California Court of Appeals, Fourth District, First Division
Pub. Order 10/28/13
APPEAL from a judgment of the Superior Court of San Diego County 37-2010-00090600-CU-PN-CTL, Frederick L. Link, Judge.
Law Offices of Martin N. Buchanan, Martin N. Buchanan; Coughlan, Semmer, Fitch & Pott, R. J. Coughlan, Jr., and Cathleen G. Fitch for Defendant and Appellant.
Wolfe Legal Group, Deborah A. Wolfe and Lann G. McIntyre for Plaintiffs and Respondents.
Dennis Wise and Joan Macfarlane (together the Wises) were represented by the law firm, defendant DLA Piper LLC (US),  that aided them in obtaining a judgment in 1994 against William Cheng. However, DLA did not advise the Wises of the necessity to renew the judgment, and after 2004 the judgment became unenforceable. The Wises brought this action alleging malpractice and obtained a judgment against DLA. On appeal, DLA contends the evidence is insufficient to support the judgment against it because there was no evidence the Wises' judgment against Cheng would have been collectable even had it been renewed. DLA also contends on appeal (1) there was no substantial evidence the statute of limitations on the malpractice claim had been tolled by continuous representation, (2) the special verdict form was fatally flawed because it did not submit to the jury the issue of whether there had been continuous representation within four years of filing the complaint, and (3) even assuming the judgment as to liability and damages was proper, there was no legal basis for the award of attorney fees against DLA. We do not reach these contentions because of our conclusion that there was no substantial evidence the judgment against Cheng was collectable.
A. DLA's Representation of the Wises in the Cheng Matter
In 1987, the Wises loaned $350, 000 to Cheng, who signed two promissory notes. However, Cheng defaulted on the notes, and later filed for bankruptcy.
The Wises retained their attorney, Robert Copeland, for assistance. Copeland, a DLA attorney, referred the matter to Mr. Breslauer (a fellow DLA attorney) to handle the bankruptcy issues. DLA filed a complaint in the bankruptcy court contesting the dischargeability of the debt owed by Cheng, alleging the loans were intended to be used for Cheng's business but Cheng had embezzled the money for his own use. The Wises and Cheng ultimately settled the complaint, with Cheng agreeing (1) to reaffirm the debt, (2) to commence making payments on the new obligation commencing in mid-1994, and (3) to stipulate that a judgment be entered against Cheng in state court in the event he defaulted on his new payment obligations.
Cheng made no payments on the debt. Accordingly, DLA obtained a state court judgment against Cheng, entered on August 1, 1994, for $605, 184.50. DLA attorney Breslauer, who represented the Wises in obtaining the judgment, told them "we have got this judgment, it's good forever, until the cows come home." Breslauer also told the Wises "[w]e will keep our ears to the ground" and "we can come back and bring in Mr. Cheng for examinations from time to time, every six months, or surely once a year, if we want, just for harassment purposes even, if you want to." However, DLA did not inform the Wises the judgment would become invalid if not renewed within 10 years.
In 1994, DLA pursued collection efforts but determined Cheng was "dead broke, " and a report from an asset search firm reported Cheng had no assets, had numerous other creditors, had been sued in numerous other proceedings, and had state and federal tax liens filed against him. Breslauer sent the asset search report to the Wises, and stated that if they were aware of any banking relationships not reflected in the report, they should contact Breslauer and DLA would "follow up." The Wises did not ask DLA to do anything further to collect the judgment, because there was nothing else to do unless something new came up.
Copeland left DLA in mid-1995 and took some of the Wises' matters with him to his new firm. However, the Wises instructed that the Cheng bankruptcy issues were to remain with Breslauer at DLA. When Breslauer left DLA at the end of 1995, the Cheng bankruptcy matters apparently remained with DLA, because DLA attorney Rubin wrote to the Wises in April 1996 explaining the status of the Cheng bankruptcy and told them they would receive a final distribution check later in the year, and that the "remainder of your judgment will survive this bankruptcy and is enforceable against Cheng's post-bankruptcy assets." Rubin stated she would "continue to monitor this case" but told the Wises "it is likely you will not receive any further notices except the one to allow the creditor distribution."
In late 1996, DLA attorney Zander sent a letter to the Wises enclosing a check from the bankruptcy trustee for $21, 578.63, "representing the final distribution on your claim in the [Cheng] bankruptcy case." DLA sent no further bills to the Wises on the Cheng matter, although Rubin did send another letter to them in March 1998 that enclosed a small check from the bankruptcy trustee and stated "[a]pparently, this is the final distribution.... Give me a call if there is anything else we can do for you."
The Wises had no further contact with DLA until 2009. Although DLA closed the Cheng file administratively, DLA did not notify the Wises it had ceased representing them.
B. Subsequent Events
The Wises divorced in 1998. When dividing their marital assets, they contacted Copeland at his new firm to help accomplish the division and assignment of the Cheng judgment, with each receiving one-half. Copeland's new firm appeared as counsel of record for the Wises in the state court lawsuit in which the judgment against Cheng had been obtained and accomplished the division and assignment later in 1998. Copeland did not advise the Wises of the need to renew the judgment within 10 years.
In 2004, the judgment expired as a matter of law. At trial, DLA stipulated its representation of the Wises fell below the standard of care because it did not inform them of the need to renew the judgment or calendar the 10-year expiration date on the judgment. In 2009, the Wises discovered the judgment had been allowed to ...