Sheryl Schwab v. Jennifer Zahradnik

IN THE COURT OF APPEALS OF IOWA

No. 18-1118
Filed July 24, 2019

SHERYL SCHWAB,
Plaintiff-Appellant,

vs.

JENNIFER ZAHRADNIK,
Defendant-Appellee.
________________________________________________________________

Appeal from the Iowa District Court for Benton County, Lars G. Anderson,

Judge.

A claimant appeals the district court rulings dismissing her claims of legal

malpractice. AFFIRMED.

Peter C. Riley of Tom Riley Law Firm, P.L.C., Cedar Rapids, for appellant.

Gregory M. Lederer and Shannon M. Powers of Lederer Weston Craig PLC,

Cedar Rapids, for appellee.

Heard by Vaitheswaran, P.J., and Tabor and Bower, JJ.
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BOWER, Judge.

Sheryl Schwab appeals the district court’s grant of summary judgment in

her legal malpractice action against her dissolution attorney, Jennifer Zahradnik.

Schwab claims Zahradnik provided negligent legal representation by failing to

preserve her rights to her ex-spouse’s potential medical-malpractice claim, her

right to file a loss-of-consortium claim, and a right to reimbursement for insurance

premiums paid during the dissolution. We find Schwab had no right to her ex-

spouse’s post-dissolution personal-injury settlement. We also find any claims she

might have had accrued at the time of the dissolution decree and have expired

under the statute of limitations. We affirm the district court’s grant of summary

judgment in favor of Zahradnik.

I. Background Facts & Proceedings

In September 2008, Schwab filed a petition to dissolve her marriage with

Dennis Musel. Zahradnik represented Schwab in the proceedings. Prior to

completion of the dissolution proceedings, Musel sustained injuries during surgery

which led to Musel’s partial paralysis. On June 16, 2009, Musel’s attorney sent a

letter to Zahradnik indicating Musel was contemplating a medical malpractice

action and would reimburse Schwab for insurance premiums paid during the

dissolution but would not agree to Schwab receiving any of the settlement

proceeds.

Schwab and Musel submitted a stipulated dissolution decree, which was

approved by the court on July 8, 2009. Schwab knew of Musel’s potential medical-

malpractice claim at the time the decree was entered, though Musel had told her

he was not intending to bring a claim. The dissolution decree did not preserve any
3

claim Schwab might assert to Musel’s potential malpractice action, preserve her

own potential loss-of-consortium claim, or preserve a right to reimbursement for

the insurance premiums.

Musel filed his medical-malpractice claim in March 2012 and settled in

November 2013. Schwab learned of the settlement through an article in the

newspaper and then requested her dissolution file from Zahradnik.

On January 5, 2017, Schwab filed a legal malpractice petition against

Zahradnik. Schwab made three negligent representation claims against

Zahradnik: failure to preserve Schwab’s right to make a claim against Musel’s

medical-malpractice action and failure to preserve a loss-of-consortium claim;

failure to preserve Schwab’s right to reimbursement of insurance premiums; and

failure to inform Schwab of Musel’s intent to file a claim and her related rights.

Schwab also brought a breach-of-contract claim against Zahradnik, alleging

Zahradnik had failed to inform Schwab of Musel’s potential medical-malpractice

claim and failed to preserve her rights in the dissolution decree. Zahradnik’s

answer included two affirmative defenses: Schwab’s legal-malpractice claim was

time-barred by the statute of limitations and Schwab was a proximate cause of her

own damages.

In February 2018, Zahradnik filed a motion for summary judgment based on

the statute-of-limitations defense; Schwab resisted. The district court denied

summary judgment on March 30. On April 20, the court amended its ruling and

granted Zahradnik summary judgment as to any allegations concerning loss of

consortium, finding Schwab held such rights independent of Musel’s medical-

malpractice claim and any loss of consortium occurred during Schwab and Musel’s
4

marriage. Because her loss-of-consortium claim accrued during the marriage and

was lost with the decree in 2009, it was time barred by the statute of limitations.

