Judge Bruce G. Iwasaki, Case Number: 22STCV36711, Date: 2024-09-25 Tentative Ruling

Motions: (1) Motion for Order for Distribution of Proceeds Deposited With the Court (filed June 10, 2024)

(2) Motion for Order for Distribution of Proceeds Deposited With the Court (filed August 29, 2024)

Tentative Rulings: Keystone Law Group, P.C.’s Motion for Order for Distribution of Proceeds Deposited with the Court is granted in the amount of $69,370.07.

Steffanie Stelnick’s Motion for Order for Distribution of Proceeds Deposited is granted to any sum remaining after distribution to Keystone and up to a maximum of $35,327.01

Defendant Jamisha Duncan’s former counsel, Steffanie Stelnick (“Stelnick”), moves the Court for an order to release a portion of the proceeds that were deposited with the Court, arguing the following.

On October 29, 2022, and April 23, 2023, Stelnick and Defendant entered into Hourly Fee Agreements that allow Stelnick to attach liens to any recovery that Defendant may obtain whether via judgment, settlement, or otherwise. On December 8 and 11, 2023, Stelnick was relieved as counsel for Defendant in Case Numbers 22CMCV00583 and 22STCV33544, respectively.

On or around January 2, 2024, Stelnick filed two Notices of Lien: one in 22STCV33544 for $11,063.58 and the second in 22CMCV00583 for $24,263.43, a total of $35,327.01.

Subsequently, Stelnick filed Notices of Lien against Defendant’s interest in real property. However, because those liens had to be removed for title to be perfected and the real property sold, Stelnick signed a Stipulation and Agreement providing that Defendant’s proceeds from the sale will be deposited with the Clerk of Court and would remain with the Court until further court order. Stelnick removed her liens on the real property.

On May 1, 2024, Stelnick received notice that Defendant’s proceeds of $150,883.82 had been deposited with the Court.

On June 10, 2024, Stelnick moved for a distribution of $35,328.01 from those proceeds for her liens. (Her two liens actually total $35,327.01.)

Keystone Law Group, P.C. (“Keystone”), Defendant’s former counsel, opposes Stelnick’s motion.

Kesystone relies on Civil Code section 2897, which states: “Other things being equal, different liens upon the same property have priority according to the time of their creation, except in cases of bottomry and respondentia.”

Keystone asserts a lien of $92,598.98. (It appears, however that based on its invoices, more than $20,000 of this amount was incurred after it substituted out as Janisha’s attorneys on August 31, 2022.) Keystone contends that its lien has priority over Stelnick’s attorney fee liens because Keystone’s lien was created before Stelnick’s liens, on July 2, 2021, when Defendant and Keystone entered into Attorney-Client Hourly Fee Agreement. The agreement contained an attorney lien provision. Stelnick’s liens were created after Keystone’s liens (i.e., October 29, 2022, and April 2, 2023, when Stelnick and Defendant entered into their Hourly Fee Agreements). In addition, Stelnick had constructive notice of Keystone’s Notice of Lien, because the notice was filed in the estate proceeding where Keystone represented Defendant and also served Defendant with the notice. Stelnick was also made aware that on November 2, 2023, Defendant owed Keystone approximately $82,000 in fees.

Keystone asserts that because its lien takes priority over Stelnick’s liens, the Court should deny Stelnick’s motion and instead order that $92,598.98 be released to Keystone to satisfy its attorney lien.

In reply, Stelnick does not address Civil Code section 2897 or dispute Keystone’s argument that Keystone’s lien has priority over her liens. Instead, she argues (among other things) that Keystone delayed in filing its motion for distribution and that, contrary to Keystone’s argument, she provided the firm copies of her instant motion and minute order. She argues that the Court should disregard Keystone’s allegations and allow the proceeds to be distributed to her.

“A lien in favor of an attorney upon the proceeds of a prospective judgment in favor of his client for legal services rendered has been recognized in numerous cases. Such a lien may be created either by express contract … [citations], or it may be implied if the retainer agreement between the lawyer and client indicates that the former is to look to the judgment for payment of his fee [citations].” (Cetenko v. United California Bank (1982) 30 Cal.3d 528, 531.)

“Civil Code section 2897 provides: ‘Other things being equal, different liens upon the same property have priority according to the time of their creation, except in cases of bottomry and respondentia.’” (Bluxome Street Associates v. Fireman’s Fund Ins. Co. (1988) 206 Cal.App.3d 1149, 1158 (Bluxome).)

“Under Civil Code section 2897, [the] analysis of the priority of … [a] lien does not end with the determination that it was created prior to [other] liens. The language of the statute itself requires that [the court] also determine whether the equities of the lienholders are equal. [Citations.] For example, in [one case], the trial court’s determination that a judgment creditor’s lien had priority over a prior contractual lien of an attorney for services performed in the action was upheld on appeal on the ground that the equities favored the judgment lien creditor. The contract between the plaintiff-debtor and the attorney to grant the attorney a lien was not made until after the judgment creditor had given notice that it intended to move the court for a lien under Code of Civil Procedure section 688.1.” (Bluxome, supra, 206 Cal.App.3d at p. 1159 [emphasis added].)

