Villanueva v. First Am. Title Ins. Co.

• Decision Date: 18 March 2013
• Docket Number: No. S12G0484.,S12G0484.
• Parties: VILLANUEVA et al. v. FIRST AMERICAN TITLE INSURANCE COMPANY.
• Court: Georgia Supreme Court

292 Ga. 630

740 S.E.2d 108

VILLANUEVA et al.

v.FIRST AMERICAN TITLE INSURANCE COMPANY.

No. S12G0484.

Supreme Court of Georgia.

March 18, 2013.

Hugh C. Wood, Wood & Meredith, LLP, Tucker, for appellants.

Frederic S. Beloin, Charles William Brown, Beloin, Brown, Blum & Wise, L.L.C., Atlanta, for appellee.

James R. Evans, McKenna, Long & Aldridge, Oliver Maner, Patrick T. O'Connor, Robert B. Lingle, Kenneth L. Shigley, Chambers, Aholt & Rickard, Robin F. Clark, Paula J. Frederick, State Bar of Georgia, amici curiae.

BENHAM, Justice.

We granted the petition for a writ of certiorari filed by appellants Derick Villanueva and The Villanueva Law Firm LLC following the decision of the Court of Appeals in Villanueva v. First American Title Ins. Co., 313 Ga.App. 164, 721 S.E.2d 150 (2011). In granting the petition, we expressed interest in the Court of Appeals's holding in Division 2 of its opinion that legal malpractice claims are not per se unassignable. After studying the issue, we agree with the Court of Appeals that legal malpractice claims are not per se unassignable.

In May 2007, appellant Villanueva acted as the closing attorney for a mortgage-refinance transaction in which Homecomings Financial, LLC served as the lender supplying funds to pay off earlier mortgages on the secured property. Appellee First American Title Insurance Company issued title insurance on the transaction. Pursuant to Villanueva's instructions, Homecomings wired funds into a specified escrow account. However, the funds were not used to pay off the earlier mortgages; instead, the funds were withdrawn and the account closed by a person not a lawyer. First American paid off the earlier mortgages and, pursuant to its closing protection letter to Homecomings, became “subrogated to all rights and remedies [Homecomings] would have had against any person or property....” First American then filed this lawsuit against appellants, the estate of another attorney, the escrow account, the non-lawyer who withdrew the funds from the escrow account, and others, seeking damages for legal malpractice and breach of a contract with Homecomings. The trial court denied summary judgment to appellants.

The Court of Appeals affirmed the trial court's denial of summary judgment to appellants on the claim of legal malpractice, agreeing with Villanueva that First American's subrogation was an assignment since the protection letter transferred to First American Homecomings's right of action in addition to its rights of recovery (313 Ga.App. at 167, 721 S.E.2d 150), but disagreeing with Villanueva's assertion that a legal malpractice claim is never assignable. Recognizing that OCGA § 44–12–24¹ states that a right of action is assignable if it involves a property right but not when it is for personal torts or for injuries arising from fraud, the Court of Appeals concluded that a legal malpractice claim may be assignable under OCGA § 44–12–24 when it involves injury to property in the form of financial loss and is not based on fraud or does not involve a personal tort. The Court of Appeals pretermitted deciding whether there are cases where the special nature of the attorney-client relationship precludes assignment of a legal malpractice claim. 313 Ga.App. at 169, 721 S.E.2d 150.²

