Covington v. Rhodes

• Decision Date: 19 September 1978
• Docket Number: No. 7710SC973,7710SC973
• Citation: 38 N.C.App. 61,247 S.E.2d 305
• Parties: L. Philip COVINGTON v. Michael R. RHODES and Mary R. Rhodes, Individually and as next friends of Sherwin G. Rhodes, a minor, Defendants, and Wake County Board of Education, Respondent.
• Court: North Carolina Court of Appeals

Page 305

247 S.E.2d 305

38 N.C.App. 61

L. Philip COVINGTON v. Michael R. RHODES and Mary R. Rhodes, Individually and as

next friends of Sherwin G. Rhodes, a minor,

Defendants, and Wake County Board of

Education, Respondent.

No. 7710SC973.

Court of Appeals of North Carolina.

Sept. 19, 1978.

L. Philip Covington, Garner, for plaintiff-appellant.

George R. Barrett, Raleigh, for defendant-appellees Rhodes.

Tharrington, Smith & Hargrove by George T. Rogister, Jr., Raleigh, for respondent-appellees.

ARNOLD, Judge.

I.

The major issue presented by this appeal is whether an attorney may recover on a contingent fee contract when his clients have discharged him prior to final disposition of the case. We find no North Carolina case which decides this point, and there is a split of authority in other jurisdictions. Some courts have held that the attorney is entitled to the contract amount, others that he may recover only the reasonable value of the services which he has performed. 7 Am.Jur.2d, Attorneys at Law § 256, and cases cited therein; 136 A.L.R. 231; 7 C.J.S. Attorney and Client §§ 168 & 169a(2).

Plaintiff cites two North Carolina cases to support his position that he should recover the contract amount. In Casket Co. v. Wheeler, 182 N.C. 459, 109 S.E. 378 (1921), the attorney was allowed recovery of the contract amount, and the court indicated that the contingent fee contract constituted an equitable assignment of the judgment. However, in Casket Co., unlike this case, the attorney prosecuted the case to its conclusion. Likewise in Higgins v. Beaty, 242 N.C. 479, 88 S.E.2d 80 (1955), the attorney recovered the contract amount where the contract provided for a fixed amount, not a contingent fee.

Since we find no North Carolina cases which are determinative, we shall briefly examine the law of other jurisdictions. The older rule, and still the rule in some jurisdictions, is that where the attorney is discharged without cause, he may recover the entire contingent fee. See, e. g., Warner v. Basten, 118 Ill.App.2d 419, 255 N.E.2d 72 (1970); Thomas v. Mandell & Wright, 433 S.W.2d 219 (Tex.Civ.App.1968). Plaintiff cites us to Chambliss, Bahner & Crawford v. Luther, 531 S.W.2d 108 (Tenn.App.1975), for this proposition, but we note that, while declining to overrule an earlier case that allowed the full contract recovery, the Tennessee court stated: "It would seem to us that the better rule is that because a client has the unqualified right to discharge his attorney, fees in such cases should be limited to the value of the services rendered or the contract price, whichever is less." Id. at 113. The rationale in these cases has been that the general law of contract applies and that when the client breaches by discharging his attorney without cause, the attorney can recover the contract price.

What we perceive to be the modern trend, and, we believe, the better rule, is that an attorney discharged with or without cause can recover only the reasonable value of his services as of that date. A number of well-reasoned opinions have taken this view, beginning as early as 1916 with Martin v. Camp, 219 N.Y. 170, 114 N.E. 46. E. g., Fracasse v. Brent, 6 Cal.3d 784, 100 Cal.Rptr. 385, 494 P.2d 9 (1972); 610 Lincoln Rd., Inc. v. Kelner, P. A., 289 So.2d 12 (Fla.App.1974); Heinzman v. Fine, Fine, Legum & Fine, 217 Va. 958, 234 S.E.2d 282 (1977). See also Brookhaven Supply Co., Inc. v. Rary, 131 Ga.App. 310, 205 S.E.2d 885 (1974); Wright v. Fontana, 290 So.2d 449 (La.App.1974); Dill v. Public Utility District No. 2 of Grant Co., 3 Wash.App. 360, 475 P.2d 309 (1970).

In a recent federal case the attorney, in a situation practically identical to the one before us, was awarded only the reasonable value of his services. Potts v. Mitchell, 410 F.Supp. 1278 (W.D.N.C.1976). That court, in our view, followed the correct rule, and we further agree that any equitable interest by the plaintiff in the recovery of defendants in the case at bar could not attach "until the case was prosecuted to a favorable judgment or settled By the contracting attorney." Id. at 1282 (emphasis added).

It is a settled rule that because of the special relationship of trust and confidence between attorney and client the client may terminate the relationship at any time, with or without cause. 7 C.J.S. Attorney and Client § 109. Plaintiff does not dispute this rule, but argues that a client who discharges his attorney without cause must still pay the contract price. Fracasse v. Brent, supra, answers his argument:

The right to discharge is of little value if the client must risk paying the full contract price for services not rendered upon a determination by a court that the discharge was without legal cause. The client may frequently be forced to choose between continuing the employment of an attorney in whom he has lost faith, or risking the payment of double contingent fees equal to the greater portion of any amount eventually recovered.

Id. 6 Cal.3d at 789, 100 Cal.Rptr. at 388, 494 P.2d at 12.

The courts which follow the modern trend also base their holdings on the view that a client's discharge of his attorney is not a breach of contract. "Such a discharge does not constitute a breach of contract for the reason that it is a basic term of the contract, implied by law into it by reason of the special relationship between the contracting parties, that the client may terminate the contract at will." Id. at 791, 100 Cal.Rptr. at 389, 494 P.2d at 13. See also Martin v. Camp, supra.

The plaintiff argues that such a rule ignores the realities of the contingent fee system and will prevent its use in the future. We believe he is mistaken in more than one respect. First, we reject his assumption that the main purpose of the contingent fee system is to allow lawyers to balance their budgets, with high fees in some cases making up for other cases in which there are no recoveries. In Casket Co. v. Wheeler, supra; the North Carolina Supreme Court found contingent fees acceptable and said: "(O)therwise a party, without the means to employ an attorney and pay his fee certain, and having a meritorious cause of action or defense, would find himself powerless to protect his rights." Id. 182 N.C. at 466, 109 S.E. at 382. And in 610 Lincoln Rd., Inc. v. Kelner, P.A., supra, the Florida Court noted: "Contingent fee agreements are primarily for the benefit of indigents or those not capable of employing capable counsel . . . ." Id. at 15.

Second, we find no merit in plaintiff's suggestion that clients will take advantage of the rule, using the lawyer's services until all the work is done, then discharging him and settling the case themselves. Fracasse v. Brent answers this also:

Nor do we believe that abandonment of the (contract recovery) rule will lead to a wholesale discharging of attorneys by clients motivated solely by a desire to save attorney's fees. To the extent that such discharge is followed by the retention of another attorney, the client will in any event be required . . . to pay the former attorney for the reasonable value of his services. . . . To the extent that such discharge occurs 'on the courthouse steps,' where the client executes a settlement obtained after much work by the attorney, the factors involved in a determination of reasonableness would certainly justify a finding that the entire fee was the reasonable value of the attorney's services.

Id. 6 Cal.3d at 791, 100 Cal.Rptr. at 389-90, 494 P.2d at 13-14 (citations omitted).

A contract for legal services is not like other contracts. The client has the right to discharge his attorney at any time, and it is...