Opinion
B160285.
7-31-2003
SUZANNE REESE, Plaintiff and Appellant, v. KARYN SUE SHATZKIN, Defendant and Respondent.
Law Offices of George Baltaxe and George Baltaxe for Plaintiff and Appellant. Wolfe & Wyman, Yee & Belilove, Steven R. Yee and Steve R. Belilove for Defendant and Respondent.
INTRODUCTION
In this legal malpractice action, plaintiff Suzanne Reese appeals from the judgment entered in favor of defendant Karyn Sue Shatzkin. Judgment was entered after the trial court sustained defendants demurrer to plaintiffs second amended complaint without leave to amend on the ground that her action was barred by the one-year statute of limitations for legal malpractice. We affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Inasmuch as this appeal is from a judgment entered following the sustaining of a demurrer without leave to amend, we accept as true the facts alleged in the operative complaint, as well as those facts judicially noticed. (Leasequip, Inc. v. Dapeer (2002) 103 Cal.App.4th 394, 397, fn. 1, review den. Jan. 15, 2003.)
Defendant is an attorney who represented plaintiff in Reese v. Semiconductor Corp., Inc. et al., Workers Compensation Appeals Board (WCAB) Case No. VNO350537. On June 18, 1999, a workers compensation judge dismissed plaintiffs WCAB matter due to lack of prosecution.
Following the dismissal, plaintiff called defendant and inquired about the order of dismissal. Defendant told plaintiff not to be concerned. Defendant blamed her secretary for the error and explained she had been in court for a lengthy period. Defendant advised plaintiff that, based upon these excuses, she "could and would" petition the WCAB to set aside the dismissal and have plaintiffs claim reinstated. Defendant never told plaintiff the motion to reinstate had been denied. Plaintiff, who does not claim to have inquired, consequently assumed the case had been reinstated.
On April 20, 2000, plaintiff executed a substitution of attorney that was intended to substitute Attorney Kirby Thomas of Finestone, Schumaker, Cocquyt & Graham in place and stead of defendant in her WCAB matter. Attorney Thomas sent the substitution form to defendant. In an accompanying letter, Attorney Thomas apprised defendant of plaintiffs request for representation and asked defendant to sign the substitution of attorney and return it to him for filing and service on all parties. Defendant did not execute the substitution of attorney for quite some time.
On June 25, 2001, more than two years after the dismissal of her WCAB matter, plaintiff filed this action for legal malpractice against defendant, Shatzkin and Shatzkin, and Morton L. Shatzkin. Plaintiff alleged that defendants failure to prosecute her WCAB case, which failure resulted in the dismissal of her claim, constituted negligence. Plaintiff filed her first amended complaint for legal malpractice on December 11, 2001.
Morton L. Shatzkin was improperly sued as Martin L. Shatzkin.
Defendant and the others demurred to plaintiffs first amended complaint on the ground that it was barred by the one-year legal malpractice statute of limitations set forth in Code of Civil Procedure section 340.6. At the hearing on the demurrer, the trial court, pursuant to the stipulation of the parties, took judicial notice of the substitution of attorney executed by plaintiff, along with the fact that plaintiff hired her new attorney more than one year before this legal malpractice action was filed.
ALL STATUTORY REFERENCES HEREINAFTER ARE TO THE CODE OF CIVIL PROCEDURE UNLESS OTHERWISE NOTED.
The trial court sustained the demurrer to the first amended complaint with leave to amend as to defendant only. It was sustained without leave to amend as to Morton L. Shatzkin and Morton L. Shatzkin, a professional corporation, which had been sued erroneously as Shatzkin and Shatzkin. A judgment in their favor on the first amended complaint subsequently was entered. Plaintiff did not appeal from this judgment.
On March 27, 2002, plaintiff filed her second amended complaint against defendant. With a few exceptions, the allegations of the second amended complaint were virtually identical to those of the first amended complaint. Plaintiff attempted to plead around the bar of the statute of limitations by alleging that defendant did not sign the substitution of attorney or return plaintiffs file until less than one year before this action was commenced. Plaintiff alleged that defendant was therefore estopped from claiming that she "was relieved of her obligations as attorney of record during the period that she withheld the file." In addition, plaintiff alleged that the statute of limitations was tolled pursuant to section 340.6 during the time defendant failed to advise plaintiff her motion to reinstate her WCAB matter had been denied.
Defendant demurred to the second amended complaint on the ground that it failed to state facts sufficient to state a cause of action for legal malpractice and was time barred. Defendant filed a request for judicial notice concurrently with her demurrer.
