Budd v. Nixen

CourtCalifornia Court of Appeals
Writing for the CourtGARDNER; KERRIGAN
Citation92 Cal.Rptr. 899,15 Cal.App.3d 157
PartiesWilliam A. BUDD, Plaintiff and Appellant, v. Alan NIXEN, Defendant and Respondent. Civ. 10018.
Decision Date10 February 1971

Page 899

92 Cal.Rptr. 899
15 Cal.App.3d 157
William A. BUDD, Plaintiff and Appellant,
Alan NIXEN, Defendant and Respondent.
Civ. 10018.
Court of Appeal, Fourth District, Division 2, California.
Feb. 10, 1971.
For Opinion on Hearing, see 98 Cal.Rptr. 849, 491 P.2d 433.

Page 900

Hunt, Liljestrom & Westworth, Vernon W. Hunt, Jr., Santa Ana, for plaintiff-appellant.

Groff, Dunne, Shallcross & Kane, Russell Shallcross, Los Angeles, for defendant-respondent.


GARDNER, Presiding Justice.

On November 8, 1962, plaintiff Budd was the president of, and a shareholder in Hawarden Hills, Inc. a corporation. On that date Hawarden Hills entered into a contract with one Milburn. Disputes arose concerning the contract, and on February 5, 1963, Milburn filed a complaint in the Riverside County Superior Court. Named as defendants were Hawarden Hills, Budd, other officers of Hawarden Hills, and a number of Does. The complaint alleged a breach of the contract between Milburn and Hawarden Hills; nonetheless it sought to impose personal liability for the corporation's alleged breach of contract on Budd and the other Hawarden Hills officers.

Defendant Nixen was hired by Hawarden Hills to defend the action against it. On behalf of Hawarden Hills alone, defendant filed an answer on May 3, 1963. At the same time, he filed a cross-complaint naming the corporation, Budd, and the other named individual defendants as cross-complainants. On July 29, 1963, Milburn filed an amended complaint, again naming all the parties defendant named in the original complaint. In July, defendant told plaintiff that it would be necessary for him [plaintiff] to file an answer to the Milburn complaint in his individual capacity. Therefore, on July 31, 1963, plaintiff retained defendant to represent him in the defense of the Milburn claim. Thereafter, defendant filed an answer on plaintiff's behalf. Neither this answer, nor any amendment thereto, raised as a defense the assertion that plaintiff has signed the contract with Milburn only in his capacity as president of Hawarden Hills, Inc. and was not, therefore, personally liable on the contract. To the contrary, the pleadings admitted the execution of the contract by the individuals as well as by the corporation.

Trial was held in May 1964. On September 14, 1964, plaintiff relieved defendant as his attorney of record and on the same date retained another attorney. On October 28, 1964, the trial court ruled that a judgment in the amount of $75,000.00 be awarded Milburn against all defendants. Judgment to that effect was ultimately entered on November 4, 1965. Following unsuccessful post-judgment motions, the judgment eventually became final and the plaintiff was compelled to pay a substantial portion of the judgment to Milburn.

On September 11, 1967, the plaintiff Budd filed the instant action against the defendant Nixen to recover the damages resulting from said judgment. Defendant's motion for a summary judgment was granted on the ground that the statute of limitations had run on plaintiff's cause of action.

Both parties concede that the two-year statute of limitations of Code of Civil Procedure 339(1) is applicable to plaintiff's cause of action for legal malpractice. (Alter v. Michael, 64 Cal. 2d 480, 481, 50 Cal.Rptr. 553, 413 P.2d 153.) 1 The issue is when the statute starts to run.

Several points in time suggest themselves as appropriate for selection as commencement dates for the period of the statute of limitations:

(1) If the statute runs from the date of the commission of the original negligent act, as contended by the defendant and found by the trial court, almost four years expired between that act (May or July of 1963) and the filing of the instant malpractice action. Thus, the statutory period has expired.

Page 901

(2) If the statute is activated when the negligence becomes irremediable, in this case the date of discharge of the defendant attorney (September 14, 1964), over two years elapsed before the filing of the malpractice action and the statute interposes a bar to further prosecution of the claim.

(3) If the statute runs from the time of discovery of the negligence, which was September 15, 1964, when plaintiff's new counsel informed him of it, over two years elapsed before the filing of the malpractice action and the statutory period has expired.

(4) If, as contended by the plaintiff, the statute commences to run at the date of actual damage the statutory period has not yet expired and the trial court's ruling was in error. Plaintiff selects the date of November 4, 1965, the date of entry of judgment, as the date of actual damage. Thus, only a year and ten months had elapsed. [However, to carry this theory to its logical conclusion, the date should be that on which the judgment became final. The record before us does not reveal that date, but it would be subsequent to the entry of judgment and would bring plaintiff's action even more safely within the statute of limitations.]

