Filed 5/19/11
CERTIFIED FOR PARTIAL PUBLICATION*
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
JOHN J. DACEY,
Plaintiff and Appellant,
A125080
v.
WILLIAM TARADAY et al.,
Defendants and Respondents,
(San Francisco City and County
Super. Ct. No. CGC-06-448535)
JOHN J. DACEY,
Plaintiff and Appellant,
v.
WILLIAM TARADAY, as Administrator, etc.,
Defendant and Appellant.
A125670
John J. Dacey and Burton J. Goldstein (Goldstein), who is now deceased, were
partners at the law firm of Goldstein, Barceloux & Goldstein (GB&G). GB&G and the
law firm of Desmond, Nolan, Livaich & Cunningham (Desmond) had been handling a
number of inverse condemnation cases against the State of California (the flood cases)
since 1986. Desmond and GB&G agreed to share equally in any fee recovery after
payment of other attorneys. In 1990, the partners of GB&G signed an agreement for the
dissolution and windup of GB&G (the dissolution agreement), and this agreement
provided that the flood cases were “assign[ed]” to Goldstein and specified the
percentages each former partner of GB&G would receive from the attorney fees
recovered in the flood cases.
*
Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is
certified for publication with the exception of part I.
1
Goldstein died in 2001 and the flood cases finally settled in 2004, resulting in a
substantial total fee recovery (the fee recovery). William Taraday, the administrator of
the estate of Burton J. Goldstein (Taraday, the administrator, or the estate), settled with
numerous attorneys participating on behalf of the plaintiffs in the litigation of the flood
cases. Taraday agreed to reduce the estate‟s share in the fee recovery and to increase
Desmond‟s share.
Dacey did not file a creditor‟s claim in the probate court and Taraday paid him
nothing from the fee recovery. Dacey sued Taraday, as the administrator of the estate, for
breach of the dissolution agreement and rescission of the dissolution agreement. He also
sued Taraday, as an individual, Janet Cross Goldstein (Janet),1 Barrie Taraday (Barrie),
and Gail Hart (Hart) for, among other torts, replevin and conversion.2 He also set forth
claims against Desmond for conversion and “Distribution in Violation of a Lien[.]” All
of the parties filed summary judgment and/or summary adjudication motions, and the
lower court ruled, among other things, that the statute of limitations under Code of Civil
Procedure section 366.2, subdivision (a)3 did not apply to Dacey‟s claims against the
estate because the administrator, not Goldstein, breached the dissolution agreement.
The matter proceeded to a bifurcated bench trial and the court found against Dacey
on all of his claims against the individual defendants. It found in favor of Dacey in his
breach of contract claim against the estate. Dacey appealed and Taraday, in his capacity
as the administrator, filed a cross-appeal from that portion of the judgment finding in
favor of Dacey on his breach of contract claim. At the estate‟s request, we consolidated
the appeals.
The pivotal issue in Dacey‟s appeal is the interpretation of the dissolution
agreement. The lower court ruled that the agreement expressly transferred the legal
1
Janet, the wife of Goldstein, died while this case was pending on appeal.
Taraday was appointed a special administrator of her estate for the limited purpose of
representing her interest in this appeal.
2
Barrie and Hart are Goldstein‟s daughters.
3
All further unspecified code sections refer to the Code of Civil Procedure.
2
interest in the flood cases to Goldstein, and that the parties‟ course of conduct supported
this interpretation of the agreement. The court therefore concluded that the administrator
had the authority to renegotiate the fee agreement between Desmond and GB&G in the
flood cases. Dacey objects to the lower court‟s interpretation of the dissolution
agreement and maintains that the flood cases remained an asset of the partnership and
therefore the administrator did not have the authority to modify the original 1986 fee
agreement. He also makes various other challenges to the court‟s rulings on his claim of
rescission, his tort claims against various defendants, and his request for punitive
damages against Taraday, individually. We are not persuaded by any of Dacey‟s
arguments.
The estate appeals from that portion of the judgment finding in favor of Dacey on
his breach of contract claim. The estate maintains, among other things, that Dacey‟s
claim was barred because he failed to file a creditor‟s claim as required by the Probate
Code and his claim was untimely under the statute of limitations under Code of Civil
Procedure section 366.2, subdivision (a). We conclude that the estate waived raising the
creditor‟s claim issue on appeal and that section 366.2 does not apply to Dacey‟s breach
of contract claim because Taraday, not the decedent, breached the contract. Accordingly,
we affirm the judgment.
BACKGROUND
The Formation of GB&G
In 1985, Goldstein, Dacey and Joseph Ehrlich formed the law firm GB&G. About
one year later, Jeffrey A. Baruh joined the law firm.
In 1986, 1,350 plaintiffs hired Goldstein and Desmond as co-lead counsel to
handle their claims in flood cases, which involved actions for inverse condemnation and
tort damages resulting from flooding caused by a break in the Yuba River Levee. A letter
agreement in 1986 provided for Desmond and GB&G to share equally in any fee
recovery after payment of other attorneys (the 1986 fee agreement). Desmond and
GB&G also agreed, among other things, to split equally the costs of prosecuting the
actions.
3
Dissolving GB&G
Ehrlich withdrew from the partnership on September 30, 1989. Primarily because
of financial pressures being experienced by the law firm, the partners agreed to dissolve
GB&G.
The partners of GB&G agreed that Goldstein, through his new firm Goldstein &
Goldstein, would assume all responsibility for the representation and cost of the flood
cases. At that time, according to Dacey, the parties estimated the flood cases to be worth
“hundreds of millions of dollars.” These estimates were based on client damage
information, calculations prepared by GB&G, and the opinions of the partners and others.
The parties also recognized that the flood cases would require significant resources,
monetarily and in labor. Since Goldstein was to assume these costs, Baruh and Dacey
agreed, among other things, to reduce their individual shares of the fee recovery in the
flood cases.
Goldstein, Dacey, and primarily Baruh drafted the agreement for the dissolution
and windup of GB&G. The partners signed the dissolution agreement on April 30, 1990,
although they did not execute the agreement until August 19, 1992. The integrated
agreement announced, “As a result of various changes in circumstances among the
Partners, the Partners desire to dissolve and windup the affairs of the Partnership and
liquidate the assets of the Partnership on the terms and conditions set forth herein.” The
agreement specified that Goldstein would be permitted to use the name “Goldstein &
Goldstein” for his law firm after the dissolution of GB&G.
The dissolution agreement also provided the following: “As of May 1, 1990, no
further professional services shall be rendered in the name of [GB&G], no further
business transacted for the Partnership except action necessary for the winding up of its
affairs, . . . , the distribution or liquidation of its assets, and the distribution of the
proceeds of the liquidation. . . . Prior to April 30, 1990, the Partners shall assign every
uncompleted Contingent Fee Case, to one or another of the Partners on such terms and
conditions as shall be agreeable to the clients involved and the Partners; and the rendition
of professional services from and after May 1, 1990[,] shall be by such individuals and
4
other law firms, if any, in which they may respectfully become partners or otherwise be
associated. With respect to those cases referred to as the [flood cases], the firm of
Goldstein & Goldstein shall be substituted in place of the partnership.” The agreement
noted that the partners expressly agreed that the unfinished business doctrine “shall not
be applicable for any purpose, including, without limitation, the division of proceeds
collected on matters existing at the time of dissolution.”
Attached to the dissolution agreement was the “Partnership Division of Certain
Fees and Costs on Dissolution of [GB&G]” (exhibit 5).4 The dissolution agreement
incorporated exhibit 5 by reference. The dissolution agreement provided that exhibit 5
“specifically provided for the allocation and division of, as between the Partnership and
themselves individually, of certain contingent and other non-hourly fee matters.”
Exhibit 5 specified that GB&G was to receive “75% of the net contingent
recovery” in the lawsuits involving “Monterey Hills.” With regard to the Monterey Hills
actions, exhibit 5 pointed out that the contract with another law firm had been amended to
provide GB&G with 40 percent and the other law firm with 60 percent of the net
contingent recovery, since the other law firm was “carrying the main burden of the
litigation.” Also mentioned was Safeway litigation, and the dissolution agreement stated
the following: “The contract of GB&G with Safeway Stores, in addition to hourly
charges, contains a percentage contingency of any recovery.” It noted that Goldstein and
Baruh assigned their interest in the contingent fees to Dacey. It added, “From any
contingent recovery, GB&G shall receive the sum of $42,000, representing
reimbursement for its contingent fee interest, unless the total contingent fee interest due
to [Dacey] is equal to or less than $84,000, in which case, GB&G shall be entitled to fifty
(50%) percent of any such recovery.”
With regard to the flood cases, the dissolution agreement stated that GB&G was
entitled to approximately 35 percent of the net contingent recovery as its portion of fees.
It declared that Goldstein would “assume responsibility for continuing legal services in
4
The dissolution agreement erroneously referred to this document as “exhibit 4.”
5
the cases, and the advancing of costs, disbursements and expenses, as necessary.” It
further specified that Dacey and Baruh would “not be required to advance further costs
unless agreed in writing.” Goldstein was to be repaid costs, disbursements, and expenses
advanced by him after May 1, 1990.
Exhibit 5 further specified the following: Goldstein “shall receive 70.73% of the
remaining total recovery (including without limitation, 70.73% of costs, disbursements
and expenses advanced by GB&G). NOTE: This is intended to be a different formula
than that used for Monterey Hills cases, by the allocation to [Goldstein] of 70.73% of all
costs, disbursements and expenses, advanced by GB&G, in addition to his attorney‟s
fees.” With regard to Dacey and Baruh, exhibit 5 provided that they “shall receive
29.27%, divided between them in proportion to their share in GB&G.”
Paragraph 7 in exhibit 5 set forth the following: “As to these fees and costs,
disbursements, and expense allocation agreements, [Goldstein] and [Dacey] shall have
the right to assign all or any part of their individual percentages to other attorneys who
participate in the litigation.”
Dacey and Baruh read the dissolution agreement, including exhibit 5, prior to
executing the documents on August 19, 1992, and the agreement provided “that each is
hereby bound and obligated” by the dissolution agreement‟s terms. The agreement also
provided that it could not be amended or modified unless such amendment was in writing
and approved by the partners.
Neither Dacey nor Baruh ever provided Desmond with a copy of the dissolution
agreement. They also never contacted Desmond regarding the terms of the dissolution
agreement and never indicated to Desmond that they retained any financial interest in the
fee recovery from the flood cases.
The Flood Cases
After GB&G dissolved, Goldstein continued prosecuting the flood cases as cocounsel with Desmond. Goldstein hired David Collins as an associate of Goldstein &
Goldstein to work on the flood cases, and Goldstein agreed to pay Collins 20 percent of
his 70.73 percent share of the attorney fees for the flood cases.
6
The litigation in the flood cases “was protracted and bitterly fought.” (Paterno v.
State of California (1999) 74 Cal.App.4th 68, 76.) The matter proceeded to a trial and
the plaintiffs lost on some theories, but won on an inverse condemnation (takings) theory.
(Id. at p. 75.) In 1999, the Court of Appeal affirmed the defense jury verdict finding no
dangerous condition of public property, reversed the inverse condemnation liability
verdict in favor of the plaintiffs, and remanded for another trial on inverse liability. (Id.
at pp. 75-76.)
Goldstein requested that his former partners Dacey and Baruh agree to reduce their
share of the fee recovery. Dacey and Baruh rejected Goldstein‟s request.
In the fall of 2000, Goldstein became physically and financially unable to
participate personally in the prosecution of the flood cases. With Desmond‟s consent, he
retained the services of attorney Frederick Jacobsen to represent his interest in the cases.
Dacey was aware of Goldstein‟s inability to participate in the litigation of the
flood cases, and knew that the cases were scheduled for retrial in early 2001. Goldstein
died on January 2, 2001. Dacey did not contact any attorney to offer assistance. Neither
Dacey nor Baruh ever contacted Desmond or any of the 1,350 clients in the flood cases at
any time during the litigation.
The retrial in the flood cases occurred in 2001. A four-month court trial resulted
in a judgment for the defendants. The plaintiffs appealed.
In January 2002, the probate court appointed Taraday, Goldstein‟s son-in-law, as
administrator of the estate with will annexed. Taraday retained probate attorney
Theodore Kolb. Kolb told Taraday to send Dacey and Baruh a notice of administration
of the estate. Taraday mailed the notices on February 8, 2002. He mailed the notice to
Dacey‟s former address and did not include the suite number in the address for Baruh;
both Dacey and Baruh denied ever receiving the notices.
The Court of Appeal in Paterno v. State of California (2003) 113 Cal.App.4th 998
reversed the judgment in the flood cases as to the State of California and remanded with
directions to the lower court to enter judgment for the plaintiffs and conduct any further
necessary proceedings. A settlement followed in the spring of 2004, resulting in a
7
substantial fee recovery. Taraday contacted Desmond and represented to Desmond that
the estate was authorized to receive payment of Goldberg‟s share of the fee recovery.
After the settlement, Desmond claimed entitlement to more than the 50 percent
share it had under the 1986 agreement. Desmond asserted that GB&G, Goldstein &
Goldstein, and the estate had failed to meet their obligations under the 1986 agreement.
The estate executed a settlement with the Desmond firm in late July 2005, which
modified Desmond‟s share to 60 percent and reduced the estate‟s share to 40 percent.
Both agreed that Desmond would hold back one $1 million in a separate account until
June 30, 2006, to cover various contingencies; the money would thereafter be paid out.
