No. 89-514
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
LEONARD and BONNIE BOLES,
Plaintiffs & Appellants,
RICHARD S. SIMONTON and McDONOUGH, COX
and SIMONTON, P.C., a Nontana Corporation,
Defendants & Respondents.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Russell K. Fillner, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Lloyd E. Hartford, Billings, Montana
.For Respondent:
Ira Eakin, Billings, Montana
Herbert I. Pierce 111, Billings, Montana
Kelly Jean Beard, Billings, Montana
Submitted on Briefs: February 9, 1990
Decided: April 25, 1990
Justice Fred J. Weber delivered the Opinion of the Court.
This appeal arises from an order by the District Court,
Thirteenth Judicial District, Yellowstone County, Montana, granting
summary judgment in favor of defendants. Plaintiff appeals. We
affirm.
The issues presented for our review are:
1. Whether the District Court erred in granting summary
judgment in favor of defendants by concluding that the cause of
action was time-barred.
2. Whether the District Court erred in granting summary
judgment in favor of defendants by concluding that defendants owed
no duty to the client in respect to certain alleged errors.
The Lers owned a service station and garage in a small town
in eastern Montana. In 1978 they began negotiations to sell this
business to Mr. and Ms. Boles. The parties agreed to a sale price
of $65,000, to be paid over a term of ten years pursuant to a
contract for deed. The parties agreed that an attorney should
draft the contract. Attorney Richard Simonton was retained for
this purpose. He testified by deposition that he represented both
parties. Each party paid half of the fees.
On September 22, 1978, the parties met in the offices of
Richard Simonton and signed the contract for deed. The contract
signed by the parties contained a default clause, which provided:
And in case of the failure of said Parties of the Second
Part to make either of the payments, or interest thereon
or any part thereof or perform any of the covenants on
their part hereby made and entered into, then at the
election of the First Parties, the whole of said payments
and interest provided for herein, shall become
immediately due and payable and this Contract shall at
the option of said First Parties be forfeited and
determined by giving to said Second Parties ninety (90)
days notice in writing of the intention of the First
Parties to cancel and determine this Contract, setting
forth in said notice the amount due on said Contract and
the time and place when and where payment can be made by
said Second Parties.
IT IS MUTUALLY UNDERSTOOD AND AGREED by and between the
Parties to this Contact that ninety (90) days is a
reasonable and sufficient notice to be given to said
Second Parties in case of failure to perform any of the
covenants on their part hereby made and entered into, and
shall be sufficient to cancel all obligations hereunto
on the part of the said First Parties and fully re-
invest them with all right, title and interest hereby
agreed to be conveyed, and the Parties of the Second Part
shall forfeit all payments made by them on this Contract
and any right, title and interest in all buildings,
fences or dther improvements whatsoever, and such
payments and improvements shall be retained by the said
Parties of the First Part, in full satisfaction and as
a reasonable rental for the property above described and
in liquidation of all damages by them sustained and they
shall have the right to re-enter and take possession of
the premises aforesaid. IT IS FURTHER AGREED that the
Parties of the First Part in addition to all remedies set
forth herein, shall have all other remedies available to
them at law and in equity.
The Boles began having difficulty making the monthly payment,
which was in the amount of $624. The Boles missed payments due on
the first day of December 1982, January 1983, and February 1983.
On February 10, 1983, Ms. Ler sent the Boles a "Notice of Intent
to Cancel and Debermine Contract." This notice stated that the
Boles had failed to make the payments due on January 1, 1983 and
February 1, 1983. It declared that the entire balance of
3
approximately $37,600 was accelerated and due within 90 days.
On April 25, 1983, the Boles filed a court action seeking to
enjoin Ms. Ler from accelerating the balance due under the
contract. The District Court granted summary judgment in favor of
Ms. Ler. That order was appealed to this Court and affirmed.
Boles v. Ler (1986), 222 Mont. 28, 719 P.2d 793. Ms. Ler
eventually repossessed the property.
In January 1986, the Boles filed suit against Mr. Richard
Simonton, alleging negligence in drafting the contract for deed.
They alleged the contract should have contained a I1saving clauseu
providing a grace period allowing the Boles ninety days to make up
any late monthly payments, prior to acceleration of the balance due
under the default clause. By deposition Mr. and Ms. Boles state
that the Lers agreed that Boles should have ninety days to make up
late payments. However, Ms. Ler states by deposition that she did
not remember any such agreement.
The complaint also alleged damage from Boles1 inability to
obtain a loan to pay the accelerated balance due because of an
error in the legal description of the property in the contract for
deed. In August 1986 the Boles amended the complaint to include
an allegation that Mr. Simonton failed to ensure that a preliminary
title report was obtained. The Boles amended their complaint a
second time, in September 1987, to include the law firm of
McDonough, Cox and Simonton.
