Opinion
D058624 Super. Ct. No. 37-2009-00095170-CU-PN-CTL
10-13-2011
GREGORY D. BUCKNER, Plaintiff and Appellant, v. DAVID J. GEBHARDT et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
APPEAL from a judgment of the Superior Court of San Diego County, William R. Nevitt, Jr., Judge. Affirmed.
Defendant David J. Gebhardt and his firm, Centara Legal Group, APC (together, Gebhardt), represented plaintiff Gregory D. Buckner in the sale of his bail bond business. After the buyers' default, a third-party creditor of the buyers, United States Fire Insurance (USFI), perfected a security interest in the business assets, which was senior to any security Buckner had in the business.
Buckner filed a complaint against Gebhardt for professional negligence on July 31, 2009. Gebhardt moved for summary judgment (Code Civ. Proc., § 437c, subd. (c) [undesignated statutory references will be to the Code of Civil Procedure]), asserting (1) the applicable one-year statute of limitations (§ 340.6, subd. (a)) barred the action, and (2) Buckner failed to prove a causal connection between Gebhardt's alleged negligence and his injuries. The trial court found the action time-barred and granted Gebhardt's motion for summary judgment, but did not reach the issue of causation.
Buckner appeals, contending the trial court erred in granting the motion because the one-year statute of limitations had not run before he filed his complaint because it was tolled until USFI perfected its security interest in August 2008. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
In February 2007, after being in the business for approximately 14 years, Buckner sold his bail bond business to purchasers Zachary Harris and Anthony Hanson (the purchasers). To formalize the transaction, Buckner and the purchasers signed a binding agreement to sell the business titled "Offer of Purchase, and Pre-Closing Statement of Terms of Agreement" (the offer), which did not provide any security interest.
In May 2007 Buckner retained Gebhardt to review and finalize the offer. Gebhardt advised Buckner he thought the deal was "quite a risky transaction the way [Buckner] had negotiated it" and suggested Buckner request as security a down payment and mortgages and/or deeds of trust against real property the purchasers owned. Buckner explained he did not want to jeopardize the agreement already in place with requests for added securities and only wanted to maintain the ability to reclaim the business if the purchasers defaulted. Gebhardt then drafted the "Agreement for Purchase and Sale of Assets and Stock" (the agreement) between Buckner and the purchasers, which Buckner believed incorporated provisions ensuring this remedy, specifically, paragraphs 5.1 and 8.1. Paragraph 5.1 reads in pertinent part:
"Should Buyer and/or Guarantors default on the obligations under this Agreement, Buyer and Guarantors shall agree as follows: Buyer and Guarantors shall, within thirty days of receipt of written notice [of] default, [] 1) cure such default and provide reasonable proof of cure to Seller; or 2) unconditionally assign to Seller all interest in [the business] and all related entities . . . ."Paragraph 8.1 reads:
"For a period of seven years and six months from the effective date of this Agreement, the Buyer and Guarantors shall not assign any lease agreements entered into prior to this Agreement or closing or assign any trade names or fictitious business names . . . without express consent of Seller."On June 5, 2007, Buckner and the purchasers executed the agreement, closing the sale.
In April 2007, before finalizing the agreement, the purchasers entered into an underwriting agreement with USFI, which Buckner recommended to the purchasers because he had previously used USFI to underwrite the business. As with Buckner's previous agreement with USFI, the purchasers' agreement with USFI required them to pledge the business's assets and rights as collateral. USFI would not underwrite the business's bonds otherwise. Buckner understood California law required the purchasers to have a contract with a surety to operate the business.
The purchasers had trouble paying their installments to Buckner, which ultimately led them to default in June 2008. In August 2008 the purchasers abandoned the business and left the state. USFI then took over the business.
On August 7, 2008, USFI filed a UCC-1 financing statement, which perfected its security interest in the business's assets.
On September 23, 2008, Buckner filed a complaint for breach of contract. On October 7, 2008, Buckner filed an ex parte writ of possession to reclaim the business, which USFI opposed. The court denied the writ on December 18, 2008, finding USFI's perfected security interest was superior to any Buckner allegedly possessed because he did not establish he had perfected any security interest.
On July 31, 2009, Buckner filed a complaint against Gebhardt for professional negligence, alleging Gebhardt failed to (1) inform him the obligations under the sale agreement were unsecured; (2) advise him to secure the purchase; (3) provide a security in the purchase; and (4) advise him of the risks associated with selling the business unsecured. At oral argument, Buckner further alleged Gebhardt was negligent in failing to perfect Buckner's requested security. Moreover, he asserted he was not harmed until August 2008 when USFI perfected its security interest.
Gebhardt moved for summary judgment, asserting (1) the applicable statute of limitations barred the action, and (2) Buckner failed to prove a causal connection between Gebhardt's alleged negligence and his injuries. Buckner opposed the action on the grounds the applicable statute of limitations had not run because he did not suffer actual injury until USFI filed its financing statement. The court found the action time-barred, concluding Buckner discovered, or through the use of reasonable diligence should have discovered, the facts constituting Gebhardt's alleged malpractice no later than June 2008. Thus, the court did not reach the issue of causation. Buckner appeals the judgment entered in Gebhardt's favor, and we affirm.
