CORRECTED: DECEMBER 19, 2019 RENDERED: AUGUST 29, 2019 TO BE PUBLISHED
2018-SC-000344-TG
MEREDITH L. LAWRENCE, APPELLANTS AND CUT-N-SHOOT, LLC.
ON TRANSFER FROM COURT OF APPEALS V. CASE NO. 2018-CA-000993 GALLATIN CIRCUIT COURT NO. 14-CI-00055 HONORABLE JAMES ROGER SCHRAND II
BINGHAM GREENEBAUM DOLL, L.L.P. APPELLEE
OPINION OF THE COURT BY CHIEF JUSTICE MINTON
VACATING AND REMANDING
We granted transfer of this ongoing dispute between Meredith L.
Lawrence and the Bingham Greenebaum Doll law firm to address Lawrence’s
various claims of error in trial court proceedings resulting in the foreclosure
and judicial sale of some of Lawrence’s property. Although we reject most of
Lawrence’s claims of error, we find that the trial court’s grant of summary
judgment in favor of Bingham was erroneous. We vacate the summary
judgment and remand this case to the trial court for further proceedings
consistent with this opinion. >1 I. BACKGROUND.1
We recently dealt with the ongoing litigation between these parties.2 In
2008, Lawrence retained Bingham attorney J. Richard Kiefer to defend him
against federal tax-evasion charges. At some point in the representation, the
parties agreed to revise their original fee agreement because Lawrence had
fallen behind in his payments. The new agreement stated that Lawrence would
pay a flat fee of no less than $450,000 the principal not to exceed $650,000.
Lawrence agreed to secure his payment with a mortgage on real estate he
owned, and he signed a promissory note evidencing his debt.
Lawrence was convicted of three counts of filing false tax returns. He
then sued Kiefer and Bingham, among others, in Kenton Circuit Court for legal
malpractice. Because Lawrence had not paid for a portion of the legal services
provided to him, Bingham filed a counterclaim to recover its fee; specifically,
Bingham sued for enforcement of the promissory note. The Kenton Circuit
Court dismissed Lawrence’s malpractice claim and granted default judgment to
Bingham on its counterclaim. We upheld this judgment.3
Simultaneously occurring with the Kenton Circuit Court case, Bingham
sued Lawrence in Gallatin Circuit Court to foreclose on the property Lawrence
agreed to mortgage as security on his debt for Bingham’s services. Gallatin
1 We note that we only have a partial, incomplete record on appeal that has not been appropriately cited to by either party. 2 Bingham Greenebaum Doll, LLP v. Lawrence, 567 S.W.3d 127 (Ky. 2018); Lawrence v. Bingham Greenebaum Doll, LLP, 567 S.W.3d 133 (Ky. 2018). 3 Lawrence, 567 S.W.3d at 131. 2 County was the chosen venue for this action because the mortgaged real estate
was situated in that county.4 Lawrence counterclaimed for legal malpractice.
Also occurring simultaneously with the above two cases was a collateral
attack on his conviction that Lawrence filed in federal court based, in part, on
a claim of ineffective assistance of counsel. The federal court ruled against
Lawrence on his ineffective-assistance-of-counsel claim and issued its final
order before the resolution of the Kenton and Gallatin cases.
In the Gallatin Circuit Court foreclosure action, Bingham moved for
summary judgment, which the trial court granted. Then, upon Bingham’s
motion, the trial court entered an order of sale. After several further procedural
steps, the property was sold, and the sale was confirmed by the trial court on
May 30, 2018.
Lawrence appealed the trial court’s judgment; the appeal eventually
transferred to this court.
II. ANALYSIS.
Lawrence attacks the trial court’s grant of summary judgment in favor of
Bingham that enforced the mortgage on his Gallatin County property, and he
attacks the validity of the judicial sale.
The thrust of Lawrence’s appeal can be summarized into two main
arguments. First, Lawrence attacks the trial court’s exercise of jurisdiction over
this case. Second, Lawrence argues that the trial court erred when it upheld
the enforceability of the mortgage.
