MARY PACHECO v. RICHARD GOSVENER (2011)

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

OPINIONFACTS AND PROCEDURAL HISTORY

In probate proceedings regarding the administration of a decedent's trust, one of the trust beneficiaries, Mary Pacheco (Mary),¹ contended that the law firm representing the trustee was disqualified due to an alleged conflict of interest.   That contention was based on the fact that an attorney in the subject law firm had previously prepared estate planning documents for Mary, which involved the communication of confidential information.   The trial court rejected Mary's claim that such facts warranted disqualification of the law firm in the present case.   Mary filed the instant petition for a writ of mandate seeking to vacate the trial court's ruling.   We find no abuse of discretion;  therefore, the petition is denied.

This case concerns the administration of the Hazel Rocha Living Trust dated February 11, 2000 (the trust), subsequent to Hazel Rocha's death in August of 2006.   Mary and Frank Rocha, Jr. (Frank) are children of the decedent, Hazel Rocha, and are the beneficiaries under the trust.   Upon Hazel Rocha's death, Richard Gosvener (the trustee) became the successor trustee of the trust.   In September of 2006, he hired the Visalia law firm known as Ruddell, Cochran, Stanton, Smith, Bixler & Wisehart, LLP (the Ruddell law firm) to represent him as the trustee and to assist in the completion of the administration of the trust.   At that time, Attorney D. Zackary Smith, who had originally prepared the trust for Hazel Rocha in late 1999 or early 2000, was given primary responsibility at the Ruddell law firm to represent the trustee.

In late 2007, a dispute arose over how some of the trust property ought to be distributed.   Frank gave notice that he was exercising his rights under a partnership agreement to buy out the trust's interest in a partnership.   He took the position that he was entitled to exercise his buy-out rights by making the purchase directly from the trust.   Mary believed the property should be distributed in the manner set out in the trust and that the trust should not be involved in the sale of the partnership to Frank.   Thus, the two beneficiaries disputed whether the partnership interest was to first be distributed out of the trust to the trust beneficiaries, or whether Frank was to purchase the partnership interest directly from the trust.   Since the parties were unable to resolve the issue on their own, the trustee filed a petition for instructions pursuant to Probate Code section 17200.   The trial court resolved that issue in April of 2008 by holding that the purchase of the partnership interest was intended to be made through the trust rather than after distribution to the beneficiaries.   Accordingly, the trustee was ordered to carry out the purchase and sale provisions of the partnership agreement.

On April 23, 2008, Mr. Smith received a call from Attorney Leonard Herr indicating that Mr. Herr would now be representing Mary in this matter.²  In May or June of 2008, due to demands on his time, Mr. Smith turned over primary responsibility for legal representation of the trustee to another attorney in the Ruddell law firm, Matthew Bixler.

In April of 2009, after objections from Mary concerning the appraised value of the trust's partnership interest for purposes of the buy-out by Frank, the trustee filed another petition for instructions seeking the trial court's authority to proceed with the sale of the partnership interest at a price determined by appraisers according to a method set forth in the provisions of the partnership agreement.   The trial court approved the sale and purchase price as requested.   Following the trial court's order on the trustee's petition for instructions, Mary filed an appeal contending the appraised value was erroneous or contrary to statute.   On March 22, 2010, we issued our opinion affirming the trial court's order.  (See Gosvener v. Pacheco (Mar. 22, 2010, F057818) [nonpub. opn.].)

In May of 2010, the trustee filed a petition for settlement of account, which was formally objected to by Mary on June 7, 2010.   The matter was set for a contested hearing on October 18, 2010.   Meanwhile, the trustee elected to conduct discovery regarding Mary objections, and her deposition has taken on September 29, 2010.   During the deposition, Mary, through her attorney Mr. Herr, for the first time raised the issue that the Ruddell law firm allegedly had a conflict of interest because the firm had previously prepared Mary's estate planning documents.

