Gackstetter v. Frawley

Opinion

I. INTRODUCTION

Attorneys settled a malpractice and negligent misrepresentation action against them by trust beneficiaries and obtained a good faith settlement determination order pursuant to Code of Civil Procedure section 877.6.^[1] In a separate probate proceeding, the trust beneficiaries sought relief against the trustee of those trusts for certain derelictions of his trust duties. This dispute was settled. In the case before us, the attorneys were sued by the trustee, whom the attorneys had represented, for various torts related to the services provided the trustee in connection with the trusts. The trial court denied the attorneys’ summary judgment and summary adjudication motions to bar claims based on the good faith determination order.

The attorneys cross-claimed against the trustee for equitable indemnity for monies paid by the attorneys to settle the beneficiaries’ claims against them. The jury found for the trustee against the attorneys, but found that because the trustee was 50 percent at fault and the attorneys were entitled to equitable indemnification, the judgment should be reduced accordingly. The trial court refused to modify the jury’s findings, and a judgment in favor of the trustee for damages was entered.

In the published portion of the opinion, we hold that the attorneys can appeal from the denial of the summary judgment and summary adjudication motions and that, because of the good faith determination, the trial court erred in not granting summary judgment in favor of the attorneys. We conclude that a good faith determination may bar the claims of an unnamed party; the trustee and the attorneys were joint tortfeasors; the trustee’s claims were either for indemnification or in effect for indemnification; and therefore, under section 877.6, the good faith settlement barred the trustee’s claims. Accordingly, we reverse the judgment on the trustee’s first amended complaint.

A

. General Allegations and Proceedings

In 1987, defendant, Attorney Patrick Frawley (Frawley),^[2] prepared documents establishing two trusts for Agnes Gordon. One trust, the Agnes Gordon Trust (Sisters’ Trust), was to benefit Ms. Gordon’s sisters (Sisters) and to include a house (the Marlin Place Property) so that one of the Sisters would •always have a home. The other trust, the Billy and Agnes Gordon Trust (Charitable Trust), was a residual charitable trust created to establish a program to train dogs to assist hearing-impaired persons. After the creation of the Sisters’ Trust, Agnes Gordon allegedly revoked her will. That will provided for distributions comparable to those provided for by the trusts. Plaintiff Henry C. Gackstetter (Gackstetter), a close friend of Agnes Gordon and her late husband, was the trustee for both trusts. After Agnes Gordon died, Frawley represented her executor and niece, Patricia Murphy (Murphy), in the probate of the estate. According to Gackstetter, Frawley provided legal services to Gackstetter as trustee of the trusts and individually.

By mistake, before Agnes Gordon’s death, Frawley had transferred the Marlin Place Property into the Charitable Trust instead of the Sisters’ Trust. One of the Sisters continued to live in the house, and Gackstetter used funds in the Charitable Trust to maintain the residence. Gackstetter claimed to have made personal loans to the Charitable Trust and to have repaid himself out of trust funds. Gackstetter also mortgaged the Marlin Place Property to obtain $104,000 for himself. He said that money, or some of it, was later used to repay his loans. As trustee for the trusts, Gackstetter failed to prepare accountings, tax returns, and other necessary documents and otherwise failed to maintain proper records. It was necessary to open a probate proceeding for the Agnes Gordon estate because the Sisters’ Trust was not funded, and assets had to be redistributed in view of Frawley’s error. Various proceedings and actions ensued.

