Schmidt v. Pearson, Evans, and Chadwick

Annotate this Case
Paul A. SCHMIDT, Pauline B. Schmidt, Paul G.
Schmidt and Acro Corporation v. PEARSON,
EVANS, and CHADWICK, a Partnership; C. Thomas
Pearson, Jr.; Marshall Dale Evans; Charles R.
Chadwick; Stephen R. Bigger; Steven Tennant,
P.A.; and Steven Tennant

95-519                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered November 4, 1996


1.   Judgment -- judgment notwithstanding the verdict -- when trial
     court may enter such judgment. -- A trial court may enter
     judgment notwithstanding the verdict only if there is no
     substantial evidence to support the verdict of the jury and
     the moving party is entitled to judgment as a matter of law;
     a trial court may not substitute its view for that of the
     jury, and, to be set aside, the jury's verdict must be clearly
     against the preponderance of the evidence; the standard
     regarding a motion for a new trial is the same; on appeal, the
     court views the evidence and all reasonable inferences
     therefrom in the light most favorable to the party for whom
     the original judgment was entered.  

2.   Attorney & client -- legal malpractice -- controlling
     principles. -- In legal malpractice actions, an attorney is
     negligent if he or she fails to exercise reasonable diligence
     and skill on behalf of the client; to prevail under a claim of
     legal malpractice, a plaintiff must prove that the attorney's
     conduct fell below the generally accepted standard of practice
     and that this conduct proximately caused the plaintiff
     damages; to show damages and proximate cause, the plaintiff
     must show that but for the alleged negligence of the attorney,
     the result in the underlying action would have been different. 
     

3.   Appeal & error -- failure to request finding on issue
     submitted to jury on interrogatories constitutes waiver on
     appeal -- court cannot speak for jury. -- When the issues are
     submitted to the jury on interrogatories, failure to request
     a finding on one issue is a waiver of that issue on appeal,
     and the appellate court cannot say what the jury would have
     found. 

4.   Appeal & error -- use or misuse of retainer was not a
     negligence issue -- proximate cause not shown. -- Appellants'
     argument concerning the alleged misuse of a retainer was an
     issue dealing with breach of contract, not negligence, but,
     even if the retainer was negligently used, the appellants
     failed to show that the misapplied expenditures proximately
     caused the loss of their lender-liability suit.

5.   Appeal & error -- issue unsupported by argument or authority -
     - issue not reached on appeal. -- The court will not consider
     assignments of error that are unsupported by convincing
     argument or authority.

6.   Attorney & client -- malpractice -- attorney not labile for
     error of judgment made in good faith. -- Where, from the
     record as abstracted, the jury was not asked to return a
     finding as to whether appellants' counsel were negligent in
     the foreclosure action, appellants could not claim on appeal
     that the attorneys' acts in one cause of action were the
     proximate cause of their loss in a different cause of action;
     an attorney is not a guarantor that his judgment is infallible
     and is not liable for an error of judgment made in good faith.

7.   Attorney & client -- malpractice -- attorney's not liable for
     good-faith errors in judgment. -- An attorney is not liable to
     a client when, acting in good faith, he makes mere errors of
     judgment; here, the evidence showed the attorney used his best
     judgment in not dissolving the company, which might then have
     been forced into receivership and liquidation. 

8.   Attorney & client -- malpractice -- attorneys not liable for
     mistaken opinion on point of law. -- As a matter of law,
     attorneys are not liable for mistaken opinion on a point of
     law that has not been settled by a court of highest
     jurisdiction and on which reasonable attorneys may differ.

9.   Attorney & client -- trial court did not find attorneys
     negligent -- trial court was within its authority. -- Where
     the disagreement between their legal expert and the appellants
     was sufficient evidence that, as a matter of law, appellees
     were not negligent in failing to amend the appellants'
     complaint before the summary-judgment hearing, the trial court
     was within its authority to determine, as a matter of law,
     that appellees were not negligent in failing to amend the
     complaint before the summary-judgment hearing since whether
     appellees should have filed an amendment in these
     circumstances involved an unsettled legal issue about which
     experts could reasonably disagree.  

10.  Attorney & client -- issues raised by appellants were in
     contract -- issues were not proximate cause of appellants'
     failure to prevail on lender-liability claim. -- Appellants'
     contention concerning appellees' negligence was a contract
     issue and not one sounding in tort; even if they had appealed
     the foreclosure decree, no evidence was presented at trial
     that appellants would have prevailed and obtained reversal of
     the decree; the issue of the $1000 and appeal of the
     foreclosure decree was not a proximate cause of the
     appellants' failure to prevail in their lender-liability
     action.

