Rock v. Ballou , 286 N.C. 99 ( 1974 )

Justice Sharp

concurring:

With the result in this case I am in accord. The contract between plaintiffs-attorneys and defendants, their clients, is one for a contingent fee, and the rule as stated in Casket Company v. Wheeler, 182 N.C. 459, 467, 109 S.E. 378, 383, 19 A.L.R. 391 (1921) applies. I cannot agree, however, that the case of Stern v. Hyman, 182 N.C. 422, 109 S.E. 79, 19 A.L.R. 844 (1921), which the majority opinion purports to overrule, has any application whatever to this case.

In Stern, the plaintiffs, attorneys, sought to recover $5,050 in fees for adjusting the defendants’ fire loss on a stock of goods insured with several companies. The plaintiffs contended that they had recovered $25,250 for defendants; that after defendants had employed them, and pending the adjustment, defendants had agreed to pay them 20 % of the amount recovered. The defendants denied that plaintiffs had collected $25,250 for them. They contended (1) that the only contract they had made with the plaintiffs was to pay them $200 for making proofs of loss and assisting in adjusting the same; and (2) that if there were any contract for 20% of the recovery, “it was made during the time that plaintiffs were acting in pursuance of their employment and was void, and that plaintiffs were entitled only to reasonable compensation for their services to be assessed by the jury.” This Court upheld the defendants’ contention.

The rule laid down in Stern v. Hyman is that once the relation of attorney and client has been established with reference to a particular transaction, matter, or litigation, any contract made thereafter between the two which purports to bind the client to pay the attorney increased compensation for completing or continuing the work he had undertaken to perform is void as a matter of law. Chief Justice Clark stated the rule as follows: “While the relationship exists an attorney cannot bind his client in any manner to make him greater compensation for his services than he would have the right to demand if no contract had been made, during the existence of the relationship.” Id. at 424, 109 S.E. at 80. (Emphasis added.)

In the case we here consider, defendants first employed plaintiff Hamilton to examine the title to a 1,600-acre tract of land to determine whether it was marketable. A cursory examination of the public records was sufficient to convince plaintiffs that the title was not marketable “and that the only chance of getting any title was to Torrenize it.” When plaintiffs made this report to defendants at that time (February 1968) they had performed the services for which they had then been employed.

The question which arose immediately thereafter was whether a proceeding under the Torrens law (G.S. 43-1 et seq.) would produce a marketable title and, if so, how much it would cost. Defendants, of course, “didn’t want to get into the cost of it if they couldn’t have assurance of a good title,” and plaintiffs “couldn’t give them any assurance.” Sometime in March or April of 1968, however, “the plaintiff, Hamilton, agreed with defendants to institute Torrens proceedings and handle them on a contingency fee basis of 25% of the net profit from the sale of the land. Thereafter, on 29 July 1968, Hamilton and defendants renegotiated the fee arrangement. Hamilton agreed to reduce the contingent fee to 20 % of the profit from the sale of the land, and defendants agreed to advance costs up to $1,000.

The attorney-client relationship between plaintiffs and defendants with reference to the subject matter of this suit began when plaintiffs agreed to institute Torrens proceedings for a contingent fee of 25% of the net profit from the sale of the land involved. No previous contract with reference to plaintiffs’ compensation for instituting and conducting the Torrens proceedings had been made. Thereafter, according to the judge’s finding of fact, made upon supporting evidence, on 29 July 1968 the contingent-fee contract was changed to decrease the attorneys’ compensation from 25% to 20% of defendants’ net profit from the sale of the land. The decision in Stern voids only a contract granting an attorney greater compensation “while the relationship exists.”

It may be that the rule of Stern v. Hyman is unnecessarily harsh; that the “generally accepted view” quoted in Randolph v. Schuyler, 284 N.C. 496, 504, 201 S.E. 2d 833, 837-838, is the better rule; and that Stern v. Hyman should be overruled when an occasion calls for it. I express no opinion on that question. I merely point out that Stern v. Hyman is not pertinent to decision here and that we should neither contrive an attorney-client relationship where none existed in order to overrule it, nor should we purport to overrule it by obiter dicta.