Akutagawa v. Laflin, Pick & Heer, P.A.

Citation2005 NMCA 132,126 P.3d 1138
Decision Date29 September 2005
Docket NumberNo. 25,116.,25,116.
PartiesTazue AKUTAGAWA, individually and Tazue Akutagawa and Stanley Yoshiro Akutagawa, as Co-Trustees of Trust B, the Decedent's Trust, Created Under the Taro Akutagawa and Tazue Akutagawa Revocable Trust, Plaintiffs-Appellants, v. LAFLIN, PICK & HEER, P.A., Defendant-Appellant.
CourtNew Mexico Supreme Court

Anthony Lawrence Romo, Romo & Associates, Albuquerque, NM, for Appellants.

Carol Lisa Smith, Rikki L. Quintana, Bannerman & Williams, P.A., Albuquerque, NM, for Appellant.

OPINION

BUSTAMANTE, Chief Judge.

{1} Plaintiffs filed a complaint for legal malpractice against the law firm of Laflin, Pick & Heer, P.A. (Law Firm or Defendant). The district court granted Defendant's motion for summary judgment "based on lack of damages" and Plaintiffs appeal. We affirm.

BACKGROUND

{2} Drawing from the record and the briefs, we assume the following facts are accurate. Tazue Akutagawa (wife) and her now deceased husband, Taro Akutagawa (husband) engaged John Laflin — a principal in the Law Firm — to provide estate planning services. Laflin prepared a series of estate planning documents for the Akutagawas beginning in 1979, with various revisions and amendments, through 2002. The Akutagawas requested an estate plan that would be consistent with Japanese traditions and customs. Laflin prepared an A-B Trust for the Akutagawas, which consisted of a revocable survivors trust (Trust A) and an irrevocable decedents trust (Trust B). In accordance with Japanese custom, their eldest son, Stanley Yoshiro Akutagawa (son) was to be responsible to see to the needs of Taro or Tazue and his siblings, and to effect the wishes of his parents as to the distribution of property. The Akutagawas contend that the primary purpose of the trust was to allow all property owned by them at the death of the first of them to be available to support the survivor of them for his or her lifetime. Laflin contends that in preparing the trust, the Akutagawas expressed a desire to minimize future estate taxes.

{3} The A-B Trust arrangement set up for the Akutagawas by Laflin is apparently a very common estate planning technique used in estates of married couples who want to provide for the surviving spouse and at the same time minimize estate taxes. The defense expert, Kenneth C. Leach (Leach), asserted by affidavit that Laflin and the Law Firm complied with the standard of care required of estate planning attorneys by including critical language in the trust restricting the unconditional access of the surviving spouse to the Trust B assets to the extent required by applicable Internal Revenue Code and Internal Revenue Service regulations, so as to minimize the potential for future estate taxes. The governing A-B Trust agreement required that assets in the trust be divided between Trust A and Trust B so that each trust had a net community asset value equal to one-half the total value of the trust estate. Under the terms of the estate plan, half of the Akutagawas' property becomes property of Trust B after the death of the first spouse. Language in versions of the trust agreement prior to 1998 provided that distributions under Trust B would be under the control of the son and surviving spouse. The parties stipulated that there are no allegations or claims for legal malpractice for any legal services or advice provided by Laflin prior to the preparation and signing of the 1998 trust amendment.

{4} In preparing revisions to the trust documents in 1998 and subsequently in 2002, a critical paragraph governing distributions from Trust B during the lifetime of the surviving spouse — present in previous versions of the trust — was omitted. As a result of the omission, the provisions for Trust B require that for any distributions from the trust, one of the trustees must be independent. Since neither wife nor son are independent as to Trust B, the wishes of the Akutagawas that the trust be controlled by son are thwarted by the omission. The omission of the critical paragraph prevents wife from practical access to the property that she thought would be available to her.

{5} It is unclear from the complaint when Plaintiffs became aware of the omission of the critical paragraph. Laflin stated in his affidavit that he became aware of the omission only when the complaint was filed.

{6} Laflin met with Plaintiffs following husband's death and made several suggestions for the division of the trust assets between the A and B Trust, all of which were rejected by Plaintiffs. The value of the total gross estate at the time of husband's death was less than one million dollars, so no federal or state tax returns were due. No action or inaction by Laflin reduced the aggregate net value of the estate, and the value of the estate was the same, with or without the estate planning services and advice provided by Laflin. To divide the assets as required by the trust agreement, wife contributed the household effects and artwork to Trust B, conveyed the family residence from the trust to herself, and revoked Trust A in its entirety. This was done after terminating the services of Laflin, and not in reliance upon any legal advice provided by Laflin.

