Opinion
No. C7-02-781.
Filed February 11, 2003.
Appeal from the District Court, Yellow Medicine County, File No. C501131.
Paul A. Sortland, Sortland Law Office, (for appellants)
Lewis A. Remele, Jr., Charles E. Lundberg, Bassford, Lockhart, Truesdell Briggs, P.A., (for respondents)
Considered and decided by Shumaker, Presiding Judge, Lansing, Judge, and Schumacher, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
In this professional-negligence action, appellants challenge summary judgment dismissing their claim, contending that they produced sufficient expert evidence to create a genuine fact issue for trial. Because appellants' expert evidence failed to show admissible facts for trial, we affirm.
FACTS
The Diebold family owned the Granite Falls State Bank. James Diebold was president and majority shareholder. His siblings, Janet Diebold and appellants John and Jay Diebold, were minority shareholders.
Alleging that James Diebold breached his fiduciary duties and misused corporate assets, the minority shareholders sued him. Respondent Steven Torvick served as their attorney.
By February 1996, the district court had ordered the bank sold for $2.2 million and had directed James Diebold to pay to the minority shareholders the fair value of their stock. The minority shareholders disagreed with the sale price, and they and James Diebold could not agree as to the value of the stock. Accordingly, the court scheduled a hearing for March 27, 1996, to hear the minority shareholders' motion to reconsider the bank's sale price and to determine the value of the stock.
Prior to the hearing, the court requested that the parties attempt to settle their remaining disputes through mediation. The court appointed the bank appraiser to serve as the mediator.
A mediation session was held on March 27, 1996. Janet Diebold did not attend. John and Jay Diebold attended, but allege that Torvick had not told them there would be a mediation and settlement efforts.
The mediation was to be limited to the fair allocation of the value of the minority stock and was not to include "secondary issues." Among the secondary issues was the minority shareholders' claim that James Diebold had improperly purchased a life-insurance policy for $300,000 from corporate funds. During the mediation, the mediator stated that the insurance policy had a cash value of approximately $64,000. Appellants contend that "Torvick incorrectly implied * * * that [the appraiser's] evaluation was correct and thus the life-insurance issue had limited bearing upon settlement."
After considerable negotiation, the parties reached a settlement whereby each minority shareholder would receive $360,000 in consideration of the release of all secondary claims. Later, Janet Diebold disavowed the settlement, to which she was not an express party; continued to litigate her claim; and received an award after trial of approximately $414,000 for her shares of stock.
When appellants failed in their efforts to set the settlement aside, they sued Torvick for damages for professional negligence, alleging that he failed to advise them properly of the value of secondary claims, particularly the claim regarding James Diebold's life-insurance policy.
Torvick moved for summary judgment. Granting the motion, the district court ruled that appellants' expert evidence was insufficient to create fact issues as to the applicable standard of care. Appellants challenge the summary judgment in this appeal.
DECISION
We review a summary judgment to determine whether there exists a genuine issue of fact for trial and whether the district court erred in its application of the law. Leamington Co. v. Nonprofits' Ins. Ass'n, 615 N.W.2d 349, 353 (Minn. 2000).
There are four elements that ultimately must be proved in an attorney-negligence action: (1) the existence of an attorney-client relationship; (2) acts or omissions by the attorney that constitute negligence; (3) that the attorney's negligence proximately caused damages; and (4) but for the attorney's negligence the client would have succeeded in the underlying matter. Spannaus v. Larkin, Hoffman, Daly, Lindgren, Ltd., 368 N.W.2d 395, 398 (Minn.App. 1985), review denied (Minn. Aug. 20, 1985).
To survive a summary judgment motion, it is not necessary to prove the claim but only to produce sufficient evidence that shows the existence of a genuine issue of material fact on each of the disputed elements of the claim. Glass Serv. Co., Inc. v. State Farm Mut. Auto. Ins. Co., 530 N.W.2d 867, 870 (Minn.App. 1995), review denied (Minn. June 29, 1995).
The adequacy of an attorney's professional conduct in representing a client is measured against the standard of care that is accepted in the profession as appropriate to the activity for which the client retained the attorney. Wartnick v. Moss Barnett, 490 N.W.2d 108, 112 (Minn. 1992). The standard of care in attorney-negligence actions ordinarily is shown through expert evidence:
Expert testimony should be generally required to establish the standard of care applicable to an attorney whose conduct is alleged to have been negligent and further to establish that his conduct deviated from that standard.
Spannaus, 368 N.W.2d at 399 (citations omitted).
In response to Torvick's summary judgment motion, appellants offered the affidavit of attorney Robert H. Preston to show issues as to the applicable standard of care and Torvick's alleged deviation from that standard.
