Bennett v. Dowden

Filed 4/4/08 Bennett v. Dowden CA2/1

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

APPEAL from a judgment of the Superior Court of Los Angeles County. Cesar C. Sarmiento, Judge. Reversed in part with directions and affirmed in part.

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Dana Sherman for Defendant, Cross-Complainant and Appellant.

Murphy, Rosen & Cohen, Philip Kent Cohen, Troy Slome; Bennett & Lepak and Michael R. Bennett for Plaintiffs, Cross-Defendants and Respondents Michael R. Bennett and Bennett & Lepak.

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Bennett & Lepak, LLP and Michael R. Bennett (collectively Bennett) sued the estate of Leo L. Erickson and two individuals to recover attorneys fees to which Bennett was allegedly entitled under a contingency fee agreement. The estate filed a cross-complaint against Bennett, alleging professional malpractice. Bennett voluntarily dismissed one individual defendant, and the other prevailed on summary judgment. The remaining claims, between Bennett and the estate alone, were tried to a jury, which returned a verdict in favor of Bennett on both the complaint and the cross-complaint. The estate appeals. We reverse in part and direct the trial court to enter judgment against Bennett on the complaint, but we affirm the judgment in favor of Bennett on the cross-complaint.

BACKGROUND

In June 1999, Erickson and two of her daughters, Sadie W. Patterson and Virgie W. Dowden, retained Bennett to collect on a promissory note in the original amount of $150,000. The retainer agreement provided for a contingency fee of one-third of the clients recovery.

The debtors on the $150,000 note were Karin Patterson (Sadies daughter) and Gregory C. Wright (to whom Karin Patterson apparently was once engaged).^[1] The note was secured by a deed of trust on real property owned 80 percent by Gregory and 20 percent by Karin. Although Erickson, Sadie, and Virgie retained Bennett to collect on the note, the payees on the note were Erickson and one of her sons, Darrow Weems; Sadie and Virgie were not parties.

Bennett was never able to determine the precise amount due on the note because Erickson, Sadie, and Virgie had no documentation of the notes payment history. Bennett did, however, determine that there were several senior encumbrances recorded against the property in question, including deeds of trust securing debts of (1) approximately $41,700 that Gregory owed to Darrow, (2) approximately $107,300 that Gregory and Karin owed to Erickson and Darrow, and (3) approximately $20,000 that Gregory and Karin owed to Melanie Remaro, who is Darrows daughter.

Some time in 1999 or the first half of 2000, Bennett began representing Karin. Bennett wrote, in a letter admitted into evidence at trial, that Karin retained him in approximately May of 1999. In his trial testimony, Bennett said that he started representing Karin in approximately the early part of May, 2000.

Erickson passed away on or about December 22, 1999. Bennett later negotiated a settlement agreement between Ericksons estate and Sadie, Darrow, Melanie, Karin, Gregory, and Tommie Wright (whose relationship to the other parties we have been unable to determine). Under the settlement agreement, which was not executed until January 2001, Ericksons estate and Sadie, Darrow, and Melanie agreed to release their claims against the property, and Karin agreed to quitclaim her interest in the property. In exchange, Gregory agreed to pay a total of $200,000 to the estate, Sadie, Darrow, Melanie, and Karin, but the agreement said nothing about how the $200,000 was to be apportioned among them.^[2]

Gregorys $200,000 settlement payment was to be transferred from an escrow account directly into Bennetts client trust account on or about January 17, 2001. The transfer did not, however, take place. Rather, on January 16, 2001, Virgie, Darrow, Melanie, and Karin instructed the escrow company to transfer the funds to Karin, and Bennett told the escrow officer to follow their instructions. Roughly one week later, Bennett received a letter from attorney Dana Sherman, informing Bennett that the non-estate beneficiaries of the proceeds of the settlement had retained Sherman to represent them. Sherman also instructed Bennett not to contact Karin, Sadie, Darrow, or Melanie. Bennett never received any fees for his work on the matter.

Bennetts operative second amended complaint against Sadie, Virgie, and Ericksons estate alleges claims for breach of contract, fraud (against Sadie alone), and quantum meruit. The estates operative first amended cross-complaint against Bennett alleges a single cause of action for professional negligence. Bennett voluntarily dismissed all claims against Virgie, and Sadie prevailed on summary judgment, leaving the estate as the sole remaining defendant.

