JOHN PARKER, Cross-complainant and Appellant, v. RICHARD E. MORTON, Cross-defendant and Respondent.
Civ. No. 23140
Fourth Dist., Div. Two.
Apr. 3, 1981.
117 Cal. App. 3d 751
Lewis, D‘Amato, Brisbois & Bisgaard and R. Gaylord Smith for Cross-complainant and Appellant.
Breidenbach, Swainston, Yokaitis & Crispo, W. F. Rylaarsdam and Phillip J. Argento for Cross-defendant and Respondent.
OPINION
KAUFMAN, Acting P. J.—Appellant, defendant and cross-complainant, John Parker appeals from a summary judgment entered against him and in favor of cross-defendant Richard Morton on the cross-complaint for declaratory relief, implied indemnity and equitable apportionment.
The action began as a suit for legal malpractice by plaintiff, Lourdes Peterson, against her former attorney, Parker, who had represented her in a dissolution proceeding in 1972. Parker‘s alleged negligence was his failure to litigate in the dissolution action his cliеnt‘s community property interest in the vested military pension of her husband.
Parker filed a cross-complaint, the subject of this appeal, for total or partial indemnity against Morton, an attorney subsequently retained by Mrs. Peterson, in 1976, to remedy the problem of the unlitigated and undisposed military pension. The cross-complaint alleged that Morton failed to pursue the client‘s community property claim against her former husband and thereby caused or exacerbated the damages that the client seeks in her complaint against Parker.
On September 28, 1979, cross-defendant Morton moved for summary judgment on the ground that for policy reasons, an attorney such as Parker, who is sued by his previous client for malpractice, may not successfully cross-complain against the client‘s successor attorney retained to remedy the problem created by the alleged negligence of the first attorney. The trial court granted summary judgment and cross-complainant appeals.
There are, of course, a number of recent decisions that articulate one or more public policy arguments for such a rule. (E.g., Goodman v. Kennedy (1976) 18 Cal.3d 335, 344 [134 Cal. Rptr. 375, 556 P.2d 737]; Rowell v. TransPacific Life Ins. Co. (1979) 94 Cal.App.3d 818, 821-822 [156 Cal.Rptr. 679]; Gibson, Dunn & Crutcher v. Superior Court (1979) 94 Cal.App.3d 347, 355-356 [156 Cal.Rptr. 326]; Commercial Standard Title Co. v. Superior Court (1979) 92 Cal.App.3d 934, 945-946 [155 Cal.Rptr. 393]; Held v. Arant (1977) 67 Cal.App.3d 748, 752-753 [134 Cal.Rptr. 422]; Norton v. Hines (1975) 49 Cal. App.3d 917, 922-923 [123 Cal.Rptr. 237].) Analysis discloses, however, that the “policy” considerations articulated in thоse decisions, even if appropriate there,1 have no applicability to the circumstances presented by the case at bench. Moreover, denying a cross-complaint for partial equitable indemnity in the case at bench would be inconsistent with long established legal principles, themselves founded on important public policy considerations.
The seminal case upon which cross-defendant relies is Norton v. Hines, supra, 49 Cal.App.3d 917. Insofar as the circumstances of that case may be argued to be pertinent, the adverse party in an earlier lawsuit in which the defendant attorneys represented the plaintiff sued the attorneys for negligently advising their clients to initiate and prosecute the earlier lawsuit. Noting that privity between the plaintiff and the defendant attorneys was no longer strictly required (see Lucas v. Hamm (1961) 56 Cal.2d 583 [15 Cal.Rptr. 821, 364 P.2d 685]), the former adversary asserted that an attorney should be held liable in damages to any person who might foreseeably be injured by the attorney‘s negligence. In other words, the plaintiff in the lawsuit against the attorneys
Not surprisingly, potential liability on the part of the attorneys on that basis was rejected, largely on public policy grounds. The court stated: “The attorney owes a duty to his client to present his case vigorously in a manner as favorable to the client as the rules of law and professional ethics will permit.... He is cognizant of the public policy that encourages his clients to solve their problems in a court of law.... We believe the public policy of favoring free access to our courts is still viable. However, if Norton‘s [the former adversary‘s] cause of action against attorneys for negligence is permitted, this policy will be subverted. The attorney must have the same freedom in initiating his client‘s suit as the client. If he does not, lawsuits now justifiably сommenced will be refused by attorneys, and the client, in most cases, will be denied his day in court.” (49 Cal.App.3d at pp. 922-923, fns. omitted.)
