Michelle R. Skadburg v. Gary Gately and Whitfield and Eddy, PLC , 911 N.W.2d 786 ( 2018 )

IN THE SUPREME COURT OF IOWA
No. 17–0151
Filed May 11, 2018
MICHELLE R. SKADBURG,
Appellant,
vs.
GARY GATELY and WHITFIELD & EDDY, P.L.C.,
Appellees.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Cerro Gordo County, Rustin
Davenport, Judge.
A lawyer and his firm seek further review of a court of appeals
decision finding a genuine issue of material fact as to when the cause of
action accrued. DECISION OF COURT OF APPEALS VACATED;
DISTRICT COURT JUDGMENT AFFIRMED.
Peter C. Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for
appellant.
Lylea Dodson Critelli and Nick Critelli of Critelli Law, P.C.,
Des Moines, for appellees.
2
WIGGINS, Justice.
A client appealed the district court’s grant of summary judgment in
favor of her attorney and the attorney’s law firm in her legal negligence
action. The client argued the court erred in finding the statute of
limitations barred her action. She also contended the court erred in
declining to apply the discovery rule, the continuous-representation rule,
or the doctrine of fraudulent concealment.
We transferred the case to the court of appeals, which reversed the
judgment of the district court. The attorney and his firm applied for
further review, which we granted. On further review, we hold no genuine
issue of material fact exists as to when the cause of action accrued and
the statute of limitations bars the client’s action because the cause of
action accrued more than five years before she filed suit. We also hold the
client may not use the discovery rule, the continuous-representation rule,
or the doctrine of fraudulent concealment to circumvent the limitations
period. Accordingly, we vacate the decision of the court of appeals and
affirm the judgment of the district court.
I. Background Facts and Proceedings.
Michelle Skadburg is the daughter and sole heir of Barbara Haffner,
who passed away in August 2008. As the designated beneficiary of both
Haffner’s life insurance policy and 401k account, Skadburg received
$20,000 and $87,054.65, respectively. The estate was insolvent because
the debts exceeded the probate assets.
On November 6, the court appointed Skadburg as the administrator
of Haffner’s estate. Skadburg designated Gary Gately of Whitfield & Eddy,
P.L.C. as the administrator’s attorney. The next day, Skadburg signed the
notice of appointment and notice to creditors. Upon Gately’s advice,
Skadburg alleges, she used the funds from Haffner’s life insurance policy
3
and 401k account to pay the debts of Haffner’s estate. Skadburg further
alleges Gately failed to advise her that these funds were exempt from any
claims against the estate.
On August 18, 2010, the district court closed the estate and
discharged the administrator. Gately forwarded this order to Skadburg in
a letter dated August 31, informing her the court had closed the estate and
had discharged her as the administrator.
On August 19, 2015, Skadburg filed suit against Gately and
Whitfield & Eddy, alleging Gately was negligent in his representation of
her in connection with the probate of the estate and asserting Whitfield &
Eddy was vicariously liable for Gately’s negligence. 1 Gately answered,
denying all claims and asserting the affirmative defense of the statute of
limitations.
On August 18, 2016, Gately filed a motion for summary judgment,
arguing the statute of limitations barred Skadburg’s action. Calculating
the accrual date most favorably to Skadburg, Gately argued the latest date
on which the cause of action accrued was August 18, 2010, and Skadburg
filed suit on August 19, 2015, one day after the five-year limitations period.
Skadburg resisted, arguing she submitted her petition at law on August
18, 2015, 2 and asserting Gately represented her as administrator of the
estate until August 31, 2010, when he sent the letter informing her the
court had closed the estate.
In her supplemental response to Gately’s motion for summary
judgment, Skadburg alleged Gately never advised her that her ability to
1We will collectively refer to both Gately and Whitfield & Eddy as Gately.
2The court filed the petition at law on August 19. We go by the filing date. See
Iowa R. Elec. P. 16.306(2); Concerned Citizens of Se. Polk Sch. Dist. v. City Dev. Bd., 872
N.W.2d 399, 403–05 (Iowa 2015).
4
pay debts was very limited until four months after the second publication
of the estate notice. Rather, Gately allegedly told her to pay all the debts
and keep the leftover money. Skadburg further alleged Gately never told
her the proceeds from the life insurance policy and the 401k account were
exempt from any claims against the estate and she could keep those funds.
At first glance, it appears Skadburg made two claims, but these
claims make up her overall claim that Gately negligently gave her incorrect
legal advice. “Our law does not allow the splitting of a cause of action, and
any effort to do so to avoid the commencement of the statute of limitations
would be inconsistent with the purpose of cutting off stale claims.” Rathje
v. Mercy Hosp., 745 N.W.2d 443, 458 (Iowa 2008). Thus, we will treat her
allegations as one legal negligence claim.
