Keegan v. First Bank of Sioux Falls

Decision Date27 July 1994
Docket NumberNo. 18427,18427
Citation519 N.W.2d 607
CourtSouth Dakota Supreme Court
PartiesJulie KEEGAN, Plaintiff, v. FIRST BANK OF SIOUX FALLS, Individually and as Executor of the Estate of C.L. Anderson, Deceased, Defendant. and Gunnar MERTZ, Petitioner and Appellant, v. Robert J. McDOWELL, Defendant and Appellee, and Boyce, Murphy, McDowell & Greenfield, Third Party Defendant and Appellee.

Richard A. Johnson, Strange, Farrell, Johnson & Casey, Sioux Falls, Michael D. Klampe of Michael Klampe & Associates, Rochester, MN, for appellant.

David R. Gienapp of Arneson, Issenhuth, Gienapp & Blair, Madison, for appellees.

DOBBERPUHL, Circuit Judge.

Gunnar Mertz (Mertz) appeals a summary judgment granted to defendant, Robert J. McDowell (McDowell) and his law firm third-party defendant, Boyce, Murphy, McDowell & Greenfield (the firm) in a cross-claim action by Mertz against McDowell and a third-party claim against the firm for malpractice and breach of fiduciary duty. We reverse and remand.

PROCEDURAL HISTORY

The lawsuit which gave rise to this appeal was originally brought by Julie Keegan (Keegan) in 1984 against Mertz, McDowell and the estate of C.L. Anderson (Anderson). The suit arose from transactions surrounding a bank in Wibaux, Montana. Keegan had been partners with McDowell and Anderson in the Montana bank prior to Mertz's acquisition of her interest. Mertz later cross-claimed against McDowell and brought a third party complaint against the firm. This pleading, dated February 14, 1986, alleged legal malpractice and breach of fiduciary duty against McDowell and the firm in connection with the Montana bank transactions, and also in connection with transactions surrounding another bank in Lovell, Wyoming.

Keegan's claims surrounding the Montana bank have all been settled, and she is no longer a party to this suit. Only Mertz's claims of malpractice and breach of fiduciary duty against McDowell and the firm remain. The malpractice claims involve several alleged instances surrounding the Montana and Wyoming bank transactions. Mertz argues that an attorney-client relationship was established between himself and McDowell, and sets forth several events which he claims evidence such relationship and give rise to his malpractice claim.

On February 10, 1989, McDowell and the firm moved for summary judgment claiming that Mertz's malpractice claim was barred by the statute of limitations. Then circuit judge, Robert A. Amundson, the original trial judge, denied the motion stating that questions of fact existed concerning: (1) the existence of an attorney-client relationship between McDowell and Mertz; and (2) whether the statute of limitations was tolled by a continuing attorney-client relationship between them.

On March 23, 1990, after further discovery, McDowell and the firm renewed their summary judgment motion. Judge Amundson took this motion and several others under advisement. 1 Before having a chance to rule on the renewed summary judgment motion, Judge Amundson was appointed to the South Dakota Supreme Court. Judge William J. Srstka was then appointed to hear the case. He however, removed himself from hearing the matter more than a year later. On February 19, 1993, Judge James W. Anderson became the third trial judge to be appointed to the case.

The renewed summary judgment motion of McDowell and the firm was reargued on May 13, 1993. Judge Anderson reversed Judge Amundson's prior order denying summary judgment and granted the renewed motion.

FACTS

Because a clear understanding of the significant dates, events and transactions is crucial to our decision, a chronology of the same is set forth below.

1. In 1978, McDowell approached friend and client, Keegan inquiring about her interest in becoming partners with himself and Anderson in a bank in Wibaux, Montana.

2. From 1979 to 1981, Mertz and McDowell and the firm established an attorney-client relationship where legal work was done for Mertz personally and for certain corporations with which he was involved.

3. In December of 1980 or January of 1981, Keegan told McDowell that she "wanted out" of the Montana bank.

4. In July of 1981, Mertz was approached by McDowell regarding Mertz's purchase of Keegan's interest in the Montana bank.

5. In December 1981, McDowell arranged a meeting with Mertz and Keegan to memorialize Mertz's acquisition of Keegan's ownership interest in the Montana bank. In connection with this transaction, McDowell prepared

three documents, an option to purchase stock, a promissory note, and an indemnity agreement. These were dated January 1, 1981, 2 and were signed at the December meeting. McDowell also prepared a letter on the firm's letterhead summarizing the Montana transaction and gave copies to Keegan and Mertz.

