Court Opinion

ID: 9614172
Source: CourtListenerOpinion
Date Created: 2023-08-22 04:23:08.62133+00
Date Added: 2024-06-11T09:00:48.319085
License: Public Domain

LUCAS, C. J.
I dissent.
We granted review of this case in order to decide when plaintiff suffered “actual injury” within the meaning of Code of Civil Procedure section 340.6, subdivision (a)(1), for purposes of tolling the limitations period applicable to her legal malpractice action. Concerned with the “numerous variables” arising in the unique context of missed-statute malpractice cases, the lead opinion has declined to resolve the question presented, opting instead to remand the case to the trial court for resolution of the “actual injury” issue as a question of fact in every missed-statute case. In so doing, the lead opinion disserves both the courts and missed-statute malpractice litigants by perpetuating uncertainty and guaranteeing that each case will lead to prolonged and costly litigation. In my view, the court should follow the guidance of its own recent precedent and provide a clear rule for the bench and bar by *600deciding when “actual injury” occurred in this case. In this regard, I believe that important policy considerations are best served by a rule recognizing that “actual injury” in missed-statute malpractice cases involving an underlying action occurs at the point of disposition of plaintiff’s underlying lawsuit, whether by settlement, dismissal or adverse judgment.
The lead opinion avoids deciding when “actual injury” occurred in this case primarily on the basis of a statement in Budd v. Nixen (1971) 6 Cal.3d 195 [98 Cal.Rptr. 849, 491 P.2d 433] (hereafter Budd) that “the determination of the time when plaintiff suffered damage raises a question of fact.” (Id. at p. 202.) Such reliance ignores the reasoning of Budd, and our seminal decision in Laird v. Blacker (1992) 2 Cal.4th 606 [7 Cal.Rptr.2d 550, 828 P.2d 691] (hereafter Laird), an opinion rendered after the Legislature codified the discovery and actual injury rule in Code of Civil Procedure section 340.6, now governing legal malpractice cases.
In Laird, we noted the suggestion in Budd, supra, 6 Cal.3d 195, that the time of commencement of the statute of limitations is often a question of fact for the jury. (Laird, supra, 2 Cal.4th at p. 611.) But we clearly viewed the proposition set forth in that case as consistent with—rather than a barrier to—our determination in Laird that “actual injury” occurred at adverse judgment rather than at the conclusion of an appeal of right. As we explained in Laird, the Budd court recognized that it would be unfair for a malpractice plaintiff to face a statute of limitations on the date he or she first incurs nominal damages. Budd thus concluded that the typical malpractice plaintiff suffers appreciable harm on entry of adverse judgment. (Laird, supra, 2 Cal.4th at p. 612; Budd, supra, 6 Cal.3d at pp. 200-201.) The Budd court held that the plaintiff’s action accrued at least “on entry of [adverse] judgment because [the plaintiff] clearly then became obligated to pay a considerable sum to the broker or to post a bond on appeal.” (6 Cal.3d at p. 202; see also Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176 [98 Cal.Rptr. 837, 491 P.2d 421] [approving Hays v. Ewing (1886) 70 Cal. 127 [11 P. 602], in which we accepted the date of dismissal of the suit—that is, the date upon which the client suffered damages—as the crucial point from which the statute of limitations should run].)
Because litigants had significant difficulty in reconciling Budd' s discussion of appreciable injury and the statute’s “actual injury” tolling provision, we granted review in Laird. (Compare Southland Mechnical Constructors Corp. v. Nixen (1981) 119 Cal.App.3d 417, 434 [173 Cal.Rptr. 917] [“actual injury” occurs when plaintiff in underlying action incurs and pays attorney fees, legal costs and expenditures] with Troche v. Daley (1990) 217 Cal.App.3d 403, 410 [266 Cal.Rptr. 34] [statute commences when court *601dismisses underlying lawsuit].) In Laird, we resolved the substantial disagreement in the Courts of Appeal over whether the statute of limitations in attorney malpractice actions is tolled until final judgment in the underlying action on which the malpractice action is based, or on the date the appeal of right is resolved. We held that “actual injury” occurs on entry of adverse judgment or final order of dismissal. (Laird, supra, 2 Cal.4th at p. 615.)