Taraday testified that he settled because he preferred to settle rather than litigate disputes,
he recognized that Desmond had more resources, and he appreciated the amount of work
Desmond did after Goldstein died. After paying other attorneys, Desmond received
$64,304,960.88. Desmond gave the estate approximately $24 million.5
Kolb, in a letter dated September 7, 2005, advised the estate that Dacey‟s “failure
to file a claim within the time allowed by law bars [his] right to receive any payment
from the Estate.”
Dacey’s Complaint and Pretrial Motions and Stipulations
In letters dated November 17, 2005, Taraday notified Dacey and Baruh of the fee
recovery. The letters declared that Dacey and Baruh would not receive any of the fee
recovery because of their failure to file creditors‟ claims within the statutory period.
On January 12, 2006, Dacey and Baruh filed a civil action in the superior court
against Taraday both as administrator and individually, alleging a cause of action for
breach of contract. The original complaint did not identify the attorney fee recovery from
the flood cases as a partnership asset. Dacey and Baruh filed an amended complaint on
March 1, 2006, which also did not identify the fee recovery from the flood cases as a
5
The calculation of the estate‟s 40 percent was based on a net recovery that was
lower than the actual amount obtained by Desmond. Desmond negotiated with another
law firm to have it reduce its share of the recovery and Taraday permitted Desmond to
retain the benefit of obtaining this agreement to a fee reduction.
8
partnership asset. Taraday and the estate filed a demurrer to the amended complaint.
They alleged that Dacey failed to file a creditor‟s claim and the statute of limitations
under section 366.2 barred his claims. The trial court issued a tentative ruling sustaining
the demurrer without leave to amend on the basis that the claims were time barred under
section 366.2. The court permitted supplemental briefing after the hearing and,
subsequently, overruled the demurrer.
On October 20, 2006, Dacey and Baruh filed the operative second amended
complaint against Taraday, as administrator, for breach of the dissolution agreement and
for rescission. They identified the fee recovery from the flood cases as a partnership
asset. They also sued the Goldstein family for, among other torts, replevin and
conversion. They added Desmond as a defendant under counts of conversion and
“Distribution in Violation of a Lien[.]” They sought punitive damages against Taraday,
as an individual. Prior to trial in the civil action, Baruh settled with the estate.
Dacey, the estate, and Desmond filed motions for summary judgment and
summary adjudication. The estate argued, among other things, that the statute of
limitations under the Code of Civil Procedure section 366.2 and Probate Code sections
9000, 9100, 9103, and/or 9352 barred Dacey‟s claims.
The trial court denied Desmond‟s motion for summary judgment. It also rejected
Dacey‟s motions for summary judgment or summary adjudication against Desmond and
against the estate.
Although the trial court denied the estate‟s motion for summary judgment, it
granted in part its motion for summary adjudication. It granted the estate‟s motion as to
Dacey‟s sixth cause of action for breach of fiduciary duty, fifth cause of action for fraud,
and request for punitive damages. With regard to the request for punitive damages, the
court found that the estate relied on counsel‟s advice in good faith after full disclosure of
the facts and therefore exemplary damages were not recoverable against the estate.
The trial court denied the estate‟s motion for summary adjudication as to the
remainder of Dacey‟s claims. The court explained that it did not agree with the estate
that section 366.2 barred all of Dacey‟s causes of action for failing to file a creditor‟s
9
claim within one year of Goldstein‟s death. It explained that Goldstein had not breached
the dissolution agreement before he died and therefore Dacey did not have a cause of
action at the time of Goldstein‟s death. The court found that it was Taraday, not
Goldstein, who engaged in the alleged wrongdoing and therefore the statute of limitations
did not begin to run when Goldstein died.
The parties stipulated to a bench trial that was bifurcated into a first phase
regarding the dissolution agreement. The court was to determine whether the dissolution
agreement assigned the flood cases to Goldstein with all rights, responsibilities, and
liabilities or whether it provided for the flood cases to be a partnership asset following the
dissolution of GB&G. The parties agreed that the material facts underlying this dispute
were essentially undisputed and that the matter was an issue of contract interpretation and
therefore within the sole province of the court.
The Bench Trial and Statement of Decisions
The first phase of the trial began on May 14, 2008, before Judge James McBride.
The sole witnesses were Dacey and Baruh. At the end of the first phase of the trial, on
May 19, 2008, the court orally ruled that the contracting parties did not intend for the
flood cases to remain an ongoing partnership asset of GB&G following the firm‟s
dissolution. On May 20, 2008, Desmond moved for judgment under section 631.8.
The bench trial continued on May 22, 2008, for the court to consider Dacey‟s
remaining claims. Dacey and Taraday were the only witnesses during this phase of the
trial.
On March 20, 2009, the trial court filed its amended and corrected statement of
decision regarding Dacey‟s action against the estate. The court first addressed the
dissolution agreement and whether it assigned the flood cases to Goldstein with all rights,
responsibilities, and liabilities or whether the flood cases remained a partnership asset
after GB&G dissolved. In deciding that the agreement made it clear that the parties did
not intend the flood cases to be a partnership asset, the court found the language of the
dissolution agreement to be “clear and unambiguous” and “not reasonably susceptible to
any other interpretation.” It stressed that section 6.1 of the agreement stated that the
10
contracting parties‟ intended to “assign” the contingent fees cases listed in exhibit 5 to the
agreement, and that included the flood cases, to one or more of the partners. The court
noted that the partners expressly agreed to substitute the law firm of Goldstein &
Goldstein in place of GB&G in the flood cases.
The court also found that the course of conduct of the parties was consistent with
the express language of the dissolution agreement. The court pointed out that it was
undisputed that after GB&G dissolved, Goldstein was solely responsible for the flood
cases and it was undisputed that neither Dacey nor Baruh performed any legal services or
contributed any costs to the flood cases after the dissolution of GB&G, including after the
death of Goldstein. The court found that neither Dacey nor Baruh treated the flood cases
like a partnership asset after dissolution, but treated these cases “in a manner consistent
with the intent to maintain their contractual right to reduced percentage of the fee
recovery and no attendant risk or responsibility following GB&G‟s dissolution. The
former partners‟ were cognizant prior to and at the time of dissolution of the substantial
potential value of the FLOOD CASES, but they also had an appreciation of the
substantial labor and financial resources needed to pursue those cases to conclusion.”
The court concluded that the dissolution agreement created a contractual right of
recovery against Goldstein for a portion of the fees for the flood cases and that it was the
intent of Dacey and Baruh, as evinced by their conduct and the clear language of the
dissolution agreement, “to assign fully the rights and obligations” of the flood case to
Goldstein in return for a reduction in their percentage of any recovery in the flood cases.
The court ruled that the estate was liable to Dacey for breach of contract and that Dacey
was entitled to damages in the amount of $4,330,708.64. The court also issued an order
granting Dacey‟s motion for prejudgment interest.
With regard to Dacey‟s rescission claim, the court found that the estate‟s failure to
pay Dacey his share of the fee recovery was not a material breach justifying the remedy
of rescission.
The court also rejected Dacey‟s causes of action for conversion and replevin
against the Goldstein family. The court found that Taraday had a good faith defense to
11
his personal liability for conversion and replevin as set forth in Probate Code section
9651 because the evidence showed that he relied on the advice of his attorney. Attorney
Kolb told Taraday that the failure of Dacey and Baruh to file timely creditors‟ claims
prevented them from claiming any right to any of the fee recovery. With regard to the
claims of Taraday and the other defendants, the court rejected the defense of unclean
hands to defeat any and all of Dacey‟s causes of action.
On this same date, March 20, 2009, the court issued its statement of decision
regarding Dacey‟s claims for conversion and distribution in violation of a lien against
Desmond. The court rejected both of Dacey‟s claims, finding that Dacey failed to
establish ownership or right to possession of the fee recovery at the time Desmond
distributed a portion of the fee recovery to Taraday. The court also determined that
GB&G‟s lien rights were assigned and transferred to Goldstein when GB&G dissolved
and therefore Desmond properly distributed a portion of the fee recovery to Taraday.
The court granted Desmond‟s motion for judgment under section 631.8. It entered a
defense judgment in favor of Desmond and against Dacey.
In its statement of decision regarding Desmond, the court noted that Dacey argued
for the first time that the flood cases were an asset allegedly held as a tenancy in common
by all of the partners following GB&G‟s dissolution. After hearing argument on this
issue, the court rejected this claim. The court found that this argument was “wholly
inconsistent with the testimony, admissions, verified pleadings and exhibits offered” by
Dacey. Additionally, this argument contradicted the dissolution agreement and the
course of conduct of Dacey. The court also concluded that the authority cited by Dacey
did not support this argument.
Appeals
Dacey appealed from the judgment involving the estate and the Goldstein family
and the judgment in favor of Desmond. The estate filed a cross-appeal from the
12
judgment entered in favor of Dacey‟s breach of contract claim. The estate filed an
unopposed motion to consolidate the appeals and we granted that motion.6
DISCUSSION
I. Dacey’s Appeal
A. The Assignment of the Flood Cases under the Dissolution Agreement
1. Introduction
Dacey challenges the lower court‟s finding that the dissolution agreement assigned
all rights and obligations to the flood cases to Goldstein and therefore the administrator
had the authority to modify the 1986 fee agreement regarding the flood cases between
GB&G and Desmond. Dacey contends that the flood cases remained an asset of the
partnership under the dissolution agreement and, consequently, the administrator had no
authority to modify the original 1986 fee agreement between GB&G and Desmond.
In the 1986 fee agreement, GB&G and Desmond agreed to split the recovery fee
equally after payment of costs and other fees, including payment of a 15 percent share to
the firm Coolidge & Gisi. Taraday, as the administrator of the estate, agreed to change
the split to increase Desmond‟s interest in the recovery to 60 percent. Additionally,
Taraday agreed that the estate‟s 40 percent would be based on payment of 15 percent to
Coolidge & Gisi even though Desmond was able to get Coolidge & Gisi to agree to a
lesser amount. Taraday agreed that Desmond could retain the benefit of the reduced fees
paid to Coolidge & Gisi.
The trial court found that Taraday had authority to negotiate a different fee split
because the dissolution agreement resulted in a contractual assignment of the flood cases
to Goldstein. The court determined that the language of the agreement clearly set forth
the parties‟ intent to permit Dacey and Baruh to “extricate themselves from the
substantial responsibility and costs associated with the further prosecution of the flood
cases, in consideration for Dacey‟s contractual right to recover from Goldstein a portion
of the fees that all the contracting parties expected to receive out of the flood cases.” The
6
Without determining the relevance of these documents, we also granted
Taraday‟s unopposed motion for this court to take judicial notice of two documents.
13
parties‟ course of conduct, according to the trial court, supported this construction of the
dissolution agreement as it was undisputed that neither Baruh nor Dacey performed any
legal services or contributed to any costs to the flood cases following the dissolution of
GB&G, even after Goldstein died.
2. Standard of Review
The parties agree that the standard of review is de novo. The parties stipulated,
and the court agreed, that the material facts underlying this dispute were for the most part
undisputed. Contract interpretation on undisputed facts is a question of law that we
review de novo. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 866.) The
terms of a contract must be interpreted to give effect to the mutual intention of the
parties. (Civ. Code, § 1636.) A contract is to be construed as a whole, “so as to give
effect to every part, if reasonably practicable, each clause helping to interpret the other.”
(Civ. Code, § 1641.) When two provisions conflict, the resulting “[r]epugnancy . . . must
be reconciled, if possible, by such an interpretation as will give some effect to the
repugnant clauses, subordinate to the general intent and purpose of the whole contract.”
(Civ. Code, § 1652.) Where the terms of the contract are ambiguous or uncertain,
determining the terms of the contract is a question of fact for the trier of fact, which in the
present case was the trial court, based on “all credible evidence concerning the parties‟
intentions . . . .” (Winet v. Price (1992) 4 Cal.App.4th 1159, 1165.)
To the extent Dacey challenges findings based on disputed evidence, we use the
substantial evidence standard of review. When a judgment is attacked on the ground that
there is no substantial evidence to sustain it, “[o]ur authority begins and ends with a
determination as to whether, on the entire record, there is any substantial evidence,
contradicted or uncontradicted, in support of the judgment.” (Howard v. Owens Corning
(1999) 72 Cal.App.4th 621, 630-631.) The testimony of a single witness may constitute
substantial evidence in support of the judgment. (In re Marriage of Mix (1975) 14 Cal.3d
604, 614.) “Even in cases where the evidence is undisputed or uncontradicted, if two or
more different inferences can reasonably be drawn from the evidence this court is without
power to substitute its own inferences or deductions for those of the trier of fact, which
14
must resolve such conflicting inferences in the absence of a rule of law specifying the
inference to be drawn. We must accept as true all evidence and all reasonable inferences
from the evidence tending to establish the correctness of the trial court‟s findings and
decision, resolving every conflict in favor of the judgment.” (Howard, at p. 631.) We
view all factual matters in the light most favorable to the prevailing party, resolving all
conflicts and indulging all reasonable inferences from the evidence to support the
judgment. (Scott v. Pacific Gas & Electric Co. (1995) 11 Cal.4th 454, 465, disapproved
on other grounds in Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 352, fn. 17.)
3. Waiver
The estate contends that Dacey waived any challenge to the trial court‟s
determination that the administrator had the authority to modify the original 1986 fee
agreement between Desmond and GB&G. The estate argues waiver on the grounds that
Dacey ignored the court‟s finding regarding course-of-conduct. The court, according to
the estate, ruled that the administrator had the authority to modify the original 1986 fee
agreement on two independent bases: its interpretation of the dissolution agreement and
the course-of-conduct evidence. Since Dacey did not discuss one of the grounds for the
court‟s ruling, the estate maintains that we should affirm on the ground not addressed on
appeal by Dacey.
