NICHOLS v. Riggs, Abney, Neal, Turpen, Orbison & Lewis, Inc., Defendant/Appellee. (2009)

¶ 1 The dispositive issue on certiorari is whether the Court of Civil Appeals erred in reversing the trial court's order. We answer in the affirmative.

I

THE ANATOMY OF LITIGATION

¶ 2 Riggs, Abney, Neal, Turpen, Orbison and Lewis (Law Firm) represented Gayle Nichols (wife or client) in her divorce case. After the divorce was granted, Law Firm filed on behalf of its client an amended application for an attorney's fee and costs in the total amount of $151,991.12.² In June 1999 the trial court awarded to the wife for her attorney's fee and costs the amount of $37,383.38 for the discharge of her liability to legal counsel.³ The award was made to the wife by the following words:

* * *[T]he Court, having heard the testimony of Plaintiff and Defendant's respective counsel, having reviewed the verified pleadings, hearing arguments and stipulation of counsel and being fully advised in the premises finds and ORDERS judgment for the Plaintiff for attorney fees of $34,784.50 and costs in the amount of $2,598.88 for a total judgment in the sum of $37,383.38. * * *

IT IS FURTHER ORDERED, ADJUDGED AND DECREED by the Court that the Plaintiff is awarded a judgment against the Defendant, ORVILLE B. NICHOLS, II, for her attorney fees and costs in the total sum of Thirty Seven Thousand Three Hundred Eighty Three and Thirty Eight One Hundredths Dollars ($37,383.38) all for which execution may issue.

Law Firm later withdrew from representation because of a dispute over the counsel fee.⁴ It originally gave notice of its attorney's lien upon the entry of appearance and later upon its application to withdraw.

¶ 3 In February 2000 the wife filed a voluntary bankruptcy and obtained a discharge on September 12 of that year.⁵ She listed on her bankruptcy schedule Law Firm's claim for an attorney's fee and costs as an unsecured debt.

¶ 4 In June 2004 the wife renewed⁶ the counsel-fee award and brought proceedings against her husband to collect that award. On 10 March 2005, shortly after learning about the wife's collection efforts but before any money had come into her hands, Law Firm moved to enforce its charging lien. Law Firm claimed that (a) it had a valid and enforceable lien upon the award as well as a prior claim to all funds that may come into the wife's hands by her collection efforts; (b) the efficacy of the lien is subject to the time limit set by the attorney's lien statute, 5 O.S.2001 § 8,⁷ and the lien may be enforced within one year after the attorney becomes aware that the party to whom the judgment is granted attempts to compromise or settle the judgment without the consent of counsel; and (c) it timely complied with the § 8 time limit by the 10 March 2005 filing of its motion to enforce the lien. Law Firm claims that on 7 March 2005 it was informed by husband's counsel of wife's collection efforts.⁸ The wife countered that Law Firm's charging lien is unenforceable because the underlying obligation for the attorney's fee is barred by laches, the running of the statute of limitations found in 12 O.S.2001 § 95⁹ and her discharge in bankruptcy.

¶ 5 The trial court initially made a finding of fact that the bankruptcy trustee had abandoned any claim the bankrupt might have to the counsel-fee award.¹⁰ This finding was incorporated in its decisional disposition holding that Law Firm had an enforceable charging lien in the fee award. Wife brought an appeal from the trial court's order.

II

COCA'S OPINION AND THE PARTIES' CERTIORARI ARGUMENTSThe Court of Civil Appeals' Reversal

¶ 6 The Court of Civil Appeals (COCA) reversed the trial court's order. Its decision rests on the view that the charging lien was barred by the running of the statute of limitations on the underlying debt to the Law Firm. COCA reasons that because Law Firm's action to enforce its charging lien was filed more than five years after the firm's last date of representation, the underlying debt for the attorney's fee that the lien secured was barred by the five-year statute of limitations for written contracts in 12 O.S.2001 § 95¹¹ and the lien provisions of 42 O.S.2001 § 23,¹² rather than the one-year limitation period of 5 O.S.2001 § 8. Because its reversal was based solely on a time bar, COCA did not deal with any other challenges to the trial court's decision.

