Court Opinion

ID: 1033206
Source: CourtListenerOpinion
Date Created: 2013-07-09 19:52:57.208903+00
Date Added: 2024-06-11T09:18:28.010013
License: Public Domain

129 Nev., Advance Opinion 143
                       IN THE SUPREME COURT OF THE STATE OF NEVADA

                EMIL FREI, III, BY AND THROUGH                         No. 58391
                HIS GUARDIAN AD LITEM, EMIL
                FRET, IV,
                Appellant,
                vs.                                                      FILED
                DANIEL V. GOODSELL, AN
                INDIVIDUAL; AND GOODSELL &
                OLSEN, A NEVADA LIMITED
                LIABILITY PARTNERSHIP,
                Respondents.

                            Appeal from a district court judgment on a jury verdict in a
                legal malpractice action. Eighth Judicial District Court, Clark County;
                Linda Marie Bell, Judge.
                            Affirmed.

                Blut Law Group, APC, and Elliot S. Blut, Las Vegas,
                for Appellants.

                John H. Cotton & Associates, Ltd., and John H. Cotton and Christopher G.
                Rigler, Las Vegas,
                for Respondents.

                BEFORE HARDESTY, PARRAGUIRRE and CHERRY, JJ.

                                                 OPINION
                By the Court, PARRAGUIRRE, J.:
                            In this appeal, appellant Emil Frei, III, challenges the district
                court's refusal to apply the doctrine of issue preclusion and its application
                of the parol evidence rule in an attorney malpractice action. Before filing
                the malpractice action, Frei sued the trustee of his deceased wife's estate,
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claiming that the trustee had improperly transferred Frei's assets into the
trust. In that trust action, Frei successfully sought to disqualify
respondent Daniel Goodsell, the attorney who prepared the trust
documents, from representing the trustee, based on the district court's
conclusion that a prior attorney-client relationship existed between Frei
and Goodsell, which created a conflict of interest.
             Following resolution of the trust action, Frei sued Goodsell for
malpractice. Frei asserted, and maintains on appeal, that the doctrine of
issue preclusion prevented Goodsell from denying the existence of an
attorney-client relationship with Frei in the legal malpractice lawsuit
because he had been disqualified from representing the trustee in the
previous trust action. Frei also objected to the district court's application
of the parol evidence rule to preclude evidence of Frei's intent in executing
a number of unambiguous documents prepared by Goodsell. We conclude
that the issue of an attorney-client relationship between Frei and Goodsell
was not "necessarily litigated" in the previous trust action, which is
essential for issue preclusion to apply, and that the district court did not
abuse its discretion in applying the parol evidence rule. Thus, we affirm
the district court's judgment in Goodsell's favor.

                  FACTS AND PROCEDURAL HISTORY
             Respondent Daniel Goodsell is an attorney who prepared
various estate planning documents for the signature of appellant Emil
Frei 111. 1 Goodsell prepared the documents at the instruction of Frei's

      1 We refer to respondent Goodsell and his law firm, respondent
Goodsell & Olsen, collectively as Goodsell. Appellant's son, Emil Frei IV,
has been appointed guardian ad litem in this action.

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                agent, Stephen Brock, who had been appointed as both Frei's attorney-in-
                fact and as trustee to a trust for Frei's wife. Per Brock's instruction, the
                documents were intended to correct an imbalance between two separate
                revocable trusts that benefited the couple's children from prior marriages.
                The documents included assignments of bank and investment accounts, a
                deed to Frei's home, two codicils to his will, an amendment to Frei's trust,
                and a declination to act as successor trustee to the wife's trust. Goodsell
                did not speak directly to Frei about the documents and delivered them to
                Brock for Frei's signature. Upon execution, the documents transferred
                over $1 million of Frei's assets into his wife's trust.
                             After his wife's death, Frei sought to void the documents and
                filed an action against Brock, arguing that he did not understand the
                impact of what he was signing and that the documents did not accurately
                reflect his intent. As litigation over the trust ensued, Frei also filed a
                motion to disqualify Goodsell from representing Brock, arguing that an
                attorney-client relationship existed to the extent that Goodsell prepared
                documents for Frei's signature. The district court concluded that Brock
                had been acting as Frei's agent in obtaining the documents, and it granted
                Frei's motion to disqualify Goodsell based on a conflict of interest. The
                trust action was ultimately resolved through a settlement agreement,
                which was approved in district court.
                             After the trust litigation settled, Frei brought the underlying
                legal malpractice action against Goodsell, arguing that Goodsell breached
                his standard of care by failing to verify Frei's intentions before preparing
                the documents for his signature.
                             Before trial, Frei filed a motion in limine to preclude Goodsell
                from arguing that an attorney-client relationship did not exist.