1. Sisters’ Petition Against Gackstetter

In the Agnes Gordon probate proceeding, on May 14, 1998, the Sisters filed a petition (Murphy Petition) against Gackstetter alleging a breach

2. Sisters’ Action Against Frawley

On July 23, 1999, the Sisters sued Patrick Frawley and Doe defendants for malpractice and negligent misrepresentation in connection with placing the Marlin Place Property in the wrong trust and failing to disclose this error. The Sisters also alleged in this action that Frawley represented Gackstetter as trustee, that Gackstetter made misrepresentations regarding the property and took money by placing a mortgage on it, and that claims against Gackstetter had been made by the Murphy Petition. The parties stipulated for the consolidation of discovery in the Murphy Petition proceeding against Gackstetter and in the Sisters’ action against Frawley. On July 20, 2000, after the instant case by Gackstetter against Frawley had been filed, Frawley settled the Sister’s action against him for $104,000, the amount of the encumbrance Gackstetter had placed on the Marlin Place Property.^[4] After giving notice to Gackstetter of an application for good faith settlement,

3. Gackstetter’s Action Against Frawley—The Instant Action

On May 5, 2000, Gackstetter, on behalf of himself, sued Frawley in the instant action for improperly advising Gackstetter of his duties and concealing the improper transfer of the Marlin Place Property. The Attorney General intervened in this case, making claims against Frawley that he “aided and abetted Gackstetter in breaching his trust.” Frawley settled the Attorney General’s claims.

Specifically, in his first amended complaint against Frawley, Gackstetter alleged Frawley concealed the incorrect conveyance of the Marlin Place Property, improperly advised him as to his duties and obligations as trustee, and committed other acts resulting in improper distributions that adversely affected the funding of the Charitable Trust. Gackstetter alleged that as a result of Frawley’s actions, the trusts were damaged and that he was sued by the Sisters and the Attorney General in the Murphy Petition proceeding. Gackstetter explicitly sought indemnity in connection with his settlement with the Sisters arising out of the Murphy Petition against him, and he also claimed for breach of fiduciary duty, professional negligence, misrepresentation, and breach of the attorney-client retainer agreement.

Frawley asserted as an affirmative defense the bar of section 877.6. Frawley had demurred, and later moved for summary judgment and summary adjudication, on the basis of the good faith settlement, but the trial court rejected that contention.^[5] Frawley also cross-claimed for indemnity for the amount he paid to the Sisters in settling their action against him.

A jury found Patrick Frawley liable for professional negligence, breach of fiduciary duty, fraud, and breach of contract and assessed damages in the amount of $289,000 for economic damages and $3,000 for emotional distress. The jury found that Gackstetter was responsible, in part, for his own damages, requiring a 10 percent reduction in the economic damages. The jury

Gackstetter filed a posttrial motion for directed verdict on Frawley’s cross-complaint as it pertained to contributory negligence and indemnity. The trial court denied the motion and entered judgment on special verdicts against Frawley for $211,000. The trial court declined to award Gackstetter any attorney fees. Gackstetter had claimed attorney fees in the amount of $521,612.50 based on a special verdict finding that Frawley had breached the retainer fee agreement with Gackstetter. That agreement contained an attorney fees clause.

Frawley appeals, claiming that the good faith settlement in the Sisters’ action against him barred Gackstetter’s recovery. He asserts that he can appeal from the denial of his motions for summary judgment and summary adjudication, by which he invoked the good faith settlement. He contends that all of Gackstetter’s causes of action were, in effect, disguised indemnity claims and therefore barred. He also argues that there could be no contract claim.

Gackstetter cross-appeals, asserting that Frawley is not entitled to the indemnity that resulted in the reduction of damages by the jury based on a percentage of the amount Frawley paid in settlement of his case with the sisters. Gackstetter contends that there can be no contributory negligence in connection with an intentional tort, that Frawley is not entitled to equitable indemnity, and that Gackstetter is entitled to attorney fees because he prevailed in a claim based on a contract that included an attorney fees clause.^[6]

B. Specific Allegations, Statements of Undisputed Facts, and Supporting Evidence in the Instant Action

1. Gackstetter’s Allegations

In the general allegations incorporated into all of the causes of action in Gackstetter’s first amended complaint, Gackstetter alleged that Frawley had conveyed the Marlin Place Property to the wrong trust; Frawley represented him in connection with Gackstetter’s position as trustee of the trusts and gave

