Matson v. Weidenkopf

• Citation: 3 P.3d 805,101 Wash.App. 472
• Decision Date: 14 July 2000
• Docket Number: No. 23262-6-II.,23262-6-II.
• Court: Court of Appeals of Washington
• Parties: Paul MATSON and Rose Matson, husband and wife; and Greg Matson, Respondents, v. Jerry WEIDENKOPF and "Jane Doe" Weidenkopf, husband and wife, and the marital community composed thereof, Appellants.

3 P.3d 805

101 Wash.App. 472

Paul MATSON and Rose Matson, husband and wife; and Greg Matson, Respondents, v. Jerry WEIDENKOPF and "Jane Doe" Weidenkopf, husband and wife, and the marital community composed thereof, Appellants.

No. 23262-6-II.

Court of Appeals of Washington, Division 2.

July 14, 2000.

David Edward Bailey, Lawrence Ethan Nelson, Law Offices of Lawrence E. Nelson, P.S., Puyallup, for Appellants.

William Richard Michelman, Lakewood, for Respondents.

ARMSTRONG, C.J.

Paul, Rose, and Greg Matson retained attorney Jerry Weidenkopf to collect on three promissory notes executed by Vance and Julie Shafer. Weidenkopf took no action to recover on the notes, and the statute of limitations ran. The Matsons then sued Weidenkopf for legal malpractice and were awarded the full amount due on the notes, plus the interest accrued to the expiration of the statute of limitations. They were also awarded prejudgment interest.

On appeal, Weidenkopf contends that the statute of limitations did not run while he was the Matsons' attorney because Vance Shafer acknowledged the debt and started the limitations period anew. In the alternative, Weidenkopf argues that the statute of limitations ran on the legal malpractice claim because the Matsons should have known when the statute of limitations expired on the underlying action. Lastly, Weidenkopf argues that the Matsons failed to prove the underlying judgment could have been collected from Julie Shafer and that the trial court erred in awarding prejudgment interest because the claim is unliquidated. Finding no error, we affirm.

FACTS

In 1984, Paul and Rose Matson and their son, Greg Matson, invested money in Vance Shafer's real estate mortgage business. Paul and Rose Matson first invested $5,000 and later an additional $2,000 with Shafer. Greg Matson invested $4,000. In return for each investment, the Matsons received a promissory note secured by a deed of trust. Each note had a one-year maturity at 20 percent interest. After maturity and on upon default, the notes also paid 20 percent interest.

Vance and Julie Shafer signed each note, as co-makers. When the notes were signed, the Shafers were married. They divorced in July 1986. Neither Vance nor Julie Shafer made any payments on the promissory notes, and each note went into default on the date of maturity. The $5,000 note matured on August 14, 1985, the $4,000 note on September 13, 1985, and the $2,000 note on October 16, 1985.

After default, Vance Shafer offered Paul Matson stock in InfoCode, a new company that Shafer was starting. Paul Matson testified that the stock was in exchange for the promissory notes. Paul Matson was told that this investment would return more money than the original investment secured by the promissory notes. In reliance on Shafer's promise, he returned the $5,000 and $2,000 promissory notes to Vance Shafer. Greg Matson was not asked to exchange his note for stock, and he retained possession of his $4,000 promissory note. Paul and Rose Matson never received any shares of stock in InfoCode.

Vance Shafer wrote Paul and Rose Matson two letters about InfoCode. Written in October 1987, the first letter states, in part:

Thank you for your confidence in InfoCode. As you have already been advised, your investment of $11,832.00 entitles you to ownership of 1,183,200 shares of InfoCode stock. This letter will serve as a receipt for the amount of money specified above.

In the second letter, dated January 9, 1988, Shafer told Paul and Rose Matson that, "the stock of InfoCode is not trading because the financial statements are not current." He further explained that there are "two companies coming out of InfoCode ... [which] is really a much better deal for us" and "the new stock certificates are into the Stock Transfer Company.... We are just waiting now for them to be sent back to us." He closed the letter with, "I apologize for any delays. I am working hard to overcome them and am working hard to clear up past problems as well. The future looks brighter, and certainly you will agree that the addition of two more companies is a nice START."

A third letter, dated March 24, 1988, to Greg Matson states:

I am writing this letter to report to you on the progress of ... our public offering and, thereby, on the progress of our loan repayment efforts.

The Form S-1 filing for our Company has been before the SEC for in excess of two months without receiving a "comment letter," which technically means our issue is approved for trading. As a result, as soon as we are able to get approval for trading from the State Securities Division for the state of incorporation, we will be in a position to repay your loan within a period of three weeks....

