No. 06-1402.Commonwealth of Massachusetts Superior Court. Essex, SS.
June 17, 2010.
MEMORANDUM OF DECISION AND ORDER ON THE DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
MITCHELL H. KAPLAN, Justice.
The plaintiff, Lisa J. Bayko, has brought this action against the defendant, Gary Evans, asserting a claim for legal malpractice.[1]
The case is before the court on the defendant’s motion for summary judgment. The defendant contends that (1) an attorney/client relationship did not exist between him and the plaintiff and therefore he owed her no duty, and (2) if such a duty did exist, her claims were not timely and are barred by the statute of limitations. For the reasons set forth below, the court agrees with both of these contentions and the defendant’s motion is therefore ALLOWED.
FACTS
The following facts are undisputed or viewed in the light most favorable to the
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plaintiff.
Lisa Bayko and her former husband Jeffrey Bayko executed a Separation Agreement on May 24, 2002 settling their marital obligations to one another.[2] That same day the Essex County Probate and Family Court entered a Judgment of Divorce Nisi, which became final ninety days later. To say that the proceedings leading up to the divorce, as well as post-divorce proceedings, were acrimonious would be an understatement. Lisa was represented during her divorce by Attorney Charles Rotundi and, at least as to certain matters, by Attorney Donald Adler as well. Jeffrey’s divorce attorney was Hans Hailey. Beginning at some time in 2001, Evans began to represent Jeffrey with respect to tax matters and the possible filing of a bankruptcy petition. By December 2001, Adler had informed Lisa that Evans represented Jeffrey and, on Evans advice, Jeffrey was considering amending the couples joint tax returns to declare substantial additional income for the tax years 1997 through 1999. Adler advised Lisa that, if amended returns were filed, she should consider protecting herself by filing the appropriate materials with the Internal Revenue Service (“IRS”) under the so-called “innocent spouse rule.”
As noted above, Lisa and Jeffrey executed their Separation Agreement at the Probate Court on May 24, 2002. Lisa was represented by Attorney Rotundi and Jeffrey by Attorney Hailey during the final negotiations and at the divorce hearing. The Separation Agreement recites that except for issues affecting the couple’s minor children, the agreement survives the entry of the divorce decree as an independent contract. Two provisions of the Separation Agreement are relevant to this motion.
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Article III, G. requires the marital home to be marketed for sale. It then includes the following typed provision: “Upon the sale of the marital home, after deducting realtor’s fees (if any), and the customary costs of closing, the joint marital debt which existed at the time of the separation shall be paid from the sale proceeds. Both parties agree to attempt to reduce said marital debt by negotiation and agree to employ an attorney or representative to negotiate said debt if necessary.” At the end of this sentence the following is handwritten: “Any agent or attorney must supply a separate invoice detailing services to both parties regarding negotiation.” Additionally, a carrot is inserted between the two typed sentences and the following handwritten note is interlineated: “See Article III G. Cont.” There is then a handwritten rider signed by Lisa and Jeff attached to the agreement which states:
“From the proceeds of the sale of the marital home, $66,000 shall be given to Attorney Gary Evans to be held in escrow. Attorney Evans shall negotiate payment of “marital debt.” He shall then pay the “marital debt” and, after deducting his fees for those services; pay the remaining portion, in equal share to the parties. “Marital debt” shall mean those liabilities listed n the Financial Statement of the Husband filed on May 30, 2001.”
Evans was contacted by phone by Hailey during the negotiation of this handwritten provision and agreed to undertake the services set out above, after the $66,000 was provided to him, but did not take part in the negotiation or drafting of this provision. The balance of the pre-typed Article III, G. goes on to state that after this $66,000 is escrowed, Lisa shall be paid identified sums for delinquent and future child support and another item, and then the balance of the proceeds of the sale of the home divided equally between Lisa and Jeffrey.
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Article III, J. 2. states, in relevant part, that: “Each party agrees that he or she shall neither contract nor incur any expenses, debts, charges or liabilities in the name of or upon the credit of the other nor for which the other or the other’s legal representative, property or estate will or may be come liable.”
