Present: All the Justices
C. LINWOOD GREGORY
OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR.
v. Record No. 951272 April 19, 1996
MILDRED M. HAWKINS
FROM THE CIRCUIT COURT OF NEW KENT COUNTY
Fred W. Bateman, Judge
In this appeal of a judgment for attorney malpractice, the
dispositive issue is whether the client proved that the
attorney's conduct was a proximate cause of the client's loss.
The issue arises from the following pertinent facts which are
recited in the light most favorable to the client, the prevailing
party at trial.
Mildred M. Hawkins (Hawkins) was the owner of a motel in New
Kent County. In December 1984, Hawkins secured a contract to
sell the business and its attendant property to Wesley and Norma
Wilson (the Wilsons). After the contract was negotiated and
signed, Hawkins retained C. Linwood Gregory (Gregory), an
attorney, to advise and assist her in concluding the sale.
On February 20, 1985, the Wilsons indicated that they
intended to default on the contract unless Hawkins agreed to a
revision of its terms. They alleged that Hawkins had
misrepresented the financial and physical condition of the
business. Gregory advised Hawkins of the terms of a proposed
addendum to the contract, which reduced the selling price and
interest rate provided for in the original agreement. On the
basis of Gregory's advice, Hawkins agreed to the reductions.
On February 21, 1985, Gregory prepared and presented to
Hawkins an indemnity agreement related to the sale of the
business. The agreement provided that for a period of five years
after the sale Hawkins would "hold harmless the Wilsons from and
against any and all cost, expense, liability, damage or other
deficiency resulting from any misrepresentations by [Hawkins]."
Gregory testified that it was his custom to have such agreements
available "in other closings of this nature." There was no
indication that the Wilsons ever requested such an agreement.
However, Gregory mailed the agreement to the Wilsons.
Hawkins testified that she questioned Gregory about the
indemnity agreement when he presented it to her. She testified
that Gregory indicated it was not a part of the contract and
that it just made her responsible for any "operational debts" she
might have. She further testified that Gregory told her he had
forgotten to have her sign the agreement earlier and that he only
wanted to put it in his file in case he ever needed it.
The Wilsons subsequently sued Hawkins (the Wilson suit),
alleging that she had misrepresented the condition of the
business and its attendant property. The Wilsons alleged
alternative theories of liability, relying both upon fraud and
the indemnity agreement. Judgment was ultimately rendered for
Hawkins on the ground that the statute of limitations had run on
the claim of fraud and that the indemnity agreement did not
provide for a recovery for innocent misstatements of fact under a
theory of constructive fraud, but only for actual fraud, which
was not supported by the evidence. Hawkins testified that she
expended over $18,000 defending the Wilson suit, but presented no
expert or other evidence relating the costs incurred as to each
of the individual theories of liability.
On March 31, 1994, Hawkins instituted the present action
against Gregory by a two-count motion for judgment. Hawkins
alleged in her first count that Gregory had committed legal
malpractice in advising her to sign the addendum to the contract.
In the second count, styled as "Fraud and Misrepresentation,"
Hawkins detailed the circumstances surrounding the signing of the
indemnity agreement, alleging that "Gregory intentionally
misrepresented an existing material fact, to wit, that the
document which he asked plaintiff to sign was in fact an
indemnity agreement . . . ."
At the conclusion of Hawkins' case-in-chief in a bench
trial, Gregory moved to strike the evidence on various grounds,
including Hawkins's failure to present expert testimony on the
standard of care owed by an attorney under the facts presented
and the failure to present evidence that the breach of that
standard proximately caused the damages for which recovery was
sought. After hearing argument on the motion, the trial judge
ruled: "I'm going to strike the evidence as to the malpractice
charge and fraud charge. . . . [E]xclusive, however, of the
indemnity situation."
Gregory then proceeded with his case, presenting expert
testimony that his actions conformed to the applicable standard
of care in reviewing and advising Hawkins concerning the
indemnity agreement. The expert further testified that it was
"within the standard of care to also offer a business
recommendation for purposes of making the deal work."
In rendering judgment for Hawkins, some confusion arose over
the basis of the trial court's prior ruling on the motion to
strike and the basis for its final judgment. Consistent with
their differing views, counsel for both parties prepared draft
judgment orders at the direction of the trial court. At the
hearing on the proposed orders, the trial court stated that the
pleading of the second count, however nominated, alleged "that
[Gregory's] conduct was misconduct in the strongest sense of that
term . . . ." In ruling that expert testimony was not required
to establish Gregory's duty of care, the trial court stated that
"it's so self-evident that it doesn't need a qualification by a
standard. In other words, misconduct is misconduct here or
wherever insofar as professionalism is concerned."
