Sirote & Permutt, PC v. Bennett

• Decision Date: 31 March 2000
• Citation: 776 So.2d 40
• Parties: SIROTE & PERMUTT, P.C., and M. Fredrick Simpler, Jr. v. William G. BENNETT et al.
• Court: Alabama Supreme Court

776 So.2d 40

SIROTE & PERMUTT, P.C., and M. Fredrick Simpler, Jr. v. William G. BENNETT et al.

1980900.

Supreme Court of Alabama.

March 31, 2000.

Rehearing Denied August 4, 2000.

John M. Johnson, Stephen J. Rowe, and Lisa J. Wathey of Lightfoot, Franklin & White, L.L.C., Birmingham, for appellants.

Clarence L. McDorman, Jr., Birmingham; and J. Timothy Francis, Birmingham, for appellees.

SEE, Justice.

In this legal-malpractice case approximately 70 plaintiffs allege that attorney M. Fredrick Simpler, Jr., and the law firm of Sirote & Permutt, P.C., were negligent in issuing a legal opinion in connection with a financing transaction. Simpler and Sirote & Permutt moved the trial court for a summary judgment, arguing that the action was time-barred. The trial court denied that motion. We granted Simpler and Sirote & Permutt's petition for permission to appeal from the trial court's order denying their motion for a summary judgment. See Rule 5, Ala. R.App. P. The sole question on appeal is when the plaintiffs' causes of action accrued.¹ Because we conclude that the trial court erred in determining when the plaintiffs' causes of action accrued, we reverse the trial court's order denying the defendants' motion for a summary judgment and remand the case with instructions.

I.

In 1979, the Alabama Commission on Higher Education ("ACHE") approved a course of study to be offered by Central Alabama Community College ("CACC") at the Draper-Staton Corrections Facility Complex, near Millbrook. From 1979 forward, CACC offered this course of study to inmates as well as to "free-world" students outside the prison population. In 1991, to attract more "free-world" students, CACC sought to relocate some of the Draper-Staton course offerings to a new building to be constructed six miles away in Millbrook. CACC hired the firm of Blount, Parrish & Roton, Inc., as the underwriter for a "certificate-of-participation" issue to finance the construction of the new building. A "certificate-of-participation" issue is similar to a bond issue, but, rather than purchasing bonds, investors purchase "participation units" that entitle them to receive a pro rata share of rent payments. Simpler, an attorney with the firm of Sirote & Permutt, acted as counsel for the transaction.

In November 1991, the Alabama Board of Education (the "Board") authorized Millbrook Leasing, Inc., to acquire property in Millbrook and to build the classroom facility proposed to be used by CACC. The Board also authorized CACC to lease the property and building and, on January 1, 1992, CACC entered into a lease agreement with Millbrook Leasing. The lease was for a one-year term, with CACC having an option to renew the lease on a year-by-year basis for 20 years and the right to terminate the lease and refuse to renew it at the end of any one-year lease period. In the lease agreement, CACC represented and warranted that it had "obtained or will obtain the consent or approval of all... governmental entities who are required by law to approve a transaction of the type contemplated by this lease agreement." The agreement further provided that if "such approval is rescinded, denied, or otherwise made unavailable, this lease agreement shall be null and void and of no effect."

On January 29, 1992, the financing transaction was closed and the certificates of participation were issued. On that date, Blount, Parrish & Roton, the underwriter, purchased the certificates at 97% of their face value. Over the next few months, Blount, Parrish & Roton, as well as brokers at Compass Bank, N.A., and Paine Webber, Inc. (a securities dealer), sold the certificates to investors. All certificates were sold by March 20. The certificates and related documents provided that Millbrook Leasing assigned its right to receive CACC's rent payments to First Alabama Bank as trustee for the benefit of the certificate holders, and that First Alabama Bank would pay each certificate holder his or her pro rata share of the rental revenue. First Alabama Bank later changed its name to Regions Bank.

In connection with the closing, Sirote & Permutt issued an opinion letter regarding the validity and tax status of the financing transaction. The opinion letter, which is the basis of the plaintiffs' legal-malpractice claims, states that, in the firm's opinion, the lease agreement was "duly authorized" and was a "valid and binding agreement of [CACC] enforceable in accordance with its terms." The opinion was based, in part, on Simpler's conclusion that CACC did not need approval from ACHE to offer courses at the Millbrook campus, because CACC was simply relocating an already-approved course of study from the Draper-Staton facility to the Millbrook campus.

