IN THE COURT OF APPEAL S STATE O

F ARIZONA DIVISION TWO

THOMAS R. ALTHAUS, TARA ALTHAUS, husband and wife; DUFF IELD, MILLER, YOUNG, ADAMSON & ALFRED , P .C ., an Arizona professional corpor ation, lately known as DUFFIELD, YOUNG, ADAMSON & ALFRED, P. C., Petitioners,

v. HON. CARMINE CORNE LIO, Judge of the Superior Court of the State of A rizona, in and for the County of Pima, Respondent,

and PENN-AMERICA

INSURANCE COMPANY, a wholly owned company of PENN-AMERICA

GROUP, INC., a Pennsylvania corporation,

Real Party in Interest. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) 2 CA-SA 2002-0107

DEPARTMENT B O P I N I O N

SPECIA L ACTIO N PROCEEDI

NG Pima County Cause No. C20012600 Humphrey Law

Firm, P. C. By Marshall Humphrey III and An drew J. P etersen Turley, Swan & Ch

ilders, P.C. By Ken t E. T urley Tucson At tor ney s f or Pe ti ti one rs
Phoenix Attorneys for Real Par ty in Interest2

P E L A N D E R, Judge. ¶1 This petition for special action arises from an attorney malpr actice action filed by real party in interest Penn-America Insurance C ompany against petitioners (collectively, Althaus). Althaus p reviously repr esented Penn-America’s insured, Pena Blanca Lake Resort, Inc., in a wrongful death action brought by Peter and Rita Wolfe for the death of their minor son. ¶2 In this petition for special action, Althaus contends the respondent judge err ed in two respects: (1) in denying Althaus’ s motion for summary judgment , in which Althaus had contended

th e attorney malpractice action was time bar red, and (2) in granting Penn-America’s

cr oss -motion

for summary judgment, thereby striking Althaus’s statute of limitations

defense, particularly, without permitting Althaus to depose, as he had requested, var ious persons who had been involved in the wrongful death action or whose affi davits Pen

n- America had submitted in support of its cross-motion. ¶3 The respondent judge’s order is not appealable, and Althaus has no equally plain, speed y, and adequate remedy by appeal. SeeAriz. R. P . Special Actions 1, 17B A. R. S. I n addition, the issues raised involv e mixed que stions of fact and law that appear to be of first impression in Arizona, and addressing themnowwill serve the interests of judicial economy. See Montano v. Browning , 2 0 2 Ariz. 544, ¶ 2, 48 P .3d 494, ¶2 (App. 2002); Harris Trust Bank v. Su perior Cour t , 188 Ar iz. 159, 162, 933 P .2d 1227, 1230 (App. 1996). Therefor e, we acce pt jurisdiction of the special action. ¶4 Onthe merits, we conclude that the respondent judge did not abuse his discretion

or otherwise err in denying Althaus’s motion for summary judgment, at least at this ju ncture. See Ariz. R. P . Special Actions 3(c). But we further conclude that the respondent judge did abuse his3

discretion ingranting Penn-America’s cr oss-motion for summary judgment and striking Althaus’s limitations defense. See Files v. Bernal , 200 Ar iz. 64, ¶2, 22 P. 3d 57 , ¶ 2 (App . 2001) (“ [A]

cou rt abuses its discretion where the rec ord fails to provide substantial support for its decision or the court commits an err or of law in reaching the decision. ”). Gen uine issues of m

aterial fact preclude tha

t ru li ng, an d Al tha us ’s requ est for fur the r di sco very bearing on the limitations issue is warranted. SeeAriz. R. C iv. P . 56(f), 16 A.R. S., Pt. 2. Although future discovery may affect final disposition of

the limitation

s defense, neither the record nor applicable law supports a finding

as a matter of law that Penn-Am erica timely filed

its malpractice action. Accordingly, we grant relief by vacating that po

rtion of the respondent judge’s order of June 19, 2002, that grantedPennAmerica’s cross-motion and s truck Althaus’s defens

e. BACKGROUND ¶5 With

respect to Penn-America’s cross-motio n, we view the facts and allreasonable inferences therefrom in the light most favorable to the nonmoving party, here, Althaus. See Walk

v. Ring , 202 Ar iz. 310, ¶3, 44 P. 3d 990, ¶ 3 (2002). So viewed, the record r eflects that, on June 3, 1999, counsel for the Wolfes and several newly retained attorne ys for Penn-America met and reacheda settlement of a pproximately $2.6 million in the wrongful death action. T hat case previously had been tried to a jury, which had returned a net ver dict of approximately $6. 5 million infavor of the Wolfes and against Pena Blanca on May 13, 19 99. As of Jun e 3, however , the verdict had not yet been

reduced to judgment. On June 4, counsel in the wrongful death action informed the trial court in that case that “the parties ha[d] reached a stipulation as to settlement1 Counsel for the bankruptcy tr ustee also attended the June 3 settlement meeting, and PennAmerica reached an agr eement with him as well. 4 terms” and would be “filing the Stipulation with the Court after approval by the Bankruptcy Court” in which Pena B

lanca was seeking

a debtor’s discharge. 1 ¶6 Ahandwritten note from the June 3 meeting, signed by the Wolfe att orneys, stated tha tth e settlement was