The court granted Gately’s motion for summary judgment. First,
based on emails sent by Skadburg to Gately, the court held under the
discovery rule Skadburg had actual or imputed knowledge of her potential
action no later than March 26, 2010. Thus, the limitations period began
to run from that date. The court also found neither the continuous-
representation rule nor the doctrine of fraudulent concealment applied. In
sum, the court ruled the statute of limitations barred Skadburg’s action.
Skadburg filed a rule 1.904(2) motion for enlargement of findings, which
the court denied.
Skadburg appealed. We transferred the case to the court of appeals.
The court of appeals reversed the judgment of the district court and
remanded the case for further proceedings. It held there was a genuine
issue of material fact as to when Skadburg attained knowledge regarding
her cause of action. Thus, a genuine issue of material fact exists as to
when the statute of limitations commenced. Alternatively, the court of
appeals applied the continuous-representation rule and held the statute
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of limitations did not begin to run until August 31, 2010, when Gately sent
Skadburg the letter informing her the court had closed the estate and had
discharged her as the administrator.
Gately applied for further review, which we granted. We lay out
additional facts as necessary.
II. Issue.
The only issue we must decide is whether the statute of limitations
precludes Skadburg’s action.
III. Scope of Review.
We review the district court’s grant or denial of a summary judgment
motion for correction of errors of law. Hook v. Lippolt, 755 N.W.2d 514,
519 (Iowa 2008). If there is no genuine issue as to any material fact and
the moving party is entitled to a judgment as a matter of law, the district
court should grant the motion for summary judgment. Nationwide Mut.
Ins. v. Kelly, 687 N.W.2d 272, 274 (Iowa 2004); accord Iowa R. Civ. P.
1.981(3). The moving party has the burden of showing the absence of a
genuine issue of material fact. Hlubek v. Pelecky, 701 N.W.2d 93, 95 (Iowa
2005). We view the facts contained in the record in the light most favorable
to the nonmoving party. Nelson v. Lindaman, 867 N.W.2d 1, 6 (Iowa 2015).
We also draw every legitimate inference in favor of the nonmoving party.
Id. at 6–7.
IV. Statute of Limitations.
Skadburg contends the district court erred in dismissing her legal
negligence action based on the statute of limitations. Skadburg is not
claiming a written contract existed between her and Gately. Therefore, the
five-year limitations period in Iowa Code section 614.1(4) (2015) is
applicable to her legal negligence claim. See Vossoughi v. Polaschek, 859
N.W.2d 643, 648 (Iowa 2015) (applying section 614.1(4)’s five-year
6
limitations period to a legal negligence claim). Iowa Code section 614.1(4)
provides,
Actions may be brought within the times herein limited,
respectively, after their causes accrue, and not afterwards,
except when otherwise specially declared:
....
4. Unwritten contracts—injuries to property—fraud—
other actions. Those founded on . . . all other actions not
otherwise provided for in this respect, within five years . . . .
Iowa Code § 614.1(4).
Skadburg concedes Gately’s negligence occurred from the time of
her appointment as the administrator on November 6, 2008, through
December of 2008. In her answers to interrogatories, Skadburg stated,
“At the time the estate was opened, Mr. Gately told me to pay all bills and
I could keep the remaining money.” Skadburg further stated, “In
December of 2008, he told me to pay the U.S. Bank credit card and that I
could forward any other creditors to him[,]” and “I told him all other bills
had been paid.”
Skadburg also admits she filed her petition at law more than five
years after the acts of negligence occurred. However, our inquiry does not
focus on when Gately’s negligence occurred. Rather, the question is when
her cause of action accrued. See Vossoughi, 859 N.W.2d at 649–50. If the
cause of action accrued more than five years before Skadburg filed her
petition at law, we must then address whether the discovery rule or the
continuous-representation rule tolls the limitations period, or whether the
doctrine of fraudulent concealment estops Gately from raising the statute
of limitations as an affirmative defense.
Legal negligence means an attorney has failed “to use such skill,
prudence[,] and diligence as lawyers of ordinary skill and capacity
7
commonly possess and exercise in the performance of the tasks which they
undertake.” Millwright v. Romer, 322 N.W.2d 30, 32 (Iowa 1982) (en banc)
(quoting Neel v. Magana, Olney, Levy, Cathcart & Gelfand, 491 P.2d 421,
422–23 (Cal. 1971)). To demonstrate a prima facie case of legal negligence,
the plaintiff must establish
(1) a duty arising from the established existence of an
attorney–client relationship; (2) the attorney breached that
duty; (3) the attorney’s breach was the proximate cause of
injury to the client; and (4) the client suffered actual damage,
injury, or loss.
