Yale v. Bowne

9 Cal. App. 5th 649, 215 Cal. Rptr. 3d 266, 2017 Cal. App. LEXIS 210

• Court: California Court of Appeal
• Decided: February 9, 2017
• Docket: B260762
• Status: Published

Opinion

Opinion

GOODMAN, J. *

This case arises from a claim of attorney malpractice in the preparation of an estate plan. The jury found that defendant Robert R. Bowne II (Bowne) had breached the standard of care in failing to properly implement Valerie Yale’s (Yale) express instruction to maintain her assets as her separate property in the trust document which Bowne prepared for her and her then husband, Bryan Knight (Knight). 1

Each party finds error in elements of the jury’s monetary award and in the trial court’s denial of Yale’s motion for prejudgment interest. 2 In the published portion of this opinion, we conclude that the trial court correctly gave the comparative fault instruction requested by Bowne. In the unpublished portions of this opinion we conclude that substantial evidence supports the jury’s award of $260,000 in damages (to be reduced under the jury’s comparative fault determination), but that the award of $57,170 for investment losses claimed by Yale was not supported by substantial evidence; nor is Yale entitled to prejudgment interest.

FACTUAL AND PROCEDURAL HISTORY

We set forth those facts relevant to the issues presented by the parties. Also, we set out the facts in the light most favorable to the jury’s verdict. (Sacramento Sikh Society Bradshaw Temple v. Tatla (2013) 219 Cal.App.4th 1224, 1227 [162 Cal.Rptr.3d 609].)

Yale grew up in the family’s retail electronics business, eventually computerizing parts of it and expanding it, and, after her mother’s death and her father’s move out of state, and when technology passed it by, selling the business real property and assets, and retiring. Her first marriage ended in divorce in 1981 and involved a “terrible financial situation,” which she believed resulted in her first husband “[taking] half of everything I had.”

In 1982, after she retired, she decided to take up tennis, then meeting tennis pro Knight. They lived together from the year in which they met until 1997, when they then married, and through December 2011, when events described below led to their separation and divorce. Prior to their marriage, they entered into a prenuptial agreement, which specified that Yale’s property was to remain her separate property.

In 1994 she updated an earlier living trust to provide for Knight, including making him the beneficiary for his life of her assets upon her death, with the remainder to go on his death to specified individuals and charities. In 1999, in another update to her living trust, she made Knight successor trustee. Yale’s assets included her family’s home on Arrowhead Drive (the house), which she had purchased from her father with her own funds prior to his departure from California.

In late 2009, Yale had “done a refi of the house.” The lender had required that Knight cosign on the transaction; this resulted in the creation of a home equity line of credit (HELOC) against which either Yale or Knight could draw funds. When problems arose in early 2010 in completing the transaction, Knight referred Yale to Bowne, who helped resolve those issues, including returning the vesting on the house to her separate property from the community property vesting which the lender had required.

On her March 30, 2010 visit to Bowne’s office, aware that Bowne considered himself to be an estate planning attorney, she began speaking with him about again updating her trust. She considered this to be a good idea as it had been over 10 years since the previous update. After meetings and e-mails, Bowne prepared estate planning documents which Yale and Knight signed in Bowne’s office on May 21, 2010.

Later in 2010 Knight began having issues at work; he stopped sleeping and exhibited signs of extreme stress. One day in November 2010, he called Yale from work and asked her to pick him up. When she arrived to get him, he was standing at the curb. Yale testified that he “wasn’t in good shape.” She took him to a psychiatrist who diagnosed him with depression, prescribed medication, and gave him a note to advise his employer that he could not return to work until the doctor cleared him. Knight’s condition did not improve. On December 26, 2011, Knight attacked Yale inside their home, coming up behind her, choking her, and attempting to suffocate her. She managed to trigger an alarm company panic alarm. The police arrived, breaking down a door to gain entry. Once inside, they observed Knight strangling Yale, and took Knight into custody. Yale obtained a domestic violence restraining order the next day, which included an order that Knight move out of the house.

