Opinion
G054844
08-07-2018
LARRY LONG TRAN, Plaintiff and Respondent, v. THE ARCADE PARTNERSHIP et al., Defendants and Appellants.
Brunick, McElhaney & Kennedy and Leland P. McElhaney for Defendants and Appellants. Curd, Galindo & Smith and Joseph D. Curd for Plaintiff 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. 30-2014-00759157) OPINION Appeal from a judgment of the Superior Court of Orange County, Geoffrey T. Glass, Judge. The judgment is affirmed. Appellant's motions for judicial notice, to augment the record and to produce additional evidence, and to file a reply brief are denied. Brunick, McElhaney & Kennedy and Leland P. McElhaney for Defendants and Appellants. Curd, Galindo & Smith and Joseph D. Curd for Plaintiff and Respondent.
* * *
The Arcade Partnership, Renald Annelle, and Robert Keeney (Arcade) sued their real estate agent Larry Long Tran. Arcade lost at the trial level and appealed; we affirmed the judgment in an earlier opinion. Tran was represented by his attorney Patrick Lund. On remand, the trial court ordered Arcade to pay Tran an attorney fee award of $241,355.29. Arcade then appealed from the attorney fee award.
While Arcade's second appeal was pending, Tran purportedly signed a settlement document, agreeing to accept a lower attorney fee award of $115,000. But Lund had electronically forged (cut and pasted) Tran's signature on the settlement document and absconded with the money. After we affirmed the $241,355.29 fee award, Tran became aware of Lund's fraud. Tran then sued Arcade for declaratory relief, seeking to set aside the purported settlement agreement. The trial court set aside and voided the agreement, but also gave Arcade $115,000 in credit for its partial payment to Lund (leaving Arcade owing a little over $126,000 to Tran).
Arcade now appeals from the trial court's declaratory relief judgment. Arcade argues that Tran "ratified" the purported settlement agreement by filing a claim with the California State Bar's Client Security Fund (CSF) and by obtaining a default judgment against Lund in a separate lawsuit.
We disagree and affirm the judgment.
I
FACTS AND PROCEDURAL HISTORY
Arcade arranged to sell an office building to a potential buyer. After the sale fell out of escrow, Arcade sued its realtor Tran for fraud, negligence, and related claims. Tran countersued for breach of contract. The trial court ruled against Arcade and dismissed Tran's counterclaim. This court upheld the judgment as to Arcade's claims, but ruled that the court had erroneously dismissed Tran's counterclaim. ([Arcade] et al. v. Tran et al (Mar. 11, 2011, G042477) [nonpub. opn.] (Tran I).)
On remand, the trial court entered a judgment in favor of Tran, who also filed a motion seeking $365,000 in attorney fees. The court awarded Tran $241,355.29 in attorney fees (exclusive of costs). Arcade appealed and this court upheld the award. ([Arcade] et al. v. Tran et al. (April 15, 2014, G048072) [nonpub. opn.] (Tran II).)
While Tran II was pending in this court, Arcade's attorney Leland McElhaney contacted Tran's attorney Lund. McElhaney was trying to settle the attorney fee award for a lower amount, but Tran rejected all settlement offers that were communicated to him. Tran then purportedly signed a document agreeing to settle the attorney fee award for $115,000. Thereafter, Arcade wrote three checks to the "Lund Law Group Trust Account" totaling $115,000.
An appellant is required to immediately notify the Court of Appeal in the event of a settlement. (Cal. Rules of Court, rule 8.244(a)(1).) Tran is not requesting sanctions against Arcade for this apparent rule violation and we are not imposing sanctions on our own motion. (Cal. Rules of Court, rule 8.276(a)(4).) However, we advise the parties to comply with the appellate rules in all future proceedings.
After Tran learned that this court had affirmed the $241,000 attorney fee award (Tran II), he contacted Lund, who told Tran that he was moving out of state and to get a new attorney. Tran then contacted McElhaney directly, who told Tran that his award had been settled for $115,000, which Arcade had already paid to Lund.
