Reynolds v. Trout Jones Gledhill Fuhrman, P.A.

• Court: Idaho Supreme Court
• Writing for the Court: HORTON, Justice.
• Citation: Reynolds v. Trout Jones Gledhill Fuhrman, P.A., 293 P.3d 645, 154 Idaho 21 (Idaho 2013)
• Decision Date: 23 January 2013
• Docket Number: No. 38933.,38933.
• Parties: Justin S. REYNOLDS and S. Kristine Reynolds; and Sunrise Development, LLC, Plaintiffs–Appellants, v. TROUT JONES GLEDHILL FUHRMAN, P.A.; and David T. Krueck, individually and in his capacity as a member of the defendant law firm. Defendants–Respondents.

154 Idaho 21

293 P.3d 645

Justin S. REYNOLDS and S. Kristine Reynolds; and Sunrise Development, LLC, Plaintiffs–Appellants,

v.TROUT JONES GLEDHILL FUHRMAN, P.A.; and David T. Krueck, individually and in his capacity as a member of the defendant law firm. Defendants–Respondents.

No. 38933.

Supreme Court of Idaho. Boise, December 2012 Term.

Jan. 23, 2013.

Lojek Law Offices, Chtd., Boise, for appellants. Donald W. Lojek argued.

Hawley Troxell Ennis & Hawley, LLP, Boise, for respondents. Michelle R. Points argued.

HORTON, Justice.

Justin S. Reynolds, Kristine Reynolds, and their construction company, Sunrise Development, LLC (collectively, Reynolds) brought a malpractice action against their law firm, Trout Jones Gledhill Fuhrman, P.A., and its attorney-employee, David T. Krueck (collectively, Trout Jones). Reynolds alleged professional negligence in both the drafting of a real estate agreement between Reynolds and Quasar Development, LLC (Quasar), and in the subsequent handling of the litigation regarding that agreement. The district court granted summary judgment in favor of Trout Jones, holding that the two-year statute of limitations found in Idaho Code § 5–219(4) applied to bar the action and Reynolds timely appealed. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

In July of 2006, Reynolds and Quasar entered into a real estate agreement (Agreement) in which Reynolds agreed to purchase certain real property in Ada County, Idaho, commonly known as Dunham Place (the Property), from Quasar. David T. Krueck, a member of Trout Jones, represented Reynolds in the transaction. Pursuant to the Agreement, Reynolds deposited $60,000 as earnest money to be applied to the purchase price of the Property if the transaction closed under the terms of the Agreement.

The Agreement, at paragraph 7(a), provided that if Quasar did not record a final plat for the Property by July 31, 2007, Reynolds had the option to terminate the Agreement and "obtain a full refund of the Earnest Money without any further obligations under the terms of this Agreement." When that date passed without a plat being recorded, Trout Jones sent a letter to Quasar on behalf of Reynolds terminating the Agreement and demanding a refund of the $60,000. Quasar did not refund the earnest money. Trout Jones made several other unsuccessful attempts to obtain the refund and finally, on September 25, 2007, filed an action on behalf of Reynolds to recover the earnest money. Reynolds moved for summary judgment and the district court entered an order on that motion on March 11, 2008. In its order, the district court determined that paragraph 7(a) of the Agreement required Quasar to refund the entire $60,000 and granted Reynolds's motion regarding the amount. However, the court held that the Agreement only required payment within a reasonable time and that determination of a reasonable time for payment was a question of fact for the jury. Reynolds and Quasar eventually reached a settlement in which Quasar stipulated to a judgment in Reynolds's favor for $60,000. However, Quasar subsequently entered into bankruptcy proceedings and never repaid the earnest money.

Reynolds brought an action against Trout Jones for professional negligence on March 9, 2010. Trout Jones moved for summary judgment and the district court granted the motion from the bench on the ground that the statute of limitations found in Idaho Code § 5–219(4) barred the action. Reynolds moved for an altered or amended judgment, and a second hearing was held on April 25, 2011. The district court again ruled that the statute of limitations barred the action and an amended judgment against Reynolds was entered on May 27, 2011.

II. STANDARD OF REVIEW

This Court exercises de novo review of appeals from an order of summary judgment, "and this Court's standard of review is the same as the standard used by the trial court in ruling on a motion for summary judgment." Taylor v. McNichols, 149 Idaho 826, 832, 243 P.3d 642, 648 (2010) (quoting Curlee v. Kootenai Cnty. Fire & Rescue, 148 Idaho 391, 394, 224 P.3d 458, 461 (2008) ).

Under that standard, summary judgment is proper "if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." I.R.C.P. 56(c). "If there is no genuine issue of material fact, only a question of law remains, over which this Court exercises free review." Cristo Viene Pentecostal Church v. Paz, 144 Idaho 304, 307, 160 P.3d 743, 746 (2007).

