VALLEY TITLE COMPANY, Petitioner, v. The SUPERIOR COURT OF SANTA CLARA COUNTY, Respondent; HANOVER INSURANCE COMPANY et al., Real Parties in Interest.
On the motion of cross-defendant Don J. Avila in the Santa Clara County Superior Court action numbered 337093, the court entered its order disqualifying James F. Matthews and his law firm from acting as attorney for Valley Title Company (Valley) because of a conflict of interest. On the application of Valley we issued an alternative writ of mandate for the purpose of determining the order's validity. Valley's application is opposed by Avila, defendant Insurance Company of North America (I N A), and defendant and cross-complainant Hanover Insurance Company (Hanover).
We have considered the record and the briefs of the several parties. We conclude that the superior court did not err, and that the peremptory writ should be denied.
Our reasons, as required by article VI, section 14, of the state's Constitution, follow.
Since they appear to have been overlooked by some of the parties, we first set forth the procedural rules by which they, and we, are here bound.
“When a finding of fact is attacked on the ground that there is no substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the finding of fact․ [¶] When two or more inferences can reasonably be deduced from the facts, a reviewing court is without power to substitute its deductions for those of the trial court.” (Green Trees Enterprises, Inc. v. Palm Springs Alpine Estates, Inc., 66 Cal.2d 782, 784–785, 59 Cal.Rptr. 141, 427 P.2d 805.)
“ ‘An appellate court will not disturb the implied findings of fact made by a trial court in support of an order, any more than it will interfere with express findings upon which a final judgment is predicated.’ ” (Griffith Co. v. San Diego Col. for Women, 45 Cal.2d 501, 507–508, 289 P.2d 476; emphasis added.)
Uncontradicted testimony of a witness “may, of course, be disbelieved if there is any rational ground for doing so, and the interest of a party in the result of a case will in some circumstances justify the trier of fact in disregarding his testimony” (Leonard v. Watsonville Community Hosp., 47 Cal.2d 509, 518, 305 P.2d 36; and see Hicks v. Reis, 21 Cal.2d 654, 659–660, 134 P.2d 788), and, as noted, in drawing contrary inferences.
And an unsworn statement or admission against interest, of a party or his attorney in the course of a trial or other proceeding, may be treated as evidence of the truth of the statement or admission. (Witkin, Cal. Evidence (2d ed. 1966) The Hearsay Rule, §§ 505–506, pp. 475–477.)
In our consideration whether the trial court's express and implied findings of fact are supported by substantial evidence and by the law, we state the evidence as it reasonably could have been, and presumably was, found true by the trial court under these rules. It is of no consequence that the court, believing other witnesses, and drawing contrary inferences, might have reached a different conclusion.
Valley was in the business of insuring real estate titles and handling real estate escrow transactions. I N A and Hanover had written policies of “fidelity” insurance agreeing to indemnify Valley against loss or legal liability, proximately resulting from fraud or dishonesty of its employees. (It is of significance that the coverage related only to employee fraud and dishonesty, and not to employee negligence.) Avila was employed by Valley as an escrow officer and manager of one of its branch facilities. One Robert C. Bartels, a real estate investment advisor or operator, transacted much business with Valley, having been involved in about 200 escrow transactions.
In the early 1970's, around 30 to 40 lawsuits seeking damages of many millions of dollars were commenced against Valley, Avila, and Bartels. Each action was premised upon alleged fraud and dishonesty of Avila in the course of his employment by Valley consisting, among other things, of a conspiracy with Bartels to steal funds belonging to others in Valley's escrow accounts. Valley's claimed liability was based upon the doctrine of respondeat superior and its employment of Avila.
Upon the filing of the actions (hereafter sometimes the third-party actions), Valley discharged Avila from his employment. Valley also made demand upon I N A and Hanover, among other things, for indemnification under their policies, against liability for Avila's fraud and dishonesty as might subsequently be determined. Upon such indemnification for losses or liability from Avila's fraud or dishonesty, the insurers would, as is well known, have subrogation or equitable indemnity rights over against Avila.
