Court Opinion

ID: 6471846
Source: CourtListenerOpinion
Date Created: 2022-06-26 14:20:26.821909+00
Date Added: 2024-06-11T15:53:50.239932
License: Public Domain

HARTZ, Judge (dissenting). I would reverse and remand to require the district court to enter judgment on behalf of Natelson. I should begin by noting that the lead opinion does not represent the views of the majority of the panel. Both Judge Apodaca and I disagree with the analysis in that opinion. Indeed, although Judge Apodaca and I disagree with respect to the result, we generally agree on the appropriate legal analysis. Our disagreement is largely confined to the application of the continuous representation rule to this case. Turning to the merits, Jaramillo v. Hood, 93 N.M. 433, 601 P.2d 66 (1979), held that a cause of action for attorney malpractice accrues once the malpractice has caused actual loss or damage and the facts necessary to sustain the claim are ascertainable and discoverable by the injured person. Both conditions were satisfied in this case more than four years before the complaint was filed. Therefore, the complaint was barred by the applicable statute of limitations, NMSA 1978, § 37-1-4 (Repl.Pamp.1990). Even were New Mexico to recognize that accrual of a cause of action for attorney malpractice could be delayed under (1) what I shall call the predicate-litigation rule or (2) the continuous representation rule, Sharts would not benefit from either rule unless we were to construe the rule in a manner that departs from its customary application and violates its underlying rationale. I. HARM A. New Mexico Precedents Judge Alarid’s lead opinion rests its conclusion on the proposition that there was no harm or loss until the time of the adverse declaratory judgment ruling by the district court. That view is contrary to our Supreme Court’s holding in Jaramillo. In that opinion our Supreme Court upheld summary judgment in favor of an attorney sued for alleged negligence in the preparation of a will. The Supreme Court opinion notes a number of potentially significant dates. It mentions that the attorney was employed to prepare a will on April 22, 1967; that the decedent died on October 6, 1967; that the will was admitted to probate on November 22, 1967; that the order admitting the will to probate was set aside nunc pro tunc on April 14, 1969; that the will was denied probate on May 28, 1974; and that the complaint for malpractice was filed on May 20, 1977. Only one date was held to be relevant to the determination of loss or damage. The Court ruled that “[t]he harm or damage in this ease arose at the time the testatrix died.” Id. at 434, 601 P.2d at 67. As I understand Jaramillo, the harm occurred at the time of the testatrix’s death because that is when the plaintiffs legal rights became fixed. So long as the testatrix was alive, the alleged negligence could have been cured by revising the will. The dates when the court acted with respect to the will were immaterial to the determination of when harm occurred. As stated in Woodburn v. Turley, 625 F.2d 589, 592 (5th Cir. 1980) (applying Texas law), “[Ljegal injury is complete when the negligence of the defendant attorney results in a diminution of the plaintiffs rights under the law, not when that diminution is confirmed by a court----” Thus, the harm in this ease occurred once the alleged negligent drafting by Natelson had irreversible legal consequences. The drafting had irreversible legal consequences when Sharts sold land pursuant to deeds that permitted purchasers to prevent Sharts from subdividing Tract Two into half-acre lots. Until such a sale, Natelson’s alleged negligence in preparing the restrictive covenants could have been corrected. That is, prior to such a sale Natelson or some other attorney could have redrafted the covenants and no harm would have been done. After the sale a court could rule on the meaning and application of the covenants but could not change the facts that determined Sharts’ legal rights under the covenants. To be sure, Sharts suffered no financial injury at the time of the first sale of a lot, but neither did the plaintiff in Jaramillo suffer a financial injury at the time of the death of the testatrix. What is important in both cases is that the event in question — the sale of the lot or the death of the testatrix — fixed the plaintiffs legal rights. Once the first lot was sold, Sharts suffered harm because his other property was subject to an unwanted restriction. Jaramillo did not express any interest in when the