It is readily apparent that the Norton decision has little bearing on the case at bench. It was not an action by an allegedly negligent attorney against an allegedly successively negligent attorney whose successive negligence was alleged to have enlarged the damages for which the first attorney might be liable. The duty asserted was the duty of an attorney running to his client‘s adversary to exercise due care in advising his client to file suit, i.e., negligent (as opposed to malicious) prosecution. The court was undoubtedly correct in concluding that the public policy of affording free access to the courts for the resolution of private disputes precluded the impositiоn of a duty on the attorney‘s running to the former adversary other than to refrain from advising the institution of suit maliciously and without probable cause. (49 Cal. App.3d at pp. 921-923.)
The decision in Goodman v. Kennedy, supra, 18 Cal.3d 335, is much the same as that in the Norton case. The clients’ adversaries sued the clients’ attorney; the principal factual difference was that in Goodman the parties suing the attorney had not been the adversaries in a lawsuit but, rather, in a transaction in which the adversaries had purchased shares of stock from the clients. The court held the attorney could not be liable to the clients’ adversaries because the duty owed by the attorney to his own clients to exercise reasonable care did not extend to the adverse parties. (18 Cal.3d at pp. 342-344.) In connection with an argument that the attorney‘s duty should extend to the adversary party, the
As in Norton, which the Goodman court noted and quoted (18 Cal.3d at p. 344, fn. 5), the Goodman court‘s conclusion that the attorney‘s duty to exercise due care did not run to his clients’ adversaries was undoubtedly sound. No claim for implied indemnity was involved or discussed in Goodman.
Held v. Arant, supra, 67 Cal.App.3d 748, did involve circumstances somewhat similar to but different in one essential from the case at bench. There an attorney was sued by his former client on allegations that the attorney‘s negligence in representing him in the negotiation and drafting of an agreement resulted in the client‘s being sued for misrepresentation in inducing the agreement. The defendant attorney sought to cross-complain against the attorneys employed by the client to represent him in respect to the situation created by the alleged negligence of the first attorney. The theory of the proposed cross-complaint was that the attorneys thus employed (the second attorneys) were negligent in advising the client to settle legally defensible claims in the misrepresentation action, as a result of which the first attorney was damaged by being exposed to liability for malpractice and injury to his professional reputation. The court quickly rejected the possibility that the second attorneys might be liable for direct negligence in respect to the first attorney because it concluded, citing earlier decisions including Norton, that the second attorneys owed no duty to exercise reasonable care with respect to the first attorney. (67 Cal.App.3d at p. 751.)
The court then proceeded to raise and reject the contention that the cross-complaint might be maintainable on the theory of equitable indemnity. Noting the general rule allowing implied indemnity where successive tortfeasors have caused losses for which the first in time is liable (Herrero v. Atkinson, supra, 227 Cal.App.2d 69, and Niles v. City of San Rafael, supra, 42 Cal.App.3d 230), the court said: “Dis-
“In the context of the case at bench, [the second group of attorneys] owed an undivided loyalty to [its client] to use its best judgment to extricate him from the situation created by [the first attorney‘s] advice. Extrication involved consideration both of resistance of the claim of [the plaintiff in the misrepresentation action against the client] and of the assertion of an affirmative claim against [the first attorney]. [The second group of attorneys‘] ability to choose between courses of conduct best designed to protect the interests of its client cannot be inhibited by the proposition that if it chooses the course of resistance of the claim it will be immune from liability to the one adversary absent malicious prosecution . . . while if it chooses the course of prosecuting the client‘s claim for malpractice against a prior attorney it may be subject to a claim to indemnify that attorney. We thus conclude that the nature of the relationship of attorney and client requires that the attorney retained to represent the client in a cause in which actual or potential adversaries include both a private person and a prior attorney not be subjected to the potentiality of being rеquired to indemnify
Thus, although it is questionable that that was the real gravamen of the cross-complainant, the court appears to have treated the case as one in which it was alleged that the negligence of the second attorney exacerbated the damages for which the first attorney could be liable. To that extent that case was like this one. However, there is an essential difference between the two cases.
As the court in Held v. Arant cogently pointed out, the negligence with which the second attorneys were charged in that case was in choosing between two alternative courses of action requiring the exercise of professional judgment. The rationale for the decision was that if the second attorneys could be held liable to the first attorney for negligence in making the choice, in future cases the choice to be made by the second attorney might well be influenced by consideration of his potential liability to the first and that that would conflict with his duty of undiluted devotion to the best interests of his client. But in the case at bench the negligence with which the second attorney is charged by the cross-complaint is not that he was negligent in choosing between two alternative remedies but that he exacerbated the client‘s damages by failing to pursue one of two availablе remedies which were not inconsistent with one another and presented no choice, which required no exercise of professional judgment, and one of which (the one not pursued) was required in all events both to protect the client‘s interests and to fulfill the client‘s obligation to mitigate the damages resulting from the first attorney‘s alleged negligence.
