Case Name: WILLIAM JEROME POLLACK, Plaintiff and Appellant, v. ROBERT C. LYTLE, Defendant and Respondent
Court: Court of Appeal of the State of California
Jurisdiction: California
Decision Date: 1981-06-25
Citations: 120 Cal. App. 3d 931
Docket Number: Civ. No. 58089
Parties: WILLIAM JEROME POLLACK, Plaintiff and Appellant, v. ROBERT C. LYTLE, Defendant and Respondent.
Judges: 
Reporter: California Appellate Reports, Third Series
Volume: 120
Pages: 931–949

Head Matter:
[Civ. No. 58089.
Second Dist., Div. One.
June 25, 1981.]
WILLIAM JEROME POLLACK, Plaintiff and Appellant, v. ROBERT C. LYTLE, Defendant and Respondent.
Counsel
William Jerome Pollack, in pro. per., Fred B. Belanger, De Goff & Sherman and Victoria J. De Goff for Plaintiff and Appellant.
Haight, Dickson, Brown & Bonesteel and Roy G. Weatherup for Defendant and Respondent.

Opinion:
Opinion
SPENCER, P. J.—
Introduction
Plaintiff William Jerome Pollack appeals from an order of dismissal as to defendant Robert C. Lytle which was entered after the trial court sustained without leave to amend defendant's demurrer to the first (fraud), second (reasonable value of services), and fifth (declaratory relief) causes of action of plaintiff's third amended complaint. The order sustaining the demurrers recited that plaintiff's fourth cause of action, seeking indemnity, "is off calendar as plaintiff orally dismisses it without prejudice."
Statement of Facts
During January 1974, plaintiff and Sidney B. Daniels (Daniels) entered into a written agreement in which plaintiff, a licensed California attorney, undertook to prepare and prosecute a medical malpractice action against Kaiser Foundation Hospitals and Dr. David Eder with respect to the negligent causation of Daniels' quadraplegia. Plaintiff agreed to advance all necessary expenses in return for a 50 percent contingency fee and reimbursement for expense advances made. Reimbursement was not contingent upon the recovery of damages.
Pursuant to his agreement with Daniels, plaintiff filed an action in the Los Angeles County Superior Court on February 21, 1974. Successful prosecution of the Daniels' action required the expert testimony of at least one competent neurological surgeon. Due to a purported malpractice crisis, plaintiff became aware that it would be extremely difficult to secure a neurological surgeon who would testify on Daniels' behalf.
In approximately May 1976, seven months prior to the scheduled trial of the Daniels' action, defendant initiated discussions with plaintiff's office regarding the availability of the necessary expert witness. Pursuant to a preconceived plan to harm plaintiff, defendant falsely represented that he was a close personal friend of a board-certified neurosurgeon, Dr. Henry P. Dodge; that he was employed by a law firm specializing in medical malpractice cases; and that he was experienced in the preparation and trial of such cases. Thereafter, defendant recommended that he arrange for Dr. Dodge to evaluate Daniels' medical records and examine Daniels after which defendant would discuss with Dr. Dodge the relevant facts with respect to the medical care provided Daniels and the cause of the quadraplegia in order to obtain his expert opinion.
Subsequently, defendant falsely represented to plaintiff that it was Dr. Dodge's unequivocal expert opinion that Kaiser Foundation Hospitals had violated standard hospital practice and Dr. Eder had violated standard surgical practice, each of which violations resulted in Daniels' quadraplegia. In addition, defendant falsely represented that Dr. Dodge would be willing to testify on behalf of Daniels, contrary to his ordinary preference, only because of his friendship with defendant and only in the event that defendant served as Daniels' trial counsel.
Defendant promised plaintiff that if associated as trial counsel on the Daniels' matter, he would advise plaintiff in a timely manner if it became necessary to secure additional expert witnesses, would attempt to secure additional experts in the event of such necessity, would report to plaintiff fully and accurately the progress of the trial in order to permit plaintiff to form a reasoned judgment as to whether and when Daniels should be advised to accept an offer or settle the case, and to notify plaintiff and Daniels immediately of the precise conditions and terms of any settlement offer to allow plaintiff's reasoned consideration of the offer and meaningful explanation thereof to Daniels. These promises were false and defendant made the foregoing representations and promises with full knowledge of their falsity and for the purpose of inducing plaintiff to associate him as trial counsel in the Daniels' matter.
