Riley v. Clark, Unpublished Decision (11-10-1999)
Riley v. Clark, Unpublished Decision (11-10-1999)
Opinion of the Court
Accordingly, we reverse in part and affirm in part the judgment of the trial court.
Also during the spring of 1993, Clark approached the Rileys to suggest that they purchase Premium Tours, Inc., dba The Cruise and Travel Shoppe ("the Travel Shoppe"), a local travel agency. Clark did not inform the Rileys that he represented the Travel Shoppe or that he owned forty percent of the Travel Shoppe's stock. Martha Graf, whom Clark referred to as the owner of the Travel Shoppe, owned only forty percent of the Travel Shoppe's stock. Steven Rodeheffer and Ralph Stevens, partners in the firm, owned the remaining shares.
During negotiations for purchase of the Travel Shoppe, the Rileys spoke with Clark frequently. Clark gave the Rileys an accountant's compilations of the Travel Shoppe's assets and liabilities and explained the Travel Shoppe's expected future income. Clark did not mention that the accounts receivable listed on the accountant's report consisted primarily of money that the corporate officers, including Clark, owed to the Travel Shoppe. Clark also did not inform the Rileys that an audit of the Travel Shoppe by the Airline Reporting Corporation ("ARC") was pending and that an ARC audit during the past year resulted in assessments for misappropriated monies, missing tickets, bad debts, and missing traveler's checks. Clark did not inform the Rileys that he was the guarantor on a business loan issued to the Travel Shoppe or that a tax lien encumbered all of the Travel Shoppe's assets.
The Rileys retained Clark to prepare articles of incorporation for Kenros, Inc., dba The Cruise and Travel Shoppe, a new corporation wholly owned by the Rileys and created for the purpose of running the Travel Shoppe. In the Rileys' presence, Clark asked Rodeheffer to sign as the statutory agent for Kenros. The Rileys paid the firm for filing the articles. Clark advised the Rileys that a title search was necessary before Kenros could purchase the Travel Shoppe, firm partner Jack Young conducted a title search, and the firm billed and accepted payment from the Rileys for the title search. Additionally, Clark prepared the sales agreement for the sale of the Travel Shoppe to the Rileys.
The Rileys paid one hundred thousand dollars for the Travel Shoppe in July 1993. Shortly thereafter, the Rileys learned of the Travel Shoppe's indebtedness, but not of Clark's connection to it. Clark advised the Rileys regarding their obligations with respect to the Travel Shoppe's debts. Clark also represented the Rileys in their application for ownership of a travel agency required by the ARC. Clark informed the Riley's that the ARC required an increase in their insurance bond because they were new owners. The Rileys paid for the increase and granted Clark power of attorney to obtain the bond insurance. In fact, the ARC required the bond increase not because the Rileys were new owners, but because of the Travel Shoppe's outstanding obligations.
The Riley's incurred significant expense in attempting to pay the creditors of the Travel Shoppe. By March 1994, the Rileys were no longer able to meet the monthly payments on their business loan, and the bank foreclosed. To prevent the sale of their home and land after foreclosure, the Rileys were forced to sell the timber on their land and refinance. The Rileys estimate that they lost a total of approximately two hundred-fifty thousand dollars in connection with their purchase of the Travel Shoppe.
The Rileys and Kenros (hereinafter "the Rileys") filed a complaint for legal malpractice, naming Clark, Rodeheffer, Young, Stevens, and the firm as defendants "in their capacities as individuals and/or partners, individually, jointly and severally." The Rileys attempted to serve all of the defendants by certified mail at the business office of the firm. Only Clark and Rodeheffer accepted service. The Rileys later served Young and Stevens, who were no longer with the firm, at their respective residences. The postal service returned the complaint addressed to the firm with the notation "attempted not known, no longer in existence." The Rileys did not attempt to serve the firm a second time.
Clark, Rodeheffer, Young and Stevens each filed for summary judgment. Clark and Rodeheffer attached affidavits to their motions in which they averred that they did not represent the Rileys and that their actions in dealing with the Rileys did not fall below the professional standard of care. The trial court entered summary judgment in favor of each of the individual defendants. The Rileys appealed the judgments in favor of Clark and Rodeheffer, but we dismissed for lack of a final, appealable order. The trial court then dismissed the complaint against the firm for failure to obtain service of process. The Rileys now appeal the judgments in favor of the firm, Clark and Rodeheffer, and assert the following four assignments of error:
I. The trial court's dismissal with prejudice for failure of service is in error.
II. The trial court's dismissal for failure to prosecute pursuant to Civil Rule 41(B)(1) is in error.
III. Stephen C. Rodeheffer failed to meet his burden of proof that no genuine issue exists as to any material fact, in support of his motion for summary judgment pursuant to Civil Rule 56(B) and Dresher v. Burt.
