Filed 4/30/20 Buda v. May CA1/5

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

CECILY BUDA,

Plaintiff and Appellant,

v.

JOHN MAY,

Defendant and Respondent.

A155597

(Contra Costa County

Super. Ct. No. CIVMSC1700327)

Cecily Buda (Buda) appeals a judgment of dismissal after the trial court sustained a demurrer to her second amended complaint (SAC) without leave to amend. The SAC asserted causes of action against attorney John May (May) for fraud and concealment relating to his representation of Buda. The court sustained May’s demurrer because Buda could not allege she justifiably relied to her detriment on May’s conduct. We affirm.

FACTUAL AND PROCEDURAL HISTORY

Buda and her former husband separated in 2004. After a long and contentious dissolution proceeding, the Contra Costa County Superior Court entered a judgment in June 2012. In late 2014, Division Three of this court filed an opinion reversing the judgment in part, affirming it in part, and remanding for further consideration of certain issues. (In re Marriage of Buda (Nov. 18, 2014, mod. Dec. 3, 2014, A136564) [nonpub. opn.].)

I. Buda’s Malpractice Complaint
II.
In February 2017, Buda filed a legal malpractice action against May, the attorney who represented her in the divorce case. In her original complaint, Buda alleged May was professionally negligent by, among other things, mishandling a claim regarding her separate ownership of an apartment building, by addressing the issue in family court rather than as a separate civil matter, and by mishandling a title insurance company’s obligation to defend and indemnify Buda regarding the title dispute. May was not served with a copy of Buda’s original malpractice complaint.

III. Buda’s First Amended Complaint
IV.
In September 2017, Buda filed a first amended complaint (FAC) against May, adding a cause of action for misrepresentation and concealment. This complaint alleged that, in the family law matter, May recommended that Buda hire a forensic accountant, Leslie Dawson, but May did not instruct the accountant properly, and Buda was required to hire a new accountant to correct Dawson’s errors. As a result of May’s alleged malpractice, Buda claimed her fees and bills in the family law case were higher than they should have been. Buda also alleged she informed May she intended to sue the accountant and May did not object or indicate he would not testify against Dawson. In “the first quarter of 2016,” May indicated for the first time that he would not testify against Dawson.

May demurred to the FAC, and the court sustained it. Based on the statute of limitations, the court sustained the demurrer to the first and second causes of action for legal malpractice and breach of fiduciary duty without leave to amend. The court explained that the divorce case ended in June 2012, May ceased representing Buda in January 2013, and, the court took judicial notice of the fact that on May 5, 2015, May sued Buda “for unpaid legal fees.” On August 4, 2015, Buda answered her former attorney’s complaint asserting affirmative defenses, including May’s “ ‘negligence, carelessness and fault’ in the underlying dissolution action.” Thus, no later than August 2015, Buda had information sufficient to put her on “ ‘inquiry notice’ ” regarding her right to pursue a malpractice claim against her former attorney. Because Buda failed to file the action within one year from this date, or within four years from the end of the divorce case, her legal malpractice and breach of fiduciary duty causes of action were barred by the one-year or four-year provisions in Code of Civil Procedure section 340.6.

With regard to her third cause of action for misrepresentation and concealment, the court sustained the demurrer with leave to amend. The court required Buda “to state specific facts and allegations necessary to state a cause of action for fraud and the specifics of her ‘discovery’ of the fraud.”

V. Buda’s Second Amended Complaint
VI.
In her SAC, Buda asserted two causes of action for fraud and concealment. Buda alleged May represented that Dawson was “capable,” “competent,” “experienced [at] providing testimony at trial,” and “qualified

to evaluate the family law and financial issues” in the divorce proceeding. However, May did not have “an adequate basis for” making these representations because the accountant “mishandled the matter . . . and . . . lacked trial experience.” According to Buda, her attorney “intentionally mislead her” regarding Dawson’s qualifications and trial experience.

When Buda advised her attorney that the accountant “had erred in providing expert services,” May “did not state that [Buda] was mistaken or otherwise incorrect in her perception, or that [he] disagreed with her statements, but rather acquiesced, thereby leading her to believe [he] shared the opinion.” In late 2011 and 2012, Buda told May she was “pursuing” Dawson for damages, and she informed May she would use her “ ‘recovery’ ” from the accountant to pay the attorney’s bill. Buda also sought to recoup fees from Dawson for work that another accountant was required to “ ‘do over.’ ”

Buda pursued litigation against “the errant expert” with “the expectation” that May would testify against Dawson. May led Buda to believe that he would “confirm the errors in court.” Based on a number of discussions Buda had with the attorney and his agents between 2012 and 2015, Buda anticipated May would testify regarding the accountant’s errors. The attorney misled Buda “by his silence.”

