Lord v. Parisi

• Decision Date: 31 January 2001
• Parties: Richard H. LORD, Appellant, v. Frank PARISI and Lane, Powell, Spears, Lubersky, Respondents.
• Court: Oregon Court of Appeals

19 P.3d 358

172 Or. App. 271

Richard H. LORD, Appellant, v. Frank PARISI and Lane, Powell, Spears, Lubersky, Respondents.

(9711-08677; CA A106705)

Court of Appeals of Oregon.

Argued and Submitted February 18, 2000.

Decided January 31, 2001.

Mark McCulloch, Portland, argued the cause for appellant. With him on the briefs was Powers, McCulloch & Bennett.

Barbara L. Johnston, Hillsboro, argued the cause for respondents. With her on the brief was Larry A. Brisbee.

Before EDMONDS, Presiding Judge, and ARMSTRONG and KISTLER, Judges.

KISTLER, J.

Plaintiff brought this action against defendants for legal malpractice and negligent misrepresentation. The trial court granted defendants' summary judgment motion because defendants owed plaintiff no duty. We affirm.

In March 1986, plaintiff agreed to sell a parcel of land to his cousin, Steve Lord,¹ who intended to develop the property and then sell it in lots. The actual sale and transfer of title took place some five months later in August. The sale agreement provided that plaintiff would be paid as lots were sold. The agreement also stated that plaintiff and Lord were dealing at arm's length, were not acting as partners, and had not entered into a joint venture.

Defendant Frank Parisi is an attorney. In June 1986, Lord met with Parisi concerning the development of the property and asked him to draft Covenants, Conditions and Restrictions (CC & Rs).² Lord asked Parisi to represent only his interests. Parisi explained:

"[Plaintiff] has never been my client. No one has ever requested that I have the interests of [plaintiff] (or [plaintiff's] trust) in mind in the preparation of any document. In particular, my client, Steve Lord, never requested that I prepare any document or take any other action for the benefit of [plaintiff] or a trust in the name of [plaintiff]. Rather, it was my understanding that even though Steve Lord and [plaintiff] were distant cousins, they dealt as arms length business partners, and that my duty was to protect the interests of Steve Lord and his company in connection with preparation of the CC & Rs."

Over the next several months, Parisi met with Lord several times. Parisi met with plaintiff only once. The meeting was brief, and plaintiff has no memory of what either he or Parisi said during that meeting. Plaintiff never consulted with his own attorney regarding this matter but says that he never considered Parisi his attorney.

The CC & Rs were completed in March 1987. They identified plaintiff as the owner of the property and Lord as the developer. Together, plaintiff and Lord were referred to as "declarants." The CC & Rs set out the declarants' obligations with respect to maintaining the property during the course of development. They also provided that those obligations would end when the homeowners' association was formed. The documents did not differentiate between the two declarants in terms of their obligations or benefits. Lord took the documents to plaintiff and asked him to sign them. Plaintiff never objected to being named as the owner of the property. Both he and Lord signed the CC & Rs.

Several months later, the purchasers of the lots brought suit against both plaintiff and Lord because of some problems with a road on the property that the CC & Rs required them to build and maintain. Lord filed for bankruptcy, and a substantial judgment was ultimately entered against plaintiff.

Plaintiff then brought this action against Parisi and his law firm, claiming legal malpractice and negligent misrepresentation. Specifically, plaintiff alleged that Parisi had been negligent in naming plaintiff as the land owner in the CC & Rs and making him responsible for the obligations set out in that document and a related maintenance agreement. Plaintiff alleges that because he was no longer the owner of the property when the documents were prepared, there was no reason to name him as such or to make him responsible for any obligation. Doing so, he alleged, amounted to both negligence and negligent misrepresentation on Parisi's part. The trial court granted Parisi and his firm's summary judgment motion on both claims. The court reasoned that Parisi was not plaintiff's attorney and did not owe a duty of care to plaintiff.

On appeal, plaintiff does not dispute that he must establish that Parisi owed him a duty before he may sue him for malpractice. See Hale v. Groce, 304 Or. 281, 284, 744 P.2d 1289 (1987) (in negligence actions involving solely economic harm, the plaintiff must establish a duty independent of a general obligation to prevent foreseeable harm). Plaintiff does not claim that a duty arose out of an attorney-client relationship between Parisi and him; rather, plaintiff concedes that Parisi was not acting as his attorney. In addition, plaintiff does not argue that he and Lord were either partners or joint venturers; that is, he does not argue that Parisi represented a partnership and thus owed a duty to both partners.

