*1 Brownell BROWNELL v GARBER 12, 1992, August No. Docket 134602. Submitted at Detroit. Decided 3, 1993, May at 9:20 a.m. brought Wayne Donald C. an action the Circuit Court Garber, against attorney, alleging legal malprac- P. Arnold an tice, contract, arising breach of fraud of out the defen- representation plaintiff during dant’s his divorce. The plaintiff alleged defendant, despite knowing that the that he property desired a division of the marital that would result in equal despite with his tax shares wife after considerations and research, advice, billing for tax with conferences an ac- firm, counting property recommended a that ulti- mately unanticipated liability in an to resulted the property unequal. that caused the after-tax division the be summary disposition The defendant moved for on the basis that, counts, despite plaintiff’s the contract and fraud the solely malpractice action sounded and that the claim was limitations, plaintiff’s barred the statute of the brought years action two was more than after the last service discovery was rendered and more than months after the six court, malpractice. Dingeman, Jr., J., alleged Harry The J. granted summary defendant, disposition holding for the plaintiff’s complaint alleged only legal malpractice, that in the absence of affirmative act of concealment there could be bring no concealment that would into effect fraudulent special two-year period running of limitation from the date the discovered, cause of action is discovered or should have been and, accordigly, that the action barred was plaintiff appealed. statute of limitations. The Appeals The Court held: allege specifically 1. did not Because result, guaranteed particular the contract count nothing duty more than a breach of the defendant’s appropriate legal The did not exercise skill. trial court err in References 2d, 217, 220, Attorneys
Am Jur at Law §§ governs damage against attorney What statute of limitations malpractice. 2 ALR 4th 284. concluding dupli- contract count should be considered subject cative of the count and to the statute of applicable malpractice limitations actions. plaintiffs allegation 2. The that the defendant had claimed question had the tax and had consulted tax he researched *2 neither, experts, when in fact he had done is sufficient to necessary bring the fraudulent concealment into establish special two-year period effect the of limitation of MCL MSA 27A.5855 that runs from the date the cause of action is plain- discovered or should have been discovered. Because the allegations accepted any in tiffs must be as true the absence of challenge sufficiency, the in to the factual trial court erred remand, granting summary disposition for if the defendant. On proffered proofs fraudulently the establish that the defendant represented billed the for services not rendered and rendered, that those services had been then there was fraudu- malpractice concealment of the and com- lent the malpractice timely. prof- mencement of the action was If the did, fact, proofs fered demonstrate that the defendant re- question accounting search the tax and did consult the with firm, then there was no fraudulent concealment and the mal- practice by action was barred the statute of limitation. brought against attorney 3. An action for fraud can he an misrepresentation attorney where a material is made the knowledge falsity recklessly a client with of its without knowledge rely truth of its and with the intent that the client upon misrepresentation and act and the client acts misrepresentation injury. on the reliance and suffers Because plaintiffs pleadings alleged support facts in of each of the fraud, elements of an action for the trial court erred in dismiss- ing the fraud count. part, part, Affirmed in reversed in and remanded. Gribbs, J., dissenting, stated that of the trial decision plaintiffs pleading court should be affirmed because the set only legal malpractice statutory forth a claim of and the periods limitation had run the time the filed his complaint. Legal Malpractice — — 1. Limitation of Actions Contracts. Any damages action that seeks to recover for the failure of an advice, attorney competent to render no matter how denominated, sounds in rather than in contract subject malpractice, and is statute of limitations for attorney guaranteed specifically particular unless the had result. Opinion Court Malpractice Legal— — Fraudulent 2. Limitation of Actions Concealment. attorney rendered and An who bills a client for services not represents have been rendered to the client that such services fraudulently may concealed from the client a be found to have attorney’s malpractice bring of action for the such as will cause two-year period of limitation runs into effect have the date the cause of action is discovered or should from 27A.5855). (MCL 600.5855;MSA been discovered Malpractice. Attorney Legal — — 3. Fraud and Client brought against attorney indepen- may An action for fraud be any where the makes dent of misrepresentation knowing it to be false to the client material disregard truth with the intent that the reckless or with misrepresentation the client client act on the basis of thereby misrepresentation and suffers on the acts in reliance injury. Kalis), (by for the W. Kails Kenneth Maurer & plaintiff. (by Leavitt, P.C. of Sullivan Law Offices Robinson), for the *3 Paul E. Leavitt and
