Greene v. Morgan, Theeler, Cogley & Petersen

1998 SD 16, 575 N.W.2d 457, 1998 S.D. LEXIS 16

• Court: South Dakota Supreme Court
• Decided: February 18, 1998
• Docket: None
• Status: Published

Opinions

MILLER, Chief Justice.

[¶ 1.] In 1988, attorney Jack Theeler prepared an antenuptial agreement for Terry Greene. The agreement, among other things, purported to waive any right that Greene’s fiancee would have to alimony should the couple ever divorce. When the couple ultimately divorced in 1993, the trial court awarded alimony to Greene’s wife, ruling that the part of the agreement waiving alimony was invalid under South Dakota law. Greene brought this legal malpractice action against Theeler and his law firm. The trial court granted summary judgment to Theeler and the law firm, holding that the three-year statute of limitations had run on the malpractice claim. Greene appeals. We affirm in part and reverse and remand in part.

FACTS

[¶ 2.] Terry Greene was the sole shareholder of Terry’s Propane, Inc. of Mitchell, South Dakota. After the dissolution of his first marriage in 1985, he began to discuss marriage with his soon-to-be second wife, Pamela. They originally planned to marry in 1987, and met with attorney Theeler in the fall of 1987 to prepare an antenuptial agreement. Greene had told Pamela that he would not get married unless they executed such an agreement as a means of protecting his business and personal assets. Theeler had represented Greene previously when Greene was setting up his business. He also represented Greene during his divorce from his first wife and in other incidental legal matters.¹ For undisclosed reasons, the marriage was postponed until June 25, 1988. Two days prior to the marriage, Greene and Pamela returned to Theeler to finalize the agreement. Among other things, it provided: “Each of the parties do hereby further waive and release all rights including, but not limited to, ... alimony, support or otherwise[.]”

[¶ 3.] Following the marriage, Theeler continued to represent Greene by providing estate planning and asset protection advice. In 1993 Pamela initiated a divorce action. Theeler initially represented Greene in that action, but withdrew when it became necessary for him to testify as a witness. The divorce court properly determined the portion of the agreement that waived alimony and support was invalid because it was viola-tive of the public policy of our state as held in Connolly v. Connolly, 270 N.W.2d 44, 46 (S.D.1978). Theeler even later testified in his deposition that at the time the agreement was signed he knew the ease law in South Dakota prohibited alimony waivers in ante-nuptial agreements. Thus, Pamela was awarded alimony payments of $1,000 per month for twenty-four months.

[¶4.] Greene then instituted an action for legal malpractice against Theeler and his law firm of Morgan, Theeler, Cogley & Peterson, Lawyers. Theeler and the firm made a motion for summary judgment, asserting the three-year statute of limitations had run on Greene’s legal malpractice claim. The trial court granted summary judgment.

[¶ 5.] Greene appeals, claiming the granting of summary judgment was inappropriate because the statute of limitations was tolled either by the continuous representation doctrine, or fraudulent concealment.

STANDARD OF REVIEW

[¶ 6.] The standard under which we review summary judgment is well established:

“Summary judgment shall be granted ‘if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.’ We will affirm only when there are no genuine issues of material fact and the legal questions have been correctly decided. All reasonable inferences drawn from the facts must be viewed in favor of the nonmoving party. The burden is on the moving party to clearly show an absence of any genuine issue of material fact and an entitlement to judgment as a matter of law. On the other hand, ‘[t]he party opposing a motion for summary judgment must be diligent in resisting the motion, and mere general allegations and denials which do not set forth specific facts will not prevent issuance of a judgment.’ ”

Schultz v. Dew, 1997 SD 72, ¶ 11, 564 N.W.2d 320, 322 (quoting Ward v. Lange, 1996 SD 113, ¶ 10, 553 N.W.2d 246, 249). Normally, statute of limitations questions are to be resolved by the jury. Sckoenrock v. Tappe, 419 N.W.2d 197, 200 (S.D.1988). Summary judgment is proper on statute of limitations issues only when application of the law is in question, and not when there are remaining issues of material fact. Kurylas, Inc. v. Brodsky, 452 N.W.2d 111, 113 (S.D.1990).

