Opinion
B159610.
9-30-2003
Estate of JERRY COSTAS ATHANS, Deceased. GOLDSMITH & BURNS, Respondent, v. JERRY B. ATHANS, Appellant.
Goldsmith & Hull and Jack D. Hull for Appellant. Robert S. Gerstein for Respondent.
INTRODUCTION
This case is before this court on appeal for the fourth time between these identical parties; the third time in connection with attorneys fee issues. The question in this appeal is whether the probate court erred in awarding attorneys fees to respondent Goldsmith & Burns (Goldsmith) against appellant, Jerry B. Athans, Successor Executor of the Estate of Jerry C. Athans (Athans).
FACTUAL AND PROCEDURAL STATEMENT OF THE CASE
We take judicial notice of our previous non-published opinions in this matter. (B094812, July 16, 1996; B130843, February 15, 2001; B154363, July 25, 2002.) The background information is partially taken from the opinions in these prior appeals. This court also granted Athans motion to take judicial notice of the complaint in Goldsmith v. Athans (BC000508), Cross Appellants Opening Brief on Precautionary Cross-Appeal from Judgment filed in B094812, and the opinion of the Court of Appeal in Goldsmith v Athans, B130843.
On June 15, 1988, Eva Athans ("Eva") retained Alice Salvo, of the law firm of Goldsmith & Burns at the hourly rate of $180 to handle her late husbands (Jerry Costas Athans) estate and two other matters involving a dispute with her sons over family property. As to the dispute between Eva and her sons, there was a settlement proposal under consideration at the time that Salvo was retained. Salvo received the outline of the settlement proposal, prepared by Jerry Athans on June 15, 1988 and Eva wanted her to review the proposal for fairness.
Due to the similarity in last names, for purposes of clarity only, we will refer to some parties by their first name
On June 28, 1988, about two weeks after Goldsmiths retention, Alice Salvo obtained Evas signature on a new retainer agreement, replacing the hourly fee with a contingency fee of 1/3 of the "gross recovery" from the lawsuits by Eva, either individually or as executrix of her late husbands estate. Eva terminated Goldsmiths services shortly after the settlement was signed.
Goldsmith sued Eva individually and as executrix of the Estate and her four adult children (Olga, Jerry B., George and Catherine) for breach of contract and for enforcement of the contingency agreement. Eva filed a cross complaint for breach of fiduciary duty and malpractice.
The trial was conducted in 1991. A jury returned a verdict for Goldsmith on his breach of contract complaint and against Eva, individually for $520,225.50 and a 66 2/3 share of stock in Athans Bel Air Corporation. The jury found in favor of Goldmith on the cross-complaint. A judgment in accordance with the jury verdict and on the courts non-jury decisions was entered in January 1995.
Eva filed for bankruptcy in January 1992 and died shortly thereafter. On January 12, 1995, the bankruptcy was dismissed and the bankruptcy stay lifted.
The trial judge ordered any and all owners of Athans Bel Air stock, including the sons, to deliver 66 2/3 share of stock to Goldsmith, and rejected Evas claims for rescission.
In June 1995, representatives of Eve filed a new trial motion, which was denied on November 1991. On July 17, 1995, the trial court granted the motion for a new trial. The order noted that attorneys fee agreements must be approved by the Probate Court and continued the case into the probate department for trial setting.
Goldsmith appealed the order for new trial, challenging the trial courts ruling that his claim for fees must be determined in the probate proceedings. On July 16, 1996, the Court of Appeal affirmed the order granting a new trial (Goldsmith v. Athans, July 16, 1996, B094812.)
On October 27, 1998, the probate judge purported to sever the malpractice cross complaint and transferred it back to civil court and retained Goldsmiths contract action for attorney fees. Thereafter, on its own motion, the probate department dismissed the contract complaint as improper, but without prejudice to filing an appropriate petition for fees in Probate Court. On October 30, 1998, Goldsmith filed a Petition for Approval of Contingent Fee Agreement and/or Allowance of Reasonable Value of Compensation to Attorneys for Former Executrix, Eva C. Athans, for Extraordinary Services ("Petition"). The Petition sought an award of $520,225.50 in fees under the contingency agreement, or in the alternative, $168,247.50 as reasonable compensation for fees for extraordinary services and $19,223.82 in costs. During trial, the demand for costs was reduced to $ 11,000 after the exclusion of $8,000 in expert witness fees.
