September 29, 2011
PATRICIA M. PERNINI, PLAINTIFF-RESPONDENT,
JOHN R. PERNINI, DEFENDANT-RESPONDENT.
IN THE MATTER OF BUDD LARNER, P.C., APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Somerset County, Docket No. FM-18-623-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 18, 2011
Before Judges A. A. Rodriguez and C. L. Miniman.
This appeal arises from an application by Budd Larner, P.C. (Budd Larner), the attorney for John R. Pernini (husband), in a divorce action to enforce a charging lien pursuant to N.J.S.A. 2A:13-5 (Lien Act). Budd Larner sought to enforce the lien against the former marital residence, the principal asset owned by the parties jointly. Patricia M. Pernini (wife), objected and prevailed. Budd Larner appeals. We affirm.
The relevant facts are undisputed. Almost three years after Budd Larner's representation began, it moved to be relieved as counsel due to the husband's lack of cooperation and subsequent disappearance. No one, including Budd Larner nor the wife, knows of the husband's present whereabouts. Budd Larner also sought a charging lien. On May 29, 2009, the judge relieved Budd Larner from representing the husband and granted the petition for a $159,099.56 charging lien.
On June 30, 2009, a final judgment by default was entered against husband. The judge determined the equitable share of each party, and ordered that arrearages for pendente lite alimony and child support owed to the wife, would be deducted from the husband's share of the martial assets. This reduced the value of husband's share to $1064.94. Specifically, the judgment provides:
11. The wife has the right to buy-out [sic] the husband's interest in the former marital residence. After applying the appropriate set-offs of monies the parties owe to each other, the wife shall pay the husband the sum of $1,064.94 for his interest in the marital residence. This amount shall be reduced by any support arrears and interest that may accrue from the date of this Judgment until the date the wife refinances the marital mortgage.
12. The wife shall have sixty (60) days from the date of the Final Judgment of Divorce to refinance the marital mortgage. At the time of the refinance in the event there should be any monies owed to the husband then his buy-out payment shall be held in trust for the children to pay towards their foreseeable medical and education expenses in accordance with [N.J.S.A.] 2A:34-23.
In addition, paragraph 9 of the divorce judgment granted the husband sole title to several personalty items.*fn1
Budd Larner submitted a proposed form of order regarding its lien, providing that the lien attach to the marital home. The wife objected. The judge heard oral argument and concluded that Budd Larner's lien could not reach the marital home. He reasoned:
As the Judgment was not in [the husband's] favor, Budd Larner does not have a charging lien on the former marital residence . . . .
Budd Larner's services have not provided [the husband] with value in the former marital residence. At most, it could be argued $1,064.94 in value has been created, but as stated above, if said money was paid it was to be paid directly into an escrow for the benefit of the parties' children.
Budd Larner appeals, contending that the judge "erred as a matter of law, or otherwise abused [his] discretion, by satisfying [husband's] pendente lite support arrears and other counsel fee obligations from [husband's] interest in marital property, to which [Budd Larner's] charging lien had attached, in violation of N.J.S.A. 2A:13-5." We disagree and affirm.
We begin our analysis by focusing on the language of the Lien Act, which provides:
After the filing of a complaint or a third-party complaint or the service of a pleading containing a counterclaim or cross-claim, the attorney or counselor at law, who shall appear in the cause for the party instituting the action or maintaining the third-party claim or counterclaim or cross-claim, shall have a lien for compensation, upon his client's action, cause of action, claim or counterclaim or cross-claim, which shall contain and attach to a verdict, report, decision, award, judgment or final order in his client's favor, and the proceeds thereof in whose hands they may come. The lien shall not be affected by any settlement between the parties before or after judgment or final order, nor by the entry of satisfaction or cancellation of a judgment on the record. The court in which the action or other proceeding is pending, upon the petition of the attorney or counselor at law, may determine and enforce the lien. [N.J.S.A. 2A:13-5 (emphasis added).]
Pursuant to this statute, the attorney is considered an equitable assignee of the judgment to the extent of the debt owed to the attorney. Horowitz v. Weishoff, 318 N.J. Super. 196, 206 (App. Div. 1999). The attorney is deemed an equitable assignee of the proceeds of litigation that are produced by a settlement without a judgment. Horowitz, supra, 318 N.J. Super. at 206.
Based on the language of the statute, the marital home per se is not subject to the charging lien because husband's interest in the property was not determined until the judgment of divorce was entered. In fact, equitable distribution of the husband's interest in the property was the main reason for Budd Larner's legal representation. This issue was still in dispute when Budd Larner obtained the lien. Therefore, the charging lien could not attach to the home itself, but only to the husband's interest, which was determined by "judgment or final order in [Budd Larner's] client's favor." N.J.S.A. 2A:13-5. Therefore, Budd Larner's lien attached to the husband's personalty and any interest in the property ($1064.94).
However, the $1064.94 was not awarded to the husband, either. Rather, the judge set that money aside for the future child support obligations that the husband, based on his disappearance, was unlikely to pay. In giving priority to the anticipated child support obligations over the lien, the judge followed the rationale of Vander Weert v. Vander Weert, 304 N.J. Super. 339 (App. Div. 19997), where we noted that an "auto accident case where the pool of funds to be distributed is from a third party tortfeasor" is distinguishable from a matrimonial case such as the one on appeal here. Accordingly, we held that the lien was limited to whatever interest the debtor spouse had in the property as accorded by the divorce judgment. We are mindful that Vander Weert did not involve N.J.S.A. 2A:13-5. Instead, it involved an attorney who secured his counsel fees through a mortgage. Nonetheless, the equitable principle is the same. We conclude that the Family Part, a court of equity, did not abuse its discretion by setting the money aside.
We are also mindful that "[c]hild support judgments are not given any special treatment in so far as priority of liens and are therefore subject to the general rule of 'first in time, first in right.'" Les Realty Corp. v. Hogan, 314 N.J. Super. 203, 210 (App. Div. 1998). Accordingly, child support payments must yield to lienholders who have perfected their liens before the child support becomes due. Id. at 210-11.
The plain language of N.J.S.A. 2A:17-56.23b also suggests that attorney fees may have priority over a judgment for child support. The statute provides:
[the child support judgment] shall stay the distribution of the net proceeds to the prevailing party or beneficiary until the child support judgment is satisfied . . . . As used in this act "net proceeds means" any amount of money . . . payable to the prevailing party or beneficiary after attorney fees . . . . [N.J.S.A. 2A:17-56.23b.]
Nonetheless in the circumstances of this case, we affirm the judge's decision. The judge could not include the $1064.94 in the reduction from the husband's equitable share in the marital home because the father's obligation was not yet payable on June 30, 2009, the date of the judgment. That obligation has certainly become due and owing by now.