The defendants made various motions to the District Court,
including a motion to dismiss because the statute of limitations
had run. These motions were supported with memorandum, depositions
and affidavits. The District Court, in considering matters outside
the pleadings, treated the motions as a motion for summary judgment
pursuant to Rule 12(b), M.R.Civ.P. The District Court concluded
that as to the alleged negligence in the drafting of the contract
for deed and the alleged omission of the saving clause, the
dispositive issue was when the cause of action for attorney
malpractice began to run. The court determined the cause of action
accrued when the contract was signed. The contract was signed in
September 1978, and the present action was not filed until January
of 1986, over seven years later. The court granted summary
judgment in favor of defendants, concluding that the suit was time-
barred. As to the issues involving the error in the legal
description of the property, and the preparation of a preliminary
title report, the court concluded that Mr. Simonton was only hired
to draft the contact for deed; thus he owed the Boles no duty in
respect to these alleged errors. The Boles urge that the District
Court erred in granting summary judgment.
I
Whether the District Court erred in granting summary judgment
in favor of defendants by concluding that the cause of action was
time-barred.
Summary judgment is appropriate when the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show there is no genuine
issue as to any material fact and that the moving party is entitled
to judgment as a matter of law. Rule 56 (c), M.R.Civ. P. ; Lorash v.
Epstein (Mont. 1989), 767 P.2d 1335, 1337, 46 St.Rep. 151, 153.
Summary judgment is an appropriate means of disposing of claims
barred by the statute of limitations. Mobley v. Hall (1983), 202
Mont. 227, 657 P.2d 604; Brabender v. Kit Manuf. Co. (1977), 174
Mont. 63, 568 P.2d 547.
As the District Court noted, and we agree, the alleged
negligence in drafting the contract is based on a theory of
attorney malpractice. The dispositive issue in the present case
is when the statute of limitations commenced to run.
In analyzing this issue, we note that traditionally the
general rule has been that a cause of action for attorney
malpractice accrues when the negligent act or breach occurs, not
when it is discovered (the occurrence rule) . 54 C.J.S. Limitations
of Actions § 172 (1987). Other theories include: 1) the statute
of limitations begins to run when the client has sustained injury
or damage (the damage rule); 2) the statute begins to run when
the negligent act is discovered or should have been discovered (the
discovery rule). Annotation, "When Statute of Limitations Begins
to Run upon Action Against Attorney for Malpractice" 32 ALR 4th 260
§ 2 (1984).
Montana has statutorily adopted the discovery rule, stated in
5 27-2-206, MCA, which provides:
Actions for legal malpractice. An action against an
attorney licensed to practice law in Montana or a
paralegal assistant or a legal intern employed by an
attorney based upon the person's alleged professional
negligent act or for error or omission in the person's
practice must be commenced within 3 years after he
plaintiff discovers or through the use of reasonable
diligence should have discovered the act, error, or
omission, whichever occurs last, but in no case may the
action be commenced after 10 years from the date of the
act, error, or omission.
The District Court concluded that the cause of action accrued
when the contract was signed because Boles read the contract at
that time; thus they knew or through the use of reasonable
diligence should have discovered the omission at that time.
Because this occurred more than three years prior to suit being
filed, the suit was time-barred.
We interpreted the above mentioned statute in Burgett v.
Flaherty (1983), 204 Mont. 169, 173, 663 P.2d 332, 334, stating:
As a matter of law, what is critical in determining when
a legal malpractice action accrues is knowledge of the
facts essential to the cause of action, not knowledge of
the legal theories upon which an action may be brought.
In Bursett the attorney had stipulated to the entry of a
dissolution decree within twenty days of service of process and
contrary to client's wishes. Noting that the client had knowledge
of these facts, triggering the statute of limitations, we affirmed
summary judgment as to that alleged negligent act.
In four recent cases, this Court again affirmed summary
judgment in favor of the attorney on the basis that the statute had
run. In Schneider v. Leaphart (1987), 228 Mont. 483, 743 P.2d 613,
the client became aware of the attorney's alleged negligence in
including a maintenance provision in a property settlement when an
accountant told him the provision was unnecessary; it was the
discovery of this fact that triggered the statute, not the later
discovery that he was damaged. In Peschel v. Jones (Mont. 1988),
760 P.2d 51, 45 St.Rep. 1244, the client alleged negligence in the
attorney's handling of negotiations regarding financial
difficulties. However, the client's knowledge of facts giving rise
to this claim had triggered the statute and the suit was time-
barred. In McMillan v. Landoe, Brown, et al., P.C. (Mont. 1988),
760 P.2d 758, 45 St.Rep. 1662, the District Court concluded that
the cause of action against an attorney accrued when the client who
purchased property at a sheriff's sale was informed of a suit
against him by a debtor challenging the validity of the sale.
Similarly, in Schweitzer v. Estate of Halko (Mont. 1988), 751
P.2d 1064, 45 St.Rep. 611, we affirmed summary judgment in favor
of the attorney where the client knew of and participated in the
attorney's alleged negligent drafting of a new will containing an
option agreement on real estate. Summary judgment in that case was
granted both on the basis that the suit was time-barred and because
the client was in pari delicto with the attorney.
In the present case, the Boles state they did not have actual
knowledge of facts essential to the cause of action, that is, they
did not know that the contract did not in fact contain the saving
clause. Thus the issue is whether they should have discovered the
omission at the time they signed the contract, or stated
differently, whether they should be held to have had constructive
knowledge of the omission at the time of signing.
