Best Choice Fund, LLC v. Childers, No. 1 CA-CV 10-0860

CourtCourt of Appeals of Arizona
Writing for the CourtAnn A. Scott Timmer
PartiesTHE BEST CHOICE FUND, LLC, a Florida limited liability company; NATIONAL TRANSPORTATION HOLDING CORPORATION, an Arizona corporation, Plaintiff/Appellant/ Cross-Appellee, v. LOW & CHILDERS, P.C., an Arizona professional corporation, Defendant/Appellee/ Cross-Appellant, And USA RISK GROUP (WEST), INC., a foreign corporation, Defendant/Appellee.
Docket NumberNo. 1 CA-CV 10-0860
Decision Date20 December 2011

THE BEST CHOICE FUND, LLC, a Florida limited liability company;
NATIONAL TRANSPORTATION HOLDING CORPORATION, an Arizona corporation, Plaintiff/Appellant/ Cross-Appellee,
LOW & CHILDERS, P.C., an Arizona professional corporation, Defendant/Appellee/ Cross-Appellant,
And USA RISK GROUP (WEST), INC., a foreign corporation, Defendant/Appellee.

No. 1 CA-CV 10-0860


Dated: December 20, 2011


Appeal from the Superior Court in Maricopa County

Cause No. CV2009-052371

The Honorable Michael R. McVey, Judge


Jaburg & Wilk PC
By Roger L. Cohen
Kathi M. Sandweiss
Attorneys for Plaintiffs/Appellants-Cross Appellees


Page 2

Jones Skelton & Hochuli, PLC
By Donald L. Myles, Jr.
Lori L. Voepel Attorneys for Defendant/Appellee-Cross Appellant


Christian Dichter & Sluga PC
By Douglas L. Christian
Gena L. Sluga
Alison Rebecca Christian
Attorneys for Defendant/Appellee USA Risk Group (West)


TIMMER, Presiding Judge

¶1 This appeal from the entry of summary judgment against appellants National Transportation Holding Corporation and Best Choice Fund, LLC requires us to consider a myriad of issues relating to the accrual of a legal malpractice claim and the authority of an agent to bind its principal to a release of claims. After doing so, we affirm the trial court's entry of summary judgment in favor of Low & Childers, P.C. but reverse summary judgment in favor of USA Risk Group, Inc. and remand for additional proceedings.


¶2 National Transportation Holding Corporation ("NT")1 is an Arizona mutual risk insurance company and captive

Page 3

insurer2 formed in 2005 to provide liability insurance to taxi companies, limousine services, and livery service providers. NT retained Low & Childers, P.C. ("L&C") to provide legal services in connection with the formation, licensing, and regulatory compliance of the company. L&C prepared and filed a license application with the Arizona Department of Insurance ("DOI") on June 1, 2005. Around the same time, NT deposited $1.5 million into its capital account as required to meet DOI's capitalization requirements. See A.R.S. § 20-1098.03(A) (providing director of DOI shall not issue a license to a captive insurer "unless the insurer possesses and thereafter maintains minimum unimpaired paid-in capital and surplus in combination").

¶3 Arizona law requires a captive insurer to employ a "captive manager" to "maintain the books and records of the captive insurer's business, transactions and affairs" and to "promptly notify the director of any failure of the captive insurer to comply with" the applicable laws. A.R.S. § 20-

Page 4

1098.16. NT retained USA Risk Group, Inc. ("USA") to fulfill this role.

¶4 On September 12, 2005, DOI issued NT a certificate authorizing it to begin conducting business. The certificate was accompanied by a "Conditions Addendum," which, among other things, required USA to be a signatory on all checks and to promptly notify DOI if NT's capital and surplus fell below $1.5 million.

¶5 Soon after issuance of the certificate, NT transferred all its capital funds into an investment fund. NT also issued checks without USA's signature. USA notified DOI of these events on February 3, 2006.

¶6 On February 10, DOI summarily suspended NT's certificate of authority for the reasons reported by USA. See A.R.S. § 20-1098.09 (authorizing director to "suspend, revoke or refuse to renew the license of a captive insurer" for listed reasons, including impairment of capital and surplus). The order immediately prohibited NT from issuing new and renewed insurance and required it to cancel or non-renew all insurance contracts by March 1. Additionally, DOI required NT to submit "an application for [NT's] withdrawal from the insurance business that includes detailed plans for the elimination of all [NT] liabilities." On February 20, NT submitted to DOI an amended business plan detailing procedures for withdrawal and

Page 5

dissolution. NT did not appeal the suspension order. See A.R.S. § 41-1092.03(B) (Supp. 2010) (authorizing appeal of agency action within 30 days of receipt of notice of agency action).