Valley and Avila entered upon their defenses of the third-party actions with separate attorneys, Valley being represented by the above mentioned James F. Matthews, and Avila by one Stephen L. Newton. However, before long Avila found himself unable financially to support his defenses by Newton. Valley offered to “assume his defense in the various lawsuits,” through its attorney, Matthews, who joined in the proposal. (It will be recalled that Matthews was later the subject of the superior court's order of disqualification here under review.) The offer was accepted.
In the course of the dual representation it was to Matthews' client Valley's interest to establish fraud and dishonesty of Avila, thus to secure indemnification under the insurance policies. At the same time it was in the interest of Matthews' client Avila not to be found guilty of such fraud or dishonesty.
Upon taking over Avila's defense in the third-party actions, Matthews knew “that there was a conflict of interest ․” In the superior court such a conflict of interest was conceded by him. Asked by the court if, “while you were representing Mr. Avila, it was well known ․ to yourself and Valley that there was a conflict of interest,” Matthews responded, “Oh, absolutely, ․” He had elsewhere conceded that upon commencement of his representation of Avila “there was a conflict of interest on the basis of possible rights of equitable indemnity which Valley might have against Avila,” a conflict which he described as “obvious.” And the evidence otherwise patently manifested such a conflict.
On September 17, 1975, and about three months after Matthews had entered upon his dual representation, he commenced the instant action numbered 337093 against I N A, Hanover, and others. The parties plaintiff were Valley, and others, and Avila who had been joined without his knowledge or consent. It sought (1) an adjudication that Valley was “entitled to indemnity” and to be “saved harmless” as to judgments entered in the third-party actions against Valley based upon Avila's fraud and dishonesty, and (2) that Hanover and I N A were bound to defend Valley in such actions. Service of summons in the action against I N A and Hanover was deferred for some tactical reason, and the action lay dormant until revived about three years later.
By the action, as in the third-party actions, it was in Valley's interest that Matthews establish therein Avila's fraud and dishonesty while, of course, it was to Avila's interest that the absence of fraud or dishonesty be proved.
(It is unclear from the record why Avila was non-consensually joined as a party plaintiff in the action. He was thus, in effect, suing for indemnity from the insurers, against judgments which might be recovered against himself and Valley based upon his own fraud and dishonesty. However, further consideration of the circumstance is found irrelevant, or at least unnecessary, to our determination of the cause.)
During his lengthy representation of Avila, according to Matthews: “[W]henever Mr. Avila asked me questions relating to his own rights, I referred him to his personal attorneys, ․ [The record establishes no such personal representation, only that Avila was without funds for such representation.] At all times I have advised him ․ that my allegiance lies to Valley, and that I cannot advise him as to matters of rights between he and Valley.” And: “From time to time Mr. Avila would ask me about the implications of a bond claim. And he would specifically ask me what—for one thing, he asked me what would the carriers be doing․ And I indicated that he should discuss that with his counsel.” It was not my “job,” he said, to “explain to him what it meant to have a bond claim pending.” (Parenthetically, we here note that: “Divergence in interest requires counsel to disclose to each of his jointly represented clients whatever is necessary to enable each of them to make intelligent, informed decisions regarding the subject matter of their joint representation.” (Spindle v. Chubb/Pacific Indemnity Group, 89 Cal.App.3d 706, 713, 152 Cal.Rptr. 776, and see authority there collected.))
And during the years of his representation by Matthews in the many third-party actions, Avila, as might be expected, had “numerous discussions” with, and gave “extensive information” to, him about the cases.
In the ensuing trials, juries reached varying results; one found that Avila was, others that he was not, “guilty of fraud or dishonesty,” and still others that “there was negligence, not fraud.”