Barker v. Capotosto, 875 N.W.2d 157, 161 (Iowa 2016); accord Ruden v.
Jenk, 543 N.W.2d 605, 610 (Iowa 1996).
No cause of action accrues until the attorney’s act or omission,
which constitutes the breach of duty, produces actual injury to the
plaintiff’s interest. Vossoughi, 859 N.W.2d at 649–50. The injury must be
“actual loss” instead of “speculative harm[] or the threat of future harm.”
Id. at 650 (quoting 7A C.J.S. Attorney & Client § 303, at 337 (2004)). No
cause of action accrues until the plaintiff suffers actual injury, regardless
of the plaintiff’s knowledge or lack thereof. Id. In the context of legal
negligence actions, we have held “[t]he cause of action accrues when the
client sustains an actual, nonspeculative injury and has actual or imputed
knowledge of the other elements of the claim.” Id. at 652 (footnote
omitted); see Franzen v. Deere & Co., 377 N.W.2d 660, 662 (Iowa 1985)
(stating the limitations period commences when the plaintiff “has actual
or imputed knowledge of all the elements of the action” (emphasis added)).
In Vossoughi, the plaintiffs entered into three agreements in
September 2006 for the sale of real and personal property. 859 N.W.2d at
645–46. In March 2007, the plaintiffs executed a warranty deed the
defendant had prepared that transferred title to the real property to one of
8
the buyers. Id. at 647. The defendant assured the plaintiffs that he would
include in the warranty deed an additional page with language stating that
the remaining payment obligations on the personal property would remain
secured by the real property. Id. The defendant did not keep his promise.
Id. In February 2008, the buyers stopped making payments on the
aforementioned remaining payment obligations in which they were to pay
a certain sum of money for the plaintiff’s personal property. Id.
We found the plaintiffs suffered actual injury when the buyers
stopped making payments in February 2008, not when the plaintiffs
executed the faulty warranty deed. Id. at 652. We reasoned “[u]ntil [the
buyers] stopped making payments in February 2008, it was entirely
possible the plaintiffs would have continued collecting contract payments
without disruption.” Id. Thus, “it was entirely possible the decision to
structure the transaction without the protection of a mortgage on the real
estate or a perfected security interest in the personal property would cause
the sellers no actual injury.” Id.
Applying Vossoughi, we find Skadburg sustained actual,
nonspeculative injury when she paid the creditors with the exempt funds
on Gately’s alleged advice in 2008. Therefore, her cause of action accrued
in 2008 when she made those payments. Because Skadburg made these
payments more than five years before she commenced this action on
August 19, 2015, section 614.1(4) bars her action unless a legal doctrine
tolls the limitations period or estops Gately from raising the statute of
limitations as an affirmative defense.
V. Whether a Legal Doctrine Tolls the Five-Year Limitations
Period or Estops Gately from Raising the Statute of Limitations as an
Affirmative Defense.
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Skadburg argues three exceptions to the strict commencement of
the limitations period. These exceptions are the discovery rule, the
continuous-representation rule, and the doctrine of fraudulent
concealment. Although Gately has the burden of establishing the statute-
of-limitations defense, Skadburg, as the party attempting to avoid the
limitations period, has the burden of demonstrating any exception. See
Neylan v. Moser, 400 N.W.2d 538, 541 (Iowa 1987).
A. The Discovery Rule. Generally, “a cause of action accrues when
the aggrieved party has a right to institute and maintain a suit.”
Chrischilles v. Griswold, 260 Iowa 453, 461, 150 N.W.2d 94, 99 (1967),
superseded by statute on other grounds, 1975 Iowa Acts ch. 239, § 26
(codified at Iowa Code § 614.1(9) (1977)), as recognized in Langner v.
Simpson, 533 N.W.2d 511, 516–17 (Iowa 1995); see also Bob McKiness
Excavating & Grading, Inc. v. Morton Bldgs., Inc., 507 N.W.2d 405, 408
(Iowa 1993) (“It is well settled that no cause of action accrues under Iowa
law until the wrongful act produces loss or damage to the claimant.”).
However, the discovery rule tolls the statute of limitations. K & W Elec.,
Inc. v. State, 712 N.W.2d 107, 116 (Iowa 2006).