In June 1990, Paul Matson hired attorney Jerry Weidenkopf to collect the money due on all three notes. He gave Weidenkopf all of the documents he had, including copies of the three promissory notes and the deeds of trust. Weidenkopf agreed to handle the matter and was paid a $300 retainer. Greg Matson authorized his father to act on his behalf in the collection of his note.

After a year with no progress on the case, Paul Matson contacted Weidenkopf's office but was unable to get any information. He wrote letters and made phone calls to Weidenkopf without any response. Finally, Weidenkopf responded on January 28, 1992, with a letter to Paul and Rose Matson. He apologized for the delay. He explained that he had a full caseload, that the Matson's claim was a low priority, and that it was in their "best interest not to act quickly in attempting to `win' against a white collar crime person."

After this letter, Paul Matson still saw no activity on the case. He tried again to contact Weidenkopf but got not response until August 6, 1993, when Weidenkopf wrote the Matsons and told them he was dropping their case because he was too busy.

The trial court found that the statute of limitations on the three promissory notes expired on August 14, September 13, and October 16, 1991. This is based on the six-year statute of limitations for written instruments. See RCW 4.16.040(1). Weidenkopf's first letter was written over three months after the statute of limitations had expired on the last note. Weidenkopf never advised the Matsons that the statute of limitations had expired. In February 1994, Paul Matson went to another attorney and learned for the first time that the statute of limitations had expired on all three notes. The Matsons' legal malpractice suit was filed in December 1994.

The trial court found that the Matsons were naïve about investments and legal matters. They "could not have known" that Weidenkopf was no longer working on their claim until after his last letter dated August 6, 1993, and they "could not have known" that they had a legal malpractice claim against Weidenkopf until that date. The court applied the discovery rule to the Matsons' suit and concluded that it was filed within the three-year statute of limitations.

The court also concluded that the Matsons were entitled to simple interest on their respective notes from the date the notes were made through the date of the expiration of the statute of limitations on the notes. By the terms of the promissory notes, the interest rate is 20 percent per annum on each note. The plaintiffs were also awarded prejudgment interest on the notes, at a rate of 12 percent per annum, from the date that the applicable statute of limitations expired until entry of the findings of fact and conclusions of law.

ANALYSIS

I. Acknowledgment of the Debt

To establish legal malpractice, a plaintiff must show (1) the existence of an attorney-client relationship; (2) a duty on the part of the attorney; (3) the failure to perform the duty; and (4) the attorney's failure to perform the duty is a proximate cause of the client's damages. Martin v. Northwest Washington Legal Servs., 43 Wash.App. 405, 408, 717 P.2d 779 (1986).

Weidenkopf argues that his inaction was not the proximate cause of the Matsons' damages because Vance Shafer acknowledged the debt and restarted the statute of limitations. He contends that the letters from Vance Shafer acknowledge the amount of the promissory notes, promise stock in return for investment, refer to ongoing efforts to issue stock certificates, and contain a reassurance that the loan would be repaid. His argument raises two possible issues: Are the letters to the Matsons sufficient to create an acknowledgment of the debt and, if so, did Vance Shafer's acknowledgment bind his exwife, Julie Shafer?¹ The second issue is dispositive.

Assuming that the letters are sufficient to create an acknowledgment, the question is whether Vance Shafer can acknowledge a debt on behalf of his ex-wife, Julie Shafer. A written and signed acknowledgment or promise to pay a debt restarts the statute of limitations. See RCW 4.16.280; Jewell v. Long, 74 Wash.App. 854, 856, 876 P.2d 473 (1994). When an acknowledgment is made before the running of the statute of limitations, we infer a promise to pay unless the writing expresses a contrary intention. Cannavina v. Poston, 13 Wash.2d 182, 195, 124 P.2d 787 (1942) (quoting Griffin v. Lear, 123 Wash. 191, 200, 212 P. 271 (1923)). RCW 4.16.280 provides:

No acknowledgment or promise shall be sufficient evidence of a new or continuing contract whereby to take the case out of the operation of this chapter, unless it is contained in some writing signed by the party to be charged thereby; but this section shall not alter the effect of any payment of principal or interest.

As a general rule an acknowledgment or part payment by a joint debtor does not suspend the statute of limitations as to the other debtor, unless he or she authorizes or ratifies the payment or acknowledgment. 18 SAMUEL WILLISTON & WALTER H.E. JAEGER, A TREATISE ON THE LAW OF CONTRACTS § 2079 (3d ed.1978). Washington has not addressed the issue with respect to acknowledgments but has adopted the general...