Bye v. Mack, 930301

• Court: North Dakota Supreme Court
• Writing for the Court: MESCHKE; VANDE WALLE; RALPH J. ERICKSTAD, Surrogate Justice, sitting in place of LEVINE
• Citation: Bye v. Mack, 519 N.W.2d 302 (N.D. 1994)
• Decision Date: 18 July 1994
• Docket Number: No. 930301,930301
• Parties: Duane BYE, Plaintiff, Appellant and Cross-Appellee, v. Jerome James MACK, John H. Moosbrugger, Richard A. Ohlsen, Shirley Ann Dvorak, and Ralph F. Carter, individually and as members of the law firm of Mack, Moosbrugger, Ohlsen, Dvorak, Carter, Attorneys at Law, Defendants, Appellees and Cross-Appellants, and Jane M. Freeman, Defendant and Appellee. Civ.

Page 302

519 N.W.2d 302

Duane BYE, Plaintiff, Appellant and Cross-Appellee, v. Jerome James MACK, John H. Moosbrugger, Richard A. Ohlsen Shirley Ann Dvorak, and Ralph F. Carter, individually and as members of the law firm of Mack, Moosbrugger, Ohlsen Dvorak, Carter, Attorneys at Law, Defendants, Appellees and Cross-Appellants and Jane M. Freeman, Defendant and Appellee.

Civ. No. 930301.

Supreme Court of North Dakota.

July 18, 1994.

Duane Bye, pro se.

Kermit Edward Bye (argued), of Vogel, Brantner, Kelly, Knutson, Weir & Bye, Ltd., Fargo, for defendants, appellees, and cross-appellants.

Craig Robert Campbell (argued), of Gunhus, Grinnell, Klinger, Swenson & Guy, Fargo, for defendant and appellee.

MESCHKE, Justice.

Duane Bye appealed judgments dismissing his legal malpractice action against Jerome James Mack, John H. Moosbrugger, Richard A. Ohlsen, Shirley Ann Dvorak, and Ralph F. Carter, individually and as members of the Law Firm of Mack, Moosbrugger, Ohlsen, Dvorak, Carter, Attorneys at Law, and Jane Freeman. The defendants other than Freeman cross-appealed. We affirm.

Duane Bye, Marvin Arlien, and Roger Elvick formed "Custom Farm Services, Inc." (CFS) as part of a plan to facilitate the purchase of Bye's custom combining equipment by Arlien and Elvick. The corporate enterprise was unsuccessful. Arlien defaulted on bank loans, and Elvick and Bye became liable on personal guaranties of that debt. Elvick acquired sole control of the corporation. Bye continued to incur debts and make payments to finance Elvick and CFS. Bye eventually agreed to buy Elvick's farm to enable Elvick to repay some of his debts.

To purchase Elvick's farm, Bye obtained a first mortgage loan from Federal Land Bank for $730,000 and executed a second mortgage to Elvick for $288,500. Bye gave an unsecured promissory note to Elvick for the difference between the mortgages and the purchase price, an amount they calculated to be $50,000. Elvick later discovered that the difference was actually $59,500. Bye and Elvick agreed that Bye would execute a note for $59,500 and Elvick would return the $50,000 note at a later meeting. Elvick failed to attend the meeting and, upon closing of the sale and loan, he placed the bulk of the land sale proceeds in a spendthrift trust. Elvick made no effort to pay Bye or any of his debts.

Bye sued Elvick for all debts he had incurred on behalf of CFS. The trial court awarded Bye $258,503.79, plus interest, that he had paid on behalf of CFS and Elvick, voided the $50,000 promissory note originally executed in Elvick's favor, and found that the conveyance of the land sale proceeds to the spendthrift trust was fraudulent and void. In Bye v. Elvick, 336 N.W.2d 106 (N.D.1983), we affirmed that judgment on appeal.