DISCUSSION
I
APPLICABLE LEGAL PRINCIPLES
Summary judgment is appropriate where no triable issue of material fact exists and the moving party is entitled to judgment as a matter of law. (§ 437c, subd. (c).) A defendant is entitled to judgment as a matter of law where the plaintiff's cause of action has no merit. (Id., subd. (a).) A defendant may show the cause of action has no merit by proving (1) the plaintiff cannot establish one or more elements of the claim; or (2) the defendant has a complete defense to the entire action. (Id., subd. (o)(1)-(2).) If the defendant meets this initial burden, the burden then shifts to the plaintiff to establish triable issues of material fact as to the disputed elements and defense. (Id., subd. (p)(2).)
We review the court's summary judgment ruling on de novo, "considering all of the evidence the parties offered in connection with the motion . . . and the uncontradicted inferences the evidence reasonably supports." (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.) We also review the evidence in the light most favorable to the losing party while strictly scrutinizing the moving party's. (O'Riordan v. Federal Kemper Life Assurance Co. (2005) 36 Cal.4th 281, 284.)
II
ANALYSIS
Buckner contends the court erred in finding his action time-barred under section 340.6, which provides a one-year statute of limitations for legal malpractice actions. The statute begins to run "after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission." (§ 340.6 (a).) Buckner asserts the limitations period did not begin to run until August 2008, when USFI perfected its security interest in the business.
The wrongful act or omission must cause actual injury; the plaintiff's damages may not be contingent or speculative. (Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 749-750 (Jordache).) Actual injury occurs when the plaintiff suffers any appreciable and actual damage as a result of the attorney's allegedly negligent act(s), including the "impairment or diminution, as well as the total loss or extinction, of a right or remedy" (Village Nurseries v. Greenbaum (2002) 101 Cal.App.4th 26, 41) (Village Nurseries) because the "fact of damage rather than the amount is the relevant consideration." (Adams v. Paul (1995) 11 Cal.4th 583, 589 (Adams), italics omitted) Accordingly, any injurious alteration to a client's legal rights, remedies, liabilities, or interests due to an attorney's allegedly negligent acts constitutes actionable legal malpractice, which triggers the one-year statute of limitations under section 340.6. (Jordache, supra, 18 Cal.4th at p. 750.)
Actual injury occurs in the context of a legal malpractice action predicated on the attorney's alleged negligence in advising a client to execute an agreement only where the adverse impact on the client is effective immediately. (Turley v. Wooldridge (1991) 230 Cal.App.3d 586, 593; Radovich v. Locke-Paddon (1995) 35 Cal.App.4th 946, 975; Hensley v. Caietti (1993) 13 Cal.App.4th 1165, 1175 (Hensley).) Therefore, the statute does not begin to run if the alleged negligence in advising the client in entering an agreement creates "only the potential for future harm." (Adams, supra, 11 Cal.4th at pp. 590-591.)
Here, Buckner alleges Gebhardt negligently advised him in the sale of the business in that Gebhardt did not secure the transaction, advise him to secure it, or explain to him the risks associated with keeping it unsecured. Buckner knew of, or through the use of reasonable diligence should have known, the terms of the agreement—which did not provide any security interest—when he signed it on June 5, 2007. Because he previously used and recommended USFI to the purchasers as a surety to underwrite the business, he reasonably should have known of USFI's policies, which required pledging the assets of the business to USFI. However, he rejected Gebhardt's suggestions to securitize the agreement, stating he did not want to make changes to it. Thus, the record demonstrates Buckner was fully aware the agreement was not securitized.
Moreover, when the parties finalized the agreement on June 5, 2007, Buckner's legal rights, remedies, liabilities, and interests were altered because a contract necessarily "alters the legal relations of the parties [to it] and creates an obligation." (Hensley, supra, 13 Cal.App.4th at p. 1175.) Due to his previous relationship with USFI, as well as his extensive experience in the bail bond business, Buckner knew, or reasonably should have known, USFI would only underwrite the business if it could secure the business's assets pledged to USFI. Thus, Buckner knew, or through the use of reasonable diligence should have known, the binding agreement did not provide him the absolute right to reclaim the business in the event of the purchasers' default as he allegedly directed Gebhardt to ensure. Rather, the agreement explicitly transferred the company's assets to the buyer without any security interest that would provide him the ability to do so.
Regardless of Buckner's knowledge of the agreement's terms, it impaired his ability to recover the company if the buyers defaulted, effecting an immediate, adverse impact on his legal rights, which constitutes actual injury. (See Turley v. Wooldridge, supra, 230 Cal.App.3d at p. 593; see also Apple Valley Unified School Dist. v. Vavrinek, Trine, Day & Co. (2002) 98 Cal.App.4th 934, 951 ["a party's alteration of its legal position in reliance on its counsel can constitute actual injury even though the party may be able to avoid or reduce the injury through subsequent legal action"].)
