Crouse v. Brobeck, Phleger & Harrison

• Decision Date: 25 November 1998
• Docket Number: Nos. D025143,D026136,s. D025143
• Citation: 80 Cal.Rptr.2d 94,67 Cal. App. 4th 1509
• Court: California Court of Appeals
• Parties: , 98 Cal. Daily Op. Serv. 8691, 98 Daily Journal D.A.R. 12,051 Linda F. CROUSE et al., Plaintiffs and Appellants, v. BROBECK, PHLEGER & HARRISON, Defendant Cross-defendant and Respondent; Davis C. Boatwright, Defendant, Cross-complainant and Appellant; Page, Polin, Busch & Boatwright, Cross-complainant and Appellant. Linda F. CROUSE et al., Plaintiffs and Appellants, v. PAGE, POLIN, BUSCH & BOATWRIGHT et al., Defendants and Respondents.

Page 94

80 Cal.Rptr.2d 94

67 Cal.App.4th 1509, 98 Cal. Daily Op. Serv. 8691,

98 Daily Journal D.A.R. 12,051

Linda F. CROUSE et al., Plaintiffs and Appellants, v.BROBECK, PHLEGER & HARRISON, DefendantCross-defendant and Respondent;

Davis C. Boatwright, Defendant, Cross-complainant and Appellant;

Page, Polin, Busch & Boatwright, Cross-complainant and Appellant.

Linda F. CROUSE et al., Plaintiffs and Appellants, v.PAGE, POLIN, BUSCH & BOATWRIGHT et al., Defendants and Respondents.

Nos. D025143, D026136.

Court of Appeal, Fourth District, Division 1, California.

Nov. 25, 1998.

Rehearing Denied Dec. 23, 1998.

Review Denied Feb. 17, 1999.

Casey, Gerry, Reed & Schenk and T. Michael Reed, San Diego, for Plaintiffs and Appellants.

Post, Kirby, Noonan & Sweat, David J. Noonan and Charles T. Hoge, San Diego, for Defendant, Cross-defendant and Respondent.

Donald P. Tremblay and Jonathan R. Flora, La Jolla, for Defendant, Cross-complainantAppellant and for Defendants and Respondents.

Haight, Brown & Bonesteel, Roy G. Weatherup, Santa Monica, Jay T. Thompson, Santa Ana, and Jon M. Kasimov, Santa Monica, for Cross-complainant and Appellant and for Defendants and Respondents.

McDONALD, J.

In these consolidated appeals we examine the application of the legal malpractice statute of limitations continuing-representation tolling provision to a legal malpractice action against a law firm, a former partner of the law firm who represented the client while a partner of the law firm and after becoming a partner in a new firm, and the new firm.We also consider (1) the application of the statute of limitations to cross-complaints for equitable indemnity filed by the attorney and his new firm against his former firm, (2) the limitations on equitable indemnity rights of the attorney and his new firm against the former firm and (3) the doctrines of implied contractual duty, fiduciary duty and statutory duty owed by a law firm to its members.

AppellantsLinda F. Crouse and Linda F. Crouse Trust (together Crouse) filed this legal malpractice action against David Boatwright(Boatwright), an attorney who had represented her in a business transaction, and the two law firms in which Boatwright practiced during the times of the alleged acts of malpractice.Prior to 1990 Boatwright was an associate and partner in Brobeck, Phleger & Harrison (BPH).Between March 1990 and mid-October 1993 Boatwright was a partner in Page, Polin, Busch & Boatwright (Page).

BPH cross-complained for indemnity against Boatwright, and Page and Boatwright cross-complained for indemnity against BPH.Boatwright's cross-complaint against BPH also pleaded claims for breach of implied contract and breach of fiduciary and statutory duties.

The trial court granted BPH's motion for summary judgment on Crouse's complaint against BPH, finding that Crouse's action for BPH's malpractice prior to 1990 was time-barred by the statute of limitations.The trial court also granted BPH's motions for summary judgment on Boatwright's and Page's cross-complaints against BPH.BPH dismissed its cross-complaint against Boatwright.

The trial court granted Boatwright's and Page's motions for summary judgment on Crouse's complaint against Boatwright and Page, finding that Crouse's actions for Boatwright's malpractice prior to and after 1990 and Page's malpractice after 1990 were time-barred by the statute of limitations.

In these appeals Crouse argues the summary judgments in favor of BPH, Boatwright and Page on her complaint were error; Boatwright and Page argue the summary judgments in favor of BPH on their cross-complaints were error.

IFACTS

On appeal from summary judgments, we view the facts and inferences reasonably drawn from those facts most favorably to the respective appellants.