Goldsmith appealed the trial courts denial of his motion to enter judgment on the cross-complaint. This court reversed the trial court and directed the trial court to enter judgment on the malpractice cross-complaint. (Goldsmith v. Athans, February 15, 2001, B130843.)
On July 23, 1999, the presiding judge of the probate court denied Goldsmiths motion to approve the contingent fee agreement as the basis for awarding extraordinary fees; instead finding the contingent fee agreement unenforceable. The court ordered an evidentiary hearing, following mediation, to determine the fair and reasonable value of Goldsmiths services according to the relevant provisions of the Probate Code.
On July 26, 2001, Athans filed a motion to recover attorney fees, contending that the dismissal of Goldsmiths complaint by the probate department entitled appellant to be declared the prevailing party based on an attorneys fee provision in the June 28, 1988 contract. Goldsmith opposed the motion and filed his own motion to be declared prevailing party. After a contested hearing, the trial court denied both motions and held there was no prevailing party. The Court of Appeal reversed the decision of the trial court and held that Athans was the prevailing party on the contract action. (Goldsmith v. Athans, July 25, 2002. B 154363.)
Mediation proved unsuccessful and the issue of Goldsmiths fees was set for trial in probate court. Trial was held in probate court on January 14 and 15, 2002. On February 15, 2002, the probate judge filed a Memorandum of Intended Decision awarding Goldsmith $20,000 in extraordinary fees.
"MEMORANDUM OF INTENDED DECISIONThe Court finds that the attorneys entered into an hourly fee arrangement when the value of the estate was in excess of one million dollars. The Court further finds that the attorneys then illegally converted the hourly fee into a contingency fee arrangement. As a result of the new illegal contract, prolonged litigation resulted. The prolonged litigation substantially reduced the value of the settlement of the estate. The Court finds the legal services rendered by the law firm Goldsmith & Burns directly contributed to the losses suffered by the estate, therefore this Court finds that $20,000 in attorney fees under these particular circumstances are reasonable. The attorneys for the estate are ordered to prepare a statement of decision pursuant to Witkin Procedure, Volume 7, page 464, number 403."
Athans counsel prepared a Proposed Statement of Decision. Among other things, the proposed statement made reference to a breach of fiduciary duty. Goldsmith filed an objection to the proposed statement on the basis that the Statement of Decision should be limited to the grounds set forth in the probate courts Memorandum of Intended Decision.
On April 12, 2002, the probate court ruled on Goldsmiths objections and ordered the added language regarding "II. Legal Basis," which included language regarding fiduciary duties and conflict of interest, should be stricken, and that Goldsmith was entitled to recover $20,00 as reasonable attorneys fees for extraordinary services. Athans counsel submitted a revised Statement of Decision that was signed by the court on May 7, 2002.
Among other provisions, the revised Statement of Decision provided:
"[W]ith regard to the issue of the attorneys fees sought by the law firm of Goldsmith & Burns, the Courts decision is that the legal services rendered by the law firm Goldsmith & amp; Burns directly contributed to the losses suffered by the estate, and those losses must be taken into account in calculating the reasonable amount recoverable. The Court based its decision on the follow basis:
[¶] . . . [¶]
"9. In October 1988, the Probate Court eventually dismissed the Goldsmiths firms complaint on the same basis as that upon which the Court of Appeal overturned the jurys verdict on the contract claim, i.e., the Complaint was `improper as a matter of law. In December, 1988, the Goldsmith firm filed it `Petition for Approval of Contingent Fee Agreement and/or Allowance of Reasonable Value of Compensation to Attorneys for Former Executrix, Eva C. Athans, for Extraordinary Services. On June 16, 1999, the Probate Court, the Honorable Gary Klausner presiding, ruled that the CFA upon which the Goldsmith firm sued was unenforceable and void as a matter of law.
