Johnson v. Haugland

Decision Date23 March 1981
Docket NumberNo. 9774,9774
Citation303 N.W.2d 533
CourtNorth Dakota Supreme Court
PartiesWilliam JOHNSON, Plaintiff and Appellant, v. John C. HAUGLAND, Haugland & Heustis Law Firm, and The Western State Bank of Devils Lake, North Dakota, a North Dakota corporation, Defendants and Appellees. Civ.

Seth R. Phillips, of Blake & Phillips, St. Paul, Minn., and John W. Frith, Associate Counsel, Devils Lake, for plaintiff and appellant William Johnson; argued by Mr. Phillips.

Richard H. McGee, of McGee, Hankla, Backes & Wheeler, Minot, for defendants and appellees John C. Haugland and the Haugland & Heustis law firm.

Patrick J. Maddock, of Degnan, McElroy, Lamb, Camrud, Maddock & Olson, Grand Forks, for defendant and appellee Western State Bank of Devils Lake.

VANDE WALLE, Justice.

William Johnson appeals from judgments entered by the district court of Ramsey County after that court granted motions for summary judgments in favor of defendants Western State Bank of Devils Lake ("Western"), John C. Haugland, and the law firm of Haugland & Heustis ("law firm"). We affirm in part and reverse in part.

The factual background of this case dates back to the late 1960s when Johnson began a business known as Bill's Mobile Homes in Devils Lake. At approximately the same time, Western started operation in that city. As is the custom in the mobile-home sales business, Johnson sold financing contracts to various banks. Western was one of those banks.

In September of 1970, Johnson sold a mobile home to Richard and Mary Ann Guzman and sold the contract to Western with recourse. In March of 1973, an officer of Western contacted Johnson and instructed him to meet the officer at the site of the Guzmans' mobile home for the purpose of repossessing the mobile home because of several payments that were past due. The repossession took place and subsequently the Guzmans instituted a lawsuit in Federal district court seeking compensatory and punitive damages and naming Western, Lyle Fering, its president, James Kuchar, its vice president, the sheriff of Rolette County, and Johnson as defendants.

Immediately upon being served with the summons and complaint in the Guzman lawsuit, Johnson went to the offices of Western and spoke with Fering. Johnson apparently was confused regarding what the lawsuit was about, particularly his role in it, and sought clarification from Fering. Johnson was told by Fering that there was nothing to worry about and Fering suggested that Johnson stay until John Haugland, Western's attorney, arrived to talk about the case. Johnson told Fering that he (Johnson) had better get an attorney and was again assured by Fering that there was nothing to worry about, that what they had done was legal, and that he would take care of it. At some point during this conversation, John Kuchar, Western's vice president, joined in and gave Johnson the same general assurances that Fering had given him. Haugland arrived later and participated in the conversation. Subsequently, in a deposition, Johnson stated that following his conversations with Fering and Kuchar he "was fully under the impression that he (Haugland) was he was representing me with the bank to take care of me." Again in his deposition, regarding his conversation at the bank with Fering, Kuchar, and Haugland, Johnson stated:

"They said that there was nothing to do, to forget it, just to go on as if there was nothing to worry about."

Haugland represented Western, Fering, Kuchar, and Johnson in the Guzman lawsuit. The court granted a motion for summary judgment in favor of the defendants and dismissed the Guzman action. Guzman v. Western State Bank of Devils Lake, N. D., 381 F.Supp. 1262 (D.N.D.1974). The Guzmans appealed and the Eighth Circuit Court of Appeals, after finding unconstitutional the North Dakota prejudgment attachment statute under which the defendants had proceeded, vacated the judgment and remanded the cause for further proceedings. Guzman v. Western State Bank of Devils Lake, No. Dak., 516 F.2d 125 (8th Cir. 1975). After a jury awarded the Guzmans $9,356.23 general damages and $5,000 punitive damages against Johnson and $25,000 punitive damages against Western, Kuchar, and Fering, the Federal District Court granted the defendants' motion for judgment notwithstanding the verdict. The Guzmans again appealed, and the Eighth Circuit Court reversed. However, on appeal the punitive damages award against Western, Fering, and Kuchar was reduced to $10,000. Guzman v. Western State Bank of Devils Lake, 540 F.2d 948 (8th Cir. 1976).

