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Pamela K. Joerger Stephen v. Sallaz & Gatewood

March 17, 2011


Appeal from the District Court of the Fourth Judicial District of the State of Idaho, Ada County. Honorable Michael R. McLaughlin, District Judge.

The opinion of the court was delivered by: J. Jones, Justice.

2011 Opinion No. 26

Stephen W. Kenyon, Clerk

The judgment of the district court is affirmed.

This is an appeal from a legal malpractice judgment entered against attorney Scott Gatewood and the law firm of Sallaz & Gatewood, Chtd. Appellants argue the district court erred in finding that professional malpractice had occurred. Both parties appeal the denial of their respective requests for attorney fees. We affirm.


Factual and Procedural Background

This case arises from a malpractice action brought by Pamela Joerger Stephen ("Pamela") against the law firm of Sallaz & Gatewood, Chtd., Scott Gatewood ("Gatewood") and Dennis Sallaz ("Sallaz") (all three of the defendants are herein collectively referred to as "Appellants"). Pamela's ex-husband, Gary Stephen ("Stephen"), filed for divorce in May of 2003. During the divorce proceedings, Stephen retained attorney Ann Shepard to represent him, and Pamela retained Sallaz & Gatewood, Chtd. Pamela claims the Appellants committed malpractice by failing to make inquiries into her mental status during the divorce proceedings and by failing to properly investigate, inform, and advise her regarding the fair market value of real property that was part of the settlement agreement, which resulted in her receiving less than her equitable share of the community property.

The district court found that Gatewood was liable for malpractice in his representation of Pamela for (1) failing to inquire into Pamela's mental status prior to trial or for failing to seek a continuance, and (2) failing to investigate, inform, and advise her with respect to the value of the couple's Crescent Rim property. The court determined that Sallaz & Gatewood, Chtd., was also liable for the malpractice judgment.

With regard to the first finding, the district court noted that Gatewood had many indications of Pamela's alleged mental incapacity. Specifically, Pamela disclosed to Gatewood during a June 2003 meeting that she suffered from bi-polar disorder, that she had attempted suicide on two separate occasions, and that she was taking medications for her condition. The court also noted that Pamela was living in an unstable environment at the time of the divorce proceedings because she was residing in the couple's Crescent Rim property with another man while Stephen made payments on the property. Pamela was also receiving income from the couple's rental property at the time, but failed to make mortgage payments or pay other expenses on the rental property. Gatewood was also aware that Pamela had been involuntarily hospitalized approximately one week before the trial was scheduled to begin but "did not inquire of [Pamela] where she had been hospitalized, for what reason or by what doctor." Stephen's attorney also advised Gatewood that Pamela was using methamphetamine. Finally, the court noted that Gatewood had to personally visit Pamela's residence on several occasions in an effort to speak to her. Gatewood even filed a motion to withdraw as Pamela's attorney in July of 2004, identifying a "total communication breakdown" as the basis for the motion. Although the motion was ultimately withdrawn, Pamela testified that she received very little correspondence, court pleadings or discovery information from Gatewood during the divorce proceedings.

On the second issue, the district court found that because Pamela was never informed of Stephen's valuation of the couple's Crescent Rim property, she undervalued the property for purposes of settlement. The parties exchanged discovery requests in September of 2003, including interrogatories seeking, among other things, the other's valuation of the Crescent Rim property. Stephen was the first to respond, and he disclosed the property value to be $500,000. Pamela testified that Gatewood never informed her of this valuation and Gatewood testified he could not recall if he had. Pamela subsequently valued the property at only $385,500. This final valuation was used in the couple's final settlement agreement. There was also evidence that a judgment lien against the Crescent Rim property had been paid prior to trial, but the amount of the lien was nonetheless credited to Stephen in the settlement.

On the first day of the divorce trial, the parties informed the district court that they had reached a proposed settlement agreement. When the court asked Pamela if she understood the agreement, Pamela responded that she was in agreement "as far as I know." However, Gatewood testified that Pamela was "clear in her thoughts and understanding" at the time of the proceedings and that he "did not believe that she was impaired as a result of methamphetamine use and/or mental health issues."

In the subsequent malpractice action against Appellants, the court found that Gatewood breached duties owed to Pamela and imposed liability in the amount of $27,435.00 against Gatewood, personally, as well as against Sallaz & Gatewood, Chtd. However, the district court declined to assess any personal liability against Sallaz because the court found that he had never provided any legal services to Pamela, nor had he acted in a supervisory capacity over Gatewood. The court made this finding despite Sallaz being named as an attorney in documents filed with the court during the divorce proceedings and despite Sallaz's affiliation with Sallaz & Gatewood, Chtd.*fn1 The court also awarded Pamela $5,359.49 in costs, but refused to award discretionary costs pertaining to the appointment of a guardian ad litem during the course of the malpractice action. Pamela and Sallaz both sought an award of attorney fees, but both requests were denied.

On appeal, Appellants argue that the district court erred in its determination of the duties owed to Pamela, and contend that there was no evidence establishing a breach of any duties. They also argue that Pamela's malpractice claim is barred by judicial estoppel and judgmental immunity, and that liability cannot be imposed upon a law firm. Pamela argues that the final damage award is in error, and that Sallaz should be personally liable for the malpractice judgment. Both Sallaz and Pamela argue that the court erred in denying their request for attorney fees, and Pamela argues the court erred in denying her request for discretionary costs.


Issues on Appeal

I. Is the malpractice judgment against Gatewood supported by substantial evidence?

II. Are Pamela's incapacity claims barred by the doctrines of judicial estoppel and judgmental immunity?

III. Can liability be imposed against Sallaz & Gatewood, Chtd.?

IV. Did the district court err in determining Sallaz was not ...

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