Summary
discussing City of Vista and noting the securities there "created only the potential for future harm, which would occur if the interest payments [Vista] received over the securities' term failed to cover the city's initial investment and provide a reasonable return. Because the interest payments on the securities fluctuated over time, the city could not determine whether it would lose money and suffer appreciable harm until it approached the final interest payment"
Summary of this case from Langille v. Berthel, Fisher & Co. Fin.Opinion
NOT TO BE PUBLISHED
Appeal from an order of dismissal of the Superior Court of Orange County No. 30-2008-00112288 Nancy Wieben Stock, Judge.
Crandall, Wade & Lowe, James L. Crandall, Edwin B. Brown, and Janet G. Harris for Plaintiffs and Appellants Richard Kelter and Rio Vista West, LLC.
William P. Warden for Defendant and Respondent Jeffrey Yelland.
OPINION
ARONSON, J.
Plaintiffs Richard Kelter and Rio Vista West, LLC (collectively, Kelter) established a pension plan designed to claim income tax deductions for the contributions he paid into the plan. The Internal Revenue Service (IRS) later audited the plan, found it constituted an illegal tax shelter not entitled to income tax benefits, and notified Kelter he owed back taxes, penalties, and interest on the tax deductions he took for plan contributions.
Kelter then sued the insurance companies, pension planners, financial advisors, accountants, attorneys, and other professionals who developed and sold him the pension plan. Kelter alleged these defendants knew the pension plan featured characteristics the IRS looked for in illegal tax shelters, but nonetheless intentionally misrepresented that the plan qualified for preferential tax treatment, while concealing the significant tax risks associated with the plan. Kelter sought to recover his contributions to the plan, all back taxes, penalties, and interest the IRS assessed, and the fees and costs he incurred during the IRS audit.
Kelter appeals from an order of dismissal entered after the trial court granted without leave to amend defendant Jeffrey Yelland’s motion for judgment on the pleadings. Kelter alleged Yelland served as his tax accountant and referred Kelter to the financial advisor who convinced Kelter to establish the pension plan. According to Kelter, Yelland helped induce him to establish the plan by misrepresenting the financial advisor’s professional qualifications and failed to disclose the advisor agreed to pay Yelland a substantial referral fee.
The trial court found the statute of limitations barred Kelter’s lawsuit because his claims accrued when he established the pension plan and paid the first contribution. We disagree and conclude his claims did not accrue at that point because the contributions Kelter paid into the plan did not cause him any harm until the IRS made its final determination the plan constituted an illegal tax shelter. Accordingly, we reverse.
I
Because this appeal follows a judgment on the pleadings, which is equivalent to a sustained demurrer, we summarize the underlying facts as alleged in the complaint. (Pang v. Beverly Hosp., Inc. (2000) 79 Cal.App.4th 986, 989 (Pang); Landmark Screens, LLC v. Morgan, Lewis & Bockius, LLP (2010) 183 Cal.App.4th 238, 240.)
Internal Revenue Code section 412, subdivision (i), authorizes a defined benefits pension plan (Section 412(i) Plan or Plan) that allows an employer to hold in a trust an insurance policy on each plan participant’s life. The employer funds the trust to pay the life insurance premiums and receives a tax deduction for the premium payments. When a plan participant retires, the employer sells the insurance policy on that participant’s life and uses the proceeds to purchase an annuity. The revenue stream from the annuity pays the participant his or her retirement benefits.
Because all insurance premiums paid under Section 412(i) are tax deductible, taxpayers often used the Plan to shelter large amounts of income. The IRS responded by identifying certain misuses of Section 412(i) Plans as “abusive” tax shelters not entitled to any income tax benefits. These misuses include funding a plan solely with a life insurance policy that (1) provides death benefits exceeding the amount allowed for an approved Section 412(i) Plan; (2) pays extremely high fees and commissions to the salespeople; and (3) carries exorbitant surrender charges that essentially require an employer to forfeit the plan’s assets if the employer terminates the policy early.
In the late 1990’s, a life insurance company (AmerUs), pension planner (ECI), and law firm (Bryan Cave) developed a defined benefits pension plan they called the Pendulum Plan. Although they were aware of the IRS’s position, AmerUs, ECI, and Bryan Cave designed the Pendulum Plan as a Section 412(i) Plan and funded it solely with life insurance policies displaying the characteristics the IRS looks for in an abusive tax shelter.