Dacey responds that the lower court did not find that the terms of the dissolution
agreement were ambiguous and therefore the conduct evidence was not critical to its
conclusion that the agreement gave Taraday authority to modify the terms of the
agreement between GB&G and Desmond. He also argues that, even if the court based its
decision on course-of-conduct evidence, such evidence was undisputed and his argument
was that his conduct was consistent with the dissolution agreement.
In its statement of decision, the trial court expressly stated that the clear language
of the dissolution agreement showed the parties‟ intent to assign all of the legal
obligations and rights to the flood cases to Goldstein and that Goldstein had the authority
to modify the agreement between GB&G and Desmond. When considering course of
conduct, the court noted that extrinsic evidence is not usually considered when the terms
15
of the agreement are clear and ambiguous. (See § 1856.) The court elaborated that such
evidence is given great weight when a contract is ambiguous. The court then set forth the
procedure for considering extrinsic evidence when a dispute arises over the meaning of
the language in the instrument. It concluded that the express terms of the dissolution
agreement assigned the flood cases to Goldstein and that the course of conduct was
“totally consistent with the express language of the” dissolution agreement.
We do not agree that the trial court found that the course of conduct was an
independent basis for its ruling. Rather, we conclude that it found that the former
partners‟ course of conduct supported the court‟s interpretation of the contract.
Accordingly, we consider the merits of Dacey‟s challenge to the court‟s ruling on
Taraday‟s authority to modify the agreement between GB&G and Desmond.
4. Interpreting the Dissolution Agreement
a. The Language of the Dissolution Agreement
As already stressed, the salient issue is whether the language of the dissolution
agreement evinced an intent of the former partners to assign the flood cases to Goldstein
with all rights, responsibilities, and liabilities or whether the agreement showed an intent
to have the flood cases remain a partnership asset.
The dissolution agreement sets forth the parties‟ intent for writing this agreement
as “to dissolve and windup the affairs of the Partnership and liquidate the assets of the
Partnership . . . .” Under the heading, “The Rendering of Professional Services upon
Termination,” is paragraph 6.1, which is entitled, “No Further Professional Services
Rendered in Partnership Name.” Paragraph 6.1 specifies: “As of May 1, 1990, no
further professional services shall be rendered in the name of Goldstein Barceloux &
Goldstein, no further business transacted for the Partnership except action necessary for
the winding up of its affairs, (including legal actions which have been continued with the
Agreement of the partners), the distribution or liquidation of its assets, and the
distribution of the proceeds of the liquidation. Maintenance of offices to effectuate or
facilitate the winding up of the Partnership affairs shall not be construed to involve the
continuation of the Partnership. Prior to April 30, 1990, the Partners shall assign every
16
uncompleted Contingent Fee Case, to one or another of the Partners on such terms and
conditions as shall be agreeable to the clients involved and the Partners; and the rendition
of professional services from and after May 1, 1990[,] shall be by such individuals and
other law firms, if any, in which they may respectfully become partners or otherwise be
associated. With respect to those cases referred to as the „Yuba Levee Cases” (see
exhibit „[5]‟), the firm of Goldstein & Goldstein shall be substituted in place of the
partnership.”7
Paragraph 6.1 expressly “assigns” every uncompleted contingent fee case, which
included the flood cases, to a particular partner. In the present case, it is undisputed that
the flood cases were assigned to Goldstein.
The common legal definition of assign is “to transfer to another” a property or
legal right. (Http://www.merriam-webster.com/dictionary/assign.) “To „assign‟
ordinarily means to transfer title or ownership of property [citation], but an assignment,
to be effective, must include manifestation to another person by the owner of his
intention to transfer the right, without further action, to such other person or to a third
person. [Citation.] It is the substance and not the form of a transaction[,] which
determines whether an assignment was intended. [Citations.] If from the entire
transaction and the conduct of the parties it clearly appears that the intent of the parties
was to pass title to the chose in action, then an assignment will be held to have taken
place. [Citations.]” (McCown v. Spencer (1970) 8 Cal.App.3d 216, 225.) An
assignment carries with it all of the assignor‟s rights. (Civ. Code, § 1084; see also
Foreman Roofing Inc. v. United Union of Roofers Etc. Workers (1983) 144 Cal.App.3d
99, 107.)
7
Dacey argues that this clause required a substitution of counsel. He claims that
no substitution of counsel was filed in the flood cases. When making this argument,
Dacey fails to cite to any evidence in the record. As already stated, we view all factual
matters in the light most favorable to the prevailing party, resolving all conflicts and
indulging all reasonable inferences from the evidence to support the judgment. (Scott v.
Pacific Gas & Electric Co., supra, 11 Cal.4th at p. 465.) Accordingly, we reject Dacey‟s
argument that the facts do not show that any substitution of counsel was filed in the flood
cases.
17
Here, attorneys drafted the agreement and the reasonable construction of the term
is the common legal definition of transferring legal rights and title. Moreover, paragraph
6.1 provides that, “[w]ith respect to those cases referred to as the [flood cases], the firm
of Goldstein & Goldstein shall be substituted in place of the partnership.” Thus, this
provision makes it clear that the legal interest in the flood cases was being transferred to
Goldstein and his new firm Goldstein & Goldstein.
This interpretation is consistent with other provisions in the dissolution agreement
that relate to “unfinished business.” The flood cases were pending at the time GB&G
dissolved and thus they fall under the category of unfinished business.
The general unfinished business rule is that a partnership does not terminate upon
its dissolution but continues to exist for the limited purpose of winding up the
partnership‟s affairs and completing all unfinished business. (Rosenfeld, Meyer &
Susman v. Cohen (1983) 146 Cal.App.3d 200, 216, overruled on another issue in Applied
Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 521, fn. 10.) Under
the Uniform Partnership Act (Corp. Code, § 15001 et seq.), a dissolved partnership
continues until the winding up of unfinished partnership business. (Corp. Code,
§ 15030.) Other than a surviving partner, no partner is entitled to compensation in an
amount that is greater than would have been received as the former partner‟s share of the
dissolved partnership for services rendered in completing unfinished business. (Jewel v.
Boxer (1984) 156 Cal.App.3d 171, 176.) “Thus, absent a contrary agreement, any
income generated through the winding up of unfinished business is allocated to the
former partners according to their respective interests in the partnership.” (Ibid.)
Here, the dissolution agreement detailed a contrary rule in paragraph 6.2. This
paragraph expressly states that the unfinished business doctrine does not apply.
Specifically, it provides: “The Partners expressly agree that the unfinished business
doctrine ([s]ee Jewel v. Boxer[, supra] 156 Cal.App.3d 171 . . . ; Fox v. Abrams [(1985)
163] Cal.App.3d 610 . . . ; Rosenfeld Meyer & Susman v. Cohen[ supra,] 146 Cal.App.3d
200 . . .) shall not be applicable for any purpose, including, without limitation, the
division of proceeds collected on matters existing at the time of dissolution. By separate
18
agreement, attached hereto as exhibit [5], and incorporated herein by this reference
(entitled „Partnership Division of Certain Fees and Costs on Dissolution of Goldstein,
Barceloux & Goldstein‟), [Goldstein, Dacey and Baruh] have specifically designated
responsibility for certain specified cases referenced therein and have specifically
provided for the allocation and division of, as between the Partnership and themselves
individually, of certain contingent and other non-hourly fee matters.” Thus, the
dissolution agreement makes it clear that the rule under the Uniform Partnership Act as
set forth in Jewel, Fox, and Rosenfeld, does not apply.
Dacey objects to the foregoing interpretation of the dissolution agreement and
maintains that the word “assigned” in paragraph 6.1 simply means that the case was
“allocate[d]” to a particular partner. He claims that this provision, read in context, simply
assigns the duty to perform professional services, and remains silent regarding the right to
fees. He points out that paragraph 6.1 specifies that the “terms and conditions” must “be
agreeable to the clients involved” and claims that paragraph 6.2 then identifies those
“agreeable” terms when it declares, by separate agreement as provided for in exhibit 5,
the partners had “specifically designated responsibility for certain specified cases
referenced therein . . . .”
We disagree with Dacey‟s interpretation. As already discussed, the common legal
definition of assign is to transfer a legal or valuable interest and it is reasonable to use the
legal definition when the agreement involves the winding up and dissolution of a law
firm. Dacey‟s citation to a portion of paragraph 6.2 does not persuade us that his
definition of assign reflects the parties‟ intent. Dacey focuses on the beginning portion of
a sentence in paragraph 6.2, and ignores the remainder of the sentence. After specifying
that the partners “have specifically designated responsibility for certain specified
cases[,]” the sentence provides that exhibit 5 has “specifically provided for the allocation
and division of, as between the Partnership and themselves individually, of certain
contingent and other non-hourly fee matters.” Thus, this latter portion of the sentence
makes it clear that the parties were not only designating responsibility for a case to a
19
particular partner, but also were transferring legal interests between GB&G and
individual partners.
Dacey also complains that paragraph 6.2 did not waive the protection of the
Uniform Partnership Act because the paragraph does not even mention this Act. Dacey,
however, ignores that the cases cited in this paragraph, e.g., Jewel v. Boxer, supra, 156
Cal.App.3d 171, specifically discuss the unfinished business doctrine and the Uniform
Partnership Act.
The dissolution agreement expressly states that the unfinished business doctrine
does not apply and the Court of Appeal decisions cited discuss the general rule of the
unfinished business doctrine under the Uniform Partnership Act. Accordingly, we agree
with the lower court that the dissolution agreement clearly sets forth the parties‟ intent for
the rule regarding unfinished business under the Uniform Partnership Act not to apply to
the cases still pending at the time GB&G was winding up.
Even if paragraph 6.2 waives the protection under the Uniform Partnership Act,
Dacey declares that this paragraph simply sought to avoid placing a disproportionate
burden on the partners for completing unfinished business and did not assign the flood
cases to Goldstein. Such an interpretation, however, would require us to construct
paragraph 6.2 individually and not to harmonize this paragraph with the remainder of the
agreement, including paragraph 6.1. This is a clear violation of the rules of statutory
construction. When considering paragraphs 6.1 and 6.2 together, it is clear that the
parties intended at the time they signed the dissolution agreement to assign the flood
cases to Goldstein and waive the protections of the Uniform Partnership Act.
Other provisions in the dissolution agreement, not related to the flood cases,
bolster our conclusion that the lower court correctly interpreted the dissolution
agreement. Paragraph 2.2 states that Goldstein “is hereby assigned and shall be entitled
to use the former telephone number and telefax numbers of the Partnership.” At trial,
when asked whether the phone number of a law firm was a “fairly important asset[,]”
Dacey responded, “I suppose so.” Dacey was further questioned, “And you transferred
this asset to Burt Goldstein, didn‟t you?” Dacey replied, “Yes.” Thus, Dacey agreed that
20
the parties intended the word “assign” as used in paragraph 2.2. to mean the transfer of a
valuable asset; “assign” did not mean in this paragraph to designate a duty.
Additionally, the dissolution agreement made it clear when the parties intended to
have the partnership retain an interest in a pending case that had a fee contingency
agreement. Exhibit 5 expressly declared that GB&G retained an interest in a recovery in
the Monterey Hills and Safeway cases. No language in the dissolution agreement
indicated that any proceeds from the flood cases would be partnership property or was
being collected by or on behalf of the partnership. Rather, the agreement simply
provided for the percentage share each partner would “receive” out of any fee recovery in
the flood cases.
In urging this court to accept his interpretation of the dissolution agreement,
Dacey relies heavily on paragraphs 2.b. and 7 in exhibit 5. Paragraph 7 , which is the
final paragraph in exhibit 5, reads as follows: “As to these fees and costs, disbursements,
and expense allocation agreements, [Goldstein] and [Dacey] shall have the right to assign
all or any part of their individual percentages to other attorneys who participate in the
litigation.” Paragraph 2.b. in exhibit 5 provides that Goldstein “shall receive 70.73% of
the remaining total recovery” and Dacey and Baruh “shall receive 29.27%, divided
between them in proportion to their share in GB&G.” Dacey contends that the use of the
word “divided” when describing the partners‟ shares in the recovery fee indicates that the
former partners retained a right to recovery, and that the entire interest was not
transferred to Goldstein. Paragraph 7, according to Dacey established that Goldstein had
the right to assign his own percentage interest in the flood cases, but not the other former
partners‟ interest in the flood cases. Dacey maintains that, had the intent been for
Goldstein to have the right to assign both his own and other attorneys‟ percentages,
paragraph 7 would have explicitly stated that.
Paragraph 7 merely states that, if another attorney works on the case, Goldstein or
Dacey have a right to assign a portion of his share of a fee to another attorney. This
paragraph does not restrict Goldstein‟s right to modify a contingent fee contract or a fee
21
sharing agreement with another lawyer in a case assigned to Goldstein.8 As the trial court
found, the agreement provided for a lawyer‟s fee to come out of Goldstein‟s share if
Goldstein hired a lawyer to work directly on the case for him after dissolution. The
Desmond firm, however, had been co-counsel on the flood cases with GB&G for four
years prior to GB&G‟s dissolution. Accordingly, as the lower court explained: “If the
GB&G partners had wanted to tie Goldstein‟s hands about changing the fee allocation
with Desmond, they could have. They did not.” We agree with the lower court‟s
conclusion that “Dacey and Baruh agreed to take a fixed percentage of Goldstein‟s fees,
but did not include any term that tied this measure to the original Desmond and GB&G
fee split.”
