Granite Commercial Industries v. Landmark American Insurance

Judge Leonard Wexler

Landmark removed Granite’s lawsuit—seeking $812,000 in coverage losses—to federal court. The “Removed Action” was settled for $125,000. Due to competing creditor claims, Landmark did not pay Granite. Its third-party interpleader complaints sought a determination of priority to settlement proceeds. Granite claimed counsel fees based on a $50,000 charging lien reflecting the 40 percent to which counsel was entitled, under retainer, in the Removed Action’s settlement. Discussing LMWT Realty v. Davis Agency, Banque Indosuez v. Sopwith Holdings and Bank of India v. Weg and Myers, the court held that a lien asserted by CIT—under a security agreement perfected by a 2002 Uniform Commercial Code (UCC) financing statement with New York’s Department of State, and UCC-3 continuation statements filed in 2007 and 2012—was entitled to priority over the charging lien, which vested with the Removed Action’s 2010 commencement. As in Bank of India, CIT had a prior perfected security interest in the settlement fund. Granite’s attorneys had constructive and actual knowledge of CIT’s interest, and recognized CIT’s priority in writing.