6. In February of 1982, McDowell approached Mertz concerning the purchase of Richard Fait's (Fait) ownership interest in a bank in Lovell, Wyoming, which was also owned by McDowell and Anderson. In his negotiations with Fait, Mertz learned for the first time that he was required to obtain approval from the Comptroller of Currency under the federal Change in Bank Control Act of 1978, 3 before change in control of the bank could take place. Upon discovering this, Mertz approached McDowell and Anderson and asked why they had not previously informed him of this regulation, and asked for their help. He was informed that he must write and obtain change in control forms from the government which he did. Mertz experienced great difficulty in preparing the forms and consulted with McDowell regularly concerning their completion but received little help from him. As a result, Mertz's application was filed incorrectly and approval was never forthcoming. On several occasions Mertz and Fait urged McDowell to complete the legal documents necessary to finalize the Wyoming bank transaction. Mertz alleges that McDowell assured them that he would "take care of it" and that they need not worry, but he never followed through with this alleged assurance.

7. In 1983, Mertz, McDowell and Anderson attempted to sell their ownership interest in the Montana and Wyoming banks to Anant Kumar Tripati (Tripati).

8. An "Option Agreement" dated April 15, 1983, was drafted by McDowell for the sale of his and Mertz's interests in the Montana bank to Tripati.

9. In April of 1983, Anderson died unexpectedly. Both Mertz and McDowell negotiated with Tripati subsequent to Anderson's death.

10. In May of 1983 the Comptroller of Currency notified Mertz and McDowell of a pending investigation for alleged violations of federal banking laws in the acquisition and sale of the two banks. When he sought McDowell's advice on how he should respond to the investigation, Mertz alleges that he was told by McDowell that they could "skate around this" by "blaming it on the dead man."

11. On June 22, 1983, Mertz hired separate counsel, but was eventually assessed a $595,000.00 civil money damage penalty by the Comptroller of Currency for willful failure to comply with the act in regard to the Wyoming bank.

12. On February 14, 1986, Mertz brought his cross-claim and third-party complaint against McDowell and the firm.

ISSUES

1. Do genuine issues of material fact exist as to whether Mertz and McDowell had an attorney-client relationship and whether McDowell committed malpractice within the three year statute of limitations?

2. Did Mertz establish material fact issues on whether McDowell continued to represent him until at least February 14, 1983, which would toll the statute of limitations?

STANDARD OF REVIEW

Our standard of review for a grant or denial of summary judgment is well settled:

In reviewing a grant or a denial of summary judgment under SDCL 15-6-56(c), we must determine whether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. The evidence must be viewed most favorably to the nonmoving party and reasonable doubts should be resolved against the moving party. The nonmoving party, however, must present specific facts showing that a genuine, material issue for trial exists. Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied. If there exists any basis which supports the ruling of the trial court, affirmance of a summary judgment is proper.

Ashby v. Northwestern Public Service Co., 490 N.W.2d 286, 288 (S.D.1992); Waddell v. Dewey County Bank, 471 N.W.2d 591, 593 (S.D.1991); Garrett v. BankWest, Inc., 459 N.W.2d 833, 836-37 (S.D.1990); Pickering v. Pickering, 434 N.W.2d 758, 760-61 (S.D.1989).

Statute of limitations questions are normally for the jury. Schoenrock v. Tappe, 419 N.W.2d 197, 200 (S.D.1988). Further, summary judgment is proper on the issue of statute of limitations only when application of the law is in question. Kurylas, Inc. v. Bradsky, 452 N.W.2d 111, 113 (S.D.1990). Summary judgment is therefore improper where there is a dispute of material fact which would affect the application of the statute of limitations. Id.; Schoenrock, supra.

DECISION
I. DO GENUINE ISSUES OF MATERIAL FACT EXIST AS TO WHETHER MERTZ AND MCDOWELL HAD AN ATTORNEY-CLIENT RELATIONSHIP AND WHETHER MCDOWELL COMMITTED MALPRACTICE WITHIN THE THREE YEAR STATUTE OF LIMITATIONS?
A. Legal Malpractice/Attorney-Client Relationship

The central cause of action in Mertz's cross-claim and third-party complaint against McDowell and the firm is legal malpractice.

In a legal malpractice case, the plaintiff must prove:

1. the existence of an attorney-client relationship giving rise to a duty;

2. that the attorney, either by an act or a failure to act, violated or breached that duty;

3. that the attorney's breach of duty proximately caused injury to the client; and

4. that the client sustained actual injury, loss or damage.

Haberer v. Rice, 511 N.W.2d 279, 284 (S.D.1994). The...

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