Sheryl Schwab v. Jennifer Zahradnik ( 2019 )


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  •                    IN THE COURT OF APPEALS OF IOWA
    No. 18-1118
    Filed July 24, 2019
    SHERYL SCHWAB,
    Plaintiff-Appellant,
    vs.
    JENNIFER ZAHRADNIK,
    Defendant-Appellee.
    ________________________________________________________________
    Appeal from the Iowa District Court for Benton County, Lars G. Anderson,
    Judge.
    A claimant appeals the district court rulings dismissing her claims of legal
    malpractice. AFFIRMED.
    Peter C. Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for appellant.
    Gregory M. Lederer and Shannon M. Powers of Lederer Weston Craig PLC,
    Cedar Rapids, for appellee.
    Heard by Vaitheswaran, P.J., and Tabor and Bower, JJ.
    2
    BOWER, Judge.
    Sheryl Schwab appeals the district court’s grant of summary judgment in
    her legal malpractice action against her dissolution attorney, Jennifer Zahradnik.
    Schwab claims Zahradnik provided negligent legal representation by failing to
    preserve her rights to her ex-spouse’s potential medical-malpractice claim, her
    right to file a loss-of-consortium claim, and a right to reimbursement for insurance
    premiums paid during the dissolution. We find Schwab had no right to her ex-
    spouse’s post-dissolution personal-injury settlement. We also find any claims she
    might have had accrued at the time of the dissolution decree and have expired
    under the statute of limitations. We affirm the district court’s grant of summary
    judgment in favor of Zahradnik.
    I.     Background Facts & Proceedings
    In September 2008, Schwab filed a petition to dissolve her marriage with
    Dennis Musel.    Zahradnik represented Schwab in the proceedings.          Prior to
    completion of the dissolution proceedings, Musel sustained injuries during surgery
    which led to Musel’s partial paralysis. On June 16, 2009, Musel’s attorney sent a
    letter to Zahradnik indicating Musel was contemplating a medical malpractice
    action and would reimburse Schwab for insurance premiums paid during the
    dissolution but would not agree to Schwab receiving any of the settlement
    proceeds.
    Schwab and Musel submitted a stipulated dissolution decree, which was
    approved by the court on July 8, 2009. Schwab knew of Musel’s potential medical-
    malpractice claim at the time the decree was entered, though Musel had told her
    he was not intending to bring a claim. The dissolution decree did not preserve any
    3
    claim Schwab might assert to Musel’s potential malpractice action, preserve her
    own potential loss-of-consortium claim, or preserve a right to reimbursement for
    the insurance premiums.
    Musel filed his medical-malpractice claim in March 2012 and settled in
    November 2013. Schwab learned of the settlement through an article in the
    newspaper and then requested her dissolution file from Zahradnik.
    On January 5, 2017, Schwab filed a legal malpractice petition against
    Zahradnik.    Schwab made three negligent representation claims against
    Zahradnik: failure to preserve Schwab’s right to make a claim against Musel’s
    medical-malpractice action and failure to preserve a loss-of-consortium claim;
    failure to preserve Schwab’s right to reimbursement of insurance premiums; and
    failure to inform Schwab of Musel’s intent to file a claim and her related rights.
    Schwab also brought a breach-of-contract claim against Zahradnik, alleging
    Zahradnik had failed to inform Schwab of Musel’s potential medical-malpractice
    claim and failed to preserve her rights in the dissolution decree. Zahradnik’s
    answer included two affirmative defenses: Schwab’s legal-malpractice claim was
    time-barred by the statute of limitations and Schwab was a proximate cause of her
    own damages.
    In February 2018, Zahradnik filed a motion for summary judgment based on
    the statute-of-limitations defense; Schwab resisted.   The district court denied
    summary judgment on March 30. On April 20, the court amended its ruling and
    granted Zahradnik summary judgment as to any allegations concerning loss of
    consortium, finding Schwab held such rights independent of Musel’s medical-
    malpractice claim and any loss of consortium occurred during Schwab and Musel’s
    4
    marriage. Because her loss-of-consortium claim accrued during the marriage and
    was lost with the decree in 2009, it was time barred by the statute of limitations.
    The remaining negligence and contract claims on Zahradnik’s failure to preserve
    Schwab’s right to make a claim against Musel’s medical-malpractice recovery and
    her right to reimbursement of insurance premiums remained set for trial.