Although Preston's affidavit suggests deviations as to issues relating to deferred compensation, an employment contract, and legal fees, Preston's only particularization is as to James Diebold's life-insurance policy. According to Preston, the gist of Torvick's negligence on the life-insurance issue was that Torvick failed to investigate the value of the policy. Had Torvick done so, says Preston, he would have discovered that the policy had a value of approximately $500,000 and that each of the applicants would have been entitled to about 25% of that value. Thus, Torvick's negligence in failing to investigate the value of a substantial bank asset caused appellants to settle for significantly less than they would have accepted had they thought the life-insurance policy had more value than the $64,000 indicated by the mediator.
Evidence offered in support of or opposition to a summary judgment motion must be such as would be admissible at trial. Hopkins by LaFontaine v. Empire Fire Marine Ins. Co., 474 N.W.2d 209, 212 (Minn.App. 1991). In his affidavit, Preston related the value of the James Diebold life-insurance policy as follows:
Based upon information available to me as an expert witness, the major life insurance policy, for which the bank paid $300,000, in about 1986, had, at the time of settlement, a value of about $500,000.
(Emphasis added.)
The record before the district court contained no admissible evidence of the value of the insurance policy. During oral argument appellants conceded that the $500,000 valuation was not in the record as a formal valuation, but rather someone had called the bank, gotten the $500,000 figure, and appellants' attorney related that alleged value to the expert. Thus, the expert relied on double hearsay in forming his opinion, and appellants have not shown that any hearsay exception might apply to allow the expert's opinion as to the value of the policy to be admitted in evidence.
At oral argument, appellants conceded that the specific amount at issue in this action is the $300,000 that James Diebold allegedly misappropriated from the bank by purchasing the life-insurance policy. Appellants also conceded that they knew about the alleged misappropriation and its amount before the mediation and settlement. In fact, it was this precise alleged misappropriation that made up a substantial part of appellants' claim in the action against James Diebold.
Appellants' expert gave his opinion that Torvick negligently failed to investigate and to advise as to the value of the life-insurance policy. The district court ruled that appellants had failed to show facts that would provide a foundation for the expert opinion. Although the district court's foundational concerns related to the standard of care and deviation, we express the foundational concerns differently. There is no foundation for the expert's opinion that the life-insurance policy was valued at $500,000. Without the opinion as to the value of the life-insurance policy, there is no fact issue as to whether appellants might have received more money had Torvick investigated properly. Appellants knew before they settled that they had alleged a secondary claim relating to the funds James Diebold used in purchasing the life insurance. They knew the amount of that claim. They have presented no evidence that, had Torvick investigated further, the amount of that secondary claim would have changed. Appellants knew that if they settled they would release all secondary claims, including the allegation of James Diebold's $300,000 misappropriation. They have presented no evidence to create a fact issue as to whether they were coerced into the settlement. Thus, it appears that appellants knew precisely what they were settling, what they would receive, and what they would have to forego. They have failed to show the existence of any fact issue on their negligence claim. Appellants were dissatisfied with their settlement, and became so after Janet Diebold litigated her claim and received a higher value for her stock. But we are guided by the principle that mere dissatisfaction with a settlement will not support a claim of attorney negligence:
To allow a client who becomes dissatisfied with a settlement to recover against an attorney solely on the ground that a jury might have awarded them more than the settlement is unprecedented.
Glenna v. Sullivan, 310 Minn. 162, 170, 245 N.W.2d 869, 873 (1976).
The district court did not err in ruling that foundation was lacking for the essential expert evidence and, therefore, there was no genuine issue of material fact for trial.
Appellants also argue that, if their expert affidavit is insufficient, they were entitled to a 60-day period under Minn. Stat. § 544.42, subd. 6(c) (2002), within which to cure any deficiencies. Minn. Stat. § 544.42 (2002) requires, with some exceptions, an affidavit by an expert in any professional negligence action that the expert has reviewed the claim and that there appears to have been a deviation from the applicable standard of care. Minn. Stat. § 544.42, subd. 2(1). The statute requires a second affidavit to provide more particular information supporting the claim. Minn. Stat. § 544.42, subd. 2(2).
Torvick has not contended that Preston's affidavit fails under section 544.42. Rather, he contends, and the district court held, that the affidavit failed to show that there is a genuine issue for trial. In opposing a summary-judgment motion, a party must show at the time of the motion that facts creating a genuine trial issue exist. Rosvall v. Provost, 279 Minn. 119, 124, 155 N.W.2d 900, 904 (1968); Borom v. City of St. Paul, 289 Minn. 371, 375, 184 N.W.2d 595, 597 (1971). The expert-review statute is inapplicable at the summary-judgment stage of litigation. Rather, the adequacy of an expert affidavit at that stage is determined under Minn.R.Civ.P. 56.05.