Law Office of Stern v. Security Nat. Corp.

• Court: Florida Supreme Court
• Writing for the Court: Bell
• Citation: Law Office of Stern v. Security Nat. Corp., 969 So.2d 962 (Fla. 2007)
• Decision Date: 05 July 2007
• Docket Number: No. SC06-361.,SC06-361.
• Parties: LAW OFFICE OF DAVID J. STERN, P.A., Petitioner, v. SECURITY NATIONAL SERVICING CORPORATION, Respondent.

969 So.2d 962

LAW OFFICE OF DAVID J. STERN, P.A., Petitioner, v. SECURITY NATIONAL SERVICING CORPORATION, Respondent.

No. SC06-361.

Supreme Court of Florida.

July 5, 2007.

Rehearing Denied December 3, 2007.

Robert M. Klein, Gregory S. Glasser, and Cayla B. Tenenbaum of Stephens, Lynn, Klein, et al., Miami, FL, for Petitioners.

Nancy W. Gregoire of Bunnell, Woulfe, Kirschbaum, Keller, McIntyre, Gregoire, and Klein, P.A., Fort Lauderdale, FL, for Respondents.

BELL, J.

Law Office of David J. Stern, P.A. (Stern) seeks review of the Fourth District Court of Appeal's decision in Security National Servicing Corp. v. Law Office of David J. Stern, P.A., 916 So.2d 934 (Fla. 4th DCA 2005), on the ground that it expressly and directly conflicts with three decisions of this Court, Cowan Liebowitz & Latman, P.C. v. Kaplan, 902 So.2d 755 (Fla.2005), KPMG Peat Marwick v. National Union Fire Insurance Co. of Pittsburgh, Pa., 765 So.2d 36 (Fla.2000), and Forgione v. Dennis Pirtle Agency, Inc., 701 So.2d 557 (Fla.1997). We have jurisdiction. See art. V, § 3(b)(3), Fla. Const.

This case involves a legal malpractice claim arising out of an attempted mortgage foreclosure. Briefly, Security National alleges that Stern committed legal malpractice by filing an untimely foreclosure action and by voluntarily dismissing a previously filed, timely foreclosure action on the same mortgage. This blunder apparently occurred because Stern, having realized its error in filing the untimely action, intended to dismiss it but instead dismissed the timely foreclosure action by mistake. Stern continued to prosecute the untimely foreclosure action, and the trial court entered summary judgment against it. Meanwhile, the mortgage and note were assigned several times before Security National finally acquired them during the appeal in the foreclosure action. Security National retained Stern as counsel to represent its interests in the appeal. Ultimately, the Second District affirmed the trial court's decision on appeal.

Subsequently, Security National brought a legal malpractice action against Stern, claiming to have standing either (1) by virtue of its attorney-client relationship with Stern or (2) as the assignee of the mortgage and note involved in the underlying foreclosure action. The trial court entered summary judgment against Security National, but the Fourth District reversed. The Fourth District held that Security National has standing to sue Stern as the assignee of the mortgage and note. See Stern, 916 So.2d at 939.

Now Stern seeks review by this Court of the Fourth District's decision. For the reasons stated, we conclude that Security National lacks standing to sue Stern for legal malpractice either by attorney-client relationship or by assignment. Therefore, we quash the decision below.

FACTUAL AND PROCEDURAL BACKGROUND

The Fourth District described the facts of this case as follows:

This legal malpractice action arises out of a botched mortgage foreclosure. Security National is the transferee of the underlying note and mortgage....

... In 1997, the holder of the note and mortgage, UMLIC-SIX CORP., timely filed a mortgage foreclosure action. While that action was pending, UMLIC-SIX assigned the loan to EMC Mortgage. EMC hired Stern to foreclose the loan. Stern filed a second foreclosure action on the same note and mortgage on December 15, 1998. By this time, the statute of limitations had already expired, so that this 1998 foreclosure action was untimely.

On February 19, 1999, Stern substituted as counsel in the timely 1997 foreclosure suit, then five days later voluntarily dismissed that timely action, leaving only the untimely action intact. Stern essentially admits that this was malpractice.

On August 27, 1999, EMC assigned the loan to Universal Portfolio Buyers, Inc. (Universal). Stern continued on as Universal's counsel in the untimely 1998 action. On October 15, 1999, Universal assigned the loan to North American Mortgage Co. (North American). Stern remained as North American's counsel in the 1998 action.

On July 24, 2000, the owner of the encumbered property moved for summary judgment on statute of limitations grounds. On November 5, 2000, the trial court entered summary judgment for the defendant. North American appealed.

