Case Name: Bohlin v. Poyner, et al.
Case No.: 18CV321836

Defendants Roger Winton Poyner and Poyner & Poyner LLP (collectively, “Poyner” or “Defendants”) demur to the First Amended Complaint (“FAC”) filed by plaintiff Bernard David Bohlin (“Plaintiff”).

I. Factual and Procedural Background

This is an action for legal malpractice. According to the allegations of the FAC, on December 11, 2006, Plaintiff and his former wife, Sandra, hired Poyner to draft certain estate planning documents, including the Bohlin Family Living Trust. (FAC, ¶ 5.) In exchange for drafting these documents, Plaintiff and his then-wife paid Poyner the sum of $1,450. (Id.) On December 7, 2007, Plaintiff and Sandra executed various estate planning documents executed by Poyner including a document entitled “Community Property Statement Transmutation Agreement” (the “Transmutation Agreement”), which purportedly transmuted one-half of Plaintiff’s right, title and interest in various real property to Sandra. (Id., ¶ 6.) In the preparation of the estate planning documents, Poyner jointly represented Plaintiff and Sandra and owed a duty of care and loyalty to both. (Id., ¶ 7.) Prior to the execution of the aforementioned documents, Plaintiff was the sole owner of all right and title to various real properties located in Sunnyvale and San Jose. (FAC, ¶ 8.)

Poyner ultimately failed to exercise its obligations to Plaintiff under the various contracts for legal services by: failing to obtain a waiver of conflict as between Plaintiff and Sandra; failing to properly advise Plaintiff of the effects of the Transmutation Agreement; failing to properly go over the various documents being signed by Plaintiff and specifically advising him that he was gifting over 50% of his separate property assets; and failing to advise Plaintiff that he should seek independent legal counsel before signing any transmutation agreements. (FAC, ¶ 11.) Plaintiff was merely instructed to sign the foregoing documents without any opportunity to review them and without any advice as to what he was signing. (Id., ¶ 12.)

Plaintiff filed his initial complaint on January 16, 2018, asserting claims for professional negligence, breach of fiduciary duty and negligent infliction of emotional distress based on Poyner’s alleged failures, which purportedly caused Plaintiff to lose right, title and interest in certain real properties. Within a year of filing this complaint, Plaintiff discovered for the first time that he had signed the Transmutation Agreement and that actually suffered harm when he realized it might be enforceable. (FAC, ¶ 13.) The Transmutation Agreement became an issue within that time because Plaintiff and Sandra initiated proceedings to dissolve their marriage. (Id.) A complaint has been filed to determine the enforceability of the Transmutation Agreement which has required the retention of legal counsel. (Id.)

Plaintiff filed the FAC on October 1, 2018, asserting claims for (1) breach of contract and (2) professional negligence. On November 6, 2018, Defendants filed the instant demurrer to both of the claims asserted in the FAC on the ground of failure to state facts sufficient to constitute a cause of action. Plaintiff opposes the motion.

II. Demurrer

In demurring to the claims asserted in the FAC, Poyner maintains that both are barred by the applicable statute of limitations, i.e., Code of Civil Procedure section 340.6 (“Section 340.6”), which specifies the limitations period for attorney malpractice claims. Although the first cause of action is for breach of contract, the same limitation period applies to this claim as the second because its merit necessarily depends on Poyner’s alleged violation of a professional obligation while providing professional services. (See Lee v. Hanley (2015) 61 Cal.4th 1225, 1229.)

Such an action must be filed “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).) However, the limitations period is tolled under specified circumstances, including, as relevant here, until the plaintiff has sustained an “actual injury.” (Code Civ. Proc., § 340.6, subd. (a)(1).) The parties disagree sharply over when Plaintiff sustained actual injury as a result of Poyner’s alleged malpractice, with Defendants arguing that such injury occurred on December 7, 2007, the date upon which Plaintiff executed the Transmutation Agreement gifting 50% of his separate real property to Sandra. In contrast, Plaintiff maintains that he did not sustain actual injury until he incurred legal fees defending against enforcement of the Transmutation Agreement in the dissolution proceedings, thereby making his claims in this action timely.

“There is no bright-line rule to apply in determining when actual injury has occurred within the meaning of section 340.6. [Citation.] Instead, actual injury issues require examination of the particular facts of each case in light of the alleged wrongful act or omission.” (Truong v. Glasser (2009) 181 Cal.App.4th 102, 111 [internal quotations omitted].) Determining when actual injury has occurred is predominantly a factual inquiry, but when material facts are undisputed, the determination may be resolved as a question of law. (Id.; Jordache v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 751 (“Jordache”).) In Jordache, the leading Supreme Court decision on the analysis of actual injury in this context, the court explained that “[a]actual injury occurs when the client suffers any loss or injury legally cognizable as damages in a legal malpractice action based on the asserted errors or omissions ….” (Jordache, 18 Cal.4th at 743.) Defendants argue that the weight of relevant authority, including Jordache, clearly supports their assertion that Plaintiff incurred actual injury at the time he executed the Transmutation Agreement and not when he incurred legal fees to defend against its enforcement.

