Richard ANTONE, Respondent, v. Israel MIRVISS, Appellant.
No. A04-1367.
Supreme Court of Minnesota.
Aug. 17, 2006.
720 N.W.2d 331
Jeffrey A. Olson, PLLC, Julia A. O‘Brien, Edina, MN, for Respondent.
David F. Herr, Haley N. Schaffer, Maslon Edelman Borman & Brand, LLP, Minneapolis, MN, for MN Lawyers Mutual Ins. Co. Amicus Curiae.
Thomas J. Shroyer, Peter A. Koller, Moss & Barnett, P.A., Minneapolis, MN, for MN Society of Certified Public Accountants Amicus Curiae.
Mary C. Lauhead, St. Paul, MN, Michael Dittberner, Clugg, Linder & Dittberner & Edmiston, Ltd., Edina, MN, Donald L. Enockson, El-Ghazzawy Law Offices, Minneapolis, MN, for Family Law Section, MSBA Amicus Curiae.
OPINION
ANDERSON, PAUL H., Justice.
Richard Antone brought this legal malpractice action against his attorney, Israel Mirviss, alleging that Mirviss was negligent when he drafted an antenuptial agreement. Antone asserted that Mirviss failed to draft an agreement that protected
In December 1986, respondent Richard Antone hired appellant Israel Mirviss as his attorney to draft an antenuptial agreement. He did so in anticipation of his marriage to Debra Schmidt. At that time, Antone owned several rental properties and he wanted to protect any appreciation in value of those properties from claims Schmidt could assert as his spouse. Antone alleges that he asked Mirviss to draft the antenuptial agreement to protect any appreciation from such claims by Schmidt. Schmidt at first refused to sign the agreement prepared by Mirviss, but changed her mind the next day after consulting with her own attorney and making some revisions to the agreement. Although the first draft of the agreement may have protected Antone‘s interest in any marital appreciation to his premarital properties, the final draft did not.1 Antone alleges that Mirviss gave him only the signature page of the agreement and assured him that the agreement protected the marital appreciation of his premarital properties.2
Antone and Schmidt were married on December 21, 1986. In 1998, Antone petitioned for dissolution of the marriage. He stated in a deposition that when he petitioned for dissolution of the marriage, he discovered for the first time that the antenuptial agreement failed to protect his interest in the marital appreciation of his premarital properties. He also said he would not have married Schmidt if Mirviss had provided him with this information.
On November 9, 2000, the district court in the dissolution proceeding found that, although Antone‘s premarital properties appreciated in value during the marriage, the appreciation was attributable only to market forces, not marital efforts. Antone v. Antone, 645 N.W.2d 96, 99 (Minn.2002). As a result, the dissolution court awarded all of the marital appreciation to Antone as nonmarital property. Schmidt appealed, and the court of appeals affirmed. We then granted Schmidt‘s petition for review and on June 13, 2002, we reversed, holding that the district court erred by not apportioning the marital appreciation between Antone and Schmidt. Id. at 102-03. On January 3, 2003, the district court issued an amended dissolution judgment awarding Schmidt a portion of the marital appreciation of Antone‘s premarital property.
In September 2003, Antone commenced this legal malpractice action against Mirviss for negligence, breach of fiduciary duty, and breach of contract. As to dam-
Without specifying the procedural rule relied on, Mirviss filed a “motion to dismiss,” arguing that Antone‘s claims were “barred by the 6 year [legal malpractice] statute of limitations set out in
A divided court of appeals reversed, holding that the requisite damages for accrual of Antone‘s cause of action commenced when Antone “sustained the money damages that provide the object of his legal malpractice lawsuit.” Antone v. Mirviss, 694 N.W.2d 564, 571 (Minn.App.2005). The court also said Antone‘s loss was only “potential,” and that he had no actionable claim for malpractice “[u]ntil the contingencies of the appreciation in value, the dissolution, and the award of a portion of the appreciated value occurred.” Id. The dissent concluded that Antone was damaged when he married Schmidt because the antenuptial agreement immediately deprived him of an exclusive interest in his nonmarital assets. Id. at 572 (Dietzen, J., dissenting). We granted Mirviss‘s petition for review.