On September 30, 2010, Mr. Herr sent a letter to Mr. Bixler formally claiming a conflict of interest existed due to the fact that Mary had provided the Ruddell law firm with extensive, personal financial information as part of the preparation of her estate planning documents.   On October 4, 2010, Mr. Bixler sent a letter to Mr. Herr stating his (Bixler's) belief that there was no conflict of interest because the firm had not obtained any information from Mary that was in any way material to the administration of the trust.   Additionally, Mr. Bixler stated that the Ruddell law firm had been representing the trustee for over four years and that if Mary was going to raise the issue of a conflict of interest, she should have done so several years previously.   During a hearing on October 7, 2010, Mr. Herr again raised the issue of the claimed conflict of interest and the trial court vacated the contested hearing date and set a new hearing on November 9, 2010, to allow a motion to be heard regarding the question of whether the Ruddell law firm should be disqualified.   By agreement of the parties, the issue was brought before the trial court via a petition for instructions filed by Mr. Bixler and the trustee.

In connection with the petition for instructions, Mr. Smith filed a declaration describing the nature of his prior representation of Mary. Mr. Smith stated that in late 1999 or early 2000, he assisted Hazel Rocha in preparation of the trust.   The trust was amended several times thereafter, the last amendment occurring on April 28, 2004.   On January 26, 2000, Mr. Smith met with Mary regarding the preparation of a living trust for Mary and her husband, Louis J. Pacheco.   A living trust document was completed and executed by Mary and her husband in June of 2000.   Mary and her husband amended their living trust with Mr. Smith's assistance in October of 2003.   According to Mr. Smith:  “In preparing the trust and amendments for [Mary], we received information regarding [Mary's] assets and finances, as well as information regarding [Mary and her husband's] desires with respect to the testamentary disposition of their estate.   All of this was the ordinary type of information that attorneys receive in preparing an estate plan.   However, I did not share any information with [Mary], or her mother Ms. Rocha, regarding their respective estate plans.   Further, none of the information I received in preparing [Mary's] estate plan had any relevance to our ultimate representation of Richard Gosvener as the Successor Trustee of Ms. Rocha's Trust.”   In addition, Mr. Smith noted that he had briefly assisted Mary in January of 2004 with a small claims matter that she was involved in, which “had nothing to do with either her trust or Hazel Rocha's Trust.” ³

Based on this declaration, the trustee's position was that there was no conflict of interest because the Ruddell law firm did not learn of any confidential information during the prior representation that would be material to the firm's representation of the trustee with respect to the trust administration.   The trustee argued that this was a case of successive (not concurrent) representation, and that under the substantial relationship test, disqualification should be denied because no substantial relationship existed between the former and current representation.   Furthermore, the trustee argued that it would not be in the best interest of the trust to change attorneys since it would take new counsel a long time to become fully informed of all aspects of the case and the trust administration, which would result in unnecessary significant expenses for the trust.

Mary's declaration in support of her request for disqualification of the Ruddell law firm stated that she understood that Mr. Smith was, and continued to be, her estate planning attorney.⁴  Thus, in her points and authorities, she argued that concurrent representation created an inherent conflict of interest;  alternatively, she argued that disqualification was warranted even if there was only successive representation, because a substantial relationship existed between the prior representation and the present case.   Mary believed that Mr. Smith must have provided confidential financial information to Mr. Bixler and to the trustee in the present litigation, because of the nature of the questions asked by Mr. Bixler at Mary's deposition and the fact that the trustee had, according to Mary, repeatedly favored Frank in the administration of the trust.   Her attorney, Mr. Herr, speculated that the financial information provided by Mary to the Ruddell law firm in the prior representation was passed on to the trustee, leading the trustee to believe that Frank was “the needier or more deserving beneficiary.”

Both Frank and the trustee filed reply declarations asserting that no favoritism had been shown to Frank in the administration of the trust.⁵  The trustee denied receiving any confidential information regarding Mary.

