Antone v. Mirviss , 2006 Minn. LEXIS 532 ( 2006 )

OPINION

ANDERSON, PAUL H., Justice.

Richard Antone brought this legal malpractice action against his attorney, Israel Mirviss, alleging that Mirviss was negligent when he drafted an antenuptial agreement. Antone asserted that Mirviss failed to draft an agreement that protected his interest in any marital appreciation to his premarital property. The Hennepin County District Court dismissed Antone’s complaint under the six-year statute of limitations for legal malpractice actions, concluding that Antone’s cause of action accrued either when he signed the agreement and was married or when the premarital property thereafter appreciated, both of which events occurred more than six years before this action was commenced. The Minnesota Court of Appeals reversed, holding that Antone’s cause of action did not accrue until the district court awarded a portion of the marital appreciation of Antone’s premarital property to his wife in a marital dissolution proceeding, which event occurred less than six years before this action was commenced. We reverse the court of appeals.

In December 1986, respondent Richard Antone hired appellant Israel Mirviss as his attorney to draft an antenuptial agreement. He did so in anticipation of his marriage to Debra Schmidt. At that time, Antone owned several rental properties and he wanted to protect any appreciation in value of those properties from claims Schmidt could assert as his spouse. Antone alleges that he asked Mirviss to draft the antenuptial agreement to protect any appreciation from such claims by Schmidt. Schmidt at first refused to sign the agreement prepared by Mirviss, but changed her mind the next day after consulting with her own attorney and making some revisions to the agreement. Although the first draft of the agreement may have protected Antone’s interest in any marital appreciation to his premarital properties, the final draft did not.¹ Antone alleges that Mirviss gave him only the signature page of the agreement and assured him that the agreement protected the marital appreciation of his premarital properties.²

Antone and Schmidt were married on December 21, 1986. In 1998, Antone petitioned for dissolution of the marriage. He stated in a deposition that when he petitioned for dissolution of the marriage, he discovered for the first time that the ante-nuptial agreement failed to protect his interest in the marital appreciation of his premarital properties. He also said he would not have married Schmidt if Mirviss had provided him with this information.

On November 9, 2000, the district court in the dissolution proceeding found that, although Antone’s premarital properties appreciated in value during the marriage, the appreciation was attributable only to market forces, not marital efforts. Antone v. Antone, 645 N.W.2d 96, 99 (Minn.2002). As a result, the dissolution court awarded all of the marital appreciation to Antone as nonmarital property. Schmidt appealed, and the court of appeals affirmed. We then granted Schmidt’s petition for review and on June 13, 2002, we reversed, holding that the district court erred by not apportioning the marital appreciation between Antone and Schmidt. Id. at 102-03. On January 3, 2003, the district court issued an amended dissolution judgment awarding Schmidt a portion of the marital appreciation of Antone’s premarital property.

In September 2003, Antone commenced this legal malpractice action against Mir-viss for negligence, breach of fiduciary duty, and breach of contract. As to damages, Antone alleges in his complaint that Schmidt received more money from the property award in the dissolution proceeding than she would have received “had the antenuptial agreement been drafted properly and as contemplated and explained to Antone by Mirviss.” Antone’s prayer for relief does not itemize damages.

Without specifying the procedural rule relied on, Mirviss filed a “motion to dismiss,” arguing that Antone’s claims were “barred by the 6 year [legal malpractice] statute of limitations set out in Minn.Stat. § 541.05, subd. 1.” In response, Antone filed a “memorandum of law opposing summary judgment.” (Emphasis added.) The district court treated Mirviss’s motion as a motion to dismiss for failure to state a claim. upon which relief can be granted under Minn. R. Civ. P. 12.02(e). The court then granted the motion, concluding that Antone suffered damage, and thus the statute of limitations began to run, either (1) as soon as he was married because “[t]here was a risk of loss of part of the appreciation of [his] nonmarital property,” or (2) as soon as his nonmarital property increased in value because “at that point, [he] lost rights to a portion of that increase in value.”³

A divided court of appeals reversed, holding that the requisite damages for accrual of Antone’s cause of action commenced when Antone “sustained the money damages that provide the object of his legal malpractice lawsuit.” Antone v. Mir-viss, 694 N.W.2d 564, 571 (Minn.App.2005). The court also said Antone’s loss was only “potential,” and that he had no actionable claim for malpractice “[u]ntil the contingencies of the appreciation in value, the dissolution, and the award of a portion of the appreciated value occurred.” Id. The dissent concluded that Antone was damaged when he married Schmidt because the antenuptial agreement immediately deprived him of an exclusive interest in his nonmarital assets. Id. at 572 (Dietzen, J., dissenting). We granted Mirviss’s petition for review.