I.
In reviewing a grant of summary judgment,4 we determine whether there are any genuine issues of material fact and whether the district court erred in its application of the law. Wallin v. Letourneau, 534 N.W.2d 712, 715 (Minn.1995). There are no material facts at issue on this appeal. Thus we need only determine “whether the court erred in applying the law regarding the accrual of the cause of action and the running of the statute of limitations.” Weeks v. American Family Mut. Ins. Co., 580 N.W.2d 24, 26 (Minn.1998). This is a question of law that we review de novo. Id.
There are three types of accrual rules based on the damages element.5 The first rule is the traditional “occurrence” rule, which assumes that nominal damages occur, the cause of action accrues, and the statute of limitations begins to run, simultaneously with the performance of the negligent or wrongful act. See, e.g., Wilcox v. Executors of Plummer, 29 U.S. (4 Pet.) 172, 177, 7 L.Ed. 821 (1830); Greene v. Morgan, Theeler, Cogley & Petersen, 575 N.W.2d 457, 459 (S.D.1998). Under this rule, the statute of limitations begins to run as soon as the negligent act is committed even though there is no actual damage at that time. 575 N.W.2d at 459. Most jurisdictions have moved away from the occurrence rule. 3 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 22.10, at 303 (2006) (stating that, by requiring suit before actual damage has occurred, the occurrence rule “encourages speculative litigation that can involve the client, the attorney and the courts in wasteful economic behavior“). We likewise have rejected the occurrence rule. Dalton, 280 Minn. at 154, 158 N.W.2d at 585 (“[I]t is not the wrongful, i.e., negligent act, which gives rise to the claim. For there must be damage caused by it.“) (quoting Brush Beryllium Co. v. Meckley, 284 F.2d 797, 800 (6th Cir.1960)).
At the other end of the spectrum is the “discovery” rule, under which the cause of action accrues and the statute of limitations begins to run only when the plaintiff knows or should know of the injury. See, e.g., Mumford v. Staton, Whaley & Price, 254 Md. 697, 255 A.2d 359, 365 (1969); Zimmie v. Calfee, Halter & Griswold, 43 Ohio St.3d 54, 538 N.E.2d 398, 401 (1989). Some legal commentators have noted that a significant disadvantage of the discovery rule is that it provides “open-ended liability.” Mallen & Smith, supra, § 22.15, at 420. We have also rejected the discovery rule. Dalton, 280 Minn. at 153, 158 N.W.2d at 584 (“Under our statutes it has been determined that ignorance of a cause of action not involving continuing negligence or trespass, or fraud on the part of the defendant, does not toll the accrual of a cause of action.“).
Minnesota has taken the middle ground by adopting the “damage” rule of
II.
Mirviss focuses on this “some damage” rule and asserts that the court of appeals erred in focusing only on “the damage” for which Antone seeks recovery—the amount of the marital appreciation in Antone‘s premarital property that was awarded to Schmidt. Mirviss argues that under the damage rule, Antone‘s cause of action accrued and the statute of limitations began to run when any compensable damage occurred, even damage unrelated to the injury for which Antone ultimately seeks relief. Antone agrees that the standard is “some damage,” but asserts that this standard means the occurrence of “some damage supporting the relief sought.” He argues that because the relief he seeks is the portion of the marital appreciation of his premarital property that was awarded to Schmidt at the conclusion of their marriage dissolution proceeding, the statute of limitations did not accrue until the property award was actually made in 2003.
Our prior cases have not addressed the issue of what type of damages trigger accrual of the cause of action and the running of the statute of limitations. But our case law does support a broad interpretation of the concept of “some damage.” See, e.g., Noske v. Friedberg, 670 N.W.2d 740, 742 (Minn.2003) (“The showing a plaintiff must make in order to survive a motion to dismiss under
Where a greater injury remains uncertain, tolling is not appropriate if another injury is a consequence of the same alleged misconduct. An attempt to divide different damages resulting from one error into “separate” causes of action is illogical and antithetical to the purpose of a statute of limitations.
