Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
Appeal from a judgment of the Superior Court of Los Angeles County. No. SC090209 Lisa Hart Cole, Judge.
Parker Mills and David Parker; Law Offices of Theodore F. Monroe, Theodore F. Monroe, Bradley O. Cebeci, and Daniel A. Beck for Plaintiffs and Appellants.
Kaplan, Kenegos & Kadin, Jerry Kaplan and David Scott Kadin for Objectors and Respondents.
CHAVEZ, J.
Webillcards, LLC (Webillcards), Direct Billing, LLC, and Ship-It Services, LLC (collectively appellants), appeal from an order of the trial court denying appellants’ verified petition, filed pursuant to Civil Code section 1714.10 (section 1714.10), seeking leave to file their proposed verified third amended complaint (VTAC) against respondents Jerome Alan Kaplan, David Scott Kadin, and the law firm of Kaplan, Kenegos & Kadin (collectively respondents). We affirm.
CONTENTIONS
Appellants contend that the trial court erred in requiring appellants to proceed by verified petition under section 1714.10 because (1) appellants never alleged any conspiracy or concert of action between respondents and any other defendant; and (2) the proposed pleading alleged an “independent legal duty” as the basis for appellants’ claims against respondents, therefore the statute was inapplicable by its own express terms.
BACKGROUND
All facts are taken from the pleadings or documents filed in connection with appellants’ verified petition. Thus, these facts have not been established in this case.
Appellants are companies that provide credit card merchant accounts, customer service, sales, and operations support to merchants. To perform those functions, appellants establish accounts with agents of certain banks. Cardready International, Inc. (Cardready), acts as such an agent on behalf of certain banks. Through a series of merchant processing agreements, appellants opened merchant accounts with Cardready and KeyBank in August 2003 in order to process credit card transactions for their customers through the Visa and Mastercard networks. Appellants’ claims against the Cardready defendants arise under these merchant agreements, and are based upon their alleged improper withholding and conversion of funds from appellants’ merchant and reserve funds both during the course of processing and after the termination of those agreements.
Cardready, Jim Berland (Berland), Cardready’s president, Cardready’s chief executive officer Brandon Becker (Becker), Cashready, LLC, a business that issues loans to online merchants, and KeyBank National Association (KeyBank) are defendants in this action. They are not parties to this appeal. These defendants shall be collectively referred to as “the Cardready defendants.” Respondents have, at all relevant times, been acting as Cardready’s attorneys.
Appellants’ allegations against respondents are based on a series of events beginning in April 2004. On or about April 16, 2004, Berland telephoned appellants’ employee, Glenn Lench, and informed him that Cardready was subject to very high prospective fines by Visa and Mastercard as a result of appellants’ operations. Under threat of legal action, Lench acquiesced to Berland’s demand that he wire $800,000 of appellants’ funds to respondents, who were Cardready’s attorneys. Respondent Kaplan confirmed receipt of the funds in a letter dated April 19, 2004, addressed to both Berland and Webillcards, which states:
“This will confirm that pursuant to an agreement last week between [Glenn] Lench of WebillCards and Jim Berland of CardReady International, Inc., the sum of $800,000.00 is being held in the Kaplan, Kenegos & Kadin Trust Account pending resolution of a pending dispute involving Visa U.S.A. The monies will be held for fines, penalties, attorneys’ fees and related costs, and will not be disbursed for any other purpose.”
Appellants further alleged that Cardready’s former corporate counsel, Steven Huskey of Epport, Richman & Robbins emailed Kadin on May 12, 2004, and referred to respondents as “the trustee . . . of the $800,000 of reserves.”
This email was attached to the declaration of Richard Fisher (Fisher), principal of Webillcards, filed in support of appellants’ verified petition. The email was sent in connection with a proposed “Partial Release of Reserve Funds Agreement,” which was forwarded from Steven Huskey to Webillcards on May 12, 2004. Huskey noted that the proposed agreement was also being forwarded to Cardready and respondents, therefore the agreement “remain[ed] subject to their verification . . ., comments and approval.” Fisher rejected the proposed agreement.
