Liggett v. Young
877 N.E.2d 178 (2007)
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Rule of Law:
Business transactions between an attorney and a client are presumptively invalid under common law as the product of undue influence. The attorney bears the burden of proving the fairness and honesty of the transaction to overcome this presumption.
Facts:
- Dean Young was serving as the personal attorney for Ronald Liggett, a building contractor, on an unrelated matter.
- While this attorney-client relationship existed, Liggett and the Youngs entered into a contract for Liggett to construct a private residence for the Youngs.
- The contract was a pre-printed form, but Young, the attorney, drafted custom language for a clause related to contract changes (Paragraph 12(b)).
- During construction, a dispute arose over payment for additional labor and materials that Liggett claimed were for change orders requested by the Youngs.
- The Youngs paid the full price specified in the original written contract but refused to pay for the alleged additional work.
Procedural Posture:
- A supplier sued Ronald Liggett in a state trial court.
- Liggett filed a third-party complaint against Dean and Elisabeth Young in the same action.
- The Youngs filed a counterclaim against Liggett for negligent and untimely performance.
- The Youngs moved for partial summary judgment on Liggett's claims against them.
- The trial court granted the Youngs' motion for partial summary judgment and entered a final judgment on those claims in their favor.
- Liggett, as appellant, appealed to the Indiana Court of Appeals.
- The Court of Appeals affirmed the trial court's grant of summary judgment in favor of the Youngs, as appellees.
- The Indiana Supreme Court granted Liggett's petition to transfer the case for review.
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Issue:
Does the common law presumption that business transactions between an attorney and a client are fraudulent and the product of undue influence preclude summary judgment in favor of the attorney, when the attorney drafted parts of the contract and has not presented evidence to overcome the presumption?
Opinions:
Majority - Dickson, J.
Yes. The common law presumption that a business transaction between an attorney and client is fraudulent and the product of undue influence creates a genuine issue of material fact that precludes summary judgment in favor of the attorney. The court reasoned that Indiana has a long-standing common law principle that treats such transactions as presumptively invalid. This places the burden of proof squarely on the attorney to demonstrate the fairness and honesty of the transaction. While the Indiana Rules of Professional Conduct do not create a private cause of action for civil liability, the underlying common law fiduciary duty does. Young, as the moving party for summary judgment, failed to produce evidence to rebut this presumption of invalidity or to establish as a matter of law that the contract was a 'standard commercial transaction' exempt from the rule, especially since he drafted a key part of the disputed contract. Therefore, summary judgment was inappropriate.
Concurring - Boehm, J.
Yes. The concurring opinion agrees that summary judgment must be reversed but focuses more narrowly on the specific contract provision at issue. This was not a 'standard commercial transaction' because the lawyer drafted a unique document. The core dispute is whether the Youngs can use a 'written change orders only' clause, which Young drafted, to avoid paying for changes they allegedly requested orally. Enforcing such a provision against the client under these circumstances would not be 'fair and reasonable.' As a fiduciary, the attorney must place the client's interests above his own, and precluding the client from being compensated for work the attorney requested violates this duty. Therefore, the attorney should be prevented from enforcing this specific contract provision.
Analysis:
This decision reinforces the high fiduciary duty attorneys owe to their clients in Indiana, particularly in business dealings. It clarifies that while a violation of the Rules of Professional Conduct is not an independent basis for civil liability, the common law doctrine of presumptive fraud for attorney-client transactions remains robust. The ruling makes it significantly harder for an attorney to win a contract dispute against a client on summary judgment, as the presumption of undue influence creates a factual question that usually requires a trial. This serves as a strong deterrent for attorneys considering entering into business deals with their clients without ensuring utmost transparency and fairness, including advising the client to seek independent counsel.
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