Mallen & Smith, supra, § 22.12, at 368.6 Accordingly, we conclude that the rule that is the most logical and consistent with our precedent is that a cause of action accrues, and the statute of limitations begins to run, on the occurrence of any compensable damage, whether specifically identified in the complaint or not.
We now turn to the issue of whether Antone suffered any compensable damage more than six years before the commencement of this action. Here, our decision in Herrmann v. McMenomy & Severson, 590 N.W.2d 641 (Minn.1999), is instructive. In 1986, the defendant law firm in Herrmann prepared an employee benefit pension plan and trust for the plaintiff clients, but allegedly did not advise the clients that the tax laws prohibited them from engaging in certain transactions with the plan. Id. at 642. When the clients engaged in these transactions in 1987, they immediately became liable for significant excise taxes and interest. In 1993, the clients first discovered that the transactions were prohibited and began to address the problem. Id.
Three years later, in 1996 and shortly after the Internal Revenue Service notified the clients of their tax liability and interest, they commenced a legal malpractice action against the law firm. Id. at 642-43. The clients alleged that the law firm was negligent in failing to advise them that the transactions were prohibited. The law firm argued that the action was barred because the client was damaged in 1987, and thus the statute of limitations began to run more than six years before the commencement of the action. We held that some damage occurred in 1987 when the client became “immediately liable” for the tax because at that point the client could have commenced an action for legal malpractice that would have survived a motion to dismiss for failure to state a claim. Id. at 643-44.
In Antone v. Antone, 645 N.W.2d at 103, we held that the appreciation of Antone‘s premarital property during his marriage was marital property. On remand the district court awarded Schmidt part of this appreciation. This appreciation is what Antone claims he paid Mirviss to protect and what Antone claims he lost because of Mirviss‘s negligence. When Antone was single, his rental property appreciation belonged solely to him. As soon as Antone was married, in the absence of an effective antenuptial agreement, the appreciation was no longer protected from Schmidt‘s claims and Antone lost the right to unilaterally change this consequence. See
When Antone entered his marriage with Schmidt, he passed a point of no return with respect to the laws of marital and nonmarital property and he did so without the legal shield he retained Mirviss to provide. See, e.g.,
The dissent argues that the seeds of some damage did not ripen until the dissolution of the marriage because Antone‘s risk of losing some part of the marital appreciation of his premarital property was not fixed or certain when the marriage was entered into. But we have held that the ability to ascertain the exact amount of damages is not dispositive with respect to the running of the statute of limitations. See generally Herrmann, 590 N.W.2d at 643 (stating that “[t]he running of the statute does not depend on the ability to ascertain the exact amount of damages.“) (emphasis added). Accordingly, the inability to calculate the precise damage at the time of marriage does not preclude the running of the statute of limitations from that point in time. At the time of his marriage, Antone lost the legal right to unfettered ownership in his premarital property. This loss was not a mere seed planted when Antone said “I do“; rather, it was a fully-matured briar patch.
The difficulties that would result from Antone‘s proposed rule are illustrated by the different positions taken by the dissent and the court of appeals as to when Antone‘s cause of action accrued. The court of appeals concluded that the cause of action accrued when Antone “sustained the money damages that provide the object of his legal malpractice lawsuit.” Mirviss, 694 N.W.2d at 571. The dissent concludes that the cause of action accrued either in 1998 when Antone incurred attorney fees defending against his liability or in 2000 when the first judgment and decree was issued awarding any appreciation in value solely to Antone. We conclude that such variations insert too much ambiguity into the law and in the end come very close to establishing a discovery rule which we previously rejected because it presented the potential for unintended, open-ended liability.
