                            No.    90-291
          IN THE SUPREME COURT OF THE STATE OF MONTANA
                                  1990


JOHN L. BINK,
          Plaintiff and Appellant,


FIRST BANK WEST, GREAT FALLS, INC.
and FIRST BANK SYSTEM, a Minnesota
Banking Company,                                CLERK OF S r Fa-ILidZ COURT
                                                          L
                                                   STATE OF IBON'TADJA
          Defendants.


APPEAL FROM:    District Court of the Eighth Judicial District,
                In and for the County of Cascade,
                The Honorable Thomas M. McKittrick, Judge presiding.


COUNSEL OF RECORD:
          For Appellant:
                Alexander Blewett, I11 ; Hoyt   &   Blewett; Great Falls
                Montana
          For Defendants:
                Stephen Bell; Dorsey & Whitney; Billings, Montana
                Gene Daly, Helena, Montana


                            Submitted on Briefs:        November 1, 1990
                                            Decided:    January 10, 1991
Filed:
Justice R. C. McDonough delivered the Opinion of the Court.

       This is an appeal from an order of the Montana Eighth Judicial
District Court, Cascade County, awarding attorney fees to the
plaintiff John Binkls former attorney Gene Daly.       The sole issue
on appeal is whether the District Court erred in awarding these
fees.      We reverse and remand for a full hearing on the subject of
attorney fees.
       Bink contacted and retained Daly as his attorney for the
purpose of litigating Binkls cause         for wrongful discharge in
October of 1986.      Bink makes several allegations regarding Dalyls
performance as his attorney.      He also alleges that he eventually
terminated Daly for cause.      Bink contacted the law firm of Hoyt   &

Blewett in October of 1987 and requested that they take over his
representation, asking Daly to step down as his attorney.        Bink
alleges that Daly continually refused to withdraw.
       On November 30, 1987, Bink filed a formal motion for change
of attorney with the District Court. On May 6, 1988 at the hearing
on the motion, the District Court agreed to sign an order allowing
Hoyt   &   Blewett to proceed with Binkls case provided Bink paid Daly
$5,127.00 alleged as Dalyls costs attributable to his work on
Binkls case.
       In its Order Substituting Counsel For Plaintiff, the court
ordered
       that the law firm of Hoyt & Blewett of Great Falls,
       Montana, is substituted as counsel of record for the
       plaintiff in place of Attorneys Gene B. Daly, Joseph W.
       Duffy and Walter M. Hennessey.
            IT IS FURTHER ORDERED that John L. Bink shall
       immediately pay to Gene B. Daly the sum of $5,127.00.
            FURTHERMORE, IT IS ORDERED that Attorneys Gene B.
       Daly, Joseph W. Duffy, and Walter M. Hennessey have an
       attorneys1 lien on the claim of plaintiff, the amount of
       such lien to be determined in the appropriate manner at
       a later time. (Emphasis added.)
Hoyt   &   Blewett took Binklscase to trial on a one-third contingency
fee basis, and on November 27, 1989 they received a verdict in
favor of Bink against the defendants in the sum of $175,000.00.
Approximately four months later, on April 3 , 1990, without an
appropriate motion, notice or hearing, the District Court issued
a memorandum and order awarding Daly $19,796.06 in attorney fees
from Bink.
       We have continually held that a district court's granting of
attorney fees should be based on the introduction of competent
evidence:
       [I]n contested cases we are inclined to follow those
       states requiring the introduction of proof from which a
       reasonable fee may be determined. To award a fee in such
       a case without proof would be to disresard the
       fundamental rules of evidence. An award of fees , like
       any other award, must be based on competent evidence.
       See Lyle v. Lyle, (Fla.App.1964), 167 So.2d 256, 257.
       Furthermore, the proper determination of a legal fee is
       central to the efficient administration of justice
       the maintenance of public confidence in the bench and
       bar. (Emphasis added.)
Crncevich v. Georgetown Recreation Corp. (1975), 168 Mont. 113,
120, 541 P.2d 56, 59; see also First security Bank of Bozeman v.
Tholkes (1976), 169 Mont. 422, 429-430, 547 P.2d 1328, 1332;
Talmage v. Gruss (1983), 202 Mont. 410, 412-413, 658 P.2d 419, 420-
421. In its substitution order the District Court noted the amount
of Dalylslien would be determined later in the appropriate manner.
The appropriate manner in this case is pursuant to a hearing.
Thus, the court erred when it made the award without an evidentiary
hearing and without the appropriate motion and notice required by
Rule 5(a), M.R.Civ.P.                  Accordingly,      we   reverse the   District
Court's order and remand the cause to a different judge for a
determination of whether Daly was in fact terminated for cause and
the total appropriate fees and costs, if any, to be awarded
attorney Daly. Such award should be either increased or decreased
as necessary by the prior award of $5,127.00 in alleged costs
awarded to Daly.
        REVERSED and REMANDED for further proceedings consistent with

