SLOVENSKY v. FRIEDMAN

Filed 9/19/06

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

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Story continue from Part I ...

Defendants’ separate statement

Defendants alleged the following facts were undisputed:

1. Beginning no later than the fall of 1997, plaintiff experienced water intrusion into her apartment that was never resolved, making the apartment uninhabitable from around November 1997.

2. A bulletin from The Fairways management went out to tenants on May 8, 1998, stating in part: “We are aware that you have all received a letter from an attorney suggesting that harmful mold may be present in some apartments at The Fairways. . . .

. . . IF YOU SEE ANY EVIDENCE OF MOLD, OF ANY KIND, IN YOUR APARTMENT, PLEASE CONTACT THE MANAGEMENT OFFICE . . . SOME EFFECT [sic] FROM THESE TWO MOLDS ARE FLU-LIKE IN NATURE . . .

. . . we need to hear from you immediately if you are presently experiencing any water intrusion problem or see any evidence of damage, of any kind, from a prior event.”

Plaintiff admits she wrote and sent a letter dated May 11, 1998, which stated in part: “In response to your letter dated 5-8-98, left on my door on 5-9-98, I spoke with your business office and advised them that I don’t have a mold problem[.]” Plaintiff refused to authorize entry into her apartment in her absence, allegedly because she kept firearms there.

3. On or about June 19, 1998, The Fairways’ management issued a document to residents citing “[t]he Fairways mold abatement program[,]” stating that water intrusion leads to mold, and requesting entry and inspection. A telephone message slip in The Fairways’ business records indicates plaintiff called, acknowledged the notice, and said she did not have a mold problem. Plaintiff neither recalls nor denies leaving this message.

4. Plaintiff and The Fairways did not agree on a mutually acceptable inspection date. 5. Plaintiff did not take air samples or samples from her walls or carpet for testing.

6. Before moving out, plaintiff photographed wall stains where water had leaked in the apartment. She believed that these brownish or black stains (which she described as looking “like mascara -- runny mascara”) were from leaking roofing paper or mud.

7. Before moving her furnishings out of the apartment no later than March 21, 1999, plaintiff threw out water-soaked clothing, shoes, boxes, and bedding. At times the carpet was also soaked.

8. Plaintiff applied to rent an apartment elsewhere on September 3, 1998, and leased an apartment beginning November 2, 1998.

9. Plaintiff contends she “was extremely sick from exposure to toxic mold which grew in [her] apartment because [her] landlord did not stop water intrusion into the apartment.”

10. Plaintiff has suffered from headaches, sinus infections, nosebleeds, hearing loss, dental infections, skin irritations, difficulty in concentrating, chronic fatigue, respiratory distress, and respiratory ailments. Between October 1997 and the date plaintiff moved out of The Fairways, she experienced headaches, shortness of breath, fatigue, and dizziness.

11. Although she does not recall when it started, plaintiff had a “constant cough . . . such a bad cough that it was embarrassing[.]” She attributed it to Vicodin, which she began taking in 1997. A co-worker recalled that plaintiff coughed during the period 1997 to 1999 and had sought medical treatment for the cough.

12. Plaintiff began suffering from head and neck pain in 1997 and her other maladies around 1999. Plaintiff contends that as a result of toxic mold exposure, she suffers from headaches, sinus infections, ear infections, hearing loss, dental infections, skin irritations, difficulty in concentration, and respiratory distress.

13. Plaintiff first sought representation from defendants for a mold claim on March 21, 2000.

14. On or about July 28, 2001, plaintiff told defendant Cutter in a recorded conversation that the “water intrusion problems“ in her apartment had begun in 1996 or 1997. Asked if she noticed mold then, she responded, “I didn’t notice that there was mold, what I noticed is that . . . looked like soot, brown soot, dark stuff that was seeping through the ceiling.”

Plaintiff’s response

In her separate statement opposing summary judgment, plaintiff admitted most of these alleged facts were undisputed.

Plaintiff purported to dispute statement No. 1 by asserting: “Defendants cite no evidence to support their assertion that plaintiff claims her apartment was uninhabitable beginning approximately November 1997.” However, she did not dispute that she had experienced unresolved water intrusion into the apartment beginning in the fall of 1997.