Among the documents defendant asked the court to notice judicially was the WCABs petition to dismiss plaintiffs workers compensation matter for failure to prosecute, which was served on plaintiff on April 16, 1999, the WCABs May 25, 1999 notice of intention to dismiss for lack of prosecution, and the WCABs June 18, 1999 order dismissing plaintiffs workers compensation claim. Defendant also asked the trial court to take judicial notice of the substitution of attorney form executed by plaintiff on April 20, 2000, substituting Attorney Kirby Thomas in place and stead of defendant in her WCAB matter, as well as Attorney Thomass letter to defendant.
Although an express ruling on defendants request for judicial notice does not appear in the appellate record, the trial court was required to take judicial notice of these documents. (Evid. Code, §§ 452, 453.) We accordingly take judicial notice of them as well. (Id., § 459, subd. (a).)
Plaintiff opposed defendants demurrer. She argued that defendant was estopped from relying on the statute of limitations during the time defendant refused to sign the proffered substitution of attorney and refused to return plaintiffs file.
On May 30, 2002, the trial court sustained defendants demurrer to plaintiffs second amended complaint without leave to amend. On July 2, judgment in favor of defendant was entered. This appeal followed.
Neither the trial courts minute order of May 30, 2002 nor the reporters transcript of the hearing on the demurrer to the second amended complaint has been included in the record on appeal.
CONTENTION
Plaintiff contends that inasmuch as "defendant . . . refused to return Plaintiffs file and refused to sign the substitution of attorney for an extended period, she should be estopped during that period from relying on the passage of the state of limitations under the doctrine of continuing representation." There is no merit to this contention.
DISCUSSION
Standard of Review
The standard of review on appeal from a judgment entered following the sustaining of a demurrer without leave to amend is well settled. We are obligated to give the complaint a reasonable interpretation. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125, 271 Cal. Rptr. 146, 793 P.2d 479.) We accept as true all material facts that are pleaded properly and are subject to judicial notice. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 635, 909 P.2d 981; Edwards v. A.L. Lease & Co. (1996) 46 Cal.App.4th 1029, 1032.) We will not assume the truth of contentions, deductions or conclusions of law, however. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal. Rptr. 718, 703 P.2d 58.)
It is error for the trial court to sustain a demurrer if the plaintiff has stated a cause of action under any theory. If plaintiff has failed to do so and there is a reasonable possibility that the plaintiff can amend the complaint to cure the defect, the trial court must sustain the demurrer with leave to amend. To do otherwise is an abuse of discretion. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967, 831 P.2d 317; Coast Plaza Doctors Hospital v. UHP Healthcare (2002) 105 Cal.App.4th 693, 696-697.)
Legal Malpractice Statute of Limitations
The statute of limitations for legal malpractice is set forth in section 340.6. Subdivision (a) of that statutory provision provides in pertinent part that "an action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first. In no event shall the time for commencement of legal action exceed four years except that the period shall be tolled during the time that any of the following exist:
"(1) The plaintiff has not sustained actual injury;
"(2) The attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred;
"(3) The attorney willfully conceals the facts constituting the wrongful act or omission when such facts are known to the attorney, except that this subdivision shall toll only the four-year limitation; . . ." ( § 340.6, subd. (a).)
Analysis
This case is governed by the one-year statute of limitations for legal malpractice. Plaintiffs cause of action against defendant accrued when plaintiff received notice that the WCAB had dismissed her claim on June 18, 1999. The order of dismissal appears on the same form that was used to give plaintiff prior notice that her WCAB claim would be dismissed "for lack of prosecution" unless good cause was demonstrated. Thus, upon receipt of the order of dismissal, plaintiff discovered that defendant had been negligent and that defendants negligence resulted in the dismissal of her claim. (Fantazia v. County of Stanislaus (1996) 41 Cal.App.4th 1444, 1450-1451.) Indeed, plaintiff concedes that she knew early on that her WCAB claim had been dismissed.
As previously noted, plaintiff contends that inasmuch as "defendant . . . refused to return plaintiffs file and refused to sign the substitution of attorney for an extended period, she should be estopped during that period from relying on the passage of the statute of limitations under the doctrine of continuing representation." Continuing representation is a statutory basis for tolling the statute of limitations. Estoppel and tolling are two separate and distinct legal principals, however. We consequently discuss them separately.
"Tolling refers to suspending or stopping the running of a statute of limitations. It is analogous to a clock stopping, then restarting." (Ortega v. Pajaro Valley Unified School Dist. (1998) 64 Cal.App.4th 1023, 1047.) In the legal malpractice arena, the doctrine of equitable tolling has no applicability. (Gordon v. Law Offices of Aguirre & Meyer (1999) 70 Cal.App.4th 972, 974.) "Only the exceptions enumerated in subdivision (a) of section 340.6 can be used to toll or extend the statute." (Leasequip, Inc. v. Dapeer, supra, 103 Cal.App.4th at p. 406.)