this opinion.




We Concur:




                               ner
                            fl
sitting for ~ u s t i d ~arrison



                                                Davis
S i t t i n g for C h i e f ~ u s t i c eT u r n a g e
                                                     4
Justice John C. Sheehy, dissenting:
        I dissent.
        In this cause the district judge awarded Gene Daly a fee of
one-third of any attorney fee recovered herein.       While the order
for Daly's fee is couched in terms of the attorney fee received by
the firm of Hoyt and Blewett, the responsibility for the payment
of that fee is on the plaintiff, John L. Bink, unless when Hoyt
and Blewett accepted employment by Bink, they agreed with Bink to
pay whatever fees Daly had incurred at the time they took over the
case.    The amount of Daly's fee, however, as ordered by the court
is 1/9 of the total recovery of Bink, which, in the circumstances
of this case, is a proper fee.
     John L. Bink was discharged by his employer Banks on October
20, 1983.

     Nearly three years later, on August 6, 1986, Bink requested
Daly to represent him in his claims against the Banks.       Daly was
already engaged in suing the same Banks for two other former
employees, for which cases he had plenty to do.      Nevertheless, in
the discussion with Bink in their first meeting, Daly agreed to
represent Bink, and noted the impending date of the statute of
limitations.     Daly contends that he agreed to represent Bink for
a contingent fee of 40%. Bink contends that the oral agreement was
for 33 1/3%.         (Of course, Daly should have obtained a written
agreement from Bink.)      The District Court apparently resolved this
conflict in favor of the client by awarding Daly 1/3 of any
attorney fees received.
     In time to avoid the statute of limitations, Daly filed on
Binkgsbehalf a seven-page complaint against the defendants. That
complaint contains all of the essentials upon which Binkgscase was
eventually tried.    The complaint was later amended once through an
agreement with the Banks to eliminate John Reichel as a party
defendant, after Dalygs services had been terminated.        Aside from
dividing into two counts the wrongful discharge claim and the
negligence claim against the defendants, which causes were combined
in Dalygs complaint, the allegations in the amended complaint are
essentially the same as those in the complaint filed by Daly.
There was never a pre-trial order issued in this case so the issues
on which the case was tried were framed by Binkts complaint, as
amended, and the joint response of the Banks to the amended
complaint.     The joint response again is essentially the same as
their original separate responses, except for the addition of some
purported     affirmative   defenses   which   are   in   reality   only
repetitious of their earlier affirmative offenses in their first
responses.
     Bink moved in District Court to discharge Daly as his attorney
on November 30, 1987. First West Side National Bank of Great Falls
had filed its answer to the complaint.     The answer of Reichel was
filed on December 15, 1987, and that of First Banks System on
December 23, 1987. The order substituting counsel was not granted
until May 9, 1988, and then only after a hearing before Judge
McKittrick.
     In the hearing before the District Court on the motion to
substitute counsel, the following colloquy occurred:
    THE COURT: Well, the main concern that I have right at
    the moment is Mr. Bink wants to move his case forward and
    there is a dispute. I think it's -- it goes without
    saying that Mr. Daly is owed a certain amount of money,
    in addition to whatever the costs were.
    What is your objection to just having a lien placed on
    the case, accepting the costs now and we can have a
    hearing on the other monies at a later date to allow the
    case to go forward?
    MR.  DALY:   I would go for that.     And I've already
    explained to them that -- their problem was I accept my
    cost and leave. I told them I would accept a cost, take
    a lien on the case and then decide what percentage of
    that case if settled I am entitled to.
    THE COURT:    I think you are entitled -- just for
    starters, from what I know about the case, you are
    entitled to more than your costs. That goes without
    saying here, and but I think for the benefit of the
    client, are you in a position to tender those costs now
    with the understanding that there are still monies owed,
    or at least the court is going to consider argument as
    to monies owed in the future?
    MR. BLEWETT:    Your Honor, I guess we really aren't
    because we don't know what the costs are for Mr. Bink.
    We don't know what work Mr. Daly has done. Mr. Bink
    tells us he has filed a complaint and a summons. [The
    actual state of the pleadings was set out above].
    Now, I am just willing to say he can prove his costs and
    he can prove his fees that he is entitled to later.
    THE COURT:   I thought that tender of the $5,100 or
    $5,000+ was for cost?
    MR. BLEWETT:     We are willing to say this is for
    everything and you are out of the case, Mr. Daly. And
    we'll put this up now. I am not saying that it was --
     I don't think Mr. Bink knows what he did for $15,000 had
    anything to do with Mr. Bink. We were just going to
    resolve --
    THE COURT:   Weren't depositions taken, pleadings filed?
MR. BLEWETT: Not in Mr. Bink's case. There hasn't even
been an appearance by the defense in Mr. Bink's, to my
understanding.
MR. DALY:    Your Honor, that is not true, but go ahead.
MR. BLEWETT: I don't know anything about it because we
haven't got the file.
THE COURT: Here is what the court is focusing on. Mr.
Bink is entitled to move his case forward, and this
dispute should not hold it up. But I think you ought to
get together and tender at least costs, and then the
other amounts we ought to talk about at a later date to
allow the case to go forward. If that is agreeable with
everybody that would be agreeable with me.
MR. BLEWETT: It is agreeable with us except I don't--
and if his costs on John Bink's case are $5,127 to date,
we'll pay that too, your Honor. I just don't know that
that is the case, and I guess we're going to have to talk
with John and see what he says.
THE COURT: I think that is what that $5,100 is for.
That Is what my understanding was, that was a tender of
the costs.


