Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County No. GIC881930, Timothy B. Taylor, Judge.
HUFFMAN, J.
Plaintiffs and appellants Andjelka Raicevic and Imelda Raicevic, individually and as trustees of their respective family trusts (one of which was established by Vojo Raicevic, now deceased; collectively "Plaintiffs"; or, where relevant, referred to individually as "A.R., " "V.R." or "I.R."), were the losing parties in a summary judgment motion brought by defendants and respondents Stephen F. Lopez and the law firm of Geraci & Lopez (together Defendants). (Code Civ. Proc., § 437c; all statutory references are to this code unless noted.) A.R. and V.R., formerly a married couple, continued to own property together and in 1998, sold a house, in a secured loan transaction, to another couple, the Travises (who were also named as defendants in the action, but are not parties to this appeal). In 2003, V.R. made a separate, similarly secured loan to the Travises. I.R. is the widow of V.R., who died in 2005.
After the Travises separated, Matthew Travis passed away, and his estate is a named defendant. Mrs. Launi Travis is also a named defendant. No issues are raised regarding their liability in this appeal, and we treat them as a unit.
In 2004, in connection with those two loan transactions, the Travises retained Defendants to act as their attorneys in changing the security for the loans, by proposing a pledge agreement that substituted personal property collateral for the real property security. On behalf of the Travises, Defendants drafted a pledge agreement for such collateral, and transmitted a copy to the Plaintiffs, seeking their approval. Plaintiffs agreed to the change in security, and ultimately, the Travises defaulted on their obligations. It is not now disputed that the pledge agreement was defectively drafted, because it did not include any required list of the specific property purportedly subject to the security interest created, and in fact its terms would prevent the secured parties from recording any such UCC-1 financing statements or other security instruments until the debtors (the Travises) were already in default under the notes. (Comm. Code, § 9108, subd. (c).)
In this lawsuit, Plaintiffs sued the Travises on various theories. As relevant here, Plaintiffs also alleged against Defendants a cause of action for professional malpractice. Plaintiffs contended that when Defendants acted in a professional capacity on behalf of their clients, the Travises, by sending the transmittal letter with the proposed pledge agreement, Defendants also undertook and owed to Plaintiffs some professional obligations, which they then performed negligently or fraudulently. Plaintiffs allege they were intended or third party beneficiaries of the attorney-client retainer agreement between Defendants and the Travises, to prepare the pledge agreement.
Additionally, Plaintiffs alleged against Defendants causes of action for intentional or negligent misrepresentation, and financial elder abuse (assisting another in wrongfully taking property). (Welf. & Inst. Code, § 15600 et seq., the Elder Abuse and Dependent Adult Civil Protection Act (the Act).) Plaintiffs sought compensatory and punitive damages for property loss and emotional distress, allegedly caused when the Travises did not repay their obligations to the Plaintiffs, for which the Defendants' improper performance of their professional and other duties was a causative factor.
In their motion for summary judgment, or alternatively, summary adjudication of each cause of action, Defendants first argued that when they sent to Plaintiffs, on behalf of the Travises, the proposed pledge agreement, utilizing the transmittal letter dated May 27, 2004, Defendants did not directly or indirectly undertake any duties to Plaintiffs, and they remained adverse in interest to Plaintiffs in the transaction. Defendants contended Plaintiffs could not qualify as intended beneficiaries of the attorney-client relationship between themselves and the Travises. Defendants also contended no actionable misrepresentations were made, as a matter of law, nor that any elder abuse occurred.
The trial court agreed with Defendants' argument that their lack of duty undertaken toward Plaintiffs could be determined as a matter of law, and that this resolved the professional negligence claims and the negligent misrepresentation claims. Additionally, the trial court agreed with Defendants that Plaintiffs had not carried their burden to show that triable issues of fact remained on the claims for damages and other relief for financial abuse of elderly persons. The trial court found that the intentional misrepresentation cause of action must fail, because the May 27, 2004 letter contained only nonactionable statements of opinion or predictions of future conduct by third parties, the Travis clients.
On appeal, Plaintiffs contend they demonstrated the existence of triable issues of fact regarding professional duties and breach, so that the trial court erred in granting Defendants' summary judgment motion. Plaintiffs argue the court erroneously sustained Defendants' evidentiary objections to the declaration of A.R., and that as a matter of law, Plaintiffs could show that their damages were caused by those breaches of professional duties. In addition, Plaintiffs argue that the negligent misrepresentation cause of action has merit, because an attorney who communicates legal opinions to another, intended to secure benefit for the clients, must act with due care, "or the attorneys who do not act carefully will have breached a duty owed to those they attempted or expected to influence on behalf of their clients." (Roberts v. Ball, Hunt, Hart, Brown & Baerwitz (1976) 57 Cal.App.3d 104, 111 (Roberts).)
Even setting aside the professional duty issues, Plaintiffs contend they reasonably relied on Defendants' misrepresentations about the pledge agreement in the May 27, 2004 letter, to their detriment, and that this case falls into the category of lawyers who are hired to accomplish a specific task, and in doing so, have the same duty others have " 'not to defraud another, even if that other is an attorney negotiating at arm's length.' " (Vega v. Jones, Day, Reavis & Pogue (2004) 121 Cal.App.4th 282, 291 (Vega).) Here, the purpose of Defendants' legal representation of their clients was to provide an appropriate and functional security agreement, and even though Plaintiffs were adverse parties, under these facts, they contend triable issues remain on whether Defendants' concealment or failure to disclose that the agreement was actually inadequate for its intended purpose were fraudulent misrepresentations.
Initially, we will consider, on a de novo basis, the issues about whether these Defendants owed professional duties of attorney representation directly toward Plaintiffs, on this set of facts. (Fox v. Pollack (1986) 181 Cal.App.3d 954, 960 (Fox) [an attorney for one of the parties to a real estate transaction does not owe a duty of care to an unrepresented party to the transaction]; Orrick Herrington & Sutcliffe v. Superior Court (2003) 107 Cal.App.4th 1052, 1056-1057 (Orrick).) In that respect, we conclude the trial court correctly relied on the general rule that an attorney has no professional obligation to nonclients and cannot be held liable to nonclients for the consequences of the attorney's alleged professional negligence. (Moore v. Anderson Zeigler Disharoon Gallagher & Gray, P.C. (2003) 109 Cal.App.4th 1287, 1294; B.L.M. v. Sabo & Deitsch (1997) 55 Cal.App.4th 823, 839 (B.L.M.) [holding that an attorney is not liable to a third party for a legal opinion which the third party could not, for reasons of adversity and under the Rules of Professional Conduct, have contracted to obtain from that attorney].)
Thus, with respect to the cause of action for legal malpractice, the trial court correctly determined as a matter of law that Defendants did not undertake or owe to Plaintiffs the professional duties of an attorney in the pledge agreement transaction, since at all times, Plaintiffs were adverse in interest to the attorney Defendants' representation of the Travis Defendants and in the pledge agreement, and Plaintiffs did not qualify as third party or intended beneficiaries of its terms, as a matter of law.
Nevertheless, the trial court erred in concluding that Defendants were entitled to summary judgment as a matter of law on all of the claims brought against them. On this record, Plaintiffs carried their burden of showing that triable issues of material fact remain as to negligent misrepresentation of facts, or the existence of enforceable duties to disclose all relevant facts even to adverse parties in the transaction, in light of the expressly disclosed purpose of the Defendant attorneys' retention. (§ 437c, subd. (p)(2).) Triable issues also remain on whether reliance on the representations by Plaintiffs was justified.
