Clark v. Rideway

Mary CLARK v. Robert D. RIDGEWAY, Jr.

95-695                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered February 12, 1996


1.   Civil procedure -- when A.R.C.P.Rule 12(b) motion treated as
     one for summary judgment -- matters considered in summary
     judgment proceedings. -- When matters outside the pleadings
     are presented and not excluded by the trial court in
     connection with an A.R.C.P. Rule 12(b) motion, the motion is
     treated as one for summary judgment under Rule 56 of the
     Arkansas Rules of Civil Procedure; matters which will be
     considered in summary judgment proceedings are limited to
     affidavits, depositions, admissions, and answers to
     interrogatories. 

2.   Civil procedure -- affidavits were presumably considered by
     the trial court -- dismissal order treated as one for summary
     judgment. -- Because the two affidavits by appellant were not
     excluded by the trial court and were presumably considered by
     the court, the dismissal order was treated as one for summary
     judgment; the supreme court refused to consider the exhibits
     attached to the appellee's brief as evidence.
  

3.   Attorney & client -- asserted contract did not relate to
     attorney's performance of professional services for appellant
     -- privity of contract was lacking. -- The immunity granted by
     Ark. Code Ann.  16-22-310(a) (Repl. 1994) clearly refers to
     contracts for professional services performed by the attorney
     for the client; here, the asserted contract did not relate to
     appellee's performance of professional services rendered to
     appellant, rather, the alleged breach appeared to relate to
     appellee's representation of appellant's ex-husband in matters
     concerning the divorce, which he agreed not to do; the alleged
     contract did not involve appellee's legal representation of
     appellant; privity of contract was lacking, though the
     appellee could still be liable under the statute for
     intentional misrepresentations and fraud.


4.   Fraud -- promise cannot be made false by subsequent events and
     still be considered intentional fraud unless party making the
     promise knew it would not be kept at the time the promise was
     made. -- A promise or averment cannot be made false by
     subsequent events and still fall under the umbrella of
     intentional fraud unless the party making the promise knew it
     would not be kept at the time of the promise. 

5.   Fraud -- no factual basis found for the conclusory allegation
     that appellee intentionally misrepresented his neutrality in
     the divorce case -- court's finding that appellee was immune
     from appellant's complaint was correct. -- Where neither
     lawsuit could have been foreseen with any degree of certainty
     when the 1989 affidavit was made by appellee in that both
     developed from circumstances arising after the divorce decree,
     the appellate court found no factual basis for the conclusory
     allegation in appellant's amended complaint that appellee
     intentionally misrepresented his statement of neutrality in
     the divorce case on August 11, 1989; thus, no genuine issue of
     material fact had been presented on the immunity question with
     respect to negligence and fraud and the trial court's finding
     and conclusion that appellee was immune from appellant's
     complaint under  16-22-310 was correct.

6.   Statutes -- statute did not usurp court's authority to
     regulate the practice of law -- arguments meritless. -- 
     Arkansas Code Annotated  16-22-310 does not usurp the court's
     authority to regulate the practice of law; the statute
     enunciates the parameters for litigation by clients against
     attorneys and does not conflict with any rule or decision by
     the supreme court; the arguments of legislative usurpation and
     violation of the separation of powers were meritless.

7.   Contracts -- existence for the trier of fact to determine --
     where a fact question is raised the issue then becomes whether
     the cause of action is precluded by prior litigation where
     breach of contract could have been raised. -- Whether a
     contract exists or not is for the trier of fact to determine;
     where the allegations and affidavits were sufficient to raise
     a fact question as to whether a contract was made, the issue
     then became whether the cause of action was precluded by prior
     litigation where breach of contract could have been raised.  

8.   Appeal & error -- appellant entitled to have her claim heard -
     - trial court's order as it pertained to appellant's breach of
     contract complaint reversed and remanded. -- Where it did not
     appear that a decision on appellant's allegation of breach of
     contract had been made, appellant was entitled to have the
     claim heard; the trial court's order was reversed, solely as
     it pertained to appellant's complaint of breach of contract,
     and remanded for trial.

