CEDAR SPRINGS TRACTOR & EQUIPMENT INC V MARK KEHOE
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STATE OF MICHIGAN
COURT OF APPEALS
CEDAR SPRINGS TRACTOR & EQUIPMENT,
INC., a Michigan corporation, and PETER YFF
and PATRICIA YFF,
UNPUBLISHED
December 18, 2001
Plaintiffs-Appellants,
No. 226701
Kent Circuit Court
LC No. 97-002585-NM
v
MARK KEHOE and MIKA, MEYERS,
BECKETT & JONES,
Defendants-Appellees,
and
JOHN ANDING and DREW, COOPER &
ANDING,
Defendants.
Before: Wilder, P.J., and Griffin and Smolenski, JJ.
PER CURIAM.
In this action alleging legal malpractice, plaintiffs appeal as of right the circuit court’s
orders granting summary disposition pursuant to MCR 2.116(C)(7), on statute of limitations
grounds. We affirm.
I
The present appeal stems from a claim of legal malpractice asserted by plaintiffs against
two attorneys and their law firms. The trial court granted summary disposition based on the
statute of limitations to one of the attorneys and his firm, defendants Mark Kehoe and Mika
Meyers, Beckett & Jones (Mika Meyers), and plaintiffs subsequently settled their claims against
the other attorney, John Anding, and his firm, Drew, Cooper & Anding, prior to trial. Plaintiffs
now appeal the dismissal of defendants Kehoe and Mika Meyers.
-1-
Defendant Kehoe was first retained by plaintiffs in November 1991 to render advice
concerning the status of a promissory note given by Cedar Springs Tractor & Equipment, Inc.,
(CSTE)1 to the National Bank of Detroit (NBD). In particular, plaintiffs sought advice regarding
a “threat” made by NBD to liquidate the collateral subject to the promissory note because CSTE
had fallen behind on the payments. NBD indicated to plaintiffs that the note would not be
extended beyond December 31, 1991. In November and December 1991, several meetings
involving Kehoe and the principals of CSTE were held. At those meetings, various options were
discussed, including bankruptcy. Plaintiff Peter Yff and a potential investor met with an officer
of NBD in an attempt to work out an alternative to bankruptcy and, at the conclusion of the
meeting, both Yff and the investor were convinced that the loan officer had orally agreed to a
six-month extension of the credit. Plaintiffs informed defendant Kehoe of the alleged agreement
and, in early January 1992, plaintiffs deposited a large sum of money into the CSTE account at
NBD. On January 6, 1992, NBD “swept” $356,388.58 from the account and applied it against
the outstanding promissory note. NBD then initiated an action for claim and delivery and for
money damages against CSTE and the individual plaintiffs herein as guarantors of the
corporation’s remaining debts.
Plaintiffs were referred by Kehoe to attorney Anding in March 1992 for representation in
the suit brought by NBD. Anding, a specialist in lender liability law, was a former partner of
Kehoe. On March 26, 1992, Anding substituted for Kehoe as counsel for plaintiffs. Anding
thereafter represented plaintiffs in the NBD action and filed a counterclaim against NBD.
Following a trial in 1994, NBD prevailed in both the principal action and plaintiffs’
counterclaim. As a consequence of that trial, a deficiency judgment was entered against
plaintiffs. A subsequent appeal to this Court by plaintiffs herein was unsuccessful. See NBD
Bank, NA v Cedar Springs Tractor & Equipment, Inc, et al, unpublished opinion per curiam of
the Court of Appeals, issued June 18, 1996 (Docket No. 181945).
On March 11, 1997, approximately five years after Kehoe last represented plaintiffs, they
commenced the present action alleging, in pertinent part, legal malpractice. The gist of the
malpractice claims against Kehoe and Mika Meyers consisted of allegations that Kehoe should
have advised plaintiffs that the assumed agreement with NBD for an extension of the loan was
not binding unless it was in writing, and that Kehoe should have advised CSTE and its principals
that Chapter 11 bankruptcy proceedings were still a viable protective option even after the
accounts had been swept by NBD in early January 1992. Plaintiffs also alleged that Kehoe
conspired with subsequent counsel, Anding, to conceal Kehoe’s malpractice and to commit a
fraud on the plaintiffs.
Defendants Kehoe and Mika Meyers moved for summary disposition, alleging in relevant
part pursuant to MCR 2.116(C)(7) that the statute of limitations barred plaintiffs’ malpractice
claims. On August 13, 1997, the trial court granted the motion insofar as it pertained to
plaintiffs’ claim that Kehoe should have advised them to reduce the agreement with NBD for a
deadline extension to writing. However, the trial court denied the motion as it related to
plaintiffs’ claim that Kehoe failed to give proper advice about the option of bankruptcy.