Regarding the claim for intentional misrepresentation, the trial court erred in declaring that none of Defendants' alleged misrepresentations in the transmittal letter could be deemed actionable, on the ground given (that statements of opinion relating to future actions of third parties, such as the Travises, are not actionable). (Cohen v. S&S Construction (1983) 151 Cal.App.3d 941, 946 (Cohen).) Even regarding this arm's-length transaction, Plaintiffs have brought forth sufficient evidence on whether these attorney Defendants acted contrary to the same duty others have " 'not to defraud another, even if that other is an attorney negotiating at arm's length.' " (Vega, supra, 121 Cal.App.4th 282, 291.)
Moreover, based on the above, we cannot now conclude that Plaintiffs will be unable to prove the existence of a predicate tort on which to base the additional remedies for financial elder abuse allowed by the Act. In any case, the law is unsettled at this time on whether any such predicate tort is required in the first instance, or whether an independent statutory cause of action is created by the Act. (See Perlin v. Fountain View Management, Inc. (2008) 163 Cal.App.4th 657, 665-666 (Perlin).) On this record, we are unable to determine that no triable issues of fact were demonstrated regarding the elder abuse cause of action, on whether the nature of these Defendants' involvement in the pledge agreement transaction fell within the scope of coverage of the Act.
Under Welfare and Institutions Code section 15610.07, abuse of an elder or dependent adult means either "(a) [p]hysical abuse or financial abuse... with resulting physical harm or pain or mental suffering"; or "(b) [t]he deprivation by a care custodian of goods or services that are necessary to avoid a physical harm or mental suffering."
Accordingly, the summary judgment is subject to reversal because of error in the trial court's interpretation of authorities on misrepresentation and elder abuse, on the current record. In light of the views expressed in this opinion on those three causes of action, the trial court may consider in any appropriate further proceedings whether summary adjudication may nevertheless be properly granted on the professional negligence cause of action.
FACTUAL AND PROCEDURAL BACKGROUND
A. Introduction; Underlying Transactions
As shown in the respective separate statements of undisputed facts filed for this motion, the transactions between Plaintiffs and the Travises that gave rise to this lawsuit began in 1998. At all times, the Travises and their family trust are treated as identical and need not be distinguished in this action. The Travises owned shares in a shopping center corporation, Poway City Centre, Inc. (the corporation).
A.R. and V. R. were married from 1961 to 1991. V.R. spoke and read limited English. Later, V.R. married I.R. V.R. died in 2005, at the age of 83. In 2004, A.R. was 65 years of age.
In 1998, Plaintiffs sold real property ("Poway Road") to the Travises' family trust, and received in return a note in the amount of $1.45 million, secured by the subject property. In January of 2001, Plaintiffs and the Travises amended the agreement to substitute a different parcel of real property ("Paseo Valle Alto") for the original property contained in the 1998 trust deed.
In 2003, V.R. loaned Travis $100,000 and took back a promissory note that was also secured by a trust deed on the Paseo Valle Alto property. Plaintiffs refer to these two promissory notes as "the notes."
In April 2004, the Travises notified Plaintiffs that they could not keep the payments on the notes current because of cash flow problems associated with their corporation. They requested a deferment of the monthly payments on the notes. Plaintiffs refused.
Next, the Travises brought Defendants into the transaction to seek a substitution of security on the notes. Defendants drafted the pledge agreement to substitute "all personal property assets of debtors" as collateral for the release of the real property security. In the pledge agreement, Defendants covenanted to create and protect a security interest and to execute all necessary documents to allow Plaintiffs to record a UCC-1 financing statement or other necessary documents to give notice of and to perfect the security interest. The events of default are then defined, along with remedies on default. The proposed pledge agreement was sent by Defendants to Plaintiffs along with a May 27, 2004 transmittal letter.
In the May 27, 2004 transmittal letter sent to Plaintiffs, Defendants first stated that the Travises asked them to make the following proposal regarding the Plaintiffs' 1998 note and deed of trust, and explained the proposed agreement as follows. On behalf of the Travis family trust, Defendants requested that Plaintiffs remove their deed of trust from the real property (Paseo Valle Alto), and allow the Travis trust to sell the property free and clear of the lien. According to Defendants, "in exchange, " the Travises "will do as follows." Six statements followed: (1) The Travises will continue to keep the note current; (2) they will personally guarantee the note; (3) they will pledge all of their personal assets to Plaintiffs pursuant to the enclosed pledge agreement; (4) the Travises will obtain permanent financing on the corporation, and then Plaintiffs "will have the option of either continuing the payments or being paid off fully on the note;" (5) taking those actions "will allow the Travises to keep you current on your note"; and (6) "if this [is] acceptable, please call Matt or myself so that the necessary paper work can be finalized."
According to A.R.'s deposition, she called Defendant Lopez and asked him questions about the proposal, and her copy of it contains her handwritten notations, such as question marks about the collateral and security to be provided. Without consulting their own counsel, Plaintiffs signed the pledge agreement June 15, 2004.
Defendants, on behalf of the Travises, reconveyed the deed of trust on the Paseo Valle Alto property. The pledge agreement was drafted in such a way that no UCC-1 statement had to be recorded until all the notes were already in default, which essentially defeated the purpose of any UCC-1 document. Defendants never prepared or recorded any UCC-1 lien that would have provided any public notice of Plaintiffs' security interest in any of the Travises' personal assets.
Around that same time, the Travises separated and began to split up their millions of dollars worth of assets, including the corporation and the proceeds of the sale of the Paseo Valle Alto property (sold November 10, 2004). After August 2004, the Travises stopped making regular payments to Plaintiffs, then paid the arrears in April 2005 and made only a partial payment in February 2006. They then stopped paying Plaintiffs altogether. Matthew Travis died in 2007 and his estate's administrator was substituted as a party.
B. Plaintiffs File This Action
In March 2007, A.R. and I.R. sued the Travises and these Defendants, seeking damages and injunctive relief. The operative pleading is the first amended complaint (FAC). As against these Defendants (as well as the Travises), Plaintiffs allege a cause of action for financial abuse of elderly persons (their fifth cause of action). Under the Act, "financial abuse" of an elder, with resultant physical harm or pain or mental suffering, is defined and forbidden. (Welf. & Inst. Code, § 15610.07; remedies are provided in § 15657 et seq.) Under Welfare and Institutions Code section 15610.30, subdivision (a)(2), "financial abuse" may include assistance in another's wrongful taking of property of an elder, for a wrongful use or with intent to defraud.
Plaintiffs allege that Defendants were aware that the pledge agreement was substantially inferior as a security device for repayment of the notes, so that the substitution of the ineffective pledge agreement amounted, under the Act, to bad faith taking of the personal property of A.R. and V.R., who were 65 and 82 at the time. Also, A.R. had recently had a stroke (October 2003). Plaintiffs sought damages for financial loss and also emotional distress damages, for their fears of being left homeless for lack of funds, among other things.
In their seventh cause of action for breach of professional duty, Plaintiffs allege that when the Travises retained Defendants to prepare an effective pledge agreement, Defendants' professional duties also extended toward Plaintiffs, as intended third party beneficiaries of the attorney retention contract. Plaintiffs plead numerous factors to support their allegations of duties owed to them, in the style recognized in leading case law. (See, e.g., Lucas v. Hamm (1961) 56 Cal.2d 583 (Lucas) [attorney liable to beneficiaries under a will].) Plaintiffs seek financial damages due to negligence of Defendants, including attorney fees incurred to prosecute the case.
