Can Do, Inc. Pension & Profit Sharing Plan & Successor Plans v. Manier, Herod, Hollabaugh & Smith

922 S.W.2d 865, 1996 Tenn. LEXIS 304, 1996 WL 224575
CourtTennessee Supreme Court
DecidedMay 6, 1996
Docket01S01-9501-CH-00013
StatusPublished
Cited by33 cases

This text of 922 S.W.2d 865 (Can Do, Inc. Pension & Profit Sharing Plan & Successor Plans v. Manier, Herod, Hollabaugh & Smith) is published on Counsel Stack Legal Research, covering Tennessee Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Can Do, Inc. Pension & Profit Sharing Plan & Successor Plans v. Manier, Herod, Hollabaugh & Smith, 922 S.W.2d 865, 1996 Tenn. LEXIS 304, 1996 WL 224575 (Tenn. 1996).

Opinion

OPINION

ANDERSON, Chief Justice.

This case presents a question of first impression in Tennessee: whether or not a legal malpractice claim is assignable. We have determined that sound public policy reasons militate against allowing assignment of legal malpractice actions. We, therefore, reverse the Court of Appeals and dismiss the complaint.

BACKGROUND

This appeal arises from the trial court’s grant of the defendant law firm’s motion to dismiss the complaint for failure to state a claim. Accordingly, the facts as alleged in the complaint must be taken as true, and are as follows.

George W. Holder, Jr., employed the defendant law firm, Manier, Herod, Hollabaugh and Smith, to perform certain legal services for him. Later, Holder individually filed a voluntary bankruptcy petition. Holder owned all the stock in Can Do, Inc. and was the primary beneficiary of and served as trustee of the Can Do, Inc. Pension and Profit Sharing Plan.

The bankruptcy trustee, William L. Newport, transferred to the Can Do, Inc. Pension and Profit Sharing Plan certain assets, including an assignment of “any cause of action or right to payment the bankruptcy estate may have against the following ... C. Kinian Cosner, Jr. and Manier, Herod, Hollabaugh and Smith.”

Following the transfer, Can Do, Inc., filed this complaint asserting that the law firm’s mismanagement of Holder’s legal affairs resulted in his bankruptcy. The law firm moved to dismiss the complaint for failure to state a claim, upon the grounds that the “claim for legal malpractice, if any, belongs to George W. Holder and cannot, as a matter, of law, be assigned.”

The trial court dismissed the complaint, because “the assignment of a legal malpractice claim in Tennessee is void and invalid as against public policy because it constitutes champerty and maintenance and would frustrate, if not entirely endanger, the attorney—client relationship.”

The Court of Appeals reversed, concluding that a legal malpractice cause of action survives the death of the assignor and therefore is assignable, and adopted the minority view that assignment of such claims does not violate public policy.

We granted the defendants’ application to consider this important question of first impression in this State. For the reasons articulated below, we have concluded that legal malpractice claims are not assignable.

ASSIGNMENT

Because a legal malpractice claim is a chose in action, we begin our analysis by reviewing the assignability of choses in action. With few exceptions, at early common law, a chose in action, which is a right of proceeding in a court of law to procure payment of a sum of money or to recover a debt, *867 was not assignable. Black’s Law Dictionary, 241 (6th ed. 1990); Moran v. Adkerson, 168 Tenn. 372, 79 S.W.2d 44 (1935). The rule of nonassignability was so strictly construed that it applied even though the original promise was made to the promisee and his assigns. Hutsell v. Citizens’ Nat. Bank, 166 Tenn. 598, 64 S.W.2d 188 (1933).

One reason cited to support the rule of nonassignability was that personal rights are nontransferable. See Piccadilly, Inc. v. Raikos, 582 N.E.2d 338 (Ind.1991). However, the major purpose of the rule was to prevent champerty and maintenance. In Tennessee, “champerty” has been defined as “a bargain with a plaintiff or defendant in a cause to divide the matter sued for, if they prevail, whereupon the champertor is to carry on the party’s suit at his own expense;” whereas, “maintenance” has been defined as “an officious intermeddling in a suit which no way belongs to one by maintaining or assisting either party, with money or otherwise, to prosecute or defeat it.” Spicer v. Jarrett, 61 Tenn. 454, 457 (1873) (citations omitted).

The rule of nonassignability began to gradually erode over time as the public need to expand the quantity of transferable property in commerce increased. Under modern statutes and decisions, the assignability of a chose in action is now the general rule, and nonassignability the exception. 6A C.J.S., Assignments §§ 6 and 7 (1975). For example, in Tennessee, any contract-based chose in action, except those involving matters purely personal in nature, is assignable. See Tenn.Code Ann. § 47-50-102 (1995); Berger v. Paalzow, 40 Tenn.App. 153, 289 S.W.2d 861 (1956). Tort actions involving injuries to property are also assignable, East Tenn G. & V.R.R. v. Henderson, 69 Tenn. 1 (1878); Tenn.Code Ann. § 20-5-120 (1994), while tort actions involving personal injuries and wrongs done to the person, reputation, or feelings of the injured party continue to be unassignable. See Annotation, Assignability of Claim for Personal Injury or Death, 40 A.L.R.2d 500 (1975); 6A C.J.S. § 7, Assignments (1975).

In the absence of a statute, courts determining whether a chose in action is assignable generally apply the traditional common law test—whether the action would survive the death of the assignor and pass to the personal representative. See e.g., Haymes v. Halliday, 151 Tenn. 115, 268 S.W. 130 (1925). For example, in this case, the Court of Appeals applied that traditional survivability test and determined that legal malpractice actions survive the death of the assignor and are assignable.

Although a chose in action must survive to be assignable, not every action that survives is assignable. For example, claims for personal injuries survive, pursuant to Tenn.Code Ann. § 20-5-102 (1994), but generally are not assignable.

In modern times, the common law test of determining the issue of assignability solely by whether the claim survives the assignor’s death seems outdated and misplaced. Other state courts have experienced difficulty in applying the survival test and have approached this issue by considering factors such as public policy considerations, which vary depending upon the particular type of action under examination. Joos v. Drillock, 127 Mich.App. 99, 338 N.W.2d 736, 738 (1983).

Public policy is, in fact, the primary consideration upon which courts from other jurisdictions have focused in determining the as-signability of a legal malpractice action. For example, the Indiana Supreme Court stated:

Today, it seems anachronistic to resolve the issue of the assignability of a legal malpractice claim by deciding whether such a claim would survive the client’s death.... As is sometimes the case with the common law, the rule has outlived the reason for its creation.

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Bluebook (online)
922 S.W.2d 865, 1996 Tenn. LEXIS 304, 1996 WL 224575, Counsel Stack Legal Research, https://law.counselstack.com/opinion/can-do-inc-pension-profit-sharing-plan-successor-plans-v-manier-tenn-1996.