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FRANK L. RIZZO AND LENA RIZZO v. BARTON A. HAINES (03/06/89)

decided: March 6, 1989.

FRANK L. RIZZO AND LENA RIZZO, APPELLEES,
v.
BARTON A. HAINES, ESQ., APPELLANT



Appeal from the Order of the Superior Court, No. 1882, Phila. 1985 and No. 1944, Phila. 1985, entered August 4, 1986, affirming in part and reversing and remanding in part of the Judgment of the Court of Common Pleas of Phila. County, Civil Division, No. 623, July 1979. Nix, C.j., and Larsen, Flaherty, McDermott, Zappala, Papadakos and Stout, JJ. Flaherty, J., joins the majority opinion and files a concurring opinion in which Zappala, J., joins. Papadakos, J., concurs in the result.

Author: Stout

[ 520 Pa. Page 489]

OPINION OF THE COURT

Barton A. Haines, Esquire, appeals from the order of the Superior Court, 357 Pa. Super. 57, 515 A.2d 321 affirming in part, and reversing and remanding in part, the judgment order of the Court of Common Pleas of Philadelphia County that held that he negligently, and in bad faith, conducted settlement negotiations for his client Frank L. Rizzo,*fn1 that he had fraudulently induced his client to transfer $50,000 to him, and that he improperly accounted for costs and expenses. The trial court entered a judgment against him in the amount of $530,000 in compensatory damages and $150,000 in punitive damages. In addition, the trial court denied Haines' recusal motion. In affirming the judgment, the Superior Court held that Haines must pay interest at the market rather than the statutory rate on the fraudulently-transferred monies. We affirm.

On September 20, 1968, Rizzo, while stopped in a vehicle at an intersection, was rear-ended by a City of Philadelphia police vehicle. At the time, Rizzo was an off-duty police officer for the City of Philadelphia. Rizzo's soft-tissue neck, back, and arm injuries, sustained in the accident, eventually worsened, and he came under the supervision of Henry T. Wycis, M.D. After three surgical procedures between September 29 and October 16, 1971, he became permanently partially paralyzed. Once a handsome and vital police officer, he became a comparatively helpless and pitiful invalid.

Rizzo originally retained Anthony J. Caiazzo, Esquire, to institute a suit against the City of Philadelphia [hereinafter " City " case]. Later he retained the law firm of Richter, Syken, Ross & Levant, which assigned the case to Haines, an associate with the firm. The relationship between Haines and the Richter firm deteriorated, and Haines left the firm. He copied the Rizzo file and took it and the client,

[ 520 Pa. Page 490]

    who by this time had become a personal friend, with him.*fn2 Frank and Lena Rizzo, under Haines' counsel, instituted a medical malpractice action against Dr. Wycis and the hospital where the surgeries were performed [hereinafter " Wycis " case].*fn3 The instant action arises from Haines' representation of Rizzo in these two lawsuits.

Haines did not pursue consolidation of the two cases. Rather, after a failed attempt on the part of the City to join Dr. Wycis' estate,*fn4 the City case was listed for a jury trial before the Honorable Merna B. Marshall. The jury returned a verdict in favor of Mr. Rizzo for $450,000. Reassuring the Rizzos that the Wycis case was still viable, Haines recommended that Rizzo take the money. Neither party filed post-trial motions.

After the verdict in the City case, Judge Marshall, by agreement of those involved, conducted a fee dispute hearing, wherein Caiazzo and Haines argued for a portion of the one-third of the verdict that had been placed in escrow for the payment of legal fees. Citing dissatisfaction with the conduct of the attorneys, and with Haines' conduct during settlement negotiations, Judge Marshall ordered a return from the escrow fund, to Rizzo, of $50,000, and divided the remainder between the attorneys. Subsequently, Haines procured for himself from Rizzo, supposedly as a gift, a return of the $50,000.

