Stine v. Dell'Osso

• Court: California Court of Appeals
• Writing for the Court: Banke, J.
• Citation: Stine v. Dell'Osso, 230 Cal.App.4th 834, 178 Cal.Rptr.3d 895 (Cal. App. 2014)
• Decision Date: 17 October 2014
• Docket Number: A137679
• Parties: Joanne Holman STINE, Plaintiff and Appellant, v. Monica DELL'OSSO et al., Defendants and Respondents.

230 Cal.App.4th 834

178 Cal.Rptr.3d 895

Joanne Holman STINE, Plaintiff and Appellant,

v.Monica DELL'OSSO et al., Defendants and Respondents.

A137679

Court of Appeal, First District, Division 1, California.

Filed October 17, 2014

As Modified on Denial of Rehearing November 14, 2014

Aaron, Riechert, Carpol & Riffle and Kathleen A. Durrans, Brian E. Kulich and Sarah A. Brooks, , Redwood City, for Plaintiff and Appellant.

Law Offices of Steven B. Piser and Steven B. Piser, Oakland; and Murphy, Pearson, Bradley & Feeney and Timothy J. Halloran and Jonathan M. Blute, San Francisco, for Defendants and Respondents.

Banke, J.

I. INTRODUCTION

Joanne Holman Stine (Stine), the conservator of Donna L. Davis (Donna), brought this malpractice action against Monica Dell'Osso and Burnham Brown, APC (Attorneys), alleging dereliction in representing the prior conservator, David B. Davis III (David). David is Donna's son, and was removed as conservator after misappropriating over $1 million in assets from the conservatorship estate.

The trial court sustained the Attorneys' demurrer to the complaint without leave to amend on two grounds: (1) the Attorneys' attorney-client relationship was with David, not Stine, and therefore the Attorneys owed no duty of care to Stine, and (2) Stine, as successor conservator, is subject to any defense that can be interposed against David and David's malfeasance, therefore, bars Stine from asserting a malpractice claim against the Attorneys under the doctrine of unclean hands. We reverse, concluding Stine, as the successor conservator, may pursue a malpractice claim against the Attorneys and is not burdened by David's malfeasance.

II. PROCEDURAL AND FACTUAL BACKGROUND

Because this appeal is from a judgment following the sustaining of a demurrer without leave to amend, we set forth the facts as alleged in the operative (third amended) complaint. (See Mendoza v. Town of Ross (2005) 128 Cal.App.4th 625, 629, fn. 3, 27 Cal.Rptr.3d 452 ["A demurrer admits, provisionally for purposes of testing the pleading, all material facts properly pleaded. Accordingly, the reviewing court may draw its facts, which it accepts as true for purposes of the appeal, from the plaintiff's complaint."].)

In 2002, David hired the Attorneys to represent him in connection with a "petition for the appointment of a probate conservator of the person and estate" of his mother. Thus, the "primary reason" David and the Attorneys established an attorney-client relationship was "to establish a conservatorship proceeding for [Donna] in order to preserve [Donna's] property and to ensure that [her] interests could be adequately protected in a family law action pending at the time in Alameda County."

In his petition for appointment as conservator, David represented "there were no conservatorship assets, as all of [Donna's] assets were held in her Trust," and therefore no bond was required. Donna, however, actually owned significant assets, including real property and several individual retirement accounts (IRAs), individually and not as assets of her Trust.

On January 10, 2003, the probate court issued letters of conservatorship and appointed David as conservator of both Donna's person and estate, finding she was "unable properly to provide for her personal needs for physical health, food, clothing or shelter and was substantially unable to manage ... her financial resources or to resist fraud or undue influence." In the order appointing David, "the court waived bond."

The Attorneys continued to represent David following his appointment as conservator. During their representation, the Attorneys "knew that Donna ... had assets in her name that under California law were assets of the conservatorship" and knew David "had marshaled those assets and that he was controlling them while he was serving as conservator for Donna." Indeed, the Attorneys "monitored and/or assisted [David] with the management of [Donna['s] ... real property and IRA assets."

"[D]espite their knowledge of the existence of conservatorship assets," the Attorneys never informed the probate court of their existence despite their obligation to do so under the Probate Code. Likewise, the Attorneys never petitioned the court to require or increase a bond despite their statutory obligation to do so.¹ As a result, no bond was in place to protect the conservatorship assets.

David subsequently misappropriated over one million dollars’ worth of conservatorship assets, including real and personal property. In December 2010, the probate court removed David as conservator and appointed Stine, a licensed professional fiduciary.

Stine then brought this action against David for financial elder abuse and conversion, and against the Attorneys for legal malpractice. After sustaining the Attorneys' demurrer to the third amended complaint without leave to amend, the trial court dismissed the lawsuit as to them.