Rather, plaintiff advances three reasons why he may bring a malpractice action against Parisi. He argues first that, under Oregon case law, he was an intended beneficiary. Second, plaintiff asks us to adopt the so-called "California test" for determining when a court should recognize exceptions to the rule that only a client may sue his or her attorney for malpractice. Third, plaintiff argues that this is a case in which the defendant has "blurred the lines" of representation to such a degree he should be entitled to maintain an action against Parisi. It is helpful to put plaintiff's arguments in historical context before we address their merits.

Initially, the Oregon Supreme Court held that only a client may sue his or her attorney for malpractice. Currey v. Butcher, 37 Or. 380, 61 P. 631 (1900) (the jury should have been instructed that if the plaintiff's husband, rather than the plaintiff, had hired the attorney to do a title search, the plaintiff had no malpractice claim against the attorney); see also Savings Bank v. Ward, 100 U.S. 195, 25 L.Ed. 621 (1879). The court suggested in Currey that there might be exceptions to this rule but did not have occasion to define them. See 37 Or. at 389, 61 P. 631. Since Currey, Oregon has continued to adhere to the general rule that only a client may sue his or her attorney for malpractice, and the question has been when exceptions to that rule should be recognized. See Roberts v. Fearey, 162 Or.App. 546, 550, 986 P.2d 690 (1999) (explaining that Oregon has adopted a case-by-case approach in determining whether to take a case out of the general rule).

Three Oregon Supreme Court decisions have addressed that question. The first recognized the possibility of an exception to the general rule in Currey, based roughly along the lines of the California test that plaintiff urges us to adopt. See Metzker v. Slocum, 272 Or. 313, 316, 537 P.2d 74 (1975). The court, however, found it unnecessary to decide whether to adopt that test; it reasoned that even if the test applied, the plaintiff still failed to state a negligence claim against the attorney. Id. at 317, 537 P.2d 74 (reasoning that there must be "a much more certain, direct, and foreseeable connection between the lawyer's negligence and the third party's injury than exists in the present case").

The court returned to the issue two years later in McEvoy v. Helikson, 277 Or. 781, 562 P.2d 540 (1977). In that case, a court order and stipulation in a domestic relations case imposed a duty on an attorney to hold his client's passport so that she would not leave the country with her minor child. When the attorney breached that duty, the court concluded that the client's spouse could sue for malpractice. Id. at 785-86, 562 P.2d 540. The court did not explain the basis for its holding other than to say that the circumstances were sufficient to take the case out of the general rule announced in Currey. Id. at 786, 562 P.2d 540. It is worth noting, however, that the court did not apply the multiple-factor test that it had mentioned two years earlier in Metzker. Its holding appears to rest instead on the breach of a legal duty arising out of the attorney's agreement to follow the terms of the court order. Id. at 785-86, 562 P.2d 540.

Finally, in Hale, the court clarified the basis for finding exceptions to the general rule that only a client may bring a malpractice claim against his or her attorney. The court started from the proposition that "one ordinarily is not liable for negligently causing a stranger's purely economic loss without injuring his person or property." Hale, 304 Or. at 284, 744 P.2d 1289. The court reasoned that, in those circumstances, "[i]t does not suffice that the harm is a foreseeable consequence of negligent conduct that may make one liable to someone else, for instance to a client. * * * Some source of a duty outside the common law of negligence is required." Id.

In Hale, the court found that duty in the law of contracts. It reasoned that the plaintiff in that case was "a classic `intended' third-party beneficiary" of the attorney's promise to his client to include the plaintiff in his will and that the plaintiff could bring a breach of contract action against the attorney. Id. at 286, 744 P.2d 1289. The court then reasoned: "Because under third-party analysis the contract creates a `duty' not only to the promissee, the client, but also to the intended beneficiary, negligent nonperformance may give rise to a negligence action as well." Id. The court thus held that the plaintiff could pursue a negligence claim against the attorney not because the harm was foreseeable but because the court could identify a duty that the attorney owed the plaintiff apart from the foreseeability of the harm.³ See Onita Pacific Corp. v. Trustees of Bronson, 315 Or. 149, 159 and n. 7, 843 P.2d 890 (1992) (explaining Hale.) With that background in mind, we turn to plaintiff's arguments.

Plaintiff argues initially that he is an...