[¶] . . . [¶]
"6. Accordingly, the Court finds that the Goldsmith firm is only entitled to arecovery of $20,000.00 as and for reasonable, unpaid legal services."
On May 7, 2002, the probate court signed an Order Authorizing Payment of Attorneys Fees for Extraordinary Services. A timely Notice of Appeal was filed on June 19, 2002.
APPELLANTS CONTENTIONS
Athans argues that the probate court made factual findings that Goldsmith breached its fiduciary obligation to Eva changing from the hourly rate to the unlawful contingency agreement and that those findings are supported by substantial evidence. Athans contends that as a consequence of the finding of breach of fiduciary obligation, the probate court erred, as a matter of law, when it failed to cut off Goldsmiths recovery of fees entirely as of the time Salvo obtained Evas signature on the contingent fee agreement, and the order must therefore be reversed.
Goldsmiths counter is that an attorney can recover fees when there has not been a breach of fiduciary duty or breach of professional responsibilities and that appellant cannot argue breach of duty based on the doctrines of law of the case, collateral estoppel and res judicata.
STANDARD[S] OF REVIEW
Resolution of the issues in this appeal involves the application of several different standards of review. The determination of the basis for an award of attorneys fees is a question of law which an appellate court reviews de novo. (Bussey v. Affleck (1990) 225 Cal.App.3d 1162, 1165.) The evaluation of the amount of the attorneys fee award is made pursuant to the abuse of discretion standard. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1096.) The proper standard of review for the allowance of extraordinary fees in a probate proceeding is also the abuse of discretion standard. (Guardianship of Jacobson (1947) 30 Cal.2d 312, 325; Denham v. Superior Court (1970) 2 Cal.3d 557, 566.) The decision of the trial court will be upheld on appeal if the decision of the trial court is fair and reasonable under all of the reasonable circumstances. Where there has been a factual finding that provides the basis for the ruling, the factual finding itself is subject to review under the substantial evidence standard.
As stated in PLCM Group, Inc. v. Drexler, supra, 22 Cal.4th at page 1096, "`The value of legal services performed in a case is a matter in which the trial court has its own expertise. [Citation.] . . . The trial court makes its determination after consideration of a number of factors, including the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case. [Citation.]"
CONTENTIONS ON APPEAL
Appellant contends "[t]he trial court made factual findings which established that Goldsmith breached its fiduciary obligations to Eva in moving from the hourly rate to the unlawful contingency agreement, and those findings are supported by substantial evidence." Appellant next contends that because those findings are supported by substantial evidence, Goldsmith committed a serious breach of duty and therefore "the trial court erred as a matter of law to the extent that it failed to cut off Goldsmiths recover of fees entirely as of the time Salvo obtained Evas signature on the contingent fee agreement and the order must therefore be reversed."
Respondent counters that "an attorney can recover attorneys fees when there has not been a breach of fiduciary duty or breach of professional responsibilities." In this case however, appellant is precluded from arguing breach of fiduciary duty based on the doctrines of law of the case, collateral estoppel and res judicata.
DISCUSSION
Entitlement to Attorneys Fees
Before evaluating the various contentions regarding attorneys fees, we must determine what factual findings, if any, were made by the judge. We must also consider the basis of the probate judges decision to award reasonable fees to Goldsmith. We begin with the action of the probate judge to set aside the contingency fee agreement. A contingency fee agreement can be set aside either because it was executed in violation of Business & Professions Code section 6147, or because there was a breach of the attorneys ethical obligations.
