Friday, May 25, 2012
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Court Revives Legal Malpractice Suit Over Trust Documents
Panel Says Trial Judge Calculated Limitations Period Incorrectly, Clarifies ‘Actual Injury’ Rule
By KENNETH OFGANG, Staff Writer
The time in which a client could sue the attorneys who drew up trust documents, which the client said were negligently drawn—as a result of which he was forced to share the trust assets with his ex-wife—did not commence to run until the divorce was finalized, this district’s Court of Appeal ruled yesterday.
Div. Three reinstated Ken Shifren’s suit against Randy M. Spiro and Spiro & Altshuler. Justice Richard Aldrich, writing for the court, said Los Angeles Superior Court Judge John Kronstadt—now a U.S. district judge—erred in concluding that the limitations period began to run no later than the date Shifren incurred attorney fees in the dissolution action related to the dispute over the validity of the trust documents.
“In this case,” Aldrich wrote, “we conclude the allegations of attorney error arising from the preparation of the trust documents required a resolution of the marriage dissolution action to establish that Attorneys breached a duty of care owed to Shifren and to establish the consequences of Attorneys’ error.
Family Trust
The court explained that in 1988, Shifren and his wife drew up a family trust, in the process signing a transmutation agreement. The agreement provided that all of the property they then owned, and everything they subsequently acquired during the marriage, was to be community property—even if acquired by gift or inheritance.
In 2001, the Shifrens hired Spiro and his firm to draw up an amendment to the trust. The purpose of the amendment was to permit Shifren’s mother to transfer her majority ownership of a commercial property in Los Angeles to Shifren as his sole and separate property.
The firm prepared an amendment, annulling the previous statement of the trust and replacing it with new language, including a provision that:
“All property now or hereafter conveyed or transferred to the Trustee...which was at the date of such conveyance or transfer community property or quasi-community property of the Trustors, or the separate property of either Trustor shall remain the community property or quasi-community property of the Trustors, or the separate property of either Trustor as it was before such conveyance or transfer....”
Wife’s Divorce Action
Shifren’s mother transferred the commercial property to him in 2002. He and his wife separated in 2006, and Barbara Shifren filed for divorce.
Among the allegations made in the divorce was that the amendment prepared by Spiro’s firm did not supersede the transmutation agreement. Kronstadt agreed, entering a judgment in August 2009 that treated the transferred interest in the commercial property as community property.
Shifren filed his malpractice suit in December 2009. The defense moved for summary judgment, claiming that Shifren knew or should have known of the malpractice no later than 2007.
The limitations period in legal malpractice cases is four years from the date of the error or omission, or one year from when it was or should have been discovered by plaintiff, whichever is sooner.
Aldrich, however, wrote yesterday that the suit was timely under Code of Civil Procedure Sec. 340.6(a)(1), which tolls the statute “during the time that...[t]he plaintiff has not sustained actual injury.”
‘Actual Injury’
The justice cited the “actual injury” analysis of Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, which held that actual injury does not occur until the client suffers legally cognizable damages recoverable in a malpractice suit. Shifren, Aldrich said, suffered no such damages until the judge in the dissolution action ruled that the trust amendment did not supersede that transmutation agreement; up until that point, the justice explained, “Shifren could have prevailed, and [the defendants] would have been vindicated.”
Instead, the jurist went on to say, “Shifren suffered actual injury in 2009 when the court rendered its decision that the 2001 trust did not terminate the transmutation agreement” and he consequently “lost his separate property interest in the Olympic Property.”
Attorneys on appeal were Warren Nemiroff for the plaintiff and Cindy A. Shapiro, James J. Kjar and Evan N. Okamura of Reback, McAndrews, Kjar, Warford & Stockalper for the defendants.
The case is Shifren v. Spiro, 12 S.O.S. 2544.
Copyright 2012, Metropolitan News Company