Pickett, Houlon & Berman v. Haislip

ROSALYN B. BELL, Judge. In a legal malpractice action, a jury of the Circuit Court for Prince George’s County rendered Elizabeth Haislip a verdict in the amount of $75,582.50 against Pickett, Houlon & Berman and Sanford Z. Berman. This case began in 1981 with the retention by Mrs. Haislip of Mr. Berman of the law firm Pickett, Houlon & Berman. Prior to this time, Mrs. Haislip had separated from her husband and had filed a suit for divorce through another attorney on the grounds of adultery. ⁹³ In October of 1981, a hearing was held and as a result of that hearing Mrs. Haislip was awarded a divorce.

The issues of alimony and property rights were reserved by the court for later determination. In January of 1982, the issues of alimony and property rights came before the court for trial. At that trial, Mrs. Haislip testified on her standard of living and certain alleged items of marital property. At the conclusion of the first day of trial, a conference was held with the trial judge who indicated that he had reviewed the case and was inclined to award Mrs. Haislip alimony for only three years.

Following the conference with the court, the parties entered into settlement negotiations. As a result of these negotiations, the parties agreed to four years of nonmodifiable, nonadjustable alimony, two years at $15,000 and two years at $12,000. The marital home would be sold, and the net proceeds divided. The parties agreed to divide equally three properties, Martin’s Acres, 381 Joint Venture and Old Marshall Hall.

In addition, Mrs. Haislip was to receive approximately $108,000 as a monetary award to be paid over six years starting in 1982 at $18,000 per year. Upon the completion of the payment, the jointly held stock of Peoples Security Bank would be conveyed to Mr. Haislip. In December of 1983, Mr. Berman wrote Mrs. Haislip advising her that if she was not rehabilitated during her four year alimony term, she could petition the court to extend the term. The letter further advised her that she must file such a petition within the four-year period.

In August of 1984, Mrs. Haislip retained new counsel, Steven Friedman. Mr. Friedman stated that Mrs. Haislip asked him to move for an extension of alimony payments. Although Mr. Friedman thought the stipulations’ provisions, “nonmodifiable, nonadjustable,” meant that the alimony agreement could not be extended, he nevertheless attempted to obtain an extension. He was unsuccessful.

Mr. Friedman charged Mrs. Haislip $300 for his services. ⁹⁴ In May of 1985, Mrs. Haislip filed a legal malpractice complaint against Mr. Berman and his law firm, alleging breach of contract and negligence. The allegations central to the issues on appeal involve alimony, rights to marital property and costs incurred as a result of Mr. Berman’s advice. Specifically, she contends Mr. Berman failed to conduct adequate discovery on the value of the assets and hence she received less in settlement than she should have. On appeal, appellants do not claim that the discovery was adequate.

Mrs. Haislip also claims that she was damaged as a result of his advice relative to the extension of alimony, arguing that she should have received indefinite alimony. In the malpractice case, the jury rendered a special verdict with questions and answers. These questions were in three separate categories: I. 1. Q. “Do you find that the Defendant was negligent in failing to seek pendente lite alimony for the Plaintiff?” A. “[Y]es.” 2.

Q. “Do you find the Plaintiff sustained damages as a result of the Defendant’s negligence in failing to seek pendente lite alimony?” A. “[Y]es.” 3. Q. “What damages do you find the Plaintiff sustained as a result of the Defendant’s negligent failure to seek pendente lite alimony?” A. “... $2600.” II. 1. Q. “Do you find that the Defendant was negligent in failing to pursue formal discovery concerning Mr. Haislip’s assets and income?” A. “[Y]es.” 2. Q. “Do you find that the Defendant was negligent in failing to employ an expert or experts to evaluate Mr. Haislip’s assets?” A. “[Y]es.” 3.

Q. “Do you find that the Defendant was negligent in presenting Mrs. Haislip’s case to the Court on January 25, 1982?” A. “[N]o.” ⁹⁵ 4. Q. “Do you find as a result of the Defendant’s negligence that Mrs. Haislip failed to receive an equitable distribution of the marital property.” A. “[Y]es. “The amount of these damages as found by the jury is $72,682.50.” 5. Q. “Do you find as a result of the Defendant’s negligence that Mrs. Haislip failed to receive an award of permanent alimony?” A. “[N]o.” III. 1. Q. “Do you find that the Defendant was negligent in advising the Plaintiff that the Court had the authority to extend the alimony payments that the parties had agreed to on January 26, 1982?” A. “[Yes].” 2.

