Opinion
No. A04-1139.
Filed March 15, 2005.
Appeal from the District Court, Douglas County, File No. C3030824.
Frederick L. Grunke, Rajkowski Hansmeier Ltd., (for appellants).
John M. Degnan, Jesse R. Orman, Briggs and Morgan, P.A., (for respondent).
Considered and decided by Hudson, Presiding Judge; Peterson, Judge; and Willis, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
In this appeal from summary judgment for respondent attorney in a legal-malpractice action, appellants argue that there are genuine issues of material fact regarding whether respondent's allegedly negligent acts were the proximate cause of appellants' injuries. Because we conclude that genuine issues of material fact preclude summary judgment, we reverse and remand.
FACTS
In March 1996, appellants Gary and Diana St. Martin entered into a purchase agreement with Richard and Joyce Jones (buyers) for the sale of a portion of appellants' lakeshore property. Appellants retained a portion of their property with the intent of building their retirement home on it. The buyers expressed an interest in buying the balance of the property, and to accommodate their interest, the purchase agreement included a hand-drafted "first right of refusal" that later was amended to give the buyers a "first option to buy" all or part of the balance of appellant's property. The amended language states, "Seller agrees to give buyer first option to buy adjoining lot or portion of lot to south at price of $1,000 foot."
Respondent William J. Leuthner is an attorney who was retained to prepare the closing documents for the sale of the property. Upon seeing the hand-written amendments to the purchase agreement, respondent contacted Gary St. Martin to determine whether appellants wanted to include an option to buy or a right of first refusal in the document. After explaining to St. Martin the difference between an option to buy and a right of first refusal, respondent understood that St. Martin did not want to grant a right of first refusal. Respondent testified,
[m]y recollection was that [St. Martin] was clear that he did not want a right of first refusal on the property. And then the option was the other choice, was to purchase the property as an option, you need an end date, and so we picked December 31, 1997, as the end date of the option period, which would coincide with the termination of the temporary access easement that they were giving to [buyers] at the same time.
Respondent admitted that he did not discuss with St. Martin what was meant by the term "first option to buy." Respondent explained that he did not discuss this with St. Martin because St. Martin was clear that he did not want a right of first refusal. When asked if St. Martin made it clear that he was willing to let the buyers buy the property regardless of whether St. Martin wanted to sell, respondent said, "No." The entire conversation between respondent and St. Martin lasted at most fifteen minutes and took place the day before respondent sent the documents to the title company and two days before the closing.
At his deposition, respondent testified that a "first option to buy" is a term of art in the real estate business. A first option to buy is in the nature of a right of first refusal; it is triggered only if the seller wishes to sell.
Respondent drafted the closing documents and sent them to the title company that was handling the closing. Respondent did not send copies of the documents to appellants or the buyers. Respondent was not asked to attend the closing, and he did not attend.
The documents that respondent drafted granted the buyers an unconditional option to buy the balance of appellants' property until December 31, 1997. At the closing, appellants and the buyers amended the option by extending the termination date to December 31, 2001. This change was made without consulting respondent, and respondent was not aware of the change until sometime in 2000 when Gary St. Martin consulted respondent about a balloon payment that was part of the transaction. At that time, St. Martin told respondent that he was not concerned about the buyers exercising their option to buy because they could not buy the property unless he offered it for sale. Respondent told St. Martin that it was his understanding of the document that the buyers had a right to purchase the property whether or not appellants wanted to sell it. Respondent and St. Martin resolved to "let a sleeping dog lie" and hope that the buyers did not exercise the option.
By autumn of 2000, appellants had developed preliminary house plans and applied for the permits and approvals necessary to begin constructing a home on the remaining portion of their property. In February 2001, the buyers gave notice of their intent to exercise their option to buy the remaining property. After appellants refused to convey the property, the buyers filed a complaint seeking specific performance of the option agreement. Both parties filed motions for summary judgment. The district court denied both motions, and the parties eventually settled their dispute. As part of the settlement, appellants paid the buyers $11,250 and granted them a permanent driveway easement across appellants' property.
