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Shaw Investment Co v. Rollert

Michigan Court of Appeals
Apr 21, 1987
159 Mich. App. 575 (Mich. Ct. App. 1987)


Docket No. 88792.

Decided April 21, 1987.

Charfoos Christensen, P.C. (by Jody L. Aaron), for plaintiff.

Menmuir, Zimmerman, Rollert Kuhn (by John A. Mac Neal), for defendants.

Before: BEASLEY, P.J., and CYNAR and R.C. ANDERSON, JJ.

Circuit judge, sitting on the Court of Appeals by assignment.

Plaintiff appeals as of right from an order granting defendants' motion for summary disposition on the ground that the statute of limitations barred plaintiff's legal malpractice action. We reverse.

Plaintiff is a Michigan corporation. Defendant E. David Rollert is a practicing attorney in the State of Michigan and a partner in the law firm of Menmuir, Zimmerman, Rollert and Kuhn. Prior to October, 1979, Rollert had acted as legal counsel for plaintiff for a number of years. In October, 1979, while still acting as attorney for plaintiff, Rollert persuaded Robert Shaw, one of plaintiff's three board members, to enter into a partnership with Rollert and two other individuals. Shaw agreed and became a partner in BTRS Properties Management Leasing Company. When BTRS needed additional funds, Rollert suggested that plaintiff lend money to BTRS. Rollert assured plaintiff that this would be an advantageous business investment for plaintiff since BTRS would pay a very high rate of return on plaintiff's money. Plaintiff was not told by Rollert that this rate of interest exceeded the statutory usury limits. On October 22, 1979, BTRS executed a demand promissory note to plaintiff for $37,000 with a seventeen percent interest rate. Rollert prepared and executed the note.

When plaintiff demanded payment on the note, BTRS refused. On June 30, 1983, plaintiff retained attorney James Stephen, and Stephen filed suit against BTRS for plaintiff on the note. Rollert answered the complaint, but in February, 1985, Rollert filed a motion to amend his answer to add the defense of usury. The motion was granted, and on February 6, 1985, Rollert filed his amended answer which contained the affirmative defense of usury.

On July 15, 1985, plaintiff filed the instant legal malpractice suit against Rollert and his law firm. Defendants filed a motion for summary disposition pursuant to MCR 2.116(C)(7) on the ground that plaintiff's claim was barred by the statute of limitations, citing MCL 600.5805(4); MSA 27A.5805(4). Plaintiff's answer to the motion alleged that the applicable statute of limitations was MCL 600.5838(2); MSA 27A.5838(2) and that, since plaintiff filed the legal malpractice action only five months after defendant Rollert asserted the usury defense, plaintiff's suit was not barred. Attached to plaintiff's memorandum of law in opposition to defendants' motion for summary disposition were affidavits of Mary K. Shaw, treasurer of plaintiff, Robert A. Shaw, president of plaintiff, and John R. Shaw, secretary of plaintiff, that they did not know that seventeen percent was usurious. In defendants' brief in support of summary disposition, filed October 15, 1985, defendants noted that MCL 600.5805(4); MSA 27A.5805(4) provides that a person shall not bring a malpractice action unless it is brought within two years after the claim first "accrued," and that MCL 600.5838(1); MSA 27A.5838(1) provides that a malpractice claim accrues at the time the defendant discontinues serving the plaintiff. Defendants noted that plaintiff did not dispute that neither Rollert nor his law firm provided legal services to plaintiff within two years before the malpractice suit was commenced. Defendants argued that the only way plaintiff's malpractice suit could succeed is if the "six month rule," MCL 600.5838(2); MSA 27A.5838(2), applied. Defendants alleged that that subsection did not save plaintiff.

On October 25, 1985, at the hearing on the motion for summary disposition, defendants argued that plaintiff discovered or should have discovered the alleged malpractice by June 30, 1983, the date the original suit was filed. Plaintiff argued that it did not discover the malpractice until February 6, 1985, the day the usury affirmative defense was raised, as, until then, plaintiff suffered no harm. The trial court ruled that plaintiff in the instant case knew or should have known about the alleged malpractice on June 30, 1983, when it retained Stephen to file suit on the note. Since plaintiff did not file the instant suit within six months thereafter, nor within the two-year limit, plaintiff's suit was barred. Summary judgment was granted to defendants.

