Filed 3/22/22 Menagh v. Thorn CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, Eddie C. Sturgeon, Judge. Affirmed.

Catalano & Catalano, Patrick E. Catalano and Mark Adams Poppett for Plaintiff and Appellant.

Pettit Kohn Ingrassia Lutz & Dolin, Douglas A. Pettit, Jennifer N. Lutz, Matthew C. Smith, and Alexander P. Cohen for Defendants and Respondents.

Doloras Menagh appeals the summary judgment in her legal malpractice action against Richard Dunbar Thorn and his law firm. Menagh claims that because she filed her action less than one year after she discovered and suffered actual injury from Thorn’s malpractice, the trial court incorrectly ruled the statute of limitations barred the action. We disagree with Menagh and affirm the judgment.

I.

BACKGROUND

A. Thorn’s Work for Menagh

Menagh hired Thorn in September 2013 to review her property holdings and to prepare estate planning documents. He assisted her in taking out a reverse mortgage on her residence in August 2014 in part to secure funds needed to repair an unstable slope on the property.

In September 2015, heavy rain caused the slope to fail, and concrete, rocks, soil, vegetation, and debris from Menagh’s property were deposited onto the lands of her downslope neighbors. Menagh and her neighbors submitted claims to her homeowner’s liability insurer for the damage to their respective properties. Menagh’s policy provided for defense and indemnity of claims for property damage caused by an occurrence during the policy period. The policy contained a provision that after an occurrence, “the insured shall not, except at the insured’s own cost, voluntarily make payments, assume obligations or incur expenses.” In February 2016, the insurer sent Menagh a letter designating an attorney to investigate the claims and reserving its rights to deny coverage based in part on an exclusion for damage to property she owned.

In the meantime, Thorn assisted Menagh with repairs related to the slope failure by advancing Menagh funds to pay for removal of debris from the neighbors’ properties and by attempting to obtain permits from the City of San Diego and permission from the neighbors to enter their lands to repair the slope. Thorn and Menagh met with the insurance investigator and an insurance adjuster in March 2016 to discuss repair plans, and after the meeting Thorn told Menagh there was no insurance coverage. Menagh became frustrated with the delay in obtaining the permits and permissions, and on July 11, 2016, her son sent an e-mail advising her to “FIRE” Thorn and to hire a new attorney if Thorn did not threaten to sue the neighbors and otherwise “MOVE FORWARD ON THIS ISSUE!!!!!!!!!” On September 7, 2016, Menagh sent her neighbors an e-mail that she was “sorry Mr. Thorn didn’t handle this project in an acceptable manner”; and two days later she sent Thorn an e-mail that she was now handling the slope repairs and related insurance claims “independently of [his] office.” Thorn then stopped working for Menagh.

B. Menagh’s Subsequent Repair Efforts and Insurance Claims

Over the 18 months after Menagh fired Thorn, she spent approximately $240,000 of the reverse mortgage funds to repair the failed slope. During that time, Menagh sent a letter to her insurer on June 16, 2017, to advise that Thorn and his firm were no longer involved in the insurance claims. She also complained that she had received no communication from the insurer since February 25, 2016, and the insurer’s failure to “rectify” the neighbors’ claims required her to spend “exorbitant funds” to do so. Menagh accused the insurer of failing to handle her neighbors’ claims properly, “abandon[ing]” her, “driv[ing] [her] into poverty,” and making her “financially destitute.”

After completion of the slope repairs, Menagh submitted a claim for reimbursement of the costs to her homeowner’s insurer. By letter dated July 30, 2018, the insurer denied the claim based in part on the no voluntary payments condition and the owned property exclusion of the policy. Menagh retained a law firm to assert a claim for bad faith denial of coverage against the insurer. Menagh settled for a net amount less than what she paid to clean up her neighbors’ properties and repair the slope.

