Case Number: BC680349 Hearing Date: August 31, 2018 Dept: 56

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES – CENTRAL DISTRICT

JAMES EISMAN,

Plaintiff,

vs.

HAHN & HAHN LLP, SUSAN T. HOUSE, PALERMO, BARBARO, CHINEN & PITZER, LLP, RICHARD L. CHINEN, and DOES 1-100, inclusive,

Defendants.

CASE NO.: BC680349

[TENTATIVE] ORDER RE: DEMURRERS; MOTIONS TO STRIKE

8:30 a.m.

August 31, 2018

Dept. 56

This is an action arising from Defendants’ alleged professional negligence in providing estate planning services to the Plaintiff. On June 11, 2018, Plaintiff filed the operative Second Amended Complaint (“SAC”) alleging causes of action for (1) professional negligence, (2) professional negligence, (3) breach of fiduciary duty, (4) breach of fiduciary duty, and (5) fraud.

Demurrers

Defendants Hahn & Hahn, LLP, Susan T. House, Palermo, Barbaro, Chinen & Pitzer, LLP, and Richard L. Chinen demur to all causes of action on the grounds that such claims are time-barred and fraud is not particularly pled.

On January 26, 2018, the Court ruled on Defendants’ previous demurrers and found as follows:

Defendants demur to both causes of action on the ground that they are barred by the statute of limitations for legal malpractice under Code Civ. Proc. § 340.6(a). Under Section 340.6(a), a cause of action for legal malpractice 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.” However, this provision also states that “the period shall be tolled during the time that [t]he plaintiff has not sustained actual injury.”

The complaint alleges that Plaintiff retained Defendants to prepare an estate plan in 2013; Defendants advised Plaintiff regarding transmutation of his separate property into community property; Defendants prepared a transmutation agreement, which Plaintiff signed on 8/14/2013; Defendants prepared a related waiver agreement, which Plaintiff signed on 9/12/2013; Defendants prepared estate planning documents, which Plaintiff signed on 9/12/2013; and on 12/10/2013 Plaintiff transferred his separate property interests to his marital community. The complaint alleges that Defendants were negligent by failing to advise Plaintiff that there were other estate planning options besides transmutation of his separate property; failing to advise him of other options that would have protected him in the event of a divorce; and failing to advise him of the consequences of transmutation under the Family Code. The complaint also alleges that Plaintiff did not become aware of the damaging results of Defendants’ conduct until he became involved in a divorce proceeding on 10/20/2016.

The demurrer turns on the question of when Plaintiff suffered “actual injury” within the meaning of Section 340.6(a). Defendants contend “actual injury” occurred in 2013, when advice was given and the transmutation of Plaintiff’s separate property occurred; and the claims are barred because Plaintiff did not file the action until 10/20/2017, well beyond the period of limitations. Plaintiff contends “actual injury” did not occur until 10/20/2016, when his divorce proceeding caused him to suffer losses in the distribution of his marital property; and the filing was timely.

Defendants’ position is well -supported by the law. Under Section 340.6(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 Enterprises v. Brobeck, Phleger (1998) 18 Ca1.4th 739, 742-43. And “An existing injury is not contingent or speculative simply because future events may affect its permanency or the amount of monetary damages eventually incurred.” Id. at 754. Under circumstances similar to our case, courts have specifically held that “actual injury” occurs when an agreement dividing marital property is signed, because a married couple’s legal relations and property interests are altered at that point. See Radovich v. Locke-Paddon (1995) 35 Ca1.App.4th 946, 966; Hensley v. Caietti (1993) 13 Cal.App.4th 1165, 1175; Turley v. Woodbridge (1991) 230 Cal.App.3d 586, 593.

Plaintiff relies on Callahan v. Gibson, Dunn, & Crutcher LLP (2011) 194 Cal.App.4th 557, but that case is inapposite. Callahan case involved an attorney’s failure to include a succession plan in a partnership agreement. That failure did not involve an immediate change in property interests, as we have here. Instead, the plaintiffs’ property interests were not affected until the partnership dissolved because of the absence of a succession plan. Callahan itself recognized this distinction in discussing the holdings in Radovich and Hensley. Id. at 572.

Plaintiff also argues that he did not have reason to know of his injury until the marital dissolution action was filed in 2016. But under Section 340.6(a), an injury need not be recognized or noticed by the plaintiff. See Croucier v. Chavos (2012) 207 Cal.App.4th 1138, 1148; Foxborough v. Van Atta (1994) 26 Cal.App.4th 217, 227. And the fact that a plaintiff was ignorant of a legal remedy is irrelevant. See Worton v. Worton (1991) 234 Cal.App.3d 1638, 1650; Village Nurseries v. Greenbaum (2002) 101 Cal.App.4th 26, 42.