The negligence complained of in the cross-complaint is the second attorney‘s failure to advise the client to institute an action for division of the former husband‘s vested military pension benefits. When the client first employed the second attorney in 1976, it was well settled that the vested military pension constituted a community property asset (see In re Marriage of Fithian (1974) 10 Cal.3d 592, 596 [111 Cal. Rptr. 369, 517 P.2d 449], cert. den., 419 U.S. 825 [42 L.Ed.2d 48, 95 S.Ct. 41], rehg. den., 419 U.S. 1060 [42 L.Ed.2d 657, 95 S.Ct. 644], and authorities cited therein); it was equally well settled that community property not dealt with or disposed of in the dissolution action was considered to be the joint property of the spouses, divisible in a subse-
Gibson, Dunn & Crutcher v. Superior Court, supra, 94 Cal.App.3d 347, is a case like that the court in Held v. Arant thought it had. The client guaranteed repayment of a bank loan to Virtue Bros. Mfg. Co., Ltd., (VBM), and VBM purportedly conveyed to the bank security interests in personal property. VBM subsequently defaulted; the client paid off the bank pursuant to its guarantee; and the bank assigned to the client the security interests it had received from VBM. When the client attempted to enforce the security interests, VBM filed a petition in bankruptcy, and in the bankruptcy proceedings other creditors of VBM challenged the validity of the security interests. Represented by a second law firm the client entered into a settlement with the other creditors and subsequently filed suit against the attorneys who had represented it in the loan transaction, alleging they were negligent in failing to see thаt enforcible security interests were created and in fail-
The court correctly acknowledged that the case before it was factually distinguishable frоm the Goodman case stating: ”Goodman‘s action was based upon an alleged duty of an attorney to a person not his client. The cross-complaints of Bank3 and [the first attorneys] are based upon the duty of [the second law firm] to its own client . . . [They] concede that [the second law firm] owed no duty to them. They ask only that [the second law firm] contribute to any damages awarded to their client . . . to the extent that it . . . negligently harmed [the client].” (94 Cal.App.3d at p. 353.) Nevertheless, the court concluded that the second law firm could not be held liable, employing reasoning identical to that of the court in Held v. Arant, supra, 67 Cal.App.3d 748: “What was said in Held v. Arant is quite as applicable to indemnification under the comparative negligence standards. Since American Motorcycle has greatly expanded the opportunities for defendants in negligence cases tо seek indemnification from parties whom the plaintiff did not choose to sue, the hazard to the attorney-client relationship could now be vastly greater than it was under the substantive law previously in effect.
“Bank and [the first attorneys] argue that permitting their cross-complaint will not impinge upon a lawyer‘s duty to his client because the cross-complaints do not involve any expansion of the lawyer‘s duty. They argue that they are doing nothing more than seeking to protect and enforce the lawyer‘s duty to his client. In short, if lawyer II fully performs his duty to his client, he need fear no cross-complaint for comparative indemnification.
“This argument misses the vice of the lawyer I versus lawyer II cross-complaint. The problem is not that lawyer II may be found liable to his
“The parties have mooted [sic] the question whether in a factual setting of the kind presented here lawyer II would or would not be motivated to litigate rather than settle his client‘s claim in order to minimize his exposure to a cross-complaint. We think the problem is more complex than that.
“A client seeking to extricate himself from a situation caused by the negligence of lawyer I may find his options limited both by legal constraints and practical considerations. The client‘s perception of his own best interests, after obtaining sound legal advice, may dictate a course which lawyer I may fairly characterize as ‘unreasonable and disproportionate to the risk involved.’ What effect a settlement so motivated would have on the client‘s claim against lawyer I is not before us. What is pertinent here is the effect upon the relationship between lawyer II and the client when the client‘s alternatives are under consideration. Lawyer II should not be required to face a potential conflict between the course which is in his client‘s best interest and the course which would minimize his exposure to the cross-complaint of lawyer I.” (Gibson, Dunn & Crutcher v. Superior Court, supra, 94 Cal.App.3d at pp. 355-356; italics added.)
