Court Opinion

ID: 9843730
Source: CourtListenerOpinion
Date Created: 2023-09-24 02:42:34.708584+00
Date Added: 2024-06-11T09:16:53.697373
License: Public Domain

KAPSNER, Justice,
dissenting.
[¶ 49] I respectfully dissent. I would affirm the trial court’s grant of summary judgment.
[¶ 50] In Larson I, we reversed a summary judgment, indicating:
[T]here is a genuine issue of material fact precluding summary judgment on the question of when Page knew, or with reasonable diligence should have known, of the injury, its cause, and the defendants’ possible negligence. The focus of inquiry is when Page was. “apprised of facts which would place .a reasonable person on notice that a potential claim exist[ed].” Wall, 393 N.W.2d at 761 [1986]. The ultimate question with regard to triggering the running of the statute of limitations is when did Page “know enough to be on notice of a potential claim” for legal malpractice. Schanilec, 1999 ND 165, ¶ 19, 599 N.W.2d 253.
2001 ND 103, ¶ 13, 627 N.W.2d 386 (footnote omitted). The additional evidence, received by the trial court after remand, makes dismissal appropriate as a matter of law because the statute of limitations had run.
[¶ 51] I take issue with the majority and concurring opinions on two matters. First, what is an injury for purposes of determining when the statute of limitations starts to run. Second, whether there is evidence showing as a matter of law that Norkot and Page had sufficient information to be on notice of a potential malpractice claim more than two years before they filed their suit against Larson and the McGee Hankla law firm.
[¶ 52] The majority opinion reverses the judgment and remands for a determination of “when Page suffered damages” and “when Page knew or with reasonable diligence should'have known of his injury.” This language perpetuates the confusion created by the inartful and interchangeable use by this Court of the words “damages” and “injury,” a confusion in which I have participated. See Dan Nelson Constr., Inc., v. Nodland & Dickson, 2000 ND 61, ¶ 14, 608 N.W.2d 267. We should take this opportunity to clarify that the focus of the *48injury/damages inquiry for purposes of the statute of limitations is the harm occasioned to the client, not the measure of that harm in the form of compensation which can be sought for the injury.
[¶ 53] The concurring opinion exacerbates the problem by suggesting that the necessary “damages” which must be shown are those that flow from the injury. In paragraph 24, the concurrence states: “the only injury or damage which Norkot or Page could claim as a result would be their attorney’s fees and costs incurred in defending the South Dakota action.” In paragraph 25, the concurrence suggests that Norkot and Page did not sustain any injury or damages from the absence of the indemnity agreement. This statement confuses the existence of a legal injury with the amount of damages. Further, the concurrence’s reliance on Sirott v. Latts, 6 Cal.App.4th 923, 8 Cal.Rptr.2d 206 (1992) has to be measured against the decision of the California Supreme Court in Jordache Enterprises, Inc., v. Brobeck, Phleger & Harrison, 18 Cal.4th 739, 76 Cal.Rptr.2d 749, 958 P.2d 1062 (1998), which calls into question whether the Sirott decision is good law in a legal malpractice action. Jordache specifically dealt with the question: “When does a former client — having discovered the facts of its attorney’s malpractice — sustain actual injury so as to require commencement of an action against the attorneys within one year?” 18 Cal.4th at 747, 76 Cal.Rptr.2d 749, 958 P.2d at 1068.
[¶ 54] California law on the statute of limitations in a malpractice action derives from Budd v. Nixen, 6 Cal.3d 195, 98 Cal.Rptr. 849, 491 P.2d 433 (1971), the case relied upon by this Court in Wall v. Lewis, 366 N.W.2d 471 (N.D.1985). Following Budd, the California legislature enacted the statute that governs the commencement of the limitation period. However, certain circumstances toll that period, including one in which the plaintiff has not sustained “actual injury.” Cal.Code Civ. Proc. § 340.6. In Jordache, the California Supreme Court discussed the development of the concept of injury since the Budd decision.
[¶ 55] In Jordache, the California court noted that:
[T]he existence of appreciable actual injury does not depend on the plaintiffs ability to attribute a quantifiable sum of money to consequential damages. Similarly, Laird rejected the claims that actual injury should be defined by a monetary amount and that the limitations period should be tolled if the injury is, in some way, remediable. Adams recognized that actual injury may consist of impairment or diminution, as well as the total loss or extinction, of a right or remedy. “When malpractice results in the loss of a right, remedy, or interest, or in the imposition of a liability, there has been actual injury regardless of whether future events may affect the permanency of the injury or the amount of monetary damages eventually incurred.”