In the spring of 2016, May indicated for the first time that he “would not so testify as [Buda] had been led to believe.” “It was not until this time that [Buda] realized . . . [May] concealed the true facts” regarding his “willingness to testify.” Buda relied to her detriment on May’s misrepresentations and concealments because they prevented Buda from “filing an action” against the attorney “within the time provided by law.” Buda believed May “engaged in the conduct complained of to retain . . . fees,” to “prevent having to repay Ms. Buda for fees she already paid which were not properly earned and charged, and to prevent her from disputing further fees that were excessive and improper.”

May demurred to the SAC. The court sustained the demurrer without leave to amend finding the SAC was devoid of allegations to support the element of detrimental reliance. As explained by the court, there was no allegation that Buda would not have pursued her claim against Dawson if she had known earlier that her attorney would not testify against the accountant. “The most she has (or likely) could allege is that she received less in the Dawson action than she would have received if May had testified. This is entirely conclusory and speculative.”

Buda also alleged that her attorney’s “deceit impeded her and her counsel from timely filing a malpractice action.” The court determined this allegation concerned “whether there were reasons for filing a late malpractice action against May. This court has already decided this issue on the prior demurrer. . . . [¶] Since this is the second time that [Buda] has attempted to state a fraud claim, the court should sustain the demurrer without leave to amend.”

In August 2018, the court entered judgment in favor of May and against Buda. Buda appeals.

DISCUSSION

On appeal, Buda argues she can successfully allege causes of action against her former attorney for fraudulent concealment and legal malpractice. We disagree.

I. Standard of Review
II.
On review of an order sustaining a demurrer, “we examine the complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory, such facts being assumed true for this purpose.” (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded, and matters of which judicial notice has been taken. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) We construe the pleading in a reasonable manner and read the allegations in context. (Ibid.) However, we do not assume the truth of “contentions, deductions or conclusions of law.” (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.) It is an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable probability that the defect can be cured by amendment. (Schifando v. City of Los Angeles, at p. 1081.)

III. Buda Cannot Plead Fraudulent Concealment
IV.
“ ‘[T]he elements of an action for fraud and deceit based on concealment are: (1) the defendant must have concealed or suppressed a material fact,

(2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as [s]he did if [s]he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.’ ” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 748.)

“[F]raud must be pled specifically; general and conclusory allegations do not suffice.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) In actions alleging fraud or deceit, plaintiffs must plead reliance, and “specific pleading is necessary to ‘establish a complete causal relationship’ between the alleged misrepresentations and the harm claimed to have resulted therefrom.” (Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1092.) In cases of fraud by omission, the plaintiff must establish that “had the omitted information been disclosed, [he or she] would have been aware of it and behaved differently.” (Id. at p. 1093.)

We focus on justifiable reliance and whether Buda can allege that May’s conduct caused her harm. In the SAC, Buda alleged that May concealed his unwillingness to testify against Dawson “in an effort to mislead [Buda] into not filing an action . . . [against May] within the time provided by law.” But the trial court took judicial notice of the fact that May had already sued Buda for unpaid legal fees in May 2015, and, in August 2015, Buda asserted affirmative defenses against May for “ ‘negligence, carelessness and fault.’ ” Thus, no later than August 4, 2015, Buda “knew of [May’s] negligence, carelessness and fault because she affirmatively pled those defenses . . . . Therefore, both the four and the one year provision(s) of CCP 340.6 had run.”

We agree with the trial court. A malpractice claim must be brought within four years of the wrongdoing or within one year of discovery of facts that would put the client on inquiry notice. (§ 340.6, subd. (a).) Inquiry notice exists when “plaintiffs have reason to at least suspect that a type of wrongdoing has injured them.” (Fox v. Ethicon Endo-Surgery, Inc. (2005)

35 Cal.4th 797, 807.) “ ‘Once the plaintiff has a suspicion of wrongdoing, and therefore an incentive to sue, she must decide whether to file suit . . . .’ ” (Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 685.)

Here, no later than August 2015, Buda had information sufficient to put her on inquiry notice regarding May’s alleged malpractice, but she did not sue May until over a year later, in February 2017.

On appeal, Buda argues that May’s concealment of his unwillingness to testify against Dawson left her without “time to find another expert” in her lawsuit against the accountant (the Dawson action). More specifically, Buda argues that May informed her that he would not testify against Dawson “shortly before the 50 day expert disclosure deadline in her suit against Dawson,” which left her “without an expert to testify on her behalf against Dawson.”

May responds that we should not consider this argument because Buda makes it for the first time on appeal. We disagree with May’s claim that we cannot consider the argument. Nevertheless, on the merits, we reject Buda’s argument. In the SAC, Buda alleged she hired a “new accountant [to] do over” the work that Dawson mishandled. In the Dawson action, Buda alleged she hired Stanley C. Pollock to correct Dawson’s errors, and that Pollock began his review of Dawson’s accounting in August 2009. In her issue conference statement filed in the Dawson action in June 2016, Buda identified Pollock as a witness who would testify on her behalf regarding “the work performed by Dawson and its adequacy, the corrections and redoing [of] the work improperly done and the fees and costs involved.” Buda’s identification of Pollock as a potential witness undermines her contention that May’s silence left her “without an expert to testify on her behalf against Dawson.”

