Yandell v. Baker

• Citation: 258 Cal.App.2d 308,65 Cal.Rptr. 606
• Court: California Court of Appeals
• Decision Date: 26 January 1968
• Parties: John YANDELL, Dorothy Yandell, Yandell Truckaway, Inc., a California corporation, and Sierra Warehouse Corporation, Plaintiffs and Appellants, v. Daniel W. BAKER, Defendant and Respondent. Civ. 23473.

Page 606

65 Cal.Rptr. 606

258 Cal.App.2d 308

John YANDELL, Dorothy Yandell, Yandell Truckaway, Inc., a California corporation, and Sierra Warehouse Corporation, Plaintiffs and Appellants, v. Daniel W. BAKER, Defendant and Respondent.

Civ. 23473.

Court of Appeal, First District, Division 3, California.

Jan. 26, 1968.

Rehearing Denied Feb. 23, 1968.

Hearing Denied March 20, 1968.

Guidotti & Mellana, Oakland, for appellants.

Elke, Farella Braun & Martel, Jerome I. Braun, David H. Melnick, San Francisco, for respondent.

BRAY, Associate Justice. ^*

In this appeal by plaintiffs from summary judgment in favor of defendant Daniel W. Baker, the only question presented is whether, on the motion for summary judgment which was granted on the sole ground that plaintiffs' alleged cause of action was barred by the statute of limitations, any triable issues of fact were raised. We hold that there were not.

RECORD

The action is one for malpractice and breach of contract for attorney's services against defendants Kasch, Lautze & Lautze, certified public accountants, and defendant Baker, an attorney at law. Plaintiffs John W. Yandell and Dorothy Yandell, husband and wife (hereinafter referred to as the Yandells), were the sole stockholders of Longridge Transportation Co., a corporation. About January 1962 the Yandells orally employed defendant Baker to review, recommend and carry out a tax program in conjunction with defendant accountants. The tax program recommended and carried out was the dissolution of Longridge, the distribution of its assets to the Yandells as stockholders, and the transfer by them of such assets at the fair market value to two newly-formed corporations, Yandell Truckaway, Inc., and Sierra Warehouse Corporation. Baker and defendant accountants represented that such tax program would provide the Yandells with longterm capital gain treatment of all the earned surplus of Longridge. The certificate of 'Winding Up and Dissolution' of Longridge was filed with the Secretary of State June 11, 1962, and with the Alameda County Clerk June 14, 1962. The Internal Revenue Service took a dim view of the procedure and notified plaintiffs in July 1963 that it rejected plaintiffs' version of the tax program. On December 11, 1963, the Service notified the Yandells that they were required to make an additional tax payment of $32,000. Plaintiffs on December 10, 1964, filed this action for malpractice against all defendants, claiming damages in said sum of $32,000 and an additional sum of $80,000 which it is alleged they will sustain because of additional taxes.

Defendant Baker filed a notice of motion for summary judgment alleging, among other grounds, that as to him the cause of action was barred by the statute of limitations. (Code Civ.Proc., § 339(1).) Before the motion was heard, plaintiffs filed a first amended complaint. The motion was denied because of the existence of the amended complaint. Thereupon defendant Baker filed a new motion for summary judgment on the same grounds. ¹ The motion was granted and summary judgment in defendant Baker's favor entered. Plaintiffs on appeal contend that there was a triable issue of fact raised on the motion as to when the attorney's services ended and the statute of limitations started to run.

No triable issue of fact.

The granting of a summary judgment is proper where the affidavits clearly show that plaintiffs' action is barred by the statute of limitations. (See Graham v. Bank of California (1961) 197 Cal.App.2d 438, 17 Cal.Rptr. 279; Reiner v. Hermann (1947) 79 Cal.App.2d 543, 180 P.2d 385.) It is well settled that the two-year period of section 339(1) of the Code of Civil procedure is the applicable period of limitation in attorney malpractice actions and that the statute in such actions begins to run from the time of the negligent act rather than from the time of discovery of the injury. (Griffith v. Zavlaris (1963) 215 Cal.App.2d 826, 30 Cal.Rptr. 517; Bustamente v. Haet (1963) 222 Cal.App.2d 413, 35 Cal.Rptr. 176; Alter v. Michael (1966) 64 Cal.2d 480, 50 Cal.Rptr. 553, 413 P.2d 153.) Thus, the date of the alleged negligent act or acts of Baker becomes of vital importance.

