Mills Land & Water Co. v. Golden West Refining Co.

186 Cal. App. 3d 116, 230 Cal. Rptr. 461, 1986 Cal. App. LEXIS 2091
CourtCalifornia Court of Appeal
DecidedSeptember 30, 1986
DocketG002451
StatusPublished
Cited by37 cases

This text of 186 Cal. App. 3d 116 (Mills Land & Water Co. v. Golden West Refining Co.) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mills Land & Water Co. v. Golden West Refining Co., 186 Cal. App. 3d 116, 230 Cal. Rptr. 461, 1986 Cal. App. LEXIS 2091 (Cal. Ct. App. 1986).

Opinions

Opinion

SONENSHINE, J.

This appeal concerns several measures taken by the trial court as a result of its determination an attorney in this litigation violated rule 7-103 of the California Rules of Professional Conduct (rule 7-103). The rule provides: “A member of the State Bar shall not communicate directly or indirectly with a party whom he knows to be represented by counsel upon a subject of controversy, without the express consent of such counsel. This rule shall not apply to communications with a public officer, board, committee or body.”

Here, the party affected is a corporation. Opposing counsel directly contacted the corporation’s former president, also an attorney, who remained a member of the board of directors and a shareholder.

The trial court disqualified the offending attorney and his law firm. In addition, the attorneys for the litigants opposing the aforementioned cor[121]*121poration were “prohibited from discussing, disclosing or otherwise divulging any information or documents obtained by virtue of the communication. ...” However, the court declined to disqualify counsel representing other adverse parties in the lawsuit. The court also declined to suppress all discovery to ensure no privileged or confidential information would be used in the lawsuit. In addition, the court refused to impose sanctions against the offending attorney for opposing the motion to disqualify him. Both sides appeal.

We affirm that portion of the trial court’s order disqualifying the individual attorney from further participation in the lawsuit and forbidding him from discussing his communication with the corporation’s former president and current director. However, in keeping with the only California precedent relied upon by the trial court (Chronometrics, Inc. v. Sysgen, Inc. (1980) 110 Cal.App.3d 597 [168 Cal.Rptr. 196]), we reverse the order insofar as it disqualifies the offending attorney’s law firm. In addition, we clarify the reach of the trial court’s suppression order. This resolution makes it unnecessary to reach the remaining issues raised by the parties on appeal.

I

The underlying lawsuit is an unlawful detainer action initiated by Mills Land and Water Company concerning land it owns in Huntington Beach. In 1956 Mills leased the property to Wilshire Oil Company to operate a petroleum storage depot. The lease was for 25 years with an option for another 25 years. One of the lease’s terms provided Mills would not unreasonably withhold consent to an assignment of the lease.

Wilshire was succeeded by Gulf Oil Corporation. In April 1982, Gulf told Mills of its intention to assign the lease. One year later, Gulf formally asked for consent to an assignment to Thrifty Oil Company and its subsidiary Golden West Refining Company.

Ultimately, Mills consented to the assignment. But the manner in which this allegedly came about, and Mills’ apparent attempt to repudiate the consent as part of its unlawful detainer action, are of substantial importance in the underlying lawsuit and this appeal.

Reputedly,1 one director, Eugenia R. Moore, an attorney, wanted consideration from Gulf in exchange for consent to assign the lease. But the [122]*122other two directors, Carol G. Wynn2 and Carl W. Barrow, also attorneys, apparently disagreed with Moore. They felt the only legitimate reason for withholding consent would be the assignee’s inability to meet the financial obligations of the lease. After receiving financial information, Wynn and Barrow concluded Golden West, a new subsidiary of Thrifty, would be able to meet the terms of the lease. Consequently, Wynn, then president of Mills, delivered consent on July 28, 1983. It is also of note the monetary compensation provided in the lease is very unfavorable to Mills.

Subsequently* Mills went through a shake-up in management. On October 1,1983, 51.1 percent of the shareholders discharged all the directors. Again, according to the pleadings and discovery in the underlying case, an impasse developed. The Moore family, led by Eugenia Moore and her son Robert London Moore, Jr., also an attorney, could elect one director and the Wynn family could elect another. But a third director could not be elected without shareholder Kathleen Murphy’s cooperation.

Murphy was the subject of guardianship proceedings in Nevada. The Moore faction and Murphy’s temporary guardian, Michael Murphy, apparently sought the court’s permission in Carson City, Nevada, to allow the temporary guardian to vote Kathleen Murphy’s shares.

In the Nevada proceedings both Moores declared Wynn had violated his fiduciary and legal obligations to Mills when he consented to the lease assignment. It was also alleged Wynn and Barrow met secretly with Gulf representatives and failed to follow the law with respect to director’s meetings. Finally, the Moores contended the consent to the lease assignment was adverse to Mills’ financial interest.

On November 7, 1983, the Carson City court granted the petition, permitting Kathleen Murphy’s temporary guardian to vote on her behalf. The court did not reach the substance of the claims of mismanagement. Rather, it simply found the order was necessary to break the impasse in Mills’ management.

A special meeting of Mills’ shareholders was scheduled for November 21, 1983. Wynn sent a letter to the shareholders explaining the lease assignment and expressing his opinion he and Barrow had exercised their best judgment concerning Mills’ legal obligations in the lease assignment matter. Nevertheless, a new board was elected: Robert Moore, Thomas E. Murphy and Wynn (whose family held sufficient shares to reelect him). Wynn was [123]*123removed as president of Mills. Robert Moore became president and Eugenia Moore corporate secretary.

Shortly thereafter, the board sought the opinion of counsel concerning the consent to the lease assignment by Mills’ “former president. ” In October 1984, Mills filed the underlying unlawful detainer action against Gulf. In substance, Mills contends Gulf breached the lease agreement when it assigned the lease to Thrifty and Golden West.

Wynn continued to attend formal meetings of the board. However, the record suggests hostility towards Wynn by the current Mills controlling faction. He was apparently never directly informed Mills had served a three-day “Notice to Quit” on Gulf or commenced the unlawful detainer action. But he was present at a board of directors meeting where retention of a law firm in contemplation of litigation was authorized. When deposed, Eugenia Moore testified Wynn improperly executed the consent without her signature as corporate secretary and discussed the matter with Barrow without formal notice to her. Robert Moore, during his deposition, similarly condemned Wynn’s actions.

Further, at Wynn’s deposition, Mills’ counsel sat across the table from Wynn, while at the Moore’s depositions, Mills’ counsel sat next to them. Wynn did not have a lawyer at the deposition. Mills’ counsel called examination of Wynn “cross-examination.” The examination itself was frequently antagonistic.

Before he was disqualified, Donald C. Smaltz was counsel for Thrifty and Golden West. Smaltz first met with the Moores and Mills’ counsel in October to discuss the impending lawsuit, which was actually filed on October 19, 1984.

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Cite This Page — Counsel Stack

Bluebook (online)
186 Cal. App. 3d 116, 230 Cal. Rptr. 461, 1986 Cal. App. LEXIS 2091, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mills-land-water-co-v-golden-west-refining-co-calctapp-1986.