Day-Peck v. Little
| Decision Date | 04 May 2021 |
| Docket Number | No. A-1-CA-37168,A-1-CA-37168 |
| Citation | 493 P.3d 477 |
| Parties | Sandra DAY-PECK and Alexander R. Day, Plaintiffs-Appellants, v. Sandra Morgan LITTLE, Individually, and Little & Gillman-Tepper, P.A.; Robert H. Jacobvitz, Individually; and Jacobvitz, Thuma & Walker P.C, Defendants-Appellees. |
| Court | Court of Appeals of New Mexico |
Steven K. Sanders & Associates, LLC, Steven K. Sanders, Albuquerque, NM, Queener Law Firm, Richard L. Queener, Clovis, NM for Appellants
Brant & Hunt, Attorneys, John M. Brant, Jeannie Hunt, Albuquerque, NM, for Appellees Robert H. Jacobvitz and Jacobvitz, Thuma & Walker, P.C.
Dixon Scholl Carillo, PA, Briggs Cheney, Albuquerque, NM, for Appellees Sandra Morgan Little and Little & Gilman-Tepper, P.A.
{1} This is an appeal from the district court's grant of summary judgment dismissing this legal malpractice action as barred by the statute of limitations. This lawsuit was filed on December 3, 2014, by Plaintiff Sandra Day-Peck (Day-Peck) on her own behalf, on behalf of her adult son Alexander Day (Alexander), and on behalf of her two minor children, J.D. and M.D. (Alexander, J.D., and M.D. collectively referred to as Children) (Day-Peck and Children collectively referred to as Plaintiffs).1 The complaint alleged legal malpractice, negligent misrepresentation, fraud, breach of fiduciary duty, breach of contract, and conspiracy to commit fraud against defendant attorneys and law firms.2 (collectively, Attorneys) in their representation of Day-Peck and Children in the settlement of claims to the proceeds of two policies—a $5 million policy and a $500,000 policy—insuring the life of Mark Day, Day-Peck's former husband and Children's father. Attorneys represented Day-Peck and Children in four interrelated proceedings: a divorce, in which the division of property and child support remained unresolved at the time of Day's death; the probate of the Day estate; Day-Peck's Chapter 7 bankruptcy; and a federal court interpleader action to distribute the benefits of the $500,000 policy. With the exception of Attorney Johnstone, who was a court-appointed guardian ad litem for Children, Attorneys represented both Day-Peck and Children in the settlement of these four proceedings. The settlements resolving these cases were agreed to by Day-Peck and approved by the various courts in 2008. As noted above, this case was not filed until December, 2014, more than six years after approval of the settlement agreements.
{2} Day-Peck claims on appeal (1) the district court abused its discretion in disqualifying her chosen counsel based on a conflict of interest created by counsel's representation of both Day-Peck and Children; (2) the district court abused its discretion in denying her motion for an extension of time to file a factual response to Attorneys’ summary judgment motions on the statute of limitations; (3) the district court erred in holding that there were no genuine issues of material fact as to the time of accrual of Day-Peck's malpractice action; and (4) the district court abused its discretion in awarding Attorneys the costs they incurred to recover documents from Day-Peck's hard drive and in allocating costs to Day-Peck, rather than dividing them among Day-Peck and Children. Finding no error, we affirm.
{3} The merits of Day-Peck's malpractice claim are not before this Court on appeal. A brief review of the nature of the proceedings in which Attorneys represented Day-Peck and Children, however, is useful in understanding the issues on appeal.
{4} Day-Peck filed her original complaint for malpractice, negligent misrepresentation, breach of fiduciary duty, breach of contract, fraud, and conspiracy to commit fraud, against Attorneys on December 3, 2014. Day-Peck's claims arose out of settlement agreements entered into in 2008, more than six years earlier, addressing the proceeds of two policies insuring the life of Day, Day-Peck's deceased ex-husband and Children's father. One of the policies paid a $5 million death benefit, the other a $500,000 death benefit. Day took his own life in 2006, shortly after he and Day-Peck were divorced.
{5} In this attorney malpractice action, Day-Peck claims that Attorneys conspired to conceal from her the fact that New Mexico, by statute, NMSA 1978, § 42-10-3 (1937) and NMSA 1978, § 42-10-5 (1889), exempts life insurance benefits from both creditors of the insured and creditors of the beneficiary of the policy. Section 42-10-3 states, in relevant part, as follows:
[P]ayments of every kind from any life, accident or health insurance policy ... issued upon the life of a citizen or resident of the state of New Mexico ... shall in no case be liable to attachment, garnishment or legal process in favor of any creditor of the person whose life is so insured or who is protected by said contract, or who receives or is to receive the benefit thereof, nor shall it be subject in any other manner to the debts of the person whose life is so insured, or who is protected by said contract or who receives or is to receive the benefit thereof[.]