Further, in the causes of action for intentional misrepresentation and negligent misrepresentation, Plaintiffs claim they suffered damages due to their reasonable reliance on representations made by Defendants about the nature and effect of the pledge agreement, in the transmittal letter. Facts are pleaded about these Defendants' roles in preparing and communicating the proposal for the pledge agreement, along with their later cooperation in the Travises' obtaining of alternative financing for the corporation by using its shares (already pledged as collateral to Plaintiffs) as security for a 2005 corporate refinancing deal. Plaintiffs therefore contend Defendants negligently represented, without reasonable basis, that the pledge agreement would be effective throughout the process of obtaining alternative financing for the corporation, or they concealed that it would not. Such negligent representation, concealment and failure to disclose the true intentions of all the Defendants was allegedly material to Plaintiffs' decisions to proceed with the pledge agreement. Similar allegations are made about Defendants' intentional misleading of Plaintiffs. Financial and emotional distress damages were sought.
C. Summary Judgment Motion, Opposition
Defendants filed their motion for summary judgment, or alternatively, summary adjudication. Defendants provided attorney declarations and lodged documents to support their position that they were entitled to prevail, as a matter of law, due to Plaintiffs' inability to show essential elements of each cause of action. Specifically, regarding the professional malpractice claim, Defendants argued they could not be held liable to nonclients for the consequences of any professional negligence they might have committed, because an attorney does not owe a professional obligation to nonclients. Defendants argued that none of the recognized exceptions to the general rule of non-liability existed here (e.g., for intended beneficiaries of the attorney's services). Rather, Defendants argued that Plaintiffs were adverse parties to the pledge agreement and thus were not, as a matter of law, intended or third party beneficiaries to the attorney retention contract. In the alternative, Defendants argued the action was barred by the applicable statute of limitations, since damage had been sustained beginning in 2004. (§ 340.6.)
The trial court did not issue a ruling on the statute of limitations argument, and we need not consider it here. Section 340.6, on which Defendants' argument was based, pertains only to the professional negligence cause of action. Nothing in this opinion is intended to resolve any limitations issues that may arise as to the other causes of action pursued by Plaintiffs against these Defendants.
Regarding the causes of action for intentional and negligent misrepresentation, Defendants argued that Plaintiffs were not alleging any oral misrepresentations were made to them by attorney Lopez, and the only written representations were in the transmittal letter and should be viewed, as a matter of law, as statements of opinion or future predictions of third party conduct that were not actionable. Because of how the transaction was structured, Defendants argued no negligent failure to disclose occurred nor any intentional misconduct occurred as to these Plaintiffs, who were adverse parties.
Regarding elder abuse, Defendants provided their declaration that Lopez did not know the age of the Plaintiffs at the time of the transactions, nor did he have custody or care of them, in order to become liable under the Act for any infliction of financial abuse. (Welf. & Inst. Code, § 15610.30, subd. (a)(2).)
In their opposition and separate statement, Plaintiffs included their responses and objections to the defense separate statement. Plaintiffs contended numerous triable issues of fact remained, notably, as identified in the declaration of A.R., in which she stated that she asked Defendant Lopez questions about the proposed pledge agreement, which he answered by telephone. According to A.R., "I understood from our conversation that [Defendants] had been hired by the Travis defendants to create an effective substitute for the Deed of Trust that was to be replaced."
Based on their deposition testimony and the documentary evidence, Plaintiffs contended that both A.R. and V.R. relied on Defendants' statements and upon the transmittal letter's representations in agreeing to release the deed of trust on the property. They argued Defendants were active participants in the proposal but never informed them that, as Defendant Lopez represented in his declaration, the proposed pledge agreement was actually designed to assist the Travises in avoiding foreclosure or bankruptcy. As laypersons, Plaintiffs were unaware of the self-defeating effect of the provisions of the pledge agreement, with regard to the lack of a perfected security interest. A.R.'s declaration then repeats most of the duty, causation and damages allegations of the FAC.
Mainly, Plaintiffs based their claims of actionable misrepresentations and breaches of duty upon Defendants' representations that the Travises would pledge all of their personal assets to them, pursuant to the pledge agreement, in exchange for reconveyance of their trust deed. They argue these Defendants, who had superior knowledge of the matters and who stated their opinions about what would happen as existing facts, knew or should have known that the pledge agreement did not do what it was represented to do, but in fact did the opposite, and moreover, that it could be inferred Defendants knew the Travises would not do what they represented they would do.
In reply, Defendants filed 29 evidentiary objections to the declaration of A.R., on numerous grounds (to be discussed post). Defendants argued that Plaintiffs' account of their telephone call failed to indicate what questions she asked or what replies were made, to support her allegations of the Travises' hiring of Defendants to confer a benefit on Plaintiffs, as well as on the Travises. In any case, Plaintiffs did not claim that Defendants had made any oral misrepresentations of material fact to them, such as expressly creating an attorney-client relationship.
D. Ruling
Following oral argument, the trial court took the matter under submission. On February 18, 2009, the court issued its orders. First, it granted Defendants' request for judicial notice of the original complaint (but not including the truth of any allegations contained within it; Evid. Code, § 452, subd. (d)).
In ruling on the evidentiary objections raised by Defendants, the court first overruled an objection to the declaration of A. R., which gave her opinion, formed after talking on the telephone with Lopez about the transmittal letter at that time, that he "had been hired by the Travis defendants to create an effective substitute for the Deed of Trust that was to be replaced." The remaining objections raised by Defendants were sustained, as to numerous specific lines within paragraphs (nos. 8, 9, & 12), and as to the entirety of paragraphs 7, 11, and 13-27. The court based the rulings on "grounds of irrelevance, lack of foundation, speculation, conclusion of law or fact, lack of personal knowledge of the declarant or a co-plaintiff, and hearsay."
On the merits, the trial court granted summary judgment to Defendants, citing to authorities as to each cause of action: breach of professional duty, intentional or negligent misrepresentations, and the statutory claim of financial abuse of elderly persons. The court analyzed the entire complaint against these Defendants as revolving around the May 27, 2004 transmittal letter, which it found did not contain any actionable misrepresentations nor create duties to Plaintiffs. The order explains the court's reasoning that Plaintiffs could not prove an essential element of each of their claims against Defendants, and denies summary adjudication as moot. We will defer outlining the details of the order until the discussion portion of this opinion.
This summary judgment disposed of the entire action as to these Defendants. Plaintiffs appeal.
DISCUSSION
I
STANDARDS OF REVIEW
In appeals from summary judgments, we review the court's ruling on the motion de novo. (Lunardi v. Great-West Life Assurance Co. (1995) 37 Cal.App.4th 807, 819.) In doing so, we "apply the same rules and standards that govern a trial court's determination of a motion for summary judgment." (Distefano v. Forester (2001) 85 Cal.App.4th 1249, 1258.) Summary judgment should be granted if "all the papers submitted show that there is no triable issue of material fact and... the moving party is entitled to a judgment as a matter of law." (§ 437c, subd. (c).)
To satisfy its burden, a moving defendant is not required to "conclusively negate an element of the plaintiff's cause of action.... All that the defendant need do is to 'show[] that one or more elements of the cause of action... cannot be established' by the plaintiff." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 853.) Once this defendant's burden is met, the "burden shifts to the plaintiff... to show that a triable issue of one or more material facts exists..." (§ 437c, subd. (p)(2).) In opposing the motion, "[t]he plaintiff... may not rely upon the mere allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists...." (Ibid.; Brundage v. Hahn (1997) 57 Cal.App.4th 228, 234.) Summary judgment is proper only if no triable issue of fact is shown by all the papers submitted, such that the moving party is entitled to judgment as a matter of law. (Orrick, supra, 107 Cal.App.4th 1052, 1056-1057.)