Plaintiff also purported to dispute statements Nos. 9 and 10. As to statement No. 9, she admitted she had contended in the underlying lawsuit that she was sick from toxic mold exposure, but added: “As shown below in plaintiff’s additional disputed facts, plaintiff was not so aware and did not so contend until 2000.” As to statement No. 10 (listing her symptoms), she called it, “[u]ndisputed but misleading [because] [p]rior to 2000, plaintiff believed her health problems related to her 1997 auto accident . . . .”

Plaintiff further alleged as undisputed:

She first learned of her toxic mold exposure in January or February 2000. In February or March 2000, plaintiff realized from watching a news program about toxic mold at The Fairways that her apartment had looked worse than the one shown in the program. Although plaintiff had photographed the conditions in her apartment before moving out, she did not know she was photographing evidence of mold. After watching the program, plaintiff met with a city official who examined her photographs and advised her to see a doctor and an attorney right away. Until seeing the program, plaintiff thought what she had observed was leaking or staining of black roofing paper (looking like “runny mascara”); she did not know it was mold, which she believed to be “fuzzy stuff.” Plaintiff believes she conveyed that understanding of her wall stains to The Fairways’ business office. It took plaintiff six months to move from The Fairways to another complex; she spent time in The Fairways up until she handed in her keys on March 22, 1999, and did not fully vacate the apartment until then. Until early 2000, plaintiff thought her health problems had been caused by her February 1997 automobile accident, and she had so advised the attorney she consulted on March 21, 2000. As of then she did not know which, if any, of her health problems were attributable to toxic mold; therefore she asked defendants to let her drop her case if medical testing was negative. Plaintiff did not consider or discuss filing an action against The Fairways at any time before March 2000.

We conclude as a matter of law (as did the trial court) that plaintiff should have realized she had a cause of action long before March 2000. Beginning in fall 1997 she knew of unresolved water intrusion into her apartment that left black and brown stains on her walls; around the same time she developed a violent and persistent cough. In May 1998, she received notice from The Fairways’ management that apartments could have a mold problem related to water intrusion, that it could cause “flu-like” effects, and that tenants should notify management immediately of “any evidence of damage, of any kind, from a prior event.” In June 1998, she received further notice to the same effect, along with a request to enter and inspect her apartment. In response to both notices she denied a mold problem and refused to permit inspection, even as she experienced a battery of physical symptoms -- as of 1999 including headaches, sinus infections, chronic fatigue, and respiratory ailments, all reasonably describable as “flu-like” -- along with the continuing water intrusion. She refused to believe the stains on her walls could be mold because she clung to the fixed idea -- which she did nothing to test -- that mold is “fuzzy,” not “runny.” She refused to investigate whether her physical problems could be mold-related because of her fixed idea that they stemmed from other causes.

When a person knows or believes she is suffering harm and a plausible explanation appears, she cannot reasonably refuse to investigate it merely because other explanations occur to her. A reasonable person in plaintiff’s position would not have waited to learn from television news, long after vacating an apartment rendered uninhabitable by water intrusion, that what appeared on her walls could have been mold and could have caused her ailments. She would have put two and two together as soon as she got notice of mold problems from The Fairways and permitted a prompt inspection of her apartment; she also would have discussed the situation with her doctor. Having done those things, she would have discovered she had a cause of action before the statute of limitations expired.

Plaintiff asserts it was reasonable to believe her symptoms (not all of which were “flu-like”) stemmed from her automobile accident or the medications prescribed for her afterward. She asserts The Fairways’ “ambiguously worded letter” was too “vague” and “general” to give notice that she might have toxic mold in her apartment or that toxic mold could explain any of her health problems.^[1] Finally, she quotes dictionary definitions of “mold” and “fungi” to show she could reasonably have believed her wall stains were not mold because they were not “fuzzy.” In other words, plaintiff still believes she was entitled to put her head in the sand and ignore all warning signals for years merely because she thought she could explain the facts in some other way. When it comes to statutes of limitations, the law disagrees.

Plaintiff relies vainly on Clark v. Baxter Healthcare Corp. (2000) 83 Cal.App.4th 1048 and Ward v. Westinghouse Canada, Inc. (9th Cir. 1994) 32 F.3d 1405. In both cases the plaintiffs got the benefit of the delayed-discovery rule on summary judgment because it was unclear whether they reasonably could have known the negligent causes of their injuries before the statute of limitations expired. (Clark, supra, 83 Cal.App.4th at pp. 1052-1053, 1057-1059; Ward, supra, 32 F.3d at pp. 1406-1408; see Jolly, supra, 44 Cal.3d at pp. 1109-1114.) But here plaintiff knew from the fall of 1997 on that The Fairways had wrongfully failed to prevent or remediate water intrusion into her apartment, and learned from The Fairways in mid-1998 that this problem could cause toxic mold. Thus she was fully on notice of the negligent cause of her injury almost two years before she filed suit. The delayed-discovery rule does not help plaintiff.