At the November 9, 2010, hearing, the trial court continued the hearing to November 29, 2010, to allow Mary to submit a supplemental declaration.   Following oral argument on November 29, 2010, the trial court took the matter under submission.   On December 8, 2010, the trial court issued its order holding that there was “no factual basis for the recusal of attorney Bixler or his firm from the continued representation of the Trustee.”   The trial court found that there was no concurrent representation of Mary by Mr. Smith or the Ruddell law firm, and that “no confidential relevant material information [was] disclosed to Mr. Smith with reference to the legal services rendered to [Mary] and her husband.”

On December 28, 2010, Mary filed the instant petition for writ of mandate seeking to vacate the trial court's order.   Her petition claimed the trial court failed to apply the correct legal standard;  that is, it allegedly failed to apply the substantial relationship test.   We issued an order to show cause and directed real party in interest (the trustee) to file a return.   A return and opposition to the petition have been filed, and the matter is now fully briefed by the parties.

DISCUSSION

I. Standard of Review

Although the matter was presented to the trial court in the form of a petition for instructions, the sole issue below was whether the Ruddell law firm was disqualified to represent the trustee, as asserted by Mary. Thus, our review is from the trial court's denial of Mary's request for disqualification.

“Generally, a trial court's decision on a disqualification motion is reviewed for abuse of discretion.  [Citations.]  If the trial court resolved disputed factual issues, the reviewing court should not substitute its judgment for the trial court's express or implied findings supported by substantial evidence.   [Citations.]  When substantial evidence supports the trial court's factual findings, the appellate court reviews the conclusions based on those findings for abuse of discretion.  [Citation.]  However, the trial court's discretion is limited by the applicable legal principles.  [Citation.]  Thus, where there are no material disputed factual issues, the appellate court reviews the trial court's determination as a question of law.  [Citation.]  In any event, a disqualification motion involves concerns that justify careful review of the trial court's exercise of discretion.  [Citation.]”  (People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1143–1144 (SpeeDee Oil ).)   A trial court's order on a disqualification motion will not be disturbed unless an abuse of discretion is shown.   (Chambers v. Superior Court (1981) 121 Cal.App.3d 893, 903, fn. 7.) ⁶

Here, the supporting and opposing declarations were in dispute as to the nature of Mr. Smith's prior representation of Mary;  therefore, we review the trial court's findings based on the abuse of discretion standard.   In any event, we would reach the same outcome under a de novo standard of review.

II. Disqualification Principles

Where, as here, a motion for disqualification is based on an asserted breach of confidentiality or conflict of interest, the trial court must cautiously balance the competing interests.  (In re Marriage of Zimmerman (1993) 16 Cal.App.4th 556, 562–563 (Zimmerman ).)  “Ultimately, disqualification motions involve a conflict between the clients' right to counsel of their choice and the need to maintain ethical standards of professional responsibility.  [Citation.]  The paramount concern must be to preserve public trust in the scrupulous administration of justice and the integrity of the bar.   The important right to counsel of one's choice must yield to ethical considerations that affect the fundamental principles of our judicial process.  [Citations.]”  (SpeeDee Oil, supra, 20 Cal.4th at pp.   1145–1146.)   Such important ethical considerations include the attorney's duties of confidentiality and loyalty.  (Id. at p. 1146.)

An attorney may not do anything which will injuriously affect his former client in any matter in which he formerly represented him, nor at any time use against his former client knowledge or information acquired by virtue of the previous relationship.  (Med–Trans Corp., Inc. v. City of California City (2007) 156 Cal.App.4th 655, 664 (Med–Trans );  People ex rel. Deukmejian v. Brown (1981) 29 Cal.3d 150, 155;  Zimmerman, supra, 16 Cal.App.4th at p. 562.)  “The purpose of the rule is to protect both confidential communications and the enduring confidential relationship between attorney and client.”   (Zimmerman, supra, at p. 562.)   To protect the confidential nature of the attorney-client relationship from conflicts of interest, the State Bar Rules of Professional Conduct, rule 3–310(E), provides that an attorney may not, “without the informed written consent of the client or former client, accept employment adverse to the client or former client where, by reason of the representation of the client or former client, the member has obtained confidential information material to the employment.”  (Med–Trans, supra, at p. 664.)

