Biel v. Clark

• Court: Court of Appeals of South Carolina
• Decided: June 4, 2008
• Docket: 2008-UP-285
• Status: Unpublished

Opinion

THIS OPINION HAS NO PRECEDENTIAL VALUE.  IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 239(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

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Jack H. Biel and Biel & Clark, P.A., Respondents,

v.

William C. Clark and Clark & Stevens, P.A., Appellants.

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Appeal From Beaufort County
 Edward D. Buckley, Jr., Special Referee

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Unpublished Opinion No. 2008-UP-285
Heard May 7, 2008 – Filed June 4, 2008
Withdrawn, Substituted and Refiled September 23, 2008

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AFFIRMED

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Attorney Robert L. Widener, of Columbia, for Appellants.

Attorney Drew A. Laughlin, of Hilton Head Island, for Respondents.

PER CURIAM:  In this action arising out of the dissolution of a law practice, William C. Clark (Clark) and Clark & Stevens, P.A. appeal the special referee’s finding that contingency fee cases were an asset of the firm subject to distribution in accordance with the parties’ respective ownership interests.  Clark further asserts the special referee erred in finding unjust enrichment and in granting relief that exceeded the relief requested by plaintiffs.  We affirm.

FACTS

Jack H. Biel (Biel) and Clark practiced law together as a professional association organized as a professional corporation under the name Biel & Clark, P.A. (the Firm).  Clark joined the Firm in 1988 and became an equal shareholder sometime in late 1989 or early 1990.  During the twelve year duration of the Firm’s practice, Biel primarily handled real estate, probate, estate planning, and business matters, while Clark handled litigation and domestic matters.  Biel and Clark shared equally in the profits and expenses of all legal matters handled by the Firm, regardless of the originating attorney or the working attorney.  

Biel and Clark mutually agreed to cease practicing law together as Biel & Clark, P.A., effective December 31, 2000.  There was no written agreement governing the termination of the Firm’s practice.  The professional association remains in existence and has been in the process of winding up since the mutual agreement to cease practicing law together. 

At the time the Firm concluded its operations, Clark was handling several significant cases that he retained and continued to manage at his new firm.    Among these cases are three contingency fee cases that are the subject of the present litigation: (1) McKinley; (2) Southwind II; and (3) Ocean Palms.  The McKinley case is a personal injury matter involving Grant McKinley, a longtime friend and client of Biel.  The Southwind II and Ocean Palms cases are complex construction matters involving condominium and timeshare projects.  There was no agreement between Biel and Clark regarding attorney’s fees that might be earned on these cases. 

Due to his personal relationship with Grant McKinley and his prior legal work for the Southwind II property owners’ association, Biel played a significant role in procuring the McKinley and Southwind II cases for the Firm. 

With regard to the McKinley case, Clark worked a total of 52.7 hours and collected a fee of $50,000.00.  Of that time, 17.8 hours were expended prior to December 31, 2000.  Prior to that date, the Firm advanced $1,233.33 for costs.  When the case settled, Clark tendered $5,000.00 to Biel as a finder’s fee.

With regard to the Southwind II matter, Clark worked a total of 95.75 hours and received a fee of $203,291.91.[1]  Of the 95.75 hours, Clark worked a total of 16.75 hours prior to December 31, 2000, and the Firm advanced a total of $393.04 for costs.  A settlement statement dated March 1, 2002, and signed by the president of Southwind II’s governing body shows “[t]otal expenses for Biel & Clark, P.A.” of $550.21.  Clark’s time and expense records show that those expenses were incurred after December 31, 2000; however, they are attributed to the Firm on the settlement statement.  The balance of the fee was retained by Clark and Stevens, P.A..[2]

As to Ocean Palms, this case was procured by Clark.  Prior to December 31, 2000, the work performed by the Firm for Ocean Palms was billed on an hourly basis and the fees earned and billed on that basis were collected and distributed equally between Biel and Clark.  In September of 2001, Clark entered into a contingency fee agreement with Ocean Palms.    At the time of the hearing before the special referee, portions of the Ocean Palms case had settled and a fee of $275,000.00 had been collected.  Other portions of the case were pending settlement at the time of the hearing.

Prior to December 31, 2000, the clients in the McKinley, Southwind II, and Ocean Palms cases did not receive written notification that Biel and Clark were ceasing to practice law together or that the Firm was going to cease operations.  The Firm appears as counsel for the plaintiffs in pleadings filed in all of these cases both before and after December 31, 2000.  Clark took no steps to see that the Firm was relieved as counsel in any of the disputed cases. 

