Beesley v. Van Doren

873 P.2d 1280, 1994 Alas. LEXIS 41, 1994 WL 184954

• Court: Alaska Supreme Court
• Decided: May 13, 1994
• Docket: S-5374
• Status: Published

Opinions

OPINION

COMPTON, Justice.

Pursuant to Alaska Rule of Appellate Procedure 407, the United' States District Court for the District of Alaska certified the following question to this court: In a legal malpractice action, is the statute of limitations tolled until final resolution of the litigation underlying the malpractice claim?

I. FACTUAL AND PROCEDURAL BACKGROUND

In April 1983 the eight plaintiffs (collectively, Beesley) and other truck drivers for Mukluk Freight Lines, Inc. (Mukluk) hired William Van Doren to represent them in a wage dispute. Mukluk sent Beesley checks accompanied by letters indicating that signing and cashing the checks “shall constitute a complete release by you of all claims you now have against Mukluk.” Van Doren allegedly advised Beesley to endorse the cheeks for deposit into a court-supervised account. Van Doren later filed a complaint against Mukluk and its parent company, Crowley Maritime Corp. (Crowley), on behalf of the drivers.

The drivers dismissed Van Doren and retained other counsel in December 1983. In March 1984 Crowley and Mukluk filed a motion for summary judgment based on the affirmative defense of accord and satisfaction. The trial court granted the motion in August. The case was appealed to this court, which reversed the trial court’s decision. Phillips v. Mukluk Freight Lines, 721 P.2d 1143 (Alaska 1986). We held that there was sufficient evidence of bad faith in Mukluk’s settlement offer to defeat summary judgment. Id. at 1146.

The case was litigated for four more years in state and federal courts. While in federal court, defendants Crowley and Mukluk filed another motion for summary judgment based on accord and satisfaction, which was not granted. The ease finally settled in September 1990.

Beesley filed the complaint in the present case in federal court in October 1991. Bees-ley alleges that Van Doren’s advice to sign the cheeks amounted to gross negligence and a reckless disregard for the rights of his clients. Beesley asserts that Van Doren’s advice (1) added time and expense to the litigation, (2) caused Beesley to settle for far less than if the defense of accord and satisfaction had not existed, and (3) caused Bees-ley to suffer “great anxiety and worry causing emotional distress, fear, unhappiness and depression.”

Van Doren responds that the statute of limitations began to run in March 1984, when Beesley was forced to defend against Mukluk’s motion for summary judgment, or at the latest by August 1984, when the trial court ruled against Beesley. United States District Court Judge H. Russel Holland agreed, concluding that under Wettanen v. Cowper, 749 P.2d 362 (Alaska 1988), the statute of limitations began to run upon the initial adverse judgment at the trial court level. On reconsideration, however, Judge Holland decided that Wettanen was distinguishable because Beesley had continued to pursue the merits of the underlying litigation. Simultaneous litigation of the underlying case and the malpractice case might have forced Beesley to take inconsistent positions. Judge Holland certified the question whether the statute of limitations in a legal malpractice case is tolled until the litigation underlying the malpractice claim has been resolved. This court granted the certificate.

II. DISCUSSION

The issue before us is a question of law, to which we will apply our independent judgment. On questions of law, our “duty is to adopt the rule of law that is most persuasive in light of precedent, reason, and policy.” Guin v. Ha, 591 P.2d 1281, 1284 n. 6 (Alaska 1979).

In Wettanen we held that the statute of limitations for attorney malpractice begins to run when

the client discovers or reasonably should have discovered the existence of all the elements of his cause of action. Moreover, if the client discovers his attorney’s negligence before he suffers damages, the statute of limitations will not begin to run until the client suffers actual damages.

Wettanen, 749 P.2d at 364 (citing Greater Area, Inc. v. Bookman, 657 P.2d 828, 829 & n. 3 (Alaska 1982)); see also Thomas v. Cleary, 768 P.2d 1090, 1094 (Alaska 1989) (holding that because plaintiffs “have incurred no damages, no [professional malpractice] has occurred.”).

