MASTERGUARD HOME SECURITY V NEMES AND ANDERSON PC
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STATE OF MICHIGAN
COURT OF APPEALS
MASTERGUARD HOME SECURITY, d/b/a
MASTERGUARD SECURITY SERVICES, BOB
SHONCE, and TOM WALTERS,
UNPUBLISHED
July 29, 2010
Plaintiffs-Appellants,
v
NEMES AND ANDERSON, P.C., d/b/a NEMES
BUMBAUGH, P.C., THOMAS C. NEMES,
JAMES A. BUMBAUGH, and RYAN A.
MCKINDLES,
No. 291085
Oakland Circuit Court
LC No. 2008-089579-NM
Defendants-Appellees.
Before: SAWYER, P.J., and BANDSTRA and WHITBECK, JJ.
PER CURIAM.
In this legal malpractice case, plaintiffs Masterguard Home Security, Bob Shonce, and
Tom Walters (collectively, “Masterguard”) appeal as of right the trial court’s order granting
defendants Nemes And Anderson, P.C., Thomas C. Nemes, James A. Bumbaugh, and Ryan A.
McKindles (collectively, “Nemes & Anderson”) summary disposition under MCR 2.116(C)(7)
and (10). We affirm.
I. BASIC FACTS
In 1998, Bob Shonce and Tom Walters founded Masterguard Home Security, doing
business as Masterguard Security Services, to sell and service residential alarm systems. In
2001, Alliance Security Network offered to buy the company. And, in January 2001,
Masterguard and Alliance entered into a purchase agreement for the sale of Masterguard to
Alliance. Pursuant to the original purchase agreement terms, the transaction would be a cash
sale, by which Shonce and Walters would receive cash proceeds at the transaction closing.
However, the parties later entered into an amended purchase agreement, by which Shonce and
Walters would receive a subordinated promissory note instead of the simple cash sale. The
promissory note required Alliance to make periodic payments to Shonce and Walters over a twoyear period.
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Notably, Masterguard claims that Nemes & Anderson reviewed the note and advised
Masterguard to sign it, which Masterguard did, claiming not to know that the note was
subordinated to that of another creditor. Nemes & Anderson, however, denies this allegation.
In September 2001, Masterguard and Alliance closed on the sale, and Alliance began
making payments on the promissory note. However, in May 2002, Alliance stopped making
payments. Masterguard then retained Nemes & Anderson to assist with enforcement of the
promissory note. And, to that end, Masterguard, through Nemes & Anderson, filed a breach of
contract suit against Alliance.
Following the filing of the complaint, Masterguard and Alliance entered settlement
negotiations, which resulted in a June 2002 settlement agreement, by which they agreed to a
modified payment schedule. Paragraph 7 of the settlement agreement stated that Alliance “shall
use reasonable efforts to secure this Settlement Agreement with a pledge of its accounts second
only to SLP for which [Alliance] shall execute a UCC-1 and Security Agreement in support
thereof.” Shonce expressed concern about this provision, questioning why Masterguard would
“leave it up to [Alliance] to file a UCC.” However, despite his concerns, Shonce signed the
agreement in July 2002.
Alliance complied with the payment schedule through August 2005, when it filed for
Chapter 11 bankruptcy. In September 2005, Masterguard received notice that Alliance had listed
it in the bankruptcy filings as an unsecured creditor. Masterguard was surprised at its unsecured
status because it believed that it had a secured interest, based on the June 2002 settlement
agreement. Accordingly, Masterguard retained Nemes & Anderson to seek reclassification of
Masterguard as a secured creditor. But in July 2006, the bankruptcy court determined that
Masterguard was an unsecured creditor.
As part of the bankruptcy proceeding, Alliance filed a counterclaim against Masterguard,
asserting that Masterguard violated the parties’ non-compete agreement. Masterguard and
Alliance ultimately negotiated a settlement by which Masterguard agreed to an unsecured claim
in the amount of $90,000 in exchange for Alliance’s withdrawal of its non-compete claim.
Accordingly, in January 2007, the bankruptcy court entered a stipulated order stating that
Masterguard “shall have a general unsecured claim in the amount of $90,000.00[.]” And,
pursuant to the approved reorganization plan, Masterguard received a right to a total payment of
30 percent of its claim, or approximately $30,000.
