McClung v. Smith, Civ. A. No. 3:93cv549.
| Decision Date | 20 December 1994 |
| Docket Number | Civ. A. No. 3:93cv549. |
| Citation | 870 F. Supp. 1384 |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | Constance A. McCLUNG, Plaintiff, v. William Massie SMITH, Jr., and Paxson, Smith, Gilliam & Scott, P.C., Defendants. |
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Thomas E. Albro, Patricia D. McGraw, John K. Taggart, III, Tremblay & Smith, Charlottesville, VA, for plaintiff.
William D. Bayliss, Dana D. McDaniel, Robert T. Mayo, Williams, Mullen Christian & Dobbins, Richmond, VA, for defendants.
Constance A. McClung instituted this action against William Massie Smith, Jr. and Paxson, Smith, Gilliam & Scott, P.C., the law firm in which he was a partner, to recover damages that McClung claims to have sustained as the consequence of legal malpractice. The case was tried to the court, sitting without a jury, and was submitted for decision following briefing and argument.
On October 26, 1976, McClung married John Lowe, a lawyer then engaged in the general practice of law in Charlottesville.1 It was the second marriage for each party. McClung's son from her previous marriage was subsequently adopted by Lowe. The couple lived in Charlottesville in what is referred to as the Blue Ridge Road house which Lowe owned when he and McClung were married. After McClung funded more than $100,000 in improvements to the Blue Ridge Road house, it was titled jointly.
McClung was not employed outside the home during the marriage, but she contributed substantially to the family's income from the annual yield of the "Dadiani" and the "Anthony Oil" trusts, both of which were her separate property. Both trusts were administered by the Leavenworth National Bank & Trust Company in Leavenworth, Kansas ("LNB"). From 1978 to 1989, the trusts generated approximately $422,000 in income. In addition to the trust income, McClung received other separate funds by gift and inheritance, which she contributed to the marriage.2 Lowe's sole source of income was his law practice which, during that same period, generated approximately $644,000 in income.
During the marriage, Lowe handled all of the couple's financial transactions, including McClung's individual finances. Lowe established an account in her name and deposited approximately $500.00 each month to fund certain household expenses and McClung's personal expenses.
As early as 1980, McClung reported to her psychiatrist that she was having marital difficulties with Lowe. (Tr. 251). Not long thereafter, McClung developed a dependency on alcohol which grew progressively worse. Lowe was fully aware of her dependency and the results of it. (PEx. 88; PEx. 89). In the Spring of 1988, McClung was admitted to Springwood, a drug and alcohol rehabilitation clinic. McClung's indulgence in alcohol was accompanied by numerous acts of adultery, all of which were subsequently condoned by Lowe. The record does not reflect a possible cause of McClung's alcoholism, but it convincingly demonstrates that McClung was substantially weakened by her addiction to alcohol and that, with Lowe's encouragement, she became evermore dependent upon him to handle her financial affairs.
The central focus of this action is Lowe's use of McClung's separate funds for the purchase of two beachfront properties in Emerald Isle, North Carolina: the "Sea Dunes house" and the "Inlet Drive house." Further evidence of the extent of Lowe's control over McClung's affairs is found in a general power of attorney she executed in Lowe's favor in July 1978 (PEx. 177, p. 1) and in a special power of attorney she executed in February 1988 to allow Lowe to handle a refinancing of the Inlet Drive house. (PEx. 127; PEx. 177, pp. 2-3).
McClung asserts that Smith committed malpractice in two ways. First, he is alleged to have breached his contract of employment to secure an accounting from Lowe for the misappropriation of certain separate funds entrusted to him by McClung for purchasing and building the Sea Dunes house and the Emerald Isle house. Second, he is alleged to have negligently represented McClung in the divorce and dissolution proceedings instituted by Lowe.
