FILED BY CLERK
IN THE COURT OF APPEALS OCT 18 2007
STATE OF ARIZONA
COURT OF APPEALS
DIVISION TWO DIVISION TWO
MARIA A. KEONJIAN, a single person, )
)
Plaintiff/Appellant, ) 2 CA-CV 2007-0047
) DEPARTMENT B
v. )
) OPINION
TIMOTHY A. OLCOTT, an Arizona )
professional corporation; TIMOTHY A. )
OLCOTT, a single person, )
)
Defendants/Appellees. )
)
APPEAL FROM THE SUPERIOR COURT OF PIMA COUNTY
Cause No. C-20055248
Honorable Deborah Bernini, Judge
AFFIRMED
Munger Chadwick, P.L.C.
By Mark E. Chadwick Tucson
Attorneys for Plaintiff/Appellant
Smith Law Group
By Christopher J. Smith and E. Hardy Smith Tucson
Attorneys for Defendants/Appellees
V Á S Q U E Z, Judge.
¶1 In this legal malpractice action, appellant Maria A. Keonjian appeals from the
trial court’s grant of summary judgment in favor of appellee Timothy A. Olcott. Keonjian
argues the trial court erred in ruling (1) that her claim was barred by the two-year statute of
limitations for tort actions, and (2) that she had no claim for breach of contract and was
therefore not entitled to the longer limitations period applicable to contract actions. For the
following reasons, we affirm.
Facts and Procedural Background
¶2 Although the pertinent facts of this case are largely undisputed, we view them
in the light most favorable to the party opposing the summary judgment motion below. Hill-
Shafer P’ship v. Chilson Family Trust, 165 Ariz. 469, 472, 799 P.2d 810, 813 (1990). In
August 2000, Keonjian and her daughter, Asya Almonte, signed a contract for the
construction of a house on real property located in Green Valley, Arizona. The contract
provided that the construction costs would be divided between them, with Keonjian paying
seventy-five percent and Almonte paying twenty-five percent. In December 2000, Olcott,
who had been Keonjian’s family lawyer since 1994, agreed to provide legal services in
connection with this project. At Keonjian’s request, Olcott drafted a deed dividing
ownership of the property according to each party’s contributions to the construction costs.
However, Almonte objected to the first draft of the deed, which gave a seventy-five percent
interest in the property to Keonjian and a twenty-five percent interest to Almonte and her
husband. Olcott prepared a second draft, which created a seventy-five percent joint tenancy
held by Keonjian and Almonte and a twenty-five percent joint tenancy held by Almonte and
2
her husband. Although Olcott advised Keonjian that there were no material differences
between the two drafts, the second draft effectively gave Almonte and her husband a 62.5
percent interest in the property and Keonjian a 37.5 percent interest. Based on Olcott’s
advice, Keonjian executed this second deed.
¶3 In February 2001, in the course of securing a loan to fund her capital
contribution to the project, Almonte asked Keonjian to sign a gift letter. The letter stated
that Keonjian had made a gift, valued at “over $300,000,” of an undivided 3/4 interest in the
property, to herself and Almonte as joint tenants with right of survivorship. Olcott advised
Keonjian to sign the gift letter, telling her it was an “internal” letter that could only be used
for loan purposes.
¶4 In July 2002, Keonjian learned that the deed she had executed had effectively
given Almonte a 62.5 percent interest in the property. Almonte refused to sign a revised
deed, and Keonjian sued Almonte and her husband seeking to “remedy all of the problems
created by the execution of the deed and the gift letter.” In October 2003, the parties
entered into a settlement agreement, which they amended the following month.
¶5 Keonjian filed the current action against Olcott on September 16, 2005. In
her complaint, Keonjian alleged that Olcott breached his fiduciary duty with respect to both
the preparation of the deed and his advice to Keonjian regarding the gift letter and breached
his contract to perform legal services. In his answer, Olcott asserted Keonjian’s claims were
barred by the statute of limitations. On November 8, 2006, both parties filed motions for
summary judgment based on the statute of limitations.
3
¶6 The trial court granted summary judgment in favor of Olcott, finding that
Keonjian’s claims arose from tort, not contract, and had accrued no later than July 2002,
when Keonjian sued Almonte. This timely appeal followed.
Standard of Review
¶7 We review a trial court’s grant of summary judgment de novo, remaining
“mindful that ‘the statute of limitations defense is not favored.’” CDT, Inc. v. Addison,
Roberts & Ludwig, C.P.A., P.C., 198 Ariz. 173, ¶ 5, 7 P.3d 979, 981 (App. 2000), quoting
Logerquist v. Danforth, 188 Ariz. 16, 22, 932 P.2d 281, 287 (App. 1996). Summary
judgment is appropriate if there is “no genuine issue as to any material fact and . . . the
moving party is entitled to judgment as a matter of law.” Ariz. R. Civ. P. 56(c).
Discussion
¶8 Keonjian argues the trial court erred on two substantive grounds in granting
summary judgment in favor of Olcott. First, she contends that her malpractice claims based
on negligence and breach of fiduciary duty did not accrue until the settlement of the lawsuit
with Almonte on October 1, 2003, and are thus not barred by the two-year limitations
period. Second, she argues she has a valid breach of contract claim against Olcott on which
she is entitled to the longer limitations period applicable to contract actions.
