Title: Murphy v. Housel & Housel

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Murphy v. Housel & Housel1998 WY 28955 P.2d 880Case Number: 96-313Decided: 03/12/1998Supreme Court of Wyoming

Delphine Badura MURPHY and Elmarie Denney, Co-Personal 
Representatives of the Estate of Dominic G. Badura, Appellants

(Plaintiffs),

v.

HOUSEL & HOUSEL; Jerry W. Housel and John O. 
Housel, Appellees (Defendants).

 

Appeal from The District Court 
of Park County, Arthur T. Hanscum, J.

 

Don W. Riske of Riske & 
Arnold, P.C., Cheyenne, for Appellants 
(Plaintiffs).

Lawrence B. Cozzens of 
Crowley, Haughey, Hanson, Toole & Dietrich, P.L.L.P., Billings, for 
Appellees (Defendants).

 

Before TAYLOR, C.J., and THOMAS, MACY, GOLDEN and 
LEHMAN JJ. 

 

THOMAS, 
Justice.

[¶1] The only issue to be 
resolved in this case is whether the trial court ruled correctly when it granted 
a summary judgment to Housel & Housel, Jerry W. Housel and John O. Housel 
(the Housels), on the premise that the statute of limitations for attorney 
malpractice had run at the time the action was filed. In ruling against Delphine 
Badura Murphy and Elmarie Denney, the successor co-personal representatives of 
the Estate of Dominic G. Badura (the personal representative), the trial court 
concluded that there was no genuine issue of fact as to when a successor attorney became 
aware of the alleged claim for malpractice nor the attribution of that knowledge 
to the personal representative. The trial court held, as a matter of law, that 
the statute of limitations had expired prior to the filing of this action, and 
its Order Granting Defendants' Motion for Reconsideration of Motion for Summary 
Judgment and Granting Summary Judgment was entered on October 7, 1996. We affirm 
the trial court.

 

[¶2] In the Brief of 
Appellant, filed on behalf of the personal representative, the stated issues 
are:

 

1. Whether the District Court erred in ruling that 
the knowledge of Diane Walsh was imputed to the Appellant for purposes of 
applying the statute of limitations.

 

2. Whether the knowledge of Diane Walsh imputed to 
the Appellant was within the scope of her representation of the 
estate.

 

3. Whether the Appellees are able to claim the 
benefit of the imputation rule.

 

4. Whether material factual questions regarding the 
knowledge of Diane Walsh imputed to the Appellant sufficient to preclude Summary 
Judgment exist in this record.

 

Only one issue is stated in 
the Brief of Appellees, filed on behalf of the Housels:

 

The sole issue presented by this appeal is whether 
the trial court erred in granting summary judgment in favor of the Appellees 
(hereinafter referred to as the "Housels") based upon the determination that the 
case was barred by the two year statute of limitations set forth in Wyo. Stat. § 
1-3-107.1

 

[¶3] In this instance a 
rather detailed recitation of the facts in a chronological context is helpful in 
understanding the resolution of the issues. Dominic G. Badura died testate on 
January 5, 1985. Dominic Badura's brothers, Robert B. Badura and John A. Badura, 
and his sister, Joan S. Badura, were appointed and served as co-personal 
representatives of the Estate of Dominic G. Badura (the estate). In February of 
1985, Robert Badura retained the Housels' law firm to provide legal services in 
connection with the probate of the estate. On August 26, 1986, Robert Badura 
executed the Estate Inventory that listed "all assets in which decedent [Dominic 
G. Badura] had an interest subject to probate[.]" The appraisal of the assets of 
the estate demonstrated a value for the estate of $371,252.38. In May of 1987, a 
Final Report and Accounting and Petition for Distribution was filed, which 
stated that the value of the assets in the estate was $390,737.00. The Housels 
submitted a report to the Wyoming Inheritance Tax Commissioner stating that 
neither federal estate taxes nor Wyoming Inheritance Taxes were due because the 
value of the estate was less than $500,000.00.