Section 42-10-5 provides, "The proceeds of any life insurance are not subject to the debts of the deceased, except by special contract or arrangement, to be made in writing." Day-Peck alleges in her original and amended complaint, inconsistently, that she was entitled to the full $5 million proceeds "as the sole beneficiary," and Day-Peck and Children were each separately entitled to the full $5 million. Day-Peck's pleadings also seek to dissolve the trust created for Children's benefit with the proceeds of the 2008 settlement agreements.
{6} Day-Peck's and Children's conflicting claims to the $5 million life insurance benefits arose, in part, out of ambiguity in the partial divorce decree entered by the domestic relations court prior to Day's death. The decree required Day to "maintain life insurance of $5 million with [Day-Peck] or [C]hildren listed as beneficiaries until he is no longer obligated for child support." (Emphasis added.) The divorce decree failed to specify whether the court intended the beneficiary of the $5 million policy to be Children or Day-Peck. The decree also did not state whether the beneficiary would be entitled to the full amount of the policy, or only the amount the court determines is necessary for child support over Children's minority, with the remainder returning to Day or his estate.
{7} Following Day's death, his creditors filed a probate proceeding and intervened in the pending divorce proceeding, contending in both courts that Day-Peck and Children's claim to the $5 million policy was limited to the amount necessary for child support and that creditors were entitled to the remainder. Day-Peck filed a Chapter 7 bankruptcy proceeding in federal bankruptcy court to attempt to protect the $5 million in life insurance proceeds from creditors.
{8} The last proceeding at issue in this malpractice case addressed the $500,000 life insurance policy. Shortly before his death, Day made two conflicting changes to the $500,000 life insurance policy: he first changed the beneficiary from Day-Peck to Children, and then from Children to Day's friend, Deborah Shamaley. The insurance carrier filed an interpleader action in federal district court so the court could determine who was entitled to payment of the benefits.
{9} In 2008 Day-Peck and Children, represented by Attorneys, entered into two settlement agreements with Day's creditors resolving the claims made by all parties in the proceedings described above. A settlement agreement pertaining to the $5 million life insurance proceeds was executed by Day-Peck and creditors on or about May 2, 2008, and approved by the bankruptcy court on July 23, 2008. That agreement gave Day-Peck $2.75 million of the $5 million life insurance benefits. The $2.75 million, plus interest, was placed in a trust for Children's benefit. The creditors received the remainder of the $5 million. The probate court approved this same settlement on August 5, 2008. The second settlement agreement resolved the interpleader action on the $500,000 life insurance policy. An agreement was reached in mediation on March 27, 2008, and was approved by the federal court on September 8, 2008. Day-Peck, on behalf of Children, agreed to split the proceeds of the $500,000 policy equally with Shamaley. The $250,000 plus interest, was placed in Children's trust.
{10} Day-Peck claims that, but for Attorneys’ negligence and their conspiracy to keep from her knowledge of the New Mexico statutes exempting life insurance proceeds from creditors, neither Day-Peck nor Children would have entered into the 2008 settlement agreements. Day-Peck claims that if she and Children had not settled, they would have received the full $5,500,000 in life insurance benefits.
{11} Day-Peck does not dispute that the statute of limitations for legal malpractice is four years in New Mexico, see NMSA 1978, § 37-1-4 (1880), or that the date of her loss due to the alleged malpractice was September 8, 2008, at the latest, when the last settlement agreement was approved by a court. Nor does she dispute that her complaint was filed until more than six years after the last settlement agreement. Day-Peck claims that her cause of action for malpractice did not accrue, and the statute of limitations did not begin to run, until 2013, when an independent lawyer (who later filed this malpractice suit on her behalf) reviewed thousands of pages of Attorneys’ files and advised her "in a manner she could understand" that he believed there had been malpractice. Day-Peck also alleges in her complaint that Attorneys fraudulently concealed the existence and import of the New Mexico statutes exempting life insurance benefits from creditors’ claims, and that this fraudulent concealment tolled the statute of limitations, pursuant to NMSA 1978, Section 37-1-7 (1880), until she discovered the fraud in 2013. See id. (...
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