¶9 In Arizona, legal malpractice claims are generally governed by the statute of
limitations for tort claims in A.R.S. § 12-542, which provides that such claims must be
brought “within two years after the cause of action accrues.” See Kiley v. Jennings, Strouss
& Salmon, 187 Ariz. 136, 139, 927 P.2d 796, 799 (App. 1996). Arizona applies the
4
discovery rule to determine when a cause of action for legal malpractice accrues.
Commercial Union Ins. Co. v. Lewis & Roca, 183 Ariz. 250, 254, 902 P.2d 1354, 1358
(App. 1995). “[T]he discovery rule applies not only to the discovery of negligence, but also
to discovery of causation and damage.” Id. at 253, 902 P.2d at 1357. Thus, for legal
malpractice claims, the limitations period starts to run when the client has suffered harm and
knows or should have known that the harm was a direct result of the attorney’s negligence.
Id.
¶10 Keonjian cites Commercial Union for the proposition that the statute of
limitations does not begin to run until the harm is “impossible to remedy or retract.”
Drawing on this proposition, she argues her cause of action against Olcott did not accrue
until her claims against Almonte were exhausted, because until then the damages caused by
Olcott could be remedied by recovering damages against Almonte. Keonjian misinterprets
Commercial Union. The recovery of damages on her separate claim against Almonte has
no bearing on the issue of when her cause of action accrued against Olcott.
¶11 In Commercial Union, attorneys at a law firm had erroneously overlooked a
relevant case in advising a client about an insurance coverage issue. Id. at 252, 902 P.2d at
1356. However, a different attorney representing the client in subsequent litigation advised
that the case was distinguishable. Id. at 253, 902 P.2d at 1357. Until the court in that
litigation ruled against the client and found the overlooked case controlling, the client had
not suffered damages even though the negligence had occurred some years before. Id. at
256-57, 902 P.2d at 1360-61. As the court noted in Commercial Union, until that ruling,
5
“[t]he coverage issue was an open question.” Id. at 257, 902 P.2d at 1361. Thus, it was in
this context that Commercial Union used “irremedia[b]l[e] or . . . irrevocable” to describe
the “actual and appreciable” harm a plaintiff must sustain before a cause of action for
professional negligence can accrue. Id. at 254, 902 P.2d at 1358 (citations omitted).
¶12 In the other two cases relied upon by Keonjian, Glaze v. Larsen, 207 Ariz. 26,
83 P.3d 26 (2004), and Amfac Distribution Corp. v. Miller, 138 Ariz. 152, 673 P.2d 792
(1983), the issue was when a cause of action accrues for legal malpractice that occurred in
the course of litigation. Glaze, 207 Ariz. 26, ¶ 14, 83 P.3d at 29; Amfac, 138 Ariz. at 153,
673 P.2d at 793. In such cases, “‘the injury or damaging effect’” of the negligence “‘is not
ascertainable until the appellate process is completed or is waived by a failure to appeal.’”
Id. ¶ 15, quoting Amfac, 138 Ariz. at 154, 673 P.2d at 794. These cases are distinguishable
from the present case, because Olcott’s alleged malpractice did not occur during the course
of litigation and any harm or damage to Keonjian was immediate and ascertainable. Here,
unlike Amfac and Glaze, there was no prospect that the “[a]pparent damage may vanish with
successful prosecution of an appeal and ultimate vindication of the attorney’s conduct by
an appellate court.” Amfac Distrib. Corp. v. Miller, 138 Ariz. 155, 156, 673 P.2d 795, 796
(App. 1983), supplemented by Amfac, 138 Ariz. 152, 673 P.2d 792.
¶13 In the majority of malpractice cases, “the damage or injury occurs
contemporaneously with the malpractice.” Commercial Union, 183 Ariz. at 256, 902 P.2d
at 1360. Keonjian’s is just such a case. Any harm arising from the drafting of the deed
occurred at the moment she executed it, because it diminished her interest in the property
6
to less than the undivided seventy-five percent she had intended. And any harm she suffered
from advice relating to the gift letter arose when she signed it, depriving herself of any right
to reimbursement for “over $300,000,” which the letter characterized as a gift. Thus, if the
facts are as Keonjian alleges, the harm was irremediable or irrevocable at those two points
in time because “a future appeal or other court proceedings” would not have enabled her to
“avoid[]” such harm. Glaze, 207 Ariz. 26, n.1, 83 P.3d at 30 n.1. This is the case
“notwithstanding that [her] damages may not have been fully ascertainable at that time.”
Id.
¶14 The “controlling issue” is when Keonjian “became aware or should have been
aware of the cause of [her] harm.” Commercial Union, 183 Ariz. at 256, 902 P.2d at 1360.
Keonjian was aware she had been harmed certainly no later than July 2002, when she sued
Almonte and her husband. Keonjian’s complaint in that action sought damages specifically
for alleged misrepresentation with regard to both the deed and the gift letter. But Keonjian
contends “the ‘who’ part of the inquiry was not known on July 2002 because the damages
were asserted against the Almontes on that date.”