Furthermore, Dacey‟s interpretation of paragraph 7 conflicts with those other
provisions in the dissolution agreement that stated the legal interest in the flood cases was
being transferred to Goldstein. Generally, “[c]ontradictory or inconsistent provisions of a
contract are to be reconciled by interpreting the language in such a manner that will give
effect to the entire contract.” (Estate of Petersen (1994) 28 Cal.App.4th 1742, 1754, fn.
4.) We must reject an interpretation that creates conflicts between various provisions
“when another interpretation serves to harmonize all the provisions . . . .” (Southern
Pacific Land Co. v. Westlake Farms, Inc. (1987) 188 Cal.App.3d 807, 822.) Dacey
complains that the conflict in interpretation does not justify ignoring or nullifying
paragraph 7. However, the trial court‟s interpretation does not nullify or rewrite any
provision in the dissolution agreement, but simply interprets the plain language of
paragraph 7 in a manner that is consistent with the other provisions.
We also do not agree with Dacey‟s argument regarding the use of the word
“divided” in paragraph 2.b. This paragraph simply means that Baruh and Dacey were to
divide any amount of the fee recovery they were to receive according to their respective
interest in GB&G. When arguing that “divided” indicates that the partners were to retain
a right to the recovery, Dacey professes that this interpretation “flows from” McCafferty
8
Indeed, that happened. Attorneys worked on the flood cases under Goldstein
and their payment of fees came out of Goldstein‟s share of the fee recovery.
22
v. Gilbank (1967) 249 Cal.App.2d 569 (McCafferty). McCafferty, however, is
completely inapposite.
In McCafferty, supra 249 Cal.App.2d 569, an ex-wife traded a lump-sum
judgment she obtained for past due child support against her ex-husband in exchange for
a percentage of litigation proceeds in the ex-husband‟s personal injury action against a
third party. (Id. at p. 571.) On the strength of this promise, the ex-wife failed to file a
judgment lien in the personal injury action. After the personal injury lawsuit was settled
and the attorney for the ex-husband received the proceeds, he cashed the checks with his
client and personally kept the amount he considered his fees even though he was
intimately involved in preparing the agreement between his client and the ex-wife.
(Ibid.) The appellate court reversed the trial court‟s granting the attorney‟s motion for a
nonsuit in the wife‟s action for conversion, determining that the equities of the case
favored imposition of an equitable lien. (Id. at pp. 576-577.) The court examined the
conduct of the parties, the letter from the ex-wife‟s lawyers referring to the transaction as
an “ „assignment[,]‟ ” and the lawyer‟s proposed “ „dividing‟ the net proceeds of the
recovery.” (Id. at p. 576.) The court concluded that a reasonable interpretation of the use
of the word “ „dividing‟ ” was the “draftsman‟s intention that plaintiff be given a property
interest in such proceeds and not just his client‟s promise to pay the agreed sum when
due.” (Ibid.)
Dacey claims that the court‟s definition of “ „dividing‟ ” in McCafferty, supra, 249
Cal.App.2d 569, is relevant to the present case. This argument, however, lacks merit.
The court in McCafferty was not interpreting a contract, but was examining language in a
letter in combination with the parties‟ conduct to determine whether the promise created
a triable issue of fact that there was an equitable lien. The court concluded: “ „ “[W]here
a third party has paramount title to the money in the hands of the agent, and notifies the
latter of his claim, if the agent nevertheless pays the principal, he is liable to the true
owner.” ‟ ” (Id. at p. 577.) The facts and issues considered in McCafferty have no
relevance to the present case or to the interpretation of the word “divided” as used in the
present dissolution agreement.
23
Paragraph 5, according to Dacey, also supports his argument that the parties
intended to keep the flood cases as a partnership asset. This paragraph relates to
liquidation of assets and reads in relevant part: “As of May 1, 1990, the Partners shall be
the agents of the terminated Partnership in liquidation, and of the individual Partners, for
winding up all of its affairs and all business transactions of the Partnership, other than the
performance of incomplete professional services referred to in Section 6 herein.” Dacey
observes that renegotiating the agreement between GB&G and Desmond does not
constitute the performance of professional services and therefore does not fall under this
exception. He concludes that, consequently, the partnership continued to exist for
purposes of the agreement between GB&G and Desmond.
We disagree with Dacey‟s interpretation. Paragraph 5 is simply irrelevant to the
question of whether the parties intended to assign the flood cases entirely to Goldstein or
to keep them as an asset of the partnership. The agency referred to in paragraph 5 refers
to the winding up of the partnership‟s affairs and business transactions. Since other
provisions in the dissolution agreement make it clear that the partnership‟s interest in the
flood cases was transferred to Goldstein, paragraph 5 does not apply to the flood cases.
Dacey also refers to the language in the dissolution agreement that provides,
“[u]nder existing contracts with other counsel, GB&G is entitled to approximately 35%
of the net contingent recovery as its portion of fees . . . . (Note: The 35% may vary by
reason of referral fees payable to other lawyers).” Dacey argues that only referral fees
could trigger a change in GB&G‟s share of the recovery. We disagree. This language
does not suggest that existing contracts could not be changed; nor does it specify that the
percentage may vary only because of referral fees. Rather, under this provision, one
reason a percentage of the recovery may vary was that a referral fee was payable to
another attorney.
Finally, Dacey cites Dunne & Gaston v. Keltner (1975) 50 Cal.App.3d 560
(Dunne) in support of his argument that the dissolution agreement prevented the estate
from modifying the original 1986 fee sharing agreement between GB&G and Desmond.
In Dunne, a partner withdrew from a continuing law partnership and left a number of
24
contingent fee cases that he had brought into the firm with the firm. (Id. at pp. 561-562
& fn. 2.) The agreement between the departing partner and the law firm specified that the
firm would pay him an identified “ „percentage of the attorneys‟ fees recovered on said
cases as set forth on exhibit “B,” and said percentage of attorneys‟ fees will become a
lien upon the fees paid in that particular case.‟ ” (Id. at p. 562, fn. 2.) After the attorney
departed from the law firm, the law firm entered into a written agreement with another
law firm regarding one of the cases the departing attorney had brought to the firm. The
new firm handling the case was to receive 60 percent of the recovery. (Id. at p. 562.)
Once the case settled, the law firm sent the attorney who had departed one-sixth of the
fee it received, but the attorney claimed that he was entitled to one-sixth of the entire
attorney‟s recovery under the terms of the agreement. (Id. at pp. 562-563.) The court
held that, at the time the agreement was executed, there was nothing in the record to show
that “the parties intended, or even contemplated, that [the case at issue on appeal]
subsequently was to be referred to another legal firm which would also share in the total
attorneys‟ fee (the trial court expressly found that there was no such intention) . . . .” (Id.
at p. 563, fn. omitted.) The court reasoned that the use of the word “recovered” in the
agreement had “the common connotation of representing the entirety of a sum obtained
by process and course of law which includes settlement. (Id. at p. 564.) The court
therefore concluded that the law firm owed the attorney who had left one-sixth of the
entire sum of attorney fees.
Although Dacey relies on Dunne, this case does not benefit him. Firstly, the
agreement interpreted in that case did not have language similar to the language in the
present dissolution agreement. In Dunne, the court interpreted the language of the
agreement as stating that the one-sixth interest was based on the entire recovery. Dacey
maintains that, similarly here, the dissolution agreement states that he is entitled to a
portion of the “total recovery[.]” Dacey‟s argument is somewhat incomprehensible
because he never argues that he is entitled to a portion of the total recovery. As already
stressed, provisions in the dissolution agreement make it clear that Dacey was entitled to
a portion of Goldstein‟s net recovery, not a portion of the total fee recovery.
25
Secondly, at the time the partner was leaving the law firm in Dunne, the parties
did not intend to share the recovery with another law firm. In the present case, at the time
of the dissolution agreement, GB&G had already entered into an agreement with
Desmond to co-litigate the flood cases. Thus, a fee sharing arrangement was already
contemplated at the time of the agreement and, if the parties had wished, they could have
written a provision limiting Goldstein‟s authority to alter the terms of that fee sharing
arrangement. No such provision was in the dissolution agreement and the agreement
assigned the flood cases to Goldstein. Moreover, as the trial court observed, Dacey and
Baruh agreed to take a fixed percentage of Goldstein‟s fees, and included no term that
tied this measure to the original fee split between GB&G and Desmond. Dacey asserts
that the agreement is silent with regard to any renegotiation of the agreement between
GB&G and Desmond. However, no such provision was necessary since the dissolution
agreement assigned the flood cases to Goldstein, giving him the authority to renegotiate
any fee agreements related to the flood cases.
Dacey grasps onto language in a footnote in Dunne, supra, 50 Cal.App.3d 560, to
argue that Dunne’s reasoning requires us to reject the lower court‟s interpretation of the
dissolution agreement in the present case. In this footnote, the Dunne court observed:
“By a logical, although admittedly unrealistic, extension of plaintiff‟s position, if it had
agreed to give the new firm the entire fee, defendant would thereafter have been entitled
to nothing by way of his „1/6‟ share.” (Id. at pp. 564-565, fn. 6.) Dacey argues that
“[p]recisely the same untenable logic led to the erroneous result here.”
In the present case, the possibility that Dacey could receive nothing from the flood
cases does not reflect “untenable logic.” In Dunne, the partner who had left the firm was
the person contacted to take the case (Dunne, supra, 50 Cal.App.3d at p. 562), and it
would therefore be presumably unfair for him to receive nothing. Here, the plaintiffs in
the flood cases hired Goldstein and Desmond as co-counsel, and Dacey did no work on
the cases. Moreover, the flood cases involved the investment of significant resources
with a risk that there would be no attorney fee recovery. Finally, Goldstein died while
the flood cases were still pending and, consequently, it would be reasonable to conclude
26
that Desmond, who now had to carry a more significant load, would receive a greater
share. Thus, not only are the terms of the agreement at issue in Dunne completely
different, but the facts are not the same and the equities in the two cases are completely
distinguishable.
We agree with the lower court that the dissolution agreement, by its express terms,
waived the protection of the Uniform Partnership Act and assigned, that is, transferred
the obligations and costs related to the flood cases to Goldstein and his new firm
Goldstein & Goldstein. We now consider the lower court‟s determination that the
evidence of course of conduct provided further support that the parties did not intend for
the flood cases to remain an asset of GB&G. (See McCown v. Spencer, supra, 8
Cal.App.3d at p. 225.)
b. Course of Conduct
The undisputed evidence established Dacey and Baruh did not perform any legal
services on the flood cases or contribute any costs toward the prosecution of the flood
cases after the dissolution of GB&G. This remained true even after Goldstein‟s death on
January 2, 2001. Dacey never contacted any of the clients of the flood cases after
GB&G‟s dissolution and never disclosed to any insurer any ongoing responsibility for the
litigation in the flood cases. Dacey also never contacted Desmond to offer any type of
legal or financial assistance. Dacey and Baruh did not provide Desmond with a copy of
the dissolution agreement or contact Desmond regarding the terms of the dissolution
agreement. They also never advised Desmond that they had any financial interest in the
fee recovery.
In Dacey‟s initial pleading in this action, he asserted a cause of action for breach
of contract but did not identify the fee recovery as a partnership asset. It was after a
demurrer to an amended pleading based upon a statute of limitations defense under
section 366.2 that Dacey filed his second amended complaint and identified the fee
recovery as a partnership asset.
Dacey argues that evidence in the record shows that Baruh and he met with
Goldstein after Goldstein asked them to reduce their percentage share in the fee recovery
27
and Goldstein denied their offers to help. The record establishes that Dacey was asked
the following at trial: “Between GB&G‟s dissolution at the end of April of 1990 and the
phone call . . . letting you know that Mr. Goldstein had passed away, during that frame,
did you ever make an offer to Burt Goldstein to assist in the ongoing prosecution of the
[flood] cases?” Dacey responded, “No, I did not.” Subsequently, Dacey was asked about
this meeting when Goldstein requested the former partners to reduce their percentages,
and Dacey testified that, as he recalled, Baruh and he “offered to assist in the case with
him in order to help him with whatever problems he was having.”
The trial court found that Dacey did not offer to assist in the flood cases and
Dacey‟s initial testimony supports that finding. Furthermore, even if Dacey made a
vague offer to assist, this does not establish that Dacey considered the flood cases a
partnership asset.
We agree with the lower court that the former partners‟ course of conduct
indicated that they did not intend the flood cases to be a partnership asset, and such
behavior was consistent with the express terms of the dissolution agreement.
Accordingly, we conclude that the lower court correctly interpreted the dissolution
agreement as assigning all of the legal obligations of the flood cases to Goldstein.
c. The Authority of the Administrator to Modify the Agreement with Desmond
Dacey contends that even if Goldstein could renegotiate the agreement between
GB&G and Desmond, Taraday, as the administrator of the estate, had no such authority. 9
9
Dacey also argues that GB&G‟s share of the flood cases had been assigned, if at
all, to the three former partners as tenants in common and therefore Goldstein had no
right to adjust the fee recovery with Desmond without the other partners‟ agreement.
Dacey supports this argument with no citation to the record and does not show that he
raised this issue in the trial court.
As the estate points out, Dacey did not raise this issue in his complaint and raised
it for the first time on the tenth day of trial. On May 20, 2008, the court asked counsel
for Dacey: “Should they, at this late date, be required to defend a tenancy in common
theory that was never pled and not in any version of the complaint, either.” Counsel for
Dacey acknowledged: “That is correct. It was not in any version . . . .”
