Foxborough v. Van Atta

• Decision Date: 28 June 1994
• Docket Number: No. A061040,A061040
• Citation: 31 Cal.Rptr.2d 525,26 Cal.App.4th 217
• Court: California Court of Appeals Court of Appeals
• Parties: FOXBOROUGH, Plaintiff and Appellant, v. David VAN ATTA et al., Defendants and Respondents.

Page 525

31 Cal.Rptr.2d 525

26 Cal.App.4th 217

FOXBOROUGH, Plaintiff and Appellant, v. David VAN ATTA et al., Defendants and Respondents.

No. A061040.

Court of Appeal, First District, Division 3, California.

June 28, 1994.

Review Denied Oct. 20, 1994.

Ronald R. Rossi, Susan R. Reischl, Liccardo, Rossi, Sturges & McNeil, San Jose, for plaintiff and appellant.

James M. Hanavan, Diane R. Crowley, Gordon & Rees, San Francisco, for defendants and respondents.

CHIN, Associate Justice.

Foxborough, a general partnership, appeals after the trial court found that the statute of limitations, Code of Civil Procedure section 340.6, barred Foxborough's legal malpractice action. ¹ Foxborough had sued its former attorney, respondent David Van Atta, alleging that he failed to protect Foxborough's interests in a condominium development transaction. ²

Because the alleged malpractice occurred in a transactional setting, this appeal presents a novel context for construing subdivisions (a)(1) and (a)(2) of section 340.6, which respectively toll the statute of limitations during the time that "[t]he plaintiff has not sustained actual injury," and "[t]he attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred...." Thus, we must determine when Foxborough "sustained actual injury" (§ 340.6, subd. (a)(1)) and whether Van Atta, by acting years later as a consultant and expert witness in related litigation, "continue[d] to represent [Foxborough] regarding the specific subject matter in which the alleged wrongful act or omission occurred...." (§ 340.6, subd. (a)(2).)

We conclude that Foxborough sustained actual injury when it lost the right Van Atta was to secure indefinitely, and that Foxborough's pursuit of a possible third-party remedy did not toll the limitations period. We also conclude that Van Atta's representation of Foxborough ceased long before he assumed the roles of consultant and expert witness. Finally, we find no abuse of discretion by the trial court in denying Foxborough leave to amend its complaint. We affirm the judgment.

FACTS ³

Foxborough owned two adjoining parcels of land in San Jose. On one parcel was a 296-unit apartment complex (the Apartments); the smaller parcel was undeveloped. From November 1978 through January 1981, Foxborough retained Van Atta to perform legal services concerning the two parcels. Van Atta was to assist in converting the Apartments into condominiums, transferring the Apartments to Daon Corporation (Daon) in a property exchange, and securing the right to develop the smaller parcel with condominiums that Foxborough could automatically annex to the Apartments without the approval of Daon or the owners of condominiums in the Apartments. The automatic annexation right, without time constraints, was of particular importance to Foxborough.

The exchange agreement drafted by Van Atta and signed by Daon and Foxborough in 1979, provided, in pertinent part: "... DAON hereby agrees to incorporate provisions in all of its condominium applications and documentation which will anticipate and allow the annexation of the condominium units located on the adjoining Parcel into the condominium project located on the San Jose Property, automatically without further approval of DAON or the future owner of the San Jose Property, except as may be required by law and Department of Real Estate regulations...." Then as now, a regulation required that any automatic annexation of land to an existing condominium take place within three years after issuance of the original public report for the immediately preceding phase of the condominium's development; failing that, annexation requires approval by a two-thirds vote of the condominium association members. (Cal.Code Regs., tit. 10, § 2792.27, subds. (a), (b)(4); see Cal. Condominium and Planned Development Practice (Cont.Ed.Bar 1984) State Regulation of Common Interest Subdivision Sales, § 3.81, pp. 244-245.)

After waiting for favorable economic conditions, Foxborough decided in 1984 to build 20 condominium units on its retained parcel. In late 1984 to early 1985, Foxborough learned that documents Daon filed with Santa Clara County in 1980 limited Foxborough's annexation rights to the three-year regulatory deadline. By February 1985, Foxborough knew it could not automatically annex its undeveloped parcel to the Apartments because the three-year period had expired on May 8, 1983.

