A California appellate court has reversed a summary judgment in favor of an attorney in a legal malpractice action. In Kachlon v. Spielfogel, a husband and wife (“lenders”) had loaned another couple (“debtors”) $53,000 in exchange for a promissory note in that amount, which was secured by a deed of trust. Thereafter, the lenders signed an agreement cancelling the promissory note and then re-conveyed the deed of trust in exchange for $12,000.
The lenders hired an attorney to file suit against the debtors for default on two additional loans. The lenders also maintained that they were still owed the deficiency on the promissory note, pursuant to an oral agreement. Based on the attorney’s advice, the lenders sought non-judicial foreclosure on the deed of trust, which resulted in the filing of three notices of default on the debtors’ property.
The debtors then sued the lenders for damages arising from the foreclosure proceedings, including attorney’s fees they incurred to clear title and the diminished value of the property. The lenders fired the attorney and hired two other lawyers to represent them in that case. Two years later, the debtors’ action resulted in the entry of judgment against the lenders in the amount of $500,000.
The lenders then sued the attorney for legal malpractice alleging that he had negligently advised them to initiate the foreclosure proceedings. The attorney successfully moved for summary judgment on the grounds that the claim was barred by a statute of limitations. The lenders appealed.
The appellate court reversed. Under California law, a legal malpractice claim must be filed within one year after the plaintiff discovers, or reasonably could have discovered, the attorney’s wrongful act or omission. This period is tolled until the plaintiff has sustained an actual injury. The attorney argued that an actual injury occurred upon the filing of the debtor’s action. The appellate court disagreed, finding that the mere exposure to liability does not constitute an actual injury. This only occurred when the adverse judgment was entered against them. Since the lenders brought the malpractice suit within three months of that date, their claim was not time barred.
Decision: Kachlon v. Spielfogel