Some of the issues in this appeal involve section 6147, which states, in relevant part: "(a) An attorney who contracts to represent a client on a contingency fee basis shall, at the time the contract is entered into, provide a duplicate copy of the contract, signed by both the attorney and the client, or the clients guardian or representative, to the plaintiff, or to the clients guardian or representative. The contract shall be in writing and shall include, but is not limited to, all of the following: [¶] "(1) A statement of the contingency fee rate that the client and the attorney have agreed upon. [¶] "(2) A statement as to how disbursements and costs incurred in connection with the prosecution or settlement of the claim will affect the contingency fee and the clients recovery. [¶] . . . [¶] "(5) If the claim is subject to the provisions of Section 6146, a statement that the rates set forth in that section are the maximum limits for the contingency fee agreement, and that the attorney and client may negotiate a lower rate. [& para;] "(b) Failure to comply with any provision of this section renders the agreement voidable at the option of the plaintiff, and the attorney shall thereupon be entitled to collect a reasonable fee."
Business & Professions Code, section 6147, the contingency fee statute, states that failure to abide by written requirements relating to contingency fee agreement makes contract voidable at option of the client and the attorney is entitled to receive a reasonable fee for services performed. The Legislature by this language has expressly declined to make total forfeiture of fees the appropriate sanction for failure to comply with section 6147. This is consistent with the general rule that when legal services have been provided without a valid written fee agreement, the lawyer may generally recover the reasonable value of services performed in an action in quantum meruit. (Flannery v. Prentice (2001) 26 Cal.4th 572, 588-589, Iverson, Yoakum, Papiano & Hatach v. Berwald (1999) 76 Cal.App.4th 990, 996.)
All further undesignated statutory references are to the Business and Professions Code.
If the contingent fee contract in this case was set aside simply because it was in violation of section 6147, the statute clearly and expressly provides for the award of reasonable fees. Absent an allegation that the $20,000 amount of the fees was unreasonable, our inquiry would end at this point.
When however, there has been an ethical violation by an attorney of a duty to his client, the rule can be different. Clark v. Millsap (1926) 197 Cal. 765, 785, upon which the appellant relies, contains a very broad statement of this rule: "[A] court may refuse to allow an attorney any sum as an attorneys fee if his relations with his client are tainted with fraud. `Fraud or unfairness on the part of the attorney will prevent him from recovering for services rendered; as will acts in violation or excess of authority, and acts of impropriety inconsistent with the character of the profession, and incompatible with the faithful discharge of its duties. (6 Cor. Jur. 722, 723.)"
However, appellate courts have allowed partial fee recovery or acknowledged that some fees could be recovered by the attorney: (1) where there was no objection by the client (Clark v. Millsap, supra, 197 Cal. 765); (2) for services rendered before the ethical breach (Jeffry v. Pounds (1977) 67 Cal.App.3d 6; or (3) on an unjust enrichment theory where the clients recovery was a direct result of the attorneys services (Estate of Falco, (1987) 188 Cal.App.3d 1004).
An attorney receives harsher treatment for a violation of one of the specified ethical duties to the client because it is regarded as in violation of vital public policy considerations. "It is clearly contrary to the public policy of this state to condone a violation of the ethical duties which an attorney owes to his client. (Academy of California Optometrists, Inc. v. Superior Court [(1975)] 51 Cal.App.3d 999, 1006.) In recognition of this premise, `[c]ontracts which violate the canons of professional ethics of an attorney may for that reason be void. (Ibid.)" (Kallen v. Delug (1984) 157 Cal.App.3d 940, 951.) The "general rule" holds that "where an attorney violates his or her ethical duties to the client, the attorney is not entitld to a fee for his or her services." (Cal Pak Delivery, Inc. v. United Parcel Service, Inc. (1997) 52 Cal.App.4th 1, 14.)
Serious Violation
In application, some courts have articulated the view that "there must be a serious violation of the attorneys responsibility before an attorney who violates an ethical rule is required to forfeit fees." (Pringle v. La Chapelle (1999) 73 Cal.App.4th 1000, 1006 [dual representation conflict of interest]; Rest.3d Law Governing Lawyers § 37 [fee forfeiture as remedy limited to clear and serious violations of duty].) As a result, identifiable categories of cases have developed where a forfeiture of fees has been held appropriate for a "serious violation" of ethical rules.
