Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County. James A. Bascue, Judge. Los Angeles County Super. Ct. No. SC086679
Engstrom, Lipscomb & Lack, Walter J. Lack and Paul A. Traina for Plaintiffs and Appellants.
Mitchell Silberberg & Knupp, Peter B. Gelblum and Diana L. Abdulian for Defendants and Respondents.
CHAVEZ, J.
Appellants Jack Neinstein and Edward Landry, cotrustees of the Marcia Israel Living Trust and special representatives of the Estate of Marcia Israel and the Marcia and Lawrence Israel Charitable Foundation, Inc., also known as the Marcia Israel Foundation (Foundation) (appellants), appeal from an order of the trial court sustaining the demurrer of Mitchell, Silberberg & Knupp LLP and Stanley Arenberg (respondents) without leave to amend and dismissing appellants’ legal malpractice action in its entirety on the ground that the action was time-barred under Code of Civil Procedure section 340.6 (section 340.6).
In this appeal, we address a single, narrow issue: whether, on the face of the complaint, appellants’ legal malpractice claim is barred under section 340.6. Because we find that the allegations of the complaint do not permit a definitive determination of the date that appellants suffered actual injury under section 340.6, subdivision (a)(1), we reverse and remand for further proceedings.
BACKGROUND
1. The Ninth Amendment to the Estate Plan of Marcia and Lawrence Israel
Appellants’ complaint against respondents sets forth the following facts: respondents represented husband and wife, Lawrence and Marcia Israel (hereinafter referred to as Marcia and Lawrence) individually and as trustor and trustee of their trust. Respondents represented Marcia from 1990 to 1997 and Lawrence from 1990 until his death on September 26, 1991.
On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, we treat the demurrer as admitting all facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.)
In August of 1991, respondents provided legal assistance to the Israels in connection with the preparation and execution of a ninth amendment to their joint estate plan. Prior to the ninth amendment, a substantial amount of Lawrence’s estate was to be held in trust largely for the benefit of the Israels’ two daughters, Jane Siegel and Judith Israel. The ninth amendment would serve to effect a material change in the estate plan, providing that the community property interest of the first spouse to die would pass in trust for the exclusive benefit of the surviving spouse.
At the time that the ninth amendment to the joint estate plan was drafted and executed, Lawrence was terminally ill with cancer and taking several medications. Respondent Arenberg, who at the time was counsel with respondent Mitchell, Silberberg & Knupp LLP, confirmed with the Israels’ accountant that, despite his medical condition, Lawrence was lucid and intended that all of his property pass to Marcia upon his death.
Arenberg drafted the ninth amendment to the joint estate plan. On August 28, 1991, he went to the Israels’ home with a notary public to have the ninth amendment executed. At the Israels’ home, in the presence of the Israels’ accountant, the notary, Marcia, Lawrence, and Arenberg, the ninth amendment was executed. However, the complaint alleges that Lawrence’s signature on the ninth amendment was not in fact made by Lawrence, but by Marcia. The complaint further alleges that Marcia could lawfully have signed the ninth amendment on behalf of Lawrence, without risking an adverse effect on its legal validity, but that respondents did not follow proper procedures. Respondents’ omissions, according to the complaint, grossly deviated from the standard of care for estate planning lawyers in the Los Angeles community.
2. The Siegel Action Challenging the Ninth Amendment
Lawrence died on September 26, 1991, approximately one month after the execution of the ninth amendment. Marcia died 13 years later, on August 17, 2004.
On December 17, 2004, Jane Siegel filed a petition for an order declaring the ninth amendment void due to lack of capacity, lack of testamentary intent, lack of due execution, mistake, undue influence, duress, coercion, fraud and deceit (petition) in Los Angeles Superior Court. The petition challenged the validity of the ninth amendment in part because of Lawrence’s health at the time the amendment was executed and in part because of the allegation that Marcia assisted him in signing it.
3. The Malpractice Action
Appellants filed the current action for legal malpractice against respondents on August 17, 2005, approximately eight months after the Siegel petition was filed. The complaint alleged that respondents’ failure to follow the proper procedures in order for Marcia to execute the ninth amendment on behalf of Lawrence resulted in the creation of a “material risk” that (1) property intended by Lawrence to pass to Marcia on his death would not so pass; and (2) that the survivor’s trust would be found liable for damages and/or interest by virtue of the alleged wrongful taking, possession, and/or management of property claimed to belong to trusts allegedly created for the benefit of Jane Siegel and Judith Israel.
