Gregory v. Hawkins

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.