Title: Kurylas, Inc. v. Bradsky

State: south-dakota

Issuer: South Dakota Supreme Court

Document:

452 N.W.2d 111 (1990) KURYLAS, INC., Plaintiff-Appellant, v. Walter J. BRADSKY, Defendant-Appellee. No. 16594. Supreme Court of South Dakota. Argued October 17, 1989. Decided February 21, 1990. Rehearing Denied April 2, 1990. *112 J.M. Grossenburg, Day & Grossenburg, Winner, Gale Fisher of Fisher & Hughes, Sioux Falls, for plaintiff-appellant. Paul T. Barnett of Siegel, Barnett & Schutz, Aberdeen, for defendant-appellee. DOBBERPUHL, Circuit Judge. Kurylas, Inc. (Kurylas) appeals from a summary judgment entered against it in its action for damages allegedly arising from an attorney/client relationship with Walter J. Bradsky (Bradsky). We affirm. Kurylas' complaint in this case alleged damage from a conversion suit brought against it by Rushmore State Bank. See Rushmore State Bank v. Kurylas, Inc., 424 N.W.2d 649 (S.D.1988). A $83,711.58 judgment was entered against Kurylas and in favor of Rushmore State Bank. Kurylas also incurred a large amount of attorney's fees due to the conversion suit and other matters. Kurylas alleged that Bradsky negligently failed to possess and exercise that degree of knowledge and skill ordinarily possessed and exercised by lawyers engaged in the legal profession in the same or similar locality. Kurylas and Bradsky agree that an attorney/client relationship existed between them. Roman Kurylas, president and primary owner of Kurylas, is married to Bradsky's sister Wilma. Due to this relationship, Bradsky worked with Kurylas on many matters. The relationship pertinent to this appeal is one which grew out of transactions involving the sale of a motel complex. Kurylas owned a motel which was being offered for sale to Darrell Kiser (Kiser). Kurylas negotiated the sale with Kiser. Kurylas asked Bradsky to draw up documents relevant to the sale of the motel. The document relevant to this appeal contained a clause in which Kurylas was granted a security interest in the personal property of the motel. In addition, a financing statement was to be filed at the time of the execution of the sale agreement. The financing statement was not filed until over a year later. A chronological sequence of events follows setting out the dates and transactions or events that occurred: The trial court considered these facts in making its determination. Applying the statute of limitations found in SDCL 15-2-14.2 the trial court entered summary judgment in favor of Bradsky. Further, the trial court announced that the continuous representation doctrine did not apply in this case to toll the statute of limitations. Kurylas raises two issues: The scope of review from an order granting summary judgment is: Lunstra v. Century 21 GKR-Lammers, 442 N.W.2d 448 (S.D.1989); Nizielski v. Tvinnereim, 429 N.W.2d 483, 485 (S.D. 1988), quoting Time Out, Inc. v. Karras, 392 N.W.2d 434, 436-37 (S.D.1986). From our review of the record, there are no material issues of fact. The issues raised are questions of law. Kurylas states in a third issue that summary judgment should not have been granted. This claim is actually incorporated in the other two issues. However, a brief note on summary judgment is warranted. Kurylas claims that a summary judgment is not proper for a statute of limitations question citing Schoenrock v. Tappe, 419 N.W.2d 197 (S.D.1988), for the proposition that statute of limitation questions are normally for the jury. Kurylas fails to recognize that the Schoenrock court allowed dismissal of the action on the statute of limitations issue. If the facts were in dispute, then there would be a material issue of fact invalidating the summary judgment. In the case at bar the facts are not in issue, only the application of law. This is the same scenario recognized in Schoenrock. SDCL 15-2-14.2 reads: Kurylas' claim is very similar to the claims made in the Schoenrock case, supra.[1] In Schoenrock the client commenced an action against his attorney for rendering an inaccurate title opinion. The attorney rendered a title opinion on February 20, 1981. The title opinion failed to mention a certain wildlife easement which contained various restrictions on the land. This court found: Schoenrock, supra, at 199. The action was barred after February 20, 1984. Hence, summary judgment was appropriate because Schoenrock's attorney did not sign the summons and complaint until November 25, 1985.