Opinion
No. WD68662
August 19, 2008
Appeal from the Circuit Court of Cole County, Missouri, The Honorable Richard G. Callahan, Judge.
Before James Edward Welsh, P.J., Paul M. Spinden, and Alok Ahuja, JJ.
Hanrahan Trapp, P.C., appeals the circuit court's judgment granting the State of Missouri's motion for summary judgment. Hanrahan Trapp claims that the circuit court erred because: (1) the State failed to file a reply to its counterclaim and (2) the funds at issue were not an asset belonging to or due to Lorne Bass because Bass had assigned the funds to Hanrahan Trapp prior to the State's filing its petition for incarceration reimbursement. We affirm.
On March 29, 2006, Bass was arrested and charged with drug possession. At the time of his arrest, the Cole County Sheriff seized $4,421.00 from his possession. On April 3, 2006, the State filed a petition seeking forfeiture of the $4,421.00. Hanrahan Trapp represented Bass in his drug possession case. Bass signed an undated authorization to release $4,421.00 to Hanrahan Trapp for legal fees. Bass entered a guilty plea and was sentenced to three years in prison. The State dismissed its forfeiture petition. The State then filed its petition for incarceration reimbursement claiming the $4,421.00 being held by Cole County. Hanrahan Trapp was granted leave to intervene. The State filed its motion for summary judgment, and the circuit court entered summary judgment in favor of the State on June 29, 2007. Hanrahan Trapp appeals.
Our review of summary judgment is essentially de novo. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). "The criteria on appeal for testing the propriety of summary judgment are no different from those which should be employed by the trial court to determine the propriety of sustaining the motion initially." Id. Summary judgment is proper only if "the motion, the response, [and] the reply . . . show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Rule 74.04(c)(6).
For its first point, Hanrahan Trapp argues that the circuit court erred in granting summary judgment for the State because the State failed to file a reply to its counterclaim. Hanrahan Trapp argues that it is entitled to default judgment on the counterclaim. We disagree.
Rule 55.01 sets out the required pleadings:
There shall be a petition and an answer; and there shall be a reply to a counterclaim denominated as such; an answer to a cross-claim, if the answer contains a cross-claim; a third-party petition, if leave is given to summon a person who was not an original party; and there shall be a third-party answer, if a third-party petition is served. A defense consisting of an affirmative avoidance to any matter alleged in a preceding pleading must be pleaded. No other pleading shall be required except as ordered by the court.
(Emphasis added.) Although Hanrahan Trapp filed a pleading entitled "Counterclaim" with its motion to intervene, it was erroneously named. Pursuant to Rule 55.08, "[w]hen a party has mistakenly designated a defense as a counterclaim or a counterclaim as a defense, the court may treat the pleadings as if there had been a proper designation." The pleading merely asserted that Hanrahan Trapp claimed an interest in the money at issue, not a counterclaim against the State. Hanrahan Trapp's answer contained affirmative defenses but did not contain a counterclaim. No reply was necessary since the answer did not contain a counterclaim, and the averments in the answer were taken as denied. Rule 55.09; Cantor v. Union Mut. Life Ins. Co., 547 S.W.2d 220, 224 (Mo.App. 1977). In addition, the State was not required to file a reply just because affirmative defenses were asserted in the answer. Hertzog v. City of Greenwood, 944 S.W.2d 588, 589 (Mo.App. 1997). Further, we find no order of the circuit court mandating the State to file a reply. As such, the claim of interest asserted by Hanrahan Trapp did not require a reply or answer. Point I denied.
In its second point, Hanrahan Trapp contends that summary judgment should not have been granted to the State because the funds at issue were not subject to incarceration reimbursement in that the funds had previously been assigned to Hanrahan Trapp.
Pursuant to section 217.825- 217.841, RSMo 2000, the State is authorized to seek reimbursement from a current or former offender for the expense of housing the offender in a state correctional facility. The reimbursement comes from the offender's assets. Assets are defined by section 217.827(1)(a), RSMo 2000, as:
[P]roperty, tangible or intangible, real or personal, belonging to or due an offender or a former offender, including income or payments to such offender from Social Security, workers' compensation, veterans' compensation, pension benefits, previously earned salary or wages, bonuses, annuities, retirement benefits, or from any other source whatsoever. . . .
It is undisputed that Bass is currently serving time at a Missouri correctional facility. The issue is whether the funds held by Cole County are assets belonging to Bass.