9.   Attorney & client -- allegation of purposeful concealment of
     affidavit meritless -- appellant presumably had a copy of the
     affidavit. -- Appellant's allegation that appellee
     purposefully failed to disclose his 1989 affidavit to the
     chancellors who denied his disqualification as counsel was
     without merit where appellant presumably had a copy of the
     affidavit, as it was part of her divorce proceedings.

10.  Negligence -- issue of proximate causation for damages not
     relevant where appellee found to be immune from negligence
     claim -- appellant's point without merit. -- The appellant's
     question as to whether sufficient facts supported proximately
     caused damages was no longer relevant; proximate causation is
     an essential element for a cause of action in negligence and
     appellee was determined to be immune from a negligence claim
     due to lack of privity; the only viable claim was breach of
     contract, and proximate causation is not an essential element
     to a finding of damages due to contractual breach.

11.  Attorney & client -- appellant's allegations of breach of
     fiduciary duty and conflict of interest without merit --
     appellee had no duty to appellant based on legal
     representation. -- Appellant's assertion of breach of
     fiduciary duty and conflict of interest on appellee's part was
     without merit; there was no duty flowing to appellant from
     appellee based on legal representation; this claim had no
     merit, and the trial court's order on this point was affirmed.
     

     Appeal from Garland Circuit Court; Walter G. Wright, Judge;
affirmed in part; reversed in part.
     Timothy O. Dudley and Sloan, Rubens & Peeples, by:  Kent J.
Rubens , for appellant.
     D. Scott Hickam, for appellee.

     Robert L. Brown, JusticeAssociate Justice Robert L. Brown
February 12, 1996 *ADVREP8*






MARY CLARK,
                    APPELLANT,

V.

ROBERT D. RIDGEWAY, JR.,
                     APPELLEE,

95-695




APPEAL FROM THE GARLAND COUNTY
CIRCUIT COURT,
NO. CIV 94-310,
HON. WALTER G. WRIGHT, JUDGE,




AFFIRMED IN PART; REVERSED IN
PART AND REMANDED.