In reliance on defendant's false representations and promises, plaintiff did engage and associate defendant as attorney of record and agreed that he was to receive one-third of plaintiff's contingent fee while plaintiff would continue to6 advance funds for all necessary expenses. Thereafter, defendant repeatedly assured plaintiff that Dr. Dodge remained of the opinion that Kaiser Foundation Hospitals' and Dr. Eder's violations of standard professional practice were the proximate cause of Daniels' quadraplegia and would so testify. On approximately November 22, 1976, defendant represented to plaintiff that Dr. Dodge had testified "beautifully" and "gone all the way for Daniels" during the deposition given on November 15. In truth, Dr. Dodge had not been questioned at all by either defendant or by opposing counsel present at the deposition with respect to the issue of proximate cause. Had plaintiff known the falsity of defendant's representations and promises and the true state of facts, he would neither have associated defendant as counsel nor relied on the sufficiency of Dr. Dodge's expert opinion. Rather, he would have obtained other experts and made alternative arrangements for adequate preparation, assessment and trial of Daniels' case.
Plaintiff repeatedly requested that defendant submit a written summary of the facts, the questions based on those facts which were submitted to Dr. Dodge, and Dr. Dodge's responses. On each occasion, defendant promised to comply promptly, but never did so. In response to plaintiff's requests, defendant repeatedly agreed to perform his promises, but failed to do so. Unbeknown to plaintiff, defendant never intended to perform his promises and, in fact, from the outset intended to gain exclusive control of the Daniels' matter by causing a rift in plaintiff's relationship with Daniels, thereby inducing Daniels to discharge plaintiff.
Approximately December 1, 1976, defense counsel in the underlying case offered on behalf of Kaiser Foundation Hospitals and Dr. Eder to settle for $250,000. In continuing reliance on defendant's false representations, particularly with respect to Dr. Dodge's anticipated testimony, plaintiff formed the opinion that it would be preferable to await the empaneling of a jury in the hope of securing a larger settlement offer. Furthermore, defendant recommended that the offer be rejected. Accordingly, Daniels was so advised and the offer was rejected.
At some time during December 1976, during the empanelling of the jury, defendant succeeded in inducing Daniels, by improper means, to discharge plaintiff. Thereafter, neither defendant nor Daniels communi cated with plaintiff as to the status of the case. As a result, plaintiff was not informed of a renewal of the $250,000 settlement offer on approximately December 13, 1976, or of the condition that it required prompt acceptance. Had plaintiff known of the offer, he would have recommended that Daniels accept it immediately and Daniels would have accepted it immediately. However, defendant allowed the offer to lapse.
During the course of the trial, defendant failed to question Dr. Eder as to whether his treatment conformed with standard neurosurgical practice. Moreover, Dr. Dodge did not testify that negligence on the part of the hospital or Dr. Eder was the proximate cause of Daniels' quadraplegia. As a direct result of defendant's failure to elicit essential evidence from Dr. Eder's and Dr. Dodge's testimony, there was no substantial evidence that Dr. Eder was negligent or that negligence on the part of the hospital was the proximate cause of Daniels' quadraplegia and the jury returned a verdict in favor of the hospital and Dr. Eder.
Thereafter, defendant induced Daniels to file a malpractice action against plaintiff, seeking $1 million in general damages and $2 million in punitive damages.
Contentions
Plaintiff contends that the trial court erred in sustaining defendant's demurrers to the first and third amended complaints which include causes of action for breach of fiduciary duty, fraud, breach of contract, legal malpractice, and declaratory relief without leave to amend.