MR. BLEWETT: We'll pay them, if he says that the $5,127
was for costs attributable to John Binkls case, we'll
pay those costs to him on Monday.
THE COURT:     All right.
MR. BLEWETT:    And then    --
THE COURT: Then he has a lien on the case for the rest
of it, and we'll have a hearing to determine what the
rest of those monies are at a later date.
MR. BLEWETT:    What the value of his lien is.
THE COURT:     Is that agreeable to everybody?
MR. DALY:    Yes, your Honor, that's agreeable.
THE COURT:   We'll be in recess.
MR. BLEWETT:    Would you like an order on that?
     THE COURT:      Yes.     Would you prepare the order, Mr.
     Blewett?
     MR. BLEWETT:    Okay.    Thank you.
     The order, signed by the court on May 6, 1988, provided in
part :
     It is further ordered that John L. Bink shall immediately
     pay to Gene B. Daly the sum of $5,127.
     Furthermore, it is ordered that attorney Gene B. Daly,
     Joseph W. Duffey, and Walter M. Hennessy have an
     attorneyst lien on the claim of plaintiff, the amount of
     such lien to be determined in the appropriate manner at
     a later time.
     From the foregoing, there could be no doubt that in the
perception of the District Court, the amount of costs was agreed
upon, was ordered to be paid, and that there would be further
proceedings with respect to the lien on the cause in favor of Gene
B. Daly.
     While   the    order    of   the   District   Court   permitted   the
substitution of counsel, it made no mention of the papers which had
come into the possession of Gene Daly as the result of his
representation of Bink.      Daly refused to surrender those papers,
as he explained in a June 8, 1988 letter to the firm of Hoyt and
Blewett :
     To be real honest all of your delays result from your
     refusal to pay the money, first for costs and now,
     because my attorneys fees are contingent, a contract to
     guarantee the fees and percentage. The judge has made
     this abundantly clear.
     I am willing to give you my work product as soon as I am
     sure the matter is at rest -- NO PROBLEMS.
     As will be demonstrated below, Daly's legal position on the
matter was absolutely correct.
     A critical item in all of the pending cases against the Bank
employers, but especially in this case for Bink, was a document
described as First Bank System's "New Direction,Ita document which
eventually led to the liability of First Banks System in this case.
Daly had turned up information about the "New Direction1' in his
other cases, information which the Hoyt and Blewett attempted to
get through another attorney in Great Falls. The following appears
in a letter from the Hoyt and Blewett dated September 23, 1988 to
the other attorney:
     When, in turn, I requested information concerning First
     Banks System's "New Directionw and a copy of the
     deposition that Gene Daly took of Jim Connelly, I was
     astounded at your refusal to divulge this information to
     me.
     Now I understand that Mr. Daly is calling the shots for
     you and will not permit you to provide us with reciprocal
     information.
     Following that refusal, the firm of Hoyt and Blewett pursued
its own discovery, and obtained the "New Directionu document.    In
the circumstances existing at the time, however, Bink had no legal
claim to those papers from Daly.   The document had been turned up
by Daly's work, and Hoyt and Blewett attempted to get it without
going through Daly.
     In Montana, there are two liens that an attorney acquires when
he undertakes the representation of a client.      The first is a
statutory lien, set out in 5 37-61-420, MCA, which provides in
pertinent part:
     (2) From the commencement of an action or the service
     of an answer containing a counterclaim, the attorney who
     appears for a party has a lien upon his client's cause
     of action or counterclaim which attaches to a verdict,
     report, decision or judgment in his client's favor and
     the proceeds thereof in whose hands they may come. Such
