Kovacevich v. McKinney & Wainwright, F016529
| Decision Date | 04 June 1993 |
| Docket Number | No. F016529,F016529 |
| Citation | 19 Cal.Rptr.2d 692,16 Cal.App.4th 337 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Kenneth KOVACEVICH, Plaintiff and Appellant, v. McKINNEY & WAINWRIGHT, et al., Defendants and Respondents. |
Kenneth Kovacevich appeals from a judgment entered in favor of defendants McKinney & Wainwright, et al. (respondents) following a July 15, 1991, order granting respondents' motion for nonsuit. In a bifurcated trial, the court determined the provisions of CODE OF CIVIL PROCEDURE SECTION 340.61 barred Kovacevich's March 4, 1986, action for damages for legal malpractice.
Under section 340.6, the one-year statute of limitations for legal malpractice does not begin to run until a plaintiff knows of the attorney's negligence and sustains actual and appreciable harm. 2 (Budd v. Nixen (1971) 6 Cal.3d 195, 200, 98 Cal.Rptr. 849, 491 P.2d 433; Sirott v. Latts (1992) 6 Cal.App.4th 923, 928, 8 Cal.Rptr.2d 206.) There is no apparent dispute about when Kovacevich "discovered" respondents' alleged malpractice that eventually led to a lawsuit against Kovacevich by Wells Fargo Bank and a $927,390.73 summary judgment in favor of the bank. Here, as in other recently reported cases, the question is, when did Kovacevich sustain actual damages sufficient to trigger the running of the statute? Respondents maintain it was the date Kovacevich retained counsel to represent him in the underlying Wells Fargo action and he began to incur attorney fees (to wit, December 14, 1984). Kovacevich maintains he did not suffer "actual and irremedial damage" within the meaning of the statute on that date because his insurance carrier, Cal-Farm Insurance Company, paid in full his attorney fees in the Wells Fargo action. He maintains he did not suffer actual damage until summary judgment was entered against him in the underlying Wells Fargo action on June 14, 1985; therefore, he reasons, his March 1986 malpractice action was filed timely.
The relevant facts are these: In 1981 respondent Russell R. McKinney, a Visalia attorney, and others solicited Kovacevich, a Delano farmer, to participate in the promotion and organization of a new bank in Delano. The group of 19 organizers entered into a joint venture in this regard in 1982 known as the Delano Organizers. The United States Comptroller of the Currency (the Comptroller) issued preliminary approval for a bank charter in the name of InterAmerica National Bank (in organization) on November 5, 1982. Kovacevich became one of the 10 members (selected from the 19 organizers) of the InterAmerica interim board of directors.
Wells Fargo extended InterAmerica two lines of credit in the approximate total amount of $1 million; Wells Fargo required each of the interim directors sign continuing personal guaranties for the notes securing the lines of credit. Kovacevich executed two such guaranties: one on February 4, 1983, in the amount of $850,000, and the other upon renewal and increase of the line of credit on October 1, 1983, in the amount of $950,000.
The Comptroller revoked InterAmerica's preliminary charter in 1984; this prevented further sale of the bank stock, the proceeds from which would have provided the capital to eliminate the personal guaranties. By the fall of 1984 the Wells Fargo notes were in default; the debt owed to the bank was approximately $943,727.15, plus accrued interest. Wells Fargo filed a complaint against InterAmerica and all of its organizers in San Mateo County Superior Court on November 21, 1984, seeking damages for breach of the line of credit notes and for breach of the continuing guaranties.
After Wells Fargo served Kovacevich with summons and complaint, he consulted in early December with Attorney Self who examined the pertinent documents. On December 14, 1984, Attorney Self explained to Kovacevich the joint and several liability that flowed from his continuing personal guaranties and the fact organizers who were not interim directors were not liable for the Wells Fargo notes because they had not executed personal guaranties. 3 On December 14, 1984, Cal-Farm agreed to pay Attorney Self's fees incurred on behalf of the defendants in the Wells Fargo action, including Kovacevich, until such time as outside counsel could render a decision regarding Cal-Farm's responsibility for such fees. 4
Wells Fargo obtained a writ of attachment against Kovacevich's land holdings in Tulare County on March 28, 1985. Wells Fargo selected Kovacevich as its "target defendant" and moved for summary judgment on the causes of action alleged against him. The San Mateo County Superior Court granted Wells Fargo summary judgment against Kovacevich only on June 14, 1985, in the sum of $927,390.73. Kovacevich borrowed funds in July 1985 in order to satisfy the Wells Fargo judgment. 5 He thereafter filed an action against his fellow-organizers in Fresno County on August 14, 1985, and obtained partial reimbursement by settlement in July 1990.
