Finlayson v. Sanbrook

• Decision Date: 12 November 1992
• Docket Number: No. H009221,H009221
• Citation: 13 Cal.Rptr.2d 406,10 Cal.App.4th 1436
• Court: California Court of Appeals Court of Appeals
• Parties: Richard Lee FINLAYSON, Plaintiff and Appellant, v. George SANBROOK, et al., Defendants and Respondents.

Page 406

13 Cal.Rptr.2d 406

10 Cal.App.4th 1436

Richard Lee FINLAYSON, Plaintiff and Appellant, v. George SANBROOK, et al., Defendants and Respondents.

No. H009221.

Court of Appeal, Sixth District, California.

Nov. 12, 1992.

Rehearing Denied Dec. 10, 1992.

Review Denied Jan. 28, 1993.

Steven Kazan, Brian Mikulak, Kazan, McLain, Edises & Simon, Oakland, for appellant.

Michael L. Boli, Jeanette Traverso, Long & Leavit, San Francisco, for respondents.

COTTLE, Acting Presiding Justice.

In a legal malpractice action (Code Civ.Proc., § 340.6) ¹ the statute of limitations does not begin to run until the plaintiff suffers "actual injury." ( § 340.6, subd. (a)(1).) "Actual injury," the Supreme Court recently explained, occurs when a plaintiff suffers an adverse judgment or order of dismissal in the underlying action on which the malpractice action is based. (Laird v. Blacker (1992) 2 Cal.4th 606, 7 Cal.Rptr.2d 550, 828 P.2d 691.)

Relying on Laird, plaintiff argues the trial court erred in entering judgment for defendant on statute of limitations grounds. Plaintiff's suit was filed less than a year after he obtained an adverse judgment in his underlying personal injury suit.

Defendant also claims to rely on Laird. (More accurately, defendant relies on an Indiana case cited with approval by the Laird court.) The Indiana case holds that where the attorney malpractice consists of not filing an underlying action within the applicable statute of limitations, the statute on attorney malpractice begins to run when the underlying statute of limitations is missed. Although the Indiana statute is distinguishable, we believe the rule stated therein is sound and is consistent with the Laird court's admonition that "the focus of the statute of limitations for legal malpractice should be on discovery of the fact of damage...." (2 Cal.4th at p. 612, 7 Cal.Rptr.2d 550, 828 P.2d 691, emphasis in original.) Accordingly we hold that in those circumstances where the malpractice consists of missing a statute of limitations, a plaintiff sustains "actual injury" when the underlying action is lost due to the attorney's malpractice.

PROCEDURAL BACKGROUND

A. The 1983 Legal Malpractice Action

In 1983 plaintiff filed a legal malpractice action (the 1983 action) against his former attorney. He alleged he had been injured from exposure to asbestos and asbestos-related insulation and building materials while employed as a sheet metal worker from 1952 to 1981. He retained defendant in 1981 to represent him on a workers' compensation claim and to pursue "the possibilit[y] of other remedies of compensation for his injuries." Defendant advised plaintiff he would "protect[ ] his legal right regarding any and all claims arising out of his asbestos-related illness." However, defendant failed to file "a third party civil action against the manufacturers and suppliers of asbestos and asbestos related products for his injuries." ² As a result, plaintiff "suffered pecuniary and other losses." Based on these allegations, plaintiff sought damages for legal malpractice, negligent misrepresentation, and negligent infliction of emotional distress.

In February 1989, after the court denied his motion to extend the five-year statute for bringing an action to trial ( § 583.310), plaintiff dismissed this legal malpractice action.

B. The 1983 Third Party Action

In 1983 plaintiff (through his new attorney) also filed a third party action against the asbestos manufacturers and suppliers he claimed defendant should have brought suit against. ³ Several of the manufacturers and suppliers raised the asbestos statute of limitations as an affirmative defense in their answers; two settled. In 1988 some manufacturers and suppliers obtained summary judgment on the grounds plaintiff's suit was time-barred. The record does not indicate whether this action ever went to trial against the remaining defendants; however, the record does indicate it had not gone to trial by February 1989.

C. The 1989 Legal Malpractice Action

On February 6, 1989, the same day plaintiff dismissed his 1983 legal malpractice action, he filed a new legal malpractice action. The allegations in the 1989 action were virtually identical to the allegations in the 1983 action. This time, however, he alleged he "sustained actual injury on or about May 26, 1988 when summary judgment on limitations grounds was granted in favor of certain asbestos manufacturers/suppliers and against plaintiff in his asbestos personal injury action."

Defendant law firm demurred to the complaint on the ground that all causes of action were time-barred. The court sustained without leave to amend the demurrer as to the legal malpractice and negligent misrepresentation causes of action. Later the court granted summary judgment as to the remaining cause of action for negligent infliction of emotional distress. It is from the ensuing judgment that plaintiff appeals.