The basic legal principles against which Smith's conduct must be measured is the law of legal malpractice of Virginia. It is well-settled that lawyers are charged with the obligation to use a reasonable degree of care, skill and diligence in handling the matters entrusted to them and are bound contractually to perform the work they agree to undertake for their clients. Glenn v. Haynes, 192 Va. 574, 66 S.E.2d 509, 512 (1951). To prevail in an action for legal malpractice, a plaintiff must prove: (1) the attorney's employment; (2) neglect or breach of duty; and (3) a loss proximately caused by that neglect or breach. Stewart v. Hall, 770 F.2d 1267 (4th Cir.1985).
Because negligence is actionable only if it was the proximate cause of the claimed damages, see Maryland Casualty Co. v. Price, 231 F. 397 (4th Cir.1916), proof of negligence alone is an insufficient basis for recovery. Duvall, Blackburn, Hale & Downey v. Siddiqui, 243 Va. 494, 416 S.E.2d 448 (1992). This means that:
In making the determination that an attorney's negligence proximately caused a client's damages, the trier of the malpractice action must find that the result in the underlying action would have been different but for the attorney's negligent performance.
Stewart, 770 F.2d at 1269 (emphasis added). Thus, the trier of fact in the malpractice action must consider the merits of the underlying action, and consequently the plaintiff must prove a See Stewart, 770 F.2d at 1270; Byrd v. Martin, Hopkins, Lemon and Carter, P.C., 564 F.Supp. 1425 (W.D.Va.1983) (), aff'd, 740 F.2d 961 (4th Cir.1984); Goldstein v. Kaestner, 243 Va. 169, 413 S.E.2d 347 (1992).
There is no single formula for measuring damages in legal malpractice actions; and therefore, the appropriate measure of damages must be determined by the facts and circumstances of each case. Duvall, 243 Va. 494, 416 S.E.2d at 450. Damages will be calculated on the basis of the value of what was lost or the consequences of the adverse judgment suffered by the client; and, although the client is not required to prove the exact amount of incurred damages, she is required to show facts and circumstances from which the trier of fact can make a reasonably certain estimate of those damages. Id. But, the actual damage requirement does not permit a negligent lawyer to evade responsibility for malpractice by claiming that the damages are too "speculative" in nature to be determined. Better Homes, Inc. v. Rodgers, 195 F.Supp. 93 (N.D.W.Va.1961).
The Virginia Supreme Court, in Allied Prods., Inc. v. Duesterdick, 217 Va. 763, 232 S.E.2d 774, 776 (1977), cited the following rationale for requiring the plaintiff to prove actual injury:
If an attorney, in disregard of his duty, neglects to appear in a suit against his client, with the result that a default judgment is taken, it does not follow that the client has suffered damage, because the judgment may be entirely just, and one that would have been rendered notwithstanding the efforts of the attorney to prevent it.
Duesterdick, 232 S.E.2d at 775 (citing Price, 231 F. at 402). Even after a client has proved her case, if she "has suffered a judgment for money damages as the proximate result of her lawyer's negligence, such judgment constitutes actual damage recoverable in a suit for legal malpractice only to the extent such judgment has been paid." Id., 217 Va. 763, 232 S.E.2d at 717.
With these principles in mind, and on the basis of the facts proved by a preponderance of the evidence, the court considers McClung's claims that Smith was negligent in failing to institute an action for an accounting and in representing her in the divorce proceedings.
SMITH'S FAILURE TO SECURE AN ACCOUNTING OF LOWE'S MISHANDLING AND MISAPPROPRIATION OF McCLUNG'S SEPARATE FUNDS
In the summer of 1983 Lowe and McClung decided to purchase a beach house located on Sea Dunes Drive in Emerald Isle, North Carolina. By letter dated September 27, 1983, Lowe outlined to McClung's grandfather, D.R. Anthony, III, the reasons which prompted the desire to purchase the Sea Dunes house and asked for a loan with which to purchase it.
Lowe sent the letter "at Connie's request." (PEx. 83). He represented that the Sea Dunes house was a good investment and had the potential to be a retirement home. He explained that they needed the loan because their financial reserves had been exhausted by debt which Lowe had incurred to finance an ill-fated representation referred to as the "Garwood case" and by educational expenses for their son. (PEx. 83).
The requested loan was in the amount of $159,000. To that end, Lowe represented the following:
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