Elliott v. Videan
| Decision Date | 30 November 1989 |
| Docket Number | No. 2,CA-CV,2 |
| Citation | 791 P.2d 639,164 Ariz. 113 |
| Parties | Frank S. ELLIOTT and Mary A. Elliott, husband and wife, Plaintiffs/Appellants/Cross-Appellees, v. James M. VIDEAN, and Renaud, Cook & Videan, P.A., an Arizona corporation, Defendants/Appellees/Cross-Appellants. 89-0111. |
| Court | Arizona Court of Appeals |
This is an appeal from a judgment of legal malpractice. The appeal involves the proper measure of damages, and the cross-appeal questions the propriety of the malpractice judgment. We affirm the cross-appeal issues and reverse on the appeal issue.
In 1976 appellant Frank Elliott developed a flexible insulated roof top for mobile homes. He obtained a patent on the process in 1977. Elliott and his wife had retained attorney Dan Morris or his firm in several miscellaneous legal matters, and he sought Morris's advice about his invention. Morris prepared the paperwork to incorporate Thermo-Ann Industries, Inc. He later incorporated another corporation for Elliott named Advanced Insulation, Inc. Initially, appellant owned 40% of the shares of stock in Thermo-Ann Industries, Inc., his father-in-law owned 20%, and Morris owned 40%.
In late 1980, after the company encountered financial difficulties, Morris proposed that Elliott meet with Evan Mecham and his brothers as potential investors in Thermo-Ann Industries. Morris was present during negotiations and prepared documents for the transaction, including an irrevocable assignment of Elliott's patent to Thermo-Ann Industries, a five-year employment contract for Elliott and a "purchase agreement" that provided for Mecham Investments, Inc. to invest cash and to pledge its credit in exchange for 51% of Thermo-Ann's stock.
A month and a half after the agreements were signed, Elliott was terminated by Wayne Mecham. A few months later, he retained appellees James Videan and his law firm (Videan) to represent him for a contingent fee of one-third of the gross recovery. Videan filed a lawsuit against Dan Morris; Wayne, Willard, and Evan Mecham; and Mecham Investments, Inc. In his complaint against Morris, Elliott sought punitive damages, alleging that Morris had willfully and intentionally breached his fiduciary relationship to him while acting as his attorney. Discovery commenced and some depositions were taken.
After the suit had been pending for 23 months, it was dismissed for lack of prosecution on October 11, 1983. Videan learned of the dismissal on November 15. He immediately confirmed the dismissal and within two weeks had obtained six affidavits showing excusable neglect. Videan told Elliott he needed $5,000 to obtain experts' affidavits to show a meritorious claim. Elliott obtained the money from a friend in mid-March 1984. On April 16, 1984, Videan moved to set aside the dismissal. Attached to the motion was the affidavit of an attorney who stated that he had reviewed the verified complaint and that, if the allegations were true, Morris had committed legal malpractice. Videan paid $1,500 for the affidavit. Judge David Grounds denied the motion, finding that it was not timely filed, that there had not been prompt application for relief under Rule 60(c), Ariz.R.Civ.P., 16 A.R.S., and that the attorney's affidavit was insufficient to establish a meritorious claim. No appeal was taken from the ruling, and the statute of limitations barred refiling of the tort claims.
This legal malpractice action was filed in October 1984. At the end of the trial, the jury answered interrogatories in favor of Elliott, finding that the fraud and conspiracy to defraud claims had been proven against Morris, Evan and Wayne Mecham and Mecham Investments, Inc. The jury also found that Elliott had proven the malpractice claim against Morris. Elliott was awarded actual damages of $64,600 and punitive damages of $800,000 on the underlying claims. The trial court later granted Videan's motion for judgment notwithstanding the verdict and set aside the $800,000 punitive damage award.
Elliott contends on appeal that in a legal malpractice claim, the punitive damages that the jury determined should have been assessed against the defendant in the underlying case are part of the value of his lost claim. Videan contends in his cross-appeal that the evidence was insufficient to show that the underlying claims would have been successful, that Elliott failed to show that Videan breached any duty to Elliott, and that the verdict was the product of passion and prejudice. For purposes of clarity, we address the cross-appeal issues first.
A plaintiff in a legal malpractice action must prove that his suit would have been successful if the attorney had not been negligent. Phillips v. Clancy, 152 Ariz. 415, 733 P.2d 300 (App.1986). Videan argues that the evidence was insufficient to support a finding that Morris breached any duty to Elliott. He further argues that there was a lack of clear and convincing evidence of fraud by the defendants in the underlying action. Finally, he contends that no cause of action exists for conspiracy to defraud.
Videan contends that Elliott failed to show that Morris breached any duty he owed to Elliott. Elliott testified that prior to the incorporation of Thermo-Ann Industries, Morris or his firm had been his or his wife's attorney in various matters, including a guardianship, a child support matter, and some domestic relations matters. During the period that Elliott owned stock in Thermo-Ann, Morris served as president and prepared necessary legal documents. Morris denied that he acted as attorney either for Thermo-Ann Industries or for Elliott. Elliott testified that Morris did not advise him that the Mechams and Mecham Investments, Inc. were clients of his firm. Morris did not inform Elliott of the existence of actual or potential conflicts of interest even though he made at least one entry in his personal diary that implied such conflicts existed. Morris did not withdraw as Elliott's attorney during the negotiations with the Mechams or while he was drafting the legal instruments for sale of the corporation. After Elliott was terminated, Morris assisted Wayne Mecham in auditing the company records in order to justify stopping payments to Elliott under the agreement.