 

[¶4] At the time of his 
death, Dominic G. Badura was a partner in a Wyoming partnership known as Badura 
Brothers in which the other partners were Robert B. Badura and John A. Badura. 
In the fall of 1987, it became apparent that the original inventory of the 
estate had not included his interest in some of the assets of the partnership. 
This resulted in Robert Badura filing a Supplement to Estate Inventory that 
added assets to the estate having a value of $85,050.00. On January 18, 1988, 
Donna Sears, an attorney who worked for the Housels, prepared and Robert Badura 
executed the second Final Report and Accounting and Petition for Distribution, 
which listed the total assets of the estate as having a value of $475,789.00. 
Although the value of the estate now exceeded the $400,000.00 federal estate tax 
exemption, neither a federal estate tax return nor a Wyoming state inheritance 
tax return was filed, and no taxes were paid.

 

[¶5] About a year and a half 
later, on July 13, 1989, Jerry Housel entered into an agreement with another 
attorney, Diane Walsh, pursuant to which Walsh agreed to provide legal services 
to some of Jerry Housel's clients, acting as co-counsel, and one of those 
clients was the Estate of John A. Badura. While she was working on the estate, 
Diane Walsh discovered additional assets in the Badura Brother's Partnership, 
including a certificate of deposit valued at $834,200.32, that had been omitted 
from the inventory of the Estate of Dominic G. Badura. On May 6, 1991, Diane 
Walsh advised Jerry Housel of the existence of the additional assets and of the 
requirement that a federal estate tax return be filed for the Estate of Dominic 
G. Badura.

 

[¶6] In September of 1991, a 
meeting with respect to the estate was held in which Jerry Housel, John Housel, 
Diane Walsh and Robert Badura participated. It was agreed at the meeting that 
Diane Walsh would serve as the attorney for the estate with respect to all 
matters arising from the failure to file a federal estate tax return and payment 
of the taxes owed by the estate. At a subsequent point in the meeting, Diane 
Walsh explained to Robert Badura the necessity for reopening the estate in order 
to file a federal estate tax return, pay the taxes and interest on taxes past 
due, and pay any penalties that the Internal Revenue Service might assess. There 
also occurred a discussion about whether the estate should assert a claim for 
legal malpractice against the other attorney who had worked for the Housels and 
had been involved in the failure to file a federal estate tax return for the 
estate. At that time, Robert Badura indicated that he did not want to assert a 
claim against the other attorney for malpractice.

 

[¶7] After the September 
1991 meeting, Diane Walsh served as the only attorney performing any services in 
connection with the estate. In June of 1993, she prepared and Robert Badura 
executed the Petition to Reopen Estate. After that, a Supplemental Estate 
Inventory was filed which increased the assets of the estate in the amount of 
$341,801.36. In February of 1995, a federal estate tax return was filed which 
showed a federal estate tax assessment of $108,816.30 and a Wyoming Inheritance 
Tax of $20,781.24. On April 17, 1995, the Internal Revenue Service sent a 
Request for Payment in the amount of $51,687.75 in penalties and $193,634.68 in 
interest to the estate.

 

[¶8] On October 19, 1995, 
Robert B. Badura, as personal representative of the estate, filed this Complaint 
against the Housels asserting a right to recover for legal malpractice. The 
Housels filed a motion for summary judgment asserting that the action was not 
timely, but the district court denied that motion on May 15, 1996, ruling that a 
genuine issue of material fact was present as to when Robert Badura either knew 
or should have known of the cause of action against the Housels. Thereafter, 
Delphine Badura Murphy and Elmarie Denney were appointed as successor 
co-personal representatives of the estate on September 11, 1996, and they were 
substituted as parties. The Housels filed a Motion for Reconsideration of Motion 
for Summary Judgment, again asserting that there was no genuine issue of 
material fact as to when Diane Walsh acquired knowledge of the cause of action 
against the Housels and that an attorney-client relationship had been formed 
between Diane Walsh and Robert Badura pursuant to which her knowledge of the 
cause of action was imputed to Robert Badura. The Housels asserted that these 
events antedated the complaint for legal malpractice by more than two years, and 
on October 7, 1996, the district court granted the Motion for Reconsideration of 
Motion for Summary Judgment.

