201 P.3d 629 (Idaho 2009), 34609, City of McCall v. Buxton

Docket Nº:34609.
Citation:201 P.3d 629, 146 Idaho 656
Opinion Judge:EISMANN, Chief Justice.
Party Name:CITY OF McCALL, a municipal corporation, Plaintiff-Appellant, v. Susan E. BUXTON; Moore, Smith, Buxton & Turke Chartered, a professional service corporation; William A. McCurdy; and Brassey, Wetherell, Crawford & Garrett, a limited liability partnership, Defendants-Respondents.
Attorney:Ellis, Brown & Sheils, Chartered, Boise, and Strother Law Office, Boise, for appellant. Jeffrey Strother argued. Hawley Troxell Ennis & Hawley LLP, Boise, for respondents Susan E. Buxton and Moore, Smith, Buxton & Turke Chartered. Craig Meadows argued. Elam & Burke, P.A., Boise, for respondents W...
Judge Panel:EISMANN, Chief Justice. Justices BURDICK, J. JONES, W. JONES and Justice Pro Tem KIDWELL concur.
Case Date:January 22, 2009
Court:Supreme Court of Idaho

Page 629

201 P.3d 629 (Idaho 2009)

146 Idaho 656

CITY OF McCALL, a municipal corporation, Plaintiff-Appellant,

v.

Susan E. BUXTON; Moore, Smith, Buxton & Turke Chartered, a professional service corporation; William A. McCurdy; and Brassey, Wetherell, Crawford & Garrett, a limited liability partnership, Defendants-Respondents.

No. 34609.

Supreme Court of Idaho, Boise

January 22, 2009

Page 630

[146 Idaho 657] Ellis, Brown & Sheils, Chartered, Boise, and Strother Law Office, Boise, for appellant. Jeffrey Strother argued.

Hawley Troxell Ennis & Hawley LLP, Boise, for respondents Susan E. Buxton and Moore, Smith, Buxton & Turke Chartered. Craig Meadows argued.

Elam & Burke, P.A., Boise, for respondents William A. McCurdy and Brassey, Wetherell, Crawford & Garrett. Jeffrey Thomson argued.

EISMANN, Chief Justice.

This is an appeal from a judgment dismissing an action for legal malpractice on the ground that it was barred by the statute of limitations. We hold that for two of the claims, there was not objective proof of damage to start the running of the statute of limitations until the jury verdict in the case in connection with which the malpractice allegedly occurred.

I. FACTS AND PROCEDURAL HISTORY

On May 11, 2000, the City of McCall (City) entered into a contract with St. Clair Contractors, Inc., (St. Clair) for the construction of a storage lagoon to hold treated effluent. The City also contracted with J-U-B Engineers, Inc. (J-U-B) to be the project engineer overseeing the work. The City was represented by Susan Buxton (Buxton) and William McCurdy (McCurdy), attorneys at law, throughout the construction project. For convenience, we will use the word " Attorneys" to refer to Buxton and McCurdy and their respective law firms of Smith, Buxton & Turke, Chartered, and Brassey, Wetherell, Crawford & Garrett, LLP, formerly

Page 631

[146 Idaho 658] known as Brassey, Wetherell, Crawford & McCurdy, LLP.

St. Clair encountered various delays during the course of the construction, and the City concluded that St. Clair was not performing according to the terms of the contract. On the alleged advice of its Attorneys, the City terminated its contract with St. Clair on February 12, 2001.

Employers Insurance of Wausau (Wausau) had issued a performance bond for St. Clair, and it hired a replacement contractor to complete the project. The City concluded that the replacement contractor's work was deficient. Again, on the alleged advice of its Attorneys, the City decided in June 2001 to withhold payments to Wausau for its replacement contractor and to hire another contractor.

On December 20, 2001, Wausau filed an action in federal district court to recover against the City for wrongfully demanding payment under the performance bond and withholding payments and against St. Clair pursuant to an indemnity agreement. The Attorneys represented the City throughout the litigation in district court. In January 2002, the City began incurring defense costs in the Wausau lawsuit. On April 12, 2002, St. Clair filed a cross-claim against the City. Allegedly on the advice of its Attorneys, the City released J-U-B from any liability on July 25, 2002.

On May 4, 2004, the jury awarded a total of $4,955,096 in damages against the City. After the district court denied the City's motion for a new trial, the City hired another attorney to prosecute an appeal, which was not successful.

On May 3, 2006, the City filed this action against the Attorneys. In its first amended complaint, the City alleged: (a) Count One, the Attorneys negligently advised the City to terminate its contract with St. Clair; (b) Count Two, the Attorneys negligently advised the City to release any of its claims against J-U-B arising from its role as project engineer for the construction project; (c) Count Three, the Attorneys negligently advised the City to withhold payments from Wausau and hire another contractor in place of Wausau's replacement contractor; (d) Count Four, the Attorneys negligently failed to advise the City of a conflict of interest regarding their advice to release J-U-B from liability and to advise the City to seek advice from independent counsel; (e) Count Five, the Attorneys negligently advised the City not to accept Wausau's offer to settle with the City for $500,000; and (f) Count Six, the Attorneys have been unjustly enriched in the amount of legal fees paid for their services in the litigation against the City.

