Campbell v. Bettius

• Decision Date: 18 September 1992
• Docket Number: No. 911928,911928
• Citation: 421 S.E.2d 433,244 Va. 347
• Parties: Wade A. CAMPBELL, et al. v. Marc E. BETTIUS, et al. Record
• Court: Virginia Supreme Court

Page 433

421 S.E.2d 433

244 Va. 347

Wade A. CAMPBELL, et al. v. Marc E. BETTIUS, et al.

Record No. 911928.

Supreme Court of Virginia.

Sept. 18, 1992.

Lawrence E. Freedman, Fairfax, for appellants.

Gerald R. Walsh, Fairfax (Robert F. Donnelly, Jr., Walsh & Cremins, on brief), for appellees.

Present: All the Justices.

LACY, Justice.

The dispositive issues in this legal malpractice case are whether the plaintiffs adequately alleged a cause of action for fraud and whether the plaintiffs' evidence supported a finding that the defendants' negligence proximately caused the damage which the plaintiffs claimed.

In 1982, Manchester Lakes Associates (Manchester Lakes), a Virginia limited partnership, purchased 192 acres of land in several parcels from various sellers for a residential development. Manchester Lakes paid each seller a portion of the purchase price in cash, issuing promissory notes for the remainder. First deeds of trust on the parcels secured those notes. These liens subsequently were subordinated to a lien held by Dominion Federal Savings and Loan (Dominion), a limited partner of Manchester Lakes. Sellers of two of the parcels, Raymond L. Campbell and his wife and Wade A. Campbell and his wife (the Campbells), received promissory notes personally guaranteed by James L. Brehony, a general partner in Manchester Lakes, and Frederick M. Lacey, Jr.

In 1984, Manchester Lakes defaulted on all the promissory notes. Thereafter, the noteholders hired attorney Marc E. Bettius and his firm (Bettius) to represent their interests. Bettius filed suits on behalf of the noteholders against Manchester Lakes, Dominion, and other entities. Those actions challenged the original subordination of the noteholders' liens to the Dominion lien, and alleged, inter alia, fraud and civil conspiracy to injure business. ¹ In an attempt to settle the litigation, Dominion offered the noteholders 80% of the amount outstanding on their notes in exchange for the dismissal of the suits and the surrender of their notes. This offer was contingent on unanimous agreement of all the sellers to those terms.

The Campbells advised Bettius that they did not want to accept the Dominion settlement offer. Rather, they wanted to recover the full outstanding value of their notes because, unlike those of the other noteholders, Brehony and Lacey personally guaranteed their notes. The Campbells agreed to accept the Dominion settlement offer only after Bettius advised them that they could later proceed on the guarantees to recover the remaining 20% of the notes because their rights were preserved by language drafted by Bettius and added to the notes and releases. ² Under the terms of the settlement agreement, each Campbell couple received over $250,000, and Bettius received $150,000 in additional attorney's fees from the proceeds of the settlement when the parties executed the settlement agreements.

Following settlement, the Campbells employed another attorney to pursue their claims against the guarantors. In dismissing the Campbells' suit seeking the unpaid amount of the notes, the trial court held that the surrender of the notes in the previous settlement barred any recovery based on the guarantees contained in those notes or in the settlement releases, and a jury found that there was no independent agreement between the Campbells and Lacey to pay the remaining 20% of the notes.

The Campbells then filed these suits, alleging that Bettius's actions constituted fraud and legal malpractice. ³ The Campbells sought damages in the amount of $63,000 per couple, plus recovery of the attorney's fees expended in their suit to recover on the personal guarantees. Bettius filed a demurrer to the fraud allegation, which the trial court sustained without leave to amend. Following the close of the Campbells' evidence, the trial court granted Bettius's motion to strike the evidence of legal malpractice and dismissed the case. We awarded the Campbells this appeal.

I. The Pleadings

In Count II of their amended motion for judgment, the Campbells alleged that Bettius, knowing that the Campbells "would not enter into the agreement if it meant giving up their rights against the guarantors," told the Campbells that, by adding the language to the notes and settlement agreements reserving the Campbells' rights against the guarantors, the Campbells

would thereby be protecting their rights and would be able to collect the additional 20 percent of their note from the guarantors on the note.

The Campbells alleged that Bettius made these representations

either knowing that said representations were false at the time made and were made fraudulently, deliberatively, maliciously and wilfully with gross negligence or with a wanton, wilful and reckless disregard for the rights of the [Campbells] for the purpose of inducing the [Campbells] to enter into the settlement agreement....

Finally, the Campbells alleged that these representations were made so that Bettius could "collect under the settlement agreement an additional $150,000.00 fee."

The demurrer which Bettius filed attacked these allegations in two particulars: (1) the allegedly offending representations were predictions of future events rather than of present facts and, therefore, were insufficient to support a cause of action for fraud; and (2) the fraud allegations lacked particularity. The trial court did not identify the ground or grounds on which it granted the demurrer, so we consider both grounds raised by Bettius in order.

First, Bettius argues that the alleged fraudulent representation that the Campbells "would be able to collect" the remaining 20% from the guarantors is no more than a prediction of future events, and that "[i]naccurate prognostications and predictions" are not actionable as fraud. See generally Soble v. Herman, 175 Va. 489, 500, 9 S.E.2d 459, 464 (1940).

Bettius reads the pleadings too narrowly, however. The offending representations recited in the pleadings included an allegation that Bettius told the Campbells that their rights would not be defeated if they endorsed over the notes because the reservation of rights language protected the Campbells. This alleged representation communicated the present effect of the reservation language, not its future impact. Accordingly, the trial court erred to the extent it sustained the demurrer on the ground that the allegations did not contain statements of present fact but predictions of future events.

We find Bettius's second assertion that the fraud allegations lacked particularity equally meritless. The pleadings alleged specific facts which identified as fraudulent the representations made by...