Title Insurance v. Smith, Debnam, Hibbert & Pahl

Judge Martin, Mark D.,

concurring with separate opinion.

The majority opinion presents the question of whether there is sufficient evidence to support the jury’s liability determination where the plaintiff sustained actual damages prior to the return of the verdict. A brief review of our jurisprudence is necessary for proper resolution of this question.

Section 1-15 of our General Statutes provides in pertinent part:

*618 Except where otherwise provided by statute, a cause of action for malpractice . . . shall be deemed to accrue at the time of the occurrence of the last act of the defendant giving rise to the cause of action: . . . Provided further, that in no event shall an action be commenced more than four years from the last act of the defendant giving rise to the cause of action ....

N.C. Gen. Stat. § l-15(c) (1983) (emphasis added).

According to the language of section 1-15, a professional malpractice cause of action ordinarily accrues “at the time of the occurrence of the last act of the defendant giving rise to the cause of action.” Because the statute links accrual to the “last act of the defendant” which gives rise to the “cause of action,” section 1-15 is ambiguous as to whether the limitations period accrues from the date of the last act of negligence by the defendant or, alternatively, from the date plaintiff incurs actual damages.

Our courts have resolved this ambiguity in favor of accrual of a malpractice cause of action from the date of the last act of negligence by the defendant. In Southeastern Hospital Supply Corp. v. Clifton & Singer, 110 N.C. App. 652 , 430 S.E.2d 470 (1993), aff’d, 335 N.C. 764 , 440 S.E.2d 275 (1994), this Court concluded that “[a] cause of action for legal malpractice accrues at the time of the occurrence of the last wrongful act of the defendant and an action must be commenced within three years of that accrual.” Id. at 653-654, 430 S.E.2d at 471 (emphasis added). Likewise, in Nationwide Mutual Ins. Co. v. Winslow, 95 N.C. App. 413, 416 , 382 S.E.2d 872, 874 (1989), notwithstanding plaintiffs argument that actual damages were not incurred until the default judgment became final on 3 July 1985, plaintiffs cause of action for legal malpractice was held to accrue from the date the defendant allegedly failed to file an answer, 8 March 1983. 1

The operation of the statute of repose in section 1-15 was recently interpreted in Hargett v. Holland, 337 N.C. 651 , 447 S.E.2d 784 , petition for reh’g denied, 338 N.C. 672 , 453 S.E.2d 177 (1994). la. Hargett plaintiffs alleged in their complaint that defendant prepared a will for the testator on or before “September 1, 1978” which “fail[ed] to use *619 the appropriate verbiage so as to effectuate the intent of the testator.” Id. at 653, 447 S.E.2d at 787 . After the death of the testator, plaintiff filed suit on 6 November 1991 and sought damages to the extent they did not receive all of the remainder interest in the family farm. Id. at 654 , 447 S.E.2d at 787 .

The Supreme Court concluded the “defendant’s last act giving rise to the claim occurred when he supervised the execution of the will on 1 September 1978; therefore plaintiffs’ claim, being brought more than four years after that date, is barred by the four-year statute of repose provision contained in the professional malpractice statute of limitations.” Id. In support of its holding, the Court stated:

Regardless of when plaintiffs’ claim might have accrued, or when plaintiffs might have discovered their injury, because of the four-year statute of repose, their claim is not maintainable unless it was brought within four years of the last act of defendant giving rise to the claim.

Id. at 655 , 447 S.E.2d at 788 .

In the present case the defendant attorney executed and submitted to plaintiff the “Attorney’s Preliminary Report on Title,” dated 11 August 1988, in which the Deer and Wachovia deeds of trust were identified as liens on the subject property. In September 1988 the defendant attorney executed and delivered to plaintiff the “Attorney’s Final Certificate for Owners and/or Loan Policy,” in which the defendant attorney expressly represented to the plaintiff in writing, among other things, that the Deer and Wachovia deeds of trust had been can-celled of record or released and that First Federal of Raleigh had a first lien position on the subject property. Plaintiff filed suit on 19 August 1991, within three years from the date of the attorney’s completion of the final title opinion.

The lesson of our jurisprudence under section 1-15 is perfectly clear: If plaintiffs await the occurrence of actual damages within the context of legal malpractice, their right to sue for redress of the harm may be barred by section 1-15’s three-year statute of limitations or, alternatively, the four-year statute of repose. Because our courts have held that a malpractice cause of action accrues from the date of the defendant’s negligence, section 1-15 provides little comfort in cases where, as here, the consequences of the negligence do not manifest until years after the last act of the defendant. This dilemma has been *620 recognized by Mallen and Smith in their leading treatise on Legal Malpractice:

Particularly in legal malpractice contexts . . . [the negligent act] may not be discoverable by the client or even the lawyer, and the injury may not be foreseeable or occur for years.

2 Ronald E. Mallen and Jeffrey M. Smith, Legal Malpractice, § 18.10 (3d ed. 1989) (hereinafter “Legal Malpractice”).

Having its roots in ordinary negligence claims, the “occurrence” rule governing the accrual of malpractice causes of action, as applied in North Carolina, had its genesis in the United States Supreme Court opinion of Wilcox v. Plummer’s Executors, 29 U.S. (4 Pet.) 172 , 7 L. Ed. 821 (1830). Rejecting the argument the statute of limitations did not accrue until the client suffered actual damages due to the attorney’s negligence, the Court stated:

When the attorney was chargeable with negligence or unskill-fulness his contract was violated, and the action might have been sustained immediately. Perhaps, in that event,, no more than nominal damages mav be proved and no more recovered: but, on the other hand, it is perfectly clear that the proof of actual damage mav extend to facts that occur and grow out of the iniurv. even up to the dav of the verdict,.

