Thompson v. Thompson

• Decision Date: 04 September 1984
• Docket Number: No. 8329DC578,8329DC578
• Court: North Carolina Court of Appeals
• Parties: Carol M. THOMPSON v. Donald O. THOMPSON; L & O, Inc., a corporation; and Robert B. Pryor, Trustee. STEPP, GROCE, PINALES & COSGROVE, a Partnership v. Carol M. THOMPSON.

Page 315

319 S.E.2d 315

70 N.C.App. 147

Carol M. THOMPSON v. Donald O. THOMPSON; L & O, Inc., a corporation; and Robert

B. Pryor, Trustee.

STEPP, GROCE, PINALES & COSGROVE, a Partnership v. Carol M. THOMPSON.

No. 8329DC578.

Court of Appeals of North Carolina.

Sept. 4, 1984.

Lentz, Ball & Kelley, P.A. by Ervin L. Ball, Jr., Asheville, for defendant-appellant.

Stepp, Groce, Pinales & Cosgrove by Edwin R. Groce and W. Harley Stepp, Jr., Hendersonville, for intervenors-appellees.

JOHNSON, Judge.

The central question presented by this appeal is whether the contingent fee contract sued upon by the intervenor law firm in this domestic action between a wife and husband is enforceable. For the reasons set forth below, we hold that a contract for the payment of a fee to an attorney contingent upon the securing of a separation or divorce or contingent in amount upon the amount of alimony, support or property settlement obtained is void as against public policy.

I

The evidence offered at trial may be summarized as follows: Mr. and Mrs. Thompson were married in 1953 and up to the time of their divorce in March, 1982 were involved in the business of construction and land development. The couple did business through a corporation known as L & O, Inc., named as a party defendant in the original suit, in which Mrs. Thompson had a 49% ownership interest and Mr. Thompson a 51% ownership interest. Mr. and Mrs. Thompson also owned equal interests in a partnership known as Haywood Knolls. The Thompsons were very successful in their various enterprises. Haywood Knolls consisted primarily of land held for development purposes and was valued at approximately 1.5 million dollars, with an indebtedness of approximately one-half million dollars at all relevant times. The couple's total equity in all of their properties was substantially in excess of two million dollars in December of 1980, the month that Mr. Thompson left his wife.

In December, 1980, Mrs. Thompson purportedly conveyed certain real property to Mr. Thompson and to certain trusts after being told by him that the conveyances were for estate planning and tax reasons. Mr. Thompson also either caused Mrs. Thompson to sign a number of deeds in blank, or forged her name to such deeds, purportedly conveying some of their real estate holdings to himself. Later that month, while Mrs. Thompson was vacationing in Florida, Mr. Thompson, among other things, withdrew approximately $500,000 in cash from various joint bank accounts, and put the money into his individually-owned accounts. Upon Mrs. Thompson's return from Florida, she found that Mr. Thompson had removed himself from the marital home; he also announced that he was no longer going to live with her. In early 1981, Mrs. Thompson discovered her husband's financial manipulations. It is against this background that Mrs. Thompson sought an attorney with the law firm of Stepp, Groce, Pinales & Cosgrove.

Mrs. Thompson met with Mr. Stepp of the intervenor law firm for the first time on 5 January 1981. Soon thereafter, Mrs. Thompson prepared statements, at Mr Stepp's request, showing the financial worth of herself and her husband. In addition, she provided copies of all the pertinent real estate documents her husband had recorded at the Henderson County Courthouse, tax listing sheets and other information. Three or four meetings were held during the next three weeks between Mr. Stepp and Mrs. Thompson regarding the suit.

Mr. Stepp testified that he discussed the matter of fees with Mrs. Thompson during their first meeting. According to Stepp, he gave Mrs. Thompson a choice between a flat fee and a contingent fee arrangement and advised her to think about it further. Mrs. Thompson, to the contrary, testified that the first time a fee was discussed between Mrs. Thompson and Mr. Stepp was on 26 January 1981, and at that time she was given a choice between an hourly rate or a one-fourth fee contingent upon the amount secured by settlement or other judicial disposition of the case; she chose the latter. A written fee contract was executed on 27 January 1981.

Mr. Thompson was then represented by Mr. Boyd B. Massagee, Jr., an attorney practicing in Henderson County. Mr. Massagee testified that immediately after receiving Mr. Stepp's first letter of 9 January 1981, the two attorneys began discussing a settlement of the Thompson case. A number of proposals were made and the same day that the fee contract was executed, 27 January 1981, Mr. Massagee received a detailed letter from Mr. Stepp containing an offer to settle the Thompson case. Mr. Stepp received a reply from Mr. Massagee on or about 9 February 1981. Mr. Stepp and Mrs. Thompson were in touch by telephone from 27 January to 9 February 1981.