Yale became concerned about both her personal and financial safety and went to Attorney Charles Larson (Larson), whom she described as “a trust attorney,” three days later, on December 29, 2011. He reviewed her documents, told her that everything was community property and advised her that she should get all of her assets out of the family trust and he would prepare documents to do that. The next day she returned to sign a deed to transfer the house back to her name as her separate property. He also advised her that this did not solve the problem with the securities account she and Knight, as trustees, maintained with Vanguard and suggested that she contact Vanguard and ask them for help to transfer those assets to an account in her name (outside of the trust that Bowne had established).

During the same period of time, Knight called her from jail, asking her to put the house up as collateral so he could bail out. She refused to do so.

Yale next opened a new separate property account at Vanguard, and wrote checks on the existing Vanguard money market account to close it, depositing the funds in the new account. Because Vanguard had told her it would take seven to 10 days to transfer the brokerage account from its present status in the trust to any new account, which she wanted to do, and it would be difficult on the last day of the calendar year for her to find a financial institution with the authority to affix the required Medallion signature guarantee 3 verifying her signature, Yale decided she could not wait and proceeded to sell all of the holdings in the brokerage account. She completed the sales within a few days and deposited the proceeds in a new Chase Bank account she had set up in her name. By mid-January she had transferred those proceeds to the new Vanguard accounts vested in her name only. In December 2011, before she began the transfer and sales of assets, the accounts consisted of a money market account, mutual funds, and E.T.F.s (described in the record as a “basket” of stocks), all selected by her.

Once all funds were in the new, separate property Vanguard accounts, Yale began to watch the stock market to see if there was a point at which she could “get back in when the market was low.” She testified that the opportunity came about June 3rd or 4th of 2012 when there was a 5 percent “dip.” She did not have a financial adviser because “[e]ver since I retired, I wanted to handle my own money because that was the last money that I was going to be making and it was to see me though retirement. [¶] And frankly, I just got really interested in learning about investing; so, I started to subscribe to newsletters and basically teaching [sic] myself about investments so I didn’t do something dumb, and I really enjoyed it. In fact, it was similar, you know, to managing money at my business, and it’s just, you know, something that I felt confident in doing.” She was fully invested by June 2012.

On February 15, 2012, Knight had Yale served with divorce papers. Shortly after he started the divorce proceedings, he withdrew $200,000 against the HEFOC. Yale hired Attorney Bruce Abramson (Abramson) to represent her in the divorce. She testified that Abramson recommended that she settle the divorce proceedings with Knight on terms which included Yale paying him $260,000, an amount reached in the course of settlement negotiations. Abramson advised this would be reasonable to avoid potentially losing half of everything based on the claim that the estate plan Bowne had put in place transmuted all of her separate property to community property. She accepted his advice and the matter settled in late 2012. The property settlement agreement included a provision that Knight would receive the $260,000 in exchange for releasing Yale from any obligation to pay any larger sum. Yale fulfilled that obligation by paying Knight $60,000 in cash and assuming the obligation to repay the $200,000 due to the lender under the HEFOC.

Yale’s complaint originally contained causes of action for negligence and for breach of fiduciary duty. She dismissed the latter claim prior to trial.

The jury’s verdict included findings that both Bowne and Yale were negligent, allocating fault 90 percent to Bowne and 10 percent to Yale. The jury awarded damages of $260,000 for the amount Yale had paid to Knight to resolve the monetary aspects of their divorce; $57,170 in investment losses she incurred in her Vanguard accounts; and $39,000 to reimburse her for attorney fees she had paid to her divorce and other attorneys for representation in that action and which was attributable to errors made by Bowne in preparing the estate plan. The parties filed a timely appeal and cross-appeal.