A violation of conflict of interest rules has generally been regarded as a "serious violation" and courts have denied fees entirely in those circumstances: "California courts have often held that when the ethical violation in question is a conflict of interest between the attorney and the client . . . the appropriate fee for the attorney is zero." (U. S. v. Jerry M. Lewis Truck Parts & Equipment, Inc. (9th Cir. 1996) 89 F.3d 574, 579); Day v. Rosenthal (1985) 170 Cal.App.3d 1125, 1162, [no finding on reasonable value of attorneys services necessary because conflict of interest rendered services valueless].)
The rule that an attorney who engages in conflicting representation without obtaining informed consent is not entitled to compensation is not based on the premise that the attorney must pay a penalty so much as on the principle that "payment is not due for services not properly performed." (Schaefer v. Berinstein (1960) 180 Cal.App.2d 107, 135, overruled on other grounds in Jefferson v. J.E. French Co. (1960) 54 Cal.2d 717, 719.)
In Goldstein v. Lees (1975) 46 Cal.App.3d 614, an attorney was prevented from collecting fees when he represented minority shareholder in proxy fight designed to gain control of the corporation where he previously had been the corporations general counsel. It was held in Conservatorship of Chilton (1970) 8 Cal.App.3d 34, that representation of a friend and putative husband was inimical to, and in direct conflict with, representation of the wife. The attorney in Chilton was not entitled to fees as in essence the attorney rendered no services to wife.
Even where courts bar a fee recovery by attorneys violating conflict of interest (or other ethical) rules, the recovery of fees may be allowed for the reasonable value of services rendered before the ethical breach (e.g., before the conflict of interest arose).
In Jeffry v. Pounds, supra, 67 Cal.App.3d 6, one partner in a firm represented a client in a personal injury matter, another partner represented the clients wife in a marital dissolution action. The court held counsel breached the rules of professional conduct prohibiting an attorney from representing conflicting interests except with written consent of all parties. This irreconcilable conflict precluded the firm from recovering fees incurred after the breach of the rules of professional conduct. In Jeffry however, quantum meruit recovery was allowed; limited to the value of services rendered before the date of the violation. (Id ., at p. 12)
Cal Pak Delivery, Inc. v. United Parcel Service, Inc., supra, 52 Cal.App.4th 1, was a class action suit against a provider of shipping services for overcharges and exemplary damages, where the trial court disqualified plaintiffs counsel for attempting to "sell out his client and the class the client was seeking to represent." (Id. at pp. 5-6) But, the trial courts order "that he be prohibited from receiving any fees" in connection with the case was found to be overbroad. (Id . at pp. 14-16) The court concluded that while an attorney generally is not entitled to fees where he has violated ethical duties to the client, plaintiffs counsel may be entitled to an award of attorneys fees for services during the three years before committing the actions resulting in his disqualification under a quantum meruit theory, depending on the ultimate outcome of the litigation. (Ibid.)
Athans argues that Goldsmiths behavior in securing the contingent fee agreement from Eva constitutes a serious breach of fiduciary duty and a conflict of interest because Goldsmith put his financial benefit ahead of the benefit of his client. Athans argues the factual determination Goldsmith committed a serious breach of ethical duties was made by the probate court when it set aside the contingency agreement. Goldsmith contends that the jury made the determination there was no breach of fiduciary duty when it held for Goldsmith on Athans cross-complaint in the civil trial and that that determination is now either law of the case, collateral estoppel or res judicata.
In this appeal we need to determine whether Goldsmith should be awarded fees based on quantum meruit for services performed, "reasonable fees" because of the violation of section 6147 or limited only to fees for work performed prior to the ethical breach in this case. We shall continue by recounting a little procedural history. The jury in the underlying action found for Goldsmith on the malpractice action and the trial court granted a motion for new trial. Goldsmith appealed the order granting a new trial and Athans filed a precautionary cross-appeal from the judgment and the order denying their motion for judgment notwithstanding the verdict. The Court of Appeal held that the trial court correctly granted the new trial on the fee issues and further held that "This renders moot . . . defendants protective cross-appeal from the judgment and order denying defendants motion for judgment notwithstanding the verdict." The court then dismissed the cross appeal as moot. No appeal was taken from this dismissal.
