Valentine v. Matthews

Filed 10/11/07 Valentine v. Matthews CA2/3

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION THREE

APPEAL from a judgment of the Superior Court of Los Angeles County, Richard L. Fruin, Jr., Judge. Affirmed in part, reversed in part, and remanded with directions.

Lamb & Kawakami, Robert M. Gilchrest and Priya Mohan for Defendants, Respondents and Appellants.

Martin E. Jacobs, Inc., Martin E. Jacobs and Eugene R. Salmonsen for Plaintiffs, Appellants and Respondents.

________________

I.

INTRODUCTION

Through a bankruptcy proceeding, Westland Architecture & Development Corporation (Westland) obtained an option to buy a commercial building. Attorney Leodis C. Matthews (Matthews) represented Westland and its president, Youless Jimmy Valentine (Valentine). About five months later, Matthewss solely owned corporation Retra, LLC bought the building by purchasing the option from Westland.

The factual underpinnings of this case involve allegations by Westland and Valentine that Matthews breached his fiduciary duties, including the duty of loyalty, and committed legal malpractice.

At trial, there was conflicting evidence as to who Matthews represented and when. There were disputes over the authenticity of documents and confusing evidence as to when Valentine was an officer of Westland. The jury found that Matthews represented Westland until May 15, 1999, the date Retra agreed to buy the option from Westland. This finding was consistent with Matthewss testimony.

We hold: (1) the trial court lacked jurisdiction to rule on the posttrial motions for judgment notwithstanding the verdict and new trial; (2) Westland and Valentine have not shown error with regard to the award against them for compensatory damages on the slander of title cause of action, however, the trial court erred in awarding Retra punitive damages on that cause of action; and (3) the trial court correctly denied Matthewss motion for directed verdict.

We remand to the trial court and direct it to (1) reinstate the jury verdict on the complaint in the sum of $2,016,709 in favor of Westland against Matthews and his law firm, Matthews & Partners, and (2) strike the $20,000 punitive damage award in favor of Retra on the slander of title cause of action. In all other respects we affirm.

II.

FACTUAL AND PROCEDURAL BACKGROUND

A. The facts.

Valentine was the president of Westland, a corporation that was incorporated in 1998 to buy, and thereafter develop, distressed properties.

Lydia Soriano of Interlink Development (Interlink) managed a three-story office building located at 4322 Wilshire Boulevard in the Hancock Park area of Los Angeles. Interlink owned an option to purchase the property for a price of $2.9 million. The option expired June 30, 1999.

In June 1998, Westland entered into an agreement to acquire the option from Interlink for approximately $60,000.

About a month later, Interlink attempted to rescind the agreement with Westland. In response, Valentine and Westland filed a lawsuit in the Superior Court (BC196140) in August 1998, alleging Soriano and Interlink violated their contractual obligations to sell the option.

Soriano, doing business as Interlink, filed for bankruptcy protection thereby staying the civil lawsuit.[1] A hearing in the bankruptcy court was set on February 3, 1999, to sell Interlink and its assets, including the option.

Through their counsel, attorney Benjamin Wyatt, Valentine and Westland filed a claim with the bankruptcy court alleging they had a valid right to the option and they also filed an adversary proceeding.

In January 1999, Valentine and Lawrence Nash, Westlands secretary, met with Matthews to discuss if Matthews could replace attorney Wyatt as attorney for Westland and Valentine. Matthews said he needed some time to look over the situation.

At a second meeting, Matthews agreed to take the case. He and Valentine did not discuss the exact cost of the expected legal services, although Valentine said he could not pay more than $10,000. Matthews said he needed $100,000. Matthews represented that he had a large firm, Matthews & Partners. In actuality, Matthews was a sole practitioner.[2] Matthews and Valentine agreed to meet at the Bankruptcy court on February 3, 1999, the date of a scheduled hearing.

On January 25, 1999, Matthews and Westland, through its president Valentine, executed a written fee agreement in which Matthews agreed to enforce the option in the bankruptcy proceeding. The agreement provided that if the matter settled, Matthews was entitled to an interest in Client Corporation and its interest in 4322 Wilshire Blvd., . . . only if Client obtains the Option . . . as a result of efforts of [Matthews]. The agreement did not specify how the contingency interest was to be calculated or its terms.

There may have been a February 2, 1999, special board meeting of Westland. A board resolution of that date purports to oust certain directors. The resolution gave Matthews, who was named as a corporate director, 33 percent of Westland. Matthews signed the board resolution, as did Valentine.

On February 3, 1999, Matthews appeared for Valentine and Westland at the bankruptcy hearing. Matthews told Valentine that he had arranged financing so Westland could purchase all Interlink assets, including the option, and that there was no need for Valentine to pursue other litigation. Matthews suggested he would put up the money for Westland and that thereafter, they would work out an agreement. The bankruptcy court accepted Westlands bid of $212,500 for Interlink and Matthews tendered a check. Matthews signed a bankruptcy document signifying that he was the attorney for both Valentine and Westland.

On Matthewss advice, Valentine and Westland dismissed the Superior Court civil lawsuit and the bankruptcy adversary action.

Valentine also owned California Mortgage Brokers. After the option was bought from Interlink, California Mortgage Brokers and Westland moved into the Wilshire Boulevard building. The mortgage company, Valentine, and Westland put considerable efforts and money into the Wilshire Boulevard building preparing it for occupancy. They painted, replaced the roof, installed elevators, resealed windows, carpeted, and installed heating and air conditioning pumps, electrical wiring, a fire alarm, and garage doors. They obtained a permission of occupancy.

