Dearborn Animal Clinic, P.A. v. Wilson

• Decision Date: 01 March 1991
• Docket Number: No. 63904,63904
• Citation: 248 Kan. 257,806 P.2d 997
• Parties: DEARBORN ANIMAL CLINIC, P.A., et al., Appellants, v. Charles R. WILSON, Appellee.
• Court: Kansas Supreme Court

Page 997

806 P.2d 997

248 Kan. 257

DEARBORN ANIMAL CLINIC, P.A., et al., Appellants, v. Charles R. WILSON, Appellee.

No. 63904.

Supreme Court of Kansas.

March 1, 1991.

Syllabus by the Court

1. The burden is on an appellant to designate a record sufficient to present appellant's position to an appellate court and to establish the claimed error.

2. The critical information to trigger the running of the statute of limitations is knowledge of the fact, not the extent, of the injury.

3. In determining when a cause of action accrues under K.S.A. 60-513(b), two alternatives are recognized, depending upon the facts of the case. Under the first alternative, the cause of action shall not be deemed to have accrued until the act giving rise to the cause of action first causes substantial injury. Under the second alternative, if the fact of injury is not reasonably ascertainable until some time after the initial act, then the period of limitations does not commence until the fact of injury becomes reasonably ascertainable to the injured party.

4. In a legal malpractice action in which there is underlying litigation which may be determinative of the alleged negligence of the attorney, the better rule, and the one which generally will be applicable under K.S.A. 60-513(b), is that the statute of limitations does not begin to run until the underlying litigation is finally determined.

5. In a legal malpractice action, the rule that the underlying litigation must be finally determined before the statute of limitations begins to run cannot be arbitrarily applied in every case. If it is clear that the plaintiff in a potential legal malpractice action has incurred injury and if it is reasonably ascertainable that such injury was the result of the defendant attorney's negligence, then under K.S.A. 60-513(b) the statute begins to run at the time that it is reasonably ascertainable that the injury was caused by the attorney's malpractice even though the underlying action may not have been finally resolved.

6. The reasons given by a district court for its decision are immaterial so long as its ruling was correct for any reason.

Zygmunt J. Jarczyk, Kansas City, argued the cause and was on the brief, for appellants.

James D. Griffin, of Blackwell Sanders Matheny Weary & Lombardi, Overland Park, argued the cause, and Michael P. Mergen, of the same firm, was with him on the briefs, for appellee.

HOLMES, Chief Justice:

Plaintiffs, Dearborn Animal Clinic, P.A., and Central Animal Hospital, Inc., appeal from an order of summary judgment in favor of the defendant in a legal malpractice action filed against their former attorney, Charles R. Wilson. The trial court held the action was barred by the statute of limitations, K.S.A. 60-513. The Court of Appeals affirmed the trial court in an unpublished opinion, Dearborn Animal Hosp., v. Wilson, 792 P.2d 1077 (1990). We granted review, and we now affirm the Court of Appeals and the district court.

The facts are complicated and will be set forth in detail. Dearborn Animal Clinic, P.A., (Dearborn) was a professional corporation owned by Jim Guglielmino, D.V.M., and Patricia Stewart, D.V.M. Dearborn owned and operated several veterinary clinics in the Johnson County area. Central Animal Hospital, Inc., (Central) was a corporation which owned veterinary equipment. Dearborn owned two-thirds of the capital stock of Central and William L. (Luke) Fry, D.V.M., owned the other one-third. Several area veterinary clinics used Central's equipment and paid a percentage of their gross revenues to Central for the use of such equipment.

In the fall of 1984, Dearborn decided to sell one of its clinics, the Antioch 75 Clinic, and stock in Central to Thomas Holenbeck, D.V.M. Charles R. Wilson (Wilson or defendant), an attorney for Dearborn and Central, was asked to draft an asset purchase agreement between Dearborn and Holenbeck. Dr. Guglielmino testified he told Wilson to be sure Holenbeck was required to buy stock in Central. Wilson drafted the "Asset Purchase Agreement" which Dearborn and Holenbeck signed on November 30, 1984. Central was not a party to the agreement.

The contract provided for a purchase price of $82,500 to be paid in monthly installments for the Antioch 75 Clinic and $30,430 for one-fourth of the stock in Central. In December of 1984, Holenbeck began paying Dearborn $1,200 per month on the contract. In December of 1985, Holenbeck lowered his monthly payments to $879, informing Guglielmino that he had not purchased stock in Central and did not wish to exercise his option to purchase the stock.

