Outland v. Beverly

Filed 5/14/08 Outland v. Beverly CA2/7

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

APPEAL from a judgment of the Superior Court of Los Angeles County. Elizabeth Allen White, Judge. Affirmed in part and reversed in part.

Greenberg, Fields & Whitcombe, Richard C. Greenberg and Leonard Grayver, for Cross-Defendant and Appellant William Beverly.

Ayscough & Marar and Sidney Lanier, for Cross-Complainants and Respondents Catherine Outland, Mary Susan Outland Gleason, Individually and as Administrator of the Estate of Christine Lucille Outland Martell.

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Attorney William Beverly (Beverly) appeals the judgment on a jury verdict on the cross-complaint of his former clients Catherine Outland and Mary Susan Outland Gleason, individually and as Administrator of the Estate of Christine Lucille Outland Martell (collectively the Outlands). The jury found Beverly committed constructive fraud, professional negligence, and breach of fiduciary duty arising out of two discrete events, (1) Beverlys preparation and recordation of a quitclaim deed that erroneously conveyed title to the Outlands as tenants in common, and (2) Beverlys facilitation of a loan from one of Beverlys clients to the Outlands and two developers with whom the Outlands were in a partnership. On appeal, Beverly principally contends that the statute of limitations has run on the Outlands claims, and that the jury erroneously included certain items in the Outlands damage award. We affirm the judgment on the claims relating to the quitclaim deed, but reverse with respect to the claims relating to the loan.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

1. Formation of the Partnership between the Outlands and the Clelands.

Thomas and Catherine Outland, husband and wife,[1]bought property located at 1401 Hamilton Avenue in San Pedro in 1974. They planned to subdivide the property into three lots, develop two of the lots, sell them for a profit, and retain the lot upon which their house sat. However, in order to subdivide, they required the city to deed to them a portion of Hamilton Avenue to make the other two lots big enough for building.

The Outlands entered into a partnership named Hamilton Properties with two builders, Dennis and Michael Cleland, of MJC Properties. The Hamilton Properties Partnership Agreement, dated May 18, 1984, provided that the Clelands were the general partners and the Outlands were limited partners. The stated purpose of the partnership was to improve the Outlands lot. In connection with the formation of the partnership, in 1985 Catherine and the Outlands two daughters, Mary Susan Outland Gleason (Mary Susan) and Christine Outland Martell (Christine) transferred the Hamilton Avenue property to the partnership.

Catherine testified at trial that at the time of the transfer, she and Thomas had a mortgage on their property of $25,000 to Bank of America with a payment of $264.36 per month. Thomas had taken out a second trust deed on the property with an entity known as Avanta. That loan had a balance of approximately $25,000, and the Clelands made the payments on it.

2. The Lazo Note: 1990.

When Thomas died in January 1987, the subdivision of the parcel had not been completed. After he died, Catherine decided to complete the project, and in late 1989, in need of legal help, she met with Beverly at Hitchcock, Bowman, Schachter & Beverly (HBSB).

Beverly testified that because the project was languishing, he understood his role to be to push the Clelands to complete development of the property. Beverly believed the Clelands had taken advantage of the Outlands in the formation of the partnership, and obtained authorization from Catherine to try to renegotiate the deal with the Clelands. At the time, he did not believe the Clelands had financial problems; rather, they were making hay someplace else and were not devoting enough time to the Outlands project.

In June 1990, Beverly explained to Catherine and her daughters that the Clelands were out of money, that Beverly had arranged for a loan through Larry Bowman, a member of HBSB, that the lender wanted a first trust deed and the other two loans paid off. The loan had to be secured by the entire property because the subdivision was not complete. He told the Outlands that Bowman was formerly an attorney in the practice and he now managed retirement plans; and that Bowman would be able to get one of the plans to make a loan. Although at the time he stated that the house had to be part of the security, four years later he told them that it was not.

According to Catherine, Beverly offered to arrange a loan to the partnership of $90,000, and on August 15, 1990, Catherine and her two daughters (Mary Susan Outland Gleason and Christine Outland Martell) signed a trust deed and a promissory Note payable to Henry Lazo, the trustee of the Double D Produce, Inc. Money Purchase Pension Trust (the Lazo Note and Trust Deed). The Lazo Note and Trust Deed encumbered all three lots, and the Lazo Note was due in full on August 15, 1991. The loan proceeds were used to pay off the Bank of America encumbrance and the Avanta loan on the Outlands property. The Clelands received the balance, and were to make the payments on the Lazo Note. Catherine was not capable of making the Lazo Note payments of $1,050 per month.

The Double D Pension Trust (Double D Trust) was a client of HBSB, in particular partner Larry Bowman,[2]who acted as an investment advisor for the Double D Trust. Over a period of approximately 20 years, Bowman arranged about 20 to 40 loans for the Double D Trust. Bowman testified at trial that he did not know that this loan was being made for a client of the firm.

Beverly did not provide Catherine with a written disclosure concerning a conflict of interest when the loan was made, nor did he ask her to sign an acknowledgment of an explanation of the conflict. Beverly believed any conflict of interest was technical.

There was no builders control (a procedure used by a bank or lender to ensure that loan proceeds are used for construction) over the money to ensure that the loan proceeds were spent on the project; Beverly did not set one up because Double D did not request him to do so. He was not concerned that the Clelands were doing anything improper with the money, and did not believe a builders control would have prevented the loan proceeds from being used on another property.

3. Assignment of the Lazo Note and 1992 Foreclosure.

In July 1991, the Clelands wrote HBSB requesting an extension of the Lazo Note because the City was behind in approving the subdivision of the parcel. In September 1991, the Lazo Note was extended for an additional year to August 15, 1992. The subdivision of the parcel was completed in October, 1991. The subdivision created Lots 1, 2, and 3.