On July 18, 1978, three years after commencement of his representation of both Valley and Avila, Matthews withdrew from the representation of Avila. By letter Avila was told: “Valley Title is unwilling to continue to pay for your representation,” that a conflict of interest had finally appeared in the “Bartels-related cases,” and that “In the agreement of June 23, 1975, we provided that, should it appear that there was a conflict of interest for us to represent both Valley and you, we would be free to withdraw as your counsel upon fifteen days' notification, and that Valley would have no further obligation or liability to represent you or retain or pay for your representation.” (In the superior court, it will be remembered, Matthews conceded that there had been an obvious conflict in the “Bartels-related cases” from the commencement of his representation of Avila.)
On or about June 12, 1979, Valley's instant and theretofore dormant action against I N A and Hanover, had been reactivated by the filing of a first amended complaint. Avila, without his knowledge or consent, was this time eliminated as a plaintiff of the action. The first amended complaint continued to seek an adjudication that the insurance companies were (1) bound to defend, or to pay the defense costs of, the third-party actions, and (2) were bound to indemnify Valley against liability for damages resulting from Avila's fraudulent and dishonest conduct.
Upon service of the first amended complaint upon I N A and Hanover, Hanover filed its cross-complaint against Avila, thus bringing him back into the action. By the cross-complaint Hanover sought indemnity, or subrogation, against Avila for such sums as it might be obliged to pay under its policy because of his fraud or dishonesty.
Avila's motion to disqualify Matthews from representing Valley in the instant action because of a conflict of interest followed five months later, at the trial's commencement.
On Avila's motion, the superior court expressly found that a conflict of interest had existed during Matthews' dual representation of Valley and Avila. And it impliedly found in favor of Avila, the prevailing party, on his motion as to all facts necessarily supportive of the ruling. (See Griffith Co. v. San Diego Col. for Women, supra, 45 Cal.2d 501, 507–508, 289 P.2d 476; Mathewson v. Mathewson, 207 Cal.App.2d 532, 535, 24 Cal.Rptr. 466; People v. Tannehill, 193 Cal.App.2d 701, 706, 14 Cal.Rptr. 615.)
Before entering upon our discussion whether the trial court's express and implied findings were supported by substantial evidence, we set forth the long-existent, and here applicable, basic law of California and the nation.
“The relation of attorney and client is one of highest confidence and as to professional information gained while this relation exists, the attorney's lips are forever sealed, and this is true notwithstanding his subsequent discharge by his client and notwithstanding the lack of any justification for such action. [¶] ‘The obligation to represent the client with undivided fidelity does not end with the matter in which the lawyer may have been employed. Thenceforth the lawyer must refrain not only from divulging the client's secrets or confidences, but also from acting for others in any matters where such secrets or confidences or knowledge of the client's affairs acquired in the course of the earlier employment can be used to the former client's disadvantage.’ ․ ‘It is the general and well-settled rule that an attorney who has acted as such for one side cannot render services professionally in the same case to the other side, nor, in any event, whether it be in the same case or not, can he assume a position hostile to his client, and one inimical to the very interests he was engaged to protect; and it makes no difference, in this respect, whether the relation itself has been terminated, for the obligation of fidelity and loyalty still continues․ The test of inconsistency is not whether the attorney has ever appeared for the party against whom he now proposes to appear, but it is whether his accepting the new retainer will require him, in forwarding the interests of his new client, to do anything which will injuriously affect his former client in any matter in which he formerly represented him, and also whether he will be called upon, in his new relation, to use against his former client any knowledge or information acquired through their former connection․ An attorney cannot use the knowledge acquired confidentially from his client in trafficking with his client's interests.’ ” (Wutchumna Water Co. v. Bailey, 216 Cal. 564, 571–572, 15 P.2d 505, and see authority there collected; see also People ex rel. Deukmejian v. Brown, 29 Cal.3d 150, 155–156, 172 Cal.Rptr. 478, 624 P.2d 1206; Sheffield v. State Bar, 22 Cal.2d 627, 630–631, 140 P.2d 376.)
