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Lois M. Bishop, Personal Representative of Patricia J. Shelton v. R. Bruce Owens and Jane Doe Owens

January 12, 2012

LOIS M. BISHOP, PERSONAL REPRESENTATIVE OF PATRICIA J. SHELTON, DECEASED,
PLAINTIFF-RESPONDENT,
v.
R. BRUCE OWENS AND JANE DOE OWENS, HUSBAND AND WIFE, AND THE MARITAL COMMUNITY COMPOSED THEREOF; OWENS & CRANDALL, PLLC, A LIMITED LIABILITY COMPANY OPERATING IN THE STATE OF IDAHO; R. BRUCE OWENS AND JEFFREY J. CRANDALL, INDIVIDUALLY, AND IN THEIR CAPACITIES AS PRINCIPALS, MANAGERS, AGENTS, PARTNERS, REPRESENTATIVES, AND EMPLOYEES OF OWENS & CRANDALL, PLLC, DEFENDANTS-APPELLANTS. OWENS & CRANDALL, PLLC, THIRD-PARTY PLAINTIFF,
v.
IDAHO STATE INSURANCE FUND, THIRD-PARTY DEFENDANT.



Appeal from the District Court of the First Judicial District of the State of Idaho, Kootenai County. Hon. John P. Luster, District Judge.

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

2012 Opinion No. 15

Stephen W. Kenyon, Clerk

The judgment of the district court is reversed. Costs are awarded to appellants. No attorney's fees are awarded.

I. NATURE OF THE CASE

Patricia Shelton ("Shelton") filed suit asserting breach of contract and legal malpractice based on an alleged breach of an attorney-client relationship and contingency fee agreement. During the pendency of this action, Shelton passed away. Lois Bishop ("Bishop") sought to assert Shelton's claims as her personal representative. R. Bruce Owens, Jeffrey Crandall, and Owens and Crandall, PLLC (herein referred to collectively as "Owens") asserted that the legal malpractice claim abated upon Shelton's death and that the breach of contract claim did not state a claim. Owens now appeals the district court's decision holding that Patricia Shelton's claim for legal malpractice did not abate upon her death and that Shelton's breach of contract action stated a claim. Furthermore, Owens seeks review of the district court's decision granting Lois Bishop's Motion to Substitute as Plaintiff. Because Patricia Shelton's legal malpractice claim sounds in tort and abated upon her death, and her breach of contract claim fails to state a claim, the district court erred in denying Owens's Motion for Summary Judgment and in granting Bishop's Motion to Substitute as Plaintiff.

II. FACTUAL AND PROCEDURAL BACKGROUND

On February 3, 1997, during the course of her employment, Patricia Shelton was involved in an automobile accident that left her a quadriplegic. The Idaho State Insurance Fund provided her with workers' compensation benefits, including medical benefits. On September 21, 2006, Shelton was admitted to North Idaho Advanced Care Hospital ("Advanced Care") to wean her off of a ventilator on which she was dependent. Advanced Care's treatment of Shelton resulted in further injury. Thereafter, Shelton retained attorney R. Bruce Owens to represent her in a medical malpractice claim against Advanced Care. Shelton entered into an attorney-client relationship with Owens and signed a contingent fee contract on December 25, 2007.

In September of 2008, Owens represented Shelton in mediation with Advanced Care, Idaho State Insurance Fund, and Advanced Care's insurer. Shelton's medical malpractice claim was settled on February 6, 2009, in the amount of $1,150,000. Shelton, as a requirement of the settlement, signed the Full Release and Settlement Agreement releasing the hospital and the insurer from liability. After deducting costs and Owens's contingency fee, Idaho State Insurance Fund sought the remainder of the settlement funds in the amount of $664,543.54, citing its subrogation claim under I.C. § 72-223. Idaho State Insurance Fund's subrogation claim was later settled in the amount of $270,000. Owens did not represent Shelton during the settlement.

Patricia Shelton alleged that prior to her signing the Full Release and Settlement Agreement, Owens failed to inform her of the consequences of the settlement and release in regard to Idaho State Insurance Fund's subrogation claim. As a result, Shelton filed her legal malpractice and breach of contract claims on May 6, 2009, contending that Owens breached his duty to inform her of Idaho State Insurance Fund's subrogation claim and that the medical malpractice settlement could terminate or reduce payment of compensation benefits paid by the Idaho State Insurance Fund. Shelton further contended that Owens breached his duty to seek a partial lump sum settlement, approved by the Idaho Industrial Commission, settling the subrogation interest in her claim.

During the pendency of this action, on or around November 10, 2009, Shelton passed away. Owens later filed and served the Second Motion for Summary Judgment on May 6, 2010. Thereafter, on May 10, 2010, Shelton's attorney Joseph Jarzabek filed its Motion to Substitute as Plaintiff pursuant to Rule 25(a)(1) of the Idaho Rules of Civil Procedure, seeking to appoint Bishop as personal representative. The district court denied the Second Motion for Summary Judgment by Memorandum Opinion and Order on July 21, 2010. Owens made timely application to the district court to appeal by permission under I.A.R. 12(b), which was denied. On October 20, 2010, this Court granted Owens's Motion for Appeal by Permission pursuant to I.A.R. 12(c). Owens timely filed the Notice of Appeal on November 8, 2010.

III. ISSUES ON APPEAL

1. Whether the district court erred in determining that Patricia Shelton's claim for legal malpractice did not abate upon her death?

2. Whether the district court erred in determining that Patricia Shelton's claim for breach of contract stated a claim upon which relief can be granted?

3. Whether the district court erred in ruling that Shelton's claim for legal malpractice was not barred by the economic loss rule?

4. Whether the district court erred in granting the Motion to Substitute as Plaintiff?

5. Whether Lois Bishop is entitled to attorney's fees on appeal according to I.C. § 12-120(3) and I.C. § 12-121 in her capacity as personal representative of Patricia Shelton?

IV. STANDARD OF REVIEW

On October 19, 2010, this Court granted Owens's Motion for Appeal by Permission pursuant to I.A.R. 12(c). "Generally, an appeal under I.A.R. 12 will be permitted when the order involves a controlling question of law as to which there is substantial grounds for difference of opinion and that an immediate appeal may materially advance the orderly resolution of the litigation." Kindred v. Amalgamated Sugar Co., 118 Idaho 147, 149, 795 P.2d 309, 311 (1990). As this appeal involves controlling questions of law, this Court exercises free review over those issues. Infanger v. City of Salmon, 137 Idaho 45, 47, 44 P.3d 1100, 1102 (2002).

V. ANALYSIS

A. Shelton's Claim for Legal Malpractice Abated upon Her Death

The abatement rule holds that in the absence of a legislative enactment addressing the survivability of a claim, the common law rules govern. See I.C. ยง 73-116 ("The common law of England, so far as it is not repugnant to, or inconsistent with, the constitution or laws of the United States, in all cases not provided for in these compiled laws, is the rule of decision in all courts of this state."); see also Evans v. Twin Falls Cnty., 118 Idaho 210, 215, 796 P.2d 87, 92 (1990). Under the common law, claims arising out of contracts generally survive the death of the claimant, while those sounding in ...


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