Tran contacted the district attorney and filed an "Application for Reimbursement" with the CSF. In the application, Tran stated that when he contacted McElhaney it "was the first I had heard of any settlement." Tran said that, "I did not agree to its terms, and I did not know about it." Tran stated that his attorney "Lund settled my lawsuit without my consent, forged my signature on the settlement agreement, and personally kept all $115,000 in settlement funds paid by the judgment debtors."
Thereafter, Tran filed the instant complaint for declaratory relief seeking to set aside the purported settlement agreement. Tran also filed a separate lawsuit against Lund and obtained a default judgment for fraud and related claims.
On February 27, 2017, following a one-day trial, the trial court entered a judgment in favor of Tran on the declaratory relief action: "The court declares that the purported settlement agreement dated October 3, 2013 . . . is void and is set aside. The court further declares that [Arcade] is entitled to $115,000 credit for the proceeds paid by [Arcade] in partial satisfaction of that judgment." Arcade appeals.
II
DISCUSSION
The purpose of declaratory relief is to avoid issues that might result in future litigation. (Kendall v. Scripps Health (2017) 16 Cal.App.5th 553, 575-576.) "Any person interested under a written instrument . . . who desires a declaration of his or her rights or duties . . . may . . . bring an original action . . . for a declaration of his or her rights and duties . . . including a determination of any question of construction or validity arising under the instrument . . . ." (Code Civ. Proc., § 1060, italics added.)
Declaratory relief is an equitable remedy, not a cause of action. (Faunce v. Cate (2013) 222 Cal.App.4th 166, 173.) Thus, a trial court's decision to grant declaratory relief is reviewed under an abuse of discretion standard. (Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 364.) In a civil matter, a client generally has a unilateral right to control the outcome of his or her case, including the "right to settle or refuse to settle a claim." (In the Matter of Guzman (Review Dept. 2014) 5 Cal. State Bar Ct. Rptr. 308, 314.)
Here, Tran had secured an attorney fee award. But without his consent, Lund forged Tran's signature and agreed to "settle" the award for a lower amount. The trial court voided the purported settlement agreement based on the fraud committed by Lund. The court undoubtedly acted within its discretion.
In this appeal, Arcade does not contend that the trial court abused its discretion. Nor does Arcade dispute the underlying facts. Rather, Arcade argues that Tran ratified the settlement agreement as a matter of law. We disagree.
"'Ratification is the voluntary election by a person to adopt in some manner as his own an act which was purportedly done on his behalf by another person, the effect of which . . . is to treat the act as if [it was] originally authorized by him. [Citations.]'" (Estate of Stephens (2002) 28 Cal.4th 665, 673.) Ratification may occur expressly or by conduct that is consistent with voluntary affirmation. (Rakestraw v. Rodrigues (1972) 8 Cal.3d 67, 73.) The conduct must "be truly voluntary in character . . . there can be no adoption if the act . . . is done only because the purported principal is obligated to minimize his losses caused by the agents' wrongful act." (Ibid.)
In some cases, a person may ratify his forged signature. (Common Wealth Ins. Systems, Inc. v. Kersten (1974) 40 Cal.App.3d 1014, 1024.) Whether there has been ratification of the forgery is ordinarily a question of fact, as is the question of whether one is estopped to deny its validity. (Ibid.) Thus, the function of an appellate court "is limited to the question whether there is any substantial evidence, contradicted or uncontradicted, which will support the questioned finding." (Id. at p. 1026.)
Arcade contends that Tran ratified the purported settlement agreement: 1) by filing a CSF application for reimbursement; 2) by obtaining a default judgment against Lund in a separate proceeding; and 3) that case law compels this finding.
1. Tran did not ratify the settlement agreement by filing a CSF claim.
Arcade contends on appeal, as it did in the trial court, that by filing a CSF claim Tran was estopped from setting aside the purported settlement agreement and had "impliedly affirmed the settlement of the debt."