When Fisher returned to the office, he challenged Berland’s representations concerning prospective fines from Visa. Thereafter, Berland and Fisher agreed that respondents would return $200,000 of the $800,000 to Webillcards, and continue to hold the remaining $600,000 in the Kaplan firm trust account pending resolution of the dispute with Visa.
The Cardready defendants terminated appellants’ merchant accounts in May 2004.
2. Procedural Background
Appellants filed this action against Cardready in June 2006, alleging breach of contract and other causes of action. The second amended complaint, filed May 29, 2007, alleged causes of action for breach of contract, contractual breach of implied covenant of good faith and fair dealing, money had and received, accounting, conversion, constructive trust, and unjust enrichment against all of the Cardready defendants.
As alleged in the proposed VTAC, appellants discovered on or about September 11, 2007, when reviewing discovery from a third party, that respondents “wrongfully distributed, dissipated and converted the trust res in derogation of their ethical and fiduciary obligations to [appellants].” Appellants alleged that the third party provided appellants with a document entitled “CardReady/Webillcards.com Accounting” which showed that respondents wrongfully distributed and converted the entirety of appellants’ funds. Specifically, appellants alleged that the document showed that respondents:
“misused the remaining $600,000 in Entrusted Funds to pay the Kaplan firm’s own bills for legal matters unrelated to and beyond the reasonable scope of the trust, as well as other law firms and legal consultants for similarly unrelated legal work clearly outside the reasonable scope of the trust. These expenditures appear to have constituted payment for legal fees, expert fees, arbitration fees and other fees pertaining to unrelated litigation, as well as for the apparent creation of an asset protection plan for the Cardready Defendants.”
While appellants noted that one entry reflected a withdrawal for “Visa fines” in the amount of $162,030.18, appellants alleged that there was no evidence that these fines were related to the activities of appellants.
Appellants filed their motion for leave to file third amended complaint on October 9, 2007. Respondents opposed the motion, arguing that appellants’ attempt to name them as defendants in the lawsuit violated the strict requirements set forth in section 1714.10 which protect the attorney-client relationship and preclude a party from naming an attorney of record in a complaint. In addition, respondents argued that the acts alleged against them were protected by the litigation privilege. The hearing on appellants’ motion took place on November 6, 2007. The trial court denied the motion and explained: “[Y]ou are alleging a civil conspiracy between the client and the lawyers. And under the circumstances, I think that there is enough information on that aspect of the case to require that there be a 1714.10.”
In compliance with the court’s order, on November 9, 2007, appellants filed a verified petition pursuant to section 1714.10 seeking an order permitting the proposed VTAC to be filed. The VTAC alleged two causes of action against respondents: the sixth cause of action for conversion, and the seventh cause of action for breach of fiduciary duty. In their verified petition, appellants argued that the VTAC alleged claims which fell within the independent duty exception to section 1714.10. In sum, appellants argued, as they do here, that respondents undertook an independent fiduciary duty to appellants by receiving the money wired from Webillcards to Cardready in April 2004.
Respondents opposed the verified petition, arguing that the causes of action alleged against respondents sounded in civil conspiracy and that the exception found in section 1714.10 for actions arising out of an independent duty was inapplicable. Because respondents were acting solely as agents of their client, Cardready, respondents argued that the agent immunity rule set forth in Doctors’ Co. v. Superior Court (1989) 49 Cal.3d 39 (Doctor’s Co.), barred appellants’ causes of action against them.
The hearing on the verified petition took place on December 6, 2007. After argument, the trial court made the following findings: “With regard to the sixth cause of action for conversion, the court does not find that there’s a reasonable probability that [appellants] will prevail on this action.” The court cited the agent immunity rule, and found that respondents were acting as the “agent for their client.” The court further found, with regard to the seventh cause of action for breach of fiduciary duty, that there was no legal duty. The court specified that “the law is specifically . . . opposite.” Appellants were thus denied leave to file the VTAC.
A trial court’s order denying a verified petition under section 1714.10 is directly appealable as a “final judgment” pursuant to section 1714.10, subdivision (d). On December 10, 2007, appellants timely appealed from the court’s order.