In February 1992, the principal on the Lazo Note had not been paid, and an interest payment was overdue. Beverlys firm commenced a foreclosure proceeding on behalf of the Double D Trust against the Outlands property, and on July 28, 1992, caused to be recorded a Notice of Default seeking $100,238.70 in unpaid interest and principal. At the time, no building had taken place on Lots 2 and 3.

At the time of the foreclosure proceedings, Beverly did not tell the Outlands that the foreclosure was commenced by HBSB. In 1995 he wrote to Catherine, but still did not disclose that it was his firm that had commenced the foreclosure. He also did not tell her that Double D was an HBSB client, but claimed she already knew. Nonetheless, when he found out about the foreclosure, Beverly contacted the Outlands because he did not want to stand by and have the foreclosure go forward. He asked Bowman for an extension, but Bowman told him the Double D Trust would not authorize an extension.

In order to get the Clelands additional construction funds, on August 10, 1992, Beverly had the partnership deed its interest in Lot 1 back to Catherine, Mary Susan, and Christine (1992 Deed). The 1992 Deed did not specify that the interest granted was a joint tenancy.[3] In addition, in connection with the transaction, the partnership deeded Lots 2 and 3 to Michael Cleland, which permitted Cleland to obtain a $150,000 loan on Lots 2 and 3, ostensibly to complete the project.

Also in August 1992, Michael Cleland paid off the Lazo Note and received an assignment of the Lazo Note and Trust Deed.[4] Following this assignment, Cleland divided the Note into four parts, and re-assigned it to himself, his brother Dennis Cleland, HBSB attorney Robert Schachter, and Beverly. Beverly testified the assignments were handled in this fashion because the attorneys could not deal directly with the pension trust as lender or borrower. The assigned Lazo Note released Lots 2 and 3 from the encumbrance.

On February 15, 1993, Beverly wrote to Michael Cleland requesting a status update, and remarked that he had seen no tangible results from the new loan. At some point, Beverly learned that the Clelands had used the $150,000 loan proceeds to reimburse themselves and purchase their $50,000 interest in the Lazo Note.

On March 26, 1993, Beverly wrote Catherine to explain the transactions. In 1990, this office assisted in making arrangements for the private lender to pay off an existing debt and to generate some additional cash to complete the subdivision of your property. That loan, in the amount of about $90,000, was due in December of 1991. The loan was not paid when it was due, and interest was over six months in arrears. Satisfactory arrangements could not be made to extend the loan with the lender. A foreclosure was actually commenced, and in order to avoid a trustee sale of your property, Robert Schachter and I agreed to purchase the loan from the current lender along with Michael and Dennis. This lien will remain as a first trust deed on your house, as payments are not being required. . . . The letter further informed her that the partnership and the Clelands had been taken off Lot 1, and Catherines name was taken off Lots 2 and 3.

On June 11, 1993, Beverly wrote to Michael Cleland and noted that it had been over two months since their last communication. He stated, It is becoming increasingly clear that this is a project that you neither care to or are able to complete. If I do not hear from you within ten days . . . we will refer the Outlands to another law firm to immediately commence litigation. Because this office peformed a small task for you at one time, I feel that the specter of conflict makes it inappropriate to represent them in a lawsuit against you. As to the Outlands, however, Beverly believed his acquisition of the Lazo Note presented at most a technical conflict of interest. He testified, I owned a part of the mortgage on her home which I purchased to protect her from a foreclosure. I didnt consider that a conflict. I considered it a favor.

On September 2, 1993, Catherine wrote to Beverly and complained that Lots 2 and 3 were still in the Clelands names. She felt the taxes had increased dramatically. Catherine handled the property tax appeal herself. Although Lot 1 could have avoided reassessment if it had remained in the Partnership, it was Beverly who originated the transfer.

In September 1994, due to the Clelands failure to pay their mortgage, Lots 2 and 3 went into foreclosure. Beverly spoke to the Clelands and encouraged them to make arrangements to satisfy the debt. At the same time, he encouraged the Outlands to file a lawsuit against the Clelands. It was not possible to borrow additional funds because the value of the lots was close to the outstanding loan. Beverly spoke with the Outlands about selling the lots, but the attempts to sell were unsuccessful.

4. Lawsuit against the Clelands, 1995-1996.

On July 13, 1995, the Outlands filed a complaint against the Clelands for breach of contract and breach of fiduciary duty. On September 1, 1995, Beverly left HBSB and formed his own law firm. He sent the Outlands substitution of attorney forms, but they never returned them, and HBSB remained attorneys of record.

On October 4, 1995, Beverly wrote to Catherine and advised her that he and his former partner Bob Schachter had put up the money to buy the Note. With accrued interest, the Outlands now owed $74,578.12 to the Clelands and $74,578.12 to Beverly and Schachter. Beverly told her that he had met with three different attorneys to see if any attorneys would take the case against the Clelands on a contingency basis, but none of them would take the case.

In February 1996, Catherine wrote to Beverly concerning the loss of Lots 2 and 3 in foreclosure. She complained of the financial mess and made it clear to him that she wanted to get her home free and clear, including the elimination of the power of attorney. She had discussions with Beverly concerning suing the Clelands, but Beverly told her they were probably going into bankruptcy and suing them would be like drilling an empty oil field. However, she testified she never authorized Beverly to file a lawsuit against the Clelands.

On April 23, 1996, Beverly wrote to Catherine to seek her input concerning the Cleland lawsuit, which was almost dismissed for failure to prosecute. Beverly informed her that he would be making a motion to withdraw as counsel, and that he had filed the lawsuit himself only because the Outlands could not find anyone to take it on a contingency basis. He recommended that they make a deal with the Clelands because they were on the verge of bankruptcy.

