Opinion ID: 852513
Heading Depth: 1
Heading Rank: 2

Heading: Common Law Attorney-Client Fiduciary Duty

Text: Claims involving separate attorney-client transactions have long been governed by principles of Indiana law that guide the resolution of this appeal. Indiana case law recognizes that transactions entered into during the existence of a fiduciary relationship are presumptively invalid as the product of undue influence. Transactions between an attorney and client are presumed to be fraudulent, so that the attorney has the burden of proving the fairness and honesty thereof. Matter of Smith, 572 N.E.2d 1280, 1285 (Ind.1991). See also Sweeney v. Vierbuchen, 224 Ind. 341, 348, 66 N.E.2d 764, 766-767 (1946); Olds v. Hitzemann, 220 Ind. 300, 305, 42 N.E.2d 35, 37-38 (1942); Lucas v. Frazee, 471 N.E.2d 1163, 1166-67 (Ind.Ct.App.1984); Briggs v. Clinton County Bank & Trust Co., 452 N.E.2d 989, 999 (Ind.Ct.App.1983); Blasche v. Himelick, 140 Ind.App. 255, 259-260, 210 N.E.2d 378, 381 (1965); Castle v. Kroeger, 111 Ind.App. 43, 53-54, 39 N.E.2d 459, 463-464 (1942). This statement of general principle does not endeavor to specifically address standard commercial transactions between a lawyer and a client in which the lawyer does not render legal services. But, parallel to the standard commercial transaction exception noted in the Comment to Professional Conduct Rule 1.8, such transactions are likewise generally considered as not subject to the common law prohibition against attorney-client transactions. See Section 126 of the Restatement (Third) of The Law Governing Lawyers, [5] particularly comment (c). During the trial court's consideration of the Youngs' motion for partial summary judgment, and Liggett's later summary judgment motion that was treated as a motion to reconsider the Youngs' motion, the designated matters considered by the court did not expressly assert that Dean Young had prepared the contract in question. The parties' construction contract, however, was in the form of a pre-printed Building, Construction and No-Lien Agreement approved by the Indiana State Bar Association, the header of which declared: the selection of a form of instrument, filling in blank spaces, striking out provisions and insertion of special clauses, constitutes the practice of law and should be done by a lawyer. Appellant's App'x at 32, 51. And Liggett's affidavit in opposition to the Youngs' motion for partial summary judgment specifically asserts that Dean Young drafted Paragraph 12 of the construction contract, Appellant's App'x at 59, which assertion the Youngs do not dispute. Liggett's affidavit also asserted that at the time the contract was entered, Dean Young was serving as Liggett's personal attorney. Appellant's App'x at 59. The Youngs did not respond to that assertion in the summary judgment proceeding, and acknowledge that at the time of the contract's execution, Dean Young was acting as the attorney for Liggett on an unrelated matter. Appellees' Br. at 2. The designated matter considered by the trial court does not include any evidence showing that Dean Young's transaction with his client Ronald Liggett was fair and honest, or was a standard commercial transaction that should be exempted from the common law presumption of invalidity due to undue influence. Nor do the Youngs designate any materials to overcome the presumption. And while Liggett's initial opposition to the Youngs' partial summary judgment motion did not expressly assert any claim of presumed invalidity, unfairness, or dishonesty, his supporting affidavit did assert Dean Young's dual status as both Liggett's attorney and party to the contract. In Liggett's subsequent motion for summary judgment (which the court treated as a motion for reconsideration), he expressly raised issues of illegality and constructive fraud. Appellant's App'x at 97. Noting both Dean Young's dual status and that Young was responsible for drafting the contract, Liggett asserted that Rule 1.8(a) applies to render the contract void as an illegal contract, id. at 108-110, or as a constructive fraud, id. at 110-111. While excluding the further evidentiary materials supporting and opposing Liggett's motion for summary judgment, the trial court did acknowledge that Liggett contends that the written contract should be declared void based upon the fact that Young was serving as Liggett's attorney on unrelated matters. Addressing this claim, the trial court found that (a) in responding to the Youngs' summary judgment motion, Liggett had not expressly asserted that the contract was void but had affirmed the validity of the contract and claimed that he had completed his contractual obligations; and that (b) even if Liggett had made a timely challenge to the validity of the written contract, such an argument would fail. After quoting the standard commercial transactions exclusion described in the Comment to Rule 1.8., App'x at 16-17, the trial court concluded: 26. The evidence before the Court establishes that Liggett was a building contractor. With respect to the subject matter of this case, the Youngs were the clients and Liggett was the professional. Consequently, Rule 1.8 of the Indiana rules of Professional Conduct does not apply. Appellant's App'x at 16-17. As a preliminary matter, we observe that Liggett did not, by asserting completion of his obligations under the contract, forego his claim that the construction contract was void due to Dean Young's dual status in the transaction. A party may plead inconsistent, alternative claims or theories. Ind. Trial Rule 8(E)(2); Reeder v. Harper, 788 N.E.2d 1236, 1243 n. 5 (Ind.2003); Cahoon v. Cummings, 734 N.E.2d 535, 542 (Ind. 2000); Foster v. Evergreen Healthcare, Inc., 716 N.E.2d 19, 28 (Ind.Ct.App.1999). Of greater significance, however, is that Liggett's claims against the Youngs are for materials and labor not included in the original base construction contract but result instead from additional items that Liggett claims were performed at the Youngs' request. These claims derive from custom language drafted by Young and inserted subparagraph (b) in paragraph 12. ADDITIONAL COVENANTS of the pre-printed contract. This sub-paragraph 12(b) states: (b) Subject to changes which from time to time may be made following construction [sic] between Builders and Owners, and, where necessary, following consultation with Owners' construction/mortgage lenders. Appellant's App'x at 34. With respect to Liggett's contentions regarding the dual status of Dean Young as both a party to the contract with Liggett and as Liggett's attorney at the time, we conclude that the designated evidence on the Youngs' motion for partial summary judgment did not affirmatively establish the absence of a genuine issue of material fact as to whether, in light of Dean Young's fiduciary relationship as Liggett's attorney, the building contract transaction was fair and honest so as to overcome the common law presumption that the contract was fraudulent. Nor was there designated matter showing that the transaction, the centerpiece of which was a contract allegedly prepared and modified by attorney Dean Young, should as a matter of law be treated as a standard commercial transaction to which the common law presumption did not apply. Under such circumstances, the Youngs are not entitled to partial summary judgment foreclosing Liggett's claims against them. Having previously granted transfer, thereby automatically vacating the opinion of the Court of Appeals, Ind. Appellate Rule 58(A), we now reverse both (a) the trial court's final judgment in favor of the Youngs and against Liggett as to all of Liggett's claims against the Youngs and (b) the grant of the Youngs' motion for partial summary judgment as to Liggett's claims. This cause is remanded to the trial court for resolution of the remaining claims of each party in a manner consistent with this opinion. SHEPARD, C.J., and SULLIVAN and RUCKER, JJ., concur. BOEHM, J., concurs in result with separate opinion.