The legal malpractice statute of limitations is tolled during the time an errant attorney "continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred." ( § 340.6, subd. (a)(2).) To the extent plaintiff is contending that defendant continued to represent her up until defendant executed the substitution of attorney and returned plaintiffs file, we disagree.
Defendant ceased to represent plaintiff in her WCAB matter no later than April 20, 2000, when plaintiff executed the substitution of attorney replacing defendant with Attorney Thomas. That defendant delayed in executing the substitution of attorney form and in returning plaintiffs file does not compel a contrary conclusion.
In ascertaining whether representation continues, we utilize an objective standard. (Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 887; Crouse v. Brobeck, Phleger & Harrison (1998) 67 Cal.App.4th 1509, 1528.) "The continuous representation rule, as codified in section 340.6, subdivision (a), is not triggered by the mere existence of an attorney-client relationship. Instead, the statutes tolling language addresses a particular phase of such a relationship-representation regarding a specific matter. . . . Therefore, the inquiry is not whether an attorney-client relationship still exists but when the representation of the specific matter terminated. [Citation.]" (Foxborough v. Van Atta (1994) 26 Cal.App.4th 217, 228-229.) Defendants "technical status" as attorney of record alone consequently does not satisfy the tolling requirement of continuous representation. (Shapero v. Fliegel (1987) 191 Cal. App. 3d 842, 848-849, 236 Cal. Rptr. 696.) Stated otherwise, the mere fact that defendant remained plaintiffs counsel of record-failed to formally withdraw-does not constitute continued representation. (Ibid.) In hiring Attorney Thomas to represent her in her WCAB matter and executing a substitution of attorney, plaintiff effectively terminated her relationship with defendant. The statute of limitations commenced to run at that time.
(Cf. Bennett v. McCall (1993) 19 Cal.App.4th 122, 126.)
In opposition to defendants demurrer to the second amended complaint, plaintiff further argued that the statute of limitations should be tolled under section 340.6, subdivision (a)(3), until defendant returned the file, in that defendant fraudulently concealed the fact that plaintiffs motion to reinstate had been denied by the WCAB even though "plaintiff admittedly [had been] advised by the Board that the case was dismissed in the first instance." Plaintiff does not renew this argument on appeal. This is understandable, in that concealment of facts only serves to toll the four-year statute of limitations, which is not applicable in this case.
The doctrine of equitable estoppel is a judicial remedy. Its purpose is "to insure fairness, prevent injustice, and do equity. It stems from the venerable judicial prerogative to redress unfairness in the application of otherwise inflexible legal dogma, based on sound public policy and equity." (Leasequip, Inc. v. Dapeer, supra, 103 Cal.App.4th at p. 403.) Equitable estoppel applies "where the conduct of one side has induced the other to take such a position that it would be injured if the first should be permitted to repudiate its acts. [Citations.] [P] "Four elements must ordinarily be proved to establish an equitable estoppel: (1) The party to be estopped must know the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel had the right to believe that it was so intended; (3) the party asserting the estoppel must be ignorant of the true state of facts; and, (4) he must rely upon the conduct to his injury." [Citation.] [P] The doctrine of estoppel has been codified in Evidence Code section 623: "Whenever a party has, by his own statement or conduct, intentionally and deliberately led another to believe a particular thing true and to act upon such belief, he is not, in any litigation arising out of such statement or conduct, permitted to contradict it."" (Leasequip, supra, at pp. 403-404.) Not just any reliance will warrant application of the doctrine of equitable estoppel. Reliance by the person asserting estoppel must be reasonable. (Cf. Phillippe v. Shapell Industries (1987) 43 Cal.3d 1247, 1262, 241 Cal. Rptr. 22, 743 P.2d 1279; Brookview Condominium Owners Assn. v. Heltzer Enterprises-Brookview (1990) 218 Cal. App. 3d 502, 510, 267 Cal. Rptr. 76.)
Plaintiff argues that she adequately pled facts that equitably estop defendant from asserting a statute of limitations defense. In support of her position, plaintiff relies on Johnson v. Haberman & Kassoy (1988) 201 Cal. App. 3d 1468, 247 Cal. Rptr. 614. Plaintiff Johnson was a limited partner. Sometime after learning of the general partners alleged fraud and misappropriation of money, Johnson retained the defendant attorneys "to investigate, advise and protect his interests in the partnership." (At p. 1471.)