28
He argues that Probate Code section 9762 bars a representative of a deceased partner
from acting for the partnership without an express court order. As already discussed, we
have concluded that the flood cases were not an asset of the partnership and therefore
Taraday was not acting on behalf of the partnership.
Dacey also asserts, with no analysis or discussion, that Taraday lacked the power
absent court order to act on behalf of Goldstein and cites Probate Code section 9760,
subdivision (b). Dacey has not shown that this issue was raised in the trial court and has
provided no support for this assertion. Accordingly, we reject this unsupported argument
and presume that Taraday had the authority as the administrator to enter into an
agreement with Desmond regarding the fee recovery in the flood cases.
We conclude that the lower court correctly found that Taraday, as the
administrator of the estate, had the authority to modify the 1986 fee agreement between
GB&G and Desmond that had been signed prior to the dissolution agreement.
Dacey also neglects to mention that, on June 18, 2008, he requested leave to file
an amendment to his second amended verified complaint and asked to add a cause of
action against Taraday for violating his rights as a tenant in common. The court‟s order
filed on September 3, 2008, denied this motion because Dacey filed “to demonstrate a
prima facie showing necessary for such motion for the following reasons: (1) the factual
allegations in the proposed ninth cause of action are inconsistent with the facts set forth
in Dacey‟s prior verified pleadings and inconsistent with the prior rulings of this court;
(2) Dacey did not demonstrate diligence in bringing the motion, nor explain any excuse
for delay, and (3) the proposed amendment would result in undue prejudice against the
Estate defendants in the form of a legal theory not set forth in the Second Amended
Verified Complaint, creating unfair surprise.”
We will not consider the merits of Dacey‟s argument, as he did not raise this issue
in a timely fashion in the lower court and has completely failed to show that the lower
court abused its discretion in denying his motion to amend. (See, e.g., Huff v. Wilkins
(2006) 138 Cal.App.4th 732, 746 [unwarranted delay in presenting the amendment of a
pleading “ „ “may––of itself––be a valid reason for denial” ‟ ”].) Furthermore, Dacey
failed to support his appellate argument with appropriate citations to the record and
therefore waives the issue on appeal. (Duarte v. Chino Community Hospital (1999) 72
Cal.App.4th 849, 856.) If a party fails to support an argument with the necessary
citations to the record, we may deem that argument waived. (Ojavan Investors, Inc. v.
California Coastal Com. (1997) 54 Cal.App.4th 373, 391.)
29
B. Partial Rescission
1. Background
As an alternative to his breach of contract claim, Dacey alleged in his pleading
rescission of the dissolution agreement. At trial, he told the court that Taraday had a duty
to pay him his share from the fee recovery and Taraday‟s failure to pay him was a
material breach of the dissolution agreement. The court rejected this claim on the basis
that the breach was not material. It also found that damages were sufficient to make
Dacey whole.
When rejecting Dacey‟s claim, the trial court explained that the flood cases could
not be considered separate from the remainder of the dissolution agreement because the
expected outcome from this litigation was “tied up with at least all of the other contingent
fee cases.” The court stated that there was “a give and a take, back and forth among the
partners” with regard to the contingent fee cases. The court elaborated that it believed the
“principal purpose of the dissolution agreement, when it happened, was the winding up of
the firm to get out from under a bad financial situation.” The partners at GB&G, in the
court‟s view, were concerned with an “insufficient hourly-rate case income to pay the
overhead and not enough contingent-fee income to close the gap.” The court noted that
the division of the workload was of equal importance, “but not of equal concern . . .”
The trial court did not ignore the significance of the flood cases. It agreed that all
of the partners knew that the lawsuit involving the flood cases was “the biggest,” but the
court emphasized that this litigation was “the most difficult, and chancy as well . . . .”
Dacey argued that the former partners did not sign the dissolution agreement until 1992,
which was after the 1992 judgment in the first trial involving the flood cases and
therefore they knew the fee recovery was a significant asset. The court disagreed. It
found that the undisputed evidence was that the agreement was made in April 1990, not
in 1992, and the litigation involving the flood cases was an important, but not pivotal,
concern when drafting the dissolution agreement in 1990.
The trial court orally denied Dacey‟s claim for rescission, and stated the
following: “The short-term obligations, the immediate business obligations, of the firm
30
combined with the need to make more money was a major component of the decision to
enter into a partnership dissolution agreement. It was the triggering component. [¶] The
triggering component was not the existence and ongoing burden of the [flood] cases or
the other contingent fee cases.” The court elaborated: “The decision about how the
[flood cases] would be allocated, the fee would be allocated among the former partners,
was part of a package of accommodations and negotiations that include not only how
they would split the business, the ongoing business, but other obligations. [¶] It cannot
be looked at in isolation. That is not a record that is before me. The record before me
was that the whole thing was a winding up of the business and an essential component of
winding up the business . . . . [¶] The [litigation of the flood cases] was an important
aspect of the deal. [These cases were] not by [themselves] the single most important
aspect of the deal. . . .” The court concluded that Taraday‟s breach was “not so material
as to justify the remedy of rescission.”
The trial court reiterated its oral ruling in its statement of decision, and repeated
that the failure to pay Dacey his share of the fees derived from the flood cases was not a
material breach justifying the remedy of rescission. The court noted Dacey‟s argument
that the fee recovery was the single most important asset of the dissolution agreement,
but it disagreed and stressed that Dacey offered “neither legal authority nor evidence to
support his theory that the materiality of a breach of the Dissolution Agreement is
properly analyzed by looking to a single point during the long period between the break
of GB&G and the signing of the Dissolution Agreement. . . .”
2. The Standard of Review
Dacey contends that the lower court erred as a matter of law when it denied his
cause of action for rescission. However, “[w]hether a breach is so material . . . is a
question of fact for the trier of fact.” (Superior Motels, Inc. v. Rinn Motor Hotels, Inc.
(1987) 195 Cal.App.3d 1032, 1051-1052.) As already discussed, “When reviewing a
claim of insufficiency of evidence, [a court] must view the evidence in the light most
favorable to the verdict and presume in support of the judgment the existence of every
fact that the trier of fact could reasonably deduce from that evidence. The test is whether
31
substantial evidence supports the conclusion of the trier of fact . . . . Substantial evidence
must be of ponderable legal significance, reasonable in nature, credible and of solid
value.” (People v. Briscoe (2001) 92 Cal.App.4th 568, 584-585.)10
3. Applying the Standard of Review to the Facts
Dacey contends that the evidence was undisputed that the litigation involving the
flood cases was the largest lawsuit ever undertaken by GB&G. Dacey testified, “[W]hen
we took on [the flood] cases, that was probably by far the largest case that the firm had
ever undertaken.” He asserts that when the dissolution agreement was executed in 1992,
the first trial had resulted in a judgment in favor of the plaintiffs and the costs had been
modest. He claims that the lower court erred because it examined the entire dissolution
agreement and disregarded the magnitude of the flood cases as well as the fact that the
clause regarding the flood cases could have been separately rescinded.
Here, the evidence amply supports the lower court‟s finding that Taraday‟s refusal
to pay was not a material breach. Rescission allows a party to a contract to be “relieved
of the burdens and [to] procure restitutionary redress respecting a contract which was
defective at its inception because consent was not freely or knowingly given.” (Runyan
v. Pacific Air Industries, Inc. (1970) 2 Cal.3d 304, 317-318, fn. 16.) A party may rescind
a contract “[i]f the consideration for the obligation of the rescinding party, before it is
rendered to him, fails in a material respect from any cause.” (Civ. Code, § 1689, subd.
(b)(4).) A failure of consideration by one party is material only if it goes “to the
„essence‟ of the contract.” (Wyler v. Feuer (1978) 85 Cal.App.3d 392, 404.) “[A] person
10
The standard of review, according to the estate, is an abuse of discretion. If the
court had found the breach was material, we would review the remedy under an abuse of
discretion standard. When a party seeks to rescind or partially rescind a contract in court,
the remedy is equitable. (Gill v. Rich (2005) 128 Cal.App.4th 1254, 1264.) In the
rescission context, “ „ “the court should do complete equity between the parties” and to
that end “may grant any monetary relief necessary” to do so.‟ ” (Sharabianlou v. Karp
(2010) 181 Cal.App.4th 1133, 1144.) “[C]ase law recognizes the trial court‟s broad
power to fashion an appropriate remedy in cases of rescission . . . in accordance with
established principles of law and equity.” (Id. at p. 1147.) We, however, review a ruling
regarding materiality under the standard of substantial evidence.
32
is not entitled to rescind or abandon a contract for an alleged breach of that contract when
the breach does not go to the root of the consideration. [Citation.]” (Karz v. Department
of P. & V. Standards (1936) 11 Cal.App.2d 554, 557.)
The dissolution agreement stated that the dissolution and windup of GB&G was
being “made with reference” to the following facts. The following facts mentioned the
withdrawal from the partnership by Ehrlich in 1989, the withdrawal of Baruh in March
1990, an office lease with promissory notes, and bank loans exceeding $300,000. The
agreement announced, “As a result of various changes in circumstances among the
Partners, the Partners desire to dissolve and windup the affairs of the Partnership and
liquidate the assets of the Partnership on the terms and conditions set forth herein.” Thus,
the dissolution agreement declared that the firm‟s financial situation was a principal
reason for dissolving and winding up the partnership. Nothing in the agreement indicated
that the flood cases were more important than other contingency cases still pending at the
time GB&G was winding up or that the expected fee recovery in the flood cases was
central to or the essence of the dissolution agreement.
We conclude that the record contains ample evidence to support the lower court‟s
finding that the flood cases were not central to or an essential part of the dissolution
agreement. Accordingly, we affirm the lower court‟s rejection of Dacey‟s cause of action
for rescission or partial rescission.
C. The Conversion and Lien Claims
1. The Elements of Conversion
Conversion is generally described as the wrongful exercise of dominion over the
personal property of another. (Gruber v. Pacific States Sav. & Loan Co. (1939) 13
Cal.2d 144, 148.) The basic elements of the tort are (1) the plaintiff‟s ownership or right
to possession of personal property; (2) the defendant‟s disposition of the property in a
manner that is inconsistent with the plaintiff‟s property rights; and (3) resulting damages.
(Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1066.) Money can be the subject of an
action for conversion if a specific sum capable of identification is involved. (Weiss v.
Marcus (1975) 51 Cal.App.3d 590, 599.)
33
Neither legal title nor absolute ownership of the property is necessary, but the
plaintiff must show entitlement “to immediate possession at the time of conversion.”
(Bastanchury v. Times-Mirror Co. (1945) 68 Cal.App.2d 217, 236, italics omitted.)
However, “a mere contractual right of payment, without more, will not suffice.”
(Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 452 (Zerin).) “One who
holds property by virtue of a lien upon it may maintain an action for conversion if the
property was wrongfully disposed of by the owner and without authority . . . .”
(Bastanchury, supra, at p. 236.)
2. Claims Against Desmond
a. Background
Dacey claimed conversion and distribution in violation of a lien against Desmond.
Dacey contends he had a sufficient property interest in the fee recovery under the
agreement between the flood clients and GB&G and Desmond. He argues that this
agreement created an actual or equitable lien on the fee recovery.
“ „One who wrongfully withholds personal property from another who is entitled to it
under a security agreement may be liable for conversion.‟ ” (Zerin, supra, 53
Cal.App.4th at p. 452.) Dacey maintains that Desmond wrongfully distributed the
portion of the fee recovery owed to GB&G to Taraday, as the administrator of
Goldstein‟s estate.
With regard to Dacey‟s claim of conversion, the trial court found that Dacey could
not establish “ownership or right to possession” of the fee recovery at the time of
distribution by Desmond. The court found that Dacey‟s claim of a violation of lien also
failed because Desmond distributed the fee recovery to the proper recipient.
b. Standard of Review
The trial court granted Desmond‟s motion for judgment under section 631.8.
Section 631.8, subdivision (a) provides: “After a party has completed his presentation of
evidence in a trial by the court, the other party . . . may move for a judgment. The court
as trier of the facts shall weigh the evidence and may render a judgment in favor of the
moving party . . . .” The purpose of the section is to enable the trial court to weigh
34
evidence and make factual findings when it finds that plaintiff‟s case does not require the
defendant to produce evidence. (Pettus v. Cole (1996) 49 Cal.App.4th 402, 424.) Our
review is limited to whether substantial evidence in the record supports the judgment,
which we presume to be correct. (See, e.g., Jordan v. City of Santa Barbara (1996) 46
Cal.App.4th 1245, 1254-1255.)
c. Express Lien
Dacey claims that he had an express lien based on the original retainer agreement
between GB&G and Desmond and the plaintiffs in the flood cases. As already discussed,
however, GB&G assigned its legal interest in the flood cases to Goldstein prior to the
alleged wrongful distribution of the fee recovery by Desmond to the estate.
“An assignor may not maintain an action upon a claim after making an absolute
assignment of it to another; his right to demand performance is extinguished, the assignee
acquiring such right.” (McCown v. Spencer, supra, 8 Cal.App.3d at p. 225.) At the time
Desmond distributed the fee recovery in the flood cases, GB&G and Dacey had no
ownership or right to possession of the fee recovery. As already stressed, the flood cases
had already been assigned to Goldstein. Thus, the trial court correctly found that
Desmond properly distributed the fee recovery owed to Goldstein to the estate.
Dacey also argues that, even if the flood cases were assigned to Goldstein, he had
a right to the fee based on a tenancy in common theory. As already discussed (ante, fn.
