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Moonlight Enterprises, LLC v. Mroz

Supreme Court of Virginia

March 30, 2017



         PRESENT: All the Justices



         Moonlight Enterprises, LLC ("Moonlight") filed a legal malpractice action against two lawyers, Francis E. Mroz and Stephen P. Zachary. The circuit court granted the lawyers' pleas in bar, dismissing both Mroz and Zachary on statute-of-limitations grounds and, alternatively, dismissing Mroz on the basis of res judicata. On the statute-of-limitations grounds, we affirm the dismissal of Mroz but reverse the dismissal of Zachary. Given our ruling, we offer no opinion on the circuit court's alternative, res-judicata ground for dismissing Mroz.


         A. The 2008 Condo-Purchase Transaction

         In 2008, Moonlight retained Francis E. Mroz to provide legal counsel and services for the purchase of three retail condo units. Moonlight claims that Mroz failed to obtain or review, prior to closing, a resale disclosure package ("RDP") pursuant to Code § 55-79.97. Moonlight also asserts that Mroz negligently misrepresented that the 3 units included 15 parking spaces for retail tenants - a fact that Moonlight asserts would have been refuted by the RDP. The RDP allegedly included other information of which Moonlight was unaware, including fees and assessments by the condo association for parking, trash, and other services. B. The 2010 Suit Against The Condo Association

         Two years after Moonlight purchased the units, Mroz filed suit against the condo association on Moonlight's behalf, which sought both a declaratory judgment that it was not responsible for the parking and trash-removal fees and injunctive relief. Another member of Mroz's firm, Stephen P. Zachary, signed Moonlight's responsive pleading to the association's counterclaim. At some point in the pretrial stage of the case, Zachary took over primary responsibility for the litigation. Following a bench trial, the court ruled against Moonlight on all issues. On January 12, 2012, the court conducted a hearing at which it held that the condo association, as the prevailing party, was entitled to an award of $59, 021.14 in attorney fees and costs. That same day, after the hearing, the parties submitted a proposed final order to the court.

         A week later, on January 19, Zachary emailed Moonlight and confirmed Moonlight's prior statement to him that it had hired new counsel to handle the appeal. Thus, in his email, Zachary stated, "our attorney client relationship in this matter is now at an end." J.A. at 119; see also id. at 43. After Zachary discovered that the court had misplaced the proposed final order, however, he prepared another order on January 26 and forwarded it to opposing counsel who then presented it to the court for entry. See id. at 51-52; see also id. at 125-29. The court entered the final order on February 10, 2012.

         On that day, Zachary advised Moonlight by email that he had spoken with the circuit court's law clerk that morning and had learned that the law clerk had both orders, the original January 12 order and the replacement January 26 order. The circuit court had not yet entered either order. Zachary told the law clerk "to destroy the first order so that the order with [his] typewritten objections [would be] entered, rather than the one with [his] handwritten objections." Id. at 190. The law clerk "ripped up the first order while [they] were speaking." Id. Zachary copied the newly retained appellate lawyer on the email "so that she [could] also check the court's website to determine the date the order [was] entered for the purpose of any appeal [Moonlight] may pursue." Id.[1]

         C. The 2013 Malpractice Suit

         In 2013, Moonlight filed a malpractice suit against Mroz and Zachary. The complaint charged Mroz with legal malpractice in his handling of the 2008 purchase transaction by causing Moonlight to buy the condo units without being informed about the provisions in the RDP. The complaint charged Zachary with legal malpractice in his handling of the 2010 litigation against the condo association, which caused Moonlight to lose on the merits and to pay the condo association $59, 021.14 in attorney fees and costs. The court ultimately dismissed the malpractice claim against Mroz pertaining to the 2008 purchase transaction on statute-of-limitations grounds. Moonlight later nonsuited the malpractice claim against Zachary pertaining to the 2010 litigation.

         D. The 2015 Malpractice Suit

         On February 10, 2015, three years to the day after entry of the final order in the unsuccessful condo litigation, Moonlight filed a second malpractice suit - the present suit now on appeal - against Mroz and Zachary. The complaint asserted six counts of legal malpractice associated with the handling of the 2010 condo litigation.

         Mroz and Zachary responded with pleas in bar. Both pleas asserted that the three-year statute of limitations applicable to oral contracts under Code § 8.01-246(4) barred the new malpractice suit. Mroz's plea also claimed, as an independent ground for dismissal, that res judicata barred the malpractice claims against him. The circuit court agreed ...

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