C. Menagh’s Malpractice Action Against Thorn and His Firm

On September 6, 2018, Menagh sued Thorn and his firm, Ward & Thorn, APC, for mishandling the slope repairs and related insurance claims. In the operative pleading, Menagh sought compensatory and punitive damages on counts for professional negligence, “willful and wanton negligence,”[1] and breach of fiduciary duty. She alleged Thorn failed to advise her to threaten her insurer with a bad faith claim if it failed to defend and indemnify her for the neighbors’ claims; failed to evaluate potential claims against her, potential defenses to those claims, and potential claims she might have; and failed to review the policy and to advise her that if she paid for repairs, her insurer likely would refuse reimbursement based on the no voluntary payments condition. Menagh also alleged Thorn exercised undue influence over her for his own benefit by advising her to take out a reverse mortgage to repair the slope, telling the insurer not to get involved, and offering to help her financially by buying the house.

Thorn and his firm filed an answer asserting the statute of limitations (Code Civ. Proc., § 340.6) as an affirmative defense and later moved for summary judgment on that ground (id., § 437c). They argued the filing of the complaint on September 6, 2018, was untimely under the one-year limitations period because Menagh knew or should have known of any wrongdoing by Thorn by June 16, 2017, when she advised her insurer Thorn was no longer involved in the insurance coverage claims, and by that time she had incurred actual injury by using reverse mortgage funds to pay for cleanup and repairs related to the slope failure. In opposition to the motion, Menagh argued her action was timely because she did not realize Thorn had committed malpractice until after her insurer denied the claim for reimbursement of the repair costs and an attorney advised her of the malpractice “shortly before” she filed the complaint. The trial court ruled the limitations period commenced no later than June 16, 2017, by which time Menagh had become dissatisfied with Thorn’s work and notified her insurer that her attorney-client relationship with Thorn had ended. Because that was more than one year before she filed the malpractice action, the court granted the motion for summary judgment and entered judgment against Menagh.

II.

DISCUSSION

A. Menagh’s Claim of Error

Menagh claims the trial court reversibly erred by ruling her action against Thorn and his firm was barred by the one-year statute of limitations for legal malpractice actions. Menagh contends the limitations period did not start running when she fired Thorn, as the trial court ruled. The running was postponed, she argues, until her homeowner’s insurer denied her request for reimbursement of costs of cleanup and repair related to the slope failure based on the no voluntary payments provision of the policy, because not until then did she discover Thorn’s malpractice and suffer actual injury. Since Menagh sued Thorn and his firm within one year of the insurer’s denial of the reimbursement claim, she contends the action was timely.

B. Standard of Review

On appeal from a summary judgment, we review the record presented to the trial court de novo to determine whether there is a triable issue of fact and, if not, whether the moving party is entitled to a judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c); Gonzalez v. Mathis (2021) 12 Cal.5th 29, 39.) Where, as here, the defendants were the moving parties, we view the record in the light most favorable to the plaintiff by liberally construing the plaintiff’s evidence, strictly construing the defendants’, and resolving any doubts or ambiguities in the plaintiff’s favor. (Gonzalez, at p. 39; Knapp v. Ginsberg (2021) 67 Cal.App.5th 504, 525.) The “trial court’s stated reasons for granting summary judgment do not bind us; we review the court’s ruling, not its rationale.” (Citizens for Odor Nuisance Abatement v. City of San Diego (2017) 8 Cal.App.5th 350, 358.)

C. Legal Analysis

We begin with the governing law. “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.” (Code Civ. Proc., § 340.6, subd. (a), italics added.) This “time bar applies to claims whose merits necessarily depend on proof that an attorney violated a professional obligation in the course of providing professional services,” including claims alleging a breach of “fiduciary obligations” or of “the obligation to perform competently.” (Lee v. Hanley (2015) 61 Cal.4th 1225, 1236-1237.) It thus applies to Menagh’s professional negligence and breach of fiduciary duty claims. (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1121 (Prakashpalan); see fn. 1, ante.) Knowledge of circumstances sufficient to lead the client to suspect injury from a wrongful act or omission by the attorney starts the limitations period running. (Genisman v. Carley (2018) 29 Cal.App.5th 45, 50-51 (Genisman); McGee v. Weinberg (1979) 97 Cal.App.3d 798, 803 (McGee).) The limitations period is tolled, however, until the plaintiff sustains “actual injury.” (Code Civ. Proc., § 340.6, subd. (a)(1); Prakashpalan, at p. 1121.) Actual injury occurs when the plaintiff suffers any loss or injury legally cognizable as damages in an action based on the alleged wrongful act or omission of the defendant, whether or not the plaintiff recognizes or notices the injury. (Prakashpalan, at pp. 1121-1122.) The first actual injury attributable to the defendant’s wrongful act or omission ends tolling. (Sharon v. Porter (2019) 41 Cal.App.5th 1, 7 (Sharon).) Thus, if the plaintiff discovered or suspected the defendant’s wrongful act or omission and suffered a loss compensable by damages more than a year before commencement of the legal malpractice action, the action is time-barred.

