Neel v. Magana, Olney, Levy, Cathcart & Gelfand

Decision Date02 December 1971
Citation6 Cal.3d 176,98 Cal.Rptr. 837
CourtCalifornia Supreme Court
Parties, 491 P.2d 421 Gerald F. NEEL et al., Plaintiffs and Appellants, v. MAGANA, OLNEY, LEVY, CATHCART & GELFAND et al., Defendants and Respondents. L.A. 29865. In Bank

Wagner & Scuderi, and Robert S. Scuderi, Los Angeles, for plaintiffs and appellants.

Jack Tenner and William B. Murrish, Los Angeles, for defendants and respondents.

TOBRINER, Justice.

In this suit for legal malpractice plaintiffs appeal from a summary judgment against them grounded upon the two-year statute of limitations of Code of Civil Procedure section 339. That judgment rests upon the rule that a cause of action for malpractice by an attorney arises, and the limitation period commences, at the time of the negligent act. In this case, and in the companion case of Budd v. Nixen, Cal., 98 Cal.Rptr. 849, 491 P.2d 433, we undertake to review this rule. Upon reconsideration, we find that the rule as to legal malpractice contrasts with the rule as to accrual of causes of action against practitioners in all other professions; it ignores the right of the client to rely upon the superior skill and knowledge of the attorney; it denigrates the duty of the attorney to make full and fair disclosure to the client; it negates the fiduciary character of the attorney-client relationship. We conclude that the statute of limitations for legal malpractice, as for all professional malpractice, should be tolled until the client discovers, or should discover, his cause of action.

On August 13, 1968, plaintiffs filed their complaint, alleging that in 1961 they engaged one Delaney as their attorney to file a wrongful death action against San Bernardino County. Without informing plaintiffs, Delaney associated as counsel of record defendant attorneys, a partnership practicing under the name of Magana, Olney, Levy, Cathcart & Gelfand. Defendants prepared, and on May 25, 1962, Delaney filed, a complaint against the county. Neither defendants nor Delaney arranged for service of summons, 1 and on December 10, 1965, the court dismissed plaintiffs' action for failure to serve summons within three years of the filing of the complaint. (Code Civ.Proc., § 581a.) Plaintiffs further allege that if their case against the county had come to trial, they would have prevailed.

The complaint then alleges that defendants fraudulently concealed their negligence from plaintiffs and, during 1966 and 1967, falsely represented to plaintiffs that the suit against the county was still pending. Plaintiffs did not know or suspect that their action had been dismissed until they consulted independent counsel on December 21, 1967. In answer defendants admit the association of attorneys and the dismissal of plaintiffs' suit against the county, but plead the statute of limitations of section 339 as an affirmative defense. Subsequently the deposition of plaintiff Gerald Neel revealed that he did not know of the association of defendants in the case until December of 1967, and that the misrepresentations referred to in the complaint were those of Delaney. 2

Defendants then moved for summary judgment, asserting that the plaintiffs' cause of action accrued on May 25, 1965, the last day for service within the three-year period of section 581a, and that plaintiffs' action was barred by limitations as of May 25, 1967. They acknowledged that Delaney, by reason of his misrepresentations to plaintiffs, would be estopped to assert the statute of limitations. They contended, however, that they themselves made no misrepresentations and that they bore no responsibility for those of Delaney. The trial court agreed and granted summary judgment.

Legal malpractice consists of the failure of an attorney 'to use such skill prudence, and diligence as lawyers of ordinary skill and capacity commonly possess and exercise in the performance of the tasks which they undertake.' (Lucas v. Hamm (1961) 56 Cal.2d 583, 591, 15 Cal.Rptr. 821, 825, 364 P.2d 685, 689.) 3 When such failure proximately causes damage, it gives rise to an action in tort. 4 Since in the usual case, the attorney undertakes to perform his duties pursuant to a contract with the client, the attorney's failure to exercise the requisite skill and care is also a breach of an express or implied term of that contract. 5 Thus legal malpractice generally constitutes both a tort and a breach of contract. 6

A cause of action for breach of an oral contract carries a two-year statute of limitations (Code Civ.Proc., § 339, subd. 1); 7 one for breach of a written contract falls under the four-year limit of section 337, subdivision 1. 8 Actions in tort for negligence are classified as to the nature of the damage. An action for 'injury' or 'death' comes under the one-year limitation of section 340, subdivision 3; 9 three-year limitations govern damage to real property (Code Civ.Proc., § 338, subd. 2) or to tangible personal property (Code Civ.Proc., § 338, subd. 3). 10 Medical malpractice, formerly classified under the one-year limit of section 340, now falls under a separate statute of limitations in section 340.5, which provides for a one-year period of limitation from discovery of the cause of action, but bars any action filed more than four years from date of injury. 11

Malpractice in the legal field usually causes damage to intangible property interests; the Code of Civil Procedure provides no statute of limitation expressly governing actions to redress such damage. Section 339, subdivision 1, however, is not limited to actions for breach of an oral contract, but extends to any 'action upon a contract, Obligation or Liability not founded upon an instrument of writing.' (Emphasis added.) Numerous decisions have established that this section governs an action for negligent injury to intangible property interests. 12 In our recent decision in Alter v. Michael (1966) 64 Cal.2d 480, 50 Cal.Rptr. 553, 413 P.2d 153, we expressly reaffirmed that a tort action for malpractice by an attorney falls within the two-year period of section 339, and not the one-year period of section 340.

Although plaintiffs may elect between their tort and contract remedies, 13 that election in the present case does not affect the period of limitation. Whether viewed as a tort action for negligent injury to intangibles, or as a contract action for breach of an implied duty of care, section 339, subdivision 1 provides the governing period of two years.

Plaintiffs filed the present complaint eight months after they discovered their cause of action, but over three years after the last date for service of summons on their action against the county. Under the rule that provides that a cause of action for legal malpractice accrues at the time of the last negligent act, plaintiffs' action is barred unless plaintiffs can somehow establish that defendants are responsible for, and estopped by, Delaney's misrepresentations. If, however, we apply the principle developed in malpractice cases involving other professions--that the cause of action does not accrue until discovery--plaintiff's action would clearly be timely. The case thus raises the issue whether members of the legal profession should enjoy a preference as to the date when they may successfully bar adverse claims under the statute of limitations. In this case we probe the issue whether the client's claim should be outlawed before he knew of it or should have known of it. In the companion case of Budd v. Nixen we examine the effect of the requirement that the client, who knows or should have known of the attorney's negligence, must be Damaged before the statutory limitation period starts to run.

We begin by recounting the history of the California decisions on the period of limitations in legal malpractice actions, emphasizing those decisions which bear upon the issues of this case and of Budd v. Nixen. Our recital begins with Hays v. Ewing (1886) 70 Cal. 127, 11 P. 602. The plaintiff there sued in 1884, alleging defendant's negligence in a collection suit which was dismissed in November of 1881. The court stated simply that 'so far as (this action) is based on any neglect of the defendant prior to the judgment of November, 1881, (it) was barred by section 339 of the Code of Civil Procedure.' (70 Cal. at p. 128, 11 P. at p. 602.)

Since the dismissal in the collection suit occurred two and one-half years before the institution of the malpractice action, clearly the two-year limitation of section 339 barred any cause of action based on negligent conduct which occurred prior to the dismissal. Obviously this 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. Nevertheless, the publisher's headnote summarized the holding as follows: 'a cause of action against an attorney for neglect of duty in the management of an action is barred at the expiration of two years After the neglect occurred.' (Emphasis added.) We search in vain within the body of the opinion or within the facts of the case for any justification for this publisher's note. Yet this unwarranted headnote generated the peculiar rule that only in legal malpractice cases does the statute of limitations begin to run before damage and before discovery.

The issue of delayed accrual of the limitations period under section 339 first arose in Lattin v. Gillette (1892) 95 Cal. 317, 30 P. 545, which involved negligence by a non-attorney title searcher. The court held that the action accrued at the time of the negligent act; it specifically rejected contentions that accrual should be deferred until damage occurred or until the client ascertained the error in the title report. The opinion in Lattin facilely ignores its practical consequence--that a title report which...

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