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ATTORNEYS FOR APPELLANT
Mark E. GiaQuinta Robert W. Eherenman Haller & Colvin, P.C. Fort Wayne, Indiana

ATTORNEY FOR APPELLEES
Robert G. Forbes Forcum, Forbes, Danielson & Danielson LLP Hartford City, Indianapolis

______________________________________________________________________________

In the

Indiana Supreme Court
_________________________________ No. 38S02-0703-CV-80 RONALD D. LIGGETT, d/b/a LIGGETT CONSTRUCTION COMPANY, Appellant (Defendant/Third Party Plaintiff), v. DEAN A. YOUNG AND ELISABETH YOUNG, Appellees (Plaintiffs/Third Party Defendants). _________________________________ Appeal from the Jay Circuit Court, No. 38C01-0104-CP-32 The Honorable John M. Feick, Judge _________________________________ On Petition To Transfer from the Indiana Court of Appeals, No. 38A02-0511-CV-1086 _________________________________ December 4, 2007 Dickson, Justice.

The plaintiff, Ronald Liggett, d/b/a Liggett Construction Company, brings this appeal to challenge a trial court summary judgment ruling in a contract dispute arising from Liggett's construction of a private residence for his attorney, defendant Dean Young, and Young's wife, Elisabeth. To address whether the parties' attorney-client relationship affects the resolution of this dispute, we granted transfer, and now reverse the trial court.

In 2001, when sued by a supplier of bricks and materials used in the construction of the Youngs' home, Liggett initiated a third-party complaint against the Youngs. The Youngs' answer

included a counterclaim against Liggett seeking damages for allegedly negligent and untimely performance of the work under the building contract. After further counterclaims and motions for summary judgment were presented, the trial court granted partial summary judgment in favor of the Youngs as to all of Liggett's claims against them. Expressly finding no just reason for delay, the trial court entered final judgment in favor of the Youngs and against Liggett as to all of Liggett's claims against the Youngs. Liggett appealed, and the Court of Appeals affirmed. Liggett v. Young, 851 N.E.2d 968 (Ind. Ct. App. 2006).

Among Liggett's issues on appeal, we find one to be dispositive: "Whether the trial judge erred in finding no genuine issue of material fact with respect to the enforceability of a contract drafted and entered into between an attorney and his builder/client." Appellant's Br. at 1.

Before addressing this issue, however, we note the somewhat unconventional procedural posture of this case in the trial court. The motion for partial summary judgment filed by the Youngs was supported only by Dean Young's affidavit referring to the parties' building contract, asserting full payment, and attaching the contract as an exhibit. Opposing the Youngs' motion, Liggett's affidavit asserted the existence of unpaid additional labor and materials from change orders; attached exhibits consisting of plans and specifications related to the construction; and asserted that at the time of the contract, Dean Young was serving as Liggett's attorney and had assured Liggett that "that there would be no problems" as a result of Young's "dual status" as Liggett's attorney and party to the contract. Appellant's App'x at 59. Finding it undisputed that "the Youngs have paid the full price called for under the contract," the trial court granted the Youngs' motion for partial summary judgment. The court did not address Liggett's assertions regarding the fact or implications of Dean Young's "dual status" as both a contracting party with and lawyer for Liggett. Following the appointment of a special judge, the appearance of new counsel for Liggett, and a series of further pleadings, Liggett filed a motion for summary judgment. Finding that it was "in effect" a motion to reconsider the previous ruling on the Youngs' motion for partial summary judgment, Appellant's App'x at 12, the trial court undertook such reconsideration and addressed the new arguments presented by Liggett, but declared itself to be "constrained to review the record and evidence as same existed" on the date of the initial order granting partial summary judgment, and did not consider any new designated evidence submitted

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to support or oppose Liggett's motion for summary judgment. With a detailed explanatory order, the trial court denied Liggett's summary judgment and affirmed the previous order granting the Youngs' motion seeking partial summary judgment as to Liggett's claims against the Youngs.

1. Professional Conduct Rule 1.8

Liggett's appeal contends in part that the Youngs failed to carry their burden on summary judgment to prove that the construction contract was not void by reason of Indiana Professional Conduct Rule 1.8, which restricts an attorney's ability to engage in transactions with the attorney's client. Liggett urges that Dean Young violated this rule by drafting the construction contract for the project, and that attorney/client transactions are presumptively invalid as the product of undue influence. In response, the Youngs contend (a) that Liggett's designation of evidence on summary judgment, claiming an entitlement to receive the contract price plus an additional amount, is inconsistent with his claim that the contract should be found void, and (b) that the construction contract was a standard commercial transaction to which Rule 1.8 does not apply.