1
CSTE, which supplied machinery to the lumber industry, was owned by plaintiffs Peter and
Patricia Yff.
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Defendants subsequently took the deposition of plaintiff Patricia Yff. At her deposition,
Mrs. Yff acknowledged that on June 21, 1995, her husband sent a letter to Kehoe requesting a
copy of his file, and that she and her husband were concerned about Kehoe’s representation on
the date the letter was sent. On the basis of this deposition testimony, defendants renewed their
motion for summary disposition based once again on expiration of the requisite limitations
period. On December 30, 1998, the trial court issued its opinion and order granting defendants’
renewed motion, reasoning that by June 1995 plaintiffs had reasonable suspicion of Kehoe’s
alleged malpractice and that this suspicion commenced the running of the appropriate statute of
limitations. The trial court concluded that plaintiffs’ remaining malpractice claims against
defendants were time barred under the six-month discovery rule set forth in MCL 600.5838(2).
Plaintiffs now appeal.
II
We review de novo the trial court’s ruling on a motion for summary disposition. Ins
Comm’r v Aageson Thibo Agency, 226 Mich App 336, 340; 573 NW2d 637 (1997).
Furthermore, whether the period of limitations bars a cause of action represents a legal question
that we also review de novo. Id. at 340-341.
In reviewing a (C)(7) motion,2 this Court must accept the contents of the complaint as
true unless contradicted by documentation submitted by the movant. Maiden v Rozwood, 461
Mich 109, 119; 597 NW2d 817 (1999). This Court also must consider and construe in the
plaintiff’s favor any affidavits, admissions, or other documentary evidence submitted by the
parties. If the facts are not in dispute and reasonable minds could not differ regarding the legal
effect of those facts, the trial court should determine as a matter of law whether the statute of
limitations bars a cause of action. Jackson Co Hog Producers v Consumers Power Co, 234 Mich
App 72, 77; 592 NW2d 112 (1999). However, if a material factual dispute exists in such a
manner that factual development could provide a basis for recovery, summary disposition is
inappropriate. Id.
Generally, a legal malpractice action must be brought within two years of the date the
attorney discontinues serving the client or within six months after the plaintiff discovers or
should have discovered the existence of the claim, whichever is later. MCL 600. 5805(5); MCL
600.5838; Gebhardt v O’Rourke, 444 Mich 535, 541; 510 NW2d 900 (1994). A lawyer
discontinues serving a client when relieved of the obligation by the client or the court, or upon
completion of a specific legal service that the lawyer was retained to perform. Maddox v
Burlingame, 205 Mich App 446, 450; 517 NW2d 816 (1994). Retention of an alternative
attorney effectively terminates the attorney-client relationship between the defendant and the
client. Id.
2
Although defendants’ renewed motion was also brought pursuant to MCR 2.116(C)(10), and
the trial court did not specify the subsection underlying its ruling, a grant of summary disposition
pursuant to MCR 2.116(C)(7) is proper where a claim is barred by the applicable statute of
limitations. Travelers Ins Co v Guardian Alarm Co of Michigan, 231 Mich App 473, 477; 586
NW2d 760 (1998).
-3-
Plaintiffs concede that defendant Kehoe ceased acting as their attorney on March 26,
1992. Plaintiffs did not file their complaint until March 11, 1997; thus, it is undisputed that
plaintiffs did not file their complaint within two years after the accrual of their claim as required
by MCL 600.5805(5). Stroud v Ward, 169 Mich App 1, 6; 425 NW2d 490 (1988); Chapman v
Sullivan, 161 Mich App 558, 561-562; 411 NW2d 754 (1987). Consequently, this case was
timely filed only if plaintiffs filed their complaint within the six-month discovery period allowed
by MCL 600.5838(2), or if, as plaintiffs now allege, the statute of limitations has been tolled
pursuant to MCL 600.5855 because the malpractice cause of action was fraudulently concealed
by defendant Kehoe.
In its first opinion and order granting defendants’ motion for summary disposition with
respect to plaintiffs’ allegation that Kehoe failed to advise them regarding the need for a written
agreement with the creditor, the trial court acted on the basis of the six-month discovery period
set forth in MCL 600.5838(2), holding in pertinent part that
Plaintiffs’ complaint was filed on March 7, 1997. In a written opinion
attached to plaintiffs’ complaint and dated May 19, 1994, Circuit Judge Robert
Benson dismissed plaintiffs’ creditor liability action against the bank.