On December 26, 1985, Glen Beal, an attorney for Dearborn, sent Holenbeck a letter, demanding full payment of the balance due on the $82,500 sales price plus interest and alleging that Holenbeck had breached the terms of the agreement. On December 30, 1985, Michael Merriam, an attorney for Holenbeck, responded by letter, stating in part: "I have advised Dr. Holenbeck that I see no duty on his part to do so under the terms of the agreement, as he is not in default in any respect, and even if he were, the contract does not provide for acceleration of the entire purchase price balance."

On February 26, 1986, Dearborn sued Holenbeck in Johnson County District Court for breach of contract. As a part of the original asset purchase agreement, Holenbeck had agreed to pay Central 20% of his gross revenues for the use of Central's equipment and services. Holenbeck stopped making such payments after Dearborn filed the Johnson County action.

The Johnson County lawsuit against Holenbeck will hereafter be referred to as the Holenbeck suit or the underlying action.

Discovery was undertaken in the Holenbeck suit and, although the record before us from that action is skimpy, it does include Dr. Stewart's answers on behalf of Dearborn to extensive interrogatories, and it appears that Stewart and Guglielmino were both deposed at length. The principal allegations in the Holenbeck suit, which are relevant to this appeal, were based upon the contentions of Guglielmino and Stewart that Holenbeck had made a binding agreement to buy one-fourth of the stock of Central and that he had breached the agreement by refusing to purchase the stock. The relevant portion of the contract on this issue read:

"8. Seller [Dearborn] shall take appropriate steps to have Buyer [Holenbeck] placed as a member of the Board of Directors of Central Animal Hospital, Inc. Further, Seller and its officers shall take such steps as are necessary to grant an option to purchase one-fourth of the issued and outstanding shares of Central Animal Hospital, Inc., said option to be exercised within one year, but not sooner than following anticipated S.B.A. financing. The purchase price for said stock shall be $30,430."

In Dearborn's answers to Holenbeck's interrogatories, signed by Stewart on June 12, 1986, Stewart referred to the stock provision as a stock option, contending that Holenbeck had "executed upon the option" and "accepted the stock option" but stopped paying for the stock in December of 1985. In her deposition she testified that at the time the interrogatory answers were signed, it had become "unfortunately obvious" that Holenbeck had received only an option and "that what we thought we had wasn't really what we had."

Unfortunately, the record before us only includes selected bits and pieces of the depositions of Guglielmino and Stewart. We have only been furnished 9 pages of Stewart's deposition which apparently exceeded 154 pages and 3 pages of the Guglielmino deposition which exceeded 270 pages.

Following completion of discovery in the Holenbeck case, the defendant filed a motion for summary judgment and the court, on January 30, 1987, issued its order of partial summary judgment. In doing so the court found 42 uncontroverted facts and then concluded in part:

"2. With respect to Issue Number A-4 of Defendant's Motion for Partial Summary Judgment [the claim that Holenbeck was under an absolute requirement to purchase stock in Central and had breached that portion of the agreement], the Court makes the following findings:

"a. The provisions of Paragraph 8 of the Asset Purchase Agreement are as follows:

"8. Seller shall take appropriate steps to have Buyer placed as a member of the Board of Directors of Central Animal Hospital, Inc. Further, Seller and its officers shall take such steps as are necessary to grant an option to purchase one-fourth of the issued and outstanding shares of Central Animal Hospital, Inc., said option to be exercised within one year, but not sooner than following anticipated S.B.A. financing. The purchase price for said stock shall be $30,430.70.

"b. Plaintiffs contention is that the phrase 'said option to be exercised within one year' contained in such provision are words of mandatory obligation which require the defendant to purchase the stock within one year. However, the Court finds that the use of the term 'option' creates a true option on the part of the defendant which he alone may elect to exercise or not exercise, and no mandatory obligation is thus imposed.

"c. The Court further finds that plaintiffs contend the option to have been exercised by defendant. However, according to uncontroverted fact number 18 above, and uncontroverted facts numbers 20-27, inclusive, the Court must find that, for purposes of the Motion for Partial Summary Judgment, the uncontroverted fact is that the defendant did not exercise such option. Any payments made by the defendant which were applied by plaintiffs to the purchase price of such stock were made by the defendant in ignorance of such application.

"d. The Court therefore finds and concludes that the Defendant's Motion for Partial Summary Judgment designated Issue Number A-4, should be sustained."

The trial court went on to state, "[T]he Asset Purchase Agreement is interpreted to grant defendant an option to buy stock, which defendant did not...