Court Opinion

ID: 9375530
Source: CourtListenerOpinion
Date Created: 2023-02-28 00:02:37.903059+00
Date Added: 2024-06-11T17:16:59.545414
License: Public Domain

Filed 2/27/23 Tan v. Merrill CA1/2
                  NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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          IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                      FIRST APPELLATE DISTRICT

                                                   DIVISION TWO

 REGLITA C. TAN,
           Plaintiff and Appellant,
                                                                        A163406
 v.
 MICHAEL MERRILL et al.,                                                (Marin County
                                                                        Super. Ct. No. CIV1904329)
           Defendants and Respondents.

         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

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should have been granted. We reject these arguments and affirm the
judgment.
                                BACKGROUND
                                        A.
        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.)
                                        B.
        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.)

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                                       C.
      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

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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

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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

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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 before she
brought suit, and her complaint alleges she has incurred unnecessary
attorney fees and costs as a result of defendants’ negligence. This timely
appeal followed.

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                                 DISCUSSION
                                        I.
      Tan argues the court erred in sustaining the demurrer because she was
not injured until the probate court’s adverse judgment was entered against
her on November 26, 2018, less than one year before she commenced this
suit, because it was only then that the amended estate planning documents
failed to achieve their intended effect as a matter of law. She contends she
could not have brought a malpractice claim any earlier because she had
suffered no actual injury until that time. We do not agree.
      There is no “general rule tolling the limitations period until a related
lawsuit establishes a causal connection between attorney error and resulting
injury.” (Jordache, supra, 18 Cal.4th at p. 754.) “Actual injury refers only to
the legally cognizable damage necessary to assert the cause of action. There
is no requirement that an adjudication or settlement must first confirm a
causal nexus between the attorney’s error and the asserted injury. The
determination of actual injury requires only a factual analysis of the claimed
error and its consequences.” (Id. at p. 752.) This inquiry asks “whether
‘events have developed to a point where plaintiff is entitled to a legal remedy,
not merely a symbolic judgment such as an award of nominal damages.’ ”
(Ibid.) “[O]nce the plaintiff suffers actual harm, neither difficulty in proving
damages nor uncertainty as to their amount tolls the limitations period.”
(Ibid.) It is “the fact of damage, rather than the amount, [that] is the critical
factor.” (Ibid.)
      Under this standard, as noted, “[A] plaintiff sustains ‘actual
injury’ when he or she incurs attorney fees to rectify the problem caused by
the prior attorney’s alleged negligence.” (Pointe San Diego Residential
Community, L.P. v. Procopio, Cory, Hargreaves & Savitch, LLP (2011)

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195 Cal.App.4th 265, 275-276; see, e.g., Jordache, supra, 18 Cal.4th at p.754
[expenditure of attorney fees to defend litigation as a result of attorney
negligence held actual injury].)
         Here, Tan alleges that shortly after Pollexfen died in 2016, she “became
the target of litigation by Ms. Pollexfen’s nieces and nephew as well as her
former hairdresser,” in multiple cases that “challenged her right to receive
any distribution, removed her as successor trustee of the three trusts, and
sought civil damages against her as well.” Court records judicially noticed by
the trial court indicate that the earliest such case was filed on April 18, 2017,
and the last one (a will contest) on August 1, 2018. Tan alleges she
eventually was “forced” to settle with those parties (tentatively in 2019, and
then finally approved by the probate court in January 2020) in order to avoid
a forced sale of the property. She alleges that defendants’ negligence “has
caused her to incur unnecessary attorney’s fees and costs,” which she
previously stipulated also included attorney fees incurred in those other
cases.
         Regardless of the outcome of the probate case she herself initiated, the
attorney fees she incurred in the earlier filed cases and now seeks as
damages constitute actual injury sufficient to end the tolling period. (See
Sindell v. Gibson, Dunn & Crutcher (1997) 54 Cal.App.4th 1457, 1466-1473
[heirs suffered actual injury by incurring attorney fees to defend litigation
resulting from estate planning attorney’s alleged negligence, regardless of
litigation’s outcome].) Because she began incurring those fees far earlier
than one year before she filed this malpractice lawsuit, the tolling period had
long since expired.
         At the least, Tan suffered actual injury no later than in March 2018,
when the successor trustee asserted that the will provision authorizing the

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use of sub-trust assets to pay off encumbrances on the property was invalid,
and Tan was forced to incur attorney fees to respond to that claim by
bringing suit in probate court. (See Callahan v. Gibson, Dunn & Crutcher
LLP (2011) 194 Cal.App.4th 557, 575.) “ ‘[T]he mere fact of such litigation is
[an] unwanted consequence’—hence, the ‘actual injury’—for which the
negligent lawyers are responsible.” (Ibid.; accord, Truong v. Glasser, supra,
181 Cal.App.4th at pp. 111-115 [tolling period ended when plaintiffs were
required to hire and pay counsel to file suit in an effort to “escape the
consequences” of prior attorney’s alleged transactional malpractice, not later
when the litigation concluded adversely to the plaintiffs].) Had she won the
probate court case, it would merely have diminished her damages, not
extinguished them. (See Jordache, supra, 18 Cal.4th at p. 753; Sindell v.
Gibson, Dunn & Crutcher, supra, 54 Cal.App.4th at p. 1471.)
      In contending she was not actually injured until the probate court case
concluded, Tan relies principally on Sirott v. Latts (1992) 6 Cal.App.4th 923
(Sirott) and Baltins v. James (1995) 36 Cal.App.4th 1193 (Baltins),
disapproved in Jordache, supra, 18 Cal.4th at p. 761, fn.9, but neither
supports a contrary result.
      “Sirott does not support a general rule that judicial determinations are
necessary precursors to actual injury.” (Jordache, supra, 18 Cal.4th at
p. 759.) On the contrary, it acknowledged the principle, applicable here, that
a plaintiff “suffers damage when he is compelled, as a result of the attorney’s
error, to incur or pay attorney fees.” (Sirott, supra, 6 Cal.App.4th at p. 928.)
It held that a client had incurred actual injury not just when litigation
confirmed that its attorney had erred by giving it bad advice, but also earlier
when the client had been forced to incur attorney fees as a result of the
attorney’s negligence. (Id. at p. 929; see also Jordache, at p. 759 [construing