Throughout the course of the City case, Haines repeatedly led the Rizzos to believe that the Wycis case had a recovery value of between $800,000 and $1 million. The record reveals, however, that there was insufficient evidence

[ 520 Pa. Page 491]

    of Dr. Wycis' malpractice to justify this figure. Furthermore, the doctor's professional liability insurance coverage was only $100,000. In addition, there was insufficient evidence that the hospital was negligent either in extending staff privileges to Dr. Wycis or in caring for Rizzo. On January 23, 1978, the Wycis case was dismissed on a summary judgment motion. The Honorable Harry A. Takiff dismissed the suit on the basis that, inter alia, the recovery in the City suit had fully compensated Rizzo for his injuries. Rizzo v. Rohrback, 8 Pa.D. & C.3d 122, aff'd, 261 Pa. Super. 455, 395 A.2d 995 (1978).

The Rizzos instituted the instant malpractice action against Haines alleging, inter alia, professional negligence in settling the City case, breach of fiduciary duties with respect to the $50,000 transfer, and improper accounting of costs and expenses. The case was tried without a jury before the Honorable I. Raymond Kremer. On January 18, 1984, the judge found for the Rizzos. He awarded $300,000 compensatory damage for negligent settlement, plus $150,000 interest on that sum, calculated at the statutory rate of 6%. He also awarded a return of the $50,000 transfer, plus $25,000 in interest also calculated at the statutory rate. In addition, he awarded another $5,000, including interest, representing costs and expenses for which Haines had improperly accounted. Lastly, the court awarded $150,000 in punitive damages. Trial Ct. slip op. at 73. Both sides filed post-trial motions, Haines objecting to the judgment against him and the Rizzos objecting to the rate of interest applied to the judgment. On January 30, 1984, Haines filed a recusal motion, alleging that Judge Kremer had been involved in the City case in 1975. On June 20, 1985, Judge Kremer denied the post-trial motions and the motion to disqualify. The Superior Court affirmed, and held that, due to his breach of the fiduciary duty to Rizzo with regard to the $50,000 transfer, Haines must pay interest on that amount at the market rate rather than the statutory rate.

In reviewing the factual determinations of the trial court sitting as finder of fact, we must attribute to them the

[ 520 Pa. Page 492]

    same force and effect as a jury's verdict. Cover v. Cushing Capital Corp., 344 Pa. Super. 593, 497 A.2d 249 (1985); Snellbaker v. Herrmann, 315 Pa. Super. 520, 462 A.2d 713 (1983). Accordingly, we view the evidence and all reasonable inferences therefrom in the light most favorable to the Rizzos, as verdict winners. Wilson v. Benjamin, 332 Pa. Super. 211, 481 A.2d 328 (1984); Courts v. Campbell, 245 Pa. Super. 326, 369 A.2d 425 (1976). We will only upset the findings if there is insufficient evidence, or if the trial court committed an error of law. Penn State Constr. Inc. v. Cambria Sav. & Loan Ass'n, 360 Pa. Super. 145, 519 A.2d 1034 (1987); Piccinini v. Teachers Protective Mut. Life Ins. Co., 316 Pa. Super. 519, 463 A.2d 1017 (1983). In reviewing the findings, the test is not whether we would have reached the conclusion of the trial court, but rather whether we reasonably could have reached the same result. Harrisburg School Dist. v. Pennsylvania Interscholastic Athletic Ass'n, 453 Pa. 495, 309 A.2d 353 (1973); Delahanty v. First Pa. Bank, 318 Pa. Super. 90, 464 A.2d 1243 (1983). We will not substitute our judgment for that of the trial court. Delahanty, supra.

Viewed in this light, the facts surrounding the settlement negotiations of the City case are as follows. On March 5, 1974, at Haines' request, an informal conference was held in the office of Sheldon Albert, the Chief Deputy City Solicitor. After a "mini-trial" of Rizzo's position, Haines, with Rizzo's approval put forth $1.2 million as his client's initial settlement offer. N.T. 8/21/83 at 86-89; 4/29/83 & 5/2/83 at 24. The City did not accept this offer. Haines later provided the City with actuarial figures detailing his client's potential earnings as a police officer versus his earnings in other jobs that he conceivably could perform given his disability. N.T. 8/21/83 at 87-88; 4/29/83 at 69-70. The City never responded.