    On April 23, in a pretrial colloquy, Schwab indicated she was not pursuing
    the legal malpractice as a breach-of-contract claim.1      The court revisited the
    summary judgment motion and granted summary judgment in favor of Zahradnik
    on the negligence claim. Schwab filed an Iowa Rule of Civil Procedure 1.904(2)
    motion to reconsider, enlarge, and amend, which the court denied.
    Schwab appeals.
    II.    Standard of Review
    We review a summary judgment ruling for correction of errors at law. Huck
    v. Wyeth, Inc., 
    850 N.W.2d 353
    , 362 (Iowa 2014).           “Summary judgment is
    appropriate when the moving party demonstrates that no genuine issue of material
    fact exists and that the movant is entitled to judgment as a matter of law.”
    Vossoughi v. Polaschek, 
    859 N.W.2d 643
    , 649 (Iowa 2015).            We afford the
    nonmoving party “every legitimate inference that can be reasonably deduced from
    the evidence.” Hills Bank & Tr. Co. v. Converse, 
    772 N.W.2d 764
    , 771 (Iowa 2009).
    If reasonable minds can differ on the inferences drawn from the evidence in a way
    1
    Schwab had alleged the malpractice in terms of breach of a legal contract of
    representation and as negligent representation. However, “[l]egal malpractice claims
    sound in negligence.” Vossoughi v. Polaschek, 
    859 N.W.2d 643
    , 649 (Iowa 2015).
    5
    that might affect the outcome of a lawsuit, a genuine issue of material fact exists.
    Banwart v. 50th St. Sports, L.L.C., 
    910 N.W.2d 540
    , 544–45 (Iowa 2018).
    III.    Analysis
    A plaintiff alleging legal malpractice must produce substantial evidence of
    the following elements:
    (1) an attorney-client relationship existed giving rise to a duty; (2) the
    attorney violated or breached the duty, either by an overt act or a
    failure to act; (3) the breach of duty proximately caused injury to the
    client; and (4) the client did sustain an actual injury, loss, or damage.
    Stender v. Blessum, 
    897 N.W.2d 491
    , 502 (Iowa 2017).                   A claim for legal
    malpractice must be brought within five years of accrual. Venard v. Winter, 
    524 N.W.2d 163
    , 165–66 (Iowa 1994) (applying Iowa Code § 614.1(4)).
    On appeal, Schwab asserts three claims of legal malpractice against
    Zahradnik.2 First, we will address her claim relating to Musel’s personal-injury
    settlement. Next, we will consider her loss-of-consortium claim. Finally, we will
    address her claim for reimbursement for insurance premiums.
    Because the district court determined Schwab’s claims were barred by the
    statute of limitations, the question before us is when did Schwab’s legal-
    malpractice cause of action accrue. Zahradnik suggests the legal-malpractice
    action is a collateral attack on the dissolution decree itself. Schwab had one year
    after the dissolution decree to challenge its validity under a claim of fraud by Musel.
    See Iowa Rs. Civ. P. 1.1012–.1013; see also Simon v. Simon, No. 15-0814, 
    2016 WL 1703521
    , at *1–2 (Iowa Ct. App. Apr. 27, 2016) (finding a fraud petition relating
    2
    Schwab also asks on appeal that our decision in In re Marriage of Jervik, No. 15-0766,
    
    2016 WL 5930425
    (Iowa Ct. App. Oct. 12, 2016), be overruled. Our supreme court
    transferred this appeal to our court, and we decline Schwab’s invitation to overrule Jervik.
    6
    to the value of an asset awarded in the dissolution decree based on pre-dissolution
    representations to be an untimely and therefore an impermissible collateral attack
    on the dissolution decree).
    “No cause of action accrues until the attorney’s act or omission, which
    constitutes the breach of duty, produces actual injury to the plaintiff’s interest.”
    Skadburg v. Gately, 
    911 N.W.2d 786
    , 792 (Iowa 2018). “[T]he statute of limitations
    does not begin to run on a legal malpractice claim until . . . . the client sustains an
    actual, nonspeculative injury and has actual or imputed knowledge of the other
    elements of the claim.” 
