Patterson v. Swarr, May, Smith & Anderson

• Decision Date: 16 August 1991
• Docket Number: No. 89-436,89-436
• Citation: 473 N.W.2d 94,238 Neb. 911
• Parties: Ronald PATTERSON and Carol Patterson, Appellants and Cross-Appellees, v. SWARR, MAY, SMITH & ANDERSON, a Professional Corporation, et al., Appellees and Cross-Appellants.
• Court: Nebraska Supreme Court

Page 94

473 N.W.2d 94

238 Neb. 911

Ronald PATTERSON and Carol Patterson, Appellants and Cross-Appellees, v. SWARR, MAY, SMITH & ANDERSON, a Professional Corporation, et al., Appellees and Cross-Appellants.

No. 89-436.

Supreme Court of Nebraska.

Aug. 16, 1991.

Syllabus by the Court

1. Trial: Motions for Mistrial. No antecedent objection is necessary in order to move for a mistrial.

2. Motions for New Trial: Appeal and Error. The standard of review of an order granting a new trial is whether the trial court abused its discretion.

3. Rules of Evidence: Insurance: Liability: Negligence. Evidence that a person was or was not insured against liability is not admissible upon the issue whether he acted negligently or otherwise wrongfully. This rule does not require the exclusion of evidence of insurance against liability when offered for another purpose, such as proof of agency, ownership, or control, or bias or prejudice of a witness.

4. Motions for New Trial. A motion for new trial should be granted only where there is error prejudicial to the rights of the unsuccessful party.

5. Directed Verdict. On a motion for directed verdict or judgment notwithstanding the verdict, the moving party is deemed to have admitted as true all the material and relevant evidence admitted which is favorable to the party against whom the motion is directed, and, further, the party against whom the motion is directed is entitled to the benefit of all proper inferences which can reasonably be deduced therefrom.

6. Directed Verdict. In order to sustain a motion for a directed verdict or for judgment notwithstanding the verdict, the court resolves the controversy as a matter of law and may do so only when the facts are such that reasonable minds can draw but one conclusion.

7. Directed Verdict: Evidence: Negligence. In a negligence case, a trial court should sustain a motion for directed verdict or for judgment notwithstanding the verdict only when the evidence, viewed in the light most favorable to the party against whom the motion is directed, fails to establish actionable negligence.

8. Actions: Negligence: Proof: Damages. As an element of a negligence cause of action, a plaintiff must prove damages with reasonable certainty.

9. Attorney and Client: Negligence: Proof: Proximate Cause: Damages. There are three elements a plaintiff alleging attorney negligence must prove: (1) the attorney's employment, (2) the attorney's neglect of a reasonable duty, and (3) that such negligence resulted in and was the proximate cause of loss (damages) to the client.

10. Attorney and Client. An attorney-client relationship is created when a person seeks advice or assistance from an attorney, the advice or assistance sought pertains to matters within the attorney's professional competence, and the attorney expressly or impliedly agrees to give or actually gives the desired advice or assistance.

11. Negligence: Damages. In a negligence case, the proper measure of damages is that which will place the aggrieved party in the position in which he or she would have been had there been no negligence.

12. Trial: Expert Witnesses. When an expert opinion is given which is not in accordance with the actual facts, it lacks probative value.

13. Trial: Rules of Evidence: Expert Witnesses. If the assumption for an opinion advanced by an expert witness is not true, such opinion lacks probative value and should be rejected as irrelevant.

Michael A. Patrick and David W. Griffith of Williams, Trine, Greenstein & Griffith, P.C., Boulder, Colo., for appellants.

John W. Wilke and Clark J. Vanskiver of Sodoro, Daly & Sodoro, Omaha, for appellees.

HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, SHANAHAN, GRANT, and FAHRNBRUCH, JJ.

FAHRNBRUCH, Justice.

Complaining that the trial court erred in granting the defendant lawyers a new trial, the appellants, Ronald Patterson and his wife, Carol Patterson, request that this court reinstate a $1,114,600 legal malpractice jury verdict in their favor.

In their petition, the Pattersons alleged that the defendant attorneys negligently represented them in their chapter 11 bankruptcy reorganization.

After the jury verdict was returned, the district court for Douglas County granted a new trial because of Ronald Patterson's testimonial reference to the defendants' having insurance.

By cross-appeal, the defendants, consisting of Swarr, May, Smith & Anderson, a professional corporation, and lawyers Thomas D. Stalnaker and James T. Gleason, as individuals, claim that the trial court erred in overruling their motions for a directed verdict and for judgment notwithstanding the verdict.