In March 1999, Matthews and Valentine discussed forming a real estate company together, which would include the Wilshire Boulevard building. Valentine learned Matthews had a real estate brokers license, and thus, Matthews could act as broker for Valentine and for Westland, in addition to being their attorney. At that time, Matthews and Valentine also discussed a contingency fee for Matthews. Valentine offered Matthews 30 percent because Matthews was to be a partner in the real estate company.

Prior to March 23, 1999, members of Westlands board of directors hired attorney Lorraine Loder because they were unhappy with how the option was being handled. When Loder was hired, there were issues relating to the option and who could exercise it, Westland or Valentine. There was testimony that at a March 23, 1999, meeting, Folabi Lapido replaced Valentine as president. Later, Valentine would return to the position as president.

Loder believed Matthews was representing himself and Valentine in an attempt to acquire the option. However, Matthews considered himself to be Westlands corporate attorney and stated that he also represented Valentine. Matthews told Loder that Westland did not own the option.

On March 25, 1999, Loder advised Valentine and Westlands board of directors that Lapido had replaced Valentine as Westlands president. The letter also advised that the board was not interested in pursuing the option, but that Valentine could do so personally. Valentine showed the letter to Matthews and the two decided to re-visit the issue with the board. Matthews was to assist Valentine in getting a loan for purchase of the property.

On April 21, 1999, Loder wrote Matthews in Matthewss capacity as attorney for Valentine. Loder stated that Westland was willing to sell its option to Valentine or his designee for a price that would allow Westland to clear up its current obligations of approximately $400,000. Loders itemization of Westlands debts included $10,000 in attorney fees.

On April 21, 1999, Matthews wrote Loder on behalf of Valentine. Matthews stated that he would forward Loders letter of that date to Valentine. Matthews also stated the following: The investors who paid for the option owned it. There was never a loan arrangement between the investors and Westland and Westland had never acquired any interest in the bankruptcy purchase. He was not addressing whether Loders clients could act on behalf of Westland. According to Matthewss testimony, by his letter of April 21, 1999, he was representing Westland.

On April 28, 1999, Matthews wrote a letter to Loder proposing that the parties agree to a settlement by which the option would be transferred and other issues, such as the amount of certain Westland obligations, be resolved through other means, e.g., arbitration. The letter acknowledged Westlands debts and said they would be paid when the option was transferred.

On April 29, 1999, Loder rejected Matthewss April 28th offer. Loder stated that Westlands board wanted payment of obligations and not new promises to pay those obligations. She also stated that if Valentine or Matthews cared to discuss the matter further, they should contact her. Otherwise, according to Loder, Westland would be pursuing other alternatives.

In a May 3, 1999, letter to Loder, Matthews rejected Loders April 25, 1999, offer. Matthews demanded Loder withdraw her letter to the escrow company which had resulted in it refusing to proceed with the escrow, or we will be forced to seek a legal remedy.

A May 6, 1999, communication from a lender shows that Matthews was trying to obtain funding for himself to buy the property.

On May 7, 1999, Matthews sent a letter to Valentine stating the bank will not approve our loan without documents showing that the option will be signed over to Retra. Matthews asked Valentine to assist in getting the documents.

On May 15, 1999, Westlands board of directors met. Matthews testified, in part, that he wanted the meeting to deal with the contingency and deal with [his] role as an attorney. At the meeting, the board adopted a resolution authorizing the sale of the option to Retra. The resolution stated, in part, that in consideration of the promises made by Matthews and Retra, Westland was transferring to Retra the rights [Westland] may have acquired by reason of the Bankruptcy sale of assets of Interlink . . . . Retra, through Matthews, was to hold Westland and its board members harmless for the Westland debts as had been identified in Loders April 21, 1999, letter. Valentine signed the resolution, as did other board members. Matthews was at the May 15, 1999, board meeting, although he was not allowed to be present or participate in all discussions.

Loder and Matthews drafted the May 15, 1999, board resolution. Valentine believed he was to be partners with Matthews in owning the option after it was sold by Westland. Valentine testified that Westlands board members approved the sale to Retra only because Valentine was to be a partner in the project.

Throughout the events described above, Matthews and Valentine were in constant communication with one another and Valentine introduced Matthews as his attorney and partner. Valentine understood he was to receive two-thirds of the building once it was purchased.

Matthews testified that until the board meeting on May 15, 1999, it was unclear who represented Westland. Matthews took the position that he was representing Westland until that date and that he was obligated to protect its interests. Matthews further testified that while he negotiated with Loder to purchase the option for Retra, he was negotiating on behalf of Westland. Matthews testified that he was communicating with Valentine, as president and representative of Westland, and that Valentine had the authority to act on behalf of the corporation. However, Matthews insisted that the only time he represented Valentine personally was in the bankruptcy proceeding on February 3, 1999. Matthews testified that because Westland agreed to give him a percentage of the company, he saw it as his obligation to stay in there until that interest was realized.

Probably sometime in May 1999, Matthews presented Valentine with a letter discussing conflicts of interest involving this transaction. The letter recommended that you consult with another attorney. However, Matthews tore up the document and threw it in the trash after he saw that it was not backdated. When Matthews left the room, Valentine picked up segments of the torn document from the trash can.[3] Matthews and his girlfriend re-drafted the letter agreement and backdated it to February 2, 1999, the day before the bankruptcy hearing. Valentine signed that document for himself and on behalf of Westland. The letter references the Wilshire Boulevard building.

