Liggett v. Young

• Decision Date: 04 December 2007
• Docket Number: No. 38S02-0703-CV-80.,38S02-0703-CV-80.
• Citation: 877 N.E.2d 178
• Parties: Ronald D. LIGGETT, d/b/a Liggett Construction Company, Appellant (Defendant/Third Party Plaintiff), v. Dean A. YOUNG and Elisabeth Young, Appellees (Plaintiffs/Third Party Defendants).
• Court: Indiana Supreme Court

877 N.E.2d 178

Ronald D. LIGGETT, d/b/a Liggett Construction Company, Appellant (Defendant/Third Party Plaintiff), v. Dean A. YOUNG and Elisabeth Young, Appellees (Plaintiffs/Third Party Defendants).

No. 38S02-0703-CV-80.

Supreme Court of Indiana.

December 4, 2007.

Mark E. GiaQuinta, Robert W. Eherenman, Haller & Colvin, P.C., Fort Wayne, IN, Attorneys for Appellant.

Robert G. Forbes, Forcum, Forbes, Danielson & Danielson LLP, Hartford City, IN, Attorney for Appellees.

On Petition to Transfer from the Indiana Court of Appeals, No. 38A02-0511-CV-1086.

DICKSON, Justice.

The plaintiff, Ronald Liggett, d/b/a Liggett Construction Company, brings this appeal to challenge a trial court summary judgment ruling in a contract dispute arising from Liggett's construction of a private residence for his attorney, defendant Dean Young, and Young's wife, Elisabeth. To address whether the parties' attorney-client relationship affects the resolution of this dispute, we granted transfer, and now reverse the trial court.

In 2001, when sued by a supplier of bricks and materials used in the construction of the Youngs' home, Liggett initiated a third-party complaint against the Youngs. The Youngs' answer included a counterclaim against Liggett seeking damages for allegedly negligent and untimely performance of the work under the building contract. After further counterclaims and motions for summary judgment were presented, the trial court granted partial summary judgment in favor of the Youngs as to all of Liggett's claims against them. Expressly finding no just reason for delay, the trial court entered final judgment in favor of the Youngs and against Liggett as to all of Liggett's claims against the Youngs. Liggett appealed, and the Court of Appeals affirmed. Liggett v. Young, 851 N.E.2d 968 (Ind.Ct.App.2006).

Among Liggett's issues on appeal, we find one to be dispositive: "Whether the trial judge erred in finding no genuine issue of material fact with respect to the enforceability of a contract drafted and entered into between an attorney and his builder/client." Appellant's Br. at 1.

Before addressing this issue, however, we note the somewhat unconventional procedural posture of this case in the trial court. The motion for partial summary judgment filed by the Youngs was supported only by Dean Young's affidavit referring to the parties' building contract, asserting full payment, and attaching the contract as an exhibit. Opposing the Youngs' motion, Liggett's affidavit asserted the existence of unpaid additional labor and materials from change orders; attached exhibits consisting of plans and specifications related to the construction; and asserted that at the time of the contract, Dean Young was serving as Liggett's attorney and had assured Liggett that "that there would be no problems" as a result of Young's "dual status" as Liggett's attorney and party to the contract. Appellant's App'x at 59. Finding it undisputed that "the Youngs have paid the full price called for under the contract," the trial court granted the Youngs' motion for partial summary judgment. The court did not address Liggett's assertions regarding the fact or implications of Dean Young's "dual status" as both a contracting party with and lawyer for Liggett. Following the appointment of a special judge, the appearance of new counsel for Liggett, and a series of further pleadings, Liggett filed a motion for summary judgment. Finding that it was "in effect" a motion to reconsider the previous ruling on the Youngs' motion for partial summary judgment, Appellant's App'x at 12, the trial court undertook such reconsideration and addressed the new arguments presented by Liggett, but declared itself to be "constrained to review the record and evidence as same existed" on the date of the initial order granting partial summary judgment, and did not consider any new designated evidence submitted to support or oppose Liggett's motion for summary judgment. With a detailed explanatory order, the trial court denied Liggett's summary judgment and affirmed the previous order granting the Youngs' motion seeking partial summary judgment as to Liggett's claims against the Youngs.