“The relevant test for disqualification is whether the former representation is ‘substantially related’ to the current representation․ The interest to be preserved by preventing attorneys from accepting representation adverse to a former client is the protection and enhancement of the professional relationship in all its dimensions. It is necessary to preserve the value attached to the relationship both by the attorney and by the client. These objectives require a rule that prevents attorneys from accepting representation adverse to a former client if the later case bears a substantial connection to the earlier one․ [¶] Perhaps the most important facet of the professional relationship served by this rule of disqualification is the preservation of secrets and confidences communicated to the lawyer by the client. If there is a reasonable probability that confidences were disclosed which could be used against the client in later, adverse representation, a substantial relation between the two cases is presumed. Confidentiality, however, is not the only aspect of the professional tie preserved by the disqualification rule. [¶] Both the lawyer and the client should expect that the lawyer will use every skill, expend every energy, and tap every legitimate resource in the exercise of independent professional judgment on behalf of the client and in undertaking representation on the client's behalf. That professional commitment is not furthered, but endangered, if the possibility exists that the lawyer will change sides later in a substantially related matter. Both the fact and the appearance of total professional commitment are endangered by adverse representation in related cases. From this standpoint it matters not whether confidences were in fact imparted to the lawyer by the client. The substantial relationship between the two representations is itself sufficient to disqualify․ The test does not require the former client to show that actual confidences were disclosed. That inquiry would be improper as requiring the very disclosure the rule is intended to protect․ The inquiry is for this reason restricted to the scope of the representation engaged in by the attorney. It is the possibility of the breach of confidence, not the fact of the breach, that triggers disqualification․ [¶] Once the attorney is found to be disqualified, both the attorney and the attorney's firm are disqualified from suing the former client․ Confidential information possessed by one attorney may or may not have been shared with other members of the firm, but the firm as a whole is disqualified whether or not its other members were actually exposed to the information.” (Trone v. Smith (9th Cir.) 621 F.2d 994, 998–999, fn. omitted; and see authority there collected.)
To the same general effect see Yorn v. Superior Court, 90 Cal.App.3d 669, 674–677, 153 Cal.Rptr. 295, Klemm v. Superior Court, 75 Cal.App.3d 893, 142 Cal.Rptr. 509, passim, Industrial Indem. Co. v. Great American Ins. Co., 73 Cal.App.3d 529, 534–538, 140 Cal.Rptr. 806, Earl Scheib, Inc. v. Superior Court, 253 Cal.App.2d 703, 706–710, 61 Cal.Rptr. 386.
Also apposite are the Rules of Professional Conduct, which by statute are “binding upon all members of the State Bar.” (Bus. & Prof.Code, § 6076 et seq.) Rule 4–101: “A member of the State Bar shall not accept employment adverse to a client or former client, without the informed and written consent of the client or former client, relating to a matter in reference to which he has obtained confidential information by reason of or in the course of his employment by such client or former client.”
In the proceedings before this court Valley and Matthews contend “that there is no substantial evidence to support a finding that a conflict existed during the period of joint representation, ․”
The contention is manifestly invalid. It was, as we have by now repetitiously stated, to Valley's interest that Matthews establish Avila's fraud and dishonesty in each of the third-party actions, thus to entitle Valley to indemnity from I N A and Hanover for any loss or liability there established. On the other hand Matthews' duty to his client Avila was manifestly to avoid such a fraud and dishonesty adjudication with its attendant moral and social obloquy and liability to the third-party plaintiffs, or to Valley, or to I N A and Hanover under their subrogation or indemnity rights. And in the superior court Matthews had, as noted, conceded the existence of such a conflict of interest.
No reasonable trier of fact could have found otherwise.
It is contended that there were “no confidential communications between Avila and Matthews ․”
From the evidence, and rational inferences therefrom, the trial court reasonably found otherwise. In the many third-party actions Matthews had represented Avila, who testified, as noted, that he had given his attorney, Matthews, extensive information about the cases; such information was manifestly and, as a matter of law, confidential.