While the Fresno action against his fellow-organizers was pending, Kovacevich filed the instant action in propria persona against respondents for legal malpractice in Ventura County on March 4, 1986. Kovacevich later retained and substituted counsel; the Ventura court transferred the action to Tulare County for resolution.
Respondents moved for summary judgment on May 16, 1991, 6 contending the statute of limitations set out in section 340.6 barred the action. The trial court denied the motion, ruling a question of fact existed whether Kovacevich suffered "actual harm" when he first incurred attorney fees as a result of the Wells Fargo action.
On the date scheduled for jury trial, the court ascertained it was Kovacevich's intention to rely upon the facts and affidavits set forth in his opposition to respondents' motion for summary judgment in a trial of the special defense that the action was barred by the statute of limitations (§ 340.6). The court bifurcated the issue of the limitations period, deemed the affidavits and moving papers filed by Kovacevich in opposition to the motion for summary judgment to be his opening statement on the bifurcated issue, assumed that such facts and statements could be proved and proceeded to grant a nonsuit in favor of respondents. (§ 597.)
The court reasoned as follows: Kovacevich maintained he sustained the alleged injury either when he signed the continuing guaranties without being informed by respondents regarding liability created by those documents or when he was not informed that certain of the other organizers, not members of the provisional board of directors, had failed to execute such guaranties. Based upon those contentions, the court opined Kovacevich sustained injury "immediately upon signing a guarantee"--an argument the court acknowledged was not urged by either party. The court further reasoned even if injury had not occurred at that point, it occurred upon default of the Wells Fargo obligation (September 30, 1984) and the commencement of and service of summons in the Wells Fargo action against Kovacevich. At that point Kovacevich was compelled to incur attorney fees and to engage Attorney Self to represent him on December 14, 1984. Thus, the court concluded, Kovacevich sustained actual injury within the meaning of the statute no later than December 14, 1984, and the legal malpractice action filed March 4, 1986, was barred by the passage of time.
The California Supreme Court has recently spoken to the issue of the commencement of the statute of limitations in legal malpractice actions. (Laird v. Blacker (1992) 2 Cal.4th 606, 7 Cal.Rptr.2d 550, 828 P.2d 691.) There, defendants represented plaintiff in an underlying action that was dismissed on October 20, 1981, for lack of prosecution. Plaintiff proceeded in propria persona to file a notice of appeal on December 7, 1981. Plaintiff voluntarily dismissed the appeal on September 15, 1982, and on May 17, 1983, filed the legal malpractice action. (Id. at p. 610, 7 Cal.Rptr.2d 550, 828 P.2d 691.) Following a jury verdict in favor of plaintiff, defendants appealed. The Court of Appeal reversed and directed judgment be entered in favor of defendants on the ground the malpractice action was barred by the statute of limitations (§ 340.6). The Supreme Court affirmed, rejected plaintiff's argument that the limitations period was tolled until her appeal of right was dismissed (id. at p. 615, 7 Cal.Rptr.2d 550, 828 P.2d 691) and held "plaintiff ... sustained actual injury when the trial court dismissed her underlying action and she was compelled to incur legal costs and expenditures in pursuing an appeal." (Id. at p. 615, 7 Cal.Rptr.2d 550, 828 P.2d 691.)
In so holding, the Laird court discussed and rejected the strict "occurrence rule" upon which the trial court here apparently relied (a cause of action accrues on the date on which the malpractice occurred) and the "irremediable damage" rule initially cited by Kovacevich (the cause of action accrued when he paid the underlying Wells Fargo judgment). (Laird v. Blacker, supra, 2 Cal.4th at pp. 611-612, 7 Cal.Rptr.2d 550, 828 P.2d 691.)
In Laird, the Supreme Court acknowledged the statute of limitations for legal malpractice commences when the client discovers, or should have discovered, the cause of action and suffers actual harm. It further recognized the applicable limitations period is tolled until the client sustains "actual injury." (Laird v. Blacker, supra, 2 Cal.4th at p. 609, 7 Cal.Rptr.2d 550, 828 P.2d 691.) In his attempt to establish actual...
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