Himrich v. Carpenter

• Decision Date: 03 June 1997
• Docket Number: No. 19918,19918
• Parties: E.A. HIMRICH, and Gerald M. Baldwin, Plaintiffs and Appellants, v. Edward C. CARPENTER and the Partnership known as Costello, Porter, Hill, Heisterkamp and Bushnell, Defendants and Appellees. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 568

569 N.W.2d 568

1997 SD 116

E.A. HIMRICH, and Gerald M. Baldwin, Plaintiffs and Appellants, v. Edward C. CARPENTER and the Partnership known as Costello Porter, Hill, Heisterkamp and Bushnell, Defendants and Appellees.

No. 19918.

Supreme Court of South Dakota.

Considered on Briefs June 3, 1997.

Decided Oct. 8, 1997.

Scott N. Heidepriem and Shane D. Buntrock of Johnson, Heidepriem, Miner & Marlow, Sioux Falls, for plaintiffs and appellants.

Charles M. Thompson of May, Adam, Gerdes & Thompson, Pierre, for defendants and appellees.

KEAN, Circuit Judge.

PROCEDURAL HISTORY/FACTUAL BACKGROUND

¶1 In 1994 the South Dakota Supreme Court held that a lease-purchase agreement between the City of Custer (City) and Homes, Inc., which included the Custer City Attorney, Gerald Baldwin (Baldwin), as one of the principles, was null and void as violative of public policy under SDCL 6-1-1. Speckels v. Baldwin, 512 N.W.2d 171 (S.D.1994). Subsequent to that decision, Baldwin and E.A. Himrich (Himrich) instituted a legal negligence lawsuit against Edward C. Carpenter (Carpenter) and his legal partnership. Carpenter had represented Baldwin and Himrich at the trial court level and in the South Dakota Supreme Court in their unsuccessful attempt to defend the lawsuit brought by Jerome Speckels. The decision required Himrich and Baldwin to repay City the monthly rental payment which City had been making to them since September 1986, the date the revenue bonds were retired. For further details of that transaction see Speckels, 512 N.W.2d at 173-74.

¶2 The basis for Baldwin and Himrich's claim for legal negligence lies in three separate areas. These are as follows:

(1) The failure of Carpenter to preserve on appeal the statute of limitations defense found at SDCL 6-1-4.

(2) The failure of Carpenter to assert a cross-claim in the prior litigation against City.

(3) The failure of Carpenter to assert as an affirmative defense in the prior litigation the curative legislation of SDCL 9-27-35.

¶3 The first point arose when Carpenter filed an answer for Himrich and Baldwin and asserted the affirmative defense of the statute of limitations. The trial court held that SDCL 6-1-1 did not apply and there was no reason to apply SDCL 6-1-4, the section dealing with the statute of limitation. The trial court also ruled that if SDCL 6-1-1 did apply, SDCL 6-1-4 would also apply. When Speckels did not prevail in the prior litigation, he appealed. Carpenter wrote Himrich and Baldwin and suggested that a notice of review be filed on the statute of limitations matter. Baldwin responded and told Carpenter to proceed, but Carpenter did not file a notice of review on that point. This was noted in Speckels, 512 N.W.2d at 176: "City and Home failed to file a notice of review pursuant to SDCL 15-26A-22, thus precluding it from being raised on appeal."

¶4 The next point deals with the claim of the failure to assert a cross-claim against City in its initial answer. Baldwin and Himrich attempted to file a cross-claim against City after the remand of the original proceeding. They concede that the failure to file the cross-claim in the initial lawsuit effectively precludes them from doing so now. However, they claim that Carpenter's failure to assert the original cross-claim is legal negligence.

¶5 The final point deals with the curative legislation found at SDCL 9-27-35. Baldwin and Himrich claim SDCL 9-27-35 is clear and constitutional and validates the lease purchase agreement as a conveyance of the nursing home because it was made prior to January 1, 1992, the date set forth in this statute. They also claim that SDCL 9-27-35 makes a void act a valid one and operates to cure any irregularities or defects in the conveyance of the real estate such as the real estate at issue in this case.

¶6 Carpenter moved for summary judgment and it was granted. This appeal followed.

ISSUE

¶7 There is a single issue on appeal.

¶8 I. Did the trial court err in granting summary judgment to Carpenter, considering that SDCL 6-1-4, 9-27-35, and 15-2-8(4) and cross-claims against City were not asserted as affirmative defenses in the underlying cause of action or raised on the prior appeal?

¶9 We hold that summary judgment was proper.

ANALYSIS

¶10 The standard of review for summary judgment is well established.

In reviewing a grant ... of summary judgment under SDCL 15-6-56(c), we must determine whether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. The evidence must be viewed most favorably to the nonmoving party and reasonable doubts should be resolved against the moving party. The nonmoving party, however, must present specific facts showing that a genuine, material issue for trial exists. Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied. If there exists any basis which supports the ruling of the trial court, affirmance of summary judgment is proper.

