Potter v. Pierce

CourtNew Mexico Supreme Court
DecidedJanuary 8, 2015
Docket34,365
StatusPublished

This text of Potter v. Pierce (Potter v. Pierce) is published on Counsel Stack Legal Research, covering New Mexico Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Potter v. Pierce, (N.M. 2015).

Opinion

1 IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

2 Opinion Number:

3 Filing Date: January 8, 2015

4 NO. 34,365

5 JEFFREY POTTER,

6 Plaintiff-Petitioner,

7 v.

8 CHRIS PIERCE, WILLIAM DAVIS, 9 DAVIS & PIERCE, P.C., and 10 JOHN DOE LAW FIRM,

11 Defendants-Respondents.

12 ORIGINAL PROCEEDING ON CERTIORARI 13 Carl J. Butkus, District Judge

14 Law Office of Daymon Ely 15 Daymon B. Ely 16 Albuquerque, NM

17 Law Office of William G. Gilstrap 18 William Grant Gilstrap, II 19 Albuquerque, NM

20 for Petitioner 1 Domenici Law Firm, P.C. 2 Pete V. Domenici, Jr. 3 Lorraine Hollingsworth 4 Albuquerque, NM

5 for Respondents 1 OPINION

2 DANIELS, Justice.

3 {1} Res judicata is a judicially created doctrine designed to promote efficiency and

4 finality by giving a litigant only one full and fair opportunity to litigate a claim and

5 by precluding any later claim that could have, and should have, been brought as part

6 of the earlier proceeding. In this case, we examine the preclusive effect of a fee

7 proceeding in bankruptcy court on a later lawsuit for legal malpractice allegedly

8 committed in the course of the bankruptcy. We hold that the elements of res judicata

9 are met and that Petitioner was sufficiently aware of his malpractice claim, which he

10 could and should have brought in the bankruptcy proceeding. We affirm the dismissal

11 of Petitioner’s subsequent malpractice suit but emphasize that barring a claim on res

12 judicata grounds requires a determination that the claimant had a full and fair

13 opportunity to litigate the claim in the earlier proceeding.

14 I. BACKGROUND

15 {2} One month prior to filing for voluntary Chapter 11 bankruptcy on May 19,

16 2005, Petitioner Jeffery Potter sold his interest in a limited partnership known as

17 Monte Mac. Petitioner was represented in the bankruptcy proceedings by

18 Respondents. During these proceedings, Petitioner, through Respondents as counsel,

19 filed his schedules and his statement of financial affairs (SOFA). The SOFA requires 1 that the debtor list all property transferred within the year immediately preceding the

2 bankruptcy petition, other than property transferred in the ordinary course of business

3 or financial affairs. See Official and Procedural Bankruptcy Forms, Form 7, 11 U.S.C.

4 (2003). Petitioner testified under oath that he had reviewed the schedules and the

5 SOFA and that they were true and correct. Neither the schedules nor the SOFA listed

6 Petitioner’s sale of the Monte Mac interest.

7 {3} Referring to “a fundamental disagreement,” Respondents filed a motion to

8 withdraw as counsel for Petitioner, which the bankruptcy court granted one year after

9 Petitioner’s Chapter 11 filing. After moving for withdrawal, Respondents also filed

10 an application for fees, to which Petitioner filed an objection on May 22, 2006. The

11 objection from Petitioner did not specifically mention the undisclosed Monte Mac

12 transfer but alleged, among other things, that Respondents had threatened Petitioner

13 with their withdrawal, had caused Petitioner to file inaccurate financial disclosures,

14 and had obtained his signature on these disclosures by fraud. The bankruptcy court

15 held a fee hearing on April 10, 2007. After hearing objections, the bankruptcy court

16 analyzed billing records and disallowed some fees as excessive, duplicative, clerical,

17 or administrative in nature. The bankruptcy court approved the rest in a final fee

18 award entered on June 4, 2007, addressing the services performed, rates charged, and

2 1 time billed but not specifically mentioning the allegations made in the objections.