Also in January 1992, officials at Alabama State University ("ASU"); Auburn University at Montgomery; and Troy State University at Montgomery informally advised ACHE officials that they had some concerns about, and objections to, the proposed new CACC campus in Millbrook. ASU's concerns related, in part, to the possible adverse impact of the new CACC campus on ASU's ability to comply with a 1991 order from a federal district court order directing ASU to "develop and implement a plan to recruit white students." See Knight v. Alabama, 787 F.Supp. 1030, 1380 (N.D.Ala.1991), aff'd in part, vacated in part, and rev'd in part, 14 F.3d 1534 (11th Cir.1994). Other concerns, shared by all three institutions, related to duplication of course offerings in the Montgomery area.

Construction of the classroom facility began in May 1992 and was completed in February 1993. CACC renewed the lease through September 30, 1993.

In August 1992, Dr. Fred Gainous, chancellor and chief executive officer of the Alabama Department of Post Secondary Education, requested ACHE approval of CACC's proposal to offer courses at the Millbrook campus. Dr. Gainous stated that the proposal was "nothing more than a relocation of existing programs, services and activities" that ACHE had approved in 1979. The request was resubmitted in October, after apparently having been withdrawn. ACHE staff opposed the proposal, taking the position that ACHE had never authorized CACC to offer courses to "free-world" students at the Draper-Staton facility and that, therefore, CACC proposed to do more than relocate already-approved programs. At its October 23, 1992, meeting, ACHE denied CACC's proposal.

In March 1993, Millbrook Leasing and the president of CACC sued ACHE (that lawsuit will be called the "ACHE case"), seeking, among other things, a declaration that CACC did not need ACHE approval to offer courses at the Millbrook campus. Millbrook Leasing and CACC argued that CACC was simply relocating already-approved course offerings from the Draper-Staton facility to the Millbrook campus, and that, therefore, ACHE approval was not required. See Ala.Code 1975, § 16-5-8(c).² On December 30, 1993, the trial court entered a final judgment in favor of ACHE, holding that, because "in 1979 ACHE approved a program of instruction for prison students, not free-world students," CACC's proposal was for a new program of instruction and was subject to ACHE approval. See id.

Pursuant to the terms of the lease, CACC terminated the lease effective September 30, 1993. CACC had paid rent from September 1992 through February 1993.

In October 1993, Regions Bank, as trustee, notified the certificate holders that CACC had stopped paying rent, that the building was not occupied, and that Regions Bank had withdrawn money from the debt-service reserve fund in order to make the scheduled October 1993 payment to certificate holders. Regions Bank also informed the certificate holders that "[t]he judge [was] expected to render a decision soon" in the ACHE case. In March 1994, Regions Bank notified the certificate holders that it had withdrawn more money from the debt-service reserve fund in order to make the scheduled April 1994 payment to certificate holders, that CACC was still not paying rent, that the building was still unoccupied, and that Regions Bank did not have enough money to make the payment scheduled for October 1994. At that time, Regions Bank also informed the certificate holders that the court had ruled in the ACHE case that CACC did not have the right to offer courses at the Millbrook campus. In August 1994, Regions Bank notified the certificate holders that the Millbrook campus remained unoccupied, that the building was no longer insured, and that Regions Bank had elected not to take possession of the building. Regions Bank made a partial payment to certificate holders in October 1994, but, because no additional funds were available, it made no further payments.

By August 1995, some of the certificate holders had hired attorneys to consider suing the entities that eventually became the defendants in this action. On August 16, Sirote & Permutt; Blount, Parrish & Roton; Millbrook Leasing; First Alabama; and Edward W. Mudd, one of the certificate holders, in his individual capacity and as chairman of a committee of certificate holders, entered into an agreement, the purpose of which was to facilitate an out-of-court resolution of the certificate holders' claims. Among other things, the agreement provided that, in exchange for Mudd's covenant not to sue for a certain period of time, Sirote & Permutt agreed to a tolling of the statutory limitations period for a period of time beginning on July 27, 1995.³

On January 16, 1996, 53 certificate holders filed this action against Blount, Parrish & Roton; Simpler; Sirote & Permutt; Millbrook Leasing; Paine Webber; and Compass Bank. Regions Bank was later added as a party defendant. An additional 25 plaintiffs joined the action by amendment. The trial court dismissed Regions Bank and Millbrook Leasing. All other defendants, except Sirote & Permutt and Simpler, have settled with the plaintiffs. The plaintiffs claim, among other things, that Sirote & Permutt and Simpler...