If a plaintiff has let the limitations period on her cause of action expire because she clung to a mistaken theory until it was too late, she will normally lose her lawsuit. That did not happen to plaintiff here because defendants won her a settlement. If she had fired them so as to proceed apart from the other plaintiffs, The Fairways certainly would have found the fatal flaw in her case. It had no incentive to do so as long as the case was part of a package settlement.^[2]

We agree with the trial court that plaintiff cannot show damages from defendants’ alleged malpractice as a matter of law.

II

To the extent plaintiff’s fiduciary breach claim alleges the same damages as her malpractice claim, it fails for the same reason. Plaintiff contends, however, that defendants’ fiduciary breach entitles her to disgorgement of her fees even if she cannot prove malpractice damages, and defendants’ failure to confute her allegations of fiduciary breach compels reversal of the summary judgment. We disagree with both contentions.

Where a defendant moving for summary judgment has failed to controvert factual allegations in the complaint, the trial court must deem the allegations true for purposes of the motion. (Cox v. State of California (1970) 3 Cal.App.3d 301, 309.) As noted, defendants did not controvert plaintiff’s fiduciary breach allegations on their motion, but attempted to do so for the first time in replying to plaintiff’s opposition. That is too late. (San Diego Watercrafts, Inc. v. Wells Fargo Bank (2002) 102 Cal.App.4th 308, 316; see United Community Church v. Garcin (1991) 231 Cal.App.3d 327, 337.)

Therefore, for purposes of review, we accept as true plaintiff’s allegations in her complaint that defendants concealed and misrepresented material facts while dealing with plaintiff, thus violating professional duties spelled out in rule 3-310 of the California Rules of Professional Conduct and in Business and Professions Code section 6068. Specifically, they misrepresented to plaintiff that they were evaluating and pursuing her case on its own merits, while actually lumping it in with other plaintiffs’ cases to seek a global settlement with The Fairways. They failed to advise her of the conflicts arising from this course of action or of her right to seek disinterested advice about whether to waive the conflicts. They concealed from her that the success of the global settlement negotiations turned on her acceptance of the settlement amount worked out by counsel without regard to the merits of her case. They made repeated false statements to plaintiff to pressure her into accepting the settlement. They breached confidentiality to enlist her physician as an agent in their campaign against her. They used pressure tactics to break down her resistance. Finally, after obtaining her consent to the settlement through these improper means, they unilaterally and without notice had her settlement check reissued to themselves so they could deduct their fees.

“[A] breach of fiduciary duty is a species of tort distinct from a cause of action for professional negligence. [Citations.] The elements of a cause of action for breach of fiduciary duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach. [Citation.]” (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086 (Stanley).)

“The attorney-client relationship is a fiduciary relation of the very highest character imposing on the attorney a duty to communicate to the client whatever information the attorney has or may acquire in relation to the subject matter of the transaction. [Citations.]” (Beery v. State Bar (1987) 43 Cal.3d 802, 813.)

“The scope of an attorney’s duty may be determined as a matter of law based on the Rules of Professional Conduct which, ‘together with statutes and general principles relating to other fiduciary relationships, all help define the duty component of the fiduciary duty which an attorney owes to his [or her] client.’ [Citations.] Whether an attorney has breached a fiduciary duty to his or her client is generally a question of fact. [Citation.]” (Stanley, supra, 35 Cal.App.4th at pp. 1086-1087.)

It is undisputed that defendants owed plaintiff a fiduciary duty. Because they failed to controvert plaintiff’s factual allegations, their breach of this duty is also undisputed. However, that still leaves unresolved whether plaintiff can establish a triable issue of fact as to damages. We conclude she cannot.

Disgorgement of fees may be an appropriate remedy for an attorney’s breach of fiduciary duty. (See, e.g., In re Fountain (1977) 74 Cal.App.3d 715, 719 (Fountain).) As we shall explain, plaintiff’s failure to plead that remedy by name does not prevent her from claiming it.

We recognized in our landmark case, FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, authored by Justice Blease, that the pleadings delimit the scope of the issues on summary judgment. (Id. at p. 381.) However, nothing in FPI suggests that a plaintiff facing summary judgment must adhere to any special rules of pleading. Nor do we know of any other authority so holding. When we apply traditional rules of pleading, we conclude, contrary to the trial court, that plaintiff adequately pled the remedy of disgorgement of fees.