Martin J. defendant. Neff, P.J., Shepherd,
Before: and Gribbs JJ. legal malpractice J. This is Shepherd, right appeals from the as of Plaintiff
fraud case. opinion 12, 1990, and order court’s October trial granting summary disposi- motion for defendant’s ground of limitation tion on the had run. We part. part in in and reverse affirm proceedings in 1984. divorce initiated Plaintiff mid-1984, in of state moved out his counsel When prosecute the di- retained defendant alleges, tax ad- render and, vorce action prop- agreed plaintiff, According to the he vice. negotiated by erty agreed-to divi- that "the "assurances” defendant’s property represented sion of an after-tax '50-50’ split parties.” property of the Plaintiff fur- alleges: ther part of representation As Defendant’s of Plain- during tiff those proceedings, divorce Defendant $5,500.00 advice,
billed Plaintiff for tax research Moran, and conferences with & Plante a C.P.A. firm. incorrectly
Plaintiff claims that defendant ad- regarding consequences vised him tax of tak- ing pursuant property title to the settlement of realty by purchasing certain his wife’s interest. alleges: 21. Defendant Garber failed to advise Plaintiff payments that cash out her made to Mrs. to buy adjust share that asset would not Plain- tiff Brownell’s in that realty upwards, basis nor did he used to payments advise that such could not be gains capital reduce his income liabil- ity upon any future sale that realty. 1988, 22. In Plaintiff sold that in realty St. Clair. In connection with preparation of his income in early April, tax return vised Plaintiff was ad- his accountant paid that the funds Mrs. Brownell would not serve to his increase income tax basis in property, and that his liability $23,000.00 would thus be some higher than ex- pected. complaint damages The seeks in three counts: malpractice, contract, breach of and fraud. Plain- damages, $38,783 tiff seeks as itemized follows: a) $5,500.00 apparently unnecessary tax-re- fees; lated *4 b) $23,500.00 liabilities; in additional and c) in legal for $9781.00 fees nonexistent inade- quate legal representation. 523 judgment February The divorce was entered April June, It amended in 1986. is undisputed represent plain- that defendant did not noted, claims he tiff after June As consequences prop- first learned of the tax erty April 1989. This action was 13, 1989. commenced on November granted The trial court defendant’s motion 2.116(C)(7) summary disposition pursuant to MCR period ground the the of limitation had on plaintiff argues appeal, trial run. On ignored his claims for fraud and breach of court disregarded argument contract and his that defen- fraudulently action, of dant concealed the cause making subject two-year to the thus period running
of limitation from the date or should been cause of action is discovered have discovered. legal malpractice
Generally, must be action brought years of the date the within two serving plaintiff or within six discontinues have months after the discovers or should claim, is later. MCL whichever discovered 600.5805(4); 600.5838(2); 27A.5805(4); MSA MSA 27A.5838(2); Fitzgerald, Hodg- v MSA Seebacher King, PC, man, & Cawthorne (1989). However, the fraudu- 646; NW2d of the existence of a cause lent concealment bringing subject makes the of the action special two-year of MCL of limitation provides: 27A.5855, 600.5855; MSA which any claim person may If is or be liable for who the existence of the claim or fraudulently conceals person is for the identity any who liable knowledge person entitled from the claim claim, may be commenced on the the action sue person years after the who any time within *5 App 524 Mich 519 discovers, bring entitled the action to should discovered, have the claim existence of or the claim, person identity of the who is for the liable although would be barred otherwise of limitations. appeal, plaintiff In his brief on asserts that his complaint filed seven after was months his discov- ery of concealment. defendant’s fraudulent Complaint "concedes his was filed years per- more than [defendant] two after last legal [plaintiff] formed services for and more than [plaintiff] six months after of learned his addi- liability. [plaintiff’s] Complaint However, tional tax years discovery herein was filed within two his plaintiff’s of the added tax burden.” It is conten- tion MCL 27A.5855 MSA saves his malpractice claim.
i
plaintiff’s allegations
The trial court ruled that
authority
and,
sounded in
on the
Dilley,
App
Barnard
375;
v
134 Mich
350 NW2d
(1984), applied
appli-
887
the statute of limitations
malpractice,
to
cable
claims of
instead of the stat-
applicable
ute
to claims of breach of contract.
argues
appeal,
Defendant
on
he
below,
as
did
"special
type
he had a
contract” referred
Rudner,
in Stewart v
459;
349
84
Mich
NW2d
(1957).
case,
defendant,
In that
doctor,
a
ex-
pressly agreed
perform
a Caesarean section and
plaintiff’s
so,
then failed to do with the result that
vaginal
produced
delivery
a stillborn child. The
predicated
Court noted
action is
upon
requisite
the failure to
skill,
exercise the
upon
profes-
whereas a contract action is based
"
perform
special
sional’s
agreement.’
failure
'a
”
Id.
