Eagle Star Group Inc. v. Marcus

• Citation: 334 S.W.3d 548
• Decision Date: 14 December 2010
• Docket Number: No. WD 71622.,WD 71622.
• Court: Missouri Court of Appeals
• Parties: EAGLE STAR GROUP, INC., Appellant,v.David MARCUS, Esq. and Berkowitz, Oliver, Williams, Shaw & Eisenbrandt, LLP., Respondents.

334 S.W.3d 548

EAGLE STAR GROUP, INC., Appellant,
v.
David MARCUS, Esq. and Berkowitz, Oliver, Williams, Shaw & Eisenbrandt, LLP., Respondents.

No. WD 71622.

Missouri Court of Appeals, Western District.

Dec. 14, 2010.Motion for Rehearing and/or Transfer to

Supreme Court Denied Feb. 1, 2011. Application for Transfer Denied April 26, 2011.

[334 S.W.3d 550]

David E. Larson, Liberty, MO, Michael W. Blanton, Leawood, KS, for Appellant.

[334 S.W.3d 551]

Steven H. Schwartz, St. Louis, MO, for respondents.Before MARK D. PFEIFFER, P.J., JAMES EDWARD WELSH, and KAREN KING MITCHELL, JJ.JAMES EDWARD WELSH, Judge.

Eagle Star Group, Inc., appeals from a judgment entered upon a jury verdict in favor of David Marcus and Berkowitz, Oliver, Williams, Shaw & Eisenbrandt, LLP, on a claim for legal malpractice. Eagle Star had hired Berkowitz Oliver ¹ to set aside a default judgment previously entered against Eagle Star, but Berkowitz Oliver was unsuccessful in getting the default judgment set aside. In its legal malpractice case, Eagle Star claimed that Berkowitz Oliver committed legal malpractice when it failed to raise the issue of a defective return of service in the motion to set aside a default judgment. A jury disagreed and found in favor of Berkowitz Oliver, and the circuit court entered judgment consistent with the jury's verdict. Eagle Star appeals, asserting that the circuit court erred (1) in limiting Eagle Star's ability to present evidence regarding the amendment of the return of service and allowing Berkowitz Oliver to argue that the return would have been amended and (2) in admitting into evidence an agreement made between Eagle Star and the attorney and plaintiff from the default judgment case. We affirm.

The evidence established that, in 2002, Robin McElroy was living in the Stone Oak Apartments. While working on McElroy's apartment air conditioner, maintenance workers for the apartment complex placed a light bulb in one of McElroy's light fixtures. When McElroy later attempted to remove the light bulb, the glass lens on the light fixture fell off, injuring McElroy's hand and wrist. Thereafter, McElroy hired Steven Effertz on a contingency fee basis to litigate her personal injury action against Eagle Star. Effertz filed a Petition for Damages on behalf of McElroy with the circuit court, alleging that Eagle Star owned and operated the apartments and that maintenance workers failed to sufficiently secure the glass lens on a light fixture, causing it to come loose and break when McElroy tried to change the light bulb.

After filing the petition, Effertz requested court appointment of a private process server to serve the petition on Eagle Star. Effertz intended the process to be served on Eagle Star through its registered agent, who Effertz mistakenly believed to be Michael Jaax. Jaax was not the registered agent, but he was Eagle Star's president. Ultimately, the private process server left a copy of the summons and petition with Jaax's wife at Jaax's house. The process server prepared a return of service that stated: “I certify that I have served the above summons by: ... leaving a copy of the summons and a copy of the petition at the dwelling place or usual abode of the Defendant/Respondent with Mike Jaxx (sic) Wife....” Jaax's wife was Eagle Star's corporate secretary and treasurer at the time of the service.

Upon receiving the petition from his wife, Jaax notified his insurance agent of the claim and forwarded the petition. Jaax was told by the insurance agent that his insurance company would take care of the claim.

When no answer was filed to respond to McElroy's petition, Effertz filed a Motion

[334 S.W.3d 552]

for Default Judgment on behalf of McElroy against Eagle Star. The circuit court granted the motion, and, after a hearing on McElroy's damage claim, the circuit court entered a $369,000 judgment for McElroy against Eagle Star. Thereafter, Effertz sent a copy of the court's default judgment to Eagle Star. After receiving the default judgment, Eagle Star learned that its insurance agent had not obtained insurance coverage on the apartments. Thus, Eagle Star hired the law firm of Berkowitz, Oliver, Williams, Shaw & Eisenbrandt, LLP, to address its legal options with respect to the default judgment. The law firm assigned the handling of Eagle Star's case to David Marcus, who was an attorney at the firm.