The remaining negligence and contract claims on Zahradnik’s failure to preserve

Schwab’s right to make a claim against Musel’s medical-malpractice recovery and

her right to reimbursement of insurance premiums remained set for trial.

On April 23, in a pretrial colloquy, Schwab indicated she was not pursuing

the legal malpractice as a breach-of-contract claim.1 The court revisited the

summary judgment motion and granted summary judgment in favor of Zahradnik

on the negligence claim. Schwab filed an Iowa Rule of Civil Procedure 1.904(2)

motion to reconsider, enlarge, and amend, which the court denied.

Schwab appeals.

II. Standard of Review

We review a summary judgment ruling for correction of errors at law. Huck

v. Wyeth, Inc., 850 N.W.2d 353, 362 (Iowa 2014). “Summary judgment is

appropriate when the moving party demonstrates that no genuine issue of material

fact exists and that the movant is entitled to judgment as a matter of law.”

Vossoughi v. Polaschek, 859 N.W.2d 643, 649 (Iowa 2015). We afford the

nonmoving party “every legitimate inference that can be reasonably deduced from

the evidence.” Hills Bank & Tr. Co. v. Converse, 772 N.W.2d 764, 771 (Iowa 2009).

If reasonable minds can differ on the inferences drawn from the evidence in a way

1
Schwab had alleged the malpractice in terms of breach of a legal contract of
representation and as negligent representation. However, “[l]egal malpractice claims
sound in negligence.” Vossoughi v. Polaschek, 859 N.W.2d 643, 649 (Iowa 2015).
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that might affect the outcome of a lawsuit, a genuine issue of material fact exists.

Banwart v. 50th St. Sports, L.L.C., 910 N.W.2d 540, 544–45 (Iowa 2018).

III. Analysis

A plaintiff alleging legal malpractice must produce substantial evidence of

the following elements:

(1) an attorney-client relationship existed giving rise to a duty; (2) the
attorney violated or breached the duty, either by an overt act or a
failure to act; (3) the breach of duty proximately caused injury to the
client; and (4) the client did sustain an actual injury, loss, or damage.

Stender v. Blessum, 897 N.W.2d 491, 502 (Iowa 2017). A claim for legal

malpractice must be brought within five years of accrual. Venard v. Winter, 524

N.W.2d 163, 165–66 (Iowa 1994) (applying Iowa Code § 614.1(4)).

On appeal, Schwab asserts three claims of legal malpractice against

Zahradnik.2 First, we will address her claim relating to Musel’s personal-injury

settlement. Next, we will consider her loss-of-consortium claim. Finally, we will

address her claim for reimbursement for insurance premiums.

Because the district court determined Schwab’s claims were barred by the

statute of limitations, the question before us is when did Schwab’s legal-

malpractice cause of action accrue. Zahradnik suggests the legal-malpractice

action is a collateral attack on the dissolution decree itself. Schwab had one year

after the dissolution decree to challenge its validity under a claim of fraud by Musel.

See Iowa Rs. Civ. P. 1.1012–.1013; see also Simon v. Simon, No. 15-0814, 2016

WL 1703521, at *1–2 (Iowa Ct. App. Apr. 27, 2016) (finding a fraud petition relating

2
Schwab also asks on appeal that our decision in In re Marriage of Jervik, No. 15-0766,
2016 WL 5930425 (Iowa Ct. App. Oct. 12, 2016), be overruled. Our supreme court
transferred this appeal to our court, and we decline Schwab’s invitation to overrule Jervik.
6

to the value of an asset awarded in the dissolution decree based on pre-dissolution

representations to be an untimely and therefore an impermissible collateral attack

on the dissolution decree).

“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.”

Skadburg v. Gately, 911 N.W.2d 786, 792 (Iowa 2018). “[T]he statute of limitations

does not begin to run on a legal malpractice claim until . . . . the client sustains an

actual, nonspeculative injury and has actual or imputed knowledge of the other

elements of the claim.” Vossoughi, 859 N.W.2d at 652 (footnote omitted). The

injury must be an actual loss, not speculative harm. Id.; see also Skadburg, 911

N.W.2d at 792.