The Attorneys moved for summary judgment on two grounds: the decision to sue the Attorneys was made by the city manager who lacked that authority and the City's cause of action against the Attorneys was barred by the statute of limitations. The City responded that the city manager had implied authority to commence this litigation and that his action had subsequently been approved by the city council. The City also contended that the running of the statute of limitations had been tolled under the doctrine of equitable estoppel.

When deciding the motions for summary judgment, the district court addressed the allegations in the City's first amended complaint.1 The district court rejected the equitable estoppel claim and held that the claims against the Attorneys were barred by Idaho Code § 5-219(4), the applicable statute of limitations. Based upon its decision that all claims alleged in the first amended complaint were barred by the statute of limitations, the district court held it would not decide the issue of whether commencement of this litigation had not been properly approved by the city council.

Page 632

[146 Idaho 659] On July 9, 2007, the district court entered a judgment dismissing all claims against the Attorneys. The City timely filed a motion for reconsideration, which the district court denied. On September 24, 2007, the City timely filed a notice of appeal. The Attorneys had requested an award of attorney fees, which the City objected to. After the matter was heard, the district court awarded Buxton and her law firm $58.00 in costs and $26,731.00 in attorney fees pursuant to Idaho Code § 12-120(3), and it awarded $58.00 in costs and $30,285.00 in attorney fees to McCurdy and his law firm pursuant to Idaho Code § 12-120(3). On November 2, 2007, the court entered an amended judgment including the awards of costs and attorney fees.

II. ISSUES ON APPEAL

1. Did the district court err in holding that the City's claims were barred by the statute of limitations?

2. Did the district court err in holding that the statute of limitations did not bar the Attorneys from asserting the doctrine of equitable estoppel as a defense?

3. Did the district court err in awarding the Attorneys attorney fees pursuant to Idaho Code § 12-120(3)?

4. If the City's claims are not barred by the statute of limitations, should this Court uphold the district court on the alternative ground that the city manager did not have authority to commence this lawsuit and, if not, that the city council lacked authority to later ratify that act?

5. Are the Attorneys entitled to an award of attorney fees on appeal pursuant to Idaho Code § 12-120(3)?

III. ANALYSIS

A. Did the District Court Err in Holding that the City's Claims Were Barred by the Statute of Limitations?

" An action to recover damages for ‘ professional malpractice’ must be commenced within two years after the cause of action has accrued." Lapham v. Stewart, 137 Idaho 582, 585, 51 P.3d 396, 399 (2002); I.C. § § 5-201 & 5-219(4). The cause of action for professional malpractice accrues " as of the time of the occurrence, act or omission complained of, and the limitation period shall not be extended by reason of any continuing consequences or damages resulting therefrom or any continuing professional or commercial relationship between the injured party and the alleged wrongdoer." I.C. § 5-219(4).

This Court has held that a cause of action for professional negligence cannot accrue until some damage has occurred. Stephens v. Stearns, 106 Idaho 249, 254, 678 P.2d 41, 46 (1984). The reason for the " some damage" rule is that " in order to recover under a theory of negligence, the plaintiff must prove actual damage." Id. " Until some damage occurs, a cause of action for professional malpractice does not accrue. Therefore, some damage is required because it would be nonsensical to hold that a cause of action is barred by the statute of limitations before that cause of action even accrues." Lapham v. Stewart, 137 Idaho 582, 586, 51 P.3d 396, 400 (2002) (Citations omitted). Obviously, the " some damage" that has occurred must be damage that the client could recover from the professional in an action for malpractice.

Potential harm or an increase in the risk of damage is not sufficient to constitute some damage. For example, in Parsons Packing, Inc. v. Masingill, 140 Idaho 480, 95 P.3d 631 (2004), the seller of about 15,000 onion bins had its attorney draft an installment sale contract to convey the bins to a buyer. The attorney failed to file a UCC-1 financing statement to perfect his client's security interest in the property. The buyer made the payments due on the contract for almost four and one-half years until after it filed for bankruptcy protection under Chapter 11 of the bankruptcy code. The case was later converted to a proceeding under Chapter 7. Just less than two years after the buyer filed bankruptcy, the seller brought an action against his attorney to recover damages. The district court granted the attorney summary judgment on the ground that the statute of limitations began running when the onion bins were sold without adequate security.

Page 633

[146 Idaho 660] This Court reversed, holding that although the seller was subject to greater risk of nonpayment by not having a perfected security interest, it did not suffer damage until the buyer filed bankruptcy. 140 Idaho at 483, 95 P.3d at 634. The attorney's negligence in...

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