Brunacini v. Kavanagh

• Decision Date: 16 December 1993
• Docket Number: No. 14638,14638
• Citation: 1993 NMCA 157,117 N.M. 122,869 P.2d 821
• Parties: Mayme BRUNACINI, and Brunacini Appliance Company, Inc., Plaintiffs-Appellees, v. Robert G. KAVANAGH, and Threet and King, Defendants-Appellants.
• Court: Court of Appeals of New Mexico

Page 821

869 P.2d 821

117 N.M. 122

Mayme BRUNACINI, and Brunacini Appliance Company, Inc., Plaintiffs-Appellees, v. Robert G. KAVANAGH, and Threet and King, Defendants-Appellants.

No. 14638.

Court of Appeals of New Mexico.

Dec. 16, 1993.

Certiorari Denied Feb. 4, 1994.

[117 N.M. 123] Briggs F. Cheney, Michael P. Clemens, Butt, Thornton & Baehr, P.C., Albuquerque, for defendants-appellants.

David B. Martinez, William J. Friedman, Eaton, Martinez & Hart, P.C., Albuquerque, for plaintiffs-appellees.

OPINION

DONNELLY, Judge.

This interlocutory appeal raises the issue of whether the trial court erred in denying Defendants' (the Law Firm's) motion to dismiss the legal malpractice action brought by Mayme Brunacini and Brunacini Appliance Company (Plaintiffs). The sole question presented on appeal is whether Plaintiffs' claim of legal malpractice was a compulsory counterclaim that was required to be raised in the Law Firm's prior action against Plaintiffs to recover legal fees. We reverse the trial court's order denying the motion to dismiss and hold that Plaintiffs' malpractice claim was a compulsory counterclaim within the contemplation of SCRA 1986, 1-013(A) (Repl.1992), and that the malpractice claim is barred in the present action under the doctrine of res judicata.

FACTS

Plaintiffs employed the Law Firm to review a contract of employment with a third party to determine its enforceability. Robert Kavanagh, a member of the Law Firm, reviewed the employment contract and, on November 13, 1989, prepared an opinion letter that stated, in part: "[I]t is my legal opinion that [the written agreement] has no effect to bind the corporation [Brunacini Appliance Company]."

Based on the opinion letter and the advice given by Kavanagh, Plaintiffs terminated the employment of the third party. Thereafter, the third party filed a lawsuit against Plaintiffs for breach of the employment contract, and the Law Firm was retained to defend Plaintiffs in the action. Following a jury trial, the jury returned a verdict finding that Mayme Brunacini was not liable individually for any damages resulting to the third party, but that Brunacini Appliance Company breached the employment contract. The jury awarded damages in favor of the third party and against Brunacini Appliance Company in the amount of $120,067. Judgment was entered against the corporation on May 21, 1991.

Thereafter, Plaintiffs filed an appeal from the judgment. On October 25, 1991, while the appeal was still pending, the Law Firm filed a lawsuit against Plaintiffs to collect its legal fees for its services in representing Plaintiffs in the breach of contract action.

After the Law Firm filed its suit to collect legal fees, Plaintiffs employed a new attorney to defend against such claim and also to represent them in their pending appeal. On May 16, 1992, Plaintiffs, with the advice of their new attorney, entered into a stipulated judgment settling the Law Firm's suit for legal fees. On June 19, 1992, our Supreme Court, in an unpublished decision, denied Plaintiffs' appeal and affirmed the jury verdict in the breach of employment contract case.

Approximately four and one-half months later, on November 5, 1992, Plaintiffs brought a legal malpractice action against the Law Firm and Kavanagh, alleging that Defendants were negligent in the issuance of the Law Firm's opinion letter and that they negligently failed to warn and advise Plaintiffs of the foreseeable risk and financial exposure that could arise from the Law Firm's interpretation and construction of the disputed contract.

The Law Firm filed a motion to dismiss the malpractice action, arguing that the malpractice claim was a compulsory counterclaim to the action for legal fees and that the judgment entered in the legal fees case was res judicata, thus barring any subsequent attempt to litigate the malpractice claim. Following a hearing on February 23, 1993, the trial court denied the motion to dismiss.

RES JUDICATA

The Law Firm argues that the trial court erred in failing to grant its motion to dismiss. The Law Firm contends that under SCRA 1-013(A) and Bennett v. Kisluk, 112 N.M. 221, 814 P.2d 89 (1991) (Franchini, J., and Sosa, C.J., dissenting), Plaintiffs' claim for legal malpractice was a compulsory counterclaim, and Plaintiffs' failure to timely file such claim bars any subsequent assertion of such claim. SCRA 1-013(A) states, in applicable part, that a party is required to set forth as a counterclaim:

[A]ny claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.