plaintiff in that case had suffered any financial loss. But if that is a concern, in this case Sharts suffered financial loss more than four years before filing suit. The problem with the covenants prepared by Natelson required Sharts to incur various legal expenses to try to correct the problem, see Kovacevich v. Wainwright, 16 Cal.App.4th 337, 19 Cal.Rptr.2d 692 (Ct.App.1993) (actual injury occurred when plaintiff compelled to incur legal costs); Grunwald v. Bronkesh, 131 N.J. 483, 621 A.2d 459, 465 (1993) (in determining when cause of action for attorney malpractice accrues, actual damage may consist of attorney’s fees), and the delay to the planned development caused Sharts to suffer substantial financial losses, such as having to pay additional interest charges. Contrary to the reasoning in the lead opinion, Jaramillo clearly rejects the view that harm from the negligent drafting of a document cannot occur until a court has construed the document. Jaramillo held that the limitations period had commenced prior to the time that the improperly drafted will was denied probate. (The will was denied probate on May 28, 1974; suit was filed on May 20, 1977; yet the court held that the four-year statute-of-limitations period had expired.) It is noteworthy that the appellate brief-in-chief of the losing plaintiff in Jaramillo made the argument seemingly adopted by the lead opinion in this ease. The brief contended: Beneficiaries under the will had no dispute with defendant-attorney until such time as they were denied recovery under the will____ [I]t would be premature for a disclosed beneficiary to file an action against the attorney to protect his bequest on grounds that provisions of the will may fail and that probate may take longer than the four year statute of limitations. It is not the policy of the courts to promote such premature suits. The reliance of the lead opinion on three other New Mexico decisions is misplaced. Chisholm v. Scott, 86 N.M. 707, 526 P.2d 1300 (1974), is a Court of Appeals decision that predates Jaramillo; it certainly cannot be read as limiting Jaramillo. First National Bank v. Diane, Inc., 102 N.M. 548, 698 P.2d 5 (1985), is a Court of Appeals decision that appears to have no relevance to the issues in this appeal; it discusses the standard of care, not the statute of limitations. As for Aragon & McCoy v. Albuquerque National Bank, 99 N.M. 420, 659 P.2d 306 (1983), the Supreme Court simply held that the limitations period under New Mexico’s Tort Claims Act had expired because the very last possible date that one might argue was the date of loss was a date more than two years before the claim was filed. The holding in Aragon & McCoy on this point is that the limitations period certainly begins before an appellate court ruling on the issue. This holding appears inconsistent with the statement of law in the lead opinion. If, as the lead opinion states, harm does not occur until legal rights are settled, I would think that no harm occurs until the final appellate decision. B. The Predicate-Litigation Rule On the issue of harm there remains for discussion only those decisions in other jurisdictions which at first glance may appear to support the approach of the lead opinion. Some courts have stated in certain circumstances that a cause of action for attorney malpractice did not accrue until the termination of related litigation. See, e.g., Laird v. Blacker, 2 Cal.4th 606, 7 Cal.Rptr.2d 550, 828 P.2d 691 (1992) (en banc). This rule properly applies only when the related litigation is the litigation in which the alleged malpractice was committed, which I shall term the “predicate litigation.” Thus, I would call the rule the “predicate-litigation rule.” It may make sense to say that no harm or damage has occurred until the predicate litigation has been concluded. Every attorney makes some mistakes during litigation and some of those mistakes may well be malpractice, but often the result is not affected by the error. For example, a party may win a lawsuit despite incompetent cross-examination conducted by the party’s attorney. The following passages from 2 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 18.11 (3d ed. 1989), explain that the time at which harm occurs does not depend on the outcome of litigation unless the alleged malpractice was committed during the litigation. [A] right or a remedy is usually lost, or a liability is imposed at the time of a lawyer’s error even though a court does not so declare until a later date. Although the unpredictability in