In August, 2002, Evans wrote to Rotundi revisiting the issue of amendments to the couple’s tax returns. He sent Rotundi the amended returns and asked him to have Lisa sign them, but also advised that Jeffrey had no choice but to file the amended returns with or without Lisa’s signature. The amended returns were filed, although the filing date is not clear from the summary judgment record. To avoid personal liability arising from the amended returns, Lisa retained an accountant to assist her in filing for innocent spouse status with the IRS in March, 2003. The IRS did, however, file liens on Jeffrey’s interest in the marital home.
Also in August, 2002, Lisa contacted Joyce Adams, a real estate agent, with a request that she market the marital home. Ms. Adams informed Lisa that Jeffrey’s signature was required for the listing agreement. Lisa did not have a telephone number for Jeffrey, and Ms. Adams was directed to contact Evans by Attorney Hailey who advised her that Evans represented Jeffrey with respect to real estate matters. She faxed the listing agreement to Evans and eventually received a copy signed by Jeffrey, with changes on it. Efforts to sell the property failed for reasons not here relevant. In June 2003, Jeffrey told Ms. Adams that this was Lisa’s fault. Ms. Adams called Evans to tell him that “she would discuss real estate only with his client and that Lisa Bayko had done everything humanly possible to sell this property.”
During negotiations leading up to the execution of the Separation Agreement, Hailey claimed that Lisa and Jeffrey owed Jeffrey’s parents money and should be granted a mortgage on
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the marital property. This request was rejected by Lisa, through her counsel, and was not addressed in the Agreement. Nonetheless, on July 19, 2002, Evans prepared and notarized a mortgage in favor of Jeffrey’s parents on the marital home in the amount of $46,360 and caused it to be recorded. On May 23, 2003, he assisted Jeffrey in granting and recording another mortgage in favor of his parents in the amount of $6,300. Neither Jeffrey nor Evans disclosed these mortgages to Lisa, her attorneys, or the realtor, until July 2, 2003, when the mortgages were listed on a financial statement filed in the Probate and Family Court in connection with post-divorce proceedings.[3] Thereafter, Attorney Rotundi had a title exam performed on the marital home. It was completed on July 18, 2003 and delivered to Rotundi either that day or within a few days thereafter. It disclosed the mortgages to Jeffrey’s parents and Evans’ role in their preparation and recording.
Through the spring of 2003 the bank holding the first mortgage on the marital home was threatening foreclosure for failure to make payments on the note the mortgage secured. A buyer for the home was found, and the sale was scheduled to close on August 5, 2003. Shortly before the closing, the attorney for the bank financing this buyer’s purchase informed Rotundi that the sale could not close because the mortgages held by Jeffrey’s parents (even though only securing Jeffrey’s interest in the property) had to be discharged and, in his opinion, the proceeds were insufficient to pay them off. The attorney further stated that the IRS and Massachusetts
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Department of Revenue liens recorded against Jeffrey’s interest further clouded the title and prevented closing.
Thereafter, litigation in multiple forums ensued as Lisa sought to invalidate the mortgages on the grounds, among others, that they were granted by Jeffrey in violation of the Separation Agreement. With Evans assistance, Jeffrey also filed a bankruptcy petition further complicating Lisa’s efforts to recover the sums due her from the sale of the marital home and adversely affecting her exposure for the couple’s pre-divorce debts.
Lisa filed the instant action against Evans on July 28, 2006.
DISCUSSION
Summary judgment will be granted when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Mass. R. Civ. P. 56(c); Cassesso v. Comm’r of Correction, 390 Mass. 419, 422 (1983). To prevail on his summary judgment motion, the moving party must affirmatively demonstrate the absence of a triable issue, and that the summary judgment record entitles him to a judgment as a matter of law. Pederson v Time, Inc., 404 Mass. 14, 16-17 (1989). If the moving party does not have the burden of proof at trial, he may demonstrate the absence of a triable issue either by submitting affirmative evidence that negates an essential element of the opponent’s case or “by demonstrating that proof of that element is unlikely to be forthcoming at trial.” Flesner v. Technical Communications Corp., 410 Mass. 805, 809 (1991). “[A]ll evidentiary inferences must be resolved in favor of the [nonmoving party].” Boyd v National R.R. Passenger Corp., 446 Mass. 540, 544 (2006).
