Roberts v. Ball, Hunt, Hart, Brown & Baerwitz

• Decision Date: 06 April 1976
• Citation: 57 Cal.App.3d 104,128 Cal.Rptr. 901
• Court: California Court of Appeals Court of Appeals
• Parties: Ken ROBERTS, Plaintiff and Appellant, v. BALL, HUNT, HART, BROWN & BAERWITZ, a Law Partnership and Harvey Fierstein, Defendants and Respondents. Civ. 46507.

Page 901

128 Cal.Rptr. 901

57 Cal.App.3d 104

Ken ROBERTS, Plaintiff and Appellant, v. BALL, HUNT, HART, BROWN & BAERWITZ, a Law Partnership and Harvey Fierstein, Defendants and Respondents.

Civ. 46507.

Court of Appeal, Second District, Division 4, California.

April 6, 1976.

Rehearing Denied April 26, 28, 1976.

Hearing Denied June 2, 1976.

Peter C. Bennett and Richard H. Floum, Inc., a Professional Corporation, and Richard H. Floum, Beverly Hills, for plaintiff and appellant.

Bonelli, Malone, Wood & Lyden, Encino, and Stanley Sapiro, Sherman Oaks, for defendant and respondent Ball, Hunt, Hart, Brown & Baerwitz.

Moore, Graves & Madory, and Richard E. Madory, Tustin, for defendant and respondent Fierstein.

JEFFERSON, Associate Justice.

Plaintiff Roberts filed his first amended complaint against various defendants, including those who are parties to this appeal, I.e., Ball, Hunt, Hart, Brown & Baerwitz, a law partnership, and attorney Harvey Fierstein, alleging that these defendants had committed fraud and had made negligent misrepresentations. These latter defendants demurred to the first amended complaint; the demurrers were sustained with leave to amend; plaintiff chose to stand on the complaint and, accordingly, dismissal was entered (pursuant to Code Civ.Proc. § 581d). Plaintiff appeals from the judgment of dismissal.

'In our examination of the complaint we are guided by the well settled principles governing the testing of its sufficiency by demurrer: A demurrer admits all material and issuable facts properly pleaded. (Citations.) However, it does not admit contentions, deductions or conclusions of fact or law alleged therein. (Citations.)' (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713, 63 Cal.Rptr. 724, 737, 433 P.2d 732, 745.)

The complaint is cast in seventeen causes of action. The first ten causes of action seek monetary recovery against fourteen persons alleged to have been general partners of a partnership known as Burbank Broadcasting Company (BBC), against E. H. Bookasta and against other persons alleged to have acted in concert with BBC; these causes of action seek to recover over $800,000 allegedly loaned by plaintiff to, or advanced on account of BBC.

The eleventh and twelfth causes of action seek recovery from defendant law firm, Ball, Hunt, Hart, Brown & Baerwitz (hereinafter Ball) for alleged fraud and negligence in giving Bookasta a letter hereinafter discussed. The thirteenth and fourteenth causes of action seek recovery from attorney Fierstein for fraud and for negligence in making representations to plaintiff; the other causes of action are immaterial to this appeal. (The causes of action against Ball and Fierstein incorporate the allegations of the first four causes of action.) The appeal before us concerns only those causes of action alleged against defendants Ball and Fierstein.

The gravamen of the complaint against Ball is that that firm, at the request of Bookasta and with knowledge that he would show it to plaintiff, a prospective creditor of BBC, gave to Bookasta a letter stating that, in the professional opinion of the firm, BBC was a duly organized general partnership, consisting of fourteen individuals who were general partners (also named as defendants in the first amended complaint); that Ball knew and understood that this letter was to be shown to plaintiff in order to induce plaintiff to make loans to BBC.

Plaintiff also alleged that Ball's knowledge of this use to which said letter would be put imposed upon Ball a duty to plaintiff to state in the letter all facts known to Ball respecting not only the legal nature of BBC and its component mumbers, but also the fact of the beliefs of such component members respecting the legal nature of BBC and their memberships therein; that by failing to disclose the fact of such beliefs, Ball omitted to state material facts necessary in order to make the statements contained in the letter Not misleading.