Thus, in Gibson, Dunn & Crutcher v. Superior Court as in Held v. Arant, the second attorneys were called upon to advise the client as to a choice between alternative remedies: whether to settle with thе other creditors and sue the former attorneys for the loss or to litigate with the other creditors. The choice required the exercise of the attorneys’ professional judgment; success in litigation against the other creditors was far from certain. The “undivided loyalty to client” rationale of Held v. Arant was therefore applicable. As already pointed out, in the case at bench, by contrast, there was no such choice to be made. The client‘s potential loss was increasing each month; she had the duty to mitigate her damages; and conceivably the first attorney might be found not to have been negligent or might be judgment proof. The client‘s interests required as a matter of law that a proceeding be commenced against the former spouse to have the pension divided.4
Commercial Standard Title Co. v. Superior Court, supra, 92 Cal.App.3d 934, a split decision of the First Division of this court is much like the Rowell case and is similarly distinguishable. In Commercial Standard the plaintiff filed suit against two title insurance companies for negligently or fraudulently issuing a defective lot book guarantee upon which the plaintiff had relied in entering into a transаction involving the exchange of real property. The defendant title insurance companies filed a cross-complaint against the plaintiff‘s attorney asserting that the attorney‘s negligence in advising the plaintiff to rely upon the lot book guarantee, which purported to limit liability of the insurers to $100, caused or contributed to the plaintiff‘s injury. A majority of the court upheld the trial court‘s dismissal of the cross-complaint, apparently on at least three separate bases. First, it was apparently concluded that the defendant title companies and the cross-defendant attorney were not really joint tortfeasors within the contemplation of
In respect to the latter basis, however, although the majority did say that “[t]he lawyer‘s duty in re full and frank discussion and disclosure could not help but be affected by this overhanging threat of a lawsuit brought by a person about whom the lawyer is advising his client,” it gave to the asserted interference with the attorney-client relationship a new twist. It said: “If suit were to be permitted against the current acting attorney for plaintiff, such rule would effectively allow a defendant to require plaintiff‘s now-sued attorney for multiple reasons to recuse himself.... There is inherent in proposed extension of the [American Motorcycle] rule the seeds of irresponsible cross-lawsuits motivated by naught but spite and a desire to spread confusion, dissention [sic] in the opponent‘s camp.” (92 Cal.App.3d at p. 945.)
As in Rowell, the majority in the Commercial Standard case did not disclose the analysis by which they concluded that allowing the cross-complaint in that case would affect the “lawyer‘s duty in re full and frank discussion and disclosure.” The dissent of Acting Presiding Justice Cologne, even if unpersuasive in the Commercial Standard case itself, correctly evaluated Held v. Arant, supra, 67 Cal.App.3d 748, and indicated the proper analytical approach in this kind of case. It stated: “The court [in Held v. Arant, supra] reasoned that allowing such an indemnity action to be filed would be detrimental to the attorney-client relationship. When an attorney knows he may have to indemnify an adversary if he pursues one course for his client and that he will not have to indemnify anyone if he pursues a different course, his own self-interest interferes with his objectivity in making decisions for his client. To avoid this possibility, the court would not allow the indemnity action to be brought in that particular situation.
“The present case, however, presents no considerations of interference with the attorney-client relationship. Assuming there is proof of the al-
The observation by the majority in Commercial Standard that the filing of a cross-complaint against the plaintiff‘s attorney would result in the attorney‘s having to discontinue representing the plaintiff in the action, even if true, cannot be a controlling consideration. The right of a party to be represented by the attorney of choice and the ability of the attorney to continue representing the client are, of course, very important, but they are required to give way in various circumstances and may not be urged as a complete shield to the attorney‘s being responsible for the consequences of his negligent conduct. (See Gibson, Dunn & Crutcher v. Superior Court, supra, 94 Cal.App.3d at p. 352; see also
The case at bench is a perfect illustration. Had the problem of cross-defendant‘s alleged negligence not come to light as a result of the cross-complaint, it probably would have in discovery with respect to cross-complainant‘s defenses to the main action and certainly would have during trial. Two of cross-complainant‘s prime defenses at trial must of necessity be that plaintiff failed to mitigate her damages by failing to file an action for division of the retirement benefits and that a substantial part of the damages claimed were not proximately caused by cross-complainant‘s negligence but the negligence of cross-defendant in not advising the institution of such a suit. We are not entirely convinced that in all cases the filing of a cross-complaint against the plaintiff‘s attorney will necessitate that he discontinue representing the plaintiff in
We have no quarrel with disallowing a cross-complaint against the plaintiff‘s attorney when the negligence alleged is the unreasonable choice of alternative rеmedies of uncertain efficacy and requiring the exercise of professional judgment. In the case at bench, however, the institution of a suit against plaintiff‘s former spouse for division of the retirement benefits was necessary as a matter of law to serve the client‘s best interests whether or not suit was also filed against her former attorney for negligence in failing to have the retirement benefits disposed of in the dissolution proceeding. No exercise of judgment in choosing between alternative remedies was involved, and the possibility of a cross-complaint for proportional indemnity in the case at bench could not have affected the exercise of any such judgment.