When disqualification of an attorney or law firm is sought for an alleged violation of the above ethical principles in cases involving successive representation, as here, a test known as the substantial relationship test is employed.   Under the substantial relationship test, “[w]here an attorney successively represents clients with adverse interests, and where the subjects of the two representations are substantially related, the need to protect the first client's confidential information requires that the attorney be disqualified from the second representation.”  (SpeeDee Oil, supra, 20 Cal.4th at p. 1146.)   The rationale for this rule has been explained as follows:  “Where the potential conflict is one that arises from the successive representation of clients with potentially adverse interests, the courts have recognized that the chief fiduciary value jeopardized is that of client confidentiality.   Thus, where a former client seeks to have a previous attorney disqualified from serving as counsel to a successive client in litigation adverse to the interests of the first client, the governing test requires that the client demonstrate a ‘substantial relationship ’ between the subjects of the antecedent and current representations.  [¶] The ‘substantial relationship’ test mediates between two interests that are in tension in such a context—the freedom of the subsequent client to counsel of choice, on the one hand, and the interest of the former client in ensuring the permanent confidentiality of matters disclosed to the attorney in the course of the prior representation, on the other.   Where the requisite substantial relationship between the subjects of the prior and the current representations can be demonstrated, access to confidential information by the attorney in the course of the first representation (relevant, by definition, to the second representation) is presumed and disqualification of the attorney's representation of the second client is mandatory;  indeed, the disqualification extends vicariously to the entire firm.  [Citations.]”  (Flatt v. Superior Court (1994) 9 Cal.4th 275, 283–284.)

If the former representation involved a direct relationship with the client, “the attorney is presumed to possess confidential information if the subject of the prior representation put the attorney in a position in which confidences material to the current representation would normally have been imparted to counsel.”  (City and County of San Francisco v. Cobra Solutions, Inc. (2006) 38 Cal.4th 839, 847 (italics added);  H.F. Ahmanson & Co. v. Salomon Bros. (1991) 229 Cal.App.3d 1445, 1454.)  “[S]uccessive representations will be ‘substantially related’ when the evidence before the trial court supports a rational conclusion that information material to the evaluation, prosecution, settlement or accomplishment of the former representation given its factual and legal issues is also material to the evaluation, prosecution, settlement or accomplishment of the current representation given its factual and legal issues.”  (Jessen v. Hartford Casualty Ins. Co. (2003) 111 Cal.App.4th 698, 713.)

III. Application of Law to Present Controversy

In her petition for writ of mandate, Mary argues the trial court failed to apply the correct legal standard—namely, the substantial relationship test —and therefore abused its discretion.⁷  This purported error is allegedly evidenced by the fact that the trial court's written order did not expressly reference the substantial relationship test and merely stated that no material confidential information was imparted in the prior representation.   Furthermore, according to Mary, if the substantial relationship test had been applied, it would have inexorably led to the conclusion that the Ruddell law firm is disqualified.   We now consider these contentions.

“ ‘A judgment or order of the lower court is presumed correct.   All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown.’ ”  (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.)   The ordinary rules of implied findings are applicable on decisions on motions, including a motion for disqualification.  (Higdon v. Superior Court (1991) 227 Cal.App.3d 1667, 1671.)   Additionally, the trial court is presumed to have followed the law.   (Wilson v. Sunshine Meat & Liquor Co. (1983) 34 Cal.3d 554, 563.)  “[T]he fact that the court's conclusion is set forth in summary fashion does not mean the court failed to engage in the requisite analysis, or that its analysis was incorrect.”  (City of Los Altos v. Barnes (1992) 3 Cal.App.4th 1193, 1198.)