9), Dacey did not raise this issue in a timely fashion in the trial court and has waived
raising this issue on appeal.11
11
In its statement of decision regarding Desmond, the trial court addressed
Dacey‟s newly raised argument and stated the following: “The court notes that following
its May 19, 2008 findings in favor of defendants, Dacey represented, for the first time,
that the flood cases were an asset allegedly held as a tenancy in common by all of the
partners following GB&G‟s dissolution, as opposed to a partnership asset as previously
alleged and argued . . . . After entertaining argument, the court rejected this claim. First,
the court finds that it is wholly inconsistent with the testimony, admissions, verified
pleadings and exhibits offered by plaintiff. Assuming arguendo that plaintiff could
somehow plead around his verified pleadings and admissions, which the court finds he
cannot, there is no excusable neglect by plaintiff that can be shown in failing to plead this
35
d. Equitable Lien
Alternatively, Dacey maintains that Desmond is liable for conversion under an
equitable lien theory.12 For the reasons discussed below, we conclude this assertion lacks
merit.
A lien may arise either by contract or by operation of law. (Civ. Code, § 2881.)
“An equitable lien is a right to subject property not in the possession of the lienor to the
payment of a debt as a charge against that property. [Citation.] It may arise from a
contract[,] which reveals an intent to charge particular property with a debt or „out of
general considerations of right and justice as applied to the relations of the parties and the
circumstances of their dealings.‟ [Citation.] „The basis of equitable liens is variously
placed on the doctrines of estoppel, or unjust enrichment, or on the principle that a person
having obtained an estate of another ought not in conscience to keep it as between them;
and frequently it is based on the equitable maxim that equity will deem as done that
which ought to be done, or that he who seeks the aid of equity must himself do equity.‟ ”
(Zerin, supra, 53 Cal.App.4th at p. 453.)
“It has been judicially observed that equitable liens arising by contract are as
various as the contracts parties may make, and the question whether a lien has been
created under particular circumstances depends upon the facts of the case. [Citation.]
For example, where a lessor contracted to purchase insurance on behalf of both the lessor
and the lessee but purchased protection for itself only, and a loss ensued for which the
inconsistent fact at an earlier time. (See e.g., Trafton v. Youngblood (1968) 69 Cal.2d 17,
31.) Second, the court finds that this alleged new fact contradicts the integrated
[dissolution agreement] and the course of conduct of plaintiff. Finally, the court finds
that the authority cited to by the parties negates this newly contrived fact. There was no
unity of control or possession of the flood cases following dissolution of GB&G, nor was
there an interest in common owned by several persons after dissolution, or one that was
not acquired by them in partnership. [Citation.]”
12
Desmond argues that Dacey fails to show in his opening appellate brief that he
raised this issue in the trial court. In his reply brief, Dacey cites to places in the record
that could be interpreted as a claim based on an equitable lien theory. Even though it is
clear that the court never addressed this issue in its statement of decision, we will decide
this issue on its merits.
36
lessor was reimbursed, the lessee is entitled to an equitable lien on the insurance
proceeds.” (Zerin, supra, 53 Cal.App.4th at p. 454.)
Here, the equities do not support Dacey‟s argument that he had an equitable lien.
As the trial court pointed out, Desmond properly distributed the portion of the fee
recovery formerly owed to GB&G to the estate. Desmond knew GB&G had dissolved
and also knew that the only partner working on the case after the firm‟s dissolution was
Goldstein. It was undisputed that after execution of the dissolution agreement, neither
Dacey nor Baruh ever contacted Desmond to advise the firm that they believed they
retained an interest in the fee recovery. Neither of them furnished Desmond a copy of the
dissolution agreement.
Furthermore, Dacey did not pay any of the costs for litigating the flood cases or
assist in the litigation after the windup of GB&G. Indeed, he never provided assistance
or contacted any of the plaintiffs in the flood cases even after he learned about
Goldstein‟s death. Since, unlike Dacey, Desmond participated in the litigation of the
flood cases from its inception until the final settlement almost 10 years later and paid for
some of the costs of the litigation, the record does not support a finding that Desmond
would be unjustly enriched absent a lien or that it would be “inequitable and unjust”
(Zerin, supra, 53 Cal.App.4th at p. 455) to withhold the fee recovery from Dacey.
Dacey argues that the equities support his claim because Desmond knew Dacey
when the law firm first agreed to be co-counsel with GB&G on the flood cases. Dacey
relies on Kaiser Foundation Health Plan, Inc. v. Aguiluz (1996) 47 Cal.App.4th 302,
overruled on another point in Snukal v. Flightways Manufacturing, Inc. (2000) 23 Cal.4th
754, 775-776. Not only are the facts in Kaiser distinguishable, the Kaiser court took the
pre-existence of an equitable lien for granted, and never really considered whether such a
lien should be imposed in the first place. (Kaiser, supra, at p. 307.) In Kaiser, an
attorney was aware of his client‟s contractual obligation to indemnify his health care
provider from the proceeds of a settlement or judgment. The court held the attorney was
liable to the health care provider because the attorney settled the action and disbursed the
proceeds to his client in disregard of the health care provider‟s lien. (Id. at pp. 303-304.)
37
Kaiser has no relevance to the present case because, here, as already discussed, Desmond
correctly distributed the money to Taraday.
Dacey also again claims, without any citation to the record, that no substitution of
counsel had been filed to replace GB&G. As already discussed, we will not consider this
assertion that is not supported by any citation to evidence in the record. Dacey also
argues that Desmond took an additional 10 percent of the fee recovery for itself in
exchange for forwarding the remainder to Taraday and this was unjust because the firm
never provided this information to Dacey. Dacey maintains that Desmond never asked
Taraday whether he had authority to receive the portion of the fee recovery that Dacey
claims was owed to GB&G.
Most of the evidence cited by Dacey is irrelevant. It is immaterial whether
Desmond asked Taraday whether he had authority to receive the percentage of the fee
recovery owed to Goldstein because, as the trial court found and we are affirming,
Taraday did have that authority. Furthermore, since Dacey had no legal interest in the fee
recovery, Desmond had no obligation to inform him about the renegotiated fee between
Taraday and Desmond.
Since we conclude that the lower court correctly rejected Dacey‟s conversion and
lien claims, we need not consider Desmond‟s arguments that the judgment should also be
affirmed on the grounds that Dacey abandoned any right to enforce any alleged GB&G
interest and Desmond‟s payment to the estate was not wrongful.
3. Claims Against the Goldstein Family
Dacey also alleged conversion and replevin against the Goldstein family. He
claimed that the inheritance of members of the Goldstein family from Goldstein or Janet
(Goldstein‟s‟ wife) constituted a conversion in light of Dacey‟s alleged right to receive a
share of the fee recovery. The court rejected Dacey‟s claim that an equitable lien arose
from the dissolution agreement.
Dacey again focuses on the language of paragraph 7 in exhibit 5 of the dissolution
agreement and asserts that this provision created an equitable lien. As already noted,
paragraph 7 reads as follows: “As to these fees and costs, disbursements, and expense
38
allocation agreements, [Goldstein] and [Dacey] shall have the right to assign all or any
part of their individual percentages to other attorneys who participate in the litigation.”
As already discussed, the fact that Goldstein could not assign any part of Dacey‟s
percentage in what the estate was to receive does not mean that Goldstein or the estate
could not negotiate the total amount the estate was to receive. “At most, [the dissolution
agreement] was a mere agreement to pay [Dacey a share of the fee recovery], when
received, but such an agreement [did] not create a lien even upon [the receipt of the fee
recovery].” (Morrison v. Havens (1938) 24 Cal.App.2d 504, 506 [no equitable lien when
plaintiff‟s assignor performed construction work on property owned by the defendant‟s
father even though the father promised to pay for the work out of the sale of property];
see also Imperial Valley L. Co. v. Globe G. & M. Co. (1921) 187 Cal. 352, 354 [landlord
had a viable claim for breach of contract when tenant breached his agreement to pay a
percentage of his crop to the landlord but then sold the entire crop to pay his personal
debts but could not assert a claim for conversion because he did not have legal title to the
proceeds from the crop sales or a lien on those proceeds].) Here, as already extensively
discussed, the dissolution agreement did not confer on Dacey the right to legal title to the
fee recovery; nor does the dissolution agreement provide him with an express lien for the
payment of his contractual right to a share of the fee recovery.
Dacey does not have a claim for an equitable lien because the equities do not
support his claim. The trial court noted that the record did not show that Dacey suffered
any detriment as a result of the reduction of GB&G‟s share in the fee recovery or that
others were unjustly enriched because Dacey did not have use of the money to which he
claimed entitlement under the dissolution agreement. The court explained: “When
Dacey agreed to give up half of what he would have been entitled to as a partner in
GB&G, he gave up a percentage of an uncertain fee contingent on the successful outcome
of the case. While it was reasonable at the time of the dissolution to anticipate a large
fee, it was equally reasonable to recognize some possibility that the flood cases would
pay little or nothing. No matter what the outcome, it was only reasonable to anticipate
that whatever fee would be earned would come only after months and years of lawyering
39
that would not be compensated in the interim. Although Dacey agreed to cut his
partnership share in that uncertain future fee by half, he also obtained immediate benefit
from that bargain. He was no longer obliged to pay his share of the costs of the litigation
and no longer obliged to provide legal representation on a contingent fee basis. In short,
his investment of money and labor and his risk of loss were both fixed at the time of
dissolution. Dacey‟s reliance on Goldstein‟s promise to pay him out of the recovery in
the Flood Case is not detrimental reliance. In exchange for his agreement to take less, he
contributed nothing to the prosecution of the case and obtained relief from substantial
ongoing obligations.”
We agree with the trial court that the equities do not support Dacey‟s claim.
Dacey knew that the flood cases would take time to litigate so there was no detrimental
reliance based on his now having to wait to receive any portion of the fee recovery.
Dacey complains that there was no evidence that the partners anticipated that the flood
cases would be unusually protracted. However, it was Dacey‟s burden to establish that
he expected to recover his portion of the fee recovery within a relatively short period of
time. He had to establish detrimental reliance. Additionally, as already discussed, he did
not suffer as a result of the reduction in Goldstein‟s portion of the fee from 50 percent to
40 percent, as he did no work on the case and expended no money after GB&G dissolved.
We conclude that the lower court correctly rejected Dacey‟s claims of conversion
and replevin and we need not consider Taraday‟s additional argument that Dacey‟s claim
was barred against him as he reasonably relied on legal advice from his counsel that
Dacey‟s claim was time-barred.
D. Request for Punitive Damages against Taraday
Dacey sought punitive damages against Taraday, individually, based on his claims
against him for replevin, conversion, fraud and deceit, and breach of fiduciary duty. The
trial court had granted summary adjudication against Dacey‟s claims against Taraday for
breach of a fiduciary duty, finding that Taraday had no fiduciary duty to Dacey. It also
granted the defendants‟ motion for summary adjudication against Dacey‟s claim for
fraud. Finally, the court granted summary adjudication against his claim for punitive
40
damages against Taraday. The court found that the punitive damages claim against
Taraday was barred under Probate Code section 9651 because Taraday acted in good
faith and under the advice of his counsel. It is this latter finding that Dacey challenges on
appeal.
We need not address the merits of Dacey‟s argument that Taraday could not rely
on his advice of counsel. In the present case, the trial court found in favor of Dacey
solely on his breach of contract claim and rejected his tort claims. We have affirmed the
court‟s rejection of Dacey‟s tort claims. Punitive damages are permissible only in
connection with “an action for the breach of an obligation not arising from [a] contract.”
(Civ. Code, § 3294, subd. (a).) Since the only viable theory of liability is based on a
contract,13 not on fraud or any other tort, punitive damages are unavailable.
II. The Estate’s Appeal
A. Dacey’s Failure to File a Creditor’s Claim
1. Introduction
The estate maintains that Dacey is not entitled to any portion of the fee recovery
because, after Goldstein‟s death, he failed to file a creditor‟s claim in the probate
proceedings as required by the Probate Code. Probate Code section 9100 states that a
creditor must file a claim in a probate proceeding either within four months after the
court appoints a personal representative, or within 60 days after notice. “The time
restriction on filing creditor‟s claims is intended to ensure the representative of an estate
is notified of all claims within a reasonable period so that the estate can be expeditiously
settled and distributed to the legatees or heirs.” (Varney v. Superior Court (1992) 10
Cal.App.4th 1092, 1101.) Failure to comply with this time requirement bars the claim.
(Prob. Code, § 9002, subd. (b).) Generally, the time requirement cannot be waived either
by the estate‟s personal representative or the probate court. (Nathanson v. Superior
Court (1974) 12 Cal.3d 355, 361-362.)
13
The estate is appealing the lower court‟s ruling on the breach of contract claim.
41
Dacey responds that the estate waived raising this issue on appeal. The estate
points to the places where it raised this issue in the trial court, but the question remains
whether the issue was sufficiently raised in the lower court to preserve it for appeal.
2. The Record in the Lower Court
The estate first raised the issue of Dacey‟s failure to file a creditor‟s claim in a
footnote in a section related to the statute of limitations under section 366.2 in its papers
filed in support of its demurrer to Dacey‟s complaint. In the footnote, the estate wrote:
“Defendants nevertheless anticipate that plaintiffs may attempt to argue that [section
366.2, subdivision,] (b)(1) somehow excepts this matter from the requirements of [section
366.2, subdivision,] (a). Any such effort, however, would be misplaced, and the law is
clearly contrary to any such argument. Indeed, Part 4 (commencing with Section 9000)
of Division 7 of the Probate Code (as referenced in [section 366.2, subdivision,] (b)
itself) clearly imposes the one-year statute within the context of probate administration.