    Vossoughi, 859 N.W.2d at 652
    (footnote omitted). The
    injury must be an actual loss, not speculative harm. Id.; see also 
    Skadburg, 911 N.W.2d at 792
    .
    A.     Interest in Musel’s medical-malpractice action.               The critical
    element here is when Schwab suffered damage, if at all, with respect to Musel’s
    medical-malpractice action.      Schwab dates her alleged injury to when she
    discovered Musel had filed and settled a medical-malpractice action. Zahradnik
    places the date of injury, if any, at the time of the dissolution decree.
    The district court found Musel’s 2013 settlement “irrelevant to what Ms.
    Schwab would have or should have received at the time of the divorce,” Schwab’s
    damages were not speculative, and the statute of limitations had passed. In its
    ruling on the motion for additional findings, the court concluded Schwab did not
    have a right to Musel’s post-dissolution recovery and fixed her damages at the time
    of divorce, resulting in the claim being barred by the statute of limitations.
    In order to determine when Schwab’s damages occurred, we must
    determine how Schwab was injured.             Settlement payments received before
    7
    dissolution are marital property. In re Marriage of Schriner, 
    695 N.W.2d 493
    , 497
    (Iowa 2005). “The proceeds of a personal injury claim are divided according to the
    circumstances of each case.” In re Marriage of Plasencia, 
    541 N.W.2d 923
    , 926
    (Iowa Ct. App. 1995) (citing In re Marriage of McNerney, 
    417 N.W.2d 205
    , 206
    (Iowa 1987)). Settlement proceeds do not automatically belong to either party.
    
    McNerney, 417 N.W.2d at 208
    . Rights not specifically preserved in the dissolution
    decree are forfeited. Iowa Code § 598.20 (2009); see also 
    Plasencia, 541 N.W.2d at 926
    . Moreover, benefits and proceeds received after a divorce is final are the
    separate property of the injured spouse. In re Marriage of Schmitt, No. 15-1207,
    
    2016 WL 3556462
    , at *4 (Iowa Ct. App. June 29, 2016). We have held a spouse
    does not have “a right to any part of a future recovery made after the dissolution.”
    In re Marriage of Jervik, No. 15-0766, 
    2016 WL 5930425
    , at *7 (Iowa Ct. App. Oct.
    12, 2016).
    Even if we found Schwab had a right to a part of Musel’s recovery and found
    Zahradnik violated a duty to Schwab in failing to preserve that right, the statute of
    limitations would bar Schwab’s claim against Zahradnik. The dissolution decree
    was entered in 2009, more than five years before Schwab commenced this action
    on January 5, 2017. Therefore Iowa Code section 614.1(4) bars Schwab’s action
    unless a legal doctrine tolls the limitations period. See 
    Skadburg, 911 N.W.2d at 793
    .
    Schwab seeks to apply the discovery-rule exception, which tolls the
    limitations period until the plaintiff has actual or imputed knowledge of all the
    elements of the action. See 
    id. at 794.
    As the party attempting to avoid the
    limitations period, Schwab has the burden of demonstrating any exception. See
    8
    
    id. at 793.
    When a plaintiff has information alerting “a reasonable person of the
    need to investigate, the plaintiff ‘is on inquiry notice of all facts that would have
    been disclosed by a reasonably diligent investigation.’” 
    Id. at 794
    (citation omitted).
    The plaintiff’s cause of action accrues when the plaintiff has imputed knowledge,
    i.e., knows or should have known sufficient facts to recognize the problem existed.
    See 
    id. at 795.
    Schwab asserts there remains a genuine issue of material fact precluding
    summary judgment on her legal-malpractice claim because Musel informed her he
    was not going to pursue a medical-malpractice action and she only became aware
    this was not true when she read of his settlement in 2013.             However, it is
    undisputed Schwab was aware Musel had suffered a personal injury during their
    marriage. Schwab knew of the possibility of Musel’s medical-malpractice action,
    even if she did not know it would be pursued. Schwab consented to a dissolution
    of marriage decree that did not preserve any claim with respect to Musel’s personal
    injury. Schwab knew at the time the decree was entered that it did not preserve
    for her any rights to any future recovery by Musel. While the amount of the
    potential damages was not discovered until 2013, Schwab was on inquiry notice
    from the time the decree was filed—any claim accrued at that time.