Discussion
On appeal, the plaintiff bears the burden of demonstrating either that a demurrer was sustained erroneously or that sustaining a demurrer without leave to amend was an abuse of discretion. (Stanson v. Brown (1975) 49 Cal.App.3d 812, 814 [122 Cal.Rptr. 862].) A trial court's ruling sustaining a demurrer is deemed erroneous where a plaintiff has stated a cause of action under any possible legal theory. (See Barquis v. Merchants Collection Assn. (1972) 7 Cal. 3d 94, 103 [101 Cal.Rptr. 745, 496 P.2d 817]; Porten v. University of San Francisco (1976) 64 Cal.App.3d 825, 833 [134 Cal.Rptr. 839].) In assessing the sufficiency of a demurrer, all material facts pleaded in the complaint and those which arise by reasonable implication are deemed true. (See Buckaloo v. Johnson (1975) 14 Cal.3d 815, 828 [122 Cal.Rptr. 745, 537 P.2d 865]; Glaire v. La Lanne-Paris Health Spa, Inc., supra, 12 Cal.3d 915, 918.)
In the instant case, plaintiff has alleged sufficient facts to establish that defendant acted as his agent in the prosecution of the Daniels' matter. It is well settled that a contract of agency may be implied from the conduct of the parties. (Bergtholdt v. Porter Bros. Co. (1896) 114 Cal. 681, 688 [46 P. 738]; cf. Englert v. Ivac Corp. (1979) 92 Cal.App.3d 178, 189-190 [154 Cal.Rptr. 804].) The allegations that plaintiff engaged defendant to conduct trial preparation and to try the malpractice action; that defendant promised to keep plaintiff informed of expert witness availability and adequacy as well as the terms and advisability of any settlement offer; that plaintiff relied on defendant's representations and recommendations in advising Daniels; and that plaintiff repeatedly requested written reports from defendant raise a clear inference of agency.
An agent is a fiduciary with the same obligations of diligence and faithful service as a trustee. (Civ. Code, § 2322, subd. 3; Cutler v. State Bar (1969) 71 Cal.2d 241, 251 [78 Cal.Rptr. 172, 455 P.2d 108].) Accordingly, an agent must make the fullest disclosure of all material facts which might affect his principal's decision-making. (Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 782 [157 Cal.Rptr. 392, 598 P.2d 45]; Smith v. Zak (1971) 20 Cal.App.3d 785, 793 [98 Cal.Rptr. 242].) In addition, an agent is bound to use reasonable care, skill and diligence in the performance of the object of the agency. (Lab. Code, § 2858, 2859; Stiefel v. McKee (1969) 1 Cal.App.3d 263, 266 [81 Cal.Rptr. 565].) Finally, an agent is under a duty not to compete with his principal on matters connected with the agency. (Realty Co. of America v. Burton (1958) 160 Cal.App.2d 178, 191 [325 P.2d 171]; Rest.2d Agency, § 393.)
Plaintiff has alleged breaches of all of the foregoing duties. He has alleged that defendant, who gained employment as cocounsel by misrepresenting that he was a skillful and experienced attorney in the area of medical malpractice, failed to elicit evidence of Dr. Eder's negligence and failed to develop the requisite evidence of causation. By any reasonable interpretation, this amounts to a demonstrated lack of even minimal legal knowledge and skill or a failure to exercise reasonable skill and diligence. He further alleges that defendant misrepresented or failed to disclose material facts pertinent to the prosecution of the Daniels' matter. Finally, plaintiff alleges that defendant acted purposefully to cause a rift between plaintiff and Daniels and to induce Daniels to discharge plaintiff. There could be no more direct competition for the subject matter of the agency.
The breach of a fiduciary duty is tortious in nature. (See Brown v. Critchfield (1980) 100 Cal.App.3d 858, 871 [161 Cal.Rptr. 342].) Civil Code section 3333 establishes the measure of damages applicable to tortious conduct: "[F]or the breach of an obligation not arising from contract, the measure of damages . is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not." Accordingly, a fiduciary in breach must give the injured party the benefit of his bargain, placing him (insofar as possible) in the same position he would have enjoyed had the fiduciary performed his duties. (See Pepitone v. Russo (1976) 64 Cal.App.3d 685, 689 [134 Cal.Rptr. 709].)