On May 20, 1999, Valentine secured an equity loan commitment of $3.5 million to $4 million from the Oakwood Financial Group. The commitment letter listed conditions Westland was required to meet. At the time the commitment letter was issued, the lender believed it was likely Westland would receive the loan. Further, because the project had equity in it, financial institutions [had] no problem dealing with this type of projects. There was a whole market out there for hard money loans, i.e., loans based on the equity in a property rather than a persons individual ability to pay back the loan.

On May 24, 1999, an assignment of option to purchase and designation of nominee was executed transferring the option to Retra. Several days later, Retra exercised the option to purchase the property with the payment of $200,000.

In 1999, Retra paid approximately $2.9 million to exercise the option and buy the Wilshire Boulevard property. At the time, the property was appraised (as will be discussed below) for at least $7.1 million.

Matthews, as the sole owner of Retra, received a real estate brokerage commission of more than $85,000 when the option was exercised and the property was sold to Retra. Additionally, Matthews received $100,000 which was an asset of Interlink. Neither Valentine nor Westland was advised of these facts.

In March 2004, Retra sold the property to a third party for the fair market value of $6.7 million.

B. Procedure.

1. The Valentine/Westland complaint.

a. The complaint and trial posture.

On August 5, 1999, Valentine and Westland filed a complaint against Matthews and Retra, which was subsequently amended. In August 1999, a lis pendens was filed.

Trial before a jury was held only against Matthews. Westland argued Matthews breached the legal services agreement, committed legal malpractice and breached fiduciary duties when he acquired the option for his company, Retra. In contrast, Valentine argued Matthews breached fiduciary duties owed to Valentine under an oral partnership agreement by which he and Matthews would own the option jointly. Valentine alleged breach of the legal services agreement, legal malpractice, breach of fiduciary duties and conversion.

The trial court ruled that Valentine had not pled breach of a partnership agreement. The trial court did not permit Valentine to amend the complaint to conform to proof and did not permit the partnership theory to go to the jury.

b. The expert testimony.

(1) The ethics expert.

Westland and Valentine called attorney Theodore Cohen to the stand as an expert on legal ethics. Cohen explained the fiduciary duties owed by attorneys to their clients, including the duty of loyalty. Cohen explained that lawyers owed the highest obligation of good faith to protect their clients interests. Cohen also explained Business and Professions Code section 6147 and the applicable Rules of Professional Conduct, including rules 3-300 and 3-310 addressing avoiding adverse interests. Additionally, Cohen described the numerous occasions that Matthews violated his fiduciary obligations and the Rules of Professional Conduct. This testimony was uncontradicted as Matthews did not call to the stand an ethics expert.

(2) The evidence as to the value of the property.

Valentine testified he believed that in 1999 the building was worth $8 million.

Valentine and Westland called Scott P. Hall, an MAI real estate appraiser, as an expert witness. Hall testified that on June 4, 1999, he was an employee of Southern Pacific Bank. On that date, he prepared a written appraisal on the property for the banks consideration as to whether it should make a loan on the property. Hall testified that three different methods of valuing properties yielded a fair market value of the property of about $7 million for the property as is and $8.1 million if necessary work was completed. Hall calculated that it would cost about $730,000 for construction costs to finish the building and about $300,000 in expenses to lease out the space. Hall was cross-examined about the accuracy of his report.

Thereafter, Valentine and Westland recalled Hall to the stand. In addition to reiterating his prior valuation testimony, he testified that if the signed leases were not in place, his appraisal would vary only by five to ten percent. In cross-examination, Hall was criticized about using the leases as part of his valuation methodology.

Upon stipulation, one page of the Hall appraisal report was admitted into evidence. Thereafter, the trial court permitted introduction of the entire report.

c. The motion for directed verdict.

Trial on the complaint was held before a jury. At the close of evidence on May 19, 2004, Matthews made a motion for directed verdict arguing there was no evidence to support a finding that his conduct caused damages. The trial court denied the motion.

d. The verdict on the complaint.

The jury was instructed in a special verdict to decide the questions pertaining to Valentine only if it found against Westland.

On May 21, 2004, the jury rendered a special verdict in favor of Westland and against Matthews. The jury found that Matthews represented Westland from January 25, 1999, to May 15, 1999, and that his breaches of fiduciary duty and legal malpractice proximately caused damages to Westland in the amount of $2,016,709. As it had been instructed, the jury did not reach the issues as to Valentine.

2. TheRetra cross-complaint against Valentine/Westland.

Retra cross-complained against Valentine and Westland for slander of title and cancellation of cloud on title.

After the jury trial on the complaint, the issues on the cross-complaint were tried by the court.

On August 10, 2004, the trial court rendered a statement of decision on the cross-complaint finding for Retra. The trial court found that the wrongful filing of the lis pendens had caused Retra to incur $61,084.75 in attorney fees. The trial court awarded Retra $61,084.75 for compensatory damages and $20,000 in punitive damages against Valentine and Westland, jointly and severally.

3. The entry and service of the notice of entry of judgment.

On August 26, 2004, the trial court signed and entered judgment on the cross-complaint and concurrently signed and entered judgment on the complaint. The trial court dismissed Valentine as a plaintiff on the complaint.

Also on August 26, 2004, the clerk served by mail a copy of the trial courts statement of decision on the cross-complaint and a notice of entry of judgment on the complaint and on the cross-complaint.

4. The motions for judgment notwithstanding the verdict and new trial.

On September 8, 2004, Matthews served a notice of intention to move for judgment notwithstanding the verdict (jnov) or in the alternative, for a new trial with respect to the jury verdict.

In September 2004, Valentine filed a motion for new trial with respect to the jury verdict. Valentine argued he should be entitled to a new trial if the verdict against Matthews was overturned because the jury had not addressed any issues with regard to him.