In the final order entered April 12, 1995, the trial court
"entered judgment against [Gregory] with respect to the
allegations of misrepresentation set forth in Count II and
awarded [Hawkins] compensatory damages in the amount of $9,100.00
for attorney's fees and $1,275.00 in costs expended in the
defense of [the Wilson suit] filed against plaintiff based on an
indemnity agreement alleged in Count II of the motion for
*
judgment." We awarded Gregory this appeal.
To sustain her claim for legal malpractice, Hawkins was
*
Because of our view that the issue of proximate cause of
the damages asserted by Hawkins is dispositive in this case, we
will assume that the trial court properly exercised its
discretion to reform the pleading of Count II to conform with the
evidence. Code § 8.01-377. The trial court clearly dismissed
the allegation of fraud.
required to plead and prove that an attorney-client relationship
existed between her and Gregory which gave rise to a duty, that
Gregory neglected or breached that duty, and that the neglect or
breach was a proximate cause of her claimed damages. Allied
Productions v. Duesterdick, 217 Va. 763, 764-65, 232 S.E.2d 774,
775 (1977). Each of these elements is necessary to establish a
prima facie case of legal malpractice, a mere allegation of
negligence or breach of a duty being insufficient to support an
action for legal malpractice. Campbell v. Bettius, 244 Va. 347,
352, 421 S.E.2d 433, 436 (1992)("the client must prove that the
attorney's negligence proximately caused the damages claimed");
Duvall, Blackburn, Hale & Downey v. Siddiqui, 243 Va. 494, 497,
416 S.E.2d 448, 450 (1992)(client must show "damages claimed were
proximately caused by the attorney's negligence").
We will assume, without deciding, that expert testimony was
not required to establish the existence of the duty and the
breach. Compare Seaward International, Inc. v. Price Waterhouse,
239 Va. 585, 592, 391 S.E.2d 283, 287 (1990)(expert testimony
required to establish all three elements of liability for
malpractice except where they fall within the common knowledge of
the trier of fact) with Beverly Enterprises v. Nichols, 247 Va.
264, 267, 441 S.E.2d 1, 3 (1994)(expert testimony not required
where "the alleged act of negligence clearly lies within the
range of the jury's common knowledge and experience").
Nonetheless, we hold that the record fails to establish, by
evidence, expert or otherwise, the necessary element of proximate
causation of the damages claimed.
Our recent decision in Hazel & Thomas v. Yavari, 251 Va.
162, 465 S.E.2d 812 (1996), is dispositive of the proximate
causation issue in this appeal. There, we held that the question
of proximate causation in an attorney malpractice case, as in any
negligence action, is subject to an initial determination of law
before becoming an issue to be decided by the trier of fact. Id.
at 166, 465 S.E.2d at 815. We said that if "the evidence is such
that reasonable minds could not differ as to the outcome, the
issue of proximate cause should be decided by the court, not the
jury." Id. In a bench trial, the court is not divested of its
role as determiner of law even though it also acts as trier of
fact.
In Hazel & Thomas, the issue was whether one party to a
contract would have agreed to certain provisions which the
attorneys representing Yavari failed to negotiate. We held that
absent evidence that the terms would have been agreed to by the
other party, or that Yavari would not have accepted the contract
without the provisions, the evidence did not, as a matter of law,
sustain a finding of proximate causation. 251 Va. at 166-67, 465
S.E.2d at 815.
In this case, Hawkins sought damages to compensate her for
"expend[ing] large sums of money defending [the Wilson suit]."
The record clearly establishes that, while the Wilsons relied on
the indemnity agreement as an alternate basis for alleging
Hawkins' liability, they also alleged actual fraud. Because the
indemnity agreement did no more than establish her liability for
actual fraud, the predicate for her having to defend against the
allegations by the Wilsons was not the agreement, but her
underlying acts.
The five-year term of the agreement had the practical effect
of extending the statute of limitations on the fraud claim, but
this does not alter the fact that the basis for bringing the suit
was independent of the agreement itself. Nothing in the record
establishes that the existence of the agreement was the
instigating factor of the Wilson suit or increased the cost of
defending the suit. In short, nothing in the record establishes
that absent the indemnity agreement the Wilsons would not have
filed their suit against Hawkins.
Under the rationale of Hazel & Thomas, we hold that Hawkins'
evidence failed as a matter of law to establish that Gregory's
conduct was a proximate cause of the loss sustained by Hawkins.
Accordingly, we will reverse the judgment of the circuit court
and enter final judgment for Gregory.
Reversed and final judgment.