Again at Haines' request,*fn5 a pre-trial settlement conference was held before the Honorable John J. McDevitt, III.

[ 520 Pa. Page 493]

At the April 2, 1975, meeting, the judge put an initial settlement range on the case of between $500,000 and $3,000,000. N.T. 7/21/83 at 107. Haines reiterated his client's demand of $1.2 million. Mr. Moran, a Deputy City Solicitor, responded by offering $300,000 plus a lifetime pension, which Haines did not accept. Id. Moran stated that although he needed approval from other departments within his office to effectuate the pension, he regarded the offer as "firm" because he believed he could accomplish it. Id. at 38. Sheldon Albert testified that Moran had the authority to settle in such a fashion. N.T. 4/29/88 at 11. Haines testified that, at the meeting, he neither inquired of the City what was involved in a lifetime pension, N.T. 4/27/83 at pm1-2, nor asked whether the pension was analogous to a structured settlement. Id. at pm6. He stated that he did not explore the pension because Rizzo previously applied to the City for a disability pension which the City denied after an administrative hearing because the accident did not occur while he was on duty. Rizzo therefore did not believe that the City could get him a pension. N.T. 4/29/83 & 5/2/83 at 27. Haines also did not explore the pension because he did not believe that Mr. Moran's remarks concerning the pension constituted a true offer. Rather, he thought that Moran made the remark in passing. N.T. 4/27/83 at pm4. He did, however, within one week of the conference, write two letters to Mr. Moran in which he specifically asked for an offer from the City, as well as for information concerning the pension. Mr. Moran did not respond to these letters. N.T. 7/21/83 at 104-08; N.T. 5/3/83 at 29.

Subsequently, Haines arranged for a second formal settlement conference. It transpired on Friday, April 18, 1975, three days before trial, in front of Judge Marshall. At the

[ 520 Pa. Page 494]

    meeting, Haines raised his settlement demand to $2 million.*fn6 In response, Moran made the only offer ever made by the City in writing. This offer was for $50,000. Moran testified that he lowered the offer because Haines had raised the demand. N.T. 5/3/83 at 12.

After the fourth day of trial, another settlement conference was held before Judge Marshall. The judge offered to lend her assistance in reaching settlement by putting a figure of $550,000 on the case. Id. at 13. Haines, without first consulting Rizzo, immediately rejected the figure. N.T. 4/27/83 at pm40. Moran, in response, did not offer the $550,000, because "if he is not going to accept it there is no point in me offering it." N.T. 5/3/83 at 14. During the course of trial, however, Moran did say to Haines, "Look, I've got more than 550, what do you really want," to which Haines' only response was "$2 million." Id. at 15. Haines did not inquire how much "more" the City was willing to pay. Moran further testified that he was authorized to settle at trial for $750,000. Id.

Rizzo testified that he had authorized Haines to settle the case for $700,000 to $750,000. N.T. 4/29/83 & 5/2/83 at 30, 161. He further testified that he never authorized Haines to raise the demand to $2 million, nor did Haines ever tell him he was going to do so. Id. at 128; N.T. 8/12/83 at 4, 30. He also testified that Haines never informed him that Judge Marshall had suggested the $550,000 settlement figure until after the case was over.*fn7 N.T. 4/29/83 & 5/2/83 at 160; N.T. 8/12/83 at 64.

In addition to the evidence detailing the specifics of the settlement negotiations, there was also evidence that Haines considered the opportunity to try the case to be a cornerstone in building his reputation as a successful plaintiff's

[ 520 Pa. Page 495]

    attorney. N.T. 4/27/83 at am49; 5/2/83 at 7-8; 5/3/83 at 8-9.