Q. “Do you find that the Plaintiff sustained damages as a result of the Defendant’s negligence in advising her that she could seek an extension of the alimony payments that the parties had agreed to on January 26th, 1982?” A. “[Y]es.” 3. Q. “What damages do you find the Plaintiff sustained as a result of the Defendant’s negligence in advising her that she could seek an extension of the alimony payments agreed to on January 26th, 1982?” A. “The damages awarded are $300.” Following the jury verdict in the legal malpractice trial, Mr. Berman and Pickett, Houlon & Berman appealed. They contest the verdict in categories II and III. They raise four questions: “I. Whether the trial court improperly denied Appellants’ Motion for Directed Verdict when the Appellee failed to produce sufficient evidence regarding the identity and value of alleged marital property. “II.

Whether the trial court improperly denied Appellants’ Motion for Separate Trial on the issues of alimony and marital property disposition. “HI. Whether the trial court acted improperly by failing to instruct the jury that the Appellee had the burden ⁹⁶ of proving the identity and value of the items Appellee alleged constituted marital property. “IV. Whether Appellant Berman’s advice was correct as a matter of law when he advised Appellee that she possessed the right to seek an extension of alimony payments.” Mrs. Haislip cross-appealed and raises one question: “Whether the trial Court properly excluded post-January 26, 1982 evidence regarding of [sic] the Haislips’ respective standards of living.” SUFFICIENCY OF THE EVIDENCE In order to recover based on legal malpractice, the claimant must establish: “(1) the attorney’s employment; 2) his neglect of a reasonable duty; and (3) that such negligence resulted in and was the proximate cause of loss to the client.” Kendall v. Rogers, 181 Md. 606, 611 , 31 A.2d 312 (1943); Glasgow v. Hall, 24 Md.App. 525, 529 , 332 A.2d 722 (1975). In the case sub judice, appellants do not contest the employment or neglect elements but contend that appellee did not establish that appellants’ negligence resulted in and was the proximate cause of her loss.

Appellants primarily contend that to do so, appellee was required to “prove that she would have prevailed in the underlying divorce action but for the alleged acts or omissions of the appellants.” Appellee claimed that appellants’ actions caused her to receive less than an equitable share of the marital property. Thus, appellants assert that appellee must affirmatively prove this alleged equitable share. Appellants insist that appellee failed in her proof in that she did not identify all the marital assets, did not value all the marital assets, did not identify the source of funds, and did not classify the debt. Appellants conclude that because appellee failed to identify and value all the marital property the jury was barred from finding that she was entitled to recover.

We disagree. ⁹⁷ The case sub judice, while implicating marital property laws, is a malpractice action. The primary focus is therefore on whether appellee met her burden to survive a directed verdict motion in a legal malpractice case. In order to understand the damages claimed in the legal malpractice case, it is necessary to examine the Marital Property Act. 1 This Act forms the basis for a monetary award in a divorce case. —Marital Property Act— Maryland defines marital property as “property, however titled, acquired by 1 or both parties during the marriage.” Md.Fam. Law Code Ann. § 8-201(e)(l) (1984). 2 Marital property does not include property acquired before marriage, acquired by gift or inheritance from a third party, or excluded by valid agreement.

In addition, any property directly traceable to these sources is excluded. Md. Fam.Law Code Ann. § 8-201(e)(2) (1984). In a divorce proceeding where property disposition is at issue, the party asserting a marital property interest in specific property has the burden of producing evidence as to the identity and value of that property. Green v. Green, 64 Md.App. 122, 139 , 494 A.2d 721 (1985).

The court must then follow a three-step process when disposing of the marital property. First, if there is a dispute as to whether certain property is marital property, the court shall determine which property is marital property. § 8-203(a). In resolving that dispute, the source of the funds rule may be applicable. In applying the rule, we consider not only which spouse contributed the funds but also whether the ultimate source was marital or nonmarital.

Grant v. Zich, 300 Md. 256 , 477 A.2d 1163 (1984); Harper v. Harper, 294 Md. 54 , 448 A.2d 916 (1982). ⁹⁸ Secondly, it must determine the value of such property. § 8-204. Finally, it “may grant a monetary award as an adjustment of the equities and rights of the parties concerning marital property, whether or not alimony is awarded.” § 8-205(a). In making such a monetary award, the court must consider ten factors, as set forth in the statute. § 8-205(a). See, e.g., Schweizer v. Schweizer, 55 Md.App. 373, 375 , 462 A.2d 562 (1983), modified on appeal, 301 Md. 626 , 484 A.2d 267 (1984).