Next, Buda argues that without May’s testimony in the Dawson action, Buda’s “recovery from Dawson was substantially reduced,” and “[a] smaller recovery against Dawson ensued.”

Buda’s argument fails; her allegations are insufficient to state a cause of action for fraudulent concealment. We take judicial notice of the fact that Buda settled her action against Dawson in June 2016. Buda does not argue she would not have sued Dawson if May had not concealed his unwillingness to testify against Dawson, nor is it clear that Buda would have been better off if she did not settle the Dawson action. Buda only speculates that May’s refusal to testify on her behalf “substantially reduced” her recovery against Dawson, especially given that the Dawson action settled on terms that were favorable to Buda. Buda provides no allegation or argument supporting a reasonable inference that May’s late disclosure of his unwillingness to testify against Dawson caused her to settle the case for less than she would have otherwise obtained. (Agnew v. Parks (1959) 172 Cal.App.2d 756, 768 [“fraud without damage is not actionable”].)

Relying on Adams v. Paul (1995) 11 Cal.4th 583, Buda contends that “impairment or reduction of one’s claim may comprise actual injury.” Adams addressed “the ‘classic’ missed statute situation, in which the attorney negligently fails to file the underlying lawsuit within the applicable

statutory period and does nothing further.” (Adams, at p. 589.) But here Buda does not argue May failed to timely file the divorce case; instead, she argues that May’s “non-disclosure until spring 2016 that he would not testify . . . impaired or reduced the amount of [Buda’s] claim against Dawson.” This claim—which concerns the amount of Buda’s recovery against Dawson—is speculative and Adams does not support it.

Buda also suggests that she relied to her detriment on the false impression created by May’s silence because it induced her to “wait” until after the Dawson action “to resolve [May’s] bill.” But May had already sued Buda for unpaid legal fees in May 2015. Buda fails to establish she justifiably relied to her detriment on May’s alleged silence.

V. Buda Cannot Plead Legal Malpractice or Breach of Fiduciary Duty
VI.
Buda argues her causes of action for legal malpractice and breach of fiduciary duty against May were timely. We disagree.

“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.” (§ 340.6, subd. (a).)

In a strained argument, Buda attempts to outline a cause of action

for breach of fiduciary duty: “by the time when [May] in March 2016

finally disclosed” he would not testify against Dawson, “the statute of limitations . . . [had run] on [Buda’s] legal malpractice claims against [May], which in turn allowed [May] to collect the inflated amount of his fees against [Buda].” Buda contends that May knew “she would wait until after [May] testified against Dawson to pay [May’s] fees,” and he made use of this confidential information to, essentially, run out the clock on the statute of limitations for her causes of action for professional negligence and breach of fiduciary duty.

These arguments are meritless. According to Buda, she first learned that May would not testify against Dawson in the spring of 2016. But Buda did not immediately file her malpractice action; instead, she waited until February 2017. By then, more than four years had passed since May allegedly mishandled the divorce case, and more than one year had passed since she asserted her affirmative defense in May’s action for unpaid fees. Based on the express language of section 340.6, Buda plainly fails to state allegations to support a timely malpractice cause of action.

Relying on Eisenbaum v. Western Energy Resources, Inc. (1990)

218 Cal.App.3d 314, and on the fiduciary relationship between Buda and

her former attorney, Buda claims the trial court “could not properly point . . . to inquiry notice as a basis for finding that the statute of

limitations had run.” Eisenbaum does not help Buda because it does not construe section 340.6, the statute of limitations in attorney malpractice actions, which expressly provides the action must be commenced within four years of the malpractice or within one year of being put on inquiry notice. (§ 340.6, subd. (a).) Nor do we discern any viable argument for tolling the statute of limitations, especially given Buda’s own assertion of May’s negligence and carelessness in August 2015.

Buda’s final argument is that May’s concealment of his unwillingness to testify against Dawson, which she did not discover until the spring of 2016, was itself a breach of his fiduciary duty to Buda and an act of professional negligence. But Buda fails to discuss or explain how she was harmed by May’s alleged concealment. As explained ante, it is too speculative to conclude that May’s alleged conduct caused Buda to settle the Dawson action for less than she otherwise would have. (Budd v. Nixen (1971) 6 Cal.3d 195, 200 [“The mere breach of a professional duty, causing only . . . speculative harm . . . does not suffice to create a cause of action for negligence.”]; In re Easterbrook (1988) 200 Cal.App.3d 1541, 1544 [complaint failed to state cause of action for legal malpractice; “damages may not be based upon sheer speculation or surmise”], disapproved on other grounds by People v. Romero (1994) 8 Cal.4th 728, 744, fn. 10.) We reject Buda’s suggestion that we can construe May’s “concealment . . . [as] an act of professional negligence.”

DISPOSITION

We affirm. May is entitled to costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1).)

 

_________________________

Jones, P. J.

WE CONCUR:

_________________________

Simons, J.

_________________________

Burns, J.

A155597