On October 18, 2004, the parties appeared for a hearing on the posttrial motions. Matthewss counsel advised the trial court that the 60-day period during which the trial court had to rule on the motions would expire on November 5, 2004.

On October 20, 2004, the trial court served the parties by facsimile with a draft ruling indicating it was inclined to grant the jnov motion, but that it had not evaluated the new trial motions. The first paragraph of the document stated, This is a draft ruling. The court is leaving for vacation and therefore is unable to complete its ruling. The court sets a further hearing for Monday, November 1, 2004 @ 9:30 a.m., to consider this draft. Counsel are requested to bring their evidence books, trial transcripts and any authority needed to support their argument. The trial transcripts are not available for the court and therefore the court must rely on . . . counsel to cite and provide copies of testimony that support their positions. The draft ruling stated there was substantial evidence to support the jurys finding that Matthews represented Westland from January 1999 until May 15, 1999. The trial court indicated it tentatively found there was no substantial evidence to support the jurys verdict that Matthews breached his professional duties. The trial court also tentatively found that as a matter of law, Matthewss breach of Rules of Professional Conduct, rule 3-310 did not cause Westland any damages because it had been represented by independent counsel, i.e., Loder. The last paragraph summarized the tentative ruling on the jnov motion: Westland does not establish that Matthews was required to send a conflict letter to Westland in order to be able to engage in the purchase transaction nor that his failure to do so caused Westland any damage. There is not substantial evidence therefore to support the jurys verdict.

In the draft opinion, the trial court did not provide guidance as to its thinking with regard to the two new trial motions. Rather, the draft ruling stated, RULING ON DEFENDANTS MOTION FOR NEW TRIAL: [] (This motion is equally important and should be briefed carefully.) [] C. RULING ON PLAINTIFF VALENTINES MOTION FOR NEW TRIAL.

Thereafter, the parties filed supplemental pleadings addressing the effect of the trial courts October 20, 2004, draft ruling and whether or not the trial court had the jurisdiction to rule on the pending motions.

On November 1, 2004, the trial court issued a decision on the posttrial motions. The trial court did not directly address its jurisdiction to render a ruling on the motions, but merely acknowledged that there was confusion on this issue. The trial court adopted its draft ruling granting Matthewss jnov motion. The trial court granted Matthewss new trial motion solely on the ground that he was prejudiced by the trial courts error in admitting into evidence the Hall appraisal after evidence had closed and after earlier indicating that it would not receive the appraisal.[4] The trial court denied Valentines motion for a new trial.

On November 12, 2004, Westland and Valentine filed a motion to strike the order granting jnov and a new trial. They noted that the 60th day upon which the trial court had to rule was October 26, 2004, and thus, the trial court was without jurisdiction to rule on the motions. On December 7, 2004, the trial court denied the motion to strike.

The trial court entered a final judgment in favor of Matthews on the complaint and in favor of Retra on the cross-complaint. Retra was awarded $61,084.75 in compensatory damages and $20,000 in punitive damages.

C. The appeals.

The parties have appealed from the final judgment arguing the following:

Valentine and Westland contend the trial court had no jurisdiction to, and erred in, granting Matthewss motions for jnov and new trial. Valentine contends that if the trial court had jurisdiction to rule on the posttrial motions, then he was entitled to a new trial because the jury should have reached a verdict as to him. Matthews contends that if the trial court had no jurisdiction to rule on his jnov and new trial motions, then the trial court erred in denying his motion for a directed verdict.

With regard to the cross-complaint on the slander of title cause of action, Valentine and Westland contend Retra was not entitled to judgment.

We reverse the trial courts order granting jnov and a new trial to Matthews and we direct the trial court to reinstate the jury verdict on the complaint against Matthews and in favor of Westland. On the cross-complaint for slander of title, we direct the trial court to strike the punitive damages. In all other respects we affirm the judgment.

III.

DISCUSSION

A. The appeal.

1. The trial courts ruling on the jnov motion and the new trial motions was a nullity.

Valentine and Westland contend the trial court had no jurisdiction to rule on the motions for jnov and new trial and thus, the rulings on these motions was a nullity. This contention is persuasive.

As discussed below, the jurisdictional restrictions that apply to a new trial motion also apply to jnov motions.

Jnov motions are controlled by Code of Civil Procedure section 629. This section states in part:

The court, before the expiration of its power to rule on a motion for a new trial, either of its own motion, after five days notice, or on motion of a party against whom a verdict has been rendered, shall render judgment in favor of the aggrieved party notwithstanding the verdict whenever a motion for a directed verdict for the aggrieved party should have been granted had a previous motion been made.

. . . The court shall not rule upon the motion for judgment notwithstanding the verdict until the expiration of the time within which a motion for a new trial must be served and filed, and if a motion for a new trial has been filed with the court by the aggrieved party, the court shall rule upon both motions at the same time. The power of the court to rule on a motion for judgment notwithstanding the verdict shall not extend beyond the last date upon which it has the power to rule on a motion for a new trial. If a motion for judgment notwithstanding the verdict is not determined before such date, the effect shall be a denial of such motion without further order of the court. . . .

Because Code of Civil Procedure section 629 directs that a trial courts power to rule jnov motions shall not extend beyond the last date upon which it has the power to rule on a motion for a new trial, we turn to section 660 addressing new trial motions.

