UNITED STATES COURT OF APPEALS

Filed 8/26/96 FOR THE TENTH CIRCUIT

JOSEPH R. BRUNETTI and FLORENCE BRUNETTI,

Plaintiffs,

v. THE REGENCY AFFILIATES, a Nevada nonprofit organization; REGENCY GROUP, INC., a Nevada corporation; SUN TREE CORPORATION, d/b/a Clearbrook Apartment Village; 9TH & 9TH MARKET & CAFE, a Utah corporation; R.G. UTAH, INC., a Utah corporation; 2ND AVENUE MARKET & CAFE, a Utah corporation; WHOLE EARTH ENTERPRISES, a Utahcorporation, d/b/a The John HenryMackay Company; NEW FRONTIERS NATURAL FOODS I, a Nevada corporation; NEW FRONTIERS NATURAL FOODS II, a Nevada corporation; NEW FRONTIERS NATURAL FOODS III, a Nevada corporation; A.J. MACKAY & SONS, a Utah corporation; NORTHERN NEVADA CONSTRUCTION, INC., a Nevada corporation; THREE J ENTERPRISES, a Utah corporation; ASBESTOS TRANSPORT SYSTEMS, a Nevada corporation; LUMBERLAND, INC., a Utahcorporation; PORTERKNOLLWOOD ESTATES, a Utah No. 95-4160 (D.C. No. 90-CV-200-W) (D. Utah) (152 B.R. 320)-2-

corporation; NATURAL ABILITIES, INC., a Utah corporation; GENESIS I BUILDERS, a California nonprofit organization; BUILDERS CONSTRUCTION COMPANY, INC., a Nevada corporation; NORMAN PAULSEN; JOHN H. MCCAUGHEY; JONATHAN KING; JOSEPH BELTON; and DAVID EDDY,

Defendants-Third-Party Plaintiffs,

v. JONES, WALDO, HOLBROOK & MCDONOUGH, a Utah professional corporation, Third-Party Defendant,

_______________________________ FLYING S LAND & CATTLE CO., a Nevada corporation; REGENCY GROUP, INC., a Nevada corporation; THE REGENCY AFFILIATES, a Nevada nonprofit organization; BUILDERS LAND & CONSTRUCTION COMPANY; a Nevada corporation; OASIS ENERGY CORPORATION, a Nevada corporation; INTERNATIONAL RESERVE INVESTMENTS & CONSTRUCTION COMPANY, a Hawaii corporation; and GENESIS I-3-

BUILDERS, a California nonprofit organization,

Plaintiffs-Appellants,

v. JONES, WALDO, HOLBROOK & MCDONOUGH, a Utah professional corporation, Defendant-Appellee.

----------------------------------------- JONES, WALDO, HOLBROOK & MCDONOUGH, a Utah professional corporation, CounterclaimantAppellee,

v. FLYING S LAND & CATTLE CO., a Nevada corporation; REGENCY GROUP, INC., a Nevada corporation; THE REGENCY AFFILIATES, a Nevada nonprofit organization; BUILDERS LAND & CONSTRUCTION COMPANY; a Nevada corporation; OASIS ENERGY CORPORATION, a Nevada corporation; and GENESIS I BUILDERS, a California nonprofit organization,

Counterclaim-DefendantsAppellants,-4-

and NORTHERN HOLDINGS UTAH, INC., a Nevada corporation; BUILDERS CONSTRUCTION COMPANY, INC., a Nevada corporation; PORTER-KNOLLWOOD ESTATES, a Utah corporation; SUN TREE CORPORATION, d/b/a Clearbrook Apartment Village; NEW FRONTIERS NATURAL FOODS I, a Nevada corporation; NEW FRONTIERS NATURAL FOODS II, a Nevada corporation; NEW FRONTIERS NATURAL FOODS III, a Nevada corporation; NEW FRONTIERS NATURAL FOODS IV, a Nevada corporation; NEW FRONTIERS NATURAL FOODS V, a Nevada corporation; NORTHERN NEVADA CONSTRUCTION, INC., a Nevada corporation; WASTE CONTROL MANAGEMENT NEVADA, INC., a Nevada corporation; PATRICIA DECATALDO; NORMAN PAULSEN; JOSEPH BELTON; and JONATHAN KING, Counterclaim-Defendants.* This order and judgment is not binding precedent, e xcept under the

doctrines of law of the case, res judicata, and col lateral estoppel. The court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3.