CONTENTIONS

Yale contends: (1) giving the jury an instruction on comparative fault by Yale was error; (2) no substantial evidence supports the jury’s reduction in the amount awarded for investment losses; and (3) she is entitled to prejudgment interest.

In addition to disputing these contentions, Bowne contends in his cross-appeal that there was no substantial evidence to support (1) an award of any damages for Yale’s claimed investment loss or (2) $200,000 of the $260,000 awarded in connection with Yale’s divorce settlement.

I. The Comparative Fault Instruction

Among the instructions given to the jury was an instruction on professional negligence and, over Yale’s objection, an instruction on comparative negligence, which Bowne had requested. 4 Yale contends the trial court erred in giving the comparative fault instruction, arguing: (a) no California appellate court decision has discussed application of the principle of comparative fault in attorney malpractice cases; (b) the instruction should not have been given because Yale did no more than rely on her lawyer’s advice; (c) “public policy considerations” require the instruction not be given when the client does not have the knowledge to understand the documents the lawyer has prepared; and (d) the instruction is inappropriate when “the client’s conduct does not interrupt the causal chain from the attorney’s negligence.” At oral argument counsel for Yale conceded that comparative fault instructions may be appropriate in attorney malpractice cases in certain circumstances. We will therefore focus our discussion on whether sufficient circumstances were presented in this case and will conclude that substantial evidence did warrant the giving of such an instruction.

A. Additional facts

Yale first sought Bowne’s legal advice in completing the transaction by which she and Knight obtained the HELOC on the house in 2009. The transaction included removing the house from her then trust, vesting title in herself alone, obtaining the new loan (the HELOC), and then, as a condition she had placed on the transaction, returning the title vesting to her as her separate property and as trustee of her trust. She did all of this because the new lender had required that Knight “be put on the loan” as a cosigner (Yale did not have sufficient income by herself to obtain it) and be equally obligated to make any repayments on sums borrowed. This required that title to the house be conveyed from Yale as trustee of her separate trust to her as her separate property, then to her and Knight as community property. Yale had secured the lender’s agreement that once the loan was recorded, title could be returned to her as her separate property. When Yale encountered problems in completing the deed recordation process, Knight suggested that she seek Bowne’s assistance. Knight knew Bowne through Bowne’s relationship with the bank at which Knight was then working. Yale obtained Bowne’s help in early March 2010, and during that month he completed the transfers as she had wanted.

Once Bowne had completed the title transfers, Yale decided to retain him to update her estate plan. In a series of meetings and via e-mail, Yale explained to Bowne her desires, including that her property must remain her separate property. Bowne explained to her ways to achieve her objectives, which also included Knight succeeding her as trustee on her death or incapacity. On May 21, 2010, Yale and Knight went to Bowne’s office to hear his explanation of the documents he had prepared and to sign them as needed. Yale did not read all of the documents, but did read certain portions. The first document Yale and Knight signed was the new trust. Yale read paragraph 1.2(B) of that document, “Property to Retain its Character,” which declared that both separate and community property were being placed in the new trust. She did not raise any issue concerning the meaning of this paragraph with Bowne.

Yale also read the granting clauses of the three deeds she signed that day. She understood the execution of these deeds to be part of the process of transferring the house from her 1999 trust to this new trust. When she read the words “community property” in two of the deeds, she understood what that meant but she did not say anything to Bowne about the use of the term “community property” or raise any other question with him about the effect of these deeds. At the time the 2010 trust was created, her separate property was worth approximately $2 million. Shortly after completing the meeting at Bowne’s office, Yale changed the vesting on the investment account she had at Vanguard, revesting it as “Valerie A Yale & Bryan J Knight TR UA 05-21-2010 The Valerie A Yale and Bryan J Knight Fam Tr.”