     lien cannot be affected by any settlement between the
     parties before or after judgment.
        Daly's statutory lien is the legal basis for the order of the
District Court in this case awarding him 1/9 of the total recovery,
that being the District Court's assessment of the value of the
services that Daly provided the client in the prosecution of the
client's claim.
        There is however, another lien, a common law lien, that an
attorney acquires in the retention of the papers that come to him
in the course of his representation of a client.       The retention
lien, however, is lost, if the attorney gives up the client's
papers without first requiring either payment or security for his
interest in the case.        Required reading on this subject (I
especially recommend it to the plaintiff's bar) is Morse v. Eighth
Judicial District Court (Nev. 1948), 195 P.2d 199.
        In Morse, the clients had entered into a contingent fee
agreement with the Morse firm on July 11, 1947.       The Morse firm
filed a complaint on their behalf on December 1, 1947.           The
defendants appeared by demurrer or motion to strike, and these
pleas were pending when on April 12, 1948, the plaintiffs in the
action filed a motion to substitute another attorney for the Morse
firm.     The motions were heard in the court on April 28, 1948, at
which time the Morse firm stated there was no objection to the
substitution of attorneys.     The court thereafter entered an order
substituting the attorneys, but requiring the Morse firm to turn
over to the substituted firm all of their papers and correspondence
                                  11
pertaining to the suit.    When the lower court did not rule on the
motion of the Morse firm for rehearing, the firm petitioned the
Nevada Supreme Court in an original proceeding, protesting the
terms of the lower court order substituting attorneys.            In the
proceeding before the Supreme Court, Morse did not contest the
power of the court to substitute attorneys. He maintained however,
that the lower court was without jurisdiction to discharge and
destroy the Morse firm's attorney's lien upon the papers in their
possession and that their lien would be destroyed by delivering the
papers in compliance with the order.
     In   deciding   the   case, the   Nevada   Supreme   Court    first
distinguished between the statutory or "charging1'lien and the lien
on the attorney's papers, called the "retaining1'lien. The Nevada
Court said:
     ...    But the 'laforesaid lien1' quoted by respondents
     immediately precedingthis assertion is the lien provided
     by 5 89-23, NCL giving the attorney a lien upon his
     client's cause of action which attaches to the judgment
     etc. and the proceeds thereof. This is a special or
     charging lien and was the kind of lien with which Mr.
     Justice Ducker was dealing in Berrum v. Georgetta, supra.
     It is entirely separate, distinct and remote from a
     retaining lien. The lien affected by the lower court's
     order in the present case is distinctly a retaining lien.
      his attaches to all papers, books, documents,
     securities, and money that come to the attorney in the
     course of his professional employment by the client
     without any special contract regarding it. The charging
     lien, such as considered in Berrum v. Georgetta, is a
     lien on the judgment obtained from the client for the
     attorney's services rendered in obtaining it. The former
     depends upon possession.     The latter does not.     The
     former applies to a general balance for all professional
     services performed whether in the action itself or in
     prior actions or for general legal services. The latter
     attaches to the judgment or proceeds for services
     performed in the particular action only. The former is
     lrpassivell and not enforceable by proceedings to
     foreclose, except as may be accomplished through some
     incidental proceeding.    The latter may be actively
     enforced as in Berrum v. Georgetta.  ...