11.  Attorney & client -- no substantial evidence found to support
     verdict for malpractice -- trial court's ruling was correct. -
     - The trial court was correct in finding no substantial
     evidence to support the verdict against appellees for legal
     malpractice where none of the issues presented by appellants
     was the proximate cause of the loss of their lender-liability
     claim against the bank; therefore, appellees were entitled to
     judgment notwithstanding the verdict as a matter of law. 


     Appeal from Washington Circuit Court; David Burnett, Judge;
affirmed.
     Henry McDermott, for appellants.
     Davis, Cox & Wright, by:  Constance G. Clark, Walter B. Cox,
and Don A. Taylor, for appellees Pearson Evans, and Chadwick, a
Partnership, C. Thomas Pearson, Jr., Marshall Dale Evans, and
Charles R. Chadwick.
     Warner, Smith, & Harris PLC, by:  G. Alan Wooten and Kathryn
Stocks Campbell, for appellees Stephen R. Bigger, Steven Tennant,
P.A., and Steven Tennant.

     Tom Glaze, Justice.
     The appellants, Paul A., Pauline B., and Paul G. Schmidt,
bring this legal malpractice suit against attorneys C. Thomas
Pearson, Jr., and Steven Tennant for their alleged negligence
committed in Schmidt v. McIlroy Bank & Trust, 306 Ark. 28, 811 S.W.2d 281 (1991).  Schmidt involved the Schmidts' lender-
liability action against McIlroy Bank & Trust.  This court affirmed
an award of summary judgment dismissing the Schmidts' suit against
McIlroy Bank because they failed to make a timely amendment to
their complaint alleging their status or standing as guarantors of
their corporation's (Acro's) debts.  In other words, the Schmidts
had not pled any individual cause of action under their separate
guaranty contract against the Bank.  Presented with a case of first
impression in Schmidt, this court held that filing a motion to
amend the pleadings was unnecessary under Ark. R. Civ. P. 15(a),
and that until the pleadings were amended and a request was made to
strike a pleading, the trial court was not required to determine
whether prejudice or undue delay would result from the amendment. 
Because the Schmidts had had ample time to amend their pleadings to
allege their guarantor status, but had failed to do so, we upheld
the trial court's granting of McIlroy Bank's second request for
summary judgment, which dismissed the Schmidts' action.
     We believe a recitation of the facts leading up to the present
legal malpractice action might be helpful.  The Schmidts were the
sole shareholders of Acro Corporation, a family farming and egg-
producing business.  The Schmidts had had a business relationship
with McIlroy Bank & Trust since 1976.  At the time the lender-
liability cause of action arose, McIlroy Bank held Acro's secured
notes, mortgage, and checking accounts.  The notes and the mortgage
were secured by the personal guarantees of the Schmidts.  In 1986,
the Bank's employees were replaced by employees of Bancshares,
which was in the process of purchasing the Bank.  The evidence
showed the Bank agreed to extend payments under the secured notes
and to allow the Schmidts to temporarily overdraw on Acro's
checking accounts.  However, after Acro overdrew its checking
accounts, the Bank closed the accounts, filed a foreclosure suit in
chancery court, and made demand for payment under the secured
notes.  The Schmidts filed for Chapter 11 bankruptcies, but
voluntarily dismissed them later.
     The Schmidts, through their original attorney, Larry Froelich,
then filed their lender-liability complaint in circuit court
against the Bank, seeking $15 million in compensatory and $1
million in punitive damages for Acro and themselves as
shareholders.  However, as previously noted in our discussion of
Schmidt, the Schmidts failed to request relief as guarantors. 
While those actions in circuit and chancery court were pending, the
Schmidts employed attorney, C. Thomas Pearson, Jr., to pursue their
lender-liability suit and to defend the Bank's foreclosure action. 
With the Schmidts' approval, Pearson engaged the assistance of
Steven Tennant as co-counsel.      
     In 1988, the appellants' original counsel, Larry Froelich,
withdrew, leaving Pearson and Tennant as attorneys of record in the
lender-liability suit and Tennant as attorney of record in the
foreclosure case.  See McIlroy Bank & Trust v. Acro Corp., 30 Ark.
App. 189, 785 S.W.2d 47 (1990) (where judgment for the Bank was
reversed and remanded, because the chancellor signed the
foreclosure consent decree in error).  On retrial of the
foreclosure action, the Bank was awarded $634,279.20 plus 10%
attorney's fee.  The Schmidts' property was sold at foreclosure for
$30,000, leaving an outstanding judgment against them.
     On August 3, 1990, the Schmidts filed a complaint against
