Cannon v. Hirsch Law Office, P.C.

• Decision Date: 14 July 2009
• Docket Number: No. 1 CA-CV 08-0283.,1 CA-CV 08-0283.
• Citation: 222 Ariz. 171,213 P.3d 320
• Parties: Sylvia L. CANNON, Plaintiff/Appellant, v. HIRSCH LAW OFFICE, P.C.; Lawrence D. Hirsch; Iva S. Hirsch, Defendants/Appellees.
• Court: Arizona Court of Appeals

213 P.3d 320

222 Ariz. 171

Sylvia L. CANNON, Plaintiff/Appellant, v. HIRSCH LAW OFFICE, P.C.; Lawrence D. Hirsch; Iva S. Hirsch, Defendants/Appellees.

No. 1 CA-CV 08-0283.

Court of Appeals of Arizona, Division 1, Department A.

July 14, 2009.

Sylvia L. Cannon, Plaintiff/Appellant, Wickenburg, In Propria Persona.

Hinshaw & Culbertson, LLP by Victoria L. Orze, Phoenix, Attorneys for Defendants/Appellees.

OPINION

BARKER, Judge.

¶ 1 Appellant Sylvia Cannon ("Cannon") appeals the trial court's decision to grant summary judgment in favor of Lawrence Hirsch ("Hirsch"). The trial court found that Cannon's legal malpractice claim was barred by the two-year statute of limitations. For the reasons that follow, we find that genuine issues of material fact preclude summary judgment on the issue of whether Cannon's malpractice claim was filed before the two-year statute of limitations had run, and thus we reverse and remand.

Facts and Procedural History

¶ 2 In May 2004 Cannon retained Hirsch to protect her interests as a creditor in a Chapter 13 bankruptcy action filed by Angele and Gwin Vaughn ("Vaughns"). Cannon had loaned the Vaughns money for their printing business, which was evidenced by a note secured by an equipment lien (hereinafter "Note"). The Note was secured by printing equipment, office equipment, and other items used in the Vaughns' business. Cannon gave Hirsch a copy of the Note as well as a list of the equipment intended to secure the Note. Hirsch attended the meeting of creditors on Cannon's behalf. He also filed a stipulation for relief from the automatic stay in the bankruptcy court, which memorialized an agreement among Cannon, the Vaughns, and the bankruptcy trustee to allow Cannon to foreclose upon her secured collateral.

¶ 3 Hirsch then engaged Arizona Auctioneers to retrieve the equipment and sell it at public auction. Arizona Auctioneers sold the printing equipment at a public auction on September 30, 2004. The company then sent Hirsch a $956.04 check, payable to Cannon, for the net proceeds of the sale. On October 25, 2004, Hirsch sent Cannon a letter that explained the breakdown of the proceeds of the auction, and he enclosed the $956.04 check he had received on her behalf from Arizona Auctioneers. On November 4, 2004 Hirsch spoke with Cannon regarding the completed auction and sale of equipment. On November 5, 2004, Hirsch sent Cannon another follow-up letter about the sale, attaching a copy of the newspaper ads noticing the sale and documentation of the expenses attendant to the sale.

¶ 4 During this same period, the Vaughns' Chapter 13 bankruptcy case was converted to a case under Chapter 7. A meeting of creditors on the Chapter 7 petition was held on October 25, 2004. The deadline to file a complaint objecting to discharge of the debtor expired on December 27, 2004. The Vaughns were granted a discharge on January 4, 2005.

¶ 5 Cannon filed a complaint in superior court on January 3, 2007, alleging legal malpractice, among other claims. In particular, Cannon claimed that Hirsch did not properly represent her as a creditor in the Vaughns' bankruptcy proceedings. Hirsch filed a motion for summary judgment. Cannon responded to the motion but did not file a separate or controverting statement of facts. The trial court granted Hirsch's motion, finding that Cannon's malpractice claim was barred by the two-year statute of limitations. In making this ruling, the trial court made a preliminary finding that the alleged malpractice did not occur "during the course of litigation" and thus her cause of action accrued when she found out about the sale of the printing equipment in November of 2004.

¶ 6 Cannon filed a premature notice of appeal on April 2, 2008. A signed final judgment was entered on April 21, 2008. We have jurisdiction pursuant to Arizona Revised Statutes ("A.R.S.") section 12-2101 (2003).¹

Discussion

¶ 7 Summary judgment may be granted when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Ariz. R. Civ. P. 56(c)(1). We review a summary judgment de novo to determine whether any genuine issues of material fact exist and whether the court properly applied the law. Eller Media Co. v. City of Tucson, 198 Ariz. 127, 130, ¶ 4, 7 P.3d 136, 139 (App.2000). In reviewing a grant of summary judgment, we view the evidence and reasonable inferences "in the light most favorable to the party opposing the motion." Wells Fargo Bank v. Ariz. Laborers Local No. 395 Pension Trust Fund, 201 Ariz. 474, 482, ¶ 13, 38 P.3d 12, 20 (2002).

