Snow, Nuffer, Engstrom & Drake v. Tanasse, 970079

• Decision Date: 18 May 1999
• Docket Number: No. 970079,970079
• Citation: 980 P.2d 208
• Parties: 369 Utah Adv. Rep. 36, 1999 UT 49 SNOW, NUFFER, ENGSTROM & DRAKE, Plaintiff and Respondent, v. James A. TANASSE, Defendant and Petitioner.
• Court: Utah Supreme Court

Page 208

980 P.2d 208

369 Utah Adv. Rep. 36, 1999 UT 49

SNOW, NUFFER, ENGSTROM & DRAKE, Plaintiff and Respondent, v. James A. TANASSE, Defendant and Petitioner.

No. 970079.

Supreme Court of Utah.

May 18, 1999.

David Nuffer, St. George, for plaintiff.

Robert O. Kurth, Jr., Las Vegas, Nev., for defendant.

On Certiorari to the Utah Court of Appeals

DURHAM, Associate Chief Justice:

¶1 Defendant James Tanasse seeks review of a court of appeals' decision upholding the dismissal of his motion to set aside an execution sale of his legal malpractice cause of action against plaintiff law firm. In upholding the trial court's dismissal, the court of appeals held that (a) it was unnecessary to determine whether a legal malpractice claim is assignable in Utah; (b) a legal malpractice cause of action is not beyond the reach of an involuntary transfer such as a judicially-sanctioned execution sale; and (c) it is not against public policy in the state of Utah for a law firm to purchase in an execution sale a legal malpractice claim asserted against it in a separate lawsuit. Tanasse v. Snow, 929 P.2d 351, 352 (Utah Ct.App.1996). We affirm in part and reverse in part.

¶2 In 1992, Tanasse and Club St. George, Inc., retained defendant law firm Snow, Nuffer, Engstrom and Drake ("Snow Nuffer") to prepare a lease agreement between Club St. George as landlord, and Nedra Pauline and Terry Burchinal, doing business as Nedra's Cafe, as tenants. Thereafter, a dispute arose between the parties to the lease. An eviction was subsequently prepared and executed on Burchinal. Following eviction, Burchinal, doing business as Nedra's Cafe, filed suit against Tanasse and Club St. George for wrongful eviction.

¶3 Soon thereafter, Snow Nuffer withdrew as counsel for Tanasse and Club St. George due to nonpayment of attorney fees in the amount of approximately $14,000. Immediately after withdrawing as counsel, Snow Nuffer filed a lawsuit against Tanasse, Young-Tanasse, Inc., and Club St. George, seeking to collect on a promissory note for attorney fees. The law firm obtained a default judgment against Tanasse on June 8, 1993.

¶4 On September 7, 1993, the Burchinal wrongful eviction action came to trial. Tanasse and Club St. George had to retain new counsel to defend them. The wrongful eviction trial resulted in a judgment of over $100,000 entered against Tanasse and Club St. George. Several months later, Tanasse, Young-Tanasse, and Club St. George filed a legal malpractice lawsuit against Snow Nuffer. Meanwhile, after obtaining the default judgment against Tanasse, Snow Nuffer sought to recover on its default judgment against Tanasse by executing on Tanasse's interest in the legal malpractice action.

¶5 On December 1, 1994, the law firm purchased the malpractice claim for $10,000 at a sheriff's auction initiated by Snow Nuffer. The law firm had filed a praecipe requesting the Washington County Sheriff to execute on and sell all the right, title, equity, and interest of James A. Tanasse, Club St. George, and Young-Tanasse Inc. in the malpractice claim.

¶6 After purchasing the malpractice claim against it, Snow Nuffer filed a partial satisfaction of judgment in its collection action against Tanasse, leaving in place a deficiency judgment. Tanasse then filed a motion to set aside the sale, which was denied by the trial court. The court of appeals affirmed. We granted certiorari to review the question of whether a law firm may purchase at an execution sale a legal malpractice claim filed against it by the judgment debtor in order to extinguish the lawsuit.

¶7 We review the following three issues as framed and addressed by the court of appeals:

(1) Are legal malpractice claims assignable? (2) Even if they are not, may they be reached by execution? (3) Even assuming that a legal malpractice cause of action can generally be levied upon by a judgment creditor through an execution sale, does public policy preclude the very law firm against whom the claim is asserted from purchasing the claim?

Tanasse, 929 P.2d at 352. These questions of law are reviewed under a correction of error standard. State v. Pena, 869 P.2d 932, 936 (Utah 1994). We consider the issues before us as follows.

I. ASSIGNABILITY OF LEGAL MALPRACTICE CLAIMS

¶8 We affirm the court of appeals' determination that there is no need to decide whether a legal malpractice claim is assignable under Utah law in order to resolve this particular dispute. See Tanasse, 929 P.2d at 353. Tanasse never attempted to voluntarily assign his legal malpractice claim, and Snow Nuffer has not tried to assign the claim since acquiring it through execution. Acquisition of a legal malpractice claim through purchase at a sheriff's auction in order to satisfy a default judgment is not the same as acquiring it through a voluntary assignment. Thus, the issue of the claim's assignability was not before the court of appeals and is not before us.

