Bohn v. Cody
| Citation | 832 P.2d 71,119 Wn.2d 357 |
| Decision Date | 27 February 1992 |
| Docket Number | No. 57579-7,57579-7 |
| Court | United States State Supreme Court of Washington |
| Parties | Landis BOHN and Lucille Bohn, husband and wife, Petitioners, v. George CODY and Jane Doe Cody, husband and wife, Cody, Hatch & Bedle, Inc., P.S., a Washington professional service corporation, and Cody & Hatch, Inc., P.S., a Washington professional service corporation, formerly d/b/a Cody, Hatch & Bedle, Inc., P.S., Respondents. |
Wurdeman & Tesch, P.C., Richard D. Wurdeman, Edmonds, Talmadge, Friedman & Cutler, Philip A. Talmadge, Seattle, and Talmadge, Friedman & Cutler, Bernard H. Friedman, Mukilteo, for petitioners.
Lane, Powell, Spears & Lubersky, Eugene H. Knapp, Jr. and Karen Vedder, Mount Vernon, for respondents.
Lucille and Landis Bohn loaned money to their daughter after discussing aspects of the proposed loan with their daughter's attorney. After their daughter failed to repay the loan, the Bohns sued the attorney. The attorney moved for summary judgment on the theory that he owed no duty of care to the Bohns, because the Bohns were neither his clients nor were they within the class of third parties to whom an attorney would owe a duty of care. The trial court found that no duty of care existed and dismissed the Bohns' claims in contract and negligence. The trial court also dismissed the Bohns' claim that the attorney had violated the former attorney disciplinary rule regarding conflicts of interest. The Court of Appeals affirmed.
On the issue of duty, we reverse. Although we agree with the courts below that no attorney/client relationship was formed under these circumstances, genuine issues of material fact exist as to whether Bohn was within the class of nonclients to whom an attorney owes a duty of care. We affirm the dismissal of the claim alleging violation of the disciplinary rules.
The transaction at issue here had its roots in a foreclosure proceeding involving Dian and Marville Follett. The Folletts had purchased a house on a real estate contract and had subsequently failed to make a $15,000 balloon payment. George Cody represented the Folletts in defending the foreclosure action. The trial judge in the foreclosure action imposed a deadline of June 30, 1982 (plus a 5-day grace period) for the Folletts to pay the entire balance due under the contract.
Dian Follett was unable to obtain a commercial loan to cover the amount owed. She then approached her parents, Lucille and Landis Bohn, to borrow from them the necessary sum. Cody was not involved in these negotiations between the Folletts and the Bohns.
On June 30, 1982, Lucille Bohn met alone with Cody to discuss the situation. According to Cody, he told Lucille Bohn at the outset that he represented the Folletts in this matter, not the Bohns. Lucille Bohn does not dispute these statements.
At that meeting, Lucille Bohn told Cody that she and her husband were interested in paying the amount due under the contract on behalf of her daughter and son-in-law. She wanted to know the total amount due. She then described the agreement that she and her husband had tentatively worked out with the Folletts. The Bohns would receive the deed to the house after the contract was paid in full. The Folletts would have 1 year in which to repay the Bohns, during which time the Folletts could continue to live in the house. If the loan was repaid, the Folletts would get the house back; if not, the Bohns would sell the house and retain the proceeds to the extent of their loan.
Lucille Bohn told Cody that she and her husband were willing to advance the necessary amount only if they could have "absolute security". Cody said he would prepare an assignment of the right to receive the deed from the contract vendors--the Heatheringtons--but added that he could do so only after obtaining the Folletts' approval. Lucille Bohn asked whether she would receive a "free and clear" deed. Cody responded that the deed would be free and clear of any liens resulting from the Heatheringtons' ownership of the property. Cody did not say whether any liens could have arisen from the Folletts' ownership interest. The Bohns contend that although the information in Cody's statement was technically accurate, it was misleading in its failure to fully address the question asked.
On July 2, 1982, Cody met with Lucille Bohn and Dian Follett. They had further discussions about the amount due under the contract. Later that day, Lucille Bohn posted approximately $50,000--representing her and her husband's life savings--with the court registry on behalf of the Folletts. The terms of the actual loan were never reduced to writing. Shortly thereafter, Cody prepared a document assigning to the Bohns the right to receive the Heatheringtons' fulfillment deed.
