THIRD DIVISION
January 15, 2003

JUSTICE WOLFSON delivered the opinion of the court:

Plaintiff Evelyn Watkins bought a car financed by GMACFinancial Services ("GMAC") and an insurance policy from NationalHeritage Insurance Company ("National") for the car. The car wasstolen and damaged.

When National did not offer to pay for the loss, Watkinsretained an attorney, Jared B. Staver, under a contingency feeagreement. Staver secured a lien on any proceeds from Nationalunder the Attorney's Lien Act, 770 ILCS 5/1 (West 2000). Staverthen reached a settlement in which National agreed to pay for theloss of the car in return for the title. When Staver contactedGMAC about its share of the settlement and release of the title,GMAC refused to release the title and endorse the settlementdraft. GMAC contended it was entitled to all the insuranceproceeds and was not required to release the title to the car.

Watkins then sued GMAC and National to determine theparties' rights to the settlement money and for breach ofcontract. Watkins and GMAC filed cross-motions for summaryjudgment. The court denied Watkins' motion and granted GMAC'smotion on all counts. Watkins appeals the trial court'sdecision. We affirm.

FACTS

On August 31, 1999, Watkins entered into a contract withGMAC. Under the contract, GMAC financed Watkins' purchase of acar. The contract contains, among other things, provisionsallowing Watkins to prepay any portion of the loan and providingthat GMAC may use insurance proceeds to reduce the amount Watkinsowes:

"You can prepay all of your debt and get a refund of part ofthe Finance Charge.

***

If the vehicle is lost or damaged, you agree that theCreditor may use any insurance settlement to reduce what youowe or repair the vehicle."

The contract also contains the following provision providingGMAC with a security interest in the proceeds of insurancepolicies:

"You give the Creditor a security interest in *** anyproceeds of insurance policies or service contracts on thevehicle."

The title for the car, which was issued on October 22, 1999,shows GMAC is a lien holder.

In September 1999, Watkins purchased an automobile insurancepolicy for the car. The declarations page of the policy states,"LOSS PAYEE: ANY LOSS IS PAYABLE AS INTEREST MAY APPEAR TO THENAMED INSURED AND *** [GMAC]."

On January 30, 2001, Watkins' car was stolen and damagedbeyond repair. Despite receiving notice of the loss, Nationaldid not offer to pay under the policy. On April 4, 2001, Watkinsretained Staver to represent her in her claim against Nationalpursuant to a one-third contingency fee arrangement. On April 5,2001, Staver sent to National notice of his lien on any proceedsunder the Attorney's Lien Act, and a demand to settle the claimfor the total loss of the car.

On April 19, 2001, Staver reached a lump sum settlement withNational for $11,437.35, the total loss of the car. Nationalagreed to send a settlement draft to Staver in that amount madepayable to Watkins, Staver, and GMAC in exchange for the title tothe car.

That same day, GMAC informed Staver that Watkins had anoutstanding balance of $16,322.09. Staver sent a letter to GMACadvising it of the settlement and asking GMAC to release thetitle to the car and endorse the settlement draft. In exchange,Watkins would provide GMAC with $7,620.95, the amount of thesettlement minus attorney's fees. In the letter, Staveracknowledged Watkins' obligation to pay the remaining balance of$8,701.14.

GMAC refused to release the title to the car and to endorsethe settlement draft. GMAC contends its claim to the proceeds ofthe settlement is superior to Staver's lien, entitling GMAC toall of the settlement proceeds.

Watkins filed a three-count complaint contending: (1) GMACis required to endorse the settlement draft, release the title tothe car, and accept the proceeds minus attorney fees; (2) GMACbreached the contract by not accepting Watkins' offer to pre-pay$7,620.95 of her debt; and (3) under the common fund doctrine,GMAC is required to pay Staver's fees and expenses.

Watkins filed a motion for summary judgment on all counts ofher complaint. The trial court denied her motion. The trialcourt held: (1) Watkins received no proceeds to which Stavercould claim a lien; (2) even if Staver had a valid lien, hisinterest in the proceeds was junior to GMAC's interest; (3) GMACdid not breach the contract by refusing Watkins' offer to prepaypart of her debt because what Watkins sought was a contractmodification; and (4) the common fund doctrine did not applybecause Watkins' debt to GMAC was independent of her settlementwith National.

GMAC then filed its own motion for summary judgment on allcounts, which the trial court granted.

DECISION

Summary judgment is proper when "the pleadings, depositions,and admissions on file, together with the affidavits, if any,show that there is no genuine issue as to any material fact andthat the moving party is entitled to a judgment as a matter oflaw." 735 ILCS 5/2-1005(c) (West 2000); Frank v. Edward HinesLumber Co., 327 Ill. App. 3d 113, 126, 761 N.E.2d 1257 (2001). The standard of review on appeal from a grant of summary judgmentis de novo. Outboard Marine Corp. v. Liberty Mutual InsuranceCo., 154 Ill. 2d 90, 102, 607 N.E.2d 1204 (1992).

