Collins v. Miller & Miller, Ltd.
| Decision Date | 24 December 1996 |
| Docket Number | No. 1,CA-CV,1 |
| Citation | 189 Ariz. 387,943 P.2d 747 |
| Parties | , 232 Ariz. Adv. Rep. 37 Donald E. COLLINS; Financial Placements, Inc., a Missouri corporation; Mildred Colletta; Equity Reclamations, Inc., an Arizona corporation; and Lawrence Grinnell, Plaintiffs-Appellants, v. MILLER & MILLER, LTD.; Murray Miller and Jane Doe Miller, husband and wife, Defendants-Appellees. FINANCIAL PLACEMENTS, INC., a Missouri corporation; Mildred Colletta; Equity Reclamations, Inc., an Arizona corporation; and Lawrence Grinnell, Plaintiffs-Appellants, v. MILLER & MILLER, LTD.; Murray Miller and Jane Doe Miller, husband and wife, Defendants-Appellees. 96-0139. |
| Court | Arizona Court of Appeals |
This is an appeal from the trial court's grant of summary judgment to appellees on appellants' claim for legal malpractice. Appellants' complaint alleged malpractice sounding in negligence as well as malpractice based on breach of contract. For the reasons set forth below, we reverse the ruling of the trial court on the negligence claim but affirm that court on the breach of contract claim. We also conclude that appellants are not barred by collateral estoppel from litigating the causation element of their claim.
In 1972, Pollution Controls, Inc. ("PCI"), a Minnesota corporation, experienced financial difficulties. Appellants Financial Placements, Inc. ("FPI") and Donald E. Collins ("Collins") helped PCI locate funds to remain in business. By promissory note dated August 4, 1972, PCI promised to pay the principal amount of $5,000 and interest in the form of 2,500 shares of PCI common stock to FPI and one Melvyn Bell, with payment due in thirty days. In the event the principal was not paid when due, the payees could opt to receive more PCI common stock as additional interest on the unpaid principal balance.
PCI executed a similar promissory note dated August 28, 1972. The principal amount of that note was $20,000, and the payees were FPI and Collins. This note was payable in six months, and the interest was to be paid in PCI common stock. Again, if the principal was not paid when due, additional interest was payable in PCI stock. Both notes were executed and delivered in Minnesota.
PCI failed to pay the principal and interest when due under both notes. By declining to attempt to collect on the notes, Collins and FPI in effect exercised their right granted under each note to receive additional interest payable in PCI stock.
Eventually, PCI was merged into Environmental Systems Company ("ESC"), a company whose stock became very valuable over time. In 1989, Collins and FPI hired appellant Equity Reclamations, Inc., ("Equity"), an Arizona corporation, to assist them in recovering, in the form of ESC stock, the principal and interest owed to them under the notes. Later that year, Equity, through its president Lawrence Grinnell ("Grinnell"), contacted appellee Miller & Miller, Ltd., a Phoenix law firm, ("the firm") to discuss representing appellants in the note-collection process.
Before he agreed to be retained by appellants, appellee Murray Miller ("Miller"), a principal of the firm, engaged a Los Angeles law firm to research and assess the effect of the statute of limitations on appellants' claims. The resulting research memorandum indicated that under Minnesota law, the notes most likely would be treated as demand notes with the result that the statute of limitations would not begin to run until actual demand was made. The memorandum cautioned, however, that demand generally had to be made within a "reasonable" time and that "[r]easonableness is a jury question and not easily defined."
On December 1, 1989, the firm and Equity/Grinnell entered into a contract for legal services. The contract called for the firm to "provide reasonable and necessary services" to Equity and Grinnell, including representing them "in litigation to recover assets which belong to them."
By letter dated January 12, 1990, Miller demanded that ESC pay amounts due under the $20,000 note. Miller wrote that he would "take the appropriate and necessary action to protect our clients' interest" if ESC did not respond by January 31. The letter did not refer to the $5,000 note and the record does not indicate whether ESC responded to this letter.