Goldsmith v. Athans, July 16, 1996, B094812.
In Goldsmith v. Athans, (B130843, February 15, 2001), the Court of Appeal directed the civil trial judge to enter judgment in favor of Goldsmith on Athans legal malpractice cross complaint.
In so holding, the Court of Appeal found:
"In 1995, when the new trial order was fresh in the judges mind and Goldsmiths attorney specifically sought clarification on the precise issue whether the new trial order was intended to vacate the judgment on the jury verdict on the cross-complaint for malpractice, the court made perfectly clear during the proceedings of August 7 and August 25, 1995, that the new trial order did not affect the judgment on the cross-complaint. On August 7, the court said unambiguously that the defense verdict on the cross-complaint should be included in the judgment and was not affected by the new trial. On August 25, the court repeated that the cross-complaint would not be retried. The court reviewed the judgment on the jury verdict and gave page and line references for the portions remaining in effect and not to be retried, and those references included the portion her at issue. The court offered the additional explanation that it found the issues on the cross-complaint to be severable from the complaint on which the new trial was granted." (Id. at p. 9, fn. omitted.)
Because of this procedural chronology, Athans argues that judgment was entered on the cross-complaint upon direction of the court "without there ever having been an opportunity to challenge the verdict on the cross-complaint on the merits" and for that reason collateral estoppel is inapplicable.
We conclude nothing in the record up to this point supports appellants argument that a finding was made that Goldsmith committed a serious breach of fiduciary duty. In fact, the jurys verdict for Goldsmith can only be construed as an opposite finding. Further, we note Athans gives no reason why he failed to challenge the Court of Appeals dismissal of his precautionary appeal as moot. Given the procedural stance of the case at that time: the dismissal of the cross-appeal as moot, the fact that a new trial was granted as to the attorneys fee issue only and that the judgment in favor of Goldsmith on the malpractice and breach of fiduciary duty causes of action remained, Athans should have taken further action at that time. At a minimum, Athans certainly could have requested reinstatement of the cross-appeal because there had yet to be an evaluation of the jurys verdict on the malpractice and breach of fiduciary duty counts. We do not find Athans claim of his inability to raise the issue in a previous appeal, now six years after the decision of the Court of Appeal, to be compelling.
In fact, rather than the decision of the trial court, Athans principal argument relies on the ruling of the probate court when it considered Goldsmiths Petition. The probate judge in ruling on the Petition prepared a Memorandum of Intended Decision that stated:
"The Court finds that the attorneys entered into an hourly fee arrangement when the value of the estate was in excess of one million dollars. The Court further finds that the attorneys then illegally converted the hourly fee into a contingency fee arrangement. As a result of the new illegal contract, prolonged litigation resulted. The prolonged litigation substantially reduced the value of the settlement of the estate. The Court finds the legal services rendered by the law firm Goldsmith & amp; Burns directly contributed to the losses suffered by the estate, therefore this Court finds that $20,000 in attorneys fees under these particular circumstances are reasonable." (Emphasis added.)
The probate court then directed Athans counsel to prepare a proposed statement of decision. The proposed Statement of Decision contained a section entitled "Factual Basis" and another entitled "Legal Basis." The Factual Basis portion of the Statement contained the following text:
"1. . . . .
"2. . . . .
"3. On June 28, 1988, after learning that the settlement proposal already on the table and predating any of the Goldsmiths firms efforts was in excess of $1 million (i.e., approximately $ 1.8 million), the Goldsmith firm induced Eva, without adequately explaining the consequences to convert the hourly fee agreement into a contingency fee arrangement. (`CFA).
"4. The Goldsmith firms fiduciary duties to the client required it to explain and no evidence was presented that it did explain to Eva; (1) [meaning and effect of term "gross recovery; (2) [possibility that Goldsmith firm may receive substantial fees for little work]; (3) [net effect of CFA on recovery]; and (4) [alternative fee arrangements.]