In this opinion, (1) AmerUs refers to AmerUs Life Insurance Company, (2) ECI refers collectively to Economic Concepts, Inc., ECI Pension Planners, LLC, Kenneth R. Hartstein, and Brian D. Hartstein, and (3) Bryan Cave refers collectively to Bryan Cave, LLP and Richard C. Smith.
As early as 1999, AmerUs’s professional advisors warned the company that the IRS might consider the Pendulum Plan an abusive tax shelter. In June 2003, ECI announced it would stop marketing the Pendulum Plan in December 2003 due to widespread industry concerns that contributions to Pendulum Plans would not be tax deductible. Nonetheless, AmerUs and ECI later embarked on a nationwide campaign to market and sell Pendulum Plans as qualified Section 412(i) Plans without disclosing the significant risk that the IRS would audit an employer’s plan, find it abusive, and assess substantial back taxes, interest, and penalties against the employer.
In 2003, Yelland served as Kelter’s certified public accountant and advised him on all tax matters. Yelland introduced Kelter to a financial advisor, Jeffrey Forrest, who Yelland described as knowledgeable, experienced, and trustworthy in creating pension plans. Kelter met with Forrest in November 2003. Forrest recommended Kelter establish a Pendulum Plan to take advantage of the income tax benefits it provided. Forrest used marketing materials AmerUs and ECI prepared to explain and sell a Pendulum Plan to Kelter. During the sales process, Kelter consulted ECI several times. ECI represented the Pendulum Plan complied with all federal tax laws and Kelter would receive a tax deduction for the life insurance premiums he paid to fund the plan.
In December 2003, Kelter established a Pendulum Plan entitled the Rio Vista West, LLC Defined Benefit Pension Plan (the Rio Plan). He purchased an AmerUs life insurance policy as the sole means to fund the Rio Plan. The policy’s terms included (1) a face value exceeding $6 million; (2) annual premiums exceeding $400,000; (3) a surrender charge exceeding $1.3 million; and (4) an annual “policy expense charge” exceeding $28,000. At no time did ECI or AmerUs advise Kelter about the tax risks associated with establishing the Rio Plan or that the Rio Plan featured all the characteristics the IRS looked for in an abusive Section 412(i) Plan.
Kelter alleged he purchased a single life insurance policy to fund the Rio Plan, but he did not allege how many employees participated in the Rio Plan or whether he participated. For example, he does not allege whether he was the only plan participant and the life insurance policy insured his life only, or whether multiple employees participated in the Rio Plan and the insurance policy insured each of their lives.
After Kelter established the Rio Plan, Forrest paid Yelland a referral fee exceeding $100,000, which neither Forrest nor Yelland disclosed to Kelter. Kelter did not discover the referral fee until late 2008 when Forrest testified in a separate lawsuit.
In February 2004, the IRS issued two revenue rulings and proposed regulations further defining the characteristics of an abusive Section 412(i) Plan. ECI told Kelter about the proposed regulations in March 2004, but both ECI and Bryan Cave assured Kelter the Rio Plan qualified as a legitimate Section 412(i) Plan and he should continue paying the life insurance premiums.
In April 2004, Kelter authorized Bryan Cave to seek an IRS determination on whether the Rio Plan complied with Internal Revenue Code provisions. In March 2005, the IRS issued a “favorable determination letter” regarding the Rio Plan. AmerUs, ECI, and Bryan Cave reassured Kelter the letter demonstrated the Rio Plan qualified as a Section 412(i) Plan. Kelter thereafter continued paying life insurance premiums that funded the Rio Plan and continued to claim tax deductions for those payments. Kelter paid more than $1.6 million in premiums and costs on the Rio Plan.
In March 2006, the IRS notified Kelter it would audit the Rio Plan to determine whether it qualified as a Section 412(i) Plan. ECI continued to assure Kelter the Rio Plan qualified and recommended Kelter retain Bryan Cave to represent him during the IRS audit, which Kelter did in April 2006. In February 2007, the IRS notified Kelter it “initial[ly]” determined the Rio Plan did not meet the requirements for a Section 412(i) Plan. In June 2007, the IRS notified Kelter, “Our final position is that we consider your plan abusive because it fails to satisfy Code sections 412(i)(3).”
