AL: Underlying business transaction
Facts: Client alleged that the firm had breached its duty to Client and had acted negligently in preparing and drawing six checks that were supposed to have been payable to Client. Client also alleged that the firm had failed to discover alterations to the checks in a timely manner and had failed to notify Client of the alternations until one year after the checks had already been issued. In 1997, the firm issued a letter to Client informing Client that the checks had been altered. Client made a written demand for the checks to be reissued. The firm’s reply was made in 1998. Client filed suit in 2000. The firm asserted that Client’s claim was subject to a two-year statute of limitations provision of the Alabama Legal Services Liability Act §6-5-574(a). The firm argued that this provision barred Client’s suit. The trial court ruled in favor of the firm and granted the firm’s motion to dismiss. Client appeals, asserting that his cause of action had accrued in 1998, not 1997.
Issue: Whether the applicable two-year limitations period had expired before Client filed the lawsuit?
Ruling: Yes. Under the accrual approach, the statute begins to run when some injury occurs which gives rise to a maintainable cause of action. The court notes that Client could have sued the firm in 1997 after receipt of the firm’s letter. Client should have known from the firm’s letter that his property rights had been damaged.
Lesson: The time limits imposed by §6-5-574(a) are to be measured from the date of the accrual of a cause of action and not from the date of the occurrence of the act or omission. The cause of action “accrues” and the statute of limitations begins to run when and only when the damages are sustained. This is known as the accrual approach.
In the lead opinion Ex parte Panell, 756 So.2d 862, 865 (1999), Chief Justice Hooper and Justice Maddox advocated the “occurrence” approach. The lead opinion stated that a legal malpractice cause of action accrues and the statute of limitations period begins to run when the act or omission or failure giving rise to the claim occurs, and not when the client first suffers actual damage.