resolution through the judicial process may excuse discovery of the injury, such a determination of rights and liability does not “create” the damage. For example, an injury to title exists when the lawyer erred, even though the client seeks to litigate what ultimately proves to be a meritorious claim of the adverse party. Id. at 108 (footnotes omitted). The date of injury is when the right is lost or the liability is imposed. For example, a California lawyer was sued for an error in 1974 in preparing a marital property settlement agreement which failed to protect his Ghent’s interest in her former husband’s military pension. Although the client claimed that she did not sustain any damage until 1979 when her former spouse’s right to receive the pension vested, the court held that whatever right she had was lost in 1974, regardless of the contingent nature of that interest. Similarly, a Georgia decision held that an unfavorable property separation agreement caused damage when it was signed as a binding obligation, not when it was later incorporated into the divorce decree. Id. at 109 (footnotes omitted). A situation to be distinguished is where the error which causes the damage occurs within the judicial proceeding itself. Then, the judicial process does not declare the rights and liabilities of the parties, but rather is the situs of the client’s injury to a cause of action or a defense. Since subsequent effects usually determine the economic consequence of the error, the time of the injury is when the judicial action is completed, typically upon the entry of an order or judgment. Id. at 110 (footnote omitted). Recognizing the distinction between predicate litigation and other related litigation is Arizona Management Corp. v. Kallof, 142 Ariz. 64, 688 P.2d 710, 714 (Ct.App.1984) (distinguishing Amfac Distrib. Corp. v. Miller, 138 Ariz. 155, 673 P.2d 795, approved as supplemented, 138 Ariz. 152, 673 P.2d 792 (1983), as limited to malpractice occurring during litigation). See Graham v. Holler, 499 So.2d 62 (Fla.Dist.Ct.App.1986) (distinguishing Richards Enterprises v. Swofford, 495 So.2d 1210 (Fla.Dist.Ct.App.1986)); Grunwald v. Bronkesh, 621 A.2d at 465; Magnuson v. Lake, 78 Or.App. 620, 717 P.2d 1216 (1986); Zidell v. Bird, 692 S.W.2d 550, 557 (Tex.Ct.App.1985); see also Massachusetts Elec. Co. v. Fletcher, Tilton & Whipple, 394 Mass. 265, 475 N.E.2d 390 (1985). The contrary authority is rather limited. Some Kansas decisions could be read as applying the predicate-litigation rule even when the alleged malpractice was not committed in the related litigation, but the Kansas Supreme Court now appears to have rejected the view that harm cannot occur until the conclusion of related litigation. See Dearborn Animal Clinic v. Wilson, 248 Kan. 257, 806 P.2d 997 (1991) (treating related litigation as being relevant to discoverability rather than harm). In any event, Kansas cases are not good authority in New Mexico because they follow Price v. Holmes, 198 Kan. 100, 422 P.2d 976 (1967), which held that a cause of action for malpractice in preparing a will accrued only after the will was declared invalid, a result contrary to Jaramillo. Occasionally other courts also fail to distinguish between predicate litigation and other related litigation. This error was made, for example, in Grunwald v. Bronkesh, 254 N.J.Super. 530, 604 A.2d 126, 130 (Ct.App.Div.1992), rev’d, 131 N.J. 483, 621 A.2d 459 (1993). All but one of the decisions upon which the New Jersey Appellate Division relied involved predicate litigation. That one decision, Haghayegh v. Clark, 520 So.2d 58 (Fla.Dist. Ct.App.1988), had itself relied on decisions involving predicate litigation in erroneously applying the rule to other related litigation. Moreover, as noted above, Florida appellate courts do not all agree with Haghayegh. See Graham v. Holler. This Court should not follow the few cases that have mechanically applied the predicate-litigation rule to other related litigation without examining the rationale of the rule. Finally, I see no public policy reason to hold that no harm occurs until the resolution of related litigation that is not the predicate litigation. My review of statutes in other jurisdictions reveals that New Mexico’s four-year limitations period is one of the longer in the country for attorney malpractice actions, and reportedly New Mexico has one of the faster dockets in the country. Ordinarily, if the person alleging legal malpractice thought that it would cause problems to file suit before related litigation