The nonmoving party, however, cannot defeat a motion for summary judgment by merely asserting that facts are disputed. Mass. R. Civ. P. 56(e); LaLonde v. Eissner, 405 Mass. 207, 209 (1989).
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Rather, to defeat summary judgment the nonmoving party must “go beyond the pleadings and by her own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.” Kourouvacilis v. General Motors Corp., 410 Mass. 706, 714 (1991). “Conclusory statements, general denials, and factual allegations not based on personal knowledge [are] insufficient.” Cullen Enters., Inc. v. Massachusetts Prop. Ins. Underwriting Ass’n, 399 Mass. 886, 890 (1987), quotin Madsen v. Erwin, 395 Mass. 715, 721 (1985).
A. The Attorney/Client Relationship.
“It is the general rule that an attorney’s liability for malpractice is limited to some duty owed to a client. . . . Where there is no attorney/client relationship there is no breach or dereliction of duty and therefore no liability[4] . . . . An attorney/client relationship need not rest on an express contract. An attorney-client relationship may be implied when (1) a person seeks advice or assistance from an attorney, (2) the advice or assistance sought pertains to matters within the attorney’s professional competence, and (3) the attorney expressly or impliedly agrees to give or actually gives the desired advice or assistance. . . . In appropriate cases the third element may be established by proof of detrimental reliance, when the person seeking legal services reasonably relies on the attorney to provide them and the attorney, aware of such reliance, does nothing to negate it.” (Internal citations and quotations omitted.)DeVaux v. American Home Assurance Co., 387 Mass 814, 818 (1983).
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Additionally, “[i]n a legal malpractice action it is not sufficient merely to prove an attorney-client relationship existed with respect to some matters. It is necessary to establish that the relationship existed with respect to the act or omission upon which the malpractice claim is based.” Page v. Frazier, 388 Mass. 55, 62 n. 10 (1983), citing, Kurtenbach v. Tekippe, 260 N.W. 2d 53, 56 (Iowa 1977).
In the present case, before considering whether an attorney/client relationship exists between Lisa and Evans, it is useful to consider the acts or omissions that Lisa alleges violated the duty owed her by Evans. In her answers to Evans’ interrogatories, Lisa identifies the following acts: assisting Jeffrey in filing for bankruptcy which caused marital debt to fall on me; assisting Jeffrey in filing amended tax returns, which forced me to file for Innocent Spouse status, which caused tax liens to placed on the marital home; and assisting Jeffrey’s parents in securing the mortgages on the home.[5] None of these activities involve providing a legal service to Lisa, or failing to provide a service for Lisa that she understood Evans would be performing for her. Rather, they all involve legal services that Evans undertook on behalf of Jeffrey.
DeVaux suggests that the first point to consider in determining whether an attorney/client relationship exists is whether Lisa and Evans have an express agreement in which he agrees to provide legal services for her. The court finds that they do not. The only place such an express
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agreement could arise is in the rider to the Separation Agreement. That Agreement states that $66,000 will be placed in escrow with Evans after the marital home is sold. That sum represents the amounts owed to the couples’ creditors. In the rider, Evans agrees that after the sum is deposited with him, he will attempt to convince the couple’s creditors to take less than the full amount owed them and both Lisa and Jeffrey will share equally in any savings that Evans can achieve. Although Evans did not sign the Separation Agreement, he consented to his name being included and fairly could be said to have accepted the engagement outlined in it. The escrow was, however, never funded and that was clearly a condition precedent to any obligation that he undertook to act on behalf of Lisa. He received no confidential information from Lisa in preparation for his undertaking that task. Lisa paid him nothing to serve in that standby capacity. And certainly, he could have changed his mind with respect to the assignment any time before he accepted the funds. His agreement to do anything on behalf of Lisa was contingent and the contingency never happened.