their attorneys for breach of contract and for legal malpractice in
both the lender-liability and foreclosure actions.  Specifically,
the Schmidts alleged, among other things, that Pearson and Tennant
willfully and negligently allowed Acro's corporate charter to be
revoked, failed to properly dissolve Acro and preserve its cause of
action against the Bank, and failed to properly amend the lender-
liability complaint to include the Schmidts as guarantors.  The
Schmidts sought in excess of $7 million in damages and refund of
all amounts paid to Pearson and Tennant.  A jury trial was held on
August 9-11, and September 15-16, 1994, and by interrogatories the
ten-member jury found both Pearson and Tennant negligent.  On
September 26, the trial court entered judgment against Pearson and
Tennant for damages of $880,609.74 in favor of the Schmidts and
$3.1 million in favor of Acro.  On that same date, Pearson and
Tennant filed a motion for judgment notwithstanding the verdict,
and in the alternative, for new trial and stay of judgment.
     On October 25, the trial court entered its order granting
Pearson and Tennant their motion for JNOV finding there was
insubstantial evidence to support the verdict.  The trial court
also conditionally granted them a new trial because of other 
irregularities in the proceedings.  On appeal from that order, the
Schmidts argue the trial court abused its discretion in granting
Pearson's and Tennant's motions for JNOV and new trial, and they
also argue the trial court abused its discretion in finding it had
erred by (1) failing to strike two veniremen; (2) failing to
exclude hearsay evidence; and (3) allowing introduction of
testimony regarding Pearson's and Tennant's expenditure of monies
advanced for litigation costs.  Because we find the Schmidts failed
to show Pearson and Tennant negligently and proximately caused the
Schmidts' damages, we affirm.  
     In reviewing this matter on appeal, we are guided by the rule
that a trial court may enter judgment notwithstanding the verdict
only if there is no substantial evidence to support the verdict of
the jury and the moving party is entitled to judgment as a matter
of law.  McLaughlin v. Cox, 324 Ark. 361, 922 S.W.2d 327 (1996). 
Furthermore, a trial court may not substitute its view for that of
the jury, and the jury's verdict must be clearly against the
preponderance of the evidence in order to be set aside.  The
standard regarding a motion for a new trial is the same.  See Ark.
R. Civ. P. 50(b).  Also, on appeal, this court views the evidence
and all reasonable inferences therefrom in the light most favorable
to the party for whom the original judgment was entered. 
McLaughlin, 324 Ark. at 368.
     We next turn to those principles that control in legal
malpractice actions, and we are met by the rule that an attorney is
negligent if he or she fails to exercise reasonable diligence and
skill on behalf of the client.  Anthony v. Kaplan, 324 Ark. 52, 918 S.W.2d 174 (1996).  And, in order to prevail under a claim of legal
malpractice, a plaintiff must prove that the attorney's conduct
fell below the generally accepted standard of practice and that
this conduct proximately cause the plaintiff damages.  To show
damages and proximate cause, the plaintiff must show that but for
the alleged negligence of the attorney, the result in the
underlying action would have been different.  Id.; see also Tyson
Foods, Inc. v. Adams, 326 Ark. ____, ____ S.W.2d ____ (Oct. 21,
1996); Callahan v. Clark, 321 Ark. 376, 901 S.W.2d 842 (1995);
Shaffer v. Wilkes, 65 F.3d 115 (8th Cir. 1995); Vanderford v.
Penix, 39 F.3d 209 (8th Cir. 1994).
     In deciding this case, we can assume the Schmidts presented
sufficient proof to have prevailed in their underlying lender-
liability action against McIlroy Bank.  Even so, we conclude their
evidence falls short in showing Pearson's and Tennant's actions
negligently and proximately caused the Schmidts' damages.  The
Schmidts point to five instances where Pearson and Tennant
negligently performed, causing the Schmidts to sustain damages.  We
consider each instance in the order the Schmidts discussed them in
their brief.
     The Schmidts first complain of Pearson's and Tennant's use of
a $11,000 nonrefundable retainer for payment to themselves, other
attorneys, and secretaries, rather than for discovery and copying
costs.  The Schmidts contend that they entered an oral, contingency
contract with Pearson and Tennant, and agreed to provide them with
an initial $10,000 retainer for discovery, deposition, and copying
costs; apparently, an additional $1000 was paid later.  The
Schmidts argue Pearson and Tennant were negligent in the use of
this retainer.    
     Whether Pearson and Schmidt spent the retainer as the parties