Subsequent to the filing of their legal malpractice action against respondents, appellants state that, as a result of respondents’ failure to follow the necessary procedures in executing the trust, appellants were forced to settle the Siegel action, “expending hundreds of thousands of dollars in fees and costs, in an effort to reasonably preserve as much of the trust corpus as possible.”
Respondents filed their demurrer on January 3, 2006 on the ground that the complaint failed to state facts sufficient to constitute a cause of action because it was barred by the applicable statute of limitations and could not state the necessary elements of duty and causation. Appellants filed their opposition on February 8, 2006, and respondents filed their reply on February 15, 2006.
A hearing on respondents’ demurrer was held on February 23, 2006. On March 17, 2006, the court entered an order sustaining respondents’ demurrer without leave to amend. The court found that the complaint was time-barred because “[appellants] sustained ‘actual injury,’ if ever, when Lawrence Israel passed away in 1991. At that time any injury became irremediable. The fact that actual monetary damages were not incurred until a future time is irrelevant.” In support of its order, the trial court referenced two cases: Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739 (Jordache), and Foxborough v. Van Atta (1994) 26 Cal.App.4th 217. The court indicated that leave to amend was denied because the demurrer was sustained on a purely legal issue. The court did not reach the questions of whether the complaint adequately pled duty and causation, but indicated that if it were to rule on those issues, it would have overruled them.
Appellants timely filed their appeal on May 16, 2006.
DISCUSSION
I. Standard of Review
A demurrer tests the sufficiency of the plaintiff’s complaint. Thus, in ruling on a demurrer, the court must determine whether the complaint at issue states facts sufficient to constitute a cause of action upon which relief may be granted. (Code Civ. Proc., § 430.10, subd. (e).) In making this determination, a court may consider all material facts pleaded in the complaint and those facts that may be implied or inferred from those expressly alleged; it may not consider contentions, deductions or conclusions of fact or law. (Moore v. Conliffe (1994) 7 Cal.4th 634, 638; Montclair Parkowners Assn. v. City of Montclair (1999) 76 Cal.App.4th 784, 790 (Montclair).)
On appeal, we review the trial court’s sustaining of a demurrer without leave to amend de novo, exercising our independent judgment as to whether a cause of action has been stated as a matter of law. (Montclair, supra, 76 Cal.App.4th at p. 790.)
II. Section 340.6
The trial court sustained respondents’ demurrer on the ground that appellants’ complaint was barred as a matter of law under the statute of limitations set forth in section 340.6. We therefore begin with a discussion of this statute.
Respondents also claim that appellants’ action should be barred under Code of Civil Procedure section 366.1 (section 366.1), which describes the limitation period applicable upon the death of a person entitled to bring an action. Section 366.1 provides that a survival action may be brought before the expiration of the later of (a) six months after the person’s death; or (b) the limitations period that would have been applicable if the person had not died. The applicable limitation period had Marcia not died is section 340.6. Therefore respondents’ argument that the cause of action – insofar as it was brought on behalf of Marcia individually – expired within six months of Marcia’s death is correct only if section 340.6 does not provide a later expiration date.
Section 340.6 provides, in pertinent part:
“(a) 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; and
“(4) The plaintiff is under a legal or physical disability which restricts the plaintiff’s ability to commence legal action.”
Thus, a legal malpractice claim is barred (a) within one year after the plaintiff discovers, or should have discovered, facts constituting the wrongful omission; or (b) within four years; unless one of the four tolling provisions applies.
Respondents argue that appellants’ claim is barred under the one-year provision of section 340.6 because Marcia’s participation in the events surrounding the execution of the ninth amendment put her, and thus the Foundation, which was the principal beneficiary of the trust for which Marcia served as trustor and trustee – on at least constructive notice of the issues relating to the execution of the documents. This argument fails because the case comes to us on appeal from a demurrer, therefore we must treat the demurrer as admitting all facts properly alleged. (Aubry v. Tri-City Hospital Dist., supra, 2 Cal.4th at pp. 966-967.) The complaint specifically alleges that “up to and including the date of her death, Marcia reasonably believed the Ninth Amendment to be valid and enforceable.” These allegations do not allow us to conclude, at this stage, that Marcia discovered or should have discovered the facts constituting respondents’ alleged wrongful omission. Further, even if Marcia had knowledge of respondents’ alleged omissions, the tolling provision preventing the statute from running until the plaintiff suffers actual injury applies to both the one-year and four-year provisions of section 340.6. (Laird v. Blacker (1992) 2 Cal.4th 606, 609; Fantazia v. County of Stanislaus (1996) 41 Cal.App.4th 1444, 1450.)