The Parties' Certiorari Arguments

¶ 7 Law Firm argues COCA erred in applying to the claim the statute of limitations in 12 O.S.2001 § 95 and the general lien provisions of 42 O.S.2001 § 23 in concluding that its charging lien was unenforceable. According to Law Firm (a) these statutes are not applicable to an attorney's charging lien; (b) the Legislature carved out of the general lien statute the category of attorneys' charging liens and provided in 5 O.S.2001 §§ 6¹³ and 8 a specific method for their enforcement; and (c) its motion to enforce the lien was timely brought.

¶ 8 Wife counters that COCA correctly determined (a) the provisions of 5 O.S.2001 § 8 do not create an exception to the generally applicable statute of limitations and (b) the attorney's charging lien stands extinguished when the claim for the underlying debt becomes time barred.

¶ 9 We granted certiorari on Law Firm's quest for corrective relief and now vacate COCA's opinion, affirm the trial court's disposition on a theory different from that on which it was rested below and, for the reasons to be stated, remand the cause for further proceedings to be consistent with today's pronouncement.

¶ 10 An appellate court has a common-law duty to affirm a trial judge's decision if it can be supported by any applicable legal theory.¹⁴ We need not reach for discussion Law Firm's lien theory. Another analysis is fully explanatory of Law Firm's rights and provides ample basis for the trial court's disposition.

III

THE COUNSEL-FEE AWARD IN FAVOR OF THE WIFE (AND ANY MONEY THAT COMES INTO HER HANDS IN PAYMENT OF THAT AWARD) IS IMPRESSED BY OPERATION OF LAW BY A CONSTRUCTIVE TRUST FOR THE BENEFIT OF THE SERVICE-RENDERING LAW FIRMA.Law Firm Has A Beneficial Interest In the Constructive Trust Impressed By Operation of Law On the Counsel-Fee Award

¶ 11 When an award for an attorney's fee is made directly to the client who is a party,¹⁵ a constructive trust attaches eo instante by operation of law to the award¹⁶ for the benefit of the lawyer who performed the services for which compensation is allowed. The legal entitlement to the award goes to the client, but the beneficial interest is created in favor of the lawyer. The client stands as a constructive trustee and the lawyer as a constructive beneficiary (cestui que trust ).¹⁷ It is the dual title-the splitting of title into legal and equitable components-that creates the constructive trust. If money for satisfaction of the counsel-fee award comes into the hands of a constructive trustee it stands impressed eo instante in trustee's hands with the earmarks of the trust res.

¶ 12 The application of constructive-trust law to a counsel-fee award operates to protect the ethical restraints upon legal practitioners. These restraints prohibit a lawyer from sharing fees with nonlawyers and disallows a nonlawyer's attempt to lay claim to an attorney's fee.¹⁸

¶ 13 The constructive trust arises here from the wording of the counsel-fee award and the attorney-client relationship. When the wife was awarded an attorney's fee, she then stood as a constructive trustee of the award for the benefit of the Law Firm by operation of law. An ethical conflict would have arisen in violation of law if she were declared the sole beneficiary of that award. This is so because such declaration would constitute a legally impermissible award of an attorney's fee to a nonlawyer. In short, the imposition of a constructive trust in favor of the service-rendering lawyer assures the award's conformity to applicable law.

B.

