Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County, No. 06CC10542, Thomas I. McKnew, Jr., Judge. (Judge of the Los Angeles Super. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.)
Law Offices of Keith B. Bardellini, Keith B. Bardellini and Anton D. Jensen for Plaintiff and Appellant.
Robie & Matthai, Edith R. Matthai, Gabrielle M. Jackson and Natalie A. Kouyoumdjian for Defendant and Respondent Mark Millard.
Nemecek & Cole, Jonathan B. Cole, Mark Schaeffer and Janette S. Bodenstein for Defendant and Respondent Steven Briggs.
OPINION
FYBEL, J.
Introduction
We consider when the plaintiff in a malpractice action had knowledge or should have had knowledge of the alleged wrongdoing by her attorneys in the underlying action, and when she suffered actual injury. We conclude the trial court correctly determined plaintiff’s malpractice action was untimely filed because plaintiff had knowledge of her attorneys’ allegedly wrongful or negligent acts or omissions more than one year before the malpractice action was filed. Additionally, we conclude the limitations period was not tolled, because plaintiff suffered actual injury at the time of the attorneys’ alleged wrongdoing, not when the underlying action was later settled. Therefore, we affirm the judgment following the trial court’s order sustaining the attorneys’ demurrers without leave to amend. There is no contention by plaintiff that the trial court erred by declining to permit amendment.
Statement of Facts and Procedural History
Karinn Kelly and Brent Bostwick married in May 1983. Kelly was a one-sixth owner of Draper’s & Damon’s, Inc. (Draper’s), having acquired her equity interest in 1993. Bostwick, Bradford Farmer, and Jeffrey Farmer were the directors and copresidents of Draper’s.
The other owners, each of whom owned an equal one-sixth interest, were Bostwick, Bradford J. Farmer, Jeffrey D. Farmer, Kathleen D. Farmer, and Karen Beth Farmer.
Kelly and Bostwick separated in October 2000. Bostwick filed for dissolution of the marriage in June 2001 (the dissolution action). Mark Millard represented Kelly in the dissolution action until July 2003, when he substituted out of the case; Kelly then retained Steven Briggs to represent her. A judgment of dissolution of martial status was entered on July 13, 2004. In October 2004, Briggs substituted out, and Kelly retained another attorney to represent her.
On March 11, 2005, Kelly sued Draper’s and the five other Draper’s shareholders, alleging Bostwick, Bradford Farmer and Jeffrey Farmer had paid themselves excessive compensation, depriving Kelly of her rights as a Draper’s shareholder, and breaching their fiduciary duties to her as a minority shareholder (the federal action).
On November 29, 2005, Kelly and Bostwick reached a settlement of the dissolution action, which became a stipulated judgment. Bostwick claimed the postseparation salary he had received from Draper’s was no longer in his possession. Although Kelly sought payment of one-half of the excessive compensation payments as part of the settlement of the dissolution action, Bostwick refused.
Kelly filed the present negligence and malpractice action on September 29, 2006. Kelly claimed that while she was being represented by Millard and Briggs, Bostwick was taking large amounts of cash – approximately $2 million per year –from Draper’s as a salary. Kelly claimed Millard and Briggs were on notice of those cash withdrawals but failed to identify Bostwick’s postseparation “salary” as Draper’s assets, in which Kelly had a community property interest. Kelly also alleged Millard and Briggs failed to take the steps necessary to ensure any payments made to Bostwick would be preserved from dissipation.
Millard and Briggs separately demurred to Kelly’s complaint, arguing her claims were barred by the applicable statute of limitations. The trial court sustained the demurrers with leave to amend.
