Opinion
E063262
05-08-2017
CHRISTOPHER J. FORNEY et al., Plaintiffs and Appellants, v. THOMAS J. FORNEY as Trustee, etc., Defendant and Respondent.
Buxbaum & Chakmak and Charles L. Zetterberg for Plaintiffs and Appellants. Ward & Ward, Alexandra S. Ward; James B. Church & Associates and James B. Church for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. RPRRS03040) OPINION APPEAL from the Superior Court of San Bernardino County. Cynthia Ann Ludvigsen, Judge. Affirmed. Buxbaum & Chakmak and Charles L. Zetterberg for Plaintiffs and Appellants. Ward & Ward, Alexandra S. Ward; James B. Church & Associates and James B. Church for Defendant and Respondent.
The trial court disqualified the attorneys who were representing Christopher J. Forney and Jonathan D. Forney (collectively, beneficiaries) in their case against Thomas J. Forney (successor-trustee) in his capacity as trustee of the "Forney Irrevocable Trust Agreement Dated April 8, 2010" (merged-trust). Beneficiaries contend the trial court erred by disqualifying the attorneys. We affirm the judgment.
FACTUAL AND PROCEDURAL HISTORY
A legal dispute arose involving The TJP Child's Special Needs Trust (special needs trust) and The Thomas J. Forney Irrevocable Child's Trust (child's trust). Successor-trustee was the beneficiary of the special needs trust and the child's trust. In March 2010, the legal dispute was privately mediated.
A binding settlement agreement was reached at the mediation. The settlement provided that (1) Libby Greenwalt of Ingram Management, Inc. and John Forney (collectively cotrustees) would no longer serve as the trustees of the special needs trust and the child's trust, and (2) successor-trustee would become the trustee of both trusts. The settlement further reflected, "The parties agree that [successor-trustee] intends to merge the above two trusts and reform the terms of the trusts for the purpose of allowing steady income to the beneficiary without restriction."
At the mediation, cotrustees were represented by John Chakmak and John P. Howland of Buxbaum & Chakmak. Pursuant to the settlement, successor-trustee became the trustee of both trusts. Successor-trustee merged the two trusts together to create a new trust, i.e., the merged-trust, which caused the special needs trust and the child's trust to be terminated.
In January 2013, beneficiaries brought a petition against successor-trustee. Beneficiaries asserted successor-trustee exceeded the authority granted in the settlement agreement by omitting beneficiaries as contingent beneficiaries of the merged-trust. Beneficiaries are the children of John Forney and the nephews of successor-trustee. Beneficiaries' attorney, who brought the petition, is Howland of Buxbaum & Chakmak.
Successor-trustee moved to disqualify Chakmak, Howland, and the law firm of Buxbaum & Chakmak (collectively, the disqualified attorneys). Successor-trustee asserted (1) there was a conflict of interest due to the disqualified attorneys having represented cotrustees and now representing beneficiaries; (2) Chakmak and Howland received confidential information during their representation of cotrustees that they might now use against successor-trustee; and (3) the mediated case and the current case are substantially related. Successor-trustee asserted he did not consent to the disqualified attorneys representing beneficiaries.
Beneficiaries opposed the motion. First, beneficiaries asserted successor-trustee lacked standing to seek disqualification because no confidential relationship exists between successor-trustee and the disqualified attorneys. Second, beneficiaries argued they were not acting adversely to their former clients, cotrustees. Third, beneficiaries asserted that if Chakmak and Howland were called as witnesses in the current case, disqualification would not be required because the current case would proceed by court trial, not via a jury trial.
At a hearing on the motion, the trial court explained successor-trustee has standing to bring the motion to disqualify because the rights and privileges of the cotrustees flow to successor-trustee. The trial court explained that the disqualified attorneys had to give successor-trustee their non-mediation confidential communications related to the child's trust and the special needs trust.
The trial court explained that the current case arose out of the settlement agreement, in which the disqualified attorneys represented cotrustees. The trial court said, "And so the allegations [in the current case] are that the Trust acted improperly when it allowed a reformation of the trust that affected these [beneficiaries'] interests. So, you know, you can't now represent those [beneficiaries] while they attack the Trust for having allowed the Trust Reformation." The court explained to beneficiaries' counsel, Charles Zetterberg of Buxbaum & Chakmak, "[Y]our duty to the Trust now flows to Thomas as the Successor Trustee."
The trial court granted the motion for disqualification. The order reads, "John Chakmak and John P. Howland of Buxbaum & Chakmak and The Law Firm of Buxbaum & Chakmak are disqualified from representing [beneficiaries] or any other party in an action against [successor-trustee] as Trustee of the Forney Irrevocable Trust Agreement Dated April 8, 2010."
