McCann v. Davis, Malm & D'Agostine

• Decision Date: 17 September 1996
• Citation: 423 Mass. 558,669 N.E.2d 1077
• Parties: Richard K. McCANN v. DAVIS, MALM & D'AGOSTINE & others. 1
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1077

669 N.E.2d 1077

423 Mass. 558

Richard K. McCANN v. DAVIS, MALM & D'AGOSTINE & others. ¹

Supreme Judicial Court of Massachusetts Plymouth.

Argued May 6, 1996.

Decided Sept. 17, 1996.

Jack R. Pirozzolo (Richard E. Bennett with him), Boston, for plaintiff.

Allen N. David (Harvey Weiner with him), Boston, for defendants.

Before LIACOS, C.J., and WILKINS, ABRAMS, LYNCH, O'CONNOR, GREANEY and FRIED, JJ.

WILKINS, Justice.

The plaintiff asserts a claim of malpractice and a violation of G.L. c. 93A (1994 ed.), based on the defendant law firm's conduct in representing him in the sale of his stock in two corporations, Imperial Millwork, Inc. (Imperial), and McCann-Anderson Building Systems, Inc. (Building Systems). The negligence action was tried to a jury. The judge reserved the G.L. c. 93A claim for his determination.

The jury, by a special jury verdict, found that the defendant law firm was negligent in its representation of the plaintiff but that the firm's negligence was not "the proximate cause of the damages sustained by the plaintiff." In a brief memorandum the trial judge adopted the findings of the jury and ruled that the "activities of the defendant were neither unfair nor deceitful," and accordingly he found for the defendant law firm on the G.L. c. 93A claim. The plaintiff appeals from judgments for the defendants (on the jury verdict and on his G.L. c. 93A claim) and from the denial of his motions for a new trial and for judgment notwithstanding the verdict. We transferred the appeal here on our own motion. We affirm the judgment.

In 1986, the plaintiff and Hugh Anderson each owned fifty per cent of the stock of Imperial and Building Systems. The plaintiff wanted to sell his interests in the corporations, and Anderson wished to acquire them. The defendant firm represented both parties in preparing documents to carry out the sale. Anderson could not obtain financing to purchase the plaintiff's stock, and ultimately, in full payment for his stock, the plaintiff took a $600,000 note from Anderson, payable over twenty years. The defendants never advised the plaintiff that he should have separate counsel representing him as seller. Although the plaintiff wanted security for the note, he received none except in the stock sold and an insurance policy on Anderson's life. Anderson had no unencumbered assets in December, 1986, apart from stock in the corporations, that he could have offered as collateral. Anderson made monthly payments from April, 1987, through November, 1989, including about $40,000 of the principal on the $600,000 note. In January, 1990, a bank foreclosed on Imperial and Building Systems. Anderson went into bankruptcy in 1992, and his debts were discharged. The plaintiff has no prospect of recovery of the amounts due on the note.

Although this appeal can be disposed of because there was no causal connection between the defendant firm's wrongdoing and the plaintiff's losses, we briefly comment on the firm's participation on behalf of both buyer and seller of the corporate stock. The defendants' position that they were representing the corporations is neither accurate nor an adequate justification for the dual representation. Clearly, the firm was representing differing interests. Under the Massachusetts Code of Professional Responsibility, S.J.C. Rule 3:07, Canon 5, DR 5-105(C), as appearing in 382 Mass. 781 (1981), an attorney may properly undertake dual representation only "if it is obvious that he can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each." ² It was not obvious that the law firm could adequately represent the plaintiff's interests against Anderson's interests, especially because Anderson was to be a continuing client of the firm. Moreover, there was no client consent or full disclosure of the sort required by DR 5-105(C). A violation of DR 5-105(C), a disciplinary rule intended to protect one in the plaintiff's position, would be some evidence of negligence. See Fishman v. Brooks, 396 Mass. 643, 649, 487 N.E.2d 1377 (1986).

The evidence fully warranted the finding, however, that the firm's negligence caused no damage to the plaintiff. When the plaintiff elected to sell his stock, there was no security available to protect him other than stock in the two corporations and the insurance policy. The plaintiff's own expert testified that it was unclear what proper and...