Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Fresno County. Donald R. Franson, Jr., Judge. Super. Ct. No. 07CECG02834
James C. Holland, in pro. per., for Defendant and Appellant.
Central California Legal Services, Inc., Indirajith S. Meganathan and Michael J. Kanz, for Plaintiffs and Respondents.
OPINION
Ardaiz, P.J.
INTRODUCTION
James C. Holland appeals from four orders relating to his special demurrer and motion to strike based upon Civil Code section 1714.10. Section 1714.10 generally provides that a plaintiff cannot assert a civil conspiracy cause of action against an attorney unless the plaintiff first obtains an order from the trial court judge. In this case, the trial court concluded that the plaintiffs in this case, Juan A. Rios and Lupe M. Rios (the Rioses), did not have to obtain an order because the case was subject to an exception in section 1714.10, subdivision (c). The trial court concluded that the exception applied because Holland owed an independent legal duty to the Rioses. For the following reasons, we affirm.
All further statutory citations are to the Civil Code, unless otherwise indicated.
FACTUAL AND PROCEDURAL BACKGROUND
On January 10, 2008, the Rioses filed their first amended complaint (FAC). In the FAC, they allege that they were the victims of a civil conspiracy that included defendants Barbara Ortiz, Jack Farris, aka Jack DeFehr, Brian A. Dunn, and appellant.
The Rioses allege that they purchased a house from Ortiz for $170,000. They paid her a $10,000 down payment. They further allege that Ortiz gave them documents to sign, some of which had blank pages. The Rioses assert that they did not understand these documents, were not provided consideration for these agreements, and were falsely informed about the purposes of these documents by Ortiz.
In the FAC, the Rioses further assert that they made monthly payments to Ortiz in a timely fashion until August 2005 when they were not able to locate or contact Ortiz. They contend that they had the money to make the August 2005 payment to Ortiz. Subsequently, the Rioses received a Notice of Default, dated August 5, 2005, from All-Cal Foreclosure Services, Inc.
After they received the Notice of Default, the Rioses allege that they were contacted by numerous people claiming to be “investors” who offered to buy their interest in the property for a small sum. One of these investors, Jack Farris, allegedly told the Rioses that he could save their home if they signed certain documents. The Rioses agreed to sign these documents. Farris took them to a notary public, and they signed a set of documents, some of which had different dates.
The Rioses signed documents dated November 9, 2005, whereby their interest in the home was transferred to a “Trust” naming Dunn as the trustee. The duration of the trust was 20 years, unless the Trust was terminated by the Rioses upon 30 days notice. The Trust was given authority to represent the Rioses in legal proceedings against Ortiz.
In exchange, the Rioses were to receive $1,500 “on loan” and secured by the real property and were allowed to stay in the house for a monthly payment of $500. In exchange, a lawsuit was to be filed against Ortiz. If the lawsuit was won, the Trust would pay the Rioses $2,000, and then $6,500 if the Rioses moved out of the house within three days after notice from the Trust (less rent owed). However, they would receive no money if the lawsuit was lost.
In addition, the Rioses also signed a promissory note entitled “Short Form Deed of Trust and Assignment of Rents” in the amount of $10,000, naming Dunn as beneficiary secured by the real property. They also signed a Bill of Sale dated November 17, 2005, stating that they sold their beneficial interest in the Trust to Dunn for $1.00. Finally, they signed a “General Power of Attorney” form that gave Dunn power to act for the Rioses in matters concerning “real estate transactions, banking transactions, claims and litigation, personal relationships and affairs and all other matters.”
According to the FAC, the Rioses did not understand that they had conveyed title to the real property to Dunn for $1.00 and that they had also agreed to pay Dunn $10,000.
On November 21, 2005, the Rioses received a Notice of Trustee’s Sale setting the date of the foreclosure sale for December 21, 2005. The house was sold at a foreclosure sale to defendant Razmik Hakopian for $78,000.