agreed is an issue dealing with breach of contract, and not one of
negligence.  See Robertson v. White, 633 F. Supp. 954 (W.D.Ark.
1986) (the failure to perform a promise implied in a professional
relationship sounds in contract, rather than tort).  On this point,
we note that Paul G. Schmidt testified and conceded the $10,000
paid Pearson and Tennant was nonrefundable and, as a consequence,
the evidence reflects there was no duty to return any portion of
the retainer to the Schmidts.  And while the Schmidts offered some
testimony that the retainer should have been spent for depositions,
they failed to show what depositions should have been taken or what
depositions may have made a difference in proving their case.  In
addition, from the record as abstracted, the jury was not given an
interrogatory on the Schmidts' breach-of-contract claim, nor did
the jury return a finding that a breach of the retainer contract
occurred.  When the issues are submitted to the jury on
interrogatories, failure to request a finding on one issue is a
waiver of that issue on appeal, and this court cannot say what the
jury would have found.  Olmstead v. Moody, 311 Ark. 163, 842 S.W.2d 26 (1992).  Further, even if the retainer was negligently used, the
Schmidts fail to show that the misapplied expenditures proximately
caused the loss of their lender-liability suit.
     The Schmidts also complain that even though they paid this
retainer on January 5, 1988, Pearson and Tennant did not enter
their appearance until three months later in April.  We note that
the Schmidts made no argument on this issue, and this court will
not consider assignments of error that are unsupported by
convincing argument or authority.  Fayetteville Sch. Dist. v. Ark.
State Bd. of Education, 313 Ark. 1, 852 S.W.2d 122 (1993).
     Second, the Schmidts contend Pearson and Tennant ignored the
Bank's settlement offer of $500,000 in the foreclosure action, and
did no evaluation or investigation of their lender-liability case
until after the offer was withdrawn on November 21, 1988.  The
Schmidts point to Tennant's testimony that he waited so he could
use the Bank's evidence presented in the foreclosure hearing to get
a "free shot" at what the Bank's testimony would be in the lender-
liability case.  Tennant testified after he heard the Bank's
evidence, he "decided we had a hard, hard row to hoe."  The
Schmidts contend Pearson and Tennant were negligent in not deposing
the Bank's employees while the foreclosure settlement-offer was
still viable.  In response, Pearson maintains the settlement offer
was discussed between the parties, and ultimately rejected.
     The Schmidts presented no evidence showing the Bank's
settlement offer in the foreclosure action should have been
accepted, nor if it had been accepted that its acceptance would
have caused them to prevail in the lender-liability action.  In
fact, the Schmidts' expert testified he had no opinion regarding
whether the Bank's settlement offer should have been accepted. 
Instead, the Schmidts merely assert the deficiency judgment against
them would have been less had the settlement offer been accepted. 
     An attorney is not a guarantor that his judgment is infallible
and is not liable for an error of judgment made in good faith. 
Spivack, Shulman & Goldman v. Foremost Liquor Store, Inc., 124 Ill.
App.3d 676, 465 N.E. 500 (Ill. App. 1 Dist. 1984).  Finally, from
the record as abstracted, the jury was not asked to return a
finding as to whether Pearson and Tennant were negligent in the
foreclosure action.  Without more, the Schmidts cannot claim on
appeal that the attorneys' acts in one cause of action were the
proximate cause of their loss in a different cause of action.
     Third, the Schmidts maintain Pearson was negligent in not
dissolving Acro pursuant to Ark. Code Ann.  4-26-1101 -1109 (Repl.
1991), thereby preserving Acro's only asset of any value, namely,
its lender-liability action against the Bank.  For support, the
Schmidts point to the statements of their legal expert, Richard
Downing, who testified that a reasonable attorney would have paid
Acro's back franchise taxes and filed a certificate of dissolution,
thus allowing Acro to wind down its affairs and pursue its suit
against the Bank in its corporate name.  Then, Downing testified,
the reasonable attorney would have amended the complaint to include
the Schmidts as guarantors.  
     But Pearson contends dissolving Acro would have resulted in
the very thing the Schmidts did not want, that is the appointment
of a receiver, thereby depriving the Schmidts of their assets. 
Pearson cites Downing's testimony acknowledging that dissolution
would have allowed Acro's creditors to force the Schmidts into a
