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Loosveldt v. Paine

December 30, 1996


Appeal from Superior Court of Benton County;. Docket No: 892010361. Date filed: 11/02/94. Judge signing: Hon. Dennis D. Yule.

Authored by Sharon S. Armstrong, Visiting Judge.* Concurring: William W. Baker, Ann L. Ellington.

The opinion of the court was delivered by: Armstrong

ARMSTRONG, J.P.T.* -- Charles and Sharon Loosveldt appeal the dismissal of their attorney malpractice action, asserting that the trial court erred by concluding that their claim was time-barred. We affirm.

In January 1982, the Loosveldts and Richard and Joy Bergloff purchased a beer distributorship from Frank Granger, Inc. The Loosveldts and Bergloffs were personally obligated to make payments under a purchase agreement and covenant not to compete. To finance the purchase, Charles Loosveldt borrowed $300,000 from H. Clay Barr (Barr, Sr.) and agreed to repay the loan within one year. Loosveldt agreed that if he failed to meet that obligation, he would transfer to Barr, Sr., all his interest in the distributorship, Desert Sun Distributing.

In March 1983, the Loosveldts and R. Clay Barr (Barr, Jr.) and his wife purchased Central Music and Vending, Inc., from Millard and Bettyjean Triplett for $1.25 million under a stock purchase agreement calling for monthly installment payments. Three months later, having failed to repay the $300,000 Desert Sun loan, the Loosveldts transferred all of their interest in Desert Sun Distributing to Barr, Jr., at Barr, Sr.'s request.

In November 1983, Granger commenced an action against the Loosveldts and Bergloffs based on their failure to make payments under the covenant not to compete. When Charles Loosveldt was served, he took the complaint to Barr, Jr., who stated that he would take care of it. The Barrs then consulted Paine, Hamblen, their long-time attorneys, who served a notice of appearance on Granger's counsel on behalf of the Loosveldts and Bergloffs. The Loosveldts had no contact with Paine, Hamblen at that time regarding the litigation.

In December 1983, Fred Emry, Curtis Shoemaker, and Shaun Cross, all attorneys with Paine, Hamblen, exchanged memoranda concerning the possible vulnerability of Desert Sun's assets because of the Granger lawsuit. In early January 1984, Emry sent a letter to Barr, Jr., suggesting three options:

(1) continue making the payments to Granger; (2) default on the Granger debt and abandon the $300,000 investment in Desert Sun; or (3) default on the debt and sue Granger for fraud. Emry did not send the Loosveldts a copy of this letter.

After meeting with Paine, Hamblen lawyers a few days later, Barr, Sr., decided to attempt to negotiate a debt reduction with Granger. As part of this strategy, Barr, Sr., and his attorneys discussed obtaining the Loosveldts' interest in Central Music. If Loosveldt's financial statement showed fewer assets, it would be easier to persuade Granger to reduce the Desert Sun debt. The Barrs and the attorneys also discussed Paine, Hamblen's conflict of interest in representing the Loosveldts. The Barrs then met with Charles Loosveldt and told him he should obtain his own attorney because of the conflict of interest. As a result, Loosveldt contacted his attorney Lynn Fielding, who called Emry on January 26, 1984.

One day later, Emry sent Barr, Jr., documents that Emry had drafted:

a sales agreement transferring the Loosveldts' interest in Central Music to Barr, Jr., and an option agreement granting Charles' father Ray Loosveldt an option to repurchase 48 percent of the shares in Central Music. The letter accompanying the agreements stated that the documents were in draft form, that the sales agreement must be signed and dated prior to the option agreement, and that Barr, Jr., should contact Emry before executing the agreements.

Emry also sought the advice of Paine, Hamblen attorneys Shoemaker and Cross. Cross expressed his concern regarding the conflict of interest because Shoemaker, who had signed the notice of appearance, was still representing the Loosveldts.

On February 6, having spoken with Emry several days beforehand, Fielding signed a notice of substitution of counsel on behalf of the Loosveldts and sent it to the trial court for filing. Paine, Hamblen did not send Fielding copies of the draft agreements regarding the Central Music transfer, nor did Emry otherwise advise Fielding of the proposed transfer.

On February 10, 1984, Barr, Sr., presented three agreements regarding Central Music to the Loosveldts and Charles Loosveldt's parents. The agreements were a sales agreement between the Loosveldts and the Barrs, an option to purchase agreement for Charles' father to sign, and an assignment of the option to purchase from Charles' father to Charles. Barr, Sr., stated that the sole purpose of the agreements was to assist in resolving the Granger litigation and that after that resolution the ...

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