STATUTE OF LIMITATIONS FOR LEGAL MALPRACTICE

[¶7.] The statute of limitations for legal malpractice actions in South Dakota is found in SDCL 15-2-14.2, which provides:

An action against a licensed attorney, his agent or employee, for malpractice, error, mistake or omission, whether based upon contract or tort, can be commenced only within three years after the alleged malpractice, error, mistake or omission shall have occurred. This section shall be prospective in application.

We have often stated that, absent fraudulent concealment of an attorney’s negligent advice, the statute of limitations begins to run from the “occurrence” of the alleged negligence, and not from when the negligence is discovered or the consequential damages are imposed. Keegan v. First Bank of Sioux Falls, 519 N.W.2d 607, 612 (S.D.1994); Kury-las, 452 N.W.2d at 114; Schoenrock, 419 N.W.2d at 199; Hoffman v. Johnson, 374 N.W.2d 117, 122 (S.D.1985).

[¶ 8.] Greene’s cause of action against Theeler began to run in 1988 when the agreement was signed. Greene did not serve Theeler with the summons and complaint in his malpractice suit until 1996, well after the three-year statute of limitations had run. Since the statute of limitations had run, the granting of summary judgment is presumed correct, and the burden is thus on Greene to establish the existence of material facts to show the statute of limitations was somehow tolled. See Keegan, 519 N.W.2d at 615 (citing Kurylas, 452 N.W.2d at 117).

[¶ 9.] Under our “occurrence rule” for legal malpractice actions, the three-year statute of limitations “will be tolled until the cause of action is discovered or might have been discovered, if there is fraudulent concealment of the cause of action.” Glad v. Gunderson, Farrar, Aldrich & DeMersse-man, 378 N.W.2d 680, 682 (S.D.1985) (citing Holy Cross Parish v. Huether, 308 N.W.2d 575, 577 (S.D.1981); Hinkle v. Hargens, 76 S.D. 520, 524-25, 81 N.W.2d 888, 890-91 (1957)). We have stated the general rule as to fraudulent concealment and the statute of limitations as:

[I]n summary judgment proceedings where the defendant asserts the statute of limitations as a bar to the action, and presumptively establishes the defense by showing the ease was instituted beyond the statutory period, the burden then shifts to the plaintiff to establish the existence of material facts in avoidance of the statute of limitations, e.g., fraudulent concealment of the cause of action.

Glad, 378 N.W.2d at 682 (citations omitted); see also Keegan, 519 N.W.2d at 615; Kury-las, 452 N.W.2d at 117.

[¶ 10.] We have also consistently held that the continúous representation doctrine, adopted from the continuous treatment doctrine in medical malpractice cases, can likewise serve to toll the statute of limitations for legal malpractice. Keegan, 519 N.W.2d at 613; Kurylas, 452 N.W.2d at 115; Schoen-rock, 419 N.W.2d at 200.

DECISION

[¶ 11.] I. Continuous representation doctrine.

[¶ 12.] Greene argues the grant of summary judgment was improper because material issues of fact exist as to whether the statute of limitations was tolled under the continuous representation doctrine. We disagree.

[¶ 13.] The continuous representation doctrine in a legal malpractice action applies when there is a:

[C]lear indicia of an ongoing, continuous, developing, and dependent relationship between the client and the attomey[.] This relationship is one which is not sporadic but developing and involves a continuity of the professional services from which the alleged malpractice stems. Furthermore, the application of this doctrine should only be applied where the professional’s involvement after the alleged malpractice is for the performance of the same or related services and is not merely continuity of a general professional relationship.

Keegan, 519 N.W.2d at 613 (citations and internal quotations omitted) (emphasis added). The continuous representation itself must occur before the three-year statute of limitations has run, to effectively toll it. Id. (citing Schoenrock, 419 N.W.2d at 201-02).