It is beyond question that plaintiff has alleged detriment proximately resulting from defendant's breaches of fiduciary duty. He has alleged that as a direct result of defendant's failure to exercise reasonable care, skill and diligence, the jury found against Daniels. He has further alleged that defendant's failure to disclose material facts with respect to Dr. Dodge's prospective testimony and plaintiff's reliance on defendant's false representations as to the expected nature of that testimony resulted in his advising Daniels to reject the settlement offer of $250,000 and, but for defendant's withholding information as to the second offer, plaintiff immediately would have recommended acceptance and Daniels would have accepted. Finally, plaintiff has alleged that defendant, wrongfully induced Daniels to lose faith and discharge him. As a result, plaintiff has suffered professional embarrassment; impaired reputation; Daniels' loss of professional confidence in him; the resulting exposure to malpractice liability with the attendant expenses and loss of business which may be attributable to the necessity of defending against Daniels' suit seeking $1 million in compensatory damages and $2 million in exemplary damages; and the loss of one-third of the $250,000 settlement offer which he alleges Daniels would have accepted. While plaintiff may have a difficult time proving this last element of damage, he has adequately alleged facts to show its existence.
It is axiomatic that once the cause and existence of damages have been established, recovery will not be denied because the damages are difficult of ascertainment. (Horn v. General Motors Corp. (1976) 17 Cal.3d 359, 369 [131 Cal.Rptr. 78, 551 P.2d 398].) Thus plaintiff has done all that normally would be required in order to state a cause of action for breach of fiduciary duty.
We are not unmindful of the growing body of law which holds, as a matter of public policy, that a successor attorney owes no duty to his predecessor. (See, e.g., Gibson, Dunn & Crutcher v. Superior Court (1979) 94 Cal.App.3d 347 [156 Cal.Rptr. 326]; Rowell v. Transpacific Life Ins. Co. (1979) 94 Cal.App.3d 818 [156 Cal.Rptr. 679]; Commercial Standard Title Co. v. Superior Court (1979) 92 Cal.App.3d 934 [155 Cal.Rptr. 393]; Held v. Arant (1977) 67 Cal.App.3d 748 [134 Cal.Rptr. 422].) The roles of successor and associate attorneys are decidedly different. In the fulfillment of his duty of undivided loyalty to the client, a successor attorney must view the client's situation as of the moment when he is engaged. Hence public policy requires that he not be subjected to any possible conflict of interest which may deter him from determining the best interests of the client by the possibility that he may be held liable for his acts by his predecessor. (See Gibson, Dunn & Crutcher v. Superior Court, supra, 94 Cal.App.3d 347, 356.) In contrast, an associate attorney acting as the agent of the principal attorney replaces no one, but acts at the behest of his principal.
Admittedly, he remains bound to act in the best interests of the client, but this creates no unavoidable conflict. Should he find that the principal attorney's actions to date pose a potential danger to the client's best interests, the agent-associate is dutybound to make the fullest disclosure of these material facts to the principal attorney. Since the principal attorney and the associate attorney each owes the same duty of loyalty to the client, the disclosure of information which reveals a potential danger to the client's interests will normally prompt the principal attorney to act in protection of those interests. However, should the principal attorney choose to ignore the client's interests, the agent-associate remains free to terminate the agency relationship and withdraw as associate counsel. Furthermore, the associate attorney's duty to exercise reasonable professional care, skill and diligence on behalf of the client is precisely equivalent to the duty he owes his principal in dealing with the subject matter of the agency. Accordingly, public policy considerations do not mandate that an associate attorney remain free from liability for a breach of the duty owed to his principal. To the contrary, whether associate counsel is brought in from outside the principal attorney's office or is the junior associate in a firm of attorneys, the problems inherent in allowing an agent-associate to act in conflict with or contradiction of the principal attorney are manifest. Holding that an associate attorney owes no duty to anyone but the client would create the potential for a battle of wills over promotion of the client's interests, a situation which could well rebound to the client's detriment, for the determination of a client's best interests is at best a subjective value judgment upon which reasonable minds could differ. Moreover, in view of the principal attorney's liability for the acts of subordinate counsel under the doctrine of respondeat superior, it would be manifestly unfair to relieve an agent-associate of accountability to his principal.
