Miller v. Sears

636 P.2d 1183, 1981 Alas. LEXIS 569
CourtAlaska Supreme Court
DecidedDecember 4, 1981
Docket4762, 4763
StatusPublished
Cited by90 cases

This text of 636 P.2d 1183 (Miller v. Sears) is published on Counsel Stack Legal Research, covering Alaska Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Miller v. Sears, 636 P.2d 1183, 1981 Alas. LEXIS 569 (Ala. 1981).

Opinions

MATTHEWS, Justice.

In this case a judgment mandating rescission of a sale of real estate and ordering restitution was entered. Many claims of error are presented. We affirm that portion of the judgment requiring rescission, vacate the award of restitution, and costs, and remand for further proceedings.

FACTUAL AND PROCEDURAL SETTING

During February 1976, Eugene and Frances Miller decided to move from Alaska. Their house, where Mr. Miller also practiced law, was put up for sale. Soon thereafter, the Millers began negotiating with Dallas and Sara Sears for the sale of the house.

For at least four years prior to the sale negotiations, Eugene Miller had represented Dallas and Sara Sears as their attorney. Concurrently with the negotiations, Eugene Miller drafted the incorporation papers for Norlite, Inc., which owned the Sears’ business holdings and ultimately became the purchaser of the Millers’ home.1

The documents consummating the sale were prepared by an employee of Eugene Miller. As they were originally prepared, the documents would have conveyed the property to the Sears personally, and the Sears would have been personally liable on the note for the balance of the purchase price. At the time scheduled for closing the sale, the Sears advised Eugene Miller that they wanted these documents changed to designate Norlite, Inc. rather than themselves as purchaser and obligor. The change was made and on June 29, 1976, closing took place. The sale price was $500,000.00. A down payment of $30,000.00 was paid and the balance, $470,000.00, was to be paid under the terms of a promissory note from Norlite, Inc.2 The note was se[1187]*1187cured by a Deed of Trust under which Nor-lite, Inc. was trustor. The Sears also signed a document which was appended to the deed of trust entitled “Indemnity Agreement.” This agreement provided that the Sears would personally guarantee the performance of Norlite’s obligations under the deed of trust. One of Norlite’s obligations under the deed of trust was to pay the promissory note. The Sears were to be given possession no later than January 1, 1977.

The parties differ considerably as to what transpired during the negotiations. The Sears claim that Eugene Miller misrepresented the income-producing capabilities of the property, that Eugene Miller stated that his law associate would continue as a lessee in the building, and that they were never advised to seek independent counsel. They also contend that they did not realize that they would be personally liable as guarantors of the note. Eugene Miller denied making representations concerning the rental value of the property or his associate’s intentions. He testified that he had advised the Sears to seek independent counsel and believed that they had done so before the documents were signed. He also testified that he had made it clear to the Sears that they would be personally liable on the note.

Following the sale, the Millers purchased a farm in Missouri and took up residence there. The Sears requested and received several modifications of the sale payment terms.3 They paid $30,000.00 on August 23, 1976. They took possession a few days before November 1, 1976, and immediately began remodeling the residential portion of the property with a view to converting it to commercial uses.

On January 12, 1977, the Sears, after consulting with another attorney, wrote the Millers, requesting to “just void the contract. ...”4 This was rejected by the Millers. On March 12, 1977, the Sears sent the Millers a formal notice purporting to cancel the sale.

When settlement discussions failed, the Millers sued the Sears and Norlite, Inc. for recovery of the amount owing on the promissory note. The Sears answered stating breach of fiduciary duty as an affirmative defense, and counterclaimed on the same theory, requesting rescission of the sale and monetary damages.

[1188]*1188At trial, the jury found for the Sears in a special verdict accompanied by interrogatories. The court granted judgment for rescission of the contract and awarded attorney’s fees and costs to the Sears. Subsequently, a hearing on restitution was held and the court awarded the Millers restitu-tionary damages in the amount of $1,857.00, plus interest. All parties have appealed.

BREACH OF ATTORNEY’S FIDUCIARY OBLIGATIONS

The central challenge the Millers raise against the judgment of rescission is that too high a legal standard was imposed upon Eugene Miller in his dealings with the Sears. At trial, the following interrogatories were submitted to the jury in a special verdict:

INTERROGATORY NO. 1: Have the Sears proved, by a preponderance of the evidence that there was an attorney-client relationship existing between Mr. Miller and the Sears and Norlite, Inc. at the time of this transaction?
If your answer to the above interrogatory is “No,” then you should sign Verdict Form No. I. If you answer interrogatory no. 1 “Yes,” then answer each of the following questions.
INTERROGATORY NO. 2: Was the transaction fair to the Sears and Norlite, Inc.?
INTERROGATORY NO. 3: Were all the facts which were known or should have been known to Mr. Miller disclosed to the Sears prior to the sale?
INTERROGATORY NO. 4: Did Mr. Miller either fully explain to the Sears the significance and legal effect of each term or advise the Sears to obtain independent legal counsel to explain the transaction in question?
If you have answered each of interrogatories numbered 2, 3, and 4 “Yes,” you should sign Verdict Form No. I. If you have answered “No” to any of numbers 2, 3 or 4, then you should sign Verdict Form No. II.

The jury answered the first three interrogatories in the affirmative and the fourth in the negative.

The Millers claim that interrogatory number 4 is superfluous. They argue that the court should have entered judgment rejecting the remedy of rescission based upon the jury’s findings in interrogatories numbers 2 and 3 that the transaction was fair to the Sears and that Eugene Miller had disclosed to the Sears all the facts which he either knew or should have known.

Interpreting interrogatories number 3 and 4 together, it is plain that the word “facts” used in interrogatory number 3 does not include the “significance and legal effect” of the contract terms referred to in interrogatory number 4. There would have been no reason to treat legal effects separate from facts, as they were in interrogatory number 4, if the latter were meant to include the former.

Sales transactions between lawyers and their clients are subject to rescission where the client expects the lawyer to act as such for the client and the lawyer does not fully discharge his fiduciary obligations to the client.5 Courts will scrutinize such transactions for fairness and the lawyer’s obligation is to explain all relevant facts and the legal significance of the documents.6 Thus, even though the transaction may be fair, and the lawyer may have disclosed all matters of fact relevant to the transaction, the transaction is voidable if the legal consequences flowing from it are not explained.7 Therefore interrogatory [1189]

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636 P.2d 1183, 1981 Alas. LEXIS 569, Counsel Stack Legal Research, https://law.counselstack.com/opinion/miller-v-sears-alaska-1981.