ADAMS v. PAUL (1994)

This case presents another variation on the question of when does a plaintiff sustain actual injury in an action for legal negligence when a statute of limitations is missed.   The trial court followed the rule announced in Finlayson v. Sanbrook (1992) 10 Cal.App.4th 1436, 13 Cal.Rptr.2d 406 (Finlayson ).   Subsequently, another district announced a conflicting rule in Pleasant v. Celli (1993) 18 Cal.App.4th 841, 22 Cal.Rptr.2d 663 (Pleasant ), favored, not surprisingly, by Katherine Adams (Adams), appellant herein.   As we explain, neither case satisfactorily resolves the particular issue framed by this case.   However, by analysis different from that employed below, we affirm the judgment because we nevertheless conclude appellant's case is time-barred.  (Devey v. Southern Pacific Co. (1897) 116 Cal. 325, 329, 48 P. 117.)

I. FACTS

Adams appeals from a judgment of dismissal following the sustaining of a demurrer without leave to amend.   The following pertinent facts derive from the material allegations in the complaint:  In April 1983 Adams's husband shot and killed their son.   Because he was suffering from a mental disease and diminished capacity, he did not intentionally kill the boy.   That same day Mr. Adams died in a fire.

Later that year Adams contacted attorney Steven Kazan (Kazan) concerning her rights surrounding the death of her son.   Kazan referred Adams to respondent Aaron Paul (Paul), an attorney with experience in probate law and estate administration, for purposes of setting up a probate estate, representing the administrator and advising her and the Kazan office about procedures for timely filing of claims and lawsuits.

In April 1984 Paul agreed to act as attorney for the estate of Adams's late husband and to advise Adams and Kazan as requested.   At that time Paul was informed of Adams's intention to file a claim against the estate.   Paul advised Adams that (1) the time for filing the claim commenced when letters of administration were issued and (2) an action on a rejected claim should be filed 90 days after written rejection of the claim.

Letters of administration issued on October 16, 1984.   In January 1985 Paul advised Adams that February 16, 1985 was the deadline for filing a claim against the estate;  she filed her wrongful death claim on February 12.   Paul did not tell Adams that the underlying statute of limitations on her wrongful death action commenced when letters of administration were issued.   Nor did he inform her of alternative procedures for pursuing a lawsuit limited to the estate's insurance proceeds.

The administrator of the estate formally rejected Adams's claim in September 1986.   Adams filed her wrongful death complaint in December 1986—within the 90 days as specified by Paul, but nearly 14 months beyond the statute of limitations.   In March 1990 the estate moved for summary judgment contending the statute of limitations had expired.   Adams, through the Kazan office, opposed the motion on grounds the estate was estopped from asserting this defense.   Paul signed a declaration supporting Adams's position wherein he acknowledged his failure to advise on the deadline for filing the wrongful death action.   This was the last legal service Paul provided on behalf of Adams.

The court denied the estate's motion, finding triable issues of fact concerning whether (1) Paul, as attorney for the estate, made material misrepresentations to Adams or Kazan regarding the time for filing a complaint against the estate;  and (2) Adams and Kazan reasonably relied on those representations.   Had the motion been granted, Adams would have filed her action against Paul within one year thereafter.

In October 1991 the parties settled the case.   Adams sued Paul a year later.   In her complaint Adams averred that she settled the wrongful death claim against the estate for substantially less than its actual value because of the statute of limitations issue.

Paul demurred successfully, arguing that the complaint was time-barred under Code of Civil Procedure section 340.6 (hereafter, section 340.6) and Finlayson.   Dismissal and appeal followed.

II. DISCUSSION

A. Adams's Complaint Against Paul Is Time–Barred

 The one-year statute of limitations for attorney negligence begins to run when the plaintiff knows of the negligence and sustains actual and appreciable harm.  (§ 340.6; ¹  Kovacevich v. McKinney & Wainwright (1993) 16 Cal.App.4th 337, 339, 19 Cal.Rptr.2d 692.)

Our Supreme Court recently stated that this limitations period commences “on entry of adverse judgment or final order of dismissal” because at that point the client experiences “actual injury” under the statute.  (Laird v. Blacker (1992) 2 Cal.4th 606, 615, 7 Cal.Rptr.2d 550, 828 P.2d 691.)   In Laird, the negligence was failure to prosecute which resulted in dismissal.   The precise issue on review was whether the period for commencing suit against the attorney was tolled during the time plaintiff appealed from the underlying judgment of dismissal.

