28
Oct
11

Court of Appeals Confirms Assignability of legal malpractice claim — Georgia a minority of states allowing such a claim

In Villanueva v. First American Title Ins. Co., 2011 Ga. App. LEXIS 933 (Oct. 27, 2011), the Georgia Court of Appeals decided a case of first impression and held that a closing attorney could be sued by an assignee of a legal malpractice claim.  Unlike most states which forbid the assignment of a legal malpractice claim on public policy grounds, the Court of Appeals held that legal malpractice claims that arise out of an interest in property may be assigned. 

The opinion relied upon OCGA 44-12-24 in finding that the assignment was proper since the legal malpractice claim was a property interest and not a personal injury, fraud or reputation claim.

In general, under Georgia law, a right of action is assignable “if it involves, directly or indirectly, a right of property,” while “[a] right of action for personal torts or for injuries arising from fraud to the assignor may not be assigned.” OCGA § 44-12-24. “Personal torts” are torts involving an injury to the person, to the reputation, or to feelings, as distinguished from an injury or damage to real or personal property, which is a property tort.  OCGA 44-12-24 “codifies the common law prohibition against assignment of personal injury claims.” 

Legal malpractice claims often involve injury to property in the form of financial loss, rather than personal injury, and therefore may be assignable under OCGA § 44-12-24. And here, the alleged legal malpractice is not based on fraud and does not involve an injury to the person, to the reputation, or to feelings.Instead, the loss is solely a financial loss, it involves a right of property, and it is assignable. “A party may assign a cause of action involving a tortious injury to his property.” 

(Citations omitted.)  Georgia is definitely in a minority of states that permit legal malpractice claims to be assigned.  The reason for not allowing legal malpractice cases is already a part of Georgia law.

Thus, “[c]ertain classes of contracts are inherently non-assignable in their character, such as promises to marry, or engagements for personal services, requiring skill, science, or peculiar qualifications. When rights arising out of contract are coupled with obligations to be performed by the contractor and involve such a relation of personal confidence that it must have been intended that the rights should be exercised and the obligations performed by him alone, the contract, including both his rights and his obligations, can not be assigned without the consent of the other party to such contract. The rule is sometimes stated by saying, ‘Contract rights coupled with liabilities, or involving a relation of personal confidence between the parties, can not be transferred to a third person by one of the parties to the contract without the assent of the other.’ [Cit.]”

Decatur North Assoc. v. Builders Glass, Inc., 180 Ga. App. 862, 350 S.E.2d 795 (1986).  These principles were clearly ignored by the Court of Appeals in its decision.  The opinion greatly expands the potential liability for attorneys and law firms.

Hopefully the Supreme Court will get a chance to review this opinion.

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