Sirott v. Latts

6 Cal. App. 4th 923, 8 Cal. Rptr. 2d 206, 92 Daily Journal DAR 6777, 92 Cal. Daily Op. Serv. 4299, 1992 Cal. App. LEXIS 637

• Court: California Court of Appeal
• Decided: May 19, 1992
• Docket: B054536
• Status: Published

Opinions

Opinion

LILLIE, P. J.—

plaintiff, Stanley Sirott, M.D., appeals from judgment dismissing his action for legal malpractice as to defendants Leatrice Latts and Latts & Herstead after their general demurrer to the first amended complaint was sustained without leave to amend on the ground the action is barred by limitations.¹

Facts

The action was commenced January 31, 1990.

Limited to material facts, and without its contentions, deductions and conclusions of fact or law (see Serrano v. Priest (1971) 5 Cal.3d 584, 591 [96 Cal.Rptr. 601, 487 P.2d 1241, 41 A.L.R.3d 1187]), the first amended complaint alleged: In July 1986 plaintiff, a physician and surgeon, decided to retire from the practice of medicine. In October 1986 plaintiff sought advice from defendants regarding the purchase of “tail” insurance coverage for medical malpractice through his medical malpractice insurance carrier, Cooperative of American Physicians Mutual Protection Trust (the insurer). Defendants advised plaintiff that the $50,000 premium for tail coverage demanded by the insurer was an unconstitutional and unenforceable form of age discrimination and that plaintiff need not pay the premium. Thereafter, plaintiff was sued for medical malpractice. In advising plaintiff not to pay the premium for tail medical malpractice insurance coverage, defendants rendered substandard legal services to plaintiff. Had plaintiff purchased the insurance which was the subject of the legal advice given by defendants, he would have had full coverage for defense and indemnity costs in the medical malpractice action.

It was further alleged: Defendants attempted without success to reinstate plaintiff’s tail coverage and obtain an adjudication that the insurer’s requirement of a premium for such coverage was an unconstitutional form of age discrimination. Consequently, plaintiff was required to retain counsel to defend the medical malpractice action at his own expense. Such expense did not exceed the $50,000 premium plaintiff would have been required to pay had he not followed defendants’ advice. On January 3, 1990, at a mandatory settlement conference in the medical malpractice action, plaintiff’s counsel advised him to pay $230,000 to settle the action; plaintiff paid said sum on January 11, 1990. As a result of defendants’ professional negligence plaintiff sustained damages of $230,000.

Defendants Leatrice Latts and Latts & Herstead demurred generally to the first amended complaint on the ground the action is barred by the statute of limitations for legal malpractice (Code Civ. Proc., § 340.6). In conjunction with the demurrer defendants requested that the trial court take judicial notice of its records (Evid. Code, §§ 452, subd. (d), 453) in the medical malpractice action against plaintiff (Gallo v. Sirott (Super. Ct. L.A. County) No. NEC-46422) and an arbitration proceeding by the insurer against plaintiff (Cooperative of American Physicians, Inc. v. Sirott (Super. Ct. L.A. County) No. C-662326). Such records showed: In the medical malpractice action a demurrer to the complaint was filed on behalf of Dr. Sirott by his counsel on January 20, 1987. In the arbitration proceeding, on August 7, 1987, an award was rendered which determined that Dr. Sirott was not entitled to rescind his decision to be responsible for his own tail coverage and the insurer had no obligation to defend or indemnify Dr. Sirott in the medical malpractice action. On January 7, 1988, judgment was entered confirming the award.

Defendants argued that plaintiff suffered actual injury from defendants’ alleged negligence, within the meaning of Code of Civil Procedure section 340.6, both by incurring legal fees to defend the medical malpractice action and by losing his right to insurance coverage. Inasmuch as both events occurred more than one year before the instant legal malpractice action was filed, that action is barred by section 340.6.

The demurrer was sustained without leave to amend and the action dismissed as to the demurring defendants. Plaintiff appeals from the judgment of dismissal.

Discussion

Under Code of Civil Procedure section 340.6, the one-year statute of limitations for legal malpractice does not begin to run simply when the plaintiff knows, or should know, of the attorney’s negligence; the plaintiff also must sustain actual and appreciable harm.² (Goebel v. Lauderdale (1989) 214 Cal.App.3d 1502, 1507 [263 Cal.Rptr. 275].) As our Supreme Court explained in Budd v. Nixen (1971) 6 Cal.3d 195 [98 Cal.Rptr. 849, 491 P.2d 433]: “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 his attorney’s negligence, the client cannot establish a cause of action for malpractice.” (Id., at p. 200, fn. omitted.)

A complaint showing on its face the cause of action is barred by the statute of limitations is subject to demurrer. (Jessica H. v. Allstate Ins. Co. (1984) 155 Cal.App.3d 590, 592 [202 Cal.Rptr. 239].) In determining the sufficiency of a complaint against a demurrer, the court reads the complaint as including matters subject to judicial notice. (Gilbert v. State of California (1990) 218 Cal.App.3d 234, 240-241 [266 Cal.Rptr. 891]; Code Civ. Proc., §§ 430.30, 430.70.) So read, the first amended complaint alleged: Defendants negligently advised plaintiff that he did not have to pay the insurer a premium for tail medical malpractice coverage. Plaintiff followed that advice. Thereafter, he was sued for medical malpractice and retained counsel to represent him in that action at his own expense. Attorney fees for such representation were incurred, at the latest, on January 20, 1987, when counsel for plaintiff filed a demurrer to the medical malpractice complaint on his behalf. On August 7, 1987, an arbitration award was rendered which determined that the insurer was not obligated to defend or indemnify plaintiff in the medical malpractice action. On January 7, 1988, judgment was entered confirming the award. On January 11, 1990, plaintiff paid $230,000 to settle the medical malpractice action.