Only those marital assets which have been sufficiently identified and valued can be considered in any court award. Green, 64 Md.App. at 139 , 494 A.2d 721 . Appellants claim that the trial court ought to have granted their motion for a directed verdict because appellee’s evidence as to the identity and value of marital property was inadequate as a basis for a monetary award and hence insufficient to go to the jury. —Standard of Review— In reviewing a trial court’s grant of a motion for judgment notwithstanding the verdict, the evidence and all reasonable inferences which can be drawn from it must be considered in the light most favorable to the party opposing the motion. Impala Platinum, Ltd. v. Impala Sales, Inc., 283 Md. 296, 328 , 389 A.2d 887 (1978).

Only where reasonable minds cannot differ in the conclusions to be drawn from the evidence, after it has been viewed in the light most favorable to the plaintiff, does the issue in question become one of law for the court and not of fact for the jury. Burns v. Goynes, 15 Md.App. 293, 301 , 290 A.2d 165 (1972), cert. denied, 410 U.S. 938 , 93 S.Ct. 1398 , 35 L.Ed.2d 603 (1972). We, therefore, review the evidence elicited in the malpractice action relating to the identity and value of marital property with those principles in mind. —Evidence of Identity of Marital Property— Appellee testified that neither she nor her husband had brought any significant assets into the marriage and that their standard of living at the beginning of the marriage had been quite modest. While Mr. Haislip had brought a ⁹⁹ car and approximately $8,000 to $9,000 into the marriage, appellee inherited during the marriage approximately $8,000 from her mother.

Thus, the parties’ contributions of nonmarital property were about even. Appellee stated that, from the date of their wedding until their separation in 1980, Mr. Haislip’s law practice prospered and he became active in banking, real estate and other investments. By the time of the divorce in 1982, the Haislips had substantial interests in a number of business enterprises. Other marital assets included the family home, 9,691 shares of Peoples Security Bank stock, and an array of personal property.

While appellee admitted that her understanding of the parties’ various real estate holdings was not extensive, and that she did not personally know their value, she identified a number of those assets at trial. These were also identified through the introduction of a number of financial statements. Several additional assets were also identified through these financial statements. 3 Appellee’s identification of each asset was corroborated by the Haislips’ joint tax returns from 1979 and 1980. Finally, there was testimony that in 1963 Mr. Haislip helped organize the People’s Security Bank and that he subsequently purchased 9,691 shares of its stock.

By appellee’s uncontroverted testimony, all of these were marital property. Appellants argue that the trial court’s confusion over the identity of marital assets is reflective of the insufficient evidence which was before the jury. They highlight the court’s confusion by quoting a statement by the trial judge made outside the presence of the jury: “Prospect Park Apartments, I have not the foggiest idea of what it is, nor do I know what Woodyard Road Joint Venture is other than what I am reading on this financial ¹⁰⁰ statement, or Henson Valley, or these two lots in Capital Heights.” In fact, Prospect Park Apartments, Woodyard Road Joint Venture, and Henson Valley Development Corporation were each identified three separate times. First, appellee identified them in her testimony.

Second, each was listed on the Haislips’ 1980 joint tax return. Finally, each appeared in the four financial statements introduced into evidence. The Capital Heights property was also identified through the four financial statements, referred to as “2 Lots—Central Ave. across from proposed Metro Station.” It is apparent that the court’s frustration with the assessment of damages stemmed from the fact that questions relating to marital property arose without the convenience of having testimony from both parties to the marriage. The court expressed itself on this issue as follows: “It is just a difficult ballgame all together in this type of case to try to evaluate marital property than it would be in a domestic case in evaluating marital property where both of the parties to the marriage are parties to the case.