18 Cal.4th at 750, 76 Cal.Rptr.2d 749, 958 P.2d at 1070 (citations omitted)(emphasis added).
[¶ 56] The California court specifically rejected the notion suggested by the concurrence that the amount of damages must be decided by the ultimate resolution of the lawsuit imposing liability on the injured client. Jordache, 18 Cal.4th at 752, 76 Cal.Rptr.2d 749, 958 P.2d at 1071. The California court interprets the actual injury requirement as whether the plaintiff has sustained any harm compensable in an action against the attorney for professional negligence, even though the amount of compensable damages might not yet be known. “Actual injury occurs when the *49client suffers any loss or injury legally cognizable as damages in a legal malpractice action based on the asserted errors or omissions.” Jordache, 18 Cal.4th at 743, 76 Cal.Rptr.2d 749, 958 P.2d at 1065. See also Samuels v. Mix, 22 Cal.4th 1, 91 Cal.Rptr.2d 273, 989 P.2d 701 (1999).
[¶ 57] We are not the only state to have expressed confusion about the use of “injury” and “damages.” See Ronald Mallen & Jeffrey Smith, 3 Legal Malpractice §§ 22.11-22.12 (5th ed.2000). The author notes “the prevailing rule is that there only need be the fact of an injury rather than a specific quantity of damage, even if significant damages may not occur until the future, if at all.”
[¶ 58] I cannot agree with the concurrence’s assertion that our cases are contrary. The development of California law is compatible with the prior formulations of this Court, as quoted by the majority. In Wall v. Lewis, 366 N.W.2d 471, 473 (N.D.1985), this Court did say: “A cause of action for legal malpractice does not accrue, and the statute of limitations does not commence to run, until the client has incurred some damage.” However, the Court went on to quote Budd v. Nixen:
The cause of action arises, however, before the client sustains all, or even the greater part, of the damages occasioned by his attorney’s negligence.... Any appreciable and actual harm flowing from the attorney’s negligent conduct establishes a cause of action upon which the client may sue.
Indeed, once having discovered his attorney’s negligence and having suffered some damage, the client must institute his action within the time prescribed in the statute of limitations or he will be barred from thereafter complaining of his attorney’s conduct.
Wall, at 473 (citations omitted).
[¶ 59] The Court in Wall, at 473, held that the claimants had sufficient notice of their injury “no later than” the date the IRS issued its notice of assessment. The Court stated in a footnote in Wall, at 474, that whether the Doctors sustained actual damages prior to the deficiency assessment by the IRS is a question of fact to be determined at a trial on the merits, citing Budd.
[¶ 60] In this case, appreciable harm can include the inability to seek indemnity based upon the attorney’s failure to include a provision for indemnity in the contract. “The loss or diminution of a right or remedy constitutes injury or damage. Neither uncertainty of amount nor difficulty of proof renders that injury speculative or inchoate.” Jordache, 18 Cal.4th at 744, 958 P.2d at 1066 (citation omitted). The specific harm or injury asserted in this case is exposure to liability as a result of the contract drafted by the attorneys and that harm was appreciable or actual in January 1996 because demand had been made in that month on Page and Norkot.
[¶ 61] The second dispute I have with the majority and concurring opinion is the remand for determination of when Norkot and Page knew, or with reasonable diligence should have known, of their injury. Norkot and Page served a malpractice action against Larson and the McGee Hankla law firm dated February .6, 1998, alleging:
When Larson and McGee prepared the Asset Purchase Agreement and the Consulting and Noncompetition Agreement between Rexworks and Norkot and Page, Larson and McGee failed to include any provision in the contract to protect Norkot and Page from liability to parties who may be injured, physically or financially, as a consequence of the use of any of the assets transferred from Norkot to Rexworks.
[¶ 62] In Duncklee v. Wills, 542 N.W.2d 739, 742 (N.D.1996), we said:
*50The statute of limitations for legal malpractice actions commences to run when the plaintiff knows, or with reasonable diligence should know, of the injury, its cause, and the defendant’s possible negligence. Wall v. Lewis, 393 N.W.2d 758 (N.D.1986). A malpractice plaintiffs knowledge is ordinarily a question of fact, and summary judgment is rarely appropriate on the issue of when the plaintiff should have discovered there was a potential malpractice claim. Id., 393 N.W.2d at 762.