IV. Roger L. Clark failed to meet his burden of proof that no genuine issue exists as to any material fact, in support of his motion for summary judgment pursuant to Civil Rule 56(B) and Dresher v. Burt.
Service of process * * * shall be made as follows:
* * *
(G) Upon a partnership * * * by serving the entity by certified or express mail at any of its usual places of business or by serving a partner, limited partner, manager or member.
The record reflects that the Rileys served Clark, Rodeheffer, Young, and Stevens, and that each were partners in the firm at one time. Paragraph one of the Rileys' complaint identifies the attorneys as defendants "in their capacities as individuals and/or partners." Hence, the Rileys contend that, despite the fact that the postal service returned the envelope addressed to the firm, their service upon the individual partners constituted service upon the firm.
Rodeheffer, though not conceding that he is a representative of the firm, argues on behalf of the firm that the Rileys' service upon the individual partners did not constitute service upon partners of the firm. Rather, Rodeheffer contends that, because the firm dissolved prior to service of the complaint, he and his former partners no longer existed in their capacity as partners when the Rileys served the complaint. Therefore, according to Rodeheffer, when he and his former partners accepted service in their individual capacities, they were not capable, as a matter of law, of accepting service on behalf of the firm. Rodeheffer also asserts that the Rileys only intended to serve the individual partners as individuals, and that the Rileys cannot now ask that the service "double" as service upon the firm.
If we accept Rodeheffer's interpretation of Civ.R. 4(G), then whenever a partnership suspects that it might be subject to a lawsuit, it can avoid liability by dissolving the partnership prior to the plaintiff's attempt to serve it. However, in R.C.
Permitting partners of dissolved partnerships to accept service on behalf of the partnership also accomplishes the public policy underlying the service requirement. The purpose of service is to provide defendants with due process by notifying them of a new lawsuit in a method reasonably calculated to give them actual notice of the lawsuit. Skuratowicz v. Tracy (1996)
We also reject Rodeheffer's argument that the Rileys originally intended to serve the individual partners only in their individual capacities, and that such an intent prevents the Rileys from later characterizing the individual service as service upon the firm. Rodeheffer asserts that the fact that the Rileys originally sent a separate complaint to the firm evidences their intent that each individual service applied only to the individual partner who accepted that service.
Rodeheffer cites no authority for his contention that service upon an individual cannot also function as service upon a partnership to which that individual belongs. In fact, the only authority Rodeheffer cites stands for the opposite conclusion; that service "reasonably calculated" to reach the interested parties is constitutionally valid. Akron-Canton Regional AirportAuth. v. Swinehart (1980),
Paragraph one of the Rileys' complaint clearly identifies their intent to initiate suit against the attorneys in their capacities both as individuals and as partners in the firm. The Rileys sent their complaint, by certified mail, to four named partners in the firm, a method reasonably calculated to give actual notice of their lawsuit. Thus, based upon Civ.R. 4(G), we find that the Rileys effectively served their complaint upon the firm when the individual partners accepted service. The trial court erred as a matter of law by refusing to recognize service upon the partners as service upon the firm. Accordingly, we sustain the Rileys' first and second assignments of error.
Summary judgment is appropriate only when it has been established: (1) that there is no genuine issue as to any material fact; (2) that the moving party is entitled to judgment as a matter of law; and (3) that reasonable minds can come to only one conclusion, and that conclusion is adverse to the nonmoving party. Civ.R. 56(A). See Bostic v. Connor (1988),
The burden of showing that no genuine issue of material fact exists falls upon the party who moves for summary judgment.Dresher v. Burt (1996),
In reviewing whether an entry of summary judgment is appropriate, an appellate court must independently review the record and the inferences which can be drawn from it to determine if the opposing party can possibly prevail. Morehead,
In order to establish a cause of action for legal malpractice, a plaintiff must show: 1) that the attorney owed a duty or obligation to the plaintiff, 2) that there was a breach of that duty or obligation and that the attorney failed to conform to the standard required by law, and 3) that there is a causal connection between the conduct complained of and the resulting damage or loss. Vahila v. Hall (1997),
An attorney-client relationship sufficient to form the basis for a legal malpractice claim arises "when a person approaches an attorney with the view of retaining the attorney's services."David V. Schwarzwald, Robiner, Wolf Rock Co., L.P.A. (1992),
Even when construing this evidence in the light most favorable to the Rileys, we find that reasonable minds could not conclude that the Rileys established an attorney-client relationship with Rodeheffer. The Rileys did not establish that Rodeheffer ever offered them any guidance or advice regarding their legal rights, and the Rileys never paid Rodeheffer for such services. The Rileys did not establish that Rodeheffer invoked their trust. While the Rileys did produce evidence that they sought advice from, trusted, and paid the firm, that evidence is not relevant to their claim against Rodeheffer in his individual capacity. Hence, we find that Rodeheffer established that he, as an individual, was entitled to summary judgment because he did not represent the Rileys. However, we make no finding as to the merits of the Rileys' case against Rodeheffer in his capacity as a partner with the firm.