** Honorable Ruggero J. Aldisert, Senior Circuit Judge , United States Court of Appeals for the Third Circuit, sitting by design ation. -5- ORDER AND JUDGMENT *

Before TACHA, ALDISERT, ** and BALDOCK, Circuit Judges.

After examining the briefs and appellate record, th is panel has determined unanimously to grant the parties’ request for a dec ision on the briefs without oral argument. See Fed. R. App. P. 34(f) and 10th Cir. R. 34.1.9. Th e case is therefore ordered submitted without oral argument. Appellants Flying S Land & Cattle Co., Regency Group, Builders Land & Construction Co., Oasis Energy Corp., The Regency A ffiliates, Genesis I Builders, and International Reserve Investments & C onstruction Co. (collectively referred to as Flying S) appeal the district court’ s entry of summary judgment against them on their legal malpractice claims agai nst the law firm of Jones,1 The district court disposed of appellants’ claims i n two summary judgment

orders, the first of which disposed of all but two of appellants’ claims and the second of which disposed of the remaining claims. The district court published its first order, Brunetti v. Regency Affiliates , 152 B.R. 320 (D. Utah 1993), but it did not publish the second order. -6- Waldo, Holbrook & McDonough. 1 The district court determined that appellants’ malpractice claims, which were filed on March 1, 19 91, were barred by Utah’s four-year statute of limitations. See Utah Code Ann. § 78-12-25. This case requires us to determine when appellants’ malpracti ce claims accrued and the statute of limitations began to run. We review bot h the district court’s grant of summary judgment and its interpretation of Utah lawde novo. See Wolf v. Prudential Ins. Co. of Am. , 50 F.3d 793, 796 (10th Cir. 1995)(summary judgment); Salve Regina College v. Russell , 499 U.S. 225, 231 (1991)(state law). The general rule in Utah is that a cause of action accrues, and the statute of limitations begins to run, “upon the happening of the last event necessary to complete the cause of action.” Myers v. McDonald , 635 P.2d 84, 86 (Utah 1981). Under this general “occurrence” rule, “mere ignoran ce of the existence of a cause of action does not prevent the running of the statu te of limitations.” Id. In some instances, however, the Utah courts will apply a “d iscovery” rule, rather than the occurrence rule. Under the discovery rule, the lim itations period does not begin to run “until the discovery of facts forming the ba sis for the cause of action.” Id. The Utah courts have applied the discovery rule in three types of situations: 1)-7-

when the legislature has incorporated the discoveryrule into the particular statute of limitations; 2) when the defendant has concealed the facts from the plaintiff or misled the plaintiff as to the true facts; and 3) w hen application of the general rule to the particular circumstances or the particu lar cause of action would produce an irrational or unjust result, even in the absence of any wrongdoing by the defendant. E.g. , id. ; Warren v. Provo City Corp. , 838 P.2d 1125, 1129 (Utah 1992). In Merkley v. Beaslin , 778 P.2d 16, 19 (Utah Ct. App. 1989), the court h eld that the discovery rule should apply to causes of a ction for legal malpractice. The court determined that fundamental fairness requ ired application of the discovery rule to malpractice claims “because the attorney-client relationship is based upon trust, and is a situation in which one l ess knowledgeable must rely on another, who has special expertise, for advice and assistance.” Id. The court further noted that much of an attorney’s work is do ne outside the view of the client, and that “[t]he nature of the attorney-clie nt relationship is such that, often, attorney negligence would not be discovered until y ears after the act had occurred.” Id. Therefore, rather than apply the general occurren ce rule, the court held that “a cause of action for legal malpractice accrues, and the four-year statute of limitations commences to run, when the a ct complained of is discovered or, in the exercise of reasonable care, should have been discovered.” Id.-8-