“[s]ubject to confidentiali ty agreement” and “ approval of bankruptcy court. ” Similarly, a June 7 memor andumby Penn-America’s Pennsylvan ia counsel state

d that,

onJune 3, “ we settled the case for an agreed $1. 3 million for each plaintiff ” a nd that “[t]he settlement

is contingent upon approval by the bankruptcy cour t and extinguishment of all claims, bothcontractual and extra-contr actual.” AJune 7 Penn-America internal memorandum authored bythe company’s senior vice pr esident for cl aims stated that, after ten hours of negotiations on June 3, he “ was able to settlethis case,” deemed it “an excellent r esult,” and noted that “[w]e will

sec ure all nec essary releases prior to the distribution of any moni es.” Finally, Penn-America acknowledged

in its statement of facts below that “the conditional settlem ent was reached, rather than litigate and file post-trial motions, because in balance, it made th e mos t sense to PennAmerica, and so was done.” ¶7 Following the June 3 settlement meeting, counsel for the Wolfes and Penn-America negotiated, drafted, and ultimately agreed on a settlementagreeme nt and release, which the Wolfes and their attorneys exec uted on June 11. As did the June 3 handwr itten note, the settlement

agreement stated that it was subject to and contingent on the

approval and final order of the bankruptcy court in Pena Blanca’s Chapter 7 bankr uptcy proceeding. The agreement also

wa s subjec t to and contingent on the release of Penn-America fr om any bad faith claims by the debtor, Pena Blanca, and its trustee in bankr uptcy.5

¶8 T he ba nkruptcy court appr oved the settlement by order on July 9, 1999. On August 20, the under lying wrongful de ath action against Pena Blanca was dismissed with prejudice. Penn-America filed its ma lpractice action against

Althaus on June 7 , 2001. Thus, that action was timely filed unless it accrued before June 7, 1999. SeeA.R. S. § 12-542. DISCUSSION ¶9 The respondent judge foun d, and the recor d could support such a fin ding, that “P enn-America kne

w or sh oul d ha ve k now n of Mr. Alth aus ’ cl

aim ed m alp ract ice on o r bef ore June 3, 1999. ” But the

respondent judge then ruled that, “as a matter of law, .

. . an enforceable Settlement

Agreement, without contingencies, did not occur until June 11, 1999, at the earliest, ” and, therefore, “the curr ent [malpractice] cl ai m did not begin to accrue until that date. ” T he ruling was based on the so-called final judgment accrual rule of Am fac Dis tribution Corp

. v. Miller , 138 Ariz. 155, 673 P .2d 795 (App. 1983) ( Amfac I ), which our supreme court later approved. Amfac Distrib ution Corp. v. Miller

, 138 Ar iz. 152, 673 P .2d 792 (1983) ( Amfac II );

seealso Taylor v. State Farm Mut. Auto. Ins. Co. , 185 Ar iz . 174, 17 9, 913 P .2d 1092, 1097 (1996); Glaze v. Larsen , ___ Ar iz. ___, 55 P. 3d 93 (App. 2002). Altha us contends that rule “should have no applica

tion after a s ettlement or where there is evidence that the plaintiff h

as waived the r ight to appeal.” We generally agree with that pr emise, but its application her e is complicated

by the s ettlement conditions in the Wolfes’ wrongful death case and Pena Blanca’s bankruptcy proceeding. ¶10 In Amfac II , our supreme court appr oved the court of appeals’ holding in Amfac I that “a cause of action fo

r legal malpractice occurring in the course of litigati on accrues when

the plaintiff knew or should reasonably have known of the malpractice and when the plaintiff’s damages are certain and not contingent upon the outcome of an appeal.” 138 Ariz. at 156, 6736