On May 6, 1996, Beverly wrote Catherine. Everybody associated with the Hamilton Avenue project essentially either was incompetent or crooked. I did not select any of these people and I did not refer you to any of them. You did not want a lawsuit, so I helped you to push them into completing the project and even helped to arrange financing (which is something that they should have done). When the project ran out of money, I then protected you from foreclosure when the loan was not paid by using my own money to buy the loan. Lastly, I insured that your home was removed from the partnership after you had deeded the entire property to the Clelands. I think it is important to remind you of this generally because I feel like I am being made the scapegoat for some very bad decisions. Beverly stated that no other attorneys would take the matter on a contingency basis because it was not lucrative enough; he had received information that the Clelands were on the verge of bankruptcy. He concludes, It makes no sense to flog a dead horse.

5. Termination of HBSB and Beverly, 1996-1997.

Beverly wrote Catherine August 7, 1996, stating that he received a call from Schachter informing him that the Outlands had retained a new attorney to file a lawsuit against Beverly because we did not sue the Clelands sooner. . . . Apparently, you have forgotten that you repeatedly directed us not to file a lawsuit against the Clelands because you did not want to get involved in litigation due to your age. . . . []  It is a shame that you do not appreciate the fact that you would not have a home now if it was not for us. We got your house out of the partnership so it was not a part of the Inland Bank foreclosure [of Lots 2 and 3]. We also stopped the Double D Trust from foreclosing on your house by buying the [Lazo] Note. We have since kept the Clelands from foreclosing because of our ownership interest in the [Lazo] Note.

In September 1996 and January 1997, the parties signed a Tolling and Standstill Agreement tolling the filing of any lawsuit by the Outlands against HBSB for a period of one year, from August 10, 1996 through August 9, 1997.

On January 3, 1997, Beverly wrote to Michael OKeefe, the attorney now representing the Outlands in the lawsuit against the Clelands. Beverly wrote that HBSB was in the process of withdrawing from representation. The matter is complicated by the fact that Mr. Schachter and I each own an undivided 25% interest in [the Lazo Note] which we purchased to prevent a foreclosure on Mrs. Outlands home when the partnership did not meet its obligations. By copy of this letter to you and her, we are recognizing and proclaiming the existence of an actual conflict with respect to enforcement on the [Lazo Note]. While we remain neutral at this time and do not intend to take any action, we likewise will not be exerting any effort to resist the foreclosure or prevent Mr. Cleland from exercising whatever rights he may have under the [Lazo Note].

In January 1997, HBSB moved to withdraw as counsel. Beverly submitted a declaration in support of the motion to withdraw as counsel. In that declaration he stated that he advised the Outlands to obtain a second opinion regarding any settlement. He further stated there were serious differences in the course of conduct of the litigation, and there was a conflict of interest between him and Schachter on the one hand and the Outlands on the other.

On March 10, 1997, the trial court granted HBSBs unopposed motion to withdraw as the Outlands counsel. On April 28, 1997, Catherine requested that Beverly send her files to her new attorney, Michael Levanis.

On December 11, 1997 Beverly wrote to Robert Schachter. Havent we passed the statute of limitations on Outland? . . . It also seems to me that it might be time to sell the [Lazo Note] to an independent third-party who will threaten foreclosure, get a payoff or make some kind of payment arrangement. We loaned these people real money and we did a lot for them that they seem to have forgotten about. I do not intend to write this off. At trial, Beverly denied that he intended to foreclose at the time.

6. Settlement with the Clelands, 1998-1999.

On June 15, 1998, Beverly wrote to Catherine, reciting the facts that she had given the Clelands authority to borrow money, a foreclosure was commenced, and Beverly and Schachter purchased the Lazo Note to prevent the foreclosure. Obviously, we did not want to foreclose on you; however, we may not be able to stop the Clelands from foreclosing on you. If we dont reach an agreement soon on how we are going to be repaid, then I plan to sell my share of the [Lazo] Note to a third party or to the other note holders so that I can get my money back. At trial, Beverly admitted that he did not mention in the letter that he was with the law firm representing the retirement trust.

On August 19, 1999, the Outlands entered into a Settlement Agreement with the Clelands. The Clelands agreed to pay the Outlands $85,000 and to execute and record a deed transferring their one-half interest in the Lazo Note and Trust Deed to Catherine and Mary Susan as joint tenants. At the time of the settlement, Catherine knew that HBSB owned the other 50 percent of the Lazo Note.

7. Assignment of Lazo Note to Oliver Maupin and Maupins Foreclosure.

On September 16, 1999, Schachter assigned his 25 percent interest in the Lazo Note and Trust Deed to Beverly. Through a third party, Beverly arranged for a sale of his share of the Lazo Note to Oliver Maupin for $63,463.94 (at the time the total accrued interest and principal was $126,927.87).

On May 31, 2000, Maupin recorded a Notice of Default on Lot 1, claiming $342,588.57 in accrued interest and principal. Maupin believed the Lazo Note to be valid. On August 20, 2000, Schachter sent Beverly a fax regarding Maupins notice of default on the Outlands property. Bill I presumed you were aware of these notices so I didnt send. Then decided I [had] better let you know. What is status anyway? On August 21, 2000, Beverly responded that he had not heard anything since the sale of the Lazo Note and Trust Deed. At trial, Catherine testified that when she saw the Notice of Default, she realized it had something to do with the $90,000 note.

On September 3, 2002, Maupin filed the underlying complaint in this action for judicial foreclosure against the Outlands. On February 10, 2003, the Outlands filed a cross-complaint against Maupin, Beverly, Schachter, HBSB, and others. The Outlands operative first amended cross-complaint sought cancellation of the Lazo Trust Deed, and stated claims against HBSB for constructive fraud, legal malpractice, slander of title, breach of fiduciary duty, and negligent and intentional spoliation of evidence. We affirmed summary judgment in favor of the Outlands on December 14, 2004, holding that the Lazo Note and Trust Deed were extinguished by the co-makers (the Clelands) payment in full to the Double D Trust. (Maupin v. Outland (Dec. 14, 2004, No. B167722 [nonpub. opn.].)

