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Behrens v. Behrens6/22/2005
-default provisions (purportedly triggered by bankruptcy) and the foreclosure provisions were not fully enforceable in bankruptcy. Consequently, Behrens were unable to get their business back. Furthermore, because the indebtedness was not cross-collateralized, they were unable to use excess equity in the mortuary building (subject to the contract for deed) to secure the promissory note.
[ .] Behrens alleged that as a result of these problems, they incurred a $462,890 loss in the bankruptcy . They were also required to spend $14,579 in bankruptcy attorney fees. Behrens claimed that if Wedmore had better collateralized the promissory note, they would have been paid in full or they would have gotten their business back. Although Wedmore's efforts made resulted in Behrens being better positioned than most other creditors in the Loewen bankruptcy, Behrens contended that Wedmore committed malpractice. Behrens specifically alleged that Wedmore was negligent in negotiating and preparing the transactional documents and in failing to warn them of the potential risks of an installment sale in bankruptcy.
[ .] On the other hand, Wedmore's experts testified that Wedmore could not have better collateralized the transaction because the Initial Agreement was legally enforceable and it finalized the terms of the sale, which included the $2 million unsecured note. Under Wedmore's theory, his ability to negotiate for additional security was limited because the Initial Agreement was binding and further security demands risked a loss of the entire sale. He further contended that he did make additional efforts to obtain more security, but those efforts were rejected by Loewen. Wedmore finally contended that Behrens ultimately received approximately $4,088,286 after bankruptcy , which was substantially more than they could have received under the Initial Agreement that they had negotiated on their own.
[ .] With respect to attorney's fees, there is no dispute that Wedmore charged a 1% transaction fee for the legal services provided. Behrens alleged that the fee was unreasonable. They also alleged that Wedmore breached his fiduciary duty in failing to timely disclose this fee. Wedmore conceded that his fee was not disclosed at the time he was retained; . Hhowever, he provided expert testimony that the 1% transaction fee was customary in that community and that it was reasonable for the work provided.
[ .] On appeal, Behrens raise the following issues:
1. Whether Behrens were entitled to summary judgment declaring that the Initial Agreement was a letter of intent, rather than a binding contract;
2. Whether the trial court improperly instructed the jury on contributory negligence and assumption of the risk;
3. Whether the trial court erred in refusing to instruct on Behrens' theory of breach of fiduciary duty in Wedmore's charging the 1% transaction fee;
4. Whether Wedmore had the duty to seek the advice and assistance of a specialist;
5. Whether admission of a business appraisal was prejudicial error;
6. Whether Behrens were entitled to a mistrial based upon Wedmore's method of presenting exhibits;
7. Whether Wedmore was entitled to certain disbursements as a prevailing party.
Wedmore filed a notice of review, raising the following issue:
8. Whether Wedmore was entitled to a directed verdict and/or motion for judgment as a matter of law on the legal malpractice and attorney's fees claims.
Analysis and Decision
1. Whether Behrens were entitled to summary judgment declaring that the Initial Agreement was a letter of intent, rather than a
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