B. Applicable law

“A party is entitled upon request to correct, nonargumentative instructions on every theory of the case advanced by him [or her] which is supported by substantial evidence.” (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 572 [34 Cal.Rptr.2d 607, 882 P.2d 298].) “The propriety of jury instructions is a question of law that we review de novo. [Citation.]” (Cristler v. Express Messenger Systems, Inc. (2009) 171 Cal.App.4th 72, 82 [89 Cal.Rptr.3d 34]; see Sander/Moses Productions, Inc. v. NBC Studios, Inc. (2006) 142 Cal.App.4th 1086, 1094 [48 Cal.Rptr.3d 525]; National Medical Transportation Network v. Deloitte & Touche (1998) 62 Cal.App.4th 412, 426-427 [72 Cal.Rptr.2d 720].)

The principle of comparative fault was established in our Supreme Court’s decision in Li v. Yellow Cab Co. (1975) 13 Cal.3d 804 [119 Cal.Rptr. 858, 532 P.2d 1226] (Li). In rejecting the prior doctrine of contributory negligence, our Supreme Court explained that the former doctrine was “rooted in the long-standing principle that one should not recover from another for damages brought upon oneself [citations.]” (Id. at p. 810.) The consequence of application of this doctrine (with some exceptions) was that the plaintiff recovered nothing when he or she was found to have contributed in any way to the harm created by the fault of the defendant. Notwithstanding the long history of the doctrine, the Li court concluded that this ‘ “all-or-nothing” ’ approach “is inequitable in its operation because it fails to distribute responsibility in proportion to fault” (ibid., fn. omitted), and that the contributory negligence defense should be replaced “by a system under which liability for damage will be borne by those whose negligence caused it in direct proportion to their respective fault.” (Id. at p. 813, fn. omitted, italics added.) The fundamental purpose of the new principle of comparative fault was, in the court’s judgment, “to assign responsibility and liability for damage in direct proportion to the amount of negligence of each of the parties. Therefore, in all actions for negligence resulting in injury to person or property, the contributory negligence of the person injured in person or property shall not bar recovery, but the damages awarded shall be diminished in proportion to the amount of negligence attributable to the person recovering.” (Id. at pp. 828-829.) The court adopted the new rule of comparative fault based on “considerations of fairness and public policy. [Citations.]” (Id. at p. 829.)

In the present case, then, the question before us is whether there was substantial evidence to warrant the giving of a comparative fault instruction.

In considering the jury instruction challenged in this case, we begin with the recognition that legal malpractice actions in California are a subset of negligence actions in general and are governed by the rules of pleading and proof applicable to all negligence actions except to the extent “the Legislature has statutorily modified, restricted, or otherwise conditioned some aspect of an action for malpractice . . . .” (Flowers v. Torrance Memorial Hospital Medical Center (1994) 8 Cal.4th 992, 998-999 [35 Cal.Rptr.2d 685, 884 P.2d 142].)

Yale asserts that applying the principle of comparative fault “defies reason” because of “the great disparity in knowledge and experience between lawyers and [their] clients,” and in particular in this case. However, in this case, the facts support the giving of the challenged instruction. It is undisputed that Yale read the granting clauses of the deeds, saw the change from separate property to community property in two of the deeds, and was entirely conversant with the issue as she had just completed a transaction involving the identical property, which included her insisting that the same parcel be restored from community property to separate property status at the conclusion of the HELOC transaction. Notwithstanding her knowledge and having just completed that transaction, she remained silent rather than ask the same lawyer who had represented her in completing that transaction why it was appropriate to sign the deeds now presented to her containing these particular granting clauses: Yale had the basic knowledge to pose a question to Bowne rather than remain quiet. It was for the jury to evaluate whether her failure to ask a question contributed to the situation for which she now sought damages.