The trial court found that Tran's CSF application "clearly sets out the facts . . . including the claims that Tran did not approve or agree to the settlement and that Tran's former attorney fraudulently forged Tran's name and took the $115,000. This is not by any means an affirmation that Tran was ratifying the settlement - it was an affirmation that [Arcade] had partially paid the debt owed and the attorney had stolen it." The court's finding was based on the unchallenged exhibits and trial testimony. This constitutes substantial evidence; therefore, we must affirm.
Further, the CSF is a form of quasi insurance. It is designed to "relieve or mitigate pecuniary losses caused by the dishonest conduct of active members of the State Bar . . . arising from or connected with the practice of law." (Bus. & Prof. Code, § 6140.5.) Tran's claim was apparently an attempt "to relieve or mitigate" his losses based on Lund's fraud. To conclude that Tran's filing of a CSF claim can be interpreted as a "ratification" of Lund's fraud is not a logical inference, just as the filing of an insurance claim by a theft victim cannot be interpreted as a "ratification" of the actions of the thief.
The CSF application asked: "Can your loss be reimbursed from any other source . . . ?" Tran answered, "No." Arcade argues that Tran's answer reveals an implied ratification (which confirms that this is not a pure question of law). In any event, as well stated by the trial court: "Any discrepancies in the claim . . . such as the veracity of the statement that there are no other avenues of recovery, would be addressed between the CSF and Tran and are not a basis . . . to argue ratification of the settlement."
In short, Arcade failed to prove that by filing a CSF claim, Tran voluntary ratified (or affirmed) the purported settlement agreement.
We deny Arcade's motions and all other requests relating to Tran's CSF claim. The State Bar's rulings are not relevant to our review. (See Bus. & Prof. Code, § 6140.5, subd. (a) ["Any payments from the fund shall be discretionary and shall be subject to regulation and conditions as the board shall prescribe"].) --------
2. Tran did not ratify the agreement by suing Lund for his fraud.
Arcade also contends that Tran ratified the purported settlement agreement by suing Lund for fraud and later obtaining a default judgment. Arcade made the same argument in the trial court.
The trial court rejected these arguments, finding that "Tran's claim against his attorney was based on the facts known at the time, which included [Arcade's] position that Tran was bound by the settlement. The judgment reflected that uncertainty. Since this court rules that [Arcade] remains liable for part of the original judgment, [Lund] can certainly argue that the judgment against him is too high, but the mere fact of a judgment against [Lund] does not diminish the original liability of [Arcade]."
The trial court's ruling is supported by substantial evidence and by common sense. Conversely, Arcade argues that "by seeking and obtaining a judgment against [Lund] for the full amount of the attorney's fee award ($241,355.29), Tran necessarily acknowledged the binding force of the Settlement Agreement, and that it effectively compromised and settled the award which was on appeal when the Settlement Agreement was executed. Otherwise, Tran would not have suffered a $241,355.29 'loss.'"
The logic of Arcade's argument is difficult to discern. At the time Tran sued Lund and obtained a default judgment, Lund had cheated Tran out of his entire attorney fee award, to which he was legally entitled. Lund had directly stolen $115,000, and Lund had signed away the remainder by forging Tran's signature. For Arcade to argue that Tran somehow ratified Lund's fraud by suing him for that fraud, and that Arcade is now off the hook for the remaining $126,355.29 is, well . . . let us say brazen.
3. Case law does not support Arcade's arguments.
Arcade cites Alvarado Community Hospital v. Superior Court (1985) 173 Cal.App.3d 476 (Alvarado) for the proposition that "a client ratifies his attorney's wrongful settlement of the client's claim when the client either seeks reimbursement from the State Bar's Client Security Fund or sues the attorney for damages resulting thereon."
