Tan v. Merrill
| Decision Date | 27 February 2023 |
| Docket Number | A163406 |
| Parties | REGLITA C. TAN, Plaintiff and Appellant, v. MICHAEL MERRILL et al., Defendants and Respondents. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED
Marin County Super. Ct. No. CIV1904329
Reglita Tan, the primary beneficiary of a survivor's trust created by Paul and Lee Pollexfen, brought suit for legal malpractice against widow Pollexfen's estate planning attorneys, Michael Merrill and his law firm Merrill, Arnone &Jones, LLP, alleging they were negligent in drafting amendments to the late Mrs. Pollexfen's estate planning documents. The malpractice, Tan alleged, led to probate court litigation that caused her to incur attorney fees. It also she alleged, resulted in her obtaining an unfavorable judgment-one granting her title to real property located in Sausalito, California that was encumbered with indebtedness though she was supposed to receive the property free and clear of all indebtedness.
The trial court sustained defendants' demurrer to the first amended complaint on statute of limitations grounds. Tan now appeals, arguing that the complaint was timely filed and that, even if it was not, leave to amend should have been granted. We reject these arguments and affirm the judgment.
A cause of action for legal malpractice must be filed within the earlier of "four years from the date of the wrongful act or omission" or "one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission." (Code Civ. Proc., § 340.6, subd. (a).) But the limitations period "shall be tolled" in various situations, including during the time "[t]he plaintiff has not sustained actual injury." (Id., subd. (a)(1).)
The test for actual injury is whether the plaintiff has sustained any damages compensable in a legal malpractice action against an attorney. (Jordache Enters., Inc. v. Brobeck, Phleger &Harrison (1998) 18 Cal.4th 739, 751 (Jordache).) Under this standard, the fact of damage, not the amount, is the critical factor. (Id at p. 752.) Attorney fees incurred as a result of an attorney's alleged malpractice constitutes actual injury sufficient to end the period of tolling. (See, e.g., Truong v. Glasser (2009) 181 Cal.App.4th 102, 114.)
Our recitation of facts is based upon the well-settled standard of review for an order sustaining a demurrer. Our review is de novo, accepting as true all material facts properly pled and matters that may be judicially noticed, and disregarding contentions or conclusions of law. (290 Division (EAT), LLC v. City and County of San Francisco (2022) 86 Cal.App.5th 439, 450.)
In November 1994, Jack and Lee Pollexfen executed a revocable living trust that was to be divided into three sub-trusts upon the death of the first spouse: a Survivor's Trust, a Marital Trust and a Credit Shelter Trust.
Following Jack Pollexfen's death in November 2003, Lee Pollexfen created and funded the three sub-trusts. The main asset of the Survivor's Trust is real property located at 48-50 Bulkley in Sausalito, California. Tan is its primary beneficiary.
In 2011, Lee Pollexfen retained the services of defendants to amend her estate planning documents. Tan alleges that Lee Pollexfen asked defendants to amend her estate planning documents to ensure Tan would receive distribution of the property free and clear of all mortgages and encumbrances.
Lee Pollexfen died in September 2016.
Tan alleges that following Lee Pollexfen's death, Tan became the subject of litigation by various family members and another beneficiary (Pollexfen's former hairdresser) challenging Tan's right to receive any distribution from the estate. Documents judicially noticed by the trial court reflect that they included: a probate action filed on April 18, 2017, that led to Tan's removal as trustee of the Marital Trust and Credit Shelter Trust and the appointment of a successor trustee; a civil lawsuit filed against Tan on June 30, 2017, for financial elder abuse, breach of fiduciary duty and fraud; another probate court case commenced against Tan on November 28, 2017, that led to her removal as trustee of the Survivor Trust; and a probate action filed on August 1, 2018, that involved a contest to Lee Pollexfen's will.