DISCUSSION
We begin with a discussion of the history and purpose of section 1714.10. The statute reads, in part:
“No cause of action against an attorney for a civil conspiracy with his or her client arising from any attempt to contest or compromise a claim or dispute, and which is based upon the attorney’s representation of the client, shall be included in a complaint or other pleading unless the court enters an order allowing the pleading that includes the claim for civil conspiracy to be filed after the court determines that the party seeking to file the pleading has established that there is a reasonable probability that the party will prevail in the action.” (§ 1714.10, subd. (a).)
Thus, “[s]ection 1714.10 prohibits the unauthorized filing of an action for nonexempt civil conspiracy against an attorney based on conduct arising from the representation of a client that is in connection with any attempt to contest or compromise a claim or dispute.” (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 815 (Berg).) “It requires a plaintiff who desires to pursue such an action to first commence a special proceeding by filing a verified petition naming the attorney as respondent . . . [i]f the petition is granted, the plaintiff is permitted to file the complaint in the main action, subject to the attorney’s right to appeal the order. If, on the other hand, the petition is denied, the plaintiff is foreclosed from filing the complaint, likewise subject to his or her right to appeal that determination.” (Ibid.)
The purpose of section 1714.10 is “to weed out the harassing claim of conspiracy that is so lacking in reasonable foundation as to verge on the frivolous. [Citations.] The weeding tool is the requirement of prefiling approval by the court, which must be presented with a verified petition accompanied by a copy of the proposed pleading and ‘supporting affidavits stating the facts upon which the liability is based’; the pleading is not to be filed until the court has determined ‘. . . the party seeking to file the pleading has established that there is a reasonable probability that the party will prevail in the action.’ [Citation.]” (Evans v. Pillsbury (1998) 65 Cal.App.4th 599, 604.)
Section 1714.10, subdivision (c), specifies exceptions to the statute’s application. It provides:
“This section shall not apply to a cause of action against an attorney for a civil conspiracy with his or her client, where (1) the attorney has an independent legal duty to the plaintiff, or (2) the attorney’s acts go beyond the performance of a professional duty to serve the client and involve a conspiracy to violate a legal duty in furtherance of the attorney’s financial gain.”
“The Legislature originally enacted section 1714.10 in 1988 in response to Wolfrich Corp. v. United Services Automobile Assn. (1983) 149 Cal.App.3d 1206 (Wolfrich), in which the Court of Appeal had held that although attorneys representing an insurance company, who were not themselves engaged in the business of insurance, could not be sued for violating Insurance Code section 790.03, subdivision (h)(5), they could be liable for conspiring with their client to do so. (Pavicich v. Santucci (2000) 85 Cal.App.4th 382, 390 (Pavicich).) The legislative impetus for the enactment was concern about the use of frivolous conspiracy claims that were brought as a tactical ploy against attorneys and their clients and that were designed to disrupt the attorney-client relationship. (Id. at pp. 390-391, 394-395; Hung v. Wang (1992) 8 Cal.App.4th 908, 920.)” (Berg, supra, 131 Cal.App.4th at p. 816.)
The California Supreme Court overruled Wolfrich in Doctor’s Co., supra, 49 Cal.3d at pages 41, 45-49. The high court explained “the fundamental principle that conspiracy is not an independent tort and, thus, a claim for conspiracy cannot lie if [the] alleged conspirator was not personally bound by the duty violated and was instead acting only as the agent or employee of the party who did owe that duty. [Citations.] This principle is known as the ‘agent’s immunity rule,’ which establishes that ‘an agent is not liable for conspiring with the principal when the agent is acting in an official capacity on behalf of the principal.’ [Citations.]” (Berg, supra, 131 Cal.App.4th at p. 817.) However, the court in Doctor’s Co. did articulate two settings in which a conspiracy claim might lie against an attorney for participating in the violation of a duty owed by the client to another: (1) where the attorney violates a duty that he or she independently owes to the plaintiff; and (2) where the attorney’s acts go beyond the performance of a professional duty owed to the client and are, in addition, done for his or her own personal financial gain. (Doctor’s Co., supra, 49 Cal.3d at pp. 46-47.)