The writing that Hanrahan Trapp relies upon as an assignment is an undated document entitled "Authorization for the Release of Funds by Inmate," which was executed by Bass and provides:
I, Loren Bass, hereby authorize the release of any and all of my funds currently in the possession of Cole County, Missouri (believed to be approximately $4421.00) to the firm of Hanrahan Trapp, PC as the initial retainer for legal representation fees.
In this case, the circuit court found no contract ambiguity, and neither party argued or asked the circuit court to find the release ambiguous. This court can only consider those issues and theories properly raised in a party's motion for summary judgment and the responses thereto. Citibrook II, L.L.C. v. Moran's Foods of Missouri, Inc., 239 S.W.3d 631, 635 (Mo.App. 2007); Heffernan v. Reinhold, 73 S.W.3d 659, 663 (Mo.App. 2002). We will not consider theories and issues raised for the first time on appeal. D.E. Properties Corp. v. Food for Less, Inc., 859 S.W.2d 197, 201 (Mo.App. 1993); Citibrook, 239 S.W.3d at 635; and Heffernan, 73 S.W.3d at 663. We, therefore, decide the question presented to the circuit court as it was presented. Each party maintains that they are entitled to the proceeds by the clear terms of the release. Only one of them is correct.
When the language of a contract is unambiguous, we determine the parties' intent from the four corners of the document. J.H. Berra Const. Co., Inc. v. Missouri Highway Transp. Comm'n, 14 S.W. 3d 276, 279 (Mo.App. 2000). The determination of whether a contract is ambiguous is a question of law. Id. Summary judgment is proper where the meaning is so clear that it can be determined from the four corners of the contract. Id. We, therefore, do not rely on Bass's affidavit or the affidavit of the assistant prosecuting attorney in determining the parties' intent. We merely construe the release from the four corners of the document.
Hanrahan Trapp contends that it had a valid assignment. In support of his contention, he relies on Greater K.C. Baptist Community Hospital Association, Inc. v. Businessman's Assurance Co., 585 S.W.2d 118 (Mo.App. 1979) (" BMA"). In that case, this Court held there was an assignment where an insured executed a form that stated:
[I] hereby authorize payment directly to the below named hospital of the group hospital insurance benefits specified and otherwise payable to me but not to exceed the balance due of the hospital's regular charges for this period of hospitalization.
Id. at 119. The BMA Court cited Halvorson v. Commerce Trust Co., 222 S.W. 897 (Mo.App. 1920), wherein the court held that a document which consented to or directed the payment of a real estate commission at a future time was a valid assignment. The present case, however, is distinguishable from both BMA and Halvorson in that Bass did not authorize payment for a balance due. Instead, Bass authorized the release of funds to Hanrahan Trapp as an " initial retainer for legal representation fees."
The central issue in BMA was the determination of the hospital's status as a real party in interest to sue on a patient's hospitalization policy. The court construed an ambiguous document to confer real party in interest status on the hospital.
Had Bass's release said "for payment of legal fees," then BMA and Halvorson would control, but Bass's release did not state that it was for payment of legal fees. It merely said the money was to be used as an initial retainer for legal representation fees. A deposit of an initial retainer with a lawyer is markedly different than a payment for legal fees. A retainer does not belong to the lawyer; it belongs to the client. When a client deposits an initial retainer with an attorney, a client maintains the right to receive the retainer back or to make a further assignment of that retainer if the retainer has not been earned by the attorney. As the Halvorson court stated, a valid assignment cannot be revoked, and ownership cannot be revived at the pleasure of the assignor. Id. at 898. This cannot be said about Bass's release. In this case, by stating that the funds were to be used as an initial retainer, it is clear that the proceeds were not intended for payment of services already rendered and, therefore, may be reclaimed by Bass. An absolute assignment, one that divests all interest from the assignor to the assignee, does not exist in this case. It is clear that the release did not pass all of Bass's title or interest in the funds to Hanrahan Trapp nor did it divest Bass of all right of control over the funds; therefore, no assignment occurred.
Indeed, any money released to Hanrahan Trapp presumptively would have been put into a trust account for Bass's benefit. As such, the money would still be subject to the State's claim.
When the State filed its petition for incarceration reimbursement, the funds were still in the possession of Cole County. The funds had not been released to Hanrahan Trapp. They still could have been released to Bass or any other persons that he authorized. Further, Bass could have revoked his authorization. As such, the money was still an asset belonging to Bass and subject to the reimbursement statute.