Summary judgment is appropriate only when the designated evidence shows there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Indiana Trial Rule 56(C); Biddle v. BAA Indianapolis, LLC, 860 N.E.2d 570, 575 (Ind. 2007); Gunkel v. Renovations, Inc., 822 N.E.2d 150, 152 (Ind. 2005); Worman Enterprises, Inc. v. Boone County Solid Waste Mgmt. Dist., 805 N.E.2d 369, 373 (Ind. 2004). We construe all facts and reasonable inferences in favor of the non-moving party. Gunkel, 822 N.E.2d at 152. Furthermore, we carefully review summary judgment decisions to ensure a party is not improperly denied its day in court. Id.; Reeder v. Harper, 788 N.E.2d 1236, 1240 (Ind. 2003); St. Vincent Hosp. and Health Care Ctr., Inc. v. Steele, 766 N.E.2d 699, 702 (Ind. 2002).

At all relevant times (from the contract date of July 2, 1999, through the date the Youngs filed their complaint, April 2, 2001), Rule 1.8(a) of the Indiana Rules of Professional Conduct provided as follows: (a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:

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(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner which can be reasonably understood by the client; (2) the client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and (3) the client consents in writing thereto. 1 The Comment to Rule 1.8, as relevant to subsection (a), emphasized the general principle that "all transactions between client and lawyer should be fair and reasonable to the client," and added that, "[i]n such transactions a review by independent counsel on behalf of the client is often advisable." Ind. Prof. Cond. R. 1.8 cmt. (1999). But the Comment also noted an exception: Paragraph (a) does not, however, apply to standard commercial transactions between the lawyer and the client for products or services that the client generally markets to others, for example, banking or brokerage services, medical services, products manufactured or distributed by the client, and utilities services. In such transactions, the lawyer has no advantage in dealing with the client, and the restrictions in paragraph (a) are unnecessary and impracticable. Id. 2 The parties disagree regarding whether their transaction falls within this "standard commerThis provision was slightly revised effective January 1, 2005, as part of the broad revision of the Indiana Rules of Professional Conduct following the American Bar Association's 2002 changes in its Model Rules of Professional Conduct. In its present form, Indiana's Rule 1.8(a) is identical to its predecessor except as to subsections (2) and (3), which now state: (2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and (3) the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer's role in the transaction, including whether the lawyer is representing the client in the transaction . Ind. Prof. Cond. R. 1.8(a) (2006) (emphasis added to identify new language).
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Following the 2002 revision of the ABA Model Rules, the Comment was substantially rewritten. In relevant part, it now provides: [1] A lawyer's legal skill and training, together with the relationship of trust and confidence between lawyer and client, create the possibility of overreaching when the lawyer participates in a business, property or financial transaction with a client, for example, a loan or sales transaction or a lawyer investment on behalf of a client. The requirements of paragraph (a) must be met even when the transaction is not closely related to the subject matter of the representation, as when a lawyer drafting a will for a client learns that the client needs money for unrelated expenses and offers to make a loan to the client. The Rule applies to lawyers engaged in the sale of goods or services related to the practice of law, for example, the sale of title insurance or investment services to existing clients of the lawyer's legal practice. See Rule 5.7. It also applies to lawyers purchasing property from estates they represent. . . . In addition, the Rule does not apply to standard commercial transactions between the lawyer and the client for products or services that the client generally markets to others, for example, banking or brokerage services, medical services, products manufactured or distributed by the client, and utilities' services. In such trans-

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cial transaction" exception. The Youngs argue that they fall within the exception because the transaction involves a product and/or service that Liggett, a building contractor, generally markets to others. Liggett contends that it does not apply because the dispute centers on the interpretation of the construction contract drafted by his lawyer, Dean Young.