Count I

Watkins contends (1) Staver's lien attaches to thesettlement proceeds, and (2) Staver's lien is superior to GMAC'sinterest in the proceeds. Because our decision on Watkins'second contention disposes of this count, we need not decidewhether Staver's lien attaches to the proceeds of the settlement.

In support of her contention that Staver's lien is superiorto GMAC's interest in the settlement, Watkins says the Attorney'sLien Act establishes the superiority of Staver's lien. Accordingto Watkins, "[t]he legislature could have made an exception [tothe attorney's statutory lien for] another lien holder; it chosenot to." Watkins contends her interpretation of the act isconsistent with public policy, which is to "protect[] individualsof less financial means by providing them access to legalservices through a contingency fee arrangement." GMAC respondsthat under the Illinois Commercial Code its security interest inthe proceeds is superior to Staver's interests.

The Attorney's Lien Act states, in relevant part:

"Attorneys at law shall have a lien upon all claims, demandsand causes of action, *** which may be placed in their handsby their clients for suit or collection, or upon which suitor action had been instituted, for the amount of any feewhich may have been agreed upon by and between suchattorneys and their clients, ***. To enforce such lien,such attorneys shall serve notice in writing, *** upon theparty against whom their clients may have such suits, claimsor causes of action, claiming such lien and stating thereinthe interest they have in such suits, claims, demands orcauses of action. Such lien shall attach to any verdict,judgment or order entered and to any money or property whichmay be recovered, on account of such suits, claims, demandsor causes of action, from and after the time of service ofthe notice. ***" 770 ILCS 5/1 (West 2000).

Contrary to Watkins' contention, an attorney's lien underthis statute is not always superior to other secured interests. Generally, "the lien which is first in time has priority." HomeFederal Savings and Loan Ass'n of Centralia v. Cook, 170 Ill.App. 3d 720, 724, 525 N.E.2d 151 (1988). A statutory attorney'slien is not an exception to this rule. For example, in Fornoffv. Smith, 281 Ill. App. 232 (1935), the court held the attorney'slien in that case was junior to the interests of a judgmentcreditor where the creditor perfected his interests before theattorney did. Fornoff, 281 Ill. App. 232, 1935 WL 3653, at *3-4.

In McKee-Berger-Mansueto, Inc. v. Board of Education of theCity of Chicago, 691 F.2d 828 (7th Cir. 1982), the attorneysclaimed they possessed an interest in judgment proceeds superiorto that of a party that perfected its interest before theattorneys did. In rejecting the attorneys' argument, the SeventhCircuit Court of Appeals said:

"The [Attorney's Lien Act] states in clear terms that theattorneys' lien is perfected 'from and after the time ofservice of the notice,' a provision that the Illinois courtshave consistently interpreted to mean that no enforceablelien is created until the requisite notice has been served.*** Moreover, we are unable to agree with [the attorneys']suggestion that the notice requirement of the statute doesnot affect the priority of the attorneys' lien." McKee-Berger-Mansueto, 691 F.2d at 835.

Citing Fornoff, the court in McKee-Berger-Mansueto held thatthe attorney lien was junior to the other party's prior-perfectedinterest. McKee-Berger-Mansueto, 691 F.2d at 835. Watkins'public policy argument fails in the face of this established caselaw.

Staver's lien is junior to GMAC's interests because GMACperfected its interest in the insurance proceeds first. UnderSection 9-306⁽¹⁾ of the Illinois Commercial Code, a securityinterest in "[i]nsurance payable by reason of loss or damage tocollateral" is perfected "if the interest in the originalcollateral was perfected." 810 ILCS 5/9-306(1), (3) (West 2000).

GMAC obtained its interest in the car and the insuranceproceeds through the financing agreement signed on August 31,1999. Additionally, GMAC is named as a loss payee under theinsurance policy and is identified as lien holder on the title ofthe car. The title was issued on October 22, 1999. Thus, GMAC'sinterest in the proceeds of the National insurance policy wasperfected no later than October 22, 1999, about one-and-a-halfyears before Staver perfected his lien by sending notice toNational. Given the priority of GMAC's interest, GMAC isentitled to the proceeds of the insurance policy.

Count II

Watkins contends GMAC breached the terms of the financingagreement by not cooperating with her attempt to prepay a portionof her debt under the financing contract. In support, Watkinsdirects this court's attention to clauses in the contract thatallow her to prepay her debt. Because GMAC has breached thecontract, Watkins says, the financing agreement is null and voidand GMAC is not entitled to any proceeds from the settlement. Wedo not agree with Watkins' argument.

Watkins specifically made the prepayment contingent onGMAC's agreement to release the title. In his April 19, 2001,letter to GMAC, Staver says GMAC will receive the net proceedsfrom the settlement "in exchange for the title to my client'svehicle so that I can tender the title to National Heritage." (Emphasis added.) The letter shows Watkins sought to do morethan merely exercise her right to prepayment under the contract. She also sought to compel GMAC to release the title to the car --something that GMAC was not required to do under the contract. In other words, Watkins attempted to modify the contract. Buther attempt failed because the requirements for a contractmodification are not present here.