Here, Flying S retained the Jones, Waldo firm in late 1983 or early 1984 to assist it in removing a lien from the Big Springs R anch, which Flying S purchased from Robert Beaumont in 1981. When these efforts p roved unsuccessful, Jones, Waldo recommended that Flying S file for reorganization in bankruptcy under Chapter 11. Jones, Waldo filed the bankruptcy peti tion on behalf of Flying S on May 24, 1984, and represented Flying S in the ensui ng bankruptcy proceedings until March 26, 1986, when the firm withdrew. Flyi ng S contends that Jones, Waldo committed various acts of malpractice during the course of this representation. At the time the bankruptcy petition was filed, Flyi ng S owed Jones, Waldo approximately $100,000 in attorney fees. In an effort to obtain payment of preand post-petition fees, Jones, Waldo allegedly ente red into various agreements whereby it obtained security interests in property of Flying S and its affiliates. In the summer of 1985, an associate at Jones, Waldo al so structured several loans to Flying S from other clients of the firm that contai ned terms and conditions unfavorable to Flying S. The proceeds of these loa ns were paid to Jones, Waldo for legal fees. Appellants contend that Jones, Wal do did not reveal to the bankruptcy court that the firm had an interest in p roperty of Flying S and its affiliates, which property was necessary for the re organization. Nor, according to-9-

appellants, did Jones, Waldo seek bankruptcy court approval to act as counsel for Flying S. Flying S also contends that Jones, Waldo delayed th e reorganization effort by filing unrealistic reorganization plans and by f ailing to pursue other reorganization efforts, which would have conflictedwith Jones, Waldo’s own interests. Further, appellants allege that Jones, Waldo charged excessive fees and that it abandoned Flying S in the bankruptcy procee dings by abruptly withdrawing in March 1986. Finally, Flying S alleges that Jones, Waldo was neg ligent in handling a fraud claim against Beaumont. First, Jones, Waldo allegedly refused to bring a claim against Beaumont despite repeated requests fr om Flying S to do so. Appellants contend that once Jones, Waldo finally d id draft a complaint against Beaumont in August 1985, it was frivolous. Finally , Jones, Waldo allegedly represented to Flying S that the fraud claim had me rit and could be used as a tool in negotiating with Beaumont when, in fact, Jones, Waldo believed the claim to be without merit. The district court concluded that the undisputed fa cts established that Flying S knew or should have known of each of the a lleged acts of negligence more than four years before it commenced suit again st Jones, Waldo on March 1,2 As to the allegation that Jones, Waldo misrepresent ed to Flying S the merits

and usefulness of the fraud claim against Beaumont, the district court concluded that, because Flying S hired new counsel to pursue the claim in October 1986, which resulted in some success, no reasonable jury could find appellants suffered any injury as a result of Jones, Waldo’s alleged mi srepresentation. Appellants do not challenge this determination on appeal. -10- 1991. 2 Appellants do not challenge the district court’s conclusions concerning the dates of their knowledge. Appellants’ sole challen ge on appeal is to the district court’s conclusion that, pursuant to Merkley , “the statutory period for attorney malpractice begins to run on the date a plaintiff d iscovers, or reasonably should discover, the act complained of, regardless of the existence of an actionable injury .” Brunetti v. Regency Affiliates , 152 B.R. 320, 323 (D. Utah 1993)(emphasis added). Appellants argue that the d ecision in Merkleyconstitutes “an unexplainable departure“ from the line of Utah Supreme Court cases applying the discovery rule, and that both the district court’s interpretation of the Merkley decision and its reliance on the decision are in er ror. Br. of Appellants at 18. Among other things, appellants contend that Merkley ’s accrual rule for legal malpractice claims fails to take into accountsituations in which the client learns of the attorney’s negligent act or omission before the act or omission has caused any actionable injury. We need not conside r how the Merkleyrule might apply in such a situation, however, because the rec ord here reflects that appellants had suffered actionable injury by the time they eit her discovered, or should have-11-

discovered, their counsel’s alleged acts of malprac tice. Therefore, appellants’ claims for malpractice accrued, and the statute of limitations began to run, more than four years before they filed suit. That appel lants may have suffered additional damages after March 1, 1987, including t he loss of the Big Springs Ranch, does not affect the date(s) on which their c laims for malpractice accrued. Because appellants failed to bring suit within fouryears of the accrual of their malpractice claims, the district court properly ent ered summary judgment in favor of Jones, Waldo on those claims. The judgment of the United States District Court fo r the District of Utah is
AFFIRMED.

Entered for the Court

Ruggero J. Aldisert Senior Circuit Judge