[2] Here, as in Schoenrock, Kurylas urges the court to follow a date of damage or injury rule to determine when the statute begins to run for attorney malpractice actions. This type of theory is also referred to as the discovery rule. South Dakota has chosen not to follow the discovery or date of damage rule. The legislature has specifically set up an "occurrence" rule. This court has previously stated: Schoenrock, supra, at 199; Hoffman v. Johnson, 374 N.W.2d 117 (S.D.1985). The injury is the late filing of the financing statements. The motel property in question changed hands from Kurylas to Kiser, then to Kiser's corporation. After Kiser's corporation defaulted, the motel was transferred to Ceasar's, another corporation. The exchange agreements between all these parties contemplated the filing of financing statements. Kurylas did have a financing statement filed listing Kiser as a debtor on November 13, 1984. However, Kiser no longer had any interest in the property after July 1, 1983. See Rushmore State Bank v. Kurylas, Inc., supra. Therefore, this filing was ineffective against Ceasar's, the current party in default. In the meantime, the Rushmore State Bank had filed a financing statement listing Ceasar's as the debtor. Subsequently, Kurylas filed a financing statement with Lewis, Ceasar's trustee, listed as a debtor. The negligence[3] is the failure to file a timely financing statement and list the proper debtor. The question becomes what act or omission starts the time clock running under these facts for statute of limitation purposes. South Dakota case law is very limited regarding SDCL 15-2-14.2. The first case interpreting this statute was Hoffman v. Johnson, supra. Although this case applied another statute of limitations, it effectively introduced the occurrence rule. Hoffman reviewed the legislative history of SDCL 15-2-14.1 and 15-2-14.2. It noted that the previous discovery rule adopted by SDCL 15-2-15(3) was rejected. See also, Alberts v. Giebink, 299 N.W.2d 454 (S.D.1980) (SDCL 15-2-14.1 is reviewed concerning medical malpractice limitations). The next case reviewing this statute was Glad v. Gunderson, Farrar, Aldrich, 378 *115 N.W.2d 680 (S.D.1985). Summary judgment was ordered by application of the statute of limitations in SDCL 15-2-14.2. It was conceded that time had run under this statute. The defense, fraudulent concealment of the legal malpractice action, tolled the statute of limitations however. The facts were found insufficient to constitute fraudulent concealment. Thus, the Glad case does not give much guidance for this situation. The next decision, Schoenrock, supra, is important because it notes that the act or omission begins the running whether the act could have been later cured or not. Of course, if an attorney is under a duty to correct the act because he or she is continuing to represent the client on the same matter then the statute of limitations is tolled. There are several times where Bradsky may have acted in a negligent fashion, either by commission or omission. The first omission occurred upon the initial transfer from Kurylas to Kiser on June 11, 1983, where an effective financing statement was never filed.[4] A second omission could be presumed to have occurred when Kiser transferred the motel to his corporation. This was on July 1, 1983. Another transfer occurred in February of 1984 where no financing statement was immediately filed. A financing statement was filed more than a year later. In any event, the date which begins the running of time is the date of each transfer where Bradsky allegedly represented Kurylas. If the latest transfer date is used, then the last possible date when an action could have been initiated was February 9, 1987. The current action was started at least eight months after that date. Therefore, the occurrence rule precludes Kurylas' action. Kurylas raises the continuous representation doctrine as a defense to the statute of limitations. The continuous representation doctrine was first recognized in the area of medical malpractice. The continuing treatment rule in the medical malpractice area was accepted in Alberts v. Giebink, supra, and more fully developed in Wells v. Billars, 391 N.W.2d 668 (S.D. 1986). Schoenrock, supra, was the case which adopted the medical continuing treatment doctrine and extended it to legal malpractice actions. A continuous representation is, in effect, when there is a: Schoenrock, supra, at 201. See generally, Wells v. Billars, supra. This presents another question where the facts are not in dispute, only the application of the law. Kurylas claims that Bradsky continuously represented it through November 7, 1987. Kurylas presented records from Costello, Porter showing many telephone conferences and meetings with Bradsky relating to Kurylas' representation. The Costello, Porter billings show contact between Bradsky and Costello, Porter from the time that Kurylas came to that firm until the time when Kurylas contacted Attorney Butler. The relevancy of this evidence is questionable, since it does not prove that Kurylas (client) and Bradsky (attorney) had a continuing relationship on *116 this matter. Undoubtedly, Costello, Porter did continue to contact Bradsky; however, the contacts do not establish a continuing relationship on this specific matter between Kurylas and Bradsky. This does not present "clear indicia of an ongoing, continuous, developing, and