Here, the trial court's order held in a summary fashion that no factual basis existed for recusal of the Ruddell law firm.   In stating that succinct conclusion, the trial court's order noted that no relevant confidential information was communicated to Mr. Smith in the prior representation of Mary, but the order did not explicitly state that there was a lack of a substantial relationship between the prior representation and the current one.⁸

These aspects of the trial court's order do not reflect that it failed to apply the correct standard.   Neither the abbreviated style of the order, nor its inclusion of a finding regarding confidential information, means that the trial court failed to apply the substantial relationship test.   The trial court was under no obligation to provide written findings, and there is no indication that its brief order was intended to be an exhaustive elaboration of the grounds for denying the disqualification request.   Moreover, the record shows the trial court was well aware of the substantial relationship test.   The substantial relationship test was plainly set forth in the parties' points and authorities in the trial court, it was reiterated by the parties during oral argument, and the trial court itself referenced the substantial relationship test during oral argument.   We conclude that Mary has not established that the trial court failed to apply the substantial relationship test.

Furthermore, the record suggests there was a sound reason for the trial court to make an express finding that no relevant confidential information was communicated during the prior representation:  Mary's arguments in the trial court largely focused on the alleged actual communication of confidential information, which information was allegedly being used against her in the present litigation.   In light of that fact, it should come as no surprise that the trial court elected to address that matter directly in its order;  but the fact that it did so does not suggest it failed to apply the substantial relationship test.   Additionally, a reasonable construction of the trial court's express finding would be that no confidential information relevant or material to the present matter was communicated in the prior representation, which finding is of course fully consistent with an application of the substantial relationship test and may even have been intended as a shorthand expression of it.⁹

The order of the trial court is presumed correct, and Mary has not demonstrated that the court failed to apply the substantial relationship test.   Furthermore, as we explain below, the record adequately supported the trial court's implied conclusion that there was no substantial relationship between the prior representation and the current litigation;  therefore, Mary failed to demonstrate an abuse of discretion.  (SpeeDee Oil, supra, 20 Cal.4th at p. 1143 [we defer to the trial court's express or implied factual findings when they are supported by substantial evidence, while the trial court's conclusions based thereon are reviewed for abuse of discretion];  see Chambers v. Superior Court, supra, 121 Cal.App.3d at p. 903, fn. 7 [order on disqualification motion will not be disturbed unless abuse of discretion is shown].)

In support of the trustee's position below, the declaration of Mr. Smith reflected that in his prior representation of Mary, when he prepared an estate planning document for her, the only matters disclosed by Mary and her husband related to their finances and assets and their desires regarding testamentary disposition thereof, which was the ordinary type of information that attorneys receive in preparing an estate plan.   According to Mr. Smith, none of that information had any relevance to the subsequent representation of the trustee relating to administration of the trust in the present litigation.   In conjunction with that declaration, the trial court's own familiarity with the present trust litigation on file before it would have further confirmed the lack of substantial relationship between the two matters.

Based on this evidence, we agree with the implied finding of the trial court (i.e., no substantial relationship) and hold it to be adequately supported.   We discern no legal or factual similarities in the subject matter or issues involved in the two representations.   Nor does it appear that any information disclosed in the prior representation would be material to the second.   That is, Mr. Smith's prior representation of Mary (i.e., preparing and amending an estate planning document for her) and the type of information that would ordinarily be disclosed therein, had no bearing on or relevance to the subject matter and/or issues in the present litigation involving the administration of the trust which was created by Mary's mother.   In short, the record supported the trial court's finding of no substantial relationship between the two matters.   Therefore, the trial court's conclusion that disqualification (or recusal) of the Ruddell law firm was not required under the circumstances was a reasonable one.   No abuse of discretion is shown.

We note that in the trial court, Mary's primary effort to show a substantial relationship was her assertion that if the Ruddell law firm disclosed Mary's financial information to the trustee, such information would arguably be material in the present case because the trustee might want to favor the beneficiary who is less wealthy (i.e., Frank).   The trial court apparently (though implicitly) regarded that assertion as unpersuasive or lacking in credibility.   We would agree with that assessment, since the premise that the trustee would be willing to violate his fiduciary responsibilities based merely on which beneficiary is more or less wealthy than the other, is highly tenuous and implausible, if not wholly speculative.