Section 660 reads in pertinent part: Except as otherwise provided in Section 12a of this code, the power of the court to rule on a motion for a new trial shall expire 60 days from and after the mailing of notice of entry of judgment by the clerk of the court pursuant to Section 664.5 or 60 days from and after service on the moving party by any party of written notice of the entry of the judgment, whichever is earlier, or if such notice has not theretofore been given, then 60 days after filing of the first notice of intention to move for a new trial. If such motion is not determined within said period of 60 days, or within said period as thus extended, the effect shall be a denial of the motion without further order of the court. (Italics added.) Section 660 continues with the last three sentences of the section, stating: A motion for a new trial is not determined within the meaning of this section until an order ruling on the motion (1) is entered in the permanent minutes of the court or (2) is signed by the judge and filed with the clerk. The entry of a new trial order in the permanent minutes of the court shall constitute a determination of the motion even though such minute order as entered expressly directs that a written order be prepared, signed and filed. The minute entry shall in all cases show the date on which the order actually is entered in the permanent minutes, but failure to comply with this direction shall not impair the validity or effectiveness of the order.

The time limits in Code of Civil Procedure section 660 are jurisdictional and strictly applied. Thus, rulings on jnov and new trial motions made after the 60-day limitation are void. They are a nullity. (In Mercer v. Perez (1968) 68 Cal.2d 104, 118; Fischer v. First Internat. Bank (2003) 109 Cal.App.4th 1433, 1450-1451; Westrec Marina Management, Inc. v. Jardine Ins. Brokers Orange County, Inc. (2000) 85 Cal.App.4th 1042, 1049.) The period may not be enlarged under the rubric of mistake, inadvertence, surprise, excusable neglect under section 473 or by means of a nunc pro tunc order. [Citation.] (Dodge v. Superior Court (2000) 77 Cal.App.4th 513, 518.) Fairness has little to do with it. With jurisdictional deadlines, the rule, like the song, is what a difference a day makes. If the statute is to provide exceptions, the job is for the Legislature, not the courts, to carve them out. (Id. at p. 524.)

Code of Civil Procedure section 1013, subdivision (a) does not extend the 60-day period by five additional days for mailing of the clerks notice. (Westrec Marina Management, Inc. v. Jardine Ins. Brokers Orange County, Inc., supra, 85 Cal.App.4th at pp. 1047-1049.)

Here, on August 26, 2004, the clerk served by mail a copy of the trial courts statement of decision on the cross-complaint and a notice of entry of judgment on the complaint and on the cross-complaint. Thus, the trial court was mandated to rule on the motions for jnov and new trial no later than 60 days later, on October 25, 2004. It did not do so. Rather, on October 20, 2004, the trial court served the parties by facsimile with a draft ruling in which the court expressed its inclination to grant the jnov motion, but also stated it was unable to complete its ruling. The trial court set an additional hearing and required the parties to bring their evidence books, trial transcripts and any authority needed to support their arguments. The trial court explicitly stated that it had not ruled on the new trial motions. Thus, on October 20, 2004, the trial court signaled to the parties that before a final decision would be rendered, there would be further hearing and discussion. By issuing the draft ruling, the trial court did not rule on the motions for new trial and jnov and did not comply with Code of Civil Procedure Section 660s 60-day requirement.

Additionally, Code of Civil Procedure section 660 states that A motion for a new trial is not determined within the meaning of this section until an order ruling on the motion (1) is entered in the permanent minutes of the court or (2) is signed by the judge and filed with the clerk. (See generally, Pratt v. Vencor, Inc. (2003) 105 Cal.App.4th 905.) The October 20, 2004, draft ruling did not comply with either of these requirements. (Compare with Catania v. Halcyon Steamship Co. (1975) 44 Cal.App.3d 348 [jnov ruling timely where trial court filed with the clerk and signed a memorandum of opinion setting forth the trial courts reasons granting jnov within 60 days, even though after the deadline the trial court signed a judgment and one day later that judgment was entered].)

Lastly, Code of Civil Procedure section 629 requires that jnov and new trial motions be ruled on at the same time. In the October 20, 2004, draft ruling, the trial court did not rule on the motions for new trial, but rather acknowledged they were pending.

Matthews contends that the October 20, 2004, draft ruling satisfies the statutory time requirements because at that time, the trial court passed on the motion. For this proposition, Matthews primarily relies upon Spier v. Lang (1935) 4 Cal.2d 711 (Spier). In Spier, the Supreme Court addressed the timeliness of amendments to a new trial order. The trial court had issued an initial order on August 3, 1932, simply stating that the new trial motion by defendants  is now by the court denied. Judgments are modified to be against [defendant] only.  On September 13, 1932, the trial court signed another order, dated August 3d, in conformity with the minute order and directing preparation of amended findings and judgment . . . . Also under date of August 3, 1932, the findings of fact and conclusions of law were changed and the judgment modified in accordance with the order of that date. They were served on the plaintiffs counsel on August 16th, were filed on September 13th, and the judgment was entered on September 16, 1932. (Id. at p. 713.)

In discussing the timeliness of the trial courts actions, and as relevant here, Spier, supra, 4 Cal.2d stated at page 715: The findings of fact and conclusions of law were changed and the judgment was modified by formal documents signed by the judge on or before August 16, 1932, when, according to the record, the plaintiffs counsel acknowledged service of copies thereof signed by the judge. They were dated August 3, 1932, which was the date of the minute order, and may be deemed effective as of that date. [Citation.] The fact that they were not filed until September 13th would not destroy the power theretofore exercised within due time. Section 662 of the Code of Civil Procedure sets no limit on the time when the court, after pronouncement of its determination, must sign and file its order. [Citation.] The language of section 660 of the Code of Civil Procedure indicates that so long as the court passes on the motion within the sixty-day period, it has lawfully exercised its jurisdiction to determine the motion, and the filing of the formal order or findings and judgment thereafter, when the time of filing is subsequent to the last day of the sixty-day period, does not amount to a denial of the motion by operation of law. [Citation.] (Id. at p. 715.)[5]

However, after Spier was decided in 1935, section 660 of the Code of Civil Procedure was amended significantly. In 1959, the Legislature added the last three sentences of section 660 specifying when new trial motions were determined. (Stats. 1959, ch. 468,  1, p. 2403.) Additionally, in 1969, the first sentence in the third paragraph was amended in six ways. The change most relevant to the case before us is that the word passes was deleted and the word rule was inserted in its place. (Stats. 1969, ch. 87, 1, p. 209; Stats. 1970, ch. 621, 2, p. 1232.)