On September 18, 1979, Johnson commenced the action that is the subject of this appeal. The district court granted summary judgment on motion of Haugland and the law firm. The court found that there was no genuine issue as to any material fact regarding the application of Section 28-01-18, N.D.C.C., the statute providing a two-year limitation on malpractice actions, and that the statute barred Johnson's claim as to those defendants.

Subsequently, the court heard a motion by Western to dismiss and a motion by Johnson to amend his complaint. Upon leave of the court, Johnson amended his complaint, but the court ruled that the amended complaint did not state a claim upon which relief could be granted. The court, pursuant to Rule 12(b), N.D.R.Civ.P., treated Western's motion to dismiss as one for summary judgment under Rule 56, N.D.R.Civ.P., and granted the motion.

Johnson raises two major issues on this appeal:

1. Did the district court err in its determination that the claim against Haugland and the law firm sounded in malpractice and thus was barred by the statute of limitation found at N.D.C.C. Section 28-01-18(3)? 1

2. Did the district court err in its determination that Johnson's amended complaint as to Western failed to set forth a claim upon which relief could be granted?

Before addressing the specific details regarding the issues raised by Johnson, we review briefly the function of the summary-judgment procedure.

The purpose of a summary judgment, under Rule 56, N.D.R.Civ.P., is to promote the expeditious disposition of a legal conflict on its merits, without a trial, where there exists no dispute as to material facts or where only a question of law must be determined. Pioneer State Bank v. Johnsrud, 284 N.W.2d 292 (N.D.1979). A summary judgment may be based upon pleadings, depositions, admissions, affidavits, interrogatories, and the inferences that may be drawn therefrom. Pioneer State Bank, supra. Whatever evidence is used by the trial court in considering a motion for summary judgment, that evidence should be reviewed in the light most favorable to the party opposing the motion. Pioneer State Bank, supra. While, generally, a summary judgment is appropriate where there exists no genuine issue of material fact, undisputed facts do not justify the issuance of a summary judgment if reasonable conflicting inferences may be drawn from those undisputed facts. Helbling v. Helbling, 267 N.W.2d 559 (N.D.1978). Further, the party who moves for summary judgment carries the burden of showing clearly that there exists no genuine issue of material fact to be determined. Winkjer v. Herr, 277 N.W.2d 579 (N.D.1979). Finally, on appeal from summary judgment, this court's only task is to determine: Did the information available to the trial court, when viewed in a light most favorable to the opposing party, preclude the existence of a genuine issue as to any material fact and entitle the moving party to summary judgment as a matter of law? Sayler v. Holstrom, 239 N.W.2d 276 (N.D.1976). With that standard in mind, we first review the summary judgment granted to Haugland and the law firm. We shall then address the same issue in regard to Western.

I

In his amended complaint, Johnson alleged, as to Haugland and the law firm of Haugland & Heustis:

"3.

"Plaintiff now has knowledge and information to allege that Defendant John C. Haugland and the Law Firm of Haugland and Heustis were in a conflict of interest in representing the above defendants in that his interests were not identical nor parallel with those of Defendant Western State Bank and were in fact in conflict or contrary in some ways to the interest of the Bank. The Bank was relieved of liability and Johnson was found liable to the Guzmans'.

"4.

"Plaintiff alleges that the Defendants John C. Haugland and the Law Firm of Haugland and Heustis acted negligently in their representation of his case before the U. S. District Court named above."

Johnson argues that his amended complaint must be read as a whole and, because it sets forth the related conduct of Western, Haugland, and the law firm, it precludes any of them from raising a separate defense. He contends that the amended complaint sets forth causes of action that are subject to the statute of limitation found at Section 28-01-16(1), (2), (5), and (6), N.D.C.C. 2 Johnson further urges that because the amended complaint is directed toward the defendants collectively, the issue of legal malpractice and the corresponding two-year limitation statute are not germane to the questions here involved. 3 However, it is clear that paragraphs 3 and 4 of Johnson's amended complaint set forth specific allegations regarding the conduct of Haugland and the law firm in the context of the attorney/client relationship that existed between these defendants and Johnson during the course of the Guzman litigation. The essence of Johnson's complaint as to these defendants is that they breached their professional duty to Johnson by negligently handling his defense in the Guzman case and that they failed to inform him of the conflict of interest in their simultaneous representation of Johnson and Western in the Guzman case. This court has made it clear that a client may be entitled to damages for losses resulting from his attorney's failure to exercise the degree of care, skill, and diligence commonly exercised by reasonable and prudent lawyers and...

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