Neither Budd nor Laird addressed the limitations question in the context of a second, underlying action. In ITT Small Business Finance Corp. v. Niles (1994) 9 Cal.4th 245 [36 Cal.Rptr.2d 552, 885 P.2d 965] (hereafter ITT), we held that until bankruptcy litigation concerning the effectiveness of inadequately prepared loan documents is settled, the question whether the attorney committed malpractice in preparing those documents has not been resolved. (ITT, supra, 9 Cal.4th at pp. 257-258.) We followed the reasoning of Budd, and held that the limitations period in a professional malpractice action commences on discovery of the malpractice, but is tolled until the client suffers appreciable harm as a consequence of the negligence. We also followed Laird, which recognized that although a client may suffer harm or monetary damage prior to entry of adverse judgment, the cause of action for professional negligence does not arise until judgment is entered, because in order to prosecute a malpractice action, the former client, as plaintiff, must show both that there was a breach of the duty of care, and that the breach caused plaintiff’s harm. (Laird, supra, 2 Cal.4th at p. 614.) In ITT, therefore, we employed the reasoning of Budd and Laird to hold that the question whether the client suffered “actual injury” as a result of the attorney’s preparation of the loan documents is necessarily contingent on the outcome of the adversary proceeding. (ITT, supra, 9 Cal.4th at p. 258.) Therefore, the statute of limitations was tolled until the adversary proceeding was complete. (Ibid.)
Several Courts of Appeal have applied the reasoning of Budd, Laird, and ITT in recent cases, and have developed, for the first time, consistent results in limitations cases. (See Baltins v. James (1995) 36 Cal.App.4th 1193 [42 Cal.Rptr.2d 896] [“actual injury” occurred on the date of adverse judgment in a marital dissolution proceeding]; see also Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397 [44 Cal.Rptr.2d 339] [adverse arbitration decision]; Kamo v. Biddle (1995) 36 Cal.App.4th 622 [42 Cal.Rptr.2d 318] [settlement of underlying action by tenants against malpractice plaintiffs]; Radovich v. Locke-Paddon (1995) 35 Cal.App.4th 946 [41 Cal.Rptr.2d 573] [declining to apply ITT to transactional malpractice action in which there was no underlying third party action].) The lead opinion’s reasons for departing from our recent cases provide poor solace to plaintiffs who have already suffered at the hands of those entrusted to know the law.
*602Notwithstanding the clear guidelines set forth in the above cases, the lead opinion attempts to reconcile this court’s determination of when “actual injury” occurred in ITT with its refusal to do so here by asserting that ITT did not articulate a “rule for all seasons.” This understanding does not, however, justify a departure from the manner in which that case was decided. Indeed, we circumscribed our holding narrowly in ITT in order to allow for the possibility that, under cases not involving transactional malpractice, “actual injury” may be found to occur at some other point. The prospect that other facts might warrant a different rule does not, however, preclude us from applying the principles that guided us in ITT and cases it followed. If that is the lead opinion’s message, it is clearly misguided.
In sum, our decisions and those of the Courts of Appeal construing the “actual injury” tolling provision of Code of Civil Procedure section 340.6, subdivision (a)(1) have consistently recognized the propriety and the desirability of making an express determination as to when the plaintiff suffered “actual injury” based on the facts presented. By refusing to undertake a similar task here, the lead opinion ignores fundamental principles of judicial decisionmaking under which those cases were resolved.
More serious than the lead opinion’s departure from such principles, however, are the practical consequences of its holding. In the wake of its conclusion that the determination of when “actual injury” occurs in missed-statute malpractice cases is a question of fact, by what criteria will the trier of fact make the “actual injury” determination? The lead opinion has assertedly provided “some contours to the pertinent inquiry” (maj. opn., ante, p. 589) but the guidance it sets forth is illusory. For example, the lead opinion instructs that “the fact of damage rather than the amount is the relevant consideration.” (Ibid.) How a factfinder is to apply this explication of its task to a particular set of facts is not readily apparent, however. Indeed, the notion of the “fact” versus the “amount” of damage has been relied on to justify opposite conclusions in missed-statute malpractice cases. (Compare Finlayson v. Sanbrook (1992) 10 Cal.App.4th 1436, 1444 [13 Cal.Rptr.2d 406] [“actual injury” occurred at expiration of limitations period on underlying claim] with Pleasant v. Celli (1993) 18 Cal.App.4th 841, 850 [22 Cal.Rptr.2d 663] [“actual injury” occurred at dismissal or adverse judgment].)