Thus, Spiers discussion is outdated and does not apply to the facts before us.

The trial court had no jurisdiction to rule on the motions for jnov and new

trial and the judgment on the complaint, as rendered by the jury must be reinstated.[6]

2. The compensatory damages awarded to Retra on its slander of title cause of action are affirmed. The punitive damage award must be stricken.

The trial court found for Retra on its cross-complaint against Valentine and Westland for slander of title and cancellation of cloud on title.[7] Valentine and Westland contend the evidence did not support this cause of action. We affirm the award of compensatory damages, however, we order that the punitive damage award be stricken.

a. Facts relevant to the cross‑complaint.

Retra exercised the option to purchase the property in 1990. In the complaint filed on August 5, 1999, Westland and Valentine requested a constructive trust requiring title of the property be transferred to Westland and Valentine. On August 6, 1999, the day after they filed their complaint, Valentine and Matthews filed a lis pendens on the property.

On January 12, 2000, the trial court denied Retras motion to expunge the lis pendens brought pursuant to Code of Civil Procedure section 405.31. On such a motion, the trial courts analysis is analogous to, but more limited than, that taken by a court on a general demurrer. The trial court examines if a pleading states a real property claim. The trial court noted that there was conflicting authority on whether a cause of action for constructive trust was a real property claim and then analyzed the facts before it. The trial court stated that if the trier of fact concluded that the option was fraudulently obtained, the conveyance would be voided, and the option would again be held by plaintiff Westland. As a result of this determination, the pleadings contain a real property claim which supports a lis pendens pursuant to Code of Civil Procedure  405.31.

On January 31, 2001, the trial court issued a tentative ruling on a motion for summary judgment stating in part: The facts of the present case reveal that [Westland and Valentine] never had title. At best, they might have had a right to acquire the option to purchase the building and thus obtain title. [Westland and Valentine] fail to establish the ownership and right to possession, as required for the quiet title cause of action. [Matthews and Retra] have met their burden to show the cause of action for quiet title had [no] merit.

On January 24, 2002, the trial court issued a tentative decision on Matthews and Retras motion for summary adjudication on its cause of action to cancel cloud on title. The trial court stated in part, Plaintiffs seek to use the lis pendens to give notice not of a claim against defendants title but notice that defendants are liable in damages to plaintiffs.

On May 17, 2002, the trial court affirmed its January 24, 2002, ruling. The trial court granted Retras motion for summary adjudication with regard to its cause of action for cancellation of cloud of title. The trial court stated in part, the court relies on the May 15, 1999, board resolution that was signed by all board members. It is presumptive evidence that Westland on that date transferred its interest in the subject property to Retra . . . [] The court does not regard [the prior orders] as deciding the question presented by the present motion. [The prior ruling] did not decide the effect of the May 15, 1999 board resolution that this court regards as determinative. . . .

The lis pendens was expunged in May 2002. Retra expended $61,084.75 in attorney fees in relation to the lis pendens.

In its cross-complaint, Retra alleged its ownership rights were interfered with by the false recording and maintenance of the lis pendens on August 6, 1999. In addition to other allegations, Retra alleged the lis pendens impaired the market value of the property, caused inconvenience and disturbance, and required Retra to retain attorneys to clear title. In addition to other damage awards, Retra also sought punitive damages.

After the jury trial on the complaint, the issues on the cross-complaint were tried by the court. Retra submitted attorney bills totaling $61,084.75. The bills were addressed to Matthews and his law firm.

On August 10, 2004, the trial court rendered a statement of decision on the cross-complaint. The trial court found that the only damage caused by the filing of the lis pendens was the sums Retra expended in attorney fees. The trial court awarded Retra $61,084.75 as compensatory damages and $20,000 in punitive damages against Valentine and Westland, jointly and severally. On appeal, Westland and Valentine attack the trial courts decision.

b. Discussion.

(1) Retra is entitled to compensatory damages.

Westland and Valentine contend that the trial court erroneously awarded Retra compensatory damages on its cause of action for slander of title because on January 12, 2000, the trial court had denied the motion to expunge the lis pendens. Westland and Valentine assert that the January 12, 2000, ruling proves they did not act with malice.

On appeal, Westland and Matthews argue that they did not act maliciously, an element required to prove a cause of action for slander of title. They argue that they did not act maliciously as decided by the trial court in its January 12, 2000, ruling. Assuming, without deciding that malice is required, the argument presented by Westland and Matthews is not persuasive. The January 12, 2000, ruling was made upon a motion to expunge pursuant to Code of Civil Procedure Section 405.31. Accordingly, the trial courts analysis was limited to ascertaining if Westland and Valentine pled a real property claim. The trial court was not making any factual findings. Section 405.31 concerns judicial examination of allegations only. . . . The analysis . . . is analogous to, but more limited than, the analysis undertaken by a court on a general demurrer. Rather than analyzing whether the pleading states any claim at all, the court must undertake the more limited analysis of whether the pleading states a real property claim. [Citation.] (3 Witkin, Cal. Procedure (4th ed. 1996) 369, 461.)[8]Thus, the trial courts January 12, 2000, ruling did not establish that Westland and Valentine had a good faith belief in their pleadings or acted without malice. (Compare with Roberts v. Sentry Life Insurance (1999) 76 Cal.App.4th 375 [denial of summary judgment motion established probable cause as it demonstrated that suit was not totally lacking in merit].)

