EQUITANIA INSURANCE COMPANY, ET AL. V. SLONE & GARRETT, P.S.C., ET AL.
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RENDERED : FEBRUARY 23, 2006
TO BE PUBLISHED
,Supratt$ Courf of ~[
2003-SC-1003-DG
EQUITANIA INSURANCE COMPANY
ROBERT B . CONGLETON, ROBERT P.
LEVY AND DONALD G . FRALEY
V
APPELLANTS
ON APPEAL FROM THE COURT OF APPEALS
2002-CA-1355-MR
FAYETTE CIRCUIT COURT CIVIL ACTION NO . 97-C1-604
SLONE & GARRETT, P.S.C. AND
LAUREL GARRETT
APPELLEES
OPINION OF THE COURT BY JUSTICE WINTERSHEIMER
REVERSING
This appeal is from an opinion of the Court of Appeals which affirmed a
judgment of the circuit court based on a summary judgment/jury verdict that rejected the
claim of the Equitania Insurance Company and its Vimont shareholder group for legal
malpractice against Garrett and her law firm.
The major issues are whether the proper standard for proving liability in a legal
malpractice case was followed and whether the instructions given by the trial judge to
the jury regarding specific factual issues violated the rule in favor of barebones jury
instructions . The other questions presented are whether collateral estoppel can be
applied to bar a third party from relitigating an issue already decided in a prior litigation ;
whether it was error to exclude expert opinions when the expert was timely disclosed,
his opinion was seasonably supplanted, he gave his deposition regarding all opinions
and the trial was postponed absent prejudice to the other party.
Two groups of shareholders, the Vimont group, composed of four of the
shareholders, and the Pavenstedt group, composed of a group of shareholders led by
Johann Pavenstedt began to vie for control of Equitania, an insurance company which
provided insurance for horse owners. After the Vimont group bought out the
Pavenstedt group, the company continued to decline in its efforts to return a profit.
Vimont eventually entered an agreement to sell the book of business to Markel
Insurance Company. That deal was closed in January 1995. In March of that year, the
Vimont group filed a civil action in circuit court, seeking to rescind the agreement
between them and the Pavenstedt group . That case was assigned to Fayette Circuit
Judge Gary Payne. A judgment was rendered against the Vimont group and it was
upheld by the Court of Appeals in an unpublished opinion .
Laurel Garrett and the law firm of Slone & Garrett represented the Vimont group
in its attempt to gain control of the company prior to Vimont buying the shares of
Pavenstedt. As a result of that representation, Vimont filed a civil action against Garrett
in circuit court in February of 1997, alleging legal malpractice by Garrett in connection
with her representation . That case was assigned to Fayette Circuit Judge John R.
Adams and it is the principal subject of this appeal . Judge Adams ruled against Vimont
and the Court of Appeals upheld that decision . This appeal followed .
This case is a complex legal malpractice claim brought by Vimont against Garrett
alleging that she negligently advised them during the midst of the shareholder dispute .
They claim that Garrett negligently failed to properly advise them as to how to retain
control of the corporation ; that the methods she advised violated the insurance code ;
violated a fiduciary duty to shareholders ; was unethical, and was substantially more
expensive. The circuit judge granted Garrett a partial summary judgment based on his
interpretation of the contract which was different from the interpretation made by the
circuit judge in the earlier civil case. The other portion of the claim was resolved in
favor of Garrett by a jury verdict . The Court of Appeals upheld the decision of the
circuit court, and this Court granted discretionary review .
I . Jury Instructions
Correct instructions are absolutely essential to an accurate jury verdict. The
fundamental function of instructions is to tell the jury what it must believe from the
evidence in order to resolve each dispositive factual issue in favor of the party who has
the burden of proof on that issue. See Webster v. Commonwealth , 508 S .W .2d 33 (Ky.