had been decided, there would still be ample time to resolve the related litigation before the limitations period expired in the malpractice action. For example, in this case the related litigation was the declaratory judgment action. Judgment was entered less than two years after the complaint for declaratory judgment was filed. Moreover, even if our limitations period were shorter or our docket slower, the public policy argument for delaying accrual of the cause of action is a weak one. If the very act of filing a complaint for attorney malpractice would prejudice the plaintiff in litigation regarding the effect of the work of the sued attorney (a proposition that I question, see Grunwald, 621 A.2d at 466-67), it would generally be in the interest of the allegedly negligent attorney as well as the plaintiff to enter into an agreement tolling the statute of limitations. Also, one must not totally ignore the interests of the accused attorney, whose ability to prepare a defense will diminish with the passage of time. It is the attorney’s interest in repose that is protected by the statute of limitations. See id., 621 A.2d at 465-66 (permitting tardy commencement of malpractice claim “would frustrate the purposes of limitations periods: to protect against the litigation of stale claims; to stimulate litigants to prosecute their claims diligently; and to penalize dilatoriness.”) Of course, plaintiffs too may not always favor the rule set forth in the lead opinion because it delays when a plaintiff is permitted to file a claim — in the absence of harm a plaintiff, having no cause of action, cannot file suit even if such a course seems desirable. II. DISCOVERY A. General Rule The second requirement stated in Jaramillo for accrual of a cause of action is that the matters complained of be “ascertainable and discoverable by the injured person.” 93 N.M. at 434, 601 P.2d at 67. For that proposition Jaramillo cites Neel v. Magana, Olney, Levy, Cathcart & Gelfand, 6 Cal.3d 176, 98 Cal.Rptr. 837, 491 P.2d 421 (1971) (en banc). The specific holding in Neel was that “in an action for professional malpractice against an attorney, the cause of action does not accrue until the plaintiff knows, or should know, all material facts essential to show the elements of that cause of action.” Id., 491 P.2d at 430. It is not necessary that the client have the expertise to judge whether the attorney acted beneath the standard of professional care, so long as the pertinent facts are available to the client. This is the general rule with regard to the discovery requirement for the accrual of causes of action for professional malpractice. Thus, in medical malpractice litigation the California Supreme Court has adopted the view that ‘“when the plaintiff has notice or information of circumstances to put a reasonable person on inquiry, or has the opportunity to obtain knowledge from sources open to his investigation ... the statute commences to run,’ ” Sanchez v. South Hoover Hosp., 18 Cal.3d 93, 132 Cal.Rptr. 657, 553 P.2d 1129, 1135 (1976) (quoting 2 Within, Cal.Procedure (2d ed. 1970) Actions § 339, p. 1181 (emphasis deleted)). Similarly, federal courts have stated, “ ‘[W]hen the facts [become] so grave as to alert a reasonable person that there may have been negligence related to the treatment received, the statute of limitations [begins] to run against the appellant’s cause of action.’ ” Sanders v. United States, 551 F.2d 458, 460 (D.C.Cir.1977) (quoting Reilly v. United States, 513 F.2d 147, 150 (8th Cir. 1975)). In the specific context of legal malpractice the New Jersey Supreme Court wrote: [T]he discovery rule ... postponed] the accrual of a cause of action when a plaintiff does not and cannot know the facts that constitute an actionable claim. ... The limitations period begins to run when a plaintiff knows or should know the facts underlying those elements [injury and fault], not necessarily when a plaintiff learns the legal effect of those facts. Grunwald v. Bronkesh, 621 A.2d at 463 (citations omitted). There is no genuine issue of material fact with regard to whether the essential facts of Sharts’ claim were discoverable and ascertainable by Sharts prior to July 10, 1985. Sharts predicates his cause of action on the contention that he requested Natelson to draft restrictive covenants only for Tract One of the sixty-acre property. Natelson’s failure to handle properly the alleged assignment was clearly ascertainable by Sharts well before July 10, 1985. In 1981 Sharts had received a letter from an