Gackstetter alleged causes of action for breach of fiduciary duty and fraud, and for each of these causes of action he alleged damages to him and the Charitable Trust. He also alleged a cause of action for negligent misrepresentation. Both the fraud and negligent misrepresentation causes of action are based on misrepresentations concerning the trusts and Gackstetter’s duties as trustee. In addition, Gackstetter alleged causes of action for “Implied Indemnity” and “For Equitable Indemnity on a Comparative Fault Basis” in which he claimed he is entitled to damages arising out of the Murphy Petition against him. In his last two causes of action, Gackstetter alleged that Frawley breached agreements to defend him in the Murphy Petition proceeding and to advise him with regard to the administration of the trusts.

2. Summary Judgment Contentions of Undisputed Facts

Frawley stated in his statement of undisputed facts in support of his summary judgment and summary adjudication motions that “Gackstetter and the Frawley defendants are joint tortfeasors with regard to the claims by the Sisters against them in that it was alleged that both Gackstetter and the Frawley defendants caused the Sisters to not receive the Marlin Place Property free and clear.” Although Gackstetter disputes this statement in his statement regarding undisputed facts, the dispute was only on the grounds that he did not draft the documents, the Sisters sued Frawley for negligence, the Sisters’ action against Frawley did not mention Gackstetter,^[7] and the Murphy Petition against Gackstetter did not mention Frawley. This response by Gackstetter, however, does not refute the assertion that Frawley and Gackstetter were joint tortfeasors based on the allegations in the two proceedings brought by the Sisters and the allegations in Gackstetter’s first amended complaint.

Also in his statement of undisputed facts, Frawley stated that “the only damages sought by Gackstetter in his capacity as an individual and as trustee

In the application for the order settling the Murphy Petition against Gackstetter, among the recitals are the following: Frawley’s negligence and concealment in connection with the trusts; Frawley’s advice to Gackstetter “in these proceedings, that caused the Petitioners to be unaware of the loss of their rights and interest in and to [the Marlin Place Property] until recently”; Gackstetter as trustee “contends that he has vigorously defended the trust”; Gackstetter “further asserts that he has expended Trust and personal funds and efforts to maintain and improve [the Marlin Place Property]”; and the Attorney General filed his own petition in the proceeding against Gackstetter for an accounting and to surcharge the trustee. The settlement provides that Gackstetter shall, as trustee, transfer the Marlin Place Property from the Charitable Trust to the Sisters Trust and shall pay $104,000 to the beneficiary of the deed of trust on the Marlin Place Property and that the beneficiary of the deed of trust is to execute a full reconveyance of the deed of trust on the property. Frawley also submitted in evidence the settlement that was later completed between Gackstetter and the Attorney General. A principal term of that settlement was that Gackstetter waived all claims he had for fees and loan repayments.

Gackstetter, in opposition to the summary judgment and summary adjudication motions, submitted documents from Agnes Gordon’s probate case. He also introduced documents showing Frawley’s representation of Gackstetter and Frawley’s preparation of the trust estate documents in issue.

m. DISCUSSION

A. Appealability

Frawley contends that the propriety of the denial of a summary judgment^[8] may be raised in an appeal from a judgment after a trial. Gackstetter asserts that by not seeking a writ of mandate as provided by section 437c, subdivision (m)(l),^[9] Frawley has forfeited the right to challenge the denial of a summary judgment motion.

In Waller v. TJD, Inc. (1993) 12 Cal.App.4th 830 , 836 [ 16 Cal.Rptr.2d 38 ] (Waller), the court recognized “as a general proposition, that an order denying a motion for summary judgment, while not directly appealable, may be reviewed on appeal from the final judgment.” It added, however, that no case has “considered] the merits of the order denying summary judgment as a basis to reverse a judgment entered after the trial on the merits.” (Ibid.) The court refused to do so, limiting its opinion “to situations in which a party moves for a summary judgment on the ground that there is no triable issue of fact, the motion is denied, and the same questions raised by the motion are then decided adversely to the unsuccessful moving party after a trial on the merits which is itself free from prejudicial error.” (Ibid.) It noted, “We do not intend by this decision to imply that review of such orders is never possible.” (Ibid.) But in Sierra Craft, Inc. v. Magnum Enterprises, Inc. (1998) 64 Cal.App.4th 1252 , 1256 [ 75 Cal.Rptr.2d 681 ], the court said the denial of a summary judgment is reviewable only by a timely writ petition and not by an appeal.

