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Appeals court hears whether bank or attorneys have priority to condemnation award funds
Summary
At oral argument in Merceri v. State, attorneys debated whether a bank's equitable lien on inverse‑condemnation proceeds deposited in the court registry can be enforced against funds that, appellant argues, are subject to a statutory attorney lien created by 2004 amendments. Judges pressed both sides on statutory text and timing.
The Washington Court of Appeals, Division 2, heard oral argument in Merceri v. State of Washington on whether a bank may recover from a condemnation award deposited in the court registry and whether that bank's equitable lien must yield to a statutory attorney lien.
Appellant counsel Gary Mank told the three‑judge panel that two issues control the case: “whether the bank should have been permitted to recover anything at all from the compensation award that was deposited into the court registry,” and, if it could recover, whether “its equitable lien should have been subordinated to the attorney lien of Ms. Merceri’s attorneys.” Mank argued the bank waited too long to pursue apportionment—citing the state action around 2011, a bank counterclaim in 2016 and a judgment entered in 2022—and said that statutory limits and equitable defenses such as unclean hands could bar recovery.
Respondent counsel Thomas Abbot, representing Deutsche Bank National Trust Company, countered that the attorney‑lien statute was designed to prevent double taxation of attorney fees, not to create a “super priority” that would automatically trump preexisting security interests. Abbot described the statutory scheme and the apportionment process: after settlement or judgment, the trial court determines competing claims and “what the client actually has,” the res, is what an attorney's lien attaches to, he said. Abbot disputed the portrayal of Deutsche Bank receiving a windfall, noting the underlying loan was approximately $2,800,000 and the apportionment applied to reduce the borrower’s outstanding indebtedness.
Judges pressed both sides on statutory language and scope. One judge noted the statute’s plain‑language provision that certain attorney liens are “superior to all other liens,” and asked whether that language could reasonably be read to displace equitable liens created when property collateral is diminished. Counsel disputed the plain‑language reading: Mank argued the 2004 amendments recognize an attorney’s property right in proceeds and should be liberally construed to protect attorneys and access to counsel; Abbot emphasized reading the statute as a whole and limiting priority to assets a client actually possesses after apportionment.
The bench also queried whether appellants may challenge a holder‑in‑due‑course’s right to enforce an endorsed note and how broadly an unclean‑hands defense could be applied if accepted; Mank argued the court should allow discovery to investigate the bank’s alleged market misconduct and its specific effect on Merceri’s loan, while Abbot stressed the established rules about holders of endorsed notes and the functional role of apportionment motions.
No final rulings were issued during argument. The panel concluded the Merceri argument and moved on to the next case on the calendar. The record shows the dispute will turn on statutory interpretation of the attorney‑lien provisions (including language added in 2004), the apportionment order issued after settlement, and any factual record supporting equitable defenses such as unclean hands.
What happens next: the court may take the matter under advisement and issue a written opinion clarifying whether attorney liens under the cited statute attach to registry funds or only to the portion of the judgment apportioned to the client, and whether timing or equitable defenses bar the bank’s claim.