[¶ 14.] Theeler does not really argue with the claim that, during the divorce proceedings in 1993, he represented Greene with respect to the agreement. Greene claims that during that time he was constantly reassured by Theeler that the agreement was enforceable and Theeler made attempts to enforce the agreement. Rather, Theeler argues that, even assuming the divorce proceedings in 1993 constituted continuous representation as to the agreement, such was too late to revive the cause of action. This assertion is correct. See Schoenrock, 419 N.W.2d at 201. Therefore, our analysis must focus on the time period between the signing of the agreement in 1988 and the subsequent divorce proceedings in 1993.

[¶ 15.] Greene points to instances in 1990 and 1991 in which he engaged in discussions with Theeler concerning estate planning and asset protection. He claims the agreement was a small part of his overall estate planning and asset protection scheme. Theeler, on the other hand, argues that the instances of estate planning and asset protection do not fit into the definition of “continuous representation” so as to toll the statute of limitations. Rather, he claims that such representation by him was merely evidence of a general professional relationship, but unrelated to the agreement.

[¶ 16.] We hold that Greene has failed to overcome his burden under the continuous representation doctrine. Greene and Theeler had an ongoing, continuous relationship; however, this relationship was not related to the alleged negligent act involving the ante-nuptial agreement. Greene has made broad statements that the agreement was a part of his larger asset protection plans. While this may be true, to apply the continuous representation doctrine in such an attenuated fashion would be improper. See Smith v. Stacy, 198 W.Va. 498, 482 S.E.2d 115, 121 (1996) (holding: “[T]he limitations period for a legal malpractice claim is not tolled by the continuous representation rule where an attorney’s subsequent role is only tangentially related to legal representation the attorney provided in the matter in which he was allegedly negligent”).

[¶ 17.] In Kurylas, we were faced with a situation in which Kurylas presented records from the defendant’s law firm indicating several instances of contact between Kurylas and his attorney after the allegedly negligent incident had occurred. 452 N.W.2d at 115. We held that the relevance of the evidence was questionable because it did not prove, among other things, that the later professional services and the alleged omission were related. Id. at 116.

[¶ 18.] Likewise, Greene has failed to prove that his later meetings with Theeler were related to the agreement. Almost any work performed by an attorney could arguably be classified as asset protection or estate planning in some fashion or another, and to hold that the continuous representation doctrine should apply in such a situation would defeat the purpose of the doctrine. See Smith, 482 S.E.2d at 121 (observing that the doctrine has a dual purpose in that it protects the attorney-client relationship by affording the attorney an opportunity to remedy an error, while also preventing the attorney from defeating a client’s cause of action by delay) (citing Wall v. Lewis, 393 N.W.2d 758, 763 (N.D.1986)). At best, the facts presented by Greene indicate the “continuity of a general professional relationship.” That is not enough. See Schoenrock, 419 N.W.2d at 201. Therefore, the granting of summary judgment on this issue was correct and we affirm.

[¶ 19.] II. Fraudulent concealment.

[¶ 20.] Greene next argues that there are issues of material fact yet to be decided on the issue of fraudulent concealment so as to make summary judgment inappropriate. We agree.

[¶ 21.] Theeler first claims this issue is not properly before this Court. He claims the issue was never argued to the trial court, and the trial court did not properly rule on the issue of fraudulent concealment.²

[¶22.] Greene did argue fraudulent concealment to the trial court at the hearing on the motion for summary judgment, and the trial court ruled on it.³ In reviewing the transcript from the hearing on the motion for summary judgment, it is apparent that the issue was raised. While Greene did not use the specific words “fraudulent concealment” in his argument, it is clear that this was one of two theories he was presenting. Greene argued to the trial court:

Well, your Honor, there is no discovery theory in this state, especially in light of the recent ruling. I don’t have the name of the case right in front of me but that Will ease that Mr. Theeler or Mr. Fuller had referred to. The point being, though, that there is ample authority in this case that if it was because of the conduct of the attorney that you couldn’t find out that he concealed this or failed to disclose it to the client that it would continue anyway, you don’t even need the continuing representation rule then. (Emphasis added.)

Greene also specifically argued later in the hearing that it was Theeler’s conduct of reassuring him that the agreement was valid, besides the continuing representation theory, that also tolled the statute of limitations.