The trial court orally stated that the motion to disqualify applied to the entire law firm of Buxbaum & Chakmak. The trial court also said "The motion is granted." Additionally, the trial court told Zetterberg of Buxbaum & Chakmak that Zetterberg has an obligation of attorney-client privilege toward successor-trustee. Therefore, it appears the trial court's order is to be understood as disqualifying the entire law firm of Buxbaum & Chakmak.
Beneficiaries' attorney on appeal is Zetterberg of Buxbaum & Chakmak. A disqualification order is in the nature of an injunction. (Machado v. Superior Court (2007) 148 Cal.App.4th 875, 882 [a disqualification order is an injunctive order].) We see no stay of the trial court's disqualification order in the register of actions from the trial court or in the docket of this court. (See Wolf v. Gall (1916) 174 Cal.140, 142 [bringing an appeal does not stay a prohibitory/preventative injunction].) Nevertheless, successortrustee raises no specific objection concerning Buxbaum & Chakmak representing beneficiaries on appeal. Accordingly, we will not further examine whether beneficiaries were required to seek a stay of the trial court's order so as to be represented by Buxbaum & Chakmak on appeal. (See Great Lakes Const., Inc. v. Burman (2010) 186 Cal.App.4th 1347, 13531354 [stay of a disqualification order to bring a writ petition].)
DISCUSSION
Beneficiaries contend the trial court erred by granting the motion for disqualification.
"'Generally, a trial court's decision on a disqualification motion is reviewed for abuse of discretion.'" (City and County of San Francisco v. Cobra Solutions, Inc. (2006) 38 Cal.4th 839, 848.) However, "'where there are no material disputed factual issues, the appellate court reviews the trial court's determination as a question of law.'" (Ibid.) The facts in the instant case are undisputed, so we will apply the de novo standard of review.
"[A] successor trustee succeeds in his predecessor's shoes with respect to attorney-client privilege." (Kelly v. Orr (2016) 243 Cal.App.4th 940, 947.) Our Supreme Court explained the policy reason behind this rule: "To allow for effective continuous administration of a trust, the right of access to [confidential] communications and the privilege to prevent their disclosure must belong to the person presently acting as trustee, because that person has the duty to conduct all pending trust business. Therefore, for a trust to continue to operate smoothly when a change in trustee occurs, the power to assert the attorney-client privilege must pass from the predecessor trustee to the successor." (Moeller v. Superior Court (1997) 16 Cal.4th 1124, 1133.)
Buxbaum & Chakmak (the law firm) represented cotrustees in the 2010 mediation. As a direct result of that mediation, successor-trustee became the successor trustee. An attorney-client privilege now exists between the law firm and successor-trustee due to the law firm previously representing cotrustees, i.e., the predecessor trustees. As the attorneys for the cotrustees, the law firm must now share confidential information with successor-trustee. (Moeller v. Superior Court, supra, 16 Cal.4th at p. 1133.)
There is an exception to the rule that a law firm for a predecessor trustee owes an attorney-client privilege to a successor trustee. The exception is that the privilege will not be owed where the trust instrument reflects the privilege does not continue to successive trustees. (Wells Fargo Bank v. Superior Court (2000) 22 Cal.4th 201, 209.) The instrument creating the child's trust is included in the record. That document reflects, "Every successor trustee shall have all the powers given the originally named trustee." We could find no exception in the document concerning attorney-client privilege as it pertains to successive trustees, and beneficiaries do not provide a record citation to such an exception. Accordingly, the general rule applies—an attorney-client privilege exists between successor-trustee and the law firm.
"When an attorney successively represents clients with adverse interests, the attorney has a potential conflict of interest. If there is a 'substantial relationship' between the subjects of the antecedent and current representations, the attorney must be disqualified. (Flatt v. Superior Court (1994) 9 Cal.4th 275, 283.)" (Meza v. H. Muehlstein & Co. (2009) 176 Cal.App.4th 969, 977-978.)
The settlement agreement from the prior mediated case provided, "The parties agree that [successor-trustee] intends to merge the above two trusts and reform the terms of the trusts for the purpose of allowing steady income to the beneficiary without restriction." In the current case, beneficiaries are asserting successor-trustee exceeded the authority granted in the settlement agreement by omitting beneficiaries as contingent beneficiaries of the merged trust. Thus, beneficiaries are adverse parties to successor-trustee because they are asserting successor-trustee erred.
Beneficiaries' case is directly questioning successor-trustee's interpretation of the settlement agreement. Successor-trustee's attorney may call Chakmak and Howland to testify regarding their representation of cotrustees. Beneficiaries' case is entirely about the prior mediated case because it concerns an interpretation of the settlement agreement from the prior case. Accordingly, there is a substantial relationship between the prior and current representations, and the parties are adverse. Therefore, the trial court did not err by granting the motion to disqualify.
DISPOSITION
The judgment is affirmed. Respondent, Thomas J. Forney, as Trustee, is awarded his costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
MILLER
J. We concur: McKINSTER
Acting P. J. SLOUGH
J.