355 F.3d 969 (7th Cir. 2004), 03-1897, Mungo v. Taylor

Docket Nº:03-1897, 03-1913, 03-2018.
Citation:355 F.3d 969
Party Name:Marjorie L. MUNGO, Debtor-Appellant, Cross-Appellee, v. Maureen Sullivan TAYLOR, Defendant-Appellee, Cross-Appellant.
Case Date:January 20, 2004
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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Page 969

355 F.3d 969 (7th Cir. 2004)

Marjorie L. MUNGO, Debtor-Appellant, Cross-Appellee,

v.

Maureen Sullivan TAYLOR, Defendant-Appellee, Cross-Appellant.

No. 03-1897, 03-1913, 03-2018.

United States Court of Appeals, Seventh Circuit

January 20, 2004

        Argued Dec. 5, 2003.

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        Michael Weininger (argued), Warren Lupel, Katz, Randall & Weinberg, Chicago, IL, for Appellee.

        Julie A. Klingbell Boynton (argued), Donald L. Johnson, Chicago, IL, for Debtor-Appellant.

        Before FLAUM, Chief Judge, and MANION and WILLIAMS, Circuit Judges.

        WILLIAMS, Circuit Judge.

        Marjorie Mungo filed a voluntary petition for relief under Chapter 11 of the bankruptcy code and listed Maureen Sullivan Taylor, her former divorce attorney, as a disputed creditor. Taylor filed a proof of claim in the bankruptcy court with respect to the fees that she claimed Mungo owed as a result of the divorce representation. Mungo objected to Taylor's proof of claim, declaring that Taylor had coerced her into signing the marital settlement, and then filed an adversary proceeding against Taylor alleging legal malpractice in the divorce action.

        The bankruptcy court consolidated the adversary proceeding and the objection to the proof of claim and held a four and a half day bench trial. Despite finding that Taylor had committed various breaches of duty to Mungo as her divorce counsel, the bankruptcy court found for Taylor in the adversary action because it found that Mungo had suffered no damages. On reconsideration, however, the court awarded Mungo $7,340.43 in damages, granted Taylor's bill of costs, and denied costs to Mungo. The bankruptcy court also sustained in part Mungo's objection to Taylor's proof of claim by reducing the amount of the claim to a figure that Mungo argued was permissible. Mungo later sought to have the claim judgment reconsidered, arguing that she had not actually agreed to that figure but rather that it was the only permissible amount that could be awarded. The court considered that argument waived.

        Mungo and Taylor both appealed to the district court, which found that the bankruptcy court had erred in awarding damages to Mungo but affirmed the bankruptcy court's judgment on all other grounds. Both parties now appeal and raise essentially the same arguments that they raised in the district court. Because the district court issued a thorough and well-reasoned memorandum opinion and order that does not contain any error, we adopt the district court's opinion dated March 7, 2003, as our own and AFFIRM the judgment of the lower court on all counts. The district court's decision is appended below.

        MEMORANDUM OPINION AND ORDER

        Debtor-Plaintiff Marjorie Lynn Mungo appeals from the October 5, 2001 judgment

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of the bankruptcy court (as amended on March 22, 2002), and Creditor-Defendant Maureen Sullivan Taylor cross appeals. For the reasons discussed below, the bankruptcy court's order as amended is affirmed in part and reversed in part.

        BANKRUPTCY PROCEEDINGS

        On July 14, 2000, Mungo filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code and listed Taylor as a disputed creditor. Taylor was a disputed creditor by virtue of her representation of Mungo in state court divorce proceedings. Mungo objected to Taylor's proof of claim, alleging that Taylor had coerced Mungo into signing a marital settlement, and Mungo filed an adversary proceeding against Taylor, alleging legal malpractice. The bankruptcy court consolidated the objection to the claim and the adversary proceeding and held a four and a half day bench trial.

        On October 5, 2001, Judge Wedoff held that Mungo had established a number of breaches of duty by Taylor, including her failure to complete discovery, failure to obtain complete financial information prior to completing the pretrial statement, failure to seek interim attorney's fees, failure to give thorough advice regarding the consequences of the settlement agreement, and her paralegal's instruction to Mungo to offer false testimony. Nonetheless, Judge Wedoff entered judgment in favor of Taylor in the adversary proceeding because he found that Mungo had failed to provide evidence of damages resulting from any of these breaches. (See R. 1-1, Record, Vol. VIII, October 5, 2001 Ruling.)