Specifically, Probate Code section 9100[,] subdivision,] (c) provides, „[n]othing in this
section shall be interpreted to extend or toll any other statute of limitations or to revive a
claim[] that is barred by the statute of limitations. The reference in this subdivision to a
“statute of limitations” includes Section 366.2 of the Code of Civil Procedure.‟
[Citation.] Reading both Section 366.2[, subdivision,] (b)(1) and Section 9100[,
subdivision,] (c) together, a creditor is put on notice of the need to file within a year. In
fact, „if the one-year deadline is approaching and no probate has been opened, the wise
approach for the plaintiff is to open a probate proceeding as a creditor and file a timely
creditor‟s claim.‟ [Citation.]” (Bold and italics omitted.)
The trial court issued a tentative ruling sustaining the estate‟s demurrer without
leave to amend. At the hearing, Dacey argued that he was claiming a right to specific
property and therefore the statute of limitations did not apply. After the hearing on the
demurrer, the court permitted supplemental briefing.
In its supplemental papers, the estate asserted that Probate Code section 9000,
subdivision (a) “defines „claim‟ as „a demand for payment for any of the following,
whether due, not due, accrued or not accrued, or contingent, and whether liquidated or
42
unliquidated: (1) Liability of the decedent, whether arising in contract, tort, or
otherwise.‟ ” The estate noted that the statutes exempted specific property from the
definition of claim, and that Dacey was attempting to “avoid the implications of section
366.2 by arguing that Goldstein‟s liability under the dissolution agreement is not a
liability at all, and that the property at issue is really „specific property,‟ somehow
insulated from the language of section 366.2.” The estate contended that Dacey was not
claiming a right to specific property and, consequently, section 366.2 applied. The estate
also argued that the Probate Code statutes “can operate independently to bar a claim” and
quoted the following from a Court of Appeal decision: “ „If a claim is not filed within the
claims filing period of Probate Code section 9100, or within the one-year limitation
period of Code of Civil Procedure section 366.2, a creditor will be forever barred from
asserting a claim against the decedent.‟ [Citation.]” The estate concluded that Dacey‟s
failure to file a claim within one year of Goldstein‟s death was “fatal to [his] present
action.”
The court overruled the estate‟s demurrer to the first amended complaint and,
subsequently, Dacey filed his second amended complaint.
The estate filed a motion for summary judgment and argued that all of Dacey‟s
claims were barred “by the statute of limitations set forth in [Code of Civil Procedure
section] 366.2, . . . Probate Code sections 9000, 9100, 9103, and/or 9352.” Under the
heading related to Code of Civil Procedure section 366.2, the estate mentioned the
following: “Plaintiffs‟ claims are clearly barred by section 366.2, as well as Probate
Code section 9100[, subdivision,] (a), because they are all founded upon plaintiffs‟
respective demands as creditors for payment of Goldstein‟s contingent debt to them under
the Dissolution Agreement.”
When denying the estate‟s summary judgment motion, the trial court ruled that the
statute of limitations under section 366.2 did not apply. The court did not make any
independent ruling on Dacey‟s failure to file a creditor‟s claim. The estate never objected
to this ruling on the ground it failed to address any argument regarding a creditor‟s claim;
nor did the estate raise this issue at trial.
43
3. Waiver
The estate argues that the foregoing was sufficient to preserve on appeal the issue
of Dacey‟s failure to file a creditor‟s claim. (See, e.g., Boyle v. CertainTeed Corp. (2006)
137 Cal.App.4th 645, 650.) “The critical point for preservation of claims on appeal is
that the asserted error must have been brought to the attention of the trial court.” (Id. at
p. 649.)
Here, a claim based on failure to file within the claims filing period of the Probate
Code was mentioned in conjunction with the statute of limitations under section 366.2,
but was not presented as an independent defense. Accordingly, we conclude that this
issue was not sufficiently preserved for appeal as an independent basis for rejecting
Dacey‟s breach of contract claim.
The estate asserts that, even if the issue was not sufficiently preserved, it could
raise this issue for the first time on appeal because Dacey‟s failure to file a claim
represents an incurable defect in Dacey‟s pleading. (See Falahati v. Kondo (2005) 127
Cal.App.4th 823, 831, fn. 18.) The estate acknowledges that older cases have held that
this particular defect cannot be raised for the first time on appeal (e.g., Falkner v. Hendy
(1895) 107 Cal. 49, 53), but maintains that the rationale for concluding there was waiver
does not apply to the present case because Dacey had the opportunity to supply “the
requisite pleading or proof” (see Burmester v. McNear (1919) 42 Cal.App. 527, 529).
We do not agree that the failure to plead compliance with Probate Code section
9100 represents an incurable defect. Courts have held that in some limited circumstances
the time requirement for filing a creditor‟s claim can be waived or the estate may be
estopped from relying on it when the decedent‟s representative has induced a creditor not
to file a timely claim. (See, e.g., Varney v. Superior Court, supra, 10 Cal.App.4th at
pp. 1101-1102 [tolled the expiration of time for filing proposed creditor‟s claim]; see also
Satterfield v. Garmire (1967) 65 Cal.2d 638, 645; Katz v. A.J. Ruhlman & Co. (1945) 69
Cal.App.2d 541, 545-546; Estate of Sturm (1988) 201 Cal.App.3d 14, 18.)
In the present case, the estate failed to assert that Dacey‟s claims were barred
solely on the basis of his failure to comply with Probate Code section 9100 and the trial
44
court never had the opportunity to consider whether the facts of the present case
supported a finding that the period should be tolled or that estoppel applies. Accordingly,
we conclude that the estate failed to preserve for appeal the issue that Dacey‟s failure to
comply with the Probate Code and file a timely creditor‟s claim bars his breach of
contract claim.
B. The Application of Section 366.2 to Dacey’s Breach of Contract Claim
1. Background
The estate argued in its summary judgment motion that Dacey‟s claims were timebarred under section 366.2, because under this statute Dacey had to file his action within
one year of Goldstein‟s death. Goldstein died on January 2, 2001, and Dacey did not file
his complaint until more than five years later on January 12, 2006.
The trial court rejected this argument and cited Estate of Yool (2007) 151
Cal.App.4th 867, 877 (Yool), for holding that section 366.2 does not apply “if the
wrongdoing does not precede the decedent‟s death.” The lower court noted that section
366.2 may bar the claim, even if the cause of action has not accrued, if the liability was
against the decedent and existed at the time of death. (See Bradley v. Breen (1999) 73
Cal.App.4th 798; Battuello v. Battuello (1998) 64 Cal.App.4th 842, superseded by
§ 366.3.) Since undisputed facts established that Goldstein did not breach the dissolution
agreement, the court determined that Dacey had no cause of action existing at the time of
Goldstein‟s death and section 366.2 did not apply.
The estate argues that the lower court erred in its interpretation and application of
section 366.2.
2. Standard of Review
The estate is challenging the lower court‟s interpretation of the statute and the
application of section 366.2 to undisputed facts. It is well established that we apply a de
novo standard of review to the construction of a statute based on undisputed facts.
(Shapiro v. Board of Directors (2005) 134 Cal.App.4th 170, 178.)
When interpreting a statute, “[o]ur fundamental task . . . is to ascertain the intent
of the lawmakers so as to effectuate the purpose of the statute.” (Day v. City of Fontana
45
(2001) 25 Cal.4th 268, 272.) When determining what the Legislature meant, “ „[t]he
statutory language itself is the most reliable indicator, so we start with the statute‟s
words, assigning them their usual and ordinary meanings, and construing them in context.
If the words themselves are not ambiguous, we presume the Legislature meant what it
said, and the statute‟s plain meaning governs. On the other hand, if the language allows
more than one reasonable construction, we may look to such aids as the legislative
history of the measure and maxims of statutory construction. In cases of uncertain
meaning, we may also consider the consequences of a particular interpretation, including
its impact on public policy.‟ ” (Martinez v. Combs (2010) 49 Cal.4th 35, 51.)
3. Interpreting Section 366.2
a. The Statute’s Language
Section 366.2 is a “general statute of limitations for all claims against a decedent.”
(Wagner v. Wagner (2008) 162 Cal.App.4th 249, 255.) Section 366.2, subdivision (a)
provides: “(a) If a person against whom an action may be brought on a liability of the
person, whether arising in contract, tort, or otherwise, and whether accrued or not
accrued, dies before the expiration of the applicable limitations period, and the cause of
action survives, an action may be commenced within one year after the date of death, and
the limitations period that would have been applicable does not apply.”
Subdivision (b) of section 366.2 states that the limitations period “shall not be
tolled or extended for any reason except as provided in any of the following, where
applicable: [¶] . . . [¶] (2) Part 4 (commencing with Section 9000) of Division 7 of the
Probate Code (creditor claims in administration of estates of decedents).”
Since it is undisputed that Dacey filed his lawsuit more than one year after
Goldstein‟s death, his breach of contract claim against the estate is time barred if section
366.2, subdivision (a) applies. It is also indisputable that Goldstein‟s obligation to Dacey
arose from the dissolution agreement and, prior to his death, he was personally liable to
Dacey for a percentage of the fee recovery from the flood cases. The litigation in the
flood cases was still pending at the time of Goldstein‟s death; therefore, the contractual
obligation regarding the fee recovery was in existence at the time of Goldstein‟s death,
46
but had not accrued. It is undisputed that Goldstein never repudiated or otherwise
breached the dissolution agreement while alive. Rather, the administrator, acting on
behalf of the estate, breached the dissolution agreement.
The estate argues that a personal liability of the person means any legal obligation,
and parties to a contract become liable to perform the covenants contained in the contract
at the time the contract is executed, “notwithstanding that no right of action could accrue
until a breach.” (Chambers v. Farnham (1920) 182 Cal. 191, 195.) The estate points out
that the legal obligation under the dissolution agreement arose prior to Goldstein‟s death.
It contends that this legal obligation was personal to Goldstein and therefore the statute of
limitations under section 366.2, subdivision (a) applies to Dacey‟s breach of contract
claim.
The estate reconciles the above interpretation of the statute with the language in
section 366.2, subdivision (a), which states the “cause of action survives” the decedent‟s
death, by maintaining that the use of the words “cause of action” does not mean that a
complete cause of action must exist at the time of the decedent‟s death. Under the
primary right theory, a cause of action is defined as “ „(1) a primary right possessed by
the plaintiff, (2) a corresponding duty imposed upon the defendant, and (3) a wrong done
by the defendant which is a breach of such primary right and duty.‟ ” (Boblitt v. Boblitt
(2010) 190 Cal.App.4th 603, 794.) The estate declares that the Legislature‟s insertion of
the words “not accrued” into the statute indicates its intent not to require the third
element, wrongdoing by the defendant, to have occurred by the time of the decedent‟s
death as long as the legal obligation under the contract with the decedent survives the
decedent‟s death.
Dacey disagrees; he asserts that there was no cause of action that survived
Goldstein‟s death since Goldstein did not breach the dissolution agreement. Dacey
contends that postdeath misconduct can be committed only by someone other than the
decedent, and section 366.2, subdivision (a) never applies to claims involving postdeath
misconduct. Dacey points out there is nothing in the language indicating that only some
47
of the elements of a cause of action have to be in existence at the time of the decedent‟s
death.
b. The Meaning of the Words in the Statute
Generally, a statute of limitations begins upon the accrual of a cause of action, but
the Legislature is free for policy reasons to adopt a different rule. (§ 312; Hamilton v.
Asbestos Corp (2000) 22 Cal.4th 1127, 1144-1145.) Section 366.2 provides that “an
action may be brought on a liability of the person . . . whether accrued or not accrued” as
long as the cause of action survives death. (§ 366.2, subd. (a).)
An action is defined as “an ordinary proceeding in a court of justice by which one
party prosecutes another for the declaration, enforcement, or protection of a right, the
redress or prevention of a wrong, or the punishment of a public offense.” (§ 22.) At oral
argument, the estate argued that, at the time of Goldstein‟s death, Dacey could have
brought an action for declaratory relief based on Goldstein‟s contractual obligation to
him.
We agree with the estate that Goldstein was liable under contract to Dacey and, at
the time of Goldstein‟s death, Dacey possibly had a creditor‟s claim. We, however, do
not agree that a contractual liability is the same as “liability of the person[.]” (§ 366.2,
subd. (a).) “Liability of the person, or „personal liability‟ means „[l]iability for which one
is personally accountable and for which a wronged party can seek satisfaction out of the
wrongdoer‟s personal assets.‟ (Black‟s Law Dict. (8th ed. 2004) p. 993.)” (Yool, supra,
151 Cal.App.4th at p. 875.) At the time of Goldstein‟s death, there was no wronged
party, and Dacey could not have filed any cause of action against Goldstein based on
contract or tort.
The estate contends that the word “liability” of the decedent is used in Probate
Code section 9000, subdivision (a)(1) to mean any “ „[c]laim‟ ” that is a demand for
payment, “whether due, not due, accrued or not accrued, or contingent, and whether
liquidated or unliquidated . . . .” It claims that the creditors‟ claim statute in the Probate
Code and the statute of limitations under Code of Civil Procedure section 366.2,
subdivision (a) are to be considered together and therefore the definition of “liability” in
48
Probate Code section 9000 applies to section 366.2. The word “liability” in section
366.2, according to the estate, refers solely to the underlying obligation.
The estate‟s argument ignores that the Legislature provided a special definition for
“liability” in Probate Code section 9000, but the Legislature did not indicate that this
special definition has any application to statutes outside the Probate Code. Probate Code
section 9000 is concerned with claims by creditors, and a creditor is any “person who
may have a claim against estate property.” (Prob. Code, § 9000, subd. (c), italics added.)