Berkowitz Oliver filed a Motion to Set Aside the Default Judgment based on excusable neglect in failing to file an answer. Berkowitz Oliver further argued Eagle Star had a meritorious defense to McElroy's action based on lack of ownership of the property. Effertz, on behalf of McElroy, argued against setting aside the default judgment. The circuit court denied Eagle Star's motion, and this court affirmed the circuit court's decision. McElroy v. Eagle Star Group, Inc., 156 S.W.3d 392 (Mo.App.2005), superseded by rule as stated in Pyle v. Firstline Transp. Sec., Inc., 230 S.W.3d 52 (Mo.App.2007). Effertz then began collection efforts on behalf of McElroy on the default judgment. After garnishing $6,000 from Eagle Star, Effertz determined Eagle Star did not have sufficient assets to satisfy the default judgment.

During his collection efforts, Effertz learned that Eagle Star sent McElroy's petition to its insurance agent and that the insurance agent led Eagle Star to believe that an insurance company would defend the claim. Effertz believed Eagle Star had a potential claim against its insurance agency for leading Eagle Star to believe that an insurance company would defend the case but then failing to see that a defense was provided. Thus, Effertz proposed an agreement to Eagle Star on behalf of McElroy in which Effertz agreed that he would represent Eagle Star and pursue a claim against R.J. Ahmann Company, WKF & C Agency, Inc., and CRC Insurance Services, Inc., (hereinafter referred to as “the insurance companies”) on Eagle Star's behalf and use the proceeds to satisfy McElroy's default judgment against Eagle Star.

On October 28, 2005, Effertz, McElroy, and Eagle Star entered into an Agreement to Retain Counsel. Eagle Star agreed to hire Effertz to litigate its claims against the insurance companies and to pay litigation costs up to $2,500. McElroy agreed not to pursue collection of the default judgment so long as this litigation was pending. Moreover, if the parties settled the case against the insurance companies, McElroy agreed to accept the settlement proceeds in full satisfaction of her default judgment against Eagle Star, regardless of the amount. In particular, the agreement said:

If McElroy and [Effertz] agree to settlement of Eagle Star's claim against Ahmann, et al., and the amount of the settlement is less than the full amount due from Eagle Star to McElroy for her judgment, then the parties agree that the full amount received by Eagle Star shall be paid to McElroy, and McElroy shall immediately acknowledge satisfaction in full for her judgment against Eagle Star.

In the meantime, when it became clear that Effertz would be called as a witness in the litigation against the insurance companies, Attorney David E. Larson took over the lead representation of McElroy and Eagle Star against the insurance companies,

[334 S.W.3d 553]

and Effertz continued to help with the representation. Thereafter, the insurance companies agreed to settle Eagle Star's claim for $240,000. In conjunction with that settlement, Larson and Effertz entered into another agreement with Eagle Star on behalf of McElroy. In the Second Addendum to Agreement to Retain Counsel, Eagle Star agreed to allow McElroy to file a legal malpractice claim against Berkowitz Oliver in Eagle Star's name.

In exchange for Eagle Star's agreement to sue Berkowitz Oliver, McElroy agreed that, regardless of the outcome of this litigation, she would make no further attempts to collect on the default judgment against Eagle Star. The Second Addendum to Agreement provided: “Robin McElroy agrees that she will not pursue recovery of her judgment against Eagle Star, or Mike Jaax or Pam Jaax.” Eagle Star agreed that the legal malpractice case would “be instituted in its name” and that McElroy would have the “exclusive authority to accept or reject any settlement offer” in this suit. McElroy also agreed to reimburse Eagle Star for the $6,011 that she had garnished from Eagle Star's bank account and for the $2,500 in lawsuit expenses that Eagle Star had paid for the lawsuit against the insurance companies. According to the Second Addendum to the agreement, this addendum superseded the original agreement to retain counsel; however, the Second Addendum to the agreement said that “[t]o the extent any provision set forth herein is in conflict with any prior provision, the terms of [the] Second Addendum control.”

Thereafter, Larson filed a claim for legal malpractice in Eagle Star's name against Berkowitz Oliver with the circuit court. The petition alleged that Berkowitz Oliver committed legal malpractice when it failed to raise the issue of a defective return of service in the Motion to Set Aside Default Judgment it prepared on Eagle Star's behalf. In response, Berkowitz Oliver argued that, because service was made upon an officer of Eagle Star, the issue of a defective return would not have been a viable ground for setting aside the default judgment. In particular, Berkowitz Oliver contended that the circuit court could have, and likely would have, exercised its discretion and allowed an amendment to the return of service pursuant to Rule 54.22(a). Berkowitz Oliver also argued that Eagle Star had no damages because of the negotiated agreement with McElroy that relieved Eagle Star of all liability under the default judgment.

After a trial, a jury entered...