A client’s failure to recover a substantial money judgment was actual injury sufficient to commence the statute of limitations on claims against a former attorney.
Anthony Chavos represented Jeff Croucier and David Moody in litigation against Sun Limousine Manufacturers and other individuals for breach of contract and fraud. Croucier and Moody obtained a default judgment of over one million dollars. Two years later Michelle Strickland substituted in as counsel for Croucier and Moody.
Strickland filed a second complaint against defendants from the first lawsuit and others alleging fraudulent conveyance of Sun Limousine and its assets. Croucier and Moody claimed the fraudulent conveyance caused them to incur attorneys’ fees, loss of credit, interest, and incidental expenses.
More than a year after Strickland substituted into the first case, Croucier and Moody filed a legal malpractice action against Chavos and his current and former law firms. Croucier and Moody claimed that Chavos failed to secure the judgment in the first lawsuit and that by the time of Strickland’s substitution Sun Limousine’s resources were no longer available.
The Court of Appeal affirmed the trial court’s ruling sustaining a demurrer on statute of limitations grounds, C.C.P. § 340.6. The earliest the statute of limitations could have commenced was when Strickland substituted into the first lawsuit, replacing Chavos as counsel of record. Croucier and Moody discovered Chavos’s alleged wrongful acts and omissions by the time they filed the second action for fraudulent transfer and began post-judgment discovery in the first action. These actions demonstrate that Croucier and Moody must have been aware that Chavos failed to undertake those activities.
By the time of Strickland’s substitution Chavos had failed to enforce the judgment in the first action for approximately two years. The transfer of assets from Sun Limousine impaired Strickland’s ability to enforce the judgment and represented actual injury.
The Court rejected Plaintiffs’ claim that the statute of limitations was tolled because the damages in the malpractice suit would necessarily be contingent upon whether, and to what extent, the judgment was enforceable during the Chavos representation and the Strickland representation. It acknowledged that the although the one million dollar uncollected judgment might not represent the amount of damages that would be awarded against Chavos in a legal malpractice action, actual injury does not depend on proof of the precise amount of damages incurred. Moreover, Plaintiffs’ efforts to remedy Chavos’ perceived shortcomings through the fraudulent conveyance action did not toll the statute of limitations because that action would neither “exonerate” Chavos, nor “extinguish” an action against Chavos. There is a difference between an actual, existing injury that might be remedied or reduced in the future, and a speculative or contingent injury that might or might not arise in the future.
Comment: This case provides a review of the current status of the law about commencement of the statute of limitations against an attorney. It clarifies the law regarding discovery of a cause of action, as well as when actual injury is incurred.