emphasis added). In fact, the trial court's order requires AF&L to calculate the commissions and interest due to Buck from October 9, 2009 to August 13, 2012, and to pay Buck and Law Firm their proportionate shares of the calculated commissions and interest. See, e.g., id. at 2-3 ("The sums due Buck as commissions and, accordingly, proportionately due to [Law Firm], from October 1, 2009 through August 13, 2012 are to be determined by AF&L. Payments shall be made proportionately to [Law Firm] and Buck based upon an attorney fee of thirty-three and one-third (33 1/3%) percent of the total of the commissions due Buck for each of the years October 1, 2009 through August 13, 2012.").

As we pointed out above, in order for a charging lien to apply, "it must appear … that there is a fund in court or otherwise applicable for distribution on equitable principles[.]" Recht, 168 A.2d at 138-39 (emphasis added). There is no fund related to payments AF&L may owe to Buck for the time period between October 1, 2009 through August 13, 2012. The only fund that existed in this case to which a charging lien could attach is the above-mentioned supersedeas bond. Thus, the trial court erred insomuch as it seemingly applied Law Firm's charging lien to the payments AF&L may owe to Buck for the time period between October 1, 2009 through August 13, 2012, except insofar as they are covered by the supersedeas bond.

For these reasons, we vacate the portions of the trial court's order which indicate that Law Firm's charging lien attaches to payments due to Buck from AF&L. We remand this matter to the trial court. On remand, the trial court shall determine what, if any, portion of the remaining supersedeas bond is subject to Law Firm's charging lien. The court may hold additional proceedings if it deems such action necessary.

Order affirmed in part and vacated in part.

Case remanded with instructions. Jurisdiction relinquished.

Judgment Entered.

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