On February 19, 2001, and March 19, 2001, Biel wrote Clark setting forth his understanding that the fees generated by the McKinley case would be split equally between the two attorneys.  In his letter, Biel also set forth his understanding that the fees generated by the Southwind II and Ocean Palms cases would be paid 50% to the Mullen firm, with the remaining balance shared equally between Biel and Clark.  Biel further invited Clark to advise him if his understanding differed from Biel’s.  Biel received no response from Clark until he settled the McKinley case more than one year later and tendered the $5,000.00 finder’s fee to Biel. 

On February 3, 2006, a hearing was held on the matter.[3]  Biel alleged causes of action for dissolution of the Firm, breach of contract, breach of fiduciary duty, unjust enrichment, and an accounting.  Specifically, Biel sought dissolution of the Firm and a distribution of 50% of the fees generated by the above-mentioned cases.  In an amended order dated February 28, 2006, the special referee held that the disputed fees were assets of the Firm to be distributed in accordance with the parties’ relative ownership interests.  The special referee rejected Biel’s breach of contract claim concluding that plaintiffs failed to prove the existence of a contract pertaining to the disputed fees or its breach.  As an alternative holding, the special referee accepted Biel’s unjust enrichment claim, finding that Biel had a reasonable expectation of payment from the contingency cases; that Clark should have reasonably expected to pay Biel; and that society would reasonably expect payment to Biel under these circumstances.  Based on these findings, the special referee ordered Clark to pay 25% of the fees generated by the Southwind II matter and 25% of the fees generated and to be generated by the Ocean Palms matter to Biel.  This allocation recognized that the Mullen firm was to receive or had received 50% of the fees from these cases.  On August 7, 2006, the special referee further ordered that the fees generated by the Ocean Palms matter after the issuance of the February 28, 2006, order shall be paid to the Firm and that the Firm be reimbursed for all expenses incurred in prosecuting the matter.  This appeal followed.

STANDARD OF REVIEW

This case involves both actions in law and in equity.  “When legal and equitable actions are maintained in one suit, each retains its own identity as legal or equitable for purposes of the applicable standard of review on appeal.”  Corley v. Ott, 326 S.C. 89, 92, 485 S.E.2d 97, 99 n. 1 (1997) (citing Future Group v. Nationsbank, 324 S.C. 89, 478 S.E.2d 45 (1996)).

“In an action at law, on appeal of a case tried without a jury, the findings of fact of the judge will not be disturbed upon appeal unless found to be without evidence which reasonably supports the judge’s findings . . . . The judge’s findings are equivalent to a jury’s findings in a law action.”  Townes Assoc., Ltd. v. Cty of Greenville, 266 S.C. 81, 86, 221 S.E.2d 773, 775 (1976).  A special referee, under Rule 53(c), SCRCP, “shall exercise all power and authority which a circuit [court] sitting without a jury would have in a similar matter.”  Accordingly, our review of a special referee’s decision is limited to the correction of errors of law.  Id. at 85, 221 S.E.2d at 775.

A corporate dissolution is an action at equity.  Jordan v. Holt, 362 S.C. 201, 205, 608 S.E.2d 129, 131 (2005).  In actions at equity, this court can find facts in accordance with its own view of the preponderance of the evidence.  Id.

LAW/ANALYSIS

Clark argues the special referee erred in finding the contingency fee cases were assets of the Firm subject to marshalling and distribution through the dissolution of the Firm.  Specifically, Clark contends the contingency cases and fees are not assets of the firm because all three cases were transferred to him after the break-up of the Firm.[4]  He further asserts the referee erred because Biel did not allege the cases and fees were assets of the Firm in their complaint.  We disagree.

As an initial matter, we note Clark failed to cite supporting authority for the primary arguments asserted in his brief on appeal.  However, to the extent appellant asserts the lack of any South Carolina authority regarding the primary issues raised, we proceed to review the arguments asserted.

The disposition of attorney’s fees upon the dissolution of a law firm organized as a professional corporation in the absence of an agreement governing the dissolution is an issue of first impression in South Carolina.  Cognizant of the reciprocal and continuing obligations of former law partners, a majority of courts apply the principles of partnership law to professional corporations where withdrawal of attorney-shareholders results in the dissolution of the corporate entity.  See, e.g., Boyd, Payne, Gates, & Farthing, P.C. v. Payne, Gates, Farthing & Radd, P.C., 422 S.E.2d 784, 789-90 (Va. 1992); Fox v. Abrams, 163 Cal. App. 3d 610, 616-17 (1985); Breaking Up Is Hard To Do: Allocating Fees From the unfinished Business Of A Professional Corporation, 64 U. Chi., L. Rev. 1367, 1368-79 (Fall 1997).   