The trial court correctly determined that Ronald Patterson's testimony regarding the defendants' insurance was prejudicial error, but because of the plaintiffs' failure of proof on the element of damages, the defendants' motions for directed verdict and for judgment notwithstanding the verdict should have been sustained. Therefore, the cause is remanded to the district court with directions to dismiss the case.

Near Gretna, Nebraska, the Pattersons engaged in farming, ranching, and land development operations. The Pattersons began breeding purebred Brangus cattle in approximately 1978. Ronald Patterson (hereinafter Patterson) testified that at that time, he understood that it would take 5 to 7 years before the cattle operation would be productive. To finance their cattle business, the Pattersons borrowed money from the Bank of Papillion (hereinafter bank). Patterson testified that by the end of 1983, the Pattersons' loan with the bank was in excess of $700,000. A note for that amount was secured by livestock, machinery, and crops. The record further reflects that the Pattersons gave the bank another note for the sum of $100,000 on September 16, 1983, which was payable on March 14, 1984. The $100,000 note was secured by certain parcels of the Pattersons' real property. Although the Pattersons had a number of other secured and unsecured creditors, the Pattersons owed the bank nearly 10 times the amount owed any other one creditor. In late 1983, the bank's larger note came due. In January 1984, the bank demanded that the note be fully paid. Apparently, it was the bank's position that the value of its security was less than the amount of the debt owed to it by the Pattersons. In that same month, the bank filed a replevin action to take possession of the personal property which secured the Pattersons' bank debt.

During all relevant times, Stalnaker and Gleason were practicing attorneys in Omaha, and they were associated with the law firm of Swarr, May, Smith & Anderson. Stalnaker and Gleason were employed by the Pattersons to represent them in their bankruptcy action. On February 9, 1984, the Pattersons filed a voluntary petition for reorganization under chapter 11 of the U.S. Bankruptcy Code. Stalnaker and Gleason explained at the malpractice trial that the purpose of a chapter 11 bankruptcy is to allow a debtor with financial difficulties to accommodate the debtor's creditors and be able to reorganize and continue to operate the debtor's business. Upon the filing of the bankruptcy petition, the bank's replevin action was automatically stayed by the bankruptcy code. See 11 U.S.C. § 362 (1982).

Patterson testified that from the commencement of the bankruptcy action, he and his wife were instructed by Stalnaker to establish a separate checking account, to sell crops and cattle, and to use the proceeds therefrom for anything in the ordinary course of their business. "Cash collateral" is defined in the U.S. Bankruptcy Code as "cash equivalents in which the estate and an entity other than the estate have an interest." 11 U.S.C. § 363(a) (1982). There was testimony that in the context of a farm bankruptcy, cash collateral is the proceeds obtained from the sale of secured crops and secured livestock, which in this case was pledged to the bank. The Pattersons used the bank's cash collateral for cattle, farm, and miscellaneous expenses. Both Stalnaker and Gleason testified they told Patterson that the proceeds could be used to keep the cows alive during the winter. Stalnaker testified that because the bank acknowledged the necessity of keeping the Pattersons' cattle alive, it tacitly agreed to their use of cash collateral to do so.

On May 9, 1984, Gleason informed the Pattersons of the need to devise a reorganization plan or, as an alternative, to reach an agreement with the bank. A reorganization plan was formulated and filed with the bankruptcy court on June 8, 1984. At the malpractice trial, there was expert testimony that the plan "was really pretty good" and that there were no impediments to its confirmation. The reorganization plan provided a method by which the Pattersons' secured and unsecured creditors, including the bank, would be repaid. The terms of the plan will be more fully discussed in part II of this opinion.

On October 18, 1984, the bank moved to have the automatic bankruptcy stay lifted. The bankruptcy court lifted the stay on November 15, 1984, after finding that the Pattersons "in this proceeding [have] spent $70,000 of cash collateral in direct violation of the [bankruptcy] statute." The U.S. Bankruptcy Code in relevant part prohibits the spending of cash collateral without a creditor's consent or a bankruptcy court's authorization. See § 363(c)(2). Because the Pattersons' chapter 11 reorganization bankruptcy remained pending even though the stay had been lifted, the Pattersons were still subject to § 363(c)(2) and therefore continued to be legally barred from using cash collateral without creditor consent or bankruptcy court approval. The Pattersons were not represented by the defendants in any bankruptcy proceedings after the lift-of-stay hearing.

With the lifting of the stay, the bank was free to pursue a creditor's remedies, such as replevin and foreclosure. On November 19, 1984, the bank's lawyer wrote to the...