Thorpe v. DeMent , 69 N.C. App. 355 ( 1984 )

JOHNSON, Judge.

The sole question presented by this appeal is whether the record discloses that the plaintiffs’ claim is barred by the running of the statute of limitations. If so, defendants were entitled to judgment as a matter of law, and summary judgment under G.S. 1A-1, Rule 56, was appropriate. Brantley v. Dunstan, 10 N.C. App. 706, 179 S.E. 2d 878 (1971).

The defendants argue that the malpractice action was not filed within three years of accrual of the cause of action and that plaintiffs may not proceed under the latent or non-apparent injury discovery proviso of G.S. 145(c) because plaintiffs either discovered or should have discovered the fact of loss within two years of the accrual of the cause of action. Both parties essentially agree that the date of the last act of the defendant giving rise to the cause of action for failing to give notice to the Wilson estate was 16 October 1976. This was the last date upon which notice of the wrongful death action could have been validly presented to the personal representative of the negligent tort-feasor’s estate. See G.S. 28A49-3; Thorpe v. Wilson, 58 N.C. App. 292, 293 S.E. 2d 675 (1982). The record reveals that on or about 17 November 1977, defendant DeMent informed plaintiffs that he had failed to give notice directly to the Wilson estate. At the same time, DeMent also informed plaintiffs that the Wilson estate had offered to settle the claim for $27,500. Plaintiffs rejected the settlement offer, obtained new counsel and proceeded to trial. On 16 August 1979, the order granting summary judgment in favor of the Wilson estate to the extent that coverage for the Thorpes’ claim was not provided by the decedent’s liability insurance was entered in the wrongful death action (Thorpe v. Wilson). On 31 October 1979, the present action for legal malpractice was filed, which was more than three years after 16 October 1976.

G.S. 1-15 provides, in pertinent part:

(c) Except where otherwise provided by statute, a cause of action for malpractice arising out of the performance of or failure to perform professional services shall be deemed to accrue at the time of the occurrence of the last act of the defendant giving rise to the cause of action: Provided that whenever there is bodily injury to the person, economic or monetary loss, or a defect in or damage to property which originates under circumstances making the injury, loss, defect or damage not readily apparent to the claimant at the time of its origin, and the injury, loss, defect or damage is discovered or should reasonably be discovered by the claimant two or more years after the occurrence of the last act of the defendant giving rise to the cause of action, suit must be commenced within one year from the date discovery is made: Provided nothing herein shall be construed to reduce the statute of limitation in any such case below three years. Provided further, that in no event shall an action be commenced more than four years from the last act of the defendant giving rise to the cause of action. . . .

For a plaintiff to avail himself of the one-year extension under the latent injury discovery rule, then, he must show that:

(1) the injury of economic loss originated under circumstances making the injury or loss not readily apparent at the time of its origin;

(2) the injury or loss was discovered or should reasonably have been discovered by the plaintiff two or more years after the occurrence of the last act of the defendant giving rise to the cause of action;

(3) suit was commenced within one year from the date discovery was made; and

(4) the statute of limitations may not, in any case, have been reduced to below three years or extended beyond four years.

The last day on which a claim against the Wilson estate could have been made in order to prevent a bar against recovery from the general assets of that estate was 16 October 1976. That is the date on which the cause of action for the defendants’ alleged malpractice accrued. G.S. 145(c); Brantley v. Dunstan, supra. Plaintiffs correctly contend that their injury or loss was not readily apparent at the time of its origin because they were entitled to rely on the defendants to make the required presentment to the Wilson estate within the time prescribed by statute.