Limitations Had No Impact On Law Firm's Interest In The Counsel-Fee Award

¶ 14 COCA's pronouncement that Law Firm's right in the fee award was unenforceable rested on a charging lien's analysis, not on a constructive-trust theory. The continuing trust character of the award operates against the running of any limitation in favor of the wife until she (qua constructive trustee) has clearly repudiated the trust and the repudiation has been brought to the attention of the trust beneficiary.¹⁹

¶ 15 We cannot tell from this record whether there has ever been a repudiation of the trust which would trigger the running of a statute of limitations, if any be applicable. If a repudiation did indeed occur when wife's counsel informed Law Firm by letter that it had no viable claim to the counsel-fee award and demanded that the lawsuit be withdrawn, it had no effect on the running of any applicable statute of limitations. This is so because it occurred during the litigation.²⁰ In short, this record neither shows a repudiation of the constructive trust nor discloses that any statute of limitations had run before the action was brought. If an issue should be pressed again on remand, its determination must be made by the trial court.²¹

C.

Laches and Wife's Discharge in Bankruptcy Are Not Acceptable Theories For Defeating Law Firm's Claim

¶ 16 The wife's bankruptcy had no effect on Law Firm's rights in the counsel-fee award. This is so because (a) the award was viable and could be enforced,²² (b) the bankruptcy trustee abandoned any claim the bankrupt might have to the counsel-fee award, and (c) the counsel-fee award in favor of the wife was not for her benefit but stood impressed with a constructive trust for the benefit of another. This analysis is consistent with federal bankruptcy law.²³

¶ 17 Laches cannot defeat the wife's status as trustee for the benefit of Law Firm.²⁴ The latter has no duty vis-a-vis the wife until she receives money in payment of the award and has repudiated the trust. As the record reveals, this litigation was brought below before any funds had been collected from the husband.

Wife's Due Process Challenge

¶ 18 Wife argued for the first time on appeal that she had never been given her due process opportunity to litigate the reasonableness and necessity of Law Firm's claimed fees. Law Firm countered that (a) it had vigorously argued the reasonableness of the fees and costs, (b) the trial court found the reasonable amount to be $37,383.38 and (c) the wife was given ample opportunity to challenge the amount of its charging lien and to brief as well as argue that issue in the trial court. Because in Part V(B) infra, we remand this cause for a determination of the quantum of Law Firm's interest in the funds collected, the wife will have the opportunity she seeks and her due process rights will be preserved.

IV

CERTIORARI-RELATED COUNSEL FEE

¶ 19 A certiorari-related counsel fee may be granted in cases where there is statutory authority to award a fee for legal services rendered in the trial of a cause.²⁵ Both the wife and Law Firm claim a certiorari-related counsel fee for services in this court and costs.

¶ 20 No trial-related counsel fee was awarded to Law Firm as the prevailing party at nisi prius. Nor does Law Firm inform us of any authority in support of its certiorari-related counsel-fee quest. Where, as here, no statutory authority is shown to grant an attorney's fee at the trial level, additional fees will not be assessed for legal services rendered in an appellate court. The wife is not entitled to certiorari-related counsel fee and costs. She is neither the successful litigant on certiorari nor may she stand here in the capacity of a divorcing wife vis-a-vis the lawyer.²⁶

¶ 21 We hold that each litigant, qua client, is responsible for compensating his own lawyer.

V

GUIDANCE GIVEN THE TRIAL COURT FOR PROCEEDINGS TO BE CONDUCTED ON REMANDA.Issues Settled by Today's Pronouncement

¶ 22 By today's pronouncement we settle that (l) a constructive trust attached by operation of law to the counsel-fee award (allowed the wife against the husband) and to any other funds she may collect as constructive trustee in payment of that award; (2) the wife is a constructive trustee of the trust; (3) Law Firm, which represented the wife when the counsel fee was awarded, is a beneficiary of the constructive trust; (4) on this record Law Firm's right in the award is not time barred and (5) enforcement of the trust res may go forward after the trial court's resolution of certain issues that may be pressed in post-remand proceedings and will have to be resolved before this litigation can come to an end.

B.