We conclude that Antone suffered some damage on December 21, 1986, when he and Schmidt entered into their marriage. Because December 21, 1986, was more than six years before the commencement of this action, the district court correctly determined that the statute of limitations bars Antone‘s action and requires entry of summary judgment in Mirviss‘s favor. Therefore, we hold that the court of appeals erred when it concluded that Antone did not suffer damage until the award of a portion of the appreciated value to Schmidt. The judgment of the court of appeals is reversed, and the case is remanded to the district court for further proceedings consistent with this opinion.
Reversed.
DISSENT
HANSON, Justice, (dissenting).
I agree with the majority‘s conclusion that a cause of action for legal malpractice accrues, and the statute of limitations begins to run, on the occurrence of some compensable damage, even damage not specifically alleged in the complaint. But I disagree with the conclusion that Antone suffered some compensable damage when he married, more than six years prior to the commencement of this action. Instead, I would follow Minnesota‘s established rule that, where liability is contingent on a future event that is not certain to occur, no compensable damage occurs unless and until that future event occurs. Because any liability that Antone might have incurred to Schmidt by reason of their marriage was contingent, Antone could not have suffered any compensable damage until the contingency occurred; that is, when Antone filed for marital dissolution and either (1) the antenuptial
I agree that our decision in Herrmann v. McMenomy & Severson, 590 N.W.2d 641 (Minn.1999), is instructive, but I take completely different lessons from it than those extracted by the majority. In Herrmann the facts presented four discrete events: (1) the negligent performance of legal services and the payment of legal fees for those services in 1986; (2) the creation of tax liability by engaging in prohibited transactions in 1987; (3) the expenditure of funds to attempt to remedy the problem in 1993; and (4) the IRS assessment of the tax liability in 1996. We did not regard the performance of legal services or the payment of legal fees for those services in 1986 as causing the malpractice claim to accrue, presumably because those acts would only be relevant to an occurrence rule, which we had already rejected. Instead, we held that “some damage” occurred in 1987 when the clients became “immediately liable” for the tax. Id. at 643-44. We concluded that at that time the clients could have commenced an action for attorney malpractice that would have survived a motion to dismiss for failure to state a claim. Id. We did not separate the damages that the clients suffered in 1987 from that suffered in 1993 or 1996 or allow the claim to proceed for those later damages.
Accordingly, I take this general guidance from Herrmann: (1) because Minnesota does not follow the occurrence rule of accrual, the negligent performance of legal services and the essentially simultaneous payment of legal fees for those services are not sufficient for a cause of action to accrue; (2) the “some damage” rule of accrual looks to the first occurrence of any compensable damages sufficient to allow the plaintiff to survive a motion to dismiss; (3) the “some damage” rule does not focus only on the damages alleged in the complaint; and (4) to the extent that the client‘s claim is for indemnity for a liability incurred by the client as a result of the attorney‘s negligent advice or performance, some damage only occurs when that liability becomes “immediate,” which I take to mean fixed and certain.
These general principles lead me to reject the majority‘s damage arguments. Also, I would reject the additional damage arguments made by Mirviss but not addressed by the majority. The majority concludes that Antone suffered some compensable damage on December 21, 1986, more than six years prior to the commencement of this action, when he and Schmidt married, because Antone “was no longer protected from Schmidt‘s claims and Antone lost the right to unilaterally change this consequence.” Mirviss suggests that two other events that occurred more than six years prior to the commencement of this action caused some compensable damage: when Antone‘s legal status changed from single to married when he married Schmidt in reliance on Mirviss’ representations; and Antone‘s payment of legal fees to Mirviss.
1. Lost legal rights associated with marriage
It is true, as the majority asserts, that at the time Antone married, the antenuptial agreement became effective, in the sense that Antone lost the right to unilat-
We have long recognized that where liability is contingent on the occurrence of an uncertain future event, the action is not sufficiently ripe to present a justifiable controversy and the statute of limitations does not accrue until the occurrence of that contingency. Bachertz v. Hayes-Lucas Lumber Co., 201 Minn. 171, 176, 275 N.W. 694, 697 (Minn.1937); accord Rayne State Bank & Trust Co. v. Nat‘l Union Fire Ins. Co., 483 So.2d 987, 995-96 (La.1986); Poole v. Lowe, 615 A.2d 589, 593 (D.C.1992). Two modern cases from this court illustrate this point.