     On May 23, 1994, appellant Mary Clark sued appellee Robert
Ridgeway Jr. for legal malpractice premised on a conflict of
interest and breach of fiduciary duty.  Ridgeway moved to dismiss
the complaint on several grounds, including the lawyer immunity
statute, Ark. Code Ann.  16-22-310 (Repl. 1994).  He further moved
for Rule 11 sanctions and attorney fees under Ark. Code Ann.  16-
22-309 (Repl. 1994).  Clark then amended her complaint to include
allegations of professional negligence, breach of contract, and
fraud.  The precise allegations read:
          12. In August of 1989, Plaintiff and Defendant
     entered into a contract.  Under the terms of the
     contract, Plaintiff agreed not to object to the
     appointment of Defendant as a Master in Plaintiff's
     divorce proceedings.  In return, the Defendant agreed
     that he would not represent either party to the action in
     the divorce case.  The terms of the contract are set
     forth in Defendant's affidavit, which is attached hereto
     as Exhibit "A".
                              ....
          15. Defendant represented to the Plaintiff that he
     would not represent either Plaintiff or her husband in
     the divorce proceedings if Plaintiff did not object to
     his appointment as Master in the divorce proceedings. 
     Plaintiff conditioned her approval of Defendant's
     appointment as Master upon Defendant's execution of an
     affidavit stating that he would not represent either
     party in the divorce proceedings.  That affidavit is
     attached as Exhibit "A".  As set forth above, Defendant
     later represented Plaintiff's ex-husband in child custody
     matters and other matters in the divorce proceedings. 
     Plaintiff relied upon Defendant's representation to her
     detriment and has sustained damages as a proximate result
     of her detrimental reliance upon Defendant's material
     representations.  Defendant knew or should have known
     that his representations were false when made.
Exhibit A to the complaint is an affidavit by Ridgeway which was
executed on August 11, 1989, and was part of the divorce action
between Mary Clark and Harvey Clark in Garland County Chancery
Court.  The affidavit reads in pertinent part:
          1. I am Robert D. Ridgeway, Jr., an attorney
     licensed and practicing in Garland County, Arkansas, and
     I have acted as the attorney for Clark Industries, Inc.,
     since its incorporation in 1985.  I have advised both
     parties to this divorce that it would be improper for me
     to do anything but remain neutral in this case, and that
     it is my desire to continue to act as attorney for the
     company.
          2. During the time in which I have acted as attorney
     for the corporation, I have had numerous conversations
     concerning corporate activities with both Harvey Clark
     and Mary Clark, some of these conversations occurring in
     person and some of them by telephone.
          3. Although most of my communications have been with
     Mary Clark concerning corporate business, it has always
     been my impression from my discussions with them that
     they were both directly involved in the day to day
     management of the business.  I say this from
     conversations with both of them, in which they mentioned
     the other at work and involved at the business, and from
     my telephone calls to the business asking for either of
     them, and they would both would (sic) be on the job site.
          4. From my knowledge of the corporation and the
     corporation's business, as mentioned above, it would
     appear to me that Mrs. Clark is every bit as involved in
     the day to day management of the business as is Mr.
     Clark.
A second motion to dismiss the amended complaint was filed by
Ridgeway, and that motion reasserted the grounds previously made.
     The trial court granted the motion to dismiss.  In doing so,
it found:
                               I.
          This Court has jurisdiction over the parties and the
     subject matter of this case.
                               II.
          The Defendant is immune from the Plaintiff's cause
     of action pursuant to Arkansas Code Annotated  16-22-
     310.
                              III.
          The Defendant, a licensed attorney, cannot be held
     civilly liable for conduct carried out in reliance on a
     Court Order.
                               IV.
          The Plaintiff's action seeks to re-litigate an issue
     which has already been decided three (3) times in the
     Courts, and twice before the committee on Professional
     Conduct.  As such, the Plaintiff's actions are barred by
     the Doctrines of Res Judicata and Collateral Estoppel.
                               V.
          The Plaintiff has failed to allege sufficient facts
     to establish any proximate causation or any other
     connection between the alleged behavior of the Defendant,
     and any alleged damages suffered by the Plaintiff.

                               VI.
          The Plaintiff has failed to state facts upon which
     relief can be granted.
                              VII.
          There are no justiciable issues of law or fact.
Clark contends that the dismissal was error.
     A history of this case is necessary to establish the context
in which this litigation arose.  Ridgeway had apparently performed
some legal services for Mary Clark, Harvey Clark (her husband), and
the family business, Clark Industries, Inc., during the time frame
of 1985 to 1989.  In 1990, Mary Clark and Harvey Clark were
divorced, with the Property Settlement and Child Custody Agreement
being filed on January 25, 1990.  As part of the divorce
proceedings, Ridgeway executed the quoted affidavit on August 11,
1989, and during the divorce proceedings, he was appointed Master
of Clark Industries.
     In August 1990, after the divorce decree was entered, Ridgeway
represented Harvey Clark and Clark Industries in foreclosure
litigation brought by One National Bank against the two clients and
Mary Clark.  A motion to disqualify Ridgeway as counsel was filed
by Mary Clark, and the chancellor denied it.
     In 1991, Ridgeway next represented Harvey Clark in a change of
custody proceeding involving Clark's children which was resolved. 
In 1993, the question of whether Clark had complied with a court
order concerning therapy sessions was raised by Ridgeway on behalf
of Harvey Clark.  In 1993, Clark filed suit against Ridgeway and
her divorce attorney, but she later dismissed Ridgeway from the
suit without prejudice.
     In her appeal in the instant case, Clark contests the findings
and conclusions by the trial court in its order: (1) that Ridgeway
was immune from civil liability, (2) that he justifiably acted in
reliance on a court order, (3) that the suit is barred by issue or
claim preclusion, (4) that Clark failed to establish proximate
causation, and (5) that there are no justiciable issues of fact. 
We note initially that some of Ridgeway's defenses are affirmative
defenses (res judicata and collateral estoppel), which are more
typically raised by answer and not by a motion to dismiss.  Clark
does not object to the procedure followed by Ridgeway, however; nor
does she contend that she was prejudiced by the process.  We have
permitted affirmative defenses to be raised by a motion to dismiss
in the past.  See Amos v. Amos, 282 Ark. 532, 669 S.W.2d 200 (1984)
(res judicata); see also Davenport v. Pack, 35 Ark. App. 40, 812 S.W.2d 487 (1991) (laches and limitations).  We will consider the
defenses in the case at hand.

