Flint v. Hart
| Citation | 917 P.2d 590,82 Wn.App. 209 |
| Decision Date | 04 June 1996 |
| Docket Number | No. 13837-2-III,13837-2-III |
| Court | Court of Appeals of Washington |
| Parties | Gordon M. FLINT, Respondent, v. Paul E. HART and Jane Doe Hart, his wife; Stephen R. Winfree and Jane Doe Winfree, his wife; and Hart & Winfree, a Washington general partnership, f/k/a Hart, Winfree & Delorie, Appellants. |
Robert B. Gould, Gloria-Rose James, Law Office of Robert B. Gould, Seattle, for Respondent.
Under current Washington law, if a plaintiff exercises independent business judgment and elects not to pursue an available legal remedy, the defendant's wrongful act cannot be the proximate cause of the plaintiff's damages. Horn v. Moberg, 68 Wash.App. 551, 558, 844 P.2d 452, review denied, 121 Wash.2d 1025, 854 P.2d 1085 (1993). The law firm of Hart & Winfree did not retain a security interest in the general intangibles for Gordon M. Flint when it represented him during the sale of his funeral home business to Michael and Vicki Meyer. The Meyers defaulted and later filed bankruptcy. Mr. Flint settled his claim with the Meyers and sued Hart & Winfree for legal malpractice. A jury returned a verdict in his favor. Hart & Winfree appeals. It contends that its negligence was not the proximate cause of Mr. Flint's damages because he exercised his independent business judgment when he settled his claim with the Meyers. Hart & Winfree further asserts the verdict is not supported by substantial evidence and that the court erred in awarding Mr. Flint attorney fees and prejudgment interest.
We take this opportunity to reexamine the independent business judgment rule. We conclude Mr. Flint's settlement of his claim with the Meyers does not bar his
subsequent negligence action against Hart & Winfree. We affirm the directed verdict on the issue of liability. Because we hold the court erred in instructing the jury on the calculation of damages, we reverse the jury award and remand for a new trial on the question of damages.
In 1985, after more than 30 years in the funeral business, Mr. Flint decided to sell the Flint Funeral Home in Prosser to the Meyers. They agreed on a price of $285,000, payable at 11 percent interest. Mr. Flint retained Hart & Winfree to prepare the sale documents. The sale closed in October of 1985.
In 1986, the Meyers' payments became irregular. Mr. Flint did not take any action and the Meyers made up the delinquent payments. In 1989, the Meyers defaulted. They asked Mr. Flint to reduce the balance owing to $100,000 and to suspend payments for one year. Mr. Flint rejected the proposal and sued to foreclose.
On December 21, the Meyers petitioned for chapter 13 bankruptcy protection. Mr. Flint hired an attorney to assist in the bankruptcy. Mr. Flint filed a creditor's claim for $273,865.23. He soon learned, for the first time, that he did not have a security interest in the general intangibles of the business. He moved to have the automatic stay of the bankruptcy lifted so he could proceed with the foreclosure action. The bankruptcy judge denied the motion. Mr. Flint also moved to dismiss the bankruptcy alleging the Meyers' unsecured debt exceeded the statutory limits for chapter 13. 1 The Meyers challenged the valuation of Mr. Flint's claim.
In August of 1990, the bankruptcy judge ruled that Mr. Flint did not have a security interest in the goodwill of On February 28, 1992, Mr. Flint sued Hart & Winfree alleging it failed to retain a security interest in the general intangibles of the business at the time of sale. The case was tried to a jury. Mr. Flint argued that his damages were $121,919--the difference between the initial sale in 1985 ($285,000) and the 1991 settlement agreement ($170,000) plus interest. He presented the testimony of a real estate broker who valued the funeral home at $290,000 as of July 30, 1990. This included real estate valued at $182,500 and a "business market value" of $110,000 to $137,500. The market value figure included personal property, cars, caskets, pre-needs (prearranged funerals), a covenant-not-to-compete agreement, as well as the goodwill of the business. The broker did not value the intangible assets separately. Hart & Winfree's certified public accountant valued the funeral home at $150,000.
the business nor in its customer lists, accounts receivable or business name. Before the judge ruled on the value of the secured assets, Mr. Flint and the Meyers entered into a settlement agreement which reduced Mr. Flint's claim to $170,000, payable at 7.8 percent interest. The claim was secured by the ongoing funeral business. The settlement was approved by the bankruptcy court on September 23, 1991.
After both sides rested, Mr. Flint moved for a directed verdict on the issue of liability. The court granted the motion. By special verdict, the jury found that Hart & Winfree's negligence was the proximate cause of damages to Mr. Flint. It calculated Mr. Flint's damages as follows:
$ 26,177.04 legal and related expenses associated with the bankruptcy
$121,919.00 value of the security interest lost after September 23, 1991
$ 450.00 attorney fees Mr. Flint paid to Hart & Winfree for the 1985
sale agreement
$ 62,707.88 value of the security interest lost in the past, together
with all interest lost from the time of the default up to
September 23, 1991
-----------
$211,253.92 Total
The jury found that Mr. Flint was 24.5 percent comparatively negligent. Hart & Winfree moved for reconsideration, vacation of the verdict or, in the alternative, amendment of the verdict. The court denied the motion. This appeal follows.
