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Behrens v. Wedmore

698 N.W.2d 555 (2005)

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Behrens v. Wedmore

South Dakota Supreme Court

698 N.W.2d 555 (2005)

Facts

Jon and Don Behrens (collectively, Behrens) (plaintiffs) owned and operated a funeral business. Behrens negotiated an agreement to sell the business to Loewen International, Inc. (Loewen). The agreed-upon terms included a cash payment at closing and installment payments beginning on the first anniversary of the closing date. Behrens agreed to hold an unsecured promissory note for the installments. Behrens and Loewen executed a document incorporating the terms (the initial agreement). Behrens engaged attorney Melvin Wedmore (defendant) to close the transaction. After the transaction closed, Loewen filed for bankruptcy. Behrens could not recover the full purchase price or get their business back. Behrens sued Wedmore, claiming Wedmore should have better collateralized the note, Behrens knew nothing about bankruptcy, and Wedmore should have warned Behrens of an installment sale’s risks in bankruptcy. Wedmore argued he understood he was to close the transaction based on the initial terms, he could not obtain additional security because the initial signed agreement was binding, his efforts to secure the indebtedness in the initial agreement protected Behrens more than they would have been had they held only the unsecured note, and Behrens were contributorily negligent and assumed the risk of their loss by entering into the initial agreement without obtaining legal advice. Wedmore’s experts testified that Wedmore could not have better collateralized the transaction because of the initial terms, the standard of care when a client states he made and signed an agreement would be to conduct oneself as if the agreement were binding, an attorney exercising due care could not have obtained a better result in the bankruptcy, and experienced businesspeople should know making a loan involves a risk of nonpayment. The jury found for Wedmore. Behrens appealed, arguing that the trial court erred in instructing the jury that contributory negligence and assumption of the risk were defenses to Behrens’ malpractice claim.

Rule of Law

Issue

Holding and Reasoning (Zinter, J.)

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