Opinion of the Court
does exist
Authority
holding
Bessman v
liable under
In
a contract
theory.
Weiss,
528, 531;
The complaint: ii of Opinion of the Court 27. Plaintiff contracted with Defendant to have him,
Defendant advise represent him in con- nection with Plaintiff’s pending then divorce ac- tion, for which agreed Plaintiff pay Defendant at the rate of $125/hr. agreed Defendant and contracted repre- sent position Plaintiff’s and to follow Plaintiff’s lawful instructions in the litigation. divorce 29. Defendant breached said contract utterly failing properly advise Plaintiff as to tax conse- quences proposed division of the marital estate, despite billing $5,500 for tax-re- lated services. In plaintiffs brief on appeal the contract is de- scribed as "a special agreement to render advice, and not just general retention of [defen- for representation in a divorce dispute.” dant] Elsewhere, plaintiff states that "what was specifi- cally promised” was that defendant would "render competent tax advice.” type
The
of interest
allegedly harmed
is the
point
focal
in determining which limitation period
Barnard,
controls.
supra at 378. Plaintiff’s contract
with defendant
legal
services was "one to
exercise appropriate
legal skill
in providing repre-
Id.;
sentation.”
see also Aldred v O’Hara-Bruce,
ii argues next the trial court errone- ously dismissed his claim on the basis it was barred by the statute of limitations. 527 Garber v Opinion of the Court agree. We Although summary disposition on this ground succeed, may eventually it was premature granted. when
The trial court rejected plaintiff’s claim that subject was to the period of limita- of statute, tion the fraudulent concealment MCL Seebacher, MSA 27A.5855. Citing supra, Ward, and Stroud v 1; 169 Mich 425 App NW2d (1988), 490 the trial court ruled that order for "[i]n fraudulent postpone concealment running period, a limitations the fraud must be manifested by some act misrepresentation; affirmative mere silence on the part the defendant is not The enough.” court then "plaintiff concluded that has not shown that defendant did anything conceal affirmatively of the discovery wrongdoing.” agree
We with the trial court overlooked exception to the "affirmative act” rule. As in Lumber Village, explained this Court Siegler, Inc v 685, 135 Mich App 694-695; 355 (1984): NW2d 654 rule, general
As a
for fraudulent concealment to
postpone
running
limitation,
the fraud must
be manifested
an affirmative act
misrepresentation.
exception
or
that there
An
rule
this
is an
duty
affirmative
to disclose where
parties
fiduciary
are in a
relationship.
[Cita-
tions omitted.]
Wittingen,
See also Carr v
275, 281;
App
Mich
(1990),
528 519 [May- Opinion op the Court length and those whose relationship is confidential or fiduciary”; suggesting also that higher stan- dard than the arm’s-length standard should be McNaughton v Rockford State applied doctors); to Bank, (1933) ("re- 265, 268; 246 84 NW gard must be had for the distinction between actions based on fraud or breach . of trust . . and those where such misconduct does not taint cause of latter, action. As to the mere silence on part of the defendant is not fraudulent con- action.”) cealment of the cause of There can be no doubt that an owes attorney Fassihi v fiduciary See, duties to a e.g., client. Sommers, Schwartz, Silver, PC, Schwartz & Tyler, 509, (1981). 515; NW2d
The legal malpractice cases cited by the trial Stroud, Seebacher court, simply recite the rule that fraudulent concealment must consist of affir- mative acts. These cases do not take note of the fiduciary relationship exception, and, to the extent they can be read that say no such exception exists, were they wrongly decided. With respect Stroud the failure to mention this exception in light understandable of the fact that such ex- Stroud, ception was dispositive not in that case. In this Court concluded that the suit was untimely it was not filed until March even though the plaintiff knew of the existence claim in September
In Seebacher, it appears that the defendants simply rendered erroneous tax advice. There was no allegation that they failed to research the tax consequences or that they either failed to disclose they had not done so or represented they had done so. In words, other there is no allegation in Seebacher were themselves the defendants aware of the existence of a cause of action. No fraudulent concealment can be said to occur where Garber v malpractice. is unaware of his It illogical attorneys would be to hold that who fail appreciate they have breached the stan- *9 duty dard of care have a to disclose such a breach notwithstanding ignorance their thereof. See (3d ed), Legal Malpractice Smith, Mallen & p § 18.13, 126. any plaintiff alleges event, case,
In
in this
more
deciding
than mere silence. In
mary
a motion for sum-
disposition
2.116(C)(7),
under MCR
a court
accept
plaintiffs well-pleaded allega-
must
all the
favorably
tions as true and construe them most
to
plaintiff.