Specifically, he determined that the burden of proving the existence of the alleged
agreement by the creditor to give an extension of time was on the plaintiffs, and
that the burden had not been sustained. Specific reference was made to the lack
of a written agreement. As of March 7, 1997, therefore, if not well before,
plaintiffs should have discovered the importance of reducing their so-called
agreement to writing. To the extent failure to so advise by Mr. Kehoe is alleged
to be malpractice, such a claim clearly is barred by the statute of limitations.
With respect to such claims, therefore, the Motion for Summary Disposition
should be and the same hereby is GRANTED.
In its subsequent opinion granting defendants’ renewed motion for summary disposition
with respect to the remaining malpractice claims, the trial court once again relied on MCL
600.5838(2). Reviewing defendants’ newly proffered evidence, specifically the deposition
testimony of plaintiff Patricia Yff, the court held:
It is clear from a fair reading of the . . . testimony that plaintiffs were not
satisfied with defendant Kehoe’s services, and held some degree of suspicion as
to the appropriateness of the same. While responsive affidavits filed by plaintiffs
and their current attorney . . . raise questions of fact as to whether plaintiffs knew
or should have known of possible legal negligence specific to the bankruptcy
issues, there is little doubt that in a general sense there was suspicion as to
Kehoe’s services as early as 1995. The Court is of the opinion that such is all that
is required to start the appropriate statute of limitations running.
. . . While plaintiffs may not have been trained in the law, and especially
bankruptcy law, they nonetheless were familiar with all of the facts involved.
Armed with dissatisfaction and suspicion as to whether they had been properly
and competently represented, they would then have the obligation timely to
investigate the matter, e.g., by presenting all of the relevant facts to attorneys or
others who could then advise them as to the possible existence of liability. For
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good and solid public policy reasons, potential claimants are not permitted to sit
on their hands and await the receipt of unsolicited information or opinions as to
what the negligence consisted of. It is the reasonable suspicion of negligence, not
the specific legal basis for same, that starts the limitation period running. All of
the facts needed to secure advice as to professional negligence as it relates to
bankruptcy were fully available to plaintiffs as of the time of their dissatisfaction
with Mr. Kehoe as reflected in the above mentioned testimony. And it should be
added that such facts were more than adequately known to plaintiffs, even in the
absence of Kehoe’s file.
***
For the above stated reasons, it is the considered opinion of this Court that
plaintiffs should have discovered the existence of their remaining claims as to
Kehoe and Mika Meyers well prior to September 11, 1996, six months before
plaintiffs actually filed. In so holding, this Court recognizes the possibility that
such a ruling could have been made back in August of 1997. Regardless, the
additional evidence from the deposition significantly strengthens defendants’
Kehoe and Mika Meyers position and, in this Court’s opinion, is dispositive of the
issue. The Court also recognizes the possibility that Mr. Kehoe may have been
professionally negligent. While a determination on this issue would necessarily
have had to await another day, the Court’s holding today might well be construed
as harsh. Unfortunately for plaintiffs, however, the Court believes it is mandated.
We find no error in the circuit court’s grant of summary disposition based on its
conclusion that plaintiffs’ malpractice action is barred under the six-month discovery rule. The
standard to be applied to legal as well as medical malpractice cases pursuant to MCL
600.5838(2) has been set forth by our Supreme Court in Solowy v Oakwood Hosp Corp, 454
Mich 214, 221-223; 561 NW2d 843 (1997):
This Court adopted the “possible cause of action” standard for determining
when the discovery rule period begins to run in Moll [ v Abbott Laboratories, 444
Mich 1, 16; 506 NW2d 816 (1993)]. The majority concluded that an objective
standard applied in determining when a plaintiff should have discovered a claim.
Further, the plaintiff need not know for certain that he had a claim, or even know
of a likely claim before the six-month period would begin. Rather, the discovery
rule period begins to run when, on the basis of objective facts, the plaintiff should
have known of a possible cause of action. The majority explained:
“We find that the best balance is struck in the use of the ‘possible cause of
action’ standard. This standard advances the Court’s concern regarding
preservation of a plaintiff’s claim when the plaintiff is unaware of an injury or its
cause, yet the standard also promotes the Legislature’s concern for finality and
encouraging a plaintiff to diligently pursue a cause of action. Once a claimant is
aware of an injury and its possible cause, the plaintiff is aware of a possible
cause of action. We see no need to further protect the rights of the plaintiff to
pursue a claim, because the plaintiff at this point is equipped with sufficient
information to protect the claim. This puts the plaintiff, whose situation at one
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time warranted the safe harbor of the discovery rule, on equal footing with other
tort victims whose situation did not require the discovery rule’s protection. [Moll
at 23-24 (emphasis added).]”