receivership.  Additionally, Pearson points out the Schmidts
voluntarily withdrew from Chapter 11 bankruptcy because of the
threat of receivership, and Paul G. Schmidt testified that a
receivership was not an option.  Finally, Pearson contends the
issue of whether to dissolve Acro was a question of professional
judgment made after discussing the issue with his clients, and
after considering the consequences and whether such action would
serve the best interest of his clients.  
     An attorney is not liable to a client when acting in good
faith, he makes mere errors of judgment.  Cianbro Corporation v.
Jeffcoat & Martin, 804 F. Supp. 784 (D.S.C. 1992); Martinson
Manufacturing Co., Inc. v. Seery, 351 N.W.2d 772 (Iowa 1984);
Spivack, Shulman & Goldman, 124 Ill. App.3d 676, 465 N.E.2d 500 (1
Dist. 1984); George v. Caton, 93 N.M. 370, 600 P.2d 822 (1979);
Herston v. Whitesell, 348 So. 2d 1054 (Ala. 1977); Talbot v.
Schroeder, 13 Ariz. App. 230, 475 P.2d 520 (1970); Meagher v.
Kavli, 97 N.W.2d 370 (Minn. 1959).  In the present case, the
evidence showed Pearson used his best judgment in not dissolving
Acro, which might then be forced into receivership and liquidation. 
See  4-26-1103(2) and (3).  
     Fourth, the Schmidts contend Pearson and Tennant should have
amended the lender-liability complaint to include the Schmidts as
guarantors of Acro's debts.  The Schmidts note the Bank apprised
Pearson and Tennant of this deficiency in the Bank's second motion
for summary judgment, yet Pearson and Tennant failed to respond
properly.  See Schmidt v. McIlroy Bank & Trust, 306 Ark. 28, 811 S.W.2d 281 (1991).  The Schmidts point to the testimony of their
legal expert who testified Pearson and Tennant were negligent in
waiting until the hearing on the summary judgment motion to request
an amendment to the complaint.  Pearson and Tennant countered with
testimony from their own legal expert.
     As a matter of law, attorneys are not liable for mistaken
opinion on a point of law that has not been settled by a court of
highest jurisdiction, and on which reasonable attorneys may differ. 
Cianbro Corp. v. Jeffcoat & Martin, 804 F. Supp. 784 (D.S.C. 1992);
Martinson Manufacturing Co., Inc. v. Seery, 351 N.W.2d 772 (Iowa
1984); Brown v. Gitlin, 19 Ill. App.3d 1018, 313 N.E.2d 180 (1974);
Martin v. Burns, 102 Ariz. 341, 429 P.2d 660 (1967); Meagher v.
Kavli, 97 N.W. 370 (Minn. 1959).  As Pearson and Tennant point out,
the disagreement between their legal expert and the Schmidts' was
sufficient evidence that, as a matter of law, Pearson and Tennant
were not negligent in failing to amend the Schmidts' complaint
before the summary-judgment hearing.  Further, they note this
court's split decision in Schmidt reflects that the issue was
unsettled and reasonably subject to differing opinions among the
experts.  Accordingly, we conclude that the trial court here was
within its authority to determine, as a matter of law, that Pearson
and Tennant were not negligent in failing to amend the complaint
before the summary judgment hearing since whether Pearson and
Tennant should have filed an amendment in these circumstances
involved an unsettled legal issue over which experts could
reasonably disagree.  
     Finally, the Schmidts contend it was negligent of Pearson and
Tennant to request $1000 to appeal the foreclosure action when they
had $4000 of the Schmidts' money remaining in the attorneys' trust
accounts.  Further, the Schmidts contend Pearson and Tennant were
negligent in failing to appeal the foreclosure decree or,
alternatively, return the $1000 to them.  But as Pearson and
Tennant point out, the issue of the $1000 is a contract issue and
not one sounding in tort.  Pearson also notes even if they had
appealed the foreclosure decree, no evidence was presented at trial
that the Schmidts would have prevailed and obtained reversal of the
decree.  Ultimately, the issue of the $1000 and appeal of the
foreclosure decree is not a proximate cause of the Schmidts'
failure to prevail in their lender-liability action.
     We hold the trial court was correct in finding no substantial
evidence to support the verdict against Pearson and Tennant for
legal malpractice.  None of the issues presented by the Schmidts
was the proximate cause of the loss of their lender-liability claim
against the Bank.  Therefore, attorneys Pearson and Tennant were
entitled to judgment notwithstanding the verdict as a matter of
law.  Because of our holding, it is unnecessary to discuss the
trial court's alternative grant of a new trial based on questions
of procedural irregularities.  We affirm.
     Jesson, C.J., Dudley and Newbern, JJ., not participating. 
Special Chief Justice Carolyn B. Witherspoon joins this opinion. 
Special Justices Hani W. Hashem and John Harris Jones concur.