Here, (1) Keystone’s lien has priority over Stelnick’s liens because the former lien was created first and Stelnick had notice of the Keystone lien; and (2) equities between Keystone and Stelnick are otherwise equal because they both have attorney liens.

Both parties cite Fletcher v. Davis (2004) 33 Cal.4th 61 and Carroll v. Interstate Brands Corp. (2002). 99 Cal.App.4th 1168 for general principles of the law regarding attorney liens. “An attorney’s lien (also known as a ‘charging’ lien) is a lien that secures an attorney’s compensation against the client's assets.” Once created, the attorney's lien grants the attorney a security interest in specific property, and the attorney has the right to receive payment from such property before payment can be made to the client. (Fletcher v. Davis (2004) 33 Cal.4th 61, 66-67.)

Stelnick also cites Isrin v. Superior Court of Los Angeles County (1965), 63 Cal.2d 153 for the principle that attorneys’ liens are provided for by legislation in limited instances and may be created by express provision of retainer contract between attorney and her client.

Stelnick cites Code of Civil Procedure section 873.820, which states that “proceeds of sale for any property sold shall be applied in the following order: (a) Payment of the expenses of sale. (b) Payment of the other costs of partition in whole or in part or to secure any cost of partition later allowed. (c) Payment of any liens on the property in their order of priority except liens which under the terms of sale are to remain on the property.”

Finally, Stelnick cites Code of Civil Procedure section 708.410, subdivision (c), which states that a judgment creditor “shall serve on all parties who, prior thereto, have made an appearance in the action or special proceeding a copy of the notice of lien and a statement of the date when the notice of lien was filed in the action or special proceeding.”

On August 29, 2024, Keystone filed its own Motion for Order for Distribution of Proceeds Deposited With the Court.

Keystone’s motion and its opposition to Stelnick’s motion are virtually identical.

In her opposition to Keystone’s motion, Stelnick generally makes the same arguments that she made in her reply in support of her motion.

Stelnick maintains that Keystone has not proved that its requested $92,598.98 is reasonable. Keystone, she argues, has only provided vague descriptions of the work it performed. Keystone has not provided the billing rate for the work performed.

In reply, Keystone argues that nowhere in the opposition does Stelnick dispute (or even address) the fact that Keystone’s lien (as the first-in-time) takes priority over hers.

Second, as to the reasonableness of Keystone’s fees, Stelnick has cited inapplicable law. Stelnick cites Probate Code section 1472, which concerns fees for counsel appointed by a court in guardianships, conservatorships, and other protective proceedings. This statute is inapplicable, as this is not a protected proceeding, nor did Keystone represent Defendant in a protected proceeding. Next, Stelnick cites PLCM Group. Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095, which relates specifically to entitlement to attorney’s fees to the prevailing party in litigation pursuant to a contract. This is also inapplicable to Keystone’s lien, as this matter does not involve a court’s award of attorney’s fees, but rather is a straightforward right to and lien securing attorney’s fees are inapplicable. Stelnick’s reliance on cases concerning the amount of attorney’s fees is off the topic.

Finally, Stelnick, as a competing lienholder, does not have standing to object to the attorney’s fees Jamisha incurred during her representation by Keystone. The client, Jamisha Duncan, is the only one with standing to dispute the fees. Stelnick no longer represents Defendant and cannot speak on her behalf.

An issue in Keystone’s motion is the total amount subject to lien. The Court concludes Keystone cannot assert a lien for any work done when it no longer represented Jamisha Duncan.

Keystone states in its motion: “Per Jamisha’s express request, Keystone’s provision of legal services concluded on August 31, 2022 when Keystone filed a Substitution of Attorney form signed by both Keystone and Jamisha. Oberto Decl., ¶ 6, Exhibit 3, Substitution of Attorney form.” (Motion, p. 3:15-17 [bold emphasis removed].) Keystone also states that on September 8, 2022, it sent a closing letter to Defendant confirming the termination of the attorney-client relationship. (Motion, p. 3:18-19.)

As of August 31, 2022, the amount Jamisha owed to Keystone’s lien was $69,370.07. (See Oberto Decl., Exhibit 2 – copies of the invoices, Invoice # 41605 with “Period End Date: 8/31/2022.”)

Despite its own invoices reflecting that Jamisha owed Keystone on August 31, 2022 a total of $69,370.07, Keystone seeks compensation for work done after that, through August 2024. Keystone has offered no factual or legal justification for why a lien attaches to purported billings when it no longer represented Jamisha Duncan. Moreover, Keystone has provided no unredacted invoices of the services it provided after August 2022. The Court concludes that these post-termination amounts are not subject to any lien enforceable here.

On the other hand, Stelnick seeks to challenge Keystone’s fees. She has not cited (and the Court has not found) any authority permitting her to do so. Here, the client, Defendant Jamisha Duncan has not objected to Keystone’s lien.

Stelnick fails to address the lien priority established by Civil code section 2897. The Keystone lien takes priority over Stelnick’s lien.

The Court orders that from the funds deposited in Court for the benefit of Jamisha Duncan, the amount of $69,370.07 shall be paid to Keystone Law Group P.C. in full satisfaction of its lien rights. If there are funds remaining, they shall be paid to the Law Office of Steffanie Stelnick up to the sum of $35,327.01.

Department 58