While Moll involved pharmaceutical products liability claims, the
majority’s analysis is not specific to those types of claims. Quite the opposite, the
analysis supports applying the standard in the context of other types of tort suits
that are subject to the discovery rule.
This Court’s opinion in Gebhardt [ v O’Rourke, 444 Mich 535; 510 NW2d
900 (1994)] bears this out. In that case, we applied Moll’s “possible cause of
action” standard to the statutory six-month discovery rule applicable to legal
malpractice claims. MCL 600.5838; MSA 27A.5838, as amended by 1986 PA
178. The rationale of Moll applies equally to malpractice actions, whether legal
or medical. Once a plaintiff is aware of an injury and its possible cause, the
plaintiff is equipped with the necessary knowledge to preserve and diligently
pursue his claim. [Emphasis added.]
In the instant case, the injury about which plaintiffs complain is the loss of certain
financial assets. Plaintiffs obviously became aware of this loss in January 1992 when NBD
swept the CSTE account and removed over $350,000 from it, and again in the summer of 1992,
when CSTE was liquidated at a loss by NBD. Given this knowledge, it must be determined
whether or not plaintiffs knew or should have known that Kehoe’s representation of CSTE was a
possible cause of their financial losses. In this regard, the testimony of plaintiff Patricia Yff,
presented by defendants in support of their motion, is significant.
In June 1995, Peter Yff wrote to defendant Kehoe and requested that he send his file to
plaintiffs’ current counsel, Mr. Hullman. The reasons for the request were explained by Mrs. Yff
at her deposition:
Q. Now, this letter, Exhibit 9, which – from your husband’s deposition,
which Mr. Jack just showed you, do you recall discussing with your husband
around that time that you – you needed to get Mark Kehoe’s file?
A. Yes.
Q. All right. And what was the reason why you wanted to contact Mark
Kehoe and get his file to give it to Mr. Hullman?
A. We just wanted to go over it ourself [sic], and also we wanted Mark
[Hullman] just to look at it.
Q. Why?
A. I guess because we were dissatisfied with the way everything was
handled. I . . . felt that we were grossly overcharged by Mark Kehoe.
Q. Okay.
-6-
A. And I wanted to see what his notes had said.
Q. All right. You didn’t want – you didn’t want him discussing the – that
issue, as the letter says, with John Anding or anyone from his firm. Why not?
A. Because I don’t think it was John’s business that we – we wanted to
check, and I guess I – I guess we didn’t want John to think that we were working
behind his back. I just felt that it was – just a personal thing that we wanted to get
this.
***
Q. Just so I’m clear, Mrs. Yff, when you and your husband wrote Mark
Kehoe back in June of 1995, it was because you wanted someone to look over his
file?
A. Yes.
Q. Just because –
A. We were – we were concerned with the – with the billing and I – I – I
just – I wanted to see it.
Q. And you were also concerned about his representation at that point?
A. Yeah, a little.
We agree with the trial court’s assessment that “It is clear from a fair reading of the
above testimony that plaintiffs were not satisfied with defendant Kehoe’s services, and held
some degree of suspicion as to the appropriateness of the same.” In other words, plaintiffs
discovered that they had a “possible” cause of action against defendants in June 1995. Gebhardt,
supra at 544. Mrs. Yff’s deposition testimony indicates at this time plaintiffs had engaged
attorney Hullman to review defendant Kehoe’s file and investigate Kehoe’s representation in the
NBD matter. The undisputed and determinative fact is that no later than June 1995, plaintiffs
were sufficiently concerned about Kehoe’s representation that they sought out another attorney
to contact Kehoe and review various portions of his file. In so doing, it can reasonably be
concluded that they knew or should have known about a possible claim against him, yet failed to
file their complaint until March 1997. It is likewise evident that, for the reasons set forth by the
trial court in its first opinion, plaintiffs should have discovered the alleged malpractice
concerning Kehoe’s failure to advise as to the need for a written agreement long before
September 1996, six months before the complaint was actually filed.
The discovery rule does not act to hold a matter in abeyance indefinitely while a plaintiff
seeks professional assistance to determine the existence of a claim; a plaintiff must act diligently
to discover a possible cause of action and cannot simply sit back and wait for others to inform
him of its existence. Turner v Mercy Hosps & Health Services of Detroit, 210 Mich App 345,
353; 533 NW2d 365 (1995). Moreover, the burden of proof is on plaintiffs to show that they
neither discovered nor should have discovered the claim more than six months before they
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commenced this suit. MCL 600.5838(2). Plaintiffs have not met their burden, notwithstanding
their affidavits.3 The dispositive facts are not in dispute and reasonable minds could not differ
regarding the legal effect of those facts. Jackson Co Hog Producers, supra. We therefore
conclude that the trial court properly determined as a matter of law that plaintiffs’ malpractice
action was barred by the six-month discovery provision of MCL 600.5838(2).