A.The Sale of Crouse's Partnership Interest

During the 1980's Crouse was a limited partner in a limited partnership known as Med-Trans.In 1987 Crouse retained BPH to advise and assist her in the sale of her limited partnership interest in Med-Trans to its general partners.Boatwright was the BPH attorney principally responsible for representing Crouse in the sale.At the end of December 1988 Crouse's sale of her limited partnership interest closed and in consideration she received a promissory note for $7.25 million (the note), which was all due and payable in September 1990.Boatwright did not deliver the note to Crouse at the sale closing and did not take action to assure that the note would be held in a secure location.

B. Boatwright Changes Firms

Boatwright left BPH in August 1989.In March 1990he became a partner in Page.BPH continued to represent Crouse with respect to the Med-Trans sale and the note until March 1990.

C.The Aborted Restructuring

In early 1990 Crouse learned the obligors on the note wished to renegotiate the terms of the note.Crouse consulted Boatwright in the spring of 1990 about negotiating a restructuring of the terms of the note, and then retained Page and Boatwright to represent her in those negotiations.BPH, at Crouse's request, transferred her Med-Trans file to Page in April 1990.

Crouse told Boatwright during an April 1990 meeting that she did not have the note.The Crouse file transferred from BPH to Page in April did not include the note.In May Crouse again told Boatwright she could not find the note, and Boatwright told her to "[p]ut it on the back burner."

During the spring and summer of 1990, Boatwright and Page negotiated a restructuring of the terms of the note.Under the restructured note, Crouse was to receive in exchange for the note $6.25 million in cash and a new $1 million note payable 18 months after the note-restructuring closing scheduled for September 25, 1990.

During the six months prior to the scheduled closing of the note-restructuring, Boatwright took no steps to locate the note.On the date scheduled for closing, Boatwright was aware he did not have the note.He had not contacted BPH about the missing note.He had not assessed the legal significance on the closing, or evaluated the alternatives that might be available to Crouse, if the note could not be found and delivered to the note obligors.

At the closing, Ms. Eisner, the attorney for the note obligors, demanded surrender of the note.Because Crouse was unable to produce the note, Eisner aborted the closing.Eisner believed that the note was negotiable and unless the note obligors obtained possession of the note in exchange for the $6.25 million cash payment and the new $1 million note, a holder in due course of the note would be entitled to demand payment of the note from the note obligors at a later date.

D.The Final Restructuring

A few days after the aborted closing, Boatwright negotiated a different note-restructuring agreement pursuant to which Crouse was to receive $5 million in cash to be held in escrow for one year, and a new $2.5 million note (the new note).This restructuring agreement closed October 12, 1990, without surrender of the note to the note obligors.

E. Crouse Learns of Malpractice Claim

By mid-October 1990 Crouse had been advised by independent attorneys that the loss of the note was negligence and that Page and Boatwright had been negligent during the spring and summer of 1990 in connection with the restructuring of the terms of the note by not searching for the note, not explaining to Crouse the significance of producing the note, and not making alternative arrangements in lieu of producing the note, at the closing of the note-restructuring transaction.

F. Boatwright's Continued Involvement With Crouse

Boatwright and Page continued to represent Crouse until July 1993 in collecting the escrowed proceeds from the restructured-note transaction and amounts due under the new note, including negotiating a discounted payoff of the new note.

IIPROCEDURAL HISTORY

Although Crouse's action for legal malpractice against BPH, Boatwright and Page was filed in August 1994, the relevant date of filing the action for statute of limitations purposes is December 1993 in accordance with a statute of limitations tolling agreement entered into by Crouse, BPH, Boatwright and Page.Page and Boatwright cross-complained against BPH for equitable indemnity.Boatwright's cross-complaint against BPH also alleged that BPH owed Boatwright certain implied contractual, fiduciary and statutory duties as a former partner, and that BPH had breached those duties.

BPH moved for summary judgment against Crouse, arguing that the statutes of limitation on her claim against BPH for negligence in losing the note began running in October 1990.BPH argued that because it had ceased representing Crouse by April 1990, there was no basis for tolling the statute of limitations on her claim against BPH and her claim was therefore barred by the one-year statute of limitations, which expired in October 1991, more than two years before the effective date of Crouse's action against BPH.The trial court granted the motion, reasoning there was no tolling against BPH because BPH had ceased representing Crouse by April 1990.The trial court granted Boatwright's motion to join in BPH's motion for summary judgment for the time period in which Boatwright was a partner at BPH.

Page and Boatwright then moved for summary judgment or judgment on the pleadings against Crouse, asserting that (1) claims against Boatwright based on negligence while at BPH were time-barred under the prior ruling for summary judgment in favor of BPH and Boatwright, and (2) Crouse's complaint did not allege and Crouse had no evidence that Boatwright and Page had been negligent during their representation of Crouse after April 1990.Crouse opposed the motions and submitted evidence that she had notified Boatwright in the spring of 1990 that the note was missing but Boatwright did nothing to find the note prior to the aborted closing on September 25, 1990.She also filed a declaration from an expert, originally retained...