On April 3, 2003, Christine died. Because there was no longer a joint tenancy, Christines heirs now owned one-third of the house. Catherine currently lives in the house and Christines two children have indicated they would like to move to California and live in the house. Catherine was not aware that house was held as tenants in common until she retained her present attorney; when she learned of the manner in which title was held, in March 2004, she recorded a deed to change her and Mary Susans interest to a joint tenancy.

8. Trial on the Outlands Cross-Complaint.

Trial on the Outlands cross-complaint commenced on April 9, 2004.

Boyd Lemon, an expert in the standard of care for legal professionals, evaluated the conduct of HBSB, and was of the opinion that HBSB performed services below the standard of care. Lemon believed the HBSB attorneys had a conflict of interest and violated their fiduciary duties to the Outlands when they negotiated and closed the $90,000 Lazo Note in 1990. Furthermore, the attorneys acted below the standard of care in failing to negotiate for better terms for the loan, i.e., terms that were customary, including a lower interest rate, longer term for the loan, use of a builder control, etc. He noted that the loan became past due very quickly, before the lot subdivision occurred, and the builder could not do anything until the subdivision was complete. In Lemons opinion, the most obvious conflict was Bowmans initiation of foreclosure proceedings on the property; the foreclosure was one of the more outrageous conflicts of interest he has seen. A further conflict occurred in HBSBs failure to inform the Outlands of the foreclosure.

He found further conduct below the standard of care in the transfer of the two lots (Lots 2 and 3) unencumbered to the Clelands. This transfer permitted the Clelands to borrow money against the property and make it worthless. With no control over how the $150,000 loan proceeds would be used, Lemon found a grave risk the lots would be foreclosed on and the Outlands would never receive any benefit.

Lemon believed the attorneys had a conflict of interest arising from the purchase of the $90,000 Lazo Note because the attorneys had a financial investment in the clients property and therefore had their own interests to protect. There was no informed written consent by the Outlands to the conflict. Lemon found an additional conflict in Schachter and Beverlys sale of the Lazo Note to Maupin. Beverly knew that when he assigned the Lazo Note, he was assigning it to someone with no duty of loyalty to the Outlands. In addition, the transfer of the Lazo Note was below the standard of care because it was extinguished when paid, Beverly should have known this, and the transfer deprived his clients of property they would have owned free and clear.

Lemon testified that although originally the property was held in joint tenancy, because of the 1992 Deed, the Outlands held Lot 1 as tenants in common. Upon her death in 2003, Christines one-third interest passed to her heirs. In his opinion, the attorneys should have explained to the Outlands how they could hold the property and the ramifications of any such decision.

Andrew Jay Waxler testified on behalf of Beverly as an expert that Beverly and HBSB acted within the standard of care during the entire course of the representation. In his view, mere violations of the rules of professional conduct do not create civil liability, and the rules of professional conduct do not require informed written consent when the lawyer is representing two sides of a transaction. Waxler believed that in procuring the Lazo Note, Beverly was giving the Outlands business advice, and because the firm did not actually foreclose, its conduct was not below the standard of care.

Deloris Waldron testified that the value of Lot 1 in April 2003 was $747,500.

Robert Schachter testified that Larry Bowman was a member of the firm in 1990. Since the mid-1970s, Bowman had been in semiretirement and was handling clients on financial investment advice only, and was not aware of the Double D loan to the Outlands. Schachter believed Beverlys letter of December 11, 1997, concerning the statute of limitations referred to the fact OKeefe was threatening to file a lawsuit and they had a tolling agreement. Schachter denied that he and Beverly agreed not to take action on a foreclosure until the statute had expired. He does not know if a conflict check was done on the Outlands file when the $90,000 loan was arranged.

The jury returned a special verdict finding:

(1) The statute of limitations did not bar the claim for constructive fraud, that Beverly, Schachter, and HBSB had committed constructive fraud, and the Outlands damages on that claim were $34,000.

(2) The statute of limitations did not bar the claim for slander of title, but that none of the defendants committed slander of title.

(3) Beverly and HBSB committed legal malpractice in preparing the 1992 Quitclaim deed that conveyed title to Catherine, Mary Susan and Christine as tenants in common, and that damages on that claim were $321,500.

(4) The statute of limitations barred the claim for legal malpractice regarding preparation of the 1990 Lazo Note and Deed of Trust.

(5) The statute of limitations did not bar the claim for breach of fiduciary duty, that Beverly and HBSB had breached their fiduciary duties to the Outlands, and damages on that claim were $222,600.

DISCUSSION

I. BEVERLY HAS STANDING TO PURSUE THE APPEAL.

The Outlands contend that Beverly has no standing to pursue this appeal due to his pending involuntary Chapter 7 bankruptcy because only the bankruptcy trustee, absent the trustees abandonment of the property, may pursue the appeal on behalf of Beverlys bankruptcy estate. We disagree.