{7} The Plaintiffs' theories of negligence in their complaint are that Laflin breached the standard of care by not honoring their wishes, by giving them negligent advice after husband died, and generally by negligently misrepresenting the efficacy of certain estate options available to them. Defendant moved for summary judgment, arguing that Plaintiffs' allegations did not establish any legally compensable damages, and, further, that Plaintiffs had wholly failed to mitigate their damages, if any. Following oral argument on the matter, the district court granted the motion for summary judgment based on lack of damages.

DISCUSSION

{8} The Akutagawas raise three issues on appeal. They contend that the district court erred (1) in finding that there are no issues of material fact in dispute, (2) in finding that the failure to mitigate serves to dismiss their cause of action in its entirety, and (3) in considering notions not on the record and improperly weighing the evidence.

STANDARD OF REVIEW

{9} "The standard of review for a motion for summary judgment is whether there are any genuine issues of material fact and whether the moving party is entitled to summary judgment as a matter of law." Williams v. Cent. Consol. Sch. Dist., 1998-NMCA-006, ¶ 7, 124 N.M. 488, 952 P.2d 978. "[W]e examine the whole record for any evidence that places a genuine issue of material fact in dispute." Rummel v. Lexington Ins. Co., 1997-NMSC-041, ¶ 15, 123 N.M. 752, 945 P.2d 970. The Defendant moved for and was granted summary judgment on the issue of damages. We limit our review on appeal to the issue of damages. We review the record to determine if there is any material fact in dispute as to the Plaintiffs' claim for damages, and whether Defendant was entitled to judgment as a matter of law. "We review these legal questions de novo." Self v. United Parcel Serv., Inc., 1998-NMSC-046, ¶ 6, 126 N.M. 396, 970 P.2d 582.

{10} "The party moving for summary judgment bears the burden of making a prima facie showing that no genuine issue of material fact exists." Hyden v. Law Firm of McCormick, Forbes, Caraway & Tabor, 115 N.M. 159, 163, 848 P.2d 1086, 1090 (Ct.App.1993). A prima facie showing is defined as "such evidence as is sufficient in law to raise a presumption of fact or establish the fact in question unless rebutted." Id. (internal quotation marks and citation omitted). Once a defendant movant meets the initial burden of negating at least one of the essential elements upon which a plaintiff's claims are grounded, the burden shifts to plaintiff to come forward with admissible evidence to establish each required element of the claim. Blauwkamp v. Univ. of N.M. Hosp., 114 N.M. 228, 231-32, 836 P.2d 1249, 1252-53 (Ct.App.1992).

ANALYSIS

{11} In a suit for legal malpractice, "a plaintiff must prove three essential elements: (1) the employment of the defendant attorney; (2) the defendant attorney's neglect of a reasonable duty; and (3) the negligence resulted in and was the proximate cause of loss to the plaintiff." Rancho del Villacito Condos., Inc. v. Weisfeld, 121 N.M. 52, 55-56, 908 P.2d 745, 748-49 (1995) (internal quotation marks and citation omitted). Plaintiffs

have the burden of showing not only negligence on the part of their attorney but also that their damages were proximately caused by that negligence. When the attorney's negligence involves failure to take certain action, the client must show that if the attorney had acted then the client would not have suffered damage, at least not to the same degree.

Carrillo v. Coors, 120 N.M. 283, 288, 901 P.2d 214, 219 (Ct.App.1995) (citation omitted). In this case, Plaintiffs were required to show that the alleged negligent conduct of Laflin, and the omission of the critical paragraph in the 1998 and 2002 trust documents, resulted in legally compensable damages.

{12} We begin with a review of the damages Plaintiffs allege to have suffered as the result of Defendant's malpractice. In their complaint and affidavits from wife, son, and Taro and Tazue's daughter Edith Keiko Lambert, Plaintiffs allege the following damages:

[Wife] is precluded for the rest of her life from practical enjoyment of the property ... built up during the ... marriage.

[D]amages [to] Trust B ... include ... the ramifications of the ongoing competing interests arising from Trust B's terms and the fact that it is not able to fulfill its primary purpose [which is] the well being of [Wife].

Plaintiffs will ... have to employ other professionals to guide [them] in coping as best they can to meet the needs of [Wife] while not violating the terms of Trust B[.]

Plaintiffs have suffered losses and will continue to suffer losses based on the information provided...

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