Smith v. Mensing

WARDEN, P. J.

In this malpractice action, the trial court entered judgment for defendants, both attorneys, after granting their ORCP 21A motions to dismiss on the ground that the action was not commenced within the applicable Statute of Limitations. Plaintiff appeals, and we reverse.

The Statute of Limitations in legal malpractice actions is two years. ORS 12.110(1); Godfrey v. Bick & Monte, 77 Or App 429, 432, 713 P2d 655, rev den 301 Or 165 (1986). That period does not begin to run until the plaintiff has been damaged and becomes aware, or reasonably should have become aware, that the defendant’s negligence has caused the damage. U.S. Nat’l Bank v. Davies, 274 Or 663, 667-69, 548 P2d 966 (1976). The material issue in this case, therefore, is whether the facts alleged in plaintiffs second amended complaint establish that he knew, or reasonably should have known, that he was damaged by defendants’ alleged negligence before April 11, 1983, more than two years before he filed the complaint.

Defendants represented plaintiff when he leased, and subsequently sold, a business to Langley. Langley was to provide instruments conveying his equity in three parcels of real property to plaintiff as security, and those instruments were to be held in escrow by defendant Whitely. Plaintiff alleges that defendants failed to obtain the security instruments and to establish the escrow. The chronology of relevant events, taken from the second amended complaint, follows:

Date Event

June 12, 1974 and May 15, 1975 Whitely prepares the sublease agreements concerning the business, wherein Langley agrees to provide security instruments on the three parcels of real estate, the instruments to be held in escrow by Whitely; the agreements grant Langley an option to purchase.

January 1,1976 Defendant Mensing prepares an agreement to sell plaintiffs business to Langley, wherein the security under the subleases would continue to secure the sale of the business.

March 22,1977 Langley asks for and receives from plaintiff a release of the security interest in one of the three parcels of real estate.

January, 1980 Langley makes last payment on the sales agreement and then defaults, leaving a substantial unpaid balance due to plaintiff.

Plaintiff participates in a meeting with Whitely and Langley’s attorney in which plaintiff was asked by Langley’s attorney and advised by Whitely to release his security interests in the remaining two parcels of real estate. Plaintiff refuses.

May 6, 1983 Plaintiff learns for the first time that he does not have security interests in the properties. He consults another attorney, who writes to Whitely requesting an explanation of plaintiff’s security interests in the properties.

May 25, 1983 Whitely calls that attorney and states that he is sure that plaintiff has enforceable security interests in the properties.

April 11,1985 Plaintiff files this action.

Defendants argue that plaintiff was on notice of sufficient facts so that he should reasonably have discovered the absence of enforceable security interests shortly after the time of Langley’s default. That argument, however, overlooks the allegation that Whitely advised plaintiff at or near the time of default that he should release his security interests in the remaining two parcels of property. That advice, from a legal advisor, might reasonably have led plaintiff to believe that he held enforceable security interests. We cannot say, as a matter of law, that he should reasonably have investigated the status of his security at or near the time when Langley defaulted.

Furthermore, there are no other allegations in the second amended complaint of facts that would have, or reasonably should have, put plaintiff on notice as a matter of law of defendants’ alleged negligence before April 11,1983. On the basis of the complaint, therefore, we cannot say as a matter of law that the Statute of Limitations has run.

Reversed and remanded.