attorney contending that the covenants affected all 60 acres of Tracts One and Two. Other attorneys challenged Sharts’ development of Tract Two in a 1983 letter. Also in 1983, a title company had informed Sharts that the restrictions applied to all 60 acres. In 1984 Sharts had even brought a declaratory judgment to attempt to remove the cloud from his title to Tract Two. Any reasonable person could infer from these events that Natelson had not handled the covenants in a manner to avoid nonfrivolous claims that Tract Two was restricted by the covenants. See Levine v. Diamanthuset, Inc., 722 F.Supp. 579, 590 (N.D.Cal.1989) (cause of action arose when plaintiffs had notice of their investment problems and the consequent legal issues because attorney general had filed suit). On April 3, 1985, Sharts wrote Natelson the following letter: This letter is to inform you that if you can get a DECLARATORY JUDEGEMENT [sic] in my favor, I’m only going to sue you for approximately $35,000 which represents the extent of the damages I’ve suffered so far, in the form of interest payments I’ve had to pay while waiting for you to correct the legal errors you should have corrected two years ago when you were made aware of them. If you lose, the Declaratory Judgement to set the record straight, I intend to bring a MALPRACTICE SUIT against Natelson and Ross for a minimum of $800,000 to $2,000,000 which represents the direct and provable damages you have caused me by your carelessness. I am bringing to New Mexico some very expensive and very professional “family” attornies [sic] who are interested in the case. The letter noted that copies were being sent to ten persons, including one titled “Esq.” Thus, it is not surprising that Sharts’ answer brief acknowledges that by April 3, 1985, he “was aware that Natelson may have been careless in drafting and recording the original restrictive covenants.” Sharts does not claim that he was unaware of any pertinent facts. As for damages, by July 9, 1985, Sharts knew that there was a cloud on his title and that the cloud at the least had delayed development of his property and had required him to incur attorney’s fees for the declaratory judgment action and related activity. Sharts’ letter to Natelson of April 3, 1985, demonstrated knowledge of serious consequences to Sharts arising from the problems with the covenants. He knew that he had suffered actual damages. The discovery rule is not designed to protect persons as aware of the essential facts as Sharts was. See Grunwald, 621 A.2d at 463. B. Was Discoverability Delayed— In his Answer Brief Sharts advances two reasons why his cause of action was not discoverable before July 10, 1985. 1. Until Conclusion of the Declaratory Judgment Action? First, he argues that his damages were not ascertainable until the conclusion of the declaratory judgment action. But, as already pointed out, even eventual victory in the declaratory judgment action would not eliminate the damages suffered by Sharts as a result of the problems with the covenants. See Laird v. Blacker, 828 P.2d at 696. Sharts would still have incurred attorney’s fees in trying to clear the cloud to his title, as well as losses from delay in the project. A cause of action accrues even when the full extent of damages is uncertain. See Grunwald, 621 A.2d at 465; Mallen & Smith, supra, § 18.11, at 105 & (3d ed. Supp.1992), at 22; cf. Whittenberg v. Graves Oil & Butane Co., 113 N.M. 450, 453, 827 P.2d 838, 841 (Ct.App.1991), cert. denied, 113 N.M. 352, 826 P.2d 573 (1992) (similar rule in workers’ compensation context). 2. Under the Continuous Representation Rule? Second, Sharts contends that discoverability of his cause of action was delayed by his reliance on Natelson as his attorney, and therefore the malpractice cause of action was not discoverable and ascertainable until Sharts’ new counsel filed his entry of appearance on July 10, 1985, exactly four years prior to the time that Sharts filed his complaint against Natelson. As I understand Judge Apodaca’s opinion, this is the one issue on which he and I differ. I would reject Sharts’ argument on this point on both the facts and the law. Even adopting Sharts’ view of the law, the undisputed facts in the record establish that Sharts acquired new counsel prior to July 10, 1985. On June 20, 1985, the district court in the declaratory judgment action had entered an order halting Natelson’s representation of Sharts in the case and requiring Sharts to secure new counsel within 15 days. Sharts’ new attorney entered an