Heyman v. Gable, Gotwals, Mock, Schwabe, Kihle, Gaberino

1999 OK CIV APP 132, 994 P.2d 92, 71 O.B.A.J. 35, 1999 Okla. Civ. App. LEXIS 133, 1999 WL 1244463

• Court: Court of Civil Appeals of Oklahoma
• Decided: June 29, 1999
• Docket: 92371
• Status: Published

Opinions

OPINION

RAPP, P.J.

¶ 1 This appeal was assigned to the accelerated docket pursuant to Oklahoma Supreme Court Rule 1.36(a)(2), 12 O.S.Supp. 1998, ch. 15, app. 1, after the trial court’s November 24, 1998, order dismissed with prejudice the Plaintiff/Appellants’ claim of legal malpractice against the Defendant/Ap-pellee law firm, pursuant to 12 O.S.1991, § 2012(G).

¶ 2 The facts herein are straightforward and are set forth only in such detail as required for this Opinion. Stephen Heyman and Stephen Jackson (Clients) and Jackson’s brother and a third person (Partners) were co-owners of a profitable gas gathering business. Partners wanted to sell the company to the highest bidder, but Clients did not. However, Clients agreed to sell the company if a certain minimum bid was obtained from a potential buyer. In anticipation of the sale, Clients hired a law firm, trial court defendant, Gable, Gotwals, Mock, Schwabe, Kihle, Gaberino, (the Firm) to prepare a “standstill agreement” (SA). The agreement specified that if a contractually defined minimum bid was received within 120 days, the Partners and Clients would sell the company. If no bids met the contractual specifications of the SA, a buy/sell agreement between the Clients and Partners would go into effect, giving each side the opportunity to purchase the other’s interest in the company.

¶ 3 A purchase bid was received which ostensibly met the SA requirements. The Partners desired to accept the bid. However, the Clients, relying on the SA language and on the Firm’s advice, decided the bid did not meet the contractual specifications. The Clients refused to attend a board meeting to accept the bid, thereby blocking the proposed sale and purchase. The SA expired and the Clients and the Partners ultimately engaged in a bidding war for control of the company. The Clients successfully outbid the Partners and took control of the company under the buy/sell agreement. The Partners, as a result of the Clients’ actions, were paid less for their shares of the company than they would have received had they been able to accept the high bid under the SA.

¶ 4 Shortly after the execution of the sale agreement between the Clients and the Partners, the Partners contended the SA was ambiguous and that the Clients had no intention of selling the business, thereby engaging in fraud in their effort to gain control of the company. The Partners then filed suit against the Clients in 1993, alleging breach of the SA and fraud. The suit was tried to a ‘jury, which found in favor of the Partners on both of their claims of breach of contract and fraud. The Clients interposed a motion for judgment non obstante veredicto (JNOV) on the fraud issue, which the trial court sustained. The trial court also ordered a remit-titur of damages on the breach of contract claim.

¶ 5 The Clients prosecuted an appeal and the Partners counter-appealed. The Oklahoma Court of Civil Appeals, Division III, in Appeal No. 86,132, affirmed the breach of contract judgment, and, after concluding substantial evidence of fraud existed, reversed the trial court’s JNOV and remanded the matter with instructions to reduce both claims to judgment. The Oklahoma Supreme Court denied certiorari and issued its mandate on November 20,1997.

¶ 6 The Clients subsequently filed suit against the Firm on March 6, 1998, alleging legal malpractice in the drafting of the SA. The Clients’ petition and amended petition alleged the Clients had been sued and suffered damages based on: (1) the Firm’s draftsmanship of the SA resulting in an ambiguous SA; (2) them acts of reliance on the Firm’s advice; and (3) its representation during trial.

¶ 7 The Firm filed a motion to dismiss, which was granted by the trial court in a minute order on July 20, 1998. The Clients amended their petition by leave of Court. The Firm filed another motion to dismiss, which was again granted with leave to amend in a minute order filed November 3, 1998. This time the Clients apparently decided to stand on their amended petition and did not file a second amended petition. The minute order of November 3, 1998, was memorialized in an order filed November 24, 1998. The Clients appeal.

¶8 We first note that the Firm’s motion to dismiss is here treated as a motion . for summary judgment because evidentiary material was presented to the trial court.¹

¶ 9 The Clients herein raise a number of issues in this matter, while the Firm basically relies upon two principal lines of defense: (1) the statute of limitations based on an assertion the Clients did not timely bring their lawsuit, and (2) the Clients, having been determined by a jury verdict to have committed fraud, should not, as a matter of public policy, be allowed to be indemnified for their fraudulent actions via recovery from the Firm for its representation of Clients.

¶ 10 The statute of limitations defense, while appearing to have some merit, is not the dispositive issue in this appeal.

¶ 11 The dispositive issue is apparently one of first impression in this state: whether the Clients’ fraud taints their action so as to deny them the requested relief and justify the trial court’s grant of the Firm’s motion to dismiss. We conclude it does.

¶ 12 The jury found the Clients committed acts of iraud, and awarded monetary damages to Partners as a direct and proximate result of Clients’ fraud. This judgment is now final. The Clients’ fraud was independent of the alleged negligent drafting of the SA and of the trial representation by the Firm. Indeed, the record shows that the Clients’ fraud — the commission of which damaged the Partners — preceded both the drafting of the allegedly defective SA and the trial representation. Thus, the damages recovered by Partners from Clients were proximately caused by the Clients’ fraud and not by the Firm. It would be contrary to public policy to allow the Clients here to benefit from their own confirmed fraud and recover a monetary judgment from the Firm to indemnify them for their fraud. See Saks v. Sawtelle, Goode, Davidson & Troilo, 880 S.W.2d 466 (Tex.Ct.App.1994); Mettes v. Quinn, 89 Ill.App.3d 77, 44 Ill.Dec. 427, 411 N.E.2d 549 (1980). We therefore conclude the trial court correctly granted judgment to the Firm.

¶ 13 The trial court correctly granted the proffered motion to dismiss. The trial court’s judgment is affirmed.

¶ 14 AFFIRMED.

REIF, J. (sitting by designation), concurs, and STUBBLEFIELD, J. (sitting by designation), concurs in result.

1 . Under 12 O.S.1991, § 2012(B)(6), if a party submits evidentiary matter outside the pleading, the motion shall be treated as one for summary judgment and all parties shall be given an opportunity to present all material pertinent to such motion. Accordingly, the motion to dismiss will be treated as a motion for summary judgment. State ex rel. Macy v. One (1) Pioneer CD-ROM Changer, MDL. No. DRM-600-A, Ser. No. ML 8515021, 1994 OK CIV APP 100, ¶3, 891 P.2d 600, 603.