[¶ 63] Although a malpractice plaintiffs knowledge is ordinarily a question of fact, it becomes a question of law, if the evidence is such that reasonable minds could draw but one conclusion. Schanilec v. Grand Forks Clinic, Ltd., 1999 ND 165, ¶ 20, 599 N.W.2d 253. This, after remand, is such a case. In January 1996, Norkot and Page knew, or with reasonable diligence should have known, the contractual provisions did not include indemnification of Norkot and Page by Rexworks so as to render the complaint against Larson and McGee outside the two-year limitations provision. In Larson I, we stated:
We agree with the trial court that service upon Page of the third-party complaint in the South Dakota litigation “would have triggered discussions between Page and his attorneys about the indemnification provisions of the agreements.” Such discussions reasonably should have provided Page with knowledge sufficient to trigger the running of the statute of limitations. Page’s registered agent received the third-party complaint in the South Dakota litigation on January 8, 1996. Page’s attorneys prepared an answer and counterclaim seeking indemnity or contribution, which was dated February 20, 1996. The parties have not drawn our attention to any record evidence showing when Page was actually apprised of the third-party complaint in the South Dakota litigation or when Page discussed that litigation with attorneys in preparing to respond to the third-party complaint, to determine by what date between January 8, 1996, and February 20, 1996, “discussions between Page and his attorneys about the indemnification provisions of the agreements” should reasonably have taken place. Thus, the record is not clear whether the statute of limitations had run by the time Page served his counterclaim.
Larson v. Norkot Manufacturing, 2001 ND 103, ¶ 12, 627 N.W.2d 386.
[¶ 64] The additional information which the trial court received after remand included the following:
1. On January 8, 1996, a third-party complaint was served on Max Rosenberg, the registered agent for Norkot, in the South Dakota action against Rexworks.
2. On January 8, 1996, Rosenberg sent the third-party complaint to Page.
3. On January 9, 1996, Page received the third-party complaint and sent it to his attorney Douglas Christensen. In the letter from Page to Christensen, Page enclosed part of his agreement with Rexworks and requested the attorney to “Call me.”
4. On January 19, 1996, Page sent another letter to Christensen. Page indicates in the letter he had read the contract with Rexworks. The letter also states, “As we discussed, I don’t believe rexworks is entitled to include me in this lawsuit, at least not from what I believed was the agreement in the contract with them.”
5. A few days later, Page received a certified letter from Rexworks dated January 19, 1996 notifying Page “of several claims for indemnification.” *51The letter from Rexworks tendered defense of the South Dakota litigation to Norkot and notified Norkot of other claims being made against Rexworks, including the claim in Texas. Rexworks demanded indemnification from both Page and Nor-kot under the contract for both the South Dakota litigation and the claim in Texas.
6. On January 30, 1996, Christensen sent a letter to the attorney for Rex-works in the South Dakota litigation requesting an extension of time to answer the third-party complaint.
[¶ 65] The majority opinion in ¶ 13, focuses on the assertions made by Page that he had never had conversations with his attorneys about the alleged malpractice of Larson or the McGee Hankla law firm. These assertions are irrelevant. “In applying the discovery rule we have used an objective standard for the knowledge requirement; we focus upon whether the claimant has been appraised of facts which would place a reasonable person on notice that a potential claim exists, without regard to the claimant’s subjective beliefs.” BASF Corp. v. Symington, 512 N.W.2d 692, 695 (N.D.1994). “The focus is upon whether the plaintiff has been apprised of facts which would place a reasonable person on notice that a potential claim exists. It is not necessary that the plaintiff be subjectively convinced that he has been injured and that the injury was caused by the defendant’s negligence.” Schanilec, 1999 ND 165, ¶ 13, 599 N.W.2d 253, citing Wheeler v. Schmid Laboratories, Inc., 451 N.W.2d 133 (N.D.1990).
[¶ 66] If conversations with lawyers about malpractice were necessary, theoretically the statute of limitations might never begin to run. Page asserts he had no specific conversations about malpractice. However, on January 9, 1996, Page sent a copy of the Summons in the South Dakota litigation to his attorney Doug' Christen'sen. His letter states:
■I ENCLOSE A SUMMONS OR WHATEVER FROM REXWORKS, THE COMPANY I SOLD THE GRINDER PRODUCT LINE TO. NAMING NORKOT A THIRD PARTY DEFENDANT. AS I READ THIS THING IT APPEARS THAT ONE OF THE GRINDERS NORKOT BUILT AND SOLD TO REXWORKS AS PART OF THE PACKAGE OF SELLING THE WHOLE PRODUCT LINE IN 1993, WAS SOLD TO CARLSON EQUIPMENT IN MINNEAPOLIS WHO THEN SOLD IT TO THE CITY OF RAPID CITY SOUTH DAKOTA.
IT EVIDENTLY CAUGHT FIRE AND BURNED AND NOW THEY ARE SUING CARLSON, REXWORKS AND REXWORKS IS ENJOINGIN NORKOT. I GUESS WE HAVE TO ANSWER IT.
