Barmat v. John and Jane Doe Partners A-D, A-D

• Decision Date: 10 December 1987
• Docket Number: No. CV-86-0572-PR,A-D,CV-86-0572-PR
• Citation: 747 P.2d 1218,155 Ariz. 519
• Parties: Ziva BARMAT, on behalf of herself and as personal representative of the Estate of Charles Barmat, Plaintiff/Appellant, v. JOHN AND JANE DOE PARTNERS, et al., Defendants/Appellees.
• Court: Arizona Supreme Court

Page 1218

747 P.2d 1218

155 Ariz. 519

Ziva BARMAT, on behalf of herself and as personal representative of the Estate of Charles Barmat, Plaintiff/Appellant, v. JOHN AND JANE DOE PARTNERS A-D, et al., Defendants/Appellees.

No. CV-86-0572-PR.

Supreme Court of Arizona, In Banc.

Dec. 10, 1987.

W. James Harrison, P.C. by John Gabroy, Richard M. Rollman, Sharmila Roy, Tucson, for plaintiff/appellant.

Gallagher & Kennedy by Michael K. Kennedy, Chris J. Scheldrup, Phoenix, for defendants/appellees.

FELDMAN, Vice Chief Justice.

This is a legal malpractice action in which the trial court granted summary judgment for the defendants. The court of appeals reversed and allowed plaintiffs attorney's fees on appeal. Barmat v. John and Jane Doe Partners, 155 Ariz. 515, 747 P.2d 1214 (App.1986). We granted review for the sole purpose of determining whether a legal malpractice action "arises out of a contract" so as to be eligible for an award of attorney's fees pursuant to A.R.S. § 12-341.01(A).

I. FACTS

In February 1982, police officer Jeffrey Ross was killed during a narcotics raid on a bar owned by Charles and Ziva Barmat. Ross's widow filed a wrongful death action against the Barmats. Their insurer, Ambassador Insurance Company, assigned counsel to represent the Barmats. The rather complicated events that followed are fully set forth in the court of appeals' opinion. For purposes of this case, we need only note that Ambassador eventually became insolvent and the Arizona Guaranty Fund (the Fund) took over the Barmats' defense. See A.R.S. § 20-667 (Supp.1986). The Fund retained attorney Edward Hochuli to represent the Barmats. The Barmats now allege that the attorney breached the duty of "undeviating and single allegiance" he owed them by giving the Fund advice that was contrary to the Barmats' best interests, by disclosing confidential information to the Fund, by placing its interests ahead of the Barmats', and by providing the Barmats inadequate representation during certain proceedings in the trial court.

The trial court granted the attorney's motion for summary judgment, ruling that he was an agent of the Fund and therefore immune from suit under A.R.S. § 20-675(A). The court of appeals reversed, holding that, when representing the Barmats, the attorney was not an agent of the Fund and was not entitled to the immunity granted by § 20-675(A). The court concluded that the rule of Parsons v. Continental National American Group, 113 Ariz. 223, 550 P.2d 94 (1976), precludes the existence of an agency relationship between the attorney and the insurer that assigned him to the defense. That attorney, the court held, acts as the attorney for and agent of the insured, and not as the agent of the Fund for purposes of the immunity statute. 155 Ariz. at 518, 747 P.2d at 1217- ----. We agree with the analysis and conclusions of the court of appeals.

In passing, however, the court allowed the Barmats attorney's fees on appeal, pursuant to A.R.S. § 12-341.01(A). Hochuli petitioned for review, raising five issues. We denied review on all but the propriety of the allowance of attorney's fees. We review that issue to settle some uncertainty in previous cases with regard to the circumstances under which attorney's fees may be recovered in tort actions in which the victim and the tortfeasor have some type of contractual relationship. See Rule 23, Ariz.R.Civ.App.P., 17A A.R.S. We have jurisdiction pursuant to Ariz. Const. art. 6, § 5(3) and A.R.S. § 12-120.24.

II. DISCUSSION

A. Interim Appeal

Hochuli contends that the award of fees on appeal was improper because the appeal resulted only in reversal of the summary judgment and remand for trial. It is not yet determined, Hochuli argues, who will be the "successful party" eligible under A.R.S. § 12-341.01(A) for an allowance of fees. We believe that our recent decision in Wagenseller v. Scottsdale Memorial Hospital, 147 Ariz. 370, 710 P.2d 1025 (1985), is dispositive. Here, as in Wagenseller, the Barmats' legal position was meritorious and the issue resolved was central to the case. Id. at 393-94, 710 P.2d at 1048-49.