In conducting de novo review, we view the evidence in the light most favorable to the plaintiffs, liberally construing the Plaintiffs' submissions and strictly scrutinizing the defendants' showing, and resolve any evidentiary doubts or ambiguities in Plaintiffs' favor. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768.) "Summary judgment will be upheld when, viewed in such a light, the evidentiary submissions conclusively negate a necessary element of plaintiff's cause of action, or show that under no hypothesis is there a material issue of fact requiring the process of a trial, thus defendant is entitled to judgment as a matter of law." (Thompson v. Sacramento City Unified School Dist. (2003) 107 Cal.App.4th 1352, 1360-1361.)
II
EVIDENTIARY ISSUES
Properly reviewing a summary judgment requires the court to "review the record de novo, considering all the evidence set forth in the moving and opposition papers except that to which objections have been made and sustained. [Citation.]' [Citations.]" (Smith v. Wells Fargo Bank, N.A. (2005)135 Cal.App.4th 1463, 1472, citing Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.) An abuse of discretion standard of review is applied to those rulings on objections. In Carnes v. Superior Court (2005) 126 Cal.App.4th 688, 694, the appellate court noted that even though ordinarily an appellate court reviews a summary judgment motion "de novo, " a different analysis will apply for review of a trial court's rulings on evidentiary objections. Thus, "an appellate court reviews a court's final rulings on evidentiary objections by applying an abuse of discretion standard." (Ibid.) Even where an appellant disagrees with the rulings made, reversal is not required if they are not shown to be incorrect. " 'Anyone who seeks on appeal to predicate a reversal of [a judgment] on error must show that it was prejudicial. [Citation.]' " (Ibid.)
First, without discussing the merits of the rulings, we address Plaintiffs' argument that the ruling was technically inadequate. The trial court resolved the evidentiary objections raised by Defendants in this manner: "The Court overrules Objection #1, attacking paragraph #6, lines 24-26 of the [A.R.] declaration submitted... in opposition to the motion, as it is her opinion. In all other respects, the Court sustains Objections #s 2-29 [specifying particular lines within paragraphs 7, 8, 11, 12, 13, 14, and amounting to all of paragraphs 7, 11, and 13-27]... in their entirety on grounds of irrelevance, lack of foundation, speculation, conclusion of law or fact, lack of personal knowledge of the declarant or a co-plaintiff, and hearsay."
On appeal, Plaintiffs contend those rulings were insufficiently specific. They rely on Demps v. San Francisco Housing Authority (2007) 149 Cal.App.4th 564, 575 (Demps), involving a defense summary judgment motion in the plaintiff's action, in which the defendant moving party raised evidentiary objections; however, the trial court did not expressly rule upon them, before granting a defense summary judgment. On review, the appellate court treated this failure to obtain a ruling as resulting in waiver of the defense objections to the plaintiff's evidence; accordingly, all of plaintiff's evidence became part of the appellate record. (Id. at p. 578.) That court did not have before it a "refusal" to rule, only a failure to do so. Where, however, a trial court's conduct was "the functional equivalent of a refusal to rule, " then the defense objections would be preserved on appeal. (Id. at p. 579.)
In our case, Plaintiffs are contending the trial court did not adequately meet its obligation to "expressly rule on the individual objections, " so that "the objections are deemed waived and the objected-to evidence included in the record." (Demps, supra, 149 Cal.App.4th at p. 578.) Plaintiffs argue that when the court sustained the defense objections 2 through 29, giving grounds of "irrelevance, lack of foundation, speculation, conclusion of law or fact, lack of personal knowledge of the declarant or a co-plaintiff, and hearsay, " that amounted to a failure to expressly rule on each objection, so they were waived and Plaintiff's declaration should be deemed admitted and dispositive.
We disagree with that contention, because the order contains sufficient specificity as to the various paragraphs and lines being addressed, according to the format of the objections, and it discloses that adequate consideration and analysis was directed toward the merits of the objections. (See, e.g., the objections and ruling listing various grounds and particular lines within paragraphs 7, 8, 11, 12, 13, & 14.) The court also had the discretion to sustain objections to the entirety of paragraphs 15-27 of the declaration, because those paragraphs merely repeated the allegations of the FAC, in such a manner that only conclusions of law or fact were set forth. There is no justification for finding the court failed to rule on, nor that waiver resulted of, the objections.
We also conclude on the merits of the evidentiary rulings that Plaintiffs have not shown how they represent any abuse of discretion. The trial court distinguished between matters of which A.R. had personal knowledge, and those in which she did not. In any case, reliance of a party may be inferred from other admissible evidence. (See Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 170 [reliance can be shown through circumstantial evidence that a party was substantially influenced by a representation or concealment].) The portions of the Plaintiffs' declaration allowed into evidence will be further addressed as necessary, post. At this time, we need only conclude that the trial court neither abused its discretion nor prejudicially erred in the manner of making its evidentiary rulings.
III
PROFESSIONAL NEGLIGENCE ISSUES
As support for their cause of action for breach of professional duty, Plaintiffs do not rely on the pledge agreement that they signed (along with the Travises), but instead upon the fact of Defendants' employment by the Travises, and the contents of the transmittal letter that sent the proposed agreement that he had drafted to them and that made certain express or implied representations about its purpose and effect. Plaintiffs acknowledge there is a bright line rule that an attorney's duty extends only to the intended beneficiaries of the attorney's acts. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 344 (Goodman).) They contend that under these circumstances, the relevant policy considerations weigh in favor of imposing a legal duty on Defendants, such that the court's ruling did not adequately address them.
We first take note that we do not review the reasoning of the court, but instead the correctness of the relevant legal rulings. (See D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 18-19.) The question of whether an attorney may, under certain circumstances, owe a duty to some third party arising out of professional conduct is essentially one of law and, as such, involves " ' "a judicial weighing of the policy considerations for and against the imposition of liability under the circumstances. [Citation.]" ' " (Skarbrevik v. Cohen, England & Whitfield (1991) 231 Cal.App.3d 692, 700-701.)
We next discuss the relevant policy considerations, together with third party beneficiary rules, and apply them to the factual context of this cause of action.
A. General Principles
The elements of a cause of action for professional negligence are simply stated: "(1) the duty of the professional to use such skill, prudence, and diligence as other members of his profession commonly possess and exercise; (2) a breach of that duty; (3) a proximate causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the professional's negligence." (Budd v. Nixen (1971) 6 Cal.3d 195, 200; Adams v. Paul (1995) 11 Cal.4th 583, 588-590.) Defendants were retained for this transaction by the Travises, and Plaintiffs contend they were separately or additionally owed professional duties by Defendants.
The undisputed facts in the record show that Plaintiffs and the Travises had been doing business together from 1998 through 2004, including the preparation of the two promissory notes and a previous substitution of security. Plaintiffs previously discussed the issues directly with the Travises and Plaintiffs do not dispute that those business dealings were arm's-length transactions.
When the attorney Defendants were brought in to participate in the Travises' plan to again substitute security, Defendants sent the letter as a proposal to Plaintiffs from the Travises. Plaintiffs and the Travis Defendants were adverse in interest in the pledge agreement, which they each signed. (Norton v. Hines (1975) 49 Cal.App.3d 917, 921 ["Clearly, an adverse party is not an intended beneficiary of the adverse counsel's client"]; 1 Witkin, Cal. Procedure (5th ed. 2008) Attorneys, § 301, pp. 380-381.)
