Court Opinion

ID: 9743138
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:26:27.094163+00
Date Added: 2024-06-11T07:24:39.612036
License: Public Domain

J. R. Kirwan, J.
concurring in part, and dissenting in part). Plaintiff appeals as of right from a directed verdict granted in favor of defendant Thomas Green on plaintiff’s claim of fraud and legal malpractice against him.__
*398Plaintiff, an accountant, had been hired by James Chumbley to serve as general manager and secretary-treasurer of Jim Chumbley Chevrolet, Inc. The dealership eventually folded after General Motors cancelled its franchise. Defendant, as Chumbley Chevrolet’s attorney, then filed a lawsuit against General Motors, naming Chumbley and Chumbley Chevrolet as plaintiffs. That suit was settled several years later for $150,000.
Pursuant to two agreements defendant drafted, defendant was to receive 40 percent of the "net amount of money collected” from the lawsuit; plaintiff was to get 20 percent of the "net proceeds of any judgment or settlement” in return for his services in liquidating the dealership and in providing defendant with assistance in conducting the lawsuit. Deduction of costs and expenses left the settlement balance at $121,343.06. Plaintiff understood he would receive 20 percent of that. Instead, defendant and the other attorneys who worked on the lawsuit took 40 percent of the original $150,-000; defendant personally received $36,000. Chumbley received $66,343.06. Defendant understood plaintiff was to receive 20 percent of Chumbley’s share, and not 20 percent of the gross. Defendant and Chumbley offered plaintiff $13,000, which plaintiff refused to accept.
Plaintiff brought this action against Chumbley, the dealership, and attorney Green, claiming he never received the sums he was entitled to after settlement of the lawsuit. Prior to filing this action, plaintiff had sued Chumbley on some notes plaintiff held; according to plaintiff, that suit was dropped because of defendant’s assurances that plaintiff would recover on these once the GM settlement came in.
Plaintiff settled his action against Chumbley.
In considering defendant’s motions for directed *399verdict, the trial court was obliged to view the evidence, and all legitimate inferences therefrom, in the light most favorable to plaintiff; if reasonable persons could honestly reach different conclusions concerning plaintiff’s establishment of a prima facie case, the motions should have been denied. In reviewing the trial court’s ruling, this Court applies the same standard required of the trial court. Ransford v Detroit Edison Co, 124 Mich App 537, 542; 335 NW2d 211 (1983).
In an action for legal malpractice, the plaintiff has the burden of proving: (1) the existence of the attorney-client relationship; (2) the acts which are alleged to have constituted the negligence; (3) that the negligence was the proximate cause of the injury; and (4) the fact and extent of the injury alleged. Basic Food Industries, Inc v Grant, 107 Mich App 685, 690; 310 NW2d 26 (1981), lv den 413 Mich 913 (1982). The trial court granted defendant’s motion for directed verdict on the legal malpractice claim because it ruled that plaintiff had failed to prove the first element, the existence of an attorney-client relationship between plaintiff and Green. After reviewing the facts, wé affirm the directed verdict on that count.
Plaintiff first met defendant Green, who was Chumbley Chevrolet’s attorney, when defendant drafted a stock option agreement for them. Plaintiff and Chumbley had worked out the details of the agreement, then asked defendant to draft it. Plaintiff understood that the agreement entitled him to purchase 25% of the stock of Chumbley Chevrolet, for which he paid $12,000, and to eventually obtain 49% of the stock, once the dealership’s obligations to General Motors Holding Corporation were satisfied, since it owned all the stock of the dealership.
Defendant also prepared the appropriate docu*400ments for purchase of some land next to the dealership, after plaintiff and Chumbley had negotiated the deal. He similarly drew up a partnership agreement for plaintiff and Chumbley, but was contacted to do so only after the partners had worked out all the details between themselves. Plaintiff did not recall ever either receiving a bill or paying defendant for any of these services. On two other occasions, defendant was hired by Chumbley Chevrolet to represent plaintiff in connection with suits filed by others against Chumbley Chevrolet.
Plaintiff hired defendant to represent him during his divorce, and also to bring a lawsuit to recover damages for loss of some personal property. Plaintiff acknowledged that these two actions were the only matters in which defendant represented him on a personal, rather than a corporate, basis. Plaintiff testified that at all other times defendant was the attorney for the corporation, Chumbley Chevrolet, not his personal attorney.
Where an attorney represents a corporation, the attorney’s client is the corporation and not the shareholders. Fassihi v Sommers, Schwartz, Silver, Schwartz & Tyler, PC, 107 Mich App 509, 514; 309 NW2d 645 (1981). Plaintiff introduced nothing at trial to contradict this proposition that defendant’s client was the corporation, Chumbley Chevrolet, and not plaintiff, even though, as plaintiff stated, he "was part of the corporation”.
Although plaintiff may have mistakenly believed that defendant was looking out for plaintiff’s interests at the same time defendant was representing the corporation, a unilateral act is not sufficient to create an attorney-client relationship, the attorney-client relationship being based in contract. Fletcher v Bd of Ed of School Dist Fractional No 5, 323 Mich 343, 348; 35 NW2d 177 (1948). Plaintiff *401points to no action on defendant’s part that might signify that defendant was plaintiffs attorney as opposed to the dealership’s, and according to Fassihi defendant could not be both. Therefore, a directed verdict on the legal malpractice claim was proper.
The trial court also granted a directed verdict against plaintiff on his claim of fraud.
The elements of fraud are: (1) a material representation which is false; (2) known by defendant to be false, or made recklessly without knowledge of its truth or falsity; (3) that defendant intended plaintiff to rely upon the representation; (4) that, in fact, plaintiff acted in reliance upon it; and (5) thereby suffered injury. Fassihi, supra, p 517. The court found that plaintiff had failed to present any evidence on an essential element of fraud, that defendant knew his representations to plaintiff were false, or that he made them with reckless disregard as to their truth or falsity. Plaintiff argues that defendant knew the stock option agreement would never give plaintiff 25% of the corporation’s assets. The trial judge based his decision on another aspect of this suit, concerning the amount of money plaintiff would receive from the GM settlement, and did not rule on the question of defendant’s knowledge of the stock option agreement’s invalidity.
Defendant, called as an adverse witness, admitted that plaintiff’s claim to 25% of the corporation’s shares based on the stock option agreement was, in his opinion as an attorney, not legitimate. Defendant also acknowledged that he had drafted that agreement, and that his obligation as corporate attorney was to follow the directions of the officers. Defendant also knew the agreement was to provide plaintiff an incentive not to accept another job offer. Defendant stated that he never *402informed plaintiff that his claim was no good because he did not want to take sides as between the two partners, and he felt he could not give plaintiff legal advice as far as corporate matters were concerned.
I believe this is sufficient evidence that defendant made a material representation, by drafting the stock agreement, which he knew was "false”, in the sense that it did not do what plaintiff understood it would do, even though it was drafted at plaintiff’s direction. Defendant argues that his statement regarding the agreement’s invalidity was merely an exercise of his professional judgment. That may be, but that is for the jury to decide. In my view, a prima facie case of fraud was presented.
Plaintiff also stated a claim for breach of contract in his complaint. Although plaintiff presented testimony at trial raising questions of fact concerning the agreements as to settlement proceeds drafted by defendant, we have been unable to determine what happened to this count and must presume it was dismissed at some point.