4 Kentucky Revised Statutes (“KRS”) 452.400(3) (“Actions must be brought in the county in which the subject of the action, or some part thereof, is situated: (3) For the sale of real property under a mortgage, lien, or other encumbrance or charge[.]”). 3 Because this case arrives here on the trial court’s grant of summary
judgment in favor of Kiefer and Bingham, we review the trial court’s grant de
novo.5 A summary judgment should only be granted when there “is no genuine
issue as to any material fact and . . . the moving party is entitled to a judgment
as a matter of law.”6
As a preliminary matter, throughout Lawrence’s brief he alleges that
Kiefer engaged in the unauthorized practice of law while representing him in
the federal criminal prosecution. His argument is without merit.
Kiefer was admitted to practice law in Indiana and sought and obtained
pro hac vice admission to represent Lawrence in the U.S. District Court for the
Eastern District of Kentucky. Lawrence argues, however, that regardless of
those facts, Kiefer represented a Kentuckian and appeared in federal court
within the geographical boundaries of the Commonwealth of Kentucky, so
Kiefer should have sought admission to the Kentucky bar. Essentially,
Lawrence is arguing that an attorney, duly admitted to the bar in another state
and the federal bar in which he is practicing, cannot practice law in the state
where that federal court is located without admission to the bar of that state,
as well. We reject that contention.
We find persuasive the Maryland Court of Appeals’ articulation of the
rules applicable in this situation.7 In the conventional factual scenario
involving an attorney who is not admitted in Kentucky and who maintains a
5Adams v. Sietsema, 533 S.W.3d 172, 176 (Ky. 2017). 6 Kentucky Rules of Civil Procedure (“CR”) 56.03. 7 Kennedy v. BarAss’n of Montgomery County, Inc., 561 A.2d 200, 209-10 (Md. App. 1989). 4 principal office for the practice of law in the jurisdiction where that attorney is
admitted, there is no tension between the Kentucky Rules of Professional
Conduct and admission to the bar of the federal court in Kentucky.8 That
federal recognition allows the unadmitted attorney to render professional
services on behalf of the client in the federal court in Kentucky.9 It is only when
the attorney establishes a principal office for the practice of law in Kentucky,
where he is not admitted to practice, that creates tension between that
attorney’s federal bar admission and the Kentucky Rules of Professional
Conduct.10 Here, there is no evidence that Kiefer’s principal office is in
Kentucky; in fact, his principal office appears to be in Indiana.
Moreover, we find persuasive the District of Connecticut bankruptcy
court’s articulation of the rule that an attorney who is not licensed in Kentucky
but who is authorized to practice before a federal court may, notwithstanding
the Kentucky Rules of Professional Conduct, practice law in Kentucky and even
maintain an office here so long as the services rendered in Kentucky are limited
to those reasonably necessary and incident to the specific matter pending in
the federal court.11 There is no evidence here that Kiefer’s services to Lawrence
exceeded the bounds of this rule. We decline to hold that Kiefer was engaged in
the unauthorized practice of law when representing Lawrence on his federal
tax-evasion charges after having been duly admitted in Indiana and the
8 Id. 9 Id. at 210. 10 Id. 11 In re Peterson, 163 B.R. 665, 675 (D. Conn. 1994). 5 Eastern District of Kentucky pro hac vice and having his principal office in
Indiana.
A. Lawrence’s arguments challenging the Gallatin Circuit Court’s jurisdiction over this case are meritless.
Lawrence argues that the Gallatin Circuit Court does not have
jurisdiction over this case. All these jurisdictional arguments are meritless,
however.
First, Lawrence argues that the doctrine of claim preclusion prevents the
Gallatin Circuit Court from hearing Bingham’s case. Specifically, Lawrence
argues Bingham’s claim for enforceability of the promissory note, which has
been adjudicated in favor of Bingham by default judgment, precludes Bingham
from asserting a claim for enforceability of the mortgage.
“For further litigation to be barred by claim preclusion, three elements
must be present: (1) identity of the parties, (2) identity of the causes of action,
and (3) resolution on the merits.”12 Lawrence’s argument fails for lack of
identity of the causes of action.