Both of their lawyers are here. I can say to their lawyers get me this information. I need this information to make my decision.” 4 The absence of Mr. Haislip and the time lapse of almost five years between the property disposition hearing and the trial of appellee’s case against appellants for malpractice increased the complexity of the instant litigation. It certainly made identification and valuation of the marital property more difficult. 5 Section 8-203(a) expressly provides ¹⁰¹ that the court shall determine which property is marital property, “if there is a dispute as to whether certain property is marital property.” (Emphasis added.) To the extent that appellee identified property of the marriage, other than the law practice, the factfinder could justifiably conclude that it was marital property since no claim was made to the contrary. 6 Appellants argue in their brief that “[t]he only method of identifying and valuing alleged marital property is to ascertain the source of funds used to purchase that alleged marital property.” This would add an element of proof far beyond that envisioned by the Court of Appeals in Harper v. Harper, 294 Md. 54 , 448 A.2d 916 (1982), when it established the “source of funds rule.” If a party contends property acquired during the marriage is other than marital, the court will look to the source of the funds used to acquire it in order to determine what percentage, if any, is marital.

Harper, 294 Md. at 80 , 448 A.2d 916 . In this case, no evidence was presented by appellants to suggest that any of the property identified in appellee’s case was non-marital. Nor was there any suggestion that this was an issue in the underlying divorce action, outside of the ex-husband’s interest in his law practice. 7 Hence, the source of the funds was not an issue in determining what was marital property in this appeal. —Evidence of Value of Marital Property— Appellee produced sufficient evidence of the value of the Haislips’ marital property. Appellee relied on the testimony of James Fielding and Marlin Husted, the financial ¹⁰² statements, and the tax returns in evidence.

Mr. Fielding, an accountant who served as an expert witness for appellee, testified that he believed the September 30, 1981 financial statement, showing Mr. Haislip’s net worth at $530,084, to have been undervalued by at least $70,000. Moreover, Mr. Fielding opined that the listed values of the law practice, Henson Valley Development Corp., Woodyard Road Joint Venture and the Peoples Security Bank stock were too low as reflected on that statement. Appellee also called Mr. Marlin Husted, ex-president of Peoples Security Bank, to testify as to his opinion concerning the value of Mr. Haislip’s bank stock at the time of the divorce. He testified on direct examination as follows: “Q. Do you know what the book value of Peoples Security Bank was as of January 26, 1982? “A. Well, not certain, but it would be somewhere, I would think, between 28 and $30 a share____ “Q. Do you have an opinion within a reasonable degree of certainty, based on your experience, Mr. Husted, as to the correct multiple that might be utilized in relating book value to actual value as of January 1982, for the common stock of Peoples Security Bank? “A. The—my opinion in that time frame, as it relates to the value of the bank in the—in an atmosphere of ceiling [sic] because that was the beginning of a wave of the sale of banks, my opinion at that time would have been that the value should have been at least one and a half times book, at a minimum.” Appellants noted, in their cross-examination of Mr. Husted, that Peoples Security Bank had offered its stock for sale to employees and existing shareholders for $30 a share in 1981.

This did not change Mr. Husted’s opinion that the value of Mr. Haislip’s stock in January of 1982 was at least one-and-one-half times the book value: “Q. In your opinion, Mr. Husted, is there any difference in the value of stock offered for sale to employees under a stock option plan, and the value of stock held in a 10,000 ¹⁰³ or 14,000 share lot owned by somebody such as yourself or Mr. Haislip? ... “A. Absolutely there is a difference. “Q. Why is that, sir? “A. Because a two and a half or three percent interest in a corporation, that block of stock is conceived to have some degree of control, at least with other similar blocks of stock, and therefore it is worth more.” Appellants claim that appellee produced no evidence of marital debt. They argue that debt must be considered when determining the value of marital property. Thus, appellants contend that appellee’s failure to introduce such evidence renders the marital property incapable of correct valuation. We disagree.

Appellants would have us hold appellee accountable for both the proving of the value of the marital property and the reducing of that value because of marital debt. In essence, appellants want appellee to not only prove her case, but prove their case too. In Schweizer v. Schweizer, 301 Md. 626 , 484 A.2d 267 (1984), the Court of Appeals held that once marital property has been identified and valued, its value is adjusted downward by the amount of the marital debt. Schweizer, 301 Md. at 637 , 484 A.2d 267 .

It is the obligation of the party asserting a marital property interest in specific property to produce evidence as to the identity and value of that property. Green, 64 Md.App. at 139 , 494 A.2d 267 . Once that party makes out a prima facie case, the burden of producing evidence to refute those claims shifts to the other party. District Heights Apartments v. Noland Co., 202 Md. 43, 50-51 , 95 A.2d 90 (1952); c.f.

Randolph v. Randolph, 67 Md.App. 577 , 508 A.2d 996 (1986). Here, appellee affirmatively described and valued numerous marital assets. That having been done, the burden of introducing contrary evidence to lower that value by the amount of marital debt shifted to appellants. Appellants offered no evidence substantiating the identity or value of ¹⁰⁴ marital debt.