The demurrers by all Defendants are sustained, and the motions to strike are moot. Because Plaintiff contends he can amend his complaint to plead around the statute of limitations on other grounds, 20 days leave to amend is granted.

(January 26, 2018, Minute Order.)

On May 22, 2018, the Court sustained Defendants’ demurrers to the First Amended Complaint, again finding that the claims pled were time-barred.

On June 11, 2018, Plaintiff filed the SAC which asserts a new claim for fraud. The SAC’s first through fourth causes of action have also been amended to be additionally premised on a Waiver of Reimbursement and/or Ownership Interest (“Waiver”) signed by Plaintiff and provided by Defendants during the course of their representation. The Waiver states,

I, JAMIE ERIC EISMAN, hereby waive any and all rights to reimbursement to which I or any successors, heirs or beneficiaries of mine, may be entitled to as a result of: the payment of community obligations (In re Marriage of Epstein (1979) 24 Ca1.3d 76) or the payment of the separate obligations of my wife, HOLLY HUNNEWELL, including, but not limited to, mortgage, home improvements, entertainment, travel, food, clothing, and all other living expenses; and the use of my separate property contributed towards the acquisition or improvement of community property (Family Code section 2640) or my wife’s separate property, and decisions and statutes of similar import. Any such payment and/or contribution towards such expenses, including the acquisition or improvement of community or separate property from my separate property or my portion of community property, are intended to be a gift from my separate property or my share of community property to my wife, HOLLY HUNNEWELL.

(SAC, Exhibit C.) Plaintiff alleges that Defendants intentionally concealed advice pertaining to the effect of the Waiver and made intentional misrepresentations which would be contrary to its effect. Plaintiff contends that because he pleads fraud, Code Civ. Proc. § 340.6 is no longer applicable as that statute, by its plain language, does not pertain to “actual fraud.” Plaintiff also argues that the Waiver did not cause injury until his dissolution proceedings such that his claims are not time-barred under any applicable statute of limitations.

“The limitations period commences when the cause of action accrues.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal. App. 4th 1308, 1317.) “Generally speaking, a cause of action accrues at the time when the cause of action is complete with all of its elements.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal. 4th 797, 806 (internal quotation marks omitted).) Here, the Waiver caused injury when Plaintiff signed it on September 12, 2013, and forfeited his substantive rights and converted his contributory payments to a “gift.” (SAC, Exhibit C.) Thus, this is when all of Plaintiff’s causes of action accrued.

Plaintiff argues that he could not have discovered Defendants’ fraud until his dissolution proceeding. Code Civ. Proc. § 338(d) states that a claim for fraud “is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” “This discovery element has been interpreted to mean the discovery by the aggrieved party of the fraud or facts that would lead a reasonably prudent person to suspect fraud.” (Doe v. Roman Catholic Bishop of Sacramento (2010) 189 Cal. App. 4th 1423, 1430 (internal quotation marks omitted).) “The discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action. . . . In other words, plaintiffs are required to conduct a reasonable investigation after becoming aware of an injury, and are charged with knowledge of the information that would have been revealed by such an investigation.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal. 4th 797, 807–08.)

Here, Plaintiff had inquiry notice of Defendants’ fraud when he signed the Waiver on September 12, 2013, as it was one page and its effect was allegedly contradictory to what had been said by Defendants. (SAC ¶¶ 70-78.) Thus, Plaintiff’s fraud claim accrued on September 12, 2013.

Plaintiff cites to Brown v. FSR Brokerage, Inc. (1998) 62 Cal.App.4th 766 (“Brown”) to argue that his execution of the Waiver did not equate to inquiry notice or actual knowledge; however, Brown did not pertain to inquiry notice or even the statute of limitations.

As to malpractice, under Code Civ. Proc. § 340.6(a) an injury need not be recognized or noticed by the plaintiff (see Croucier v. Chavos (2012) 207 Cal.App.4th 1138, 1148; Foxborough v. Van Atta (1994) 26 Cal.App.4th 217, 227), and the fact that a plaintiff was ignorant of a legal remedy is irrelevant. (Worton v. Worton (1991) 234 Cal.App.3d 1638, 1650.)

Because Plaintiff’s claims accrued on September 12, 2013, they were time-barred when Plaintiff filed the Complaint on October 20, 2017, under any applicable statute of limitations, including Code Civ. Proc. §§ 338, 340.6. Accordingly, the Demurrers are SUSTAINED. Because Plaintiff has demonstrated that he cannot remedy the statute of limitations bar by amendment, the Court denies leave to amend.

Motions to Strike

Defendants’ Motions to Strike are DENIED as moot given the ruling on the Demurrers above.

Defendants are ordered to give notice of this ruling.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Dated this 31st day of August 2018

Hon. Holly J. Fujie

Judge of the Superior Court