Morris's conduct in his relationship with Elliott constituted violations of DRs 1-102, 4-101, 5-104, 5-105, and 7-101 that were in effect in Arizona in 1980. See former Ariz.Sup.Ct.R. 29(a). Videan complains that the jury was instructed as to Morris's malpractice by means of "abstracts" of disciplinary decisions. We disagree. The jury was instructed on the existence of certain rules of professional conduct, including the following: a lawyer may not represent clients of differing interests in the same matter; an attorney-client relationship is an ongoing one that gives rise to a continuing duty by the attorney unless and until the client clearly understands or reasonably should understand that the relationship may no longer be depended upon; it is improper for a lawyer to enter into a business relationship with a client without advising the client to seek outside counsel and without fully disclosing the nature of the transaction. The court also instructed the jury as follows:
These rules are rules of professional conduct only, and a violation of these rules does not establish an act of malpractice. They are merely evidence that you may consider in your determination of whether Dan R. Morris committed malpractice.
Our supreme court has recognized that an "attorney-client relationship is an ongoing relationship giving rise to a continuing duty to the client unless and until the client clearly understands, or reasonably should understand, that the relationship is no longer to be depended on." In re Weiner, 120 Ariz. 349, 352, 586 P.2d 194, 197 (1978). The court also held in that case that it is improper for a lawyer to enter into a business relationship with a client without insuring that the transaction is fair to the client and without fully disclosing the nature of the transaction and the presence of any conflict of interests. We find that the evidence supports the jury's conclusion that Morris committed malpractice and that the court properly instructed the jury as to that issue.
Videan contends next that even assuming Elliott showed a breach of duty, he cannot recover because he lost only a "worthless" cause of action. There was conflicting evidence as to the value of the patent and the corporation at the time the Mechams took control, and the jury resolved that conflict.
Videan also contends that Elliott failed to introduce clear and convincing evidence that any of the underlying defendants committed fraud. The trial court correctly instructed the jury on the nine elements of fraud and on the burden of proof by clear and convincing evidence. See Staheli v. Kauffman, 122 Ariz. 380, 595 P.2d 172 (1979). We find sufficient evidence that the underlying defendants entered into the agreements with Elliott without intending to fully perform so as to support the jury's finding of fraud.
Videan also complains that there was no evidence to support the underlying cause of action for conspiracy to defraud against the Mechams and Morris, arguing that no such cause of action exists in Arizona and citing Tovrea Land & Cattle Co. v. Linsenmeyer, 100 Ariz. 107, 412 P.2d 47 (1966). The trial court instructed the jury as follows:
Conspiracy to defraud is a combination of two or more persons to accomplish by concerted action an unlawful purpose or a...
To continue reading
Request your trial
-
Ferguson v. Lieff, Cabraser, Heimann & Bernstein, LLP
...v. Rice (S.D.1994) 511 N.W.2d 279, 286; Patterson & Wallace v. Frazer (1906) 100 Tex. 103, 94 S.W. 324, 326; Elliott v. Videan (Ct.App.1990) 164 Ariz. 113, 791 P.2d 639, 645-646; Scognamillo v. Olsen (Colo.Ct.App.1990) 795 P.2d 1357, 3. Of course, plaintiffs may recover punitive damages in ......
-
Cecala v. Newman
...20 (noting that rules of professional responsibility "are not designed to be a basis for civil liability")); Elliott v. Videan, 164 Ariz. 113, 116, 791 P.2d 639, 642 (Ct.App.1989) (discussing jury Cecala attempts to support her theory of negligent supervision with the affidavit of her legal......
-
Vallinoto v. DiSandro
...liable for client's emotional distress caused by his malicious withdrawal as counsel two months before trial); Elliott v. Videan, 164 Ariz. 113, 791 P.2d 639 (App.1989) (client's loss due to attorney's negligence justified imposition of punitive damages); Liles v. Liles, 289 Ark. 159, 711 S......
-
Wells Fargo Bank v. Arizona Laborers
...an agreed upon conspiratorial arrangement, on this record, cannot rise to the clear and convincing level. See Elliott v. Videan, 164 Ariz. 113, 116, 791 P.2d 639, 642 (App.1989). ¶ 101 There is a qualitative difference between proving an agreement to participate in a tort, i.e., a civil con......
-
Timothy P. Terrell, Professionalism on an International Scale: the Lex Mundi Project to Identify the Fundamental Shared Values of Law Practice
...646, 654 (Wash. 1992); see also Beach Higher Power Corp. v. Rekant, 832 So. 2d 831, 833 (Fla. Dist. Ct. App. 2002). 321 Elliot v. Videan, 791 P.2d 639, 642 (Ariz. Ct. App. 1989); Stanley v. Richmond, 35 Cal. App. 4th 1070, 1086-87 (Cal. Ct. App. 1995); Waldman, 544 A.2d at 688; Allen, 453 S......