*1 NESVIG, Plaintiff Richard John Appellant, NESVIG, Defendant
R. Gordon Appellee.
No. 20030041. Dakota. North Court of
Supreme
Feb.
74 Firm, Morley, Morley
Patrick R. Law Ltd., Forks, ND, Grand for defendant and appellee. WALLE,
VANDE Chief Justice. Nesvig [¶ Richard from a appealed 1] judgment upon jury entered dis- verdict missing against action fiduciary duty. breach of a We hold jury instructions and erroneously jury’s limited the consider- Nesvig’s ation of legal Richard claims for fiduciary duty. and breach of a judgment We reverse the and remand for proceedings. further Nesvig, Richard a self-employed Buxton, Dakota, living farmer near North severely injured in a 1984 automobile County. accident Traill attorney Richard cousin and Grove, Minnesota, Cottage represented Richard negotiations settlement with the automobile per- insurer and injury sonal against County action Traill and Anderson Brothers Construction. See Co., Nesvig v. Anderson Bros. Constr. As a result insurer, settlement automobile $235,000. Richard received Gor- don deducted fees and and, expenses, other an invest- broker, $175,000 ment deposited of that settlement a Franklin fund for Richard Nesvig. against the action Traill Coun-
ty Brothers, and Anderson $50,000 settled with Anderson Brothers for jury and obtained a verdict of more $900,000 than against County. Traill After Howe, Henry Seaworth, H. Howe & deductions for ex- fees ND, Forks, Grand penses, for plaintiff appel- received a net lant. $611,768.18 award December any money in ed. I did not think there was Nesvig deposited and Gordon problem. bearing in an interest Minneapolis bank that listed Richard money market account you subsequently and did Q. Okay, *3 beneficiary and Gordon something getting start statements from no docu- There was written as trustee. Fund for the like the Franklin and Richard Gordon mentation between Minneapolis to with you sent down that of the regarding deposit Gordon? ac- market bearing money in the interest
count. No, I did not. A. he Nesvig, According to Richard [¶ 4] Okay. you did was Q. How —what East Nesvig in Grand met Gordon you get money to from process 1993 to endorse Forks in December you had left of the Gordon money: for the check with Gordon. words, exact I don’t remember
A. I to him and call A. would have call he just said that I think he but a, him I give him and him tell what in Minne- get me more interest could know, you it give for and wanted him— I signed I the check and apolis. So just not tough. he He would hand was couple papers, of other signed off on any I had to it to me reason. out whatever, money to sent and he sometimes give him a reason then thought I Minneapolis which was what some, times he give he me to for a short going we were do would not. you know. or whatever or time According Nesvig, he to Gordon [¶ 5] your un- and what was Q. Okay, so man- could did not believe to going was about what he derstanding specific he received age the money? do with the Nesvig about instructions from Richard to going Well, thought I he was A. money: or it down the road somewhere
invest them, Well, the one A. to summarize whatever, thought I to but give it me instruction was that probably paramount it somewhere going he invest was want- readily he it available. He wanted money. get some more where we could ed, and he needed this if he called me something, he did not want to
money for And the second— wait for it. you got the mon- Q. Okay, and when ey signed the check with you give Gordon did
December list, we will Q. go Let’s was on what he any specific instructions said. you explain what was have money. or not do do item All And the second right. A. No, time. A. not which I that and don’t remember were, he not want to they but did order you going think was Q. What did any principal. lose money, your based on happen with any Q. Okay, more? contact with Gordon? he one was that did A. Third Well, talk a little guess I we did
A. is the stock market to be me more want give He told me he could bit. used, took that but I why I that we figured word Minneapolis is interest security where any traded publicly I mean figured I it there and could send down you lose want- could me whatever I he could sent [sic] Q. just about How bonds? interest. fair to Seems me.” Accord- ing got July to Richard Nesvig, he A. It would include bonds. statement from Q. Any more? got monthly never another statement or A. That is as far as can remember. $1,000.00 a month after handwritten three Those were the cardinal rules. According letter Gordon Nesvig. [¶ 6] Gordon testified he did Richard Nesvig, he was unable mon- get send Richard statements re- ey from Gordon Nesvig when he wanted it. account,