        Mungo filed a motion for reconsideration, and on March 22, 2002, Judge Wedoff amended his ruling on the adversary complaint to award Mungo damages in the amount of $7,340.43. (See R. 1-1, Record, Vol. I, Mar. 22, 2002 Mem. of Decision.) Mungo and Taylor both filed a bill of costs in the adversary case, and on April 17, 2002, Judge Wedoff entered an order granting Taylor's bill of costs and denying Mungo's bill of costs. Taylor filed a timely notice of appeal from the amended ruling on the adversary action, and Mungo filed a timely appeal from the order denying her bill of costs.

        On the claim objection, Judge Wedoff sustained Mungo's objection in part, reducing Taylor's proof of claim from $25,224.28 to $10,641.38. (See R. 1-1, Record, Vol. VIII, October 5, 2001 Ruling.) Mungo sought to amend or alter the allowance of Taylor's claim, but that motion was denied. Mungo subsequently filed a timely notice of appeal related to the amount of Taylor's proof of claim.

        CURRENT APPEALS

        In accordance with Federal Rule of Bankruptcy Procedure 8006, Mungo filed and served her statement of issues to be presented on appeal, which may be summarized in these terms:

        1. Whether Mungo proved damages in excess of $7,340.43;

        2. Whether Mungo waived the argument that Taylor's claim for attorney's fees should be disallowed where Mungo failed to make the request during closing argument;

        3. Whether the bankruptcy court erred by failing to compel testimony concerning a gift received by Mungo's former spouse just days after the divorce settlement; and

        4. Whether the bankruptcy court erred by failing to award Mungo costs where she was the prevailing party at trial.

        In accordance with Rule 8006, Taylor filed and served her statement of issues to be presented on appeal. These issues are as follows:

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        1. Whether any of Taylor's negligent acts or omissions proximately caused Mungo any damages;

        2. Whether the bankruptcy court's finding that Taylor failed to give thorough advice concerning the divorce settlement was clearly erroneous;

        3. Whether the bankruptcy court's finding that Taylor and her former spouse were undergoing an irreconcilable breakdown in August 1997 was clearly erroneous;

        4. Whether the bankruptcy court's finding that dissipated family assets were not used for legitimate family expenses was clearly erroneous;

        5. Whether Mungo is entitled to damages based on a legal theory not raised until closing arguments; and

        6. Whether the bankruptcy court erred by refusing to permit Mungo to testify contrary to her sworn testimony in the underlying state court divorce proceedings.

        STANDARD OF REVIEW

         In the course of a district court's decision to affirm, modify or reverse an order of the bankruptcy court, "[f]indings of fact ... shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses." Fed. R. Bankr.P. 8013. Thus, a bankruptcy court's factual findings cannot be disturbed "simply because [the district court] is convinced it would have decided the case differently." In re Weber, 892 F.2d 534, 538 (7th Cir. 1989) (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985)). Both questions of law and mixed questions of law and fact, however, are reviewed de novo. See In re Ebbler Furniture and Appliances, Inc., 804 F.2d 87, 89 (7th Cir. 1986).

        I. MUNGO'S PROOF OF DAMAGES

         In order to recover damages for a legal malpractice action in Illinois, a plaintiff must establish what the result would have been in the underlying action where the plaintiff's former attorney committed the alleged malpractice. See Eastman v. Messner, 188 Ill.2d 404, 411, 242 Ill.Dec. 623, 721 N.E.2d 1154, 1158 (Ill.1999). A plaintiff need not prove to a certainty that she would have prevailed absent legal malpractice, but she must show that a victory of some sort was more likely than not in the underlying action. See Praxair, Inc. v. Hinshaw & Culbertson, 235 F.3d 1028, 1032 (7th Cir. 2000); Jones Motor Co. v. Holtkamp, Liese, Beckemeier & Childress, P.C., 197 F.3d 1190, 1193 (7th Cir. 1999). In this case, the underlying action was a divorce action, and the measure of damages for Mungo's legal malpractice claim is the difference between her recovery under the settlement agreement and what she would have recovered in the divorce action but for Taylor's legal malpractice.

         Mungo attacks Judge Wedoff's analysis of the value of her underlying divorce action, arguing that he undervalued the marital estate. In a divorce action, the issues of damages and the valuation of the marital estate are factual...

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