 

[¶9] Summary judgment is 
appropriate when no genuine issue of material fact is present and the prevailing 
party is entitled to judgment as a matter of law. Hermreck v. United Parcel 
Service, Inc., 938 P.2d 863 (Wyo. 1997); Woodard v. Cook Ford Sales, Inc., 927 P.2d 1168, 1169 (Wyo. 1996). See also, W.R.C.P. 56(c). The record must be 
examined from the view most favorable to the party opposing the motion, and that 
party must be given the benefit of all favorable inferences which may be fairly 
drawn from the record.  Duncan v. 
Town of Jackson, 903 P.2d 548, 551 (Wyo. 1995); Reno Livestock Corp. v. Sun Oil 
Co. (Delaware), 638 P.2d 147, 150 (Wyo. 1981), followed in, Nowotny v. L & B 
Contract Industries, Inc., 933 P.2d 452, 455 (Wyo. 1997). We make an independent 
examination of the record for genuine issues of material fact and review a 
summary judgment without according deference to the decision of the district 
court on any issues of law. Woodard, 927 P.2d  at 1169; Davidson v. Sherman, 848 P.2d 1341, 1343 (Wyo. 1993).

 

[¶10] The pertinent statute 
of limitations is WYO. STAT. § 1-3-107 (1988):

 

(a) A cause of action arising from an act, error or 
omission in the rendering of licensed or certified professional or health care 
services shall be brought within the greater of the following 
times:

 

(i) Within two (2) years of the date of the alleged 
act, error or omission, except that a cause of action may be instituted not more 
than two (2) years after discovery of the alleged act, error or omission, if the 
claimant can establish that the alleged act, error or omission 
was:

 

          
(A) Not reasonably discoverable within a two (2) year period; 
or

 

(B) The claimant failed to discover the alleged act, 
error or omission within the two (2) year period despite the exercise of due 
diligence.

 

This statute applies to 
claims against an attorney for legal malpractice. Hiltz v. Robert W. Horn, P.C., 
910 P.2d 566, 569 (Wyo. 1996); Boller v. Western Law Associates, P.C., 828 P.2d 1184, 1185 (Wyo. 1992). In Wyoming, the statute of limitations is triggered when 
the plaintiff knows or has reason to know of the existence of a cause of action. 
Barlage v. Key Bank of Wyoming, 892 P.2d 124, 126 (Wyo. 1995). See also, Duke v. 
Housen, 589 P.2d 334 (Wyo. 1979), reh'g denied, 590 P.2d 1340 (Wyo. 1979), cert. 
denied, 444 U.S. 863, 100 S. Ct. 132, 62 L. Ed. 2d 86 (1979). We describe this 
doctrine as the discovery rule.

 

[¶11] Ordinarily, entry of a 
summary judgment on the issue of when the statute of limitations commences to 
run would be inappropriate. Hiltz, 910 P.2d  at 569. If, however, uncontroverted 
facts exist that demonstrate with specificity the time when a reasonable person 
would have been placed on notice, we will resolve the question as a matter of 
law. Hiltz, 910 P.2d  at 569; Bredthauer v. Christian, Spring, Seilbach and 
Associates, 824 P.2d 560, 562 (Wyo. 1992).

 

[¶12] As these concepts are 
applied in this case, uncontroverted facts establish that at the meeting in 
September of 1991 involving Jerry Housel, John Housel, Diane Walsh and Robert 
Badura, an agreement was formed to the effect that Diane Walsh would act as 
attorney for the estate on all matters arising from the failure to file a 
federal tax return and payment of taxes owed by that estate. The attorney-client 
relationship between Diane Walsh and the estate, which was established in 
September of 1991, invoked principles of agency law, pursuant to which knowledge 
of an attorney is imputed to the client. This proposition is stated in Stricker 
v. Frauendienst, 669 P.2d 520, 522 (Wyo. 1983) (emphasis added): 

 

"`Whenever 9*9 9*9 9*9 a regularly admitted attorney 
appears for a party in a cause, the presumption is that such appearance is 
authorized.'" Heyer v. Hines, 36 Wyo. 53, 252 P. 1028, 1029 
(1927).

