Dessel v. Dessel

• Decision Date: 23 November 1988
• Docket Number: No. 86-1098,86-1098
• Citation: 431 N.W.2d 359
• Parties: Imogene DESSEL, Executor of the Estate of James L. Dessel, Deceased, Plaintiff, v. George DESSEL, Defendant. George DESSEL, Appellee, v. R.L. DONOHUE, Appellant.
• Court: Iowa Supreme Court

Page 359

431 N.W.2d 359

Imogene DESSEL, Executor of the Estate of James L. Dessel, Deceased, Plaintiff, v. George DESSEL, Defendant.

George DESSEL, Appellee, v. R.L. DONOHUE, Appellant.

No. 86-1098.

Supreme Court of Iowa.

Nov. 23, 1988.

Rehearing Denied Dec. 16, 1988.

Frederick G. White, Waterloo, for appellant.

David M. Elderkin and Edward M. Blando of Elderkin, Pirnie, Von Lackum & Elderkin, Cedar Rapids, for appellee.

Considered by McGIVERIN, C.J., and HARRIS, CARTER, LAVORATO, and NEUMAN, JJ.

HARRIS, Justice.

The court of appeals set aside a client's recovery for legal malpractice, determining as a matter of law that none of the client's damages were proximately caused by the conduct of the attorney. We vacate the court of appeals decision. We affirm in part, reverse in part and remand.

James Dessel, now deceased, and his brother George Dessel were partners in a successful retail furniture business. In 1979 James decided to retire and it was agreed to dissolve the partnership. To do so they consulted R.L. Donohue, a local attorney, whom they engaged to draw up the dissolution agreement. Neither brother had independent counsel; both relied on Donohue to represent them.

The agreement provided for the sale of James' share of the partnership, except for accounts receivable, to George. The accounts receivable were to be divided equally as they were collected.

After the dissolution, James died. His widow Imogene was appointed executor of his estate and Donohue was retained as her attorney. A dispute arose between Imogene and George about the collection and division of the accounts receivable.

During the dispute Donohue counseled both George and Imogene. When the matter could not be resolved Donohue, acting for the estate, sued George, claiming George breached his fiduciary duties in the collection of the accounts. George then retained other counsel. George thereafter filed a third-party action against Donohue, claiming Donohue committed legal malpractice in representing him. Donohue then removed himself as attorney for James' estate.

This appeal has to do with George's two claims against Donohue. The first relates to the manner in which Donohue drafted the partnership dissolution agreement. The agreement contained a hold harmless clause and this provision was a prime basis for Imogene's suit against George. This provision was inserted by mistake and in violation of the wishes and instructions of both James and George.

George also asserts he was damaged because of Donohue's conflict of interests. Under the original dissolution agreement James and George were to share in efforts to collect the accounts receivable, even after James retired from the business. Later James decided to leave the state and to rely on George alone to collect the remaining accounts. To compensate for this change the two entered into a separate oral agreement which provided that George was to be paid a six percent commission for the accounts he collected.

On the basis of the second agreement George made collections and retained six percent of the amounts so collected. After James died Imogene disputed the second agreement. As a result of Donohue's advice George stopped taking the six percent fee and paid $7606 to the estate for commissions previously retained under the second agreement.

After a bench trial the estate's suit against George was dismissed. On George's claims against Donohue the trial court awarded George attorney fees for defending the action because the agreement was improperly drafted. The court also found there was an agreement between James and George regarding commissions. It awarded George $28,368 for commissions under the second agreement. It also awarded George $20,000 in punitive damages.

I. In a lawyer malpractice case the plaintiff must demonstrate:

1. the existence of an attorney-client relationship giving rise to a duty;

2. that the attorney, either by an act or a failure to act, violated or breached that duty;

3. that the attorney's breach of duty proximately caused injury to the client; and

4. that the client sustained actual injury, loss, or damage.

Burke v. Roberson, 417 N.W.2d 209, 211 (Iowa 1987).

There is no question concerning the existence of the attorney-client relationship. Donohue raises his defense against the other three elements, contending there was not substantial evidence to support the trial court's findings of negligence, proximate cause or damages.

II. The trial court found Donohue negligent by reason of each of the claimed breaches of duty. Substantial evidence supported the trial court's factual findings on George's first negligence claim against Donohue. Because Donohue inserted the hold harmless clause into the dissolution agreement by mistake, and in violation of instructions, he was negligent.

The second claim is based on a violation of the code of professional ethics for lawyers. It is clear that the "code of professional responsibility sets the standard for an attorney's conduct in any transaction in which his professional judgment may be exercised." Cornell v. Wunschel, 408 N.W.2d 369, 377 (Iowa 1987).

It is also clear that the code does establish a specific standard regarding conflicts of interest. The district court found Donohue breached three rules: (1) DR4-101(B) (lawyer shall not knowingly use a confidence or a secret of a client to the disadvantage of the client); (2) DR5-105(C) (lawyer shall not continue multiple employment if the exercise of that lawyer's independent professional judgment in behalf of a client will be or is likely to be adversely affected by the representation of another client); and...