Musser v. Provencher

• Decision Date: 10 July 2001
• Docket Number: No. A088934.,A088934.
• Citation: 109 Cal.Rptr.2d 214,90 Cal.App.4th 545
• Court: California Court of Appeals Court of Appeals
• Parties: Sandra G. MUSSER, Cross-Complainant and Appellant, v. Douglas PROVENCHER et al., Cross-Defendants and Respondents.

109 Cal.Rptr.2d 214

90 Cal.App.4th 545

Sandra G. MUSSER, Cross-Complainant and Appellant, v. Douglas PROVENCHER et al., Cross-Defendants and Respondents.

No. A088934.

Court of Appeal, First District, Division 2.

July 10, 2001.

Review Granted September 19, 2001.

James A. Murphy, Alexander J. Berline, Murphy, Pearson, Bradley & Feeney, San Francisco, CA., for Appellant.

Christopher R. Miller, Cheryl P. Martinsen, Lanahan & Reilley, LLP, Sacramento, CA., for Respondent.

KLINE, J.

INTRODUCTION

Sandra G. Musser appeals from a judgment of the Marin County Superior Court, following the entry of nonsuit against her cross-complaint for indemnity. She claims the trial court erred in ruling that she could not maintain an indemnity action against her former cocounsel following her settlement of a malpractice claim with their mutual client. Specifically, she contends cocounsel are not barred from seeking equitable indemnity against one another where one counsel has associated another to assist in a particular aspect of the case, and the associated counsel commits malpractice in the course of that representation for which the associating counsel is held liable to the client. She further contends the court erred in ruling that her insurance company, which paid the damages claimed by the client, could not be subrogated to her indemnity cause of action against cocounsel; the court erred in holding that Musser's settlement of the main action with the client barred her from seeking recovery of her fees and the costs incurred in representing the client as an element of damages in her indemnity action against cocounsel; and the court erred in ruling that she could not prove as damages the insurance policy deductible which she paid to the client.

FACTS & PROCEDURAL BACKGROUND¹

Musser is an attorney who practices family law. She represented Pam Scott in divorce proceedings in 1992. Musser filed a petition for spousal and child support set to be heard on July 17, 1992. At that hearing, Scott's husband declared that he had filed for bankruptcy and the support hearing was continued. Musser arranged for respondent Douglas Provencher, a bankruptcy specialist, to obtain relief from the automatic stay imposed by the bankruptcy court. Provencher did not obtain relief from the stay, but advised Musser that she could proceed with the hearing to set support. Provencher advised Musser that the support hearing would not violate the stay if the court did not enter the support order until after the stay was lifted. This advice was contrary to well-established legal authority. Musser asserts Provencher did not even attempt to research the issue. Acting on Provencher's advice, Musser continued with the hearing, although the family law judge warned her she might be violating the automatic stay in so doing.

Thereafter, Mark Scott appealed the grant of spousal and child support and in an unpublished opinion (In re Marriage of Scott (Feb. 28, 1994) (A059831)), the Court of Appeal reversed the support awards on the grounds they were void ab initio as the hearing setting support violated the automatic stay.

Facing punitive damages for violation of the automatic stay, Scott settled with her former husband for less than the original support order. She then sued Musser for malpractice and breach of contract. Musser cross-complained against Scott for past-due attorney fees and costs. Musser moved for summary judgment on the ground that Scott had not sued the sole negligent party, Provencher. The court denied Musser's summary judgment motion, finding Musser was vicariously liable for Provencher's negligence.

Musser requested that Provencher and his insurance carrier contribute to a settlement offer to Scott, but Provencher refused. Musser then filed a cross-complaint against Provencher for indemnity and settled the case with Scott. Mark Scott also filed a complaint against Musser for her part in the violation of the automatic stay. Musser again requested Provencher and his insurer to contribute to a settlement but was again refused. Musser then amended her cross-complaint against Provencher to allege these additional damages, and settled with Mark Scott.