To argue that the transmittal letter created different duties than those attached to the pledge agreement itself, Plaintiffs rely on third party beneficiary rules, which are summarized as follows: "A third party beneficiary's rights under a contract are not based on the existence of an actual contractual relationship between the parties, but on the law's recognition that the acts of the contracting parties created a duty and established privity between the promisor and the third party beneficiary with respect to the obligation on which the action is founded." (14A Cal.Jur.3d (2008) Contract, § 305, pp. 195-196.) Then, "the relations of the parties are the same as though the promise had been made directly to the third party. This rule is one of substantive... law, and the putative third party's rights under a contract are predicated on the contracting parties' intent to benefit it." (Ibid., fn. omitted; Civ. Code, § 1559.)
In making such legal determinations about the intent of the contracting parties to confer a benefit upon a third party, policy considerations relating to the attorney-client relationship must be considered. " '[The] determination whether in a specific case the [attorney] will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, among which are the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the [attorney's] conduct and the injury, and the policy of preventing future harm. [Citation.]' " (Fox, supra, 181 Cal.App.3d 954, 960; italics added.)
This duty analysis recognizes that if an attorney is preoccupied with the possibility of third party claims based on negligence, the attorney might be deterred from primarily seeking to protect the known client's interests. (Goodman, supra, 18 Cal.3d 335, 344.)
"In order to show a duty was owed to a third party beneficiary of a legal services agreement the third party must show that 'that was the intention of the purchaser of the legal services--the party in privity, ' and that 'imposition of the duty carries out the prime purpose of the contract for services.' [Citation.]" (B.L.M., supra, 55 Cal.App.4th 823, 832; see Goldberg v. Frye (1990) 217 Cal.App.3d 1258, 1268.)
It is not enough that third parties might be incidentally or remotely benefited by the creation and performance of an attorney-client relationship. (Lucas, supra, 56 Cal.2d 583, 590; Civ. Code, § 1559.) However, in Lucas, the applicable policy considerations allowed extension of attorney liability to beneficiaries under a will, even though they were nonclient third parties, because they were intended beneficiaries of the attorney's services. (Lucas, supra, at p. 590.)
It is a "question of fact whether a particular third person is an intended beneficiary of a contract" (Prouty v. Gores Technology Group (2004) 121 Cal.App.4th 1225, 1233), but "where... the issue can be answered by interpreting the contract as a whole and doing so in light of the uncontradicted evidence of the circumstances and negotiations of the parties in making the contract, the issue becomes one of law that we resolve independently." (Ibid.; Souza v. Westlands Water Dist. (2006) 135 Cal.App.4th 879, 891.)
In a real estate transaction that is conducted at arms-length between represented clients and nonrepresented clients, the attorney for the represented client does not owe legal duties to the unrepresented party, assuming no particular contrary promises have been made. (Fox, supra, 181 Cal.App.3d 954, 960-962; 1 Witkin, Cal. Procedure, supra, § 301, pp. 380-381; B.L.M., supra, 55 Cal.App.4th 823, 837.) We next seek to determine whether Plaintiffs qualify for any exceptions to the above rules.
B. Analysis: Existence of Duty Factors
Plaintiffs sought to prove triable issues remained about professional breach of duty, on the basis that Defendants knew or should have known that the pledge agreement did not do what they represented, in the transmittal letter, that it would do. They assert that the purpose of the attorneys' employment was to prepare an effective pledge agreement, but Defendants' professional negligence in drafting it entirely frustrated the purpose of that agreement. They contend they, as well as the Travises, were intended to benefit from the correct preparation of the agreement, and Defendants' failure to do so represented a breach of duties to them. Under these particular circumstances, they would find inapplicable the ordinary rule, that an adverse party is not an intended beneficiary of the employment of the adverse counsel. (Norton v. Hines, supra, 49 Cal.App.3d 917, 921.)
Plaintiffs therefore argue they demonstrated the existence of triable issues of fact, because Defendants' transmittal letter stated that the purpose of the pledge agreement would be to allow the Travises to keep their payments current on the notes. However, in his declaration, Defendant Lopez stated that the purpose was to protect the Travises from bankruptcy or foreclosure. Plaintiffs seek a ruling that this is a discrepancy that raises triable issues about the nature of the duty undertaken by Defendants, to provide an adequate and functional pledge agreement, and for whom. In particular, they claim the factors for evaluating duty weigh in their favor, as to foreseeability of harm. (Fox, supra, 181 Cal.App.3d 954, 960.)
Plaintiffs further base their claim of duty directly owed to them on the status of Defendants as attorneys, on which they reasonably relied in believing that the pledge agreement would be effective. That is, they relied on the appearance of the transmittal letter and its attorney letterhead. Even though an attorney is not "burdened" with any duty toward nonclients merely due to having status as an attorney, Plaintiffs argue that under these circumstances, there is a close enough connection between the attorney's professional conduct and the injury. (Fox, supra, 181 Cal.App.3d 954, 960.)
Even where a third party may benefit from the successful completion of a client's particular transaction, for which an attorney is employed in a professional capacity, that factor does not confer third party beneficiary status under the client's attorney retention agreement. (B.L.M., supra, 55 Cal.App.4th 823, 832.) Plaintiffs have not shown the Travises had any intention to create a benefit for Plaintiffs as part of the purpose of the contract for professional services. (Ibid.)
Rather, in sending the transmittal letter and the proposed pledge agreement, Defendants were clearly acting on behalf of the Travises, who were asking for an agreement from the Plaintiffs, as adverse parties. Defendants did not undertake, as part of representing the Travises, a duty to advise Plaintiffs whether the deal was adequate from their point of view, since the Travises had been essentially in an adverse position to Plaintiffs since the beginning of the loan transactions in 1998. The trial court correctly concluded that Plaintiffs were not intended beneficiaries of the attorney-client relationship between the moving parties and the Travis defendants: "Like Fox, the case at bar is an arms' length real estate transaction where counsel for one of the parties allegedly negligently prepared the documents to the detriment of the non-represented party. [Plaintiffs] did not hire or pay any fees to the attorney defendants. As in Fox, there is no duty owed to the [Plaintiffs] in this case as they were not the clients of [Defendants]."
Moreover, whenever the defective nature of the proposed pledge agreement was actually discovered, that factor does not change the adverse nature of the Defendants' legal representation as to Plaintiffs, at the time that Defendants and the Travises sought to obtain Plaintiffs' agreement to substitute the collateral. Plaintiffs were approached as adverse parties in the transaction. We do not disagree with Plaintiffs that harm was foreseeable if the transaction went badly, but this record is not susceptible of a reading that Defendants were required by the Travises, nor that they otherwise independently undertook, a professional duty to protect the interests of Plaintiffs by taking into account those interests, in drafting and presenting the proposed pledge agreement.
The trial court was correct in its legal analysis of the lack of a professional duty extending from Defendants to adverse parties in the transaction, Plaintiffs. However, that conclusion about the missing elements of the professional malpractice claim does not necessarily lead to similar conclusions on the misrepresentation causes of action, as we next explain. Summary judgment was not justified by that duty analysis.
IV
NEGLIGENT MISREPRESENTATION
Plaintiffs next seek to demonstrate that triable issues of fact remain as to whether Defendants negligently failed to disclose material facts about the transaction. The complaint frames these issues alternatively as (1) Defendants had a professional duty not to misrepresent, in a negligent manner, the anticipated efficacy of the pledge agreement, or (2) even considering that Defendants were acting as attorneys in the transaction, they had a separate, more general duty to disclose known facts, involving the ultimate success or failure of the proposed substitution of the security.
