Barnes v. Turner
606 S.E.2d 849, 2004 Fulton County D. Rep. 3752, 278 Ga. 788 (2004)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
In a legal malpractice action concerning a secured transaction, if an attorney fails to inform a client that a UCC financing statement must be renewed after five years, the attorney undertakes a duty to renew the statement on the client's behalf. The statute of limitations for a malpractice claim based on the failure to renew begins to run from the date the renewal was due, not from the initial failure to inform.
Facts:
- On October 1, 1996, William Barnes, Jr. sold his company to James and Rhonda Lipp, receiving a ten-year promissory note for the $180,000 balance.
- The note was secured by a blanket lien on the Lipps' assets.
- Barnes retained attorney David Turner, Jr. to handle the transaction.
- On October 30, 1996, Turner perfected Barnes's security interest by filing UCC financing statements.
- Turner did not inform Barnes that these financing statements would be effective for only five years and would require renewal.
- The Lipps subsequently pledged the same collateral to two other creditors in 1998 and 2001, who perfected their own security interests.
- On October 30, 2001, Barnes's financing statements lapsed because no continuation statements were filed, causing him to lose his senior creditor status.
- James Lipp later filed for Chapter 7 bankruptcy while still owing Barnes more than $142,000.
Procedural Posture:
- William Barnes, Jr. sued David Turner, Jr. for legal malpractice in the trial court on October 18, 2002.
- The trial court granted Turner's motion to dismiss the case.
- Barnes, as appellant, appealed the dismissal to the Georgia Court of Appeals.
- The Court of Appeals affirmed the trial court's decision, holding that the four-year statute of limitations had expired as the alleged malpractice occurred in 1996.
- The Supreme Court of Georgia granted Barnes's petition for a writ of certiorari.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an attorney, hired to handle the sale of a business secured by a ten-year promissory note, have a continuing duty to either inform the client of the five-year UCC financing statement renewal requirement or to renew the statement, such that the statute of limitations for malpractice accrues when the renewal period lapses rather than at the initial consultation?
Opinions:
Majority - Fletcher, Chief Justice
Yes. An attorney retained to secure a client's interest in a long-term payment plan has a duty to safeguard that interest, which includes either informing the client of the UCC renewal requirement or renewing the financing statement. The breach of this duty occurs when the attorney fails to do both, and the statute of limitations begins to run from the date the renewal should have occurred. The attorney's duty extends beyond the initial closing to fulfill the main, known objective of the representation—ensuring the client is paid. By failing to inform Barnes of the renewal requirement in 1996, Turner undertook a duty to renew the statements himself in 2001. The court clarified this is not an application of the 'continuous representation rule' but a new duty that arose from the initial failure to inform, with a new breach date in 2001.
Dissenting - Benham, Justice
No. An attorney's duty is defined by the specific task for which they were employed, which in this case was to handle the closing of the sale. Any breach, such as the failure to inform Barnes of the renewal requirement, occurred at the time of the closing in 1996. The majority improperly creates a new, conditional duty that arises from an initial mistake, which is functionally equivalent to the 'continuous representation rule' that Georgia courts have rejected. This holding creates indefinite liability for attorneys, destroys finality in legal transactions, and will ultimately lead to higher costs for clients.
Analysis:
This decision expands the scope of an attorney's duty in long-term transactional matters, particularly those involving security interests under the UCC. It establishes that an attorney's duty may not end at the closing but can extend for years if future action is required to protect the client's primary objective. By creating a bifurcated duty (either inform the client or perform the task), the court effectively shifts the accrual date for malpractice claims from the initial consultation to the future date of necessary action, making it easier for clients to bring such claims within the statute of limitations. This precedent places a greater burden on transactional attorneys to ensure clients are fully informed of all future obligations or to explicitly limit the scope of their representation in writing.