Appellants commenced a legal-malpractice action against respondent, alleging that respondent's negligence in preparing the closing documents is the direct and proximate cause of damages that appellants sustained, including the costs incurred defending the action brought by the buyers, the diminution in the value of their property as a result of the settlement of the buyers' suit, and the costs of construction delays that resulted from the existence of the option to purchase. Respondent moved for summary judgment, arguing that because the buyers could not have exercised the option within the original term drafted by respondent, appellants' damages resulted from their extension of the option term and would have been avoided had they executed the documents as drafted by respondent. Respondent also argued that he had not breached the applicable standard of care in his representation of appellants.
The district court concluded that because appellants failed to present evidence that the buyers could have exercised the option to purchase by December 31, 1997, and the buyers did not exercise their option until long after the original termination date drafted by respondent, appellants failed to establish the "but for" element of their legal-malpractice action. Because the evidence that appellants presented failed to establish an element of their claim, the district court granted summary judgment in favor of respondent. The district court did not address any other issues. This appeal followed.
DECISION
A motion for summary judgment shall be granted when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that either party is entitled to a judgment as a matter of law. On appeal, the reviewing court must view the evidence in the light most favorable to the party against whom summary judgment was granted.
Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted). No genuine issue of material fact exists "`[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party.'" DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997) (alteration in original) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356 (1986)). "[T]he party resisting summary judgment must do more than rest on mere averments." Id. at 71. A genuine issue for trial must be established by substantial evidence. Id. at 69-70.
To prevail on their legal-malpractice claim, appellants must establish four elements: (1) the existence of an attorney-client relationship; (2) that respondent acted negligently or in breach of contract; (3) that respondent's acts were the proximate cause of appellants' damages; and (4) that but for respondent's conduct, appellants would have avoided altogether or prevailed in their defense of the buyers' action against them. Blue Water Corp. v. O'Toole, 336 N.W.2d 279, 281 (Minn. 1983). "Failure of proof on any one element defeats recovery." Id. at 282.
Citing Yusefzadeh v. Ross, 932 F.2d 1262 (8th Cir. 1991), the district court concluded that because appellants did not produce evidence showing that the buyers could have exercised their option to purchase the remaining part of appellants' property by December 31, 1997, and the option term that respondent drafted expired before the buyers attempted to exercise the option, appellants failed to establish the "but for" element of their cause of action.
In Yusefzadeh, the plaintiff hired an attorney to assist him in obtaining financing to purchase a business. Id. at 1263. The purchase eventually closed, but the deal included several aspects that the plaintiff considered to be unfavorable. Id. at 1263-64. The plaintiff brought a malpractice action against his attorney alleging that if the attorney had acted with due care and in accordance with all ethical precepts, he would have advised the plaintiff to look elsewhere for financing, once it appeared that the financing that the attorney was negotiating was going to be significantly less favorable to the plaintiff than the plaintiff had expected. Id. at 1264. The plaintiff alleged further that if the attorney had advised him to look for other financing, the unfavorable aspects of the deal that actually closed could have been avoided because the plaintiff would have obtained other financing. Id.
The Yusefzadeh court affirmed a summary judgment for the attorney because the plaintiff failed to produce evidence that he could have obtained other financing within the time available and, therefore, he failed to create a genuine issue of material fact on the issue of causation. Id. at 1265. In other words, because the plaintiff did not present evidence that he could have timely obtained other financing, he could not show that but for his attorney's negligence, he would have obtained other financing.
But unlike the plaintiff in Yusefzadeh, appellants are not claiming that respondent's negligence prevented them from obtaining something that they could have obtained; they are claiming that respondent's negligence caused them to lose a defense to the seller's action for specific performance that they would have had if respondent had not been negligent. The district court's reasoning that because appellants did not produce evidence showing that the buyers could have exercised the option by December 31, 1997, and the option term that respondent drafted expired before the buyers attempted to exercise the option, does not support the conclusion that appellants failed to establish the "but for" element of their claim.