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                Specifically, Frei argued that under the doctrine of issue preclusion,
                Goodsell could not deny the existence of an attorney-client relationship in
                light of the district court's order disqualifying Goodsell from the trust
                action. The district court denied Frei's motion, reasoning that the
                disqualification ruling had not resulted in a final, appealable order.
                            During trial, Goodsell raised a parol evidence objection in
                response to questions regarding Frei's intent in executing the documents.
                Goodsell argued that each document was clear and unambiguous, such
                that Frei could not testify to contradict the plain meaning of its contents.
                The district court agreed that evidence of Frei's intent was precluded by
                the parol evidence rule. Following a general jury verdict, the district court
                issued judgment in Goodsell's favor.

                                               DISCUSSION
                            On appeal, Frei argues that the doctrine of issue preclusion
                should have precluded Goodsell from denying the existence of an attorney-
                client relationship. Frei also argues that the district court erred by
                concluding that the parol evidence rule barred testimony regarding his
                intent and understanding of the documents. We disagree.

                Application of the doctrine of issue preclusion
                            Frei argues that the district court erred in denying his motion
                in limine because the doctrine of issue preclusion should have precluded
                Goodsell from arguing that an attorney-client relationship did not exist.
                We review de novo whether the doctrine of issue preclusion applies to
                preclude a party from relitigating legal issues that were addressed in a
                previous action. Five Star Capital Corp. v. Ruby, 124 Nev. 1048, 1052, 194
                P.3d 709, 711 (2008); Univ. & Cmty. Coll. Sys. v. Sutton,       120 Nev. 972,
                984, 103 P.3d 8, 16 (2004).
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            In order for issue preclusion to apply, each of the following
elements must be met:
            "(1) the issue decided in the prior litigation must
            be identical to the issue presented in the current
            action; (2) the initial ruling must have been on the
            merits and have become final; . . . (3) the party
            against whom the judgment is asserted must have
            been a party or in privity with a party to the prior
            litigation"; and (4) the issue was actually and
            necessarily litigated.

Five Star, 124 Nev. at 1055, 194 P.3d at 713 (alteration in original)
(quoting Univ. of Nev. v. Tarkanian, 110 Nev. 581, 598, 879 P.2d 1180,
1191 (1994)); see also Kahn v. Morse & Mowbray, 121 Nev. 464, 474, 117
P.3d 227, 234-35 (2005) (noting that "a litigant must show that an issue of
fact or law was necessarily and actually litigated in a prior proceeding").
            Focusing on the fourth factor—whether the issue was actually
and necessarily litigated, which is dispositive here—we conclude that
while the issue of Goodsell's attorney-client relationship with Frei was
actually litigated in the previous trust action, cf. In re Sandoval, 126 Nev.
         232 P.3d 422, 424-25 (2010) (concluding that a case had not been
"actually. . . litigated" without knowledge and participation of both
parties and findings of fact established by evidence); see Restatement
(Second) of Judgments § 27 cmt. d (1982) ("When an issue is properly
raised. . . and is submitted for determination,. . . the issue is actually
litigated. . . ."), it was not necessarily litigated. Nevada law provides that
only where "the common issue was . . . necessary to the judgment in the
earlier suit," will its relitigation be precluded.   Tarkanian, 110 Nev. at
599, 879 P.2d at 1191 (emphasis added). Thus, for issue preclusion to
apply in this case, the issue of whether Frei and Goodsell had an attorney-