The plaintiffs reposed their trust in the defendants to properly handle all of the claims arising out of their intestate’s wrongful death on 16 April 1976. The contingency fee contract executed between plaintiffs and defendants on 30 April 1976 provided that defendant “Attorneys will devote their full professional abilities to case and clients agree to fully cooperate with the Attorneys.” Part of the defendants’ professional responsibilities included presentation of the plaintiffs’ claim to the personal representative of the negligent tortfeasor, Robert Manson Wilson. The plaintiffs, who are laymen, became aware that their claim was not timely presented only when they were so advised by their attorneys, the defendants. Logically, defendants could only have advised plaintiffs of their omission after the close of the six month presentment period. Necessarily, then, the loss was “not readily apparent” to plaintiffs at the time of its origin. See Black v. Littlejohn, 67 N.C. App. 211, 214, 312 S.E. 2d 909, 912 (1984) (Johnson, J., dissenting) (action for medical malpractice; while physician-patient relationship continues, the plaintiff is not ordinarily put on notice of the negligence of the physician upon whose skill, judgment and advice she continues to rely).

However, we do not agree with plaintiffs’ further related contentions (1) that they were not put on notice of their loss as a matter of law by reason of DeMent’s informing them of his failure to make a timely presentment of their claim; (2) that “in the course of legal proceedings, a claimant may not suffer a ‘loss’ unless and until a judge so declares”; and (3) that only with entry of the 16 August 1979 order barring their recovery from the general assets of the Wilson estate, did they-jdiscover an “economic or monetary loss” resulting from defendants’ omission. In their brief, plaintiffs concede that prior to Judge Britt’s ruling in the wrongful death action, they were “aware that defendants had erred in failing to follow the presentment statute; their negligence was spelled out in G.S. 28A-19-3.” However, plaintiffs argue that they did not know that such conduct constituted actionable negligence “because they had not yet suffered a loss,” and therefore that their damages were not then apparent. We reject this interpretation of the “loss” to be discovered under the proviso of G.S. l-15(c).

The plaintiffs’ argument depends upon the conclusion that their loss could not have occurred, and thus could not have been discovered, until their damages were made clear to them and that this happened only when the trial court ruled on the summary judgment in August, 1979. This conclusion confuses the fact of loss with the extent of that loss. The only question resolved by the trial court’s ruling on 16 August 1979 concerned the extent to which plaintiffs’ potential recovery in the wrongful death action would be barred by the defendant’s omission.

It is well established that in a case such as this, “loss” or the invasion of a legally protected right of the plaintiffs, occurs when the negligence occurs. In Shearin v. Lloyd, 246 N.C. 363, 98 S.E. 2d 508 (1957), the Supreme Court held that ordinarily, a cause of action for negligent injury accrues when the wrong giving rise to the right to sue is committed, even though the damages at that time are nominal. Similarly, in Jewell v. Price, 264 N.C. 459, 142 S.E. 2d 1 (1965), a case involving recovery for the negligent performance of a building contract, the court stated the following rule:

Nominal damages may be recovered in actions based on negligence . . . The accrual of the cause of action must therefore be reckoned from the time the first injury, however slight, was sustained ... It is unimportant that the actual or the substantial damage does not occur until later if the whole injury results from the original tortious act . . . [P]roof of actual damage may extend to facts that occur and grow out of the injury, even up to the day of the verdict. If so, it is clear the damage is not the cause of action. (Citations omitted.)

Id. at 461-462, 142 S.E. 2d at 3. See also Brantley v. Dunstan, supra, and Stereo Center v. Hodson, 39 N.C. App. 591, 251 S.E. 2d 673 (1979).