Westland and Valentine also argue Retra did not prove that it incurred $61,084.75 in attorney fees because the bills were directed to Matthews. However, Matthews was the sole owner of Retra. Thus, Westland and Valentine have not shown error in awarding Retra $61,084.75 in compensatory damages for slander of title.

(2) Retra waived any claim to punitive damages.

The punitive damage award in the sum of $20,000 was based upon the trial courts conclusion that regardless of [Westland and Valentines] attorneys opinion regarding the merits of the dispute concerning the ownership of the option to purchase[,]  . . . [t]he court  . . . made this clear on January 31, 2001, in issuing his tentative ruling on defendants motion for summary judgment [that the facts revealed Westland and Valentine never had title and thus, their cause of action for quiet title had no merit.]

However, at the beginning of the trial on the cross-complaint, Retras counsel specifically stated that Retra was waiving any claim to punitive damages. Retras counsel stated: It is a slander of title and cloud of title claims. It is the cross-complainants position that claims were basically merged because we are not seeking punitive damages which would be available under the slander of title claims. Further, on appeal, Retra has not stated that it presented evidence specifically on the issue of punitive damages or that it argued for punitive damages in closing statement. The trial brief filed by Retra does not contain an argument for punitive damages. In the trial brief on the cross-complaint, Retra stated that it was entitled to damages for the pecuniary loss resulting from the impairment of the vendibility of the office building caused by the lis pendens[] as well as the attorneys fees and costs reasonably and necessarily incurred in the course of removing the cloud on title . . . . There was no statement that Retra was seeking punitive damages.

Thus, the trial court erred in awarding Retra punitive damages as the issue was not before the trial court.

Retra cites Forte v. Nolfi (1972) 25 Cal.App.3d 656 and Weiss v. Blumencranc(1976) 61 Cal.App.3d 536, 542 to support its proposition that it did not waive its request for punitive damages. Neither case assists Retra.In Forte v. Nolfi, supra, at page 687, the court stated,  The fact that exemplary damages finds no express mention in the prayer of the complaint does not preclude the allowance of such damages upon a contested trial. [Citation.] [Citations.]  Weiss v. Blumencranc, supra, at page 542,held that a default judgment including punitive damages was valid where the plaintiff had not specifically identified punitive damages in the prayer, but had requested compensatory damages. Neither Forte v. Nolfinor Weiss v. Blumencranc addresses a situation where a party was awarded punitive damages after specifically relinquishing a claim thereto and never presenting an argument requesting such relief.

We will direct the trial court to strike the award of punitive damages.

B. The cross-appeal.

Matthews filed a cross-appeal in the event that we reversed the order of the trial court granting jnov and a new trial. In that we have done so, we turn to the cross-appeal. In the cross-appeal, Matthews contends the trial court erred in failing to grant his directed verdict motion. This contention is unpersuasive.

1. Standard of review.

In ruling on a motion for a directed verdict, the trial court has no power to weigh the evidence, and may not consider the credibility of witnesses. It may not grant a directed verdict where there is any substantial conflict in the evidence. [Citation.] A directed verdict may be granted only when, disregarding conflicting evidence, giving the evidence of the party against whom the motion is directed all the value to which it is legally entitled, and indulging every legitimate inference from such evidence in favor of that party, the court nonetheless determines there is no evidence of sufficient substantiality to support the claim or defense of the party opposing the motion, or a verdict in favor of that party. [Citations.] (Howard v. Owens Corning (1999) 72 Cal.App.4th 621, 629; accord, Kephart v. Genuity, Inc. (2006) 136 Cal.App.4th 280, 289.)

2. The duties of an attorney.

Violations of the Rules of Professional Conduct do not necessarily impose civil liability. (BGJ Associates v. Wilson (2003) 113 Cal.App.4th 1217, 1227 (BGJ).) However,[i]t is well established that an attorneys duties to his client are governed by the Rules of Professional Conduct, and that those rules, together with statutes and general principles relating to other fiduciary relationships, help define the duty component of the fiduciary duty which an attorney owes to his client. [Citation.] (American Airlines, Inc. v. Sheppard, Mullin, Richter & Hampton(2002)96 Cal.App.4th 1017, 1032.) It is incumbent upon attorneys to show that the dealings with clients are fair and reasonable and are fully known and understood by the clients. (Clancy v. State Bar (1969) 71 Cal.2d 140, 146-147.)