In either case, " 'Negligent misrepresentation is a separate and distinct tort, a species of the tort of deceit.' " (B.L.M., supra, 55 Cal.App.4th 823, 834.) A representation may be actionable, even though not made with knowledge of actual falsity, if it asserts as fact " 'that which is not true, by one who has no reasonable ground for believing it to be true, ' " with the intent to induce the recipients to alter their positions, to their detriment. (Ibid.) A positive assertion of some kind is required. (Vega, supra, 121 Cal.App.4th 282, 291-292.)
The elements of negligent misrepresentation also include justifiable reliance and damage. (Fox, supra, 181 Cal.App.3d 954, 962 ["Negligent misrepresentation is a form of deceit, the elements of which consist of (1) a misrepresentation of a past or existing material fact, (2) without reasonable grounds for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) ignorance of the truth and justifiable reliance thereon by the party to whom the misrepresentation was directed, and (5) damages."].)
In B.L.M., the court limited its analysis of third party professional negligence claims by stating, "We do not suggest that an attorney should be exempt from liability for negligent misrepresentation under circumstances in which a nonattorney could be held liable." (B.L.M., supra, 55 Cal.App.4th at p. 839.)
It is first important to distinguish between an attorney's representations of legal opinions, given to adverse parties, versus representations about factual matters. More recent case law seems to recognize such recovery by a third party against an attorney under a negligent misrepresentation theory is limited "to those cases involving misrepresentations of fact rather than legal opinions." (B.L.M., supra, 55 Cal.App.4th 823, 839, citing, e.g., Cicone v. URS Corp. (1986) 183 Cal.App.3d 194.)
Plaintiffs rely on Roberts, supra, 57 Cal.App.3d 104, 109, for the concept that Defendants must be liable for their negligent misrepresentations to Plaintiffs, even if Plaintiffs were not the clients' intended beneficiaries, because Defendants' conduct was intended to influence them. In that case, the attorney defendants knew about certain potential problems with plaintiff's proposed lending transaction with a partnership ("the true picture of the... partnership, " or whether the partnership was viable and creditworthy), but the attorneys knowingly failed to reveal that knowledge to a potential lender, the plaintiff. Specifically, in Roberts, the defendant attorney was acting for the partnership defendants and knew that some general partners had met and voted to dissolve, and some of the participants in the partnership were disputing their status as general partners, but the attorney knowingly failed to reveal those problems to plaintiff, even though they would clearly have been relevant to the plaintiff's lending decision. (Id. at pp. 108-109.)
In finding that a cause of action for negligent misrepresentation was supportable, the court in Roberts said the defendant attorney's opinion "concerning the status of the partners was rendered for the purpose of influencing plaintiff's conduct, and harm to him was clearly foreseeable." (Roberts, supra, 57 Cal.App.3d at p. 111.) It followed that "the issuance of a legal opinion intended to secure benefit for the client, either monetary or otherwise, must be issued with due care, or the attorneys who do not act carefully will have breached a duty owed to those they attempted or expected to influence on behalf of their clients." (Ibid.; 1 Witkin, Cal. Procedure, § 303, p. 385.)
Thus, in Roberts, "the firm had a duty to reveal to plaintiff this doubt as to the status of the partnership as a general partnership, since the firm knew that disclosure of this doubt might well be determinative of plaintiff's decision to make loans to [the partnership]. Half the truth is often as misleading as outright falsehood. Where a defendant makes false statements, honestly believing them to be true, but without reasonable grounds for such belief, he may be held liable for negligent misrepresentation, a form of deceit." (Roberts, supra, 57 Cal.App.3d 104, 111, italics added.)
Arguably, in Roberts, supra, 57 Cal.App.3d 104, the defendant attorney's understanding of the partnership status could be characterized as fact-based rather than opinion-based. In any case, even where a third party may not justifiably rely upon the legal opinion of another party's lawyers, the third party may be able to recover damages under a negligent misrepresentation theory, in cases involving misrepresentations of fact by the adverse attorney. (B.L.M, supra, 55 Cal.App.4th at pp. 839-840.)
In our case, Plaintiffs have alleged Defendants made the required "positive assertions" (Vega, supra, 121 Cal.App.4th 282, 291) or active concealment or suppression of facts, as negligent or false representation equivalents. (Ibid.) These include Defendants' role in preparing and communicating the proposal for the pledge agreement, along with their later cooperation in the Travises' obtaining of alternative financing for the corporation by using its shares (already pledged as collateral to plaintiffs) as security for the related corporate refinancing deal. Plaintiffs contend Defendants negligently represented in 2004, without reasonable basis, that the pledge agreement would be effective, throughout the anticipated process of obtaining alternative financing for the corporation. Such negligent representation, concealment and failure to disclose the true intentions of all the Defendants was allegedly material to Plaintiffs' decision to proceed with the pledge agreement.
Plaintiffs therefore base their negligent misrepresentation theory not only on the professional undertaking by Defendants to prepare a pledge agreement that was sufficient for its intended purposes, but also upon their ongoing participation in raising funds for the financially troubled Travises, which was not completed until the later corporation refinancing transaction. These amount to allegations of concealment or nondisclosure of material facts about whether the Travises' proposal would actually require or allow them to continue to make payments to Plaintiffs, as represented.
Specifically, Plaintiffs argue they demonstrated the existence of triable issues of fact, in that Defendants' transmittal letter expressly stated that the purpose of the pledge agreement would be to allow the Travises to keep their payments current on the notes. However, in his declaration, defendant Lopez stated that the purpose was to protect the Travises from bankruptcy or foreclosure. Plaintiffs argue that inferences can be drawn that Defendants knew that the Travises were in financial trouble (potential bankruptcy or foreclosure) and thus they would possibly be unable to keep their payments current on the notes, as promised. Nevertheless, Defendants participated in the proposal and attempted to convince Plaintiffs to agree to it, by making representations about its validity.
Plaintiffs also rely on A.R.'s declaration, stating she and V.R. signed the pledge agreement "in reliance on the representations" in the Lopez letter and the telephone call. No objections to that portion of the declaration were sustained. Other portions of her declaration stated Plaintiffs would not have released the real property security without a safe and effective way to secure performance, in the event the Travises failed to make the promised payments. The court did not sustain objections to her statements that Defendants did not disclose that the proposal "was obviously designed to keep the Travis defendants from facing litigation, foreclosure or bankruptcy, " and thus represented an undisclosed attempt to forestall litigation or other action by Plaintiffs. (The remainder of the reliance allegations in the declaration were stricken.)
Plaintiff A.R.'s declaration then states that the Travises had failed to timely make all the payments called for after the pledge agreement was executed, and that Plaintiffs became concerned in November 2006 that the payments might stop. The Travises had missed payments at times between the years 2000-2004, but had always caught them up, with explanations and reassurance.
From all of the evidence, Plaintiffs argue they raised triable material issues of fact on negligent misrepresentation or concealment, both regarding the efficacy of the pledge agreement and any known problems with it, and about any knowledge Defendants may have had about the Travises' intentions in the overall transactions that involved the refinancing of their debts, personal and corporate. We agree. Even though Defendant attorneys allegedly prepared the subject documents in reliance on information they received from the clients, the Travises, Plaintiffs have raised issues about whether Defendants had reasonable grounds for believing that the Travises were going to comply with the obligations supposedly created by the proposal, in light of the Travises' known financial problems. Although Plaintiffs had dealt personally with the Travises on the same liabilities for several years, the added participation of Defendants in May 2004 raises issues about the nature of the disclosures required to be made by Defendants, to provide complete, rather than partial, misleading information about the topics of discussion. (Fox, supra, 181 Cal.App.3d 954; Roberts, supra, 57 Cal.App.3d at pp. 108-111.) For example, the transmittal letter stated that plaintiffs should contact Matt Travis or Defendants so that the necessary paper work could be finalized, which may amount to representations that the transaction would be completed according to law.