For example, in Hensley, the defendant represented the plaintiff in a marital dissolution action. (Hensley, supra, 13 Cal.App.4th at p. 1168.) The plaintiff and her former spouse entered into a settlement agreement on the advice of their respective counsel, which the court later approved and held effective immediately. (Ibid.) The plaintiff filed a complaint for legal malpractice against the defendant, which the court found time-barred because it was filed over a year after the plaintiff entered into the settlement agreement. (Id. at p. 1169.) On appeal, the court affirmed, concluding "tortious inducement to enter into a contract which imposes noncontingent obligations is actionable at the time of contracting." (Id. at p. 1175.)
Accordingly, the one-year limitations period imposed under section 340.6 began to run on June 5, 2007, when Buckner executed the agreement, which renders his July 31, 2009 complaint untimely. (See Jordache, supra, 18 Cal.4th at pp. 748-750.)
In his opening brief, Buckner cites Truong v. Glasser (2009) 181 Cal.App.4th 102 (Truong), Foxborough v. Van Atta (1994) 26 Cal.App.4th 217 (Foxborough), Jordache, supra, 18 Cal.4th 739, and Village Nurseries, supra, 101 Cal.App.4th 26 in support of his argument the action is not time-barred. These cases do not support his argument; rather, they are either inapplicable or contrary to his position.
In Truong, the plaintiff sued defendant for legal malpractice when plaintiff lost litigation pertaining to a contract on which the defendant advised the plaintiff. (Truong, supra, 181 Cal.App.4th at p. 108.) The court found the action time-barred and rejected the plaintiff's argument actual injury did not occur until the trial court entered judgment against the plaintiff in the underlying litigation. (Id. at pp. 113-114.) Truong, therefore, is inapplicable here.
Foxborough supports Gebhardt's argument that Buckner's action is time-barred. In that case, the plaintiff sued the defendant/attorney for legal malpractice for failing to execute an agreement that would secure the plaintiff's unrestricted right to annex a parcel of property, which was an interest "of particular importance to Foxborough." (Foxborough, supra, 26 Cal.App.4th at p. 222.) As in Truong, the court rejected Foxborough's argument he did not suffer actual injury until the court entered judgment against him in litigation related to the subject parcel. (Foxborough, supra, 26 Cal.App.4th at p. 227.) Similar to Buckner's circumstances, the court found Foxborough suffered actual injury when he was unable to annex the parcel due to the agreement's terms. (Ibid.)
Jordache does not help Buckner either. The relevant holding of Jordache is that it is irrelevant what amount of damage a client suffers due to an attorney's negligence. (Jordache, supra, 18 Cal.4th at p. 743.) The Supreme Court reaffirmed its holding in Adams that the fact of the damage, not the amount, is the relevant consideration in determining whether the statute of limitations under section 340.6 has begun. (Jordache, supra, at p. 743)
Finally, Village Nurseries, similar to Foxborough, involved an attorney's failure to perfect liens on real property. (Village Nurseries, supra, 101 Cal.App.4th at p. 32.) The court rejected the plaintiff's argument it did not suffer actual injury until a bankruptcy court found the liens invalid. (Id. at p. 42.) Rather, the court found the plaintiffs had suffered actual injury when another attorney for the plaintiffs expressed the belief they were invalid after reviewing the defendant/attorney's work. (Id. at p. 43.) Because this occurred over a year before the plaintiffs filed the complaint against the attorney, thus rendering their complaint untimely under section 340.6, the court expressly declined to determine when the plaintiffs actually discovered the facts constituting actual injury. (Village Nurseries, supra, at p. 44.) Moreover, the case did not address the issue of whether an attorney's negligence in reviewing a client's agreement triggers the statute of limitations.
Moreover, even if the statute of limitations did not begin to run on the date the agreement was executed, it ran at the latest in August 2007 or June 2008 when the purchasers defaulted. By August 2007, the purchasers were either late paying Buckner, or did not pay him at all. At that time, Gebhardt referred Buckner to a litigation attorney to pursue collecting the debt from the purchasers. In June 2008, the purchasers defaulted again by only paying $5,000 of a $16,667 payment. By that time, Buckner believed the purchasers had breached the contract. Because the statute of limitations is triggered when a plaintiff suffers an injury as a result of an attorney's alleged negligence, the statute began to run at the latest in June 2008. (Jordache, supra, 18 Cal.4th at pp. 748-750.) This date was also well over a year before the complaint in this action was filed.
Because we find Buckner suffered actual injury on execution of the agreement, or at the latest, in June 2008, we conclude his complaint against Gebhardt was time-barred.
Therefore, we need not reach Gebhardt's alternative contention that he did not proximately cause Buckner's injuries. Accordingly, we conclude the trial court properly granted Gebhardt's motion for summary judgment.
DISPOSITION
The trial court's judgment is affirmed. Gebhardt shall recover his costs on appeal.
NARES, Acting P. J.
WE CONCUR:
AARON, J.
IRION, J.