This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The Plaintiffs retained the Defendants, bankruptcy attorneys, in 1985 to assist with financial issues related to their business. The attorneys assured the Plaintiffs that judgment liens on their residential property would be avoided through bankruptcy proceedings. However, after the Plaintiffs' discharge in bankruptcy in 1986, the liens remained on their property. The Plaintiffs discovered this issue in 1997 when attempting to refinance their home, leading to financial losses and further legal action to resolve the liens (paras 2-5).
Procedural History
- District Court of Bernalillo County: The Plaintiffs' complaint was dismissed on the grounds that the four-year statute of limitations for legal malpractice claims had expired. The court held that the Plaintiffs knew or should have known of the alleged malpractice upon their discharge in bankruptcy in 1986 (paras 6-7).
Parties' Submissions
- Plaintiffs-Appellants: Argued that the statute of limitations did not begin to run until 1997, when they discovered the liens remained on their property. They contended that they were not actually injured until 1999, when their efforts to mitigate damages failed (paras 1, 8-9).
- Defendants-Appellees: Asserted that the Plaintiffs sustained actual injury in 1986 upon their discharge in bankruptcy when the liens were not avoided. They argued that the Plaintiffs were on constructive notice of the liens due to their recording and had a duty as landowners to be aware of the status of their title (paras 6, 9, 12-14).
Legal Issues
- Did the Plaintiffs sustain actual injury in 1986 upon their discharge in bankruptcy, or in 1999 when their mitigation efforts failed?
- When should the Plaintiffs have discovered the facts essential to their legal malpractice claim?
- Does constructive notice under recording statutes or a landowner's duty to monitor title status impose a legal obligation on the Plaintiffs to discover the liens earlier?
Disposition
- The Court of Appeals reversed the district court's dismissal of the Plaintiffs' complaint and remanded the case for reinstatement of their claims (para 19).
Reasons
Per Fry J. (Bustamante and Kennedy JJ. concurring):
The Court held that the Plaintiffs sustained actual injury in 1986 when the Defendants failed to avoid the liens during the bankruptcy proceedings. This loss of a right or interest constituted actual injury under established case law (paras 10-11).
However, the Court found that the discovery rule required a factual determination of when the Plaintiffs discovered or should have discovered the malpractice. The district court erred in concluding as a matter of law that the Plaintiffs should have discovered the issue in 1986. The Court rejected the argument that landowners have a duty to monitor their title status or that constructive notice under recording statutes applied in this context (paras 12-15).
The Court emphasized that professional malpractice law does not impose an obligation on clients to investigate a professional's work without an objective reason to do so. The Plaintiffs were entitled to rely on the Defendants' assurances that the liens would be avoided (paras 13-14).
The affidavit of a title examiner submitted by the Plaintiffs raised a factual issue as to whether a title search would have revealed the Defendants' failure to avoid the liens. This precluded summary judgment (paras 17-18).
The Court concluded that the Plaintiffs presented a genuine issue of material fact regarding the discovery of their claim, warranting reversal of the dismissal (para 19).