Mauzey v. Morschauser

RUTH IMOGENE MAUZEY et al., Plaintiffs and Respondents, v. WILLIAM B. MORSCHAUSER et al., Defendants and Appellants.

D070681

D070683

COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA

March 3, 2017

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. 04CC10040)

CONSOLIDATED APPEALS from a judgment and postjudgment order of the Superior Court of Orange County, Ronald Bauer, Judge. Reversed and remanded with directions.

Law Offices of Steven R. Young, William Zulch; Ferguson Case Orr Paterson, Wendy C. Lascher and John A. Hribar for Defendants and Appellants.

Werner Law Firm and Lee G. Werner for Plaintiffs and Respondents.

Defendant and appellant William B. Morschauser, an attorney, appeals from a judgment and postjudgment order granting a motion to tax costs following a jury trial on plaintiffs and respondents Ruth Mauzey and Larry Mauzey's¹ complaint for professional negligence in connection with Morschauser's untimely filing of a petition to probate the will of Ruth's son. The jury returned a special verdict in Ruth's favor finding Morschauser was negligent, his negligence was a substantial factor in causing Ruth harm, and Ruth's damages were $183,000. In these consolidated appeals, Morschauser contends: (1) the trial court erred by denying his motion for judgment notwithstanding the verdict (JNOV) because there is insufficient evidence that he owed Ruth a duty of care, and neither the jury instructions nor special verdict enabled the jury to decide whether he acted as Ruth's attorney; (2) Ruth failed to establish causation or damages to a reasonable certainty; and (3) the court erred by ruling Morschauser's Code of Civil Procedure section 998 (hereafter section 998) settlement offer was improper or of no effect and granting Larry's motion to tax costs.

We agree the record in this case lacks substantial evidence of causation and damages proved to a reasonable certainty. We further agree that the trial court had no basis to reject Morschauser's settlement offer as invalid. Accordingly, we reverse the judgment and remand with directions set forth below.

FACTUAL AND PROCEDURAL BACKGROUND

For our review of the jury's verdict generally, as well as the trial court's order denying Morschauser's motion for JNOV (but not for purposes of assessing his claim of instructional error, as we explain below), we state the facts in the light most favorable toRuth, resolving all conflicts and indulging all reasonable inferences to support the judgment. (Sweatman v. Department of Veterans Affairs (2001) 25 Cal.4th 62, 68; American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1459, fn. 1; Casella v. SouthWest Dealer Services, Inc. (2007) 157 Cal.App.4th 1127, 1143-1144.)

Don Mauzey died in June 2002. His relatives initially did not find a will, and in July 2002, Morschauser, representing Don's daughter Kelly Mauzey, filed an intestate probate petition on her behalf. That petition was granted in February 2003 over a challenge by Kelly's brother James Mauzey to Kelly's appointment as the administrator. Thereafter, letters of administration issued to Kelly.

Don's will was eventually found in August 2003. It left the bulk of his approximately $2 million estate to his parents, with bequests of $100 each to Kelly and James, and various bequests to other relatives. Don's father had predeceased him. On August 7, 2003, Morschauser called Don's mother Ruth in Oklahoma to notify her about the will's discovery and asked her to meet with him in his office in California. Within a day or two, Don's brother Larry met with Morschauser at his office where they went through the will and its beneficiaries, and Morschauser told Larry that Morschauser would get him appointed the estate's executor, they would have to obtain a tax identification number and open an estate bank account, and Kelly would have to account for the estate and return everything she had taken or face a lawsuit. When Larry asked Morschauser if he needed to get a lawyer or if it was something Morschauser could do, Morschauser responded that it was something he could do. Larry told Morschauser thatas a family friend who was involved in the matter, he trusted him and he could do it and, as Larry put it, Morschauser "accepted that he would be our lawyer." Morschauser never told Larry he could not represent them because he had to get permission from Kelly. Larry understood Morschauser was to start right away to get the will into the court system and begin going through all the assets.

