A superior court order required the Child Support Services Division (CSSD) to audit the child support and spousal support accounts of a divorced couple. The audits revealed that the agency had collected too much child support from the ex-wife and that the ex-husband owed her the overpayment as well as arrearages in spousal support. The ex-wife's attorney filed an attorney's lien on money in the ex-husband's possession that the attorney claimed was owed to his client, then filed a separate action to enforce the lien. The ex-husband paid the money to CSSD, which turned it over to the ex-wife.
The superior court granted summary judgment to the ex-husband on the attorney's lien claim, concluding that the lien was invalid because the ex-husband was required to pay the money for the overpayment and the spousal support arrearages directly to CSSD. The attorney appeals.
We conclude that the attorney's lien satisfied the requirements of the governing statute, AS 34.35.430(a)(3). We therefore reverse the superior court's summary judgment order and remand for further proceedings.
II. FACTS AND PROCEEDINGS
Michelle and Dana Ceccarelli are divorced. Michelle initially had custody of their two children, but Dana took full custody while Michelle spent time in prison. Michelle and Dana have had disputes over child and spousal support for over ten years. Michelle moved for back payment of child support but in October 2005 the superior court denied her motion, then in November 2005 denied her motion for reconsideration.
A. The June 2007 Superior Court Order
In 2007 the superior court decided that it had based its November 2005 order on an incomplete record, omitting an October 2005 Notice of Adjustment from CSSD. The November 2005 order had concluded that Dana was current on his child support obligation, but it relied on a CSSD audit that predated the Notice of Adjustment. The Notice of Adjustment revealed that Dana was in arrears in the amount of $11,244.02 at the time he took custody of the children. The court ordered that CSSD take into account these newly determined arrearages in offsetting the parties' CSSD accounts.
B. The June 2008 Child Support Order
A June 2008 order required Michelle to pay Dana monthly child support. The order erred in its child support calculation, however, and it failed to expressly state that it did not supersede the superior court's 2007 order taking into account the child support arrearages Dana owed Michelle. Because CSSD failed to credit Michelle with the $11,244.02 in arrearages, her child support payments began to accrue immediately and for the wrong amount. These errors meant that Michelle incorrectly accrued approximately $18,000 in child support arrearages while she was imprisoned.
C. CSSD's Seizure Of Michelle's Funds
After Michelle was released from prison, CSSD's accounts continued to show that she owed Dana approximately $18,000 in unpaid child support. Dana asked for CSSD's help to recover this money after Michelle received a settlement in a personal injury case following a bike accident. CSSD apparently served an order to withhold and deliver on Michelle's personal injury attorney,
D. The March 2013 Order Modifying Child Support
In March 2013 the superior court issued an order modifying the June 2008 child support
The 2013 order also found that the 2008 order had the wrong amount for Michelle's monthly child support obligation. The court required CSSD to adjust her child support account to correct for the error in the 2008 order; it further found that she was physically incapacitated because of her bike accident, that because of her incapacity she should pay only the minimum child support obligation of $50 per month, and that her account should be adjusted to reflect this amount "as of May 2012 until further order of the court."
This March 2013 order did not expressly require the parties to repay any excess funds to CSSD. It simply instructed CSSD to "notify the parties' attorneys" should the "credit plus the sums seized from [Michelle] in 2012 exceed [Michelle's] current arrearages."
E. The November 2013 Order
In November 2013 the superior court ordered CSSD to "adjust its account for [Dana] to reflect the correction of the arrears." It further ordered CSSD to "offset the accounts for child support owed by each parent as ordered in the June 18, 2007 order" and gave the agency 30 days to provide the court and the parties with new audits of both parties' child support accounts. When CSSD finished these audits, it concluded that Dana owed spousal support but not child support and that it had taken too much money from Michelle by garnishment, with the result that Dana owed Michelle a refund for overpayment of child support. On February 7, 2014, Michelle moved "for a hearing regarding the distribution ... of $10,639.88 presently held by ... Dana." This amount represented the overpayment to Dana that had been revealed by the CSSD audit.
F. The Attorney's Lien Filed By Michelle's Attorney
Michelle had been represented by attorney Steven D. Smith since CSSD's seizure of her settlement funds. In January 2014 Smith filed a notice of attorney's lien on Dana's counsel, Carl Cook, based on legal fees Michelle owed for the services Smith had provided. On February 24 Smith filed an Action to Foreclose Lien under AS 34.35.430. In his complaint, Smith alleged that the amount of his lien was $7,742.18 and that "as the result of a garnishment upon Michelle ... performed by [CSSD]" Dana had been given "[m]ore than $10,000 in excess of what [Michelle] owed." Smith alleged that he had served notice of his attorney's lien on Dana's counsel but that Dana had stated his "intent not to honor the lien but instead pay the money to CSSD." Dana's answer to the complaint asserted various affirmative defenses and generally denied "all allegations that he is liable for payment of a debt owed by Michelle ... to [Smith]."
On February 25, 2014, the day after Smith filed his complaint, Dana sent two payments to CSSD: one for the excess funds CSSD had garnished from Michelle and turned over to him and the other for spousal support arrearages he owed Michelle. CSSD passed the money on to Michelle. Michelle then paid Smith $2,000, leaving a balance of $5,742.18 due for his legal fees.
