Opinion ID: 1426902
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Heading: Budd and Actual Injury

Text: Section 340.6 is not simply a mechanical transcription of the holdings in Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 98 Cal.Rptr. 837, 491 P.2d 421 ( Neel ) and Budd; the Legislature plainly intended to address additional concerns when it established a separate statute of limitations for legal malpractice actions. Unlike section 340.6, Budd does not use the phrase actual injury, referring instead to damage, actual loss or damage, appreciable harm, and appreciable and actual harm. ( Budd, supra, 6 Cal.3d at pp. 198, 200-201, 98 Cal.Rptr. 849, 491 P.2d 433.) However, the pertinent legislative history shows how the actual injury tolling provision derived from the holding in Budd [6] The Legislature considered section 340.6 as Assembly Bill No. 298 (1977-1978 Reg. Sess.). When the bill went to the Assembly Committee on the Judiciary, it contained a tolling provision for the time the plaintiff had not sustained significant injury. (Digest, supra, pp. 1, 4.) The Digest noted that the committee members had been provided the detailed analysis of recommended legal malpractice statutes of limitations recently published in the State Bar Journal  (Digest, supra, p. 3.) That analysis proposed to toll the statute until significant injury occurred based on Budd 's holding that any appreciable and actual harm sufficed for a cause of action's accrual and commencement of the limitations period. ( Budd, supra, 6 Cal.3d at p. 201, 98 Cal.Rptr. 849, 491 P.2d 433; see Mallen, Panacea or Pandora's Box ? A Statute of Limitations for Lawyers (1977) 52 State Bar J. 22, 24; 2 Mallen & Smith, Legal Malpractice (4th ed. 1996) Statutes of Limitations, § 21.11, p. 784.) The Digest referred to Neel, supra, 6 Cal.3d 176, 98 Cal.Rptr. 837, 491 P.2d 421, and Budd, supra, 6 Cal.3d 195, 98 Cal.Rptr. 849, 491 P.2d 433, when it stated: In two landmark 1971 decisions, the California Supreme Court substantially modified [the prior] rule to provide that in an action for legal malpractice, the cause of action does not accrue until the plaintiff knows or should know the material facts in issue for a legal malpractice action and the plaintiff sustains actual damage. (Digest, supra, p. 2.) The Digest again alluded to Budd in discussing commencement of the limitations period: The court has recognized that only when the negligent act results in an actual injury will an action for legal malpractice exist. Assembly Bill 298 provides that the statute of limitations is tolled until the plaintiff sustains significant injury. (Digest, supra, p. 4.) The committee amended the provision to specify actual injury rather than significant injury. ( Id., p.1.) Therefore, as we have noted, the Legislature's choice of actual injury for the tolling provision plainly was intended to invoke Budd. (See, e.g., Adams, supra, 11 Cal.4th at p. 588, 46 Cal.Rptr.2d 594, 904 P.2d 1205 (lead opn. of Arabian, J.); Laird, supra, 2 Cal.4th at p. 612, 7 Cal.Rptr.2d 550, 828 P.2d 691.) The import of the change from significant to actual injury also is reasonably clear: The Legislature used the term actual to focus inquiry on the fact of damage; it omitted other qualifiers to preclude digressions into whether various quantities of damage trigger the limitations period. (See Laird, supra, 2 Cal.4th at p. 613, 7 Cal. Rptr.2d 550, 828 P.2d 691; Foxborough v. Van Atta, supra, 26 Cal.App.4th at p. 226, 31 Cal.Rptr.2d 525; see also 2 Mallen & Smith, Legal Malpractice, supra, Statutes of Limitations, § 21.11, pp. 784-785.) Budd 's basic premise was that a plaintiff could not assert a cause of action for legal malpractice, and hence the limitations period should not commence, until the plaintiff sustained some damage occasioned by the attorney's negligence. ( Budd, supra, 6 Cal.3d at pp. 200-201, 98 Cal.Rptr. 849, 491 P.2d 433.) Budd recognized that actual loss or damage resulting from the professional's negligence was an essential element of a cause of action in tort for professional negligence. ( Id. at p. 200, 98 Cal.Rptr. 849, 491 P.2d 433.) Thus, Budd held that the statute of limitations began to run when the plaintiff sustained loss or damage from the attorney's negligence that allowed the plaintiff to assert a malpractice cause of action. ( Id. at pp. 200-201, 98 Cal.Rptr. 849, 491 P.2d 433.) In section 340.6's terms, the one-year limitations period that commences when the plaintiff actually or constructively discovers the attorney's wrongful act or omission is no longer tolled after the plaintiff sustains actual injury, i.e., when the plaintiff can plead a legal malpractice cause of action. Budd remains instructive on the test for actual injury: If the allegedly negligent conduct does not cause damage, it generates no cause of action in tort. [Citation.] The mere breach of a professional duty, causing only nominal damages, speculative harm, or the threat of future harmnot yet realized does not suffice to create a cause of action for negligence. [Citations.] Hence, until the client suffers appreciable harm as a consequence of [the] attorney's negligence, the client cannot establish a cause of action for malpractice. ( Budd, supra, 6 Cal.3d at p. 200, 98 Cal.Rptr. 849, 491 P.2d 433, fn. omitted.) The cause of action