Facts

Plaintiff, National Union Fire Insurance Co. of Pittsburgh, Pennsylvania, obtained a $61,153.90 judgment against Construction Financial, LLC. effective Feb. 20, 1996.
To protect this judgment, plaintiff duly filed and served a creditor's lien judgment on April 24, 1997 in another action that involved Construction Financial, as assignee of Franklin Reinforcing Steel Co., suing Newberg-Dick and others.
On May 30, 1997, Construction Financial, Franklin and Newberg, entered into a settlement agreement and mutual release of claims in connection with the Franklin case.
Newberg paid $710,000 to settle all claims in that case. The agreement acknowledged plaintiff's judgment lien and established a trust for the sole purpose of preserving that lien.
The trust was funded by Newberg with $61,153.90 on September 2, 1997.
Pursuant to the agreement, no funds were to be transferred from the trust account unless
one of the following events occurred: (1) Plaintiff's judgment lien was released or withdrawn; (2) a fully executed written agreement between Franklin, Construction Financial and plaintiff evolved; or (3) an order of court quashing or effecting a satisfaction
and/or release of plaintiff's judgment lien. Construction Financial's attorney, defendant Gladych & Associates Inc.'s president, John A. Gladych, agreed to serve as one of the trust account's trustee. Newberg's attorney, Kenneth C. Gibbs, served as the other trustee.
Any checks drawn from the trust account were required to bear the signature of both Gladych and Gibb's signatures.
On Oct. 1, 1997, defendant filed the lawsuit against plaintiff seeking a judicial declaration that he had an attorneys' lien on the $61,153.00 held in the trust account which was superior to the judgment lien claimed by plaintiff. Plaintiff filed a cross-complaint
against defendant seeking a judicial declaration that its judgment lien was superior to the claims asserted by defendants.
On Jan. 14, 1998, John Gladych, as defendant's president, withdrew the entire contents of the trust account at Construction Financial's direction. He did so without Gibbs' signature and without notifying plaintiff. The trust account funds were deposited
into defendant's general operating account. Plaintiff's judgment lien was never paid.
On July 30, 1998, plaintiff amended its cross-complaint to add causes of action for
conversion, breach of fiduciary duty, statutory duty to pay a judgment lien against defendants and Construction Financial to recover the $61,153.90 removed from the trust account.

The plaintiff contended that John Gladych as an individual did not have an attorneys' lien
because the attorney-client fee agreement was not with Gladych as an individual.
Moreover, defendant did not have a valid attorneys' lien because defendant had
never been certified by the California State Bar as a professional corporation and therefore
had never been entitled to practice law in the state of California. Even if defendants did
have a valid attorneys' lien, however, equities favor plaintiff because the trust account was
established solely to protect plaintiff's lien and because John Gladych as president of
defendant Gladych & Associates Inc. transferred funds that were subject to National
Union's lien.
The plaintiff further contended that by virtue of its judgment lien and the
agreement, it was the equitable owner of the $61,153.90 held in the trust account. Hence,
plaintiff was entitled to immediate possession of the funds when the account was opened
and defendants' actions constituted conversion.
The plaintiff also contended that the settlement agreement satisfied all the
necessary elements for the creation of a trust. Hence, defendants' actions of failing to
properly administer the trust, engaging in adversarial conduct toward plaintiff, accepting
trustee duties with a pre-existing conflict of interest and failing to inform and provide
plaintiff with an accounting constituted a breach of fiduciary duties.
The plaintiff's fourth contention was for breach of third party contract. The
plaintiff was an intended third party beneficiary of the agreement. Hence, defendants
breached the trust provisions of the agreement when they withdrew all the funds from the
trust and placed it into their own account without the co-signature such withdrawal
required. The agreement was further breached when the funds were not placed into an
interest bearing account.
Finally, the plaintiff contented was that in transferring the monies, which were
subject to the judgment lien, to the judgment debtor when it endorsed the checks to the
attorney who represented the debtor, defendants breached their statutory duty.
DEFENDANT CONTENTIONS:
The defendants contended that they had a valid
attorneys' lien pursuant to a fee contract and its lack of certification to practice law did not
affect its right to an attorneys' lien.
The defendant also contended that the attorneys' lien was created before plaintiff's
judgment lien. Moreover, when defendant filed a third party claim against the trust
account, the claim was never properly contested and hence, it was implicitly valid.
Consequently, after the levying officer released the trust account from an attachment lien,
defendant was permitted to withdraw the funds by operation of law.
The defendant further contended that it and owed no legal duty to plaintiff. In fact,
defendant has been adverse to plaintiff's interest at all times. Finally, defendant contended
that Franklin assigned its interest to Construction Financial and Construction Financial
was plaintiff's judgment debtor. Hence, neither party could be liable for paying the
judgment lien.
Defendant asserted that the trust funds were withdrawn to pay attorneys' fees that

Settlement Discussions

On the evening before trial, defendant Gladych demanded that plaintiff pay him $25,000 to settle all potential claims between them.

Length

three days