Accordingly, we overrule the Rileys' third assignment of error.
Clark contends that he did not represent the Rileys in their purchase of the Travel Shoppe, and that the Rileys failed to produce evidence establishing a genuine issue as to whether he represented the Rileys. Specifically, Clark notes that the Rileys produced no fee agreement to prove that they were engaged in an attorney-client relationship. Additionally, Clark contends that he was not engaged in an attorney-client relationship with the Rileys based upon his subjective perception that he had not formed such a relationship with the Rileys.
Evidence in the record shows that Clark advised the Rileys, performed work on their behalf, and induced them to trust him. Additionally, documents in the record show that the firm accepted payment from the Rileys for work that the Rileys retained Clark to perform. Clark does not dispute that he represented the Rileys in the past, yet he produced no written fee agreements regarding those matters. Therefore, we are not persuaded that the absence of a fee agreement in this case proves the absence of an attorney-client relationship. Additionally, while the attorney's subjective intent may be an indicator of whether a relationship exists, we do not agree that it definitively establishes the absence of a relationship, especially when substantial evidence supports the contrary conclusion.
Accordingly, we find that the record contains evidence that gives rise to a genuine issue of material fact as to whether the Rileys retained Clark as their attorney in their negotiations and purchase of the Travel Shoppe.
Typically, the law requires plaintiffs to produce expert testimony establishing the applicable standard of care in legal malpractice cases. However, "[e]xpert testimony, or testimony at all, for that matter, is not always required to establish a standard of care." Kemper v. Builder's Square (1996),
In this case, the Rileys claim that a lay jury could recognize that an attorney breaches his duty to his client when the attorney betrays the client's trust by neglecting to inform the client that their respective interests are adverse. Additionally, the Rileys contend that it is obvious to a lay jury that an attorney breaches his duty when the attorney fails to advise his client of crucial information known to the attorney, such as the fact that the business the client intends to purchase is encumbered by a tax lien. Finally, the Rileys contend that a lay jury could readily understand that Clark caused them harm by advising them to purchase the Travel Shoppe, at a cost of one hundred thousand dollars, despite his knowledge of the Travel Shoppe's extensive financial troubles.
Clark contends that the Rileys' claim is virtually identical to the legal malpractice claim asserted in Northwestern Life Ins.Co. v. Rogers (1989),
In reaching its judgment, the Northwestern Life court noted that the plaintiffs failed to allege how their attorney's conflict of interest directly and proximately caused harm to them. The record showed that the attorney withdrew upon learning of the conflict. The plaintiffs did not point to specific conduct that caused them harm, nor did they allege any damages resulting from the attorney's conduct. Id. at 511-512. The method, if any, by which the attorney may have profited as a result of the conflict of interest was neither alleged nor apparent from the facts.
In contrast to the Northwestern Life plaintiffs, the Rileys alleged that Clark's conflict of interest directly and proximately caused them to incur damages to Clark's direct benefit. Specifically, the Rileys alleged that Clark's conflict of interest motivated Clark to misrepresent the meaning of the accountant's report and title search, to structure the sales agreement with terms favorable to the Travel Shoppe, and to encourage the Rileys to purchase the Travel Shoppe. The Rileys further alleged that they relied upon Clark's advice because they believed they had retained him, and that they incurred quantifiable financial harm as a result of that reliance. Moreover, unlike the conflict in Northwestern Life, the conflict in this case did not involve a third party whose ability to profit from the transaction was complex or unclear. Rather, the advantage to the Travel Shoppe's owners, including Clark, in misleading the Rileys is obvious: Clark profited directly from advising the Rileys to pay an inflated price for a failing business that he secretly owned in part.
Construing the evidence before the trial court in the light most favorable to the Rileys, we find that the questions of whether Clark breached his duty to the Rileys and whether he proximately caused their harm is within the jury's general experience and knowledge. Additionally, we find that reasonable minds could conclude that Clark breached his duty and caused harm to the Rileys. Thus, we find that Clark did not meet his burden of showing that no genuine issues of material fact existed for trial and that reasonable minds could only conclude that he did not commit legal malpractice. Therefore, we find that the trial court erred when it entered summary judgment in favor of Clark in his individual capacity.
Accordingly, we sustain the Rileys' fourth assignment of error.
Accordingly, we reverse in part and affirm in part the judgment of the trial court, and remand this case to the trial court for further proceedings consistent with this opinion.
JUDGMENT AFFIRMED IN PART AND REVERSED IN PART.
The Court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this Court directing the Scioto County Court of Common Pleas to carry this judgment into execution.
Any stay previously granted by this Court is hereby terminated upon the date of this Entry.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions.
Abele, J. and Evans, J.: Concur in Judgment and Opinion.
For the Court
BY: _______________________________ Roger L. Kline, Presiding Judge
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