Basic Food Industries, Inc. v. Grant

• Decision Date: 08 July 1981
• Docket Number: Docket No. 51288
• Citation: 107 Mich.App. 685,310 N.W.2d 26
• Parties: BASIC FOOD INDUSTRIES, INC., a Delaware Corporation, Plaintiff-Appellee, v. Donald W. GRANT, Defendant-Appellant. 107 Mich.App. 685, 310 N.W.2d 26
• Court: Court of Appeal of Michigan — District of US

Page 26

310 N.W.2d 26

BASIC FOOD INDUSTRIES, INC., a Delaware Corporation Plaintiff-Appellee, v. Donald W. GRANT, Defendant-Appellant.

Docket No. 51288.

107 Mich.App. 685, 310 N.W.2d 26

Court of Appeals of Michigan.

July 8, 1981.

Released for Publication Sept. 9, 1981.

[107 MICHAPP 687] Leo Papp, Detroit, for plaintiff-appellee.

James M. Prahler, Birmingham, for defendant-appellant.

Before V. J. BRENNAN, P. J., and KELLY and RILEY, JJ.

RILEY, Judge.

This appeal arises from a legal malpractice lawsuit instituted as a result of defendant Grant's allegedly negligent defense of plaintiff corporation in a separate lawsuit for attorney fees by a law firm that had previously represented plaintiff. Defendant appeals the jury verdict in favor of the plaintiff for $5,000.

The events giving rise to this lawsuit began around 1970 when Basic Food became interested in acquiring a Detroit company and making it a subsidiary. Basic Food retained a law firm to represent its legal interest with respect to this acquisition. When the firm submitted its bill for legal services to Basic Food, a dispute arose and the law firm sued for unpaid attorney fees alleging that Basic Food was liable on a contract claim for [107 MICHAPP 688] $8,900 or, in the alternative, on a quantum meruit basis for $15,000 (later amended to $300,000).

In March, 1971, Basic Food retained defendant to defend it in the lawsuit for attorney fees. Basic Food's chairman of the board sent defendant a retainer check and instructed him to "aggressively pursue our rights in this case". The defendant filed an answer to the complaint against Basic Food, stating only that the allegations of the complaint were denied. Correspondence from the defendant to Basic Food's chairman of the board indicates that they agreed that a counterclaim against the law firm for malpractice would be an effective means of forcing a settlement. Basic Food directed defendant to depose members of the law firm so that the counterclaim could be filed prior to the running of the malpractice statute of limitations.

About a year later, defendant attempted to file a counterclaim against the law firm, but his motion for leave was denied. Defendant then filed a separate lawsuit against the law firm but a panel of this Court ruled that the statute of limitations had run.

During the two and one-half year period between his retention as counsel and the time of trial, the defendant failed to take any depositions or discovery even though he had been repeatedly asked by Basic Food's chairman when he would do so. Nor did he seek to depose an expert witness of the plaintiff even though he had been advised approximately a month before trial of plaintiff's intention to use this witness.

In the instant trial, defendant testified that he listed six witnesses on the pretrial statement that he had prepared for Basic Food. One of the witnesses listed was Basic Food's chairman. The pretrial order issued by the pretrial judge indicated, [107 MICHAPP 689] however, that Basic Food would use only one witness, namely their chairman of the board. Shortly before trial, Basic Food's chairman became ill and was, therefore, unable to testify at trial. During the course of trial, defendant did not attempt to amend his witness list so that others could testify for Basic Food in its chairman's absence. Approximately ten days after the trial began, defendant attempted to call Basic Food's treasurer to testify, but the trial judge disallowed this testimony since defendant had made no attempt to amend his pretrial statement to add the treasurer as a witness.

Defendant rested his case without having introduced any evidence on behalf of Basic Food. He subsequently attempted to call a witness who had been listed on Basic Food's pretrial statement but the court refused to reopen defendant's case.

Following the trial, the jury returned a verdict against Basic Food in the amount of $25,000. On appeal, this Court affirmed the judgment.

Basic Food thereupon instituted this suit against defendant for legal malpractice, contending that defendant's failure to depose one of the plaintiff's principal employees despite repeated written promises to do so, his failure to file the counterclaim timely, his failure to investigate or ascertain the facts constituting the defense to the attorney fee suit, and his failure to engage in any discovery whatsoever, resulted in judgment against Basic Food in an amount greater than it should have been held justly liable for.

Defendant appeals the jury's $5,000 verdict and the court's denial of his motions for a directed verdict, judgment notwithstanding the verdict and new trial.