“The Legislature responded to the court’s holding in Doctor’s Co. in 1991 by amending section 1714.10. First, the amendment limited the section’s application to attorney-client conspiracy actions that arise from any attempt to contest or compromise a claim or dispute. Second, it expressly excepted from the statute’s application the two contexts identified in Doctor’s Co. in which a viable attorney-client conspiracy can be asserted. [Citation.]” (Berg, supra, 131 Cal.App.4th at p. 818.)
“[T]he effect of the amendment on the statute’s application is anomalous. Since the statute now removes from its scope the two circumstances in which a valid attorney-client conspiracy claim may be asserted, its gatekeeping function applies only to attorney-client conspiracy claims that are not viable as a matter of law in any event” under the agent’s immunity rule. (Berg, supra, 131 Cal.App.4th at p. 818.) “Thus, a plaintiff who can plead a viable claim for conspiracy against an attorney need not follow the petition procedure outlined in the statute as such a claim necessarily falls within the stated exceptions to its application.” (Ibid.)
Thus, in applying section 1714.10, the determinative question is “whether the pleading falls . . . within the coverage of the statute or, instead, within one of its stated exceptions.” (Berg, supra, 131 Cal.App.4th at p. 818.) If the pleading states a viable claim for conspiracy against an attorney, “the analysis ends before reaching evidentiary considerations; the statute does not apply because the claim necessarily falls under one of its exceptions.” (Ibid.) If the pleading states a claim for conspiracy against an attorney which does not fall under one of the statute’s exceptions, “the analysis likewise ends, but with the opposite result; the pleading is disallowed for its failure to meet the initial gatekeeping hurdle of the statute.” (Ibid.) In other words, when a plaintiff attempts to bring a claim against an attorney for civil conspiracy with his or her client, the claim is only viable if it falls under one of the two exceptions set forth in section 1714.10, subdivision (c).
II. Standard of Review
In order to overcome the gatekeeping hurdle of section 1714.10, the plaintiff must state a viable cause of action and present “competent, admissible evidence to establish the elements of the claim.” (Berg, supra, 131 Cal.App.4th at p. 817, fn. omitted.) However, the trial court does not weigh the evidence. Instead, it “merely assesses whether the plaintiff has stated and substantiated his or her claim. [Citation.]” (Id. at p. 817, fn. 7.) The plaintiff must show that a prima facie case can be established at trial. (Ibid.)
“Since the section 1714.10 special proceeding procedure operates like a demurrer or motion for summary judgment in reverse [citation], and since it involves only questions of law, it follows that our review of the order under that section is de novo. [Citation.]” (Berg, supra, 131 Cal.App.4th at p. 822.)
With these principles in mind, we turn to an independent analysis of whether appellants have stated a claim against respondents for civil conspiracy with their client, Cardready -- and if so, whether one of the exceptions found in section 1714.10, subdivision (c), applies to permit appellants’ claims against respondents.
III. The Applicability of Section 1714.10
Appellants’ first argument is that the trial court erred in applying section 1714.10. Appellants point to the allegations against respondents, claiming that it is clear that appellants “do not assert any form of conspiracy or concert of action between [r]espondents and their clients.” Thus, appellants argue, the claims, as pled, “fall outside the scope of the statute on its face, and the trial court should have simply permitted [appellants’] proposed [third amended complaint] in the first place.”
We disagree. While appellants did not explicitly allege a civil conspiracy between respondents and their client, such an explicit allegation is not necessary. Section 1714.10 may apply “without regard to the labels attached to the causes of action or whether the word ‘conspiracy’-- having no talismanic significance -- appears in them.” (Berg, supra, 131 Cal.App.4th at p. 824.) The appropriate inquiry involves a determination of whether the allegations portray a “union of conduct between attorney and client arising out of the legal representation.” (Ibid.)
A “union of conduct” between respondents and their client is alleged here. Significantly, the acts which caused appellants to wire the money to respondents were committed by respondents’ client. Appellants allege that in April 2004, Cardready’s principal, Berland, telephoned appellants’ employee and threatened him with legal action if he did not immediately wire $800,000 into respondents’ trust account. After the money was wired, respondents confirmed its receipt into their trust account, noting that such transfer was made “pursuant to an agreement . . . between [Glenn] Lench of WeBillCards and Jim Berland of CardReady.”