     The Nevada Supreme Court went on to point out that the
adoption of a charging lien by statute does not abrogate the common
law lien for retention of papers, pointing out that many federal
and state courts have so held.        In discussing the various
authorities, and after a thorough review of other cases, the Nevada
Court decided:
     ...  The record indicates that the court 's reasoning was
     simply that the right of substitution existed and that
     the substitution would have been a more or less vain act
     without providing the substituted attorney with the
     necessary data to enable her to continue the litigation,
     but, as has been seen, this is the very strength and
     purpose of an attorney's retaining lien. The court was
     without jurisdiction to discharge and destroy such lien
     without providing for the payment or security for the
     payment of the attorney fees secured thereby.
     The clients complained bitterly that the tactics of the
     attorneys have greatly prejudiced the formers' rights,
     have impeded and retarded litigation;  ...

     ...   Accordingly, it would seem that the extent of the
     recovery of the main action, although presently
     contingent and possibly problematical, should not make
     it difficult for the clients to provide such bond or
     security as may be fixed by the court. The litigation
     involving the attorney's claim for fees and the client's
     cross complaint for damages could then be tried and
     determined in an orderly manner.


     The Nevada Supreme Court then entered an order requiring that
the attorneys turn over the papers to the substituted attorneys,
upon the clients providing a bond or other security in the amount
of extent to be determined by the lower court.
     The Morse case fits exactly the situation that Daly faced when
he was substituted as counsel for the plaintiff Bink.       He had
framed a complaint upon which Bink's case depended, he had received
the answers from the defendants, and he had in his file the key to
eventual liability, the "New Discovery1'document. He informed the
substituted counsel that he was holding these papers until a
contract or other agreement was reached respecting his fee. He was
absolutely legally correct to do so.      Events have proved his
foresight was correct.    Not only does Bink refuse to pay him any
fee, but    even now he contests the cost bill      to which his
substituted attorneys agreed before the District Court.
     It is sharper than a serpent's tooth for a lawyer to have a
thankless client.    Bink, nearing the end of his time under the
statute of limitations, found a lawyer with some expertise in the
matter willing to take on his case on a contingent fee basis, and
to advance costs of his behalf because Bink claimed that he had "no
funds."    The District Court in this case was considerate in his
award of a fee to Daly.    One-ninth of a total recovery is little
enough for the lawyer who saved Bink's cause of action and whose
efforts outlined its form, and through whom the clinching document
was obtained.
     When a client enters into a contingent fee contract with an
attorney to pursue for the client a legal right, one would think
that the basic principles of contract law should apply as with any
                                                            .
other contract.     An intervening problem when a breach of a
contingent fee occurs is that even though the client is bound by
the contract, as well as the attorney, the courts nevertheless are
reluctant, through the application of ordinary contract law, to
override the client's freedom to retain counsel whom he trusts and
in whom he has confidence, and to discharge an attorney with whom
he is dissatisfied.    The California experience is illustrative.
Formerly, California held that an attorney employed under a
contingent fee contract and subsequently discharged without cause
was entitled to recover the full amount of the contingent fee
agreed upon regardless of the amount of work he had put in the case
and even though the success contemplated under the contingency was
brought about by another attorney whom the client has substituted.
Denio v. City of ~untington Beach, 140 P.2d 392 (1943); Zurich
General Accident and Insurance Company v. Kinsler, 81 P.2d 913
(1938).    In those cases, the breach of contract law was strictly