As fiduciaries, attorneys must provide their clients with undivided loyalty. (American Airlines, Inc. v. Sheppard, Mullin, Richter & Hampton, supra, 96 Cal.App.4th at p. 1044.) Attorneys may not use confidences or clients property for the attorneys own benefit. Attorneys are not to consider their own needs, but rather the clients needs. Attorneys may not compete with their clients concerning the subject matter of the agency. Attorneys must avoid circumstances where it is reasonably foreseeable that a purchase by the attorney may be detrimental or adverse to the attorneys client. (Fletcher v. Davis(2004) 33 Cal.4th 61, 67.)Attorneys are not absolutely prohibited from becoming involved in a financial transaction with a client. However, if they do so, they must take steps to protect the client and must instruct the client to obtain independent legal advice so that the client is fully aware of all potential conflicts. (Santa Clara County Counsel Attys. Assn. v. Woodside (1994) 7 Cal.4th 525, 548 [attorneys violate duties when they assume positions adverse or antagonistic to the client without the clients free and intelligent consent].)[9]

Rules of Professional Conduct, rule 3-300 (Rule 3-300) mandates that if a member of the State Bar enters into a business transaction with a client, or knowingly acquires an interest in property adverse to a client, the transaction must be fair and reasonable, the terms must be fully disclosed in writing, the client must be advised in writing that the client may seek the advice of an independent lawyer and is given a reasonable time to seek that advice, and the client must thereafter

consent.[10] The rule clearly contemplates a situation in which a client does consult with counsel, then consents in writing to the terms of the agreement. (BGJ, supra, 113 Cal.App.4th 1217, at p. 1227.)

Probate Code section 16004 is a statutory complement to rule 3-300. (BGJ, supra, 113 Cal.App.4th at p. 1227.) Section 16004, subdivision (c) provides: A transaction between the trustee and a beneficiary which occurs during the existence of the trust or while the trustees influence with the beneficiary remains and by which the trustee obtains an advantage from the beneficiary is presumed to be a violation of the trustees fiduciary duties. This presumption is a presumption affecting the burden of proof. This subdivision does not apply to the provisions of an agreement between a trustee and a beneficiary relating to the hiring or compensation of the trustee.

Probate Code section 16004 applies to the fiduciary relationship between attorney and client. [Citation.] Accordingly, [a] transaction between an attorney and client which occurs during the relationship and which is advantageous to the attorney is presumed to violate that fiduciary duty and to have been entered into without sufficient consideration and under undue influence. [Citation.] (BGJ, supra, 113 Cal.App.4th at p. 1227.)

Rules of Professional Conduct, rule 3-310 (Rule 3-310) precludes attorneys from accepting or continuing to represent a client without full written disclosure and consent where the attorney has a business or financial relationship with a party or in the same subject matter where the member knows or reasonably should know that the members interest would be affected substantially by resolution of the matter. This rule has been designed to prevent situations in which an attorney might compromise his or her representation of the client in order to advance the attorneys own financial or personal interests. (Santa Clara County Counsel Attys. Assn. v. Woodside, supra, 7 Cal.4th at p. 546.)[11]

Attorneys may not directly or indirectly purchase property in a receivers, trustees, or judicial sale if the attorney is acting for a party. (Rules of Prof.

Conduct, rule 4-300 (A).)[12] If attorneys represent clients on a contingency fee basis, the attorney must obtain a written fee agreement stating the contingent fee rate. (Bus. & Prof. Code,  6147.)

Here, the jury verdict form instructed the jury not to make findings with regard to Valentine, if it found in favor of Westland. For simplicity, we address the ethical violations by Matthews only as they relate to his client Westland. In doing so, we must mention Valentine. As the corporate entity, Westland could only act through its officers and Matthews admitted that he was dealing with Valentine as Westlands representative. We also note that Matthews admitted he represented Valentine in the bankruptcy proceedings and other facts suggest this attorney-client relationship continued.

We now explain why the trial court did not err in denying Matthewss motion for directed verdict.

There are numerous instances where Matthews breached his fiduciary obligations and did not abide by his ethical responsibilities. Matthews advised Valentine to dismiss the bankruptcy proceedings without explaining what might occur if Matthewss other clients (the investors) claimed they owned the option. Matthews never explained the potential conflicts that could arise because Matthews had obligations to the investors as well as to Westland. Matthews argued directly against Westlands interests when he threatened litigation against Westland and asserted that the investors owned the option. Matthews never obtained a written fee agreement that complied with the Rules of Professional Conduct. Matthews backdated a fee agreement to make it appear as if he had complied with his ethical responsibilities. Matthews accepted a percentage ownership in Westland without providing proper admonitions or explanation as to the affect of that arrangement, including inherent conflicts. When Matthews learned that Westland was willing to sell the option to Valentine, Matthews misled Westlands board into believing Matthews and Valentine would be partners in the new venture. Upon the sale of the property to Retra, Matthews obtained a commission of more than $85,000 and an additional $100,000, without disclosing these facts to Westland, thereby obtaining a secret profit from the transaction. Matthews failed to provide Westland with proper disclosures or warnings. Matthews never explained the conflicts of interests involved because he sought for his own company Westlands sole asset.

Matthews learned of a business opportunity through his confidential relationship with Westland and maneuvered the situation so that his solely owned entity, Retra, acquired that opportunity. Retra paid Westland about $400,000 for the rights to the option, $200,000 for the option, and approximately $2.9 million for a building appraised at more than $7 million. (Cf. Mirabito v. Liccardo (1992) 4 Cal.App.4th 41, 45-47 [attorney inducing client to make bad investments in violation of Rules of Professional Conduct and fiduciary obligations liable for losses].) As such, the transaction showed overreaching by Matthews and a transaction that was not fair or reasonable to Matthewss client, Westland.

Matthews breached his duty of loyalty, violated numerous Rules of Professional Conduct, and his obligations under the Probate Code.

Matthews argues he cannot be held responsible because as of March 23, 1999, Westland was represented by independent counsel, Loder. Matthews contends that because Loder advised the board to sell the option to Retra, any of his unethical acts did not cause damages to Westland. (Nobles v. Hutton (1907) 7 Cal.App. 14, 23 [grantee standing in confidential relationship may not confer benefit upon themselves unless grantor received independent advice of counsel in situation where the grantee cannot influence decision].)Matthews asserts that the purpose of the disclosure and notification obligations c