Because respondents’ alleged negligence occurred in 1991, the four-year limitation would bar appellants’ malpractice lawsuit unless one of the tolling provisions applies. The only tolling provision that appellants invoke is the actual injury provision. Thus, we focus our analysis on whether the complaint, on its face, describes an actual injury prior to the filing of the Siegel petition which would have caused the statute to begin running against appellants at an earlier date, thus barring the current action.
III. Actual Injury
The parties’ interpretations of the complaint differ dramatically as to its allegations regarding actual injury under section 340.6. Appellants’ position is that the complaint does not allege that actual injury occurred until December 17, 2004, the date that the trust was first challenged. Respondents’ position is that actual injury occurred, at the latest, on September 26, 1991, when Lawrence died. On that date, according to respondents, the alleged malpractice – failing to arrange for proper execution of the ninth amendment on behalf of Lawrence – could no longer be corrected.
A. The Definition of “Actual Injury”
The Supreme Court has addressed the question of what constitutes actual injury for the purposes of section 340.6 on several occasions. Most recently, in Jordache, supra, 18 Cal.4th 739, the Supreme Court explained that the actual injury tolling provision contained in section 340.6, subdivision (a)(1) was derived from the case Budd v. Nixen (1971) 6 Cal.3d 195 (Budd), where the court stated:
“‘If the allegedly negligent conduct does not cause damage, it generates no cause of action in tort. [Citation]. The mere breach of a professional duty, causing only nominal damages, speculative harm, or the threat of future harm – not yet realized – does not suffice to create a cause of action for negligence. [Citations]. Hence, until the client suffers appreciable harm as a consequence of [the] attorney’s negligence, the client cannot establish a cause of action for malpractice.’ [Citation.]” (Jordache, supra, 18 Cal.4h at pp. 749-750, quoting Budd, supra, at p. 200.)
In other words, until the client can plead damages that could establish a cause of action for legal malpractice, the limitations period under section 340.6 is tolled. (Jordache, supra, 18 Cal.4th at p. 743.)
However, as respondents point out, Jordache made it clear that the client need not have suffered “‘all, or even the greater part, of the damages occasioned by [the] attorney’s negligence. [Citations.]’” (Jordache, supra, 18 Cal.4th at p. 750.) In fact, “‘[w]hen malpractice results in the loss of a right, remedy, or interest, or in the imposition of a liability, there has been actual injury regardless of whether future events may affect the permanency of the injury or the amount of monetary damages eventually incurred.’” (Ibid., quoting Foxborough v. Van Atta, supra, 26 Cal.App.4th at p. 227.)
Significantly, the Supreme Court has made it clear that a determination of when actual injury occurred for the purposes of section 340.6 is primarily a factual inquiry. In Adams v. Paul (1995) 11 Cal.4th 583 (Adams), the Supreme Court reaffirmed “the well-settled principle that in legal malpractice actions statute of limitations issues, including injury, are at base factual inquiries.” (Id. at p. 588.) In reversing the Court of Appeal’s decision affirming the trial court’s sustaining of a demurrer on statute of limitations grounds in a legal malpractice action, the Supreme Court noted that it is “for the trier of fact to determine when the requisite harm actually did occur as a consequence of the attorney’s negligence. [Citations.]” (Id. at p. 591.)
Only if the facts are undisputed may a court resolve the question of actual injury as a matter of law. (Adams, supra, 11 Cal.4th at p. 592.) Here, the question of when actual injury occurred is vigorously disputed. However, we analyze the available facts to determine whether the date that appellants first suffered “any appreciable and actual harm flowing from the attorney’s negligent conduct” (Jordache, supra, 18 Cal.4th at p. 750), such that they could make out a claim for legal malpractice against respondents, is determinable as a matter of law from the face of the complaint.