                       I. Summary Judgment
     We first address whether the order of dismissal was in reality
one for summary judgment.  In her amended complaint, Clark attached
the 1989 affidavit of Ridgeway as an exhibit.  Also, in her
response to Ridgeway's motion to dismiss, she attached her own
affidavit in which she swore to the facts which led to her
"contract" with Ridgeway and the facts that she contends
constituted a breach.  She attached Ridgeway's 1989 affidavit as a
second exhibit to her response.
     When matters outside the pleadings are presented and not
excluded by the trial court in connection with a Rule 12(b) motion,
we treat the motion as one for summary judgment under Rule 56 of
the Arkansas Rules of Civil Procedure.  Ark. R. Civ. P. 12(b) and
(c); see Carter v. F.W. Woolworth Co., 287 Ark. 39, 696 S.W.2d 318
(1985); see also Godwin v. Churchman, 305 Ark. 520, 810 S.W.2d 34
(1991).  The matters which will be considered in summary judgment
proceedings are limited to affidavits, depositions, admissions, and
answers to interrogatories.  Ark. R. Civ. P. 56(c).  Because the
two affidavits by Clark were not excluded by the trial court and
presumably considered by the court, we will treat the dismissal
order as one for summary judgment.  We emphasize, however, that we
will not consider the exhibits attached to Ridgeway's brief in
support of his motion to dismiss in our consideration of the
propriety of summary judgment, as we have specifically held that to
do so would be incorrect.  See Godwin v. Churchman, supra; Eldridge
v. Board of Correction, 298 Ark. 467, 768 S.W.2d 534 (1989); Carter
v. F.W. Woolworth Co., supra; Guthrie v. Tyson Foods, Inc., 285
Ark. 95, 685 S.W.2d 164 (1985).