1. Professional Conduct Rule 1.8

Liggett's appeal contends in part that the Youngs failed to carry their burden on summary judgment to prove that the construction contract was not void by reason of Indiana Professional Conduct Rule 1.8, which restricts an attorney's ability to engage in transactions with the attorney's client. Liggett urges that Dean Young violated this rule by drafting the construction contract for the project, and that attorney/client transactions are presumptively invalid as the product of undue influence. In response, the Youngs contend (a) that Liggett's designation of evidence on summary judgment, claiming an entitlement to receive the contract price plus an additional amount, is inconsistent with his claim that the contract should be found void, and (b) that the construction contract was a standard commercial transaction to which Rule 1.8 does not apply.

Summary judgment is appropriate only when the designated evidence shows there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Indiana Trial Rule 56(C); Biddle v. BAA Indianapolis, LLC, 860 N.E.2d 570, 575 (Ind. 2007); Gunkel v. Renovations, Inc., 822 N.E.2d 150, 152 (Ind.2005); Worman Enterprises, Inc. v. Boone County Solid Waste Mgmt. Dist., 805 N.E.2d 369, 373 (Ind.2004). We construe all facts and reasonable inferences in favor of the non-moving party. Gunkel, 822 N.E.2d at 152. Furthermore, we carefully review summary judgment decisions to ensure a party is not improperly denied its day in court. Id.; Reeder v. Harper, 788 N.E.2d 1236, 1240 (Ind.2003); St. Vincent Hosp. and Health Care Ctr., Inc. v. Steele, 766 N.E.2d 699, 702 (Ind.2002).

At all relevant times (from the contract date of July 2, 1999, through the date the Youngs filed their complaint, April 2, 2001), Rule 1.8(a) of the Indiana Rules of Professional Conduct provided as follows:

(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:

(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner which can be reasonably understood by the client;

the client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and

the client consents in writing thereto.¹

The Comment to Rule 1.8, as relevant to subsection (a), emphasized the general principle that "all transactions between client and lawyer should be fair and reasonable to the client," and added that, "[i]n such transactions a review by independent counsel on behalf of the client is often advisable." Ind. Prof. Cond. R. 1.8 cmt. (1999). But the Comment also noted an exception:

Paragraph (a) does not, however, apply to standard commercial transactions between the lawyer and the client for products or services that the client generally markets to others, for example, banking or brokerage services, medical services, products manufactured or distributed by the client, and utilities services. In such transactions, the lawyer has no advantage in dealing with the client, and the restrictions in paragraph (a) are unnecessary and impracticable.

Id.² The parties disagree regarding whether their transaction falls within this "standard commercial transaction" exception. The Youngs argue that they fall within the exception because the transaction involves a product and/or service that Liggett, a building contractor, generally markets to others. Liggett contends that it does not apply because the dispute centers on the interpretation of the construction contract drafted by his lawyer, Dean Young.

Regardless whether this transaction does not qualify as a standard commercial transaction and thus subjects Dean Young to the requirements of Rule 1.8(a), the Rules of Professional Conduct have limited application outside of the attorney disciplinary process. On the dates relevant to this case, the Preamble to the Indiana Rules of Professional Conduct stated in part:

Violation of a Rule should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached. The Rules are designed to provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies. They are not designed to be a basis for civil liability, but reference to these rules as evidence of the applicable standard of care is not prohibited. Furthermore, the purpose of the Rules can be subverted when they are invoked by opposing parties as procedural weapons. The fact that a rule is a just basis for a lawyer's self-assessment, or for sanctioning a lawyer under the administration of a disciplinary authority, does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the Rule.

Ind. R. Prof. Cond. Preamble (1999-2004).³

Prior decisions are inconsistent regarding whether this language in the pre-2005 Preamble should be applied to preclude resort to Rule 1.8(a) in resolving the issue of civil liability. Two opinions have indicated that violation of the Rules of Professional Conduct may serve as a basis for civil liability. See Trotter v. Nelson, 684 N.E.2d 1150, 1153 (Ind.1997) ("The Rules at issue ... are explicit judicial declarations of Indiana public policy and, akin to contravening a statute, agreements in violation of these rules are unenforceable."); Picadilly, Inc., v. Raikos, 582 N.E.2d 338, 342 (Ind.1991) ("An attorney who breaches any of these duties may face both disciplinary action and a legal malpractice claim."). But neither of these cases address the above-quoted...