Myers v. Wood
| Decision Date | 17 December 1992 |
| Docket Number | CA-CV,No. 2,2 |
| Citation | 850 P.2d 672,174 Ariz. 434 |
| Parties | C. Leroy MYERS and Marie A. Myers, husband and wife; Kenneth L. Myers; the Alpha Fund, a California limited partnership; Apple Enterprises, a California limited partnership; Centaur Financial, Inc., a California corporation; Intercapital Financial Services, Inc., a California corporation; Lane D. Lee; The Triax Fund, a California limited partnership; Peter or Bernice Wilkinson, as Trustee for U.D.T.; Stephen A. Wohler; CLM Management, Inc., an Arizona corporation, Plaintiffs/Appellants, v. Walter F. WOOD and Jane Doe Wood, husband and wife; Dennis A. Rosen and Jane Doe Rosen, husband and wife; Dennis A. Rosen, Ltd., an Arizona corporation, Defendants/Appellees. 92-0146. |
| Court | Arizona Court of Appeals |
Ulrich, Thompson & Kessler by Paul G. Ulrich and Gaye L. Gould, and Pasquale R. Cheche, Phoenix, for plaintiffs/appellants.
Broening Oberg & Woods by Neal B. Thomas, and Potts & Peterson by Richard G. Potts, Phoenix, for defendants/appellees.
Insofar as we can discern from an exceptionally sparse record, plaintiffs hired defendant Walter Wood to advise them concerning financial reorganization problems of Cochise Packers, Inc., a corporation owned by Leroy Myers, his family, and others. Wood, according to the complaint, arranged a sale of the stock of that company to National Fruit Corporation (NFC), a newly formed company owned by Richard Hickey and others. Wood represented that Hickey was wealthy and that Hickey and other owners would personally guarantee the NFC debt. NFC also purchased equipment, promising to pay off the debt on that equipment that had been personally guaranteed by Myers. When the transaction closed, the only guarantee obtained was from Hickey and it was relatively worthless because not signed by his wife and thus not binding on community assets. Myers later discovered that Hickey was another client of Wood and that he was not as financially solvent as Wood had represented him to be. By August 1988, therefore, Myers knew of a legal malpractice claim against Wood concerning misrepresentation of Hickey's financial ability and failure to protect by obtaining enforceable guarantees. No payments were yet due by NFC on the underlying transactions, however, and actual default did not occur until January 15, 1990. A malpractice claim was filed on January 10, 1992. Summary judgment was granted on the basis of the statute of limitations. We reverse.
The statute of limitations in a legal malpractice action begins to run only when a cause of action has accrued. That accrual requires not only negligence but damage. On the facts of this case, there was negligence at the outset in inducing Myers to enter into a transaction with a not solvent corporation unprotected by guarantees from solvent individuals. That negligence would cause no harm, however, if NFC in fact carried out its contractual undertakings. The harm arose, and the cause of action against Wood accrued, when NFC defaulted. Tullar v. Walter L. Henderson, P.C., 168 Ariz. 577, 816 P.2d 234 (App.1991). Because that was less than two years before the complaint was filed, that complaint was timely.
Defendants seek to avoid this result by pointing to a lawsuit brought against Myers by Valley National Bank about two months after NFC purchased the stock of Cochise and the equipment for which Myers had personally guaranteed payment. That suit was on Myers' guarantee of the equipment debt. Myers retained an attorney who wrote to Wood, described the alleged malpractice in this case, and claimed that Wood had also failed to obtain a release for Myers on his equipment guarantee as he had promised to do. Thereafter an agreement was reached for NFC or Cochise to meet Myers' obligations and the Valley National Bank suit resulted in no loss to Myers. Defendants, however, contend that the lawsuit did damage Myers because it forced him to pay a lawyer, an element of damage that could have been recovered under the holding in United States Fidelity & Guaranty Co. v. Frohmiller, 71 Ariz. 377, 227 P.2d 1007 (1951). While we agree that there was some minor damage at that time, we do not believe it precludes this lawsuit. The result of obtaining legal counsel was for NFC and...
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