Moorhouse v. Ambassador Ins. Co., Inc.

• Decision Date: 21 March 1986
• Docket Number: Docket No. 78248
• Citation: 147 Mich.App. 412,383 N.W.2d 219
• Parties: Fred MOORHOUSE and Betty Moorhouse, Assignees of Gerald G. Loudon, individually and d/b/a Gerald G. Loudon Company, Plaintiffs-Appellants, v. AMBASSADOR INSURANCE COMPANY, INC., a corporation; Burns & Wilcox, Ltd., a corporation; Ames Agency, a Michigan corporation; Randy Ames, individually; and Kaufman & Friedman, P.C.; Alan Jay Kaufman, P.C. and Alan Jay Kaufman, individually, all of the foregoing, jointly and severally, Defendants-Appellees. 147 Mich.App. 412, 383 N.W.2d 219
• Court: Court of Appeal of Michigan — District of US

Page 219

383 N.W.2d 219

Fred MOORHOUSE and Betty Moorhouse, Assignees of Gerald G Loudon, individually and d/b/a Gerald G. Loudon Company, Plaintiffs-Appellants, v. AMBASSADOR INSURANCE COMPANY, INC., a corporation; Burns &amp Wilcox, Ltd., a corporation; Ames Agency, a Michigan corporation; Randy Ames, individually; and Kaufman &amp Friedman, P.C.; Alan Jay Kaufman, P.C. and Alan Jay Kaufman, individually, all of the foregoing, jointly and severally, Defendants-Appellees.

Docket No. 78248.

147 Mich.App. 412, 383 N.W.2d 219

Court of Appeals of Michigan.

Submitted May 8, 1985.

Decided Dec. 2, 1985.

Released for Publication March 21, 1986.

[147 MICHAPP 414] Cicinelli, Mossner, Majoros & Alexander, P.C. by Eugene D. Mossner, Saginaw, for plaintiffs-appellants.

Kaufman & Payton by Ronald Y. Gutman, Southfield, for defendants-appellees.

Before R.B. BURNS, P.J., and BRONSON and TAHVONEN ^*, JJ.

[147 MICHAPP 415] TAHVONEN, Judge.

Plaintiffs Fred and Betty Moorhouse bring this appeal as of right from a circuit court order granting summary judgment in favor of defendants Kaufman & Friedman, P.C., Alan Jay Kaufman, P.C. and Alan Jay Kaufman (hereinafter Kaufman). We reverse and remand.

Fred Moorhouse was injured in a construction site accident in November, 1980. Consequently Fred and Betty Moorhouse filed a personal injury suit in July, 1980, against Gerald G. Loudon, doing business as Gerald G. Loudon Company (Loudon), and others in circuit court. Loudon's insurer was Ambassador Insurance Company (Ambassador).

Loudon was served with summons and complaint on July 31, 1980. Loudon, believing that his policy with Ambassador Insurance Company provided him insurance coverage, forwarded the summons and complaint to Ambassador through his insurance agent at the Ames Agency. Burns & Wilcox, Ltd., a general insurance agency, received the summons and complaint from the Ames Agency on September 9, 1980. By then, the time period for filing Loudon's answer to the complaint had expired. By September 16, 1980, the summons and complaint were routed to defendant Kaufman at his law firm, Kaufman & Friedman, P.C.

Kaufman requested and received two extensions of time for filing an answer to the complaint against Loudon. According to Kaufman, Ambassador instructed Kaufman not to answer the complaint due to lack of coverage, and indicated that Ambassador would notify Loudon that he was without coverage. An order of default was entered against Loudon on December 1, 1980, and a copy was sent to Kaufman. Kaufman did not respond or move to set aside the default, and failed to notify Loudon. On April 30, 1982, a default judgment was entered against Loudon for $660,000, plus interest [147 MICHAPP 416] and costs. Loudon claims Ambassador never informed or advised him of its position that he had no coverage until the default had already been entered against him.

Because Loudon was nearly bankrupt, plaintiffs accepted an assignment of Loudon's causes of action against all the named defendants. Plaintiffs sued Ambassador Insurance Company, Inc.; Burns & Wilcox, Ltd., Ames Agency; Randy Ames; Kaufman & Friedman, P.C.; Alan Jay Kaufman, P.C.; and Alan Jay Kaufman, individually, on July 28, 1982. Count IV of plaintiffs' complaint sets forth allegations in regard to defendants Alan Jay Kaufman, Alan Jay Kaufman, P.C., and Kaufman & Friedman, P.C. All of those allegations refer to Kaufman's negligence in failing to answer plaintiffs' original complaint, in failing to inform Loudon of the default, in failing to attempt to set aside the order of default, and in failing to advise Loudon of the insurance coverage dispute. It was alleged that Kaufman owed Loudon specific duties in his capacity as an attorney which were breached. Kaufman answered the complaint, stating several affirmative defenses. A claim that the assignment was invalid was not among them.