B. Actual Injury and the Complaint
We reiterate that this matter is before us after a demurrer, and therefore in determining when actual injury occurred, we are limited to an analysis of the allegations in the complaint. In describing the injury arising from respondents’ alleged malpractice, the complaint states:
“As a direct and proximate result of the deviation of [respondents] from the applicable standard of care, there is a material risk that property intended by Larry to pass on his death, directly or indirectly, to Marcia, as trustee of the Survivor’s Trust, will not so pass, and that the Survivor’s Trust will be found liable for damages and/or interest by virtue of alleged wrongful taking, possession, and/or management of property claimed to belong to trusts allegedly created for the benefit of Judy and Jane. The actual amount of damage accruing as a result of such material risks will be determined by adjudication or settlement of Jane’s Petition and other claims.”
As set forth above, respondents contend, and the trial court agreed, that actual injury occurred on September 26, 1991, when Lawrence died and the “material risk” that Marcia might not receive the benefits intended for her became irremediable. Thus, under Jordache, Marcia and the relevant trusts suffered a “loss or diminution of [their] right” to receive the benefits owed to them without risk. (Jordache, supra, 18 Cal.4th at p. 744.)
Appellants, on the other hand, argue that actual injury did not occur until Jane Siegel filed her petition against the trust and appellants were forced to incur fees defending it. At that time, according to appellants, the “material risk” became an “appreciable actual injury,” compensable in a legal malpractice action. (Jordache, supra, 18 Cal.4th at p. 750.)
Our review of the complaint leads us to conclude that, at this stage of the litigation, either party may be correct. In other words, the date of actual injury may not be determined as a matter of law on the basis of the allegations in the complaint. Further factual inquiry may reveal that respondents are correct in their assertion that Marcia suffered actual injury when Lawrence died. However, the complaint contains no allegations that any actual injury occurred at that time. The “material risk” may have become irremediable at that time, but without actual damages, appellants could not have made out a cause of action for legal malpractice. Under Budd, supra, 6 Cal.3d at page 201, recently reaffirmed by the Supreme Court in Jordache, supra, 18 Cal.4th at page 750, the injury must amount to appreciable actual harm – in other words, more than nominal damages.
Respondents point out that in Jordache, the Supreme Court explained that, under Budd, any attorney fees paid by the Israels to respondents could be sufficient to constitute actual loss. (Jordache, supra, 18 Cal.4th at p. 750.) Respondents state, without citation to any factual record, that “Marcia suffered actual injury on August 28, 1991 when, as a joint client of Respondents, she incurred legal fees for Respondents’ allegedly negligent work on the Ninth Amendment.” However, appellants have not alleged that any such attorney fees were paid, much less that any such fees were sufficient to constitute more than nominal damages under the circumstances. Further factual inquiry must be made to determine whether Marcia suffered sufficient damage upon her husband’s death in 1991 such that she could make out a claim for legal malpractice at that time.
Further factual inquiry may also reveal that appellants are correct in their assertion that actual injury did not occur until the moment that Jane Siegel filed her petition on December 17, 2004. If that was indeed the first time that appellants were forced to expend an appreciable amount of money, it may be the date of actual injury. However, we note that the complaint also refers to “other claims.” The nature of any such “other claims,” and the date of those claims, may also be relevant to the actual injury analysis.
In concluding our discussion of this issue, we observe that the majority of cases cited by the parties on the question of actual injury were decided on summary judgment, not demurrer. (Jordache, supra, 18 Cal.4th at pp. 764-765 [reversing Court of Appeal’s decision reversing the trial court’s grant of summary judgment motion]; Fritz v. Ehrmann (2006) 136 Cal.App.4th 1374, 1380 [reversing trial court’s grant of summary judgment motion]; Foxborough v. Van Atta, supra, 26 Cal.App.4th at p. 224 [affirming trial court’s grant of summary judgment motion]; ITT Small Business Finance Corp. v. Niles (1994) 9 Cal.4th 245, 249, overruled by Jordache, supra, 18 Cal.4th at p. 763 [affirming Court of Appeal’s reversal of summary judgment].)
The parties describe at length the circumstances of these cases and the application of the law of actual injury under those circumstances. We find it futile to attempt to compare the facts of those cases with those before us because the complaint provides insufficient facts upon which to determine when appellants first suffered appreciable harm. Comparison of this matter to the pertinent case law will be far more useful upon further exploration of the facts.