The record does not show that anything else occurred with respect to these notes until, in a letter dated August 25, 1990, Grinnell expressed to Miller his concern about the lack of action on various matters Miller was handling for Equity, including collection of the notes. Grinnell wrote, "Please, I urge you, avoid further delays in the progress of beginning to file these and other suits."
Miller then demanded payment from ESC under the $5,000 note by letter dated September 24, 1990. ESC responded by requesting additional information and noting that it had been almost eighteen years since the notes were issued. There is no evidence that Miller ever responded to this inquiry or provided ESC with more information. In December 1990, Miller engaged the Minnesota law firm of O'Connor & Hannan to assist in collecting on the two notes. On or about March 29, 1991, Miller and O'Connor & Hannan filed lawsuits against ESC in Minnesota state court on the two notes. The actions were thereafter removed to federal district court.
The district court granted summary judgment to ESC in both cases. The court ruled that the statute of limitations on the notes had run some six and one-half years before the lawsuits were filed. The court also found that even if the notes waived the statute of limitations defense, the actions were barred by laches. Finally, the court noted that an August 30, 1972 agreement between FPI and PCI superseded FPI's rights under the notes and discharged the notes.
FPI and Collins appealed to the Eighth Circuit Court of Appeals, which affirmed on statute of limitations grounds but employed a different analysis to reach that result. Collins v. Environmental Sys. Co., 3 F.3d 238 (8th Cir.1993). Applying Minnesota law, the court found that the notes waived the statute of limitations, but that the waiver was effective only for a reasonable time, which the court determined was the six-year interval of the limitations period. Id. at 242. Thereafter, appellants had another six-year period in which to make demand, at the conclusion of which the six-year statute of limitations for suing on the notes began to run. The respective periods were tied to the months in which each note was originally due, namely, September for the thirty-day $5,000 note, and February for the six-month $20,000 note. The court thus found the commencement of the limitations period for the $5,000 note was September 1984 and for the $20,000 note was February 1985. Id. at 243. Accordingly, the court held that the six-year limitations period expired in September 1990 for the former and in February 1991 for the latter, making the claims filed in April 1991 on both notes barred by the statute of limitations. 1 Id. The court did not address the laches defense or the August 30, 1972 agreement.
In May 1994, appellants filed actions in Maricopa County Superior Court against the firm and Miller and his spouse (collectively "appellees"), as well as the law firm of O'Connor & Hannan. The complaints were for legal malpractice and alleged negligence, breach of contract, and breach of fiduciary duty. The two cases were consolidated, and the firm of O'Connor & Hannan was ultimately dismissed for lack of personal jurisdiction.
Appellees moved for summary judgment, arguing that under the unsettled point of law doctrine, they were not liable for good faith errors in judgment on an uncertain point of law. They maintained that Miller could not have predicted the Eighth Circuit would adopt the statute of limitations that it did, and therefore, Miller was not negligent as a matter of law. Appellees further argued that appellants could not provide any proof of causation. They reasoned that since the federal district court held the actions were also barred by either the doctrine of laches or the August 30, 1972 agreement, even if appellants had won on the statute of limitations issue in federal court, they would have lost on either or both of these other issues. Appellees asserted that since the district court had ruled on these issues, appellants were collaterally estopped from rearguing them in the malpractice action.
The trial court agreed and granted summary judgment in favor of appellees. It applied the unsettled law doctrine, finding that because there was no settled law on which Miller could have relied, he was not negligent as a matter of law. The court also found that no causation existed, adopting appellees' argument in this regard. The trial court did not rule directly on the breach of contract claim until it considered attorneys' fees, at which time it concluded that appellants had argued this claim in their response to appellees' motion and had not prevailed. 2
After denying appellants' motion for reconsideration, the trial court entered a judgment in favor of appellees that included an award of $22,709.50 in attorneys' fees. Appellants timely appealed.
1. Was summary judgment properly granted on appellants' negligence claim?
2. Was summary judgment properly granted on appellants' breach of contract claim?
3. Were appellants collaterally estopped from relitigating the issue of causation?
4. Did the trial court err in awarding attorneys' fees to appellees?
Appellants argue that in light of the age of the promissory notes, the uncertainty regarding the statute of...
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