garding money market but he normally monthly telephone had conversa- In November George Long- *4 regarding money. tions with him Accord- mire, on behalf of Nesvig, Richard wrote ing early Gordon 1995 he Nesvig: Gordon discovered the market account was is previous Reference made to corre- earning interest at lower than rate ex- spondence telephone conferences we pected and he informed the bank: have had in connection with [funds be- you got have to do better than this or we longing to Richard Nesvig], Rick is still Well, moving money. are we have insisting belonging funds to him should got this other it will pro- account and be returned to the Norwest Bank in duce a higher they interest rate and told Hillsboro, ND. equate me it does about thousand a month. And I dollars called Richard and I him I happened told what had As telephone indicated our initial says said open that the bank I have conference, he has a good relationship account, new got I close have the one a capable with woman this time. I that you open have new one and recently learned she had had some okay asked him if that was and he said banking experience. Further, I feel that it was. changed Rick has greatly in the two later, And then a days few or weeks years I have had contact with him. he sent me his 1994 tax information feel confident his wife be and his because I did have anything not banker keep can him soundly managing income, than He had his farm his business affairs. You and I could statement, his Franklin fund and he had keep eye also an over his shoulder and taxes, his property all paid. whatever he prevent him from throwing away his And in that envelope is when he sent me money. ... letter because he knew about intimated, As I do not feel he needs a change the bank account and that fact, conservator at this time. In it is is where thousand dollars a fight felt he appointment of a
month—and he
really
confirming
conservator.
that he wanted it in there. He wanted
month,
extra
just
thousand dollars a
It
is also felt unless his funds are
interest.
returned to this state under at least
that,
[¶ 7] Richard Nesvig
partly
testified
his supervision he will
me
have
March
Nesvig
sent Gordon
infor-
some other
litigation
commence
mation for his 1994 taxes and a handwrit-
to get
accomplished.
this
requests
Rick
ten letter asking
copy
for a
of monthly
the funds be transferred to the Norwest
indicating
statement and
Hillsboro,
he “would like
Bank
Hope
ND.
you will
$1,000.00
invested,
per
more
month when
immediately arrange for this to
done.
be
good faith
family
including
spe-
relation
defense
in view his
Am sure
form,
good faith
cial
because
you feel some
you, it is understood
to a
foolishly
him from
a defense
keep
Nesvig
He
Gordon
had a
argues
it is
action.
this
if
returned
spending
duty
fiduciary
as
jurisdiction.
him regarding manage-
advise
properly
Nesvig pe-
July
Richard
money.
ment of the
Richard
a “limited and
appointment of
titioned for
Nesvig assumed
claims Gordon
control
Gordon
filed
special conservator.”
fiduciary
and had a
over the
in the need for conserva-
a “concurrence
pru-
to invest the
under the
acting
he had been
as an
tor” which stated
dent investor rule. Richard
claims
“informal conservator” for
$335,650 in damages
he sustained
because
portion of [Richard
since 1983 and “the
prudently
failed to
invest
him to make
Nesvig’s] brain that allows
Nesvig responds the
impaired.” Gordon
decisions is
legal malprac-
in this
issue
case was
needed
concurrence stated
*5
tice,
he
Prof.
but whether
followed N.D.R.
say
a
no to most of
conservator who
distributing
holding
1.15 in
and
Conduct
Nesvig had in-
requests and Gordon
his
money
requested by
Nesvig
as
Richard
the
investments, but
to make different
tended
agreement
was an
be-
and whether there
any
Nesvig
Richard
did
want
funds
Nesvig
Richard and Gordon
to in-
tween
risk,
up for
did
want funds tied
extend-
money
something other than
vest the
in
time,
recently
ed
of
and had
indi-
periods
money
the
market account. Gordon
funds,
his
control of
cated
wanted
proper
argues good faith
a
element
“decided wait
therefore
Prof.
jury
the
to consider under N.D.R.
