Bellino v. Mcgrath North Mullin & Kratz, Pc

738 N.W.2d 434

274 Neb. 130

Richard T. BELLINO, also known as Rich Bellino, and La Vista Keno, Inc., Appellants and Cross-Appellees, v. McGRATH NORTH MULLIN & KRATZ, PC LLO, et al., Appellees and Cross-Appellants.

No. S-06-130.

Supreme Court of Nebraska.

August 17, 2007.

David A. Domina and Claudia L. Stringfield-Johnson of Domina Law Group, P.C., L.L.O., Omaha, for appellants.

John R. Douglas and David A. Blagg of Cassem, Tierney, Adams, Gotch & Douglas, Omaha, for appellees.

HEAVICAN, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, and MILLER-LERMAN, JJ.

WRIGHT, J.

I. NATURE OF CASE

Richard T. Bellino sought legal advice concerning the severance of his business relationship with Robert L. Anderson and La Vista Lottery, Inc. (Lottery). As a result of Bellino's actions in reliance on such advice, Anderson and Lottery sued and obtained a judgment against Bellino. Based on this judgment, the court awarded monetary damages and a constructive trust in favor of Anderson. Bellino brought the present action for professional negligence against the law firm McGrath North Mullin & Kratz, PC LLO, and two of its attorneys, James D. Wegner and William F. Hargens (collectively McGrath North). The jury returned a $1.6 million verdict in favor of Bellino. The district court sustained McGrath North's motion for judgment notwithstanding the verdict in part and reduced the award to $229,036.40. Bellino appeals, and McGrath North cross-appeals.

II. SCOPE OF REVIEW

The point at which a statute of limitations begins to run must be determined from the facts of each case, and the decision of the district court on the issue of the statute of limitations normally will not be set aside by an appellate court unless clearly wrong. Zion Wheel Baptist Church v. Herzog, 249 Neb. 352, 543 N.W.2d 445 (1996).

Concerning the overruling of a motion for a directed verdict made at the close of all the evidence, appellate review is controlled by the rule that a directed verdict is proper only when reasonable minds can draw but one conclusion from the evidence, where an issue should be decided as a matter of law. Fales v. Norine, 263 Neb. 932, 644 N.W.2d 513 (2002).

On a motion for judgment notwithstanding the verdict, the moving party is deemed to have admitted as true all the relevant evidence admitted that is favorable to the party against whom the motion is directed, and, further, the party against whom the motion is directed is entitled to the benefit of all proper inferences deducible from the relevant evidence. Munstermann v. Alegent Health-Immanuel Medical Center, 271 Neb. 834, 716 N.W.2d 73 (2006). To sustain a motion for judgment notwithstanding the verdict, the court resolves the controversy as a matter of law and may do so only when the facts are such that reasonable minds can draw but one conclusion. Id.

A trial court's ruling in receiving or excluding an expert's testimony which is otherwise relevant will be reversed only when there has been an abuse of discretion. Epp v. Lauby, 271 Neb. 640, 715 N.W.2d 501 (2006).

III. FACTS

1. UNDERLYING CASE

This action for professional negligence arose out of the legal representation given to Bellino with regard to the severing of his business relationship with Anderson and Lottery. Bellino was the president, a director, and a 50-percent shareholder of Lottery. Bellino's actions in severing this relationship resulted in litigation, the facts of which are reported in Anderson v. Bellino, 265 Neb. 577, 658 N.W.2d 645 (2003). Some of those facts are recounted here for the sake of providing helpful background.

In 1989, the city of La Vista sought bids for the operation of a keno-type lottery for the city. Bellino and Anderson submitted a bid for the La Vista keno contract. In April 1989, Bellino and Anderson formed Lottery, a Nebraska corporation, for the purpose of operating the keno parlor. Bellino and Anderson each owned 50 percent of the shares of stock of Lottery, and both were officers and directors of the corporation.

Lottery entered into a keno operation contract with La Vista on May 16, 1989. The fixed term of the contract was extended through July 31, 1998, with a provision that the term would continue indefinitely beyond that term until one party served 60 days' written notice of termination upon the other.

Initially, Bellino and Anderson received salaries from Lottery. In 1993, following the advice of an accountant, they stopped receiving salaries. There was no express agreement between Bellino and Anderson as to the amount of time that each would devote to the lottery business. From 1994 to 1998, Lottery employed general managers, keno managers, supervisors, and keno writers.