Mack v. Kranz Farms, Inc., 548 N.W.2d 812, 813-14 (S.D.1996).

¶11 In order to demonstrate a valid legal malpractice claim, Himrich and Baldwin must prove:

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

(2) that the attorney, either by an act or 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.

Haberer v. Rice, 511 N.W.2d 279, 284 (S.D.1994). In seeking to overturn a summary judgment against them, Himrich and Baldwin must produce evidence that but for the negligence of their attorney, their cause of action or defense against a claim in the underlying action would have been successful. Id. See Weiss v. Van Norman, 1997 SD 40, 562 N.W.2d 113. This evidence must be set forth by affidavit or other evidence of specific facts, and cannot rely on mere allegation. Weiszhaar Farms v. Live Stock State Bank, 467 N.W.2d 752, 754 (S.D.1991); Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 2137, 119 L.Ed.2d 351, 365 (1992). In this case, Himrich and Baldwin failed to prove that but for Carpenter's failure to raise the defenses of statute of limitations and SDCL 9-27-35, and to make certain cross-claims, the South Dakota Supreme Court would have ruled in their favor.

I. Contract in Violation of Public Policy

¶12 The contract between City and Homes, Inc. clearly violates South Dakota public policy. SDCL 6-1-1 plainly indicates that a contract between a municipality and one of its officers is in direct conflict with the fundamental rule against self-dealing. "Public policy requires that local government officials cannot be permitted to place themselves in a position in which personal interest may conflict with public duty." Speckels, 512 N.W.2d at 175-76 (citing Sciuto v. City of Lawrence, 389 Mass. 939, 452 N.E.2d 1148 (1983); Josephson v. Planning Board, 151 Conn. 489, 199 A.2d 690 (1964)). That an attorney was involved as a municipal officer, further extends this duty.

¶13 "The relationship between attorney and client is highly fiduciary. It consists of a very delicate, exacting and confidential character. It requires the highest degree of fidelity and good faith. It is a purely personal relationship, involving the highest personal trust and confidence." Rosebud Sioux Tribe v. Strain, 432 N.W.2d 259, 264 (S.D.1988) (citing 7 AmJur2d Attorneys at Law § 119). By virtue of his fiduciary duties to his client, an attorney is forbidden from using his official position for private gain. Speckels, 512 N.W.2d at 176. Baldwin and Himrich blatantly ignored their fiduciary duties to City; they should have made a choice between public service and private gain. By choosing both, they acted for self-profit, rather than for the benefit of their client.

¶14 The allegation that City and its residents were not harmed but rather profited because of the illegal contract is completely irrelevant. Norbeck and Nicholson Co. v. State, 32 S.D. 189, 142 N.W. 847 (1913). In addition to the pecuniary interests of the public, civic honesty and morality are protected under the doctrine of public policy. Ritter v. Mutual Life Ins. Co., 169 U.S. 139, 158-59, 18 S.Ct. 300, 306, 42 L.Ed. 693, 699 (1898); Bartron v. Codington County, 68 S.D. 309, 2 N.W.2d 337, 348 (1942). Equity and natural justice invalidate contracts which, by their nature, tend to "weaken public confidence in the integrity of the public service." Carlson v. City of Faith, 75 S.D. 432, 434, 67 N.W.2d 149, 151 (1954); Dodaro v. Commonwealth, State Ethics Comm'n, 527 Pa. 539, 594 A.2d 652, 653-54 (1991); Katz v. Brandon, 156 Conn. 521, 245 A.2d 579, 587 (1968).

II. SDCL 9-27-35

Not a Valid Defense

¶15 Public policy dictates that Himrich and Baldwin would not have been successful under SDCL 9-27-35. See, Minneapolis, St. Paul P., R. & D. Electric Traction Co. v. City of Minneapolis, 124 Minn. 351, 145 N.W. 609, 611 (1914). A validation statute is defined as, "[a] statute, purpose of which is to cure past errors and omissions and thus make valid what was invalid...." Black's Law Dictionary 1550 (6th ed 1990). SDCL 9-27-35 purports to cure and validate conveyances of real property by municipalities made prior to 1992. However, under SDCL 6-1-1, the contract was null and void from the date of its making. In applying statutes comparable to SDCL 6-1-1, courts have held, "[C]ontracts such as here involved are wholly void for all purposes as to everybody whose rights would be affected by them if valid, and such contracts require 'no disaffirmance to avoid' them; they 'cannot be validated by ratification'; and they are not 'susceptible of validation.' " Arthur v. Trindel, 168 Neb. 429, 96 N.W.2d 208, 214 (1959); Kellogg v. Howes, 81 Cal. 170, 22 P. 509 (1889); 17A AmJur2d Contracts § 7 (1991).

¶16 In addition, the...