I.

In reviewing a grant of summary judgment,⁴ we determine whether there are any genuine issues of material fact and whether the district court erred in its application of the law. Wallin v. Letourneau, 534 N.W.2d 712, 715 (Minn.1995). There are no material facts at issue on this appeal. Thus we need only determine “whether the court erred in applying the law regarding the accrual of the cause of action and the running of the statute of limitations.” Weeks v. American Family Mut. Ins. Co., 580 N.W.2d 24, 26 (Minn. 1998). This is a question of law that we review de novo. Id.

The statute of limitations for legal malpractice is six years. Minn.Stat. § 541.05, subd. 1(5) (2004). The statute does not specify when the six-year period begins to run. We have consistently held that the statute begins to run when the cause of action accrues, that is, when the plaintiff can allege sufficient facts to survive a motion to dismiss for failure to state a claim upon which relief can be granted. Dalton v. Dow Chemical Co., 280 Minn. 147, 152-53, 158 N.W.2d 580, 584 (1968). To state a claim for legal malpractice upon which relief can be granted, a plaintiff must allege “(1) the existence of an attorney-client relationship; (2) acts constituting negligence or breach of contract; (3) that such acts were the proximate cause of the plaintiffs damages; (4) that but for [attorney-jdefendant’s conduct the plaintiff would have been successful in the prosecution or defense of the action.” Blue Water Corp. v. O’Toole, 336 N.W.2d 279, 281 (Minn.1983). The only disputed element here is when damages accrued.

There are three types of accrual rules based on the damages element.⁵ The first rule is the traditional “occurrence” rule, which assumes that nominal damages occur, the cause of action accrues, and the statute of limitations begins to run, simultaneously with the performance of the negligent or wrongful act. See, e.g., Wilcox v. Executors of Plummer, 29 U.S. (4 Pet.) 172, 177, 7 L.Ed. 821 (1830); Greene v. Morgan, Theeler, Cogley & Petersen, 575 N.W.2d 457, 459 (S.D.1998). Under this rule, the statute of limitations begins to run as soon as the negligent act is committed even though there is no actual damage at that time. 575 N.W.2d at 459. Most jurisdictions have moved away from the occurrence rule. 3 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 22.10, at 303 (2006) (stating that, by requiring suit before actual damage has occurred, the occurrence rule “encourages speculative litigation that can involve the client, the attorney and the courts in wasteful economic behavior”). We likewise have rejected the occurrence rule. Dalton, 280 Minn, at 154, 158 N.W.2d at 585 (“[I]t is not the wrongful, i.e., negligent act, which gives rise to the claim. For there must be damage caused by it.”) (quoting Brush Beryllium Co. v. Meckley, 284 F.2d 797, 800 (6th Cir.1960)).

At the other end of the spectrum is the “discovery” rule, under which the cause of action accrues and the statute of limitations begins to run only when the plaintiff knows or should know of the injury. See, e.g., Mumford v. Staton, Whaley & Price, 254 Md. 697, 255 A.2d 359, 365 (1969); Zimmie v. Calfee, Halter & Griswold, 43 Ohio St.3d 54, 538 N.E.2d 398, 401 (1989). Some legal commentators have noted that a significant disadvantage of the discovery rule is that it provides “open-ended liability.” Mallen & Smith, supra, § 22.15, at 420. We have also rejected the discovery rule. Dalton, 280 Minn, at 153, 158 N.W.2d at 584 (“Under our statutes it has been determined that ignorance of a cause of action not involving continuing negligence or trespass, or fraud on the part of the defendant, does not toll the accrual of a cause of action.”).

Minnesota has taken the middle ground by adopting the “damage” rule of accrual, under which the cause of action accrues and the statute of limitations begins to run when “ ‘some’ damage has occurred as a result of the alleged malpractice.” Herrmann v. McMenomy & Severson, 590 N.W.2d 641, 643 (Minn. 1999); see also Dalton, 280 Minn, at 154, 158 N.W.2d at 585 (“Until there is some damage, there is no claim and certainly a statute prescribing the time in which suit must be filed * * * can never operate prior to the time a suit would be permitted.”) (quoting Brush Beryllium Co., 284 F.2d at 800). As noted in Mallen & Smith, “[t]he injustices and, frequently, illogical results from applying the occurrence rule have prompted most courts to add the requirement that there be actual injury before a cause of action accrues for purposes of a statute of limitations.” Mallen & Smith, supra, § 22.11, at 306. We continue to agree with the rationale supporting and the policies reflected by the “some damage” rule of accrual, and thus we reaffirm our prior case law adopting this rule.