       Hani W. Hashem, Special Associate Justice, concurs
     I concur with the result reached by the majority.  However, I
write this separate opinion to bring attention to an earlier error
of this court.  Here, the most troubling allegation made by
appellants relates to their prior lender-liability claim.  See
Schmidt v. McIlroy Bank & Trust, 306 Ark. 28, 811 S.W.2d 281
(1991).  Appellants contend that the appellees, acting as their
attorneys, failed to amend their complaint in the lender-liability
case to allege a separate cause of action on behalf of the Schmidts
as guarantors of the notes of Acro Corporation.   
     In Schmidt v. McIlroy Bank, the appellees herein represented
appellants in a lender-liability action against McIlroy Bank.  In
their complaint appellees alleged damages on behalf of Acro
Corporation and damages for the Schmidts as stockholders, but did
not ask relief for the Schmidts as guarantors of the notes owed by
Acro Corporation.  The trial court granted summary judgment against
Acro Corporation on the ground that its charter had been revoked
for failure to pay franchise taxes.  McIlroy Bank filed a
subsequent motion for summary judgment against the Schmidts
individually.  In their response to the second motion for summary
judgment the appellee attorneys stated, "The plaintiffs should be
allowed to amend their complaint to permit the real parties to
prosecute the action."  At the hearing on the second motion for
summary judgment, the appellee attorneys sought to amend their
complaint. "We ask the court to allow the plaintiffs to amend the
complaint for the sole purpose to include the individuals as
guarantors and state a cause of action that would not leave any
question . . ."  The trial court recognized the appellee attorneys'
request to amend the complaint, however, the trial court stated
that it would deny the oral motion to amend the complaint as being
untimely.  The trial court then granted summary judgment against
the Schmidts.  This court affirmed the decision of the trial court
in Schmidt v. McIlroy Bank & Trust, 306 Ark. 28, 811 S.W.2d 281
(1991).
     In the current appeal, the appellants contend that their
attorneys were negligent in the lender-liability action in
requesting permission to amend their complaint to state a separate
cause of action for the Schmidts as guarantors, as opposed to
simply going forward and filing an amended complaint.  ARCP 15(a)
allows a party to amend its pleadings at any time without
permission of the court.  The corresponding federal rule requires
leave of the court before an amended complaint can be filed under
similar circumstances.  See FRCP 15.  The point that is most
troubling to me, irrespective of this technical distinction, is
that the trial court, in ruling on the motion for summary judgment,
recognized that the appellee attorneys had requested permission to
amend their complaint, yet denied the oral motion to do so.  The
supreme court affirmed, holding that the oral motion to amend the
complaint was unnecessary and the trial court ruling was invited
error.  See Schmidt v. McIlroy Bank & Trust.  The dissent by
Justice Brown in Schmidt v. McIlroy Bank & Trust states with
greater eloquence than I am able to muster the problems attendant
in following this strict interpretation of ARCP 15 regarding
amendment of pleadings.  The decision in Schmidt v. McIlroy Bank &
Trust is bad law.  This court should take its earliest opportunity
to reverse that decision, and adopt the position of Justice Brown's
dissent in that case.
     In spite of the fact that the appellee attorneys could have
simply filed an amended complaint in the lender-liability action,
without asking permission of the court, I do not find this
sufficient basis to support a finding of legal malpractice. 
Schmidt v. McIlroy Bank & Trust was a case of first impression,
with two justices of the supreme court, including the chief
justice, dissenting.  As stated earlier in the majority opinion, an
attorney is not liable for a mistaken opinion on a point of law
that has not been settled by the court of highest jurisdiction, and
on which reasonable attorneys may differ.  Here, not only was the
issue regarding a request to amend the complaint under ARCP 15 not
a settled issue in this jurisdiction, even the supreme court
justices, the ultimate legal experts in this jurisdiction, were
unable to agree upon the final resolution of this issue.  If two
supreme court justices disagree as to the outcome of a particular
issue, it seems implausible to hold a practicing attorney to a
higher standard.