In Grothe v. Shaffer, 305 Minn. 17, 23-24, 232 N.W.2d 227, 232 (1975), this court held that a claim for contribution by a joint tortfeasor “does not accrue or mature until the person entitled to the contribution has sustained damage by paying more than his fair share of the joint obligation.” The resolution of the underlying tort action is a condition precedent to the transformation of a contingent liability to a fixed one. Without a fixed liability, there can be no damage that would trigger the commencement of the statute of limitations on a contribution claim by a joint tortfeasor. Id.
Similarly, in Oanes v. Allstate Ins. Co., 617 N.W.2d 401, 404 (Minn.2000), we were asked to determine when the statute of limitations commences against an insurer for recovery of underinsured motorist benefits. We previously held that an underinsured motorist claim is not ripe until the motorist‘s contingent liability is fixed by the resolution in the underlying tort action against the motorist. Employers Mut. Cos. v. Nordstrom, 495 N.W.2d 855, 857 (Minn.1993). In Oanes we concluded that the injured motorist is not “damaged” for purposes of an underinsured motorist lawsuit until his liability is fixed in the underlying tort action. Oanes, 617 N.W.2d at 407.
The damages suffered by the plaintiffs in Oanes and Grothe were entirely contingent on the occurrence of uncertain events; the establishment of fixed liability by the resolution of the underlying tort actions. Oanes, 617 N.W.2d at 402-03, Grothe, 305 Minn. at 18-19, 232 N.W.2d at 229. Similarly, Antone‘s liability to Schmidt for a part of the marital appreciation of his premarital property was entirely contingent on the dissolution of his marriage, an event that was not certain to occur. During the marriage the alleged defect in the antenuptial agreement did not give Schmidt any greater or different rights to a portion of the marital appreciation of Antone‘s property than she would have had if the defect in the agreement did not exist. The key point is this: If Antone had sued
I recognize that the existence of some damage does not depend, under Herrmann, on the ability to calculate the exact amount of damages. Herrmann, 590 N.W.2d at 643. But this principle has no application here because Antone‘s liability did not become fixed until within six years from the commencement of the action. In other words, where liability is contingent, neither the fact of liability nor the amount of damage can be determined until the contingency occurs. It is the inability to determine the fact of liability, not the inability to determine the amount of damages that precludes the accrual of a cause of action under the some damage rule.
Mirviss relies on an unpublished court of appeals decision to support his view that Antone was damaged when the antenuptial agreement became irrevocable on his marriage. In Harmeyer v. Gustafson, No. C8-00-1191, 2001 WL 122141 (Minn.App. Feb. 5, 2001), the court of appeals held the cause of action for attorney malpractice accrued when the client signed an irrevocable trust agreement that he claimed was negligently drawn by his attorney. But Harmeyer can be distinguished on two grounds. First, the trust was immediately funded and thus the client immediately lost an interest in the trust funds when they were made subject to the trust. Second, although the client‘s future loss of the intended tax benefits from the trust was contingent, it was contingent only on his death. Thus, while Antone‘s future loss was contingent on a marital dissolution that was not certain to occur, Harmeyer‘s future loss was contingent on a death that was certain to occur.
2. Marriage in reliance
Mirviss argues that Antone suffered damage as soon as he was married because Antone acknowledged in his deposition that he would not have agreed to marry had he known that the martial appreciation of his premarital property was not protected. He argues that a marriage can constitute damages because as soon as Antone married he (1) lost “the legal right to claim an unfettered ownership interest in his non-marital assets;” (2) was subjected to a presumption that everything he gained thereafter became marital property, see
Like the risk of losing the marital appreciation of Antone‘s premarital properties, all of these potentially negative consequences of marriage were contingent on the occurrence of future events that were not certain to occur. The first two were contingent on a marital dissolution. The second two were contingent on Antone‘s attempting unilaterally to convey his homestead or on Schmidt defaulting on household or family medical debts during the marriage, neither of which was shown to have occurred.
