Tuesday, January 12, 2016
Court of Appeal Revives Suit Against Lawyers Over Alleged Mishandling of Trust Assets
By a MetNews Staff Writer
The statute of limitations in a trustee’s malpractice suit against the attorneys for a predecessor trustee was tolled while the firm still represented the previous trustee, the Fourth District Court of Appeal ruled yesterday.
Div. One reversed a San Diego Superior Court judge’s ruling in favor of DLP Piper LLP (US). Judge Joan M. Lewis said the tolling provision of Code of Civil Procedure §340.6(a)(2) did not apply because the plaintiff knew of the alleged malpractice and could have sued earlier, but the appellate panel disagreed.
The plaintiff, James C. Kelly, sued as trustee of the Beverly Snodgrass Clark Inter Vivos 1999 Separate Property Trust. He alleged in his complaint that although the trust instrument designated him to succeed as trustee upon the resignation of the settlor’s brother-in-law, which occurred in 2008, the settlor’s daughter, Rebecca Clark, took control of the assets and acted as trustee.
Clark, acting on DLA Piper’s advice, misappropriated assets, failed to pay taxes, and paid the law firm fees to which it was not entitled, causing $300,000 in losses to the trust, Kelly alleged. Clark ultimately resigned as trustee, and Kelly replaced her in that capacity on March 22, 2013.
Kelly further alleged that he had no access to trust assets or records before that date.
His complaint was filed Feb. 27, 2014, 11 months after Clark resigned but more than a year after he first claimed to be the successor trustee and learned of the alleged malpractice, Lewis concluded. She ruled that the filing occurred beyond the one-year limitation of §340.6 and the claim was time-barred.
But Justice Alex McDonald, writing for the Court of Appeal, said it made no difference when Kelly learned of the claim if DLA Piper was still representing Clark at the time. And the justice rejected DLA Piper’s claim that its representation of Clark “as trustee” ended when Kelly “took the position that he legally succeeded [Clark] as trustee and that she was no longer trustee.”
“It is immaterial whether Defendants ever represented Kelly in any capacity, simultaneously to Rebecca or otherwise. [U]nder California law, successor trustees stand in their predecessors’ shoes with respect to legal malpractice claims against the predecessors’ attorneys….Therefore, to avail of tolling under section 340.6, subdivision (a)(2), it is sufficient for Kelly to plead that Defendants continuously represented Rebecca as trustee through February 27, 2013, one year before Kelly filed suit. Kelly does precisely that, alleging Defendants provided legal counsel to Rebecca through March 22, 2013, on issues relating to trust management.”
Documents attached to the pleadings, the jurist noted, support Kelly’s claim that DLA Piper continued to represent Clark “long after” Kelly tried to remove her.
The case is Kelly v. Orr, 16 S.O.S. 178.
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