Attorney may have fee lien by contract but not a statutory lien under KRS 376.460 in a divorce case – Ky. Supreme Ct.

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Wife signed an employment contract with attorney which gave him a lien on all of her assets. Parties subsequently entered into a Marital Settlement Agreement which provided Husband would buyout Wife’s interest and receive marital home. It further provided each would pay his or her own attorney fees, but Husband would pay $1,500 of Wife’s fees. After the entry of the divorce decree, Wife’s attorney placed a lien on the marital home. The trial court Judge set aside the lien and was upheld by the Court of Appeals. Attorney moved for review and the Supreme Court granted discretionary review.

Attorney first argues that he is entitled to a fee under the attorney fee lien statute, KRS 376.460, which does not require notice. The Supreme Court holds that the attorney’s fee lien statutes “does not apply to property assigned or divided in divorce proceedings.” KRS 376.460 allows an attorney to place a lien on fees that were recovered by the attorney. In a dissolution of marriage, marital property is already owned. The court merely divides just shares of the marital estate to one party or the other. Thus, no new interest is being created and KRS 376.460 does not apply.

Second, attorney argues that he has a contractual agreement with Wife that is enforceable against third parties without notice. The Supreme Court holds that an attorney may obtain a contractual lien against a client, but cannot enforce that lien against third parties without timely notice. While attorney had a valid lien, it could only be enforced against Husband if he was provided timely notice of the lien. Attorney-client privilege does not allow Wife to hide the encumbrance from Husband. Ultimately, the Supreme Court affirms the lower court decision in setting aside the lien on the marital home retained by Husband.

Justice Venters writes a separate concurrence to note a difference in his interpretation of KRS 376.460 which he would read broadly to include all claims for recovery of money or property, but not to include the division of a marital estate.

Justice Keller writes a separate concurrence arguing KRS 376.460 should be interpreted to allow for the recovery of marital property, but agreeing in result as in this case the lien was only perfected after the Wife had lost all interest in the marital residence.

Digested by Elizabeth M. Howell

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