Menagh’s own declaration and communications she sent show that she discovered or should have discovered Thorn’s alleged wrongdoing and that she lost money more than a year before she sued Thorn and his firm. On September 7, 2016, Menagh told her neighbors Thorn had not handled the slope repairs and related insurance claims in an acceptable way, and two days later she fired him. Menagh confirmed Thorn and his firm were no longer involved in the insurance coverage claims in a June 16, 2017 letter to her insurer. Although Menagh stated in her declaration that Thorn had previously advised her there was no insurance coverage for the claims, in the letter she insisted the insurer had a “responsibility” to “rectify” the neighbors’ claims and complained the insurer’s failure to do so required her to spend “exorbitant funds” on cleanup and repairs and had “driven [her] into poverty.” The reimbursement claim Menagh later submitted to her insurer listed more than $200,000 in expenses she had incurred by June 16, 2017, to remove debris from her neighbors’ properties and to repair the failed slope. Based on this evidence, any wrongful act or omission by Thorn occurred by September 9, 2016, when Menagh fired him and he stopped working on the slope repairs and related insurance claims. Menagh knew or at least suspected Thorn had done something wrong no later than June 16, 2017, by which time she had accused Thorn of mishandling the slope repairs, believed he had misadvised her about insurance coverage, had spent considerable sums on cleanup and repairs, and claimed to be “financially destitute.” Menagh did not sue Thorn and his firm, however, until September 6, 2018, after the one-year limitations period had expired. (See Code Civ. Proc., § 340.6, subd. (a).)

Menagh tries to avoid the limitations bar by focusing on the specific factual and legal basis of her malpractice action. In her reply brief, she describes the action “n a ‘nutshell’ ” this way: “Thorn negligently failed to advise his client Menagh, after the 2015 slope failure and after downslope neighbors . . . made third party property damage claims arising out of the 2015 slope failure, that Menagh’s . . . homeowner’s insurance policy could contain a ‘No Voluntary Payments’ condition, and if Menagh were to voluntarily pay for the repair of the slope, Menagh could be at risk of not being indemnified by [the insurer] for expenses to repair the slope.” Menagh argues that because Thorn never advised her of the condition, she “presumed all along” that her insurer would reimburse the cleanup and repair costs, and she neither had reason to suspect otherwise nor incurred any actual injury until the insurer invoked the condition to deny reimbursement on July 30, 2018. We disagree.

A plaintiff’s discovery of the specific legal theory on which to sue her attorney for malpractice is not required to commence the one-year limitations period. ([i]Croucier v. Chavos (2012) 207 Cal.App.4th 1138, 1146; McGee, supra, 97 Cal.App.3d at p. 803.) A plaintiff also “ ‘ “need not be aware of the specific ‘facts’ necessary to establish the claim; that is a process contemplated by pretrial discovery. Once the plaintiff has a suspicion of wrongdoing, and therefore an incentive to sue, she must decide whether to file suit or sit on her rights. So long as a suspicion exists, it is clear that the plaintiff must go find the facts; she cannot wait for the facts to find her.” ’ ” (Genisman, supra, 29 Cal.App.5th at p. 51.) As discussed earlier, Menagh suspected by June 16, 2017—more than a year before she sued Thorn and his firm—that he had mishandled the slope repairs and had misadvised her about insurance coverage, and by that time she alleged her payment of exorbitant repair costs had driven her into poverty. It matters not that Menagh was then ignorant of the no voluntary payments condition of her homeowner’s insurance policy, of the insurer’s potential reliance on the condition to refuse reimbursement, or of Thorn’s failure to advise her of the condition. Where, as here, the “plaintiff believes that someone has done something wrong because of the damages suffered by her, such a fact is sufficient to alert [the] plaintiff ‘to the necessity for investigation and pursuit of her remedies.’ ” (McGee, at p. 803; accord, Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 685.) In other words, Menagh needed to go find the facts; she could not wait for them to find her. (Genisman, at p. 51.)