Under SCRA 1-013(A), the affirmative defense of res judicata is available where an issue has been expressly raised or is logically related to the subject matter of the prior litigation. Slide-A-Ride of Las Cruces, Inc. v. Citizens Bank of Las Cruces, 105 N.M. 433, 435-36, 733 P.2d 1316, 1318-19 (1987). Generally, the defense of res judicata will preclude the later assertion of a claim where the party seeking to assert such claim had a full and fair opportunity to litigate the issue in the prior action, the parties are the same or in privity with another, and the causes of action logically are related. See id.; see also First State Bank v. Muzio, 100 N.M. 98, 101-02, 666 P.2d 777, 780-81 (1983); Miller v. Miller, 83 N.M. 230, 234, 490 P.2d 672, 676 (1971); Bentz v. Peterson, 107 N.M. 597, 600, 762 P.2d 259, 262 (Ct.App.1988). See generally Restatement (Second) of Judgments § 13 (1982).

As observed by 2 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 17.12, at 47 (3d ed. 1989), the defense of res judicata may arise in legal malpractice litigation and:

The most common context of the defense arises out of litigation for legal fees. Res judicata [exists] where a client unsuccessfully [raises] the issue of malpractice in the attorney's action for fees, even though the client [does] not or [can]not cross-claim for affirmative relief. The failure to raise the issue of legal malpractice by a compulsory counterclaim can also be a bar. Similarly, a client who [allows] a default to be entered against him by his former attorneys in their action to recover legal fees [can]not later urge malpractice as a defense to an action to collect the judgment.

Id. at 50 (emphasis added) (footnotes omitted).

A. Standard of Review

In reviewing an order denying a motion to dismiss under SCRA 1986, 1-012(B)(6) (Repl.1992), we assume as true all facts that are well pleaded. Fasulo v. State Farm Mut. Auto. Ins. Co., 108 N.M. 807, 808, 780 P.2d 633, 634 (1989). A motion to dismiss is properly granted only when it appears that a plaintiff cannot recover under any state of facts provable under its claim. Las Luminarias of the N.M. Council of the Blind v. Isengard, 92 N.M. 297, 300, 587 P.2d 444, 447 (Ct.App.1978); see also Apodaca v. Unknown Heirs, 98 N.M. 620, 622-24, 651 P.2d 1264, 1266-68 (1982) (defense of the statute of limitations may be raised on a motion to dismiss where it is clear from the face of the pleadings that a plaintiff's action is barred); City of Roswell v. Chavez, 108 N.M. 608, 611, 775 P.2d 1325, 1328 (Ct.App.) (determination of timeliness of claim as a matter of law is only proper where there is no room for reasonable difference in opinion), cert. denied, 108 N.M. 624, 776 P.2d 846 (1989).

B. New Mexico Precedent

The Law Firm contends that our Supreme Court, in Bennett, adopted the general rule that a claim for legal malpractice is a compulsory counterclaim that must be asserted by a defendant in a civil action brought by his or her former attorneys to collect unpaid legal fees. Plaintiffs contest this interpretation and argue that the reference by our Supreme Court, in Bennett, indicating that a cause of action for legal malpractice is a compulsory counterclaim to an action for collection of legal fees, is dicta and is not controlling in the instant case. We disagree with Plaintiffs' reading of Bennett.

In Bennett our Supreme Court addressed the issue of whether an action for malpractice, intentional infliction of emotional distress, and misrepresentation brought by a plaintiff against her former attorney in a personal injury action was barred by the doctrine of res judicata. The attorney argued, among other things, that his motion for legal fees in the settlement of his former client's personal injury case had the effect of making him an intervenor in the action, and that the malpractice claim was a compulsory counterclaim to his motion. Our Supreme Court disagreed with this contention, stating:

While the nature of the claim to attorney fees is related substantially enough to [the attorney's] efforts to effect the settlement and to his discharge without cause so as to have given rise to a compulsory counterclaim for malpractice to a complaint for collection of professional fees, we are hesitant to accord res judicata effect to all issues and claims that might have been raised in response to a motion for fees.

Bennett, 112 N.M. at 224, 814 P.2d at 92.

Our Supreme Court further observed that whether the plaintiff's claim for malpractice was a compulsory counterclaim to the attorney's motion for fees depends on whether the attorney was an " 'opposing party' " within the meaning of SCRA 1-013(A), and that:

An "opposing party" must be one who asserts a claim against the prospective counterclaimant in the first instance. Here, we hold that [the attorney], by virtue of his motion for fees, was not in the adversarial relationship with [the former client] that would trigger the compulsory counterclaim rule and its attendant res judicata effect.

Bennett, 112 N.M. at 224, 814 P.2d at 92.

The Supreme Court, in Bennett, while articulating the general rule that an action for legal...