dependent relationship between the client and attorney." Schoenrock, supra, at 201. Further, this evidence does not show any relationship between the professional services and the alleged omission(s). The deposition testimony is most relevant to disposition of this issue. Many statements are not disputed. First, Kurylas' attorney, Butler, answers questions asked by Bradsky's attorney: These statements show an unbiased appraisal of who was controlling Kurylas' legal interests. There is more deposition testimony which is especially important. Mrs. Wilma Kurylas is the secretary-treasurer of Kurylas, Inc., wife of the president of Kurylas, Inc., *117 and Bradsky's sister. It is not disputed that Bradsky took Mr. and Mrs. Kurylas to Costello, Porter. The claimed dispute is that Bradsky was still the attorney responsible for handling the motel transaction. However, the deposition of Mrs. Kurylas portrays a different picture. Her testimony also includes admissions that Bradsky was not involved in the day to day transactions. Mr. Kurylas recalled fewer dates and events but basically agreed with his wife's testimony. He admitted that Costello, Porter picked up the representation relating to the motel while Bradsky represented Kurylas on other matters. Bradsky does not dispute the contacts between himself and Costello, Porter. Bradsky had much information to convey and the family contacts kept him interested in these transactions. The burden is on Kurylas to establish the continuous representation doctrine. This was established in Glad, supra: Glad, supra, at 682; see McMahan v. Snap On Tool Corp., 478 N.E.2d 116, 120 (Ind.App.1985); and Conard v. Waugh, 474 N.E.2d 130, 134 (Ind.App.1985). This applies to the continuous representation doctrine as well. It simply was not recognized in South Dakota at the time Glad was written. Kurylas should bear the same burden when trying to toll the statute of limitations by using the continuous representation doctrine or fraudulent concealment. The statements presented do not overturn the presumption that the statute of limitations has run. Kurylas has not established that there was any tolling of the statute. The standard of Schoenrock, supra, regarding continuous representation is not met. Therefore, the summary judgment is affirmed. WUEST, C.J. and MORGAN, J., concur. SABERS, and MILLER, JJ., dissent. DOBBERPUHL, Circuit Judge, for HENDERSON, J., disqualified. SABERS, Justice (dissenting). I dissent. The complaint alleges that Bradsky represented Kurylas on June 11, 1983, and *118 "continued up to November 13, 1984 and beyond. An attorney-client relationship existed." The complaint further alleges that Bradsky "negligently failed to possess and exercise that degree of knowledge and skill ordinarily possessed and exercised by lawyers engaged in the legal profession...." As a proximate result of this negligence, Kurylas sustained damages. On or about November 7, 1984, Kurylas became disillusioned that the litigation bogged down in bankruptcy proceedings, and went to see Attorney Joe Butler. At that point in time, Attorney Butler "hadn't agreed to get in the case," but "raised the question [whether] a financing statement [had] been filed." When Wilma Kurylas left Butler's office that day, she went to Bradsky's office. Bradsky is her brother. She testified: (emphasis added). When Bradsky found the unfiled financing statement in his file, he knew or should have known that Kurylas, Inc., had an unperfected security interest in the motel property collateral. He either knew or should have known that any creditor of Ceasar's, Inc., could perfect a security interest in the motel collateral of Kurylas, and thereby take priority over the unperfected security interest of Kurylas. He testified that he knew that the motel "had changed hands so many times, and I felt each time there should have been a separate financing statement and security agreement." If the foregoing testimony is disputed, then there is a fact issue for the jury, and summary judgment is improper. If the foregoing testimony is undisputed, then the undisputed evidence is that Bradsky "said he would handle it," and had the responsibility of proceeding to perfect the security interest in favor of Kurylas.