Jones v. Westbrook, 379 P.3d 963

Background

Timothy Jones sold his corporation, Northern Heating, in 2004 and personally financed the $270,000 balance; attorney Randall Westbrook prepared the sale documents (stock purchase agreement, promissory note, security agreement, deed of trust). The security agreement secured the note with stock; the deed of trust secured the note with the buyer’s home. No recorded security interest was taken in the corporation’s physical assets (inventory/equipment).
The buyer, Grunwald, made partial and late payments from 2004 through February 2012; Jones learned of a missed payment in October 2005 but accepted forbearance and continued to receive payments.
The IRS recorded tax liens against Northern Heating in October and November 2011 and liquidated the business in early 2012; Jones first learned the corporation had tax liens in February 2012 and then learned there was no recorded security interest in the physical assets.
Jones sued Westbrook in December 2013 for legal malpractice and for violations of the Alaska Unfair Trade Practices and Consumer Protection Act (UTPA), also alleging Westbrook misrepresented his experience and failed to disclose lack of malpractice insurance.
The superior court held all claims time-barred, finding accrual (and inquiry notice) as early as July 13, 2004 and at the latest October 18, 2005. The Supreme Court of Alaska granted review.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
When did Jones’s legal malpractice claim accrue?	Accrual occurred when IRS liens extinguished Jones’s ability to obtain a senior security interest (late 2011); no appreciable injury before then.	Accrual occurred at signing (2004) or at inquiry notice when first missed payment was reported (Oct 18, 2005); statute of limitations therefore expired.	Malpractice claim accrued when IRS liens were recorded (Oct 31, 2011); suit filed Dec 2013 was timely under the 3-year statute.
When did Jones’s UTPA claims accrue under the two-year statute?	Accrual occurred when Jones suffered an ascertainable loss — i.e., when IRS liens prevented him from securing the assets (late 2011/Feb 2012 when he learned).	Accrual occurred earlier (2004/2005) because the allegedly defective security arrangement existed then and inquiry notice put Jones on guard.	Jones suffered no ascertainable loss until the IRS liens; limitations may be tolled by discovery rule and, absent proof of earlier inquiry notice, his UTPA claims filed Dec 2013 are within two years.
Did Jones have inquiry/constructive notice of injury earlier (e.g., Oct 2005) so statute should run?	No — the missed-payment notice did not create appreciable injury or compel inquiry that would reveal lack of a recorded security interest; Jones reasonably relied on continued payments.	Yes — missed payments should have prompted a prudent businessman to investigate and discover the lack of security, starting the limitations clock.	Court finds October 2005 did not produce appreciable injury; factual record insufficient to show Jones had inquiry notice of the IRS liens before Feb 2012, so discovery rule may toll the UTPA period.
Is the attorney’s failure to disclose lack of malpractice insurance a separate UTPA claim that accrued earlier?	That failure was not discoverable until Jones requested insurance information after learning of the liens; thus it accrued later.	The nondisclosure was contemporaneous with representation (2004) and thus time-barred.	Court declines to find accrual earlier; absence of written disclosure means Jones could reasonably assume coverage until he asked, so this claim is not necessarily time-barred.

Key Cases Cited

Austin v. Fulton Ins. Co., 444 P.2d 536 (Alaska 1968) (statute of limitations on torts begins when injury — invasion of legally protected interest — occurs)
Thomas v. Cleary, 768 P.2d 1090 (Alaska 1989) (no malpractice cause of action before plaintiff suffers actual tax liability or comparable injury)
Christianson v. Conrad-Houston Ins., 318 P.3d 390 (Alaska 2014) (damages — e.g., out-of-pocket payments — can trigger accrual)
Gefre v. Davis Wright Tremaine, LLP, 306 P.3d 1264 (Alaska 2013) (accrual date is a factual question and discovery rule governs when plaintiff reasonably should have known of facts supporting a claim)
Jarvill v. Porky’s Equip., Inc., 189 P.3d 335 (Alaska 2008) (discussing accrual and discovery rule principles)
Vossoughi v. Polaschek, 859 N.W.2d 643 (Iowa 2015) (similar holding that malpractice claim does not accrue until buyer default makes injury actual and nonspeculative)