The lead opinion posits that in the “classic” missed-statute case (in which the client’s attorney simply fails to file the underlying action), “actual injury” occurs at the expiration of the limitations period applicable to the underlying claim because, at that point, the client’s right and/or remedy on the action has been impaired. The lead opinion explains further that in other *603circumstances, the loss of the underlying action may remain contingent so that “actual injury” will be deemed to have occurred at some later point. Justice Kennard’s concurring opinion further confounds the issue. Significantly, however, the lead opinion fails to provide the trier of fact with a clear basis on which to draw a distinction between these two scenarios. Its admonition that the injury “must be palpable” merely begs the question.
Moreover, the lead opinion’s reference to decisions predating the enactment of Code of Civil Procedure section 340.6, and to cases that were expressly disapproved, or called into doubt, by Laird, offers questionable guidance on when the loss of a claim may be considered contingent and therefore outside the lead opinion’s so-called “classic” missed-statute malpractice case. (See, e.g., lead opinion’s reliance on Heyer v. Flaig (1969) 70 Cal.2d 223 [74 Cal.Rptr. 225, 449 P.2d 161], overruled in Laird, supra, 2 Cal.4th at p. 617; McCann v. Welden (1984) 153 Cal.App.3d 814, 824 [200 Cal.Rptr. 703] [relying on irremediability rule cases disapproved in Laird, supra, 2 Cal.4th at p. 617]; see also Horne v. Peckham (1979) 97 Cal.App.3d 404, 417 [158 Cal.Rptr. 714] [cited by lead opinion as example of contingent injury, but recently characterized as “discovery” rather than “actual injury” case in ITT, supra, 9 Cal.4th at p. 256].) In essence, the lead opinion’s “question of fact” rule places the fact finder in the same position as that of perplexed Courts of Appeal prior to our granting review in this case.
The lead opinion’s holding also contravenes our well-established policy that statutes of limitations be narrowly construed. Statutes of limitations “represent expedients, rather than principles. They are practical and pragmatic devices to spare the courts from litigation of stale claims, and the citizen from being put to his defense after memories have faded, witnesses have died or disappeared, and the evidence has been lost.” (Chase Securities Corp. v. Donaldson (1945) 325 U.S. 304, 314 [89 L.Ed. 1628,1635, 65 S.Ct. 1137].) For this reason, we consider “ ‘[s]tatutorily imposed limitations on actions [to be] technical defenses which should be strictly construed to avoid the forfeiture of a plaintiffs rights.’ ” (Steketee v. Lintz, Williams & Rothberg (1985) 38 Cal.3d 46, 56 [210 Cal.Rptr. 781, 694 P.2d 1153], quoting Sevilla v. Stearns-Roger, Inc. (1980) 101 Cal.App.3d 608, 611 [161 Cal.Rptr. 700], italics added.) Because statutes of limitations serve as obstacles to what may be meritorious claims, “ ‘courts may not indulge in a strained construction to apply these statutes to the facts of a particular case.’ ” (Ibid.) Leaving to a trier of fact the determination of when “actual injury” occurs in missed-statute malpractice cases withdraws from this court the obligation to construe Code of Civil Procedure section 340.6 in a manner consistent with legislative intent and public policy, and will lead to haphazard application of limitations periods to the significant detriment of all litigants in the missed-statute malpractice context.
*604In my view, in a case such as that presented, when, during the course of a pending lawsuit, the client is made aware of alleged attorney error because the underlying defendant has raised a statute of limitations defense, our decisions in Budd, Laird and ITT make clear that it is illogical to require a client—in the midst of that litigation—simultaneously to file a legal malpractice action against the assertedly negligent attorney. Rather, the client should be permitted to litigate the statute of limitations claim in the underlying lawsuit in an attempt to prevail on that issue, thereby potentially eliminating, and at least minimizing, the damages that may have been caused by the attorney’s negligence. In such a setting, consistent with the holdings in Budd, Laird and ITT, the better rule is that the client sustains “actual injury” within the meaning of Code of Civil Procedure section 340.6, subdivision (a)(1) when an adverse judgment, settlement or dismissal is entered in the underlying lawsuit.