From 1981 to 1985, Van Atta had no contact or involvement with Foxborough concerning either its dealings with Daon or the development and annexation of the property Foxborough kept. Foxborough contacted Van Atta in February 1985 and hired him to confront Daon and pursue the appropriate legal remedy concerning Foxborough's annexation rights. Van Atta wrote two letters to Daon on Foxborough's behalf, one in February 1985 and a brief follow-up letter in March, addressing the loss of Foxborough's automatic annexation rights. Van Atta's February 1985 letter attributed this loss to Daon's failure to inform Foxborough of the three-year deadline under the regulation. The letter requested that Daon assist Foxborough in obtaining the necessary annexation approval from the condominium owners. The letter also stated that Foxborough would hold Daon responsible for expenses and losses Foxborough incurred because of the lost automatic annexation rights. Daon did not respond to these letters, though Van Atta wrote that it was "urgent" that Daon "respond immediately."

In August 1985, Foxborough retained the law firm of Caputo, Liccardo, Rossi, Sturges & McNeil (the Caputo firm) to represent it in an action against Daon, which was filed on August 23, 1985 (the Daon litigation). Foxborough's complaint against Daon sought damages under several different theories for Daon's alleged failure to notify Foxborough, before the three-year regulatory period expired, that the automatic annexation right had been limited to that period. The record contains no evidence that Van Atta had any contact or involvement with Foxborough or the Caputo firm during the next two years.

Van Atta left Miller, Starr & Regalia in July 1987 and joined the law firm of Graham & James. In late August 1987, the Caputo firm wrote to Van Atta and retained him as a consultant and expert witness for the Daon litigation, in which he provided deposition and trial testimony. During the trial, Daon successfully moved for judgment at the close of Foxborough's case. The court entered judgment against Foxborough on March 2, 1990, and ordered it to pay Daon's attorney fees and costs.

On June 29, 1990, Foxborough filed this action against Van Atta and Miller, Starr & Regalia. The complaint alleged that Van Atta failed to advise Foxborough of the existence and effect of the regulation or to advise Foxborough on how automatic annexation otherwise could have been accomplished. Foxborough's alleged damages included the loss of the ability to effect annexation at all and the attorney fees incurred in the Daon litigation.

On October 15, 1992, Van Atta moved for summary judgment on the ground that Foxborough's complaint was barred by the statute of limitations. At the hearing on December 9, 1992, Foxborough orally moved for leave to amend its complaint to add a cause of action based on Van Atta's actions as a consultant and expert in the Daon litigation. The trial court denied the motion for leave to amend and granted summary judgment. The judgment for Van Atta was filed on January 21, 1993; this timely appeal followed.

DISCUSSION

Section 340.6 contains the statute of limitations for legal malpractice. It states, in relevant part: "(a) An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services 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. In no event shall the time for commencement of legal action exceed four years except that the period shall be tolled during the time that any of the following exist: [p] (1) The plaintiff has not sustained actual injury; [p] (2) The attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred...." (§ 340.6, subds. (a)(1), (a)(2).) "Section 340.6, subdivision (a), states that 'in no event' shall the prescriptive period be tolled except under those circumstances specified in the statute. Thus, the Legislature expressly intended to disallow tolling under any circumstances not enumerated in the statute." (Laird v. Blacker (1992) 2 Cal.4th 606, 618, 7 Cal.Rptr.2d 550, 828 P.2d 691 (Laird ).)

Foxborough's complaint acknowledged that in December 1984, Foxborough learned that Van Atta had not advised it of the three-year annexation regulation and had not obtained the automatic annexation rights that Foxborough wanted. Thus, more than four years before it filed the complaint, Foxborough discovered, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission on which it based the complaint. (See § 340.6, subd. (a).) As a consequence, Foxborough's contentions on appeal focus on the "actual injury" (§ 340.6, subd. (a)(1)) and continuous representation (§ 340.6, subd. (a)(2)) tolling provisions of the statute. ⁴

Actual Injury

Foxborough contends that it did not suffer actual injury as a result of Van Atta's negligence until it lost the Daon litigation. In Foxborough's view, so long as it had a chance to recover damages from Daon, it could have recouped its losses and cured Van Atta's alleged negligence. Foxborough bases its argument on a literal application of Laird.

In Laird, the court granted...