Howard Bank v. Estate of Pope

NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
that corrections may be made before this opinion goes to press.


                                No. 89-278


The Howard Bank, N.A.                        Supreme Court

                                             On Appeal from
     v.                                      Chittenden Superior Court

Estate of Frederic Pope, Jr.,                April Term, 1990
Pope & Pu, A Vt. Partnership;
Jack R. Abell, A. Jay Kenlan
and Keyser, Crowley, Banse,
Kenlan & Facey, Inc.


John P. Meaker, J.

Stephen J. Soule and Joseph E. Frank of Paul, Frank & Collins, Inc.,
  Burlington, for plaintiff-appellant

Robert R. McKearin and Robert L. Sand of Dinse, Erdmann & Clapp, Burlington,
  for defendants-appellees Estate of Pope and Pope and Pu

Robert D. Rachlin and Robert A. Miller, Jr., of Downs Rachlin & Martin,
  Burlington, for defendants-appellees Abell and Keyser, Crowley, Banse
  & Facey, Inc.

Elizabeth A. Glynn and R. Joseph O'Rourke of Ryan Smith & Carbine, Ltd.,
  Rutland, for defendant-appellee Kenlan


PRESENT:  Gibson, Dooley and Morse, JJ., and Mahady, D.J. and Martin, Super.
          J., Specially Assigned


     DOOLEY, J.   This is a legal malpractice action in which the main
question before us is whether the trial court erred in refusing to apply the
discovery rule to determine when the cause of action accrued, and, as a
result, in granting summary judgment for defendants.  We hold that the
summary judgment was erroneous and accordingly reverse and remand.
     Plaintiff, Howard Bank, lent money to the Rutland Industrial
Development Corporation and the Kors Company in order to buy equipment for
Kors, the ultimate beneficiary of the loans.  The money was loaned in three
separate transactions which occurred in 1978 and 1979.  The equipment was to
serve as security for the loans.  Plaintiff was unrepresented, but lawyers
for Kors, defendants Frederick Pope, Jr., Jack Abell and A. Jay Kenlan,
certified that plaintiff was fully secured.  In fact, the lawyers failed to
file financing statements naming Kors, and this led to extensive litigation
over the security after Kors went into bankruptcy in late 1980.  In March
1988, plaintiff sued the lawyers for damages caused by their alleged
malpractice.  The trial court held that in all cases more than six years had
elapsed since the alleged negligent act, and therefore the action was barred
by 12 V.S.A. { 511, the applicable statute of limitations.
     On appeal, plaintiff urges us to adopt an accrual rule based either on
the last date the injury could be avoided or on plaintiff's discovery of the
injury.  Since the trial court's action in this case, we have held that for
purposes of the six-year limitation period provided in 12 V.S.A. { 511, a
cause of action accrues at the time of the discovery of the injury.
University of Vermont v. W.R. Grace & Co., 152 Vt. 287, 290, 565 A.2d 1354,
1357 (1989).  We have also held that legal malpractice claims involving
economic loss are governed by { 511.  Fitzgerald v. Congleton, ___ Vt. ___,
___, 583 A.2d 595, 601 (1990).  Defendants argue that despite these
precedents we should not apply a discovery rule to legal malpractice
actions.  In fact, the policy reasons supporting use of a discovery rule in
malpractice actions are greater than in other areas.  See Neel v. Magana,
Olney, Levy, Cathcart & Gelfand,  6 Cal. 3d 176, 187-89, 491 P.2d 421, 428-
29, 98 Cal. Rptr. 837, 844-45 (1971).  Thus, the discovery rule has become
the majority accrual rule in legal malpractice actions.  See cases
collected in Willis v. Maverick, 760 S.W.2d 642, 646-47 (Tex. 1988); 2 R.
Mallen & J. Smith, Legal Malpractice { 18.14, at 132 (3d ed. 1989)
(discovery rule is the "predominant doctrine of accrual").  We hold that the
discovery rule applies to legal malpractice actions to define when the cause
of action accrues.
     Plaintiff has also argued for an alternative accrual rule based on when
defendants could have still taken some action to protect an interest of the
plaintiff.  While this rule might be merged with a discovery rule, at least
in part, we think that plaintiff's interests are adequately protected if we
require discovery of both the injury and its cause, as held in W.R. Grace &
Co.   See W.R. Grace & Co., 152 Vt. at 292, 565 A.2d  at 1357; Lillicrap v.
Martin, No. 86-443, slip op. at 12 (Vt. July 14, 1989).
     Defendant Estate of Pope argues that summary judgment was appropriate
with respect to it because the evidence shows as a matter of law that the
alleged malpractice should have been discovered over six years before the
action was filed, even after subtracting a period during which the parties
agreed to toll the running of the statute.  Summary judgment is appropriate
if there is no genuine issue of material fact, after giving the opposing
party the benefit of all reasonable doubts and inferences.  See Messier v.
Metropolitan Life Ins. Co., ___ Vt. ___, ___, 578 A.2d 98, 100 (1990).  When
discovery has or should have occurred is normally a question of fact for the
jury.  Lillicrap v. Martin, slip op. at 7.  There is a genuine issue of
when discovery occurred in this case; summary judgment was inappropriate.
     Defendant Kenlan argues that dismissal of the action was appropriate
because the lawyers represented Kors, rather than plaintiff, and cannot be
sued by a non-client.  The trial court never ruled on this issue, and we
decline to do so for the first time on appeal.
     Reversed and remanded.

                                        FOR THE COURT:




                                        Associate Justice