In Re O'Connell
ORDER
In this Chapter 7 case, the Debtor has filed a motion to avoid a lien of creditor Bell pursuant to
The facts on the issue before the Court are not in dispute. 1 Bell represented the Debtor in a marital dissolution action which culminated in final judgment on December 5,1992, by Order of the Montana state district court, which, amоng other things, awarded the Debtor the family home acquired during the marriage. Bell concedes the Debtor claims a valid homestead exemption in the home filed pre-petition. 2
The Debtor contends thе lien asserted by Bell for unpaid legal services in the sum of $1,806.97 is a judicial lien subject to avoidance under
(f) Notwithstanding any waiver of exemptions, the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such hen is—
(1) a judicial hen;
Judicial hen is defined in
Montana has provided under § 37-61-420 as follows:
Judgment Lien for Compensation. 4 (1) The compensation of an attorney and coun *930 sel for his services is governed by agreement, exprеss or implied, which is not restrained by law.
(2) From the commencement of an action or the services of an answer containing a counterclaim, the attorney who appears for a party has а lien upon the client’s cause of action or counterclaim which attaches to a verdict, report, decision or judgment in his client’s favor and the proceeds thereof in whose hands they may сome. Such lien cannot be affected by any settlement between the parties before or after judgment.
This Court in
In re Eisenstein,
9 Mont.B.R. 499 (Bankr.Mont.1991) examined the history of Montana Supreme Court cases interpreting Section 37-61 — 420 beginning with
Coombe v. Knox,
An attorney’s charging lien is recognized under common lаw equitable principles as an attorney’s right to have the fees and costs due the attorney for services in a suit secured out of the judgment or recovery in that suit. See In re Ashley,41 B.R. 67 (Bankr.E.D.Mich.1984). There is a statutory basis in New York for thе imposition of an attorney’s charging lien, namely § 475 of the New York Judiciary Law, which provides in relevant part as follows:
From the commencement of an action or special proceeding ..., or the service of an answer containing a counterclaim, the attorney who appears for a party has a lien upon his client’s cause of action, claim or counter-claim, which attаches to a verdict, report, decision, judgment or final order in his client’s favor and the proceeds thereof in whatever hands they may come; and the lien can not be affected by any settlement bеtween the parties before or after judgment, or final order. The court upon petition of the client or attorney must determine and enforce the lien.
In Matter of Heinsheimer,214 N.Y. 361 , 367,108 N.E. 636 (1915), Judge Cardozo (later Mr. Justice) observed that thе lien arose not when the funds were produced but rather when the attorney commenced the action out of which the assets arose. The fact that bankruptcy may have intervened between the timе when the attorney commenced the action and when the assets were received in satisfaction of the cause of action is not significant because the charging lien relates back to thе initiation of the action. In re PDQ Copy Center, Inc.,27 B.R. 123 , 125 (Bankr.S.D.N.Y. 1983); In re E.C. Ernst, Inc.,4 B.R. 317 , 320 (Bankr.S.D.N.Y.1980). The attorney need not file or record a charging lien in order to perfect it; the lien takes effect from the time the services were commenced, and a trustee in a subsequent bankruptcy case involving the client takes the property of the estate subject to such lien. In re PDQ Copy Center, Inc.,27 B.R. at 125 .
The law is clear that the attorney’s charging lien is based in Montana on a statutory right, much like a mechanic’s lien. Avoidance under
The Bankruptcy Code recognizes three types of liens: judicial, statutory and consensual. HJEt.Rep. No. 95-595, 95th Cong., 1st Sess. 312 (1977) reprinted in 1978 U.S.C.C.A.N. 5787, 5963, 6299; In re McLean, 97 B.R. [789] at 792, n. 5 [Bankr. E.D.Pa. (1989) ]. * * * But there was nо legal process or proceeding in this case.
^5 # #
By contrast a statutory lien arises “solely by force of statute on specified circumstances or condition.”11 U.S.C. § 101(53) . We are satisfied that the lien herе arose “solely by force of statute” as “Pennsylvania state law authorizes the city of Philadelphia to impose liens against property benefitted by unpaid water and sewer service”. Ransom v. Marrazzo,848 F.2d 398 , 404 (3rd Cir.1988).
I note in the case
sub judice
that the attorney’s lien was not created in the divorce decree. Rather the lien was created by Bell invoking the provisions of Section 37-61 — 420. This special circumstance parallels the facts of
In re Sacco,
An attorney’s charging lien arises by operation of law. As indicated in Recht v. Urban Redevelopment Authority, [402 Pa. 599 ,168 A.2d 134 ], no affirmative action is required to establish an attorney’s charging lien. Therеfore, we agree with the conclusion of the bankruptcy court in In re Sacerdote [74 B.R. 487 ]; we hold that a properly constituted attorney’s charging lien is a secured debt which may not be avoided pursuant to11 U.S.C. § 522(f)(1) .
Sacco,
The language of the holding in
Sacco
is strikingly similar in context to thе Montana Supreme Court’s interpretation and application of Section 37-61-420 as stated in
Baker v. Tullock,
Section 8993 [37-61 — 420] is a remedial statute which should be construed in advancement of the remedy, and “so as to secure and protect, and not defeat the rights and objects intended by its provisions.” (Citation omitted.) It is competent for the Legislature to provide for an attorney's lien on the client’s cause of actiоn even though the cause of action is “an intangible, incorporeal something,” and “the lien which the statute fixes on the plaintiffs right of action follows the transition, without interruption, and simply attaches to that intо which the right of action is merged. If a judicial recovery is obtained, the lien attaches to that; if a compromise agreement is made, the lien attaches to that; and in each case the attorney’s interest is such that it cannot be defeated or satisfied by voluntary payment to his client without his [attorney’s] consent. (Citations omitted.)”
Since Congress has specifically limited
Under this holding, it is not necessary to address Bell’s аrgument centered on Farrey v. Sanderfoot, except to note that I find that case inappropriate to the facts and law surrounding the issue before the Court. 6
IT IS ORDERED Debtor’s motion to void the statutory attorney’s lien under
Notes
. While the Dеbtor contends Bell's representation in the divorce action resulted in an unfavorable result to the Debtor, I find such matter to be immaterial under the applicable attorney lien statute. Mont.Code Ann. Section 37-61-420. The relevant fact is that the Debtor received title to the family residence in the divorce decree and claims a valid homestead exemption in the home.
. The Debtor introduced a hоmestead declaration filed by the former spouse for the benefit of the family on November 7, 1983. Bell's brief concedes the Debtor filed a homestead declaration on December 15, 1993, and the bankruрtcy petition was filed on March 16, 1994.
.
Galbreath v. Armstrong,
. The title of this section does not lend any legal support that the lien is a Judgment lien by the use of the term "Judgment”. Such term is a *930 codifier’s prerogative, Mont.Code Ann. Section 1-11-103(5), and is not binding on the text of the statute. Indeed, the prior section, Section 93-2120, R.C.M.1947, used the term “Lien For Compensation”. The statutory text remains unchanged.
. Section 37-61-420 was adopted from Cal.Civ. Proc. Section 430 (1895), which was in turn adopted from the Field Code of New York.
. This matter is before the Court solely on the pending motion under