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Sirott].) That is also what happened here. Sirott’s alternative holding—that
the client was actually injured when an arbitration award was entered
against it that proved the attorney’s advice had been wrong (Sirott, at
pp. 929-930)—was neither necessary to the decision nor dispositive. (See
Jordache, at p. 759 [describing that aspect of Sirott as “comments”].)
      Furthermore, the Supreme Court has indicated that this latter aspect
of Sirott upon which Tan relies is analytically flawed. The Court explained
that, as practical matter, it reflects application of the delayed discovery rule,
not actual injury. (See Jordache, supra, 18 Cal.4th at p. 759.) But here, Tan
is not relying on a theory of delayed discovery of defendants’ negligence to
overcome the statute of limitations defense. Nor could she. It was certainly
clear no later than the probate court’s tentative decision of September 28,
2018, that defendants had drafted a will provision that was invalid under the
terms of the original Living Trust, yet she filed suit more than one year later.
(See Code Civ. Proc., § 340.6, subd. (a).)
      Baltins does not support reversal either. In that case, the client in a
divorce case was held to have suffered actual injury when the family court
held him liable for improperly disposing of community assets on his
attorney’s advice. (Baltins, supra, 36 Cal.App.4th at pp. 1198, 1208.) The
client did not allege he incurred any attorney fees as a result of the attorney’s
negligent advice, however. Unlike the plaintiff in Baltins, Tan “expended
attorney fees as a direct result of [defendants’] alleged negligence well before
the resolution of any collateral judicial action.” (Jordache, supra, 18 Cal.4th
at p. 762 [distinguishing Baltins].)
      Finally, in her reply brief, Tan invokes the rule announced by ITT
Small Business Finance Corp. v. Niles (1994) 9 Cal.4th 245, that “in
transactional legal malpractice cases, when the adequacy of the

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documentation is the subject of dispute, an action for attorney malpractice
accrues on entry of adverse judgment, settlement, or dismissal of the
underlying action,” which is when the malpractice actually causes harm. (Id.
at p. 258.) Thus, Tan argues, her action is timely. This misstates the law:
ITT has been overruled. (Jordache, supra, 18 Cal.4th at pp. 762-763.)
      The trial court did not err in sustaining defendants’ demurrer to the
first amended complaint.
                                       II.
      Tan also contends the court abused its discretion in denying her leave
to amend the complaint another time.
      “ ‘When a demurrer is sustained without leave to amend, it is the duty
of the reviewing court to decide whether there is a reasonable possibility that
the defect can be cured by amendment. If it can, the trial court abused its
discretion and we must reverse. If it cannot be reasonably cured, there has
been no abuse of discretion. [Citation.] It is the plaintiff’s burden to show
the reviewing court how the complaint can be amended to state a cause of
action.’ ” (290 Division (EAT), LLC v. City and County of San Francisco,
supra, 86 Cal.App.5th 439, 450.)
      Tan has not met her burden to show how she could amend her
complaint to overcome the limitations bar. She contends she should have
been allowed to amend the complaint “if it was uncertain or ambiguous as to
the operative facts,” but it wasn’t. She argues she could allege with greater
specificity various alternative legal theories she asserted in the probate
matter that “should have been followed by the [probate] Court” and did not
rely on a theory of mistakes or drafting errors by defendants. But such
factual allegations would not eliminate the problem, which is that
defendants’ alleged negligence required her to incur attorney fees to file (and

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defend) litigation to rectify the consequences of negligently drafted estate
planning documents. That negligence gave the successor trustee (and,
allegedly, other adversarial parties) claims they would not otherwise possess
to try to defeat Lee Pollexfen’s bequest to Tan. Regardless of whether they
prevailed, Tan was injured. (See Jordache, supra, 8 Cal.4th at p. 761 [client
actually injured by alleged malpractice that gave adversary “an objectively
viable defense” that it “raised immediately” and caused client to incur legal
fees].)
          Because that defect could not reasonably be cured by amendment, the
trial court did not abuse its discretion in denying Tan further leave to amend
her complaint.
                                  DISPOSITION
          The judgment is affirmed. Respondents shall recover their costs.

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                                         STEWART, P.J.

We concur.

RICHMAN, J.

MARKMAN, J. *

Tan v. Merrill (A163406)

     * Judge of the Alameda Superior Court assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.

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