“[W]ell-settled . . . case law permits lenders to bring separate enforcement
actions on [a] mortgage and [a] note.”13 “A note and a mortgage given to secure
it are separate instruments, executed for different purposes, and an action for
foreclosure of the mortgage and upon the note are regarded and treated, in
practice as separate and distinct causes of action, although both may be
12 Coomer v. CSX Transp., Inc., 319 S.W.3d 366, 371 (Ky. 2010) (citing Yeoman v. Commonwealth, Health Policy Bd., 983 S.W.2d 459, 464 (Ky. 1998)). 13 Turczak u. First American Bank, 997 N.E.2d 996, 1000 (Ill. App. 2013). 6 pursued in a foreclosure suit.”14 “Even when a promissory note is incorporated
into the mortgage, it is still independent of the mortgage and is a separate
enforceable contract between the parties, and logically, even when a mortgage
is incorporated into a promissory note, the note remains independent of the
mortgage and is a separate, enforceable contract between the parties.”15 In
sum, a “mortgagee is allowed to choose whether to proceed on the note or
guaranty or to foreclose upon the mortgage. These remedies may be pursued
consecutively or concurrently.’”16
This rationale also works to reject Lawrence’s argument that Bingham’s
claims were impermissibly split. Additionally, “the rule against splitting causes
of action is an equitable rule, and it is subject to a number of exceptions.”17
One of the exceptions to the general rule against claim splitting identified by
the Restatement is when the claimant “was unable ... to seek a certain
remedy or form of relief in the first action because of . . . restrictions on [the
court’s] authority to entertain multiple . . . demands for multiple remedies or
forms of relief in a single action[.]”18
When Lawrence filed his claim for legal malpractice in Kenton Circuit
Court, Bingham most likely assumed it needed to file a counterclaim for
14 George Blum, et al., American Jurisprudence, 55 Am. Jur. 2d Mortgages § 452 (May 2019 update) (citing Monetary Funding Group, Inc. v. Pluchino, 867 A.2d 841 (Conn. App. 2005); Fifth Third Bank v. Hopkins, 894 N.E.2d 65 (Ohio App. 2008)). 15 Blum, supra FN 13 (citing Hopkins, 894 at 65). LPXXVI, LLC v. Goldstein, 811 N.E.2d 286, 290-91 (Ill. App. 2004) (quoting Farmer 16 City State Bank v. Champaign National Bank, 486 N.E.2d 301, 306 (Ill. 1985)). 17 Coomer, 319 S.W.3d at 372 (citing Capital Holding Corp. v. Bailey, 873 S.W.2d 187, 193 (Ky. 1994)); Restatement (Second) of Judgment § 26 (1982)). 18 Restatements (Second) of Judgment § 26(l)(c) (June 2019 update). 7 enforcement of the promissory note, which prompted it to file that
counterclaim. Bingham then became faced with KRS 452.400, which states,
“Actions must be brought in the county in which the subject of the action, or
some part thereof, is situated[] [f]or the sale of real property under a
mortgage[.]” So Bingham brought a separate foreclosure action in Gallatin
Circuit Court, which is located in the county in which Lawrence’s property lies,
in anticipation that Lawrence would allege improper venue in Kenton County if
Bingham would have attempted to proceed with foreclosure on the property in
Kenton County. We decline to apply the “equitable rule” against claim splitting
in these circumstances.
Next, Lawrence alleges that he was improperly served. Unfortunately, we
have before us on appeal an incomplete record that has not been properly cited
to by either party. Lawrence was in prison at the time he was served. Bingham
alleges that service was completed, through a warning order attorney, by
certified mail on May 21, 2014. The record does confirm that Lawrence
responded with a filed Answer and Counterclaim to Bingham’s complaint and
did not do so by limited and special appearance:
An appearance to an action is the first thing that a defendant does in court, and the appearances are of two kinds and are defined as special and general. The special is one where the defendant appears for the purpose of testing the sufficiency of the summons to give the court jurisdiction of his person, and the general appearance is where the defendant by some act of his is considered to submit his person to the jurisdiction of the court. Where the court has jurisdiction of the subject-matter of the action, a general appearance by the defendant waives all defects in the process or in the service of the process, or even the service of process at all. A special appearance made for the purpose of objecting to the jurisdiction of the court over the person on account of defective process or defective service of the process does not have the effect of giving the court jurisdiction over the person. Although it has sometimes been held that it is necessary for one who makes a 8 special appearance, if he would prevent his appearance from being considered a general one, that he should expressly state that his appearance is solely for the purpose of objecting to the jurisdiction; but the better rule seems to be that in courts of record the nature of the act of the defendant should determine whether the appearance is special or general. If the motions and pleadings of the defendant relate alone to the testing of the jurisdiction of the court over him, his appearance can only be considered to be special and not general.19
We cannot read Lawrence’s Answer and Counterclaim to indicate that he
protested service. In fact, nowhere in the pleading does Lawrence specifically
object to service; instead, Lawrence responds to the merits of Bingham’s
complaint. Additionally, Lawrence specifically stated in his pleading that he
“does not object to the Gallatin Circuit Court’s jurisdiction over this matter.”
