Creditor Cannot Assign Judgment to Debtor’s Lawyer

Wednesday, July 16, 2008

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Creditor Cannot Assign Judgment to Debtor’s Lawyer—C.A.

By KENNETH OFGANG, Staff Writer

A judgment creditor cannot assign an interest in the judgment to the debtor’s lawyer, the Sixth District Court of Appeal ruled yesterday.

By seeking to collect, for himself, damages that were awarded against his former client in an action he had been charged with defending, San Jose attorney Anthony Pagkas “ma[de] a mockery of the Rules of Professional Conduct,” Presiding Justice Conrad Rushing wrote.

‘We cannot conceive of, and the case law is devoid of, a scenario which could do more violence to the attorney-client relationship and the public trust in the legal system, than what Pagkas and his firm have done and seek to do,” the jurist declared.

The court denied Pagkas’ motion to substitute himself for Delia Styles in connection with Edward Mumbert’s appeal from a $730,000 default judgment that Styles obtained against him.

Finding Pagkas’ argument to be unsupported by “cogent argument” or citation to authority, the court also ordered Pagkas to pay more than $5,000 in sanctions to Mumbert’s attorneys, and gave Styles 15 days to show cause why she should not be held in default and barred from defending the appeal.

Pagkas, who could not be reached for comment, represented Mumbert, a bail bondsman, in a Santa Clara Superior Court suit brought against him by Delia Styles. Styles ultimately moved for sanctions against Mumbert for failure to respond to discovery and other violations, and the judge ordered that the action be terminated in Styles’ favor.

Pagkas, the Court of Appeal explained, admitted on the record that he did not have time to represent Mumbert further, and the defendant retained new counsel, who moved to vacate the sanctions. The motion was denied, and judgment was entered.

Mumbert appealed from the judgment, and sued Pagkas for malpractice. Pagkas cross-complained, seeking to recover the value of services rendered, and that action is still before the trial court.

Rights Assigned

While the appeal from the judgment in the first action was pending, Styles assigned her rights to Pagkas for undisclosed consideration. Pagkas, represented by another lawyer from his firm, moved to be substituted for Styles as a party to the appeal, on the basis of the assignment.

Rushing, however, agreed with Mumbert’s new counsel that, although Pagkas and Mumbert are adverse parties in the second litigation, the assignment was a breach of Pagkas’ duties to Mumbert with respect to the first suit.

The presiding justice cited several provisions of the State Bar Act and the Rules of Professional Conduct, including the ban on obtaining a pecuniary interest adverse to a client, the prohibition against representation of adverse interests, and the requirement that an attorney preserve the confidences of a client, even after representation ceases.

“Few precepts are more firmly entrenched than the fiduciary nature of the attorney-client relationship, which must be of the highest character,” Rushing wrote. “....So fundamental is this precept that an attorney continues to owe a former client a fiduciary duty even after the termination of the relationship....These duties continue after the termination of the relationship in order to protect the sanctity of the confidential relationship between and attorney and client.”

Right to Defend

Rushing rejected Pagkas’ contentions that he was entitled to obtain the assignment in order to offset any malpractice award and to “defend himself” against the malpractice action. While Pagkas has the right to present a defense to that action, disclosing client confidences if necessary, that right does not extend to the action in which he previously represented Mumbert, Rushing explained.

The jurist elaborated:

“Since the appeal is from the judgment in which Pagkas represented Mumbert, it is the same case....Under any analysis, this scenario not only raises the presumption, but establishes for a certainty, that Pagkas possesses confidential information adverse to Mumbert which would be compromised if his motion were granted. Therefore, by objecting, Mumbert can prevent Pagkas from stepping into the shoes of his adversary in order to safeguard his confidences. The duty of confidentiality of client information involves public policies of paramount importance....The preservation of confidentiality contributes to the trust that is the hallmark of the client-lawyer relationship....Pagkas may not reveal or use confidential information, gained through his prior representation of Mumbert, in this appeal because it would be contrary to public policy and would undermine the very nature of the attorney client relationship.”

Pagkas, he added, “cites no authority” that would allow him to step into the shoes of the plaintiff in an action in which he represented the defendant, “nor is there any such authority.” If there were, the presiding justice explained, Pagkas could potentially prevail in both the malpractice action and on the appeal, “leaving him with a huge windfall at the expense of his former client.”

The case is Styles v. Mumbert, H029767.