DISCUSSION

Relying on Laird v. Blacker, supra, 2 Cal.4th 606, 7 Cal.Rptr.2d 550, 828 P.2d 691, plaintiff contends he suffered "actual injury" in May 1988 when the court granted summary judgment in favor of numerous asbestos defendants. It was at that point that plaintiff suffered an "adverse judgment or order of dismissal in the underlying action on which the malpractice action is based." (Id., at p. 609, 7 Cal.Rptr.2d 550, 828 P.2d 691.) Plaintiff argues that because the 1989 action was filed within nine months of "actual injury" as defined by the Laird court, it was therefore timely.

Defendant contends the rule expressed in Laird v. Blacker is that in failure to file cases, a client suffers "actual injury" on the date the statute of limitation expires. However, Laird did not involve a failure to file case, and it never enunciated such a rule. In Laird the attorney malpractice consisted of failing to prosecute an action, which resulted in its dismissal pursuant to section 583.410. Laird 's holding assumed an "underlying action." It framed the question before it as "what constitute[d the] 'actual injury' [necessary to commence the running of the legal malpractice statute of limitations ( § 340.6) ]--the judgment against plaintiff [in the underlying action], or the finality of the appeal therefrom?"(2 Cal.4th at p. 609, 7 Cal.Rptr.2d 550, 828 P.2d 691.) The court "conclude[d] the limitations period ... commences when a client suffers an adverse judgment or order of dismissal in the underlying action on which the malpractice action is based." (Ibid; see also p. 620, 7 Cal.Rptr.2d 550, 828 P.2d 691 ["the limitations period of section 340.6 commences on adverse judgment or dismissal of the underlying action"].)

The court noted its decision was "supported by the majority of jurisdictions with statutes substantially identical to our own." (Laird v. Blacker, supra, 2 Cal.4th at p. 618, 7 Cal.Rptr.2d 550, 828 P.2d 691.) It then cited eight sister-state opinions, with brief summaries of each case. The fourth citation read: "Basinger v. Sullivan (Ind.Ct.App.1989) 540 N.E.2d 91, 94 [malpractice action accrued when clients learned attorney failed to file suit prior to expiration of statute of limitations, even though alternative avenues of relief not yet exhausted]...." (Id., 2 Cal.4th at p. 619, 7 Cal.Rptr.2d 550, 828 P.2d 691.) Basinger v. Sullivan (Ind.Ct.App.1989), 540 N.E.2d 91, and the other sister-state opinions, were cited for the proposition that they supported the court's conclusion. That conclusion, as noted above, was that the limitations period of section 340.6 commences when a client suffers an adverse judgment or order of dismissal in the underlying action. The court did not conclude, merely by citing Basinger, that in "missed statute" cases, the malpractice statute begins to run when the underlying statute of limitations expires.

Defendant claims that two other California cases--Johnson v. Haberman & Kassoy (1988) 201 Cal.App.3d 1468, 247 Cal.Rptr. 614 (hereafter Haberman ), and Panattoni v. Superior Court (1988) 203 Cal.App.3d 1092, 250 Cal.Rptr. 390 (hereafter Panattoni )--also "held" that the malpractice statute of limitations in "missed statute" cases commences on the day the underlying lawsuit is lost. ⁴ However, the issue before the courts in Haberman and Panattoni was whether the second tolling provision of section 340.6, relating to continued representation by the allegedly negligent attorney, ⁵ applied, and not whether the first tolling provision, relating to "actual injury," applied. Before determining whether the attorney continued to represent the client in Panattoni, the court observed, almost in passing, that plaintiff "agrees" the cause of action for malpractice accrued when the statute of limitations on the third party tort claim was lost. This was not the opinion's holding.

Similarly, in Haberman, the court observed that "even by the most liberal calculation," plaintiff "admittedly" (201 Cal.App.3d at p. 1474, 247 Cal.Rptr. 614) was irreparably damaged in 1978 when the statute of limitations on fraud was barred. It then moved on to the real issue: whether the attorney owed a continuing duty to the plaintiff limited partner, which would be considered "continuing representation" (ibid.) within the meaning of section 340.6, subdivision (a)(2). The court held that under the circumstances of that case, where the attorneys also represented the general partner, they should be estopped from claiming that representation of plaintiff did not continue. Accordingly, the court held the statute was tolled until April 1981 because "plaintiff neither discovered nor should have discovered the attorneys' wrongdoing until" then. (Id., at p. 1478, 247 Cal.Rptr. 614.)

Thus, none of the California cases defendant cites holds that in "missed statute" cases, the limitations period of section 340.6 commences when the statute of limitations for the underlying cause of action expires. ⁶ However, for reasons we shall explain, we so hold.

First, there can be...