We first addressed the discovery rule in Chrischilles, 260 Iowa at
461–63, 150 N.W.2d at 100. There the construction of the house based
on the defendant’s negligent architectural design was completed in the fall
of 1960. Id. at 455, 150 N.W.2d at 96. However, the plaintiff did not
become aware of the defendant’s negligent performance until December
1964 when the plaintiff found water dripping through the ceiling of the
house. Id. Adopting the discovery rule for negligence claims, we held “a
cause of action based on negligence does not accrue until [the] plaintiff
has in fact discovered that he [or she] has suffered injury or by the exercise
10
of reasonable diligence should have discovered it.” 3 Id. at 463, 150 N.W.2d
at 100. Thus, we concluded the plaintiff’s cause of action accrued in
December 1964. Id. at 463, 150 N.W.2d at 101.
We elaborated on the meaning of knowledge in Franzen. In that
case, we stated the limitations period does not commence until the plaintiff
“has actual or imputed knowledge of all the elements of the action.”
377 N.W.2d at 662. However, “[i]t is sufficient that the facts would support
a cause of action” and therefore, “[i]t is not necessary that the person know
they are actionable.” Id. In doing so, we distinguished knowledge of the
facts from knowledge that the facts are actionable. Id.
Specifically as to imputed knowledge, once a plaintiff learns
information that would alert a reasonable person of the need to investigate,
the plaintiff “is on inquiry notice of all facts that would have been disclosed
by a reasonably diligent investigation.” K & W Elec., Inc., 712 N.W.2d at
117 (quoting Perkins v. HEA of Iowa, Inc., 651 N.W.2d 40, 44 (Iowa 2002)).
“[T]he duty to investigate does not depend on exact knowledge of the
nature of the problem that caused the injury” because “[i]t is sufficient
that the person be aware that a problem existed.” Franzen, 377 N.W.2d
at 662. The duty to investigate includes determining the exact cause of
the injury. See id. at 662–63.
Based on these principles, we held in Franzen the plaintiffs—a
husband and wife—knew on the date of the accident all the necessary facts
such that they had a duty to investigate the existence of a cause of action.
Id. at 664. In that case, the husband injured his arm when it became
entangled in the revolving beaters of a forage wagon. Id. at 663. We
3We realize the language in Chrischilles is unclear. We clarify that the cause of
action accrues when the injury occurs. The discovery rule does not reset or shift the
accrual date but merely tolls the statute of limitations.
11
reasoned the plaintiffs were on inquiry notice regarding the possible
defects of the forage wagon on the date of the accident, although they
neither knew of the exact defects nor knew they might have an actionable
claim until their lawyer suggested as much. Id. Because they had imputed
knowledge, we concluded the cause of action accrued on the date of the
accident. Id. at 664.
We have applied the discovery rule to legal negligence actions. E.g.,
Cameron v. Montgomery, 225 N.W.2d 154, 155–56 (Iowa 1975). We stated
three reasons for applying the discovery rule to such actions. Millwright,
322 N.W.2d at 34. First, “a client has a right to rely upon the superior
skill and knowledge of his attorney.” Id. Second, “the absence of such a
rule denigrates the duty of the attorney to make full and fair disclosure to
the client.” Id. Third, the client does not have the ability or opportunity
to detect the mistake. See id.
In applying the discovery rule to the case at hand, we focus on three
communications from Skadburg to Gately that are relevant to determining
when Skadburg knew or should have known about her actual injury. In
the January 30, 2009 email to Gately, Skadburg wrote,
I would like to think I would have done the right thing and
paid off her debts even if I wasn’t legally obligated to . . . .
I should have given you the entire list of debts and asked for
more specific advice on what to do, but I took you at your word
to pay the debts and did that. Anyway, it was her money and
her debt and no use second guessing now as they have been
paid and that is that.
In the December 30 email to Gately, Skadburg wrote,
Paying off mom’s debt with money that should not have been
part of the estate was one of the issues that has arisen. Gary
and I have talked through this and what is done is done, but
please take these kinds of things into consideration when
setting the fee.
12
In a March 26, 2010 note to Gately, Skadburg wrote, “One other
question—is any of the money paid to other creditors refundable since
those should not have been paid out of the estate assets?” These three
communications show Skadburg was on inquiry notice as early as
January 30, 2009. The latest date when she had actual or imputed
knowledge of Gately’s possible negligence was March 26, 2010.
Skadburg contends she did not actually know the critical elements
of her claim—that Gately breached his duty and caused her damages—on
those dates. However, even assuming Skadburg did not have actual
knowledge of these elements, she was on inquiry notice because she knew
a problem existed, i.e., possible defects with Gately’s advice in which he
told her to pay the debts with exempt funds at the time the court opened
the estate.