At some point that month, Larry hired attorney Steven Kray as a "backup" to Morschauser, who was to be in charge of all the probate matters, including probating and filing the will. Kray's role was to "help make sure things were getting done correctly," and Larry felt that between the two attorneys, everything would be done right. As he put it, he hired Morschauser to file the probate petition and Kray to "make sure things got done." Though Larry did not sign a written legal services agreement with Morschauser, according to Larry, Morschauser "said he would represent us, and I took him for his word because I trusted him." Larry understood Morschauser would be paid from the probate estate; Morschauser never sent him a fee bill, invoice or a letter asking to be paid, and neither Larry nor Ruth ever paid him any attorney fees.

In early September 2003, Ruth and Larry met with Morschauser for about an hour. Morschauser showed Ruth the will and explained it to her, telling her she would be appointed the executor. Ruth, however, wanted Larry to act as the executor and signed documentation prepared by Morschauser waiving her right to the appointment. According to Ruth, Larry asked Morschauser at that meeting if there was a deadline for filing the will; Morschauser responded they should not worry about it and he would take care of everything. Ruth understood this to mean that Morschauser "would be mylawyer." Morschauser also told Ruth that if she needed anything to just give him a call. Morschauser never told them he could not help them due to a conflict of interest.

During that time, Morschauser told Larry that he and Ruth should consider settling with Kelly and James rather than filing the will. On October 6, 2003, Morschauser on Ruth's behalf sent a settlement offer to James's counsel offering James $30,000 in exchange for a release of all claims against Don's estate.

Morschauser lodged Don's will on December 3, 2003, and filed Larry's petition to probate the will the next day. However, following a probate court hearing in February 2004, Morschauser advised Larry that the court had disqualified him from representing Don's estate, Ruth or Kelly, and that Larry and Ruth should retain new counsel. He also told Larry that James had filed a will contest. Morschauser substituted out as Larry's attorney. Thereafter, Larry and Ruth hired new lawyers, respectively Carl Agren and Lee Werner.² Ruth initially agreed to pay Werner an hourly rate but in May 2005 she had incurred over $56,000 in fees and because expenses were mounting, Ruth signed a contingent fee agreement in which Ruth would pay Werner 30 percent of the amount of any recovery by way of settlement, arbitration award, judgment or otherwise, less the legal fees she had actually paid.

In the meantime, the probate court in June 2005 denied Larry's petition to probate the will because it was not filed within 60 days after he became aware of its existence.Ruth, represented by Werner, appealed the order denying the petition. Eventually, Morschauser located Don's brother Ronald Mauzey, who was a beneficiary of Don's will but incarcerated, and arranged at Morschauser's own expense to have a probate petition filed in October 2005 on Ron's behalf, which the probate court later ruled was timely.³ In 2007, addressing Ruth's and James's consolidated appeals, the Court of Appeal affirmed the probate court's orders denying Larry's probate petition and granting Ron's probate petition. Ruth received distribution of the approximately $2 million that she was entitled to collect from Don's estate.

Larry and Ruth sued Morschauser and Kray for professional negligence, breach of contract and breach of fiduciary duty. In part, they alleged that Kray had been engaged to make sure a petition to probate the will was properly and timely filed. The action was stayed pending the outcome of the probate matter. Larry and Ruth entered into a settlement with Kray that was determined to be in good faith and dismissed the case against him before trial. The legal malpractice case thereafter proceeded to trial against Morschauser, and at the close of evidence, Larry and Ruth withdrew their claims for breach of contract and breach of fiduciary duty, having the jury decide only their professional negligence claim against him.

At trial, Werner testified that he represented Ruth from March 2004 to sometime in 2012 in connection with James's challenges to Larry's probate petition including Ruth'sappeal of the order denying the petition, James's will contest, and general probate administrative matters. Werner prepared an accounting of his percentage of the total assets at the closing of the estate, explaining that out of total current assets of $2,039,629.71, 30 percent was approximately $611,000 "less the credit for the hourly fees that Ruth incurred from April 2004 through May 2005, they weren't necessarily paid in that time period, they may have been paid later. And then that number, that credit was reduced by the fees incurred on the surety bond matter coming up with the net credit and then ultimately the net attorney's fees," which amounted to...