¶15 We need not speculate about whether Keonjian knew or should have known
that Olcott was a cause of her harm in July 2002, because her actual knowledge was evident
at her deposition on February 20, 2003:
My lawyer is supposed to tell me: Stop, it’s not what you want
to be done. But I thought he knew better. He’s a lawyer. Who
am I to know what I am signing? I am not—I am a layman.
....
7
I was paying for the lawyer’s bills and everything and he
hasn’t done the things right. . . . I don’t think he’s very
competent by now.
And she stated in this further exchange:
Q. Ms. Keonjian, are you aware, if you didn’t think the
lawyer did his job, you have the right to sue the lawyer
for malpractice?
A. Yes, I probably will. You have no idea how many
people are complaining about him.
¶16 These statements show Keonjian was aware that any harm she sustained was
a direct result of Olcott’s alleged negligence. And regardless of whether they demonstrate
Keonjian’s knowledge at the time she sued Almonte in July 2002, they certainly establish
her knowledge at her deposition on February 20, 2003—over two and one-half years before
she sued Olcott. The trial court, therefore, did not abuse its discretion in finding Keonjian’s
cause of action had accrued over two years before she had filed her negligence action against
Olcott. That action, filed on September 16, 2005, was thus barred by the two-year statute
of limitations, § 12-542, and summary judgment was appropriate.
¶17 We next consider Keonjian’s argument that she has a claim against Olcott in
contract that is not barred by the two-year limitations period for tort claims. But, as we have
already noted, claims for professional malpractice are generally tort claims. See Glaze, 207
Ariz. 26, ¶ 9, 83 P.3d at 28; Kiley, 187 Ariz. at 139, 927 P.2d at 799. “Only if there is a
specific promise contained in the contract can the action sound in contract, and then only
to the extent the claim is premised on the nonperformance of that promise.” Collins v.
8
Miller & Miller, Ltd., 189 Ariz. 387, 395, 943 P.2d 747, 755 (App. 1996).1 The key word
is “nonperformance,” and the distinction to be drawn is that between nonfeasance and
malfeasance. The fact that an attorney may have carried out a task “in a negligent manner,
in violation of the duty imposed on him by law to represent his client in accordance with the
applicable standard of care, does not change the gravamen of the action from tort to
contract.” Id.
¶18 Keonjian argues the facts of this case are similar to Towns v. Frey, 149 Ariz.
599, 721 P.2d 147 (App. 1986). In that case, the court permitted a malpractice claim based
on breach of contract where a lawyer had failed to negotiate a settlement or file a lawsuit
within the applicable statute of limitations, pursuant to an oral agreement. Id. at 601, 721
P.2d at 149. Here, there is no evidence of similar nonperformance by Olcott. On the
contrary, Olcott prepared a deed and gave legal advice concerning the gift letter. Keonjian
attempts in her opening brief to create an issue of nonperformance by too narrowly
circumscribing Olcott’s duties: “to draft a deed that reflected her wishes and capital
contributions and . . . to advise her as to the significance and potential effect of the Gift
Letter.” However, the fact that Olcott did perform is not disputed; regardless of how
Keonjian attempts to frame it, the essence of her claim is that Olcott performed negligently,
1
We note the court in Collins also declined to hold that “a failure to follow a client’s
instructions, issued subsequent to and separate from a creation of the retainer contract,
constitutes a breach of that contract.” 189 Ariz. at 395-96, 943 P.2d at 755-56. Viewing
the facts in the light most favorable to the party opposing the motion below, however, we
assume that each of the services in question in this case was governed by a separate oral
contract, as Keonjian contends, rather than by a retainer agreement, as argued by Olcott.
9
not that he failed to perform at all. Thus, the underlying facts do not entail the
nonperformance of a specific promise necessary to a breach of contract claim. See id. at
601, 721 P.2d at 149.2 We therefore conclude the trial court did not err in finding that
Keonjian has no claim for breach of contract.
Disposition
¶19 For the reasons stated above, we affirm the summary judgment.
____________________________________
GARYE L. VÁSQUEZ, Judge
CONCURRING:
____________________________________
PETER J. ECKERSTROM, Presiding Judge
____________________________________
PHILIP G. ESPINOSA, Judge
2
In malpractice cases based on written agreements, we have similarly required
nonperformance of an express undertaking, not merely negligent performance, for a cause
of action to lie in contract. Beane v. Tucson Med. Ctr., 13 Ariz. App. 436, 438, 477 P.2d
555, 557 (1970). Other jurisdictions make a similar distinction. See Benard v. Walkup, 77
Cal. Rptr. 544, 603-04 (1969) (finding failure to file lawsuit within statute of limitations
period a breach of contract); Hill v. Williams, 813 A.2d 130, 660-62 (2003) (finding refusal
to file motions and schedule hearings a breach of contract); see also Long v. Buckley, 129
Ariz. 141, 146, 629 P.2d 557, 562 (App. 1981) (finding statute of limitations for breach of
written contract did not apply where breach not related to express terms of contract).
10