Emad Y. Abed, et al., Appellants, vs. Fafinski & Wallrich, P.A., d/b/a Fafinski, Wallrich & Roos, et al., Respondents.

Emad Y. Abed, et al., Appellants, vs. Fafinski & Wallrich, P.A., d/b/a Fafinski, Wallrich & Roos, et al., Respondents. A05-1689, Court of Appeals Unpublished, June 27, 2006.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-1689

 

Emad Y. Abed, et al.,

Appellants,

 

vs.

 

Fafinski & Wallrich, P.A.,

d/b/a Fafinski, Wallrich & Roos, et al.,

Respondents.

 

Filed June 27, 2006

Affirmed in part, reversed in part, and remanded

Shumaker, Judge

 

Hennepin County District Court

File No. 03-13050

 

 

John G. Westrick, Kirk M. Anderson, Westrick & McDowall-Nix, P.L.L.P., 450 Degree of Honor Building, 325 Cedar Street, St. Paul, MN 55101 (for appellants)

 

Thomas Fafinski, Edwin A. Cook III, Benepartum Law Group, P.A., 860 Blue Gentian Road, Suite 295, Eagan, MN 55121 (for respondents)

 

 

            Considered and decided by Shumaker, Presiding Judge; Wright, Judge; and Ross, Judge.

U N P U B L I S H E D   O P I N I O N

SHUMAKER, Judge

Appellant Emad Abed challenges the district court's summary judgment dismissing his fraud and negligent-representation claims and the district court's denial of his motion to amend his complaint to allege a breach of fiduciary duty.  Because there was no genuine issue of material fact as to damages in the fraud and negligent-misrepresentation claims, we affirm.  But because the court abused its discretion in denying the motion to amend the complaint, we reverse and remand.

FACTS

Beginning in the late 1990s, appellant Emad Abed retained respondent law firm, Fafinski & Wallrich (F & W), to represent him in various transactional matters and litigation, including a trial that started on April 3, 2001.  By April 13, 2001, the evidence in the trial had been presented but the parties had not yet made final arguments, which were to be by written submissions.

As of April 14, F & W alleges that Abed owed $100,000 in legal fees, and Thomas Wallrich, an F & W partner, met with Abed to discuss payment of those fees.  They met in a bar, and Abed alleges that he had six to eight alcoholic beverages.  Wallrich agreed to reduce F & W's bill to $40,000 if Abed agreed to sign a promissory note for that amount and to secure it with a mortgage against real estate Abed owned in Minneapolis.  Abed contends that at first he declined Wallrich's offer but then agreed when Wallrich promised that the mortgage would not be recorded.

On the morning of April 14, Abed went to F & W's office to sign documents that would reflect the previous evening's agreement.  Abed claims that he was suffering from a "hangover" when he arrived at the office.  He also claims that he has an attention-deficit disorder that makes it difficult for him to read lengthy documents.  There, Abed signed a promissory note, a mortgage, and a "Letter Agreement" that disclosed Abed's right to seek independent counsel; contained his acknowledgment that F & W was not acting as his legal counsel respecting the fee issue; indicated that the mortgage would give F & W an interest adverse to Abed, thus creating a conflict of interest for F & W; and stated that F & W would not record the mortgage as long as Abed was not in default on the promissory note.

After Abed signed the documents pertaining to the legal fees, F & W continued to represent him in other matters.  Presumably, F & W completed the litigation that was pending as of April 15, and F & W drafted subleases in November 2001 for property that Abed owned.  Abed alleges that ambiguities in the subleases spawned litigation.  He then did not pay the promissory note, and F & W recorded the mortgage and assigned it to respondent WALFIN.  WALFIN served a notice of default of the mortgage on Abed and then conveyed the secured property by quitclaim deed to RKL Landholding, LLC, which foreclosed by advertisement.

Abed sued F & W, alleging fraud and negligent misrepresentation, and sought declaratory and injunctive relief.  F & W moved for summary judgment.  Abed responded to the motion and moved to amend his complaint to add claims for damages for professional negligence and breach of fiduciary duty.  The district court denied the motion to amend and granted summary judgment in favor of F & W, dismissing Abed's claims.  Contending that both rulings were erroneous, Abed appealed.