Kelter began negotiating with the IRS to reach an agreement on the amount of back taxes, penalties, and interest he owed because the Rio Plan failed to qualify as a Section 412(i) Plan. As of May 2009, when Kelter filed his most recent pleading in the trial court, he had not reached an agreement with the IRS, which had yet to assess a specific amount for back taxes, penalties, and interest.
In September 2008, Kelter filed this action against Yelland and the other professionals involved in developing and selling him the Pendulum Plan. The trial court sustained several demurrers to Kelter’s first three pleadings. The operative pleading is Kelter’s third amended complaint. It alleged claims against Yelland for fraud, breach of fiduciary duty, and negligence. Kelter alleged he relied on Yelland’s representations about Forrest’s professional qualifications when Kelter hired Forrest and followed his recommendation to establish the Rio Plan. But for Yelland’s representations, Kelter alleged he would not have hired Forrest or established the Rio Plan.
Yelland filed a motion for judgment on the pleadings, arguing the statute of limitations barred Kelter’s claims. The trial court granted the motion without leave to amend, finding Kelter’s claims accrued in December 2003 when he relied on “Defendants’ representations” to form the Rio Plan and pay the first premium on the life insurance policy. The trial court further found Kelter discovered the facts giving rise to his claims no later than March 2004 when Kelter learned about the IRS revenue rulings and proposed regulations on abusive Section 412(i) Plans. Finally, the trial court found Kelter failed to allege any basis to toll the statute of limitations or equitably estop Yelland from asserting it as a defense.
The trial court thereafter entered an order granting the motion without leave to amend and dismissing Yelland. This appeal followed.
II
Discussion
A. Standard of Review
A motion for judgment on the pleadings “is equivalent to a demurrer and is governed by the same standard of review. All material facts that were properly pleaded are deemed true, but not contentions, deductions, or conclusions of fact or law.” (Pang, supra, 79 Cal.App.4th at p. 989.) Thus, as on a demurrer, a motion for judgment on the pleadings “based on a statute of limitations will not lie where the action may be, but is not necessarily, barred. [Citation.] In order for the bar of the statute of limitations to be raised by [a motion for judgment on the pleadings], the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows that the action may be barred. [Citation.]” (See Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403.)
B. The Trial Court Erred in Finding Kelter’s Claims Accrued in December 2003
In granting Yelland’s motion, the trial court found Kelter’s claims accrued in December 2003, when Kelter first “parted with [his] money based upon Defendants’ alleged fraudulent representations and Yelland’s ‘vouching’ for Defendants.” We disagree. The premiums Kelter started paying in December 2003 did not cause him any harm until the IRS issued its final determination in June 2007 that disallowed Kelter’s tax deductions on the life insurance premiums for the Rio Plan.
A plaintiff must file a cause of action within the applicable limitations period. (Code Civ. Proc., § 312; Nogart v. Upjohn Co. (1999) 21 Cal.4th 383, 397.) “[S]tatutes of limitation do not begin to run until a cause of action accrues.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806.) “‘Generally, a cause of action accrues... when a suit may be maintained. [Citations.] “Ordinarily this is when the wrongful act is done and the obligation or the liability arises, but it does not ‘accrue until the party owning it is entitled to begin and prosecute an action thereon.’” [Citation.] In other words, “[a] cause of action accrues ‘upon the occurrence of the last element essential to the cause of action.’” [Citations.]’ [Citation.]” (Howard Jarvis Taxpayers Assn. v. City of La Habra (2001) 25 Cal.4th 809, 815.)
“When damages are an element of a cause of action, the cause of action does not accrue until the damages have been sustained. [Citation.] ‘Mere threat of future harm, not yet realized, is not enough.’ [Citation.] ‘Basic public policy is best served by recognizing that damage is necessary to mature such a cause of action.’ [Citation.] Therefore, when the wrongful act does not result in immediate damage, ‘the cause of action does not accrue prior to the maturation of perceptible harm.’ [Citations.]” (City of Vista v. Robert Thomas Securities, Inc. (2000) 84 Cal.App.4th 882, 886-887 (City of Vista).)
“It is the fact of damage, rather than the amount, that is the relevant consideration. [Citation.] Consequently, [a plaintiff] may suffer ‘appreciable and actual harm’ before he or she sustains all, or even the greater part, of the damages occasioned by the [defendant’s conduct]. [Citation.]” (Van Dyke v. Dunker & Aced (1996) 46 Cal.App.4th 446, 452 (Van Dyke).)