¶ 8 Cannon argues that the trial court misapplied the law by finding that she had not timely filed her malpractice claim. In Arizona, legal malpractice claims are governed by the statute of limitations set forth in A.R.S. § 12-542 (2003), which provides that such claims must be brought "within two years after the cause of action accrues." See also Commercial Union Ins. Co. v. Lewis & Roca, 183 Ariz. 250, 254, 902 P.2d 1354, 1358 (App.1995) (holding that the statute of limitations for a legal malpractice action "begins to run when a cause of action accrues"). Arizona follows the "discovery rule" in determining the date the cause of action for a legal malpractice claim accrues. Id. ("The determination of when a cause of action accrues on a claim for legal malpractice is governed by the discovery rule."). "Traditionally stated, this rule provides that a claim for attorney negligence cannot accrue until the client knows or should know of his attorney's negligent conduct." Id.; see also Kiley v. Jennings, Strouss & Salmon, 187 Ariz. 136, 139, 927 P.2d 796, 799 (App.1996) ("A claim for legal malpractice 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.").

¶ 9 When the alleged malpractice occurs during the course of litigation, however, Arizona courts have held that 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 Distrib. Corp. v. Miller (Amfac II), 138 Ariz. 152, 154, 673 P.2d 792, 794 (1983). Consequently, "[i]t is only in the context of litigation ... that accrual of the cause of action is deferred until the litigation in which the malpractice arose is finally resolved." Commercial Union Ins. Co., 183 Ariz, at 256, 902 P.2d at 1360.

¶ 10 On appeal, Cannon claims that Hirsch's negligent representation of her as a creditor in a Chapter 7 bankruptcy proceeding constituted malpractice "during the course of litigation" as described in Amfac and the related cases. As such, she contends, the cause of action did not accrue, and the statute of limitations begin to run, until at least January 4, 2005, when the notice of discharge was filed. Accordingly, we turn to the question of whether the alleged error occurred "during the course of litigation." To determine whether the trial court properly applied the law in finding that Cannon's malpractice claim accrued before the January 4, 2004 notice of discharge, we must make a preliminary determination of whether Hirsch's alleged malpractice occurred "during the course of litigation."

1. Malpractice "During the Course of Litigation"

¶ 11 To properly address Cannon's claim, we first review the relevant Arizona cases addressing this issue. As those cases do not resolve whether a non-adversarial bankruptcy proceeding constitutes "litigation" for purposes of the accrual of an attorney malpractice claim, we turn to other definitions of the term "litigation." We then examine the nature of a bankruptcy proceeding in general and determine whether it falls within the ambit of our definition of "litigation." Lastly, we will analyze the facts of this case and determine whether Hirsch represented Cannon in a litigation matter.

a. The Arizona Cases

¶ 12 In Amfac, an attorney represented a client in a civil action against a subcontractor. Amfac Distrib. Corp. v. Miller (Amfac I), 138 Ariz. 155, 155, 673 P.2d 795, 795 (App.1983). The alleged malpractice occurred when the attorney failed to name the proper party. Id. The trial court dismissed the case. Id. The client filed an appeal, but the ruling was affirmed by our supreme court. Id.; Amfac II, 138 Ariz, at 153, 673 P.2d at 793. The client then filed a legal malpractice claim against the negligent attorney. Amfac I, 138 Ariz, at 155, 673 P.2d at 795. The trial court in the malpractice action granted summary judgment in the attorney's favor, finding that the client's claim was barred by the statute of limitations because it was filed more than two years after the client's underlying lawsuit was dismissed in the trial court. Id. at 156, 673 P.2d at 796. On appeal, we held that the malpractice action did not accrue until the underlying litigation was finally adjudicated on appeal because the client might nevertheless prevail on appeal and ultimately suffer no damages. Id. at 156-59, 673 P.2d at 796-99. In Amfac II, our supreme court approved the holding in Amfac I that "a cause of action for legal malpractice occurring in the course of litigation accrues when the plaintiff knew or should reasonably have known of the malpractice and when the plaintiff's damages are certain and not contingent upon the outcome of an appeal." 138 Ariz, at 153, 673 P.2d at 793.

¶ 13 Amfac was then interpreted in Tullar v. Walter L. Henderson, P.C., 168 Ariz. 577, 816 P.2d 234 (App.1991). In Tullar, the malpractice occurred when the Tullars hired an attorney to review their sales documents and assist with their closing, and the attorney failed to ensure that a note for the purchase was secured. Id. at 578, 816 P.2d at 235. Although the Tullar malpractice did not occur in litigation as in Amfac, the cause of action was held not to have accrued in Tullar upon the failure to obtain the security, or even...