Moreover, the limited nature of that assignment was consistent with Evans’ primary role in connection with these events, i.e., representing Jeffrey in tax and bankruptcy matters. In negotiating with creditors, he would not have to undertake any act that was adverse to Jeffrey’s interests or receive confidential information from Lisa. When Lisa, Jeffrey and their respective lawyers agreed contingently to engage Evans to deal with the creditors, it was well known that Evans had been representing Jeffrey in connection with a possible bankruptcy petition and tax matters. As noted above, Attorney Adler had explained that Evans was representing Jeffrey on these subjects in his December 2001 letter to Lisa. Jeffrey filing amended tax returns and/or filing a bankruptcy petition would both be acts adverse to Lisa’s interests. Lisa could have no
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reasonable expectation that Evans would cease to advise Jeffrey with respect to these matters, because he agreed to negotiate with the couple’s creditors after the escrow was funded.
Additionally, in August 2002, just two months after the separation agreement was executed, Evans wrote to Attorney Rotundi asking him to have Lisa sign the amended tax returns and stating that Jeffrey was going to file them whether she signed or not. If Lisa or her lawyers had any possible misconception about whether Evans was continuing to represent Jeffrey, it would have been corrected by that correspondence. Moreover, also in the summer of 2002, Lisa’s realtor, Ms. Adams, knew that Evans represented Jeffrey with respect to real estate matters and on August 15, 2002, faxed Evans the listing agreement to obtain Jeffrey’s signature. It was returned to her with comments.
Where Lisa’s claims against Evans arise out of acts that he undertook in his representation of Jeffrey rather than negligently performing some act on behalf of Lisa, or failing to do something on her behalf that she reasonably expected him to do; and where Lisa could not reasonably believe that Evans stopped representing Jeffrey after the Separation Agreement was signed, she cannot now assert that Evans representation of Jeffrey in connection with the amended tax returns, bankruptcy petition or mortgages to Jeffrey’s parents constituted legal malpractice with respect to her interests, i.e., a breach of a duty owed her arising out of an attorney/client relationship between her and Jeffrey.
A further comment concerning Jeffrey’s role in preparing and recording the mortgages on the marital home in favor of Jeffrey’s parents may be warranted. It was suggested at oral argument that because the $66,000 to pay the creditors was to come from the sale of the home, Evans involvement in any activity that might have the effect of delaying that sale or reducing the
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proceeds of the sale that would otherwise go to Lisa violated a duty that Evans had accepted by agreeing to serve as the escrow agent and negotiate with the creditors. The court disagrees. Evans clearly did not undertake any obligation to take any action in connection with the sale of the home. Indeed, the realtor, Ms. Adams was told that Evans represented Jeffrey in connection with real estate matters. There is nothing in the summary judgment record from which a fact finder could conclude that Evans had agreed to act on behalf of Lisa with respect to the sale or that could cause her reasonably to believe that Evans would do anything other than look after Jeffrey’s interests with respect to that sale. Finally, the court offers no opinion on whether, if Evans knew the terms of the Separation Agreement, it was a violation of the Code of Professional Responsibility for him to assist Jeffrey in granting the mortgages to Jeffrey’s parents. That is because such a violation would not be a violation of a duty owed to and enforceable by Lisa.