Simply put, Lawrence’s “pleadings [do not] relate alone to the testing of the
jurisdiction of the court over him,” and he therefore waived any allegation of
improper service.
Lawrence alleges that the trial court ordered, on July 7, Bingham to
serve Lawrence personally. Our review of the record brought to us from below
reveals no evidence of such an order.20 The “[a]ppellant has a responsibility to
present a ‘complete record’ before the Court on appeal.”21 An “[a]ppellant may
not raise allegations of errors on appeal ‘based entirely on a silent record.’”22 So
we decline to entertain Lawrence’s argument in this regard.
19 Brumleve v. Cronan, 197 S.W. 498, 504 (Ky. 1917) (citations omitted). 20 Montgomery v. Koch, 251 S.W.2d 235, 237 (Ky. 1952) (“Matters not disclosed by the record cannot be considered on appeal.”). 21 Hatfield v. Commonwealth, 250 S.W.3d 590, 600 (Ky. 2008) (citing Steel Technologies, Inc. u. Congleton, 234 S.W.3d 920, 926 (Ky. 2007)). 22 Hatfield, 250 S.W.3d at 601 (quoting Commonwealth v. Thompson, 697 S.W.2d 143, 144 (Ky. 1985)). 9 B. The trial court erroneously granted Bingham summary judgment.
Next, Lawrence argues that his obligation to Kiefer and Bingham should
be rendered null and void for various reasons.
First, Lawrence argues that his failure to sign one part of the total
agreement between the parties renders the entirety of the agreement null and
void. The agreement in this case, executed after Lawrence failed to make
payments for Bingham’s legal services rendered, involved Bingham continuing
to provide legal services to Lawrence on the condition that he sign three
documents: 1) a promissory note memorializing Lawrence’s payment obligation;
2) a security interest agreement securing that obligation; and 3) a full release
form verifying that the property securing the promissory note was
unencumbered. The effect of Lawrence’s failure to sign the full release form is
not to discharge Lawrence of his potential obligations on the promissory note
and security interest agreement, especially after Bingham continued to provide
legal services to him; rather, the effect is, at most, the unenforceability of that
part of the agreement.
Even so, “one party’s failure to sign an agreement does not invalidate it if
the parties’ conduct manifests assent to the terms of the contract.”23 Not only
did Lawrence sign the other parts of the agreement, but in a letter to Bingham,
Lawrence explicitly stated that he did, in fact, sign the full release form. And
Bingham proceeded with its representation of Lawrence after the execution of
the agreement. We find no merit in Lawrence’s argument here.
23 Signature Technology Solutions v. Incapsulate, LLC, 58 F.Supp. 3d 72, 81 (D.D.C. 2014) (citations omitted); see Hartford Fire Ins. Co. v. Prather, 291 S.W. 9, 9-10 (Ky. 1927). 10 Second, Lawrence argues that Kiefer fraudulently induced Lawrence to
hire him by a misrepresentation that he was licensed to practice in Kentucky
when he was not. But whether Kiefer was licensed to practice in Kentucky had
nothing to do with his ability to represent Lawrence in federal court on tax-
evasion charges. As such, this representation cannot be termed “material” to
void Lawrence and Bingham’s contract for Lawrence having been fraudulently
induced in hiring Kiefer to represent him.24
Third, Lawrence alleges that Kiefer violated various Kentucky Rules of
the Supreme Court (“SCR”) and common-law principles governing the attorney-
client relationship and, as a result, he should owe no obligation to Kiefer or
Bingham. Lawrence’s argument appears to be a breach-of-fiduciary-duty
argument that Kiefer’s actions as his attorney should void the contracts he
signed as a matter of public policy. Bingham responds by asserting that
Lawrence is simply rehashing his legal-malpractice claim that has already been
decided or, at the very least, arguments he has made before that have been
rejected.