     John Harris Jones, Special Associate Justice, concurs.
     Jury verdicts in favor of appellants for approximately $4.86
million were set aside by the trial judge and judgment
notwithstanding the verdicts rendered in favor of appellees,
dismissing the appellants' claims for malpractice for lack of
substantial evidence.  
     The claims against appellee attorneys Pearson and Tennant
arose out of a lender-liability action on behalf of appellants
against McIlroy Bank & Trust.  In February 1986, McIlroy, under new
ownership, terminated its lending relationship with appellants
which had extended over the preceding ten years and in March 1986
sued to foreclose on its collateral.
     Appellants filed for Chapter 11 bankruptcy and in August 1986
filed a lender-liability suit against McIlroy in the bankruptcy
court.  The following month appellants dismissed without prejudice
their lender-liability claim.  Appellants withdrew from bankruptcy
in September 1988. 
     October 30, 1987, lender-liability suit was filed in
Washington County Circuit Court for appellants against McIlroy.  On
January 9, 1987, the charter of Acro Corporation was revoked for
nonpayment of its franchise tax.
     Appellees were brought into the lender-liability action as
attorneys for appellants in January 1988.  At that time Acro's
charter had been revoked, and the second suit on the lender-
liability claims had been filed.
     In the present action by Acro and its only stockholders, the
individual appellants, filed August 3, 1990, the burden was upon
the appellants to prove that if their attorneys, Pearson and
Tennant, had not been negligent they would have recovered against
McIlroy Bank and that the negligence of their attorneys prevented
such recovery.  In effect, appellants had to prove two cases:  one
against McIlroy Bank, the other against their former attorneys. 
Callahan v. Clark, 321 Ark. 376, 901 S.W.2d 842 (1995).
     A careful review of the extensive record reflects substantial
evidence from which the jury could find that if such evidence had
been presented in their suit against McIlroy Bank, a verdict
against the bank would have been justified.  Such evidence
presented a jury issue from which a jury could find either for the
bank or for appellants.
     On the second issue, whether appellees failed to apply the
degree of skill and learning ordinarily possessed and used by
attorneys in good standing in the locality and that such failure
was a proximate cause of appellants' damages, appellants' proof was
not substantial. 
     Appellants' expert was critical of some actions and failure to
act by appellees.  Only one of such decisions could have caused or
contributed to appellants' loss of their claim against the bank. 
That claim was lost because, as the witness was aware, "the
corporation has to have its franchise tax current at the time it
brings this lawsuit." 
     At the time appellees assumed responsibility for representing
appellants in the lender-liability case, Acro's charter had been
revoked.  In June 1989, McIlroy Bank filed a motion for summary
judgment against Acro, citing Acro's lack of status to sue because
its charter had been revoked.  Appellees could not dismiss,
reinstate the charter, and refile the claim.  The one such nonsuit
allowed by Ark. Code Ann.  16-56-126 (1987) had been used after
the nonsuit in the bankruptcy court action against McIlroy.
     Appellees were in the position of trying to salvage the
lender-liability claim.  The trial court granted summary judgment
dismissing Acro's claim against McIlroy and later granted a second
motion for summary judgment dismissing the individual appellants'
claim against McIlroy.  The circuit court's decision was affirmed,
Schmidt v. McIlroy Bank & Trust, 306 Ark. 28, 811 S.W.2d 281
(1991).
     Tennant and Pearson on behalf of the Schmidts had urged that
since officers and stockholders are subjected to individual
liability as partners for actions in the name of the corporation
during any period of corporate franchise revocation, as partners
doing business in the name of the corporation they should have the
right to assert corporate claims.  This court held that the
Schmidts "had no standing as shareholders to sue for injuries to
the corporation."  Id.
     Appellants' expert witness testified that the appellees when
confronted with the motion for summary judgment should have paid
the franchise tax and dissolved the Acro Corporation.  Such
procedure had been suggested in McIlroy's motion for summary
judgment.  Appellees considered that possibility.
     Among cases cited by this court in affirming the summary
judgment against Acro was Sulphur Springs Recreational Park v. City
of Camden, 247 Ark. 713, 715-716, 447 S.W.2d 844, 845 (1969), which
held:
          Appellant did not have corporate status at the time
     the suit was filed.  Not being in existence it possessed
     no capacity to sue.  The subsequent reinstatement did not
     vest it with continuing existence from date of origin. 
     Moore v. Rommel, 233 Ark. 989, 350 S.W.2d 190 (1961). 
     The restoration of corporate status before trial creates