Moreover, the actual furnishing of confidential information was, and is, irrelevant. As stated in Trone v. Smith, supra, 621 F.2d 994, 999, “the underlying concern is the possibility, or appearance of the possibility, that the attorney may have received confidential information ․ that would be relevant ․ The test does not require the former client to show that actual confidences were disclosed․ It is the possibility of the breach of confidence, not the fact of the breach, that triggers disqualification. ” (Emphasis added.) To the same effect see Yorn v. Superior Court, supra, 90 Cal.App.3d 669, 675, 153 Cal.Rptr. 295, and Industrial Indem. Co. v. Great American Ins. Co., supra, 73 Cal.App.3d 529, 535–536, 140 Cal.Rptr. 806. “[T]he ethical prohibition against acceptance of adverse employment involving prior confidential information includes potential as well as actual use of such previously acquired information.” (Yorn v. Superior Court, supra, 90 Cal.App.3d p. 675, 153 Cal.Rptr. 295.)
And Galbraith v. The State Bar, 218 Cal. 329, 332–333, 23 P.2d 291, teaches that: “[T]he subsequent representation of another against a former client is forbidden not merely when the attorney will be called upon to use confidential information obtained in the course of the former employment, but in every case when, by reason of such subsequent employment, he may be called upon to use such confidential information.” (See also Ames v. State Bar, 8 Cal.3d 910, 919, 106 Cal.Rptr. 489, 506 P.2d 625; Kraus v. Davis, 6 Cal.App.3d 484, 489–490, 85 Cal.Rptr. 846.)
The rule “ ‘is designed not alone to prevent the dishonest practitioner from fraudulent conduct, but as well to preclude the honest practitioner from putting himself in a position where he may be required to choose between conflicting duties, ․’ ” (Ames v. State Bar, supra, 8 Cal.3d 910, 920, 85 Cal.Rptr. 846.)
We find nothing in the case of Croce v. Superior Court, 21 Cal.App.2d 18, 68 P.2d 369, of aid to Valley and Matthews. There an attorney had earlier been employed in defense of an action involving, unlike the case at bench, the common interest of two partners. The court found the higher authority of Wutchumna Water Co. v. Bailey, supra, 216 Cal. 564, 15 P.2d 505, and Galbraith v. The State Bar, supra, 218 Cal. 329, 23 P.2d 291, which involved conflicting interests, to be “not in point.” And, it has been said: “The continued viability of Croce has been questioned․ Nevertheless, even if Croce is still good law, it is inapplicable” in a case where the parties' interests were initially conflicting (Industrial Indem. Co. v. Great American Ins. Co., supra, 73 Cal.App.3d 529, 536, 140 Cal.Rptr. 806); “Even if Croce were applicable, we would have difficulty following it” (Goldstein v. Lees, 46 Cal.App.3d 614, 623, fn. 9, 120 Cal.Rptr. 253); and “The rule of Croce has not been followed in any other state and several more recent cases suggest that its rule may no longer be followed in California” (E. F. Hutton & Company v. Brown (S.D.Tex.) 305 F.Supp. 371, 393).
It is asserted by Valley and Matthews that contrary to the trial court's implied finding, the evidence establishes that “Avila expressly or impliedly consented to any adverse representation.”
The contention is based upon Matthews' letter of June 23, 1975, written upon his agreement to represent Avila in the third-party actions. It is argued that it was there pointed out that a conflict of interest would attend such representation, and that Avila, by acceptance of Matthews' representation with such knowledge, consented to any adverse representation.