In July
the
until
situation stabilized.”
1.15.
Conduct
1998,
appointed as con-
Norwest Bank was
Nesvig.
August
servator for Richard
Jury instructions must
[¶ 12]
the
transferred
jury
adequately
inform the
correctly
$548,100.88
Nesvig’s
in
balance
Richard
the
law and must not mislead
applicable
of
the
money market account to
conservator-
Gibson,
jury.
the
Rittenour v.
or confuse
ship.
¶14, 15,
discretion II on evi necessarily based discretion involved presented and the issues Nesvig argues appeal on dence 11] Richard court in the case. Id. to this that the trial erred Court trial court instructed the The such funds an interest-bearing trust (1) conduct, jury responsibility bank, on see account in a company, saving trust (2) 2.01, association, N.D.J.I.—Civil and loan or credit union by prove greater weight burden to account which withdrawals or that Gordon evidence breached by transfers can be made depositing of care a standard or fidu- delay. without ciary and that the breach duty proximately Upon receiving, connection with a (3) damages, of a legal caused elements representation, property funds or other fiduciary negligence duty and a breach interest, in which client has an a law- (4) claim, 15.00, see N.D.J.I. —Civil law- yer notify shall promptly the client. care, yer’s standard of see N.D.J.I.—Civil agreement Unless an has been reached (5) 15.15, lawyer’s obligation by to “abide client, lawyer promptly shall concerning objec- decisions client’s any deliver to the client funds the client and, representation, tives appro- where and, is entitled to upon request receive priate, consult with the client as to the client, by the shall promptly render a they by means which are be pursued,” full accounting regarding such funds. (6) to, exception there was “no The jury’s verdict and the an- in, reduction owed a fiduciary provided: swers any family relationship.” because of The We, jury duly impaneled jury fiduciary court on duty: instructed matter, sworn in the above make the undisputed fiduciary It is rela- *6 following questions answers to the asked tionship attorney-client exits in rela- by the court: also tionship. undisputed It is that a 1. Did R. Gordon fail Nesvig to return fiduciary relationship has a trustee all or some of the to funds Richard the property owner. John Nesvig requested when to do you If there was an agreement find byso Richard? between Richard John Nesvig and R. No_ ANSWER: Yes Z Nesvig Gordon to invest the funds in If your Question 2. answer to 1No. is something other than a money market “Yes”, was R. Gordon Nesvig acting than account R. Nesvig [sic] Gordon is in good faith when he failed to re- a deemed trustee. turn the funds? The jury court instructed the “trus- No_ Z ANSWER: Yes manage tee” shall invest and trust assets under “prudent the agreement investor rule” 3. Was there an and between hindsight did not determine a Richard John Nesvig trustee’s and R. Gordon compliance with the to Nesvig investor rule. invest the in funds some- thing other than a money market In language tracking
[¶ 14] N.D.R. account? 1.15(a) (b), Prof. Conduct and the court Yes_NoZ also jury instructed the on ANSWER: safekeeping- property: (If your Question answer to No. 1 and lawyer
A required by is “Yes”, to 2 your law hold No. is and answer No. to 3 property the of a “No”, client that is your the is if Question answer to lawyer’s possession “Yes”, connection with your No. is answer to No. 3 representation separate “No”, from the law- questions is then do 4- not answer yer’s property. own A lawyer case, holding foreperson the shall money of a required deposit bailiff.) client is sign the notify verdict and the fact-finder the rea ques- where a must evaluate jury’s answers to of the As a result of a conduct in defendant’s three, sonableness jury did through the tions one special knowledge the skill the light of relat- four seven questions answer mem presumed is have as a defendant cause, in- damages, and ing proximate profession. of the ber terest. Richard al- Nesvig’s complaint [¶ 17] dispute Nesvig Gordon does leged represented