Williams v. Waldman

• Decision Date: 13 July 1992
• Docket Number: No. 20799,20799
• Parties: Sharron WILLIAMS, Appellant, v. Herbert WALDMAN, Respondent.
• Court: Nevada Supreme Court

Page 614

836 P.2d 614

108 Nev. 466

Sharron WILLIAMS, Appellant, v. Herbert WALDMAN, Respondent.

No. 20799.

Supreme Court of Nevada.

July 13, 1992.

John Peter Lee, Ltd., and Daniel Marks, Las Vegas, for appellant.

Oshins & Gibbons, Las Vegas, for respondent.

OPINION

PER CURIAM:

The Facts

Sharron Williams, appellant, and Herbert Waldman, respondent, were originally married on March 17, 1962. The couple divorced in 1965 during the time Herbert attended law school, then remarried in 1967. Sharron states that she dropped out of college in order to maintain the couple's finances during Herbert's law school enrollment. Herbert formally entered the practice of law in September 1967, and became an associate in a private law firm. In 1974, Herbert became a partner and shareholder in his firm. A decree of divorce was entered on October 19, 1980.

At the time of the divorce, Herbert owned one-third of the stock of the professional corporation, which he maintained until he left the law firm in 1989. No mention is made in the final decree of the partition of Herbert's law practice, a primary asset of the marriage.

During the course of the marriage, Sharron worked periodically at a variety of part-time jobs. At the time of the divorce, she and her husband were involved in building and selling houses. Herbert testified, however, that Sharron "was generally at home" during the course of their marriage.

Sharron and Herbert discussed divorce periodically in the year preceding the final decree. When they entered into a final decision to end their marriage, Sharron testified that she discussed finding her own lawyer. She also stated that Herbert suggested that they save themselves the expense, and that he offered to draft the agreement. Further, Sharron testified that she relied on Herbert because he was an attorney and that he had stated he would be fair to her and their three children. ¹

Herbert drafted all of the divorce papers and showed them to Sharron, who signed them without consulting an attorney. Herbert concedes that he did not propose to her that the agreement be reviewed by independent counsel. Herbert told her that the agreement was fair and structured in a way which would save her considerable taxes. Sharron signed the property settlement agreement, as well as an answer in proper person. Herbert appeared alone in court. A decree of divorce was entered one week after the parties' final decision to end the marriage. The property settlement agreement was merged into the divorce decree.

In 1987, Sharron contacted a lawyer for the purpose of seeking an increase in child support. Sharron's attorney reviewed the property settlement for legal background and subsequently asked Sharron about the division of her former husband's law practice. According to Sharron's testimony, this was the first time that she became aware that Herbert's law practice was community property, divisible upon divorce, with a monetary value which inured to her individual benefit. Herbert argued strenuously below that Sharron had specifically stated during various discussions that she was not interested in her community share of Herbert's law firm stock. Herbert maintained that Sharron received her community interest in the law firm pension plan in lieu of her community interest in the value of Herbert's share of his firm's stock. Herbert further contended that it was inevitably apparent to Sharron that Herbert had a stock ownership interest in the firm since Herbert's name appeared on the firm's letterhead, office facilities and in the phone book. Herbert testified that the omission of the law firm stock interest from the property settlement "was an oversight." Moreover, Herbert insisted that Sharron contractually agreed to release her equitable interest in the stock pursuant to paragraph 3 of the property settlement agreement. Paragraph 3 states:

It is further agreed that all of the property now owned or held by the respective parties hereto, or that may be hereafter acquired by purchase, descent, or otherwise, and all accumulations or profits therefrom, and all earnings of either party hereto, are and shall be the separate property of that party and not the community property of the parties hereto and that neither of the parties hereto has, or at any time shall have, any right, title, interest, or claim, or has or will assert any claim of any nature whatsoever in or to the property of the other. ²

Herbert conceded below that he had a greater and a more sophisticated knowledge of community property legal principles than his former wife. He also indicated that he failed to apprise Sharron that his interest in the law firm was a community asset with a potential monetary value judicially divisible upon divorce.

The district court found Sharron to be an intelligent and articulate woman with business experience. The judge stated: "It was clear from listening to Mr. Waldman that she stated to him that she wanted nothing to do with the practice. The practice was his." The court compared Sharron's position to "Monday-morning quarterbacking ... divorce parties' remorse that she didn't get more," and found that Sharron had failed to prove by a preponderance of the evidence that the law practice was not divided upon divorce.