The contention is unsupported by the letter. It nowhere stated that a conflict of interest would attend Matthews' proffered representation; instead it recited that “should it appear that there is a conflict of interest for us to represent Valley Title and Avila as well ․ we will be free to withdraw as [Avila's] counsel ․”
Moreover, we observe the rule that, unlike the case before us, “if the conflict is merely potential, there being no existing dispute or contest between the parties represented as to any point in litigation, then with full disclosure to and informed consent of both clients there may be dual representation at a hearing or trial.” (Klemm v. Superior Court, supra, 75 Cal.App.3d 893, 899, 142 Cal.Rptr. 509.) Even in such a case, according to rule 5–102, Rules of Professional Conduct, the consent of the client must be in writing; here there was none.
But where, as here, there is an actual, present, existing conflict between the parties, any consent to dual adverse representation by an attorney will be held invalid. As said in Klemm v. Superior Court, supra, 75 Cal.App.3d 893, 898, 142 Cal.Rptr. 509:
“Though an informed consent be obtained, no case we have been able to find sanctions dual representation of conflicting interests if that representation is in conjunction with a trial or hearing where there is an actual, present, existing conflict and the discharge of duty to one client conflicts with the duty to another․ As a matter of law a purported consent to dual representation of litigants with adverse interests at a contested hearing would be neither intelligent nor informed. Such representation would be per se inconsistent with the adversary position of an attorney in litigation, and common sense dictates that it would be unthinkable to permit an attorney to assume a position at a trial or hearing where he could not advocate the interests of one client without adversely injuring those of the other.”
In such a case the desire of the parties, or their informed, or uninformed, consent, will be transcended by the paramount “objective of maintaining public confidence in the impartiality of the courts and integrity of its professional bar” (Yorn v. Superior Court, supra, 90 Cal.App.3d 669, 677, 153 Cal.Rptr. 295), and by “ ‘considerations of ethics which run to the very integrity of our judicial process' ” (Comden v. Superior Court, 20 Cal.3d 906, 915, 145 Cal.Rptr. 9, 576 P.2d 971 [cert. den., 439 U.S. 981, 99 S.Ct. 568, 58 L.Ed.2d 652]).
Another of Valley's and Matthews' contentions is that “the motion to disqualify filed by Avila was not timely filed and should have been denied on that basis.”
Avila's motion was made at the trial's commencement, October 8, 1980. We find no record indication of service of Hanover's cross-complaint upon Avila; it appears to have been served only upon the attorneys for Valley and I N A. We are thus without any information as to when Avila actually reentered the instant action, and thus about the “timeliness” of his motion. However, for the purpose of our discussion we assume arguendo that it was not “timely filed” as contended.
In Earl Scheib, Inc. v. Superior Court, supra, 253 Cal.App.2d 703, 61 Cal.Rptr. 386, the trial court had denied a similar motion on the ground that it was “filed too late,” with prejudice to the adversary party. The appellate court, commenting (p. 707, 61 Cal.Rptr. 386) upon the “ ‘most sacred and confidential relationship’ ” involved, stated: “It seems clear to us from our review of the cases discussed above that a client or former client of an attorney can raise the issue of representation of conflicting interests in any one of several ways at any time while the action is pending.” (P. 709, 61 Cal.Rptr. 386, emphasis added.)
Other courts have expressed agreement: “The law secures the client the privilege of objecting at all times and forever to an attorney, solicitor, or counselor from disclosing information in a cause confidentially given while the relation exists.” (Emphasis added; Weidekind v. Water Co., 74 Cal. 386, 389, 19 P. 173; In re Cowdery, 69 Cal. 32, 50, 10 P. 47; Earl Scheib, Inc. v. Superior Court, supra, 253 Cal.App.2d 703, 708, fn. 1, 61 Cal.Rptr. 386.) Indeed, it has been held that a trial court has inherent power on its own initiative and at any time “to inquire into any appearance of impropriety ․ and even disqualify an attorney if that appears necessary.” (Klemm v. Superior Court, supra 75 Cal.App.3d 893, 901, fn. 4, 142 Cal.Rptr. 509; see People v. Superior Court (Greer), 19 Cal.3d 255, 261, fn. 4, 137 Cal.Rptr. 476, 561 P.2d 1164.)