    Schwab had no right to any recovery Musel obtained following the
    dissolution of their marriage. Iowa Code § 598.20; see also Jervik, 
    2016 WL 5930425
    , at *7. Because she had no right to Musel’s post-dissolution recovery,
    Schwab was not injured upon discovery of Musel’s settlement of his medical-
    9
    malpractice claim.3 The marital property division, including the parties’ respective
    rights and obligations, occurred at the time of dissolution in 2009, and Schwab at
    that time knew sufficient facts to put her on inquiry notice and have imputed
    knowledge of her potential claim. Without the parties agreeing otherwise, Schwab
    was not injured when Musel settled his malpractice claim, and any claim arising
    from her lack of a right to a portion of his settlement accrued at the time of the
    dissolution decree.
    B.      Loss-of-consortium claim. Schwab also alleges Zahradnik was
    negligent by failing to preserve a loss-of-consortium claim in the dissolution
    decree. The district court determined the cause of action relating to Schwab’s
    loss-of-consortium claim accrued in 2009 upon entry of the decree. On appeal,
    Schwab concedes her claim relating to a loss of consortium is barred under the
    statute of limitations.
    The spouse of an injured person is entitled to seek damages for the loss of
    “such intangible elements as company, cooperation, affection and aid.” Spaur v.
    Owens-Corning Fiberglas Corp., 
    510 N.W.2d 854
    , 869 (Iowa 1994) (citation
    omitted). The claim is distinct from the injured party’s personal-injury claim. See
    Fuller v. Buhrow, 
    292 N.W.2d 672
    , 675 (Iowa 1980). “[A] loss of consortium claim
    is a ‘right acquired by marriage’ and . . . is forfeited unless specifically preserved”
    3
    The district court explained that at the time of the dissolution the most Schwab could
    have claimed was a greater portion of the marital property in anticipation of Musel’s
    recovery potential. Schwab argues on appeal that by doing so, the district court decided
    a claim she had not pleaded and the court did not rule on her pleaded claim. However,
    the district court found she had no damages in 2013 because she had no rights to Musel’s
    medical-malpractice settlement. The remainder simply explored what right she may have
    had at the time of the dissolution decree and noted any action arising out of the dissolution
    decree is time-barred.
    10
    in the dissolution decree. Beeck v. Aquaslide ‘n’ Dive Corp., 
    350 N.W.2d 149
    , 167
    (Iowa 1984) (citation omitted)).
    Schwab’s loss-of-consortium claim, while related to Musel’s claims, was
    separate and held by her alone while they were married. Schwab had the right to
    bring a loss-of-consortium claim within five years beginning from the time of
    Musel’s injury. Upon entry of the dissolution decree, Schwab’s damages for loss
    of consortium ceased. Schwab knew of Musel’s injury and her own efforts to help
    him prior to the dissolution. No loss-of-consortium claim was preserved in the
    dissolution decree in 2009. See Michael v. Harrison Cty. Rural Elec. Coop., 
    292 N.W.2d 417
    , 420 (Iowa 1980) (holding failure to preserve in the dissolution decree
    a right to “loss of consortium arising out of personal injury to the other spouse
    during the marital relationship” results in forfeiture of the right to maintain the
    action).    We find Schwab’s legal-malpractice claim relating to her loss-of-
    consortium claim is time-barred by the statute of limitations.
    C.     Insurance premium reimbursement.            Schwab’s final claim is
    Zahradnik provided negligent representation by failing to preserve her right to seek
    reimbursement for insurance premiums paid on Musel’s behalf during the
    marriage. The district court made no specific factual findings as to the insurance
    premiums. The insurance premiums were paid during the marriage, and the
    money used to pay them was marital property. Schwab knew she had paid the
    premiums at the time of the dissolution and knew at the time of the decree that she
    was not receiving reimbursement for those premiums.
    We affirm the district court dismissal of Schwab’s legal-malpractice claim
    relating to failure to preserve Schwab’s right to a portion of Musel’s medical-
    11
    malpractice action and dismissal of the failure to preserve Schwab’s loss-of-
    consortium claim as time-barred. We also find there is no genuine issue of material
    fact as to Musel’s offer to reimburse Schwab’s insurance premium costs for the
    same reasons previously stated.
    AFFIRMED.