Gackstetter points to cases under section 877.6,^[11] the good faith settlement statute, stating that the provision for a writ procedure in that statute is exclusive. (See O’Hearn v. Hillcrest Gym & Fitness Center, Inc. (2004) 115 Cal.App.4th 491 , 498 [ 9 Cal.Rptr.3d 342 ]; Main Fiber Products, Inc. v. Morgan & Franz Ins. Agency (1999) 73 Cal.App.4th 1130 , 1137 [ 87 Cal.Rptr.2d 108 ].) Yet, the court in Maryland Casualty Co. v. Andreini & Co. (2000) 81 Cal.App.4th 1413 [ 97 Cal.Rptr.2d 752 ], concluded that, even though a good faith settlement determination can be reviewed by prejudgment writ, it can also be reviewed by postjudgment appeal. (See Wilshire Ins. Co. v. Tuff Boy Holding, Inc. (2001) 86 Cal.App.4th 627 [ 103 Cal.Rptr.2d 480 ].) In view of the conflict of authorities, the analogy to section 877.6, subdivision (e) is not helpful.

Although the denial of a summary judgment after a trial normally would be harmless error, there can be exceptions. (Waller, supra, 12 Cal.App.4th at p. 836.) The facts here result in one of those exceptions. The good faith settlement order was not made in this case. Frawley, having obtained that good faith determination in another case was, of course, in no position to seek a writ in that case. In this case, he raised the effect of the good faith settlement by way of demurrer and summary judgment. Frawley could have sought a writ, but the language of section 437c, subdivision (m)(l) providing for a writ procedure contains the permissive word “may.” (Cf. Wilshire Ins. Co. v. Tuff Boy Holding, Inc., supra, 86 Cal.App.4th 627 , 637 [“may” used in § 877.6, subd. (e) for writ does not preclude appeal].)

The good faith settlement could have been raised in various ways in the instant action. That it was done by summary judgment should not preclude a party from appealing from a trial court’s determination that a good faith settlement in another action does not bar a claim. Accordingly, in this case,

As noted by the court in Topa, supra, 39 Cal.App.4th at page 1341, “In many cases courts have construed the term ‘joint tortfeasor,’ as used in Code of Civil Procedure sections 877 and 877.6, quite broadly to apply not only to ‘those who act in concert in causing an injury’ [citation] but generally to ‘joint, concurrent and successive tortfeasors’ [citations], and even more generally to ‘all tortfeasors joined in a single action’ whose acts or omissions ‘concurred to produce the sum total of the injuries to the plaintiff.’ [Citations.]” (See also Textron Financial Corp. v. National Union Fire Ins. Co. (2004) 118 Cal.App.4th 1061 , 1078 [ 13 Cal.Rptr.3d 586 ] [“Where tortious acts by separate persons produce the same indivisible injury, each person is liable for the whole loss even if they did not act in concert”]; Newhall Land & Farming Co. v. McCarthy Construction (2001) 88 Cal.App.4th 769 , 773 [ 106 Cal.Rptr.2d 10 ] [“A joint tortfeasor includes joint, concurrent, and successive tortfeasors whose actions combine to cause the plaintiff’s injury”]; GEM Developers v. Hallcraft Homes of San Diego, Inc. (1989) 213 Cal.App.3d 419 , 431 [ 261 Cal.Rptr. 626 ]; Kohn v. Superior Court (1983) 142 Cal.App.3d 323 , 329 [ 191 Cal.Rptr. 78 ] [actions of defendants combined to create an indivisible injury].)