Regardless whether this transaction does not qualify as a standard commercial transaction and thus subjects Dean Young to the requirements of Rule 1.8(a), the Rules of Professional Conduct have limited application outside of the attorney disciplinary process. On the dates relevant to this case, the Preamble to the Indiana Rules of Professional Conduct stated in part: Violation of a Rule should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached. The Rules are designed to provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies. They are not designed to be a basis for civil liability, but reference to these rules as evidence of the applicable standard of care is not prohibited. Furthermore, the purpose of the Rules can be subverted when they are invoked by opposing parties as procedural weapons. The fact that a rule is a just basis for a lawyer's self-assessment, or for sanctioning a lawyer under the administration of a disciplinary authority, does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforceactions, the lawyer has no advantage in dealing with the client, and the restrictions in paragraph (a) are unnecessary and impracticable. [2] Paragraph (a)(1) requires that the transaction itself be fair to the client and that its essential terms be communicated to the client, in writing, in a manner that can be reasonably understood. Paragraph (a)(2) requires that the client also be advised, in writing, of the desirability of seeking the advice of independent legal counsel. It also requires that the client be given a reasonable opportunity to obtain such advice. Paragraph (a)(3) requires that the lawyer obtain the client's informed consent, in a writing signed by the client, both to the essential terms of the transaction and to the lawyer's role. When necessary, the lawyer should discuss both the material risks of the proposed transaction, including any risk presented by the lawyer's involvement, and the existence of reasonably available alternatives and should explain why the advice of independent legal counsel is desirable. See Rule 1.0(e) (definition of informed consent). [3] The risk to a client is greatest when the client expects the lawyer to represent the client in the transaction itself or when the lawyer's financial interest otherwise poses a significant risk that the lawyer's representation of the client will be materially limited by the lawyer's financial interest in the transaction. Here the lawyer's role requires that the lawyer must comply, not only with the requirements of paragraph (a), but also with the requirements of Rule 1.7. Under that Rule, the lawyer must disclose the risks associated with the lawyer's dual role as both legal adviser and participant in the transaction, such as the risk that the lawyer will structure the transaction or give legal advice in a way that favors the lawyer's interests at the expense of the client. Moreover, the lawyer must obtain the client's informed consent. In some cases, the lawyer's interest may be such that Rule 1.7 will preclude the lawyer from seeking the client's consent to the transaction. Ind. Prof. Cond. R. 1.8 cmt. (2006).

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ment of the Rule. Ind. R. Prof. Cond. Preamble (1999-2004). 3

Prior decisions are inconsistent regarding whether this language in the pre-2005 Preamble should be applied to preclude resort to Rule 1.8(a) in resolving the issue of civil liability. Two opinions have indicated that violation of the Rules of Professional Conduct may serve as a basis for civil liability. See Trotter v. Nelson, 684 N.E.2d 1150, 1153 (Ind. 1997) ("The Rules at issue . . . are explicit judicial declarations of Indiana public policy and, akin to contravening a statute, agreements in violation of these rules are unenforceable."); Picadilly, Inc., v. Raikos, 582 N.E.2d 338, 342 (Ind. 1991) ("An attorney who breaches any of these duties may face both disciplinary action and a legal malpractice claim."). But neither of these cases address the above-quoted Preamble language. On the other hand, in Sanders v. Townsend, 582 N.E.2d 355 (Ind. 1991), this Court explicitly declared that this language in the Preamble "make[s] it clear that [the Rules of Professional Conduct] do not purport to create or describe any civil liability ..." Id. at 359.

In Sanders, the clients sued their lawyer, asserting that the lawyer breached fiduciary duties by coercing them into an inadequate settlement. This Court affirmed summary judgment for the lawyer, noting that the client's contention was that the lawyer "breached his fiduciary duties to them . . . in violation of the Indiana Code of Professional Responsibility ..." Id. at 358-59. We held "that to subject attorneys to suit for constructive fraud based on a violation of the fiduciary duties that are regulated under the Rules of Professional Conduct . . . would create unreasonable, unwarranted, and cumulative exposure to civil liability." Id. at 359. We infer from the reference to "cumulative exposure to civil liability" that Sanders stands for the proposition that, while civil liability in damages may not be predicated on a claimed violation of a specific professional conduct rule relating to fiduciary duties, a client nevertheless may seek damages if the attorney's conduct constitutes a breach of fiduciary duty at common law. 4
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The 2005 revisions to this language included the addition of the sentence: "Nevertheless, since the Rules do establish standards of conduct by lawyers, a lawyer's violation of a Rule may be evidence of breach of the applicable standard of conduct." Ind. R. Prof. Cond. pmbl.

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