Bluxome Street Associates v. Fireman’s Fund Insurance Company

Eric Woods (plaintiff) won a $582,500 settlement resulting from a legal-malpractice suit. The settlement proceeds were deposited into a trust account held by the law firm that had represented Woods in the suit, Hassard, Bonnington, Rogers & Huber (Hassard). Thereafter, Woods executed a security agreement granting a security interest in the settlement to Flynn & Stewart (Flynn) (defendant), another law firm that had provided legal services to Woods. Flynn filed a financing statement with the secretary of state, attempting to perfect the security interest under Uniform Commercial Code (UCC) Article 9 requirements. Hassard, Flynn, and other creditors, including Haas & Najarian (Haas) (defendant) and Fireman’s Fund Insurance Company (Fireman’s Fund) (defendant), each sought to enforce a lien on the settlement funds. Woods filed a motion for an order determining the priorities of the claimed liens. The trial court ordered disbursement of $352,562.14 to Hassard based on a retainer agreement, $72,500 to Charles Schilling, and the remaining proceeds to Flynn. The trial court determined that, although Haas and Fireman’s Fund had valid liens, the liens with priority had already consumed all available settlement proceeds. Haas and Fireman’s Fund appealed, arguing that (1) Flynn’s UCC-compliant financing statement did not perfect Flynn’s lien, because Article 9 was inapplicable to liens on tort claims; and (2) Haas’s and Fireman’s Fund’s liens were therefore superior to Flynn’s lien.