Finally, on appeal Mary argues for the first time that a substantial relationship existed between the prior and current representations because Mr. Smith would have discussed with Mary any expectations she may have had regarding possible future inheritances or bequests from her mother, because a thorough estate planning attorney would have asked about such things.   This new theory, based on an assumption about what a diligent estate planning attorney typically might have asked his or her client under the circumstances, is unavailing for two reasons.   First, a reviewing court does not ordinarily consider a new theory that is open to controversy and that was not presented in the trial court.  (See Strasberg v. Odyssey Group, Inc. (1996) 51 Cal.App.4th 906, 920.)   Second, even if we considered it, the new theory still falls short of establishing a substantial relationship between the prior and current matters.   That is, we fail to discern how any expectancies Mary may have had at that time constituted information that would be material to the current litigation regarding the administration of the trust itself.

In conclusion, Mary has not demonstrated that the trial court failed to apply the substantial relationship test.   Moreover, an implied finding that there was no substantial relationship between the former representation and the current one was supported by substantial evidence, and based on the entire record we conclude the trial court's ruling on the disqualification issue was within its reasonable discretion.   Since no abuse of discretion has been shown, the petition for a writ of mandate will be denied.

DISPOSITION

The petition is denied.   Costs on appeal are awarded to real parties in interest.

Kane, J.

WE CONCUR:

Dawson, Acting P.J.

Poochigian, J.

FOOTNOTES

FN1. We will use first names of the beneficiaries, who are brother and sister, for convenience only;  no disrespect is intended..  FN1. We will use first names of the beneficiaries, who are brother and sister, for convenience only;  no disrespect is intended.

FN2. Prior to that time, Mary was represented in this case by Attorney Dennis Mederos..  FN2. Prior to that time, Mary was represented in this case by Attorney Dennis Mederos.

FN3. Also, according to Mr. Smith, in 2007, in representing another client's estate, a ranch property was purchased from that estate by Mary, but he did not represent her in connection with that purchase..  FN3. Also, according to Mr. Smith, in 2007, in representing another client's estate, a ranch property was purchased from that estate by Mary, but he did not represent her in connection with that purchase.

FN4. In support of the proposition that the Ruddell law firm continued to represent her, she referred to a property purchase in 2007, in which Mr. Smith allegedly assisted her.   Mr. Smith denied that was the case (see fn. 3, ante )..  FN4. In support of the proposition that the Ruddell law firm continued to represent her, she referred to a property purchase in 2007, in which Mr. Smith allegedly assisted her.   Mr. Smith denied that was the case (see fn. 3, ante ).

FN5. The trial court sustained objections to Frank's declaration and did not consider it..  FN5. The trial court sustained objections to Frank's declaration and did not consider it.

FN6. Where a party's motion for disqualification of an attorney has been denied, immediate review of that decision may be sought by a petition for writ of mandate.  (Apple Computer, Inc. v. Superior Court (2005) 126 Cal.App.4th 1253, 1263–1264.).  FN6. Where a party's motion for disqualification of an attorney has been denied, immediate review of that decision may be sought by a petition for writ of mandate.  (Apple Computer, Inc. v. Superior Court (2005) 126 Cal.App.4th 1253, 1263–1264.)

FN7. No review is sought of the trial court's finding that there was no concurrent representation.   The parties are in agreement this is a situation of successive representation..  FN7. No review is sought of the trial court's finding that there was no concurrent representation.   The parties are in agreement this is a situation of successive representation.

FN8. As noted, the order did make a finding that there was no continued (concurrent) representation and that “no confidential relevant material information [was] disclosed to Mr. Smith with reference to the legal services rendered to [Mary] and her husband.”.  FN8. As noted, the order did make a finding that there was no continued (concurrent) representation and that “no confidential relevant material information [was] disclosed to Mr. Smith with reference to the legal services rendered to [Mary] and her husband.”

FN9. That is, the trial court may have been saying, in effect, such information was not relevant or material to the present case in light of the court's tacit conclusion that there was no substantial relationship between the prior representation and the current one..  FN9. That is, the trial court may have been saying, in effect, such information was not relevant or material to the present case in light of the court's tacit conclusion that there was no substantial relationship between the prior representation and the current one.