The judgment of dismissal is reversed.
McDaniel, J., concurred.
MORRIS, J.—I respectfully dissent.
Recent cases have uniformly held that an attorney whо is sued by a former client for malpractice may not cross-complain against the client‘s successor attorney who is retained to extricate the client from the situation created by the first attorney.
There are sound policy reasons supporting the rule that the first attorney has no right of indemnity from the second. 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 (Held v. Arant (1977) 67 Cal.App.3d 748, 752 [134 Cal.Rptr. 422]); (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 (Gibson, Dunn & Crutcher v. Superior Court (1979) 94 Cal.
The majority opinion casually dismisses these policy considerations as having no applicability to the circumstances of this case because they are factually distinguishable from the cases enunciating the rule. Certainly such factual differences exist, just as the cases cited are factually distinguishable one from another. However, the differences do not affect the policy considerations articulated in the cases. The threat to the attorney-client relationship posed by the filing of cross-complaints against plaintiffs’ counsel can be avoided only if the rule is applied to preclude the filing of all such cross-complaints.
The selective allowance or disallowance of cross-complaints based upon whether “the negligence alleged is the unreasonable choice of alternative remedies of uncertain efficacy and requiring the exercise of professional judgment” will result in emasculation of the rule. As long as a cross-complaint may be allowed if the court determines that the negligence alleged constitutes negligence as a matter of law, the danger to the attorney-client relationship envisioned by the courts in Goodman, Held, Gibson, Dunn & Crutcher and Commercial Standard remains.
In my opinion the policy reasоns underlying the rule stated in the above cases are applicable in this case.
Although my disagreement with the majority is based upon the public policy heretofore stated, I also note that the “general rule” allowing proportionate indemnity, relied on by the majority, was developed in a different factual context than that involved in this case.
As the court noted in Held v. Arant, supra, “Distinctions between the situation in Herrero and Niles” as well as peculiarities of the attorney-client relationship dictate that the Herrero-Niles rule not be extended to the situation involved in Held v. Arant. (Held v. Arant, supra, 67
The distinctions between the situation presented in the case at bench and the Herrero-Niles situation are even greater, and the policy reasons favoring the extension of the rule of proportionate indemnity correspondingly weaker. As the court noted in Held v. Arant, both Herrero and Niles involved factual situations falling within section 457 of the Restatement. Section 457 refers to additional harm resulting from efforts of a second tortfeasor to mitigate harm caused by negligence of the first. In Herrero and Niles the negligence of physicians and hospitals in providing treatment for injuries inflicted by the negligence of the first tortfeasor was alleged to have caused additional harm. In Held v. Arant the court noted that its own situation was сovered by section 447 of the Restatement, which applies where the initial actor‘s conduct is negligent because there is a realizable likelihood that a third person will act in the negligent manner in which a particular person acts. The first attorney in Arant alleged that the second attorney was negligent in settling defensible claims which were asserted against the client because of the first attorney‘s alleged negligence.
In the present matter the negligence alleged against the first attorney is covered by section 439 of the Restatement, i.e., where the original tortfeasor‘s negligent conduct actively and continuously operates to bring about harm to another even though a third person‘s negligence may operate simultaneously. Here the alleged conduct of the first attorney was negligent at the time of performance and was still actively and continuously operating at the time the second attorney entered the case. The damage to the client from that initial conduct was not dependent upon the actions of the second attorney (the § 447 situation) nor was it exacerbated by the second attorney (the § 457 situation).
Assuming, as the majority does, that Attorney Morton negligently failed to file an action against the client‘s former spouse, that negligence did not increase the harm naturally flowing from the initial negligence of Attorney Parker. Morton‘s alleged negligence was simply
Since the second attorney owed no duty to attorney number one, no public policy reason compels granting attorney number one a right of indemnity against attorney number two in this factual situation.
I would affirm the judgment of the trial court dismissing the cross-complaint.