The notable exception is Adams, supra, 11 Cal.4th 583. In Adams, the plaintiff’s claim of malpractice was based on her attorney’s failure to properly advise her as to the time within which she was required to file a wrongful death action. The attorney demurred on the grounds that the action was barred under section 340.6. The trial court sustained the demurrer on the grounds that the plaintiff had suffered actual injury when the statute of limitations expired on her wrongful death action. (Id. at p. 587.) The Court of Appeal affirmed, but for a different reason, finding that the plaintiff suffered actual injury when she was forced to defend a summary judgment motion in the wrongful death action on the ground that it was barred by the statute of limitations. (Ibid.) The Supreme Court reversed, explaining that, in sustaining the attorney’s demurrer, the trial court “found plaintiff’s malpractice action time-barred as a legal question rather than as a matter of law on undisputed facts. Although for a different reason, the Court of Appeal reached the same result without consideration of any factual record. Both determinations were inconsistent with the rule we reaffirm that actual injury is generally a question of fact.” (Id. at p. 593.) We follow the teaching of Adams in concluding that, in the matter before us, the factual analysis necessary for a determination of actual injury cannot be made without further development of the facts. Only upon such further development of the facts can the trier of fact determine “the point at which the fact of damage became palpable and definite even if the amount remained uncertain, taking into consideration all relevant circumstances. [Citation.]” (Ibid.)
Another case involving a demurrer on the question of actual injury is Baltins v. James (1995) 36 Cal.App.4th 1193. In Baltins, which predates the Supreme Court’s decision in Adams by several months, the Court of Appeal reversed the trial court’s decision sustaining a demurrer on the grounds that section 340.6 barred the action, finding that the earliest possible actual injury disclosed by the pleadings occurred within the statute of limitations.
IV. Duty and Causation
In the alternative, respondents argue that we should affirm the trial court’s ruling sustaining respondents’ demurrer on the grounds that the complaint fails to, and cannot, allege the required elements of duty and causation. As set forth below, we disagree with respondents’ position.
On the question of duty, respondents claim that they did not owe Marcia or the Foundation any duty to ascertain and document Lawrence’s testamentary capacity. Citing Moore v. Anderson Zeigler Disharoon Gallagher & Gray (2003) 109 Cal.App.4th 1287, respondents argue that “an attorney preparing a will for a testator owes no duty to the beneficiary of the will or the beneficiary under a previous will to ascertain and document the testamentary capacity of the client.” (Id. at p. 1298.)
Respondents’ argument on the question of duty fails to defeat appellants’ cause of action for malpractice. Appellants allege not only that respondents failed to confirm Lawrence’s mental capacity and testamentary intent, but that respondents failed to carry out proper procedures in executing the ninth amendment, in particular because Marcia allegedly signed on behalf of Lawrence. Respondents have cited no case law indicating that, in advising appellants regarding the execution of the ninth amendment, they did not have a duty to ensure that proper procedures were undertaken.
Respondents’ causation argument is based on the allegations in Jane Siegel’s petition, which was attached to the complaint. Respondents argue that the petition shows that Siegel would have filed it regardless of whether respondents followed all of the procedures that they are alleged to have neglected. First, respondents state, the petition alleges numerous grounds for invalidation of the ninth amendment in addition to “lack of due execution.” Thus, respondents argue, Siegel would have filed it regardless of whether all appropriate procedures were carried out during the execution of the ninth amendment. In addition, respondents point out that the petition alleges that Marcia used undue influence to cause Lawrence to agree to the ninth amendment, which was contrary to his testamentary intentions, and that due to his physical state at the time, he was unable to resist her. Thus, respondents argue, appellants cannot show that they would have achieved a better result than what they achieved in settling the Siegel petition, even if respondents had acted with due care.
Respondents’ causation argument requires us to infer facts which we may not reasonably infer from the face of the complaint: that Jane Siegel would have filed the petition even if all proper procedures were carried out in the execution of the ninth amendment; and that, regardless of respondents’ alleged negligence, appellants would not have achieved a better result following the Siegel petition. These factual issues are not appropriately decided on demurrer.
We decline to affirm the trial court’s ruling on the grounds that appellants failed to allege the necessary elements of duty and causation.
DISPOSITION
The trial court’s order sustaining respondents’ demurrer without leave to amend and dismissing the action is reversed. On remand, the court is directed to overrule the demurrer and allow respondents a reasonable time within which to answer the complaint. Appellants are entitled to their costs on appeal.
We concur: BOREN, P. J., ASHMANN-GERST, J.