There was a short delay in getting Marville Follett to sign the assignment. Lucille Bohn at this time told Cody's receptionist (who in turn told Cody) about this problem and asked that she be billed for any additional work on the assignment. Cody discussed the issue with Marville Follett, who then signed the assignment on July 15. Cody then transmitted the document to the Heatheringtons' attorney.
Later in July, the Heatheringtons' attorney made out a deed to the Folletts rather than to the Bohns. Lucille Bohn told Cody of this fact, and Cody indicated he would take care of it. Lucille Bohn offered to pay for his services in this regard. Cody stated, however, that he was doing so on behalf of the Folletts and that he was not acting as the Bohns' attorney. On July 29, Cody sent a letter to the Heatheringtons' attorney demanding that a deed be executed in favor of the Bohns. In this letter, Cody stated that he was "authorized to take court action to enforce the proper preparation and delivery of the deed...." On August 5, the Heatheringtons issued a new deed naming the Bohns as grantees.
A few days later, Lucille Bohn learned that Internal Revenue Service (IRS) liens already encumbered the property. The IRS had filed the liens in order to collect unpaid taxes from the Folletts. These liens apparently were in place at the time when Cody discussed the deed with Bohn, but Cody denies knowing of the liens at that time and the Bohns do not argue that Cody actually knew of the liens. The Bohns do contend, however, that Cody should have known that such liens were possible. They point out that Cody represented the Folletts between 1980 and June 1981 with respect to tax disputes, and that even after June 1981 Cody had reason to suspect that the Folletts' tax difficulties continued.
Later in August, Lucille Bohn again approached Cody and insisted on paying Cody for his services. Cody told her that she owed nothing, but when she persisted, he suggested that she pay $50. Bohn paid him this amount but Cody used it to credit the Folletts' account.
The IRS subsequently sold the house to another couple. The Bohns were unable to redeem the house and consequently lost their interest in it. The Folletts never repaid the money to the Bohns.
The Bohns sued Cody for negligence, breach of contract and violation of the attorney disciplinary rules. 1 Their complaint alleges that when Cody first met with Lucille Bohn he should have (1) advised her to seek independent counsel; (2) informed her of his potential conflict of interest in the transaction; (3) recommended that she obtain a title report; or (4) indicated that although the deed would be free of any liens against the Heatheringtons' interest, it could still be subject to any liens against the Folletts' interest. Lucille Bohn stated in an affidavit that she believed that Cody was acting as her attorney at all times relevant to this case.
Cody moved for summary judgment on the basis that he did not owe any duty of care to the Bohns. The superior court judge granted the motion and dismissed with prejudice all three causes of action in the Bohns' complaint. The Court of Appeals affirmed in an unpublished opinion. We granted the Bohns' petition for review.
An appellate court reviews de novo a trial court's summary judgment decision. The appellate court analyzes whether any genuine issues exist as to any material fact and whether one party is entitled to judgment as a matter of law. Herron v. Tribune Pub'g Co., 108 Wash.2d 162, 169, 736 P.2d 249 (1987). The court "consider[s] all facts submitted and all reasonable inferences from the facts in the light most favorable to the nonmoving party". Wilson v. Steinbach, 98 Wash.2d 434, 437, 656 P.2d 1030 (1982). Any doubts as to the existence of factual disputes must be resolved against the moving party. Atherton Condominium Apartment-Owners Ass'n Bd. of Directors v. Blume Dev. Co., 115 Wash.2d 506, 516, 799 P.2d 250 (1990).
The trial court granted summary judgment on the basis no duty could have existed if Lucille Bohn was neither Cody's client nor a third party to whom an attorney would have owed a duty of care. We must decide whether either of these bases for a duty exists.
Determining whether an attorney/client relationship exists necessarily involves questions of fact. See 48 Am.Jur. Proof of Facts 2d, Existence of Attorney-Client Relationship 525 (1987); 1 R. Mallen & J. Smith, Legal Malpractice § 11.2 n. 12 (3d ed. 1989). Summary judgment is proper on a factual issue only if reasonable minds could reach but one conclusion on it. Steinbach, 98 Wash.2d at 437, 656 P.2d 1030.
The essence of the attorney/client relationship is whether the attorney's advice or assistance is sought and received on legal matters. See 1 R. Mallen & J. Smith § 11.2 n. 18; 7 Am.Jur.2d Attorneys at Law § 118 (1980). The relationship need not be formalized in a written contract, but rather may be implied from the parties' conduct. In re McGlothlen, 99 Wash.2d 515, 522, 663 P.2d 1330 (1983). Whether a fee is paid is...
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