Even assuming that Defendants never undertook the capacity of attorneys acting on behalf of the Plaintiffs, to affirmatively give them advice, Defendants nevertheless made disclosures intended to be relied on by Plaintiffs, about the adequacy of the pledge agreement. As drafted and as provided to Plaintiffs, the agreement provided only an illusory security interest. Under the given structure of the transaction, Plaintiffs made some showing that Defendants' reliance on the information received from the Travis clients may have been unreasonable, or that Defendants acted on and conveyed incomplete information, or that the information in Defendants' possession did not support the statements in the transmittal letter. Accordingly, Plaintiffs have demonstrated there are triable issues about Defendants' negligent misrepresentation of material facts. Defendants were not entitled to summary judgment or adjudication as a matter of law on the negligent misrepresentation claim.
V
INTENTIONAL MISREPRESENTATION ISSUES
Plaintiffs next allege that Defendants, in presenting the proposed pledge agreement, concealed and failed to disclose the true terms, risks, and purposes of the proposed substitution of personal property collateral, without an adequate security device. Plaintiffs also contend they justifiably relied on Defendant's affirmative representations about the nature and effect of the documents Plaintiffs were being asked to sign, which were knowingly false representations.
A. Applicable Rules
To recover against Defendants for fraud, Plaintiffs must prove each of the following elements: Defendants made (1) a false representation or a nondisclosure (active concealment) of material facts; (2) with knowledge of its falsity or knowledge that such facts could not reasonably be discovered; (3) with intent to defraud or deceive, i.e., to induce reliance. Further, Plaintiffs must show justifiable reliance on the misrepresentation or resulting from the nondisclosure, and resultant damages. (Civ. Code, §§ 1572, 1709; Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239, fn. 4; Vega, supra, 121 Cal.App.4th 282, 291.)
"A fraud claim against a lawyer is no different from a fraud claim against anyone else. ' "If an attorney commits actual fraud in his dealings with a third party, the fact he did so in the capacity of attorney for a client does not relieve him of liability." ' [Citations.] While an attorney's professional duty of care extends only to his own client and intended beneficiaries of his legal work, the limitations on liability for negligence do not apply to liability for fraud. [Citation.] Accordingly, a lawyer communicating on behalf of a client with a nonclient may not knowingly make a false statement of material fact to the nonclient [citation] and may be liable to a nonclient for fraudulent statements made during business negotiations." (Vega, supra, 121 Cal.App.4th 282, 291.)
In general, statements of opinion or predictions of future conduct of another are not considered to be representations of fact. (Nibbi Brothers, Inc. v. Home Federal Savings and Loan Association (1988) 205 Cal.App.3d 1415, 1423 (Nibbi Brothers, Inc.); Cutler v. Bowen (1935) 10 Cal.App.2d 31, 34.) However, there are exceptions: (1) where a party holds itself out as specially qualified and the other party is so situated that it may reasonably rely upon the former's superior knowledge; (2) the opinion is by a fiduciary or other trusted person; and (3) where a party states its own opinion as an existing fact or as implying facts that justify a belief in the truth of the opinion. (Cohen, supra, 151 Cal.App.3d 941, 946.)
Related to the latter category, in Vega, supra, 121 Cal.App.4th 282, the court distinguished between affirmative false representations and their equivalent, active concealment/suppression of facts. "In some but not all circumstances, an independent duty to disclose is required; active concealment may exist where a party '[w]hile under no duty to speak, nevertheless does so, but does not speak honestly or makes misleading statements or suppresses facts which materially qualify those stated.' " (Id. at p. 294.)
In Vega, the defendant lawyers had allegedly concealed material facts in a merger transaction, although the main purpose of their legal representation was to make the appropriate disclosures of such facts. (Vega, supra, 121 Cal.App.4th at pp. 292-294.) The appellate court ruled in favor of the plaintiffs, on the basis that when those attorney-defendants created a disclosure schedule in the transaction, which deliberately omitted material facts, no independent, preexisting duty to disclose (e.g., from an attorney-client relationship with that plaintiff, who was harmed by the nondisclosures) was required for liability to be established. (Ibid.) Rather, those defendant lawyers did have the same duty others have " 'not to defraud another, even if that other is an attorney negotiating at arm's length.' " (Id. at p. 293.)
B. Analysis
In Defendants' letter presenting the proposed pledge agreement, they made additional representations on behalf of the Travis clients. Attorney Lopez explained that the clients were proposing that Plaintiffs remove their deed of trust from the real property, in exchange for what the Travises "will do" as follows: Pursuant to the pledge agreement, continue to keep the notes current; personally guarantee the notes; and pledge all personal assets to Plaintiffs under the proposed agreement. The proposal then offers that when the Travises obtain permanent financing on the corporation, then Plaintiffs "will have the option of either continuing the payments or being paid off fully on the note." The letter states that taking such actions "will allow the Travises to keep you current on your note. If this [is] acceptable, please call Matt or myself so that the necessary paper work can be finalized." Presumably, this letter could be interpreted as representing that appropriate security instruments would be prepared to finalize the paperwork, as contemplated by the proposed agreement, although this was never done.
For the same reasons we stated above, regarding the breach of professional duty cause of action, the trial court was correct when it initially concluded that Plaintiffs did not stand in a fiduciary relationship with the attorney Defendants, for purposes of alleging fraud. These attorney defendants owed a duty of loyalty to their principals, the Travis defendants, that precluded them from acting directly on behalf of Plaintiffs. (Cohen, supra, 151 Cal.App.3d at p. 946.)
However, the trial court's analysis of the fraud issues incorrectly went on to conclude that Plaintiffs had brought forward no facts to support one or more of the other exceptions to the principle that statements of opinion and/or predictions of future conduct of another may not be considered to be representations of fact, when fraud is alleged. (Nibbi Brothers, Inc., supra, 205 Cal.App.3d 1415, 1423.) Plaintiffs have a colorable argument that Defendants' representations fell within exceptions to the fraud rules that allow liability for statements of opinion, when they are made from a position of superior knowledge. (Cohen, supra, 151 Cal.App.3d 941, 946.) This superior knowledge consisted of Defendants' legal training, in that they should have known the proposed pledge agreement was defective. On this record, it cannot be decided as a matter of law that attorney Lopez never held himself out to Plaintiffs to be specially qualified in the drafting of agreements of any kind or in any area of the law. When he presented it to them in the transmittal letter, he made no disclaimers that he was not qualified to prepare it, or that only a legal specialist could do so. Moreover, as compared to the Plaintiffs, who were laypersons, he had superior knowledge of the subject matter, i.e., the suitability of the proposed pledge agreement and its related instruments.
Even assuming that statements of opinion or predictions of future conduct of another should not be considered to be factual representations, we agree with Plaintiffs that "it is a fine line between fact and opinion." Plaintiffs are alleging somewhat more than Defendants' status as attorneys in conveying a proposal, e.g., that Lopez was endorsing the proposal or participating in it, or alternatively, that he had some "inside knowledge" that his clients, the Travises, did not have the ability to comply with the agreement as represented in the letter, or that they never intended to "keep you current on your note. If this [is] acceptable, please call Matt or myself so that the necessary paper work can be finalized."
It is not dispositive that Plaintiffs do not contend that Defendant attorney Lopez made any oral misrepresentations of fact to them, such as in his telephone call with plaintiff A.R., in which he apparently answered questions about the proposal (although he denies this occurred). Plaintiffs are primarily basing their claim upon the face of the transmittal letter and the representations and opinions given in it about the suitability and enforceability of the proposed pledge agreement. For this reason, it is not dispositive that plaintiff V.R., now represented by his estate, is no longer living and cannot testify about his reliance on the letter.
