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September 30, 2008

Wood v. Jamison (2008) 167 Cal.App.4th 156

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The Second District holds that an attorney engaged in conflicts of interest and self-dealing was subject to both damages and attorney’s fees and costs under the Elder Abuse Act.

 After several life crises, Merle Peterson, an elderly woman, met Patrick McComb, who falsely told her he was her nephew. Peterson transferred a significant amount of money to McComb and then obtained a large loan secured by her residence so McComb could establish a nightclub. Eddie Jamison represented McComb, and also performed legal services for Peterson by advising Peterson about the loan and securing the loan. The loan bore a high interest rate, garnered a referral fee for Jamison, and was used in part to repay a loan Jamison had extended to McComb. Jamison never informed Peterson he was not her attorney, disclosed the referral fee or the repayment to him, disclosed conflicts or obtain waivers, or referred Peterson to independent counsel.

Jamison was aware that Peterson was elderly, and that her husband was incompetent. He did not advise Peterson of the risks of the night club investment or that the loan terms were inappropriate for her. He did not refer her to an accountant or financial advisor.

Peterson could not afford the loan and defaulted on the first payment. The lender initiated foreclosure proceedings. Peterson died and Craig Wood, as trustee of Peterson’s trust and estate, brought an action against Jamison and others. At trial, the court found Jamison committed malpractice, breached his fiduciary duty to Peterson and committed elder financial abuse.

The trial court denied Jamison’s motion for a new trial based on newly-discovered evidence: a written agreement between McComb and Peterson for the formation of the night club which recited that Jamison was solely McComb’s attorney and that Peterson would retain independent counsel, even if she hired Jamison to organize her estate. Jamison claimed that he received the agreement from an anonymous source, submitted a declaration from a witness who signed the document and questioned a documents expert who declared that the signatures appeared to be genuine. Wood submitted an expert declaration in opposition to the effect that the agreement would not have changed his opinion that Jamison committed malpractice and breached his fiduciary duty.

The Court of Appeal agreed that the newly discovered evidence was not material because it was not likely to produce a different result. The document came from an unknown source and there was no evidence as to the circumstances of its making. There was no showing Peterson had any legal advice about the complex conflicts of interest and Jamison’s subsequent actions were inconsistent with the notion that he did not represent Peterson.

There was substantial evidence to support the finding of representation. Jamison told the trustee that he represented Peterson. The work Jamison performed to obtain Peterson’s loan was sufficient to support a finding that an attorney-client relationship existed.

There was substantial evidence of Jamison’s malpractice as being the cause of Peterson’s damages. Either the trust or Peterson individually was liable on for the promissory note. If Jamison had properly advised Peterson, she would not have entered the loan transaction.

Woods was also entitled to fees and costs under the Elder Abuse Act. Jamison committed financial elder abuse when he took the undisclosed finder’s fee. He also knowingly aided and abetted McComb’s abusive scheme to take the loan proceeds because Jamison knew that McComb’s intended use of the loan proceeds were inappropriate for Peterson.

Comment: An attorney dealing with an unrepresented party should not perform services or render advice to the unrepresented party, despite recitals in a document that the attorney is not engaged in representation.

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