2 Petitioner did not appeal or move the bankruptcy court to reconsider its judgment.

3 {4} Following Respondents’ withdrawal, the bankruptcy court converted

4 Petitioner’s bankruptcy from Chapter 11 to Chapter 7. When questioned about the

5 Monte Mac sale on the day after the fee hearing and prior to the entry of the final fee

6 judgment, Petitioner testified to his creditors that he had owned an interest in Monte

7 Mac but had sold it for $72,000 and could not recall when he sold it.

8 {5} On March 21, 2008, Petitioner filed a motion in bankruptcy court alleging

9 damages from malpractice that included over one million dollars for his exposure to

10 a denial of his discharge.

11 {6} Petitioner never filed an amended schedule or SOFA to include the sale of his

12 interest in the Monte Mac partnership. Finding this to be a knowing and fraudulent

13 omission, the bankruptcy court denied the discharge of Petitioner’s debts on June 23,

14 2009.

15 {7} Petitioner then brought a separate action for legal malpractice, breach of

16 fiduciary duty, and misrepresentation in the Second Judicial District Court. In his

17 complaint, Petitioner made broad allegations of malpractice against Respondents.

18 Respondents moved to dismiss Petitioner’s complaint as barred by the res judicata

3 1 effect of the bankruptcy court fee award. Petitioner responded that his malpractice

2 claim had not accrued until he had been denied a discharge, because until then he had

3 not suffered injury, and so approval of the fee award did not bar his claim. The

4 district court found that this argument “fails on the facts” because Petitioner alleged

5 both malpractice and damages sustained from that malpractice in the bankruptcy fee

6 proceedings and in subsequent pleadings prior to the denial of his discharge. The

7 district court granted summary judgment for Respondents on grounds of res judicata.

8 Petitioner appealed, the Court of Appeals affirmed, and we granted certiorari. Potter

9 v. Pierce, 2014-NMCA-002, ¶ 1, 315 P.3d 303, cert. granted, 2013-NMCERT-011.

10 II. STANDARD OF REVIEW

11 {8} Summary judgment is appropriate where there are no genuine issues of material

12 fact and the movant is entitled to judgment as a matter of law. Zamora v. St. Vincent

13 Hosp., 2014-NMSC-035, ¶ 9, 335 P.3d 1243; Rule 1-056(C) NMRA. We review a

14 grant of summary judgment de novo. Zamora, 2014-NMSC-035, ¶ 9. In reviewing an

15 order on summary judgment, we examine the whole record, considering the facts and

16 drawing all reasonable inferences in a light most favorable to the nonmoving party.

17 Id. “Whether the elements of claim preclusion are satisfied is a legal question, which

18 we [also] review de novo.” Kirby v. Guardian Life Ins. Co. of Am., 2010-NMSC-014,

4 1 ¶ 61, 148 N.M. 106, 231 P.3d 87.

2 III. DISCUSSION

3 {9} Petitioner argues that New Mexico precedent does not allow a nonadversarial

4 fee proceeding to preclude a later claim for legal malpractice; and he reasons that

5 because he did not suffer any injury until the denial of his discharge, his malpractice

6 claim could not have been brought earlier.

7 {10} “[R]es judicata is designed to relieve parties of the cost and vexation of

8 multiple lawsuits, conserve judicial resources, . . . prevent [] inconsistent decisions,

9 [and] encourage reliance on adjudication.” Computer One, Inc. v. Grisham &

10 Lawless, P.A., 2008-NMSC-038, ¶ 31, 144 N.M. 424, 188 P.3d 1175 (alterations in

11 original) (internal quotation marks and citation omitted). Federal law and New

12 Mexico law are consistent on the general standards governing claim preclusion.

13 Deflon v. Sawyers, 2006-NMSC-025, ¶ 2, 139 N.M.

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Potter v. Pierce, Counsel Stack Legal Research, https://law.counselstack.com/opinion/potter-v-pierce-nm-2015.