And in such a case prejudice by reason of delay in raising the point will ordinarily not be heard as a defense to the motion. “We are ․ satisfied that in deciding whether an attorney should be permitted to continue to represent a client when the issue of a possible conflict is properly raised, the question of whether that client may have been prejudiced by reason of the delay by his former client in raising the issue, by reason of the time spent on the matter in the meantime or otherwise is not relevant. In such a case the question is whether the former client has been prejudiced. In the absence of any proof to the contrary, if it is established that the attorney is in fact undertaking to represent conflicting interests, injury to the former client must be presumed to have resulted by reason of such representation.” (Earl Scheib, Inc. v. Superior Court, supra, 253 Cal.App.2d 703, 709, 61 Cal.Rptr. 386.)
White v. Superior Court, 98 Cal.App.3d 51, 159 Cal.Rptr. 278, relied upon by Valley and Matthews, is inapposite. There the reviewing court found no violation of a confidential relationship. Instead it discerned a last-minute attempt to disqualify an attorney by “clearly a tactical maneuver,” which if successful would “corrode, prostitute and defeat the objective of the rule ․” (P. 55, 159 Cal.Rptr. 278.) Nor were the authorities from which we have quoted considered by the White v. Superior Court court. (See People v. Belleci, 24 Cal.3d 879, 888, 157 Cal.Rptr. 503, 598 P.2d 473.)
It is contended by Valley and Matthews that: “The court below abused its discretion  in failing to reopen discovery,  failing to grant a further continuance and  failing to grant an evidentiary hearing on the matters raised by Avila's motion to disqualify.”
We consider first the claimed failure to grant an evidentiary hearing. No request for such a hearing, or objection to a hearing on affidavits of the parties, was made until after the court had announced its decision. Failure to make a timely objection to, or indulgence in, an erroneous form of proof will ordinarily be deemed a waiver of such error. (Bardessono v. Michels, 3 Cal.3d 780, 794, 91 Cal.Rptr. 760, 478 P.2d 480; Witkin, Cal. Evidence (2d ed. 1966) Introduction of Evidence at Trial, §§ 1284–1285, pp. 1187–1189.)
But here we discern neither error nor abuse of discretion. Affidavits may be used as evidence upon a motion (Code Civ.Proc., § 2009; Beckett v. Kaynar Mfg. Co., Inc., 49 Cal.2d 695, 698, 321 P.2d 749), and while “oral testimony may be received in the discretion of the court, it is ordinarily proper to decide on the affidavits alone” (Skouland v. Skouland, 201 Cal.App.2d 677, 678, 20 Cal.Rptr. 185). And in a case such as this: “One of the ways in which the issue of a violation of the rule may be raised is by a motion by the former client in the case before the court to enjoin the adverse representation․ Such a motion may be heard on affidavits ․ and if the trial court resolves the issue on conflicting evidence, its determination is conclusive on appeal.” (Big Bear Mun. Water Dist. v. Superior Court, 269 Cal.App.2d 919, 927, 75 Cal.Rptr. 580.)
We need not explore the contention of erroneous failure to grant a continuance, for Valley and Matthews have now had a continuance of the trial by virtue of our order staying it, made several months ago. We may consider only error that is prejudicial. (Vaughn v. Jonas, 31 Cal.2d 586, 601, 191 P.2d 432.) (However, we do note the stipulation of the parties in this court that the five-year period for bringing an action to trial, of Code of Civil Procedure section 583, subdivision (b), may be extended for a period of eight months following filing of our remittitur in the superior court. (See Wright v. Groom Trucking Co., 206 Cal.App.2d 485, 491, 24 Cal.Rptr. 80; Govea v. Superior Court, 26 Cal.App.2d 27, 31, 78 P.2d 433.))
Nor are we persuaded that we should order discovery reopened in the event we shall (as we now do) order Valley's instant petition denied. The matter will best be left to the discretion of the superior court upon remand, to be exercised according to law.