Indeed, California courts have repeatedly held that when parties execute documents that change the character of property from separate to community, actual injury takes place at the time of execution and not when a party seeks enforcement of the document. For example, in Radovich v. Locke-Paddon (1995) 35 Cal.App.4th 946, the court concluded that actual injury, for the purposes of the commencement of the limitations period provided by Section 340.6, occurred at the time an engaged couple signed a prenuptial agreement, even though the husband only experienced the effects of the agreement (specifically, the relinquishment of any community property rights) upon his wife’s death over 30 years later. The court summarized its holding thusly: “[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.” (Radovich v. Locke-Paddon (1995) 35 Cal.App.4th 946, 979.) The plaintiff’s discovery of the wrongdoing was deemed unnecessary to finding actual injury. (See also Croucier v. Chavos (2012) 207 Cal.App.4th 1138, 1148.) The court explained that the plaintiff’s loss of his community property interest caused an immediate injury, though not yet realized, because having such an interest “would have been of real and immediate benefit” to him throughout the entirety of his marriage. (Id. at 590.) Comparable conclusions have been reached in Hensley v. Caietti (1993) 13 Cal.App.4th 1165 [holding that client suffered actual injury, sufficient to state statute of limitations running under Section 340.6, when she entered into purportedly unfavorable marital settlement agreement at the inducement of her attorney] and Turley v. Wooldridge (1991) 230 Cal.App.3d 586 [holding that client alleging malpractice suffered actual injury from allegedly unequal community property division when she executed marriage termination agreement rather than six months after entry of final dissolution of marriage when error associated with agreement became irremediable].)

In light of the foregoing, the Court finds that in the instant action, upon the execution of the Transmutation Agreement, Plaintiff immediately suffered the loss of his separate property, an interest that also would have been of real benefit to him during his marriage. Consequently, Plaintiff suffered actual injury in December 2007 when the agreement was executed and not when he incurred attorney’s fees in challenging its enforceability.

A recent federal district court decision cited by Defendants, Thompson v. Massarweh (N.D. Cal. 2017) 2017 WL 5641213, rejected the exact same allegation of injury, i.e., when legal fees were incurred in efforts to remedy the effects of the alleged malpractice, as asserted by Plaintiff in the case at bar. In Thompson, the plaintiff and his then-wife retained an attorney to execute an estate plan in August 2005. One of the documents in that plan transmuted all of their property to community property. Ten years later, the wife filed for divorce, with the family court finding the transmutation agreement enforceable. The husband filed a malpractice action against his counsel alleging that he failed to advise him of the legal effect of the document, i.e., that it would extinguish his separate property rights. After a thorough review of the relevant California cases (i.e., Radovich, Turley and Hensley), the court rejected the plaintiff’s assertion that actual injury did not occur until he learned during the dissolution proceedings in 2016 that the estate documents negatively affected some of his claims. The plaintiff was held to have incurred actual injury as soon as the transmutation agreement was executed. The instant action is factually indistinguishable from Thompson.

In his opposition, Plaintiff explains that the decision in Thompson is not binding authority and argues that in any event, the court’s decision was wrong. While Plaintiff is correct that this decision is not of any precedential value, it may be used by the Court as persuasive authority, and in making the bald assertion that the decision is wrong, Plaintiff notably fails to address the binding California cases upon which the Thompson court relied in making its decision.

In a further effort to rescue his claims, Plaintiff also suggests that subsection (b) of Section 340.6 applies; this subsection provides that:

In an action based upon an instrument in writing, the effective date of which depends upon some act or event of the future, the period of limitations provided for by this section shall commence to run upon the occurrence of that act or event.

Plaintiff asserts that the effective date of the estate planning documents executed by Defendants, including the Transmutation Agreement, would be “upon the death of the trustors under any living or revocable trust or upon such acts as to make the estate plan irrevocable,” or alternatively, “when one party asserts their rights in real property contrary to that of the other party in an adversary proceeding.” (Plaintiff’s Opp. at 7:4-8.) These assertions are completely without merit as the effect of the Transmutation Agreement- Plaintiff’s losing his separate interests in numerous real properties- was immediate. Plaintiff has pleaded no facts which establish that the document was subject to any sort of contingency or qualification that delayed its effect and does not suggest that he could amend his pleading to include such allegations.

In short, with Plaintiff having suffered actual injury in December 2007, his claims would have had to have been asserted by December 2011 in order to be timely. As they were not asserted until 2017, they are clearly time-barred. Accordingly, Defendants’ demurrer to the first and second causes of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.