A. Interest in Musel’s medical-malpractice action. The critical

element here is when Schwab suffered damage, if at all, with respect to Musel’s

medical-malpractice action. Schwab dates her alleged injury to when she

discovered Musel had filed and settled a medical-malpractice action. Zahradnik

places the date of injury, if any, at the time of the dissolution decree.

The district court found Musel’s 2013 settlement “irrelevant to what Ms.

Schwab would have or should have received at the time of the divorce,” Schwab’s

damages were not speculative, and the statute of limitations had passed. In its

ruling on the motion for additional findings, the court concluded Schwab did not

have a right to Musel’s post-dissolution recovery and fixed her damages at the time

of divorce, resulting in the claim being barred by the statute of limitations.

In order to determine when Schwab’s damages occurred, we must

determine how Schwab was injured. Settlement payments received before
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dissolution are marital property. In re Marriage of Schriner, 695 N.W.2d 493, 497

(Iowa 2005). “The proceeds of a personal injury claim are divided according to the

circumstances of each case.” In re Marriage of Plasencia, 541 N.W.2d 923, 926

(Iowa Ct. App. 1995) (citing In re Marriage of McNerney, 417 N.W.2d 205, 206

(Iowa 1987)). Settlement proceeds do not automatically belong to either party.

McNerney, 417 N.W.2d at 208. Rights not specifically preserved in the dissolution

decree are forfeited. Iowa Code § 598.20 (2009); see also Plasencia, 541 N.W.2d

at 926. Moreover, benefits and proceeds received after a divorce is final are the

separate property of the injured spouse. In re Marriage of Schmitt, No. 15-1207,

2016 WL 3556462, at *4 (Iowa Ct. App. June 29, 2016). We have held a spouse

does not have “a right to any part of a future recovery made after the dissolution.”

In re Marriage of Jervik, No. 15-0766, 2016 WL 5930425, at *7 (Iowa Ct. App. Oct.

12, 2016).

Even if we found Schwab had a right to a part of Musel’s recovery and found

Zahradnik violated a duty to Schwab in failing to preserve that right, the statute of

limitations would bar Schwab’s claim against Zahradnik. The dissolution decree

was entered in 2009, more than five years before Schwab commenced this action

on January 5, 2017. Therefore Iowa Code section 614.1(4) bars Schwab’s action

unless a legal doctrine tolls the limitations period. See Skadburg, 911 N.W.2d at

793.

Schwab seeks to apply the discovery-rule exception, which tolls the

limitations period until the plaintiff has actual or imputed knowledge of all the

elements of the action. See id. at 794. As the party attempting to avoid the

limitations period, Schwab has the burden of demonstrating any exception. See
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id. at 793. When a plaintiff has information alerting “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.’” Id. at 794 (citation omitted).

The plaintiff’s cause of action accrues when the plaintiff has imputed knowledge,

i.e., knows or should have known sufficient facts to recognize the problem existed.

See id. at 795.

Schwab asserts there remains a genuine issue of material fact precluding

summary judgment on her legal-malpractice claim because Musel informed her he

was not going to pursue a medical-malpractice action and she only became aware

this was not true when she read of his settlement in 2013. However, it is

undisputed Schwab was aware Musel had suffered a personal injury during their

marriage. Schwab knew of the possibility of Musel’s medical-malpractice action,

even if she did not know it would be pursued. Schwab consented to a dissolution

of marriage decree that did not preserve any claim with respect to Musel’s personal

injury. Schwab knew at the time the decree was entered that it did not preserve

for her any rights to any future recovery by Musel. While the amount of the

potential damages was not discovered until 2013, Schwab was on inquiry notice

from the time the decree was filed—any claim accrued at that time.

