Wall v. Lewis

• Decision Date: 30 September 1986
• Docket Number: Nos. 11162,11163,s. 11162
• Citation: 393 N.W.2d 758
• Parties: Wendell WALL and Marian Wall, Plaintiffs and Appellants, v. Bayard LEWIS and Lewis Law Office, P.C., Defendants and Appellees. Glen WILTSE and Helen Wiltse, Plaintiffs and Appellants, v. Bayard LEWIS and Lewis Law Office, P.C., Defendants and Appellees. Civ.
• Court: North Dakota Supreme Court

Page 758

393 N.W.2d 758

Wendell WALL and Marian Wall, Plaintiffs and Appellants, v. Bayard LEWIS and Lewis Law Office, P.C., Defendants and Appellees.

Glen WILTSE and Helen Wiltse, Plaintiffs and Appellants, v. Bayard LEWIS and Lewis Law Office, P.C., Defendants and Appellees.

Civ. Nos. 11162, 11163.

Supreme Court of North Dakota.

Sept. 30, 1986.

Miller, Norman, Kenney & Williams, Moorhead, Minn., for plaintiffs and appellants; argued by Keith L. Miller, Moorhead, Minn.

Nilles, Hansen & Davies, Fargo, for defendants and appellees; argued by Leo F.J. Wilking, III, Fargo.

MESCHKE, Justice.

The plaintiffs [hereinafter "Doctors"] sued Bayard Lewis and Lewis Law Office, P.C. ["Lewis"] for malpractice. The district court concluded that the applicable statute of limitations had expired and entered summary judgment dismissing the Doctors' actions. The Doctors appeal, and we remand for further proceedings consistent with this opinion.

Between 1969 and 1971, Lewis prepared trust agreements which were intended to shield medical partnership income from taxation. The Internal Revenue Service [IRS] audited the partnership's returns for the years 1972 and 1973, and in 1977 issued deficiency notices to the Doctors. After the Doctors received the deficiency notices their accountant, Gary Valeske, consulted a tax attorney, Douglas Christensen. The Doctors and Valeske met with Christensen, who reviewed with them the various options available to the Doctors. One of the options discussed was a malpractice action against Lewis for his preparation of the trust agreements.

After consulting with Christensen, the Doctors again sought Lewis's advice. He maintained that the trusts were properly drafted and advised the Doctors to sue in federal court to have the IRS assessments overturned. Lewis agreed to represent the Doctors and agreed to waive his fee for doing so if the assessments were not overturned.

On January 1, 1979, Lewis took office as a county judge. On July 2, 1979, Lewis contacted attorney Gerald Rufer and arranged to have Rufer sue the IRS in federal district court on behalf of the Doctors. Lewis agreed to pay Rufer's fees. Rufer brought an action in federal district court seeking to overturn the tax assessments. Although Lewis had a few contacts with the Doctors about the matter after July 2, 1979, Lewis apparently had virtually no contacts with Rufer thereafter. It was Rufer who handled the suit for the Doctors. The suit was finally decided in favor of the IRS on December 9, 1981.

On September 9, 1983, the Doctors commenced separate malpractice actions against Lewis which were subsequently consolidated by stipulation. On July 2, 1984, the district court entered an order striking Lewis's statute of limitations defense. The district court's order was reversed in Wall v. Lewis, 366 N.W.2d 471 (N.D.1985).

Lewis subsequently moved for summary judgment. The trial court held that the Doctors should have discovered the injury, its cause, and Lewis's possible negligence by September 1977, and that Lewis's representation of the Doctors ceased on January 1, 1979, when Lewis took judicial office. Thus, taking into account both the discovery rule and the continuous representation rule, the court concluded that the two-year malpractice statute of limitations had already expired when the Doctors sued Lewis in September 1983. The court entered summary judgment dismissing the Doctors' claims, and they appeal. ¹

Issues raised on appeal are:

I. Did the Doctors discover their injury, its cause, and Lewis's possible negligence more than two years before their action was commenced?

II. Did Lewis fraudulently conceal his malpractice?

III. Did Lewis's representation of the Doctors cease on January 1, 1979, as a matter of law?

I. DISCOVERY

The Doctors contend that the trial court erred in concluding that they had discovered, or should have discovered, their injury, its cause, and Lewis's possible negligence more than two years before the action was commenced.

In an action brought against an attorney for malpractice, the two-year statute of limitations in Section 28-01-18(3), N.D.C.C., applies. Wall v. Lewis, supra, 366 N.W.2d at 473; Johnson v. Haugland, 303 N.W.2d 533, 538-539 (N.D.1981). The statute commences to run when the plaintiff knows, or with reasonable diligence should know, of (1) the injury, (2) its cause, and (3) the defendant's possible negligence. Wall v. Lewis, supra, 366 N.W.2d at 473; Phillips Fur & Wool Co. v. Bailey, 340 N.W.2d 448, 449 (N.D.1983).

