On appeal from the Superior Court, Law Division, Somerset County.
Bischoff, Coleman and Gaulkin. The opinion of the court was delivered by Gaulkin, J.A.D.
[189 NJSuper Page 370] This case raises issues not previously addressed in our case law concerning the accrual, for limitations purposes, of a legal malpractice cause of action.
On February 26, 1981 plaintiffs Lionel A. Mant, Jr. and Katherine D. Mant (the Mants) filed this action against defendant Frederick S. Gillespie (Gillespie), their former attorney. Their complaint alleged that on October 14, 1969 they had entered into a contract to purchase certain real estate from one Carl Healey (Healey); that Gillespie represented both the Mants and Healey in that transaction and in the execution of a subsequent extension of the purchase money mortgage; that in 1974 Healey filed an action against the Mants "contending that the contract and the subsequent conveyance was fraudulently induced and was a product of undue influence"; that the Mants had prevailed at trial, but Healey prevailed on appeal, and that on retrial it was determined that "the initial purchase money mortgage was on terms that were improvident and that Healey entered into it without the benefit of competent, independent advice, and that the mortgage extension agreement was also entered into without independent advice." The Mants further alleged that Gillespie "knew or should have known" that Healey was "entitled to the benefit and should have competent, independent advice and should have been aware of the danger and risk of the possibility of action by Healey"; that Gillespie never advised the Mants "of the risks involved by representing both sides to the transaction," and that as a result of "the negligence and carelessness" of Gillespie they sustained damage "in that Healey was awarded a judgment of $30,000 . . . and [the Mants] were compelled to expend funds in defending themselves in the action instituted against them by Healey."
The answer filed on behalf of Gillespie denied any wrongful conduct and asserted, among other defenses, that the cause of action "was not instituted within six (6) years of the date of the accrual of plaintiffs' alleged cause of action." On Gillespie's subsequent motion for summary judgment and without any evidentiary hearing, the trial judge rejected the Mants' contention "that their cause of action against defendant did not accrue until January 17, 1979, the date of the entry of a final judgment against them in the suit brought by Carl Healey." He determined,
rather, that the Mants "should have discovered that there existed a basis for an actionable claim" against Gillespie no later than December 19, 1974 when
The trial judge thus found the cause of action time-barred under N.J.S.A. 2A:14-1, and dismissed the complaint. The Mants now appeal.
The parties do not dispute that the Mants' claim is subject to the six-year limitation fixed by N.J.S.A. 2A:14-1. See Carney v. Finn, 145 N.J. Super. 234 (App.Div.1976). Nor do they dispute that the cause of action is, as found by the trial judge, subject to the "discovery" rule first announced in Fernandi v. Strully, 35 N.J. 434 (1961), and more recently stated in Tevis v. Tevis, 79 N.J. 422 (1979):
That principle has been applied in recent years in an increasing variety of settings. See, e.g., O'Keeffe v. Snyder, 83 N.J. 478, 493 (1980) (replevin of stolen property); Burd v. New Jersey Tel. Co., 76 N.J. 284, 291-292 (1978) (products liability); Moran v. Napolitano, 71 N.J. 133, 139-140 (1976) (medical malpractice); New Market Poultry Farms, Inc. v. Fellows, 51 N.J. 419, 425-426 (1968) (surveyor liability). We perceive no reason why the discovery rule should not be equally applicable to a legal malpractice cause of action. See Neel v. Magana, Olney, Levy, Cathcart & Gelfand, 6 Cal. 3d 176, 98 Cal.Rptr. 837, 845-846, 491 P.2d 421, 429-430 (Sup.Ct.1971); Meiselman, Attorney Malpractice: Law and Procedure, § 5:7 (1980); Annotation, "When statute of limitations begins to run upon action against attorney for malpractice," 18 A.L.R. 3d 978 (1968 & Supp.1982). We cannot regard the contrary holding of Sullivan v. Stout, 120 N.J.L. 304 (E. & A.1938), as having any continued authority in light of our more recent case law.
We must also discount the holding of Sullivan v. Stout that a legal malpractice cause of action can accrue before any damage results from the alleged wrongful conduct. Not only is that holding at odds with the principle that harm is an essential element of a tort action (Prosser, Law of Torts (4 ed. 1971), § 30 at 143; "Development in the Law -- Statute of Limitations," 63 Harv.L.Rev. 1177, 1200-1201 (1950)), but the articulation of the discovery rule in our case law makes abundantly clear that, notwithstanding the fact of fault, damage must be sustained before a cause of action accrues:
In applying the discovery rule here, the trial court was thus required to determine when the Mants were or ought to have been aware of facts suggesting that they had sustained damage which was, or might be, attributable to malpractice of Gillespie. That inquiry must be "punctilious and probing" (id. at 73), and must consider all relevant facts and circumstances (Lopez v. Swyer, 62 N.J. 267, 276 (1973)). We find that the trial court did not sufficiently explore or properly analyze ...