A contract modification must satisfy the same criteriarequired for a valid contract: offer, acceptance, andconsideration. Nebel, Inc. v. Mid-City National Bank of Chicago,329 Ill. App. 3d 957, __, 769 N.E.2d 45, 51 (2002). Preexistingobligations are not sufficient consideration. Johnson v. Makiand Associates, Inc., 289 Ill. App. 3d 1023, 1028, 682 N.E.2d1196 (1997).

In this case, both acceptance and consideration are lacking. GMAC did not agree to modify its obligations. Also, in exchangefor release of the title, Watkins was offering to do what she wasalready obligated to do under the contract -- turn over theproceeds from the insurance settlement. She did not offer anynew consideration. Without an acceptance and consideration,Watkins cannot enforce her proposed modification to the financingagreement. Absent an enforceable modification requiring GMAC torelease the title, GMAC did not breach the contract by refusingto accept the partial prepayment in return for releasing thetitle.

Count III

Watkins also contends the common fund doctrine applies inthis case because GMAC is receiving a benefit from Staver's workwithout participating or contributing to the effort involved inobtaining the settlement. GMAC responds that Watkins' debt toGMAC is wholly independent of the settlement, making the commonfund doctrine inapplicable in this case. We agree with GMAC.

Under the common fund doctrine, "[t]he litigant or lawyerwho recovers a common fund for the benefit of others is entitledto a reasonable attorney fee from the fund as a whole." MorrisB. Chapman & Associates, Ltd. v. Kitzman, 193 Ill. 2d 560, 573,739 N.E.2d 1263 (2000). The doctrine prevents parties from beingunjustly enriched by the lawyer's efforts. Sholtens v.Schneider, 173 Ill. 2d 375, 385, 671 N.E.2d 657 (1996).

The doctrine, however, does not apply in cases such as thisone, where the debt paid from the fund existed independently ofthe creation of the fund. In Maynard v. Parker, 75 Ill. 2d 73,387 N.E.2d 298 (1979), plaintiff was hospitalized and received ahospital bill for services provided by the hospital during hisstay. Plaintiff's insurer issued a check made payable toplaintiff, plaintiff's wife, plaintiff's attorney, and thehospital. Plaintiff sued to determine the rights of the partiesto the insurance proceeds. He contended the hospital should payhis attorney costs and a percentage of the hospital's recovery. Maynard, 75 Ill. 2d at 74.

The court rejected plaintiff's argument. The court said:"[T]he plaintiff's liability to the hospital was not dependentupon the creation of a fund; plaintiff was a debtor obligated topay for the services rendered by the hospital out of anyresources which might become available to him." Maynard, 75 Ill.2d at 75. The court concluded the common fund doctrine did notapply. Maynard, 75 Ill. 2d at 75-76.

The facts in this case are analogous to those in Maynard. Watkins' obligation to GMAC existed before, and is whollyindependent of, the settlement with National. While GMAC willreceive proceeds from the settlement, those proceeds are moneydue to GMAC from Watkins under the financing agreement. Withoutthe settlement, Watkins would still be liable to GMAC for theremaining balance of $16,322.09 due under the contract. Thus,GMAC will not be unjustly enriched from receiving the insuranceproceeds without contributing to Staver's costs and fees.

The Illinois Supreme Court, in the exercise of itssupervisory authority, has directed us to reconsider the case inlight of its decision in Bishop v. Burgard, 198 Ill. 2d 495, 764N.E.2d 24 (2002). Watkins v. GMAC Financial Services, No. 94746(Ill. December 5, 2002). We have done so. We find Bishop doesnot change our view of this case; it is factuallydistinguishable.

In Bishop, the plaintiff incurred medical expenses as aresult of injuries sustained in a car accident. 198 Ill. 2d at497. Her company's ERISA plan paid out $8,576.30 to her and herhealthcare providers for the medical expenses. The plaintiffretained counsel, who procured a settlement offer of $21,500 fromthe person who had caused the accident. The ERISA plan hadpreviously claimed a lien in the amount of $8,576.30 on anyproceeds the plaintiff received as settlement. On appeal, theplaintiff argued the common fund doctrine required the plan toreimburse her attorney for the reasonable value of legal servicesrendered in protecting the plan's subrogation lien.

The supreme court applied the common fund doctrine, holdingthe circuit court properly reduced the amount the benefit planreceived from the plaintiff's settlement amount. Bishop, 198Ill. 2d at 510. The court held that but for the actions ofBishop's attorney in obtaining the settlement, there would havebeen no fund from which the plan could be reimbursed. Becausethe plan obtained the benefit of a lawsuit without contributingto its costs, it was unjustly enriched. Bishop, 198 Ill. 2d at510.

In this case, unlike Bishop, Watkins' obligation to GMACexisted independently of the settlement obtained by her attorney. Watkins is liable to GMAC for the remaining balance under thecontract.

CONCLUSION

We affirm the decision of the trial court.

Affirmed.

SOUTH, P.J., and HALL, J., concur.

1. Nearly all of Article 9 of the Commercial Code wasrewritten effective July 1, 2001. The parties do not disputethat Section 9-306 as it existed prior to July 1, 2001, appliesin this case.