Winding Creek v. McGlashan

George A. Barber, was the general partner of each of the plaintiff partnerships.^[1]

Identical agreements governed each of the plaintiff partnerships. As general partner, MBI exercised exclusive control over most aspects of partnership business, subject in some instances to voting rights of the limited partners. Of particular significance here, section 15.4 of the agreements allowed each partnership, at the discretion of the general partner, to loan funds from its contingency reserve account subject to the following conditions: “a. Such loan or hypothecation will not impair the ability of the Partnership to meet contingencies and obligations; and HO b. Such loan is fully secured by a deed of trust with power of sale and assignment of rents clauses or other security instrument with similar provisions approved by the General Partner; and [50 c. Such loan or hypothecation is in the best interest of the Partnership.” Excess funds not required to conduct partnership business could, under certain circumstances, be returned to the limited partners at the discretion of the general partner. The partnership agreements also authorized the general partner “To employ from time to time, at the expense of the Partnership, building management agents, other on-site personnel, insurance brokers, real estate brokers and loan brokers, consultants, accountants and attorneys[.]”

By 1991, the partnerships were in serious financial trouble. From the inception of the partnerships, MBI had commingled some $300,000 of the partnerships’ money with other funds and loaned it to other, financially distressed MBI-controlled entities without adequate security, proper documentation, or disclosure to the limited partners. Plaintiffs allege that these loans contravened various provisions of the partnership agreements, including the requirements of section 15.4 set forth above; impaired the partnerships’ ability to develop the mobilehome park; and resulted in a total loss of the $300,000.^[2]

Plaintiffs filed suit against MBI, Montross, Barber, and others on August 7, 1991. The complaint included causes of action for breach of contract, breach of fiduciary duty, fraud, negligence, conversion, interference with contract, and injurious falsehood. Paragraph 14 stated a standard fictitious defendant allegation: “Defendant [sic] Doe 1 through Doe 50, inclusive, are sued herein under fictitious names. Their true names and capacities are unknown to Plaintiffs. When their true names and capacities are ascertained, Plaintiffs will amend this Complaint by inserting their true names and capacities herein. Plaintiffs are informed and believe and thereon allege, that each of the fictitiously named Defendants is responsible in some manner for the occurances [sic] herein alleged, and that Plaintiffs’ damages as herein alleged were proximately caused by those Defendants.” (Italics added.) In paragraph 15, plaintiffs alleged on information and belief that “. . . each Defendant acted as agent for their co-Defendants and were acting in that capacity at all times herein mentioned, or were in the employment of said other Defendants acting within the course and scope of their employment.” These allegations were incorporated by reference into each cause of action.

Plaintiffs’ first amended complaint, filed August 20, 1991, repeats these allegations and incorporates them by reference into each cause of action.

On April 2, 1992, during a deposition in a related action, plaintiffs allegedly learned for the first time that Douglas S. McGlashan and McGlashan & Sarrail, attorneys hired by the general partner, had advised that partnership funds could be commingled with funds of other MBI-related entities and loaned to third parties.^[3]

On April 12, 1994, over two years after the deposition, plaintiffs filed a third amendment to the first amended complaint,^[4] substituting Douglas S. McGlashan, Colleen S. McAvoy, and McGlashan & Sarrail (the attorney defendants) for the fictitious defendants designated in the first amended complaint as Does 2, 3, and 4 in the second, third, and fourth causes of action. Later that month, plaintiffs filed their second amended complaint. This pleading (1) restated the causes of action against the original defendants; (2) added thirteenth and fourteenth causes of action against the attorney defendants, for breach of fiduciary duty and negligent misrepresentation; and (3) deleted any reference to the attorney defendants from the second, third, and fourth causes of action.

The att

orney defendants argue that the one-year limitations period for attorney malpractice (Code Civ. Proc., § 340.6)^[5] began to run no later than April 2, 1992, when plaintiffs were informed of the attorney defendants’ alleged advice to MBI concerning the partnerships’ funds. Accordingly, they contend, any malpractice claim against the attorney defendants expired on April 2,1993, more than a year before plaintiffs first attempted to substitute them for Does 2, 3, and 4. Plaintiffs, on the other hand, argue that they sustained no actual injury for purposes of section 340.6 and, hence, that the malpractice limitations period did not begin running until they obtained a default judgment against Montross in a related bankruptcy action in November 1994. We need not resolve this dispute, however, because our examination of the record reveals that the third amended complaint relates back to the filing date of the first amended complaint, thus defeating the statute of limitations.

“A plaintiff ignorant of the identity of a party responsible for damages may name that person in a fictitious capacity, a Doe defendant, and that time limit prescribed by the applicable statute of limitations is extended as to the unknown defendant. A plaintiff has three years under section 581a, subdivision (a)[^[6] ] after the commencement of the action to discover the identity of the unknown defendant and effect service of the complaint. [Citation.] When the complaint is amended to substitute the true name of the defendant for the fictional name, the defendant is regarded as a party from the commencement of the suit, provided the complaint has not been amended to seek relief on a different theory based on a general set of facts other than those set out in the original complaint. [Citations.] The statute (§ 474) must be liberally construed to enable a plaintiff to avoid the bar on the statute of limitations where he is ignorant of the identity of the defendant. [Citation.]” (Munoz v. Purdy (1979) 91 Cal.App.3d 942 , 946 [ 154 Cal.Rptr. 472 ], fn. omitted.)

The attorney defendants argue that a technical defect in the first amended complaint, which was filed within the limitations period, defeats application of the relation-back doctrine in this case. Because the original

pleading failed to include charging allegations against the fictitious defendants, they urge, the third amendment to that complaint does not relate back and the malpractice allegations against them are time barred.^[7] We disagree.