“[S]peculative and contingent injuries are those that do not yet exist, as when [a defendant’s conduct] creates only a potential for harm in the future. [Citation.] 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 Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 754, original italics (Jordache).)
Case law provides several examples how a defendant’s misconduct may create only the potential for harm because it is contingent on future events. (See, e.g., Williams v. Hilb, Rogal & Hobbs Ins. Services of California, Inc. (2009) 177 Cal.App.4th 624, 641-642 (Williams); City of Vista, supra, 84 Cal.App.4th at pp. 886-887; Garver v. Brace (1996) 47 Cal.App.4th 995, 999-1001 (Garver); Slavin v. Trout (1993) 18 Cal.App.4th 1536, 1540-1543 (Slavin); Walker v. Pacific Indemnity Co. (1960) 183 Cal.App.2d 513, 514-517 (Walker).)
In City of Vista, a city purchased investment securities known as interest only strips that paid the holder a percentage of the interest from a bond pool. The interest payments varied depending on whether market interest rates rose or fell. (City of Vista, supra, 84 Cal.App.4th at pp. 884-885.) More than five years after purchasing the securities, the city sued the securities dealer, alleging he misrepresented the nature of the investments. The trial court granted the dealer’s summary judgment motion on statute of limitations grounds. (Id. at pp. 885-886.)
The Court of Appeal reversed, finding a triable issue existed on when the city actually suffered harm. (City of Vista, supra, 84 Cal.App.4th at p. 887.) Purchasing the securities in reliance on the dealer’s misrepresentation created only the potential for future harm, which would occur if the interest payments it received over the securities’ term failed to cover the city’s initial investment and provide a reasonable return. Because the interest payments on the securities fluctuated over time, the city could not determine whether it would lose money and suffer appreciable harm until it approached the final interest payment. (Ibid.)
In Slavin, the plaintiff loaned money in reliance on an appraisal showing the real property offered as security satisfied the loan-to-value ratio the plaintiff required. A few years later, the plaintiff sued the appraiser because the borrower defaulted and the property failed to provide sufficient security. The trial court found the statute of limitations barred the plaintiff’s negligence claim against the appraiser because the claim accrued when the plaintiff relied on the appraisal and made the loan, not when the property failed to provide adequate security. (Slavin, supra, 18 Cal.App.4th at pp. 1538 1539.)
The Court of Appeal reversed, finding the plaintiff did not suffer any actual harm when he relied on the appraisal. (Slavin, supra, 18 Cal.App.4th at pp. 1538, 1540.) Rather, the appraiser’s negligence in valuing the property “‘created only the potential for injury to the plaintiff. So long as the [borrowers] continued to meet their obligation under the promissory note, plaintiff had no need or right to resort to the security.’ [Citation.]” (Id. p. 1540, original italics.) The Slavin court held the plaintiff did not suffer any actual injury, and its cause of action did not accrue, until the plaintiff completed the foreclosure sale and the proceeds proved inadequate to cover the loan’s outstanding balance. (Id. at p. 1543.)
In Williams, an insured sued its insurance broker for negligently securing an insurance policy without obtaining the coverages the insured requested. A third party later sued the insured and obtained a judgment exceeding the policy’s coverage limits. The Williams court held the insured’s claim against the broker did not accrue when the third party filed suit, but rather when judgment was entered against the insured in an amount exceeding the policy’s coverage. The insured did not suffer any actual injury until the insurance coverage proved inadequate. (Williams, supra, 177 Cal.App.4th at pp. 641-642; see also Walker, supra, 183 Cal.App.2d at pp. 514-517 [same result].)
Garver involved a claim for damages arising when a lender included an illegal, prepayment penalty clause in a promissory note. The borrowers’ claim against the lender did not accrue when they signed the note because they had not suffered any damages. The borrowers first suffered actual harm, and their cause of action accrued, when they prepaid the loan and the lender demanded the borrowers pay the prepayment penalty. (Garver, supra, 47 Cal.App.4th at pp. 1000-1001.)