In the first appeal, we were presented with a question of when the Doctors had incurred damage. We held that the Doctors had incurred damage "at least by September 29, 1977, the date that the IRS issued its tax deficiency notices." Wall v. Lewis, supra, 366 N.W.2d at 474. We further stated:

"The Doctors assert that because Lewis continued to insist that the IRS position was incorrect and that he had properly drafted the trust agreements, they could not have discovered Lewis' negligence until the federal district court upheld the IRS position on December 9, 1981, and therefore, the statute of limitations did not commence to run until that date. When the Doctors should have discovered Lewis' possible negligence is a question of fact to be determined at a trial on the merits."

Subsequent to our decision on the first appeal, the depositions of Christensen, Valeske, Dr. Wall, and Dr. Wiltse were taken. It is undisputed from this testimony, and the Doctors now concede, that in October of 1977 Christensen suggested the possibility of a malpractice action against Lewis.

The Doctors contend, however, that there is a factual dispute as to whether they knew or should have known of Lewis's negligence prior to December 9, 1981, when their federal court action was dismissed. They argue that they did not follow Christensen's advice, but instead believed Lewis's assertion that the trusts were properly drafted and that the IRS assessments would be overturned in court. Thus, they contend that they did not know or have reason to know of Lewis's possible negligence until the assessments were upheld in federal district court.

The import of the Doctors' argument is that the statute of limitations should not begin to run on a malpractice claim until the plaintiff subjectively believes that he has suffered an injury caused by the defendant's negligence. The discovery rule envisions no such result. As enunciated in our prior cases, the rule contemplates that the statute of limitations begins to run when the plaintiff knows, or with reasonable diligence should know, of the injury, its cause, and the defendant's possible negligence.

The purpose of the discovery rule is to prevent the injustice of barring a claim before the plaintiff could reasonably be aware of its existence. See Anderson v. Shook, 333 N.W.2d 708, 712 (N.D.1983). Thus, the focus is upon whether the plaintiff has been apprised of facts which would place a reasonable person on notice that a potential claim exists. It is not necessary that the plaintiff be subjectively convinced that he has been injured and that the injury was caused by the defendant's negligence.

A malpractice plaintiff's knowledge is ordinarily a fact question which is inappropriate for summary judgment, e.g., Phillips Fur & Wool Co. v. Bailey, supra, 340 N.W.2d at 449, but the issue becomes one of law if the evidence is such that reasonable minds could draw but one conclusion. See Belgarde v. Rosenau, 388 N.W.2d 129, 130 (N.D.1986); see also Binstock v. Tschider, 374 N.W.2d 81, 84-85 (N.D.1985). The principle is stated in R. Mallen and V. Levit, Legal Malpractice Sec. 394 (2d ed. 1981):

"The issue of discovery can become an issue of law where the pleadings or a motion for summary judgment establish that the plaintiff had a general awareness of misconduct by the attorney which pre-existed the statutory period."

We caution that summary judgment will rarely be appropriate on the issue of discovery. We conclude, however, that here the undisputed facts establish that the plaintiffs were advised by an attorney that they had a potential malpractice claim, so that these plaintiffs as a matter of law "discovered" the injury, its cause, and the defendant's possible negligence as of that date. We refuse to broaden the discovery rule to allow these plaintiffs to claim that they did not "discover" their possible malpractice action against Lewis until some six years after they had been advised by another attorney to institute such a suit.

II. FRAUDULENT CONCEALMENT

The Doctors also contend that there is a material factual dispute as to whether Lewis's conduct was fraudulent concealment which tolled the statute of limitations. Reviewing the evidence regarding Lewis's conduct in the light most favorable to the Doctors, we find no inference of fraudulent concealment which could toll the statute of limitations. The Doctors' assertions on this issue are without merit.

III. CONTINUOUS REPRESENTATION

Although we hold that the Doctors discovered their potential malpractice action in October of 1977, we consider whether the two-year statute of limitations was tolled by Lewis's continued representation of the Doctors. The Doctors contend that the trial court erred in holding that, as a matter of law, Lewis's representation ceased on January 1, 1979, when he assumed his judicial office. They contend that the statute of limitations is tolled during the period that Lewis continued to represent them, and that issues of material fact regarding the duration of Lewis's representation remain unresolved.

The continuous representation rule has been adopted in some jurisdictions to toll the running of the statute of limitations for malpractice. We briefly acknowledged the rule in a prior case. See Binstock v. Tschider, supra, 374 N.W.2d at 85. We are now called upon to assess the rule's application in this state.

The continuous representation rule is an adaptation of the ...