In 1984, Bye sued Federal Land Bank Association of Grand Forks (FLB); FLB employees Elmer Hillesland, Lee Reddig, and Ryan Westgard; First State Bank of Sharon (Bank) and its president, Warren Bud Smith. The complaint alleged: (1) that Bye's loan transaction with FLB included an agreement for disbursement of the $730,000 loan funds; (2) that FLB distributed $22,000 from the Bye loan funds to Roger Elvick in breach of the loan agreement; (3) that FLB distributed $244,253.48 from the Bye loan funds to an agent of Roger Elvick in breach of the loan agreement; (4) that Bye and Elvick had agreed that substantial sums from the FLB loan would be paid to Bye to satisfy most of Elvick's debt to Bye, and that the defendants were aware of that disbursement agreement; (5) that before the closing of the land sale and disbursement of the loan funds, Roger Elvick, as settlor, executed a trust agreement containing a spendthrift clause making its assets unreachable by Elvick's creditors; (6) that Bye was forced against his will to sign an authorization permitting disbursement of the $244,253.48 to Roger Elvick because Hillesland threatened to call the entire $730,000 loan and foreclose the mortgage if Bye did not consent to the disbursement; and (7) that an agent of Elvick transferred the $244,253.48 immediately into the spendthrift trust, and that Elvick has not paid Bye the amounts he owes Bye.

On July 28, 1987, the trial court granted summary judgment in favor of the Bank. On August 18, 1987, the court granted summary judgment in favor of FLB. Bye filed a notice of appeal on August 24, 1987, "from the Summary Judgment entered ... on the 28th day of July, 1987." Thus, Bye did not appeal from the judgment entered in favor of FLB. In Bye v. Federal Land Bank, 422 N.W.2d 397 (N.D.1988), we dismissed the appeal because no appeal was taken from the final judgment of August 18, 1987, the time for appeal had expired, and we were therefore without jurisdiction to consider the appeal.

Bye began this malpractice action in 1990 against the defendant attorneys, the defendant law firm, and Freeman, an associate of the firm, who drafted and filed the notice of appeal from the summary judgment dismissing the Bank, but who failed to appeal the summary judgment dismissing FLB in Bye's previous action. Bye alleged (1) that he suffered damage as a direct result of Freeman's negligence in failing to appeal from the FLB judgment, and (2) that he suffered damage as a direct result of the law firm's carelessness in supervising and guiding Freeman in her preparation of the appeal. Bye also alleged:

As a direct and proximate result of the negligence and carelessness on the part of all the Defendants, the right of the Plaintiff to have his day in the Supreme Court was forfeited and the Plaintiff believes that if he had been afforded his appeal in the Supreme Court, he would have had the decision of the District Court reversed and been victorious in his lawsuit.

Bye sought actual damages of $266,253.48 for the amount of loan proceeds that he alleged in the FLB suit had been wrongly disbursed to Elvick or his agent, as well as consequential, special, and exemplary damages, together with interest, costs, and disbursements.

After trial of the malpractice action, the trial court concluded:

3. By not filing an appropriate Notice of Appeal pursuant to Rule 4(a), NDRAppP, Defendant Jane Freeman conducted herself in a manner below the standard expected of a reasonably prudent attorney practicing in this state. Likewise, as the supervisor of relatively recent law school graduate and one who had also discussed the appeal in question with the Plaintiff, Defendant Jerome James Mack was negligent in failing to ensure that the Bye Notice of Appeal was in compliance with the North Dakota Rules of Appellate Procedure prior to its filing....

4. Had the Defendants properly perfected the Plaintiff's appeal, however, a preponderance of the evidence failed to establish that the issues presented on appeal would have been sufficient to reverse the adverse summary judgments....

5. Even if the summary judgments would have been reversed but for the untimely filing of appeal, the Plaintiff has still failed to prove by a preponderance of evidence that any of the Defendants in the underlying lawsuit proximately caused him to suffer any monetary damages. As clearly pointed out in Bye v. Elvick, in which Plaintiff Duane Bye prevailed, it was against Mr. Elvick that Mr. Bye had his recourse. The mere fact that Mr. Elvick may now be judgment proof does not, in and of itself, create liability for the Defendants in this litigation for any monetary loss sustained thereby by Mr. Bye.

Judgments of dismissal were entered accordingly. Bye appealed, and the defendants other than Freeman cross-appealed.

To prevail in a legal malpractice action, a claimant must establish: (1) an attorney-client relationship; (2) a duty by the ...