Defendant first contends that the judgment for [107 MICHAPP 690] plaintiff must be reversed since plaintiff failed to show that it would have prevailed in the prior litigation had the defendant not been negligent. The contention is that this so-called "case within a case" burden is an essential element of a claim for legal malpractice. Plaintiff's theory, on the other hand, is that the defendant is liable because his conduct maximized the chances of their opponent in the underlying suit and thus led to a higher damage award than would otherwise have been returned by the jury.

The precise question raised on appeal would appear to be an issue of first impression in Michigan. In an action against an attorney for negligence or breach of implied contract, the plaintiff has the burden of proving: (1) the existence of the attorney-client relationship; (2) the acts which are alleged to have constituted the negligence; (3) that the negligence was the proximate cause of the injury and; (4) the fact and extent of the injury alleged. 7 Am.Jur.2d, Attorneys at Law, § 223, p. 266. The standard of care of an attorney was stated in Eggleston v. Boardman, 37 Mich. 14, 16 (1877), as follows:

"Whenever an attorney or solicitor is retained in a cause, it becomes his implied duty to use and exercise reasonable skill, care, discretion and judgment in the conduct and management thereof."

See also Babbitt v. Bumpus, 73 Mich. 331, 41 N.W. 417 (1889).

In the instant case, undoubtedly an attorney-client relationship existed. Further, evidence presented at trial by plaintiff showed that the defendant breached his duty of care by failing to make any pretrial discovery, failing to file a counterclaim timely as had been requested by his client, and by failing adequately to inform his client of its [107 MICHAPP 691] drastically increased exposure to liability. ¹ In addition, while defendant did seek to adjourn the trial upon learning that his sole witness would be unavailable, the defendant failed to mitigate the effects of the court's denial of his request by attempting, for example, to procure the chairman's testimony by deposition or to move to amend his witness list so that another witness could have filled the gap presented by the chairman's illness.

The last two elements which must be established to make out a prima facie case of malpractice, proximate causation and damages, have proven to be problematic.

"The factor which has occasioned most difficulty to clients attempting to charge attorneys with liability for negligence in connection with litigation has been the necessity of proving that the damages claimed resulted from the alleged misconduct. The recovery sought is usually the value of the claim in suit in the proceeding in which the negligent act occurred, if the client was a plaintiff in that action, or, if he was a defendant, the amount of the judgment imposed upon him, and, in accordance with general rules as to proximate cause, it is generally held that before such recovery can be had the client must establish that, absent the act or omission complained of, the claim lost would have been recovered or the judgment suffered avoided. Accordingly, the client seeking recovery from his attorney is faced with the difficult task of proving two cases within a single proceeding." 45 A.L.R.2d 5, § 2, p. 10.

[107 MICHAPP 692] As another commentator has stated the matter:

"A client's burden of proving injury as a result of his attorney's negligence is especially difficult to meet when the attorney's conduct prevented the client from bringing his original cause of action or the attorney's failure to appear caused judgment to be entered against him as a defendant. In addition to proving negligence, a client must show that but for his attorney's negligence he would have been successful in the original litigation; in effect, he must prevail in two distinct suits. Note: Attorney Malpractice, 63 Columbia L.Rev. 1292, 1307 (1963). (Emphasis added.)

We believe that the following language, quoted recently by the Wisconsin Supreme Court, will serve to remove some of the confusion surrounding a lawyer's liability.

" ' "(A)n attorney must be held to undertake to use a reasonable degree of care and skill, and to possess to a reasonable extent the knowledge requisite to a proper performance of the duties of his profession, and, if injury results to the client as a proximate consequence of the lack of such knowledge or skill, or from the failure to exercise it, the client may recover damages to the extent of the injury sustained ; * * * " ' " Gustavson v. O'Brien, 87 Wis.2d 193, 199, 274 N.W.2d 627 (1979), quoting Malone v. Gerth, 100 Wis. 166, 75 N.W. 972 (1898). (Emphasis added.)

The Gustavson court went on in its opinion to distinguish cases where plaintiffs were required to prove a "suit within a suit" in order to recover damages based upon an attorney's negligence.

"In Cosgrove (General Accident Fire & Life Assurance Corp., Ltd. v. Cosgrove, 257 Wis. 25, 42 N.W.2d 155 (1950)) the lawyer's failure to settle the bill of exceptions[107 MICHAPP 693] resulted in the client losing his right to appeal. The (Cosgrove) court said the client would have to show that he would have been successful on appeal in order to prove that the lawyer's...