II. INVOLUNTARY TRANSFER OF LEGAL MALPRACTICE CLAIMS

¶9 We also affirm the court of appeals' holding that a legal malpractice claim can be reached through an involuntary transfer such as execution. Tanasse, 929 P.2d at 354. Rule 69 of the Utah Rules of Civil Procedure states that a sheriff shall "execute the writ [of execution] against the non-exempt property of the judgment debtor by levying on a sufficient amount of property, if there is sufficient property; collecting or selling the choses in action and selling the other property in the manner set forth herein." Utah R. Civ. P. 69(f). A "chose in action" has been defined as "a claim or debt upon which a recovery may be made in a lawsuit. It is not a present possession, but merely a right to sue; it becomes a 'possessory thing' only upon successful completion of a lawsuit." Barron's Law Dictionary 71 (3d ed.1991). Accordingly, we hold that a legal malpractice claim, like any other chose in action, may ordinarily be acquired by a creditor through attachment and execution.

¶10 While this is a question of first impression in Utah, we note that a number of states permit a "judgment creditor to execute upon a judgment debtor's cause of action against its insurer." Denham v. Farmers Ins. Co., 213 Cal.App.3d 1061, 1070, 262 Cal.Rptr. 146, 151 (Ct.App.1989) (referencing Bergen v. F/V St. Patrick, 686 F.Supp. 786 (D.Alaska 1988); Whitehead v. Van Leuven, 347 F.Supp. 505 (D.Idaho 1972); Steffens v. American Standard Ins. Co. of Wis., 181 N.W.2d 174 (Iowa 1970)). Medical malpractice claims, for example, have been held to be subject to attachment and execution by creditors. Woody's Olympia Lumber, Inc. v. Roney, 9 Wash.App. 626, 513 P.2d 849, 850-54 (1973). The Denham court interpreting Nevada law, held that, absent direct language to the contrary, all causes of action are subject to execution. See Denham, 262 Cal.Rptr. at 152. Like Nevada, Utah's rules of civil procedure contain no direct language exempting causes of action from execution. ¹ See Utah R. Civ. P. 69. Rather, as the court of appeals noted, the term "chose in action" is used "in the Utah version of Rule 69 without restriction of any sort." Tanasse, 929 P.2d at 354. Thus, we view rule 69 to encompass all choses in action, including causes of action for legal malpractice.

¶11 Ikuno v. Yip, 912 F.2d 306, 313-14 (9th Cir.1990), provides further support for our holding that legal malpractice claims may be reached through an execution sale. In Ikuno, the Ninth Circuit Court of Appeals applied Washington state law to find that a legal negligence claim "was property subject to execution." Id. at 314. The Ninth Circuit relied primarily on Woody's Olympia, cited above, which liberally construed the Washington execution statute as follows:

"[O]ur statute is sufficiently broad to include unliquidated tort claims even if of dubious value, and we see no reason to limit by judicial construction or prohibit the judicial process of attachment or execution by excluding such claims. If such a step is to be taken, it is for the legislature and not for the courts."

Id. (quoting Woody's Olympia, 513 P.2d at 853-54). We similarly hold that our writ of execution rules are quite broad and, absent legislative proscription, encompass unliquidated tort claims, including legal negligence actions. ²

III. PUBLIC POLICY

¶12 Notwithstanding our determination that a legal malpractice cause of action is subject to execution and can generally be purchased by a judgment creditor, we reverse the court of appeals' determination that the very law firm against which a malpractice claim is brought may purchase the cause of action. We do so on the basis of public policy. This question is one that this court is particularly suited to decide, because the public policy concerns at issue closely touch on our regulatory and supervisory responsibilities over the practice of law. See Black v. Clegg, 938 P.2d 293, 297 (Utah 1997) (relying on Utah Const. art. VIII, § 4 to hold that Supreme Court has power to regulate practice of law); see also Barnard v. Utah State Bar, 804 P.2d 526, 528 (Utah 1991). We hold that Snow Nuffer's actions--in forcing an execution sale of defendant's assets to satisfy a default judgment, purchasing Tanasse's pending legal malpractice claim against it, and extinguishing that claim through a motion to dismiss--violate public policy.

¶13 The acquisition of this legal malpractice claim by Snow Nuffer creates two problems. First it has the effect of denying Tanasse the right to a trial on his claims. See Utah Const. art. I, § 11. Snow Nuffer obviously has no intention to litigate a claim against itself:

When a judgment debtor's cause of action against his judgment creditor is turned over to the judgment creditor, the judgment creditor becomes the holder of a cause of action against himself. The judgment creditor becomes both plaintiff and defendant. Under such circumstances, any justiciable controversy is extinguished. Thus, the judgment debtor is forever deprived of his day in c...