                    II. Negligence and Fraud
     Mary Clark's first contention in this appeal is that the trial
judge erroneously dismissed the case on the basis of the immunity
statute for certain lawyers ( 16-22-310(a)).  According to Clark,
that statute is inapplicable to this case because privity of
contract existed between Ridgeway and her.  The privity of contract
asserted was based on an oral agreement that Ridgeway could serve
as Master for Clark Industries, if he represented neither party in
the divorce action.  Clark attached Ridgeway's affidavit, which she
contends memorializes the contract, and her own affidavit to
support her contention.
     The apposite statute relating to privity of contract and
lawyer immunity reads:
          (a) No person licensed to practice law in Arkansas
     and no partnership or corporation of Arkansas licensed
     attorneys or any of its employees, partners, members,
     officers, or shareholders shall be liable to persons not
     in privity of contract with the person, partnership, or
     corporation for civil damages resulting from acts,
     omissions, decisions, or other conduct in connection with
     professional services performed by the person ....
Ark. Code Ann.  16-22-310(a) (Repl. 1994).  The language of this
section is precise and clear and reveals that the contract
contemplated by the statute relates to a contract for professional
services performed by the attorney for the client.  Here, taking
the affidavits submitted at face value and the allegations of a
contract to be true, the asserted contract did not relate to
Ridgeway's performance of professional services rendered to Mary
Clark.  Rather, the alleged breach appears to relate to Ridgeway's
representation of Harvey Clark in matters concerning the divorce,
which he agreed not to do.  We admit to having some doubt about
whether the 1989 affidavit bound Ridgeway not to represent Harvey
Clark after the divorce decree, but even assuming it did, the
alleged contract still does not involve Ridgeway's legal
representation of Mary Clark.
     If privity of contract is held to be lacking, Clark asserts
that  16-22-310(a)(1) still provides for a cause of action against
attorneys for intentional misrepresentations or fraud.  That is
true.  To establish fraud, the following elements must exist:
          (1) a false representation, usually of a material
     fact;
          (2) knowledge or belief by the defendant that the
     representation is false;
          (3) intent to induce reliance on the part of the
     plaintiff;
          (4) justifiable reliance by the plaintiff; and
          (5) resulting damage to the plaintiff.
Wiseman v. Batchelor, 315 Ark. 85, 864 S.W.2d 248 (1993).
     Clark alleges in her complaint that Ridgeway knew or should
have known that his representations were false "when made."  She
then goes forward and asserts that Ridgeway "later" served as legal
counsel for Harvey Clark in child custody matters which were part
of the divorce proceedings.  This legal work occurred after the
divorce decree as witnessed by Mary Clark's affidavit attached to
her response to motion to dismiss:
          After the divorce, Mr. Ridgeway represented my ex-
     husband, Harvey Clark, in a custody fight between me and
     Mr. Clark and also represented Mr. Clark in a court case
     in which the terms of the settlement agreement reached in
     the divorce were at issue.
     It is clear to us that a promise or averment cannot be made
false by subsequent events and still fall under the umbrella of
intentional fraud unless the party making the promise knew it would
not be kept at the time of the promise.  See Anthony v. First
National Bank of Magnolia, 244 Ark. 1015, 431 S.W.2d 267 (1968);
Undem v. First National Bank, 46 Ark. App. 158, 879 S.W.2d 451
(1994).  In the Undem case, the Court of Appeals considered an
appeal from summary judgment entered in favor of First National
Bank of Springdale.  An affidavit of the appellant averred that an
agent of First National Bank had advised him that he would be
relieved of liability on a promissory note he made to the bank when
he went off the board of a second bank.  He went off the board of
the second bank but was then sued by First National Bank on the
promissory note.  He alleged fraud by the bank's agent but the
trial court entered summary judgment against him, apparently on the
basis that representations relating to future events cannot afford
a basis for actionable fraud.  The Court of Appeals reversed and
held that a genuine issue of material fact existed on fraudulent
inducement.
     The instant case is different from Undem v. First National
Bank, supra.  Here, Clark points to Ridgeway's legal representation
of Harvey Clark after the divorce decree in the foreclosure action
and the change-of-custody battle.  Unlike the liability on the
promissory note in the Undem case, neither lawsuit could have been
foreseen with any degree of certainty when the 1989 affidavit was
made by Ridgeway.  Both developed from circumstances arising after
the divorce decree.  We find no factual basis for the conclusory
allegation in Clark's amended complaint that Ridgeway intentionally
misrepresented his statement of neutrality in the divorce case on
August 11, 1989.  See Evans Indus. Coatings, Inc. v. Chancery
Court, Union County, 315 Ark. 728, 870 S.W.2d 701 (1994).  Thus, we
conclude that no genuine issue of material fact has been presented
on the immunity question with respect to negligence and fraud and
that the court's finding and conclusion that Ridgeway was immune
from Clark's complaint under  16-22-310 was correct.
     Nor do we view  16-22-310 as usurping this court's authority
to regulate the practice of law.  See Ark. Const. amend. 28.  The
statute enunciates the parameters for litigation by clients against
attorneys and does not conflict with any rule or decision by this
court.  The arguments of legislative usurpation and violation of
the separation of powers are meritless.

