Opinion
E075108
10-08-2021
JEFFREY S. NELSON et al., Plaintiffs and Appellants, v. THE GREEN LAW GROUP LLP et al., Defendants and Respondents.
Best Best & Krieger, Gregory G. Snarr and Ben Carney for Plaintiffs and Appellants. Freeman Mathis & Gary, Frances M. O'Meara, Stephen M. Caine and Holly M. Teel for Defendants and Respondents.
NOT TO BE PUBLISHED
APPEAL from the Superior Court of Riverside County No. RIC1821708. L. Jackson Lucky IV, Judge. Affirmed.
Best Best & Krieger, Gregory G. Snarr and Ben Carney for Plaintiffs and Appellants.
Freeman Mathis & Gary, Frances M. O'Meara, Stephen M. Caine and Holly M. Teel for Defendants and Respondents.
OPINION
MENETREZ J.
Jeffrey and Sharon Nelson and NPG, Inc. (NPG) (collectively plaintiffs) appeal from the summary judgment entered in favor of The Green Law Group (Green Law). Plaintiffs argue that the trial court erred by concluding that their legal malpractice action against Green Law was barred by the one-year statute of limitations set forth in Code of Civil Procedure section 340.6, subdivision (a) (undesignated statutory references are to this code). We disagree and affirm.
We accept as true all undisputed facts in the parties' separate statements. (Doe v. California Lutheran High School Assn. (2009) 170 Cal.App.4th 828, 830-831) We also consider all of plaintiffs' evidence as to which the trial court did not sustain Green Law's objections, because Green Law does not challenge those rulings on appeal. (Fritteli, Inc. v. 350 North Canon Drive, LP (2011) 202 Cal.App.4th 35, 41.)
A. The Settlement Agreement
According to the operative complaint, the Nelsons own and operate NPG, a concrete and asphalt construction business. Jill De La Rosa worked as an office manager for NPG from 2000 to 2006 and embezzled hundreds of thousands of dollars from NPG.
In June 2006, NPG entered into a settlement agreement in which Jill, Manny De La Rosa, and Refrigerator Concepts agreed to pay NPG $150,000 “for the company fraud, and theft of corporate funds by [Jill].” The agreement was signed by the De La Rosas and by the Nelsons on behalf of NPG. The agreement included a waiver of all legal claims known and unknown to the parties and a waiver under Civil Code section 1542. The following month, the parties acknowledged that the terms of the agreement had been satisfied.
Because the De La Rosas have the same last name, we refer to them by their first names for ease of reference. No disrespect is intended.
B. The Criminal Action
The Nelsons allege that after the parties settled they learned that the extent of the embezzlement was much greater than the amount settled upon. In September 2006, NPG filed an action against the De La Rosas and Refrigeration Concepts to rescind the settlement agreement. NPG also reported the embezzlement to the authorities.
In April 2007, a felony complaint was filed against both Jill and Manny. Jill pled guilty to embezzlement, and Manny pled guilty to grand theft. Both were placed on probation. In 2009, the criminal court ordered the De La Rosas to pay NPG over $500,000 ($430,000 from Jill and $104,000 from Manny) in restitution.
NPG later dismissed the rescission action.
C. Proceedings to Collect Criminal Restitution
In late 2014, the De La Rosas' probation ended. In November 2014, Todd Wolfe, an attorney who worked at Green Law, advised the Nelsons about a so-called “‘secret' process” to undertake “direct collection activity against the [De La Rosas]” on the amount of criminal restitution still owed. In December 2014, NPG instituted a civil collection action against the De La Rosas. Green Law represented NPG in the matter.
In that action, the De La Rosas moved to set aside the criminal restitution orders. In April 2015, the trial court denied the motion. The court concluded that in a civil action it lacked jurisdiction over the criminal restitution orders. Later that month, Green Law substituted out as NPG's counsel of record in that action.
The following year, the De La Rosas moved to compel acknowledgment of satisfaction of the criminal restitution orders based on the 2006 settlement agreement. The trial court denied that motion too. The De La Rosas appealed. In July 2017, this court affirmed the trial court's denial. We explained that the 2006 settlement agreement released the De La Rosas from “‘damages, judgments, orders, and liabilities of whatever kind or nature in law, equity, or otherwise, '” so “NPG waived its right to seek enforcement of the criminal restitution order in exchange for $151,400.” We nevertheless concluded that the restitution order remained unsatisfied “because a local collection program [could] properly seek to enforce the restitution order.” We cautioned: “If NPG seeks to enforce the criminal restitution order, that would presumably be a breach of the [2006 settlement agreement]. [The De La Rosas'] remedy is to sue for breach of contract.”