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FOR WHAT ITS WORTH I HAVE INCLUDED PART OF THE AGREEMENT I HAD WITH REXWORKS, AND HIGH LIGHTED SOME PARTS THAT MAY OR MAY NOT HAVE SOME RELAVENCE.
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I OF COURSE DENY THAT THEIR WAS ANY DESIGN FAULT BY NOR-KOT. WHAT WORRIES ME IS THAT REX IS GOING TO USE THIS AS A REASON NOT TO PAY ME ON FEB.2, THE ANNUAL 350 K PAYMENT, EVEN THOUGH THAT OBLIGATION IS TO ME PERSONALLY AND NOT NORKOT.
CALL ME
[¶ 67] On January 19, 1996, in another letter to attorney Christensen, Page wrote:
*52As we discussed, I don’t believe rex-works is entitled to include me in this lawsuit, at least not from what I believed was the agreement in the contract with them. In fact rexworks own warranty as noted in the enclosures is the same as mine was. That is I suppose a question some judge will have to determine.
Further to our conversation as I read my contract with rex, they cannot withhold unless a court of competent jurisdiction has found in their favor, a point which we will have a better feel for in the next two weeks ... from rexworks standpoint they could almost encourage someone to file a suit simply in order to avoid paying me ... and I note the payments are due me personally, and they have filed suit against norkot corp.
[¶ 68] On January 19, 1996, Rexworks sent a letter to Page notifying him as President of Norkot, of the following:
Pursuant to Article 14 of the Asset Purchase Agreement by and between Nor-kot Manufacturing Co., Inc., Rexworks Inc. and James Page, Rexworks is writing to notify you of several claims for indemnification. As provided in section 14.01 of the Asset Purchase Agreement, Norkot and James Page are jointly and severally obligated to indemnify Rex-works for such indemnification claims.
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As you know, several customers have alleged a design defect with respect to product safety and fire prevention. You are now involved in a legal action regarding fire on a machine built by Nor-kot and shipped to the City of Rapid City. Various other claims of defective design and manufacture are also being alleged by Rapid City. These alleged problems are not confined to this location. Litigation has commenced or is being threatened at Texas Dirt Works and the City of Plano, Texas. Rexworks contends that Norkot knew of these problems and the resulting liabilities and did not disclose these problems to Rex-works.
[¶ 69] In January 1996, Page had specific written discussions with his attorney about the contract and whether Norkot could be included in suits under an indemnity claim. In January 1996, Page knew that Rexworks was making claims for indemnity that include claims arising both in South Dakota and in Texas.
[¶ 70] If it was malpractice for Larson or the McGee Hankla law firm not to have included a provision in the contract for Rexworks to indemnify Norkot and Page, they were aware of its absence in January 1996. Norkot and Page were aware, or should have been aware, of their exposure to the indemnity claims of Rexworks and their lack of a contractual remedy against Rexworks.
[¶ 71] As we said in Schanilec, “[t]o trigger the running of the statute of limitations, Schanilec need not fully appreciate the potential liability or even be convinced of his injury; he need only know enough to be on notice of a potential claim.” Schanilec, at ¶ 19. Like the fact situation in Schanilec, this case is one where reasonable minds can only draw the conclusion drawn by the trial court. Looking at the specific claims of negligence made by Page and Norkot, quoted above, and based upon the evidence in this record, when did Page and Norkot have sufficient knowledge of the potential claim for legal malpractice? The trial court held that Page and Norkot had such knowledge on January 9, 1996, referring to the letter Page sent to Christensen on that date and on Page’s statement that “Mr. Christensen had a copy of the asset purchase agreement between Rexworks and him since early 1995 in connection with another case.”
*53[¶ 72] Under the undisputed evidence developed after remand, Page and Norkot knew, or with reasonable diligence should have known, that the contracts prepared by Larson contained no indemnity provisions protecting them. By receipt of the letter of demand dated January 19, 1996, Norkot and Page knew they were subject to indemnity demands by Rexworks for claims in both South Dakota and Texas.
[¶ 73] If it was malpractice not to have included an indemnity provision, an action could have been brought by Norkot and Page against Larson and the McGee Hankla law firm asserting legal malpractice with the information known to them in January 1996, even though the amount of the indemnity liability, if any, would not have been known. Norkot and Page had sufficient information of their potential claim more than two years before they commenced the legal malpractice claim against Larson and the McGee Hankla law firm. Therefore, § 28-01-18, N.D.C.C., bars the claim. I would affirm.
[¶ 74] DALE Y. SANDSTROM, J., concurs.