Wachovia Bank, N.A. v. Ferretti, 935 A.2d 565(Pa. Super. 2007)

Brief Summary
The Pennsylvania Superior Court held that the statute of limitations for a legal malpractice claim begins to run when the malpractice is committed and is only tolled until the plaintiff should reasonably have found out about some degree of injury. The statute is not tolled until all of a plaintiff’s damages are clear or until appellate proceedings in the underlying case within the legal malpractice case are over.

Complete Summary
In 1989, Renee Lynn Ferretti, Esq. and her law practice, Brown, Brown, Solt & Ferretti (collectively, “Ferretti”) represented Meridian Bank (“Meridian”), the predecessor in interest of Wachovia Bank, N.A. (“Wachovia”), in relation to a commercial loan made to Brookside Partners (“Brookside”), a real estate development partnership, for the construction of condominiums in Leigh County. In 1990, Ralph R. Pisani, one of Brookside’s partners and surety with respect to the loans made to the partnership, defaulted on the loans.

In 1991, Meridian confessed judgment against Brookside, Pisani and other sureties, and filed a confession of judgment against Pisani in Leigh County. The Leigh County judgment was transferred to Bucks County for execution against real property owned by Pisani and his wife. In 1992, Meridian and Pisani entered into a settlement agreement by which Pisani and his wife agreed to pay Meridian $160,000 in exchange for Meridian’s agreement to discharge them from the confessed judgment. Thereafter, Meridian filed a praecipe in Leigh County through Ferretti, acknowledging satisfaction of the judgment and indicating that the action was settled, discontinued and ended. Ferretti also filed a praecipe in Bucks County, indicating the same. Ferretti, however, failed to have the Bucks County judgment marked as “satisfied.”

Pisani discovered that the Bucks County judgment had not been marked satisfied and initiated proceedings against Meridian, seeking damages. In August 1995, Ferretti marked the Bucks County judgment satisfied. Ferretti continued to represent Meridian in defending against Pisani’s petition for liquidated damages and remained co-counsel when Meridian engaged another law firm to defend against the petition in 1996.

In November 1998, the trial court denied Pisani’s petition to assess liquidated damages, holding that because Meridian’s judgment was never paid in full, Meridian was not required to mark the judgment satisfied. On appeal, the matter was reversed and remanded. On remand, the trial court found merit to Meridian’s affirmative defense that Pisani’s action for liquidated damages was barred by a two-year statute of limitations. The finding was affirmed on appeal. Pisani filed a petition for allowance of appeal with the Pennsylvania Supreme Court.

While Pisani’s petition was pending, in another matter the Pennsylvania Supreme Court ruled that a six-year statute of limitations governed in such matters and, accordingly, reversed the court’s decision to affirm dismissal of Pisani’s petition based on a two-year statute of limitations. The matter was remanded to the trial court for consideration of Meridian’s affirmative defenses.

In 2003, the trial court found Meridian’s defenses to be without merit, determined that Pisani was entitled to liquidated damages, and entered an order assessing liquidated damages against Meridian and its successors in interest. The trial court’s decision was affirmed on appeal, and Meridian’s petition for allowance to appeal was denied by the Supreme Court.

In September 2005, Wachovia initiated a legal malpractice action in Leigh County against Ferretti, asserting claims of professional negligence and breach of contract. In February 2006, Ferretti filed an answer, asserting, inter alia, that Wachovia’s claims accrued no later than October 1994—that is, when Pisani commenced his action against Meridian—and were thus time-barred by the statute of limitations. The trial court found in favor of Ferretti and dismissed the complaint with prejudice. More specifically, the trial court found that the negligence cause of action, which carried a two-year statute of limitations, accrued in June 2003. The trial court likewise found that the breach of contract cause of action had accrued in October 1994. Thus, the statute of limitations for both claims had run prior to filing of the complaint.

Wachovia appealed, arguing that it had not in fact experienced an actual loss by that time and that a suit against Ferretti before that time would have been premature. The Pennsylvania appellate court disagreed and affirmed the dismissal.

Under the court’s application of the occurrence rule, the trigger for the accrual of a legal malpractice action is not the realization of actual or ultimate loss, but the occurrence of a breach of duty plus some degree of apparent harm. Thus, the court concluded that the statute of limitations for a breach of a contract claim starts when the duty is breached and is only tolled until the plaintiff should reasonably have found out about the injury. Otherwise put, and applying this reasoning to the instant matter, the court found that Wachovia or its predecessor in interest, Meridian, should have reasonably been aware of the alleged breach on or about October 20, 1994, the date Pisani initiated proceedings for liquidated damages (which, of course, had to be defended at considerable cost). Consequently, the present case was time-barred even though no final judgment determining the ultimate and actual loss had been determined before the statute began to run.

In coming to this conclusion, the court noted that its ruling may require an injured client to pursue two legal actions with competing interests at the same time—the appeal of the underlying case and the malpractice claim. The court concluded, however, that the overriding public policy concern is that stale claims not be filed.

Significance of Opinion
This opinion confirms that different states apply statutes of limitations differently and that these decisions can often be fact-specific. The opinion also confirms the wisdom of seeking tolling agreements to avoid potential problems.

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