Dep’t
Corrections,
Wade v
(1992).
158, 162-163;
Mich
1. The case which the is not fraudulently apparent concealed and is at the time two-year period case, In is committed. such a the malpractice begins run when the act of occurs. 27A.5805(4). 600.5805(4); MCL MSA malpractice
2. The case in which the act of is fraudulently concealed, not but the fact that the at the apparent act constitutes is not two-year case, time it occurs. In such a if the malpractice period already run, of limitation has plaintiff has six months from the date the claim is discovered or should have been discovered bring 600.5838(2); within which to an action. MCL 27A.5838(2). MSA
3. The case in which an act of fraudulently concealed. Under MCL years 27A.5855, MSA the date the claim is discovered or should have has two from bring been discovered within which to an action. Accordingly, type of we must determine what case is being alleged here. To the extent complaint alleges re- searched question but, the tax reasons un- known, concealed the true results of his research and consultation plaintiff, from plaintiff’s claim of legal malpractice is time-barred it falls into one of the first two situations.
However, plaintiff, in raising separate cause of fraud, action for pleads a bar to the defense that of limitation had run with respect his legal malpractice claim. On this fraudulent con- cealment theory, plaintiff’s allegations may be read to say that defendant failed to do any tax research, while representing that he question researched carefully, consulted with "income tax experts,” and came to the conclusion property would effectuate 50/50 split after tax considerations. Specifically, *10 the allegations of fraud are made in count m of plaintiff’s complaint: 34. represented Defendant to Plaintiff only not proposed
that for a "50-50” Judgment provided of Divorce split spousal assets, after-tax but that such a conclusion was arrived only Defendant consultation with after hours of tax research and experts.
income tax representations The aforesaid by Defendant were false when made. addition, In plaintiff alleges made similar representations by sending a bill included itemizations for tax research conferences with an accounting firm. Plaintiff’s complaint must be read as alleging that no consul- tation with accounting firm in fact took place. To the extent that plaintiff’s complaint alleges an act of malpractice that was fraudulently con- cealed, plaintiff’s legal malpractice claim is not time-barred because it falls within the third situa- tion outlined above. plaintiff prove
Therefore, if can that defendant fraudulently plaintiff billed for services not ren- that the services were ren- represented dered and jury
dered, then a could conclude that such action fraudulently plaintiff’s was intended to conceal cause of action for defendant’s in fail- ing aspects to research the tax of the divorce judgment failing experts and in to consult with tax claiming while If, however, have done so. proofs demonstrate that defendant did in fact question research the and consult with the ac- counting negligently firm, but rendered inaccurate advice, no fraudulent concealment within the meaning of MCL exists, MSA 27A.5855 600.5805(4); and the claim is barred MCL MSA 27A.5805(4) 600.5838(2); and MCL MSA 27A.5838(2) did not file his com- plaint discovery within six months of of the al- leged malpractice. point The essential is that statutory period order to be within the of limita- prove tion must that defendant fraudu- lently concealed the existence of the cause of by failing to disclose that he had either questions failed to research the tax or failed to accounting thereby firm, consult with the inten- tionally misleading plaintiff accepting into divorce settlement. concealment, In the absence of fraudulent complaint does viability plain- Thus, not survive. the continued legal malpractice tiff’s claim rises or falls on whether there was fraudulent concealment. required accept
Because we are all well- *11 pleaded allegations as true and to construe the allegations favorably plaintiff, most toward and challenged because defendant has not the factual sufficiency plaintiff’s regarding of claims fraudu- [May- concealment, the are reverse required
lent we malpractice trial the dismissing court’s order claim.
hi in argues next the trial court erred it as treating the claim or dismissing fraud plaintiff’s malpractice a restatement merely pe- malpractice claim the limitation applying and riod. agree. We Barnard, supra, support
The court trial cited "the of contract of its conclusion that breach malpractice only for legal fraud claims stated are barred the by and for reasons discussed above are Barnard, In this Court held statute of limitations.” against a client characterizes a claim where negligence duty as a claim and the attorney an supplied negligence element of claim is "the attorney-client relationship, existence of an malpractice tort is one claim for Barnard, supra only.” at 378-379.
Barnard did not address
However,
a
fraud claim.