II.

Mirviss focuses on this “some damage” rule and asserts that the court of appeals erred in focusing only on “the damage” for which Antone seeks recovery — the amount of the marital appreciation in Antone’s premarital property that was awarded to Schmidt. Mirviss argues that under the damage rule, Antone’s cause of action accrued and the statute of limitations began to run when any compensable damage occurred, even damage unrelated to the injury for which Antone ultimately seeks relief. Antone agrees that the standard is “some damage,” but asserts that this standard means the occurrence of “some damage supporting the relief sought.” He argues that because the relief he seeks is the portion of the marital appreciation of his premarital property that was awarded to Schmidt at the conclusion of their marriage dissolution proceeding, the statute of limitations did not accrue until the property award was actually made in 2003.

Our prior cases have not addressed the issue of what type of damages trigger accrual of the cause of action and the running of the statute of limitations. But our case law does support a broad interpretation of the concept of “some damage.” See, e.g., Noske v. Friedberg, 670 N.W.2d 740, 742 (Minn.2003) (“The showing a plaintiff must make in order to survive a motion to dismiss under Minn. R. Civ. P. 12.02(e) is minimal.”). Mallen & Smith also endorsed this broad interpretation when they said:

Where a greater injury remains uncertain, tolling is not appropriate if another injury is a consequence of the same alleged misconduct. An attempt to divide different damages resulting from one error into “separate” causes of action is illogical and antithetical to the purpose of a statute of limitations.

Mallen & Smith, supra, § 22.12, at 368.⁶ Accordingly, we conclude that the rule that is the most logical and consistent with our precedent is that a cause of action accrues, and the statute of limitations begins to run, on the occurrence of any compensable damage, whether specifically identified in the complaint or not.

III.

We now turn to the issue of whether Antone suffered any compensable damage more than six years before the commencement of this action. Here, our decision in Herrmann v. McMenomy & Severson, 590 N.W.2d 641 (Minn.1999), is instructive. In 1986, the defendant law firm in Herrmann prepared an employee benefit pension plan and trust for the plaintiff clients, but allegedly did not advise the clients that the tax laws prohibited them from engaging in certain transactions with the plan. Id. at 642. When the clients engaged in these transactions in 1987, they immediately became liable for significant excise taxes and interest. In 1993, the clients first discovered that the transactions were prohibited and began to address the problem. Id.

Three years later, in 1996 and shortly after the Internal Revenue Service notified the clients of their tax liability and interest, they commenced a legal malpractice action against the law firm. Id. at 642-43. The clients alleged that the law firm was negligent in failing to advise them that the transactions were prohibited. The law firm argued that the action was barred because the client was damaged in 1987, and thus the statute of limitations began to run more than six years before the commencement of the action. We held that some damage occurred in 1987 when the client became “immediately liable” for the tax because at that point the client could have commenced an action for legal malpractice that would have survived a motion to dismiss for failure to state a claim. Id. at 643-44. •

In Antone v. Antone, 645 N.W.2d at 103, we held that the appreciation of Antone’s premarital property during his marriage was marital property. On remand the district court awarded Schmidt part of this appreciation. This appreciation is what Antone claims he paid Mirviss to protect and what Antone claims he lost because of Mirviss’s negligence. When Antone was single, his rental property appreciation belonged solely to him. As soon as Antone was married, in the absence of an effective antenuptial agreement, the appreciation was no longer protected from Schmidt’s claims and Antone lost the right to unilaterally change this consequence. See Minn. Stat. § 519.11, subds. la, 2a (2004) (requiring mutual consent to enter into a postnup-tial contract or amend an antenuptial contract). In other words, the consequence of Antone marrying Schmidt without having an effective antenuptial agreement in place was that he was left without the nonmari-tal property protections he sought to obtain through the antenuptial agreement drafted by Mirviss. For Antone, the consequences were both immediate and irremediable as of the date of the marriage.

When Antone entered his marriage with Schmidt, he passed a point of no return with respect to the laws of marital and nonmarital property and he did so without the legal shield he retained Mirviss to provide. See, e.g., Minn.Stat. § 518.58, subd. 1 (requiring the division of marital property upon a dissolution of a marriage). Each property-related step Antone took after the date of his marriage was, unbeknownst to him, unprotected. While this reality needs no additional amplification, it is supported by Antone’s own testimony that he would not have entered into the marriage if he had known the antenuptial agreement did not adequately protect his property interests. In essence, Mirviss’s representations caused Antone to do something he would not have otherwise done because, from the moment the marriage was entered into, Schmidt was legally entitled to make a claim upon a portion of any appreciation in his premarital property. We conclude that this exposure was an injury that resulted in some damage sufficient to survive a motion to dismiss.