On appeal, plaintiff argues that the trial court erred by granting defendants' motion for summary disposition on the ground that plaintiff's legal malpractice action was barred by the statute of limitations. We agree.

The alleged negligent act of Rollert occurred on October 22, 1979, the date he drafted the promissory note. The malpractice statute of limitations in effect on that date provided two years in which an action could be brought. MCL 500.5805(1) and (4); MSA 27A.5805(1) and (4). The statute is applicable to legal malpractice actions. Sam v Balardo, 411 Mich. 405, 417; 308 N.W.2d 142 (1981). A separate statute explains when a malpractice action accrues, MCL 600.5838; MSA 27A.5838. That statute provides that an action accrues when the professional discontinues treating or otherwise serving the plaintiff. The second part of the statute provides that a plaintiff may also file suit within six months after a plaintiff discovered, or should have discovered, the existence of a claim. Dowker v Peacock, 152 Mich. App. 669, 671-672; 394 N.W.2d 65 (1986); Goodwin v Schulte, 115 Mich. App. 402, 409; 320 N.W.2d 391 (1982). Thus, an action for legal malpractice must be brought within two years after the date on which the last service is performed or six months after plaintiff discovers or should have discovered the claim, whichever is later.

In the instant case, both parties agree that plaintiff did not file suit within two years of the date Rollert last performed legal services for plaintiff; therefore, MCL 500.5838(1); MSA 27A.5838(1) does not apply. The only issue is whether the trial court could rule as a matter of law that plaintiff did not file its malpractice suit within six months of when plaintiff discovered or should have discovered that a malpractice claim existed.

Plaintiff claims that it did not discover that a malpractice claim existed until February 6, 1985, when Rollert was allowed to amend his answer to include the affirmative defense of usury. Plaintiff further alleges that, until Rollert asserted the affirmative defense of usury, plaintiff did not sustain any appreciable harm. Luick v Rademacher, 129 Mich. App. 803; 342 N.W.2d 617 (1983).

Defendants, on the other hand, argue that plaintiff suffered appreciable harm on October 22, 1979, when the note was drafted, because plaintiff's absolute legal right to collect interest on the note became subject to an infirmity.

A review of the law of usury indicates that a usurious rate of interest does not make an instrument void. To the extent that the usurious interest and principal were fully paid, the borrower cannot recover. Wright v First National Bank of Monroe, 297 Mich. 315, 328; 297 N.W. 505 (1941); Waldorf v Zinberg, 106 Mich. App. 159; 307 N.W.2d 749 (1981). The defense of usury is an affirmative defense which is waived if not raised. MCR 2.111(F)(3)(a).

We find that, until Rollert asserted the defense of usury, plaintiff did not have a malpractice cause of action because plaintiff was not damaged until BTRS asserted the defense. Plaintiff's suit would have been premature if plaintiff had not waited to see if the usury defense would be raised. This conclusion is supported by Biberstine v Woodworth, 406 Mich. 275; 278 N.W.2d 41 (1979).

In Biberstine, the plaintiff filed a legal malpractice action against the defendant because the defendant, the plaintiff's attorney, failed to schedule a debt owed by the plaintiff in the plaintiff's petition for bankruptcy. The Court held that the period of limitations started to run at the time the plaintiff was discharged in bankruptcy. Biberstine, supra, p 277. Until then, the defendant could have petitioned the bankruptcy court to amend the bankruptcy petition, and the plaintiff would not have had a claim for malpractice. Biberstine, supra, p 277. See also Dowker v Peacock, supra. Just as the bankruptcy discharge in Biberstine ended that plaintiff's chance to avert the possible harm, so too the amendment adding the usury defense ended plaintiff's chance to collect on the note and avoid the harm caused by the usurious rate. Plaintiff could not have discovered the malpractice claim until then.

Rollert was allowed to amend the BTRS answer to assert the usury defense on February 6, 1985, thus plaintiff filed the instant suit within the six-month deadline by filing on July 15, 1985.


Summaries of

Shaw Investment Co v. Rollert

Michigan Court of Appeals
Apr 21, 1987
159 Mich. App. 575 (Mich. Ct. App. 1987)
Case details for

Shaw Investment Co v. Rollert

Case Details


Court:Michigan Court of Appeals

Date published: Apr 21, 1987


159 Mich. App. 575 (Mich. Ct. App. 1987)
407 N.W.2d 40

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