Upon the commencement of bankruptcy, actions against the debtor are stayed by the automatic stay of 11 U.S.C.  362, subdivision (a)(1). Further, a debtors claims becomes part of the bankruptcy estate upon the filing of the petition, and the trustee is the representative of the estate. (11 U.S.C.,  541, subd. (a)(1);[5]323, subd. (a).) Therefore, the trustee may abandon property that is burdensome or of inconsequential value upon notice and hearing. (11 U.S.C.  544, subd. (a).) In addition, the majority California rule holds that the trustee may permit the debtor to pursue an action without abandoning the property. (See Kaley v. Catalina Yachts (1986) 187 Cal.App.3d 1187, 1194; see also California Aviation, Inc. v. Leeds (1991) 233 Cal.App.3d 724, 730 [chapter 7 debtor may pursue action with trustees authorization]; see also Robinson v. McGinn (1987) 195 Cal.App.3d 66, 78-79, disapproved on another point in Laird v. Blacker (1992) 2 Cal.4th 606, 617 [chapter 7 debtor may continue pending state court litigation absent affirmative conduct by trustee].)[6] Here, because Beverlys trustee has stipulated to permit Beverly to pursue the appeal on his own behalf, Beverly has standing.

II. 1992 DEED CLAIMS.

A. Statute of Limitations.

Beverly makes several arguments relating to the running of the statute of limitations on claims arising from the 1992 Deed. He contends (1) the trial court erred in failing to instruct in the special verdict form on the statute of limitations because it erroneously concluded the statute did not commence to run until 2003 when Christine died; (2) the Outlands claim is barred by the statute of limitations because they only had until March 10, 2001, four years after cessation of Beverlys representation, to assert the claim; (3) injury occurred when Beverly prepared the deed, not when Christine died; and (4) it was a question of fact for the jury to determine when the statute ran. We conclude as a matter of law that the statute did not begin to run until Christine died in 2003, and therefore all of Beverlys arguments fail.

Code of Civil Procedure section 340.6 sets forth two distinct and alternative limitation periods: one year after actual or constructive discovery, or four years after the date of the wrongful act or omission, whichever occurs first.[7] (Radovich v. Locke-Paddon (1995) 35 Cal.App.4th 946, 966.) In claims governed by this statute, the statute is tolled until there is actual injury, not threatened or contingent injury. (Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 754; Fritz v. Ehrmann (2006) 136 Cal.App.4th 1374, 1383-1384.) There are no bright-line rules; each case must be examined on its own facts. Where the critical facts are, as here, undisputed, the court may decide the issue as a matter of law. (Fritz v. Ehrmann, supra, at p. 1383.)

A joint tenancy consists of an estate owned jointly in undivided equal shares by two or more persons. (Civ. Code, 683, subd. (a).) Under common law, four unities are essential to the creation and continuation of a joint tenancy: unity of interest, time, title, and possession. (Tenhet v. Boswell (1976) 18 Cal.3d 150, 155.) If one of the unities is destroyed, the joint tenancy is severed and the cotenants become tenants in common, without a right of survivorship. (Ibid.) Further, [t]he principal characteristic of joint tenancy property ownership is the right of survivorship which accrues to a surviving joint tenant; the surviving joint tenant succeeds to the interest of the deceased joint tenant by operation of law. A termination of the joint tenancy, prior to the death of one joint tenant, by converting title to another form such as tenancy in common, destroys this right of survivorship. (Estate of Gebert (1979) 95 Cal.App.3d 370, 376.)

Here, the conveyance could have been changed at any time prior to Christines death in 2003 to reflect that Lot 1 was held in a joint tenancy by Catherine and her daughters. Until that time, the potential damage that the lot would pass to any one of the co-owners heirs by operation of law had not come to fruition. Thus, even though the deed was wrongly prepared nearly 11 years before, the cause of action did not accrue until Christines death and the passage of title to her heirs. The statute of limitations on the deed claims does not bar the action.

B. Claims Based on the Form of Holding Title to Lot 1.

Beverly argues, on the merits of the issue, that the Outlands were not damaged by the 1992 Deed because none of the prior conveyances had the legal effect of changing title. In that regard, he argues that because what became Lot 1 was excepted from the grant to the partnership in 1985, Lot 1 remained in joint tenancy, and thus the 1992 Deed had no effect. Thus, he argues, the trial court erred in finding that the exception of the 62 easterly feet of the lot from the 1985 deed was void and that the fact the partnership borrowed against the whole property was evidence that the portion of the property which later became Lot 1 was not excepted. Finally, he claims he was not collaterally estopped from making his arguments based on his correspondence to Catherine that Lot 1 belonged to the partnership before it was deeded back to the Outlands. We disagree.

1. Factual Background.

The record discloses that in 1982, Thomas Outland and Catherine Outland as husband and wife deeded to Catherine, Mary Susan, and Christine, as joint tenants, the Outlands unsubdivided lot, which was formerly known as Lot 35. On June 25, 1985, Catherine, Mary Susan, and Christine by grant deed conveyed their interest in Lot 35 to Hamilton Properties, the partnership; this deed excepted from the conveyance the easterly 62 feet of the lot. When the subdivision was completed in October 1991, the parcel map states the owners of the property, now consisting of Lots 1, 2, and 3, to be Catherine, Mary Susan, Christine, and Hamilton Properties. The parcel map does not state how title was held. On August 10, 1992, Hamilton Properties conveyed to Catherine, Mary Susan, and Christine Lot 1 as tenants in common.

At trial, Beverly moved for judgment notwithstanding the verdict, arguing that because title to Lot 1 was never conveyed to the Partnership, it had always been held by Catherine, Mary Susan, and Christine, and therefore the 1992 Deed had no legal effect upon title. Beverly contended the 1985 conveyance excepted the land (the easterly 62 feet) upon which the Outlands house was situated and was equivalent to Lot 1; therefore although the partnership purported to convey that land to the Outlands in 1992, it could not do so because it held no such interest. He pointed to additional evidence in the record, including a letter from Catherine to Beverly concerning her tax protest which was based upon what she believed to be the fact that Lot 1 had had the same ownership; the title report from 1992, which referred to title to the property being held as joint tenants; and the Settlement Agreement, which described Catherines home as being located on the easterly 62 feet of the property.

