Atkinson v. IHC Hospitals, Inc.
| Decision Date | 03 July 1990 |
| Docket Number | No. 880310,880310 |
| Citation | 798 P.2d 733 |
| Parties | Roger ATKINSON, Polly Atkinson, and Roger and Polly Atkinson as guardians ad litem for Chad Atkinson, Plaintiffs and Appellants, v. IHC HOSPITALS, INC., aka Intermountain Health Care, Hospitals, Inc., a corporation, Scott Olsen, Stephen G. Morgan, Morgan, Scalley & Reading, and John Does I through X, Defendants and Appellees. |
| Court | Utah Supreme Court |
Dale F. Gardiner, Robert J. Debry, Gordon Jensen, Salt Lake City, for plaintiffs and appellants.
Paul S. Felt, Salt Lake City, for Scott Wetzel Services and Scott Olsen.
B. Lloyd Poelman, Salt Lake City, for Intermountain Health Care Hospitals, Inc.
Carman Kipp, Heinz J. Mahler, Salt Lake City, for Stephen G. Morgan and Morgan, Scalley & Reading.
Plaintiffs appeal from summary judgment granted to all defendants in the Third Judicial District Court, Salt Lake County. The trial court determined that no genuine issues of material fact existed with respect to plaintiffs' complaint for legal malpractice, fraud, and negligent misrepresentation. We affirm.
Polly Atkinson and Roger Atkinson ("the Atkinsons") are the parents and guardians ad litem of Chad Atkinson, a minor, who was born on March 2, 1983. On March 4, 1983, while still in Primary Children's Medical Center, Chad aspirated digestive material that filled his lungs, causing a lack of oxygen (anoxia), which resulted in permanent brain damage. It is alleged that a nurse shut off the warning device monitoring Chad prior to the incident.
After the injury, defendant Intermountain Health Care, Inc. ("IHC"), initiated negotiations with the Atkinsons through IHC's insurance adjuster, Scott Wetzel Services, Inc. ("Wetzel"). Scott Olsen, an employee of Wetzel, met with the Atkinsons four or five times to discuss Chad's condition and possible settlement terms. After the terms, conditions, and amounts of the settlement had been fully agreed upon, Wetzel retained an attorney, Steve Morgan, for the purpose of drafting the documents necessary for presentation to the probate court for approval of the settlement as required by law for all settlements involving minors. 1 The Atkinsons claim that they understood Morgan to be their attorney and that he acted in that capacity for them in explaining the terms of the agreement and appearing on their behalf in the probate court proceeding where the Atkinsons were appointed guardians of Chad.
The Atkinsons were considered adults at the time of Chad's birth and during the settlement by reason of their marriage. 2 Neither Roger nor Polly had progressed beyond the tenth grade, nor are they presently high school graduates. They were, however, assisted in the settlement negotiations by Roger's father, George Atkinson, who was a union negotiator and who prepared a ten-page counterproposal.
The Atkinsons settled on a total amount of $1,280,000, assuming a normal life of 65 years for Chad. The settlement was structured, with payments to be spread out over a number of years, and had a present-day value of $118,000.
In the trial court, the Atkinsons claimed that the settlement was insufficient, that they were not adequately represented by Steve Morgan, and that IHC and Wetzel misrepresented to them the severity of Chad's injuries. The trial court granted all of defendants' motions for summary judgment, and the Atkinsons appeal that order.
This court has held, "Summary judgment is appropriate if the pleadings and all other submissions show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." 3 Our review on appeal requires a determination of the existence of any issues of material fact with regard to (1) whether attorney Steve Morgan owed a duty to the Atkinsons or acted in a representative capacity, and (2) whether the settlement and release obtained by Wetzel for IHC was done so by means of fraud or negligent misrepresentation.
The Atkinsons claim that attorney Steve Morgan represented them throughout the probate hearings to approve the settlement and management of Chad's estate. The Atkinsons present four theories upon which they believe that Mr. Morgan assumed the duty to represent their interests: (1) implied contract, (2) limited attorney-client relationship, (3) third-party liability, and (4) volunteer legal advice.
The record is clear that the Atkinsons did not consider Morgan their attorney at any time during his involvement in the probate proceedings. Despite the fact that Scott Olsen, manager of Wetzel, suggested that Morgan's services be utilized to prepare the necessary documents for the probate hearing, there are a number of indicators which confirm that the Atkinsons did not rely on Morgan's experience, skill, or expertise with regard to the adequacy of the settlement.
First, all of the pleadings and documents that were prepared and filed by Morgan indicated clearly that Morgan was representing IHC, not the Atkinsons. The Atkinsons had an opportunity to review the documents and apparently did discuss the settlement with an attorney of their choosing.
Second, there was no contract of employment or retainer agreement between the Atkinsons and Morgan. They did not hire Morgan, nor did they pay for any services performed. Rather, it is clear from the record that Morgan was hired by IHC, which in turn paid for his services.
Third, the probate judge asked Mrs. Atkinson directly about her legal representation while Morgan was in the courtroom participating in the hearing:
It is thus clear that the Atkinsons exercised the right which was theirs to represent themselves and to proceed without the benefit of counsel. It is equally clear that they did not consider Morgan to be their attorney and that they did not seek his advice with respect to the merits of the settlement agreement. In the absence of an attorney-client relationship, Morgan owed no implied contractual duty to the Atkinsons, nor did there exist a limited attorney-client relationship.
The Atkinsons next claim is that Morgan owed them a duty under a theory of third-party liability. We have yet to fully address the theory of third-party liability, and we have not allowed recovery in any of the cases where third-party liability was in issue. 4
Cases cited by the Atkinsons from other jurisdictions state that in order to establish a cause of action under this theory, the Atkinsons must
allege and prove that the intent of the client to benefit the nonclient was a direct purpose of the transaction or relationship. In this regard, the test for third party recovery is whether the intent to benefit actually existed, not whether there could have been an intent to benefit the third party. 5
Indeed, the third-party liability theory "does not supplant entirely the strict privity rule, but instead operates as a limited exception to that rule." 6 Cases utilizing the third-party liability theory involve drafting and administering wills and estates, 7 fraudulent misrepresentations, 8 creditors of a corporation in receivership, 9 purchasers at a foreclosure sale where attorneys conducted the sale improperly, 10 and giving a legal opinion on a bond. 11 Indeed, "any duty owed by an attorney to a third party is derivative of the duty owed by that attorney to his client." 12
The instant case is nothing like the other cases adopting the third-party liability theory. The settlement of a potential claim or a lawsuit is not the kind of benefit envisioned in the third-party liability theory. Despite the fact that IHC and the Atkinsons had reached a settlement agreement, they were still potential adversaries in litigation.
Morgan, who had a contractual duty to represent IHC, had no corresponding duty to assure that the settlement for the Atkinsons was sufficient to fit their needs. The basis of our judicial system is the adversarial model, a concept which is foreign to the placement of a duty upon counsel to represent the best interests of both sides. The third-party liability theory is thus inapposite to the factual context of the instant case.
The Atkinsons' final claim against Morgan is that by offering volunteer legal advice he undertook a duty to act in their best interests. The "legal advice" Morgan gave was an explanation of the probate documents, specifically the order approving settlement of a minor's claim. Morgan testified: "I read that document to them and explained to them that in order for the court to approve and sign this Order, that the court would have to find that the settlement in all respects was fair." Not only is the above a true statement of the law, 13 but also the court approved the settlement upon Mr. Atkinson's statement that he believed it to be fair:
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