Degenarro
v. Geiger & Merritt
Filed
9/13/13 Degenarro v.
Geiger & Merritt, LLP CA4/3
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opinion has not been certified for publication or ordered published for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
FOURTH
APPELLATE DISTRICT
DIVISION
THREE
GLORIA DEGENARRO, Individually
and as Trustee, etc., et al.,
Plaintiffs and Appellants,
v.
GEIGER & MERRITT, LLP,
Defendant and Respondent.
G047461
(Super. Ct. No. 30-2012-00544102)
O P I N I O N
Appeal from a judgment
of the Superior Court
of
County, Ronald L. Bauer, Judge. Reversed and remanded with directions.
Sayre & Levitt,
Federico Castelan Sayre and Adam L. Salamoff for Plaintiffs and Appellants.
Lewis Brisbois Bisgaard
& Smith, Kenneth C. Feldman and Brian Slome for Defendant and
Respondent.
*
* *
Introduction
The
basic facts of this case are simple:
Client is represented by law firm in a civil case. Client, unhappy with the representation
received, fires the law firm and hires a new firm. The old law firm sues client for unpaid legal
fees. Client and the old law firm
execute a settlement agreement. Client then serves on the old law firm the
malpractice lawsuit it had filed before the settlement agreement was executed.
The
question before us on appeal is whether client’s failure to file the
malpractice claim as a compulsory cross-complaint, rather than as a separate
lawsuit, requires its dismissal. We
conclude, based on the record before it, the trial court correctly sustained the
old law firm’s demurrer because the malpractice claim was a compulsory cross‑complaint.
However,
on appeal, client asks for leave to amend the complaint to allege the
compulsory cross-complaint rule is inapplicable because of the terms of the
settlement agreement. Given the liberal
rules of granting leave to amend, client should be given an additional opportunity
to try to state a cause of action and explain in a pleading why the compulsory cross-complaint
rule does not apply as a result of the settlement agreement.
We
therefore reverse the judgment and remand with directions to the trial court to
sustain the demurrer with leave to amend.
Statement of Facts and Procedural History
Gloria
Degenarro, individually and as trustee of the J.E.D. Family Trust, The Village
Retail Center, LLC, and Brad Degenarro (collectively, the Degenarros) hired Geiger
& Merritt, LLP (the Geiger firm), to represent them in a civil matter. The Geiger firm filed a complaint, naming the
Degenarros as the plaintiffs, against the Metropolitan Water District of Southern
California (the Metropolitan Water District) and W.A. Rasic Construction
Company, Inc. (W.A. Rasic); the causes of action asserted were for
underlying action).
About
eight months later, the Degenarros fired the Geiger firm, and substituted in
the law firm of Bartel & Evans LLP (the Bartel firm). Soon thereafter, the Metropolitan Water
District’s motion for summary adjudication was granted; the Degenarros
stipulated to dismiss their remaining causes of action against the Metropolitan
Water District; the court entered an order of dismissal of the claims against
the Metropolitan Water District; summary judgment was granted in favor of
W.A. Rasic and against the Degenarros, and judgment was entered in favor
of W.A. Rasic; and the Degenarros filed a notice of appeal challenging the dismissal
and the judgment. The Degenarros later settled
their claims against the Metropolitan Water District.
In
June 2011, the Geiger firm filed a lawsuit against the Degenarros for
for services rendered, and for an account stated, seeking unpaid legal fees and
costs which had been incurred in the underlying action (the legal fees
action). The Degenarros filed an answer
to the complaint in the legal fees action in August 2011. One of the affirmative defenses alleged in
the answer was that “[t]he legal services rendered were rendered negligently
depriving the services, or some of them, of any value.†The Degenarros did not file a cross-complaint
to the legal fees action.
