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NY: Statute of Limitations Retroactive Application

Berman v. Cullen & Dykman et al., 291 A.D.2d 518, 739 N.Y.S.2d 169 (2002)

NY: underlying commercial transaction, security interest, financing statement

Student Contributor: Alexis Trezza

Facts: Defendants represented plaintiffs in the sale of their business. In connection with same, defendants filed a financing statement in order to perfect plaintiff’s security interest in the purchaser’s property. The plaintiffs’ security interest then lapsed five years later. Plaintiffs commenced a legal malpractice action against defendants where they alleged that the defendant law firm and some of its partners failed to file a continuation statement. Defendants cross-moved for summary judgment dismissing plaintiffs’ complaint, and same was granted. Plaintiffs appeal.

Issue: Was defendants’ cross motion for summary judgment properly granted?

Ruling: No.  (1) The record presents triable issues as to whether the “continuous representation” rule applied so as to impose a duty upon the respondents to file the continuation agreement in 1993. The record shows, among other things, that after the closing, the defendants advised the plaintiffs in regard to the purchaser’s default on its debt to the plaintiffs, and represented the plaintiffs in the purchaser’s bankruptcy proceedings. (2)  the old  six year statute of limitations is applicable to this legal malpractice case since it was commenced in January 1996, before the September 1996 amendment which shortened the six year period to three years. The plaintiff’s malpractice claim regarding the respondents’ failure to file the continuation statement accrued in June 1993, when the original financing statement lapsed. Accordingly, that claim was timely without application of the tolling provision of the continuous representation rule. Furthermore, application of the continuous representation toll would make timely the plaintiffs’ claims of malpractice which were alleged to have occurred before 1993.

Lesson: A showing of “continuous representation” can defeat a defendant’s motion for summary judgment to dismiss an action for legal malpractice. Furthermore, the applicable statute of limitations depends upon the law at the time the malpractice accrued.

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Posted in: New York