Plaintiff then alleged that Ball breached 'said duty to, among others, ROBERTS (the plaintiff), by fraudulently failing to disclose to him in said opinion letter or otherwise BALL's knowledge of the fact that a large number of the persons named in the BALL opinion letter as being general partners of BBC: ( ) (a) Did not believe either that BBC was a general partnership or that they were general partners therein; ( ) (b) Believed that BBC was an entity in which their liability would be and was limited to their pro rata share of the indebtedness of BBC to B of A arising out of the acquisition of the stock in GEC; ( ) (c) Believed that BBC had been incorporated in or about August 1972 so that thereafter they would have no personal liability for any obligations incurred by BBC thereafter; or ( ) (d) Believed that BBC was a limited partnership with MICHAEL COLICIGNO being the sole general partner therein, with the remainder of the members of BBC named in the BALL opinion letter being limited partners therein.'

Plaintiff alleged that he lent money to BBC in reliance on the letter given him by Bookasta confirming that BBC was a general partnership; that he would not have made such loans had he been aware of the beliefs of BBC members that BBC was not a general partnership. Plaintiff also alleged that none of the money has been repaid him, and that he has been forced to incur substantial expense to hire counsel and incur litigation costs in an effort to establish the status of the fourteen partners of BBC as general partners as a prerequisite for imposing liability upon them.

The claim against attorney Fierstein is based primarily on the allegation that, prior to the time he made his representations to plaintiff concerning BBC's consisting of fourteen general partners, the alleged general partners had met and voted to dissolve; that Fierstein not only knew this, but knew that a number of the partners were disputing their status as general partners.

Plaintiff also sets forth in his complaint the allegations of negligent, as opposed to willful, misrepresentation by the Ball firm and Fierstein of the true picture of the BBC partnership.

Plaintiff's basic argument on appeal is that a complaint states a good cause of action against an attorney for fraud or negligent misrepresentation to a third party where all the elements of those torts have been pled. Defendants contend that plaintiff's complaint fails to allege a cause of action for misrepresentation which damaged plaintiff, and that there exists no duty owed by the defendant attorneys to third persons, including plaintiff, which was breached by defendants.

The extent of liability an attorney may incur toward third persons, while the attorney is acting on behalf of a client, has been the subject of divergent opinion in various American jurisdictions, the traditional view being that an attorney may not generally be held liable to third persons because he is not in privity with them, and owes them no duty to act with care. (See 'Attorneys--Liability to Third Parties,' 45 A.L.R.3d 1181.) A typical statement of this approach is that 'an attorney is not liable to third persons for acts committed in good faith in performance of professional activities as an attorney for his client. If, however, an attorney is actuated by malicious motives, or shares the illegal motives of his client, he may be personally liable with the client for damage suffered by a third person as the result of the attorney's actions.' (Fns. omitted.) (7 Am.Jur.2d., Attorneys, § 196, p. 161 (2d Ed. 1963).)

California has long adopted the view that an attorney may not, with impunity, either conspire with a client to defraud or injure a third person or engage in intentional tortious conduct toward a third person. (Greenwood v. Mooradian (1955) 137 Cal.App.2d 532, 290 P.2d 955; Atchison, T. & S.F. Ry. Co. v. Hildebrand (1965) 238 Cal.App.2d 859, 48 Cal.Rptr. 339; Warner v. Roadshow Attractions Co. (1942) 56 Cal.App.2d 1, 132 P.2d 35; see also, Daly v. Smith (1963) 220 Cal.App.2d 592, 33 Cal.Rptr. 920.)

In the instant cae, plaintiff has not pleaded that defendants conspired with others to injure him, but has sought to state causes of action against defendants for the torts of deceit and fraud. (See Civ.Code §§ 1709, 1710.) The essential allegations of an action for fraud are a misrepresentation, knowledge of its falsity, intent to defraud, justifiable reliance, and resulting damage. (Universal By-Products, Inc. v. City of Modesto (1974) 43 Cal.App.3d 145, 151, 117 Cal.Rptr. 525.) Every element of the cause of action for fraud must be alleged in the proper manner and the facts constituting the fraud must be alleged with sufficient specificity to allow defendant to understand fully the nature of the charge made. (Hills Trans. Co. v. Southwest Forest Industries, Inc. (1968) 266 Cal.App.2d 702, 707, 72 Cal.Rptr. 441.) It is clear that plaintiff has failed to plead that defendants gave their written opinions concerning the status of the BBC partnership with fraudulent intent; such an allegation was crucial to the statement of any cause of action against defendants for the intentional tort of fraud or deceit. Therefore, as to the eleventh and thirteenth causes of action, the demurrer was properly sustained.

The twelfth and fourteenth causes of action, however, allege negligent misrepresentation and, in our view, stated a cause of action against the defendants which was good against a general demurrer.

It was, of...