The common law recognizes assignment of property damage claims but not personal injury claims, and OCGA § 44–12–24 codifies these principles. Carter v. Banks, 254 Ga. 550(1), 330 S.E.2d 866 (1985). Georgia law also authorizes the assignment of all choses in action arising upon contract, except as otherwise provided in Title 11 (claims under the Uniform Commercial Code). OCGA § 44–12–22. Generally, a legal malpractice action is based upon the breach of a duty imposed by the contract of employment between the attorney and the client, and sounds in contract when it alleges negligence or unskillfulness ( Jones, Day, Reavis & Pogue v. American Envirecycle, 217 Ga.App. 80(1), 456 S.E.2d 264 (1995)), and thus may qualify as an assignable chose in action under OCGA § 44–12–22. A claim of legal malpractice may, on occasion, sound in tort (see Hamilton v. Powell, Goldstein, Frazer & Murphy, 167 Ga.App. 411(1), 306 S.E.2d 340 (1983), aff'd,252 Ga. 149, 311 S.E.2d 818 (1984)), but under OCGA § 44–12–24, the unassignable claims for legal malpractice are only those that seek recompense for “personal torts.” In Robeson v. International Indemnity Co., 248 Ga. 306(1), 282 S.E.2d 896 (1981), this Court held that interspousal immunity prevented a person from recovering from that person's spouse for “personal torts,” and described said torts as “tortious injury to [the] person.” Quoting Black's Law Dictionary, the Court of Appeals construed “personal tort” as used in the interspousal immunity statute as “ ‘one involving or consisting in an injury to the person or to the reputation or feelings, as distinguished from an injury or damage to real or personal property....’ ” Hubbard v. Ruff, 97 Ga.App. 251, 253, 103 S.E.2d 134 (1958). In Hutcherson v. Durden, 113 Ga. 987, 989–990, 39 S.E. 495 (1901), this Court determined that “injuries done to the person” included “all actionable injuries to the individual himself,” citing physical and bodily injury, injury to the reputation, false imprisonment, malicious arrest, and injury to one's health, in contrast to injury done to the person's property. In light of OCGA §§ 44–12–22 and 44–12–24 and the dichotomy presented by possible legal malpractice claims, we agree with the Court of Appeals that the assignment of legal malpractice claims is not prohibited as a matter of law.

Appellants assert that the assignment of a legal malpractice claim violates Georgia's public policy. The legislative enactment of a statute is a conclusive expression of public policy (Integon Indemnity Corp. v. Canal Ins. Co., 256 Ga. 692, 693, 353 S.E.2d 186 (1987)), and the Georgia legislature, by its enactment of OCGA §§ 44–12–22 and 44–12–24, has deemed the assignment of a chose in action arising out of contract or involving a right of property to be within the public policy of Georgia, prohibiting only the assignment of a right of action for personal torts or for injuries arising from fraud. See OCGA § 44–12–44. Nonetheless, appellants point to the fact that a majority of states ban the assignment of legal malpractice claims as void as against public policy. The judicial decisions reaching such a conclusion generally find the assignment to be one for personal injury and/or cite the need to preserve the sanctity of the unique and personal relationship between attorney and client; the incompatibility of assignment and an attorney's duty of loyalty and confidentiality;the need to avoid encouragement of the commercialization of legal malpractice claims that could promote champerty and debase the legal profession; and the concern that allowing assignment of such claims would cause attorneys to be hesitant to represent insolvent, underinsured, or judgment-proof defendants for fear that a malpractice claim would be used as tender. See Goodley v. Wank & Wank, Inc., 62 Cal.App.3d 389, 395–396, 133 Cal.Rptr. 83 (1976), the seminal case on the propriety of the assignability of legal malpractice claims. See also City of Garland v. Booth, 971 S.W.2d 631 (Tex.App.1998). In barring assignment of legal malpractice actions, several courts also have cited the “publicand disreputable role reversal” that follows the assignment of a legal malpractice claim to the adverse party in the underlying litigation ( Picadilly, Inc. v. Raikos, 582 N.E.2d 338, 344–345 (Ind.1991)abrogated on other grounds in Liggett v. Young, 877 N.E.2d 178 (Ind.2007); Zuniga v. Groce, Locke & Hebdon, 878 S.W.2d 313, 318 (Tex.App.1994)), as well as the opportunity and incentive for collusion when a legal malpractice claim is assigned to the adverse party in the underlying litigation. See Wagener v. McDonald, 509 N.W.2d 188, 191 (Minn.App.1993).

The Court of Appeals's decision in the case before us falls within the minority of courts that have declined to adopt an absolute prohibition on the assignment of claims for legal malpractice. The cases from the jurisdictions in the minority generally determine that the legal malpractice action alleges a pecuniary injury similar to a property injury and does not present the concerns raised by the courts that ban the assignment of legal malpractice claims, or suggest that those concerns are overstated. The Supreme Court of Pennsylvania saw a claim for damages based upon legal malpractice arising out of negligence and breach of contract and alleging purely pecuniary injury as akin to property rights that can be assigned, rather than unassignable personal injury rights, and ruled that public policy did not preclude a client from assigning a legal malpractice...