Van Doren argues that this court’s decision in Wettanen is indistinguishable from the present case and is controlling. In Wettanen the attorney had stipulated to settle the underlying case without the client’s knowledge or authorization. Wettanen, 749 P.2d at 363. The court entered its judgment pursuant to the stipulation in March 1982. The client hired a new attorney who moved to set aside the judgment. The motion was denied. An appeal was dismissed because it was not then from a final judgment. Final judgment was entered in December 1985. Id. The client filed a malpractice action the same day. Id. at 364. Applying the two-year statute of limitations, we held that the client’s claim was barred because he “knew of his cause of action against [his attorney] and suffered actual damages more than two years before this case was filed.” Id. at 365. A client need not suffer all of the damages caused by his or her attorney’s malpractice before the statute of limitations begins to run. Id. “[T]he guiding principle is that the statute of limitations commences to run when one is actually damaged as a result of the alleged malpractice, and that the commencement of the statute will not be put off until one learns the full extent of his damages.” Id.

Beesley argues that this court should follow the lead of some jurisdictions and adopt an “exhaustion of appeals” rule because, in the words of the Arizona Supreme Court, “the injury or damaging effect on the unsuccessful party is not ascertainable until the appellate process is completed or is waived by a failure to appeal.” Amfac Distribution Corp. v. Miller, 138 Ariz. 152, 673 P.2d 792, 794 (1983). Van Doren responds that an “overwhelming majority of courts” hold that the statute of limitations applicable to a claim for legal malpractice is not tolled pending resolution of the underlying litigation.¹

We reject the “exhaustion of appeals” rule. Wettanen holds that a statute of limitations begins running when a party suffers actual damages, without regard to whether the full extent of the damages is known at the time.² Wettanen, 749 P.2d at 365.

In the alternative, Beesley argues that Wettanen is inapplicable because the case did not address the situation where the underlying litigation continued after the discovery of attorney malpractice. The client in Wetta-nen did not appeal from the final judgment. Therefore, this court did not have occasion to consider the situation in which a legal malpractice plaintiff might have to take inconsistent positions in separate proceedings. Beesley contends that this situation may compromise his chances of success in both matters.³

In Wettanen we did not consider the problem of forcing the client to assert inconsistent positions in the underlying and malpractice cases. We do not do so in this case. We are not persuaded that Beesley’s positions in the underlying and malpractice cases are inconsistent. The question whether the defense of accord and satisfaction existed is different from the question whether Van Doren’s actions created the possibility of such defense. Even if Beesley ultimately overcame the defense, Beesley still has a cause of action against Van Doren, whose actions damaged him by extending the length and expense of the litigation. Furthermore, courts often deal with seemingly inconsistent positions. An argument that the defense of accord and satisfaction did not exist, and if it did, that the attorney was responsible for its creation, is certainly tenable in the legal arena.

Both of Beesley’s arguments would require us to overrule Wettanen. Under the rule of stare decisis, this court will overrule precedent only “where the court is ‘clearly convinced that the rule was originally erroneous or is no longer sound because of changed conditions, and that more good than harm would result from a departure from precedent.’” State v. Souter, 606 P.2d 399, 400 (Alaska 1980) (quoting IB J. Moore, Moore’s Federal Practice ¶ 0.402 at 164-55 (1974)) (other citations omitted), overruled on other grounds by State v. Dunlop, 721 P.2d 604 (Alaska 1986); see also Dunlop, 721 P.2d at 620. In this case, we choose not to disturb the rule in Wettanen, because we are not persuaded that either changed conditions or a balancing of the parties’ interests favors overruling Wettanen. Accordingly, we adhere to Wettanen and decline to adopt the “exhaustion of appeals” rule.⁴ The statute of limitations begins running when a client discovers or reasonably should have discovered all the elements of the cause of action, and suffers actual damages. Proper application of this rule will provide the client with adequate opportunity to commence his cause of action within the statute of limitations. Therefore, we find it unnecessary to adopt a rule which tolls the statute of limitations until all of a client’s appeals are exhausted.

III.' CONCLUSION

We hold that the statute of limitations in attorney malpractice cases is not tolled pending the final resolution of the litigation underlying the malpractice action. Under Wettanen, the statute of limitations began to run on Beesley’s malpractice claim when Beesley suffered actual damages. It is not necessary that all damages Beesley suffered be ascertainable before the statute begins to run.

RABINOWITZ, J., dissents.