III
Plaintiffs further argue that defendant Kehoe fraudulently concealed his negligence from
plaintiffs by refusing to turn over to attorney Hullman the entire contents of the file regarding
defendant’s work for plaintiffs, by “selecting” Anding (his former partner and acquaintance) as
his successor attorney, and by failing to advise his clients “that he had breached the standard of
care while representing them.”
Under MCL 600.5855, the statute of limitations is tolled when a party conceals the fact
that the plaintiff has a cause of action. Phinney v Perlmutter, 222 Mich App 513, 562-563; 564
NW2d 532 (1997); Sills v Oakland General Hosp, 220 Mich App 303, 310; 559 NW2d 348
(1996); Brownell v Garber, 199 Mich App 519, 523-524; 503 NW2d 81 (1993). The plaintiff
must plead in the complaint the acts or misrepresentations that comprised the fraudulent
concealment. Sills, supra at 310. The fraud must have been manifested by an affirmative act or
misrepresentation, unless the defendant owed an affirmative duty to disclose information because
of a fiduciary relationship with the plaintiff. Brownell, supra at 527. The plaintiff has the
burden of establishing the defendant’s fraud. Id. at 531. Further,
3
Plaintiffs Peter and Patricia Yff filed affidavits in opposition to Kehoe’s motion for summary
disposition in which they denied knowledge that they had a cause of action against Kehoe until
they were so informed by attorney Hullman in October 1996. Also, plaintiff Patricia Yff, in an
affidavit filed in response to Kehoe’s renewed motion for summary disposition, attempted to
explain the “concern” mentioned in her deposition as a concern not with the quality of Kehoe’s
representation but rather a concern that Kehoe’s records and testimony might not be available for
introduction into evidence in the event that she and her husband were granted a new trial in the
NBD action on appeal. Attorney Hullman, in an affidavit submitted in response to the renewed
motion for summary disposition, stated that on August 9, 1996, he had agreed to investigate a
potential malpractice claim against attorney Anding. However, the fact that an objective rather
than subjective standard applies in determining whether a possible claim should have been
discovered, renders plaintiffs’ affidavits insufficient in creating a genuine issue of material fact
necessary to avoid summary disposition. Moreover, we agree with defendants’ observation that
“[i]t stretches credibility too far to assume that the plaintiffs thought they had a possible claim
against defendant Anding at that time and did not think they also had a possible claim against
Kehoe and Mika Meyers when they had been pursuing and examining Kehoe’s file materials for
more than a year because of admitted concerns about the manner in which he had represented
them.”
-8-
No fraudulent concealment can be said to occur where an attorney is
unaware of his malpractice. It would be illogical to hold that attorneys who fail to
appreciate that they have breached the standard of care have a duty to disclose
such a breach notwithstanding their ignorance thereof. See Mallen & Smith,
Legal Malpractice (3d ed), § 18.13, p 126. [Id. at 528-529.]
Here, plaintiffs have failed to plead fraudulent concealment with sufficient specificity,
and their allegations in this regard are wholly unsubstantiated. Although plaintiffs allege that
defendant did not promptly turn over the complete file, and attorney Hullman filed this legal
malpractice case within six months after Kehoe’s file was provided to him, plaintiffs cite no
evidence contained in the file that establishes the concealment of a claim. The record indicates
that the alleged claims of malpractice were all known to attorney Hullman prior to turning over
the entire file; plaintiffs have not demonstrated that any new evidence was discovered as a result
of his review of the Kehoe legal file. Moreover, plaintiffs’ claim that Kehoe did not advise his
clients that he had breached the requisite standard of care is meritless. Kehoe consistently denied
that he breached any standard of care, and mere silence is insufficient to sustain a claim of
fraudulent concealment. Sills, supra at 310. Finally, plaintiffs have presented no evidence that
Kehoe’s “selection” of Anding as his successor resulted in a collaboration to conceal Kehoe’s
malpractice. Plaintiffs’ argument that the statute of limitations should be tolled by MCL
600.5855 is therefore without merit.
Affirmed.
/s/ Kurtis T. Wilder
/s/ Richard Allen Griffin
/s/ Michael R. Smolenski
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