As we observed in ITT, a rule allowing the client time to litigate and resolve the statute of limitations claim in the underlying action also serves the important purpose of conserving judicial resources (and presumably, malpractice premiums) by not requiring the filing of a potentially unnecessary malpractice action. (ITT, supra, 9 Cal.4th at pp. 248-249.) In addition, it avoids forcing a client to take inconsistent positions on the statute of limitations issue, simultaneously resisting the underlying defendant’s challenge to the timeliness of that action while alleging in a legal malpractice action that her underlying action was time-barred due to attorney error. (Ibid.; see also International Engine Parts, Inc. v. Feddersen & Co. (1995) 9 Cal.4th 606, 622 [38 Cal.Rptr.2d 150, 888 P.2d 1279] [hereafter IEP] [statute of limitations in accountant malpractice action alleging negligent tax preparation commences at Internal Revenue Service’s assessment of tax deficiency]; Pleasant v. Celli, supra, 18 Cal.App.4th at pp. 849-850 [admission in legal malpractice suit would have detrimental effect on contrary assertion in underlying medical malpractice action].) Although the lead opinion suggests that a request to stay the malpractice action, if granted, would alleviate the client’s predicament in having to take inconsistent positions, such a solution does nothing to lessen the burden placed on the judiciary by requiring a malpractice plaintiff to file a potentially unnecessary malpractice action. Neither does the granting of a stay relieve the malpractice defendant from having to make a claim with his or her legal malpractice insurer that might not have been necessary had the client been permitted to litigate the statute of limitations claim in the underlying action before instituting the malpractice action.
*605The policy considerations underlying our decisions in ITT and IEP are equally applicable to the facts presented here. Indeed, the procedural history of plaintiff’s underlying action illustrates the desirability of a rule permitting the client additional time, before instituting a malpractice action, to litigate the statute of limitations claim in the underlying lawsuit. Here, the estate filed a motion for summary judgment based on the statute of limitations. Plaintiff opposed the motion by arguing that the estate was estopped from asserting the defense because defendant, while representing the estate, made misrepresentations causing plaintiff to file her wrongful death action too late. The trial court denied the estate’s motion, finding material questions of fact remained as to the issue of estoppel.
Had plaintiff filed her malpractice action prior to dismissal of her underlying action following settlement, she would have been forced to take inconsistent positions with regard to the statute of limitations issue: in the malpractice action, she would have argued that she was damaged by Aaron Paul’s misadvice which resulted in the untimely filing of her wrongful death lawsuit, while in the underlying action itself, she maintained that the estate should be estopped from asserting the defense in the first place. Such a scenario not only results in a waste of judicial resources (ITT, supra, 9 Cal.4th at p. 257), but also creates the potential for inconsistent judgments.
For the reasons stated above, I would hold that in a legal malpractice action typified by the facts here—in which the client attempted to avoid dismissal of an underlying action on statute of limitations grounds by litigating the merits of the statutory defense—“actual injury” occurs at the time of disposition of the client’s underlying lawsuit, whether by dismissal, settlement or entry of adverse judgment. Such a rule is consistent with Laird, ITT, and IEP, and the myriad Court of Appeal cases that have properly applied the reasoning of those decisions. Because the rule’s parameters are clear, there is little room for its abuse.
In this case, plaintiff discovered defendant’s allegedly negligent action in April 1990 when she opposed the estate’s summary judgment motion. Under the rule I propose, the running of the one-year limitations period established by Code of Civil Procedure section 340.6, subdivision (a) was tolled, however, until October 21, 1991, when the lawsuit was dismissed following plaintiff’s allegedly unfavorable settlement of her underlying action against the estate. Because plaintiff filed her legal malpractice action against defendant on October 1, 1992, her action would be timely filed. I would therefore reverse the decision of the Court of Appeal affirming the judgment of *606dismissal against plaintiff, permitting plaintiff’s malpractice action to proceed on the merits.
Accordingly, I dissent.
Mosk, J., and George, J., concurred.