Mrs. Thompson went to Mr. Stepp's office on or about 9 February 1981 to discuss the settlement proposed by Mr. Massagee. Mrs. Thompson testified that she did not state that she would agree to the proposal but that she wanted to think about it, and further, that Mr. Stepp and his law partner, Mr. Edwin A. Groce, advised her that they believed this was the best settlement she could get out of court.

On direct examination, Mr. Stepp testified that Mrs. Thompson told him in unequivocal terms that the offer was acceptable to her. However, on cross-examination Stepp admitted that Mrs. Thompson did not sign any document indicating her acceptance of the Massagee proposal and characterized the proposal in the following terms:

I considered what we had from Mr. Massagee as a basic ground level proposition for us to start to elaborate on. It was the framework from which we could work around to a final solution for her.

Mr. Stepp also testified that he urged Mrs. Thompson to fully evaluate the proposal to determine whether it adequately protected her interests.

The amount offered in the Massagee proposal was somewhat more than one million dollars. Mrs. Thompson discussed the offer with various friends and a relative, one of whom suggested that if she was not satisfied with the offer, she should hire another attorney and discharge Stepp. That individual recommended Mr. Robert Whitmire of the Henderson County Bar. Thereafter, Mrs. Thompson discharged Mr. Stepp, collected her file, and hired Mr. Whitmire to represent her.

Mr. Stepp testified that his office kept no records of the time spent on the Thompson file, of telephone calls or of conferences. Mr. Stepp could not estimate the total time spent during his firm's thirty-day representation of Mrs. Thompson, although he guessed that it could be as high as 200 hours. Both Stepp and Massagee believed the Thompson case to be both complicated and complex, presenting questions involving the law of partnership, trusts, fraud, alimony, child custody, support, joint bank accounts and the confidential relationship between husband and wife.

Mrs. Thompson testified that she discharged Mr. Stepp because she felt that he was pressuring her to accept her husband's offer of 9 February 1981. Mrs. Thompson was dissatisfied with the terms of the offer. Mr. Whitmire, who began representing Mrs. Thompson on or about 16 February 1981, instituted a lawsuit for her on 27 February 1981 against Mr. Thompson and the parties' corporation, L & O, Inc. The Thompson case was subsequently litigated and culminated in a final settlement on 9 September 1981. Mrs. Thompson ultimately paid her attorney, Robert Whitmire, $37,500 for the services he rendered in the domestic action.

The trial court's findings of fact are generally reflective of the foregoing summary; the controverted issues of fact as to the time when fees were first discussed and whether the 9 February 1981 offer was accepted by defendant, however, were resolved against defendant and in favor of the plaintiff law firm. In essence, the trial court found and concluded that the law firm of Stepp, Groce, Pinales & Cosgrove did a considerable amount of work in a complex case on behalf of Mrs. Thompson during the period from 5 January 1981 to 16 February 1981, culminating in the 9 February 1981 offer of some one million dollars in settlement of the Thompson lawsuit, which offer was "substantially accepted" by Mrs. Thompson prior to her decision to discharge the plaintiff law firm. The court further found and concluded that the fee contract executed by the parties, providing for a contingent fee of one-fourth of any amount recovered by compromise settlement, is fair and reasonable in all respects, including the consideration that Mrs. Thompson "had very little money, if any, to pay an attorney upon a flat fee basis at the time she employed said plaintiff law firm;" that the amount of the fee that said attorneys would be entitled to under that contract is $250,000; and that using the relevant hourly basis as a guide, a reasonable fee would be at least $20,000, considering the amount of time involved and the standing of the lawyer. Finally, the court concluded as a matter of law that, taking all the relevant considerations into account, the plaintiff law firm was entitled to $85,000 as a reasonable attorney fee, less credit for the $37,500 paid to Mr. Robert L. Whitmire, Jr., the attorney subsequently hired by Mrs. Thompson.

II

Defendant primarily challenges the judgment rendered by the trial court on the contingent fee contract by assigning error to the court's order allowing the plaintiff law firm to intervene in her domestic action against her former husband, Donald Thompson. Defendant argues that the order allowing intervention was improper for the following reasons: (a) the fee contract was void as against public policy and therefore unenforceable; (b) the contract sued upon, including the claimed fee, violates the Code of Professional Responsibility and is void; (c) no cause of action was stated in the complaint in intervention; (d) intervention was improper under Rule 24 of the Rules of Civil Procedure; and (e) no cause of action had arisen on the date of...