By indicating that the good faith settlement applies to the “vicariously or derivatively liable tortfeasor” (Far West, supra, 46 Cal.3d at p. 815) and to “multiple tortfeasors” (Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital (1994) 8 Cal.4th 100 , 110 [ 32 Cal.Rptr.2d 263 , 876 P.2d 1062 ]), the Supreme Court suggested that the term joint tortfeasor as used in section 877.6 has a broad meaning.^[12] “Joint tortfeasors” have been referred to as “two or more persons who are liable to the same person for the same harm. It is not

(b) Parties

Section 877.6 applies to “an action in which it is alleged that two or more parties are joint tortfeasors.” There is no reason why a Doe allegation—such as exists in the Sisters’- action against Frawley—does not satisfy the requirement of an allegation of “two or more” parties that are joint tortfeasors. That there are unknown or unnamed tortfeasors is a reason why a settling defendant would, by the good faith settlement procedure, seek to eliminate potential indemnity claims.

A settling tortfeasor’s section 877.6, subdivision (c) good faith settlement determination discharges indemnity claims by other tortfeasors, whether or not named as parties, so long as the other tortfeasors were given notice and an opportunity to be heard. (Britz, supra, 73 Cal.App.4th at pp. 181, 184; Wilshire Ins. Co. v. Tuff Boy Holding, Inc., supra, 86 Cal.App.4th at pp. 638-644; see Mid-Century Ins. Exchange v. Daimler-Chrysler Corp. (2001) 93 Cal.App.4th 310 , 314-315 [ 112 Cal.Rptr.2d 880 ]; Singer Co. v. Superior Court (1986) 179 Cal.App.3d 875 , 895 [ 225 Cal.Rptr. 159 ] [“Having concluded that fundamental constitutional principles of due process require that a likely defendant, who was a stranger to the litigation at the time a determination of good faith was rendered, be afforded a new hearing on this issue . . . [and have] a concurrent right in such a later-named defendant to engage in discovery ... to elicit evidence relevant to the Tech-Bilt factors”]; Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2005) 1 12:860, p. 12(II)-63 [“In addition, due process requires notice to other joint tortfeasors who are not presently parties to the action but whose rights may be affected by a ‘good faith’ determination (because § 877.6(c) bars indemnity claims of party and nonparty joint tortfeasors”)], 12:926, p. 12(II)-76 [“a settling tortfeasor’s § 877.6(c) good faith settlement determination discharges indemnity claims by other tortfeasors, whether or not named as parties to the action, provided they were given notice and an opportunity to be heard . . .”].)^[14] So long as there is notice, a joint tortfeasor’s indemnity claim against the settling tortfeasor will be barred by agood faith

Both the derelictions of Gackstetter as trustee and those of Frawley as attorney for the trustee caused damages to the trusts and the Sisters as trust beneficiaries. In the Murphy lawsuit against Frawley, in which the good faith settlement order was made, the plaintiffs alleged that Gackstetter committed the same tortious acts as Frawley did and that plaintiffs had sought relief in the probate proceedings against Gackstetter for these and other acts. Gackstetter attributed his own conduct to Frawley’s tortious acts as attorney for the trusts and trustees.

The uncontradicted evidence shows that Frawley and Gackstetter both committed tortious acts that “ ‘concurred to produce the sum total of the injuries to the plaintiff[s].’ ” (Topa, supra, 39 Cal.App.4th at p. 1341.) They each “contributed to or solely caused the single injury” to the plaintiff Sisters. (Yamaha Motor Corp. v. Paseman (1990) 219 Cal.App.3d 958 , 970 [ 268 Cal.Rptr. 514 ].) Thus, for purposes of section 877.6, they were joint tortfeasors.^[15]

Frawley’s alleged misconduct and Gackstetter’s lesser culpability because of reliance on negligent or fraudulent advice and vicarious liability do not render section 877.6 inapplicable. (Far West, supra, 46 Cal.3d at p. 815.) A “vicariously or derivatively liable tortfeasor, like any other minimally culpable tortfeasor” is subject to section 877.6 but has “substantial protection” by the requirement that the settlement by the more culpable tortfeasor be in good faith. (46 Cal.3d at p. 815.)