[¶] . . . [¶]
"11. While the Goldsmith firm represented Eva and the Estate, the Goldsmith firm subverted the sale of a property . . ., the proceeds of which would have amounted to approximately $ 1.2 million. An offer was made on the . . . property for $6.75 million. . . . The Goldsmith firm failed to present any evidence that it communicated the proposal to Eva, failed to present evidence as to any advice it gave Eva as to these settlement proposals, and based on the undisputed evidence at trial, refused to release the lis pendens whereupon the sale did not go through and the benefit to the Estate was lost."
The "Legal Basis" section included the following text:
"1. The Goldsmith firm breached its fiduciary duties by not fully explaining the CFA to Eva, its own resulting conflict of interest, and the conflicts involved in representing her both in her individual capacity and as Executrix of the Estate. . . .
"2. The Goldsmith firm further breached its fiduciary duties by not giving Eva a reasonable opportunity to consult independent counsel regarding the advisability of changing her hourly agreement with the Goldsmith firm into the CFA. . . . .
"3. The CFA entered into between Eva and the Goldsmith firm was not fair or reasonable to Eva, and improperly worked to the advantage of the Goldsmith firm. . . . The Goldsmith firms conversion of the hourly fee arrangement to the CFA at a point in time when there was already an established fiduciary relationship between the law firm and its client, was wrongful and resulted in an unenforceable contract.
"4. The Goldsmith firm is not entitled to recovery of any attorneys fees for services rendered after the breach of fiduciary duties to the Estate. Attorneys who violate their fiduciary duties or the proscriptions of the California Rules of Professional Conduct may not recover compensation for services rendered after the date of the violation. (Second emphasis added.)
On March 5, 2002, along with the proposed Statement of Decision, the Athans parties submitted a supplemental post trial brief which argued "in light of the Courts findings in the Memorandum of Intended Decision, Respondent also respectfully submits the following Supplemental Post Trial Brief, which explains why based on those findings, the law firm of Goldsmith and Burns should not be entitled to any recovery of attorneys fees for extraordinary services."
On March 12, 2002, Goldsmith filed objections to the Supplemental Post Trial Brief. Goldsmith argued in the probate court that, because the jury in the civil case found in favor of Goldsmith on the Athans cause of action for breach of fiduciary duty, the operation of collateral estoppel precluded the probate court from finding a breach of fiduciary duty here. Prior to the ruling of the court, Goldsmith also filed a request for Judicial Notice of the Final Trial Brief and Closing Argument from the civil trial. The request for judicial notice included Athans cross-complaint and the amended judgment on the cross-complaint.
After a hearing and further consideration, the probate court on May 7, 2002, issued its final Statement of Decision that left the "Factual Basis" portion intact and eliminated the "Legal Basis" section in its entirety. The only fair interpretation of the action and ruling of the probate court is that it reflects the probate courts unwillingness to reach the legal conclusion there had been a breach of fiduciary duty by Goldstein sufficient to forfeit all fees in the case.
On May 7, 2002, the probate judge entered an order authorizing the Executor to pay Goldsmith "$20,000 as just and reasonable compensation for their extraordinary services rendered to the Estate representative and to the Estate." It is this order that is the subject of the appeal.
Athans argument is that although the probate court would not sign the proposed Statement of Decision, the language remaining in the "Factual Basis" section of the probate courts Statement of Decision includes "an explicit factual finding of breach of fiduciary duty." Athans contends that Goldsmith committed a breach of fiduciary duty as a matter of law and was not entitled to any fees for services after the breach.
Goldsmith replies that Athans is precluded from alleging breach of fiduciary duty under the doctrines of law of the case, collateral estoppel and res judicata. He argues that in the underlying civil action of Goldsmith v. Athans , Athans filed a cross-complaint which contained multiples causes of action including attorney malpractice and breach of fiduciary duty. A jury found in favor of Goldsmith on those counts and the Court of Appeal directed the trial court to enter judgment in favor of Goldsmith on the cross-complaint. Goldsmiths argues the decision of the Court of Appeal directing the trial judge to enter judgment in favor Goldsmith on the malpractice and breach of fiduciary causes of action constitutes law of the case and "conclusively precludes appellant from relitigating the issue of breach of fiduciary duty before this Court."