Plaintiff also relies on Kallen v. Delug (1984) 157 Cal. App. 3d 940, 203 Cal. Rptr. 879. Her reliance thereon is misplaced, however, in that it is not a legal malpractice case.
Without Johnsons knowledge or consent, the defendant attorneys thereafter undertook to represent the general partners. Upon the defendants recommendation, Johnson sold his interest in October 1975 for about 10 percent of his original investment. (Johnson v. Haberman & Kassoy , supra, 201 Cal. App. 3d at p. 1471.)
In April 1981, Johnson discovered for the first time that the defendant attorneys had been representing the general partners at the time he signed the buyout agreement. In June 1981, Johnson filed a legal malpractice action against the attorneys, alleging negligence and constructive fraud. The defendants subsequent motion for summary judgment was granted on the ground that Johnsons action was barred by the legal malpractice statute of limitations. (Johnson v. Haberman & Kassoy, supra, 201 Cal. App. 3d at pp. 1472, 1478.)
On appeal, Johnson argued that his relationship with defendant attorneys had never been terminated or repudiated. There had been no formal withdrawal, and a factual dispute existed as to whether defendant attorneys communicated their intention to terminate the attorney-client relationship with the plaintiff. (Johnson v. Haberman & Kassoy, supra, 201 Cal. App. 3d at p. 1474.)
The court in Johnson "recognized that the issue of tolling because of continued representation is not just answered by whether there has been a proper, formal withdrawal. Failure to formally withdraw as counsel standing alone does not constitute continued representation for purposes of tolling section 340.6. [Citations.]" (Johnson v. Haberman & Kassoy, supra, 201 Cal. App. 3d at pp. 1474-1475.) The court further noted, however, that "plaintiff has not just alleged the failure to formally terminate the attorney- client relationship but also attorney conduct violating the Rules of Professional Conduct." (Id. at p. 1475.) The court concluded that "under these particular circumstances, where attorneys violate the rules governing representation of adverse parties by undertaking to represent the very parties they were supposed to investigate without obtaining any waiver from their original client and without any formal termination of the relationship, they should be estopped from claiming that their representation of the original client did not continue." (Ibid.)
While recognizing that Johnson is not directly on point, plaintiff argues that it "points in the direction this court should go." Plaintiff maintains that inasmuch as defendants failure to execute the substitution of counsel was combined with her failure to return the file, defendants failure to formally withdraw did not "stand alone." This case is factually distinguishable from Johnson. Plaintiffs reliance on Johnson consequently is misplaced.
Unlike the plaintiff in Johnson, the plaintiff in this case knew all along about her attorneys negligence. Plaintiff discovered defendants negligence and sustained actual injury (dismissal of her WCAB claim) in June of 1999. Plaintiff does not dispute this.
While we agree that no attorney should gain an advantage by his or her wrongful conduct, plaintiff alleged no facts demonstrating how defendants violation of the rules of professional conduct disadvantaged plaintiffs ability to file a timely legal malpractice action. Most notable is the absence of reasonable reliance by plaintiff on any thing defendant did or said. Plaintiff knew about defendants malpractice for a substantial length of time prior to defendants ethical violations. Although defendant had told plaintiff she "could and would" have her WCAB claim reinstated and defendant should have disclosed the outcome of her efforts voluntarily, it was imprudent for plaintiff to assume that defendants efforts had been successful.
Rule 3-700(D)(1) of the Rules of Professional Conduct of the State Bar of California requires "[a] member whose employment has terminated" to "promptly release to the client, at the request of the client, all the client papers and property."
In any event, due to defendants continuous representation of plaintiff, the one-year statute of limitation commenced to run no later than April 2000, when plaintiff terminated defendant and retained Attorney Thomas. Plaintiffs legal malpractice action, filed more than two years later, was barred by the statute of limitations. Whatever misconceptions plaintiff may have been operating under in June 1999, she thereafter had ample time to make an inquiry and discover the true state of her WCAB affairs. Plaintiff offers no explanation as to why she or Attorney Thomas did not or could not ascertain the status of plaintiffs WCAB claim simply by reviewing the WCABs files, which plaintiff acknowledges were public records, after defendant failed to return the file upon request. We conclude that plaintiff failed to allege sufficiently the defense of equitable estoppel. Inasmuch as she does not claim to be able to remedy the defect, the trial court rightfully sustained defendants demurrer to the second amended complaint without leave to amend and entered judgment for defendant.
The judgment is affirmed.
We concur: ORTEGA, J., VOGEL (MIRIAM A.), J.