B. Arising Out of Contract

Hochuli next argues that the Barmats' legal malpractice claim does not meet the criteria of A.R.S. § 12-341.01(A). The statute allows an award of fees to be made in contested actions "arising out of a contract, express or implied." Pointing out that the law implies a contract between attorney and client and that one of the terms so implied is the lawyer's covenant to render competent and ethical service, the Barmats argue that their claim fairly meets the eligibility criteria of the statute. We agree that the law implies a contract between lawyer and client, including an implied covenant of competent and ethical representation. In re Hegstrom, 153 Ariz. 286, 736 P.2d 370 (1987). We do not believe, however, that the breach of an implied covenant in a contract implied in law necessarily brings the action within the statute.

The application of the contract statute to implied contracts has been variously decided in Arizona. See, e.g., Wenk v. Horizon Moving & Storage Co., 131 Ariz. 131, 639 P.2d 321 (1982), and Amphitheater Public Schools v. Eastman, 117 Ariz. 559, 574 P.2d 47 (App.1977) (both dealing with the attempt to recover attorney's fees for breach of bailment contract implied in fact); Sato v. Van Denburgh, 123 Ariz. 225, 599 P.2d 181 (1979) (declining to apply contract statute of limitations in malpractice action against accountant); Lewin v. Miller Wagner & Co., 151 Ariz. 29, 725 P.2d 736 (App.1986) (disallowing attorney's fees in malpractice action against accountant); Trebilcox v. Brown & Bain, P.A., 133 Ariz. 588, 653 P.2d 45 (App.1982) (reaching opposite result in breach of fiduciary duty action against attorney).

The law implies contracts in many professional relationships, and in such contracts generally implies a covenant that the professional is liable if he or she does not act in accordance with the standard of reasonable care. See W.L. PROSSER & W.P. KEETON, THE LAW OF TORTS § 92, at 657-58 (5th ed. 1984); 2 J. DOOLEY, MODERN TORT LAW § 33.17 (Lindahl ed. 1983). Implied contracts are also recognized in certain nonprofessional relationships, such as that between innkeeper and guest and between common carrier and passenger. See, e.g., Dove v. Lowden, 47 F.Supp. 546 (W.D.Mo.1942); Yu v. New York, New Haven & Hartford Railroad Co., 145 Conn. 451, 144 A.2d 56 (1958). To carry the Barmats' argument to its logical conclusion, our statute would permit the allowance of attorney's fees in an ordinary negligence action by a bus passenger against his carrier or by a tenant against his landlord. We do not believe that the legislature intended so broad a reading of the statute. See Wagenseller, 147 Ariz. at 391, 710 P.2d at 1046. Nor do we believe that the text of the statute requires so broad an interpretation.

Specifically, we believe that a distinction must be drawn between contracts implied in fact and those implied in law. A contract implied in fact is a true contract--an undertaking of contractual duty imposed "by reason of a promissory expression." 1 A. CORBIN, CORBIN ON CONTRACTS § 18, at 39 (1963). The distinction between an express contract and one implied in fact is that in the former the undertaking is made by words written or spoken, while in the latter conduct rather than words conveys the necessary assent and undertakings. Id. at 43. Contracts implied in law, on the other hand, are not true contracts at all. They are obligations "created by the law without regard to expressions of assent by either words or acts." Id. § 19, at 44. Historically, contracts implied in law arose as a species of obligation created to achieve a just result in a case even though there had been no expression of assent "and sometimes even against a clear expression of dissent." Id. at 46. Corbin remarks, in fact, that it might be "better not to use the word 'contract' at all," id., and today the term "quasi contract" is often used in its place.

An excellent illustration is an early case involving a professional relationship between a physician and an injured, unconscious patient. Acknowledging that there could have been " 'no contract or promise in fact--no meeting of the minds,' " the court described such a contract:

"It has no actual existence; it is simply a mythical creation of the law. The law says it shall be taken that there was a promise when, in point of fact, there was none. Of course, this is not good logic, for the obvious and sufficient reason that it is not true. It is a legal fiction, resting wholly for its support on a plain legal obligation and a plain legal right.... There is a class of legal rights [and] duties ... which seem to lie in the region between contracts on the one hand and torts on the other, and to call for the application of a remedy not strictly furnished either by actions ex contractu or actions ex delicto."

Cotnam v. Wisdom, 83 Ark. 601, 605-06, 104 S.W. 164, 165-66 (1907), quoting Sceva v. True, 53 N.H. 627 (1873).

Thus, although A.R.S. § 12-341.01(A) covers actions arising out of either express or implied contracts, there is some doubt whether the term "implied contract" includes those that are only a legal fiction. As Corbin indicates, the oft-used statutory phrase "contract express or implied" has no single meaning and "requires interpretation and definition." 3 A. CORBIN, supra § 563, at 291. Statutory interpretation of the word "implied"

must vary with the circumstances and [statutory] context. It may include ... constructive or quasi contracts as well as those actually but tacitly intended by the parties involved. It has been thought[, however] that when used in a statute the applicable meaning is generally limited to include only ... those [contracts] actually intended....

Id. at 291-92.

We believe that the problem of interpretation is properly resolved by the principles announced in Sparks v....