In anticipation of the position of respondent, appellant argued in its opening brief "in order to prevail on its collateral estoppel claim, Goldsmith must show that the question at issue in the civil case was both `necessarily decided and `identical to the issue raised here." Appellant argues further that Goldsmith cannot make such a showing because "the verdict on the fiduciary cause of action made it impossible to determine whether the specific issue relevant here `was determined in the former action . . . ." Athans counter-argument is that based on nature of the verdict form it is impossible to determine whether the jury felt "that there was no breach of fiduciary duty, or only that, even if there was such a breach, it did not result in damage to Eva." Consequently, according to appellant, the probate judge was not barred by collateral estoppel from finding that Goldsmith breached its fiduciary duty to Eva.
Recapping further pertinent facts; Athans moved for a new trial and to vacate the civil judgment on the ground that the amount of Goldsmiths fee must be determined by the probate court under provisions of the Probate Code. The trial court agreed and granted a new trial [on the fee issues only.] Goldsmith appealed and Athans took the position in that appeal that the trial courts order was for an entire new trial on all issues, not just a limited retrial on the attorneys fees issue.
The Court of Appeal in B130843 (Goldsmith v. Athans, February 15, 2001) held that "in 1995, when the new trial order was fresh in the judges mind and Goldsmiths attorney specifically sought clarification on the precise issue whether the new trial order was intended to vacate the judgment on the jury verdict on the cross-complaint for malpractice, the court made perfectly clear during the proceedings of August 7 and August 25, 1995, that the new trial order did not affect the judgment on the cross-complaint."
We are of the opinion that there has been more than sufficient judicial analysis of this issue. Suffice it to say that the disputes with respect to the validity of the contingency fee agreement and Goldsmiths right to attorneys fees cover literally hundreds of pages of court record. Ultimately, in order for this court to overturn the decision of the probate court with respect to attorneys fees, we would have to conclude the only reasonable interpretation of the record in this case is that, although the probate court did not reach the legal conclusion that Goldsmith committed a breach of fiduciary duty, his factual findings contain a reference to a breach of fiduciary duty and we therefore should find Goldsmith committed a serious breach of fiduciary duty as a matter of law. We are unable to reach that conclusion on this record. No prior judicial proceeding or appeal has reached that result. When the civil jury was presented with the issue of the legal malpractice of Goldsmith, it found in favor of the firm. When the probate court considered Goldsmiths petition, it concluded although Goldsmith was not entitled to the contractual attorneys fees under the improper contingent fee agreement, he should be awarded reasonable fees. The probate court expressly declined to adopt the language suggested by Athans that there had been a "breach of fiduciary duty" and struck approximately two pages from the Proposed Statement of Decision including language that Goldsmiths fees should be cut off as of the date of the breach.
The state of the record as described above does not allow this court to substitute its determination regarding Goldsmiths breach of fiduciary duty and right to attorneys fees. It would be presumptuous for this court to take the steps requested by appellant. Furthermore, this court will not utilize scarce judicial resources to scour the numerous trial and appellate records starting in 1990 in this case to find support for the collateral estoppel, law of the case, or res judicata arguments. The judgment of the probate court is affirmed. Let this now be the end of this litigation.
We sincerely hope and expect that the parties in these actions have run out of the time, the energy, the funds and/or the enthusiasm to continue to run this fee issue to ground. The fact that issues regarding this estate and attorneys fees, including this "final" appeal for $20,000 in fees, have consumed nearly 14 years of litigation is astonishing to this court. The amount of judicial resources utilized over the years in consideration of the issues here is equally astonishing. Although the doors of the courthouse remain open to all litigants, and remain open to the parties in this case, we pray you consider more thoughtfully next time you find or create an opportunity to appeal, the benefit to the parties versus the cost to the public in judicial resources required to carry on this now obviously rather petty and contentious dispute.
DISPOSITION
The judgment of the probate court is affirmed. Each party is to bear its own costs on appeal.
We concur: RUBIN, J. and BOLAND, J.