The rule in California is that the statute in legal malpractice cases begins to run when the original negligent act occurs. (Alter v. Michael, supra, 64 Cal.2d 480, 50 Cal.Rptr. 553, 413 P.2d 153; Lattin v. Gillette, 95 Cal. 317, 30 P. 545; Yandell v. Baker, 258 Cal.App.2d 308, 65 Cal.Rptr. 606; Eckert v. Schaal, 251 Cal.App.2d 1, 58 Cal.Rptr. 817; Shelly v. Hansen, 244 Cal.App.2d 210, 53 Cal.Rptr. 20; Bustamante v. Haet, 222 Cal.App.2d 413, 35 Cal.Rptr. 176; Griffith v. Zavlaris, 215 Cal.App.2d 826, 30 Cal.Rptr. 517; DeGarmo v. Luther T. Mayo, Inc., 4 Cal.App.2d 604, 41 P.2d 366; Jensen v. Sprigg, 84 Cal.App. 519, 258 P. 683; See Annotation--When Statute of Limitations Begins to Run upon Action against Attorney for Malpractice, 18 A.L.R.3d 978.)

In a scholarly and exhaustive discussion of many of the cases in this field, plaintiff contends that while the courts have given lip service to the 'negligent act' rule it has been but dicta and that in each case the facts were that the period did not commence until the negligent act had resulted in actual damage. He points out that the cause of action for damages against an attorney for neglect of duty is one for the tort of negligence, (Ishmael v. Millington, 241 Cal.App.2d 520, 50 Cal.Rptr. 592; Modica v. Crist, 129 Cal.App.2d 144, 276 P.2d 614; McGregor v. Wright, 117 Cal.App. 186, 3 P.2d 624) and that actual as distinguished from minimal damage is a necessary element of a tort. Thus, he reasons no cause of action arises until actual damages are sustained.

Initially, we must disagree with plaintiff's contention that the above cited cases adopt the negligent act rule only by way of dicta. For while it is true that in a number of these opinions, the court might have reached the result it did by employing plaintiff's suggested 'actual damage' rule, it is nonetheless clear that in all of these cases where the time of activation of the statute of limitations was in issue, the courts reached their conclusions through application of the negligent act rule. (Yandell v. Baker, supra, 258 Cal.App.2d 308, 65 Cal.Rptr. 606; Eckert v. Schaal, supra, 251 Cal.App.2d 1, 58 Cal.Rptr. 817; Fazio v. Hayhurst, 247 Cal.App.2d 200, 55 Cal.Rptr. 370; Bustamante v. Haet, supra, 222 Cal.App.2d 413, 35 Cal.Rptr. 176; Griffith v. Zavlaris, supra, 215 Cal.App.2d 826, 30 Cal.Rptr. 517; DeGarmo v. Luther T. Mayo, Inc., supra, 4 Cal.App.2d 604, 41 P.2d 366.)

And, while we agree thoroughly with plaintiff's exposition of the law of torts, we must point out that the rather murky field of legal malpractice has combined, perhaps unfortunately, two concepts--torts and contracts. Over a hundred years ago, the Supreme Court of the United States in

Page 902

Wilcox v. The Executors of Plummer, 29 U.S. (4 Pet.) 172, 7 L.Ed. 821 a suit for legal malpractice stated: 'The ground of action here is a contract to act diligently and skillfully, and both the contract and the breach of it admit of a definite assignment of date. When might this action have been instituted? is the question, for from that time the statute [of limitations] must run.

'When the attorney was chargeable with negligence or unskilfulness his contract was violated, and the action might have been sustained immediately. Perhaps, in that event, no more than nominal damages may be proved and no more recovered; but, on the other hand, it is perfectly clear that the proof of actual damage may extend to facts that occur and grow out of the injury, even up to the day of the verdict. If so, it is clear the damage is not the cause of action.' (4 Pet. at 181-182, 7 L.Ed. at 824.) The Wilcox rationale was carried into California law in the early case of Lattin v. Gillette, supra, 95 Cal. 317, 30 P. 545, and has continued, for better or worse, until the present time.

The dilemma with which the courts have been faced in dealing with problems of this nature may be best illustrated by the language of Rich v. New York Central and Hudson River Railroad Co., 87 N.Y. 382, 390, in which the court said: 'We have been unable to find any accurate and perfect definition of a tort. Between actions plainly ex contractu and those as clearly ex delicto there exists what has been termed a borderland, where the lines of distinction are shadowy and obscure, and the tort and the contract so approach each other and become so nearly coincident as to make their practical separation somewhat difficult * * * [A] tort is described in general as 'a wrong independent of contract.' And yet it is conceded that a tort may grow out of, or make part of, or be coincident with a contract, [citation] and that precisely the same state of facts, between the same parties, may admit of an action either ex contractu or ex delicto. [Citation.]'

Unfortunately, in the field of attorney malpractice we are left somewhere in this borderland--an area of considerable confusion and conflict. (See Prosser, the Borderland of Tort & Contract, In Selected Topics on the Law...

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