Schwab had no right to any recovery Musel obtained following the

dissolution of their marriage. Iowa Code § 598.20; see also Jervik, 2016 WL

5930425, at *7. Because she had no right to Musel’s post-dissolution recovery,

Schwab was not injured upon discovery of Musel’s settlement of his medical-
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malpractice claim.3 The marital property division, including the parties’ respective

rights and obligations, occurred at the time of dissolution in 2009, and Schwab at

that time knew sufficient facts to put her on inquiry notice and have imputed

knowledge of her potential claim. Without the parties agreeing otherwise, Schwab

was not injured when Musel settled his malpractice claim, and any claim arising

from her lack of a right to a portion of his settlement accrued at the time of the

dissolution decree.

B. Loss-of-consortium claim. Schwab also alleges Zahradnik was

negligent by failing to preserve a loss-of-consortium claim in the dissolution

decree. The district court determined the cause of action relating to Schwab’s

loss-of-consortium claim accrued in 2009 upon entry of the decree. On appeal,

Schwab concedes her claim relating to a loss of consortium is barred under the

statute of limitations.

The spouse of an injured person is entitled to seek damages for the loss of

“such intangible elements as company, cooperation, affection and aid.” Spaur v.

Owens-Corning Fiberglas Corp., 510 N.W.2d 854, 869 (Iowa 1994) (citation

omitted). The claim is distinct from the injured party’s personal-injury claim. See

Fuller v. Buhrow, 292 N.W.2d 672, 675 (Iowa 1980). “[A] loss of consortium claim

is a ‘right acquired by marriage’ and . . . is forfeited unless specifically preserved”

3
The district court explained that at the time of the dissolution the most Schwab could
have claimed was a greater portion of the marital property in anticipation of Musel’s
recovery potential. Schwab argues on appeal that by doing so, the district court decided
a claim she had not pleaded and the court did not rule on her pleaded claim. However,
the district court found she had no damages in 2013 because she had no rights to Musel’s
medical-malpractice settlement. The remainder simply explored what right she may have
had at the time of the dissolution decree and noted any action arising out of the dissolution
decree is time-barred.
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in the dissolution decree. Beeck v. Aquaslide ‘n’ Dive Corp., 350 N.W.2d 149, 167

(Iowa 1984) (citation omitted)).

Schwab’s loss-of-consortium claim, while related to Musel’s claims, was

separate and held by her alone while they were married. Schwab had the right to

bring a loss-of-consortium claim within five years beginning from the time of

Musel’s injury. Upon entry of the dissolution decree, Schwab’s damages for loss

of consortium ceased. Schwab knew of Musel’s injury and her own efforts to help

him prior to the dissolution. No loss-of-consortium claim was preserved in the

dissolution decree in 2009. See Michael v. Harrison Cty. Rural Elec. Coop., 292

N.W.2d 417, 420 (Iowa 1980) (holding failure to preserve in the dissolution decree

a right to “loss of consortium arising out of personal injury to the other spouse

during the marital relationship” results in forfeiture of the right to maintain the

action). We find Schwab’s legal-malpractice claim relating to her loss-of-

consortium claim is time-barred by the statute of limitations.

C. Insurance premium reimbursement. Schwab’s final claim is

Zahradnik provided negligent representation by failing to preserve her right to seek

reimbursement for insurance premiums paid on Musel’s behalf during the

marriage. The district court made no specific factual findings as to the insurance

premiums. The insurance premiums were paid during the marriage, and the

money used to pay them was marital property. Schwab knew she had paid the

premiums at the time of the dissolution and knew at the time of the decree that she

was not receiving reimbursement for those premiums.

We affirm the district court dismissal of Schwab’s legal-malpractice claim

relating to failure to preserve Schwab’s right to a portion of Musel’s medical-
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malpractice action and dismissal of the failure to preserve Schwab’s loss-of-

consortium claim as time-barred. We also find there is no genuine issue of material

fact as to Musel’s offer to reimburse Schwab’s insurance premium costs for the

same reasons previously stated.

AFFIRMED.