Skadburg also argues she did not have imputed knowledge. She
cites to Ranney v. Parawax Co., 582 N.W.2d 152 (Iowa 1998) (en banc) to
support her alleged lack of imputed knowledge. In that case, we held the
plaintiff was on inquiry notice by 1987 or 1988 at the latest when his wife,
who was learning in law school about occupational diseases caused by
chemical exposure, discussed with him the possibility that his exposure
to toxic materials at the defendant’s workplace caused his Hodgkin’s
disease. Id. at 154–56. We concluded the plaintiff had a duty to
investigate once he knew or should have known that his disease was
possibly—not probably—compensable. Id. at 155.
Ranney does not help Skadburg’s contention. Again, on January
30, Skadburg was on inquiry notice regarding the possible connection
between Gately’s bad legal advice and her damages. Skadburg’s argument
that economic loss may occur at no fault of the attorney representing the
administrator is irrelevant because she was on inquiry notice. The
13
December 30 email—“[p]aying off mom’s debt with money that should not
have been part of the estate was one of the issues that has arisen”—
certainly establishes actual knowledge on the part of Skadburg about
Gately’s negligence in advising her to pay the debts with funds from the
life insurance policy and 401k account. The March 26 note—“since those
should not have been paid out of the estate assets”—also affirmatively and
explicitly establishes Skadburg had actual knowledge.
Viewing the record in the light most favorable to Skadburg, the latest
date she had actual or imputed knowledge of the possible connection
between Gately’s advice and the damages caused by that advice, i.e., the
payment of the estate’s debts from exempt funds was March 26, 2010.
Accordingly, we find there is no genuine issue of material fact that by
March 26, 2010, Skadburg had the duty to investigate the possible
connection between Gately’s bad legal advice and her damages once she
knew of such a possibility. At that time, the statute of limitations began
to run under the discovery rule. She filed her action more than five years
after March 26, 2010. Therefore, as a matter of law, we find the discovery
rule does not prevent the statute of limitations from extinguishing her
cause of action.
B. The Continuous–Representation Rule. Skadburg next
contends she filed her petition at law within five years of the end of Gately’s
representation. She argues Gately’s representation ended on August 31,
2010, when Gately sent a letter informing her the court had closed the
estate and had discharged her as the administrator. Gately argues his
representation ended on August 18 because the court had closed the
estate and had discharged the administrator on that date. To decide this
appeal, we need not decide when the representation ended because we find
14
as a matter of law the continuous-representation rule does not apply
under these facts.
The continuous-representation rule embodies the idea that a client
is entitled to rely on and have confidence in the skills and good faith of his
or her attorney. Cedar Rapids Lodge & Suites, LLC v. JFS Dev., Inc.,
789 F.3d 821, 826 (8th Cir. 2015). The policy reasons undergirding this
rule are
both the unfairness of requiring the injured client to challenge
its professional advisor while remedial efforts are under way
and the potential abuse where the negligent advisor attempts
to avoid liability by diverting the client from bringing a legal
action until the limitations period expires.
Id. (quoting In re Arbitration Between Clark Patterson Eng’rs, Surveyor, &
Architects, P.C. & City of Gloversville Bd. of Water Comm’rs, 809 N.Y.S.2d
247, 249 (App. Div. 2006)).
We have not addressed the continuous-representation rule.
However, we have defined the analogous continuous-treatment rule in
medical negligence actions. E.g., McClendon v. Beck, 569 N.W.2d 382, 385
(Iowa 1997). Under the continuous-treatment rule, the limitations period
may be tolled until the cessation of medical treatment when the patient
has been receiving continuing care for the same injury from the doctor
whose negligence is at issue. Id. at 385. Yet we have explicitly declined to
apply this rule when the patient had notice of the negligence before the
termination of treatment. In Ratcliff v. Graether, we stated, “If there is
actual proof that the patient knows or reasonably should know of the injury
or harm before termination of medical treatment, the statute of limitations
is not tolled.” 697 N.W.2d 119, 125 (Iowa 2005) (quoting Stanbury v.
Bacardi, 953 S.W.2d 671, 676 (Tenn. 1997)).
15
The continuous-representation rule, like the continuous-treatment
rule, constitutes “a particularized application of the discovery rule.” See
id. (quoting Stanbury, 953 S.W.2d at 676). We adopted the discovery rule
for negligence claims in Chrischilles, reasoning
[i]f an injured party is wholly unaware of the nature of his [or
her] injury and the cause of it, it is difficult to see how he [or
she] may be charged with a lack of diligence or sleeping on his
[or her] rights.