Even if a plaintiff meets the other requirements of Doe pleading,^[8] an amended pleading will not relate back unless the original complaint set forth or attempted to set forth some cause of action against fictitiously named defendants. (Marasco v. Wadsworth (1978) 21 Cal.3d 82 , 87 [ 145 Cal.Rptr. 843 , 578 P.2d 90 ]; Austin v. Massachusetts Bonding & Insurance Co., supra, 56 Cal.2d at p. 599; Breceda v. Gamsby (1968) 267 Cal.App.2d 167 , 173 [ 72 Cal.Rptr. 832 ]; Williams v. Goodman (1963) 214 Cal.App.2d 856 , 861 [ 29 Cal.Rptr. 877 ].) “It is not enough, of course, simply to name ‘Doe’ defendants. Rather, the complaint must allege that they were responsible in some way for the acts complained of.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial 1 (The Rutter Group 1995) ¶ 6:85, p. 6-17, citing Williams v. Goodman, supra.) As another commentator explains, “Although the ironclad rule that the original complaint must contain charging allegations against the fictitious defendants may trap the unwary, compliance is relatively simple. The addition of ‘s’ to ‘defendant’ in the charging allegations will suffice as long as the complaint does not limit the word ‘defendants’ to those sued by their correct names.” (Hogan, California’s Unique Doe Defendant Practice: A Fiction Stranger Than Truth (1977) 30 Stan.L.Rev. 51 , 80, fns. omitted; see Hollister Canning Co. v. Superior Court (1972) 26 Cal.App.3d 186 , 194-196 [ 102 Cal.Rptr. 713 ] [charging allegations referring to “defendants” embraced Doe defendants; amendment related back]; Milam v. Dickman Construction Co. (1964) 229 Cal.App.2d 208 , 213-214 [ 40 Cal.Rptr. 130 ] [allegations were restricted to named defendants; no relation back]; Marasco v. Wadsworth, supra, 21 Cal.3d at p. 87 [allegation that “ ‘defendants and each of them’ ” were negligent supports relation back].)

The allegations of the first amended complaint satisfy this requirement. As noted above, every single cause of action stated in that pleading

incorporated by reference plaintiffs’ allegation that . . each of the fictitiously named Defendants is responsible in some manner for the occurances [sic] herein alleged, and that Plaintiffs’ damages as herein alleged were proximately caused by those Defendants.” Also incorporated in each cause of action was the allegation that "... each Defendant acted as agent for their co-Defendants and were acting in that capacity at all times herein mentioned, or were in the employment of said other Defendants acting within the course and scope of their employment.” The prayer for relief requests judgment “against Defendants and each of them . . . .” The complaint thus alleges that defendants, whose identities or culpable acts were unknown at the time of filing, are in some way responsible for the acts of which plaintiffs complain.^[9] The cases on which the attorney defendants rely are inapposite because, in each, no attempt was made to charge the fictitious defendants with responsibility for the plaintiffs’ injuries. (See Milam v. Dickman Construction Co., supra, 229 Cal.App.2d at pp. 213-214 [charging allegations restricted to named defendants]; Williams v. Goodman, supra, 214 Cal.App.2d at pp. 859-860 [original complaint alleged only that Doe defendants’ true names were unknown and plaintiff would amend when apprised of their identities]; Stanley v. Kawakami (1954) 127 Cal.App.2d 277 , 278 [ 273 P.2d 709 ] [same]; Sullivan v. Wright (1954) 124 Cal.App.2d 836 , 838 [ 269 P.2d 671 ] [same]; Kolodziejski v. Hover (1954) 124 Cal.App.2d 731 , 732-733 [ 269 P.2d 163 ] [same]; Gates v. Wendling Nathan Co. (1938) 27 Cal.App.2d 307 , 313, 315 [ 81 P.2d 173 ] [same], disapproved on other grounds in Cross v. Pacific Gas & Elec. Co. (1964) 60 Cal.2d 690 , 694 [ 36 Cal.Rptr. 321 , 388 P.2d 353 ].)

One further point bears noting. The trial court’s oral ruling suggests its decision was based at least in part on plaintiffs’ two-year delay between learning of the attorney defendants’ alleged involvement in the improper loans and naming them as defendants. Once suit has been filed, unreasonable delay in filing an amended pleading after discovering a Doe defendant’s identity may bar a plaintiff from using the fictitious name device. To preclude relation back on this basis, however, the opposing party must show the plaintiff was dilatory and that the defendant was prejudiced by the delay. (Barrows v. American Motors Corp. (1983) 144 Cal.App.3d 1 , 9 [ 192 Cal.Rptr. 380 ]; Sobeck & Associates, Inc. v. B & R Investments No. 24 (1989) 215 Cal.App.3d 861 , 869 [ 264 Cal.Rptr. 156 ], citing Barrows with approval; see Hazel v. Hewlett (1988) 201 Cal.App.3d 1458 , 1466 [ 247 Cal.Rptr. 723 ].) The attorney defendants have made no showing of

prejudice here and, in fact, agree that “unreasonable delay and prejudice are irrelevant to this action.”

We conclude that the 13th and 14th causes of action of the third amended complaint are not barred by the statute of limitations. We proceed to the attorney defendants’ remaining contentions in support of the demurrer.

Disposition

The judgment is reversed. The matter is remanded with instructions to the trial court to enter an order overruling the demurrer to the third amended complaint. Each party is to bear its own costs on appeal.

Parrilli, J., and McGuiness, J.,^[11] concurred.