Tolling: Duty Trumps Unknown Damage

"The overriding public policy concern is that not commencing legal malpractice actions in a timely fashion results in stale claims."

That is how the the panel of judges in Wachovia v. Ferretti decided that the statute of limitations for a breach of contract claim starts; when the duty is breached and the statute is only tolled until the plaintiff should reasonably have found out about the claim as opposed to waiting until a judgment is entered or appeals are finished. Wachovia Bank, N.A. v. Ferretti, 935 A.2d 565 (Pa. Super. 2007). This has the somewhat unintuitive result that the lack of realized damages does not always toll the statute of limitations in a legal malpractice claim, meaning that the claim must be brought in what may seem like a premature time.

"When bringing a legal malpractice claim, both the negligence and breach of contract claims need to be brought at the same time in order to avoid waiving one of the claims", Judge Bender said. The statute of limitations for negligence is two years and doubles to four years for a breach of contract claim.

The appellate court noted that to avoid waiver of either claim it had against the attorney, the bank had to assert both the negligence and breach of contract in one action, because the claims arose from the same transaction or occurrence against the same person.The bank's legal malpractice and breach of contract causes of action against the attorney accrued at the time the attorney allegedly breached a duty owed to the bank, when she failed to mark the judgment "satisfied."

However, even assuming the bank, despite the exercise of due diligence, could not have reasonably been aware of the alleged breach until the lendee initiated proceedings against the bank, the bank's legal malpractice suit, which was filed 11 years later, was barred by the statute of limitations. This was because the lack of realized damages does not toll the statute of limitations in a legal malpractice claim.

The malpractice case began when an attorney, Reneé Lynne Ferretti, filed a praecipe in Lehigh County indicating that the action was settled, discontinued, and ended, and also acknowledging satisfaction of the judgment. Ferretti also filed a praecipe in Bucks County, indicating that the action was settled, discontinued, and ended; however, she failed to have the Bucks County judgment marked "satisfied." The lendee, Ralph R. Pisani, against whom the judgment had been entered, sued the predecessor in interest after he had trouble getting credit due to the judgment not being marked appropriately in Bucks County.

Wachovia initiated a legal malpractice claim in Lehigh County against Ferretti and her firm on Sept. 9, 2005. It asserted both negligence and breach of contract claims. Wachovia further argued that actual loss was required before it could bring both its claims and a suit against Ferretti prior to that time would have been premature. According to Wachovia, the date on which both its causes of action accrued was June 30, 2003, i.e., when Wachovia suffered actual loss by entry of the judgment of over three million dollars in favor of Pisani.

Additionally, Wachovia argues that, because it did not suffer an "actual loss" until the judgment in the Pisani case was affirmed on appeal, the statute of limitations on its legal malpractice claim should have been tolled until tJuly 7, 2005, when the Supreme Court of Pennsylvania denied Wachovia's petition for allowance of appeal from the underlying judgment in favor of Pisani. As both issues are premised on Wachovia's contention that "actual loss" is required to trigger the statute of limitations.

However, the court entered an order granting Ferretti's motion for judgment on the pleadings and dismissing Wachovia's complaint with prejudice. Wachovia's argument is not the law in Pennsylvania. In Pennsylvania, the occurrence rule governs when the statute of limitations begins to run in a legal malpractice action, and the statute of limitations "is tolled only until the injured party should reasonably have learned of this breach." Accordingly, the pendency or potential pendency of an appeal in the underlying case tolling the statute of limitations in the legal malpractice action was rejected by the court.

The court concluded that Wachovia's professional negligence claim, governed by a two-year statute of limitations, accrued on June 30, 2003, when the Bucks County trial court entered judgment against Wachovia's predecessor, in favor of Pisani and was thus barred.

As for Wachovia's breach of contract claim, governed by a four-year statute of limitations, the trial court determined that Attorney Ferretti's failure to mark the Bucks County action as "satisfied" in September of 1992 constituted a breach of contract with the bank. However, the court further concluded that "it also could be reasonable to assume that the Bank did not know of the breach until Pisani filed his suit on October 20, 1994." So, the statute of limitations for the breach of contract claim began to run either in September of 1992 or in October of 1994.

Either way however, Wachovia's action was filed well-after the expiration of the four-year limitations period and the claim was dismissed. The court summarized its findings by saying that whether damages are remote or speculative is not an issue, they only have to be identifiable.

What this means for litigants henceforth is that once malpractice is apparent, the suit must be brought, even without the proper amount of damages known. This also means that practically, you could be suing your attorney at the same time an appeal is taking place, having to take opposing views on the same claim. However, the court seemed to think that this was best for public policy. Only time will tell.

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