Gordon Richard legal faith not a is defense good litigation prior that resulted he claims this malpractice Although case. $611,768.18, him net award case, malpractice perhaps he legal is anot representa- upon Nesvig’s based Gordon cor- argues trial court the incongruously invest, he properly tions that safe- inquiry faith rectly included the manage money, Richard guard, the inquiry is verdict because to retain Nesvig permitted Gordon by a rule interpretation authorized al- control of attorneys, conduct professional accept- leged solicited N.D.R. Prof. Conduct 1.15. fiduciary relationship ed had have said actual nature We prudently invest responsibly subject matter of deter an action entrusted funds. Richard testified it is a legal whether mines Nesvig] going to “thought [Gordon Haugland, case. Johnson money] somewhere down the [the invest defined We have whatever, but give road or it me or rendering one malpractice as “failure of it some- going he was to invest thought that de services exercise get where we could some more where commonly gree ap learning of skill and Coles, Attorney money.” James plied under all circumstances expert, trial about testified reputa community average prudent Nesvig’s obligation: profession ble member you should not the basic *7 loss, to the injury, damage that or result your any action would harm take that to enti or those recipient those services financial and that would include client Johnson, at rely tled them.” 538 upon to also, And, you obligation an have harm. Third New International (citing Webster’s attorney remem- and have to an we 1971)). Dictionary (Unabridged In John attorneys coun- they call us and ber also son, 538, considering a in the context of at a at law. is reason for selors There issue, limitations we looked at statute of attorneys look for ad- People that. to complaint an at against the of a essence obli- strong I a and think there is vice firm, the torney and his law and we said to at funds. And as I gation look these in the frame
allegations involved conduct it, that I understand the information attorney-client relationship an work of basically tells me that was have prior which litigation, course of during the personal injury from a suit and an of a alleged profession involved breach to extent injured Richard was the that al to client of duty and failure inform the employment questiona- future was that concluded the conflict interest. We looking are at a sum of So we ble. subject the matter of the actual nature of the that basically is malpractice. action Id. 538- legal have to him for whatever survive is, Tvenge Architects & life expectancy 39. In v. Assoc. life whatever his is Sime his (N.D. has Planners, P.C., 606, got 488 610 what and where that and attorney the to And so think has 1992), go. to actions we said refers 80 obligation, strong knowledge has a commonly possessed
to fulfill his obli- gation inquiry to make some or be in- reasonable, careful, exercised money is going formed as to where this Vaaler, lawyer, see Wastvedt v. to and to at least advise or assist the go 561, (N.D.1988), 430 N.W.2d an to as to has be done to client what belief, faith, good honest or is not a de accomplish goal having lifetime in malpractice fense action. v. Olson quite for And support. frankly, assets Fraase, 820, 421 N.W.2d know, attorney, you the does have Grimes, 662, Cosgrove See v. 774 S.W.2d say you that to how expertise do (Tex.1989) (holding subjective 664-65 this, attorney obligation has the but the faith is not to legal malpractice defense you find out say need to how to do action). generally See 3 R. Mallen & J. Maybe attorney this. becomes a Smith, 19.8, § Legal Malpractice at page facilitator, certainly part but that is (5th ed.2000). 112-13 attorney-client An give advice that relationship is a fiduciary relationship. okay, can say, client then is this what ¶¶ Maus, 87, Meyer 14-15, See ND you need to do. You need to talk to an fiduciary 626 N.W.2d A relationship person investment or someone else that “ is ‘something approximating business you you can tell need to where be so agency, professional relationship, family or that these will your funds survive life- impelling inducing time. tie trusting party vigilance relax the care ... ordi The of Richard Nesvig’s essence ” narily Matter exereise[d].’ Estate pro- action entrusted the net Lutz, ¶32, 82, 90, 563 N.W.2d recovery prior litigation ceeds of his (quoting Asleson v. West Branch Land invest, safeguard, to properly Co., (N.D.1981)). manage, 311 N.W.2d and his had obli- him. gation properly fiduciary advise We con- relationship, superior party clude in professional malprac- his action is duty act in dependent has party’s fiduciary duty tice and breach of a ¶ Lutz, best interest. A fiduciary at 32. properly advise. relationship exists when one is under for, duty give act or to advice
[¶ 19] The trial court’s instruc benefit of upon another matters within the fiduciary tions about and safekeeping ¶ scope relationship. of the (citing Id. at property effectively (Second) § 874, *8 Restatement of Torts cm. limited the jury’s inquiry whether Gor (1979)). leading One commentator ex in good don acted faith in failing to that, contexts, plains return in to Richard various an money Nesvig and attor whether there an agreement ney may was between undertake or manage invest a Richard and to invest the so, property, client’s in doing at money in something other than the money torney only must conform to the appli However, market account. an attorney cable standard of comply care and manage who undertakes to or invest a fiduciary obligations, may but also assume client’s responsi assumes broader responsibilities of a trustee. 3 R. Mal merely bilities than establishing agree an len J. § & Smith at 25.4. Although ment with the in acting good client and may and a client an agree reach faith regarding return of the funds, ment about the an attorney client’s reasonable, careful, An has an must em as a ploy care, degree skill, of diligence, lawyer to adequately advise (filed Sep- on Docket Number 11437 is reached. Court agreement before the the client 1986). (d) 12, Wastvedt, tember Subdivisions at 566. 430 N.W.2d See (g) quoted in through language and the reject We [¶ 21] after proposed the official comment were the narrow is about that this case claim Bar Associa- the 1986 North Dakota State un the funds holding of and limited issue 6, September tion and a meeting N.D.R. Prof. Con of interpretation der his of the Bar Association meeting State safekeep deals with 1.15. That rule duct “to establish a manda- Board of Governors trust bearing in an interest ing tory in North Dakota.” program IOLTA (a) (c) in account subdivisions 22, John September 1986 letter from See lawyer’s respon and outlines authorizes Widdel, Jr., Bar E. President of State trust accounts bearing for interest sibilities Dakota to Chief Jus- Association of North clients, of or for the benefit either Supreme Court Ralph tice J. Erickstad Bar North Dakota Founda of the benefit Docket Number 11437. Rule 1.15 N.D.R. (f). (d) through .The tion in subdivisions adopted Prof. effective Janu- Conduct Prof. comment N.D.R. Conduct official 1, ary language 1988 with the subdivi- part: provides, 1.15 (d) good faith through (g) and the sions of a of whether funds The determination in the official comment. Under language person could be invested or third client (2), 1.15(d)(1) Prof. N.D.R. Conduct positive net return to the provide in an lawyer deposit must a client’s funds client, judgment the sound rests so inter- bearing trust account interest charge of lawyer or law firm. No each Dakota est benefit either the North will or other breach impropriety ethical Foundation, client, and the Bar or a law- conduct shall attend professional funds in lawyer’s place either decision if judgment yer’s exercise sound type factors governed of account faith. good lawyer acts 1.15(d)(3). The his- N.D.R. Prof. Conduct Pro- North Dakota Rules of The tory of N.D.R. Prof. Con- language adopted by this fessional Conduct were a conclusion that duct 1.15 support 1988, January as the effective Court good faith in the