Per the terms of the Trust, a lawsuit was filed against Ortiz. The FAC alleges that Dunn as Trustee filed a lawsuit on December 2, 2005 and a First Amended Complaint on December 19, 2005 against Ortiz in the Fresno County Superior Court as Case No. 05 CECG 03749. The FAC further alleges that Ortiz’s demurrer to the action was granted without leave to amend on March 15, 2006 based on the trial court’s determination that Dunn lacked standing. The FAC asserts that, while the demurrer was pending, Holland on behalf of Dunn as Trustee filed a lawsuit on February 27, 2006 naming Ortiz, Hakopian, All-Cal Foreclosure Services, Inc. and Georgianne Taunton as defendants. The defendants in this case filed a demurrer on March 24, 2006, pursuant to which Holland dismissed the lawsuit with prejudice on April 14, 2006.
The Rioses were subsequently evicted from the house on April 17, 2006.
In their FAC, the Rioses assert that Holland’s actions made him liable on multiple causes of actions, including breach of contract, promissory estoppel, breach of fiduciary duty, intentional infliction of emotional distress, and unfair business practices. In support of these causes of action, the Rioses re-allege that Holland was part of a civil conspiracy with Farris, Dunn, and Doe defendants.
On March 18, 2008, appellant filed a general demurrer to the FAC on the ground that the FAC failed to state an action against him. In his demurrer, Holland contends that he was not in privity with the Rioses and that he did not owe any legal duty to them. Holland also contends that at the time he represented Dunn, the plaintiffs had sold their beneficial interest in the property to Dunn.
Holland also moved to strike the causes of action against him for failure to comply with section 1714.10, specifically for failing to file a verified petition showing a reasonable likelihood of success and for failing to allege that he had an independent legal duty to the plaintiffs.
In a May 7, 2008 order, the trial court ruled that section 1714.10 applied to the Rioses’ causes of action against Holland. The trial court did not rule on the demurrer or motion to strike. Instead, the trial court noted that the FAC did not allege any facts that would permit a finding that Holland owed an independent duty as a matter of law to the Rioses or that Holland committed acts that went beyond the performance of a professional duty to serve his client such that there was a conspiracy to violate a legal duty in furtherance of the attorney’s financial gains. The trial court stayed the case, ordered plaintiffs to file a verified petition, and set a briefing schedule and hearing date thereon.
On June 2, 2008, the Rioses filed an Ex Parte Application for an exemption or lifting of the stay so that they could conduct limited discovery of Farris, Dunn, and Holland, related to the anticipated verified petition. Holland opposed the application.
In a June 3, 2008 minute order, the trial court granted the Rioses’ application, but disallowed them from seeking discovery from Holland. The Rioses’ counsel set depositions to commence on June 18, 2008.
Holland moved for reconsideration of the June 13, 2008 order. After a hearing, in a June 17, 2008 minute order, the trial court denied Holland’s motion for reconsideration.
After deposing codefendants Dunn and Farris, on September 22, 2008, the Rioses filed a verified petition for order allowing filing under section 1714.10. They attached a proposed Second Amended Complaint. In their petition, the Rioses contend that their proposed Second Amended Complaint would include causes of action against Holland based upon civil conspiracy and separate causes of action against respondent that are not based on conspiracy. The Rioses further contend that the proposed Second Amended Complaint sufficiently shows that Holland owed an independent legal duty to them or that section 1714.10 was inapplicable because the conspiracy did not arise from Holland’s representation of his client, Dunn.
On December 24, 2008, the trial court concluded that “Holland did owe a duty to the Rioses in his capacity as attorney of record for the Trustee in Case No. 06 CECG00624.” Concluding that “the present case falls within the exception set forth at Civil Code section 1714.10(c),” the trial court overruled “the demurrer filed by Holland to the First Amended Complaint pursuant to Civil Code section 1714.10” and lifted the stay.