D. The De La Rosas' Breach of Contract Action and Plaintiffs' Legal Malpractice Action Against Green Law and Wolfe
In April 2015, the De La Rosas filed a lawsuit against the Nelsons and NPG, alleging that plaintiffs breached the 2006 settlement agreement by commencing the civil collection action. The De La Rosas also filed an ex parte application for a temporary restraining order to prevent plaintiffs from pursuing the collection action. The trial court denied that motion.
In July 2015, plaintiffs paid their attorneys $1,350 for legal representation in the breach of contract action.
The Nelsons and NPG demurred to the De La Rosas' first amended complaint. The trial court sustained the demurrer without leave to amend and dismissed the breach of contract action. The De La Rosas appealed, and in July 2017 this court reversed the judgment. We explained that the De La Rosas “alleged NPG breached the [2006 settlement agreement] on December 22, 2014, when it applied for a judgment debtor exam to enforce the criminal restitution order. [The De La Rosas] were allegedly damaged because the $534,000 liability under the criminal restitution order exceeded the $151,400 liability under the Agreement. Thus, [the De La Rosas] have properly alleged all elements of a breach of contract cause of action.”
In November 2017, plaintiffs filed a cross-complaint against the De La Rosas, Green Law, and attorney Wolfe in the breach of contract action. Plaintiffs alleged that the legal advice given to them by Wolfe and Green Law to file the civil collection action had been negligent. In May 2018, plaintiffs entered into a tolling agreement with Green Law and Wolfe. The parties agreed to suspend and stay all claims and defenses until the issues between the De La Rosas and NPG were resolved, so plaintiffs dismissed their action against Green Law and Wolfe.
In August 2018, the De La Rosas and plaintiffs entered into a settlement agreement and resolved the matters between them. Plaintiffs agreed to forgive over $1 million in debt from the De La Rosas and agreed to notify the criminal court that the De La Rosas had fully satisfied the criminal restitution orders.
Plaintiffs then commenced this action against Green Law and Wolfe. Green Law and Wolfe moved for summary judgment and argued that plaintiffs' complaint was time-barred by the one-year statute of limitations of section 340.6, subdivision (a) (section 340.6(a)). The trial court agreed and explained: “Plaintiffs were aware in April 2015 that [the De La Rosas] filed a breach of contract action (Breach Action) because of [Green Law's] act or omission. This lawsuit provided notice to Plaintiffs of [Green Law's] wrongful act or omission. The threat of a lawsuit and the filing of that lawsuit would prompt a reasonable person to inquire into the possible attorney misconduct that gave rise to the suit.” The court further found that plaintiffs suffered actual injury in July 2015, when plaintiffs paid legal fees to defend against the breach of contract action. The court entered judgment in favor of Green Law.
One day before judgment was entered, Wolfe filed a notice that the proceedings were stayed as to him because he had filed a bankruptcy petition. Green Law argues, plaintiffs concede, and we agree that judgment consequently was not entered against Wolfe. Wolfe therefore is not a party to this appeal.
STANDARD OF REVIEW
The trial court may grant summary judgment if there is no triable issue of material fact and the issues raised by the pleadings may be decided as a matter of law. (§ 437c, subds. (c), (f)(2); Biancalana v. T.D. Service Co. (2013) 56 Cal.4th 807, 813.) We review summary judgment orders de novo. (Miller v. Department of Corrections (2005) 36 Cal.4th 446, 460.) We independently examine the record to determine whether there are triable issues of material fact and whether the moving party is entitled to summary judgment as a matter of law. (Ibid.)
DISCUSSION
The sole issue presented is whether the trial court properly determined that plaintiffs' legal malpractice action against Green Law was time-barred under the one-year limitations period set forth in section 340.6(a). Plaintiffs argue that they could not have discovered that Green Law's advice was bad or negligent until July 2017, when this court issued rulings adverse to them. We are not persuaded.