In
February 2012, the Degenarros filed a legal malpractice action against the
Geiger firm and the Bartel firm (the malpractice action). The Degenarros alleged neither the Geiger
firm nor the Bartel firm had adequately marshaled the facts in the underlying
action in order to oppose the dispositive motions filed by the Metropolitan
Water District and W.A. Rasic, and both had failed to retain or designate
qualified expert witnesses in the underlying action. The Degenarros did not file a notice of
related case in the malpractice action, and did not serve the malpractice
action complaint on the Geiger firm at that time.
In
April 2012, the Degenarros and the Geiger firm entered a settlement agreement
in the legal fees action. The legal fees
action was dismissed with prejudice.
The
malpractice action was served on the Geiger firm in May 2012, after the legal
fees action had been dismissed. The
Geiger firm then demurred to the malpractice action, in part on the ground that
the Degenarros’ claim for legal malpractice was a compulsory cross-complaint in
the legal fees action. Following
briefing and a hearing, the trial court sustained the demurrer without leave to
amend, and entered a judgment and order of dismissal in favor of the Geiger
firm. The Degenarros timely appealed.
Discussion
I.
of Review
“We
independently review the ruling on a demurrer and determine de novo whether the
pleading alleges facts sufficient to state a cause of action. [Citation.]
We assume the truth of the properly pleaded factual allegations, facts
that reasonably can be inferred from those expressly pleaded, and matters of
which judicial notice has been taken.
[Citation.] We construe the
pleading in a reasonable manner and read the allegations in context. [Citation.]
‘We affirm the judgment if it is correct on any ground stated in the
demurrer, regardless of the trial court’s stated reasons. [Citation.]’
[Citation.]†(
only the allegations of the complaint, and matters that are judicially
noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
II.
The Demurrer Was Properly Sustained Because
the Malpractice Action Should Have Been Filed as a Compulsory Cross-complaint
in the Legal Fees Action; Nothing in the Complaint or in Any Matter Subject to
Judicial Notice Suggests Otherwise.
“[I]f
a party against whom a complaint has been filed and served fails to allege in a
cross-complaint any related cause of action which (at the time of serving his
answer to the complaint) he has against the plaintiff, such party may not
thereafter in any other action assert against the plaintiff the related cause
of action not pleaded.†(Code Civ.
Proc., § 426.30, subd. (a).) A
related cause of action “means a cause of action which arises out of the same
transaction, occurrence, or series of transactions or occurrences as the cause
of action which the plaintiff alleges in his complaint.†(Id., § 426.10, subd. (c).)
The
Degenarros’ claim that the Geiger firm committed legal malpractice in the
underlying action is related to the Geiger firm’s cause of action for the Degenarros’
failure to pay legal fees incurred in the underlying action. (K.R.L.
Partnership v. Superior Court (2004) 120 Cal.App.4th 490, 498-499.) If the Degenarros’ cause of action for legal
malpractice against the Geiger firm existed at the time they filed their answer
in the legal fees action, then the malpractice action was a compulsory cross‑complaint
that was required to be filed in the legal fees action.
Based
on the allegations of the complaint and the matters of which this court may
take judicial notice, we conclude the
Degenarros’ cause of action for legal malpractice against the Geiger firm
existed at the time the Degenarros filed their answer in the legal fees
action. Before that answer was filed in
August 2011, (1) the Metropolitan Water District’s motion for summary
adjudication had been granted; (2) pursuant to a stipulation, the
Degenarros had dismissed their additional causes of action against the
Metropolitan Water District in order to make the summary adjudication order appealable;
(3) W.A. Rasic’s motion for summary judgment had been granted; and (4) the
Degenarros had filed a notice of appeal from the judgment in favor of W.A.
Rasic and the order of dismissal of the action against the Metropolitan Water
District. Indeed, in their answer to the
complaint in the legal fees action, the Degenarros alleged that the legal
services provided by the Geiger firm in the underlying action “were rendered
negligently.†Therefore, the malpractice
claim was a compulsory cross-complaint in the legal fees action; the trial
court correctly sustained the Geiger firm’s demurrer to the malpractice action.
III.