The case was tried to a jury. The trial court instructed the jury on Bennetts breach of contract theory but not on quantum meruit, without objection by Bennett. By general verdict, the jury awarded Bennett $66,666.67 (presumably one-third of the $200,000 settlement) in damages and also found against the estate on the professional negligence claim.

The trial court awarded prejudgment interest and entered judgment in the amount of $101,555.70 on April 11, 2006. The trial court denied the estates post-trial motions. The estate timely appealed.

DISCUSSION

The estate argues that because Bennett represented clients with conflicting interests, he cannot recover any fees for his representation. We agree.

Erickson, who was one of the payees on the $150,000 promissory note, originally retained Bennett to collect on the note. The settlement of that matter was not executed until January 2001. Beginning no later than approximately the early part of May, 2000, Bennett also represented Karin, who was one of the debtors on the $150,000 promissory note. Thus, it is undisputed that Bennett represented both a debtor and a payee on the same note at the same time, and before the note matter had been settled. The interests of the debtor and the payee conflicted as a matter of law, and it is also undisputed that Bennett obtained no written conflict waivers from his clients. When asked on cross-examination, Did you at any time ask any of your clients to sign written con[s]ents to representing conflicting interests? he testified, No.

An attorney cannot represent clients who have conflicting interests unless the attorney obtains the clients informed written consent. (Rules Prof. Conduct, rule 3‑310(C).) It is the general rule in conflict of interest cases that where an attorney violates his or her ethical duties to the client, the attorney is not entitled to a fee for his or her services. (Cal Pak Delivery, Inc. v. United Parcel Service, Inc. (1997) 52 Cal.App.4th 1, 14; see also Day v. Rosenthal (1985) 170 Cal.App.3d 1125, 1162 [no finding on reasonable value of attorneys services necessary because conflict of interest rendered services valueless].) At most, the attorney may recover compensation for services rendered before the conflicting representation began. (Jeffry v. Pounds (1977) 67 Cal.App.3d 6, 12.)

Under the foregoing authorities, Bennett cannot recover a contingent fee based on the estates recovery under the settlement, because when the settlement was executed (January 2001) Bennett was representing another client (Karin) whose interests conflicted with the estates. Nor can we award Bennett a quantum meruit recovery for work performed before the representation of Karin began, both because the record contains no evidence on the basis of which to determine the amount of such an award and because no quantum meruit theory was presented to the jury. (Zak v. State Farm etc. Ins. Co. (1965) 232 Cal.App.2d 500, 506.) We therefore must reverse the judgment and direct the trial court to enter judgment against Bennett on the second amended complaint. (See McCoy v. Hearst Corp. (1991) 227 Cal.App.3d 1657, 1661 [When the plaintiff has had full and fair opportunity to present the case, and the evidence is insufficient as a matter of law to support plaintiffs cause of action, a judgment for defendant is required and no new trial is ordinarily allowed, save for newly discovered evidence.].)

All of the estates arguments on appeal are directed solely against the award of damages to Bennett on the second amended complaint. We therefore affirm the judgment against the estate on the first amended cross-complaint.

DISPOSITION

The judgment is reversed with respect to the second amended complaint. The superior court is directed to enter judgment in favor of defendant on the second amended complaint. The judgment is otherwise affirmed. Appellant shall recover its costs of appeal.

NOT TO BE PUBLISHED.

ROTHSCHILD, J.

We concur:

VOGEL, Acting P. J.

JACKSON, J.^*

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^[1] Because several parties have the same last names, for the sake of clarity we will refer to all parties other than Erickson and Bennett by their first names. No disrespect is intended.

^[2] Karin, Darrow, Melanie, and the estate later entered into a separate agreement concerning the division of the funds (hereafter the division agreement). Under the division agreement, the estate received $65,000 of the original $200,000 settlement. Although the division agreement was attached as an exhibit to Bennetts second amended complaint and is included in the record on appeal, it was not admitted into evidence at trial.

^* (Judge of the L. A. Sup. Ct. assigned by the Chief Justice pursuant to art. VI,  6 of the Cal. Const.)