applied.    Later, however, in Fracasse v. Brent, 494 P.2d (Cal.
1972), it was held that the remedy of a wrongfully discharged
attorney was limited to recovery in quantum meruit of the value of
the services rendered up to the time of the discharge and that the
attorney was not entitled to sue for full damages for the client's
breach of the contingent fee contract.
     The State of Idaho, when faced with this problem, refused to
follow either the former California cases or the Fracasse case, and
said in Anderson v. Gailey, 606 P.2d 90, 96 (Idaho 1986):
     Although the client is only liable for the attorney's
     actual losses and not necessarily the full contract fee,
     a client who discharges one attorney and hires another
     will nevertheless pay more in attorney's fees than if he
     had only retained the services of one attorney. The
     services performed by the second attorney will generally
     be somewhat duplicative of services already performed by
     the first attorney attorney, and those duplicated
     services ordinarily would be reflected both in the first
     attorneys recovery and in the fees recovered by the
     second attorney. In this sense, the client's freedom to
     discharge an attorney is burdened. However, it is not
     inappropriate for the client to bear this burden where
     he has discharged his first attorney without cause. In
     sum, an application of general principles of contract law
     in this type of case will not generally result in the
     imposition of a significantly greater burden on the
     client than that which results from a recovery in quantum
     merit under the California courts rule in Fracasse.
     We conclude that a proper application of the general
     principles of contract law best remedies the evils
     pointed out by the California court in Fricasse, and yet
     does so without engaging in the dubious practice of
     finding "implied in law1' terms in the contingent fee
     contract and without stripping the attorney entirely of
     his right to rely on the contingent fee contract and to
     sue for its breach. The California court's decision in
     Fracasse, as the dissent in that case noted, reduced "an
     attorney-client contract to a hollow and meaningless act"
     and to an agreement that "may be dissolved into thin air
     at the mere whim of a client" (citing authority). In our
     view, the attorney-client contract is still a contract,
     and either the attorney or the client is entitled to sue
     for damages for its breach.
     Based on the foregoing, the Idaho court remanded the cause to
the District Court with these instructions:      The court was to
consider the expenses saved by the first attorney because he was
not required to complete the performance of the contract, and to
consider the value to the first attorney of being relieved of his
obligation to continue to perform those services and expend further
time; in making those determinations on remand, the court was also
to look to the services performed by the second attorney, the
substituted counsel, as an indication of the services which
remained     to be performed and which the first attorney was no
longer obligated to perform.     It would also be recognized by the
district court on remand that some of the services performed by the
substituted counsel would be duplicative of those already performed
by the first attorney and the first attorney's recovery on contract
was not to be reduced by the value of those services.         606 P.2d at



     When push comes to shove on the remand of this case, the first
duty of the trial court would be to find whether Daly was
discharged for cause under the facts of the case.              If he was
discharged    without   cause,   merely   because    the      client    was
dissatisfied with the progress of the client's case but was not
otherwise prejudiced, then the rule adopted by the Idaho court in
Anderson v. Gailey should apply as a proper rule in Montana.           When
the cause comes back to this Court, if it does, we will have a
proper record on which to make a decision.
     In the meantime, on the record before us now, I would affirm
the District Court.


                                                               ,

                                          ,/        Justice