Here, Kelter is in the same position as the plaintiffs in the foregoing cases. He made payments and altered his position in reliance on Yelland’s representations and omissions, but he suffered no actual harm at the time he did so. Kelter received exactly what he bargained for when he established the Rio Plan and paid premiums on the life insurance policy: A defined benefits pension plan funded by a life insurance policy and tax deductions for the policy premiums he paid. Kelter’s third amended complaint alleges in hindsight the premiums he paid were “exorbitant” and caused him harm. The premiums, however, did not prove to be “exorbitant” and did not harm Kelter until the IRS completed the audit and determined the premium payments provided Kelter no income tax benefits.
When Kelter established the Rio Plan, the premium payments were high by design because Kelter received a tax deduction for the premiums’ full amount. The greater the premium, the greater the tax benefit Kelter received. If the IRS had determined the Rio Plan qualified as a Section 412(i) Plan, the “exorbitant” premiums Kelter paid would not have caused him any harm. Undoubtedly, if Kelter had sued before the IRS found the Rio Plan to be an abusive tax shelter, Yelland would have argued Kelter failed to state a cause of action because he could not allege he suffered any damages.
Yelland argues Van Dyke and Apple Valley Unified School Dist. v. Vavrinek, Trine, Day & Co. (2002) 98 Cal.App.4th 934 (Apple Valley) support the trial court’s conclusion Kelter suffered actual harm in December 2003. Those cases, however, are distinguishable because the future events there affected only the amount of harm the plaintiffs suffered, not the fact they suffered harm.
In Van Dyke, the plaintiffs donated real property they owned in reliance on their accountant’s advice they would receive an immediate tax credit for the property’s full fair market value. After the plaintiffs donated the property, however, their accountant informed them he made a mistake and they would receive a tax deduction spread over several years. A later IRS audit reduced the plaintiffs’ tax liability, but the plaintiffs still paid more in taxes than their accountant originally represented. (Van Dyke, supra, 46 Cal.App.4th at pp. 448-450.)
The Court of Appeal found the plaintiffs’ claims against their accountant time barred because the plaintiffs suffered actual harm when they donated the property and paid more in taxes than their accountant initially advised. (Van Dyke, supra, 46 Cal.App.4th at pp. 455, 457.) Van Dyke rejected the plaintiffs’ contention their claims did not accrue until the IRS completed its audit: “The propriety of the tax advice [the plaintiffs] received from [their accountant] was not contingent on the outcome of the IRS audit. There was nothing speculative about the damages they suffered in 1991 as a result of the alleged erroneous advice regarding the benefits of donating their property to a charitable organization. The determination by the IRS in 1994 regarding [the plaintiffs’] 1990 tax liability merely resolved the extent of their loss.” (Id. at p. 455.)
Apple Valley involved a local school district that distributed state funds to a charter school in reliance on an accountant’s audit of the school’s daily attendance figures. Later, the district learned the charter school overstated its attendance figures and therefore garnered more state funds than it was entitled to receive. (Apple Valley, supra, 98 Cal.App.4th at p. 937.) The district hired an accountant and attorney to investigate and also notified the state Department of Education. The state conducted an independent audit and found the district liable for the amount improperly distributed to the charter school. The district filed an administrative appeal regarding the state’s audit that remained pending at the time the district filed a lawsuit against the accountant who prepared the original audit. The trial court found the statute of limitations barred the district’s claims against the accountant and the Court of Appeal affirmed. (Id. at pp. 939 941.)
On appeal, the district argued it did not suffer any harm until the state completed its audit and found the district responsible for the overpayment to the charter school. According to the district, any liability for the overpayment was merely speculative. (Apple Valley, supra, 98 Cal.App.4th at p. 944.) The Court of Appeal disagreed, finding the district suffered actual harm when it distributed funds to the charter school and incurred accounting and legal fees to investigate the overpayment. (Id. at pp. 937, 947.) The fact the audit and administrative appeal could affect the permanency or amount of the district’s liability for the overpayment did not change the fact the district suffered harm when it distributed the funds and incurred professional fees to investigate. (Id. at pp. 948-949.)
Thus, the audits in both Van Dyke and Apple Valley had the potential only to reduce the plaintiffs’ damages, but the audit would not change the fact the plaintiffs had suffered damages. In contrast, whether the premiums Kelter paid damaged him in any way depended on the IRS audit. If the IRS found the Rio Plan qualified as a Section 412(i) Plan, Kelter’s premium payments did not harm him. On the other hand, if the IRS found the Rio Plan did not qualify, the premium payments harmed Kelter. Unlike the plaintiff in Van Dyke and Apple Valley, whether Kelter suffered any damages depended on the outcome of the audit.