 

"The attorney's knowledge is deemed to be the 
client's knowledge when the attorney acts on his behalf 9*9 9*9 9*9 [O]nce a party has designated an 
attorney to represent him in regard to a particular matter, the court and the 
other parties to an action are entitled to rely upon that authority until the 
client's decision to terminate it has been brought to their attention 9*9 9*9 
9*9." Haller v. Wallis, 89 Wn.2d 539, 573 P.2d 1302, 1307 
(1978).

 

[¶13] There also is no 
controversy about the fact that at this meeting, Diane Walsh advised Robert 
Badura of the necessity to reopen the estate in order to file the tax returns, 
pay taxes and interest on taxes past due, and pay the penalties which the 
Internal Revenue Service could assess. At that meeting Robert Badura was advised 
of a potential claim for legal malpractice against the other attorney who had 
worked on the estate, but Robert Badura indicated he did not want to assert a 
claim for legal malpractice against that attorney.

 

[¶14] Even if we were to 
assume that these facts did not lead to an ineluctable conclusion that Robert 
Badura knew or had reason to know of the existence of a potential cause of 
action for legal malpractice, there can be no question that his attorney, Diane 
Walsh, had sufficient facts available to her to be aware of the potential of a 
legal malpractice action. Under our rules of law, that knowledge was chargeable 
to Robert Badura. Since Robert Badura, by virtue of the knowledge of his 
attorney, if not his own, knew or had reason to know of the cause of action in 
September of 1991, and the estate did not file the claim for legal malpractice 
until October 1995, the suit was time barred pursuant to the provisions of WYO. 
STAT. § 1-3-107.

 

[¶15] We acknowledge Mills 
v. Garlow, 768 P.2d 554, 558 (Wyo. 1989), in which we held that the statute of 
limitations in a malpractice action against an accountant involving increased 
tax liability would not begin to run until the tax payer received the statutory 
notice of deficiency. That case is distinguishable from this case, however, 
because there the issue as to whether or not a tax liability was present 
remained debatable until the statutory notice of deficiency was sent. It was not 
until that time that the plaintiff became aware of a potential cause of action 
for malpractice relating to the issue of tax liability. In this case, it is 
apparent that both Diane Walsh and Robert Badura were aware, at least by the 
September 1991 meeting, that the estate would be subject to the payment of 
interest on taxes and potential penalties, and the statute of limitations for 
the claim of attorney malpractice began to run at that 
time.

 

[¶16] The Order Granting 
Defendant's Motion for Reconsideration of Motion for Summary Judgment and 
Granting Summary Judgment is affirmed.

 

FOOTNOTES

[1] In 
addition to this statement of the issue, the Housels articulate a series of 
arguments in their brief, which they contend serve to justify the trial court's 
decision:

 

          
A. The Standard of Review for Summary Judgments.

 

B. The 
Trial Court Correctly Determined that the Knowledge of Diane Walsh, as the 
Attorney for the Estate, Was Imputable to the Estate and Triggered the Statute 
of Limitations More than Two Years Prior to the Commencement of this Action on 
October 19, 1995.

 

1. 
Attorney Walsh had a duty to disclose to the Estate her knowledge concerning the 
malpractice claims that are asserted against the Housels in this case, and 
therefore that knowledge is imputed to the Estate for purposes of triggering the 
statute of limitations.

 

2. There 
is no basis in law or fact to support the contention that the Housels are 
estopped or otherwise ineligible to "claim the benefit of the imputation 
rule."

 

3. The 
Estate has failed to disclose any genuine issue of material fact concerning the 
knowledge of Diane Walsh that would preclude summary judgment in favor of the 
Housels.

 

C. Even 
if for Some Reason the Knowledge of Diane Walsh Cannot be Imputed to the Estate, 
This Court Should Affirm Summary Judgment in Favor of the Housels Based Upon the 
Knowledge of the Estate's Personal Representative, Robert 
Badura.