The court reasoned it was not, because plaintiff suffered injury when the court dismissed her action—at which point she was forced to incur legal costs and expenses in pursuing the appeal.   Further, her case lost considerable settlement value and potential interest on any monetary recovery that would have been awarded absent the professional negligence.   The court also emphasized that the proposed tolling rule would confuse the distinction between the fact and knowledge of damage, which correctly determines the time of injury, and the amount of damages, which does not.  (Laird v. Blacker, supra, 2 Cal.4th at p. 615, 7 Cal.Rptr.2d 550, 828 P.2d 691.)   Finally, the court also repudiated a line of cases to the extent they relied on an “irremediable damage” rule which the Legislature had rejected when it adopted section 340.6.  (Laird v. Blacker, supra, at p. 617, 7 Cal.Rptr.2d 550, 828 P.2d 691.)

The more recent Finlayson case treats the specific issue of when injury occurs in failure to file cases.   There, plaintiff sued his attorney after suffering an adverse summary judgment on statute of limitations grounds.   The trial court ruled his professional negligence claim was time-barred even though the suit was filed within nine months of adverse judgment on the underlying claim.

The Court of Appeal affirmed, reasoning that in missed statute cases actual injury under section 340.6 is apparent when the client's right or remedy is lost due to the attorney's failure to file within the limitation period.   (Finlayson, supra, 10 Cal.App.4th at pp. 1442–1444, 13 Cal.Rptr.2d 406 [Sixth District].)  Here, the trial court lined up with Finlayson and held Adams's suit against Paul was time-barred.   Paul emphasizes the decision is correct and, thus, Adams had a compensable injury as of October 1985 when, in his view, the underlying statute ran on her wrongful death claim.   Adams would be charged with awareness of Paul's negligence in failing to advise on the statute of limitations by at least April 1990.   That is when she opposed the estate's motion for summary judgment and submitted Paul's declaration to the effect that he did so fail to advise.   Under this theory, a suit filed in October 1992 would be too late.

Adams urges that we reverse under the rule set forth in Pleasant, a Second District case decided after judgment was entered below and which parts ways with Finlayson.   Simply put, Pleasant says the pronouncement in Laird that the cause of action for attorney negligence accrues on entry of the adverse judgment was meant to be a “bright line” rule for all situations, including missed statute cases.²  (Pleasant, supra, 18 Cal.App.4th at p. 847, 22 Cal.Rptr.2d 663.)   It cautions against the rule of Finlayson because inconsistencies can arise when a client is obliged to sue his or her attorney before the underlying suit is resolved.   Thus a client might be pressed to argue in the pending litigation that the complaint was timely filed while asserting in the attorney negligence suit that it was not.   (Pleasant, supra, at p. 849, 22 Cal.Rptr.2d 663.)

We think both cases assume too much.  Finlayson assumes that the statute of limitations deadline will always be obvious, even though there may be a hotly contested tolling issue.   Then, too, there is the highly unlikely but possible eventuality that defendant does not raise the statute of limitations as a defense.   Why should plaintiff have to file a precautionary attorney negligence suit in anticipation of losing on an issue that may never materialize?  (Pleasant, supra, 18 Cal.App.4th at p. 848, 22 Cal.Rptr.2d 663.)

Pleasant, on the other hand, assumes that only a judicial determination of the fact of damage will suffice.   This should not be dispositive in all cases.   For example, there may be cases where there is no arguable estoppel or tolling claim to counter a potential statute of limitations defense.   Perhaps plaintiff confirms this by consulting with an attorney.   Why should plaintiff then have the luxury of deferring commencement of the attorney negligence suit by filing a time-barred stale action, however late, and then waiting for adverse judgment before the statute kicks in on the professional negligence?   (Finlayson, supra, 10 Cal.App.4th at p. 1444, 13 Cal.Rptr.2d 406.)

In our view both Finlayson and Pleasant are too rigid and cannot embrace all the nuances of missed statute cases.   We have here a case in point.   In this situation, where the statute is missed, a late complaint nonetheless is filed, defendant moves for summary judgment on statute of limitations grounds and plaintiff counters with a triable issue of fact as to estoppel to assert the statute, the harm occurs when plaintiff is compelled to oppose defendant's motion.   It is at that point that the integrity of plaintiff's underlying lawsuit is damaged and compromised, and plaintiff must engage an attorney specifically to handle the prior attorney's error.  (See Budd v. Nixen (1971) 6 Cal.3d 195, 201–202, 98 Cal.Rptr. 849, 491 P.2d 433 [client suffers damage when compelled, as a result of attorney's mistake, to incur or pay attorney fees];  Kovacevich v. McKinney & Wainwright, supra, 16 Cal.App.4th at p. 344, 19 Cal.Rptr.2d 692 [actual injury occurs when client incurs legal fees in underlying suit, regardless of whether client's insurer pays the fees];  see also Sirott v. Latts (1992) 6 Cal.App.4th 923, 928–929, 8 Cal.Rptr.2d 206.)