Menagh’s presumption that her homeowner’s insurer would reimburse the cleanup and repair costs did not prevent accrual of actual injury and thereby toll the limitations period until the insurer denied her reimbursement claim. (See Code Civ. Proc., § 340.6, subd. (a)(1).) Actual injury occurs when the plaintiff sustains damages compensable in an action against the defendant for wrongdoing in the performance of professional services. (Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 751; accord, Prakashpalan, supra, 223 Cal.App.4th at p. 1121.) “[A]ctual injury may consist of impairment or diminution, as well as the total loss or extinction, of a right or remedy.” (Jordache, at p. 750; accord, Sharon, supra, 41 Cal.App.5th at p. 8.) Here, due to Thorn’s alleged failure to advise Menagh of the no voluntary payments condition of her homeowner’s insurance policy, she used her reverse mortgage to pay cleanup and repair costs and incurred interest charges on the mortgage. She therefore “lost profitable alternative uses for the substantial sums [she] paid in [those] costs.” (Jordache, at p. 744; see Sharon, at p. 9 [“ ‘lost time value of money’ ” constitutes actual injury].) Thorn’s alleged negligence also allowed the insurer “to raise an objectively viable defense to coverage under the polic[y]” and thereby “increased [her] costs to litigate [the] coverage claims and reduced those claims’ settlement value.” (Jordache, at p. 743.) Although the amount of Menagh’s losses was unknown until she settled her claim for bad faith denial of coverage, in determining when actual injury occurs for purposes of the statute of limitations, “the relevant consideration is the fact of damage, not the amount.” (Id. at p. 743.) Damage in fact from Thorn’s alleged failure to advise Menagh properly about insurance coverage occurred no later than June 16, 2017, when Menagh notified her insurer she had spent “exorbitant funds” on repairs and cleanup that she insisted the insurer should have paid for. (Cf. id. at pp. 752-753 [unpaid insurance benefits for defense costs, lost profits from diversion of funds to pay defense costs, and impairment of insurance contract rights by late tender of defense constituted actual injury].) Menagh’s ignorance that her payment of cleanup and repair costs constituted damage in fact while she was presuming her insurer would reimburse those costs did not forestall the accrual of actual injury. “[T]he statutory scheme does not depend on the plaintiff’s recognizing actual injury. Actual injury must be noticeable, but the language of the tolling provision does not require that it be noticed.” (Foxborough v. Van Atta (1994) 26 Cal.App.4th 217, 227; accord, Prakashpalan, at p. 1122 [“The fact of injury or damage need not be recognized or noticed by the plaintiff.”].) Menagh therefore suffered actual injury more than one year before she sued Thorn and his firm on September 6, 2018.

In sum, Menagh discovered or should have discovered Thorn’s wrongful act or omission and sustained actual injury more than one year before she sued him and his firm for legal malpractice. Her action was thus time-barred and the trial court correctly entered summary judgment against her.

III.

DISPOSITION

The judgment is affirmed.

IRION, J.

WE CONCUR:

McCONNELL, P. J.

HALLER, J.

[1] Willful and wanton negligence “describes conduct by a person who may have no intent to cause harm, but who intentionally performs an act so unreasonable and dangerous that he or she knows or should know it is highly probable that harm will result.” (City of Santa Barbara v. Superior Court (2007) 41 Cal.4th 747, 754, fn. 4.) It is an aggravated type of negligence, not a distinct cause of action. (Doe v. United States Youth Soccer Assn., Inc. (2017) 8 Cal.App.5th 1118, 1140; Sorensen v. Allred (1980) 112 Cal.App.3d 717, 725.)