Under a claims statute, such as Probate Code section 9100, the party has an obligation to
file a claim if there is any liability or legal obligation. Section 366.2, a statute of
limitations under the Code of Civil Procedure, is not concerned with possible claims
against estate property. Rather, this statute, when considered within the context of
contracts, applies to claims against the estate on all causes of action on a decedent‟s debts
when the causes of action survive the decedent‟s death. Thus, under the statute of
limitations, a party has an obligation to file an action when the party fails to perform as
promised.
The estate focuses on the language in section 366.2, subdivision (a), which states
that the cause of action against the decedent does not have to have accrued by the time of
the decedent‟s death. This language, according to the estate, shows that the Legislature
intended section 366.2, subdivision (a) to apply when a cause of action is incomplete at
the time of the decedent‟s death, such as when the wrongdoing or failure to perform
occurs after the decedent‟s death. The estate emphasizes that the present case, which
involves a contract, differs from other cases that have held that the misconduct must be
committed by the decedent because in those cases there was no contractual obligation or
liability personal to the decedent before the decedent‟s death. (See, e.g., Shewry v. Begil
(2005) 128 Cal.App.4th 639, 644 [the Medi-Cal reimbursement claim existed “only by
right of statute, and only against the deceased person‟s estate” and therefore statutory
liability arose “only upon the decedent‟s death” and “could not have been brought against
the decedent”].)
49
We are not persuaded by the estate‟s argument. If the Legislature did not intend to
require the entire cause of action to survive the decedent‟s death, it would have stated that
the claim or liability, not the cause of action, had to survive the decedent‟s death.14 “A
cause of action for breach of contract does not accrue before the time of breach.” (See
e.g., Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 488; Kroff v. Larson
(1985) 167 Cal.App.3d 857, 860-861.)
We conclude that the correct construction of the words “accrued” and “not
accrued,” which gives effect to each word in the statute without severely limiting the
meaning of “cause of action,” is the interpretation set forth in Ferraro v. Camarlinghi
(2008) 161 Cal.App.4th 509. The Ferraro court determined that section 366.2,
subdivision (a) did not apply to the claim of a breach of an agreement to make a specific
testamentary disposition. The court concluded that the claim “could not come into
existence until decedent died having failed to make provision in accordance with her
alleged agreement . . . .” (Ferraro, at p. 554.) When explaining the meaning of “not
accrued” in section 366.2, subdivision (a), and attempting to harmonize it with the latter
part of the statute requiring the cause of action to survive the death of the decedent, the
court concluded that “not accrued” referred to claims fully accrued, but not accrued until
after the decedent‟s death under the delayed discovery rule. (Ferraro, at p. 554.) Under
Ferraro’s reasoning, the breach or misconduct must occur prior to the decedent‟s death,
but the claim does not have to be discovered while the decedent is alive. (See also
Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397-398 [discusses accrual under the
discovery rule].)
Although some courts have applied section 366.2, subdivision (a) to situations
where the damages were not ascertainable or suffered until after the decedent‟s death
(see, e.g., Bradley v. Breen, supra, 73 Cal.App.4th 798; Dawes v. Rich (1997) 60
14
As we discuss subsequently, some cases involving torts committed by the
decedent hold that the element of damages does not have to be suffered prior to the
decedent‟s death. (See, e.g., Bradley v. Breen, supra, 73 Cal.App.4th 798.) We express
no opinion as to whether damages have to occur prior to the decedent‟s death for section
366.2, subdivision (a) to apply, since that issue is not before us.
50
Cal.App.4th 24, 32-36; Yool, supra, 151 Cal.App.4th at p. 876-877;15 Battuello v.
Battuello, supra, 64 Cal.App.4th 84216), we are not aware of any case that has applied the
15
The court in Yool, supra, 151 Cal.App.4th 867 provided two independent
reasons for concluding that section 366.2, subdivision (a) does not apply. In Yool, a
mother and a daughter took title to a house and, after the mother died, the daughter
claimed that the mother “had provided no consideration for the property, never intended
to take beneficial title, and accepted legal title as a mere accommodation to facilitate
financing.” (Yool, at p. 871.) The daughter asserted a resulting trust in her favor, and the
appellate court held that section 366.2, subdivision (a) did not bar the claim. (Yool, at
p. 875.) The court explained that the allegations did not state a cause of action “ „on a
liability of the person‟ ” as required by section 366.2, subdivision (a), because “the
trustee holds title, but does not own the property in question [and, therefore,] there is no
issue of personal liability or resort to the trustee‟s assets.” (Yool, at p. 875.) The court
held that the statute of limitations begins to run when the trustee repudiates the trust, and
repudiation occurs when the beneficiary demands the property from the trustee and the
trustee refuses to convey the property or account for it. (Id. at pp. 875-876.) The court
explained that by definition, an action for a resulting trust seeks only to convey legal title
to property that the claimant (not the decedent) already beneficially owns. (Ibid.)
The court in Yool also determined that an independent reason for rejecting the
application of section 366.2, subdivision (a) was that this statute “specifically
contemplates an action that may be brought against a person prior to his or her death.
Under the facts of this case there was no cause of action, accrued or not yet accrued, that
existed at the time of decedent‟s death within the sense of section 366.2 and hence no
action that could have been commenced on that cause.” (Yool, supra, 151 Cal.App.4th at
pp. 876-877.) The court stressed that the mother had not repudiated the resulting trust or
shown any resistance to conveying the property prior to her death. (Id. at p. 877.) The
court observed that the facts established that the mother would have conveyed title to the
daughter had the daughter asked her to do so. (Ibid.) The court explained that the proper
interpretation of “not accrued” in section 366.2 was that the misconduct must have
occurred prior to the decedent‟s death, but the damages do not have to occur until after
the decedent‟s death. (Yool, at p. 877.) The court concluded, “Simply put, the cause of
action had not accrued, nor did it exist.” (Ibid.)
16
The court in Battuello v. Battuello, supra, 64 Cal.App.4th 842 declared that
section 366.2 generally would not apply to a cause of action alleging a promise to leave
certain property in a will because such a cause of action “neither „accrue[s]‟ prior to the
promisor‟s death nor „survives‟ his death.” (Battuello, at p. 846.) The court concluded
an exception to this general rule occurred in the case before it because the promisor had
during his lifetime made a transfer of the promised property to another and therefore the
cause of action did exist prior to the decedent‟s death. (Ibid.) The court then appeared to
contradict its statement that the damage had to occur prior to the decedent‟s death when it
51
statute when the decedent did not commit the injury or did not already have a collectible
debt at the time of death. Thus, for example, in Bradley, the decedent pled guilty to a
criminal charge of lewd acts with a minor and the minor sued him in civil court.
(Bradley, supra, at p. 800.) After the decedent died, the minor sued the defendants,
alleging that they aided and abetted the molestation. (Ibid.) The defendants crosscomplained against the estate for indemnity and other relief. (Ibid.) The appellate court
rejected the argument that it was inequitable to apply section 366.2 to a cross-action for
equitable indemnity simply because the defendants seeking indemnity from the estate had
not paid a judgment or settlement within one year of the decedent‟s death and could not
have filed their claims any sooner. (Bradley, supra, at p. 805.) In Bradley, the decedent
committed the molestation; thus, the defendants‟ cause of action against the estate––
unlike the present case––was based on the decedent‟s wrongful conduct.
The estate cites Wagner v. Wagner, supra, 162 Cal.App.4th 249 when urging a
construction of section 366.2, subdivision (a) that does not require the decedent to have
committed the actual injury. In Wagner, the trustee of her deceased mother‟s living trust
requested an order permitting her to pay herself out of trust funds for past care of her
mother more than one year after her mother died, and her brother objected on the basis
that the request was untimely. (Id. at p. 252.) The court held that section 366.2,
subdivision (a) barred the claim by the daughter trustee against the decedent‟s living trust
for compensation. (Wagner, at p. 256.) Wagner’s rendition of the facts did not indicate
that the mother had engaged in any misconduct prior to her death, and apparently this was
not an issue raised on appeal. In rejecting the trustee daughter‟s argument that she
satisfied the statute because she had formed the claim against the trust in her own mind
stated in a footnote that the statute of limitations applied even if a transaction prior to
death “could only potentially harm” the plaintiff, because section 366.2 “governs causes
of action that exist at the time of a person‟s death „whether accrued or not accrued.‟ ”
(Battuello, supra, at p. 847, fn. 1.) Although the court was not clear whether the damage
had to occur prior to the decedent‟s death for section 366.2 to apply, it did plainly hold
that the misconduct or breach had to be committed by the decedent before his or her
death.
52
and knew about it as the trustee within the statutory period, the court announced, “ „This
uniform one-year statute of limitations applies to actions on all claims against the
decedent which survive the decedent‟s death.‟ ” (Ibid.)
Wagner v. Wagner, supra, 162 Cal.App.4th 249 did not address the question posed
here, which is whether the decedent has to commit the breach of contract for section
366.2, subdivision (a) to apply. It is axiomatic that opinions are not authority for issues
not considered. (Amwest Surety Ins. Co. v. Wilson (1995) 11 Cal.4th 1243, 1268.)
Furthermore, Wagner differs significantly from the present case because the mother in
Wagner actually owed the daughter a debt at the time of her death and therefore, at the
time of the mother‟s death, the daughter did have a cause of action on her mother‟s debt.
In contrast to the situation in Wagner v. Wagner, supra, 162 Cal.App.4th 249,
Dacey did not have a cause of action on a debt when Goldstein died, because Goldstein‟s
obligation to Dacey was contingent upon the flood cases resulting in a settlement or a
victory for the plaintiffs. Neither event had occurred at the time of Goldstein‟s death. At
the time of Goldstein‟s death, Dacey had a claim of a potential debt based on the
dissolution agreement. Since Dacey had no cause of action against Goldstein at the time
of his death, section 366.2, subdivision (a) does not apply. 17
Our interpretation of section 366.2 does not violate the public policy of protecting
the decedent‟s estate from creditors‟ stale claims. When a party has a claim based on a
contract with the decedent––no matter whether the obligation has come due or the breach
has occurred––Probate Code section 9000 et seq. will operate to ensure that stale
creditors‟ claims will not be presented years later. When the decedent actually owes
money at the time of his or her death and does not pay it or acts in some manner to
repudiate a contractual obligation, section 366.2, subdivision (a) will apply. We do not
believe that the Legislature intended section 366.2 to apply to mere claims, but intended
17
We need not consider the application of section 366.2, subdivision (a) where
the debt is enforceable against the decedent before his or her death, but a different party
commits the actual breach or refuses to pay the debt. In the present case, Dacey had no
cause of action for an unpaid debt at the time of Goldstein‟s death and Goldstein did not
breach or repudiate his contract with Dacey.
53
the statute to apply “ „in any action on a debt of the decedent . . . .‟ ” (Collection Bureau
of San Jose v. Rumsey (2000) 24 Cal.4th 301, 308, citing the Dec. 1989 Cal. Law
Revision Com.)
At the time of his death, Goldstein had a liability, but did not actually owe Dacey
any money. It would be unfair to bar Dacey‟s claim for breach of contract when he never
had any cause of action for debt against Goldstein and never had a cause of action against
Goldstein for breach of contract. As the estate argues, both section 366.2 and Probate
Code section 9000 et seq. are designed to accomplish the Legislature‟s goal of promoting
the prompt administration of estates, but they do not address the same liabilities: The
statute of limitations cuts off the time for asserting a claim against the decedent‟s estate
based on a cause of action that existed against the decedent before the decedent‟s death.
The Probate Code provides a method for the timely handling of a creditor‟s claim based
on a liability or legal obligation of the decedent.
Accordingly, we hold that section 366.2 does not apply in the present case where
the debt was not enforceable against Goldstein while he was alive and the breach of the
contract occurred after Goldstein‟s death.18
18
We need not address the arguments regarding the application of section 366.2
based on Dacey‟s assertion that he was not pursuing a contract claim but seeking to
recover specific property from Goldstein‟s estate. As already discussed, we agree with
the trial court‟s ruling that the flood cases did not belong to the partnership and therefore
Dacey had no property interest in these cases; the flood cases had been legally assigned
to Goldstein. We also do not need to consider the estate‟s arguments that, even if Dacey
prevailed on his claim that he was seeking to recover specific property, section 366.2
applies. As already stressed, we reject Dacey‟s argument that he had a right to recover
specific property and, given that holding, the sole issue remaining for our consideration
was the application of section 366.2 to his breach of contract claim.
54
DISPOSITION
The judgment is affirmed. Dacey is to pay the costs of his appeal and the estate is
to pay the costs of its cross-appeal.
_________________________
Lambden, J.
We concur:
_________________________
Kline, P.J.
_________________________
Richman, J.
Dacey v. Taraday, et al. (A125080 & A125670)
55
Trial Court:
San Francisco Superior Court
Trial Judges:
Hon. James J. McBride
Hon. Peter J. Busch
Hon. James L. Warren
Attorneys for Plaintiff and Appellant:
Dacey & Sitkin
James M. Sitkin
John J. Dacey
Nielsen, Haley & Abbott
James C. Nielsen
Jennifer S. Cohn
Attorneys for Defendants and Respondents:
Downey Brand
William R. Warne
Richard K. Sueyoshi
Cassandra M. Ferrannini
Bien & Summers
Elliot L. Bien
Amy E. Margolin
Reed Smith
Paul D. Fogel,
Raymond A. Cardozo
Freidberg & Parker
Port J. Parker, Esq.
Suzanne M. Alves
56