P. 2d at 796, approved

, Amfac II

, 138 Ar iz. at 153, 67 3 P. 2d at 793. O n its face, that holding does not apply here because Penn-America’s damages, unlike Amfac’s damage claims against its attorne y, were “ not contingent upon the outcome of an appeal.” Id . Rather , by settling the underlying wrongful dea

th a cti on, Pe nn- Am eri ca a voi ded the ent ryof judgment in that action and obviated the need for any appeal. Moreover , as noted below, onthis record, a trier of fact could find that Penn-America’s damage s were “c ert ain” as of June 3, when it arguably reached a binding and enforceable settlement with the Wolfes. In view of that settlement, the policy reasons for adopting the Amfac rule in a nonsettlement context are either inapplicable or much less cogent here. ¶11 For example, when the underlying case is not s ettled, a mal pr actice plaintiff’s inj ury or damages may not be full y “ascertainab le un til the appellate process is completed or is waived by afailure to appeal. ” Amfac II , 138 A riz . at 15 4, 673P.2d a

t 79 4. Bu t t hat con cern evaporates when a settlement of the underlying case eff ectively waives a

n y appeal therein and, thus, eliminates any possibility of the malpractice damages changing. Id. at 154 n.2, 673 P. 2d at 794 n.2. In other words, when the underlying case is settled, there is no prospect of “successful prosecution of an a ppeal [in t hat case] and ultimate vindication of the attorney’s conduct by an appellate court. ” Amfac I , 138 Ar iz. at 156, 673 P. 2d at 796. ¶12 More

ove r, i n a non settlement context, it gener ally “is only when the litigation is terminated

and the client’s rights are ‘fixed’ that it can safely be said that the lawyer’s misdeeds resulted ininjury to the client. ” Id . at 157, 673 P. 2d at 797. In a cas e su ch a s t his, howe ver, a trier of fact might find that a binding and enforceable oral settl ement of the underlying case “‘fixed’” the client’s rights andimmediately “r esulted in injury to the client, ” notwithstanding the7

need for future documents, filings, procedures, and even bankruptcy court appr oval to finalize the settlement. Id. ¶13 Finally, the concerns in Amfac I about “pr eserv[ing] the essential element of trust in the attorney-client relationship” are dubious here, inasmuch as Penn-America retained and utili zed seve ral new attorneys to r epresent itself and Pena Blanca in conjunction with the settlement

meeting on June 3, for follow-up negotiation and drafting of settlement documents and for securing bankruptcy cour t approval. Id. at 159, 673 P .2d a t 799. M oreov er, after June 3, Penn-America

us ed A lt hau s o nly for a fe w m ini st eri al tasks in finalizing the settlement and obtaining dismissal of the wrongful death action. ¶14 We therefore agr ee in principle with Althaus that Amfac ’s final judgment rule does notn ecessarily control a malpractice case s uch as this in whi

ch the underlying cas e has bee n settled. That conclusion, however, does not fully resolve the statute of l

imitations issue here. In

our view, the dispositive issue is whether, more than two years befor e Penn-America filed its malpracticeaction against Althaus, Penn-Amer ica and the Wolfes had reached a binding, enforceable settlement in t he wrongful death case, n otwithstanding the need to formalize and finalize the settlement. On this recor d, that issue cannot be deter mined as a matter of law. ¶15 Viewed

in the light most

favorable to Althaus, Walk, the r ecord supports a finding that the Wolfes

and Penn-America rea ched a settlement in the wrongful death case on June 3 in

anamount that was c

ertain, ascer tainable, and nonspeculative, albeit subject to several contingencies

noted in ¶¶ 6-7 above, including the dr afting and execution of a formal settlement agreement with acceptable release and confidential ity provisions and bankruptcy co urt approval of the settlement. Notwithstanding those conditions, all of which ultimately were satisfied, a trier of fact could find that both the fact and amount of

Penn-America’s damage caused by Althaus’s2 Although the res pon den t j udg e’s ruling did not add res s Pe nn- Am eri ca’s arguments that anyalleged settlement on June 3, 1999, was unenforceable because it failed to comply with ei

ther the statute of frauds, A.R. S. § 44-101(4), or Rule 80(d), Ariz. R. C iv. P ., 16 A.R. S., Pt. 2, we find those contention

s unpersuasive. T he un derlying case is not an action “ brought .

. . [u]pon acontract to sell or a sale of goods or choses in action.” § 44-101(4). M oreover, Penn-America fully performed its settlement obligations. Cf. Gene Hancock Constr. Co. v. Kempton & Snediger Dairy , 20 Ariz. App. 122, 125, 510 P .2d 752, 755 (1973) (“ [I]n a proper case part performance can remove the prohibition of the statute [of frauds]. ”). And, althoughRule 80(d) generally 8 alleged malpractice were established on June 3 and that Penn-America had actual knowledge of such damage on that date . T hus, at leas t i n it s pre sent posture, this case “pr esents the factu al question whether the parties intended the [June 3] oral agreement to be binding and enforceable at th at time,” with the subsequent settlement documents and bankruptcy court approval mer ely required to memorialize and finalize the oral agreement. Tabler v. Industrial Comm’n , 202 Ariz. 518, ¶7, 47 P. 3d 1156, ¶ 7 (App. 2002); see also Schade v. Diethrich , 158 Ariz. 1, 760 P .2d 1050 (1988); AROK Constr. Co. v. Indian Constr. Servs. , 174 Ar iz. 291, 848 P. 2d 870 (App. 1993); Fotinos v. Baker , 164 Ar iz. 447, 793 P. 2d 1114 (App. 1990). ¶16 We also disagree with the respondent judge’s conclusion that, as a matter of law, the June 3 settlement agreement “ made clear that approval was a contingency and not a condition subsequent.” Unlike the respondent judge, we do not view the recor d as su ppo rt ing only that conclus ion