On July 26, 2007, Masterguard filed this legal malpractice claim against Nemes &
Anderson, alleging that Nemes & Anderson failed to properly represent Masterguard regarding
the June 2002 settlement agreement. More specifically, Masterguard took issue with the fact that
paragraph 7 of the settlement agreement left it to Alliance to perfect the security interest between
the parties, which ultimately led to Masterguard’s status as an unsecured creditor. Nemes &
Anderson moved for summary disposition under MCR 2.116(C)(7), arguing that Masterguard’s
complaint was time-barred because Masterguard filed it more than two years after Nemes &
Anderson’s representation of Masterguard ended in July 2002, when Masterguard executed the
settlement agreement. Nemes & Anderson also moved for summary disposition under MCR
2.116(C)(10).
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In its written opinion and order, the trial court explained that “[t]his malpractice action
arises from a July 2002 Settlement Agreement entered into between [Masterguard] and
Alliance . . . which restructured payments owed to [Masterguard] pursuant to a Subordinated
Promissory Note.” The trial court ruled that “the execution of the 2002 Settlement Agreement
was the completion of legal services that [Nemes & Anderson] were retained by [Masterguard]
to perform” and that, therefore, Masterguard’s “claims for malpractice accrued in July of 2002
when that Settlement Agreement was executed.” The trial court noted that Masterguard had “not
argued that the 6 month discovery rule is applicable” and concluded that, “[p]ursuant to the 2
year statute of limitations for legal malpractice actions,” Masterguard was required to file its
complaint by July 2004. Accordingly, the trial court held that Masterguard’s claims were timebarred and granted Nemes & Anderson summary disposition under MCR 2.116(C)(7). The trial
court also held that, alternatively, summary disposition was appropriate under MCR
2.116(C)(10) because Masterguard failed to establish that Nemes & Anderson’s conduct
proximately caused it to suffer any damages as the result of being an unsecured creditor.
Masterguard now appeals.
II. STATUTE OF LIMITATIONS
A. STANDARD OF REVIEW
Masterguard argues that the trial court erred in granting Nemes & Anderson’s motion for
summary disposition under MCR 2.116(C)(7) because its complaint was timely filed within two
years of the date on which Nemes & Anderson discontinued its representation of Masterguard.
Under MCR 2.116(C)(7), a party may move for summary disposition on the ground that a
statute of limitations bars a claim. Neither party is required to file supportive material; any
documentation that is provided to the court, however, must be admissible evidence.1 The
plaintiff’s well-pleaded factual allegations must be accepted as true and construed in the
plaintiff’s favor, unless contradicted by documentation submitted by the movant.2 Absent
disputed issues of fact, we review de novo whether the cause of action is barred by a statute of
limitations.3
B. LEGAL STANDARDS
Generally, no person may bring an action charging malpractice unless he commences the
action within two years of when the claim accrued.4 A legal malpractice claim “accrues at the
time [the attorney] discontinues serving the [client] in a professional . . . capacity as to the
1
Maiden v Rozwood, 461 Mich 109, 119; 597 NW2d 817 (1999).
2
MCR 2.116(G)(5); Maiden, 461 Mich at 119; Gortney v Norfolk & W R Co, 216 Mich App
535, 538-539; 549 NW2d 612 (1996).
3
Colbert v Conybeare Law Office, 239 Mich App 608, 609 NW2d 208 (2000).
4
MCL 600.5805(6); Farley v Advanced Cardiovascular Health Specialists, PC, 266 Mich App
566, 571; 703 NW2d 115 (2005).
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matters out of which the claim for malpractice arose.”5 The fact that an attorney later represents
the same client in a separate matter does not extend the period of limitations.6 A lawyer
discontinues service when the client or the court relieves him of the obligation, or when he
completes the specific legal service that the client retained him to perform.7
C. APPLYING THE STANDARDS
In support of its argument that its legal malpractice complaint was timely, Masterguard
argues that the accrual statute’s use of the plural word “matters”8 indicates the Legislature’s
intent that the alleged malpractice can arise out of multiple matters. And here, Masterguard
contends that Nemes & Anderson continued to represent it during the bankruptcy proceeding.