The trial court denied Beverlys motion, finding that Beverly was estopped because his argument the partnership was entitled to borrow against the entire property (Lots 1, 2 and 3) was at odds with the argument title was never transferred; further, Beverly himself made several references to the transfer of title, including correspondence where he spoke of it being collateral for the loan, his May 6, 1996 letter to Catherine in which he stated, I insured that your home was removed from the partnership after you had deeded the entire property to the Clelands, and his June 15, 1998 letter in which he stated, You deeded your home to a limited partnership. . . .

The court also declared the 1985 grant deed, which was executed when the subdivision had not been approved, was null and void in attempting to reserve the easterly 62 feet because the Outlands could not convey an interest that had not been subdivided. The court found no evidence that the title remained in joint tenancy.

2. Discussion.

When reviewing a judgment notwithstanding the verdict, we view the record in the light most favorable to the party securing the verdict. (Trujillo v. North County Transit Dist. (1998) 63 Cal.App.4th 280, 284. Although the substantial evidence rule generally applies to the review of an order granting a judgment notwithstanding the verdict, when the motion presents a legal question based on undisputed facts, our review is de novo. (Ibid.; Gillanv. City of San Marino (2007) 147 Cal.App.4th 1033, 1043-1044.) A motion for judgment notwithstanding the verdict does not afford a review of the jurys deliberations, but is designed to prevent a miscarriage of justice in those cases where the verdict rendered is without foundation. (Trujillo, supra, 63 Cal.App.4th at p. 284.)

The Subdivision Map Act (Gov. Code,  66410, et seq.) prohibits a property owner from selling, leasing, or obtaining financing for property unless the property is a legal parcel. The Map Act defines a subdivision as the division, by any subdivider, of any unit or units of improved or unimproved land, or any portion thereof, shown on the latest equalized county assessment roll as a unit or as contiguous units, for the purpose of sale, lease or financing, whether immediate or future. (Gov. Code,  66424.) City or county approval of a map depicting the subdivided parcel and prepared in compliance with the Map Act is required to create a new legal parcel.[8] A subdivision may be made by deed, lease, or deed of trust. A final subdivision map, when approved, contains the record title information. (Hill v. City of Clovis (2000) 80 Cal.App.4th 438, 447.) It therefore extinguishes any previous subdivision. (Gov. Code,  66499.20 1/2; see Gomes v. County of Mendocino (1995) 37 Cal.App.4th 977, 986-987.)

Beverlys arguments all lack merit because the parcel map had the effect of superseding all prior deeds, and established title in 1991 as a tenancy in common between the partnership and the Outlands. Therefore, whether or not the Outlands could have reserved in 1985 what became Lot 1 from the subdivision in accordance with the Map Act is irrelevant. Furthermore, the record indicates the Outlands did not make any such reservation in connection with the subdivision; the final parcel map divided the property into three parcels which specifically included Lot 1.

In addition, Beverlys argument the quitclaim deed did not change the manner in which title is held lacks merit and confuses the manner of conveying title with the manner in which title is held. As discussed above, joint tenancy is a manner of holding title. A quitclaim deed transfers to the grantee all of the right, title and interest that the grantor may hold at the time of the execution and delivery of the deed. (City of Manhattan Beach v. Superior Court (1996) 13 Cal.4th 232, 239.)

III. THE STATUTE OF LIMITATIONS ON THE BREACH OF FIDUCIARY DUTY CLAIMS RELATING TO THE LAZO NOTE WAS TRIGGERED IN 2000 WHEN MARY SUSAN AND CATHERINE RECEIVED MAUPINS NOTICE OF DEFAULT.

Beverly argues the jurys verdict was factually inconsistent and irreconcilable because the jury found the statute of limitations barred the claim for legal malpractice based upon the assignment of the 1990 Lazo Note and Deed of Trust, but found that the statute did not bar the claim for breach of fiduciary duty. He also argues no substantial evidence supports the jurys finding the statute of limitations had not run on this claim because the facts show that the Outlands had knowledge of their claim at the latest by 1997. We agree that the statute of limitations had run on the Outlands claims for breach of fiduciary duty and constructive fraud arising out of Beverlys ongoing failure to disclose conflicts of interest.

An attorneys professional duty to the client is to provide competent legal advice and to avoid conflicts of interest that might undermine performance of that duty. (Schultz v. Harney (1994) 27 Cal.App.4th 1611, 1621.) The elements of the tort of professional malpractice are a duty to use such skill, prudence and diligence as other members of the professional community possess, a breach of that duty, a proximate causal connection between the breach and the injury, and damages resulting from the professional negligence. (Budd v. Nixon (1971) 6 Cal.3d 195, 200.)

On the other hand, a claim for breach of fiduciary duty is a tort distinct from professional negligence. (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086.) Breach of fiduciary duty requires a showing (a) of the existence of a fiduciary duty, (b) breach of the duty, and (c) damages. (Ibid.) The scope of fiduciary duty may be determined by reference to the Rules of Professional Conduct, statutes, and other general principles of law. (Id. at pp. 1086-1087.)

The statute of limitations applying to both claims in this case is Code of Civil Procedure section 340.6 because all of the duties alleged arose from the attorney-client relationship. The legislative history of the statute indicates that the Legislature intended to establish a statute of limitations for any legal malpractice falling short of actual fraud, and an action for breach of fiduciary duty based upon the violation of Rules of Professional Conduct Rule 3-300, as were the claims here, is governed by Code of Civil Procedure section 340.6. (Stoll v. Superior Court (1992) 9 Cal.App.4th 1362, 1365-1369.)[9] The statute of limitations begins to run when the plaintiff discovers the facts underlying the claim, not when the plaintiff realizes such facts constitute malpractice. (Curtis v. Kellogg & Andelson (1999) 73 Cal.App.4th 492, 501.)

