Waltrip

This case requires us to determine the priority of competing liens, of a judgment creditor and the debtor’s attorney, on settlement proceeds. Plaintiffs appeal from an order authorizing payment of counsel fees and costs from a settlement. Out of the $2.5 million settlement, the order authorized payment of $1,726,632 to counsel for fees and costs and $773,368 to Wells Fargo Bank, a creditor. Plaintiffs, who had sought disbursement of the entire settlement to counsel, contend the trial court erred because the attorney lien had priority over Wells Fargo’s creditor lien.

We agree and reverse. Although Wells Fargo had a security interest in plaintiffs’ collateral, through a collateral security agreement and later a judgment lien on personal property, those liens did not cover commercial tort claims and the settlement proceeds were from commercial tort claims. The attorney lien was created by the retainer agreement between plaintiffs and counsel and was created before Wells Fargo filed a notice of lien in the pending action. The notice of lien did not relate back to the prior liens because those liens covered different property. We remand for further proceedings.

FACTS

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