However, the fact that an attorney later represents the same client in a separate matter does not
extend the period of limitations; that is, an attorney’s consecutive representation of the same
client in a different matter does not affect the original date of accrual.9
In Balcom v Zambon, the defendants represented the plaintiff in two different actions
arising out of a bar brawl.10 The attorneys first represented the plaintiff in a criminal proceeding
and then later represented the plaintiff in a civil action.11 The plaintiff then later brought a legal
malpractice claim, alleging that the attorneys committed malpractice by (1) failing to obtain a
valid written release of civil liability in the underlying criminal matter, and (2) failing to have the
circuit court enter an order denying his motion for summary disposition in the civil case.12 After
noting that an attorney discontinues serving a client upon completion of a specific legal service
that the attorney was retained to perform, this Court pointed out that, although the plaintiff’s
legal malpractice claim was filed within two years of the civil case arising out of a bar brawl, it
was not filed within two years of the earlier criminal litigation.13 Therefore, this Court held that
the trial court erred in dismissing the plaintiffs’ claim arising out the civil action, but that the trial
court did not err in dismissing the plaintiff’s claim arising out the criminal proceeding.14
5
MCL 600.5838(1); see also Kloian v Schwartz, 272 Mich App 232, 237; 725 NW2d 671
(2006).
6
Balcom v Zambon, 254 Mich App 470, 484; 658 NW2d 156 (2002).
7
Id.
8
MCL 600.5838(1) (emphasis added).
9
Balcom, 254 Mich App at 484.
10
Id. at 472-475.
11
Id.
12
Id. at 475-476.
13
Id. at 484.
14
Id. at 484-485.
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Here, Masterguard retained Nemes & Anderson to file its breach of contract claim against
Alliance in May 2002. That lawsuit ultimately resulted in the June 2002 settlement agreement,
which was fully executed in July 2002. And in this legal malpractice action, Masterguard now
claims that Nemes & Anderson failed to protect Masterguard’s interests as a secured creditor in
that settlement agreement. Thus, Masterguard’s legal malpractice claim arises out of the
settlement agreement, and Nemes & Anderson discontinued serving Masterguard as to that
matter when Masterguard executed the settlement agreement in July 2002.15 That is, Nemes &
Anderson’s representation of Masterguard in the breach of contract action ceased upon the
conclusion of that action, which occurred when the parties executed the settlement agreement.16
Masterguard’s malpractice claim does not arise out of Nemes & Anderson’s conduct during the
bankruptcy proceeding, for which Masterguard again retained Nemes & Anderson after a threeyear interruption in service. Thus, the fact that Masterguard retained Nemes & Anderson again
in the subsequent, separate bankruptcy proceeding does not affect the date of accrual for the
original malpractice. Therefore, Masterguard was required to file its legal malpractice complaint
within two years of the July 2002 accrual, or no later than July 2004. It did not file its complaint
until July 2007, therefore Masterguard’s claim is time-barred under the general two-year statute
of limitations.
We note that at oral argument Masterguard’s counsel brought up, for the first time, the
Michigan Supreme Court’s decision in Levy v Martin,17 in which the Court adopted JUDGE
WHITBECK’s dissent in the underlying Court of Appeals decision.18 However, Levy is
distinguishable from the present case. In Levy, the plaintiffs retained the defendant accountants
to prepare their annual tax returns from 1974 to 1996.19 Due to the accountants’ improper
preparation of the 1991 and 1992 tax returns, the IRS audited the plaintiffs and required them
pay additional taxes and penalty charges.20 The plaintiffs filed a malpractice claim against the
accountants in 1997, which the trial court dismissed as untimely.21 The Supreme Court held that
the plaintiffs’ claim did not accrue until at least 1996 because it was “clear” that the plaintiffs,
“rather than receiving professional advice for a specific problem, were receiving generalized tax
preparation services[.]”22 However, here, unlike the plaintiffs in Levy, Masterguard did not
receive generalized legal services from Nemes & Anderson; instead, Masterguard received legal
15
See MCL 600.5838(1); Kloian, 272 Mich App at 237.
16
Balcom, 254 Mich App at 484 (stating that a lawyer discontinues service when he completes
the specific legal service that the client retained him to perform).
17
Levy v Martin, 463 Mich 478; 620 NW2d 292 (2001).
18
Levy v Martin, unpublished opinion per curiam of the Court of Appeals, issued Sept. 17, 1999
(Docket No. 207797).
19
Levy, 463 Mich at 481.
20
Id.
21
Id.
22
Id. at 486, 489.
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advice from Nemes & Anderson for a specific legal problem—the breach of contract action,
which ended in the settlement agreement.
Because our resolution of this statute of limitations issue is dispositive, we need not
address Masterguard’s remaining argument regarding the trial court’s ruling granting Nemes &
Anderson summary disposition under MCR 2.116(C)(10).
We affirm.
/s/ David H. Sawyer
/s/ Richard A. Bandstra
/s/ William C. Whitbeck
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