We conclude the trial court erred in finding Kelter suffered actual harm in December 2003 when he paid the first life insurance premium for the Rio Plan. The premiums Kelter paid did not cause him any actual harm until June 2007 when the IRS completed the audit and made its final determination the Rio Plan did not qualify as a Section 412(i) Plan. Until that time, the premium payments provided only the potential for future harm.
The trial court also found the limitations period on Kelter’s claims started running not later than March 2004 when he learned about the IRS revenue rulings and proposed regulations on abusive Section 412(i) Plans. The trial court ruled this information put Kelter on notice the Rio Plan may not qualify as a Section 412(i) Plan and imposed a duty on Kelter to inquire about any potential claims. Discovering this information, however, did not start the limitations period because Kelter had not suffered any injury and therefore his claims had not accrued. “[T]he discovery rule may extend the statute of limitations, but it cannot decrease it, and a statute of limitations does not accrue until a cause of action is ‘complete with all of its elements, ’ including injury. [Citation.]” (Cleveland v. Internet Specialties West, Inc. (2009) 171 Cal.App.4th 24, 32.)
Kelter argues his claims did not accrue until June 2007 based on International Engine Parts, Inc. v. Feddersen & Co. (1995) 9 Cal.4th 606 (Feddersen). Feddersen involved a claim against an accountant for professional negligence in preparing tax returns that resulted in an IRS audit and additional tax liability. (Id. at pp. 608-609.) The Supreme Court held the client did not suffer any actual harm for statute of limitations purposes until the IRS completed the audit and assessed additional taxes. (Id. at pp. 619-620.) The Supreme Court acknowledged that clients could suffer actual harm before that point, but to provide a bright-line rule it selected the completion of the audit as the accrual date. (Id. at pp. 621-622.)
The Supreme Court explained it decided a “narrow” issue (Feddersen, supra, 9 Cal.4th at p. 608) and later Supreme Court cases emphasized Feddersen involved “very narrowly drawn circumstances” (Adams v. Paul (1995) 11 Cal.4th 583, 588) and “did not articulate a rule of broad or general applicability” (Jordache, supra, 18 Cal.4th at p. 763). Other cases also limit Feddersen to accountant malpractice in preparing tax returns. (See, e.g., Van Dyke, supra, 46 Cal.App.4th at pp. 454-455; Apple Valley, supra, 98 Cal.App.4th at pp. 945-946.) We do the same and find Feddersen inapplicable because this action does not involve the malpractice of an accountant. We base our decision on the other authorities discussed above, not Feddersen.
We express no opinion on whether an accrual date other than December 2003 or June 2007 could possibly apply to Kelter’s claims. The parties argued only those two dates — when Kelter made the first life insurance premium payment and the IRS issued its final audit determination — as the possible accrual dates. Of these two dates, we conclude June 2007 is the appropriate accrual date for the reasons set forth above.
Yelland requested that we judicially notice several documents to show the IRS’s favorable determination letter regarding the Rio Plan did not toll the statute of limitations or delay its accrual. Our conclusion regarding the appropriate accrual date eliminates the need to address tolling or delayed discovery and therefore we deny Yelland’s request for judicial notice on the ground it is irrelevant. (Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063, overruled on other grounds in In re Tobacco Cases II (2007) 41 Cal.4th 1257, 1276.)
C. The Statute of Limitations Does Not Bar Kelter’s Claims Against Yelland
Kelter alleged three causes of action against Yelland: fraud, breach of fiduciary duty, and negligence. The parties agree Kelter’s claims are subject to either a two- or three-year limitations period depending on the claim. (Code Civ. Proc., §§ 338, subd. (d), 339, subd. 1.) Kelter filed this action less than two years after the June 2007 accrual date and therefore his claims are timely regardless of which limitations period applies. The trial court erred in finding Kelter’s claims against Yelland time barred.
III
Disposition
The order granting Yelland’s motion for judgment on the pleadings and dismissing him from this action is reversed. Kelter shall recover his costs on appeal.
WE CONCUR: BEDSWORTH, ACTING P. J.FYBEL, J.