Arcade has misinterpreted Alvarado; the opinion is plainly distinguishable. (Alvarado, supra, 173 Cal.App.3d 476.) In Alvarado, a plaintiff sued a hospital, alleging the wrongful death of her husband. Without the plaintiff's knowledge or consent, her attorney forged her signature on an agreement, purporting to settle the lawsuit for $15,000. The attorney then "obtained the court's dismissal with prejudice of the action as to" the hospital. (Id. at p. 479.) The attorney kept the money and was later found in federal custody. (Id. at pp. 479-480.) The plaintiff filed a claim with the CSF. (Id. at p. 480.) The State Bar paid the plaintiff $9,000, which represented her portion (60%) of the purported $15,000 settlement. Thereafter, the plaintiff moved to set aside the unauthorized dismissal and proceed with her lawsuit. (Ibid.) The trial court granted the motion, "providing that [the hospital] should have credit for the sum of $15,000 against any judgment which might be recovered against it." (Id. at p. 480.) The appellate court did not reverse the trial court, but ordered the plaintiff to return the CSF payment as a condition of proceeding with her lawsuit. (Id. at pp. 485-486.)
The Alvarado court held that, "[w]here an attorney purports to accept a settlement offer without his client's consent, the client has two options. First, the client may decide the unauthorized settlement was nonetheless a beneficial bargain and seek to ratify his attorney's acceptance. Alternatively, the client may determine the settlement was not beneficial, seek to disavow it and proceed with a lawsuit." (Alvarado, supra, 173 Cal.App.3d at p. 479.) The court found that the plaintiff had erroneously taken both courses of action. The court held that the plaintiff could have "simply moved to set aside the dismissal. In such case, she would have still possessed her cause of action against [the hospital] but she would not have been entitled to the $9,000. Instead, however, she [first] obtained the $9,000 from the CSF 'to which [she] would not be entitled unless the [settlement] were [affirmed] . . . .' [Citation.]" (Id. at p. 482, first and second brackets added.)
In other words, as stated by the trial court here, "[t]he Alvarado case addresses situations where the plaintiff has no right to recover against the defendant unless there was a settlement. In that scenario, a plaintiff cannot seek reimbursement from the CSF for the amount of the settlement without affirming the settlement." But here, unlike the plaintiff in Alvarado, Tran had already litigated his claim and was legally entitled to the judgment: the entire attorney fee award of $241,355.29. That is, Tran was legally entitled to the monetary judgment despite the fraudulent settlement agreement, not because of the fraudulent settlement agreement (as in Alvarado).
Arcade also argues that Alvarado stands for the proposition that "a client ratifies his attorney's wrongful settlement of the client's claim when the client . . . sues the attorney for damages resulting thereon." Arcade's argument is once again difficult to follow; the plaintiff in Alvarado was not legally entitled to any money whatsoever in the absence of the "wrongful settlement." Further, there are no facts in Alvarado suggesting that the plaintiff had sued her attorney; she had sued the hospital for the alleged wrongful death of her husband. To the extent that Alvarado may hold otherwise, that part of the opinion is dicta.
Moreover, the other cases mentioned in Arcade's briefing do not support its argument. (See, e.g., Navrides v. Zurich Ins. Co. (1971) 5 Cal.3d 698 [a plaintiff's claim against an insurance company for an unauthorized settlement constitutes ratification of the settlement where the plaintiff was not otherwise legally entitled to the settlement]; see also, e.g., Whittier Union High Sch. Dist. v. Superior Court (1977) 66 Cal.App.3d 504 [an unauthorized voluntary dismissal of a plaintiff's personal injury lawsuit was properly set aside due to the fraud committed by the plaintiff's attorney].)
In sum, there is substantial evidence that Tran did not ratify the purported settlement agreement with Arcade, either by seeking reimbursement from the CSF or by separately suing Lund for his fraud. Tran was legally entitled to the entire attorney fee award. Thus, the trial court did not abuse its discretion by setting aside and voiding the fraudulent settlement agreement.
III
DISPOSITION
The judgment is affirmed. Respondent is entitled to his costs on appeal.
MOORE, J. WE CONCUR: BEDSWORTH, ACTING P. J. FYBEL, J.