Thus, the effect of the existence of any marital debt is not an issue in this case. —Burden in Malpractice Cases— In order for appellee to demonstrate that the disposition of marital property negotiated by appellants on her behalf was inequitable as a result of appellants’ negligence, it was necessary for her to satisfy a jury that she would have fared better had she been given adequate representation. Appellants incorrectly argue that since appellee did not identify and value all of the marital property, she failed to prove her underlying cause of action. Maryland case law supports the proposition that the trial court should omit alleged marital items from its determination of marital property if there is insufficient evidence as to the identity and value of the alleged marital assets. Green v. Green, 64 Md.App. 122, 139 , 494 A.2d 721 (1985).

If the property is not evaluated on the record, the court may not make an award based on that property. Komorous v. Komorous, 56 Md.App. 326, 330 , 467 A.2d 1039 (1983). Therefore, in the case sub judice, even if appellee failed to identify and value all marital property, this does not mean that she did not establish her entitlement to any monetary award. It does mean that only that property which was sufficiently identified and valued could be considered in determining the value of the monetary award.

In a malpractice action based on negligence, the claimant may only recover those damages that are affirmatively proved. Jones v. Malinowski, 299 Md. 257, 269 , 473 A.2d 429 (1984). The claimant must prove the damages with “reasonably certainty,” and they may not be based on “speculation and conjecture.” Lazorcak v. Feuerstein, 273 Md. 69, 75 , 327 A.2d 477 (1974); Suburban Trust Co. v. Waller, 44 Md.App. 335, 348 , 408 A.2d 335 (1979). In the case sub judice, we have a unique situation.

Appellants agree that the basis for the jury’s award was an asset identified as marital property and evaluated in the testimony. Their motion for judgment notwithstanding the ¹⁰⁵ verdict indicates that appellants concede precisely how the verdict was arrived at: “Simple mathematics reveals the basis for the jury’s award. On his September 1982 [sic] financial statement Mr. Haislip indicated that he held 9,691 shares of People’s [sic] Security stock, valued at $30.00 per share. Counsel argued, on the basis of Marlin Husted’s testimony, that the real value of these shares was $45.00 per share.

By taking the difference in value ... one obtains $145,365.00. Taking half share of this amount, assuming Plaintiff receives a 50% marital share, you arrive at the jury’s award of $72,682.50.” The trial judge agreed with this analysis, and found it to be supported by a writing from the jury: “That’s exactly what they did____ I don’t think there is any question. If you read the jury issues, there is some scribbling above the figure, and at the time I read the jury issue I looked at the scribbling, didn’t pay any attention to it, but I’m looking at it now and it appears to be the word stock. So that’s what they did, all the damages were based on the value of the stock.” Appellants’ and the trial judge’s analysis of the jury award provides more than sufficient support for the jury’s decision.

Appellee’s unrefuted testimony established that, other than the small amounts that she and her husband had brought into the marriage, everything else owned by the Haislips at the time of separation fell within the statutory definition of marital property. Appellee identified the bank stock and called Marlin Husted, who testified that the bank had been founded in September of 1963, several years after the Haislips’ marriage. Existence of the bank stock as marital property was corroborated by various financial statements, as well as the Haislips’ 1979 and 1980 joint income tax returns. Mr. Husted opined that he believed “book value” of the stock to be between $28 and $30 per share and that actual value of Mr. Haislip’s block was one and one-half times that amount, at a minimum.

Mr. Field ¹⁰⁶ ing also testified that the value of the bank stock exceeded $30 per share. The jury verdict is consistent with both the divorce and malpractice laws of this State. Under Green, the fact finder can only consider that property which was adequately identified and valued in determining a monetary award. Green, 64 Md.App. at 139 , 494 A.2d 721 .

Under Jones , the claimant is only entitled to those damages that are affirmatively proved with reasonable certainty. Jones, 299 Md. at 269 , 473 A.2d 429 . Here, the jury found that appellee had sufficiently shown that the Peoples Security Bank stock was marital property which should have been valued at $45.00 per share. Therefore, we hold that the jury could award damages based on that evidence.

If we were to adopt appellants’ concept of appellee’s burden in a malpractice case, we would have to hold that a claimant would have to deal with the underlying case by putting on a case, then putting on the best case for the other side to refute his or her own claim. That has not been