BURKE, J., not participating.

1 . See Rhoades v. Sims, 286 Ark. 349, 692 S.W.2d 750, 752 (1985); Laird v. Blacker, 2 Cal.4th 606, 7 Cal.Rptr.2d 550, 555, 828 P.2d 691, 696 cert. denied,-U.S.-,-, 113 S.Ct. 658-59, 121 L.Ed.2d 584 (1992); Jankowski v. Taylor, Bishop & Lee, 246 Ga. 804, 273 S.E.2d 16, 18 (1980); Belden v. Emmerman, 203 Ill.App.3d 265, 148 Ill.Dec. 583, 586, 560 N.E.2d 1180, 1183 (1990); Basinger v. Sullivan, 540 N.E.2d 91, 94 (Ind.App.1989); Dearborn Animal Clinic P.A. v. Wilson, 248 Kan. 257, 806 P.2d 997, 1006 (1991); Brand v. New England Ins. Co., 576 So.2d 466, 469-70 (La.1991); Hayden v. Green, 431 Mich. 878, 429 N.W.2d 604 (1988); Sabes & Richman, Inc. v. Muenzer, 431 N.W.2d 916, 918-19 (Minn.App.1988); Dixon v. Shafton, 649 S.W.2d 435, 438 (Mo.1983); Suzuki v. Holthaus, 221 Neb. 72, 375 N.W.2d 126, 128 (1985); Zimmie v. Calfee, Halter & Griswold, 43 Ohio St.3d 54, 538 N.E.2d 398, 402 (1989); Chambers v. Dillow, 713 S.W.2d 896, 898 (Tenn.1986); Richardson v. Denend, 59 Wash.App. 92, 795 P.2d 1192, 1195 n. 7 (1990); Hennekens v. Hoerl, 160 Wis.2d 144, 465 N.W.2d 812, 818-19 (1991).

2 . The possible benefits of tolling a statute of limitations until the exhaustion of appeals do not justify a departure from the common law rule in negligence and legal malpractice cases. The period begins running at the earliest point there is knowledge of injury. Hunt v. Bittman, 482 F.Supp. 1017, 1021-22 & n. 22 (D.D.C.1980), aff'd, 652 F.2d 196 (D.C.Cir.), cert. denied, 454 U.S. 860, 102 S.Ct. 315, 70 L.Ed.2d 158 (1981), cited in Wettanen, 749 P.2d at 365. The California Supreme Court has recently held that "the statute of limitations for legal malpractice actions commences on entry of adverse judgment or final order of dismissal." Laird, 828 P.2d at 696. First, the court noted that the client sustains injury as soon as he or she is forced to incur costs pursuing an appeal. Id. Second, a successful appeal "does not necessarily exonerate the attorney, nor does it extinguish the client’s action against him for negligence in the conduct of trial." Id. A recent Alaska case supports this latter point. In Doe v. Hughes, Thorsness, Gantz, Powell & Brundin, 838 P.2d 804 (Alaska 1992), this court noted that although the clients' adoption decree was upheld on appeal, the challenge to it was a “costly affair." Id. at 806.

3 .See Peat, Marwick, Mitchel & Co. v. Lane, 565 So.2d 1323, 1326 (Fla.1990); United States Nat’l Bank & Higgens v. Davies, 274 Or. 663, 548 P.2d 966, 970 (1976); Hughes v. Mahaney, 821 S.W.2d 154, 157 (Tex.1991).

4 . If a party was forced to take truly inconsistent positions and “more good than harm would result from [the] departure,” Souter, 606 P.2d at 400 (citation omitted), then we might be inclined to tailor Wettanen to this difficult situation.

Likewise, because Beesley retained a different attorney before the motion for summary judgment against him was filed, we are not asked to consider the adoption of the "continuous representation” rule. Under that rule, the statute of limitations is tolled as long as the client is represented by the same attorney who committed the alleged malpractice. We have opined that we might adopt the rule. Wettanen, 749 P.2d at 365. Such a rule would resolve the concern for the attorney-client relationship raised by some courts which have rejected the "exhaustion of appeals” rule. See Amfac, 673 P.2d at 798-99; Neylan v. Moser, 400 N.W.2d 538, 542 (Iowa 1987).