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Colwell v. Mullen

Supreme Court of Nebraska

October 26, 2018

Dr. Robert F. Colwell, Jr., D.D.S., and Dr. Robert F. COLWELL, DDS, PC, APPELLANTS,
SEAN MULLEN, J.D., and Hancock & Dana, PC, appellees.

         1. Limitations of Actions: Appeal and Error. The point at which a statute of limitations begins to run must be determined from the facts of each case, and the decision of the district court on the issue of the statute of limitations normally will not be set aside by an appellate court unless clearly wrong.

         2. Summary Judgment. Summary judgment is proper when the pleadings and evidence admitted at the hearing disclose no genuine issue regarding any material fact or the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law.

         3. Summary Judgment: Appeal and Error. In reviewing a summary judgment, an appellate court views the evidence in the light most favorable to the party against whom the judgment is granted and gives such party the benefit of all reasonable inferences deducible from the evidence.

         4. Limitations of Actions: Negligence. The period of limitations begins to run upon the violation of a legal right, that is, when an aggrieved party has the right to institute and maintain suit. If a claim for professional negligence is not to be considered time barred, the plaintiff must either file within 2 years of the alleged act or omission or show that its action falls within an exception to Neb. Rev. Stat. § 25-222 (Reissue 2016).

         5. Limitations of Actions. The 1-year discovery exception of Neb. Rev. Stat. § 25-222 (Reissue 2016) is a tolling provision, but it applies only in those cases in which the plaintiff did not discover and could not have reasonably discovered the existence of the cause of action within the applicable statute of limitations.

         6. Limitations of Actions: Malpractice. In order for a continuous relationship to toll the statute of limitations regarding a claim for malpractice, there must be a continuity of the relationship and services for the [301 Neb. 409] same or related subject matter after the alleged professional negligence. Continuity does not mean the mere continuity of the general professional relationship.

         7. __:__. Even where a continuous relationship exists, the continuous relationship rule is inapplicable when the claimant discovers the alleged negligence prior to the termination of the professional relationship.

         8. Limitations of Actions: Torts. It is well accepted that when an individual is subject to a continuing, cumulative pattern of tortious conduct, capable of being terminated and involving continuing or repeated injury, the statute of limitations does not run until the date of the last injury or cessation of the wrongful action.

         9. __: __ . The continuing tort doctrine requires that a tortious act- not simply the continuing ill effects of prior tortious acts-fall within the limitation period.

         10. Appeal and Error. Claims not presented to or decided by the district court need not be addressed on appeal.

          Appeal from the District Court for Douglas County: Peter C. Bataillon, Judge. Affirmed.

          John A. Svoboda and Adam J. Wachal, of Gross & Welch. PC, L.L.O., for appellants.

          William F. Hargens and Lauren R. Goodman, of McGrath. North, Mullin & Kratz, P.C., L.L.O., for appellees.

          Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, and Freudenberg, JJ.

          HEAVICAN, C.J.


         Dr. Robert F. Colwell, Jr., D.D.S., and his self-named professional corporation (collectively Colwell), filed suit alleging malpractice against Sean Mullen and against Hancock & Dana, P.C. (collectively Mullen). Sean Mullen is an attorney licensed to practice law and works as a tax attorney at Hancock & Dana, an accounting firm. The district court granted Mullen's motion for summary judgment, concluding that Colwell's malpractice claims were barred by the statute of limitations set forth in Neb. Rev. Stat. § 25-222 (Reissue 2016). We affirm.

         [301 Neb. 410] FACTUAL BACKGROUND

         Dr. Colwell was a dentist practicing primarily in Douglas County, Nebraska. In 2004, he agreed to purchase 50 percent of a dental practice currently being operated by Jeffrey Garvey. The purchase agreement envisioned that Dr. Colwell and Garvey would form separate professional corporations in their respective names and that those professional corporations would each own half of the practice. The practice would be operated as Midlands Oral Health, LLC (Midlands).

         Colwell hired Mullen to assist him in forming his professional corporation. Mullen had apparently worked for Garvey in the past and was again retained by Garvey to form Garvey's professional corporation. In addition, Mullen was retained by Dr. Colwell's professional corporation, Garvey's professional corporation, and Midlands as an accountant and tax attorney.

         Midlands was formed as a going concern complete with various assets, including dental and office equipment and employees. In 2005, Midlands transferred control of its employees to a new corporation, Grobell, P.C. Grobell was owned by Garvey; apparently, Mullen assisted Garvey in the creation of Grobell and the transfer of the employees. Employees from a different dental practice that had been purchased by Midlands in 2004 were also transferred to Grobell. All employees were then leased by Grobell to Midlands, apparently at an 18-percent leasing fee. Colwell claims that this was all done without his knowledge and that he was damaged because as a 50-percent owner of Midlands, he had to pay half of the lease fee. Colwell alleges that he learned of the transfer of employees in mid-March 2011 and of the leaseback fee in August 2011.

         In addition, with Mullen's assistance, Garvey also formed Vanguard Dental Solutions, Inc. (Vanguard). Vanguard was a service which charged a membership fee to participate, with members receiving a discount on dental services from participating care providers. Midlands was a participating provider with Vanguard, and Vanguard members paid less for dental services at Midlands. Colwell denies that he was ever informed [301 Neb. 411] of Garvey's interest in Vanguard or of Mullen's assistance in the formation of Vanguard. It is not clear from the record when Vanguard was created; Colwell apparently learned of its creation in August 2011.

         In October 2010, Colwell formed RMR Enterprises, L.L.C. (RMR), for the purpose of constructing a new office building for Midlands. RMR expended over $100, 000 to buy land and pay fees associated with the purchase. In February 2011, Mullen reviewed certain provisions of an operating agreement for RMR and billed Colwell for those services.

         In April 2011, Colwell terminated his professional relationship with Mullen. He later engaged counsel to file suit against Garvey. Colwell and Garvey eventually settled in December 2011. This current action for professional malpractice was filed on March 4, 2013. As amended, Colwell's complaint alleged six acts of legal and accounting malpractice: that Mullen (1) failed to advise Colwell of Mullen's conflict of interest; (2) transferred Midlands employees to Grobell without Colwell's knowledge; (3) caused Colwell to pay 50 percent of an 18-percent administrative leaseback fee for the Grobell employees; (4) prepared and filed an erroneous Schedule K-1 (K-1) for 2010 (alleged as legal malpractice) and for 2011 (alleged as both ...

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