Under the principles of partnership law as codified in the Uniform Partnership Act (UPA), all partners, upon dissolution, have a fiduciary duty to wind up the unfinished business of the partnership and to divide the resulting fees based upon each partner’s interest in the former partnership.  S.C. Code Ann. § 33-41-370 (2006).  Likewise, courts applying a partnership analysis to allocate fees from the unfinished business of a law firm organized as a professional corporation find work in progress at the time of dissolution an asset of the firm in which the partners of the former firm have a fiduciary duty to complete.  See, e.g., First Union Nat’l Bank of Maryland v. Meyer, Faller, Weisman & Rosenberg, 723 A.2d 899, 905-07 (Md. App. 1999); Marr v. Langhoff, 589 A.2d 470, 475-77 (Md. 1991); Resnick v. Kaplan, 434 A.2d 582, 586-88 (Md. App. 1981).  In determining allocation of fees in this context, these courts hold the distribution of fees resulting from completion of work in progress, absent special agreement, be allocated according to each partner’s interest in the profits of the dissolved firm.  See, e.g., Sufrin v. Hosier, 896 F.Supp. 766, 768-69 (N.D.ILL. 1995); Boyd, Payne, Gates, & Farthing, P.C., 422 S.E.2d at 789-90; Sullivan, Bodney & Hammond v. Bodney, 820 P.2d 1248, 1250-51 (Kan. App. 1991); Fox, 163 Cal. App. 3d 610, 616-17.

In the case at hand, the Firm was organized as a professional corporation controlled by two attorney-shareholders, Biel and Clark. Consistent with the majority approach stated above, application of a partnership analysis is appropriate where the withdrawal of the attorney-shareholders results in the dissolution of the corporate entity.  Here, it is undisputed that the withdrawal of Biel and Clark from the Firm resulted in the dissolution of the partners’ professional corporation.  Thus, the work in progress associated with the three contingency fee cases constituted unfinished business in which Biel and Clark had a fiduciary duty to complete.  As such, the resulting fees generated by the completion of these three cases during the winding up process are deemed assets of the Firm subject to distribution based upon Biel and Clark’s ownership interest in the profits of the Firm.  Therefore, based upon our review of the record, we find the fees generated from the three contingency fee cases in dispute are assets of the Firm subject to marshalling and distribution between Biel and Clark.  Accordingly, we affirm the manner in which the special referee determined the allocation of the fees and expenses.

Because we affirm the decision of the special referee as to dissolution and distribution of fees, we need not reach the special referee’s alternative holding regarding unjust enrichment.  See Futch v. McAllister Towing of Georgetown, Inc., 335 S.C. 598, 518 S.E.2d 591 (1999) (holding an appellate court need not review remaining issues when its determination of a prior issue is dispositive of the appeal); see also Weeks v. McMillan, 291 S.C. 287, 292, 353 S.E.2d 289, 292 (Ct. App. 1987) (“Where a decision is based on alternative grounds, either of which independent of the other is sufficient to support it, the decision will not be reversed even if one of the grounds is erroneous.”).   

Finally, Clark argues the special referee erred in granting relief that exceeded the relief requested by Biel.  We disagree.

Our supreme court has held that where “the facts alleged are broad enough to warrant relief, it matters not how narrow the specific prayer may be if the bill contains a prayer for general relief.”  McMaster v. Strickland, 322 S.C. 451, 454, 472 S.E.2d 623, 625 (1996) (citing Mortgage Loan Co. v. Townsend, 156 S.C. 203, 152 S.E. 878 (1930)).  In addition to a prayer for dissolution and winding up of the Firm’s business and affairs, Biel’s complaint also contains a prayer for general relief.  Furthermore, the factual allegations of the complaint regarding dissolution of the Firm support the special referee’s division of fees in this manner.  Thus, we find the relief granted was appropriate.

CONCLUSION

For the foregoing reasons, the order of the special referee is

AFFIRMED.

WILLIAMS, THOMAS, and PIEPER, JJ., concur.

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[1] The fee for Southwind II was split between Clark and the Mullen firm, which was associated by Clark and/or the Firm to assist in handling the case.  The $203,291.91 reflects the amount received by Clark after paying 50% of the fee to the Mullen firm.

[2] The balance retained reflects the amount of the fee received after paying the Mullen firm’s fees and expenses. 

[3] None of the clients in the three cases at issue testified at the hearing. 

[4] We find it essential to note that pursuant to Rule 1.16 of the Rules of Professional Conduct, the right to discharge a lawyer at any time, with or without cause, lies solely with the client.  As such, any indication that the clients in these matters did in fact discharge the Firm from representation would significantly impact the decision in this case.  However, the record is deficient of any writing, testimony, or other evidence from the client to show the client’s intent in these three cases.  Thus, absent a showing that the clients directed otherwise, we cannot find error based on this allegation.