[¶ 23.] It is clear that Greene presented two theories at the hearing: One based on continuing representation and one based on Theeler’s concealment of the fact that the alimony waiver was invalid. Further, the judge ruled on both theories by stating: “[T]he Defendant is entitled to summary judgment because there was no continuing representation nor actionable fraud[.]” (Emphasis added.) The issue is properly before us at this time.

[¶24.] Greene points to Theeler’s deposition as evidence of factual issues that indicate Theeler knew the alimony waiver was invalid and that he fraudulently concealed this from Greene. The following occurred during Theeler’s deposition:

Q. Did you ever discuss with Terry Greene, that you recall, there was case law in existence in South Dakota at the time you discussed it in 1988, antenuptials, that indicated there could not be a waiver of alimony?

A. I don’t recall a specific conversation about that.

Q. Were you aware of that at the time you drafted the antenuptial, which was executed in [J]une, 1988?

A. Iam sure I was.

Q. Had you read the decision, specifically, prior to that time?

A. It had been kind of a bench mark on that issue since the seventies. I will tell you my position and you can tell me to shut up.

This testimony indicates Theeler knew the alimony waiver was not valid and that he does not remember so advising Greene. This, coupled with Greene’s statements in his affidavit that Theeler had always assured him that the agreement was valid, creates issues of material fact that Theeler fraudulently concealed this defect in the agreement from Greene.

[¶ 25.] Theeler argues that Greene has not shown the requisite intent for fraudulent concealment. He claims his reason for putting the alimony waiver in the agreement was because: “[Y]ou don’t know what the case law is going to be by the time you die or divorce. You don’t know what the law will be, or what the jurisdiction will be.” He maintains he lacked intent and that he had a legitimate reason for putting the waiver in, and just because Greene did not understand his reasons for including the waiver, such does not constitute fraud. Theeler argues that to hold silence is enough to establish fraudulent concealment would be to hold every attorney liable for a mistake even if the attorney did not recognize it. We do not agree.

[¶ 26.] We have always held that silence can constitute fraudulent concealment in certain cases:

[I]n South Dakota, if a trust or confidential relationship exists between the parties, which imposes a duty to disclose, mere silence, by the one under that duty constitutes fraudulent concealment and thus tolls the applicable statute of limitations.

Glad, 378 N.W.2d at 682-83. “The silence, however, must concern defects which the party with the duty to disclose knew or should have known.” Id. (citation omitted) (emphasis in original). We have also held that there is a relationship of trust or confidence between an attorney and client. Id. at 682. It appears that Theeler knew the case law provided the alimony waiver was invalid at the time the agreement was drafted. Thus, Theeler’s alleged knowing failure to disclose to Greene that the alimony waiver was invalid is sufficient to establish material facts still at issue in regards to fraudulent concealment.

[¶ 27.] Therefore, summary judgment was inappropriate. We reverse and remand for proceedings consistent with this opinion.

[¶ 28.] AMUNDSON and KONENKAMP, JJ., and MARTIN, Circuit Judge, concur. [¶ 29.] GILBERTSON, J., concurs in part and dissents in part. [¶ 30.] MARTIN, Circuit Judge, sitting for SABERS, J., disqualified.

1 . Theeler had represented Pamela in an action for foreclosure on her home. Theeler advised Pamela that he represented Greene in the negotiations involving the antenuptial agreement and that she could retain independent counsel. Pamela declined to do so.

2 . Theeler also argues that the issue of fraud was not properly pleaded as per SDCL 15-6-9(b). This argument is without merit as Greene is not alleging a claim of fraud upon which to' recover damages. Rather, he has raised the issue of fraudulent concealment, as was his duty, to combat Theeler’s defense of the statute of limitations. See Glad, 378 N.W.2d at 682 (stating that at a summary judgment hearing, once the defendant raises the defense of the statute of limitations, the burden shifts to the plaintiff to establish issues of material fact, such .as fraudulent concealment, to avoid the statute of limitations).

3 . Greene cites to his brief in opposition to the motion for summary judgment as evidence of raising the fraudulent concealment issue. The briefs from this hearing were not made a part of the record available on appeal and we therefore cannot consider them.