The SCR and common-law principles allegedly violated by Kiefer to which
Lawrence cites as forming the basis for his argument can be grouped into three
categories: 1) rules that one would allege as having been violated in an
ineffective-assistance-of-counsel claim; 2) rules that one would allege in
seeking to reduce or wholly discharge the amount of attorneys’ fees owed; and
3) rules that are irrelevant for purposes of either of those contentions. Bingham
24 United Parcel Service Co. v. Rickert, 996 S.W.2d 464, 468 (Ky. 1999) (“In a Kentucky action for fraud, the party claiming harm must establish” that the alleged fraudulent representation was “material.”). 11 is correct in asserting that the principles of issue and claim preclusion prevent
Lawrence from asserting violations of rules belonging to the first and second
category articulated above.
“[S]ometimes referred to as collateral estoppel[,] [i]ssue preclusion
requires four elements. First, (1) ‘the issue in the second case must be the
same as the issue in the first case.’ In addition, the issue must have been (2)
litigated, (3) decided, and (4) necessary to the court’s judgment.”25 After
Lawrence’s conviction, he filed a motion to vacate, set aside, or correct his
sentence under 28 U.S.C. § 2255, one of the grounds of his petition being
ineffective assistance of counsel. As noted by the federal trial court in that
case, to be able to succeed on an ineffective-assistance-of-counsel claim,
Lawrence needed to prove that Kiefer’s performance in his representation of
Lawrence was deficient first and foremost.26 Neither the federal magistrate
judge nor the federal district judge found any hint of deficient performance on
Kiefer’s part.27
Whether Kiefer’s performance in representing Lawrence was deficient is
an issue that has already been litigated. “The standards for proving ineffective
assistance of counsel in a criminal proceeding are equivalent to the standards
25 Commer v. CSX Transp., Inc., 319 S.W.3d 366, 374 (Ky. 2010) (quoting Yeoman v. Com., Health Policy Bd, 983 S.W.2d 459, 465 (Ky. 1998)). 26 Strickland v. Washington, 466 U.S. 668, 687 (1984). 27 This is important to note because although the test for ineffective assistance of counsel is a two-pronged test, both courts explicitly stated that counsel’s performance was not deficient; in other words, the courts did not rest their rulings on the prejudice prong but rather the deficiency prong. Had the courts rested their rulings on the prejudice prong, Lawrence would have a legitimate argument that issue preclusion would not apply because determining whether counsel’s performance was deficient is different from determining whether the defendant was prejudiced by counsel’s performance. But this did not happen, issue preclusion applies. 12 for proving legal malpractice in a civil proceeding” because both require proving
deficient conduct on the part of the attorney.28 It is therefore appropriate to
apply the doctrine of issue preclusion to this challenge to Kiefer’s professional
performance because that issue was actually litigated and decided by the
federal district court, and it was necessary to the federal court’s judgment in
rejecting Lawrence’s claim for ineffective assistance of counsel.29 So the trial
court correctly summarily dispensed with Lawrence’s argument predicated on
proving deficient performance on the part of Kiefer.
Lawrence additionally seeks to attack the amount of attorneys’ fees owed.