Kelly filed a first amended complaint, and Millard and Briggs again filed separate demurrers, arguing Kelly’s claims were barred by the applicable statute of limitations. The trial court sustained the demurrers without leave to amend. The court’s order reads in relevant part, as follows: “Plaintiff argues that the statute of limitations did not begin to run until the Stipulated Judgment was entered in November 2005, within one year before the September 2006 complaint was filed. . . . However, the sta[t]ute begins to run at the time plaintiff learns of the actual injury which led to her damages. Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739. There, the Court found that the allegations of counsel’s alleged neglect were not contingent on the subsequent settlement, and that such agreement merely reflected the plaintiff’[s] already existing predicament. Id. Such is the case here. Notably, plaintiff did not allege when she actually knew of the alleged neglect. However, it is clear from the record, including the judicially noticeable court records . . ., that she knew of the excessive payments as early as March 2005 when the federal action was filed. . . . The subject action was untimely filed more than a year after plaintiff had knowledge of the acts supporting her negligence claim.” (Italics added.)
Judgment was entered, and Kelly timely appealed.
Discussion
I.
Standard of Review
We review de novo an order sustaining a demurrer without leave to amend. (Bardin v. DaimlerChrysler Corp. (2006) 136 Cal.App.4th 1255, 1264.) “‘“We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.” [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.]’” (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)
II.
Requests for Judicial Notice
In connection with their demurrers to the first amended complaint, both Millard and Briggs filed requests for judicial notice. As to both, some specific requests were granted and some were denied. Regarding the requests to take judicial notice of the entirety of the court files in the dissolution action and the federal action, the trial court ruled as follows: “The Court may, in its discretion, take judicial notice of any court record, including orders, finding[s] of facts and judgments. [Citations.] Thus, judicial notice is taken of both the federal action filed by plaintiff and the underlying mar[it]al dissolution. However, the Court denies the request for judicial notice of the contents of the documents filed thereunder.” (Italics added.)
Therefore, the fact of the filing of certain documents in the dissolution action and the federal action was properly before the trial court in this case (and is thus properly before us). What was not before the trial court and is not before us is the truth of any statement in those documents. Millard and Briggs did not appeal from the trial court’s ruling on their requests for judicial notice, and no request has been made that this court judicially notice any documents the trial court did not.
In their respondents’ briefs, however, Millard and Briggs rely extensively on and quote liberally from documents of which the trial court declined to take judicial notice. Most serious are Millard’s and Briggs’s repeated references to declarations filed by Kelly in the dissolution action in October 2004, November 2004, and March 2005; references to declarations by the attorney who substituted in for Briggs filed in support of motions to compel the production of documents from Bostwick in the dissolution action; and reliance on the contents of the demand for arbitration submitted by Kelly in July 2005. We do not consider any of these documents in our analysis of this appeal.
III.
When did Kelly have knowledge, or should she have had knowledge, of the negligent acts and omissions of Millard and Briggs? When did the statute of limitations start to run?
“An action against an attorney for a wrongful act or omission . . . 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. . . . [T]he period shall be tolled during the time that any of the following exist: [¶] (1) The plaintiff has not sustained actual injury . . . .” (Code Civ. Proc., § 340.6, subd. (a).)
Kelly argues the trial court erred by equating her knowledge of Bostwick’s taking excessive postseparation salary payments with knowledge of Millard’s and Briggs’s alleged negligent acts and omissions. Kelly does not argue the trial court could not take judicial notice of the federal action, filed in March 2005, which alleged Bostwick, Bradford Farmer, and Jeffrey Farmer had deprived Kelly of her shareholder rights and breached their fiduciary duties to her as a minority shareholder by paying themselves excessive compensation. Kelly does argue, however, that her knowledge as of March 2005 that Bostwick had taken excessive compensation from Draper’s was not the same as knowledge that Millard and Briggs had failed to identify that issue or do anything about it in the dissolution action.
The limitations period under Code of Civil Procedure section 340.6 is triggered when the plaintiff discovers the facts constituting the wrongful act or omission, not when the plaintiff discovers that professional negligence has occurred. (Village Nurseries v. Greenbaum (2002) 101 Cal.App.4th 26, 42-43.) “‘“It is irrelevant that the plaintiff is ignorant of his legal remedy or the legal theories underlying his cause of action.”’” (Id. at p. 43.) Based on the federal action, of which the trial court could properly take judicial notice, Kelly had knowledge of the facts constituting the wrongdoing by Millard and Briggs – the failure to do anything about Bostwick’s excessive compensation – no later than March 2005.