Smith moved for summary judgment in his action to foreclose the attorney's lien. Dana opposed and filed a cross-motion for summary judgment. In June 2014 the superior court issued an order denying Smith's motion, granting Dana's cross-motion, and dismissing Smith's claim without further elaboration. Smith moved for reconsideration, arguing that the superior court had erred in failing to issue findings of fact and conclusions of law. The superior court denied the motion, stating that there was no issue of material fact and that Dana was entitled to summary judgment as a matter of law "for the reasons identified" in Dana's opposition and cross-motion. The court added that
Smith appeals, contending that the superior court erred by deciding on summary judgment that his attorney's lien was invalid and by failing to issue findings of fact and conclusions of law in support of its decision.
III. STANDARDS OF REVIEW
"We review grants of summary judgment de novo,"
A. Alaska Law Authorizes Smith's Attorney's Lien.
The validity of Smith's attorney's lien depends on whether it meets the requirements of Alaska's attorney's lien statute, AS 34.35.430. As relevant here, the statute provides that "[a]n attorney has a lien for compensation, whether specially agreed upon or implied, ... upon money in the possession of the adverse party in an action or proceeding in which the attorney is employed, from the giving of notice of the lien to that party."
"[A] charging lien is based on equitable considerations, and gives an attorney the right to have fees and costs due to the attorney for services in a particular suit secured by the judgment or recovery in such suit."
Smith served the notice of attorney's lien — both its original and amended versions — on Cook, Dana's counsel, and the parties do not dispute the notice's sufficiency.
1. The money at issue was in the possession of the adverse party.
Dana argues he "was not an adverse party" under AS 34.35.430(a)(3) "because he did not possess funds that were payable to Mr. Smith's client." He argues that he was
In support of the first argument — that court orders required him to make payments to CSSD — Dana refers to the 2001 child support order, which stated: "[Y]ou must make all payments through CSED[
But the 2001 order refers only to payments of child support, not spousal support or the potential reimbursement of overpayments. And once the superior court discovered that Dana owed these funds, its November 2013 order did not require that Dana pay the money to CSSD; it simply ordered that CSSD adjust Dana's account to reflect the arrears and that the agency "offset the accounts for child support owed by each parent as ordered in the June ... 2007 order."
As for whether Dana was required to pay CSSD by statute, we must first identify the statute under which Dana was holding the money. Smith contends that CSSD collected Michelle's funds through an order to withhold and deliver authorized by AS 25.27.250. That statute does not address overpayments. From this omission Smith argues that "[t]here is no overriding state interest to justify [Dana's ignoring of] the lien." On the other hand, Dana argues that CSSD seized the funds under the income withholding statute, AS 25.27.062, which does address one kind of overpayment. The statute provides that "if the agency receives money from an obligor under an income withholding order after the underlying support order has been satisfied and the agency was enforcing the support order at the time it became satisfied, the agency shall immediately return the overpayment to the obligor."
The orders by which CSSD seized Michelle's funds are not in the record, but a CSSD employee, Delinda Cain, testified about them at a deposition. Cain testified that CSSD issued an income withholding order to a restaurant where Michelle worked and possibly to other employers, and that it also issued an order to withhold and deliver to collect funds from Michelle's personal injury settlement, held by her attorney. But Cain's testimony does not clarify the date or purpose of the income withholding order.
Cain did testify that all of the approximately $18,000 CSSD seized from Michelle in May 2012 came from her personal injury settlement and her bank account. The parties do not appear to dispute that CSSD garnished the settlement proceeds to satisfy Michelle's child support arrearages. Cain also pointed out that an income withholding order, as the name suggests, is issued only to employers; thus one could not have been used to acquire the settlement funds that ended up in Dana's hands as an overpayment of past-due child support. Nothing in the
Further, as noted above, AS 25.27.250 — the statute authorizing orders to withhold and deliver — has no language that would oblige Dana to reimburse CSSD for an overpayment. Dana does not argue otherwise. The money at issue in this case was physically in Dana's hands. Because no order or statute required that he pay the money to CSSD directly, the money was not in CSSD's hands, even constructively, and it was subject to Smith's attorney's lien.
2. A third party's failure to honor a valid attorney's lien or interplead the claimed funds results in liability.
Dana argues that allowing an attorney's lien under the facts of this case would "wrongfully shift[ ] the burden of [Smith's] contract with his client upon [Dana]." But the same can be said of any charging lien, since any such lien requires a third party to satisfy the debt of another from funds in the third party's hands. Because a charging lien exists by statute in Alaska, an attorney has a right to use the device for the recovery of fees if the statutory requirements are met.
B. The Amount Dana Owes Smith Must Be Determined On Remand.
Smith asserts that Dana made two payments to CSSD in February 2014 by two separate checks: one for past due spousal support in the amount of $4,694.04 and one as a refund of Michelle's overpayment of child support in the amount of $6,692.03. Smith seeks only $5,742.18,
We remand so that the superior court can make factual findings regarding the amounts of both the spousal support and the refunded overpayment of child support. It may be that these numbers are not disputed. We note, however, that if Smith's attorney's lien exceeds the amount of the refunded overpayment and reaches funds that were due Michelle for spousal support, statutory exemptions may apply to reduce the amount available for attachment.
We REVERSE the superior court's grant of summary judgment and REMAND for further proceedings consistent with this opinion.
Stowers, Chief Justice, not participating.