Barnard stated that
noted,
inter-
type
as
"[t]he
point
est
harmed
focal
in deter-
allegedly
Id.
which limitation
controls.”
mining
test,
inter-
378.
this
we conclude
Applying
in a
out of
damages
arising
est
involved
claim
differs
from the
misrepresentation
a fraudulent
alleging
profes-
involved in a case
a
interest
of care.
applicable
sional breached
standard
malpractice.
fraud is distinct
from
See
Simply put,
supra,
Smith,
8.8,
p
Mallen &
§
it is
Fraud is no less actionable
commit-
ted
an
with whom
has
Id.
relationship.
attempts
If a client
attorney-client
to characterize
claim as
fraud
claim,
through
other
a court will
look
type
*12
533
placed
labels
on the claim and will make its
determination on the basis of the substance and
complaint alleges
However,
not the form.
when a
only malpractice
necessary
not
but also all the
gov-
fraud,
elements of
erning
the statute of limitations
apply
fraud actions will
to the fraud count
plaintiff may
and, if
barred,
such count is not
proceed
damages proxi-
on that court
to collect
mately
alleged
caused
fraud. See Central
Goldman,
Trust Co v
767;
AD2d
Defendant there is no factual port question claims. That is not brought solely before us. Defendant’s motion was 2.116(C)(7)(statute limitations), under MCR required *13 accept the trial court was thus pleaded allegations all well- supra. Nothing Wade, as true. opinion precludes testing in this from support allegations the factual of or of malpractice fraudulent concealment of the summary disposi- his fraud count in a motion for 2.116(C)(7) (C)(10). tion under both MCR Sum- mary disposition of the fraud and may yet appropriate plaintiff claims be if cannot plead genuine facts that raise a issue of material respect allegations fact with count and to his to the in his fraud subject claim that applicable to the statute of limitations where there has been fraudulent concealment of a cause of action.
Contrary dissenting opinion, to the this case proposition "every does not stand for the attorney legal who commits a . error . . and who services, bills his client for such will also be liable emphasis for fraudulent concealment.” For we prove wish to stress that if all can is that inadequate defendant’s research was consulting or that after accounting with the firm defendant advice, rendered bad this claim would be barred the statute of limitations. If defendant can show rely general knowledge that he did not on his tax law but conducted least some research and accounting firm, he did consult with plaintiffs claim does not survive. This is because J. by Gribbs, Dissent specific has that defendant made representations having about researched the tax questions consulting and about with accountants representations and that such fraudulent induced accept opinion him to the settlement. This should not be read to hold that the mere failure to do engage research or in consultations tolls or ex- period tends the of limitation. part part.
Affirmed in and reversed in Re- proceedings. manded for further We do not retain jurisdiction.
Neff, P.J., concurred. (dissenting). part
Gribbs, J. I dissent from that majority opinion of the that reverses the decision virtually of the trial court. The instant case is Fitzgerald, Hodgman, identical to Seebacher v King PC, 642; Cawthorne & (1989). NW2d 673 In both Seebacher and the in- provide case, stant general was retained to legal representation emphasis with an on plaintiff clearly case, tax advice. In each to file his failed complaint appli- before the legal malpractice cable statute of limitations for *14 plaintiff sought had run. In each to cir- case by alleging cumvent the statute of limitations notify the defendant failed to possible grounds of the malpractice, thus, fraudu- concealing lently the claim of justifying application special of the limitation period MSA 27A.5855. Further- MCL plaintiff alleged more, case, in each that there arrangement, special existed a over and above the general legal provide services, retention for services for advice. type Seebacher,
In this Court held that is the given harmed, of interest rather than label J. by Gribbs, Dissent claim, that determines what limitation con- trols. This Court concluded that the statute of legal malpractice applies legal limitations for to a malpractice action even when the action is denom- inated as one for breach of a contract to render competent legal affirming In services. the dismissal supra, p claims, Seebacher, this Court in 648, also held that "[i]n exist, order to the fraud must be manifested some affirmative act or misrepresentation. Mere silence of the defendant enough.” is not accepts position
If this Court advocated plaintiff, every attorney legal who commits a er- may malpractice, ror, which later be deemed who bills his services, client for such will also have against to defend claims of fraudulent conceal- ment immediately fraud, and common-law unless the possibility legal
discloses the malpractice occurred. agree
I with the trial court that all three counts legal malpractice. in this case sound in plead requisite specificity, failed to fraud with the give I opportu- and would decline to him another pursue nity the matter.
I would affirm the decision of the trial court.