But this is an argument barred by claim preclusion. We held earlier that claim
preclusion did not bar Bingham from seeking enforcement of the mortgage after
it had already received a judgment in its favor for enforcement of the
promissory note because those documents give rise to separate and distinct
rights, the promissory note establishing the obligation and the mortgage
establishing security for that obligation. Here though, Lawrence’s argument
challenging the amount of attorneys’ fees owed, is an argument that seeks to
dispute the validity of the obligation owed by him to Bingham. But Lawrence’s
attorney-fee obligation to Bingham has already been established in the
judgment rendered in the Kenton Circuit Court for purposes of claim
preclusion: “The fact that no defense was offered in the suit against the
contentions of the [plaintiff] cannot make any difference, for the rule as to the
conclusiveness of judgments applies to a judgment by default or decree pro
28 Sanders v. Malik, 711 A.2d 32, 33 (Del. 1998) (citations omitted); see also Zeidwig v. Ward, 548 So.2d 209, 213-15 (Fla. 1989). 29 Id. 13 confesso.”30 The default judgment effectively rendered valid Lawrence’s
obligation on the promissory note. The promissory note obligated Lawrence to
pay a specific sum in attorneys’ fees. The time to challenge the reasonableness
of the fee was in the Kenton County litigation, not in the Gallatin Circuit Court
litigation, where all that is at issue is the enforceability of the security interest
securing payment on the promissory note.31
Lawrence’s claim here seeking to refute the establishment of the amount
of attorneys’ fees owed, i.e. the enforceability of the promissory note, from his
prior suit fails because that is the same cause of action as the cause of action
in the Kenton Circuit Court suit. As we have stated, a resolution on the merits
exists via the Kenton Circuit Court’s grant of default judgment. And it goes
without saying that identity of parties exists here because the same two parties
are involved in this litigation as in the Kenton County litigation. Because all the
elements of claim preclusion are satisfied here, Lawrence’s challenge on the
amount of attorneys’ fees owed, i.e. the enforceability of the promissory note, is
precluded. Any argument made by Lawrence seeking to renege on his
obligation owed per the promissory note is barred by claim preclusion.
But Lawrence has alleged additional violations of rules concerning the
attorney-client relationship that are irrelevant to an ineffective-assistance-of-
counsel claim or to a challenge to the amount of attorneys’ fees owed to
Bingham. Bingham and the trial court are incorrect in asserting that claim and
30 Davis v. Tuggle’s Adm’r, 178 S.W.2d 979, 981 (Ky. 1944) (citing Kimbrough v. Harbett, 60 S.W. 836 (Ky. 1901)). 31 Sedley v. City of West Buechel, 461 S.W.2d 556, 558 (Ky. 1970) (“[A] judgment in a former action operates as an estoppel ... as to matters which were necessarily involved and determined in the former action).]”). 14 issue preclusion principles and the exoneration rule, the exoneration rule being
the basis for the dismissal of Lawrence’s legal malpractice claim, bar Lawrence
from seeking relief based on violations of rules that have nothing to do with
ineffective assistance of counsel or the obligation owed on the promissory note.
Specifically, we find merit in Lawrence’s argument that Bingham violated
the SCR and common-law principles governing an attorney’s entering into a
contract with a client that subjects that client’s property to a security interest.
Such an allegation has absolutely nothing to do with the alleged deficient
performance of counsel in counsel’s representation, the exoneration rule, or,
more generally, a legal-malpractice claim. Nor does such an allegation have
anything to do with the amount of attorney’s fees owed to Bingham or the
validity of the execution of the promissory note. Rather, this argument
attempts to attack the validity of Bingham’s securing its attorney’s fee
obligation with a security interest in Lawrence’s real property.
As stated before, for claim preclusion to apply, identity of causes of
action must exist. Kentucky follows the “transactional approach” in
determining whether identity of causes of action exists.32 “This Court’s “task is
to ‘compare the factual issues explored in the first action with the factual
issues to be resolved in the second.”33 “[T]he test for ‘common nucleus of
operative fact’ as defined for purposes of res judicata is not simply one of
32 Yeoman v. Com., Health Policy Bd., 983 S.W.2d 459, 465 (Ky. 1998) (“The key inquiry in deciding whether the lawsuits concern the same controversy is whether they both arise from the same transactional nucleus of facts.”). 33 In re Piper Aircraft Corp., 244 F.3d 1289, 1302 (11th Cir. 2001) (quoting Israel Discount Bank Ltd. v. Entin, 951 F.2d 311, 315 (11th Cir. 1992)). 15 whether the two claims are related to or may materially impact one another.”34
“[T]he connection between the core facts of the [prior] suit . . . and the core
facts of the [current suit cannot be] too attenuatedf.]”35 “If the factual scenario
of the two actions parallel, the same cause of action is involved in both.”36
Lawrence’s claim that Bingham improperly subjected his real property to