On January 2, 2009, Holland filed an appeal from the trial court’s orders of May 7, 2008 (staying action and ordering the filing of a verified petition), June 3, 2008 (permitting discovery of Dunn and Farris), June 17, 2008 (denial of motion for reconsideration of June 3, 2008 order), and December 24, 2008 (finding that the FAC sufficiently pleaded that Holland owed an independent duty of loyalty to the Rioses).
DISCUSSION
A. Jurisdiction
Appellant contends that this Court has jurisdiction over all four orders from which he is appealing under section 1714.10, subdivision (d). Respondents disagree, contending that only the May 7, 2008 and December 24, 2008 orders are appealable under that statutory provision. Furthermore, they contend that the appeal from the May 7, 2008 order is untimely. We generally agree with the respondents.
Section 1714.10, subdivision (d) provides in relevant part that: “Any order made under subdivision (a), (b), or (c) which determines the rights of a petitioner or an attorney against whom a pleading has been or is proposed to be filed, shall be appealable as a final judgment in a civil action.” Section 1714.10, subdivision (e) provides that “Subdivision (d) does not constitute a change in, but is declaratory of, the existing law.”
Thus, section 1714.10, subdivision (d) does not change the existing law except to provide that certain previously nonappealable orders are now appealable. Here, the May 7, 2008 and December 24, 2008 orders are appealable under section 1714.10, subdivision (d), because those orders determine the rights of a petitioner or an attorney against whom a pleading has been or is proposed to be filed. The May 7, 2008 order required the petitioners (the Rioses) to file a verified petition under section 1710.10, subdivision (a). The December 24, 2008 order overruled appellant’s demurrer to the FAC and motion to strike under section 1714.10, subdivision (b). The June 3, 2008 and June 17, 2008 orders, however, are not necessarily orders that determine the rights of a petitioner or an attorney. Appellant contends that those orders are appealable because they allowed petitioners to engage in discovery in order to file a verified petition as required by section 1714.10, subdivision (a). Respondents contend that the orders are nonappealable because they are interlocutory orders in the nature of discovery orders, which are generally not appealable except, in extraordinary circumstances, by writ. (See Oceanside Union School Dist. v. Superior Court (1962) 58 Cal.2d 180, 185 & note 4.) Alternatively, respondents contend that, if they were appealable orders, appellant failed to timely file an appeal and thus this Court does not have any jurisdiction to review these orders. We agree with respondents.
Under appellant’s interpretation of section 1714.10, subdivision (d), the May 7, 2008, June 3, 2008 and June 17, 2008 orders are appealable. However, appellant did not timely appeal from these three orders. The only order from which appellant timely appealed is the December 24, 2008 order. Thus, this Court does not have jurisdiction to review the May 7, 2008, June 3, 2008 and June 17, 2008 orders.
Appellant contends that this Court has jurisdiction to review the earlier orders because the Court has jurisdiction to review the December 24, 2008 order. Although not cited in his opening brief, appellant appears to be referring to Code of Civil Procedure section 906. That section provides in relevant part that, on review from a final judgment or appealable order, “the reviewing court may review the verdict or decision and any intermediate ruling, proceeding, order or decision which involves the merits or necessarily affects the judgment or order appealed from or which substantially affects the rights of a party.” (Code Civ. Pro., § 906.) However, “[t]he provisions of this section do not authorize the reviewing court to review any decision or order from which an appeal might have been taken.” (Ibid.) The May 7, 2008 order is an order from which an appeal might have been taken. Thus, it is not made appealable by Code of Civil Procedure section 906.