Section 340.6(a) provides: “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.” (§ 340.6(a).) The limitations period is tolled until the plaintiff has sustained actual injury. (§ 340.6, subd. (a)(1).) “Actual injury occurs where the plaintiff suffers any loss or injury legally cognizable as damages based on the asserted errors or omissions of an attorney” (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1121), including incurring attorney fees (Sharon v. Porter (2019) 41 Cal.App.5th 1, 7 (Sharon); Laird v. Blacker (1992) 2 Cal.4th 606, 615 (Laird)).
The four-year limitation period is not at issue here. And plaintiffs do not dispute that they suffered actual injury in July 2015, when they first paid legal fees to defend against the De La Rosas' breach of contract action. At issue is whether plaintiffs' legal malpractice claim filed in November 2017 was filed within one year after plaintiffs discovered or should have discovered facts constituting Green Law's wrongful conduct, namely, their legal advice to pursue the collection action. (Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 682.)
Plaintiffs do not dispute that if they believed that the De La Rosas' breach of contract claim against NPG had any merit, then it provided them sufficient notice to suspect that Green Law gave them bad advice about pursuing the civil collection action. Plaintiffs instead argue that the filing of the breach of contract action did not provide them such notice because plaintiffs believed that the De La Rosas' action was frivolous. They argue that their belief was reasonable because the trial court sustained plaintiffs' demurrer and dismissed the complaint, and no court otherwise ruled against them in either the civil collection action or the breach of contract action until this court issued its opinion adverse to plaintiffs in July 2017. Only then, according to plaintiffs, did they discover the possible wrongfulness of Green Law's advice. There is no dispute that the legal malpractice action against Green Law was brought within one year of that purported discovery.
Plaintiffs' argument misconstrues the nature of the discovery rule, which section 340.6(a) codifies. (Laird, supra, 2 Cal.4th at p. 611.) Under the discovery rule, “a cause of action for legal malpractice accrues when the client discovers or should discover the facts essential to the malpractice claim....” (Ibid.; Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 194 (Neel) [adopting the discovery rule for legal malpractice actions before § 340.6(a) codified it].) A “plaintiff discovers the cause of action when he at least suspects a factual basis, as opposed to a legal theory, for its elements, even if he lacks knowledge thereof-when, simply put, he at least ‘suspects... that someone has done something wrong' to him [citation], ‘wrong' being used, not in any technical sense, but rather in accordance with its ‘lay understanding' [citation].” (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397-398.) A plaintiff “has reason to discover the cause of action when he has reason at least to suspect a factual basis for its elements, ” such that the information available to the plaintiff would cause a reasonable person to be on inquiry notice. (Id. at p. 398.) “‘It is irrelevant that the plaintiff is ignorant of his legal remedy or the legal theories underlying his cause of action. Thus, if one has suffered appreciable harm and knows or suspects that professional blundering is its cause, the fact that an attorney has not yet advised him does not postpone commencement of the limitations period.'” (Worton v. Worton (1991) 234 Cal.App.3d 1638, 1650 (Worton).)
In April 2015, when the De La Rosas filed the breach of contract action, plaintiffs had notice of the facts essential to their malpractice claim against Green Law. Plaintiffs then had reason to suspect that their attempt to collect criminal restitution from the De La Rosas may have violated the terms of the 2006 settlement agreement and therefore that Green Law's advice on how to proceed in those collection efforts may have been wrong. Plaintiffs eventually alleged: “In late 2014 and early 2015, NPG took action to enforce the Criminal Restitution orders based on the advice and counsel of [Green Law]. [¶] It is because NPG followed and acted on [Green Law's] advice and counsel which has caused the De La Rosas to file suit against NPG.” Those underlying facts all became known to plaintiffs when the De La Rosas filed their breach of contract action. As they formed the basis of plaintiffs' eventual malpractice action against Green Law, those facts provided plaintiffs with reason at least to suspect that Green Law's advice about collection had been deficient.
Plaintiffs nevertheless claim that under the supposed “adverse judgment rule” they could not have discovered the facts essential to the malpractice claim until they received an adverse ruling against them. Plaintiffs rely on Laird, supra, 2 Cal.4th 606, to support their argument. They contend that Laird created a rule that in actions governed by section 340.6(a) “discovery does not occur, or is otherwise delayed, until there is an adverse judgment which puts the plaintiff on notice of the cause of action.” But Laird did not so hold and is inapposite.