a security interest is not a legal-malpractice claim but rather a breach-of-
fiduciary-duty claim. Although it is possible that those claims can overlap, “a
breach-of-fiduciary-duty claim focuses on ‘whether an attorney obtained an
improper benefit from representing the client,’ while a negligence claim focuses
on ‘whether an attorney represented a client with the requisite level of skill.”’37
In arguing that Bingham acted improperly by taking a security interest
in his property, Lawrence is not alleging deficient performance on the part of
Bingham in representing him but rather that Bingham obtained an improper
benefit from him—a security interest in his real property. The facts of
Lawrence’s breach of fiduciary duty claim do not “parallel” the facts of his legal
malpractice claim; the facts giving rise to the alleged various instances of
deficient performance on the part of Bingham in representing Lawrence in his
criminal case have nothing to do with the facts giving rise to Bingham allegedly
34 In re Piper, 244 F.3d at 1301. 33 Id. at 1302. 36 Motient Corp. v. Dondero, 269 S.W.3d 78, 83 (Tex. App. 2008) (citing Agrilectric Power Partners, Ltd. v. Gen. Elec. Co., 20 F.3d 663, 665 (5th Cir. 1994)). 37 Beck v. Law Officers of Edwin J. (Ted) Terry, Jr., P.C., 284 S.W.3d 416, 429 (Tex. App. 2009) (quoting Murphy v. Gruber, 241 S.W.3d 689, 693 (Tex. App. 2007)). 16 improperly obtaining a security interest in Lawrence’s real property. This lack
of “connection ... is simply too attenuated to justify res judicata.”38
This is the same reason why Lawrence’s prior claim for enforcement of
the promissory note does not bar him from currently asserting unenforceability
of the security interest contract. As stated before, enforcing a promissory note
is a separate cause of action from enforcing a security interest. Additionally,
the facts underlying each claim do not “parallel”; subjecting a client’s real
property to a security interest has nothing to do with creating and enforcing a
promissory note establishing the amount of fee owed.
Finally, the exoneration rule does not foreclose our ability to determine if
the security interest contract is enforceable. Justice Venters discussed the
inapplicability of the exoneration rule to Lawrence’s argument in this regard in
his unanimous majority opinion involving these parties, holding specifically
that the exoneration rule only bars Lawrence’s claim for legal malpractice:
“[Lawrence’s] concern relating to fee disputes . . . relates to contractual matters
and thus is not affected by the Exoneration Rule.”39 The reason for this is that
the exoneration rule destroys a plaintiffs allegation of legal malpractice
because it negates the plaintiffs ability to prove causation, i.e. the plaintiffs
criminal conviction was caused by his own criminal conduct, not the attorney’s
alleged deficient performance. But whether an attorney allegedly breached a
fiduciary duty by subjecting the attorney’s client’s real property to a security
38 In re Piper, 244 F.3d at 1302. 39 Lawrence, 567 S.W.3d at 141. 17 interest without meeting the requirements for validly doing so has nothing to
do with tort-law causation.
We must examine Lawrence’s breach-of-fiduciary-duty argument, for
which the remedy sought is the voiding of the security interest contract. The
only specific argument Lawrence makes on this point that has possible merit
and that is not barred by claim or issue preclusion is whether Kiefer violated
SCR 3.130(1.8)(a) by taking a possessory interest in Lawrence’s property and
by taking a property interest, the value of which exceeded the fees owed. We
have explained above why claim preclusion does not bar this argument. And no
court, including the federal court addressing Lawrence’s ineffective assistance
of counsel claim, has ever reached the merits of Lawrence’s argument on this
basis, so issue preclusion does not apply to bar Lawrence from making this
argument.
SCR 3.130(1.8)(a) states:
A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:
(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;
(2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and
(3) the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and . the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.
18 The requirements of this rule apply if a lawyer takes a security interest in the
client’s property for payment of fees.40
Although violations of the SCR “do not create a private right of actionf,]”41
we have recently stated that “an obligatory Rule of Professional Conduct for
attorneys carries equal public policy weight as any public policy set forth in our
Constitution or in a statute enacted by the General Assembly.”42 And as the
federal district court noted, the principle that the SCR do not create a private
right of action “d[oes] nothing to overturn the principle that courts will not
enforce contracts that violate public policy. Also, it d[oes] nothing to question
that the Rules of Professional Conduct may reflect Kentucky’s public policy in
proper circumstances.”43 In so finding, the federal district court in Allied
Resources held that contracts that violate SCR 3.130(1.8)(a) are
unenforceable.44 And a contract that violates SCR 3.130(1.8)(a) is one that was
entered into without satisfaction of that rule’s requirements.