Yale’s reliance on Theobald v. Byers (1961) 193 Cal.App.2d 147 [13 Cal.Rptr. 864] (Theobald) and on Daley v. County of Butte (1964) 227 Cal.App.2d 380 [38 Cal.Rptr. 693] is misplaced. In Theobald, a legal malpractice action (applying contributory negligence doctrine as it preceded Li), the plaintiffs agent had no knowledge of the intricacies of the recording statute and of the financial consequence (loss of priority in payment under federal bankruptcy law) of failing to comply with them. (Theobald, at pp. 152-153.) In Daley, the issue was whether the attorney’s neglect in missing litigation deadlines should be imputed to the client. That court’s holding, that the client is not to be charged with such specialized knowledge of the arcane aspects of civil procedure, also has no application here.

In this case, the facts and circumstances recounted above, as well as Yale’s testimony that she had made an egregious error in her first marriage by allowing property to be transmuted to community property status, constituted sufficient evidence that the issue of comparative fault was properly placed before the jury.

One of Yale’s arguments reveals a misunderstanding of the way in which the issues of negligence liability and comparative fault relate to one another. Acknowledging that some system of comparative fault is to be allowed, Yale argues, “While there is no doubt that a comparative negligence defense can be asserted in a legal malpractice case as a general matter, the application of the defense cannot diminish the defendant lawyer’s duties.” It does not follow from this statement that comparative fault does not apply in legal malpractice cases, however. To so contend fails to distinguish between the two legal principles: the first is whether the lawyer was negligent, which may be summarized as an inquiry concerning the lawyer’s professional duty and whether the lawyer has breached the standard of care to the damage of the plaintiff. The second asks a different question, whether the conduct of the client invokes application of principles of comparative fault to assist in allocating part of the responsibility, if any, for the claimed damages to the client. The two inquiries operate in related, but somewhat different ways. The following quotation from Prosser on Torts explains the distinction: “Negligence as it is commonly understood is conduct which creates an undue risk of harm to others. Contributory negligence is conduct which involves an undue risk of harm to the actor himself. Negligence requires a duty, an obligation of conduct to another person. Contributory negligence involves no duty, unless we are to be so ingenious as to say that the plaintiff is under an obligation to protect the defendant against liability for the consequences of his own negligence.” (Prosser on Torts (4th ed. 1971) § 65, p. 418, fn. omitted; see Daly v. General Motors Corp. (1978) 20 Cal.3d 725, 735 [144 Cal.Rptr. 380, 575 P.2d 1162].)

Thus, if the finder of fact determines that the lawyer has breached his or her duty, causing damage to the client, it must then be determined if the client bears any share of responsibility for the harm caused, viz., whether comparative fault principles apply. That is why the comparative fault instruction in this case was appropriately given.

Cases from other jurisdictions. Yale constructs her argument in large part upon the authority of cases from other jurisdictions. Such a course is fraught with difficulty due to the variations that share the same legal “umbrella” term “comparative fault” as a descriptor. While 46 states have adopted the principle of “comparative negligence,” there are multiple versions of this doctrine. (See, e.g., Johnson, The Unlawful Conduct Defense in Legal Malpractice (2008) 77 UMKC L.Rev. 43, 78.) Some states have adopted versions of comparative negligence by act of their state legislatures; others have done so by judicial decision. The variations in how the doctrine is applied comprise a virtual rainbow of alternatives, emanating from three basic types, identified by Prosser and Keeton as “pure, modified, and slight-gross.” (Prosser & Keeton, Torts (5th ed. 1984) Comparative Negligence, § 67, p. 471.) In addition, the Uniform Comparative Fault Act (12 U.L.A. (Master ed. 2008) p. 121) has been adopted in some states.

Yale does not discuss the source of the doctrine of comparative fault that is in use in each of the states from which she has selected cases to cite. Because of the variation in the several versions of this principle, we find giving weight to out-of-state court rulings lacks analytical value as well as any persuasive force. This is certainly so when our Supreme Court made clear in Li the scope of application of the principle.