In December 1997, Bellino and Anderson discussed the fact that Lottery's keno contract with La Vista was set to expire on July 31, 1998. Bellino told Anderson that he would meet with Anderson after the holidays to discuss Lottery's course of action. Shortly thereafter, in early 1998, Bellino sought legal advice from his attorneys concerning his desire to end the business arrangement with Anderson yet continue the keno operation.

In a letter to Anderson dated February 26, 1998, Bellino stated that he felt he was doing more than his share of the work. Bellino indicated he no longer intended to be associated with Lottery after the corporation's keno contract expired on July 31, 1998. In a letter dated April 21, 1998, Anderson's attorney informed Bellino that the keno contract with the city of La Vista was a corporate opportunity. The letter expressed Lottery's desire to have Bellino cooperate with Lottery in bidding for the new contract.

During the first quarter of 1998, Bellino met with La Vista's city administrator, Cara L. Pavlicek. After her conversation with Bellino, Pavlicek reviewed the contract and recommended to the city council that the keno contract be put up for competitive bid. On April 21, 1998, the La Vista City Council voted to accept Pavlicek's recommendation and put the keno contract up for bids. On May 4, Bellino's attorney wrote to Anderson and Lottery, informing them that Bellino had no interest in trying to resolve matters with Lottery and would not bid for the contract as part of Lottery.

Based on the advice of his attorney, Bellino formed La Vista Keno, Inc. (Keno), of which he was the sole shareholder. Bellino prepared and submitted a bid on behalf of Keno for the keno contract. The city awarded the new keno contract to Keno on July 24.

On July 29, 1998, Anderson and Lottery sued Bellino and Keno, alleging that Bellino had breached a fiduciary duty he owed to Lottery as an officer, director, and shareholder of Lottery by forming Keno and bidding on the La Vista keno contract. Anderson and Lottery sought the imposition of a constructive trust on Keno's business operations for the benefit of Anderson and Lottery.

Following a trial on May 9, 2000, the district court concluded that Bellino and Keno had obtained the contract with La Vista in breach of Bellino's fiduciary duty to Lottery and that the appropriate remedy was the imposition of a constructive trust for the benefit of Anderson and Lottery. The court further ordered Bellino to pay Anderson and Lottery $644,992.63, representing various items, including rents, profits, and benefits resulting from Bellino and Keno's receiving the keno contract from La Vista.

Bellino appealed to this court. On March 28, 2003, we affirmed the district court's order imposing a constructive trust upon Keno for the benefit of Anderson and Lottery, as well as the monetary judgment entered against Bellino.

2. PRESENT ACTION FOR PROFESSIONAL NEGLIGENCE

Bellino was represented in the above-described proceedings by attorneys Wegner and Hargens of McGrath North. Bellino relied on the attorneys' advice when he formed Keno and submitted a bid for the keno contract with La Vista. These attorneys continued to represent him throughout the resulting litigation with Anderson, including at trial, during initial settlement discussions, and on appeal. The attorneys withdrew from representing Bellino on May 27, 2003. Bellino retained new counsel and ultimately settled his dispute with Anderson for $2,427,729.76. The settlement payment was made to acquire Anderson's share in Keno that Anderson had acquired through the constructive trust.

Bellino and Keno (collectively Bellino) commenced this action for professional negligence against McGrath North, Wegner, and Hargens on December 3, 2003, in the district court for Douglas County. Bellino alleged that McGrath North committed legal malpractice because it failed to fully and fairly advise him that he could be liable for a breach of fiduciary duty by forming Keno and bidding for the La Vista keno contract while still associated with Anderson and Lottery. Bellino alleged that McGrath North failed to advise him that a court could impose a constructive trust in favor of Anderson and Lottery on Keno's profits from the La Vista keno contract. He requested judgment against McGrath North for all damages proximately caused by the attorneys' professional negligence.

After a trial, the jury awarded Bellino $1.6 million in damages. McGrath North moved for judgment notwithstanding the verdict or, in the alternative, for a new trial.

McGrath North asserted 12 grounds for judgment notwithstanding the verdict that the district court restated into four: (1) McGrath North's legal advice to Bellino did not constitute malpractice because the attorneys advised him on an unsettled point of Nebraska law, (2) McGrath North's legal advice was not the proximate cause of any damages, (3) Bellino's claim was barred by the statute of limitations, and (4) the jury verdict of $1.6 million in favor of Bellino was contrary to the law and evidence.

(a) Rejection of Argument Regarding Unsettled Point of Law

McGrath North claimed that Nebraska case law provided an "undefined exception" to the fiduciary duty rule prohibiting corporate officers...