¶7 On March 20, NT's president, Roy Gill, and USA's vice president, Marc Lapointe, executed a settlement agreement and mutual release of claims, which purported to terminate the relationship between the parties and release both NT and USA from all claims arising from events occurring before March 20 (the "USA Release"). Ten days later, on March 30, NT, through Gill, and L&C, through partner S. David Childers, executed a settlement agreement and mutual release of claims releasing the parties from all claims arising from events occurring before March 30 (the "L&C Release"). L&C continued to represent NT for purposes of the "run-off" period of withdrawal and dissolution.

¶8 More than two years later, on June 6, 2008, the State issued NT a certificate of compliance for dissolution or withdrawal, indicating NT had complied with the relevant statutes required for dissolution of the company. Accordingly, on October 31, the Arizona Corporation Commission issued NT a certificate of dissolution.

¶9 On June 23, 2009, NT initiated this lawsuit. NT alleged L&C committed professional negligence and breach of contract. NT additionally alleged USA breached its captive

Page 6

management agreement. The trial court subsequently granted summary judgment for both L&C and USA on all claims, ruling in pertinent part that (1) NT's claims against L&C were barred by the statute of limitations, and (2) the claim against USA was barred by the doctrine of accord and satisfaction due to the USA Release. After the court denied NT's motion for reconsideration, judgment was entered in favor of both L&C and USA. This timely appeal and cross-appeal followed.


¶10 The trial court may grant summary judgment when "there is no genuine issue as to any material fact and [] the moving party is entitled to a judgment as a matter of law." Ariz. R. Civ. P. 56(c). In reviewing the grant of summary judgment, we determine de novo whether any genuine issues of material fact exist and whether the trial court properly applied the law. Eller Media Co. v. City of Tucson, 198 Ariz. 127, 130, ¶ 4, 7 P.3d 136, 139 (App. 2000). We view the facts and the inferences to be drawn from those facts in the light most favorable to the party against whom judgment was entered. Prince v. City of Apache Junction, 185 Ariz. 43, 45, 912 P.2d 47, 49 (App. 1996). We will affirm the trial court's decision if correct for any reason. City of Phoenix v. Geyler, 144 Ariz. 323, 330, 697 P.2d 1073, 1080 (1985).

Page 7


I. Claims Against L&C

A. Legal malpractice

¶11 In Arizona, a lawsuit alleging legal malpractice must be filed within two years of the date the cause of action accrues. A.R.S. § 12-542; Keonjian v. Olcott, 216 Ariz. 563, 565, ¶ 9, 169 P.3d 927, 929 (App. 2007). The trial court ruled that NT's claim for legal malpractice against L&C accrued in February 2006 when DOI suspended NT's certificate of authority. Thus, the court entered judgment for L&C because NT filed its lawsuit in June 2009 - more than one year after the statute of limitations expired in February 2008. NT contends the trial court erred because a question of fact exists regarding the date NT's claim accrued. According to NT, the evidence supports a finding that its claim accrued in June 2008 when DOI issued the certificate of compliance for dissolution and withdrawal. Because NT filed its complaint within two years of that time, it asserts summary judgment is improper. Alternatively, NT argues the limitations period is tolled and, regardless, because some acts of malpractice occurred within two years of the initiation of this lawsuit, a claim stemming from these acts remain viable. We address each contention in turn.

Page 8

Accrual date

¶12 A legal malpractice claim accrues when "(1) the plaintiff knows or reasonably should know of the attorney's negligent conduct; and (2) the plaintiff's damages are ascertainable, and not speculative or contingent." Glaze v. Larsen, 207 Ariz. 26, 29, ¶ 13, 83 P.3d 26, 29 (2004) (quoting Kiley v. Jennings, Strouss & Salmon, 187 Ariz. 136, 139, 927 P.2d 796, 799 (App. 1996)). NT does not contest it was aware of L&C's alleged malpractice at the time DOI suspended NT's certificate of authority in February 2006. Rather, NT argues that because its certificate was merely suspended, NT's damages were not ascertainable at that time because a chance existed DOI would reinstate NT's certificate.

¶13 NT relies primarily on Amfac Distribution Corporation v. Miller (Amfac I), 138 Ariz. 155, 673 P.2d 795 (App. 1983), approved as supplemented, 138 Ariz. 152, 673 P.2d 792 (1983) (Amfac II), to support its position. Those cases held that damages based on an attorney's acts and omissions in the course of litigation become ascertainable and non-speculative at the time the appellate process is either waived or completed. Amfac II, 138 Ariz. at 153-54, 673 P.2d at 793-94. At that time, damages are...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT