Southland Mechanical Constructors Corp. v. Nixen

• Decision Date: 21 May 1981
• Citation: 173 Cal.Rptr. 917,119 Cal.App.3d 417
• Court: California Court of Appeals Court of Appeals
• Parties: SOUTHLAND MECHANICAL CONSTRUCTORS CORPORATION and Cooley Equipment Co., Plaintiffs and Appellants, v. Alan NIXEN, an Individual, et al., Defendants and Respondents. Civ. 23545.

Page 917

173 Cal.Rptr. 917

119 Cal.App.3d 417

SOUTHLAND MECHANICAL CONSTRUCTORS CORPORATION and Cooley Equipment Co., Plaintiffs and Appellants, v. Alan NIXEN, an Individual, et al., Defendants and Respondents.

Civ. 23545.

Court of Appeal, Fourth District, Division 2, California.

May 21, 1981.

Hearing Denied August 19, 1981.

Gray, Cary, Ames & Frye, Terry D. Ross, Jeffrey M. Shohet, Davis L. Osias and Dennis Schoville, San Diego, for plaintiffs and appellants

MacDonald, Halsted & Laybourne, Charles H. Dick, Jr. and David C. Doyle, San Diego, for defendants and respondents John B. Morgan, Victor L. Miceli and Morgan & Miceli, Inc.

Lewis, D'Amato, Brisbois & Bisgaard, Roy M. Brisbois and Jeffrey A. Tidus, Los Angeles, for defendants and respondents Alan Nixen, Dan Lewis and Nixen & Lewis.

OPINION

McDANIEL, Associate Justice.

This litigation for legal malpractice arose after plaintiffs, subcontractors for the construction of a government-sponsored housing project, lost their right to receive from the Army Corps of Engineers additional payments for work done on the project. Plaintiffs allege that the defendants, the prime contractor on the project and plaintiffs' attorneys, were responsible for processing plaintiffs' claim against the Army, and, essentially, that defendants did nothing, let alone timely, to process plaintiffs' claim. Because this appeal arises from a judgment entered after an order sustaining a general demurrer, we must, under established principles, assume the truth of all properly pleaded material allegations of the complaint in evaluating the validity of the trial court's action. (Tameny v. Atlantic Richfield Co., 27 Cal.3d 167, 170, 164 Cal.Rptr. 839, 610 P.2d 1330; Serrano v. Priest, 5 Cal.3d 584, 591, 96 Cal.Rptr. 601, 487 P.2d 1241.)

The following is an account of such material facts as properly pleaded in the complaint.

In March 1971, the Army Corps of Engineers entered into a written contract with defendant, Quiller Construction Company, Inc., (Quiller) as general contractor for the construction of a housing project. Quiller then entered into a written subcontract with plaintiff, Southland Mechanical Constructors Corporation (SMC) delegating a portion of its work to SMC. SMC, in turn, entered into a written subcontract with plaintiff, Cooley Equipment Co. (Cooley), a second-tier subcontractor.

Disagreements arose about the work to be performed by SMC and Cooley on the housing project. Although such work was ultimately performed, the subcontractors contended that they had been mislead as to the scope of the work to be performed because of incorrect job descriptions. As a consequence, by means of a written agreement, plaintiffs retained Nixen and Lewis, one of the defendant law firms, to represent the former in their claim for additional compensation against the government. Nixen and Lewis, as the attorneys for SMC and Cooley, prepared and arranged to have executed a written contract with Quiller by the terms of which SMC and Cooley were to look solely to the funds recovered from the government as settlement of their claims for additional compensation in exchange for Quiller's promise: (1) to allow the prosecution of the claim to be filed in Quiller's name on SMC's and Cooley's behalf; and (2) to cooperate with Nixen and Lewis in the prosecution of the claim.

In April 1973, Nixen and Lewis filed a claim with the government nominally on behalf of Quiller. In early 1974 Nixen and Lewis associated Morgan & Miceli, the other defendant law firm, to prosecute the government claim. However, plaintiffs were not advised of nor was their consent requested to the association of Morgan & Miceli, prior to its occurrence. In January 1974, the Army Corps of Engineers wrote to Quiller asking for more specific information to enable it to process the claim. Quiller forwarded to Nixen and Lewis a copy of this letter from the Army. Apparently, nothing was done in response to this Army Corps of Engineers' letter requesting additional information.

On January 20, 1976, Morgan & Miceli called the Army Corps of Engineers and was told by the Army, because nothing had been done to prosecute the claim, that a recommendation would be made to the contracting officer to issue a final decision based on the then existing record. The Army also told Morgan & Miceli that the decision would be sent to Quiller within a week or two, and that Quiller had 30 days after receipt of the final decision to appeal. The final decision was received by Quiller on January 29, 1976, and it denied the claim in its entirety. Because no appeal was filed, the decision became legally conclusive on February 28, 1976.

On January 31, 1977, SMC and Cooley filed an action against their former attorneys and Quiller in the San Diego County Superior Court. The complaint sought damages for failure to exercise due diligence and care in handling the claim against the government. The theories of liability pleaded were negligence, fraud, and breach of contract. This action was moved to the Los Angeles County Superior Court, and it was there that the court, pursuant to Code of Civil Procedure section 583, subdivision (a), dismissed the action for failure to prosecute. An appeal from this action is now pending before a division of the Second Appellate District.

Following dismissal of their first lawsuit, SMC and Cooley on December 21, 1979, filed this action now before us. The underlying facts and all of the parties are the same in both cases; the only change is that the second action is restricted to a theory based upon breach of a written contract.

The complaint contains three counts. The first count is directed towards the attorney defendants for breach of the written retainer contract. It seeks damages. The second count is directed towards Quiller for breach of contract. It also seeks damages. The third count for declaratory relief is also directed toward the attorney defendants but is in the alternative to the first count. As to the third count, a declaration is sought that the attorney defendants "breached their duty to exercise the requisite degree of skill, judgment, care and diligence in the representation of plaintiffs and in the handling of plaintiffs' claims which, if plaintiffs are unsuccessful in recovering against QUILLER, has proximately resulted in damages to plaintiffs...."

All of the defendants demurred to the complaint. The trial court sustained the demurrers of Nixen and Lewis and of Morgan and Miceli without leave to amend to both counts directed at them for the following reasons: (1) counts one and three are barred by the statute of limitations set forth in Code of Civil Procedure section 340.6; (2) as to Morgan & Miceli, the complaint fails to state facts sufficient to constitute a cause of action for breach of a written contract; and (3) declaratory relief is inappropriate where only past wrongs are alleged. ¹ The trial court sustained Quiller's demurrer on the ground that another action was pending and, thereupon, ordered an abatement of the proceedings against Quiller.

SMC and Cooley appeal only the trial court's rulings as to the attorney defendants. They contend that the trial court's rulings were erroneous because: (1) Code of Civil Procedure section 340.6 applies only to legal malpractice actions sounding in tort and not in contract; (2) even if section 340.6 is found to be applicable to actions based on a written contract, SMC and Cooley have not as yet sustained "actual injury" and thus the statutory period has been tolled as per section 340.6, subdivision (a)(1); and (3) there are facts sufficient to constitute a cause of action for breach of a written contract against Morgan & Miceli.

I

Code of Civil Procedure section 340.6 in pertinent part provides: "(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; ..."

SMC and Cooley (plaintiffs) contend that the Legislature, in enacting section 340.6, did not expressly declare its intent, and, consequently, we must look primarily to the language of the statute to determine the legislative intent. Plaintiffs argue at length that the words "wrongful act or omission," as used in the above statute, limit the applicable actions to those in tort and not to actions in contract, and, thus, that the underlying contractual action is governed by Code of Civil Procedure section 337, subdivision (1), ² wherein there is a limit of four years. If plaintiffs' argument is correct, then the statutory period would not have expired on December 21, 1979, the date the complaint of the second action was filed, and it would follow then that the trial court was erroneous in dismissing the action on this ground.

However, the words "wrongful act or omission" when placed in context with the rest of the phrase read, "An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services ..." (Emphasis added.) Because of the use of this language, it is clear that section 340.6 applies to legal malpractice actions against attorneys. ³ Because legal malpractice constitutes both a tort and a breach of contract (Neel v. Magana, Olney, Levy, Cathcart & Gelfand, supra, 6 Cal.3d 176, 181, 98 Cal.Rptr. 837, 491 P.2d 421), there is an ambiguity as to whether the words "wrongful act or omission" serve to limit the one-year statutory period only to...