Further, to conclude that the disadvantages of marriage outweigh the benefits so as to cause compensable damages would run contrary to public policy. It would also inject subjectivity into Minnesota‘s
3. Payment of attorneys fees to Mirviss
Finally, Mirviss argues that Antone suffered some damage as soon as he paid Mirviss’ fees for preparing an antenuptial agreement. It is not clear in our law whether a client in an attorney malpractice action can state a claim for a refund of attorney fees paid. I note that one legal malpractice treatise, in listing direct and consequential damages recoverable in an attorney malpractice action, does not include recovery of the fees paid to the defendant attorney. 3 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice, § 20.1-20.16, at 1-56 (2006). More typically, the fees of the malpractice defendant are viewed as an offset to the other damages for which the professional may be liable. See, e.g., Moores v. Greenberg, 834 F.2d 1105 (1st Cir.1987); Saffer v. Willoughby, 143 N.J. 256, 670 A.2d 527 (1996). In other words, an attorney may be able to recover fees even though there was some malpractice. This would suggest that the client would not be able to seek a refund of the fees as a compensable damage in the malpractice action.
In Minnesota, we have approached this issue under the concept of forfeiture. Thus, in Perl v. St. Paul Fire & Marine Ins. Co., 345 N.W.2d 209 (Minn.1984), we observed that generally an attorney does not forfeit his or her right to compensation for mere negligence, but only for a breach of a fiduciary duty. Id. at 212. And, as to forfeiture for breach of a fiduciary duty, we recognized that it was not dependent on any actual loss to the client, but was awarded as “nominal damages” because the client was “deemed injured” as a result of the breach of fiduciary duty. Id. Here, Antone only alleges negligence, not breach of fiduciary duty.
Of course, Mirviss’ argument also presents causation issues because Mirviss’ alleged malpractice did not cause Antone to pay his legal fees. And, as noted earlier, we find support in Herrmann for the conclusion that the payment of attorney fees for the services that are claimed to be defective does not trigger the accrual of the malpractice cause of action. Herrmann, 590 N.W.2d at 643-44. In Herrmann, the legal services were performed, and the professional fees were presumably paid, in 1986, but the client did not engage in a prohibited transaction, and thus did not incur liability as a result of the attorney‘s negligent advice, until 1987. Id. at 642. We determined that the cause of action did not accrue until 1987, when the client incurred a fixed and certain liability as a result of the attorney‘s advice.7
The occurrence rule was harsh to clients because it often would force the client to commence an action for an insignificant part of his potential loss, and then face the prospect that he may be precluded by res judicata from later pursuing a claim for the significant loss.8 As applied to the facts here, the occurrence rule would have required Antone to sue Mirviss for about $1,400 before December 22, 1992, (within 6 years from the date the antenuptial agreement was drawn and fees were paid), while he was still married, and any judgment for those fees may have precluded Antone from later suing Mirviss for the litigation costs incurred after 19989 or for indemnification of his liability for a portion of the marital appreciation of his premarital property, which only became fixed and certain when the marriage was dissolved in 2000.10
The occurrence rule also did not serve the interests of judicial economy because it required a client to sue while he is still married, bringing unhelpful stress to the marriage, and before the potentially significant damage has occurred. Because the payment of attorney fees for legal services is generally simultaneous with the performance of the services, the conclusion that the cause of action accrued on the payment of those fees would effectively reinstate the occurrence rule of accrual for attorney malpractice claims. I would reject that conclusion for the same reasons that we rejected the occurrence rule of accrual.
PAGE, Justice (dissenting).
I join in the dissent of Justice Hanson.
MEYER, Justice (dissenting).
I join in the dissent of Justice Hanson.