260 Iowa at 461, 150 N.W.2d at 100. However, this policy reason does not
apply in circumstances in which a plaintiff has actual or imputed
knowledge of his or her injury. Knowledge on the part of the plaintiff
overrides the rationale undergirding the continuous-representation rule.
We therefore decline to apply the continuous-representation rule to
the case at hand because, as we have established earlier in our opinion,
Skadburg had notice of Gately’s negligence before the termination of their
attorney–client relationship, whether that relationship ended on August
18 or August 31. 4 Cf. Ratcliff, 697 N.W.2d at 125.
We acknowledge Skadburg had a right to rely on Gately’s skill and
expertise. Moreover, Gately had a duty to give sound legal advice.
However, well before Skadburg retained new counsel in 2014, she had
actual or imputed knowledge of Gately’s negligence. Cf. Dudden v.
Goodman, 543 N.W.2d 624, 628–29 (Iowa Ct. App. 1995) (holding the
executor “had no reasonable means of knowing the estate’s attorney may
have caused the estate to pay excessive” taxes and she “had a right to rely
4In Stanbury, the Tennessee Supreme Court stated the judicial and legislative
adoption of the discovery rule in Tennessee abrogated the common law continuous-
treatment rule. 953 S.W.2d at 676. Admittedly, our adoption of the discovery rule for
negligence claims, including legal negligence claims, raises the question of whether the
continuous-representation rule has outlived its utility. However, we need not decide
today whether we should outright reject the continuous-representation rule. The rule
does not apply to the case at hand anyway.
16
on [the attorney’s] superior knowledge” until she visited an accountant
regarding the income tax return).
Accordingly, because no genuine issue of material fact exists as to
whether Skadburg had actual or imputed knowledge prior to the end of
the attorney–client relationship, we hold the continuous-representation
rule does not apply, and Skadburg cannot use this defense to toll the
statute of limitations.
C. The Fraudulent-Concealment Doctrine. Skadburg next
contends Gately’s failure to admit his fault constitutes fraudulent
concealment. In Christy v. Miulli, we explicitly distinguished fraudulent
concealment grounded in the doctrine of equitable estoppel from
fraudulent concealment that blends the principles of equitable estoppel
with the discovery rule. 692 N.W.2d 694, 700–01 (Iowa 2005).
We first explained the version of fraudulent concealment that rests
on equitable estoppel. Id. at 700. When a party’s fraud or fraudulent
concealment precludes another from knowing he or she has a cause of
action within the applicable limitations period, then that party should not
benefit from the protection of the statute of limitations. See id.
We then described fraudulent concealment separately from its
equitable estoppel roots and observed it “has evolved into a concept more
akin to, yet ostensibly distinct from, the discovery rule.” Id. We illustrated
the rule as follows:
[W]here the party against whom a cause of action existed in
favor of another, by fraud or actual fraudulent concealment
prevented such other from obtaining knowledge thereof, the
statute would only commence to run from the time the right
of action was discovered, or might, by the use of diligence,
have been discovered.
17
Id. at 700–01 (alteration in original) (quoting Koppes v. Pearson, 384
N.W.2d 381, 386 (Iowa 1986) (en banc), abrogated by Christy, 692 N.W.2d
at 701).
We observed this version of fraudulent concealment embodied an
“odd blending” of equitable estoppel and the discovery rule and that
blending was probably because we adopted the doctrine of fraudulent
concealment before we adopted the discovery rule. Id. at 701; see Woods
v. Schmitt, 439 N.W.2d 855, 861–62 (Iowa 1989) (distinguishing the
doctrine of fraudulent concealment from the discovery rule, and noting the
doctrine of fraudulent concealment was adopted in 1875 whereas the
discovery rule was adopted in 1967), abrogated on other grounds by
Christy, 692 N.W.2d at 701. Compare Dist. Twp. of Boomer v. French,
40 Iowa 601, 603 (1875) (adopting fraudulent concealment), abrogated on
other grounds by Christy, 692 N.W.2d at 701–02, with Chrischilles,
260 Iowa at 462–63, 150 N.W.2d at 100 (announcing the discovery rule for
negligence claims).
After examining the two versions of fraudulent concealment, we held
fraudulent concealment as a form of equitable estoppel was proper.
Christy, 692 N.W.2d at 701. We gave two reasons. Id. First, courts can
uniformly identify and consistently apply the elements of equitable
estoppel. Id. Second, there would be no confusion as to whether
fraudulent concealment and the discovery rule are the same concepts. Id.