Issues Arising From Pre- and Post-Judgment Events To Be Determined In Post-Remand Proceedings

¶ 23 While appellate scrutiny is generally confined strictly to the record of proceedings conducted below, a well-recognized exception allows an appellate tribunal to consider those after-occurring facts, transpiring during the pendency of an appeal, which may adversely affect the reviewing court's capacity fully to administer effective relief.²⁷

¶ 24 Some of the issues to be determined upon remand arose since the appealed-from decision was made below. We cannot ignore the reality that if after-occurring facts should indeed be present, their resolution might affect the outcome of the dispute. Because these facts must be determined in order to finalize this dispute's resolution, post-remand adversarial proceedings will be necessary for the purpose of bringing this litigation to an end.

¶ 25 Law Firm's brief informs us that during the pendency of this appeal, the wife collected from the husband funds in payment of the counsel-fee award. The funds were made available by check payable to three parties-the wife, her current counsel and Law Firm. The check has been held by wife's counsel pending resolution of the appeal. Law Firm brought against the wife a separate foreclosure action within one year of the counsel-fee payment.²⁸

The Issue Based on Pre-Appeal Events

¶ 26 Because the constructive-trust theory was not before the trial court, the issue of whether there was a repudiation of the trust which operates to bar Law Firm's action is now available to the wife if adversarial evidentiary proceedings will be sought.

Issues Based On Post-Appeal Events

¶ 27(1) Law Firm is entitled to an adversarial evidentiary hearing to determine the quantum of its beneficial interest in the funds held by the wife in constructive trust.

¶ 28(2) Because neither the funds were in existence when the lawsuit was filed nor when it came to be terminated in the trial court, the wife is entitled to an adversarial evidentiary hearing to determine the total sum due the Law Firm from the money she collected from the husband in payment of the counsel-fee award. If Law Firm should take the position the wife was required to press that issue earlier in the litigation process, the burden shall be cast on the Law Firm to prove and persuade the court that the quantum earned may no longer be placed in contest.

¶ 29(3) The husband's check in payment of the counsel-fee award shall be paid into court. The proceedings to follow below shall be conducted against the interest in that check.

¶ 30(4) The trial court is directed to consolidate Law Firm's later-filed foreclosure action with this suit for trial and disposition of post-remand issues in the same case.

VI

SUMMARY

¶ 31 The counsel-fee award in favor of the wife and any money that comes into her hands in payment of that award are impressed by operation of law with a constructive trust for the benefit of the service-rendering law firm. The wife is a constructive trustee of the trust. Law Firm is its beneficiary. The application of constructive-trust law to a counsel-fee award operates to protect ethical restraints imposed upon legal practitioners.

¶ 32 The continuing character of the award that constitutes the trust res militates against the running of limitations until there has been a repudiation of the trust by its trustee. This record does not disclose that any applicable statute of limitations has run or that there has been a repudiation of the trust. The parties' due process rights stand preserved by allowing them an opportunity to seek on remand judicial ascertainment of the quantum of Law Firm's interest in the fee award made to the wife and to address other post-remand issues deemed timely and pertinent.

¶ 33 On certiorari granted upon the law firm's petition, the Court of Civil Appeals' opinion is vacated, the trial court's order is affirmed; the cause is remanded for further proceedings to be consistent with today's pronouncement.

¶ 1 I concur in this opinion and emphasize that this cause is remanded to the trial court for consideration of evidence and argument, and then to determine the interest, if any, the Law Firm may have in this fee award. Nothing in this opinion determines the amount, if any, of additional attorney's fee owed to the Law Firm by the wife. All that is left to the trial court after an appropriate hearing on remand.

OPALA, J.

¶ 34 EDMONDSON, C.J., TAYLOR, V.C.J., and HARGRAVE, OPALA and WINCHESTER, JJ., concur. ¶ 35 KAUGER, WATT and COLBERT, JJ., dissent. ¶ 36 REIF, J., disqualified.