Code of Civil Procedure section 340.6 provides that the claim must be brought within one year of discovery of facts, or facts that would put the client on inquiry notice, unless tolled by the specific provisions of the statute, provisions not applicable to this claim. Here, Mary Susan and Catherine both admitted that they knew Maupins May 2000 foreclosure was related to the $90,000 Note; they knew at the very latest in 1998 that Beverly had an interest in the Lazo Note, and that he might foreclose; and Beverlys last overt act with respect to the Lazo Note was his sale to Maupin in September 1999. Thus, at the very latest, the Outlands claims for fiduciary duty and constructive fraud should have been brought one year after the actual date of discovery of the Maupin foreclosure in 2000, or by the end of 2001.

IV. NO ERROR IN DENIAL OF NEW TRIAL MOTION BASED UPON JUROR MISCONDUCT.

Beverly contends the trial court erred in denying his new trial motion based upon juror misconduct because the jury awarded, contrary to instruction that such damages were barred by the statute of limitations, damages for a property tax increase resulting from the quitclaim of Lot 1 from the partnership to the Outlands in 1992. We disagree.

A. Factual Background.

Beverly moved for a new trial based upon juror misconduct. He argued that the trial court had ruled as a result of his motion for nonsuit that any claims for damages for increased property taxes allegedly resulting from the transfer of Lot 1 back to the Outlands in 1992 were barred by the statute of limitations. The trial court instructed the jury on this issue, but five jurors submitted declarations stating that the increased property taxes resulting from the transfer were probably included as part of their damages award on the malpractice claim.

The trial court denied the motion. The court noted that four of the jurors declarations, which were identical, stated that In calculating [damages], I probably included, but I do not specifically recall that I did, as part of the damages, the increase in property taxes for the property that was caused by the malpractice. In addition, one juror had stated she did not include such damages, but that from the vote of the jury I observed during deliberations, a majority of the other jurors did include as damages the increase in property taxes. The court noted it was questionable whether the declarations were admissible under Evidence Code section 1150[10]because they bordered on being a simple recitation of what the jurors thought about and may have included, and that it did not see any objectively verifiable statements. The court considered first whether to admit the declarations, and second what weight it would give them if it found them admissible. The court concluded that in any event the weight of the declarations was insufficient, and denied the motion.

B.Discussion.

Juror misconduct is one of the specified grounds for granting a new trial (Code Civ. Proc., 657, subd. (2)), and a motion for a new trial may be granted on the grounds of jury misconduct where the jurors misconduct prejudiced the losing partys right to a fair trial. (Enyart v. City of Los Angeles (1999) 76 Cal.App.4th 499, 507.) A showing of misconduct creates a presumption of prejudice, which in turn may be rebutted by an affirmative evidentiary showing that prejudice does not exist or by a reviewing courts examination of the entire record to determine whether there is a reasonable probability of actual harm to the complaining party resulting from the misconduct. [Citations.] Some of the factors to be considered when determining whether the presumption is rebutted are the strength of the evidence that misconduct occurred, the nature and seriousness of the misconduct, and the probability that actual prejudice may have ensued. (Hasson v. Ford Motor Co. (1982) 32 Cal.3d 388, 417, fn. omitted; English v. Lin (1994) 26 Cal.App.4th 1358, 1364.) A denial of a motion for a new trial grounded on jury misconduct implies a determination by the trial judge that no prejudice resulted from the misconduct. (English, supra, at p. 1364.)

Subject to the restrictions of Evidence Code section 1150, a jurors affidavit may be used to impeach a verdict. Evidence Code section 1150 provides as a general rule that [u]pon an inquiry as to the validity of a verdict, any otherwise admissible evidence may be received as to statements made, or conduct, conditions, or events occurring, either within or without the jury room, of such a character as is likely to have influenced the verdict improperly. No evidence is admissible to show the effect of such statement, conduct, condition, or event upon a juror either in influencing him to assent to or dissent from the verdict or concerning the mental processes by which it was determined. Thus, juror affidavits may be used to show the effect of overt acts or statements on the verdict; they may not be used to impeach the verdict by showing a jurors subjective reasoning. (Vomaska v. City of San Diego (1997) 55 Cal.App.4th 905, 910; Krouse v. Graham (1977) 19 Cal.3d 59, 81.)

Under this reasoning, juror affidavits submitted to show a failure to follow the courts instructions are incompetent under Evidence Code section 1150. (People v. Steele (2002) 27 Cal.4th 1230, 1260-1261.) As our Supreme Court explained, while jurors may testify to overt acts -- that is, such statements, conduct, conditions, or events as are open to sight, hearing, and the other senses and thus subject to corroboration -- [they] may not testify to the subjective reasoning processes of the individual juror [Citation]. (In re Stankewitz (1985) 40 Cal.3d 391, 398.) Evidence concerning a jurys collective mental processes to establish how a verdict was reached is similarly incompetent. (Mesecher v. County of San Diego (1992) 9 Cal.App.4th 1677, 1683.) Juror declarations are inadmissible where they at most suggest deliberative error in the jurys collective mental process -- confusion, misunderstanding, and misinterpretation of the law. (Ford v. Bennacka (1990) 226 Cal.App.3d 330, 336.)

The rule precluding inquiry into the jurors thought processes may not be overcome by attempting to characterize the jurors communications amongst themselves as overt acts. The subjective quality of one jurors reasoning is not purged by the fact that another juror heard and remembers the verbalization of that reasoning. (Mesecher v. County of San Diego, supra, 9 Cal. App.4th at p. 1683.) Thus, Krouse v. Graham, supra, 19 Cal.3d 59, is distinguishable. There, an overt act occurred because the jurors expressly agreed, prior to deliberations, to violate the courts instructions. This fact was objectively verifiable and therefore juror affidavits to that effect were admissible. (Id. at p. 81.)