By deposition all parties acknowledge that they read the
contract before signing it. Mr. Boles states that he did not
understand the contract. However, none of the parties recall
asking questions or requesting clarification of any part of the
contract. In Mr. Simontonlsdeposition he states that he does not
remember explaining the contract in detail.
We conclude that the Boles should have discovered that the
contract for deed' did not contain the saving clause at the time
they signed the contract. The default clause, as here drafted, is
not complex or beyond the understanding of a lay person. The
absence of a saving clause could have been discovered by the Boles
through the use of reasonable diligence. The record discloses that
the Boles read the contract before signing and did not ask for any
explanations. Although they now claim they did not understand the
contract, and that they believed it contained the desired clause
when they signed it, we conclude that in the present case, the
Boles must be charged with knowledge of what they signed. The
plain language of the contract was clear and not technical, and the
omission of the gaving clause could have been discovered by the
Boles by the use of reasonable diligence.
The Nebraska Supreme Court faced a similar issue in
Interholzinger v. Estate of Dent (Neb. 1983), 333 N.W.2d 895.
Although the attorney, in selling the client's business, was to
exclude a certain piece of private land, he neglected to do so.
The clients, a father and son, both signed a listing agreement
which included the private land among the assets of the business.
The son, although capable of reading the agreement, did not do so.
The Nebraska court applied the relevant statute of limitations
which provided that an action for attorney malpractice commenced
when the negligent act occurred; however, commencement was deferred
if the cause of action was not discovered and could not reasonably
have been discovered within the limitations period. In applying
this rule the court concluded that the son, who had not read the
agreement, was "charged with knowledge of its contents[.]"
Interholzinser, 333 N.W.2d at 899. See also Nichols v. Ach (Neb.
1989), 447 N.W.2dS220.
The Boles contend that the statute of limitations did not
begin to run until they realized they had been damaged by the
alleged professional negligence. They contend it was not until
they received the notice from Ms. Ler in February 1983 of her
intent to cancel and determine the contract, that they realized the
contract did not contain the saving clause. However, the rule that
the statute is not triggered until the client is damaged has been
expressly rejected in Montana, as in conflict with the statute.
Schneider, 743 P.2d at 616. Moreover, our previous discussion
forecloses any argument that the notice from Ms. Ler should be the
point of discovery.
We affirm the District Court's granting of summary judgment
in favor of defendants on the basis that the suit was time-barred.
I1
Whether the ~istrictCourt erred in granting summary judgment
by concluding that defendants owed no duty to the client in respect
to certain alleged errors.
The ~istrict Court granted summary judgment in favor of
defendants in respect to the alleged error in the legal description
and the alleged negligence in failing to ensure that a preliminary
title report was prepared. The court determined that the Boles had
failed to establish that Mr. ~imontonwas retained for any purpose
other than the drafting of the contract for deed. Thus he owed no
duty to the Boles in regard to other matters.
The Boles contend that Mr. Simonton continued his legal
representation of- them subsequent to drafting the contract for
deed, noting that Mr. Simonton sent a letter Mr. Ler advising him
to place the Abstract of Title in the escrow account. They contend
Mr. Simonton had a duty to ensure this was done.
"In any professional negligence action, the plaintiff must
prove that the professional owed him a duty[.]I1 Carlson v. Morton
(1987), 229 Mont. 234, 238, 745 P.2d 1133, 1136. Absent a finding
that Mr. Simonton was retained for services other than preparing
the contract, the attorney had no duty to monitor the activities
of his client. Lorash, 767 P.2d at 1338. We agree with the
~istrict Court that Boles have failed to present facts
demonstrating that Mr. Simonton continued to represent the Boles
subsequent to drafting the contract. Further, Montana has not
recognized the llcontinuous
representationn theory. Schneider, 743
P.2d at 616. We conclude that the District Court was correct in
determining there were no genuine issues of material fact in
respect to the extent of Mr. Simontonls legal representation and
that he owed no duty to the Boles in respect to these alleged
errors.
We affirm the District Courtls granting of summary judgment
in favor of defendants.
Affirmed.
We Concur: / f
Justices
Justice William E. Hunt, Sr., dissenting:
I dissent. A lawyer is more than a scrivener. He is a
professional and a counselor upon whose advice a client, whether
skilled in the law or not, should be able to depend. If the client
must know as much as the lawyer in order to oversee the lawyer's
work and discover his errors, then the lawyer is nothing more than
a scrivener.
When a client, patient, taxpayer or builder comes to rely upon
a professional for services or advice he most often cannot discover
that a negligent act has occurred until damages arise. I do not
believe that the plaintiffs here were required to know that the
legal jargon cited by the majority did not constitute a savings
clause. In both paragraphs cited by the majority, the words
"ninety (90) daystvwere used. When they read those paragraphs, the
plaintiffs, who were lay persons, could reasonably have believed
that they had a period of grace in which they could remit any late
payments.
Plaintiffs could not reasonably have discovered the omission
in the contract until the damages occurred, that is, when they lost
their property. They should have an opportunity to present their
case to the jury.