NEW ETHICAL CONCERNS FOR FILING JUDGMENT LIENS

Andrew Vandiver Covington, Ky.
On March 21, 2013, Governor Beshear signed into law a House Bill which amends Ky. Rev. Stat. § 426.720. This statute sets forth the requirements for filing judgment liens on real property. The amendment reads as follows:
In any action involving real property which is subject to a judgment lien, service may be had upon the judgment creditor by serving the judgment creditor or the judgment creditor’s attorney as shown in the notice of judgment lien.
This new provision will often come into play during foreclosure lawsuits. Under Kentucky law, all parties holding an interest in real property must be named in a foreclosure complaint. Hence, any creditor holding an interest in real property pursuant to a judgment lien must be named as a party and served with a copy of the complaint. Rather than having to track down the judgment creditor, the lawyer filing the foreclosure complaint may now obtain valid service through the lawyer listed on the notice of judgment lien.
Under ordinary circumstances, this addition to KRS 426.720 should not create any problems for lawyers. If a lawyer who filed a judgment lien receives a foreclosure complaint, he can simply contact his client and advise him of the need to file an Answer and Cross-Claim. However, because judgment liens are valid for fifteen years after the last date of execution, it is not difficult to imagine situations arising where a lawyer is unable to locate his or her client in order to discuss the complaint.
A lawyer who finds himself in such a position faces a dilemma. If he is unable to locate the client, does the lawyer have an ethical obligation to file a responsive pleading on the client’s behalf? A resolution of this question is critical because a lawyer’s failure to file an Answer and Cross-Claim will bar the client from recovering from the proceeds of a foreclosure.
The Committee on Ethics and Unauthorized Practice of Law recently issued an opinion which is helpful in addressing this dilemma. First addressing the broader topic of the ethical obligations of a lawyer to continue to represent a client who cannot be located, the Committee set forth three ethical principles that must be considered: (1) the duty to keep the client reasonably informed; (2) the duty to confer with the client with regard to the purposes to be served by the legal representation, and (3) the duty to have a sufficient basis in law and fact before bringing or defending a proceeding. Based on these principles, the Committee concluded that “a lawyer has no duty to file a claim on behalf of a missing client and may be prohibited from doing so.”
However, the Committee also acknowledged that:
[T]here may, however, be rare situations in which, prior to disappearing, the client expressly or impliedly authorized the filing of a claim or an answer, and provided the lawyer with sufficient information to do so. In such a case the lawyer may file the appropriate pleading in order to protect the client’s interests. Although this may provide temporary protection for the client, additional problems will arise down the road if the client does not return, and the lawyer ultimately may have to notify the court of the client’s absence and seek permission to withdraw.
Hence, depending on the nature of the relationship, a lawyer facing the foreclosure dilemma described above may have limited authority to file an Answer and Cross-Claim on his client’s behalf to preserve the claim created by the judgment lien. Nevertheless, if the lawsuit proceeds and the client cannot be found, the lawyer will probably be obligated to withdraw from the case.
In light of the new amendment, Kentucky lawyers should carefully evaluate their practices relative to the filing of judgment liens. Such an evaluation should include assessing the lawyer’s practices with regard to defining and limiting the scope of representation at the beginning and the conclusion of a particular matter. Although the Ethics Opinion cited above suggests that a lawyer generally does not have an ethical obligation to file an Answer and Cross-Claim under circumstances in which his or her client cannot be found, the Opinion also noted that “[t]here is no simple answer to this question, as the lawyer’s obligations will depend on the stage of the representation and the facts of each matter.”

Andrew J. Vandiver
Adams, Stepner, Woltermann & Dusing, PLLC
40 West Pike Street
Covington, KY 41011
859-394-6204
859-392-7200
www.aswdlaw.com

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