In reviewing the trial courts ruling on a motion for new trial, we accept the trial courts credibility determinations if supported by substantial evidence. (People v. Nesler (1997) 16 Cal.4th 561, 582.) Whether prejudice arose from the misconduct is a mixed question of law and fact subject to our independent determination. (Ibid.) Thus, although the trial court is accorded a wide discretion in ruling on a motion for new trial and . . . the exercise of this discretion is given great deference on appeal . . . we are also mindful of the rule that on an appeal from the judgment it is our duty to review all rulings and proceedings involving the merits or affecting the judgment as substantially affecting the rights of a party . . . including an order denying a new trial. In our review of such order denying a new trial, as distinguished from an order granting a new trial, we must fulfill our obligation of reviewing the entire record, including the evidence, so as to make an independent determination as to whether the error was prejudicial. [Citations.] (City of Los Angeles v. Decker (1977) 18 Cal.3d 860, 871-872.) Therefore, where it is reasonably probable that in the absence of misconduct the jury would have arrived at a different verdict, the moving party is entitled to a new trial. (Id. at p. 872.)

Here, the affidavits were inadmissible to impeach the jurys verdict; the trial courts determination the affidavits were entitled to little weight is supported by the record. The jurors stated, I probably included, but I do not specifically recall that I did include property taxes as part of damages, and one juror said she did not include taxes in the damages, but observed the jury and believed that they did include property taxes.

DISPOSITION

The judgment of the superior court is affirmed on the claims relating to the 1992 Deed, and is reversed on the claims relating to the Lazo Note and Trust Deed. The parties are to bear their own costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

ZELON, J.

We concur:

PERLUSS, P. J.

WOODS, J.

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[1] Where they share the same last name, we refer to the parties by their first names to avoid confusion, and not out of disrespect.

[2] At trial, Beverly claimed that Bowman was not a member of the firm, although his name appeared on the letterhead and his assistant sent out letters under his signature. Beverly maintained that Bowman had an office at HBSB, but did not spend a lot of time there; rather, Bowman had an office in Indian Wells, and managed retirement funds. Bowman testified that he owned 40 percent of the firm in 1990, and took a monthly draw.

[3] By operation of law, therefore, the interest conveyed was as tenants-in-common. (Estate of Horn (1951) 102 Cal.App.2d 635, 640.) Prior to the deed to the partnership, the property had been held by the Outlands as joint tenants. In 1982, Thomas Outland had deeded the property to Catherine and his two daughters as joint tenants; a policy of title insurance in connection with the 1990 Lazo Note and Trust Deed stated that the property was held in joint tenancy.

[4] As discussed in the prior appeal in this matter, the effect of Michael Clelands payment on the Note was to extinguish the obligation and render the subsequent assignments of no effect. (Maupin v. Outland (Dec. 14, 2004, No. B 167722 [nonpub. opn.].) At the time, Beverly was not aware payment on the Lazo Note would have this effect.

[5] Bankruptcy Code Section 554 provides in relevant part, (a)  After notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. [] . . . [] (d) Unless the court orders otherwise, property of the estate that is not abandoned under this section and that is not administered in the case remains property of the estate. (11 U.S.C.  554.)

[6] In Bastonian v. Liberty Savings Bank (1997) 52 Cal.App.4th 1075, the court held that absent abandonment by the trustee under 11 U.S.C. section 541, subdivision (a), a chapter 7 debtor lacked standing to pursue pending litigation. (Bastonian v. Liberty Savings Bank, supra, at pp. 1082-1083.) We find the reasoning of the majority rule more persuasive.

[7] Code of Civil Procedure section 340.6 provides that (a) An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first. In no event shall the time for commencement of legal action exceed four years except that the period shall be tolled during the time that any of the following exist: (1) The plaintiff has not sustained actual injury; (2) The attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred; (3) The attorney willfully conceals the facts constituting the wrongful act or omission when such facts are known to the attorney, except that this subdivision shall toll only the four-year limitation; and (4) The plaintiff is under a legal or physical disability which restricts the plaintiff's ability to commence legal action.

[8] A subdivision into four or fewer lots requires the recordation of a parcel map, as opposed to a tract map, and therefore does not require the recordation of a tentative and a final subdivision map. The subdivider of a parcel of four or fewer lots must nonetheless record an approved parcel map prior to the sale, lease, or finance of the subdivided parcels. (Gov. Code,  66426, 66428, 66457, subd. (b).)

[9] In the context of a claim against an attorney for breach of fiduciary duty, the claim may also be styled as a claim for constructive fraud. (2 Mallen & Smith, Legal Malpractice (2008 ed.) ch. 15,  15.1, p. 644; see also Buehler v. Sbardellati (1995) 34 Cal.App.4th 1527, 1544, fn. 9.) Therefore, because Code of Civil Procedure section 340.6 expressly applies to all claims except actual fraud, it applies to the Outlands claims for constructive fraud. (Code Civ. Pro.,  340.6, subd. (a) [An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services . . .]; see also Stoll v. Superior Court, supra, 9 Cal.App.4th at p. 1368 [only limitation on application of Code of Civil Procedure section 340.6 to claims against an attorney is for actual fraud].) Thus, where the claims for breach of fiduciary obligations arise out of the attorney-client relationship, as they did here, section 340.6 applies to both the Outlands claims for constructive fraud and breach of fiduciary duty. (See Quintilliani v. Mannerino (1998) 62 Cal.App.4th 54, 68.)

[10] Evidence Code section 1150 provides, (a) Upon an inquiry as to the validity of a verdict, any otherwise admissible evidence may be received as to statements made, or conduct, conditions, or events occurring, either within or without the jury room, of such a character as is likely to have influenced the verdict improperly. No evidence is admissible to show the effect of such statement, conduct, condi