arises, however, before the client sustains all, or even the greater part, of the damages occasioned by [the] attorney's negligence. [Citations.] Any appreciable and actual harm flowing from the attorney's negligent conduct establishes a cause of action upon which the client may sue  ( Id. at p. 201, 98 Cal.Rptr. 849, 491 P.2d 433, italics added.) Subsequent decisions have made explicit What Budd implied. Thus, Dairies v. Krasna (1975) 14 Cal.3d 502, 514, 121 Cal.Rptr. 705, 535 P.2d 1161, held that the existence of appreciable actual injury does not depend on the plaintiffs ability to attribute a quantifiable sum of money to consequential damages. Similarly, Laird rejected the claims that actual injury should be defined by a monetary amount and that the limitations period should be tolled if the injury is, in some way, remediable. ( Laird, supra, 2 Cal.4th at pp. 611, 614-617, 7 Cal.Rptr.2d 550, 828 P.2d 691; see Baltins v. James (1995) 36 Cal. App.4th 1193, 1203,42 Cal.Rptr.2d 896; Foxborough v. Van Atta, supra, 26 Cal.App.4th at pp. 226-227, 31 Cal.Rptr.2d 525.) Adams recognized that actual injury may consist of impairment or diminution, as well as the total loss or extinction, of a right or remedy. ( Adams, supra, 11 Cal.4th at pp. 589-590, 591, fn. 5, 46 Cal.Rptr.2d 594, 904 P.2d 1205 (lead opn. of Arabian, J.); id. at p. 597, 46 Cal.Rptr.2d 594, 904 P.2d 1205 (cone. opn. of Kennard, J.); see Foxborough v. Van Atta, supra, 26 CalApp.4th at p. 227, 31 Cal. Rptr.2d 525 [[W]hen malpractice results in the loss of a right, remedy, or interest, or in the imposition of a liability, there has been actual injury regardless of whether future events may affect the permanency of the injury or the amount of monetary damages eventually incurred.]; 2 Mallen & Smith, Legal Malpractice, supra, Statutes of Limitations, § 21.11, at p. 782.) Budd 's discussion of the possible damages the plaintiff there incurred further illuminates the nature of actual injury. In Budd, the defendant attorney failed to allege a crucial defense in a third party's suit against the plaintiff and the corporation of which he was president. ( Budd, supra, 6 Cal.3d at p. 198, 98 Cal.Rptr. 849, 491 P.2d 433.) New counsel tried unsuccessfully to rectify the defendant's omission; the trial court entered judgment against the plaintiff personally. ( Id. at pp. 198-199, 98 Cal.Rptr. 849, 491 P.2d 433.) Budd said the facts presented after remand could demonstrate the plaintiff suffered damage when he paid the defendant attorney's fees, if the attorney's negligence caused these payments to exceed the value of the legal services. ( Id. at pp. 201-202, 98 Cal. Rptr. 849, 491 P.2d 433.) The court also observed that the plaintiff might have had a viable tort damage claim for the fees paid to the second attorney to untangle the defendant's error. ( Id. at p. 202, 98 Cal.Rptr. 849, 491 P.2d 433.) In characterizing the latter fees as a type of damage that allows a malpractice cause of action to accrue, Budd simply recognized the established rule that attorney fees incurred as a direct result of another's tort are recoverable damages. (See Brandt v. Superior Court (1985) 37 Cal.3d 813, 817-818, 210 Cal.Rptr. 211, 693 P.2d 796; Prentice v. North Amer. Title Guar. Corp. (1963) 59 Cal.2d 618, 620, 30 Cal.Rptr. 821, 381 P.2d 645; cf. 2 Mallen & Smith, Legal Malpractice, supra, Damages, § 19.10, at pp. 610-612 [attorney fees as mitigation expenses recoverable in malpractice action].) [7] The actual injury provision in section 340.6, subdivision (a)(1), effectively continues the accrual rule Budd established. Under Budd, the cause of action could not accrue until the plaintiff suffered actual loss or damage resulting from the allegedly negligent conduct. ( Budd, supra, 6 Cal.3d at pp. 200-201, 98 Cal.Rptr. 849, 491 P.2d 433.) After sustaining damages compensable in a negligence action, the plaintiff could establish a cause of action for professional negligence, and the limitations period commenced. ( Ibid. ) Under section 340.6, the one-year limitations period commences when the plaintiff actually or constructively discovers the facts of the wrongful act or omission, but the period is tolled until the plaintiff sustains actual injury. That is to say, the statute of limitations will not run during the time the plaintiff cannot bring a cause of action for damages from professional negligence. The test for actual injury under section 340.6, therefore, is whether the plaintiff has sustained any damages compensable in an action, other than one for actual fraud, against an attorney for a wrongful act or omission arising in the performance of professional services. This interpretation is consistent with the plain language of the statute and the Legislature's manifest intent in enacting section 340.6. As the lead and concurring opinions in ( Adams emphasized, determining when actual injury occurred is predominantly a factual inquiry. ( Adams, supra, 11 Cal.4th at p. 588, 46 Cal.Rptr.2d 594, 904 P.2d 1205 (lead opn. of Arabian, J.); id. at p. 595, 46 Cal.Rptr.2d 594, 904 P.2d 1205 (cone. opn. of Kennard, J.).) When the material facts are undisputed, the trial court can resolve the matter as a question of law in conformity with summary judgment principles. ( Id. at pp. 592, 46 Cal.Rptr.2d 594, 904 P.2d 1205 Gead opn. of Arabian, J.).)