Moreover, to the extent that Bass's release could be construed as a conditional assignment, such does not change the outcome in this case. First, neither party argued or asked the circuit court to find that the release was a conditional assignment, and, therefore, we should not consider this issue for the first time on appeal. D.E. Properties, 859 S.W.2d at 201; Citibrook, 239 S.W.3d at 635; and Heffernan, 73 S.W.3d at 663. Second, the release was not a conditional assignment because Bass was not seeking to release the funds as collateral security for a debt. In a "`conditional assignment for purposes of security' . . . title to the collateral is retained by the assignor subject to his performance of an independent obligation owed to the assignee." Miller v. Wells Fargo Bank Intern. Corp., 540 F.2d 548, 559 (2d Cir. 1976). Finally, even if Bass's release could be considered a conditional assignment, a conditional assignment made as collateral security for a debt does not work a divestiture of all right or interest of the assignor. C M Developers, Inc. v. Berbiglia, Inc., 585 S.W. 2d 176, 181 (Mo.App. 1979). Even if Hanrahan Trapp had a valid security interest in Bass's assets, that claim is subordinate to the State's claim. Section 217.837, RSMo 2000. Section 217.837.4 provides, "[t]he state's right to recover the cost of incarceration pursuant to an order issued pursuant to the provisions of section 217.835 shall have priority over all other liens, debts, or other incumbrances against real property or any other assets which are part of a prisoner's estate." Point II denied.
We, therefore, affirm the circuit court's judgment.
James Welsh, Judge, writes for the majority. Paul M. Spinden, Judge, concurs.
Alok Ahuja, Judge, concurs in part and dissents in a separate opinion.
MISSOURI APPELLATE COURT OPINION SUMMARY
Hanrahan Trapp, P.C., appeals the circuit court's judgment granting the State of Missouri's motion for summary judgment. Hanrahan Trapp claims that the circuit court erred because: (1) the State failed to file a reply to its counterclaim and (2) the funds at issue were not an asset belonging to or due to Lorne Bass because Bass had assigned the funds to Hanrahan Trapp prior to the State's filing its petition for incarceration reimbursement.
Affirmed. Division I holds: James Edward Welsh, P.J., Paul M. Spinden, and Alok Ahuja, JJ.
(1) Hanrahan Trapp's answer did not contain a counterclaim. The State, therefore, did not need to file a reply, and the averments in the answer were taken as denied. The State also was not required to file a reply just because affirmative defenses were asserted in the answer.
(2) The release of funds authorized by Bass did not pass all of Bass's title or interest in the funds to Hanrahan Trapp nor did it divest Bass of all right of control over the funds; therefore, no assignment occurred. By stating that the funds were to be used as an initial retainer, it is clear that the proceeds were not intended for payment of services already rendered and, therefore, may be reclaimed by Bass. When the State filed its petition for incarceration reimbursement, the funds were still in the possession of Cole County. The funds had not been released to Hanrahan Trapp. They still could have been released to Bass or any other persons that he authorized. Further, Bass could have revoked his authorization. As such, the money was still an asset belonging to Bass and subject to the incarceration reimbursement statute.
DISSENTING OPINION
I respectfully dissent from the majority's disposition of Appellant Hanrahan Trapp, P.C.'s second Point. Under the "Authorization for the Release of Funds by Inmate" which Lorne Bass executed, I believe a triable issue exists as to whether Hanrahan Trapp owned all, or part, of the seized funds at the time the State's rights attached under the Missouri Incarceration Reimbursement Act, § 217.825, RSMo et seq. Summary judgment was therefore improper, and the case should be reversed and remanded for further proceedings.
The Authorization Bass executed states in full:
I, Lorne Bass, hereby authorize the release of any and all of my funds currently in the possession of Cole County, Missouri (believed to be approximately $4421.00) to the firm of Hanrahan Trapp, PC as the initial retainer for legal representation fees.
Although inartful, I believe Bass' Authorization was sufficient to transfer his rights to the seized funds to his attorneys (subject to the qualification discussed below). "`No particular form of words is necessary to accomplish an assignment, so long as there appears from the circumstances an intention on the one side to assign . . . and on the other side to receive.'" Keisker v. Farmer, 90 S.W.3d 71, 74 (Mo. banc 2002) (quoting Farmers Ins. Co. v. Effertz, 795 S.W.2d 424, 425 (Mo.App.W.D. 1990)); accord, Greater K.C. Baptist Community Hosp. Ass'n, Inc. v. Businessmen's Assurance Co., 585 S.W.2d 118, 119 (Mo.App.W.D. 1979) (" BMA").