III. DISCUSSION

Stine is suing only for malpractice allegedly occurring in connection with the Attorney's representation of David as conservator. She acknowledges she cannot pursue a claim for any malpractice that occurred prior to David's appointment, since at that time, the Attorneys represented David only in his individual capacity, and the attorney-client relationship was therefore between the Attorneys and David, individually, and not as conservator of Donna's person and estate.

The Attorneys therefore initially contend the complaint alleges only preappointment shortcomings in representation. This is too truncated a view of the complaint. (See Intengan v. BAC Home Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1057, 154 Cal.Rptr.3d 727 [allegations must be viewed broadly on review of dismissal following sustaining of demurrer without leave to amend].)

The operative complaint alleged Attorneys represented David from 2002 until he was removed as conservator in December 2010 . Thus, the complaint alleged Attorneys not only represented David, personally, in connection with preparation of the petition to have himself appointed conservator, but they continued to represent him after he was appointed conservator on January 10, 2003, in his capacity as conservator. Indeed, it was alleged that "during the course of their representation of [David], if not from the beginning of their representation, [the Attorneys] knew that Donna ... had assets in her name that under California law were assets of the conservatorship," and Attorneys "knew that [David] had marshaled those assets and that he was controlling them while he was serving as conservator for Donna ." (Italics added.) Additionally, "during the tenure of [David's] appointment, [the Attorneys] monitored and/or assisted [David] with the management of Donna['s] real property and IRA assets." (Italics added.) However, the Attorneys neither "informed the San Mateo County Superior Court of the existence of such assets as is required under California law," nor petitioned the court "to establish or increase bond as is required by California law." David's malfeasance, moreover, did not occur until 2009, nearly six years into his role as conservator.

We therefore conclude the complaint adequately alleges postappointment representation deficiencies by the Attorneys and therefore turn to the two principal issues-whether a successor conservator can sue for legal malpractice committed in connection with the representation of a prior conservator, and if so, whether Stine is barred from doing so in this case because of David's malfeasance while serving as conservator.

A. A Successor Conservator Can Sue a Prior Conservator's Attorneys for Legal Malpractice

An attorney is normally "liable for malpractice only to the client with whom the attorney stands in privity of contract, and not to third parties." ( Borissoff v. Taylor & Faust (2004) 33 Cal.4th 523, 529, 15 Cal.Rptr.3d 735, 93 P.3d 337 ( Borissoff ).) Stine maintains two exceptions to this rule of privity apply: the successor fiduciary exception and the intended third party beneficiary exception. ( Id . at pp. 530–531, 15 Cal.Rptr.3d 735, 93 P.3d 337 ; Lucas v. Hamm (1961) 56 Cal.2d 583, 591, 15 Cal.Rptr. 821, 364 P.2d 685.) We conclude the successor fiduciary exception applies and therefore need not, and do not, decide whether the third party beneficiary exception applies.

The Probate Code provides a "successor personal representative has the powers and duties in respect to the continued administration that the former personal representative would have had." (§ 8524, subd. (c).) These include the power to "[c]ommence and maintain actions and proceedings for the benefit of the estate." (§ 9820, subd. (a).) Thus, "if the fiduciary who hired the attorney is replaced, the successor acquires the same powers the predecessor had in respect to trust [or estate] administration [citation], including the power to sue for malpractice." ( Borissoff, supra, 33 Cal.4th at p. 530, 15 Cal.Rptr.3d 735, 93 P.3d 337.) A successor fiduciary therefore "assumes all of the powers of [the predecessor], including the power to assert the attorney-client privilege as to confidential communications on the subject of trust administration." ( Moeller v. Superior Court (1997) 16 Cal.4th 1124, 1127, 69 Cal.Rptr.2d 317, 947 P.2d 279 ( Moeller ).)

Thus, " ‘as a matter of statute, a successor personal representative (albeit a nonclient) may bring suit against [a] predecessor's attorney for malpractice causing loss to the estate.’ " ( Smith v. Cimmet (2011) 199 Cal.App.4th 1381, 1397, 132 Cal.Rptr.3d 276.) "Indeed, the successor fiduciary must have standing to sue the predecessor's attorney if there is to be an effective remedy for legal malpractice that harms estates and trusts administered by successor fiduciaries." ( Borissoff, supra, 33 Cal.4th at p. 531, 15 Cal.Rptr.3d 735, 93 P.3d 337, see Vapnek et al., Cal. Practice Guide: Professional Responsibility (The Rutter Group 2014) ¶ 6:271.11, pp. 6-60.2 to 6-60.3 (rev. # 1, 2013).)

While Bori...