After respondents confirmed receipt of the funds, Berland, again participated in negotiations regarding the funds. Specifically, he spoke with Fisher and agreed that respondents should return $200,000 of the funds. Respondents apparently did as they were instructed by their client, and continued to hold the other $600,000 for “fines, penalties, attorneys’ fees and related costs.”
These allegations show that the damage of which appellants complain did not result from an independent act committed by respondents. Instead, the alleged harm necessarily resulted in part from the acts of respondents’ client, a “participant in the wrongful act.” (Howard v. Superior Court (1992) 2 Cal.App.4th 745, 748.) Thus, we conclude that the allegations subject the claims against respondents to the initial coverage of section 1714.10, subdivision (a).
As explained in Berg, supra, 131 Cal.App.4th at page 817, because respondents’ actions as agent for its client are shielded under the agent’s immunity rule, appellants’ claims against respondents can only proceed if appellants’ allegations show that respondents were acting “not just as agent for a principal, the client, but also for [themselves] independently.” Thus, we must determine whether appellants have alleged facts which support one of the two exceptions set forth in section 1714.10, subdivision (c). Those two exceptions provide that an action against an attorney for civil conspiracy with his or her client may lie where (1) the attorney has an independent legal duty to the plaintiff, or (2) the attorney’s acts go beyond the performance of a professional duty to serve the client and involve a conspiracy to violate a legal duty in furtherance of the attorney’s financial gain. Appellants do not argue that the second exception is applicable here. Thus, the viability of appellants’ claims against respondents turns on whether, under the facts alleged, respondents had an independent legal duty to appellants as fiduciaries of the $600,000. We thus discuss that issue.
IV. The Independent Duty Exception
In determining the question of whether respondents had an independent legal duty to appellants under the facts alleged, we begin with the premise that “[a]n attorney-client relationship normally is essential to the existence of an attorney’s duty toward others.” (Berg, supra, 131 Cal.App.4th at p. 826.) “This rings especially true where, as here, the attorney’s client and the third party are adverse, as the attorney’s duty of loyalty to his or her client cannot be divided or diluted by a duty owed to a third party. [Citation.]” (Ibid.) As explained in Parnell v. Smart (1977) 66 Cal.App.3d 833, 837-838, where the defendant attorneys “occupy the position of counselor to the adverse party . . . it is unreasonable to conceive that defendants owed some sort of legal duty to plaintiff.” Thus, because appellants were involved in a dispute with respondents’ clients at all relevant times, we may begin with the assumption that respondents did not owe an independent duty to appellants.
In an effort to show that an independent duty existed here, appellants have cited a number of cases. We analyze these cases below, and conclude that they do not support appellants’ position that respondents owed appellants an independent legal duty under the circumstances of this case.
Appellants first cite to several California Supreme Court cases involving state bar disciplinary proceedings. Appellants urge these cases for the proposition that “When an attorney receives money on behalf of a third party who is not his client, he is nevertheless a fiduciary as to such third party. Thus the funds in his possession are impressed with a trust, and his conversion of such funds is a breach of the trust.” (Johnstone v. State Bar of California (1966) 64 Cal.2d 153, 156; Sternlieb v. State Bar (1990) 52 Cal.3d 317, 330; Guzzetta v. State Bar (1987) 43 Cal.3d 962, 979; Hamilton v. The State Bar (1979) 23 Cal.3d 868, 879; Crooks v. State Bar of California (1970) 3 Cal.3d 346, 355; Haley v. State Bar of California (1963) 60 Cal.2d 404, 405.) Preliminarily, we find that the allegations do not show that respondents received the funds in question “on behalf of” appellants. On the contrary, the allegations show that respondents received the funds “on behalf of” their own client, Cardready, after Cardready demanded the funds from appellants. And while respondents later acknowledged that they were holding the funds “for fines, penalties, attorneys’ fees and related costs,” respondents made no indication that the funds were being held for appellants or that respondents would refrain from disbursing such funds without the explicit agreement of appellants.