BMA involved functionally identical language. In that case, a hospital patient executed a document providing in relevant part that:
I HEREBY AUTHORIZE PAYMENT directly to the below named hospital of the group hospital insurance benefits specified and otherwise payable to me but not to exceed the balance due of the hospital's regular charges for this period of hospitalization.
Id. Despite the fact that the agreement lacked the words "assign" or "transfer," the BMA court found an effective assignment, since "[t]he intention of all concerned is clear." Id. BMA cited Halvorson v. Commerce Trust Co, 222 S.W. 897 (Mo.App. 1920), which likewise found an effective assignment in similar language: "If the sale is finally concluded, you have our consent to pay over to F.B. Gillette [$3,750] out of said sum [$10,000], as his commission." Id. at 897.
I do not believe the wording of the Authorization here can fairly be distinguished from the language of the instruments at issue in BMA, or in the Halvorson case on which BMA relied. As in those cases, Bass' intent to transfer rights to specifically identified funds is clearly expressed in the writing. This transfer is plainly supported by consideration, since Bass was aware that Hanrahan Trapp would not perform legal services on his behalf without his execution of the Authorization, and Hanrahan Trapp in fact represented him thereafter.
Although the trial court's Judgment refers to the fact that "[t]he document labeled `Release of Funds' is not dated by Bass or the notary," an affidavit Bass executed explicitly testifies that he signed the document on April 13, 2006. At a minimum, the date of the Authorization's execution was a genuine fact issue which could not be resolved against Hanrahan Trapp on summary judgment.
I recognize, however, that the Authorization states that Bass authorized the release of the seized funds to Hanrahan Trapp "as the initial retainer for legal representation fees." The reference to a legal fee "retainer" leaves open the question whether all, or any portion, of those funds remained Bass' property, or had instead been earned by Hanrahan Trapp, at the time at which the State's inmate reimbursement rights attached. As the majority acknowledges, where a retainer is paid to an attorney to secure the client's payment of legal fees, the client only retains an interest in the funds "if the retainer has not been earned by the attorney." Here, two months elapsed between Bass' execution of the Authorization and the State's filing of its MIRA petition, and a further year passed before entry of Judgment on that petition. During that period, Hanrahan Trapp performed legal services for Bass, apparently through conclusion of the criminal proceedings against him. In these circumstances, I believe a triable issue existed as to whether all or part of the seized funds had been earned by Hanrahan Trapp and were no longer Bass' property at the relevant time.
The reference to a legal-fee "retainer" in the Authorization could arguably denote other fee arrangements besides a security deposit. See generally Dowling v. Chicago Options Assocs., Inc., 875 N.E.2d 1012, 1018-21 (Ill. 2007); Iowa Supreme Court Bd. of Prof'l Ethics v. Frerichs, 671 N.W.2d 470, 475-77 (Iowa 2003); In re Connelly, 55 P.3d 756, 761-62 (Ariz. 2002); 7A C.J.S., ATTORNEY CLIENT § 346 (2004); 7 AM.JUR.2D, ATTORNEYS AT LAW § 249 (2007). The parties did not brief or argue this issue, however, and I accordingly accept the majority's characterization of the Authorization's reference to an "initial retainer for legal representation fees."
The issue of precisely when property must "belong to" an inmate in order to be subject to inmate reimbursement ( e.g., at the filing of the State's petition versus upon entry of judgment), was not briefed. Both parties apparently assumed that any complete defeasance of Bass' interests occurred when he executed the Authorization, if at all. As explained in the text, however, Hanrahan Trapp may have become the owner of some or all of the funds based on its performance of services after execution of the Authorization. I do not further address the timing issue here. See, however, § 217.837.4, RSMo (State shall have priority over "other liens, debts, or other incumbrances" against an inmate's property for its reimbursement rights "pursuant to an order issued pursuant to the provisions of section 217.835").
To the extent the funds were assigned merely as security for future legal fees the firm earned, it may be that at the time of the Authorization's execution it was merely a "conditional assignment" of the sort described in, e.g., C M Developers, Inc. v. Berbiglia, Inc., 585 S.W.2d 176, 181 (Mo.App.W.D. 1979). But the result would be the same: a triable issue exists whether the funds were Bass', or instead Hanrahan Trapp's, at the time the State's MIRA rights attached, based on Hanrahan Trapp's fulfillment of any condition on its rights as assignee.