A client suffers damage when he is compelled, as a result of the attorney’s error, to incur or pay attorney fees. (Budd v. Nixen, supra, 6 Cal.3d at pp. 201-202.) Plaintiff incurred attorney fees in defending the medical malpractice action not later than January 20,1987, when his counsel filed a demurrer on his behalf. Plaintiff contends his liability for attorney fees did not constitute actual harm to him because, as alleged in the first amended complaint, such fees did not exceed the $50,000 premium plaintiff would have been required to pay had he not followed defendants’ advice. Plaintiff cites no authority for the proposition that injury suffered by the client may be negated in this manner—a form of offset—for purposes of determining when the statute of limitations for legal malpractice begins to run. We reject plaintiff’s novel and unsupported argument. In any event, the complaint shows on its face that plaintiff suffered damage in another form more than one year before the present action was commenced.

Defendants’ attempt to reinstate plaintiff’s tail malpractice insurance coverage ended in failure on August 7, 1987, when an arbitration award was rendered which determined that plaintiff could not rescind his decision to be responsible for his own tail coverage and the insurer was not obligated to defend or indemnify him in the medical malpractice action. The award was confirmed by judgment entered January 7, 1988. On that date plaintiff suffered actual damage by the irretrievable loss of the right to tail medical malpractice insurance coverage—the very purpose for which plaintiff consulted defendants and the subject of their allegedly negligent advice. (See Johnson v. Simonelli (1991) 231 Cal.App.3d 105, 110 [282 Cal.Rptr. 205].) For purposes of section 340.6, actual damage need not be defined in terms of monetary amount. (Laird v. Blacker (1992) 2 Cal.4th 606, 614 [7 Cal.Rptr.2d 550, 828 P.2d 691].) “[T]he Legislature used the term ‘actual’ to focus on the fact that damage occurred, and eliminated all qualifiers to prevent confusion that would arise by requiring courts to consider the total amount of damages.” (Id., at p. 613, original italics.)

Plaintiff contends the harm he sustained on account of defendants’ alleged negligence did not become irremediable until January 3, 1990, when he agreed to pay $230,000 to settle the medical malpractice action. Before that date, plaintiff argues, his liability for medical negligence was speculative and he could have prevailed in the action, with the result that he would not have been harmed by defendants’ negligent advice. In Laird v. Blacker, supra, 2 Cal.4th 606, our Supreme Court rejected the requirement, judicially grafted onto Code of Civil Procedure section 340.6, that damage must be irremediable as well as actual before the statute of limitations for legal malpractice begins to run.

Plaintiff sustained actual damage as a result of defendants’ alleged negligence upon entry of judgment confirming the arbitration award (Jan. 7, 1988) because at that point it was judicially determined that plaintiff was not entitled to tail malpractice insurance coverage, and he was compelled to pay the expenses of defending the medical malpractice action regardless of the outcome of that action. Accordingly, the one-year statute of limitations for legal malpractice commenced to run on January 7, 1988.

This result is not changed by the fact that plaintiff suffered additional damage from defendants’ negligence when, on January 11, 1990, he paid $230,000 to settle the medical malpractice action. “The cause of action [for legal malpractice] arises . . . before the client sustains all, or even the greater part, of the damages occasioned by his attorney’s negligence. [Citations.] Any appreciable and actual harm flowing from the attorney’s negligent conduct establishes a cause of action upon which the client may sue. [][] Indeed, once having discovered his attorney’s negligence and having suffered some damage, the client must institute his action within the time prescribed in the statute of limitations or he will be barred from thereafter complaining of his attorney’s conduct.”³ (Budd v. Nixen, supra 6 Cal.3d 195, 201.)

The demurrer to the first amended complaint was properly sustained. The only remaining question is whether the trial court abused its discretion in denying leave to amend. (See Code Civ. Proc., § 472c.) An order sustaining a demurrer without leave to amend constitutes an abuse of discretion if there is any reasonable possibility that the defect can be cured by amendment. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1387 [272 Cal.Rptr. 387].) No such possibility exists here, for matters subject to judicial notice show that the first amended complaint cannot be amended to overcome the bar of the statute of limitations.

Disposition

The judgment of dismissal is affirmed.

Woods (Fred), J., concurred.

1 Defendant John Herstead did not demur to the first amended complaint and the action presumably is still pending as to him. The judgment of dismissal nevertheless is appealable because it left no issues to be determined between plaintiff and the demurring defendants. (Buckaloo v. Johnson (1975) 14 Cal.3d 815, 821, fn. 3 [122 Cal.Rptr. 745, 537 P.2d 865].)

While the notice of appeal was filed before rendition of the judgment, we treat the notice as filed immediately after entry of the judgment. (Cal. Rules of Court, rule 2(c).)

2 Code of Civil Procedure 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: [5] (1) The plaintiff has not sustained actual injury; . . .”

3 The dissent foresees a veritable “parade of horribles” in the wake of our conclusion that plaintiff’s legal malpractice action is barred by limitations. The concerns expressed in the dissenting opinion are in the realm of speculation and therefore require no response.