Likewise, the rules pertaining to summary judgments are well settled. The purpose of the motion for summary judgment is to discover whether or not there are triable issues of fact. (Somerville v. Providence Washington Indemnity Co. (1963) 218 Cal.App.2d 237, 244, 32 Cal.Rptr. 378.) If the opposition affidavit sets up facts showing that there are triable issues of fact, such facts must be accepted as true and the motion denied. (Id.) The procedure is drastic and should be used with caution in order that it may not become a substitute for existing methods of determining issues of fact. (Id.) (Hatch v. Bush (1963) 215 Cal.App.2d 692, 701--702, 30 Cal.Rptr. 397.) Affidavits of the moving party must be strictly construed and those of his opponent liberally construed. (Somerville, supra.) The opposing affidavit must be accepted as true, and need not be composed wholly of strictly evidentiary facts. (Eagle Oil & Ref. Co. v. Prentice (1942) 19 Cal.2d 553, 556, 122 P.2d 264.) The issue to be determined by the trial court in consideration of a motion for summary judgment is whether or not any facts have been presented which give rise to a triable issue or defense, and not to pass upon or determine the true facts in the case. (Nini v. Culberg (1960) 183 Cal.App.2d 657, 661, 7 Cal.Rptr. 146.) Any doubts are to resolved against the moving party. (Family Service Agency of Santa Barbara v. Ames (1958) 166 Cal.App.2d 344, 351, 333 P.2d 142.)

Having the above rules in mind, we examine the showing made by the parties on the motion for summary judgment.

The sole showing on the motion was the affidavit of defendant Baker which accompanied the motion and the declaration of plaintiffs Yandell in opposition to the motion. Defendant Baker's affidavit stated in pertinent part that in November 1961 he was consulted by plaintiffs and defendant accountants concerning certain tax problems of corporations owned and controlled by plaintiffs; that the accountants recommended that Longridge be liquidated and dissolved and that the proceeds from such liquidation be used to repay to other corporations moneys withdrawn therefrom by plaintiffs; that he was to review said recommendations and perform legal services in the winding up and liquidation of Longridge; that he performed legal services to that end, which were performed between November 17, 1961, and June 14, 1962, although his time records (copies of which were attached to the affidavit) indicate that some incidental services in connection with the completion and winding up and liquidation of Longridge may have been performed as late as August 9, 1962. No services were rendered by him in connection with the liquidation of Longridge subsequent to that date and 'any alleged advice and counsel given by me in connection with the matters complained of in plaintiffs' complaint' was given prior to, and in no event later than June 14, 1962. The affidavit then discloses the chronology of the corporation's dissolution, the distribution of Longridge's assets, ending with the filing of a 'Certificate of Winding Up and Dissolution of Longridge Transportation Co.' with the Secretary of State June 11, 1962, and with the Alameda County Clerk on June 14 and the receipt through the accountants of a State Tax Clearance Certificate.

The declaration of plaintiffs Yandell states in pertinent part that in November 1961 the Yandells consulted defendant Baker in their own behalf and that of Yandell Truckaway, Inc., Sierra Warehouse Corp., and Longridge Transportation Company with regard to financial and tax matters. Defendant Baker stated that he would study their financial situation to determine whether anything could be done to alleviate some of their tax problems. Between November 1961 and January 1962 plaintiffs orally retained defendant Baker to review their personal and corporate financial structure and situations and to consult with and advise the defendant accountants for the purpose of minimizing, where legally possible, plaintiffs' corporate and personal taxes. Defendant Baker agreed to give 'counselling, advice and services with regard to these matters, as well as perform the necessary legal work and services in connection therewith.'

Shortly thereafter, defendant Baker represented to plaintiffs that he had reviewed their tax situations, consulted with defendant accountants and, together with the latter, had concluded that it would be in declarants' best interests to dissolve Longridge, distribute its assets to the Yandells and then redistribute these assets to the other two corporations; that he would continue to review declarants' financial situation 'in assisting and advising declarant and declarant's accountants in the handling of the dissolution and redistribution of the dissolved corporation's assets * * * until the conclusion of the above stated recommended tax program.' That the tax program was not concluded until on or about December 11, 1963, when declarant was informed by the Internal Revenue Service that it had completed its examination of plaintiffs' books and concluded that the manner and method of dissolution and redistribution of corporate assets as directed by defendant Baker and the other defendants was a corporate reorganization and not a corporate dissolution; therefore, the transaction was taxed at ordinary income rates rather than capital gain rates. That, therefore, the date when declarants suffered damage from defendants' acts was December 11, 1963, and that no...