. “‘A condition is an event, not certain to occur, which must occur, unless its nonoccurrence is

exc us ed, be for e performance under a contract becomes due. ’” AROK Constr. Co. , 174 Ariz. at 296 n.4, 848 P. 2d at 875 n.4, quoting Restatem

en t (Second) of Contracts § 224 (1981). Although bankruptcy court approval clearly was required to trigger the settlement par ties’ obligations to perform, when the record is viewed in the light mos

t favorable to Althaus, a trier of fact could find that the parties had reached a binding, enforceable settlement on June 3, with performance delayed until bankruptcy court appr oval. 2 Cf. Taylor v. State Farm Mut. Auto. Ins.applies

to settlement agreements, this is not a situation in w

hich the parties disput

ed the existence and terms of the settlement agreement or the authority of the parties’ r epresentatives to settle the wrongful death case. Compare Canyon Contracting Co. v. Tohono O’Odham Housing Auth. , 172 Ariz. 389, 837 P. 2d 750 (App. 1992), with Hays v. Fischer , 161 Ariz. 159, 777 P .2d 222 (App. 1989). 9 Co. , 175 Ariz. 148, 159, 854 P .2d 1134, 1145 (1993) (because contract language was reasonably susceptible to differing interpretations and “extrinsic evidence establishe d controversy over what occurred and what inferences to draw fr om the events, the matter was properly submitted to the jury” ); Muchesko v. Muchesko , 191 Ar iz. 265, 268, 955 P .2d 21, 24 (App. 1997) (“ Courts may look at the writing, the conduct of the parties, and the surrounding cir cumstances in deciding whether a contract existed or whether a meeting of the minds occurred.” ). And, if such approval

wer e not obtained, the agr eement would not necessarily lack binding and enforceable effect in the first instance. ¶17 “T he standard for contract enforceability is not whether the agreement included a resolution of every matterand anticipated every contingency. ” AROK Constr. Co. , 174 Ar iz. at 297, 848 P. 2d at 876. Indeed, “‘[t]he fact that one of [the parties], with the kno wled ge and approval of the other

, has begun per formance is nearly alw ays evidence that they regard the contract as consummated and intend to be bound thereby. ’” Schade , 158 Ar iz. at 10, 760 P. 2d at 1059, quoting

1A Corbin, Corbin on Contracts§ 95 at 407 (1963) (emphasis in Schade ). On this record, a trier of fact could find that th e pe rformance of counsel for the Wolfes and PennAmericaafter June 3, including their execution of the settlement and release agreement, the procurement of bankruptcy court approval, and the dismissalwith prejudice of the wrongful death action, demonstrated their understanding and i ntent that they had reached a binding, enforceable settlement on t

hat date.10

¶18 Incases such as this, in which “ a professional’s services have failed to produce the desired r e sult or may even have brought about an adver se result, ” “ it is often the rule that .

. . the question of accrual is for the jury. ” Walk, 202 Ar iz. 310, ¶17, 44 P. 3d 990, ¶ 17. And,

incases in

whic h the parties to an oral agr eement contemplate the laterexecution of

a written document, the fact-finder must resolve whether the parties intended the wr itte n do cum ent to b e a m ere memorialization of an already binding oral agreement, or whether they intended to be bound only upon execution of a formal, written instrument. Tabler, 202 Ariz. 518, ¶ 11, 47 P .3d 1156, ¶ 11. T he same can be said w hen, as here, the oral settlement

is to be followed by

the parties’ execution o

f formal settlement, release, and dismissal documents and obtaining of court approval. Concluding that this record doe s not at this stage permit summ ary resolutio n of the limitations issue as a matter of law, we vacate that por tion of the respondent judge’s order of June 18, 2002, granting Penn-America’s cross -motion for summary judgment and st riking Althaus’s lim

itations defens

e.

_______________________________________ JOHN PELAN DER, Judge CONCURRING:

_______________________________________ PHILIP G. ESPINOSA, C hief Judge

_______________________________________ WILLIAM E. DRUKE, Presiding Judge