Laird v. Blacker

• Decision Date: 07 May 1992
• Docket Number: No. S021074,S021074
• Citation: 7 Cal.Rptr.2d 550,828 P.2d 691,2 Cal. 4th 606
• Court: California Supreme Court
• Parties: , 828 P.2d 691, 60 USLW 2794 Jeri Emmet LAIRD, Plaintiff and Respondent, v. Sidney G. BLACKER, as Administrator, etc., et al., Defendants and Appellants.

Page 550

7 Cal.Rptr.2d 550

2 Cal.4th 606, 828 P.2d 691, 60 USLW 2794

Jeri Emmet LAIRD, Plaintiff and Respondent, v.Sidney G. BLACKER, as Administrator, etc., et al., Defendants and Appellants.

No. S021074.

Supreme Court of California In Bank.

May 7, 1992.

As Modified on Denial of Rehearing

July 16, 1992.

Horvitz & Levy, Ellis J. Horvitz, David S. Ettinger and Frederic D. Cohen, Encino, for defendants and appellants.

Francis C. Pizzulli, Santa Monica and Charlotte E. Costan, Burbank, for plaintiff and respondent.

King & Seligsohn and Stephen Scott King, Los Angeles, as amici curiae on behalf of plaintiff and respondent.

LUCAS, Chief Justice.

We granted review to determine whether the one-year statute of limitations for attorney malpractice actions under Code of Civil Procedure section 340.6, subdivision (a)(all further statutory references are to this code unless otherwise stated) is tolled during the time the client appeals from the underlying judgment on which the claim of malpractice is based.

Section 340.6 provides that the statute of limitations for legal malpractice commences when the client discovers, or should have discovered, the cause of action.The period is tolled during the times, inter alia, (i) the client "has not sustained actual injury,"(ii) the negligent attorney continues to represent the client, (iii) the attorney willfully conceals facts constituting the negligence, or (iv)the plaintiff is under a disability that "restricts the plaintiff's ability to commence legal action."¹ The question before us is: what constitutes "actual injury"--the judgment against plaintiff, or the finality of the appeal therefrom?

We conclude the limitations period of section 340.6 commences when a client suffers an adverse judgment or order of dismissal in the underlying action on which the malpractice action is based.As explained below, our holding conforms to legislative intent, and adopts the present majority view as explained in the most recent cases interpreting the statute at issue here and similar statutes in other states.

I.BACKGROUND

Plaintiff, a television writer, retained the law firm of Berg & Spire to prosecute a lawsuit against Spelling-Goldberg, a television production company.She alleged that Spelling-Goldberg based its television series "Family" on a script she had submitted, but failed to acknowledge or credit her contribution.After serving the complaint, Berg & Spire failed to pursue the matter, and plaintiff retained attorney Barry Post and the law offices of Samuel Z. Winnikoff(hereafter defendants) to prosecute the same suit.²

On October 20, 1981, the suit was dismissed for lack of prosecution.(§ 583.410.)On December 7, 1981, plaintiff discharged defendants and filed a notice of appeal in propria persona because she could not afford legal fees for the appeal.On September 15, 1982, she voluntarily dismissed her appeal after settling with Spelling-Goldberg for $1,000.On May 17, 1983, 19 months after her action against Spelling-Goldberg was dismissed and 17 months after Post and Winnikoff were discharged, but only 8 months after she voluntarily dismissed her appeal, plaintiff filed the present malpractice action against Berg &amp Spire and BarryPost.In February 1986, she amended her complaint to add Sidney G. Blacker and Samuel Z. Winnikoff, also known as Winnikoff & Associates.

Plaintiff settled with Berg & Spire for $50,000 and proceeded to trial against defendants.Defendants moved for a nonsuit, asserting the one-year limitation period of section 340.6, subdivision (a) began running when plaintiff's suit against Spelling-Goldberg was dismissed, regardless of her ensuing appeal.³Plaintiff asserted her cause of action for legal malpractice did not accrue until she dismissed her appeal on September 15, 1982.Defendants' motion was denied, and the jury awarded plaintiff approximately $1.7 million in damages.Defendants' motion for a judgment notwithstanding the verdict was denied.Defendants appealed.

The Court of Appeal reversed and remanded with directions to enter judgment in favor of defendants.It held that under section 340.6, subdivision (a), plaintiff sustained actual injury on December 7, 1981, when she discharged her attorneys after her case was dismissed and judgment was entered against her.Plaintiff appeals that decision, and asks this court to hold the limitations period was tolled until her appeal of right was resolved.We affirm the Court of Appeal decision.

