Schmidt v. Frankewich, 89CA1501
| Decision Date | 06 June 1991 |
| Docket Number | No. 89CA1501,89CA1501 |
| Citation | 819 P.2d 1074 |
| Parties | Gerald SCHMIDT, Jerry Hagen, Alice Hagen, Ray Weber, Irvin Nauman, Robert W. Wenande, and TLI, Inc., a Colorado Corporation, Plaintiffs-Appellants, v. Susan K. FRANKEWICH, Esq., John M. Palmeri, Esq., Jones, Jones, Close & Brown, a chartered corporation of the State of Nevada, and White and Steele, a professional corporation of the State of Colorado, Defendants-Appellees. . I |
| Court | Colorado Court of Appeals |
Podoll & Podoll, P.C., Richard B. Podoll, Denver, for plaintiffs-appellants.
Wood, Ris and Hames, P.C., Eugene S. Hames, Kathleen O. Nistico, Denver, for defendants-appellees White & Steele, P.C. and John M. Palmeri.
Hall & Evans, Paul R. Franke III, Ronald B. Taylor, Denver, for defendant-appellee Jones, Jones, Close & Brown.
Faegre & Benson, Michael S. McCarthy, Russell O. Stewart, Donald A. Burkhardt, Denver, for defendant-appellee Susan K. Frankewich.
Opinion by Judge TURSI.
In this attorney malpractice action, plaintiffs, TLI, Inc., and its individual shareholders, appeal a summary judgment in which the trial court dismissed their contract and tort claims as being barred by the doctrine of collateral estoppel. The individual shareholders additionally appeal the trial court's dismissal of their third-party beneficiary claim, and plaintiff Alice Hagen appeals the award of attorney fees assessed against her without an evidentiary hearing. We affirm.
The Bankruptcy and Guaranty Actions
TLI, Inc., borrowed $3.9 million from a savings and loan institution (Citizens) for the purpose of constructing a motel. TLI executed a promissory note and deed of trust in favor of Citizens, and TLI's individual shareholders were required to guarantee TLI's payment of the loan.
After the motel was built, TLI retained defendant Jones, Jones, Close and Brown, a Nevada law firm, and its associate, Susan Frankewich, to file Chapter 11 bankruptcy proceedings on the corporation's behalf in the bankruptcy court for the District of Colorado. Frankewich then retained the services of defendants White and Steele and its associate, John Palmeri, to assist in the TLI proceeding as local counsel.
TLI's petition for Chapter 11 was filed in the spring of 1986. Shortly thereafter, owing to TLI's default on the underlying loan, Citizens filed suit in Jefferson County District Court against the individual shareholders to collect on the personal guaranties (the Citizens guaranty suit).
Citizens served the individual plaintiffs with process during a meeting on June 13, 1986, which had been convened for the purpose of discussing how to defend against the Citizens suit. It was agreed in that meeting that Robert Updike, the individual shareholder who had retained defendants to represent TLI in the bankruptcy proceeding, would retain counsel to defend the individual shareholders in the Citizens suit. Updike forwarded the Citizens guaranty summonses and complaints which had been served on the individual shareholders to Frankewich and believed, as a result of subsequent discussions with Frankewich, that the interests of the individuals were being represented by defendants.
On June 26, 1986, defendants attempted to prohibit the Citizens guaranty suit from proceeding against guaranties of the individual shareholders by filing in the bankruptcy court a motion to enjoin such proceedings or alternatively to extend the automatic stay to them as guarantors. However, the motion was denied without prejudice four days later because it was procedurally defective.
Defendants did not file the proper pleading with the bankruptcy court for approximately two and one-half months. Responsive pleadings in the Citizens suit were not filed on behalf of the individual guarantors, and default judgment entered against them and in favor of Citizens on August 26, 1986.
The individual shareholders subsequently filed various C.R.C.P. 55 and 60(b) motions to set aside the default judgment in the Citizens guaranty suit. They alleged that Frankewich had instructed TLI's corporate counsel not to file an answer on behalf of the individual shareholders in the Citizens guaranty suit because she was representing and protecting their interests, stating that she "had everything under control." The motions were predicated in part upon the individual shareholders' alleged excusable neglect of relying upon Updike to retain counsel in their behalf. In addition, certain of the shareholders argued that, since they believed defendants had undertaken representation of their individual interests, excusable neglect relieved them from default judgment.