29 U.S. (4 Pet.) at 182 , 7 L. Ed. at 824 (emphasis added).

The occurrence rule has been superseded in most jurisdictions by one or more alternate theories governing the accrual of the limitations period in legal malpractice claims including, among other possibilities, the damage rule and the discovery rule. See Legal Malpractice, supra, §§ 18.10-18.11, 18.14. 2 In a legal malpractice *621 cause of action the aggrieved party ordinarily does not incur actual damages at or near the date of the defendant’s negligent act or omission. Therefore, the occurrence rule inescapably relies upon the concept of nominal damages to support institution of suit prior to accrual of the limitations period:

The concept of nominal damages . . . serve [s] a necessary function in those jurisdictions which purport to follow the rule that a statute of limitations commences to run when the negligence occurs. Where suit must be brought based upon the time of the wrongful act or omission, and usually before any actual damages occur, nominal damages are indispensable to a cause of action.

1 Legal Malpractice, supra, § 16.2, at 893 (emphasis added).

In the present case it can be reasonably inferred that plaintiff filed suit within three years from the completion of the final title opinion to avoid the bar of the three-year statute of limitations in section 1-15. One year later, when the four-year statute of repose would have run, plaintiff still had not incurred actual damages. Had plaintiff waited to file its suit until the occurrence of actual damages, suit would have been barred under the four-year statute of repose. Hargett v. Holland, supra.

Examination of our jurisprudence under section 1-15 reveals the wisdom of plaintiff’s election to file suit within three years of the last negligent act of the defendant. Indeed, assuming actual damages do not occur coincidental to the actual breach of duty by the defendant attorney, it is nonetheless clear suit must be instituted within the four-year statute of repose regardless of whether the plaintiff has incurred actual damages. See Hargett v. Holland, supra.

The dissent acknowledges that the occurrence rule, as applied in North Carolina, leads to “injustices and frequently illogical results.” The dissent correctly notes that Mallen and Smith indicate the occurrence rule may “promote unnecessary, expensive, and lengthy litigation”; however, the treatise nonetheless concludes, in occurrence rule jurisdictions such as North Carolina, Southeastern Hospital Supply Corp v. Clifton & Singer, supra, Nationwide Mutual Ins. Co. v. Winslow, supra, that nominal damages remain indispensable to a cause of action. 1 Legal Malpractice, supra, § 16.2, at 893.

In any event, I believe the occurrence of actual damages during the jury deliberations, thereby occurring before the return of the verdict, Wilcox v. Plummer’s Executors, supra, is sufficient to uphold *622 the jury verdict below on the question of liability. The reasoning of the decision of the United States Supreme Court in Wilcox was essentially followed by our Supreme Court in Jewell v. Price, 264 N.C. 459, 461-62 , 142 S.E.2d 1, 3 (1965) (proof of actual damage may extend to facts that occur and grow out of the injury, even up to the day of the verdict).

I do not quarrel with, but wholly endorse, the concept that claims should be barred after the proper accrual of the appropriate limitations period. Nonetheless, our jurisprudence dictates that the statute of limitations in a professional malpractice action accrues from the date of the defendant’s negligent act. Accordingly, the aggrieved party should be afforded the opportunity to seek redress for allegations of professional malpractice before the occurrence of actual damages, seeking nominal damages for the technical breach of duty in the hope actual damages accrue before the return of the verdict, Jewell v. Price, supra, or, alternatively, our jurisprudence should be revised to allow the appropriate limitations period to be tolled until the occurrence of actual damages. 3

Accordingly, I concur in the majority opinion and believe on remand plaintiff should be afforded the opportunity to prove the amount of its alleged actual damages.

. The dissent relies upon Snipes v. Jackson, 69 N.C. App. 64 , 316 S.E.2d 657 , review denied and appeal dismissed by, 312 N.C. 85 , 321 S.E.2d 899 (1984), for the proposition that a malpractice cause of action in tax matters does not accrue until actual injury. However, in Nationwide Mutual Ins. Co. v. Winslow, 95 N.C. App. 413 , 382 S.E.2d 872 (1989), this Court held Snipes was not controlling in the context of “professional negligence suits against doctors or attorneys in general.” Id. at 416, 382 S.E.2d at 874 .

. Section 1-15 provides for a partial discovery rule:

[WJhenever there is bodily injury to the person, economic or monetary loss, or a defect in or damage to property which originates under circumstances making the injury, loss, defect or damage not readily apparent to the claimant at the time of its origin, and the injury, loss, defect or damage is discovered or should reasonably be discovered by the claimant two or more years after the occurrence of the last act of the defendant giving rise to the cause of action, suit must be commenced within one year from the date discovery is made ....

Because the statute of repose within section 1-15 prohibits institution of suit “more than four years from the last act of the defendant,” Hargett v. Holland, supra, plaintiff’s suit would have been barred had it awaited the occurrence of actual damages despite the existence of the partial discovery rule in section 1-15.

. Several jurisdictions have adopted the “damage” rule of accrual within the context of malpractice litigation. See, e.g., Banton v. Marks, 623 S.W.2d 113 (Tenn. App. 1981); HagHayegh v. Clark, 520 So.2d 58 (Fla. App. 1988); Cofield v. Smith, 495 So.2d 61 (Ala. 1986); Zidell v. Bird, 692 S.W.2d 550 (Tex. Ct. App. 1985); Cantu v. St. Paul Companies, 401 Mass. 53 (1987). “An initial and stiE common application of the damage rule is an error in preparation of a will, since the injury cannot occur until after the death of the attorney’s client.” Legal Malpractice, supra, § 18.11, at 100. In Hargett v. Holland, supra, our Supreme Court declined to adopt the “damage” rule and instead applied the four-year statute of repose in section 1-15.