An application of agency principles to the relationship of an associate attorney with the principal attorney would entitle plaintiff to indemnification from defendant as to liability resulting from his tortious conduct. The right to indemnity is implied from the relationship of the parties. (Davidson v. Welch (1969) 270 Cal.App.2d 220, 226 [75 Cal.Rptr. 676]; Lewis Avenue Parent Teachers' Assn. v. Hussey (1967) 250 Cal.App.2d 232, 236 [58 Cal.Rptr. 499].) Absent the public policy considerations found in the relationship of predecessor-successor attorneys, there is no reason to deny a principal attorney the benefit of indemnity. Hence plaintiff adequately stated a claim for declaratory relief as to his right to indemnity.
In addition to successfully stating a cause of action for breach of fiduciary duty, plaintiff has stated a cause of action for fraud. The trial court found that plaintiff had adequately alleged that defendant made representations, knowing them to be false, for the purpose of inducing plaintiff's reliance thereon and that plaintiff reasonably relied on defendant's false representations. This is clearly the case. However, the trial court further found that plaintiff had failed to allege damage in that he could not demonstrate recoverable pecuniary loss.
It is true that a fraud action commonly seeks to recover pecuniary loss resulting from the invasion of a property interest. Yet, as noted in O'Hara v. Western Seven Trees Corp. (1977) 75 Cal.App.3d 798, 805 [142 Cal.Rptr. 487]: "'There is no essential reason to prevent a deceit action from being maintained, for intentional misstatements at least, where other types of interests are invaded; .[Citation omit ted.]" Civil Code section 1709 governs the damages recoverable for fraud: "One who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers." Clearly, section 1709 does not limit recovery to pecuniary loss.
Plaintiff alleges that, in reliance on defendant's false representations as to his professional expertise and Dr. Dodge's expert opinion as to negligence and proximate cause, he forewent the opportunity (a) to secure any additional expert witness or (b) to urge upon Daniels acceptance of the $250,000 settlement offer in view of the lack of evidence of proximate cause which offer Daniels would have accepted. Hence the underlying matter went to trial with plaintiff unaware of crucial defects in proof. As a result, a verdict was returned in favor of the defendants in the underlying case and plaintiff was exposed to malpractice liability. Detriment to plaintiff is clearly inferable from the foregoing. He is obliged to defend a malpractice action whereby he most assuredly will incur expenses, lose time from his practice, suffer inconvenience, face professional embarrassment and the impairment of his professional reputation. In addition, he suffered the loss of 1/3 of the $250,000 settlement offer which Daniels would have accepted. Under Civil Code section 1709, that is sufficient damage to support a cause of action for fraud.
Although plaintiff has adequately stated causes of action for breach of fiduciary duty, fraud, and declaratory relief, it is clear that the trial court was correct in determining that plaintiff is unable to state causes of action for breach of contract and legal malpractice. When a contract between attorneys involves a contingent fee, it is based on a mere expectancy of pecuniary gain with no measurable certainty of realization. Hence recovery may be sought only upon occurrence of the contingency. (Fracasse v. Brent (1972) 6 Cal.3d 784, 792 [100 Cal.Rptr. 385, 494 P.2d 9].) It follows that plaintiff is unable to allege that defendant's breach of contract proximately caused any measurable injury in that the contingency failed to materialize. As to legal malpractice, any duty running from defendant to plaintiff is either contractual in nature or stems from the principal-agent fiduciary relationship. A breach of the former is disposed of by plaintiff's inability to state a cause of action for breach of contract and a breach of the latter is subsumed in plaintiff's cause of action for breach of fiduciary duty.
The judgment is reversed and remanded for further proceedings consistent with this opinion.
Lillie, J., concurred.
While minute orders are generally nonappealable, an order of dismissal as to a particular defendant following sustaining of demurrer without leave to amend operates as a final judgment. (Diaz v. United California Bank (1977) 71 Cal.App.3d 161, 166 [139 Cal.Rptr. 314].)
In assessing whether a cause of action is stated as against a general demurrer, all material facts properly pleaded on the face of the complaint and those which reasonably arise by implication must be accepted as true. (Glaire v. La Lanne-Paris Health Spa, Inc. (1974) 12 Cal.3d 915, 918 [117 Cal.Rptr. 541, 528 P.2d 357].)