On April 30, 2001, while the appeal was pending, North American assigned the loan to Security National. The record does not reflect whether there was consideration for this transfer or whether Security National had knowledge of the status of the foreclosure at the time. Thereafter, Stern remained as counsel representing Security National, but only for a month or two.

On December 7, 2001, the second district affirmed the final judgment. [On November 5, 2002,] Security National ... brought this legal malpractice action against Stern. The complaint alleges negligence in dismissing the timely 1997 action (at the time EMC owned the loan) and in failing to timely move to reinstate the 1997 action until after the motion for summary judgment was filed (potentially spanning the ownership of EMC, Universal, and North American).

Although the trial court stated in her order that she "may take issue with the fairness of such ruling," she felt bound to enter summary judgment on Stern's behalf because there was no attorney-client relationship between Stern and Security National "at the time the cause of action accrued."

Stern, 916 So.2d at 936 (citation omitted). On appeal, the Fourth District reversed, holding that under this Court's decision in Kaplan, Security National received a valid assignment of the legal malpractice claim against Stern. The Fourth District reasoned that "the malpractice action was transferred incident to the transfer of the note and mortgage," Stern, 916 So.2d at 936, and that the assignment in question did not implicate relevant policy concerns against legal malpractice assignments. See id. at 938-39.

On February 16, 2006, Stern filed a notice to invoke this Court's discretionary jurisdiction. Stern claims that the Fourth District misapplied and improperly extended our holding in Kaplan, which was expressly limited to the particular facts of that case. Stern argues that Security National does not have standing either (1) by its attorney-client relationship with Stern or (2) by an implied general assignment of the malpractice claim. We address both of these issues in turn. As stated earlier, we ultimately determine that Security National does not have standing to sue Stern for the legal malpractice it alleges.

STANDING BY ATTORNEY-CLIENT RELATIONSHIP

The Fourth District properly concluded that Security National's attorney-client relationship with Stern did not give it standing to bring a legal malpractice action based upon acts that occurred during Stern's representation of a prior holder of the note and mortgage. As the Fourth District explained:

A legal malpractice action has three elements: 1) the attorney's employment; 2) the attorney's neglect of a reasonable duty; and 3) the attorney's negligence as the proximate cause of loss to the client. See Kates v. Robinson, 786 So.2d 61, 64 (Fla. 4th DCA 2001). For statute of limitations purposes, a cause of action for legal malpractice does not accrue until the underlying adverse judgment becomes final, including exhaustion of appellate rights. See Silvestrone v. Edell, 721 So.2d 1173, 1175 n. 2 (Fla. 1998). That is the first point at which there is a redressable harm. Id. at 1175. Until then, a malpractice claim is "hypothetical" and damages are "speculative." Id.; see also Hold v. Manzini, 736 So.2d 138, 142 (Fla. 3d DCA 1999) ("mere knowledge of possible malpractice is not dispositive of when a malpractice action accrues"). Security National points to this law and argues that because it owned the loan by the time the appeal was completed and the cause of action accrued, the law regarding the assignment of legal malpractice claims is irrelevant. Simply put, it claims that it was the owner of the loan at the critical point in time.

By contrast, Stern points to language from our decision in Kates, 786 So.2d at 64:

In stating a claim for legal malpractice, it is not sufficient merely to assert an attorney-client relationship. The plaintiff must also allege that a relationship existed between the parties with respect to the acts or omissions upon which the malpractice claim is based.

See also Maillard v. Dowdell, 528 So.2d 512 (Fla. 3d DCA 1988). These cases rejected attempts by former clients to retroactively expand the scope of the attorney's representation. While they are factually different, the basic point seems sound: the time of the alleged negligent act or omission is the critical point for testing the scope and existence of the attorney-client relationship.

Stern, 916 So.2d at 936-37. We agree with the Fourth District's conclusion. Security National did not gain standing to sue Stern for prior acts of legal malpractice by forming an attorney-client relationship with Stern during the appeal of the underlying foreclosure action. Therefore, we approve the Fourth District's conclusion on this issue. However, as explained below, we disagree with the Fourth District's extension of Kaplan into the context of general assignments of notes and mortgages.

STANDING BY ASSIGNMENT

We disapprove of the Fourth District's decision and conclude that Security National did not receive a valid assignment of the right to sue Stern for legal malpractice. First, in Kaplan, we did not adopt the minority, case-by-case approach regarding the assignment of legal malpractice claims. We continued to adhere to the majority view that legal malpractice claims are generally not assignable. Second, the Fourth District's reliance on Kaplan is further misplaced because the facts in Stern are significantly different from those in Kaplan. Third, the relevant policy considerations in cases such as this weigh against recognizing the assignment of a legal...