                     III. Breach of Contract
     As quoted above, Clark alleged in her amended complaint that
a contract existed based on mutual promises between herself and
Ridgeway.  She further alleged that she was damaged by Ridgeway's
breach of contract due to loss of custody of her daughters and her
property valued at $250,000.  In her affidavit attached to her
response to the motion to dismiss, she had this to say about the
contract:
          3. After the divorce case between Harvey Clark and
     me was filed, Mr. Clark and I could not agree on who
     should run Clark Industries or how it should be run.  A
     suggestion was made that a Master be appointed to oversee
     Clark Industries during the pendency of the divorce.  Mr.
     Ridgeway was mentioned as a potential candidate for
     Master.  I talked with Mr. Ridgeway and asked his
     assurance that he would never represent either me or
     Harvey against the other if he was appointed Master.  Mr.
     Ridgeway promised me that he would not do so because it
     would not be fair to either party for him to do so since
     he had represented both parties in the past.  Defendant
     then executed an affidavit in which he stated that it
     would be improper for him to do anything but remain
     neutral in the divorce case.
     Whether a contract exists or not is for the trier of fact to
determine.  Tolson v. Dunn, 48 Ark. App. 219, 893 S.W.2d 354
(1995).  Here, the allegations and affidavits are sufficient to
raise a fact question as to whether a contract was made.  The issue
then becomes whether the cause of action is precluded by prior
litigation where breach of contract could have been raised.  See In
Matter of Estate of Goston v. Ford Motor Co., 320 Ark. 699, 898 S.W.2d 471 (1995).
     Though Ridgeway argues in his brief that his disqualification
as counsel has been resolved by at least two chancellors, it does
not appear that a decision on Clark's allegation of breach of
contract has been made.  Was there previous litigation where the
issue could have been raised and resolved?  We do not think so.  It
is true that Clark joined Ridgeway briefly as a party defendant to
her lawsuit against her divorce attorney in 1993, but she later
dismissed him without prejudice.  See Callahan v. Clark, 321 Ark.
376, 901 S.W.2d 842 (1995).  The complaint in the case before us
was then filed in 1994.  Clark is entitled to have this claim
heard.  Ridgeway asserts that Clark has already been compensated
for any damages due to the successful lawsuit against her divorce
attorney.  That may be, but we have insufficient information before
us to resolve that issue on summary judgment.  For these reasons,
we reverse the trial court's order solely as it pertains to Clark's
complaint of breach of contract and remand for trial.

                    IV. Miscellaneous Points
     Clark further urges that Ridgeway purposefully failed to
disclose his 1989 affidavit to the chancellors who denied his
disqualification as counsel.  Because Clark presumably had a copy
of the affidavit, as it was part of her divorce proceedings, we
give this point little credence.
     On another point, whether sufficient facts support proximately
caused damages is no longer relevant.  Proximate causation is an
essential element for a cause of action in negligence.  W. Page
Keeton et al., Prosser & Keeton on the Law of Torts,  41, at 263
(5th ed. 1984).  We have held in this opinion that Ridgeway is
immune from a negligence claim due to lack of privity.  The only
viable claim is breach of contract, and proximate causation is not
an essential element to a finding of damages due to contractual
breach.
     Finally, Clark asserts a breach of fiduciary duty and conflict
of interest on Ridgeway's part.  These claims appear to be closely
aligned to her claim of legal malpractice and fraud and arise out
of his representation of Harvey Clark after the divorce decree in
connection with the property of the marriage and custody matters. 
We perceive no duty flowing to Clark from Ridgeway based on legal
representation as already discussed.  This claim has no merit, and
we affirm the trial court's order on this point.
     Affirmed in part.  Reversed in part and remanded.
.