[1] At the least, whether his offer to "handle it" constitutes continuing legal representation is a jury question. Since the Defendant's malpractice "occurred"[2] on November 7, 1984, and the *119 within action was commenced on October 30, 1987, it was within the three-year statute of limitations contemplated by SDCL 15-2-14.2. It was not until December 13, 1984the date Rushmore State Bank filed its financing statement against Ceasar's, who acquired its interest from Kiser's Rapid City Motel Co.that the "proposed" action of Bradsky would become ineffective as "too late." Whether Bradsky continued to represent Kurylas up until November 10, 1987, when he gave Kurylas a "notice of withdrawal," terminating the attorney-client relationship is another jury question. An attorney-client relationship can clearly continue to exist even though other attorneys may have been retained to handle "bankruptcy proceedings," "trial matters" or other special aspects of a transaction. Therefore, genuine issues of material fact exist concerning the attorney-client relationship, continuing representation, and negligence. Schoenrock v. Tappe, 419 N.W.2d 197 (S.D. 1988); Wells v. Billars, 391 N.W.2d 668 (S.D.1986). Since genuine issues of material fact exist concerning these matters, summary judgment was clearly improper. Groseth Int'l, Inc. v. Tenneco, Inc., 410 N.W.2d 159 (S.D.1987); Bego v. Gordon, 407 N.W.2d 801 (S.D.1987); Wilson v. Great N. Ry. Co., 83 S.D. 207, 157 N.W.2d 19 (1968). MILLER, Justice (dissenting). I generally join Justice Sabers' dissent. I do not, however, join his footnote 2. This is not the time or the case to review our interpretation of the "occurrence rule." [1] In the Schoenrock case, the claim was that "the statute of limitations did not begin to run until he sustained some injury, which he claims did not occur until he finally reconverted his land to its original condition." Schoenrock, supra, at 199. [2] Schoenrock also tried to apply the continuous representation doctrine to toll the statute of limitations. This is discussed later in this opinion. [3] On a summary judgment case, we must assume negligence because the facts are always viewed most favorably towards the nonmoving party. [4] This court noted that the transfer cut off any interest Kurylas may have had. Rushmore State Bank, supra. [1] Kurylas suggests that this could have been accomplished by Bradsky by either obtaining new financing statements executed by Ceasar's, or by filing a copy of the settlement agreement of February 9, 1984, and the exchange agreement of June 11, 1983, in lieu of a financing statement. SDCL 57A-9-402(1) provides that a "copy of the security agreement is sufficient as a financing statement if it contains the above information and is signed by the debtor." [2] I am concerned about this court's overly restrictive interpretation of "occurrence." We would be well served to abandon the outdated interpretation used by the majority. As explained in 2 Mallen and Smith, Legal Malpractice § 18.10 at 100 (3d ed. 1989): [P]roblems with the occurrence rule account for its abandonment or amelioration in almost all jurisdictions. The perseverance of the rule is more attributable to its deep historical roots rather than its logic. Mallen and Smith proceed to explain one way for courts to address these problems of the occurrence rule: The obvious injustices and frequently illogical results from application of the occurrence rule have prompted many courts to add the requirement that there be actual injury before a cause of action accrues. Id., § 18.11 at 100. Idaho has a statute similar to ours and has adopted this approach. Their statute provides that for professional malpractice "the cause of action shall be deemed to have accrued as of the time of the occurrence, act or omission complained of...." Idaho Code § 5-219(4) (1979). The Supreme Court of Idaho has ruled that "until some damage occurs no cause of action accrues for professional malpractice, even though the `occurrence, act or omission complained of,' which ultimately causes the damages, has occurred earlier." Treasure Valley Bank v. Killen & Pittenger, P.A., 112 Idaho 357, 359, 732 P.2d 326, 328 (1987). Such a conclusion is consistent with the generally recognized proposition that a statute of limitations does not "begin to run against a negligence action until some damage has occurred." Prosser and Keeton The Law of Torts, § 30 at 165 (5th ed. 1984). We should interpret "occurrence" to require actual injury before the limitation period begins to run. Otherwise, our interpretation of "occurrence" will unconstitutionally collide with our decision in Staab v. Cameron, 351 N.W.2d 463 (S.D.1984), and other similar cases. The unconstitutional collision will arise where the injury from the malpractice does not exist until more than three years after the act of negligence. In accord with Staab, during the first three years the injured party would be unable to obtain a remedy for the injury because "an attorney is liable in a malpractice action only for losses actually sustained as a proximate result of the conduct of the attorney." Id. at 466. By the time the injury arises, our interpretation of "occurrence" would bar an action to recover for the injury. The end result would be the complete denial of a remedy for an injury in violation of Article VI, § 20 of the South Dakota Constitution. See Zacher v. Budd Co., 396 N.W.2d 122 (S.D.1986). While the facts of this case do not present such a situation, we should take advantage of the opportunity to correct the problem and avoid the collision of our decisions.