In this case, the “whole injury” to plaintiffs, the loss of their right to recover from the general assets of the estate, resulted from the original omission of the defendants in failing to make a timely presentment of the claim pursuant to G.S. 28A-19-3. Plaintiffs’ reliance upon Sunbow Industries, Inc. v. London, 58 N.C. App. 751, 294 S.E. 2d 409, cert. denied, 307 N.C. 272, 299 S.E. 2d 219 (1982), for the proposition that a claimant may not suffer a “loss” in the course of legal proceedings “unless and until a judge so declares,” is both misplaced and erroneous. In Sunbow the plaintiff alleged that the defendant attorney had failed to file a financing statement or otherwise perfect a security interest in assets the plaintiff had sold to another corporation, D.B.E., Inc., on 27 May 1976. D.B.E. filed a voluntary petition in bankruptcy on 24 February 1978. On 25 September 1978 the bankruptcy court held that the plaintiff had not perfected its security interest and was subordinated as a creditor. The plaintiff then filed a malpractice action on 31 December 1979. The defendant moved pursuant to G.S. 1A-1, Rule 12(b) to dismiss the complaint on the ground that it was not filed within the applicable statute of limitations. This Court reversed the dismissal of the complaint on the ground that the complaint had been filed within three years of the accrual of the cause of action, reasoning that the defendant attorney had a continuing duty to file the financing statement after 27 May 1976, “so long as the filing . . . would protect some interest of his client.” The court first observed that if the financing statement had been filed a sufficient time prior to the filing of the petition in bankruptcy on 24 February 1978, the plaintiff would not have lost its lien, and then concluded as follows:

It is on that date that the three-year statute of limitations began to run. The complaint does not allege a fact that will necessarily bar the plaintiffs claim and it was error to dismiss the action.

58 N.C. App. at 753, 294 S.E. 2d at 410. In dictum the court also reasoned that even if 27 May 1976 were considered to be the date of accrual, the plaintiff would not have been entitled to proceed under the proviso of G.S. l-15(c) because his action was not timely even under that provision. Plaintiff had alleged that on 25 September 1978 the bankruptcy judge ruled that the security interest had not been perfected. The Sunbow court observed that, “He knew no later than that date of the alleged negligence and did not file this action until more than one year later.” Id.

The dispositive issue in Sunbow, then, was not when the plaintiff discovered, or should have discovered, the loss, but rather, when the cause of action accrued for the defendant’s negligent failure to file the financing statement. Here, the plaintiffs’ rights could only be protected up to 16 October 1976 and they were directly informed of the fact of the alleged negligence on 17 November 1977, well within two years of the accrual of their cause of action. The “loss” that plaintiffs suffered thereby must be considered to be the loss of their right to recover from the general assets of the V/ilson estate. By virtue of the fact that defendant DeMent informed plaintiffs of his omission on or about 17 November 1977, the plaintiffs were at the very least put on inquiry notice of their possible cause of action for legal malpractice. At that point in time, plaintiffs had before them the facts, or access to the facts, necessary for them to “discover” both their attorney’s negligence and the consequent loss of their legal rights against the Wilson estate. In other words, plaintiffs had constructive knowledge of all of the essential elements of a complete malpractice cause of action. See Black v. Littlejohn, supra (Johnson, J., dissenting); Ballenger v. Crowell, 38 N.C. App. 50, 247 S.E. 2d 287 (1978) (medical malpractice; discovery of “injury” held to include both negligent act and the bodily injury or harm caused thereby). See also Massey v. Litton, 669 P. 2d 248 (Nev. 1983) (medical malpractice; “injury” to be discovered, either actually or presumptively, refers to “legal injury” which includes both the fact of damage suffered and the realization that the cause was the physician’s negligence).

Accordingly, if as plaintiffs concede, the negligence of defendants was “spelled out in G.S. 28A-19-3,” then as a matter of law plaintiffs are charged with the knowledge that a reasonable inquiry would have disclosed — that their claim against the estate was barred by that allegedly negligent omission as of 17 November 1977. In other words, as a matter of law, plaintiffs should have discovered their loss on or shortly after 17 November 1977. As we stated earlier, this date was well within two years of the accrual of plaintiffs’ cause of action. Therefore, plaintiffs may not proceed under the four year discovery proviso of G.S. 145(c). Inasmuch as the complaint was not filed within three years of the last act of the defendants giving rise to the cause of action, the action was time-barred under G.S. 145(c) and summary judgment was properly entered in favor of the defendants.

Affirmed.

Judge Arnold concurs. Judge Phillips dissents.