IV.
When did Kelly suffer actual injury? Was the statute of limitations tolled?
Kelly also argues the limitations period was tolled because she did not sustain an actual injury until November 2005, when she agreed to the stipulated judgment in the dissolution action. Therefore, she argues, her malpractice action was timely, because it was filed in September 2006 – less than one year after she suffered actual injury. Millard and Briggs argue Kelly sustained actual injury when Bostwick began taking excessive compensation from Draper’s, thus depleting the community assets. Millard and Briggs therefore contend Kelly’s action was untimely, and the demurrers were properly sustained.
“Actual injury occurs when the client suffers any loss or injury legally cognizable as damages in a legal malpractice action based on the asserted errors or omissions. [Citations.] . . . [Code of Civil Procedure] section 340.6, subdivision (a)(1), will not toll the limitations period once the client can plead damages that could establish a cause of action for legal malpractice.” (Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 743 (Jordache).)
The California Supreme Court has explained, “(1) determining actual injury is predominantly a factual inquiry; (2) actual injury may occur without any prior adjudication, judgment, or settlement; (3) nominal damages, speculative harm, and the mere threat of future harm are not actual injury; and (4) the relevant consideration is the fact of damage, not the amount. [Citations.]” (Jordache, supra, 18 Cal.4th at p. 743.) The determination of when actual injury has occurred “require[s] examination of the particular facts of each case in light of the alleged wrongful act or omission.” (Id. at p. 761, fn. 9.)
In Jordache, Jordache and three of its officers, directors, and shareholders, were sued by Georges Marciano for marketing knockoffs of Guess?, Inc., jeans. (Jordache, supra, 18 Cal.4th at p. 744.) Jordache was told by its insurance broker that it did not have any insurance coverage for the claim. (Ibid.) Jordache retained the Brobeck, Phleger & Harrison law firm (Brobeck) to represent it in the action; Brobeck never asked about, investigated, or provided any advice concerning whether Jordache’s insurance might provide coverage for the Marciano lawsuit. (Id. at pp. 744-745.)
Brobeck was replaced as Jordache’s litigation counsel, and the new attorneys advised Jordache it might have insurance coverage. (Jordache, supra, 18 Cal.4th at p. 745.) Jordache knew of Brobeck’s alleged negligence in failing to advise Jordache to provide notice to its insurers no later than December 1987. (Ibid.) Through its new counsel, Jordache formally tendered the defense of the Marciano lawsuit to Jordache’s insurers, and then sued the insurers for failure to provide coverage. (Ibid.) The Marciano lawsuit settled in May 1990. (Id. at p. 746.) Jordache settled the insurance coverage suit on July 31, 1990. (Ibid.)
Jordache’s malpractice action against Brobeck was effectively filed on August 15, 1990. (Jordache, supra, 18 Cal.4th at p. 746 .) Jordache alleged Brobeck failed to investigate or advise Jordache to investigate whether Jordache’s insurance might cover the Marciano claims, failed to recognize Jordache’s liability insurance potentially applied to the Marciano action, and failed to notify or advise Jordache to notify the liability insurers of the pending Marciano action. (Ibid.)
Jordache argued its malpractice action was timely, because Jordache did not suffer actual injury until it settled the insurance coverage suit in July 1990 for less than the full amount of its claim. (Jordache, supra, 18 Cal.4th at p. 746.) The California Supreme Court, however, determined that Jordache’s malpractice action was time-barred, because Jordache sustained actual injury no later than December 1987. (Id. at p. 752.) “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. The inquiry necessarily is more qualitative than quantitative because the fact of damage, rather than the amount, is the critical factor. [Citations.] [¶] Of course, nominal damages will not end the tolling of [Code of Civil Procedure] section 340.6’s limitations period. Thus, there is no basis for Jordache’s expressed concern that the statutory period will run once the plaintiff sustains the ‘first dollar’ of injury. Instead, the inquiry concerns 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.’ [Citation.] However, once the plaintiff suffers actual harm, neither difficulty in proving damages nor uncertainty as to their amount tolls the limitations period. [Citation.]” (Ibid.)