Disgorgement of attorney’s fees is a remedy sought by plaintiff. There is a “basic distinction . . . between the cause of action (the primary right and duty, and the violation thereof) and the remedy or relief sought.” (4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 30, p. 92.) “The gravamen, or essential nature . . . of a cause of action is determined by the primary right alleged to have been violated, not by the remedy sought. [Citation.]” (McDowell v. Watson (1997) 59 Cal.App.4th 1155, 1159.)

“Since 1872, Code of Civil Procedure section 580 has provided that ‘[t]he relief granted to the plaintiff, if there be no answer, cannot exceed that which he shall have demanded in his complaint; but in any other case, the court may grant him any relief consistent with the case made by the complaint and embraced within the issue.’” (Castaic Clay Manufacturing Co. v. Dedes (1987) 195 Cal.App.3d 444, 449.)

“The prayer for relief is no part of the statement of fact, and the fact that too much is asked for does not affect the cause of action stated. Under the prayer for general relief the court can give such judgment as plaintiffs show themselves entitled to, and as may be necessary to effect justice between the parties and protect the rights of both.“ (Matteson v. Wagoner (1905) 147 Cal. 739, 745 (Matteson); italics added.)^[3]

Plaintiff’s claim for disgorgement of fees does not fall on summary judgment merely because she did not use the word “disgorgement” in her complaint. Plaintiff’s general prayer for “such other and further relief as the Court may deem proper” was sufficient to plead entitlement to disgorgement as a remedy. (Matteson, supra, 147 Cal. at p. 745.) The trial court erred by ruling that plaintiff had to specially plead disgorgement.

Nevertheless, plaintiff’s disgorgement claim fails as a matter of law. Where an attorney’s misrepresentation or concealment has caused the client no damage, disgorgement of fees is not warranted. (Frye v. Tenderloin Housing Clinic, Inc. (2006) 38 Cal.4th 23, 48.) Plaintiff cites Fountain, supra, 74 Cal.App.3d 715, and In re Occidental Financial Group, Inc. (9th Cir. 1994) 40 F.3d 1059 (Occidental), but neither creates an exception to the Frye rule.

In Fountain, supra, 74 Cal.App.3d 715, an attorney accepted a fee to file notice of a criminal appeal, then filed one that was late and inadequate, effectively forfeiting his client’s appeal rights. (Id. at pp. 717-719.) In Occidental, supra, 40 F.3d 1059, an attorney accepted a retainer to file for bankruptcy on behalf of certain firms without disclosing, as required by bankruptcy law, that he also represented the firms’ owners, whose interests might be adverse to those of the creditors’ committee that had retained him. (Id. at pp. 1061-1063.) Thus, in Fountain the client had suffered actual damage, and in Occidental, the clients stood to suffer potential damage.

Here, by contrast, the only apparent consequence of defendants’ fiduciary breach was a substantial settlement plaintiff could not otherwise have obtained.^[4] Under these circumstances, the Frye rule, supra, 38 Cal.4th 34, controls and plaintiff’s fiduciary breach claim fails because she cannot establish damages.

DISPOSITION

The judgment is affirmed. The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 27(a)(4).)

SIMS , J.

We concur:

BLEASE , Acting P.J.

CANTIL-SAKAUYE , J.

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^[1] This argument glosses over two awkward facts: (1) Plaintiff received two notices from The Fairways, both specifically warning of a possible toxic mold problem directly related to water intrusion, and rejected them both. (2) Although an inspection -- specifically requested by The Fairways -- would have settled the matter quickly, she never agreed to permit one.

^[2] Thus it is immaterial that The Fairways did not press a statute of limitations defense instead of settling plaintiff’s case. It is also immaterial that defendants did not mention the problem to her while they were handling the case.

We need not decide whether defendants should have discovered the limitations problem before July 28, 2001, when they allege plaintiff first disclosed it to them, or whether they should have then continued to negotiate on plaintiff’s behalf. Whatever might be said about their conduct, plaintiff cannot show it harmed her.

^[3] In this case, we have no occasion to decide whether this rule should apply where a plaintiff seeks injunctive relief.

^[4] Plaintiff originally claimed emotional distress as a result of defendants’ conduct, but withdrew this claim before the trial court ruled on the summary judgment motion.