appearance in court on July 10, 1985. At his deposition Sharts answered “Yes” when asked, “And seeing that Mr. Marlowe noted his entry as your attorney in court on July 10, 1985, you can be sure, can you not, that you had engaged him to represent you some days before that?” More importantly, I disagree with Sharts’ view that the pertinent date is when Sharts obtained new counsel, as opposed to the date that Natelson stopped representing Sharts on the matter. A number of courts have adopted the rule that a client’s cause of action for attorney malpractice does not accrue during the time that the attorney continues to represent the client on the subject matter of the malpractice action. See Mallen & Smith, supra, § 18.12. The rule is generally referred to as the “continuous representation rule.” See id. “The purpose of the continuous representation rule is to avoid unnecessarily disrupting the attorney-client relationship.” Id. at 115. The purpose disappears when the representation ends. See Glamm v. Allen, 57 N.Y.2d 87, 453 N.Y.S.2d 674, 677, 439 N.E.2d 390, 393 (1982). Often, of course, the ending of representation by one attorney and the commencement of representation by another attorney are virtually simultaneous. But when they are not, it follows from the rationale for the continuous representation rule that the limitations period is not further delayed once the original attorney stops representing the client. See Laird v. Blacker, 828 P.2d at 693 n. 3 (California’s codification of continuous representation rule tolls limitation period until attorney no longer represents plaintiff); cf. Hensley v. Caietti, 13 Cal.App. 4th 1165, 16 Cal.Rptr.2d 837 (1993) (tolling under continuous representation rule ended when plaintiff obtained new counsel, although defendant attorney not yet discharged). “[A]n attorney’s services are discontinued, for purposes of the statute of limitations, when the client or the court discharges the attorney.” Hooper v. Lewis, 191 Mich.App. 312, 477 N.W.2d 114, 116 (1991) (applying Michigan statute). Thus, in this case any tolling under the continuous representation rule terminated by June 20, 1985, the date of the court order halting Natelson’s representation of Sharts. Sharts contends that he could not discover his cause of action while Natelson was representing him because of Natelson’s influence over Sharts, at least with respect to this matter. That obstacle to discovery ended, however, when the district court ordered Natelson to stop representing Sharts in the case. The point is not that a former client will necessarily discover the cause of action the day after the negligent attorney quits representing the client (immediate actual discovery is unlikely even if a new attorney is retained simultaneously with discharge of the negligent attorney); the point is that once the representation ends, an otherwise discoverable cause of action becomes discoverable. The former client then has the entire limitations period to file suit. If New Mexico adopts the continuous representation rule as it is understood in other jurisdictions, Sharts would still have had four years after June 20, 1985, to file his claim. With that generous limitations period there is no reason for New Mexico to extend the period beyond what could be justified by the rationale for the continuous representation rule. Moreover, in the circumstances of this case the continuous representation rule has no application. The letter from Sharts to Natelson of April 3, 1985, threatening to sue Natelson for malpractice, demonstrates that, regardless of the sincerity of the letter, Natelson did not need the protection of the eontinuous representation rule — he was definitely not intimidated by or overly deferential toward his attorney. See Cantu v. St. Paul Cos., 401 Mass. 53, 514 N.E.2d 666, 669 (1987) (“The innocent reliance which the continued representation doctrine seeks to protect is not raised by the facts in this case[.]”) IV. CONCLUSION In summary, under the holding in Jaramillo the limitations period had expired prior to the time Sharts filed his lawsuit. The great weight of authority argues against extending the limitations period by holding that the cause of action did not accrue until the declaratory judgment litigation had terminated or until Sharts acquired a new attorney after the district court discharged Natelson. In a state which has adopted the discovery rule and provides a generous four-year limitations period, there is no reason for the court to struggle to preserve this tardy complaint.