The Case Is Remanded to Give the Degenarros
the Opportunity
Amend.
If the trial
court sustains a demurrer without leave to amend, we must consider “whether
there is a reasonable possibility that the defect can be cured by
amendment.†(Blank v. Kirwan, supra,
39 Cal.3d at p. 318.) Leave to amend is
liberally granted. (Kempton v. City of Los Angeles (2008) 165 Cal.App.4th 1344, 1348.) We note that the Degenarros’ requests for
leave to amend have been general and conclusory, and they have yet to tell any
court what facts they might allege in order to state a valid cause of action.
The
Degenarros’ entire argument, both in the trial court and on appeal, relies on
the terms of the settlement agreement by which the parties settled the legal
fees action. The Degenarros contend
their right to file their legal malpractice claim as a separate action, rather
than as a compulsory cross-complaint in the legal fees action, was specifically
preserved by the settlement agreement of the legal fees action, which excluded a
malpractice claim from its release. The
Degenarros argue in their appellate briefs that the Geiger firm either waived
its right to argue the compulsory cross‑complaint defense, or should be
judicially or equitably estopped from asserting that defense. The relevant portions of the release and
settlement agreement are quoted here:
“Accordingly,
the parties agree as follows:
“2.
[The Degenarros] shall pay to the
[Geiger firm] the sum of Thirty Thousand Dollars ($30,000.00) after execution
and delivery of this Release & Settlement Agreement by [the Geiger firm],
as well as delivery to [the Degenarros] of the fully executed Dismissal With
Prejudice, which pertains to the instant action. . . .
“3.
In consideration of the payment provided
for in paragraph 2 herein, [the Geiger firm] and its successors and assigns do
hereby release and forever discharge the
[Degenarros] . . . of and from any and all past, present or
future claims, causes of action, demands, obligations, actions, causes of
action, claimed rights and damages, costs, expenses, compensation of any nature
whatsoever and whether for compensatory or punitive damages, with which the
[Geiger firm] . . . now ha[s] or which may hereinafter accrue or
otherwise be acquired on account of, which are subject of, the action filed
herein being County of Orange, Superior Court, Central Justice Center, action
Case Number 30‑2011‑00486139, except for all general and
affirmative defenses, offsets, setoffs, cross-complaints and causes of action
relating to a potential legal malpractice claim by the [Degenarros] against the
[Geiger firm] arising out of [the Geiger firm]’s representation of [the Degenarros]
in the underlying case, which defenses, offsets, setoffs, cross‑complaints
and causes of action are expressly reserved by the [Degenarros]. The [Geiger firm] hereby absolutely and
forever releases and discharges the [Degenarros] from any and all matters which
are the subject of said complaint, including but without limitation, any and
all known or unknown claims arising out of this lawsuit, including any claims
by the [Degenarros] for the return of fees and costs previously paid, except
for all general and affirmative defenses, offsets, setoffs, cross-complaints,
and causes of action relating to a potential legal malpractice claim by the
[Degenarros] against the [Geiger firm] arising out of [the Geiger firm]’s
representation of [the Degenarros] in the underlying case, which defenses,
offsets, setoffs, cross-complaints and causes of action are expressly reserved
by the [Geiger firm]. . . .
“4. In consideration of the Release &
Settlement Agreement set forth hereinabove, [the Degenarros] and their
successors and assigns do hereby release and forever discharge the [Geiger
firm] . . . of and from any and all past, present or future claims,
causes of action, demands, obligations, actions, causes of action, claimed
rights and damages, costs, expenses, compensation, except a legal malpractice
claim by the [Degenarros] against the [Geiger firm] arising out of their
representation in the underlying case, which cause of action is expressly
reserved by the [Degenarros] and whether for compensatory or punitive damages,
with which the [Degenarros], their heirs, successors or assigns, now have or
which may hereinafter accrue or otherwise be acquired on account of, which are
subject of, the action filed herein being County of Orange, Superior Court,
Central Justice Center, action Case Number 30‑2011‑00486139. The [
except a legal malpractice claim by the [Degenarros] against the [
cause of action is expressly reserved by the [Degenarros], any and all known or unknown claims arising out of
this lawsuit, including any claims of the [Degenarros] for the return of fees
and costs previously paid.†(Boldface
omitted, italics added.)