Yale cites one unpublished federal district court case, Bank Saderat Iran, N.Y. Agency v. Telegen Corp. (N.D.Cal., Oct. 16, 1997, No. C-94-2330-VRW) 1997 WL 685247, and argues that it supports her claim, quoting the following language from this unreported case: “A client . . . does not have an independent obligation to double-check the work of her attorney. She has a right to rely on her attorney’s advice about legal matters because the attorney has superior expertise and knowledge of the law.” That court then cites Theobald and Day v. Rosenthal (1985) 170 Cal.App.3d 1125 [217 Cal.Rptr. 89]. We have explained ante why reliance on Theobald is inapposite. The issue both in Saderat and in Day concerned allegations of breach of fiduciary duty; indeed, in Day the lawyer had become the client’s business manager and was found to have defrauded the client. There is no discussion of comparative fault in either case, making reliance on either inappropriate. Thus, we do not find this unreported case to be of any persuasive value.

Yale’s argument that there must be evidence of causation before a comparative negligence instruction is given is not disputed by Bowne. Bowne’s fundamental argument on the matter of causation is that Yale was aware of the problem with the deeds and had an obligation to bring her concern to Bowne’s attention—but did not do so, thus contributing to her damage, and validating the giving of the instruction in this case.

The requirement that there be evidence of the plaintiff’s own deficient conduct before a comparative fault instruction is appropriately given was discussed, and affirmed, by our Supreme Court in LeMons v. Regents of University of California (1978) 21 Cal.3d 869, 875 [148 Cal.Rptr. 355, 582 P.2d 946].

C. Public policy

Yale further contends that, in this case, there is no policy reason to hold Yale even partly responsible ‘“for spotting and understanding the significance of her own lawyer’s error in 137 pages of documents that she hired the lawyer to produce. Under these circumstances, the comparative fault analysis does no less than impose a constructive suspension of the duties owed by the lawyer to the client. [¶] . . . [¶] The only arguable basis for assigning any blame on Yale would be to suggest that she failed to ‘supervise, review, or inquire as to the representation.’ ”

The facts of this case, however, reveal that Yale read the granting clauses of the deeds before she signed them, understood the meaning of the terms she read, and chose to remain silent. There were sufficient facts, given Yale’s very recent familiarity with the issue, for us to conclude that no public policy reason makes Yale’s own conduct immune from consideration by the jury. Moreover, Yale’s assertion is belied by our Supreme Court’s explanation in Li that public policy is one of the reasons for its adoption of the principle of comparative fault. (Li, supra, 13 Cal.3d at pp. 829-830.)

D. Conclusion

We conclude that the court correctly instructed the jury on the principles of comparative fault.

II.-IV. *

DISPOSITION

The judgment is modified by striking the award of damages for $57,170 in investment losses. As modified, the judgment is affirmed. Each party is to bear its own costs on appeal.

Chavez, Acting P. J., and Hoffstadt, J., concurred.

On March 10, 2017, the opinion was modified to read as printed above.

* Retired judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

1 Knight was not a party to this action, nor did he testify at trial. He and Yale were divorced prior to commencement of the litigation that is the subject of this appeal.

2 Bowne does not contest the jury’s finding that he was negligent.

3 A Medallion signature guarantee assures that the signature of the account holder will be recognized as genuine by the transfer agent. (Signature Guarantees: SEC.gov/Medallion Signature Guarantees: Signature Guarantees: Preventing the Unauthorized Transfer of Securities, <http://www.sec. gov/answers/sigguar.htm> [as of Feb. 9, 2017].)

4 The comparative fault instruction, given in a manner consistent with the Judicial Council’s Civil Jury Instruction No. 406, provided in part: “[Bowne] claims that [Yalefs own negligence contributed to her harm. To succeed on this claim, [Bowne] must prove both of the following: [¶] 1. That [Yale] was negligent; and [¶] 2. That [Yale]’s negligence was a substantial factor in causing her harm.”

* See footnote, ante, page 649.