Despite Hanrahan Trapp's claim that this court should order the entry of judgment on its behalf, I do not believe one can resolve the issue whether it had in fact earned all or part of the seized funds, as a matter of undisputed fact, on the existing summary judgment record. While Bass' affidavit states that he "agreed to pay Hanrahan Trapp, P.C., legal fees of $10,000.00," and that the assignment of the funds being held by the Cole County Sheriff was intended to satisfy "the balance of my legal fees," there is no other reference in the record to the terms of the parties' agreement as to Hanrahan Trapp's fees, and specifically concerning when and how those fees would be earned. In these circumstances, although I believe the summary judgment granted the State must be reversed, I would remand the case to the circuit court for further proceedings.
Although it is not dispositive from my perspective, holding that these funds no longer "belonged" to Bass, to the extent of the legal fees earned by Hanrahan Trapp, is consistent with the Supreme Court's reading of § 217.827(1)(a), RSMo in State ex rel. Nixon v. Karpierz, 105 S.W.3d 487 (Mo. banc 2003). Karpierz held that determining what property "belong[ed] to . . . an offender" required the court to determine "what is suitable, rightful, [or] fitting." Id. at 490. According to the Court, that determination had to be made in light of "the attorneys fees necessary to procure" a particular fund, and in light of the public policy in favor of assuring inmates' access to legal representation. Id. at 491.
Here, Bass' affidavit states that, "[b]ut for my assurances that I would pay Hanrahan Trapp, P.C., such fees, Hanrahan Trapp, P.C., would not have undertaken to represent me." Further, Bass' affidavit states that, but for the State's agreement to dismiss the pending forfeiture action and release the funds to Hanrahan Trapp "as payment of the remainder of my legal fees," "I would not have entered into the said plea agreement." The Assistant Prosecuting Attorney who negotiated the plea agreement for the State acknowledged by affidavit that dismissal of the forfeiture action was part of the deal, and that "[t]he State agreed to dismiss said action knowing that Defendant Bass would use the seized funds to pay outstanding legal fees owed to Hanrahan Trapp, P.C." Finally, as far as appears from the record, it was only through counsel's efforts that a plea agreement including dismissal of the forfeiture count was negotiated. In these circumstances — the Authorization's role as an essential condition of Bass' retention of counsel, and counsel's performance of services for Bass; counsel's participation in "creation" of the fund through dismissal of the forfeiture action; and the State's knowledge that the funds it had agreed to release (as a material aspect of Bass' plea agreement) would be used to pay counsel — I believe the Supreme Court's holding in Karpierz provides further support for a determination that the seized funds were not "property . . . belonging to" Bass, and therefore that these funds were not subject to incarceration reimbursement.
To the extent ownership of the funds in issue had transferred to Hanrahan Trapp, Bass would not have had the legal right to claim the funds himself, or make a further assignment to other parties, as the majority postulates. To the contrary, "[a]n assignment passes all the assignor's title or interest in the subject matter to the assignee and divests the assignor of all right of control over the subject matter." Marvin v. State Farm Mut. Auto. Ins. Co., 894 S.W.2d 712, 713 (Mo.App. W.D. 1995); accord, Marvin's Midtown Chiropractic Clinic, LLC v. State Farm Mut. Auto. Ins. Co., 142 S.W.3d 751, 754 (Mo.App.W.D. 2004). Once an effective assignment occurs, the assignor retains no right to receive assigned property itself, or to make a further assignment to others. Marvin, 894 S.W.2d at 713.
The record before the circuit court created a triable issue whether all, or at least some portion, of the seized funds belonged to Hanrahan Trapp, rather than Bass, at the relevant time. Summary judgment was improvidently granted. I accordingly, and respectfully, dissent.
MISSOURI APPELLATE COURT OPINION SUMMARY
Affirmed/Denied: Dissent.
Opinion Holds:
Judge Ahuja dissents, based on his view that a triable issue existed as to whether Appellant Hanrahan Trapp had earned all or part of the seized funds prior to the attachment of the State's rights under the Missouri Incarceration Reimbursement Act, and therefore whether those funds were in fact Bass' property subject to incarceration reimbursement at the relevant time.