We clarified “fraudulent concealment does not affect the running of the
statutory limitations period.” Id. Rather, it estops a defendant from
raising a statute-of-limitations defense “when it would be inequitable to
permit the defendant to do so.” Id.
We now address whether fraudulent concealment estops Gately
from asserting the statute of limitations as a bar to this action, not whether
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it tolls the limitations period. To establish whether fraudulent
concealment estops a defendant from asserting the statute of limitations,
the plaintiff must show by a clear and convincing preponderance of the
evidence
(1) [t]he defendant has made a false representation or has
concealed material facts; (2) the plaintiff lacks knowledge of
the true facts; (3) the defendant intended the plaintiff to act
upon such representations; and (4) the plaintiff did in fact rely
upon such representations to his [or her] prejudice.
See id. at 702 (quoting Meier v. Alfa-Laval, Inc., 454 N.W.2d 576, 578–79
(Iowa 1990)).
Ordinarily, the plaintiff must show the defendant engaged in some
affirmative act to conceal the cause of action. Id. However, our caselaw
relaxes the requirement to allege and prove affirmative concealment when
there is a confidential or fiduciary relationship. Estate of Anderson ex rel.
Herren v. Iowa Dermatology Clinic, PLC, 819 N.W.2d 408, 415 (Iowa 2012).
The relationship of trust and confidence between an attorney and his or
her client gives rise to a duty on the part of the attorney “to reveal to the
client all facts [that] might affect [his or] her interest.” Pride v. Peterson,
173 N.W.2d 549, 555 (Iowa 1970); accord Cornell v. Wunschel, 408 N.W.2d
369, 375 (Iowa 1987) (“[W]hen . . . one of the parties has superior
knowledge or a special situation, such as an attorney-client
relationship, . . . we have required the party to make a full and truthful
disclosure of all material facts within that party’s knowledge.”).
When a fiduciary relationship exists, mere silence supplies the
affirmative-act requirement. Pride, 173 N.W.2d at 555; cf. Hook,
755 N.W.2d at 526 (“[A] party’s silence cannot provide the basis for
estoppel ‘absent a special duty to disclose.’ ” (quoting Martinelli v.
Bridgeport Roman Catholic Diocesan Corp., 196 F.3d 409, 424 (2d Cir.
19
1999))). Moreover, a fiduciary relationship also relaxes a plaintiff’s duty of
diligent investigation. Pride, 173 N.W.2d at 555; cf. Hook, 755 N.W.2d at
526–27 (stating the tortfeasor did not have a special duty to disclose and
therefore holding the plaintiff bore the duty to diligently investigate the
circumstances of the accident).
Despite a fiduciary relationship, the act of concealment must be
independent of and subsequent to the original wrongdoing establishing
liability. Christy, 692 N.W.2d at 702. Additionally, “[t]he circumstances
justifying an estoppel end when ‘[the] plaintiff [becomes] aware of the
fraud, or by the use of ordinary care and diligence should have discovered
it.’ ” Id. (second and third alterations in original) (quoting Faust v. Hosford,
119 Iowa 97, 100, 93 N.W. 58, 59 (1903)). As such, the plaintiff must
bring his or her cause of action within the applicable limitations period.
Id.
We find that Gately’s alleged fraudulent concealment is independent
of and subsequent to his alleged negligence. This case is distinguishable
from the facts of Van Overbeke v. Youberg, 540 N.W.2d 273, 276–77 (Iowa
1995), abrogated on other grounds by Christy, 692 N.W.2d at 701. In that
case, we observed the plaintiff’s core claim was the doctor’s failure to
disclose that she did not receive a certain injection. Id. at 276. We held
the doctor’s “[f]ailure to disclose that need, as a ground of liability, cannot
be the basis for fraudulent concealment.” Id. at 276–77. Otherwise, “there
would effectively be no statute of limitations for negligent failure to inform
a patient.” Id. at 277.
Here, Gately’s negligence was advising her to pay the debts with the
respective life insurance policy and 401k funds even though the funds
were exempt from claims against the estate and four months did not lapse
from the date of the second publication. Gately’s concealment constitutes
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his silence after Skadburg told him she had paid all the bills in December
2008 and after Skadburg sent the three communications from January
30, 2009 to March 26, 2010, allegedly blaming herself for her economic
loss while thinking Gately did “the best” that he could for her. In other
words, Skadburg’s contention concerning fraudulent concealment is that
Gately should have told her that he gave incorrect legal advice concerning
the administration of the estate. Based on the legal principles we outlined
above, we find a genuine issue of material fact exists as to element (1)—
whether Gately made a false representation or concealed material facts
from December 2008 to March 26, 2010. See Pride, 173 N.W.2d at 555.
