## Facts

- Roy and Doris Horne sought tax planning and asked attorney Jordan N. Peckham to prepare a “Clifford Trust” benefiting their three sons, anticipating substantial business income tied to Roy Horne’s patented wood-processing product.
- Peckham told Horne he lacked tax knowledge and would draft documents if others determined what was needed; he relied on the Hornes’ accountant for materials and judgment and arranged a consultation with tax attorney Thomas J. McIntosh.
- The initial plan contemplated transferring the patent to the trust, but Horne later preferred placing a nonexclusive license into the trust; Peckham stated he did not know if a license would work and intended to raise the question with McIntosh.
- Peckham drafted the trust and related instruments intended to secure certain federal income tax consequences.
- The IRS later determined the arrangement did not achieve the intended tax treatment and assessed a deficiency, leading to tax liability and related expenses, including fees incurred in responding to and defending against the tax dispute.
- The Hornes sued Peckham for legal malpractice; a jury awarded damages. Peckham cross-complained against McIntosh seeking indemnity based on alleged reliance on McIntosh’s tax advice.

## Issues

1. Whether substantial evidence supported the jury’s finding that Peckham breached the professional standard of care in planning and drafting the tax-driven trust instruments.
2. Whether Peckham’s negligence was a proximate cause of the Hornes’ losses, including tax liability and related defense costs.
3. When the malpractice claim accrued for limitations purposes in a trust-drafting context—at the negligent act or upon the Hornes’ first actual damage.
4. Whether Peckham was entitled to indemnity from McIntosh based on consultation and alleged reliance.

## Decision

- The court affirmed the judgment for the Hornes against Peckham.
- The court held substantial evidence supported findings of breach, causation, and damages.
- The court concluded the malpractice claim accrued when the Hornes first sustained actual damage, including attorney’s fees incurred to defend the trust in connection with the IRS dispute.
- The court affirmed denial of Peckham’s indemnity claim against McIntosh and related cross-defendants.

## Legal Principles

- An attorney must exercise the skill, prudence, and diligence commonly possessed and exercised by members of the profession under similar circumstances.
- In transactional/trust-drafting malpractice, the statute of limitations begins when the client suffers actual damage, not when the negligent drafting occurs.
- Actual damage may include attorney’s fees and costs incurred to defend, correct, or respond to challenges arising from the defective legal work.
- A drafting attorney’s consultation with accountants or tax specialists does not, by itself, relieve the attorney of responsibility to the client for competent performance.
- Indemnity against a consulted professional is not established merely by showing reliance; it requires a sufficient basis to shift responsibility, which was not shown on the record.

## Conclusion

The court upheld a malpractice verdict against an attorney who undertook specialized tax-related trust drafting despite disclaiming tax expertise, and it held that limitations ran from the client’s first actual injury—including fees incurred defending the trust—while rejecting the attorney’s attempt to obtain indemnity from a consulted tax lawyer.


Horne v. Peckham, 97 Cal. App. 3d 404 (Cal. Ct. App. 1979)