Hilt v. Bernstein

707 P.2d 88, 75 Or. App. 502
CourtCourt of Appeals of Oregon
DecidedOctober 2, 1985
DocketA8304 02699; CA A29842
StatusPublished
Cited by39 cases

This text of 707 P.2d 88 (Hilt v. Bernstein) is published on Counsel Stack Legal Research, covering Court of Appeals of Oregon primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hilt v. Bernstein, 707 P.2d 88, 75 Or. App. 502 (Or. Ct. App. 1985).

Opinion

*504 WARDEN, J.

This is a malpractice action against two attorneys. Plaintiffs amended complaint contained allegations of negligence and breach of fiduciary duty against Bernstein and allegations of negligence against Pengilly. The trial court dismissed the complaint on the attorneys’ respective motions to dismiss for failure to state ultimate facts sufficient to state a claim, ORCP 21A(8), and plaintiff declined to plead further. She appeals from the subsequent judgments entered in favor of defendants. We reverse in part and remand the action against Bernstein; we affirm the dismissal of the action against Pengilly.

We summarize the facts from plaintiffs amended complaint and attached exhibits. Plaintiff and her then husband employed Bernstein in 1979 in regard to the dissolution of their marriage. In connection with the dissolution, Bernstein prepared several documents, including a property settlement agreement. The agreement provided that the parties’ house was to be refinanced to obtain funds to remodel it, and after remodeling the house was to be sold and the net proceeds divided equally between the parties. The provisions of that agreement were included in the parties’ dissolution decree. Bernstein also prepared and advised plaintiff to sign a power of attorney which gave her husband the power to borrow money, using the house as collateral, and to obligate plaintiff on that loan. Plaintiffs husband used the power of attorney to borrow money, ostensibly to remodel the house, but converted the funds to his own use. The lender foreclosed, and plaintiff lost her equity in the house.

In April, 1981, plaintiff employed Pengilly as her attorney to defend the foreclosure action. She authorized him to pursue all avenues of recovery. On April 28, 1981, Pengilly advised her that she had a claim against Bernstein for malpractice, but he did not institute an action.

We first consider plaintiffs claim against Bernstein. She commenced that action on April 28, 1983, with a complaint that alleged, inter alia:

“II.
“In 1979 Plaintiff and her husband employed Defendant Bernstein as their lawyer to represent them in regard to a *505 dissolution of their marriage. Bernstein prepared a property settlement agreement and decree which are attached as exhibits A and B.
“III.
“Defendant Bernstein was negligent in the representation of Plaintiff and his negligence directly resulted in injury to the Plaintiff.
“IV.
“Defendant Bernstein was negligent in the following particulars:
“1.) Failed to advise the Plaintiff of the potential for a conflict of interest in his representation of both Plaintiff and her husband, expecially in light of his earlier representation of the husband’s business.
“2.) Failed to advise Plaintiff to seek independent counsel when he knew or should have known that her interests and those of her husband were in conflict and that he could not fairly represent both parties.
“3.) Prepared a power of attorney for Plaintiffs signature in favor of her husband and advised Plaintiff to sign it when that power of attorney gave Plaintiff no protection from her husband squandering her assets, and gave her husband control over the one significant mutual asset, the family home.
“4.) Failed to register the parties’ divorce decree in Multnomah County where the marital home was located.
“5.) Failed to place a value on Plaintiffs interest in the home in the property settlement.
“V.
“After Plaintiff signed and delivered the power of attorney prepared by Bernstein, Plaintiffs husband borrowed funds for remodeling the family home, converted the funds to his own use and allowed the home to go into default. The home was eventually foreclosed upon and Plaintiff lost her equity.
<<* * * * *
“VII.
“As a direct result of the negligence of Bernstein Plaintiff was damaged as follows:
“ 1.) In the amount of $25,000.00 general damages in *506 that she was inconvenienced and made nervous and emotionally upset by the loss of her home and the legal actions she was required to become involved in.
“2.) The sum of $15,000.00 which represents her lost equity in the family home.
“3.) The sum of_which is the amount of attorney fees and other moneys expended by Plaintiff in her effort to redeem the home.”

Bernstein moved to dismiss the complaint for failure to state a claim and, alternatively, moved to strike the allegations of damages for mental suffering. The trial court allowed the motion to dismiss, agreeing with Bernstein that “it was unforeseeable as a matter of law that plaintiffs former husband would steal or convert the funds referred to in Para V of plaintiffs complaint.” It also ordered “that defendant’s motion to strike Para VII subpara 1, is allowed, on the grounds that damages for emotional upset are not recoverable as a matter of law in the complaint for legal malpractice.”

Plaintiff then filed an amended complaint alleging negligence and breach of fiduciary duty in separate counts. The allegations of the negligence count included:

“II.
“In 1979 Plaintiff and her husband employed Defendant Bernstein as their lawyer to represent them in regard to a dissolution of their marriage. In connection therewith Bernstein prepared several documents including a Property Settlement Agreement and Decree and a Special Power of Attorney, attached hereto as Exhibits A, B, and C. Bernstein advised Plaintiff to sign the Property Settlement Agreement and the Power of Attorney. Among other things, the Power of Attorney gave Plaintiffs husband the power to borrow money using the family home as collateral and to obligate Plaintiff on said loan. At the time Bernstein advised Plaintiff to execute the Power of Attorney, he knew or should have known that Plaintiffs husband’s business was in financial distress, that the husband needed money to live on and that because of these and other factors there was a substantial risk that the husband would convert any funds obtained by the Power of Attorney to his own use.
“III.
“Defendant Bernstein was negligent in the representation of Plaintiff and his negligence directly resulted in injury to the Plaintiff.
*507 “IV.
“Defendant Bernstein was negligent in the following particulars:

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Bluebook (online)
707 P.2d 88, 75 Or. App. 502, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hilt-v-bernstein-orctapp-1985.