Furthermore, the “discovery” orders are not made appealable by Code of Civil Procedure section 906. The June 3, 2008 and June 17, 2008 orders were not intermediate rulings that involve the merits or necessarily affect the judgment or order appealed from. In the December 24, 2008 order, the trial court concluded that the FAC sufficiently pleaded that appellant owed an independent legal duty to the Rioses. The June 3, 2008 and June 17, 2008 orders which permitted the discovery of Dunn and Farris did not address the merits of whether section 1714.10 applied, nor did the discovery permitted by those orders affect the December 24, 2008 order. That discovery was used to draft a proposed Second Amended Complaint; the FAC was unchanged. Moreover, if those orders substantially affected the rights of a party, those orders would have been made appealable by section 1714.10, subdivision (d), as they would have determined the rights of the petitioners. Thus, Code of Civil Procedure section 906 does not permit this Court to review any order other than the December 24, 2008 order.
B. December 24, 2008 Order
Holland contends that the trial court erred in concluding that Holland owed an independent duty to plaintiffs, who were beneficiaries of the trust in which Dunn, Holland’s client, was trustee. He contends that he did not do any affirmative act other than those in his official representative capacity as attorney for Dunn. Thus, he contends that the trial court should have sustained his demurrer and granted his motion to strike. We disagree.
We review de novo accepting the truth of plaintiffs’ allegations and any reasonable inferences in the complaint. (Berg & Berg Enterprises, LLC v. Sherwood Partners (2005) 131 Cal.App.4th 802, 822 (Berg); Sistare-Meyer v. Young Men’s Christian Ass’n of Metro. Los Angeles (1997) 58 Cal.App.4th 10, 13.)
Section 1714.10, subdivision (a) provides in relevant part that:
“No cause of action against an attorney for a civil conspiracy with his or her client arising from any attempt to contest or compromise a claim or dispute, and which is based upon the attorney’s representation of the client, shall be included in a complaint or other pleading unless the court enters an order allowing the pleading that includes the claim for civil conspiracy to be filed after the court determines that the party seeking to file the pleading has established that there is a reasonable probability that the party will prevail in the action. The court may allow the filing of a pleading claiming liability based upon such a civil conspiracy following the filing of a verified petition therefor accompanied by the proposed pleading and supporting affidavits stating the facts upon which the liability is based.”
Section 1714.10, subdivision (c) provides that “[t]his section shall not apply to a cause of action against an attorney for a civil conspiracy with his or her client, where (1) the attorney has an independent legal duty to the plaintiff, or (2) the attorney’s acts go beyond the performance of a professional duty to serve the client and involve a conspiracy to violate a legal duty in furtherance of the attorney’s financial gain.”
Because an attorney is liable for a civil conspiracy with his client only in those circumstances detailed in section 1714.10, subdivision (c), it has been held that section 1714.10, subdivision (a) is applicable only where the plaintiffs did not plead a viable civil conspiracy claim. (Pavicich v. Santucci (2000) 85 Cal.App.4th 382, 391; Panoutsopoulos v. Chambliss (2007) 157 Cal.App.4th 297, 304.) Thus, plaintiffs can include a civil conspiracy cause of action against Holland if plaintiffs can allege that Holland had an independent legal duty to them or that Holland’s acts go beyond the performance of a professional duty to serve Dunn and involve a conspiracy to violate a legal duty in furtherance of Holland’s financial gain.
Moreover, section 1714.10, subdivision (a) only applies to civil conspiracy causes of action. It does not apply to individual causes of action against Holland.
In this case, the trial court concluded that the FAC sufficiently pleaded that Holland owed an independent legal duty to the Rioses. The FAC alleges that Holland filed a complaint on behalf of Dunn and then dismissed that complaint with prejudice. Interpreted in the best possible light for plaintiffs, Holland committed legal malpractice by dismissing the complaint with prejudice and Holland’s legal malpractice was in furtherance of the civil conspiracy with Farris and Dunn to deprive the Rioses of their beneficial interests in the trust.
However, the FAC does not allege that Holland had any contact with the Rioses. The FAC also does not allege that Holland engaged in any affirmative conduct other than filing the complaint and dismissing the complaint with prejudice. Thus, the only basis to find that Holland owed a legal duty to the Rioses is the legal conclusion that Holland owed an independent legal duty to the Rioses who were, as the trial court concluded, beneficiaries of the trust.
