Atascadero Factory Outlets, Inc. v. Augustini & Wheeler

In Atascadero Factory Outlets, Inc. v. Augustini & Wheeler (2000) 83 Cal. App. 4th 717, a real estate law firm represented a vendor in proceedings to obtain payment from a purchaser under a note. The vendor's law firm had an agreement with the vendor for an attorney's fees lien over any moneys obtained. A dispute arose between the vendor's law firm and the vendor's secured creditors as to the relative priorities of the attorney's fees lien and the claims of the secured creditors. The appellate court held that because the secured creditors had perfected their security interests two years before the vendor gave the vendor's law firm a lien on the note proceeds, the law firm knew or should have known (because the security interests were recorded) that the attorney's fees lien was third in terms of time. ( Id. at p. 721.) Furthermore, no equitable considerations, such as the doctrine of unjust enrichment, applied to change this result. The secured creditors had not asked the vendor's law firm (or the vendor) to prosecute the action, nor had they offered to pay any litigation costs, and their mere acquiescence to the collection action did not render them liable for the vendor's litigation expenses. ( Atascadero, supra, 83 Cal. App. 4th at pp. 721-722.) Nor could the vendor's law firm argue that the firm provided services essential to create or preserve the collateral, because the note was secured by a deed of trust that encumbered the real property. ( Id. at p. 722.)