The moving party has the burden of proving that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. Indian Springs LLC v. Indian Springs Land Inv., LLC, 147 Idaho 737, 746, 215 P.3d 457, 466 (2009) (citing Cafferty v. Dep't of Transp., Div. of Motor Vehicle Servs., 144 Idaho 324, 327, 160 P.3d 763, 766 (2007) ). "This Court liberally construes all disputed facts in favor of the non-moving party, and all reasonable inferences drawn from the record will be drawn in favor of the non-moving party." Id. (citing Cristo Viene, 144 Idaho at 307, 160 P.3d at 746). However, " I.R.C.P. 56(e) provides that the adverse party may not rest upon mere allegations in the pleadings, but must set forth by affidavit specific facts showing there is a genuine issue for trial." Curlee, 148 Idaho at 394–95, 224 P.3d at 461–62 (quoting Rhodehouse v. Stutts, 125 Idaho 208, 211, 868 P.2d 1224, 1227 (1994) ).

"The date for when a cause of action accrues may be a question of fact or law." C & G, Inc. v. Canyon Highway Dist. No. 4, 139 Idaho 140, 142, 75 P.3d 194, 196 (2003) (citing Jemmett v. McDonald, 136 Idaho 277, 279, 32 P.3d 669, 671 (2001) ). However, "[i]f no disputed issues of material fact exist, when a cause of action accrues is a question of law for determination by this Court." Id.

III. ANALYSIS

A. The statute of limitations bars Reynolds's claim for professional negligence.

Reynolds argues that the question of when damages accrue for purposes of a professional malpractice claim is a question of fact that should not have been decided on summary judgment. Alternatively, Reynolds contends that the earliest date that damages could have accrued is March 11, 2008, the date of the district court's decision in the underlying litigation, because at that time the litigation could still have been resolved in a way that would leave Reynolds undamaged. Thus, he argues, there was no objectively ascertainable damage at that point, only the risk of damage. Trout Jones replies that there are no disputed material facts and that the risk of damage is irrelevant because actual damage accrued when Quasar refused Reynolds's demand to refund the earnest money and when Reynolds incurred attorney fees in the effort to recover the refund.

"An action to recover damages for ‘professional malpractice’ must be commenced within two years after the cause of action has accrued." Stuard v. Jorgenson, 150 Idaho 701, 704, 249 P.3d 1156, 1159 (2011) (footnote omitted) (quoting Conway v. Sonntag, 141 Idaho 144, 146, 106 P.3d 470, 472 (2005) ); ( I.C. §§ 5–201, –219(4)). Idaho Code § 5–219 provides that "the cause of action shall be deemed to have accrued as of the time of the occurrence, act or omission complained of, and the limitation period shall not be extended by reason of any continuing consequences or damages resulting therefrom or any continuing professional or commercial relationship between the injured party and the alleged wrongdoer...." However, under our interpretation of section 5–219(4), a cause of action "cannot accrue until some damage has occurred." City of McCall v. Buxton, 146 Idaho 656, 659, 201 P.3d 629, 632 (2009) (citing Stephens v. Stearns, 106 Idaho 249, 254, 678 P.2d 41, 46 (1984) ).

The Buxton Court explained that the basis for this interpretation is the requirement that a plaintiff must prove damage to recover in a negligence action. Id. Consequently, "some damage is required because it would be nonsensical to hold that a cause of action is barred by the statute of limitations before that cause of action even accrues." Id. (quoting Lapham v. Stewart, 137 Idaho 582, 586, 51 P.3d 396, 400 (2002) ). Further, there must be objective proof of the damage. Id. at 660, 201 P.3d at 633 (quoting Chicoine v. Bignall, 122 Idaho 482, 487, 835 P.2d 1293, 1298 (1992) ). The determination of what constitutes both damage and objective proof must be decided "on the circumstances of each case." Id. at 662, 201 P.3d at 635 (quoting Bonz v. Sudweeks, 119 Idaho 539, 543, 808 P.2d 876, 880 (1991) ). Thus, for purposes of determining when the statute of limitations begins to run, a professional negligence claim does not accrue until the claimant has suffered "some damage" that could be recovered in a malpractice action.

When evaluating the circumstances of a case to determine whether "some damage" has occurred, this Court differentiates between actual damage and the potential for damage. Conduct or action that merely creates the potential for harm, or increases the risk that the client will incur damage, does not satisfy the "some damage" requirement. Buxton, 146 Idaho at 659, 201 P.3d at 632. In that case, the client, on advice from counsel, terminated its contract with one vendor and withheld payment from another, which led to lawsuits against the client by both vendors. The Court held that "[t]he giving of legal advice often carries with it the risk of litigation," and thus there was no damage until and unless the litigation ended in an adverse outcome for the client. Id. at 662, 201 P.3d at 635. In another case, an attorney drafted an installment lease-purchase agreement for a client, but did not file a UCC–1 financing statement to secure the client's interest in the property. Parsons Packing, Inc. v. Masingill, 140 Idaho 480, 95 P.3d 631 (2004). When the buyer defaulted on the agreement and entered...