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                client relationship must have been necessary for resolution of the trust
                action.
                            In resolving this issue, we look to the Massachusetts Supreme
                Judicial Court, which addressed a similar issue in Jarosz v. Palmer, 766
                N.E.2d 482, 486 (Mass. 2002). Jarosz involved the preclusive effect of a
                district court ruling in a wrongful termination action, in which a corporate
                co-owner and former officer unsuccessfully moved to disqualify the
                corporation's attorney based on a conflict of interest arising from the
                attorney's actions in helping the former officer acquire his interest in the
                corporation. Id. at 485. The former officer then filed a subsequent legal
                malpractice claim against the attorney, who in turn moved for summary
                judgment on the ground that an attorney-client relationship did not exist
                as a matter of law. Id. The Jarosz court declined to apply the doctrine of
                issue preclusion after concluding that "[t]he issue of [an] attorney-client
                relationship . . . was clearly not essential to a determination
                of. . . wrongful termination claims against the [corporation]."   Id. at 489
                (reasoning that the former officer "could have prevailed on those claims
                regardless of the outcome of his motion to disqualify").
                            Here, resolution of the prior trust action was not dependent on
                whether Goodsell had an attorney-client relationship with Frei. Instead,
                the record indicates that either party to the trust action could have
                prevailed regardless of the district court's disqualification of Goodsell.
                Thus, we conclude that the issue of whether Frei entered into an attorney-
                client relationship was not necessarily litigated in the trust action,
                thereby rendering the doctrine of issue preclusion inapplicable in the

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                subsequent legal malpractice action. 2 Five Star, 124 Nev. at 1052, 194
                P.3d at 711.
                               Accordingly, the district court did not err in denying Frei's
                motion in limine or by allowing the issue of an attorney-client relationship
                to be determined by the jury.

                Parol evidence rule
                               Frei argues that the district court erred in applying the parol
                evidence rule to preclude testimony of his actual intent in executing the
                documents. 3 "We review a district court's decision to admit or exclude

                      2 Frei argues that the district court erred in concluding that the
                disqualification ruling did not result in an appealable, final order.
                Because we conclude that the underlying issue was not necessarily
                litigated in the trust action—a point contested in the parties' briefs and at
                oral argument—we need not address Frei's argument. Hotel Riviera, Inc.
                v. Torres, 97 Nev. 399, 403, 632 P.2d 1155, 1158 (1981) (stating that this
                court may affirm a district court's decision for different reasons than relied
                upon below).

                      3 We   limit our discussion on this issue to the arguments raised by
                Frei on appeal and therefore assume without deciding that the parol
                evidence rule is available here. It is unclear whether the parol evidence
                rule applies to this type of action, where appellant seeks recovery for legal
                malpractice and is not specifically seeking to contradict the terms of the
                document. See Schneider, Smeltz, Ranney & LaFond, P.L.L., v. Kedia, 796
                N.E.2d 553, 555-56 (Ohio Ct. App. 2003) (concluding in a legal malpractice
                case that the parol evidence rule would not preclude a client from
                introducing evidence that the document prepared by his attorney included
                different terms than those agreed to prior to execution); Thomson v.
                Canyon, 129 Cal. Rptr. 3d 525, 537 (Ct. App. 2011) ("The parol evidence
                rule prevents reconstruction of the parties' contractual obligations; it does
                not immunize real estate agents, attorneys, or other professionals from
                liability arising from their misconduct in drafting a contract."). We do not
                address this issue, however, as Frei did not properly raise this argument
                on appeal. Edwards v. Emperor's Garden Rest., 122 Nev. 317, 330 n.38,
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evidence for abuse of discretion, and we will not interfere with the district
court's exercise of its discretion absent a showing of palpable abuse." M. C.
Multi-Family Dev. v. Crestdale Assocs., 124 Nev. 901, 913, 193 P.3d 536,
544 (2008).
              Extrinsic or parol evidence is not admissible to contradict or
vary the terms of an unambiguous written instrument, 'since all prior
negotiations and agreements are deemed to have been merged therein."
Kaldi v. Farmers Ins. Exch., 117 Nev. 273, 281, 21 P.3d 16, 21 (2001)
(quoting Daly v. Del E. Webb Corp., 96 Nev. 359, 361, 609 P.2d 319, 320
(1980)).
              Frei concedes that all of the documents are unambiguous on
their face, but he argues that evidence of his intent was essential for
proving that the documents did not meet his objectives. For support, Frei
primarily relies on Russ v. General Motors Corp. for the proposition that
the district court should have allowed extrinsic evidence regarding his
understanding of the documents' effect in order to show a unilateral
mistake in execution. 111 Nev. 1431, 1438-39, 906 P.2d 718, 723 (1995)
(stating that "a court should provisionally receive all credible evidence
concerning a party's intentions to determine whether the language of a
release is reasonably susceptible to the interpretation urged by the
party"). We conclude that Frei's reliance on Russ is misplaced, as this
court has subsequently discredited this language as dictum.        Kaldi, 117
Nev. at 282, 21 P.3d at 22 (concluding that "Russ does not stand for a