comment reference to Model study the A.B.A. result of lawyer’s deci- for a establishes a standard by Profes- Conduct Rules of Professional a client in either deposit sion sional Conduct Subcommittee account, N.D.R. or an IOLTA see account Attorney Committee. Court’s Standards 1.15(d), estab- and does not Prof. Conduct Sub- Conduct See Minutes of Professional returning a lish a faith defense for Attorney Comm. Standards committee of advising or the client. client’s 1983). The A.B.A. Model 2 (Sept. rules of in- Our [¶23] Conduct do not Rules of Professional guidance designed provide to N.D.R. conduct are corresponding provisions clude (d) lawyers regulating quot- structure through (g), Prof. Conduct *9 agencies, and through disciplinary conduct from the official comment. language ed for to be a basis civil by they are not intended to this Court originally As submitted Preamble, Committee, Scope, and Terms liability. See pro- Attorney the Standards Disciplinary Prof. Conduct. 1.15 did not N.D.R. N.D.R. Prof. Conduct posed ¶ 22, McKechnie, 16, (d) ND v. 2003 Board subdivisions include the current 661, pro disciplinary said from 656 N.W.2d we language (g) quoted and the malprac significantly from ceedings differ North Dakota the comment. See official pro Conduct, actions, although of tice and the rules Supreme Rules of Professional 82 set conduct a minimal level of Ill
fessional
actions, malprac
disciplinary
conduct for
judgment
[¶ 25] We reverse the
dis-
liability
upon
conduct
premised
tice
the
missing
Nesvig’s
against
action
lawyer under
circum
the
of
reasonable
Gordon
we
pro-
remand for
Olson, 421
See also
N.W.2d at
stances.
ceedings
opinion.
consistent with the
828;
Hjellum,
Bros. v.
Martinson
(N.D.1985);
865,
Matter
N.W.2d
of
KAPSNER,
26]CAROL
RONNING
782, 784
Jaynes, 267 N.W.2d
DALE V. SANDSTROM and WILLIAM
reject
Gordon
claim that
We thus
NEUMANN, JJ.,
A.
concur.
1.15
N.D.R. Prof. Conduct
establishes a
good
returning
faith
for
defense
client’s MARING, Justice, concurring in the re-
money. Rather,
attorney
employ
an
must
sult.
skill, care,
the
degree
diligence and
I concur in the
agree
result.
I
commonly possessed
knowledge
and exer
majority
opinion that the instruc-
reasonable, careful,
prudent
by
cised
special
tions and the
erroneously
verdict
Wastvedt,
565,
lawyer,
see
430 N.W.2d
permitted
jury
the
good-faith
to consider a
and,
fiduciary,
attorney
as a
must pro
defense for
returning
client’s
I
upon
vide advice for the benefit
another
agree
also
this action is
for profession-
one
scope
matters within the
of the relation
al
and the
¶
investor
Lutz,
82, 32,
ship.
1997 ND
563 N.W.2d
rule does
apply.
separately
write
Although an
attorney
may
a client
because I
majority
am concerned that the
agreement
reach an
about
the client’s
opinion
clearly
does
set forth
funds,
the law
obligation
has an
as a
applicable
legal malpractice.
reasonable, careful,
The ele-
prudent lawyer
legal
ments of a
malpractice claim neg-
the client.
for
adequately advise
See Wast
vedt,
ligence
attorney-
proximate conduct the advice or
must establish of care applicable standard below the
falls of therefore breach
and constitutes of
duty.” Id. at 565. “The standard care attorney is held duty to which is of services
performance care, skill, degree diligence, exer-
knowledge commonly possessed and careful, reasonable, by a
cised law in state.”
lawyer practice that, expert
Id. We have said generally,
testimony necessary is establish the care whether an
standard of Id. If that standard care. from
deviated egregious so attorney’s conduct is can layperson that a evaluate the
obvious exception duty, then there is an
breach testimony. expert requirement
Id. “It that an is well established failure liable all losses caused promptness follow reasonable instructions of his client.”
care lawful Fraase, v.
Olson It is based on this law I, be tried on remand. there-
case should
fore, respectfully concur in the result. Mary Maring Muehlen Dakota, North Plaintiff
STATE of Appellee, BERGSTROM,
Zachary Defendant Appellant.
No. 20030160.
Supreme Court of North Dakota.
Feb.