D E C I S I O N

Summary-Judgment Standard

            There are two questions on appeal from summary judgment: (1) whether there are any genuine issues of material fact and (2) whether the district court erred in its application of the law.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  "On appeal, the reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted."  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). 

            The district court drew five conclusions from the admitted or undisputed facts, but two of them are dispositive on appeal.  One relates to the summary judgment and the other to the motion to amend the complaint.

            In granting summary judgment, the court concluded that Abed "failed to assert any theory or facts that would allow [him] to recover damages on any claim or proposed claim."  The court's conclusion was based on an accurate determination that Abed acknowledged his indebtedness to F & W in the sum of $40,000 and failed to point to any evidence that would create a fact issue as to the reasonableness of that fee or Abed's obligation to pay it.

            To prevail on a common-law fraud claim, the plaintiff must show, among other things, that he suffered pecuniary damages as a direct result of actionable fraud.  Specialized Tours, Inc. v. Hagen, 392 N.W.2d 520, 532 (Minn. 1986).  The same is true of a claim based on negligent misrepresentation.  Bonhiver v. Graff, 311 Minn. 111, 122, 248 N.W.2d 291, 298-99 (1976).

            Although Abed argues on appeal that there exists a myriad of fact issues as to F & W's representations to him, he fails to show any fact issue as to pecuniary damages.  Whether or not F & W made fraudulent statements or negligently misrepresented facts, Abed cannot prevail on his claims unless he suffered monetary damages.  He has produced no evidence of monetary damages. Thus, the district court properly granted summary judgment dismissing Abed's claims against F & W.

Motion to Amend the Complaint

            After an answer has been served in a lawsuit, "a party may amend a pleading only by leave of the court or by written consent of the adverse party; and leave shall be freely given when justice so requires."  Minn. R. Civ. P. 15.01.  We review the district court's denial of a motion to amend a complaint for an abuse of discretion.  Fabio, 504 N.W.2d at 761.

The district court concluded that Abed's "proposed breach of fiduciary duty claim is futile, because the transaction at issue here did not arise in a fiduciary relationship.  Rather, [Abed and F & W] were resolving a dispute over legal fees, in which counsel neither represented [Abed's] interests nor purported to do so."  In effect, but without expressly so holding, the court denied the motion to amend because the court concluded that Abed's amended complaint would fail to state a claim on which legal relief could be obtained.

In his proposed amended complaint, Abed alleged that, when he signed the documents that led to the foreclosure of the mortgage on his real estate, F & W was in a fiduciary relationship with him as his attorneys and that F & W had a "controlling influence" over him and breached their fiduciary duties by using that influence to induce him to sign the note, mortgage, and Letter Agreement.

"An attorney-client relationship gives rise to fiduciary duties."  STAR Ctrs., Inc. v. Faegre & Benson, LLP, 644 N.W.2d 72, 77 (Minn. 2002).  When there is an attorney-client relationship, the attorney must act in absolute good faith toward the client because of the confidential and fiduciary nature of the relationship.  See Colstad v Levine, 243 Minn. 279, 286-87, 67 N.W.2d 648, 654 (1954) (holding that the relationship between attorney and client is one of highest trust and confidence, requiring the utmost good faith and candor).  The attorney must show that he has been "absolutely frank and fair with his client and has taken no advantage of the confidence arising from such professional relation."  Id.at 287, 67 N.W.2d at 654.

The district court concluded that no attorney-client relationship existed, and hence no fiduciary relationship existed as to the issue of the legal fees.  But the attorney-client relationship did not end with the resolution of the fee dispute.  F & W continued to act as attorneys for Abed in the litigation pending on April 15 and in at least one later transaction.  It is not altogether clear on this record what the nature and extent of F & W's fiduciary relationship was, or even if the relationship continued, given the ongoing legal representation.  But it seems that Abed has at least proposed a sufficient claim that F & W had a fiduciary relationship with him and did not act in candor and good faith in exercising the duties of that relationship.

Accordingly, we hold that the district court erred in determining categorically that Abed failed to state a claim and abused its discretion in denying  the motion to amend the complaint.  However, by this decision, we do not express any opinion as to the merits of Abed's claim or to suggest the outcome of a dispositive motion as to that claim.

Affirmed in part, reversed in part, and remanded.