 Consonant with this approach, Adams sustained actual damage as a result of Paul's alleged negligence in April 1990 when she was forced to oppose the estate's summary judgment motion.   At that time her attorney, Steven Kazan, filed a 14–page opposition and orchestrated Paul's declaration in support of that opposition.   So, too, by then Adams's wrongful death claim had lost settlement value:  rather than a pure claim, she now had a claim tainted by the unresolved estoppel issue.   At that juncture Adams suffered compensable injury, although the specific amount of damages could not be determined until the date of settlement.

Our decision flows from the salient facts of the case and averts major pitfalls highlighted in Pleasant and Finlayson.   First, by tying the harm to the time when the missed statute becomes an issue in the underlying litigation as opposed to the time it actually expires, we avoid the possibility that the plaintiff would file a precautionary legal negligence suit in anticipation of an issue (i.e., missed statute) that the opposition might never spot.   Second, at that point the missed statute issue is framed and poised for judicial resolution.   Then, with one year to file against the attorney and with diligent prosecution of the underlying case, plaintiff in all likelihood would not be faced with taking inconsistent positions on the missed statue in the two lawsuits.   Note, too, that were we to select the date that Adams favors, namely, the date of allegedly unfavorable settlement, we would be allowing clients, with actual knowledge of their injury, to unilaterally control commencement of the statute of limitations—at least to the extent of the five-year statute for bringing a case to trial.   This result undermines the goal of resolving cases while the evidence and memories are fresh, and witnesses are available.  (Laird v. Blacker, supra, 2 Cal.4th at p. 618, 7 Cal.Rptr.2d 550, 828 P.2d 691.)

B. Paul Is Not Estopped from Raising the Statute of Limitations Defense

 Adams also maintains that Paul cannot use the statute of limitations as a defense because she relied on his erroneous legal advice regarding when to file the wrongful death claim, citing Katz v. A.J. Ruhlman & Co. (1945) 69 Cal.App.2d 541, 159 P.2d 426.

Adams is wrong and Katz is inapposite.   Paul advised Adams and also served as attorney for the estate.   Arguably the estate was estopped to use the statute to defeat Adams's suit against it, and the trial court overruled the motion for summary judgment on that basis.   However, the timeliness of Adams's pursuit of Paul is an entirely different matter.   Adams has not pled any facts tending to show that Paul interfered with, misinformed her about or in any other way influenced the timing of her decision to sue him.

Katz states that when a former executor of an estate agrees to compromise a creditor's claim but mistakenly advises the creditor that it need not file a claim, the estate cannot later repudiate the compromise after the time to file has expired.  (Katz v. A.J. Ruhlman & Co., supra, 69 Cal.App.2d at p. 545, 159 P.2d 426.)  Katz may have aided Adams against the estate, but it does not aid her against Paul.

The judgment is affirmed.

FOOTNOTES

1.   Section 340.6, subdivision (a), states that an action against an attorney for professional negligence “shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.”   However, the statute is tolled during the time that “(1) The plaintiff has not sustained actual injury;  (2) The attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred․”

2.   We are not concerned that Finlayson erodes Supreme Court precedent.  Laird must be read in context and cannot reasonably be construed to resolve whether events other than entry of adverse judgment would satisfy the criterion of actual injury.  (Bennett v. McCall (1993) 19 Cal.App.4th 122, 127, 23 Cal.Rptr.2d 268.)   A decision cannot stand for propositions not considered.   No other issue was tendered for decision in Laird.  (Hensley v. Caietti (1993) 13 Cal.App.4th 1165, 1174, 16 Cal.Rptr.2d 837.)   Further, although the bald statement is made that actual injury occurs on the date of adverse judgment, period, in the next two sentences the court explains that it was upon dismissal that (1) the client was compelled to incur costs in pursuing the appeal and (2) her case lost considerable settlement value and potential interest.  Laird also underscores that the focus of section 340.6 is on actual damage, i.e., the fact that some damage has occurred.   Under this analysis, District Five has also chosen not to construe Laird as a bright line rule, concluding instead that the client's injury occurred when he was compelled to incur attorney fees in defense of an action, several months in advance of the adverse judgment.  (Kovacevich v. McKinney & Wainwright, supra, 16 Cal.App.4th at pp. 342–344, 19 Cal.Rptr.2d 692.)

ANDERSON, Presiding Justice.

POCHÉ and PERLEY, JJ., concur.