The settlement
agreement, which was attached as an exhibit to the Degenarros’ opposition to
the demurrer and appears at pages 86 through 91 of the clerk’s transcript on
appeal, is not a matter of which the trial court or this court could take
judicial notice. In a procedurally
similar case, the appellate court concluded neither the trial court nor the
appellate court could properly consider a written release because a release is
not a matter of which a court may take judicial notice. (Afuso
v. United States Fid. & Guar. Co. (1985) 169 Cal.App.3d 859, 861‑862,
disapproved on other grounds in Moradi-Shalal
v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287, 310‑311.) “On appeal, plaintiff contends the trial court
erred in sustaining the demurrer to her complaint. Initially, she argues the language of the
release does not preclude her from litigating her claim against defendants for
their violation of [Insurance Code] section 790.03. However, we need not address this issue since
the release was not properly before the trial court. [¶] ‘A demurrer tests the pleadings alone and
not the evidence or other extrinsic matters.
Therefore, it lies only where the defects appear on the face of the
pleading or are judicially noticed [citations].
The only issue involved in a demurrer hearing is whether the complaint,
as it stands, unconnected with extraneous matters, states a cause of action
[citation].’ [Citation.] Defendants here did not request that the
trial court take judicial notice of the release. [Citation.]
However, even if they had, judicial notice would not have been proper. Although a trial court may properly take
judicial notice of the records of any court of record of any state of the United
States [citations], there is no indication
that the release in this case was part of any court record. Typically, the release in a personal injury
suit is not filed with the court. Thus,
the trial court here improperly considered the contents of the release.†(Afuso
v. United States Fid. & Guar. Co., supra,
at pp. 861‑862.) In this
case, too, the trial court could not properly consider the contents of the
settlement agreement in ruling on the demurrer.
We invited the
parties to submit supplemental letter briefs addressing whether any exception
to the aforementioned rule would permit this court to consider the terms of the
settlement agreement on appeal. Having analyzed
the parties’ arguments, we remain convinced that the settlement agreement is
not a matter of which we may take judicial notice.
However, in
their supplemental letter brief, the Degenarros argue we may still consider the
settlement agreement in determining whether they should be granted leave to amend.
It
is reasonably possible that the Degenarros could amend their complaint in the malpractice
action to support a valid cause of action on the grounds the settlement
agreement preserves their right to sue for malpractice in a separate action,
and bars the Geiger firm from asserting, as an affirmative defense, that the
compulsory cross‑complaint rule precludes the malpractice action. We cannot further comment on the manner in
which the Degenarros may try to do so, except to acknowledge that they have
stated enough on appeal to warrant an opportunity to amend. We emphasize that we express no opinion as to
whether the Degenarros will be able to amend the complaint to state a cause of
action, or whether any such amended complaint will also be subject to demurrer.
IV.
The
Geiger firm makes an additional argument in support of affirming the trial
court’s order sustaining the demurrer—that there was no causal link between the
Geiger firm’s provision of allegedly negligent legal services and the
Degenarros’ alleged damages. It is true
that the Degenarros’ complaint alleges, “Defendant Bartel & Evans had the
opportunity to correct prior deficiencies with regard to the retention/designation
of experts on behalf of [the Degenarros] who would be able to provide expert
opinions regarding [the Degenarros]’ spring/water rights, but failed to retain/designate
appropriate and/or qualified experts, even though such experts were available
and were interviewed after the fact.â€
(Some capitalization omitted.)