Kaufman filed a motion for summary judgment in June, 1983, based upon GCR 1963, 117.2(3), and another motion for summary judgment in October, 1983, based upon GCR 1963, 117.2(1). Both these motions were taken under advisement. In January, 1984, a second hearing was held on the first motion for summary judgment; the matter was again taken under advisement. In March, 1984, the lower court entered its opinion on both motions for summary judgment, granting the second motion based on subrule 1. In its denial of a motion for rehearing, the court specifically indicated that summary judgment had been granted [147 MICHAPP 417] because causes of action for legal malpractice are not assignable, and on this basis the motion for summary judgment had been granted. The counts of plaintiffs' complaint alleging negligence on the part of Kaufman were dismissed with prejudice.

I

Plaintiffs' first contention on appeal is that, contrary to the holding of Joos v. Drillock, 127 Mich.App. 99, 338 N.W.2d 736 (1983), lv. den. 419 Mich. 935 (1984), causes of action for legal malpractice in Michigan ought to be assignable. We disagree. Joos held that a legal malpractice cause of action is not assignable in Michigan. A trial judge is constrained to follow a decision by any panel of this Court unless it is contradicted by another panel or overruled by the Supreme Court. Tebo v. Havlik, 418 Mich. 350, 362, 343 N.W.2d 181 (1984), reh. den. 419 Mich 1201 (1984); In the Matter of Hague, 412 Mich. 532, 552, 315 N.W.2d 524 (1982), reh. den. 413 Mich 1106 (1982). While we are not bound to follow the opinion of another panel of this Court, we normally do so unless cogent reason appears for not doing so. People v. Waxman, 41 Mich.App. 277, 280, 199 N.W.2d 884 (1972), rev'd on other grounds 388 Mich. 774, 200 N.W.2d 322 (1972).

Joos is a well-reasoned decision with which we agree. In it, the Court carefully analyzed the policy considerations attendant to the issue of whether a legal malpractice action ought to be assignable. The Court concluded that a legal malpractice action is not assignable because of the personal nature of the attorney-client relationship and because assignment of such claims would relegate the legal malpractice action to the marketplace, which would encourage unjustified suits, increase legal malpractice litigation, and force [147 MICHAPP 418] attorneys to defend themselves against strangers. 127 Mich.App. 103, 338 N.W.2d 736. We decline to hold that Joos was wrongly decided.

Plaintiffs try to distinguish the situation here from that in Joos by claiming that no close, personal relationship between Loudon, the client, and Kaufman, the attorney, existed, and that the entire Joos decision hinged on just such a close, personal relationship. We do not think the distinction is as critical as plaintiffs believe it to be. Joos did not hold that legal malpractice claims are nonassignable only where the attorney and client had a close personal relationship. Attorney-client relationships vary and we do not think the degree of closeness of the relationship is of paramount concern. If it were, we would be left to the impossible task of dissecting the closeness of an attorney-client relationship in evaluating the validity of every assignment of a cause of action for legal malpractice.

II

Plaintiffs next assert that the invalidity of the assignment should have been raised as an affirmative defense or in a motion for accelerated judgment, since defendants were really claiming in their motion for summary judgment that plaintiffs lacked legal capacity to sue. We disagree.

Defendants first raised the invalidity of the assignment in their second motion for summary judgment, premised on subdivision 1 of the former summary judgment rule. Plaintiffs are incorrect that this claim should have been raised as a motion for accelerated judgment under GCR 1963, 116.1(3) or (5). Subdivision 5 of that rule is inapplicable to the present situation because defendants did not claim that plaintiffs assigned a claim or made some other disposition of it before commencement[147 MICHAPP 419] of the action. Rather, defendants claim that plaintiffs did not validly receive the claim by assignment. Moreover, subdivision 3 does not apply because defendants do not contest plaintiff's "legal capacity to sue". ¹

Plaintiffs also argue that the claim of invalid assignment is an affirmative defense which should have been asserted in defendants' answer under GCR 1963, 111.7. The invalidity of the assignment may well have been an affirmative defense under the portion of the rule that covers "any defense which by reason of other affirmative matter seeks to avoid the legal effect or defeat the claim set forth in plaintiff's complaint in whole or in part * * * ". An invalid assignment would be a defense to plaintiffs' claims. But more importantly, defendants could never have raised the invalidity of the assignment in their answer. Plaintiffs ignore the reality that defendants could not have raised this claim until a year and some months after the date the litigation was commenced. Joos was decided in July, 1983, and defendants' motion for summary judgment based upon the Joos defense was filed in October, 1983. Thus defendants could not have claimed it as an affirmative defense in their answer to plaintiffs' complaint. Just as affirmative defenses may be added by amendment without waiving them, Pryber v. Marriott Corp, 98 Mich.App. 50, 53, 296 N.W.2d 597 (1980), aff'd 411 Mich. 887, 307 N.W.2d 333 (1981), it makes sense to allow them to be raised when they become legally available.

[147 MICHAPP 420] Moreover, we cannot quarrel with the posture in which the defense was raised. GCR 1963, 117.2(1) was formerly the vehicle for asserting that a party had failed to state a claim upon which relief could be granted. This was a proper way to raise the Joos issue. No new facts were raised in the motion which would have surprised plaintiffs. Additionally, Kaufman's original enumeration of affirmative defenses stated that plaintiff had failed to state a claim upon which...