Additionally, a genuine issue of material fact exists as to element
(3)—whether Gately intended to mislead Skadburg. In Hook, a driver, who
was providing volunteer transportation services for a client of the Iowa
Department of Human Services (DHS), struck the plaintiff’s vehicle.
755 N.W.2d at 517–18. We held the record lacked evidence that either the
driver or the state intended to conceal the material fact that the driver was
a volunteer for the DHS. Id. at 525–26; see Meier, 454 N.W.2d at 580
(holding the dealer did not mislead the plaintiffs when the evidence did not
show either party operated under the assumption that litigation was
possible but rather showed the dealer tried to fix, possibly negligently, the
pump, and continued to repair the pump and make assurances after the
statute of limitations had run). The driver did not mention his volunteer
status to his own attorney until the plaintiff served interrogatories. Hook,
755 N.W.2d at 525. Moreover, the driver did not know his volunteer status
meant the state Tort Claims Act was applicable to the plaintiff’s claim and
the state was vicariously liable for the accident. Id. Additionally, the state
had no notice of the accident until after the statute of limitations had run.
Id. at 526.
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Unlike in Hook, in which the driver was unaware that a claim under
the state Tort Claims Act even existed, Gately was aware or at least should
have been aware that Skadburg had a legal negligence action based on his
incorrect legal advice and Skadburg’s resulting injury. Notably, Gately, as
a trained attorney, had superior knowledge of the law than Skadburg did.
Yet Gately remained silent when Skadburg sent the communications
allegedly blaming herself for her economic loss. We find a genuine issue
of material fact exists as to element (3)—whether Gately intended
Skadburg to act upon his silence.
However, no genuine issue of material fact exists as to elements (2)—
whether Skadburg lacks knowledge of the facts—and (4)—whether
Skadburg relied on Gately’s concealment to her prejudice.
Drawing all legitimate inferences in favor of Skadburg, we will
assume Skadburg lacked any knowledge regarding the possible defects in
Gately’s advice from December 2008 to when she sent her first email to
Gately on January 30, 2009. However, at the earliest, Skadburg had
inquiry notice that a problem existed on January 30. At the latest,
Skadburg gained actual or imputed knowledge that a problem existed on
March 26. Even using the March 26 date to begin the statutory clock does
not change the fate of this case because Skadburg cannot use fraudulent
concealment to estop Gately from raising his statute-of-limitations
defense. “A person cannot claim concealment, of course, if he [or she] has
knowledge” because estoppel presumes a lack of knowledge on the part of
the party seeking to apply the doctrine. Dierking v. Bellas Hess Superstore,
Inc., 258 N.W.2d 312, 316 (Iowa 1977); see Estate of Anderson, 819
N.W.2d at 415–16 (holding there was no fact question as to whether the
defendant dermatologist concealed the fact that he, rather than a
pathologist, had evaluated the biopsy specimen when it was his customary
22
practice to inform his patients whether he would evaluate the biopsy
specimens himself, he had so informed the plaintiff, and he regularly
charged an additional fee when he would evaluate the specimens in-
house).
Once Skadburg gained knowledge of Gately’s incorrect legal advice,
her reliance on Gately’s alleged concealment became unreasonable. See
Christy, 692 N.W.2d at 703 (“[A] patient’s knowledge of pertinent facts and
circumstances may affect the reasonableness of his [or her] continued
reliance on a tortfeasor’s representations.”); see also Dierking, 258 N.W.2d
at 317 (holding the plaintiffs failed to meet the reliance requirement when
they had the “means of knowledge readily available” to know the exact date
of the injury despite the defendant’s alleged misrepresentation that the
injury had occurred on a certain date). Admittedly, Skadburg was entitled
to rely on Gately’s legal advice. However, even the attorney–client
relationship cannot justify Skadburg’s reliance on Gately’s silence after
she gained knowledge of the possible defects in such advice.
We conclude as a matter of law Skadburg failed to prove by a clear
and convincing preponderance of the evidence elements (2) and (4) of
fraudulent concealment because Skadburg knew or was on inquiry notice
about the deficiencies in Gately’s advice at the time she sent her
communications. Thus, her reliance upon the alleged concealment was
unreasonable. Accordingly, no genuine issue of fact exists as to whether
Gately fraudulently concealed Skadburg’s cause of action for legal
negligence, and Gately is entitled to judgment.
VI. Disposition.
Based on the foregoing reasons, we vacate the decision of the court
of appeals and affirm the judgment of the district court.
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DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT
JUDGMENT AFFIRMED.
All justices concur except Hecht, J., who takes no part.