The trial court convened two hearings on the motions during which it heard oral argument. At the end of each hearing, the court ruled that the individual shareholders had not established excusable neglect when they relied upon a co-investor to retain counsel.
The trial court expressly stated that the individual shareholders It also found that no attorneys had entered an appearance on behalf of the individuals and that the individuals had relied upon the bankruptcy attorneys to stay the guaranty suit in lieu of filing an answer. Consequently, the court declined to vacate the default judgments.
On appeal, this court affirmed the trial court's order, holding (a) that litigation in a different court, even on a related matter is not an appearance for purposes of C.R.C.P. 53(b)(2), and (b) that reliance upon a third person to retain counsel does not constitute excusable neglect. Significantly, this court also held that "the record does not support the argument that Updike believed attorneys were handling the matter and representing defendants personally." See Citizens Federal Savings & Loan Ass'n v. Schmidt (Colo.App. No. 87CA0027, April 14, 1988) (not selected for official publication).
The Attorney Malpractice Action
On July 1, 1988, plaintiffs filed this action in Denver District Court, alleging that defendants' performance of their professional duties caused damages to the corporation, its individual shareholders, and Alice Hagen.
Defendant Frankewich, by motion, requested either dismissal or summary judgment as to all claims. Defendants White and Steele and Palmeri also filed motions for summary judgment seeking dismissal of all claims asserted by TLI and the individual guarantors.
Concluding that the doctrine of collateral estoppel applied to preclude plaintiffs' claims, coupled with the determination that third-party beneficiary claims were unavailable to the individual shareholders as a matter of law, the trial court, on July 25, 1989, granted Frankewich's motion and ordered dismissal of all claims. The court entered a separate order in which it held that consideration of the motions for summary judgment by defendants White and Steele and Palmeri was moot, given its disposition of Frankewich's motion.
Plaintiffs contend that the trial court committed error when it held that the individual shareholders were collaterally estopped from relitigating the issue whether an attorney-client relationship exists between the individual shareholders and defendants in the Citizens guaranty suit. We disagree.
The doctrine of collateral estoppel prohibits parties from relitigating issues which have previously been litigated so long as certain criteria are met, including the requirement that the issue precluded is identical to an issue actually and necessarily determined in the prior proceeding. Bennett College v. United Bank, 799 P.2d 364 (Colo.1990).
Here, plaintiffs argue that the issue litigated in the Citizens guaranty suit is not identical to the pending issue--whether an attorney-client relationship existed between the individual plaintiffs and defendants. However, we conclude that, although there is no express finding addressing the issue of the alleged attorney-client relationship, the issue in this case was actually litigated in the previous action.
The existence of an attorney-client relationship is based upon contract, which may be implied from conduct of the parties. People v. Razatos, 636 P.2d 666 (Colo.1981). However, irrespective of whether such a relationship is express or implied, the parties must agree upon all essential contractual terms whether such a relationship is express or implied. I.M.A., Inc. v. Rocky Mountain Airways, Inc., 713 P.2d 882 (Colo.1986); see Restatement (Second) of Contracts § 17(1) (1981).
Agreement to essential contractual terms is evidenced by the parties' manifestations of mutual assent. I.M.A., Inc. v. Rocky Mountain Airways, Inc., supra. If the parties fail to agree to sufficiently definite and certain terms, there is no meeting of the minds and, hence, no valid contract. Sunshine v. M.R. Mansfield Realty, Inc., 195 Colo. 95, 575 P.2d 847 (1978).
When reaching its determination that excusable neglect was not justified, the Citizens guaranty trial court expressly found that the individual plaintiffs relied upon co-investor Updike to retain counsel to represent their individual interests. This court, in affirming the trial court's findings, held that Updike did not believe that defendants were representing the individual guarantors personally.
These findings establish that neither party agreed or assented to the terms of defendants' alleged representation of the individuals. Therefore, the trial court implicitly concluded that a contract between the parties could not be established, and this finding was subsumed in the previous finding of no excusable neglect. See Reitler v. Olson, 68 Colo. 65, 187 P. 313 (1920).
Accordingly, the trial court correctly dismissed the...
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