     no right to prosecute the initial complaint.  Clark
     Estate Co. v. Gentry, 362 Ark. 80, 240 S.W.2d 124 (1951).
     Had dissolution been undertaken with payment of the past due
franchise taxes the fact would have remained that at the time the
suit was filed for lender-liability Acro had lost its corporate
status.  Appellants' expert witness in charging appellees with
negligence in failing to reinstate and dissolve Acro did not
explain (nor can I) how Acro's nonexistence when suit was filed
could be overcome by its dissolution.
     Even though appellees' argument to treat the shareholders as
partners was rejected by this court it must be remembered that
appellees made a good-faith and skillful effort to salvage a claim
submerged before they were ever made responsible for its survival
and prosecution.
     For the appellees at the time the motion for summary judgment
as to Acro was filed it could well have appeared that the rule
quoted from Sulphur Springs Recreational Park could not be avoided
while the possibility that the shareholders could be treated as
partners for purposes of pursuing the corporate claim had not been
refuted in the case law.
     The rule that an attorney is not liable for an error of
     judgment on an unsettled proposition of law is
     universally recognized and is developed concurrently with
     the concept of liability for legal malpractice.  
Mellon and Smith, Legal Malpractice, sec. 14.1, I at 812-813 (3d
ed., 1989).
     The Supreme Court of Iowa in its 1984 decision of Martinson v.
Seery, 351 N.W.2d 772, 775, stated:
     An attorney is not liable . . . for a mistake in opinion
     on a point of law that has not been settled by a court of
     last resort and on which reasonable doubt may well be
     entertained by informed lawyers. 
          Appellate courts generally have supported trial
     courts that, upon the required degree of proof, have
     applied the above principle in ruling the attorney free
     from liability as a matter of law.  (Citations omitted.)
     In this case, the record supports the circuit judge in setting
aside the verdicts because of lack of substantial evidence of legal
malpractice.
     Over objection, appellants' expert was permitted to testify at
length about expenditures from the $10,000 retainer paid by
appellants, and despite the lack of evidence that the appellees
failed to pay any appropriate expenses from that fund, testified
that expenditures from the fund were not within a reasonable
standard of care.  Expenditures from the retainer did not
materially affect the problem of dismissal of Acro's action or of
the claims of its stockholders against McIlroy.  Such testimony was
highly prejudicial against appellees as the trial judge found in
his order setting aside the verdicts.
     From the record, it is apparent that appellants have been
represented zealously and competently by their former attorneys as
well as by their attorney in this action.  By an odd concurrence of
circumstances, failure to pay the franchise tax and the earlier
nonsuit on their claims, appellants were cut off from their claims
against the bank.  However, appellees neither caused nor
contributed to such unfortunate result.
     Loss of their right to pursue the claim against the bank is an
extreme penalty for failure to pay the corporate franchise tax
taking into consideration that a monetary penalty is added to the
delinquent taxes to regain reinstatement to corporate status.
     The reinstatement statute before the court in the 1961
decision of Moore v. Rommel, 233 Ark. 989, 350 S.W.2d 190 (1961),
provided that the delinquent corporation "may be reinstated to all
its rights, powers and property" upon payment of back taxes and
penalty, and "Thereafter, such corporation shall stand in all
respects as though its name had never been included in" the
forfeiture proclamation.  This court interpreted the statute to
mean that corporate status was restored at the time of payment of
the taxes and penalty but not retroactive to the time it became
delinquent.
     Sulphur Springs Recreational Park v. City of Camden, 247 Ark.
710, 447 S.W.2d 844 (1970), held that corporate status must exist
at the time the suit is filed.  The General Assembly has amended or
rewritten the reinstatement statute three times since 1970 without
any indication of overruling Moore or Sulphur Springs.  The
relevant portion of the statute, now Ark. Code Ann.  26-54-112
(Supp. 1995), concludes with language almost identical to that in
Moore, "Thereafter, the corporation shall stand in all respects as
though its name had never been declared forfeited."
     If the Arkansas laws on forfeiture and reinstatement of
corporate status unjustly deprive shareholders of their day in
court, the solution lies with the General Assembly, not in placing
the blame for the loss on the shareholders' attorneys.
     For the above reasons, I believe the judgment of the circuit
court in granting judgment notwithstanding the verdicts should be 
affirmed.

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