B. The Statute of Limitations.
Legal malpractice claims are subject to the three-year period of limitations set out in G.L. c. 260, § 4. The discovery rule, however, “in effect, stretches the limitations period for a legal malpractice action by tolling the statue of limitations to the point in time when the alleged harm or loss caused by the legal malpractice is (or reasonably should have been) discovered.”Frankston v. Dennison, 74 Mass. App. Ct. 366, 373 (2009). “Although the statute of limitations on a legal malpractice action does not begin to run until the plaintiff has been harmed by the attorney’s malpractice, it is not necessary that the plaintiff know the full extent of harm or loss or know precisely what manner and what harmful after-effects flow from the alleged malpractice; rather, once a client or former client knows or reasonably should know that he or she has sustained
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appreciable harm as a result of the lawyer’s conduct, the statute of limitations starts to run. . . . Thus for statute of limitations analysis concerning alleged legal malpractice, one starting point may be measured from the time that the client suffered appreciable harm by the incurring of additional attorneys’ fees and expenses required to ameliorate the harm caused by the attorney’s alleged error. . . . And such appreciable harm through the incurring of such legal fees is sufficient to activate a duty of inquiry by the client into the issue/problem underlying the potential legal error or omission and to commence the running of the legal malpractice statute of limitations.” (Internal citations and quotations omitted; emphasis in original.) Id. at 374-375.
In the instant case, the plaintiff did not file her complaint until July 28, 2006. Therefore, if Lisa knew or should have known that she had sustained appreciable harm as a result of Evans’ alleged malpractice before July 28, 2003, her claims are time barred. As noted above, Lisa contends that Evans assistance to Jeffrey in filing the amended tax returns, and thereby favoring Jeffrey’s interests at her expense, constituted an act of malpractice.[6] It is undisputed that Lisa knew that Evans was representing Jeffrey in connection with tax matters at least as early as December 2001, when attorney Adler wrote to her concerning this representation and advising her that she might need to file for innocent spouse status with the IRS. In August 2002, Evans wrote to Lisa’s attorney Rotundi asking him to have Lisa sign the amended returns, but also stating that Jeffrey was going to file them whether she did or not. Then, no later than March 2003,
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Lisa hired an accountant to assist her in filing materials to establish her position as an innocent spouse. Under established case law, incurring expense to hire that accountant to help her ameliorate the effect of the amended returns constituted appreciable harm. Id. at 376, quoting Levin v. Berley, 728 F.2d 551, 554 (1st Cir. 1984) “(plaintiff’s injury did not await the tax court’s decision upholding the Internal Revenue Service’s assessment of deficiency, but started when the plaintiff paid additional legal fees to negotiate with the Internal Revenue Service to ameliorate a tax error caused by the plaintiff’s attorney).”
Lisa also contends that Evans’ assistance to Jeffrey in granting the mortgages to his parents was an act of malpractice. She first learned of the mortgages on July 2, 2003. Her attorney, Rotundi, then retained a title examiner to examine the title on the marital home. By July 18, 2003, or within a day or two thereafter, the title examiner had delivered her report to Rotundi, which disclosed both the mortgages and Evans’ involvement with them. By that point, Lisa had incurred legal fees and title examination fees as a result of the mortgages and knew that Evans had a role in preparing and recording them. Again, existing case law establishes that these fees constituted appreciable harm. Id. at 376, quotin Cantu v. St. Paul Cos., 401 Mass. 53, 57 (1987) “(though the extent of the harm, caused by the attorney’s failure to give notice to an excess insurer, would not be known until the appeal concluded in the underlying case, the plaintiff had notice of harm when he retained another attorney for advice on his personal liability for the judgment).” Similarly in this case, Lisa’s argument that she thought that Jeffrey’s parents could be prevailed upon to release their mortgages so that the sale scheduled on August 5, 2003 could close and therefore she did not know the extent of her injury until they refused to do so does not continue the tolling period to that date. She had already incurred expense in running the
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title (which examination disclosed Evans’ role in the mortgages) and having her attorney consider what steps should be taken to deal with the mortgages.[7] Additionally, although unnecessary given the expense incurred in the title exam, one can argue that once Lisa knew of the existence of the mortgages and Evans’ role in their preparation and recording she was on inquiry notice of appreciable harm because the very existence of the mortgages created a claim on property in which she had an ownership interest and therefore a cloud on the title, i.e., their very existence was harm, even if that harm could later be abated by their discharge.
ORDER
For the foregoing reasons, the defendant’s motion for summary judgment is hereby ALLOWED. Final judgment shall enter dismissing the complaint.
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