Pryor v. Merten

490 S.E.2d 590 (1997)

Betty Jean PRYOR and Ruthie Pryor, as Guardian Ad Litem for Corry L. Pryor, minor, Plaintiffs, v. David F. MERTEN, Saundra Shumate, and Jane Doe, Defendants.

No. COA96-1483.

Court of Appeals of North Carolina.

October 7, 1997.

*592 Lawrence U. Davidson, III, Charlotte, for appellants.

Law Offices of Grover C. McCain, Jr. by Grover C. McCain, Jr. and William R. Hamilton, Chapel Hill, for defendants-appellees.

EAGLES, Judge.

Appellant argues that the trial court did not retain jurisdiction to hear the quantum meruit proceedings and that appellee's claim was barred by res judicata. The case at bar was dismissed with prejudice by the plaintiffs pursuant to the settlement agreement. Davidson argues that a dismissal with prejudice gives rise to the doctrine of res judicata, and is effective not only as to the immediate parties, but also as to their privies. Johnson v. Bollinger, 86 N.C.App. 1, 8, 356 S.E.2d 378, 383 (1987) (citing 9 Wright & Miller, Federal Practice and Procedure, § 2367, p. 185-86 (1971)). Davidson accordingly contends that res judicata deprived the trial court of jurisdiction and is a bar to further action. Hamilton asserts that res judicata does not apply because he was not a party in the underlying case, and he was never given notice of the minor's settlement hearing or an opportunity to be heard. Accordingly, Hamilton contends that his claim has never been litigated. See Batch v. Town of Chapel Hill, 326 N.C. 1, 387 S.E.2d 655 (1990).

"The essential elements of res judicata are: `(1) a final judgment on the merits in an earlier suit, (2) an identity of the cause of action in both the earlier and the later suit, and (3) an identity of parties or their privies in the two suits.'" Hogan v. Cone Mills Corp., 315 N.C. 127, 135, 337 S.E.2d 477, 482 (1985)(quoting Hogan v. Cone Mills Corp., 63 N.C.App. 439, 442, 305 S.E.2d 213, 215 (1983)).

Res judicata does not bar Hamilton's action. Hamilton was neither a party to the lawsuit nor in privity with one of the parties. He was not given notice of the settlement, nor given an opportunity to be heard with respect to his quantum meruit interests. Accordingly, the issue has never been litigated and res judicata is not a bar to further action.

We next consider whether Hamilton's claim for quantum meruit attorney's fees must be asserted in a separate civil suit against his former client rather than against Davidson by motion in this cause. Davidson argues that because Hamilton had been discharged from the case prior to final judgment, Hamilton's right to the judgment was limited to the $3,119.19 actually advanced on behalf of his clients, which was paid. Davidson contends that after Hamilton was fired, Hamilton could proceed in a quantum meruit action only against his former clients for attorney's fees. Davidson relies on Mack v. Moore, 107 N.C.App. 87, 418 S.E.2d 685 (1992) (citing Covington v. Rhodes, 38 N.C.App. 61, 247 S.E.2d 305 (1978), disc. rev. denied, 296 N.C. 410, 251 S.E.2d 468 (1979)).

Hamilton argues that he performed a significant amount of work in the underlying case and is entitled to a quantum meruit recovery. However, he asserts that it would be unjust to have more than the one-third contingency fee, already paid, taxed against the handicapped minor child and his family. Hamilton also argues that it would be unfair to allow unjust enrichment of Davidson by allowing him to retain the entire fee, when Davidson was not the sole force in obtaining a settlement.

North Carolina has not addressed the issue of whether an attorney, who before being discharged performed significant services for a client in a contingent fee relationship, may recover from the settling attorney in quantum meruit. Other courts have addressed and resolved the issue. Joye v. Heuer, 813 F. Supp. 1171 (D.S.C.1993)(court approved of a quantum meruit distribution of the fees among the attorneys in direct proportion to the hours worked in the case); see also Potts v. Mitchell, 410 F. Supp. 1278 (W.D.N.C.1976)(discharged attorney's quantum meruit recovery was granted from funds being held as the contingency fee). We find these federal decisions persuasive and accordingly we conclude the trial court properly allowed the quantum meruit action by Hamilton to proceed. To require Hamilton to proceed against party plaintiffs would unfairly require plaintiffs to pay attorney's fees in excess of the one-third contingency fee to *593 which they agreed. See Covington, 38 N.C.App. at 65, 247 S.E.2d at 308. We believe the more equitable result is to allow the discharged attorney to proceed against the new attorney for the prior attorney's rightful share of the total attorney's fees. Accordingly, this assignment of error is overruled.

Davidson argues next that Hamilton should be equitably estopped from raising the quantum meruit action and that Hamilton's claim is barred by laches. Davidson claims that Hamilton unjustly delayed in giving notice of his equitable claim and that he relied to his detriment on Hamilton's failure to make the claim known. Davidson notes that when Hamilton sent his letter outlining his costs, he made no mention of a claim for attorney's fees. Davidson argues that he reasonably relied on the letter when he petitioned the court for costs. Davidson also argues that Hamilton did not give notice of his intentions by intervening during the course of litigation. Davidson finally argues that the amount of Hamilton's fee should be determined independently of what Davidson was awarded as attorney's fees, because it would be unfair to adjust Davidson's award to accommodate Hamilton's fee. We are not persuaded.

"The defense of laches will bar a claim when the plaintiff's delay in seeking a known remedy or right has resulted in a change of condition which would make it unjust to allow the plaintiff to prosecute the claim." Cieszko v. Clark, 92 N.C.App. 290, 297, 374 S.E.2d 456, 460 (1988). "The doctrine of laches, however, is not based upon mere passage of time; it will not bar a claim unless the delay is (i) unreasonable and (ii) injurious or prejudicial to the party asserting the defense." Id. (citing Taylor v. City of Raleigh, 290 N.C. 608, 227 S.E.2d 576 (1976)).

Hamilton is not barred by laches from seeking quantum meruit recovery. First, he did not have a statutory right to intervene. G.S. 1A-1, Rule 24; Howell v. Howell, 89 N.C.App. 115, 365 S.E.2d 181 (1988). Second, Hamilton could not file for an attorney's lien before the settlement hearing because such a filing would have been premature. "A charging lien is not available until there is a final judgment or decree to which the lien can attach." Id. at 117, 365 S.E.2d at 183 (citing Dillon v. Consolidated Delivery, Inc., 43 N.C.App. 395, 258 S.E.2d 829 (1979); Covington, 38 N.C.App. at 61, 247 S.E.2d at 305.). Third, Hamilton asserts that he gave oral notice of his quantum meruit interest to Davidson, and filed his claim only weeks after the settlement conference, and only one week after he learned of the settlement. Hamilton's delay was reasonable under the circumstances. Finally, Davidson has shown no prejudice from any purported delay by Hamilton in filing the motion in the cause. See Harris & Gurganus, Inc. v. Williams, 37 N.C.App. 585, 246 S.E.2d 791 (1978). Accordingly, Hamilton's claim is not barred by laches.

The order granting a quantum meruit award of attorney's fees is affirmed.

Affirmed.

JOHN C. MARTIN and TIMMONS-GOODSON, JJ., concur.