The dissent argues that the seeds of some damage did not ripen until the dissolution of the marriage because Antone’s risk of losing some part of the mkrital appreciation of his premarital property was not fixed or certain when the marriage was entered into. But we have'held that the ability to ascertain the exact amount of damages is not dispositive with respect to the running of the statute of limitations. See generally Herrmann, 590 N.W.2d at 643 (stating that “[t]he running of the statute does not depend on the ability to ascertain the exact amount of damages.”) (emphasis added). Accordingly, the inability to calculate the precise damage at the time of marriage does not preclude the running of the statute of limitations from that point in time. At the time of his marriage, Antone lost the legal right to unfettered ownership in his premarital property. This loss was not a mere seed planted when Antone said “I do”; rather, it was a fully-matured briar patch.

The difficulties that would result from Antone’s proposed rule are illustrated by the different positions taken by the dissent and the court of appeals as to when Antone’s cause of action accrued. The court of appeals concluded that the cause of action accrued when Antone “sustained the money damages that provide the object of his legal malpractice lawsuit.” Mirviss, 694 N.W.2d at 571. The dissent concludes that the cause of action accrued either in 1998 when Antone incurred attorney fees defending against his liability or in 2000 when the first judgment and decree was issued awarding any appreciation in value solely to Antone. We conclude that such variations insert too much ambiguity into the law and in the end come very close to establishing a discovery rule which we previously rejected because it presented the potential for unintended, open-ended liability.

We conclude that Antone suffered some damage on December 21, 1986, when he and Schmidt entered into their marriage. Because December 21, 1986, was more than six years before the commencement of this action, the district court correctly determined that the statute of limitations bars Antone’s action and requires entry of summary judgmént in Mirviss’s favor. Therefore, we hold that the court of appeals erred when it concluded that Antone did not suffer damage until the award of a portion of the appreciated value to Schmidt. The judgment of the court of appeals is reversed, and the case is remanded to the district court for further proceedings consistent with this opinion.

Reversed.

1 . Article five of the first draft provided: "Each of them waives any claim to any part of or interest in the non-marital property owned by the other and in the marital property hereafter acquired by the other * *

The final draft, as signed by the parties, omitted article five and did not otherwise address the division of property on dissolution.

2 . Antone does not allege fraud and does not argue for the tolling of the statute of limitations.

3 . The district court recognized that this second alternative would bar recovery only if the property value increased before August 31, 1997, six years and one day before service of the complaint. But the court reasoned that the dissolution court made findings that the value increased during the marriage and, although it did not specify when the increases took effect, "it is logical that some of [the property] increased in value during this almost eleven year period.”

4 . Antone argues that because the district court treated Mirviss's motion as a Rule 12 motion to dismiss, we are limited to the facts in the pleadings and cannot rely on the depositions and other documents. But Rule 12 provides that if "matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56.” Minn. R. Civ. P. 12.02. Because both Mirviss and Antone presented affidavits in support of their positions and the district court did not exclude them, we agree with the court of appeals that Mirviss's motion should be treated as a motion for summary judgment under Rule 56.

5 . Every factually similar foreign case involving allegations of the negligent preparation of an antenuptial agreement can be distinguished from this case on the basis of these differences in accrual rules. See, e.g., Robbat v. Gordon, 771 So.2d 631 (Fla.Dist.Ct.App. 2000) (discovery rule jurisdiction); Zimmie v. Calfee, Halter & Griswold, 43 Ohio St.3d 54, 538 N.E.2d 398 (1989) (discovery rule jurisdiction); Greene v. Morgan, Theeler, Cogley & Petersen, 575 N.W.2d 457 (S.D.1998) (occurrence rule jurisdiction).

6 . Other jurisdictions that follow the "some damage” rule of accrual generally agree that a cause of action accrues upon the occurrence of any compensable damage, not just the damage for which relief is sought. E.g., Serra Chevrolet, Inc. v. Edwards Chevrolet, Inc., 850 So.2d 259, 271 (Ala.2002); Jordache Enter., Inc. v. Brobeck, Phleger & Harrison, 18 Cal.4th 739, 76 Cal.Rptr.2d 749, 958 P.2d 1062, 1065 (1998); Figueroa v. Merrick, 128 Idaho 840, 919 P.2d 1041, 1043 (Ct.App. 1996); Jason v. Brown, 637 So.2d 749, 751 (La. Ct.App. 1994).