In Laird, the Supreme Court considered whether the one-year limitations period for attorney malpractice actions “is tolled during the time the client appeals from the underlying judgment on which the claim of malpractice is based.” (Laird, supra, 2 Cal.4th at p. 608.) The plaintiff's underlying suit had been dismissed for lack of prosecution. (Id. at pp. 609-610.) After the dismissal, the plaintiff discharged her attorneys and filed a notice of appeal herself. (Id. at p. 610.) She then settled with the defendant in the underlying action and voluntarily dismissed her appeal. (Ibid.) Nineteen months after the trial court dismissed the underlying action and eight months after she voluntarily dismissed the appeal, the plaintiff filed a legal malpractice action against her former attorneys. (Ibid.)
The Court of Appeal concluded that the lawsuit was time-barred under section 340.6(a) because the plaintiff “sustained actual injury” on the day that she discharged the attorneys after the judgment of dismissal was entered against her. (Laird, supra, 2 Cal.4th at p. 610.) The Supreme Court agreed and held that “under section 340.6, the statute of limitations for legal malpractice actions commences on entry of adverse judgment or final order of dismissal. [The p]laintiff herein, therefore, sustained actual injury when the trial court dismissed her underlying action and she was compelled to incur legal costs and expenditures in pursuing an appeal.” (Id. at p. 615.)
The question presented in Laird, supra, 2 Cal.4th 606was when the plaintiff suffered actual injury, not when the plaintiff discovered her attorneys' wrongful conduct. Laird therefore does not stand for the proposition that an adverse ruling is needed before a client or former client can discover that an attorney provided deficient professional services. “A decision is not authority for propositions not considered.” (Hensley v. Caietti (1993) 13 Cal.App.4th 1165, 1174; B.B. v. County of Los Angeles (2020) 10 Cal.5th 1, 11.)
Plaintiffs' reliance on Turley v. Wooldridge (1991) 230 Cal.App.3d 586 (Turley) and Neel, supra, 6 Cal.3d 176 is misplaced for the same reason. Neither case held that an adverse judgment is needed before a plaintiff is on notice that an attorney has provided deficient representation. (Turley, supra, at pp. 593-594; Neel, at p. 194.)
When the De La Rosas filed the breach of contract action, plaintiffs discovered the facts essential to their malpractice action, namely, that Green Law may have provided plaintiffs deficient legal advice by advising plaintiffs to institute a civil collection action against the De La Rosas to recover the unpaid criminal restitution. Plaintiffs did not learn any new facts from this court's July 2017 opinions. Instead, those opinions caused plaintiffs to reevaluate whether the De La Rosas' breach of contract action had merit, which in turn caused plaintiffs to question whether they had been given bad legal advice about collecting criminal restitution from the De La Rosas. But to trigger the limitations period plaintiffs were not required to know the legal theories on which they could proceed. (Worton, supra, 234 Cal.App.3d at p. 1650.) It follows that plaintiffs also were not required to believe in the viability of any particular legal theory to trigger the same limitations period. Plaintiffs discovered or should have discovered the underlying facts essential to the malpractice action when the De La Rosas filed the breach of contract action. That was sufficient to start the limitations period under section 340.6(a).
Because we conclude that plaintiffs discovered or should have discovered the facts essential to the malpractice action when the De La Rosas filed their breach of contract action, we need not address plaintiffs' argument that they acted with reasonable diligence to discover those facts.
We recognize, as plaintiffs point out, that this put plaintiffs in the awkward position of having to file a legal malpractice action against (or enter into a tolling agreement with) Green Law while simultaneously defending themselves against the De La Rosas' breach of contract action and before any court ruled that the breach of contract action was meritorious. But, as another appellate court recently explained in acknowledging the awkwardness of a similar bind under section 340.6(a), “such a situation did not justify tolling based upon any of the exclusive grounds under section 340.6.” (Sharon, supra, 41 Cal.App.5th at p. 11.)
Plaintiffs filed their malpractice action against Green Law over two years after plaintiffs discovered or should have discovered the facts essential to that action and over two years after plaintiffs suffered actual injury from Green Law's alleged negligent services. We consequently conclude that the trial court did not err by finding the action time-barred under section 340.6(a).
DISPOSITION
The judgment is affirmed. Green Law shall recover its costs of appeal.
We concur: RAMIREZ P. J., FIELDS J.