Discussion

To the extent that a professional practice is developed over the course of a marriage, the practice may properly be considered community property. See Ford v. Ford, 105 Nev. 672, 674-75, 782 P.2d 1304, 1306 (1989). The goodwill developed in a professional practice during marriage is also included in the community property estate and the value thereof is subject to division at divorce. Id. at 679, 782 P.2d at 1309.

In reviewing divorce proceedings on appeal, this court has generally upheld district courts' rulings that were supported by substantial evidence and were otherwise free of a plainly appearing abuse of discretion. See Buchanan v. Buchanan, 90 Nev. 209, 216, 523 P.2d 1, 5 (1974). "Where a trial court, sitting without a jury, has made a determination upon the basis of conflicting evidence, that determination should not be disturbed on appeal if it is supported by substantial evidence." Lubbe v. Barba, 91 Nev. 596, 600, 540 P.2d 115, 118 (1975); Fletcher v. Fletcher, 89 Nev. 540, 542, 516 P.2d 103, 104 (1973). However, in reaching a determination, the district court must apply the correct legal standard. Lubbe, 91 Nev. at 600, 540 P.2d at 118. We conclude that the district court failed to recognize the parties' agreement as the product of an attorney-client relationship.

The creation of an attorney-client relationship is not precluded by the mere fact of a legally close or blood relationship. See Nicholson v. Shockey, 192 Va. 270, 64 S.E.2d 813, 817 (1951). Formality is not a necessary element in the creation of such a relationship, and the relationship may exist even though the attorney renders his or her services gratuitously. See 7A C.J.S. Attorney & Client § 169 (1980 & Supp.1991) (citing cases).

An attorney-client relationship necessarily gives rise to a fiduciary relationship between an attorney and client, and all transactions growing out of such a relationship are subject to the closest scrutiny by the courts. ³ Durr v. Beatty, 142 Ill.App.3d 443, 96 Ill.Dec. 623, 491 N.E.2d 902, 906 (1986). We have also held that when an attorney enters into a business relationship with a client which is, by its terms, potentially advantageous to the lawyer, this court will closely scrutinize such a transaction on appeal. See Davidson v. Streeter, 68 Nev. 427, 440-41, 234 P.2d 793, 799 (1951); Moore v. Rochester W.M. Co., 42 Nev. 164, 176, 174 P. 1017, 1020-21 (1918). A fiduciary relationship also arises from the existence of the marriage itself, thus precipitating a duty to disclose pertinent assets and factors relating to those assets. ⁴ See In re Marriage of Coffin, 63 Cal.App.3d 139, 151-52, 133 Cal.Rptr. 583 (1976).

Under our case law, when an attorney deals with a client for the former's benefit, the attorney must demonstrate by a higher standard of clear and satisfactory evidence that the transaction was fundamentally fair and free of professional overreaching. Davidson, 68 Nev. at 440, 234 P.2d at 799; Moore, 42 Nev. at 176, 174 P. at 1021. Moreover, this relationship imposes a duty of full as well as fair disclosure. See Durr, 491 N.E.2d at 907; Goldman v. Kane, 3 Mass.App. 336, 329 N.E.2d 770, 773 (1975).

As a general proposition, lawyer-client agreements are necessarily subject to greater scrutiny and stricter rules than transactions occurring between parties on an equal footing. See Briggs v. Clinton County Bank & Trust Co. of Frankfort, Ind., 452 N.E.2d 989, 1004 (Ind.Ct.App.1983). Public policy dictates that:

When an attorney bargains with his client in a business transaction in a manner which is advantageous to himself, and if that transaction is later called into question, the court will subject it to close scrutiny. In such a case, the attorney has the burden of showing that the transaction "was in all respects fairly and equitably conducted; that he fully and faithfully discharged all his duties to his client, not only by refraining from any misrepresentation or concealment of any material fact, but by active diligence to see that his client was fully informed of the nature and effect of the transaction proposed and of his own rights and interests in the subject matter involved, and by seeing to it that his client either has independent advice in the matter or else receives from the attorney such advice as the latter would have been expected to give had the transaction been one between his client and a stranger."

Goldman, 329 N.E.2d at 773 (citations omitted).

Furthermore, it is a well settled rule that "[i]n cases of doubt or ambiguity, a contract must be construed most strongly against the party who prepared it, and favorably to a party who had no voice in the selection of...