Appellants argue that Berland’s statement to Lench that the funds would be held in the Kaplan firm trust account pending resolution of the fine dispute with Visa meant that “[r]espondents would account to [appellants] for any expenditures within the scope of the trust, and return any remaining funds to [appellants] after the parties had resolved the dispute and determined the allocation of any fines.” None of the facts alleged support appellants’ interpretation of these events to include a specific agreement on the part of respondents that they would account to appellants for expenditures or refrain from making any distributions before the parties had determined how the funds should be allocated.
In addition to the preliminary observation that respondents did not receive the funds “on behalf of” appellants, we also find that the cases cited are factually distinguishable from this matter. In contrast to the situation before us, the cases cited by appellants involve attorneys who were found to have knowingly undertaken to act on behalf of, and for the benefit of, a non-client third party.
Johnstone v. State Bar of California involved an attorney who had agreed with an insurer to share the proceeds of the amount recovered on a personal injury claim in exchange for the insurer’s release and discharge of its lien on the recovery. (Johnstone, supra, 64 Cal.2d at p. 155.) Under the circumstances, the attorney was found to have created a fiduciary relationship with the insurer. The attorney’s subsequent “willful violation” of the insurer’s trust was found to be a violation of Business and Professions Code section 6106, and the penalty imposed by the State Bar was upheld. (Id. at pp. 156-158.) Here, respondents had no specific agreement with appellants regarding the funds it was holding. Instead, as specified in respondents’ letter of April 19, 2004, the only agreement regarding the funds was between “[Glenn] Lench of WeBillCards and Jim Berland of CardReady.”
The letter was attached to appellants’ VTAC as an exhibit, and thus may properly be considered in connection with our determination of whether appellants’ claims fall under one of the stated exceptions to section 1714.10. (See, e.g., Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627 [when reviewing a pleading for adequacy, “facts appearing in exhibits attached to the complaint will also be accepted as true and, if contrary to the allegations in the pleading, will be given precedence”].)
Other cases involving liens on prospective personal injury recoveries are similarly distinguishable. (See Haley v. State Bar of California, supra, 60 Cal.2d 404 [involving attorney who knowingly converted to his own use a portion of a personal injury recovery in which he knew the State Compensation Insurance Fund had an interest]; In re Respondent P (Review Dept. 1993) 2 Cal. State Bar Ct. Rptr. 622 [involving an attorney who represented a Medi-Cal beneficiary in a personal injury matter and distributed the funds to his client without first allowing for satisfaction of the Medi-Cal lien, of which the attorney was aware]; In the Matter of George Nunez (Review Dept. 1992) 2 Cal. State Bar Ct. Rptr. 196 [involving attorney who had knowledge of a Medi-Cal lien on a client’s recovery and distributed the settlement proceeds without satisfying the lien].) Each of these cases involves a neutral third party, whose claim to certain personal injury recovery proceeds was known to the defendant attorney. Here, appellants were adverse to respondents’ client, and appellants have alleged no facts showing that respondents were knowingly holding the money at issue in trust for appellants’ benefit.
Appellants claim that Guzzetta v. State Bar, supra, 43 Cal.3d 962 is particularly illustrative of their point. In Guzetta, the Supreme Court upheld a three-year suspension of an attorney’s license to practice law based on the finding that the attorney mishandled funds received in trust and deposited into his attorney trust account. The attorney was representing his client in a divorce proceeding, and the funds came from the sale of a restaurant in which both the attorney’s client and the client’s wife, Camila, had an interest. The attorney made several disbursements from the trust account to his client without the consent of the client’s wife or her attorney, and refused to provide them with an accounting. However, the court’s finding that the attorney owed a duty to his client’s wife stemmed from the attorney’s explicit agreement to undertake such a duty. The court explained, “[h]aving assumed the responsibility to hold and disburse the funds as directed by the court or stipulated by both parties, petitioner owed an obligation to Camila as a ‘client’ to maintain complete records, ‘render appropriate accounts,’ and ‘[p]romptly pay or deliver to the client’ on request the funds held in trust.” (Id. at p. 979.) Here, again, there are no allegations that respondents agreed to hold the funds on behalf of appellants or agreed to disburse the funds only at appellants’ direction. Put simply, appellants do not allege a specific agreement on the part of respondents to undertake a duty to them. Thus, the facts of Guzzetta do not support a conclusion that an independent duty existed in this case.