With regards to the $50,000 transfer, the evidence shows that Rizzo initially retained Caiazzo pursuant to a power of attorney under which Caiazzo was to receive a fee of 50% after expenses were deducted. Rizzo then retained the Richter firm. The power of attorney between Rizzo and the firm was for 40% after expenses. After Haines left the firm, Rizzo and Haines signed a power of attorney for a one-third contingent fee with Rizzo to pay his own medical expenses. After the May 1, 1975 verdict of $450,000 in the City case, Haines, Caiazzo, and the Richter firm were unable to agree on the allocation of legal fees and costs. By written agreement, on May 13, 1975, they submitted the dispute to Judge Marshall. Also by agreement, the attorneys established a fee escrow account in an amount representing one-third of the total recovery, from which the attorneys agreed to limit their fee. N.T. 4/28/83 at am36. In July of 1975, Haines and the Richter firm reached an agreement wherein the Richter firm would accept $25,000 in settlement of its claims. N.T. 7/26/83 at 35. Consequently, the firm was not a party to or present at the fee dispute hearings. Citing Haines' failed attempt at settlement, Judge Marshall surcharged the fund for $50,000, returned the sum to Rizzo, and stated that the sum "should be added to the amount of money distributed to the Plaintiff, Rizzo." Findings of Fact and Conclusions of Law 12 (Marshall, J.). The judge divided the remaining money, approximately $70,000, evenly between Haines and Caiazzo.

Shortly after Judge Marshall issued Findings of Fact and Conclusions of Law in the fee dispute, Haines approached Rizzo and procured from him a return of the $50,000. N.T. 4/29/83 & 5/2/83 at 38. Haines told Rizzo that his practice was still not solvent, and that he needed the money to continue pursuing the Wycis case, which had a potential recovery value, according to Haines, of $800,000 to $900,000. Id. After having sought independent legal advise from Leonard J. Bucki, Esquire, as to the propriety of the action, Haines drafted a letter wherein Rizzo agreed to the

[ 520 Pa. Page 496]

    transfer.*fn8 Id. at 126. Rizzo testified that he believed this transfer to be a loan. Id. at 176-77. Haines did not inform Judge Marshall, or Caiazzo, or the Richter firm of this transaction. In addition, prior to the time that Rizzo transferred the $50,000, Haines never showed him, or his wife, Judge Marshall's Findings of Fact and Conclusions of Law, wherein the judge found that Haines had improperly negotiated settlement of the City case. Id. at 87; 5/18/83 at 2-3, 91-93; 8/12/83 at 32-33; Trial Ct. slip op. at 50.

Concerning alleged overreaching on fees and reimbursements, the evidence shows that during the pendency of the City case, Haines lent Rizzo approximately thirty or forty dollars each week for cab fare and other nominal expenses, for about eighteen or nineteen months. N.T. 5/18/83 at 96; 7/27/83 at 8-9. These transfers went largely undocumented. After the verdict in the City case but before resolution of the fee dispute, Rizzo gave Haines $30,000 in cash, $20,000 of which was a loan in order to help Haines proceed with the Wycis case. Haines had originally asked Rizzo for $100,000, which Rizzo refused to lend. N.T. 8/12/83 at 12. Haines repaid $20,000 to Rizzo. The parties dispute the remaining $10,000. Haines alleged that although the status of the money was left "open" in order to deal with changing circumstances, it basically represented a $7,200 reimbursement for the personal advances that Haines had made to Rizzo, as well as $2,800 for miscellaneous

[ 520 Pa. Page 497]

    legal services rendered to Rizzo and his family. N.T. 7/22/83 at 106-07; 7/27/83 at 11-31; 8/9/83 at 209-10. Rizzo stated that he thought the $10,000 was only for costs, and not for repayment of loans or for reimbursement of previously-incurred legal expenses. N.T. 8/12/83 at 14. There was no an agreement that Haines was to be reimbursed for these legal services. Id. at 14-15. In addition, Haines never showed him a cost sheet or otherwise accounted for expenses for the City case. Id. at 9-10. In the midst of trial, however, Haines produced his missing "black book," a ledger that detailed his costs and expenses.

Based on this evidence, the trial court found that Haines had negligently conducted settlement of the City case, that the $50,000 transfer was fraudulent and in violation of Haines' fiduciary duty, and that Haines had overreached on costs and expenses in the amount of $2,800. His settlement conduct was negligent, according to the trial court, in that he failed properly to "explore ...


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