...continued
130 P.3d 1280, 1288 n.38 (2006) (noting that this court need not consider
an issue not cogently argued or supported by relevant legal authority).
                general proposition that evidence of a party's intent may be admissible to
                create ambiguity in an otherwise unambiguous written contract").
                             In the alternative, Frei argues that the parol evidence rule
                should not have applied because, in the context of estate planning, courts
                routinely admit extrinsic evidence of a testator's intent. See Ohanneson v.
                Lambrinidou (In re Sargavak's Estate), 216 P.2d 850, 852 (Cal. 1950). In
                In re Sargavak's Estate, the court concluded that extrinsic evidence is
                admissible to show whether an allegedly testamentary instrument was
                intended by the testator to be effective as a will. Id. However, the court
                proceeded to modify its holding by explaining that such evidence is not
                admissible "for the purpose of proving the meaning the testator attributed
                to specific provisions of an admitted will."   Id.; Bowles v. Bradley, 461
                S.E.2d 811, 813 (S.C. 1995) ("If the language of the trust instrument is
                plain and capable of legal construction, that language determines the force
                and effect of the instrument. . . [and] extrinsic evidence will not be
                admitted to alter the plain language of the instrument."). Accordingly, we
                conclude that this argument is unpersuasive, as Frei does not argue that
                he lacked testamentary intent while signing the documents or that he
                failed to understand the effect of the unambiguous documents at the time
                of their execution. 4

                      4Finally, Frei cites Massie v. Chatom, 127 P. 56, 57 (Cal. 1912), for
                the proposition that the parol evidence rule only applies to actions
                between parties to the contract or their privies. In rejecting this
                argument, we note that California law wavers in this position, as recent
                cases have held that the "key consideration in application of the parol
                evidence rule, whether invoked by a party or a stranger to the contract, is
                whether the extrinsic evidence is being offered to reconstruct the parties'
                contractual obligations." Thomson v. Canyon, 129 Cal. Rptr. 3d 525, 536
                (Ct. App. 2011). In any event, Nevada has never limited application of the
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                             Therefore, we conclude that the district court did not abuse its
                discretion in prohibiting Frei from presenting extrinsic evidence with
                regard to his specific intent in executing the unambiguous documents.
                                               CONCLUSION
                             We conclude that the district court properly refused to apply
                the doctrine of issue preclusion because the issue of an attorney-client
                relationship between Frei and Goodsell was not necessarily litigated in the
                previous trust action. We also conclude that the district court did not
                abuse its discretion in applying the parol evidence rule. Accordingly, we
                affirm the district court's judgment.

                                                      Parraguirre

                We concur:

                                                 J.

                                                 J.

                ...continued
                parol evidence rule to actions between the parties to a contract or their
                privies, and we decline to do so here.

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