So all that remains is determining whether Kiefer or Bingham abided by
the requirements outlined in SCR 3.130(1.8)(a). The record reveals that “the
transaction and terms on which the lawyer acquires the interest [were] fully
disclosed and transmitted in writing” to Lawrence. The record also reveals that
40 In re Fisher, 202 P.3d 1186, 1196 (Colo. 2009); In re Taylor, 741 N.E.2d 1239, 1242- 43 (Ind. 2001). 41 Rose v. Winters, Yonker & Rousselle, P.S.C., 391 S.W.3d 871, 874 (Ky. App. 2012). 42 Greissman v. Rawlings and Associates, PLLC, 571 S.W.3d 561, 567 (Ky. 2019). 43 Institutional Labor Advisors, LLC v. Allied Resources, Inc., Civil Action No. 4:12-CV- 00044-JHM, 2014 WL4211196, at *5 (W.D. Ky. Aug. 25, 2014). 44 Id. 19 Lawrence “consent[ed], in a writing signed by [him], to the essential terms” of
the contract.
But numerous genuine issues of material facts on this issue remain.45
We find no evidence in the record to resolve the issue of whether the
“transaction and terms on which the lawyer acquires the interest are fair and
reasonable to the client[.]” Nor is there anything in the record resolving the
issue of whether Lawrence was “advised in writing of the desirability of seeking
and [was] given a reasonable opportunity to seek the advice of independent
legal counsel on the transaction.” Additionally, Bingham has not offered any
other way to resolve these issues or Lawrence’s argument in this regard on this
appeal besides the issue and claim preclusion arguments that we have
rejected. These are issues that must be resolved by the trial court before
summary judgment can be granted.
Having found that genuine issues of material fact remain unresolved, we
must vacate the trial court’s grant of summary judgment and remand this case
to the trial court for further proceedings consistent with this opinion.
C. We need not decide Lawrence’s other raised arguments at this time.
Lawrence raises a number of other arguments in his attempt to attack
the validity of the trial court’s grant of summary judgment and proceeding with
the foreclosure and sale: 1) the order of sale and order confirming sale of the
property that were entered by a judge that later recused should be rendered
null and void because of that recused judge’s disqualification; 2) further
discovery was warranted; 3) the sale of the property was defective for a number
45 CR 56.03. 20 of reasons; 4) the proceedings occurring in the Kenton Circuit Court case
should have stayed proceedings in the Gallatin Circuit Court. Although we do
not reach these arguments at this time, should Lawrence lose on remand he
would not be barred from making these same arguments in the future.
III. CONCLUSION.
Concluding that the trial court erroneously granted summary judgment,
we vacate it and remand the case to the trial court for further proceedings
consistent with this opinion.
All sitting. All concur.
COUNSEL FOR APPELLANT: MEREDITH L. LAWRENCE
Meredith L. Lawrence Pro Se
COUNSEL FOR APPELLANT: CUT-N-SHOOT, LLC.
Brandy Lawrence Katy Lawrence, Esq.
COUNSEL FOR APPELLEE:
Beverly Ruth Storm Frank Kern Tremper Arnzen, Storm, & Turner, P.S.C.
21 2018-SC-000344-TG
MEREDITH L. LAWRENCE, AND CUT-N- APPELLANT SHOOT, L.L.C.
ON TRANSFER FROM COURT OF APPEALS V. CASE NO. 2018-CA-000993 GALLATIN CIRCUIT COURT NO. 14-CI-00055 HONORABLE JAMES ROGER SCHRAND II
BINGHAM GREENBAUM DOLL, L.L.P. APPELLEE
ORDER DENYING PETITION FOR MODIFICATION OR EXTENSION
The Petition for Modification or Extension, filed by the Appellant, of the
Opinion of the Court,rfendered August 29, 2019, is DENIED. However, the
Court, sua sponte, corrects a clerical error as to the citation of the case within
the opinion. Said correction does not affect the holding of the original Opinion
of the Court
. Minton, C.J.; Hughes, Keller, Lambert, VanMeter and Wright, J.J.;
sitting. All concur. Nickell, J.; not sitting.
ENTERED: December 19, 2019. A
io