Independent Business Judgment. We first address the question of whether Hart & Winfree's failure to retain a security interest in the intangibles was the proximate cause of Mr. Flint's damages. Relying on Horn v. Moberg, 68 Wash.App. 551, 557, 844 P.2d 452, review denied, 121 Wash.2d 1025, 854 P.2d 1085 (1993), the law firm contends the cause of Mr. Flint's damages was his decision to settle the adversary bankruptcy proceeding. Hart & Winfree's position is that Mr. Flint's exercise of independent business judgment bars the present action. The question presented is one of law. Id. at 558, 844 P.2d 452.
The independent business judgment rule pits two equally important legal policies against each other. On one hand, this state is firmly committed to a policy of encouraging litigants to settle their differences at any stage of the proceedings. Kirk v. Moe, 114 Wash.2d 550, 554-55, 789 P.2d 84 (1990); Marassi v. Lau, 71 Wash.App. 912, 918, 859 P.2d 605 (1993). On the other hand, a plaintiff should not, by his or her own actions, be permitted to visit damages upon a hapless defendant. King v. City of Seattle, 84 Wash.2d 239, 252, 525 P.2d 228 (1974). The rule is simply stated: "[W]hen a plaintiff by the exercise of independent business judgment elects not to pursue available legal remedies, the wrongful act of the defendant is not the proximate cause of the plaintiff's damages." Horn, 68 Wash.App. at 558, 844 P.2d 452.
The business judgment rule was first articulated by our Supreme Court in King, 84 Wash.2d at 251, 525 P.2d 228. In that case, the Kings brought a mandamus action to require issuance of a street use and building permit by the City of Seattle. After the permits were issued, the United States Corps of Engineers revised an overwater building regulation. The Kings made no attempt to comply with the regulation, but instead abandoned the project. They sued the City, seeking damages and expenses for their lost profit. Id. at 242, 525 P.2d 228. The Supreme Court reversed the trial court's award of damages. It concluded that the City should not be subject to legal liability because the Kings did not exhaust their federal administrative remedies and did not attempt to avoid their damages. Id. at 250-51, 525 P.2d 228. Addressing the Kings' contention that they elected not to apply for the federal permit because they did not have the economic resources to pursue the project, the court held "[t]his was a voluntary business judgment." Id. at 251, 525 P.2d 228. Holding that there was no legal liability (proximate cause) in the City, the Court, at page 251, 525 P.2d 228, said, "[i]f this were not so, the plaintiff would be able to create liability in another by his own independent judgment."
But the majority's reasoning in King is circular. The mitigation of damages doctrine was inapplicable because the question of whether the Kings had a duty to mitigate presupposed that the City was legally liable for their damages in the first place. King, 84 Wash.2d at 251, 525 P.2d 228. And legal liability never arose because the Kings, presumably in an attempt to mitigate their damages, decided to abandon the project. Id. at 251, 525 P.2d 228.
The absence of liability, however, is not because of an independent business judgment. Every settlement is an exercise in independent judgment. Some the law recognizes as a valid attempt to mitigate damages. By denominating this particular exercise of judgment as "voluntary business judgment," the majority in King eliminated the proximate cause prong of the negligence action. But it is not the exercise in independent business judgment which leads to this result. It is rather the King court's policy decision that some business judgments eliminate proximate cause. The dissent would have imposed liability on the City. It argued that the majority simply denied liability because the plaintiff failed to mitigate damages. King, 84 Wash.2d at 254, 525 P.2d 228 (Brachtenbach, J., dissenting). The net effect, according to the dissent, is to shield a wrongdoer from liability.
The next case decided on the basis of the independent business judgment rule...
To continue reading
Request your trial
-
Bouten Constr. Co. v. HF Magnuson Co.
... ... "A claim is liquidated when damages are easily computed by reference to objective sources." Flint v. Hart, 82 Wash.App. 209, 917 P.2d 590, 599 (1996), citing Walla Walla County Fire Prot. Dist. 5 v. Wash. Auto Carriage, 50 Wash. App. 355, 358, ... ...
-
City of Seattle v. Blume
... ... Page 256 ... rule" and declined to apply the rule in Flint v. Hart, 82 Wash.App. 209, 917 P.2d 590 (1996). In Flint, the law firm of Hart & Winfree assisted Mr. Flint in the sale of his funeral home ... ...
-
Jacob's Meadow Owners Ass'n v. Plateau 44
... ... See, e.g., Bowers v. Transamerica Title Ins. Co., 100 Wash.2d 581, 593-602, 675 P.2d 193 (1983) (attorney fees as costs); Flint v. Hart, 82 Wash.App. 209, 223-24, 917 P.2d 590 (1996) (attorney fees as damages) ... ¶ 34 The case law regarding attorney fees ... ...
-
Kaech v. Lewis County PUD
... ... Damages for property loss are intended "to place the injured party in the condition in which he would have been had the wrong not occurred." Flint v. Hart, 82 Wash.App. 209, 222, 917 P.2d 590 (1996) (quoting Tilly v. Doe, 49 Wash.App. 727, 731-32, 746 P.2d 323 (1987) ). The trial court did ... ...