Professional Negligence

Podrebarac v. Horack, Talley, Pharr & Lowndes, P.A., 231 N.C. App. 70, 752 S.E.2d 661 (2013) and 2021-NCCOA-529 (Oct. 5, 2021).

In this long-running legal malpractice action, Mr. Podrebarac retained the defendant law firm (“Law Firm”) to represent him in an equitable distribution action against his ex-wife beginning in December 2008.  The parties apparently reached an agreement to resolve their disputes at a mediated settlement conference on April 29, 2009.  The parties’ attorneys memorialized the terms in a set of written Mediation Stipulations (“Stipulations”) with attachments which detailed the division of the assets, personal property, and two businesses (the fireworks store to the ex-wife and the liquor store to plaintiff) (“The Asset Chart”).  The Stipulations were signed by both parties but the attorneys failed to ensure that the signatures were notarized as required by N.C.G.S. §50-20(d) (notarized signatures required for a stipulation settling equitable distribution).  The Stipulations provided that the parties agreed to formalize the terms of the property settlement and alimony provisions in a to be drafted Settlement Agreement.  When the Stipulations were presented to and entered by the District Court, the Law Firm “mistakenly forgot” to attach the accompanying Asset Chart and to have the Stipulations notarized.

Counsel for the ex-wife circulated an “Alimony and Marital Property Settlement Agreement” but the ex-wife refused to sign it.  Yet, for the next two years, the parties complied with the property divisions outlined in the Stipulations and Asset Chart.  Counsel for the ex-wife withdrew in early 2011 and was replaced by new counsel who asserted that the Stipulations were not enforceable.  The Law Firm assured plaintiff that the Stipulations were enforceable.  Plaintiff retained additional trial counsel who in September 2011, moved to enforce the Stipulations as a “Mediated Settlement Agreement.”  The Law Firm withdrew in early 2012.  On April 13, 2012, counsel for the ex-wife moved to dismiss motions to enforce, which was granted on April 29, 2012 based on the lack of notarization of the signatures.

Plaintiff and the ex-wife then reached a settlement on terms that plaintiff found to be less favorable than the terms from the mediation.  On June 14, 2012, plaintiff filed an action for professional negligence against the Law Firm, among other things, for failing to have signatures on the Stipulations notarized, failing to advise him that the Stipulations were not enforceable without such notarization, and omitting the largest asset from the Stipulations by failing to submit the Asset Chart with the Stipulations to the District Court.  The Law Firm moved to dismiss the Complaint, asserting that plaintiff’s claims were barred by the applicable statute of limitations.  The relevant North Carolina law is summarized as follows:

• “A legal malpractice action is subject to a three-year statute of limitations.  N.C.G.S. § 1-15(c) (2001).
• The action ‘accrue[s] at the time of . . . the last act of the defendant giving rise to the cause of action.’  [I]f the claimant’s loss is “not readily apparent to the claimant at the time of its origin, and . . . is discovered or should reasonably be discovered by the claimant two or more years after . . . 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 . . . but in no event shall an action be commenced more than four years from the last act of the defendant giving rise to the action.”  N.C.G.S. § 1-15(c).
• “Continuing representation of a client by an attorney following the last act of negligence does not extend the statute of limitations.”

Plaintiff alleged that he was unaware that the signatures on the Stipulations had to be notarized to be enforceable, that the loss was not apparent on April 29, 2009 when the Stipulations were signed, that the Law Firm repeatedly assured him of the enforceability of the document, and that he did not discover that the agreement was unenforceable until the April 29, 2012 court ruling.  The Law Firm argued that generally a person is expected to read and understand the documents he signs and that the loss accrued on April 29, 2009 when the documents were signed.

The Court of Appeals observed that it was not necessarily reasonable for a lay person to understand the legal consequences regarding the un-notarized signatures or to second guess the alleged assurances of his attorneys.  It then held that the earliest that plaintiff could have reasonably been expected to discover the defect was on April 13, 2012, when the ex-wife’s attorney filed the motion to dismiss.  Since this date was more than two years from the last act giving rise to the claim, the discovery rule of N.C.G.S. § 1-15(c) applied.  The Court of Appeals concluded that the Complaint was filed within one year of the discovery date and therefore was not barred by the statute of limitations.

Following the reversal and remand, discovery ensued.  Eventually, the Law Firm’s motion for summary judgment was granted based on two different theories: (1) the Stipulations were an “agreement to agree” which, even if properly notarized, would have not been binding; consequently, the Law Firm’s mistakes did not proximately cause any harm to plaintiff and (2) the claims were barred by the statute of limitations.

On appeal, the Court of Appeals held that there were genuine issues of material fact as to both issues and vacated and remanded.  As to the first issue, the Court of Appeals cited precedent that “a contract that the parties expect to formalize is not rendered invalid simply because the parties ‘assent’ to the same thing in the same sense, and their minds meet as to all the [material] terms.”  Smith v. Young Moving Storage, Inc., 167 N.C. App. 487, 493 (2004).  The Court of Appeals held that a genuine issue of material fact exists as to whether the Stipulations, if properly filed by the Law Firm, would have been binding.  In the court’s view, it could be inferred the Stipulations and Asset Chart contain all material and essential terms for a binding settlement agreement and that there was no language conclusively expressing an intent that the Stipulations, on their own, were not binding.

As to the second issue, the Court of Appeals held that a genuine issue of material fact existed because it could inferred that plaintiff timely filed his Complaint: (1) the errors were not readily apparent to plaintiff when the Stipulations were submitted to the court; (2) it could be inferred from the evidence that the errors were not readily discoverable by plaintiff until April 13, 2012 when the ex-wife moved for dismissal of the enforcement action; (3) evidence inferred that the Law Firm confirmed repeatedly to plaintiff that the settlement was enforceable regardless of the errors, deterring any assumption of malpractice; and (4) the Complaint was filed within one year of discovery.

Given the remand, this case will now go on a trial calendar for the spring of 2022.