The Supreme Court rejected the argument that Jordache’s actual injury did not occur until the insurance coverage litigation was settled because the injury was only speculative until that settlement was reached. “[S]peculative and contingent injuries are those that do not yet exist, as when an attorney’s error creates only a potential for harm in the future. [Citations.] An existing injury is not contingent or speculative simply because future events may affect its permanency or the amount of monetary damages eventually incurred. [Citations.] Thus, we must distinguish between an actual, existing injury that might be remedied or reduced in the future, and a speculative or contingent injury that might or might not arise in the future.” (Jordache, supra, 18 Cal.4th at p. 754.) As the Supreme Court concluded, “[t]he loss or diminution of a right or remedy constitutes injury or damage. [Citation.] Neither uncertainty of amount nor difficulty of proof renders that injury speculative or inchoate. [Citation.] The coverage action settlement was not the first realization of injury from the alleged malpractice; the settlement simply resolved one alternative means to mitigate that injury.” (Id. at p. 744.)
Jordache is squarely on point here. The harm caused by Millard’s and Briggs’s alleged failure to identify Bostwick’s excessive compensation as community property assets and to take the necessary steps to avoid dissipation of those assets was an actual, existing injury to Kelly as of the time it occurred. The possibility that the money might not have been dissipated, in full or in part, or that Bostwick would agree to pay some of that money back to Kelly when the marital settlement agreement was reached, did not make the injury contingent or speculative at the time it occurred.
Kelly contends Jordache is not applicable in this case. Kelly fails to cite us to any cases that support her argument about when actual injury occurred. The two cases relied on primarily by Kelly are Orrick Herrington & Sutcliffe v. Superior Court (2003) 107 Cal.App.4th 1052 (Orrick) and Marshak v. Ballesteros (1999) 72 Cal.App.4th 1514, which are inapposite. Those cases did not address when actual injury arises in a professional malpractice action for purposes of determining the running of the statute of limitations; they are limited to the issue of how damages in a malpractice case are determined.
Indeed, the court in Orrick distinguished itself from Jordache on this very point: “[Real party in interest] does not appear to be arguing Jordache is factually apposite to his case. The attorneys in Jordache allegedly failed to advise their clients about the availability of insurance coverage for a third party suit, allowing the insurer to assert a viable coverage defense. [Citation.] At issue in Jordache was the meaning of ‘actual injury’ for purposes of the legal malpractice statute of limitations. [Citations.]” (Orrick, supra, 107 Cal.App.4th at p. 1060, fn. 4.)
Kelly also argues this appeal is governed by Viner v. Sweet (2003) 30 Cal.4th 1232 and other cases holding that in litigation malpractice actions, the plaintiff must prove “but for” causation through the “case within a case” method. We do not disagree with Kelly on this point, but the holdings of Viner v. Sweet and the other cases cited by Kelly are not applicable to the question of when the statute of limitations begins to run. (See Viner v. Sweet, supra, 30 Cal.4th at p. 1241; Orrick, supra, 107 Cal.App.4th at p. 1057.)
Kelly argues there are significant public policy reasons for us to decline to apply the rule of Jordache in this case. But we cannot base our decision on any concern about whether our decision will or will not result in more legal malpractice actions. In Rice v. Crow (2000) 81 Cal.App.4th 725, 733, the appellate court observed that, by following Jordache, the filing of malpractice actions while the underlying action is ongoing will occur with greater frequency. However, as our Supreme Court explained in Jordache, instituting a bright-line rule that actual injury does not occur until the underlying litigation is resolved would give the plaintiff in the malpractice action “unilateral control over the limitations period,” and would “undermine the Legislature’s purpose in enacting a statute of limitations.” (Jordache, supra, 18 Cal.4th at p. 755.)
Disposition
The judgment is affirmed. In the interests of justice, because respondents in their appellate briefs cited to and quoted from the contents of documents of which the trial court refused to take judicial notice, the parties shall bear their own costs on appeal.
WE CONCUR: RYLAARSDAM, ACTING P. J., O’LEARY, J.