1974), cert. denied, Webster v. Kentucky, 419 U.S . 1070, 95 S .Ct. 657, 42 L.Ed.2d
666 (1974). The purpose of the rule is to secure the best possible trial rather than to
have unnecessary appellate procedures . See Tillman v. Heard , 302 S .W .2d 835 (Ky.
1957).
During this trial, at about 6 :10 pm on May 16, 2002, the trial record shows that
counsel for both sides approached for a bench conference . The trial judge explained to
counsel that instead of going through each instruction phrase by phrase with objections,
the court accepted the submitted versions and gave each party a copy of proposed
instructions . For the purposes of CR 51(3), the trial judge explained that the court
would consider inconsistencies between their submitted instructions and the court's jury
instructions as fully objected to. After having been given sufficient time to review the
court's proposed instructions, each side agreed with this process and ceded to the
instructions proposed by the court.
The Vimont group offered instructions which the judge declined to use and
prepared instructions of his own. Accordingly, their tendering of the instructions was a
sufficient objection .
We should note it is well recognized that the function of instructions is only to
state what the jury must believe from the evidence. There should not be an abundance
of detail but the jury instructions should provide only the "bare bones" of the question
for the jury. Hamby v. University of Kentucky Medical Center, 844 S .W.2d 431 (Ky.App.
1992). The bare bones may then be fleshed out by counsel during closing argument.
The jury instructions given by the trial court over the objection by Vimont were
not an accurate statement of the law regarding legal malpractice in Kentucky. Vimont
objected to the instructions and tendered instructions of their own which were not used .
The instructions given follow:
Instruction No. 2 : It was the duty of Defendant, Laurel Garrett, in
undertaking the legal representation of the plaintiffs, to possess
to an ordinary extent the technical knowledge commonly
possessed in her profession, to exercise that degree of care and
skill which an ordinary, reasonably competent lawyer would
exercise under the same or similar circumstances . Provided,
however, a lawyer cannot be held responsible for errors in
judgment or for advising a course of action even if that course of
action ultimately proves to be unsuccessful .
The given instructions were incorrect for several reasons . It was properly
preserved because there was an objection to Instruction No. 2 in the submitted
instructions .
Kentucky law does not provide for an exception for attorney liability for errors in
judgment. A case relied on by the Court of Appeals, Daugherty v. Runner, 581 S .W .2d
12 (Ky.App. 1978), stated that misjudgment of the law will generally not render a lawyer
liable . However, Daugherty , supra , did not state that a lawyer can never be held liable
for an error in judgment. The tendered instructions did not advise the jury that it had to
be an error of law which precluded liability, nor did it inform the jury that there are
circumstances in which misjudgment of the law could be a basis for liability . There can
be many circumstances in which lawyers can commit errors of judgment which deviate
from the standard of care . Whether an error of judgment is legal malpractice is a
question of fact for the jury.
Vimont offered an expert, Manning Warren, to evaluate the methods undertaken
by Garrett to assist the company in its shareholders dispute . Specifically, Warren
testified that Garrett should have pursued an administrative process with the
Department of Insurance to join the Vimont group to the Pavenstedt agreement which,
if successful, would have resulted in the shareholders maintaining control of Equitania
and would have resolved the issue. This would have avoided a prolonged battle with
Pavenstedt and would have avoided spending over two million dollars by buying the
stock. They also would have avoided the issues with the Department of Insurance
regarding change of control as a result of their purchase. It was their conclusion that
Garrett committed ongoing malpractice by failing to advise them of change of control
issues . Warren further testified that it was a deviation to fail to pursue this option .
However, it is apparently undisputed that the Department of Insurance would not have
approved a Pavenstedt sale even if it had been properly submitted .
Kentucky should not allow lawyers to avoid liability for committing errors in
judgment which the average reasonably prudent lawyer would not commit. Any
avoidance of liability should only be allowed for errors of judgment made in absolute
good faith.