II.DISCUSSION

1.Background

Prior to 1977, the statute of limitations for legal malpractice actions was governed by section 339, subdivision 1, which provides a two-year limitations period for any action based on "a contract, obligation or liability not founded upon an instrument in writing...."Although section 339, subdivision 1, did not establish an accrual date for legal malpractice actions, courts generally adopted, as the date of accrual, the date on which the malpractice occurred.(Hays v. Ewing(1886)70 Cal. 127, 11 P. 602[cause of action for attorney malpractice barred at expiration of two years after neglect occurred].)Recognizing the harshness of a strict occurrence rule, later cases held that a cause of action for legal malpractice accrued when a plaintiff suffered "irremediable damage."(See, e.g., Heyer v. Flaig(1969)70 Cal.2d 223, 230, 74 Cal.Rptr. 225, 449 P.2d 161[statute of limitations for legal malpractice begins to run on date attorney performs last negligent act].)Finally, when the Legislature adopted section 340.6 in 1977, it implicitly rejected the term "irremediable damage" and codified the discovery rule of Neel v. Magana, Olney, Levy, Cathcart & Gelfand(1971)6 Cal.3d 176, 98 Cal.Rptr. 837, 491 P.2d 421(hereafter Neel ), andBudd v. Nixen(1971)6 Cal.3d 195, 198, 98 Cal.Rptr. 849, 491 P.2d 433(hereafter Budd ).These cases hold that a cause of action for legal malpractice accrues when the client discovers or should discover the facts essential to the malpractice claim, and suffers appreciable and actual harm from the malpractice.Discovery of any appreciable and actual harm from the attorney's negligent conduct establishes a cause of action and begins the running of the limitations period.(Budd, supra, 6 Cal.3d at p. 201, 98 Cal.Rptr. 849, 491 P.2d 433.)

Both Budd, supra, 6 Cal.3d 195, 98 Cal.Rptr. 849, 491 P.2d 433, andNeel, supra, 6 Cal.3d 176, 98 Cal.Rptr. 837, 491 P.2d 421, addressed the former two-year legal malpractice statute of limitations (§ 339), but did not specifically determine whether actual injury occurs when the client suffers an adverse judgment or after an appeal of right is concluded and the judgment is final.Rather, Neel and Budd suggested the time of discovery is often a question of fact for the jury.Neel, however, explained the holding in Hays v. Ewing, supra, 70 Cal. 127, 11 P. 602, which interpreted the limitations period of section 339 when the malpractice occurred in the course of litigation.Neel stated that the Hays court"accepted the date of dismissal of the suit--that is, the date upon which the client suffered damage--as the crucial point from which the statute of limitations should run.Indeed the court refused to adopt as the critical time the date of the affirmance of the dismissal on appeal."(Neel, supra, 6 Cal.3d at p. 183, 98 Cal.Rptr. 837, 491 P.2d 421.)

The Budd court further explained that, "Ordinarily, the client has already suffered damage when he discovers his attorney's negligence, as occurred in Neel....In other cases, the infliction of the damage will alert the client to the attorney's negligence and thus the statute of limitations will then begin to run on any malpractice action.Only in the unusual case will the client discover his attorney's negligence without having suffered any consequential damage."(Budd, supra, 6 Cal.3d at p. 201, 98 Cal.Rptr. 849, 491 P.2d 433.)

Budd also noted that, in general, a plaintiff suffers actual damage on entry of adverse judgment.Although the court commented that a losing defendant in the underlying action may suffer harm when he incurs monetary damages (attorneys fees, bond and court costs), this recognition of when monetary damage occurs was not the basis for the Budd decision.The court emphasized that the focus of the statute of limitations for legal malpractice should be on discovery of the fact of damage, not the amount.Indeed, the court observed that the cause of action may arise before the client sustains all or even the greater part of damage.(Budd, supra, 6 Cal.3d at pp. 200-201, 98 Cal.Rptr. 849, 491 P.2d 433.)

Nonetheless, Budd 's reference to monetary damage has caused conflict in the courts.Taken at face value, the Budd language supports a conclusion that an appeal does not extend the period of limitations beyond adverse judgment.As the Court of Appeal herein observed, "Where, however, the malpractice occurs in the course of representing a plaintiff, there is no risk of execution and no need to post a bond.There may or may not be attorney's fees incurred, lost interest or other expenses."

This uncertainty over when damage occurs has led to conflict in the Courts of Appeal.Some courts rely on Budd to support application of the earlier "irremediable damage" rule that the Legislature rejected when it codified section 340.6.(See, e.g., Southland Mechanical Constructors Corp. v. Nixen(1981)119 Cal.App.3d 417, 434, 173 Cal.Rptr. 917[actual damage occurs when plaintiff in underlying action incurs and pays attorney fees, legal costs and expenditures].)

By contrast, several recent cases hold that when the client is a losing plaintiff in the underlying action, an appeal of the dismissal of the action does not affect the date of actual harm under section 340.6(i.e., adverse judgment and dismissal of the negligent attorney).For example, in Troche v. Daley(1990)217 Cal.App.3d 403, 410, 266 Cal.Rptr. 34, Attorney Turney filed a...