Under
some circumstances, attorneys cannot be held liable for mistakes they make if
those mistakes could have been cured by counsel that substituted into the case,
if the new counsel has the time to correct those errors, and the errors are not
such that they are irreparable. (
(1985) 38 Cal.3d 46, 57 [“attorney cannot be held liable for failing to file an
action prior to the expiration of the statute of limitations if he ceased to
represent the client and was replaced by other counsel before the statute
ranâ€]; Stuart v. Superior Court (1992)
14 Cal.App.4th 124, 127‑128 [attorney filed personal injury action in
municipal court, limiting the damages recoverable, and failed to serve summons
and complaint during statutory period; because a new attorney was substituted
in before date on which proof of service had to be returned, original attorney
was entitled to summary judgment in malpractice action].)
The
Degenarros’ complaint in the malpractice action alleged not only that the Geiger
firm and the Bartel firm committed malpractice by failing to retain and
designate expert witnesses, but also that both the Geiger firm and the Bartel firm
“failed to adequately marshal facts which would have shown that [the
Metropolitan Water District] and W.A. Rasic failed to conduct appropriate
investigation of the subject soil, resulting in delay of the project, causing
[the Degenarros] to sustain damage.â€
That allegedly negligent action is not alleged to have been curable by the
Bartel firm after the Geiger firm substituted out of the case. We reject the Geiger firm’s argument that this
court, based on the record before us, can decide as a matter of law that the
malpractice was curable by the Bartel firm, and that the demurrer could be
sustained based on causation.
V.
Not Have Jurisdiction to Order the Filing of a Cross-complaint in the Legal
Fees Action.
The
Degenarros argue that the trial court retained jurisdiction over the legal fees
action (Code Civ. Proc., § 664.6), and that they should, therefore, be
permitted to seek leave from that court to file a cross-complaint for
malpractice. There are at least two
problems with this argument.
First,
the Degenarros’ argument is again premised on the language of the parties’
settlement agreement; the legal import of the settlement agreement is not before
us, and the agreement itself is not a matter of which we may take judicial
notice.
Second,
and more fundamentally, the legal fees action is not before us in this appeal
from a judgment in the malpractice action.
Indeed, the parties have stated the legal fees action has been dismissed.
Disposition
The
judgment is reversed and the matter is remanded with directions to sustain the
demurrer, with leave to amend the complaint.
In the interests of justice, all parties shall bear their own costs on
appeal.
FYBEL,
J.
WE CONCUR:
MOORE, ACTING P. J.
ARONSON, J.
notes that the notice of appeal purports to appeal from an order dated August 31,
2012, which is the date of the trial court’s minute order sustaining the
demurrer, not that of the judgment. An
order sustaining a demurrer is not an appealable order. (Doan
v. State Farm General Ins. Co. (2011) 195 Cal.App.4th 1082, 1090, fn. 4.) However, “[t]he notice of appeal must be
liberally construed. The notice is
sufficient if it identifies the particular judgment or order being appealed.†(Cal. Rules of Court, rule 8.100(a)(2).) The judgment and order of dismissal in this
case references the same August 31, 2012 minute order identified in the
notice of appeal. We liberally construe
the notice of appeal to be from the judgment and order of dismissal filed
September 21, 2012.
demurrer, the Degenarros made the following conclusory request: “Should the court be inclined to grant [the
Geiger firm’s] Demurrer, [the Degenarros] respectfully request leave to amend
the complaint, so they may allege the Complaint with more specificity, so that
it comports with the ruling of the Court.â€
They did not request leave to amend at the hearing on the demurrer. The Degenarros’ appellate counsel conceded at
oral argument before this court that the Degenarros did not properly request
leave to amend in the trial court.
The
Degenarros did not request leave to amend in either their opening or reply
brief on appeal. In their supplemental
letter brief, filed at this court’s invitation, they stated, in a heading: “If the trial court should not have
considered the settlement agreement, it is nonetheless evidence that appellants
should have been granted leave to amend to allege additional facts that the
malpractice action was both preserved and excluded from settlement.†(Boldface & some capitalization
omitted.)