Here, Garrett failed to plead or present evidence regarding her alleged errors in
judgment so as to justify her decision . The error in judgment instruction indirectly
required the jury to define and understand abstract legal principles. The jury could not
have reasonably understood the distinction between errors in judgment and legal
malpractice . It is of interest to note that the instruction provided by Vimont in this case
is similar to the instructions provided in Daugherty.
The proper jury instruction must follow a form similar to that in Palmore, 2
th
Kentucky Instructions to Juries ยง 21 .01 (4 Ed. 1989):
It was the duty of D[efendant] in undertaking the legal
representation of P[laintiff] to exercise the degree of care
and skill expected of a reasonably competent lawyer acting
under similar circumstances . If you are satisfied from the
evidence that D[efendant] failed to comply with this duty and
that such failure was a substantial factor causing the loss,
you will find for P[laintiff] ; otherwise you will find for
D[efendant] .
This instruction form contains the elements prescribed in Daugherty without requiring
the jury to understand abstract legal principles . The jury is able to determine from the
evidence whether there was a breach of duty and whether that breach caused the loss.
II . Limitation on Testimony
It was error for the trial judge to limit the expert testimony, despite the fact that
the witness was timely disclosed as an expert pursuant to- CR 26 .02 . His opinions were
seasonably updated, he was deposed twice and two years had expired between the
time of the disclosure and the trial . Thus, there was more than ample opportunity to
address the opinions offered by Warren. Ward v. Housman, 809 S.W .2d 717 (Ky.App.
1991), provides that the person requesting exclusion of testimony must show prejudice .
Otherwise, there is no valid basis to exclude or limit testimony. Here, the supplement
came before the depositions and before trial was scheduled . Actually, the opinions
were discovered more than two years prior to trial . No new theories were presented in
the supplemental disclosures . Only additional acts of negligence were noted . No
prejudice was shown, nor could have been shown, in this case because the disclosure
was given two years before trial and no material changes were made to the testimony
of the witness.
III. Ambiguity in the Agreement
It is well settled that the interpretation of contracts is an issue of law for the court
to decide . Morganfield Nat . Bank v. Damien Elder & Sons, 836 S.W .2d 893 (Ky. 1992).
The intention of the parties to a written instrument must be gathered from the four
corners of that instrument . Cf. Hoheimer v. Hoheimer , 30 S.W .3d 176 (Ky. 2000). We
are not unmindful of the authority cited by the appellants, Cook United, Inc. v. Waites ,
512 S.W .2d 493 (Ky. 1974) . Certainly, if the writing is ambiguous, the factual question
of what the parties intended is for the jury to decide.
In this situation the Vimont group failed to show Judge Adams that there was any
ambiguity in the contract . Under the circumstances, we agree with Judge Adams that
the interpretation of this contract was a matter of law.
In regard to pleadings, Kentucky has always followed the notice pleading theory
which only requires a short and plain statement of claim demonstrating that relief is
warranted and necessary. See McCollum v. Garrett , 880 S.W .2d 530 (Ky. 1994).
Consequently, under the circumstances regarding the instructions, this matter is
reversed and remanded . The decisions of the Court of Appeals and the trial court are
reversed and this matter is remanded to the trial court for a jury determination as to all
factual issues .
Upon review, we find the other issues raised by the appellants are without merit .
Neither stare decisis nor collateral estoppel apply to the issues presented in this case.
The interpretation of Fraley agreement was a question of law for the trial judge to
determine. The partial summary judgment was appropriate because the interpretation
of the contract was a matter of law. However, the error in regard to the instructions is
sufficient to require a reversal and remand of this case .
All concur.
COUNSEL FOR APPELLANTS :
Kenneth L. Sales
Paul Jason Kelley
SALES, TILLMAN, WALLBAUM,
CATLETT & SATTERLY
1900 Waterfront Plaza
Louisville, KY 40202-4251
COUNSEL FOR APPELLEE:
Perry M. Bentley
Todd S. Page
STOLL, KEENON & PARK, LLP
300 West Vine St., Suite 2100
Lexington, KY 40507
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