Although the FAC includes an allegation that the Rioses sold their beneficial interest in the Trust to Dunn for $1.00, the FAC also asserts that trust agreement provides that the Rioses would receive $2,000 if the suit against Ortiz was successful. Thus, the FAC sufficiently alleges that the Rioses are third-party beneficiaries of the trust or third-party beneficiaries of the lawsuit against Ortiz.
Having concluded that the Rioses are third-party beneficiaries, we next review whether the Rioses have sufficiently pleaded that Holland owed them an independent legal duty. If the Rioses can do so, they can file a civil conspiracy cause of action or an individual cause of action against Holland.
The California Supreme Court has held that a beneficiary to a will can bring a cause of action for negligence against an attorney that drafted the will if certain factors are met. (Lucas v. Hamm (1961) 56 Cal.2d 583, 588.) According to the Supreme Court, “the determination whether in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, among which are the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury, and the policy of preventing future harm.” (Id. at p. 588.)
Although Lucas v. Hamm, supra, involved a case where the attorney drafted a will and allegedly breached a duty of care to the beneficiaries of a will, the same principles would apply to any case of legal malpractice. Berg, supra, 131 Cal.App.4th 802, does not hold otherwise. In that case, the appellate court held that the mere fact that an attorney represented a fiduciary is insufficient to show that the attorney owes the same fiduciary obligations to the beneficiary, especially where interests of the fiduciary and of the beneficiary are adverse. (Id., at p. 826.)
Here, the FAC alleges that Holland dismissed the complaint with prejudice and it can be reasonably inferred that the dismissal with prejudice constituted a breach of care or legal malpractice. From these allegations, as well as from other allegations and reasonable inferences, we conclude that the factors noted in Lucas v. Hamm, supra, 56 Cal.2d 583, supports the finding of liability against Holland.
First, the prosecution of the lawsuit was intended to benefit the Rioses. The trust agreement provided that the Rioses would receive at least $2,000 if the lawsuit was successful. Second, the harm was foreseeable. By dismissing the lawsuit with prejudice, Holland severely, if not permanently, prevented the possibility of a successful lawsuit against Ortiz by the trust. Third, the plaintiffs were certainly harmed because they neither received the $2,000 nor retain possession of the house. Third, the dismissal with prejudice directly led to the Rioses’ loss of ever being paid $2,000. Finally, imposition of a duty to prosecute a lawsuit in the circumstances of this case would prevent harm to other similarly situated persons in the future.
In reaching this conclusion, we have taken into consideration whether recognition of liability in this case would place an undue burden on the legal profession. (See Lucas v. Hamm, supra, 56 Cal.2d at p. 589.) It does not place an undue burden on the legal profession because we believe that the factual circumstances in this case rarely occur. First, as alleged in the FAC, the prior lawsuit by Dunn was dismissed on demurrer without leave to amend because of lack of standing. It is reasonable to infer that the trial court in the case concluded that a trustee cannot represent a trust in a lawsuit in pro per. By hiring Holland, Dunn remedied that issue. According to the FAC, the lawsuit filed by Holland was also attacked by demurrer. However, it is reasonable to conclude that Holland could have responded to the demurrer by raising other grounds or even by seeking dismissal without prejudice or with leave to amend. Instead, he dismissed with prejudice. We conclude that the FAC sufficiently alleged a cause of action for legal malpractice. We also conclude that most, if not all, attorneys would not seek to dismiss the complaint with prejudice on the facts alleged by the FAC.
Therefore, we conclude that Holland owed a duty of care to the Rioses to respond to the demurrer to the lawsuit in another way besides seeking a dismissal with prejudice. Thus, the Rioses can include civil conspiracy causes of action against Holland in their FAC or in a subsequently amended complaint.
DISPOSITION
The judgment s affirmed. Costs to respondents.
WE CONCUR: Levy, J. Hill, J.