Omni-Food & Fashion, Inc. v. Smith

• Decision Date: 21 September 1988
• Docket Number: No. 87-1116,OMNI-FOOD,87-1116
• Citation: 38 Ohio St.3d 385,528 N.E.2d 941
• Court: Ohio Supreme Court
• Parties: & FASHION, INC. et al., Appellants, v. SMITH, Exrx., Appellee.

Page 385

38 Ohio St.3d 385

528 N.E.2d 941

OMNI-FOOD & FASHION, INC. et al., Appellants, v. SMITH, Exrx., Appellee.

No. 87-1116.

Supreme Court of Ohio.

Submitted June 1, 1988.

Decided Sept. 21, 1988.

Syllabus by the Court

1. Under R.C. 2305.11(A), a cause of action for legal malpractice accrues and the one-year statute of limitations commences to run either when the client discovers or, in the exercise of reasonable diligence should have discovered, the resulting damage or injury, or when the attorney-client relationship for that particular transaction or undertaking terminates, whichever occurs later. (Skidmore & Hall v. Rottman [1983], 5 Ohio St.3d 210, 5 OBR 453, 450 N.E.2d 684, explained and modified.)

2. For the purposes of determining the accrual date of R.C. 2305.11(A) in a legal malpractice action, the trial court must explore the particular facts of the action and make the following determinations: when the injured party became aware, or should have become aware, of the extent and seriousness of his or her alleged legal problem; whether the injured party was aware, or should have been aware, that the damage or injury alleged was related to a specific legal transaction or undertaking previously rendered him or her; and whether such damage or injury would put a reasonable person on notice of the need for further inquiry as to the cause of such damage or injury.

Plaintiffs-appellants, Omni-Food and Fashion, Inc. ("Omni-Food"), and Executive 200, Inc., are Ohio corporations owned principally by plaintiffs-appellants, Statford and Joan Mader. Appellee, Deborah A. Smith, is the Executrix of the Estate of Thomas L. Smith, who was an attorney at law practicing in Lima, Ohio.

On January 11, 1984, plaintiffs commenced the instant legal malpractice action against attorney Smith (hereinafter "defendant") in the court of common pleas. In their complaint, plaintiffs alleged that defendant was employed by them to do whatever was necessary to comply with laws respecting the registration of shares of stock in Omni-Food. Plaintiffs alleged that defendant had assured them that he had effected the registration of Omni-Food stock, but he had in reality failed to do so. The record indicates that the subsequent sale of 1,251 unregistered shares of stock with defendant's approval resulted in a class action suit brought by several certificate holders for $7.5 million in the Court of Common Pleas of Miami County. Plaintiffs further alleged that defendant had failed to defend such action by answer or otherwise, and that a default judgment was rendered against them in the full amount prayed for in the class action.

Plaintiffs also claimed that upon granting such default judgment, the court issued restraining orders and orders of attachment which resulted in the closing of plaintiffs' stores by the Allen County Sheriff. Plaintiffs further alleged that defendant did not file a Civ.R. 60(B) motion to vacate the default judgment but, rather, advised plaintiffs to file bankruptcy petitions in the federal bankruptcy court which they did on January 13, 1982. In their prayer for relief, plaintiffs claimed damages in the amount of $10 million as a result of the alleged legal malpractice of defendant.

Defendant answered the complaint, and on July 22, 1985, filed a motion for summary judgment alleging, inter alia, that plaintiffs' action was time-barred by the one-year statute of limitations set forth in R.C. 2305.11(A).

After due consideration, the trial court agreed with defendant and granted his motion for summary judgment based on the statute-of-limitations defense. In particular, the trial court found that plaintiffs discovered or should have discovered their injury resulting from the alleged malpractice at the latest, on January 12, 1982, when default judgment was rendered against them in the Court of Common Pleas of Miami County.

Upon appeal, the court of appeals affirmed, holding that the application of the discovery rule set forth in Skidmore & Hall v. Rottman (1983), 5 Ohio St.3d 210, 5 OBR 453, 450 N.E.2d 684, barred plaintiffs' action against defendant.

The appellate court, finding its decision to be in conflict with the decision of the Court of Appeals for Franklin County in Vail v. Townsend (1985), 29 Ohio App.3d 261, 29 OBR 324, 504 N.E.2d 1183, certified the record of the case to this court for review and final determination.

Cory, Leonard, Witter & Cheney, W.C. Leonard and James K. Leonard, Lima, for appellee.

Clark & Perdue Co., L.P.A., and Dale K. Perdue, Columbus, for appellants.

SWEENEY, Justice.

In Skidmore & Hall, supra, this court adopted the "discovery rule" for determining the accrual date for legal malpractice actions to the exclusion of any other standard. However, based on the logic, reasoning and fairness inherent in our recent pronouncement in Frysinger v. Leech (1987), 32 Ohio St.3d 38, 512 N.E.2d 337, which modified the accrual date of the statute of limitations set forth in R.C. 2305.11(A) for medical malpractice claims, this court is of the opinion that a similar modified rule should be established for claims sounding in legal malpractice.

R.C. 2305.11(A) states in relevant part: "[a]n action for * * * malpractice * * * shall be brought within one year after the cause thereof accrued * * *."

In Skidmore & Hall, supra, we patterned the "discovery rule" for legal malpractice actions after the "discovery rule" established for medical malpractice actions in Oliver v. Kaiser Community Health Found. (1983), 5 Ohio St.3d 111, 5 OBR 247, 449 N.E.2d 438. However, similar to the situation in Oliver, the alleged malpractice in Skidmore & Hall, supra, was not discovered until well after the attorney-client relationship had terminated. Thus, in Skidmore & Hall, we did not have occasion to explore the situation where the professional relationship continued after the client discovered the alleged malpractice injury. See Frysinger, supra, 32 Ohio St.3d at 41, 512 N.E.2d at 340.

Obviously, the facts sub judice present us with the same type of situation that was presented in Frysinger. Here, the professional relationship continued after the client discovered or should have discovered the malpractice injury.

Hence, we find that as was the case in Frysinger, supra, there are situations such as the instant one where the "termination rule" for legal malpractice actions enunciated in Keaton Co. v. Kolby (1971), 27 Ohio St.2d 234, 56 O.O.2d 139, 271 N.E.2d 772, and subsequently overruled in Skidmore & Hall, supra, should be considered where fundamental fairness compels the imposition of such a rule. The policy considerations and logic which led this court to modify the discovery rule and supplement it with the termination rule for medical malpractice actions in Frysinger, supra, should and must apply with the same force in legal malpractice actions.

In Frysinger, we reiterated the underpinnings of the termination rule as stated in Wyler v. Tripi (1971), 25 Ohio St.2d 164, 167-168, 54 O.O.2d 283, 285, 267 N.E.2d 419, 421:

" 'The justification for the termination rule is that it strengthens the physician-patient relationship. The patient may rely upon the doctor's ability until the relationship is terminated and the physician has the opportunity to...