Appellants' claim is that respondent negligently drafted an unconditional, rather than a conditional, option, and as a result, the option allowed the buyers to purchase the remaining part of appellants' property even though appellants did not want to sell. Under this claim, the buyers would not have been able to exercise the option during the period that it was extended if the option were not unconditional. In other words, even though the option term was extended, appellants would have avoided the sellers' action but for the fact that the option was unconditional.
The fact that the extension is what made it possible for the buyers to exercise the option should be analyzed in the context of the "proximate cause" element of appellants' legal-malpractice claim, rather than the "but for" element. Because the district court focused on the "but for" element of appellants' claim, it did not fully analyze whether respondents' alleged negligence was the proximate cause of appellants' damages. The district court's memorandum does not address appellants' claim that respondent's negligence in drafting an unconditional option was the proximate cause of damages that appellants suffered after the term of the option was extended.
Even if respondent was negligent, appellants' malpractice action is barred if respondents' negligence was not the proximate cause of appellants' damages. Wartnick v. Moss Barnett, 490 N.W.2d 108, 113 (Minn. 1992).
[I]n order for a party's negligence to be the proximate cause of an injury "the act [must be] one which the party ought, in the exercise of ordinary care, to have anticipated was likely to result in injury to others, . . . though he could not have anticipated the particular injury which did happen."
Lubbers v. Anderson, 539 N.W.2d 398, 401 (Minn. 1995) (alteration and omission in original) (quoting Wartnick, 490 N.W.2d at 113 (quotation omitted)). It must also be shown "that the defendant's `conduct was a substantial factor in bringing about the injury.'" Id. (quoting Flom v. Flom, 291 N.W.2d 914, 917 (Minn. 1980)). "Generally, proximate cause is a question of fact for the jury; however, where reasonable minds can arrive at only one conclusion, proximate cause is a question of law." Id. at 402.
While the general rule is that a negligent actor is responsible for all injuries which proximately result from a negligent action, there is an exception: the doctrine of superseding cause. The doctrine of superseding cause recognizes that although an actor's negligent actions may have put the plaintiff in the position to be injured, and therefore contributed to the injury, the actual injury may have been caused by an intervening event. That intervention prevents the original negligent actor from being liable for the final injury.
Wartnick, 490 N.W.2d at 113.
In general, a superseding, intervening cause is an act of the plaintiff or a third person that occurs after the defendant's negligent act, but in no way is caused by the defendant's negligence, and operates as an independent force to produce the injury. Hafner v. Iverson, 343 N.W.2d 634, 637 (Minn. 1984). An intervening, superceding cause insulates the original tortfeasor from liability if (1) the harmful effects of the intervening cause occurred after the original negligence; (2) the original negligence did not bring about the intervening cause; (3) the intervening cause produced a result that would not otherwise have followed from the original negligence; and (4) the intervening cause was not reasonably foreseeable by the original tortfeasor. Wartnick, 490 N.W.2d at 113. "Unless all four elements are satisfied, an intervening cause cannot be considered superseding." Id.
The district court's memorandum does not address whether respondent's alleged negligence was the proximate cause of appellants' damages. We will not address this issue for the first time on appeal. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating that "reviewing court must limit itself to a consideration of only those issues that the record shows were presented and considered by the trial court in deciding the matter before it"). Therefore, we reverse and remand to permit the district court to reconsider respondent's motion for summary judgment.
Respondent argues that he is entitled to summary judgment in any event because the purchase agreement that appellants and the buyers signed contained an enforceable option to purchase appellants' property, and the documents that respondent drafted were consistent with this term of the purchase agreement. But the district court did not address this issue, and we will not consider it for the first time on appeal.