We can understand why the court published this: people who make dog-ate-my-homework excuses need to be told to just stop. Unfortunately, it doesn’t add much to the law except a bit of confusion.

Midtown treated a couple of claimants for whose bills Farmers was responsible (one a Farmers insured, the other injured by a Farmers insured). Midtown perfected its liens and then wrote to Farmers announcing that It had to be included as a payee on any checks for settlement of their claims. Although that’s in terrorem nonsense, Farmers did it. But the claimants managed to negotiate the checks without Midtown’s endorsement and without paying Midtown. So Midtown sued Farmers. Farmers moved to dismiss; the trial court granted the motion.

The Court of Appeals reverses. Farmers argued, basically, that putting Midtown’s name on the checks was good enough and that Midtown should sue the bank for cashing them without proper endorsements. But the statute (33-934A) allows a provider to enforce its lien against an insurer and its easy enough to find cases to the effect that just paying out money isn’t good enough (e.g., Blankenbaker). If you send in your electric bill and it doesn’t arrive, don’t tell the power company to sue the post office.

But the court goes further and says that Farmers acted in derogation of the lien “by not following the express requirements of the statute to obtain releases from the lienholder.” That’s not quite what the statute says, which is that a release (e.g., one signed by the injured claimant) isn’t valid as to the lien unless the lienholder signs it (or a separate release). The statute doesn’t require a release and the suggestion that not getting one (which is fairly common) somehow violates it is the sort of thing that leads to mischief.

The court remands for further proceedings and awards Midtown its appellate costs and fees (the lien statute authorizes a fee award).

(link to opinion)

A cautionary tale for those who wonder why we tend to emphasize form and procedure.

A trustee’s sale had resulted in excess proceeds. An action was then initiated, as required by statute, to divvy up those proceeds among the junior lienholders. Sysco was one; it had obtained a judgment against the debtor. But it had perfected its judgment lien by recording the unsigned minute entry making the award rather than the judgment itself. The lien statute (33-961) requires recording “the judgment.”  As holder of a judgment lien Sysco would have priority among the junior lienholders so the others argued that the lien was not valid. The trial court agreed.

The Court of Appeals affirms. “Only a final judgment can create a judgment lien.” An unsigned minute entry is not a final judgment. The court does Sysco the courtesy of analyzing this for several paragraphs but it is black-letter law.

Because Sysco’s was not a judgment lien it fell from the top of the line to the bottom; instead of getting about $94,000 it got nothing. By not paying attention to form and procedure you run the risk of having to explain that sort of thing to your client and/or your carrier.

(link to opinion)