In addition, on April 11, 2018, Tan herself filed suit in probate court, petitioning for instructions under the trust and to compel payment to the Survivor's Trust of an amount sufficient to pay off all loans on the property. She alleged that, beginning with a fourth amendment to the Survivor's Trust, Lee Pollexfen exercised a limited power of appointment to direct that Tan receive the property free and clear of encumbrances, but that the trustee of the Marital Trust and Credit Shelter Trust was asserting that Lee Pollexfen lacked the power under her limited power of appointment to pay off creditors through those trust assets. Attached as exhibit J to the petition was a letter dated March 7, 2018, from the successor trustee's counsel to Tan's counsel asserting that the provision of Lee Pollexfen's will purporting to dispose of the Marital Trust assets and Credit Shelter Trust assets for that purpose was invalid under the terms of the original Living Trust. "As such," the trustee's counsel wrote, "the trustee will ignore such provisions and will distribute the funds to the remainder beneficiaries of the trust" and not to Tan. Tan sought a judgment interpreting the various trust instruments and compelling the successor trustee to make distributions from the two sub-trusts on her behalf equal to the encumbrances on the property. In substance, as construed by the probate court, her petition sought either (1) a finding that the original Living Trust authorized the will provision defendants drafted that purported to pay the surviving spouse's debts from the Marital and/or Credit Shelter Trust assets, or (2) reformation of the will to provide for a pecuniary gift to Tan out of those trust assets instead, in an amount equal to the encumbrances on the property.
On September 26, 2018, the probate court issued a tentative decision only partially in her favor. It found that the challenged will provision defendants had drafted was invalid for the reasons asserted by the successor trustee (i.e., because it exceeded Lee Pollexfen's authority under her limited power of appointment as the surviving spouse to dispose of the assets in the Marital Trust and Credit Shelter Trust). But it ruled tentatively that the will could be reformed to accomplish the same result, by means of making a pecuniary gift to Tan in the amount of the encumbrances.
Two months later, on November 26, 2018, the probate court issued a final statement of decision. It again concluded the will provision purporting to require the payoff of encumbrances that defendants drafted is invalid and that, although Lee Pollexfen's intent to provide the property to Tan free and clear of encumbrances was clear, the will could not be reformed. It entered an adverse judgment against Tan the same date, denying her request for monetary relief.
Tan brought suit a year later on November 25, 2019, alleging defendants negligently drafted amendments to the trusts and Lee Pollexfen's will. She alleged that Tan, as the primary beneficiary of those instruments, had been deprived of her rightful inheritance and full distribution from the trusts, as a result of the November 26, 2018 judgment that prevented her from receiving distribution of the property free of encumbrances "as promised," "and has caused her to incur unnecessary attorney's fees and costs." She alleged she suffered damages in the form of the diminished value of her inheritance and attorney fees and costs.
She then entered into a stipulation reserving the right to seek as damages the attorney fees she had incurred in the probate case she brought as well as those previously incurred in the other related cases that had been brought against her.
Defendants answered and then moved for judgment on the pleadings, arguing the sole cause of action was time-barred. They argued, among other things, that Tan was seeking as damages attorney fees she had incurred in lawsuits that had been commenced as early as April 18, 2017, and thus was actually injured more than one year before she filed suit. The court took judicial notice of various pleadings from the other actions, granted the motion for judgment on the pleadings and granted Tan leave to amend her complaint.
Tan filed a first amended complaint alleging the facts with greater specificity. She now alleges that the probate court's judgment prevented the distribution to her free and clear of all encumbrances based upon a mistake caused by defendants that the probate court declined to correct. She also alleges that, in order to avoid a forced sale of the property, she was forced to enter into a settlement of the other litigation that was tentatively reached in June 2019 and the settlement required her to pay $550,000 in attorney fees on behalf of the Survivor's Trust. She again alleges that defendants' negligence prevented her from receiving the property free and clear of all encumbrances, "and has caused her to incur unnecessary attorney's fees and costs."
Defendants demurred, arguing again the action is time-barred, including because Tan stipulated that she is seeking as damages the attorney fees she had incurred in lawsuits commenced as early as April 18, 2017, which constitutes actual injury.
The court sustained the demurrer without leave to amend. It ruled Tan was aware of defendants' mistake as of August 23 2018, when she filed her petition to reform the trust, which was more than one year...
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