Yet another issue presents itself. It arises out of the purpose of Matthews, as stated to the trial court, in the event that he shall be disqualified from representing Valley. That purpose will be gleaned from the following portions of the record:
“Mr. Matthews: It's not just the question of the hardship. It's a question of the practicalities of the thing. In that situation the reality is that that attorney has to come and talk with me about what happened․ So the fact of the matter is, the reality of the matter is that if I were precluded from representing Valley, Valley would have maybe another hundred thousand dollars worth of legal expenses, but it would be a charade because I would be sitting and spending all my time duplicating the learning and pouring it back into somebody else.” “First of all, to train another attorney to in all of these matters ․ It would take another attorney, your Honor, a year to learn all of the facts necessary to adequately try this case, and the reason for that is multi-fold․ Now, secondly, the cost to Valley is going to be enormous. I would estimate that it is going to cost at a minimum—it's very difficult to estimate, but I would estimate at a minimum it will cost fifty thousand dollars and it could cost several hundred thousand dollars, depending on what the court's ruling ultimately is on what the burden of proof is.” “Judge, what if the attorney we want has a trial next month and he is preparing for that now? ․ I just know we are going to be turned down by lawyers that we would want, and that's the thing I am concerned about, is getting adequate representation with an experienced trial counsel.” “So the jury trial will not start until the first of the year; is that—I need to be able to tell this so that we can retain a counsel.”
“Mr. Matthews: ․ If it has to be relitigated or not, I will be a witness in the coverage aspect of the case. [It will be remembered that to prove “coverage,” Valley must establish Avila's “fraud or dishonesty.”] ․ [I]f there is going to be a requirement on Valley to prove the fraud or dishonesty of Avila, I am not going to be a witness to that, ․ The Court: All right. Well, let me ask you this. Being a witness in the bad faith aspect of this case do you think that you should withdraw? Mr. Matthews: ․ If we are going to have to try—and if the burden is on Valley to prove fraud and dishonesty of Avila, which means relitigating twelve cases, then I will represent Valley. I won't testify in that action.”
Under our inherent power, and initiative, to inquire into further “appearance of impropriety, [to] control the proceedings to remedy the defect, and even disqualify an attorney if that appears necessary,” we consider these declared purposes of Matthews. (See Klemm v. Superior Court, supra, 75 Cal.App.3d 893, 901, fn. 4, 142 Cal.Rptr. 509; People v. Superior Court (Greer), supra, 19 Cal.3d 255, 261, fn. 4, 137 Cal.Rptr. 476, 561 P.2d 1164.)
From them it appears that Matthews proposes, in the event of his disqualification in the instant action, (1) to select his successor attorney, (2) to “pour back into” that attorney all information he had learned about the case from Avila, and (3) (although stated ambiguously) to testify on the issue whether Valley had insurance coverage by I N A and Hanover because of Avila's “fraud and dishonesty.” Matthews' client Valley would thus, even though its attorney be disqualified, reap the full benefit of the adverse, and improper, representation of Avila by Matthews, an alternative equally, if not more, abhorrent to our law.
Upon remand, the superior court will take such steps as are reasonably and lawfully calculated to assure that Matthews' disqualification from further representation and assistance of Valley, vicarious or otherwise, in the several causes, shall be implemented and that such prejudice as Avila may have theretofore suffered by the improper dual representation of himself and Valley be ameliorated. The fact that Valley may thereby be placed at a tactical or financial disadvantage will be transcended by manifest principles of ethics, fairness, and equity.
The peremptory writ of mandate is denied, and the alternative writ heretofore issued is discharged. Upon remand to the superior court further proceedings not inconsistent with the views we have expressed will be taken. A motion of petitioner Valley Title Company, to strike a declaration of real party in interest Don J. Avila, is denied.
ELKINGTON, Acting Presiding Justice.
NEWSOM and GRODIN, JJ., concur.