Gackstetter’s claims in the instant action fulfill the requirement of section 877.6 that they be for indemnity. Two of Gackstetter’s claims against Frawley explicitly are for indemnification. The other causes of action, although having different labels, are in effect for indemnification. Each of those causes of action is based on alleged damages Gackstetter suffered as a result of claims

Gackstetter is, in effect, claiming indemnification from Frawley for all of Gackstetter’s expenses for his liability as trustee arising from claims of the beneficiaries and the Attorney General. The total indemnity sought is relief that is encompassed within the bar of a good faith settlement. (Far West, supra, 46 Cal.3d 796 .) Moreover, Gackstetter’s claim for his attorney fees is considered “a form of implied equitable indemnity” that also can be barred by a good faith settlement. (John Hancock Mutual Life Ins. Co. v. Setser (1996) 42 Cal.App.4th 1524 , 1533 [ 50 Cal.Rptr.2d 413 ].)

Gackstetter asserts that the Sisters’ action against Frawley that was settled was limited to the erroneous transfer of the Marlin Place Property, while Gackstetter’s action against Frawley involved claims that were not limited to the conveyance of the property. Gackstetter contends that he is claiming damages incurred because of his reliance on Frawley that resulted in claims against Gackstetter for mismanagement of the trusts, and because of the involvement of the Attorney General. Thus, Gackstetter maintains that the good faith settlement could not bar claims that do not concern the Marlin Place Property.

The scope of a good faith settlement offer is normally addressed by the trial court determining the good faith of the settlement. That court has the “discretion to ferret out those claims that are in fact claims for indemnity” that would be barred by the good faith settlement. (Cal-Jones Properties v. Evans Pacific Corp., supra, 216 Cal.App.3d at pp. 327-328.) At the time of the good faith settlement order, the claims by the Sisters and the Attorney General had been made. (Ibid.) Gackstetter had notice and the opportunity to contest the scope of the settlement of the Sisters’ action against Frawley. By not appearing at the good faith settlement determination, Gackstetter not only forfeited any opportunity to raise his lack of culpability in determining the good faith of the settlement, but also failed to protect claims he believes should not be covered by that settlement.^[16]

Gackstetter’s argument that the claims not specifically alleged in the settled action are not barred by the good faith settlement cannot, in any event, prevail because Gackstetter has not distinguished between causes of damages to the Sisters. He has not distinguished between, on the one hand, damages that may be a consequence of the claims asserted in the Marlin Place Property action against Frawley for which both Frawley and Gackstetter are liable as joint tortfeasors and that are subject to the good faith settlement and, on the other hand, any other damages he claims might not be subject to the good faith settlement. Accordingly, based on the allegations and evidence, we conclude that Gackstetter’s claims in the instant action are, as a matter of law, subject to the bar of section 877.6.

Gackstetter asserts that Frawley’s settlement was not in good faith. Gackstetter did not attempt to challenge the good faith of the settlement either when it was made or, if he could, before the trial court in this case. Thus, he is bound by that determination. (See Britz, supra, 73 Cal.App.4th 177 .)

Based on the uncontradicted facts, all of Gackstetter’s claims are for indemnification from a joint tortfeasor as that term is used in section 877.6. By broadly interpreting and applying section 877.6, we conclude that the good faith settlement in the Sisters’ action against Frawley encompasses and bars all of Gackstetter’s claims against Frawley in the instant action.

D. Cross-Complaint^[17]

Frawley’s good faith settlement of the Sisters’ action against Frawley bars Gackstetter’s claims. The trial court erred by not granting Frawley’s motion for summary judgment. Frawley’s judgment on the cross-complaint is affirmed.^[18]