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Court of Appeal:
Trustee Not Liable for Spurning Attorney Lien in Pay-Out
Justices Say Former Lawyers for Beneficiaries Have No Interest in Trust Funds
By a MetNews Staff Writer
A law firm that rendered services to trust beneficiaries under a contingency fee agreement providing that it would receive 40% of the gross recovery, and was unpaid, had no causes of action against the trustee or the lawyer and the law firm he retained, Div. Four of the First District Court of Appeal has held.
Acting Presiding Justice Jon B. Streeter authored the unpublished opinion, filed Wednesday. Treating an appeal from an unappealable order sustaining demurrers without leave to amend as if it were from a judgment of dismissal (which had not been entered), Streeter said that Contra Costa Superior Court Judge Terri Mockler properly capsized the action filed by the Oakland law firm of Emeziem & Others (“E&O”).
It sued the trustee, attorney Mark S. Unger of MSU Fiduciary Partners in Contra Costa County, his lawyer Cara E. Lankford, and her firm, The Korn Law Group, also in that county.
E&O stated causes of action for money had and received, imposition of a constructive trust, conversion, and intentional interference with contractual relations.
Unger and Lankford wrongfully disbursed the entirety of the trust funds to the beneficiaries rather than honoring the attorneys’ lien, E&O alleged, and tortiously persuaded the seven beneficiaries to terminate E&O’s representation of them.
As to the claim based on the common count of moneys had and received, E&O argued in its brief appeal:
“The lower court…erroneously relied on respondents’ contention that property appellant is seeking to recover is Trust Property. It was not. As appellant has for the umpteenth time made clear, once the Trust Property was designated, set aside and sequestered for payment to its former clients, it automatically ceased to be Trust Property. The respondent was put on Notice about appellant’s lien and therefore once the funds became the clients’ funds upon designation, the duty to protect the part of the funds due to satisfy the lien attached and transformed to funds had by respondents for the benefit of appellants.”
Streeter responded:
“In this case, the trial court properly found that E&O did not state and could not state an equitable claim for money due from the Trust. E&O may claim entitlement to fees under the Fee Agreement directly from its former clients; but what it may not do is sue strangers to the attorney-client relationship for the allegedly delinquent fees.”
The jurist said that while the claim for imposition of a constructive trust “fails most basically because a constructive trust is a remedy, not a cause of action,” Mockler was correct in finding that Unger’s duty was to the trust beneficiaries and, given that neither E&O nor its principal, Kelechi Charles Emeziem, enjoys that status, “E&O had no cognizable interest in the Trust res.”
The trial judge also correctly found that there was no conversion, he set forth, because the plaintiff had no ownership interest in the Trust assets” and no wrongful act was alleged.
Interference With Contract
Streeter recited that interference with contractual relations is not a viable cause of action absent an independent wrongful act.
E&O argued that there was such an act: Unger and Lankford contacting the beneficiaries. Emeziem said in his brief: “Facts as stated in a complaint are taken as true and therefore appellant’s allegation that respondents not only communicated with its clients without its consent, but that respondents persuaded its clients to terminate their contract with appellant, should be taken as true for purposes of pleading. Communicating with a party that is represented by counsel without the permission of counsel is not only wrong but also actually persuading that client under contract to break that contract is wrongful. Wrongfulness in this context is not akin to crime. It is a civil wrong and the court below should have allowed appellant to go forward and offer proof at trial.”
He maintained that Mockler erred in relying solely on Rule 4.2 of the California Rules of Professional Conduct in deciding the issue.
Streeter wrote:
“Although it may be inferred that the subject matter of the Fee Agreement was E&O’s engagement to represent the Beneficiaries in the Trust litigation, there are no specifics as to the subject matter scope of the engagement. We find it unlikely that the scope could have had such a broad sweep as to prohibit the Beneficiaries from consulting independent counsel about terminating the engagement or refusing any payment obligation under the Fee Agreement, since E&O stood in a potentially adverse position to the Beneficiaries on those topics. But even assuming that, by its express terms, the Fee Agreement was written that broadly, it must be construed more narrowly to allow such consultations. Thus, while, factually, E&O alleges communications that in its view breached Rule 4.2(a), we see no such violation as a matter of law on the facts alleged here.”
The case is Emeziem & Others v. Unger, A170497.
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