Sternlieb v. State Bar, supra, 52 Cal.3d 317, also involved a divorce proceeding. The facts were similar to Guzzetta in that the attorney in question held funds in trust which the attorney knew were community property. The funds were to be used only for the upkeep, maintenance, and expenses related to certain rental property. In violation of this specific understanding, the attorney withdrew funds to pay herself fees. Again, the distinguishing fact is a specific agreement that the attorney would hold her client’s husband’s funds in trust on his behalf, and “the absence of any evidence that [the husband] had authorized use of his one-half of the rent moneys for a purpose other than expenses related to the property and/or community bills.” (Sternlieb, at p. 330.)
Miller v. Rau (1963) 216 Cal.App.2d 68, also relied upon by appellants, involved an attorney who was specifically instructed not to disburse certain profits “without the written approval of [the plaintiff].” (Id. at p. 73.) In determining that the attorney was properly found liable to the plaintiff for the distribution of such funds to the attorney’s client, the court stated: “‘There was nothing in the defendant’s status as attorney for [his client] . . . which made it his duty to pay to his client money which he knew . . . belonged to plaintiff. [Citations.] . . . It was his duty to hold for the plaintiff so much of the proceeds . . . as represented the plaintiff’s known interest in it.’ (Italics added.)” (Id. at p. 76.) Here, absent from appellants’ pleading is any indication that respondents knew or agreed that any portion of the money wired from appellants’ account “belonged” to appellants. On the contrary, respondents indicated their intention to disburse the money for certain purposes, and appellants do not allege that they objected to this statement of respondents’ intentions.
The remaining cases cited by appellants are all similarly distinguishable because they involve attorneys who violated specific agreements. In Hamilton v. The State Bar, supra, 23 Cal.3d 868, the attorney was acting as an escrow officer for a small club investing in second deeds. He had informed investors that money invested by them would be used to purchase such deeds. (Id. at p. 877.) Having accepted the investors’ money, he was found to be a fiduciary as to the funds belonging to the investors, and his failure to protect and account for such funds was found to be a breach of his fiduciary duty. (Id. at p. 879.) Similarly, in Crooks v. State Bar of California (1970) 3 Cal.3d 346, the attorney had been specifically asked to act as an escrow holder in connection with the sale of a business. (Id. at p. 348.) He was found to have breached his fiduciary duty to a depositor of escrow funds when he knowingly appropriated to his own use a portion of the escrow proceeds that he had been holding in trust. And in In the Matter of Lilly (Review Dept. 1992) 2 Cal. State Bar Ct. Rptr. 185, the attorney in question specifically acknowledged more than once that he was holding funds for three individuals. Thus, he was held to the same fiduciary duties to each individual “as if there were an attorney-client relationship.” (Id. at * 12.)
As set forth in Comm. on Children’s TV v. General Foods Corp. (1983) 35 Cal.3d 197, 221, superseded by statute as stated in Californians For Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, “before a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which imposes that undertaking as a matter of law. [Citations.]”
The cases cited by appellants involve situations where the attorney was found to have knowingly undertaken a duty to act on behalf of a third party. The facts alleged by appellants are not comparable. Appellants have failed to show that respondents knowingly undertook any obligation to appellants or agreed to hold any portion of the money on appellants’ behalf. Nor did respondents’ relationship with appellants impose a fiduciary duty as a matter of law. Instead, as counsel to the adverse party, it would be “unreasonable” to impose such a duty on respondents. (Parnell v. Smart, supra, 66 Cal.App.3d at pp. 837-838.)
We conclude that respondents owed no independent legal duty to appellants. Therefore, under the facts alleged, appellants cannot make out a prima facie case of either conversion or breach of fiduciary duty against respondents. Their claims against respondents must fail.
DISPOSITION
The order is affirmed. Appellants to bear the costs of appeal.
We concur:
BOREN, P. J., ASHMANN-GERST, J.