Next, we disagree with the trial court's conclusion that none of the statements in the transmittal letter implied the existence of certain other facts, such as those justifying a belief in the truth of the opinions given. In the letter, Defendant attorneys represented that when the Travises obtained permanent financing on the corporation, then Plaintiffs "will have the option of either continuing the payments or being paid off fully on the note." Arguably, more than a prediction of what the Travises might do was made by Defendants, including a promise that their clients would make good upon the notes in some way, rather than entirely defaulting on them. As their attorneys, Defendants inferentially had superior knowledge of the Travises' position in the transactions, at least as compared to Plaintiffs, and of the legal adequacy of the proposal being offered to substitute the security.
Thus, the trial court erred in concluding that all of the alleged intentional misrepresentations identified by Plaintiffs were only nonactionable statements of opinion about future action to be taken by third parties. Plaintiffs adequately showed the potential applicability of several exceptions to this rule, warranting further proceedings on the merits on the fraud claim. Summary judgment should not have been granted on this ground.
VI
ELDER ABUSE; REMAINING ISSUES
A. General Principles
The published cases are in some conflict on whether a violation of the Act constitutes an independent cause of action, or if the Act merely provides for enhanced remedies, such as attorney fees, when an underlying or predicate tort is proved. In Perlin, supra, 163 Cal.App.4th 657, 665-666, the court analyzed Supreme Court case law to find that, at least where elder abuse occurs in the health care context and where physical harm results, an independent cause of action can be brought under the Act. In Perlin, the court had before it questions about the requisite standard of proof of causation of such physical harm, for purposes of awarding attorney fees within the provisions of the Act. (Welf. & Inst. Code, § 15657 ["Where it is proven by clear and convincing evidence that a defendant is liable for physical abuse as defined in Section 15610.63, or neglect as defined in Section 15610.57, and that the defendant has been guilty of recklessness, oppression, fraud, or malice in the commission of this abuse, the following shall apply, in addition to all other remedies otherwise provided by law: [¶] (a) The court shall award to the plaintiff reasonable attorney's fees and costs"].)
Welfare & Institutions Code section 15657.5 (added 2004, Stats. 2004, ch. 886, § 4; amended 2008, Stats. 2008, ch. 475, § 2), now clarifies that financial elder abuse can also give rise to enhanced remedies, such as attorney fees: "(a) Where it is proven by a preponderance of the evidence that a defendant is liable for financial abuse, as defined in Section 15610.30, in addition to compensatory damages and all other remedies otherwise provided by law, the court shall award to the plaintiff reasonable attorney's fees and costs." The parties have not addressed the applicability of that provision, and it is not necessary to do so here.
In Perlin, the court quoted from Smith v. Ben Bennett, Inc. (2005) 133 Cal.App.4th 1507, for the observation that " '[a]n elder abuse claim could be a "cause of action" for some statutory purposes but not others.' " (Id. at pp. 1524-1525; Perlin, supra, 163 Cal.App.4th at pp. 665-666.) The court in Perlin then disagreed with the opinion in Berkley v. Dowds (2007) 152 Cal.App.4th 518, 529, about its statement, " '[t]he Act does not create a cause of action as such, but provides for attorney fees, costs and punitive damages under certain conditions.' " (Perlin, supra, at pp. 665-666; ARA Living Centers-Pacific, Inc. v. Superior Court (1993) 18 Cal.App.4th 1556, 1563-1564, Welf. & Inst. Code, § 15657.)
In Perlin, supra, 163 Cal.App.4th 657, 665-666, the court set forth its analysis that the California Supreme Court had stated in recent opinions, in dicta, that such an independent cause of action could be viable under certain circumstances. Specifically, in Barris v. County of Los Angeles (1999) 20 Cal.4th 101, in Delaney v. Baker (1999) 20 Cal.4th 23, 40 and in Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, the Supreme Court did not rule out that independent statutory causes of action could be stated under the Act, potentially as private rights of action to remedy elder abuse that was committed with recklessness, oppression, fraud or malice. (See Covenant Care, Inc., supra, 32 Cal.4th at pp. 786, 788-790.)
B. Application
In our case, the trial court ruled no liability under the Act was possible, because Plaintiffs failed to show there were triable issues regarding elder abuse, in connection with one of the other torts alleged that might qualify as a predicate tort, to give rise to a right to enhanced remedies as provided for by the Act. We have discussed above how triable issues remain on the fraud and negligent misrepresentation claims, which could potentially provide the necessary predicate tort, if it is actually essential for statutory liability. However, we need not weigh in upon that legal issue at present. (See Covenant Care, Inc. v. Superior Court, supra, 32 Cal.4th at pp. 786, 788-790.) Summary judgment should not have been granted on the ground that elder abuse cannot be pleaded or proved.
Alternatively, the trial court found Defendants' involvement in sending the transmittal letter and pledge agreement did not create a basis for a finding of duty and breach, because these Defendants were not caretakers or custodians of persons known to them to be senior citizens (Plaintiffs). As observed by the trial court at oral argument, this was not the classic fact pattern of elder financial abuse by family members, or businesses targeting senior citizens' particular vulnerabilities. Nor was it a health care negligence situation, in which the Act more clearly applies to create remedies. (Perlin, supra, 163 Cal.App.4th at pp. 665-666.)
Regardless of whether these Plaintiffs are able to make any showing that these Defendants knew of their senior citizen status at the relevant times, and that Defendants wrongfully took advantage of that knowledge, the current record does not allow us to resolve the elder abuse claim as a matter of law. Welfare and Institutions Code section 15610.30, subdivision (a)(2) defines financial abuse of an elder as including "assistance" in wrongfully or fraudulently depriving an elder person of his or her property. (See Wood v. Jamison (2008) 167 Cal.App.4th 156, 164-165 [sufficient evidence supported an award of elder abuse remedies against an attorney who not only assisted a client in depriving a vulnerable elder person of property, but also took a finders' fee out of the client's improper deal].)
Plaintiffs are currently alleging Defendants participated or assisted in making intentional or negligent misrepresentations, to enable the Travises to engage in potentially fraudulent conduct. At this point in the development of the action, it would be inappropriate to rule that Plaintiffs will be unable to supply evidence against Defendants that might bring them within the scope of conduct that is recognized as statutorily actionable and remediable under the Act. (See Perlin, supra, 163 Cal.App.4th at pp. 665-666.)
Finally, we decline to address Defendants' backup claim that dismissal must be warranted in any case, to protect Defendants' attorney-client privilege with the Travises. (Solin v. O'Melveny & Meyers (2001) 89 Cal.App.4th 451.) At this time, it cannot be resolved whether Defendants may be able to present a defense against Plaintiffs' misrepresentation and other claims, without disclosing any of the confidences reposed in them by clients. If such important privilege issues should surface in further proceedings, the trial court will be well able to handle them, in an appropriate exercise of its discretion. Likewise, although we conclude summary judgment was erroneously granted, we do not intend to foreclose any appropriate further proceedings that may be allowed by the trial court, in light of the opinions expressed above on the professional negligence cause of action in particular.
DISPOSITION
Summary judgment is reversed. Costs are awarded to appellants.
WE CONCUR: BENKE, Acting P. J., O'ROURKE, J.
Welfare and Institutions Code section 15610.30, subdivision (a)(2) defines "financial abuse" as follows: "(a) 'Financial abuse' of an elder or dependent adult occurs when a person or entity does any of the following: [¶]... [¶] (2) Assists in taking, secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both."