The settlements paid to Pam and Mark Scott included $85,000 ($10,000 of which was paid directly by Musser as her insurance policy deductible) and $20,000 in waived legal fees and costs. In addition, Musser and her insurer, Home Insurance Company (hereafter Home) spent $62,000 in defending both malpractice actions.²

Musser's "First Amended Cross Complaint for Indemnity" against Provencher alleged three causes of action: implied contractual indemnity, equitable indemnity, and tort of another. The first two sought as damages the money paid by Musser and Home and the $20,000 in waived fees and costs.³ The tort of another cause of action sought $62,000 expended in defending the malpractice actions. Provencher answered, raising several affirmative defenses, including that Musser had violated Code of Civil Procedure section 389 in failing to join Home as a party, since Home paid all but the $10,000 deductible toward the settlement and that Musser had split her cause of action for waived fees because Musser had failed to name Provencher in her cross-complaint against Scott for fees. He also raised statute of limitations defenses. In November 1997, Musser moved for summary adjudication as to several of Provencher's affirmative defenses. After hearing, Judge Gary W. Thomas ruled that Home was "in essence" a party to the action, and was authorized to sue in Musser's name; that Musser had not split her cause of action, as the same cause of action was not involved in Musser's fee action against Scott and her indemnity action against Provencher. The court also ruled that the action against Provencher was not barred by res judicata or collateral estoppel for the same reason. The judge also ruled in favor of Musser on the statute of limitations issue, finding the indemnity causes of action within the limitations period and that the "tort of another" cause of action was for malpractice, the statute of limitations for which was triggered by discovery so that triable issues of fact remained as to when Musser discovered her actual harm.

By January 1999, Provencher was represented by new counsel and the case had been transferred to a new trial judge. In pretrial motions in limine, Provencher moved to bar Musser from seeking damages based on the settlements because Home and not Musser had paid the settlement. Provencher also urged that Musser had waived her claim for fees in the settlement and that the dismissal with prejudice following settlement barred Musser's fee and cost claim. Finally, he argued that the action was in reality a legal malpractice action which could not be assigned to Home. Musser argued these issues had been decided in the summary adjudication motion and that the new motion was therefore an impermissible motion for reconsideration, made without new law or facts.

Judge Vernon F. Smith ruled that the action was in fact a legal malpractice claim that could not be assigned to the insurer. Therefore, Musser could not introduce evidence of the settlements paid by Home. Judge Smith further found that Musser could not introduce evidence of fees and costs she had waived when she settled with Scott and that the dismissal with prejudice following the settlement included those waived fees and costs. These rulings effectively struck all damage claims, except for the $10,000 deductible paid by Musser personally. Thereafter, on April 29, 1999 the trial court granted a motion for nonsuit as to the $10,000 deductible claim, preventing that damage claim from being presented to the jury. On October 26, 1999, following its grant of nonsuit on all Musser's claims, the court entered judgment against Musser and in favor of Provencher on Musser's cross-complaint. This timely appeal followed.

DISCUSSION

I.

A. The threshold question is whether cocounsel may sue each other for indemnity in these circumstances—the particular circumstances in this case being that Musser hired Provencher to assist with the bankruptcy aspect of the case, Musser and not Provencher was sued by their mutual client Scott for malpractice to which both attorneys allegedly contributed, and that Musser settled with Scott.

Numerous decided cases have addressed variations of the issue of when one attorney may sue another for malpractice or breach of fiduciary duty in connection with the representation of a mutual client. These cases have come to somewhat different conclusions. (See, e.g., Shaffery v. Wilson, Elser, Moskowitz, Edelman & Dicker (2000) 82 Cal.App.4th 768, 98 Cal Rptr.2d 419 [discussing cases in detail]; Saunders v. Weissburg & Aronson (1999) 74 Cal.App.4th 869, 87 Cal.Rptr.2d 405; Kroll & Tract v. Pans & Paris (1999) 72 Cal.App.4th 1537, 86 Cal.Rptr.2d 78; Pollack v. Lytle (1981) 120 Cal.App.3d 931, 175 Cal.Rptr. 81.)

One "well-recognized exception to the ordinary rules of implied equitable indemnity has been established: A cross-complaint will not be permitted where an attorney sued for malpractice by a former client seeks indemnification from a successor attorney hired by the client to extricate him or her from the situation allegedly caused by the first attorney. [Citations.]" (Kroll & Tract v. Paris & Paris, supra, at p. 1541, 86 Cal.Rptr.2d 78.) "The various public policy reasons supporting this exception have been pointed out in several cases: `Among them are (1) the threat of such a lawsuit by a client's adversary impinges upon the individual loyalty of the second attorney in advising his client ...; (2) one consequence of such a cross-complaint is to preclude the second attorney from trying the lawsuit, thus depriving the party of the attorney of his choice ...; (3) the threat of such a cross-complaint results in the injection of undesirable self-protective reservations into the [second] attorney's counseling role,...