Judge Bruce G. Iwasaki, Case Number: 23STCV19586, Date: 2024-02-21 Tentative Ruling

Tentative Ruling: The Demurrer to the Complaint is sustained in its entirety with leave to amend.

This is a dispute over real property. Plaintiff Samuel Gelff (Plaintiff), alleged administrator of the estate of Stephen Jefferey Gelff (Gelff), alleges that Anne Frances Weiss (Weiss) and Gelff acquired properties together in the early 1990s and formalized their real estate business partnership with a Joint Venture Agreement (Agreement) on December 17, 1997. (Compl., ¶¶ 13-17.) Originally, Weiss and Gelff jointly held four properties together, which were all held in Weiss’s name. (Compl., ¶ 19.) Thereafter, in conjunction with the Agreement, the Complaint alleges that Weiss delivered four quitclaim deeds, transferring 50% of each of the properties to Gelff, including the subject property at issue in this case – 6040 Carlton Way, Los Angeles, CA 90028 (Property). (Compl., ¶¶ 12, 20-2gelff2, Ex. B.) On January 21, 1998, Weiss transferred her entire interest in the Property to Defendant Mission Investments Inc. (Defendant). (Compl., ¶¶ 24-26.) Despite only owning 50% of the Property, Defendant Mission appears as the sole owner of the Subject Property according to the records of the Los Angeles County Recorder’s office. (Compl., ¶ 27.)

The Complaint alleges that this action became necessary because, after Weiss died in 2022, the administer of Weiss’ estate may try to include the 100% of the Property as an asset of Weiss’s estate. (Compl., ¶ 29.)

The Complaint contains causes of action for (1.) quiet title, (2.) constructive trust, (3.) resulting trust.

Defendant Mission Investments Inc. demurs to all three causes of action in the Complaint. Plaintiff opposes the demurrer.

Defendant’s request for judicial notice of Exhibits A-B is granted. (Evid. Code, § 452, subd. (d), (h).)

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading by raising questions of law. (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . . .” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated. (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

Defendant argues that the first cause of action for quiet title is barred by any applicable statute of limitations and fails to state a claim.

To maintain an action for quiet title, a plaintiff must allege that the defendant had an adverse interest in the property. (See Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 1009-1010.) Pursuant to Code of Civil Procedure section 761.020, a complaint for quiet title must be verified and contain certain essential elements: (1) A description of the property that is the subject of the action, (2) The title of the Plaintiff as to which a determination of quiet title is sought, (3) The adverse claims to the Plaintiff’s title, (4) The date as of which the determination is sought and (5) A prayer for determination of the title of the Plaintiff against adverse claims.

The Complaint here alleges that, pursuant to the Agreement between Weiss and Gelff, Weiss executed and delivered four quitclaim deeds, transferring 50% of the Property to Gelff on December 17, 1997. (Compl., ¶ 20.) Shortly after executing and delivering a quitclaim deed to Gelff that gave him 50% of the Property, Weiss later recorded a quitclaim deed on January 21, 1998, transferring her entire interest in the Property to Defendant Mission. (Compl., ¶ 24, Ex. C.)

Plaintiff alleges, as his brother’s sole heir, he is entitled to fifty percent of the Property based upon the Agreement and the December 17, 1997 quitclaim deed. The first cause of action for quiet title seeks a judicial declaration that title to 50% of the Property is owed to Gelff’s estate and that Defendant be declared to have only 50% of the Property. (Compl., ¶¶ 38-39.)

As a preliminary matter, an issue is whether the Complaint avers that Mission has asserted an adverse interest in the Property against Plaintiff/Gelff. (Compl., ¶¶ 24-30.) The only allegation suggesting an adverse interest is the allegation that “Mission appears as the sole owner of the Subject Property according to the records of the Los [Angeles] County Recorder’s office.” (Compl., ¶ 27.) Thus, Plaintiff has satisfied the pleading requirement of Code of Civil Procedure section 761.020 by alleging an adverse claim to the Plaintiff’s title.

“Generally, the most likely time limits for a quiet title action are the five-year limitations period for adverse possession, the four-year limitations period for the cancellation of an instrument, or the three year limitations period based on fraud and mistake.” (Salazar v. Thomas (2015) 236 Cal.App.4th 467, 476-477.)

In opposition, Plaintiff appears to argue that no statute of limitations applies. First, with respect to Code of Civil Procedure section 318, Plaintiff contends that he never had possession of the Property such that this statute does not apply. Irrespective of whether Section 318 may or may not apply, Plaintiff’s concession suggests that some statute of limitations must apply because the law conversely holds that “no statute of limitations runs against a plaintiff seeking to quiet title while he is in possession of the property.” (Muktarian v. Barmby (1965) 63 Cal.2d 558, 560.)

Here, Defendant argues that the three-year statute of limitations applies here because the theory of relief underlying this action for quiet title is either fraud or mistake. (Ankoanda v. Walker-Smith (1996) 44 Cal.App.4th 610, 615.)

Further, in opposition, Plaintiff contends that he is not alleging any wrongdoing “on the part of Defendant.” (Opp., 3:23-26.) Thus, the underlying relief appears to arise as result of a “mistake” triggering the three-year limitations period based on fraud and mistake.

Applying the three-year statute of limitations period, the disputed transfer occurred in 1998, approximately twenty-five years ago. (Compl., ¶ 24.) Further, Gelff died on November 20, 2006. (Def.’s RJN Ex. A.) The Complaint was not filed until August 16, 2023. Thus, under this statute of limitations, the claim is barred.

Finally, Plaintiff argues that, even assuming a statute of limitations applies, the claim is subject to delayed discovery.

It is true that a cause of action subject to section 338, subdivision (d), does not accrue “until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” (Code Civ. Proc., § 338, subd. (d); see also Arthur v. Davis (1981) 126 Cal.App.3d 684, 690 [applying accrual clause of statute to quiet title action].)

Here, Plaintiff concedes that the Complaint does not allege any delayed discovery facts but argues that he did not discover the quitclaim deed until 2022 when looking through Gelff’s files. Even assuming that this allegation had been properly alleged within the Complaint, it would be inadequate to demonstrate delayed discovery. (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1319 [“ ‘A plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence. The burden is on the plaintiff to show diligence, and conclusory allegations will not withstand demurrer.’ [Citations.]”].) The Complaint fails t allege facts necessary for the delayed discovery doctrine to apply.

Defendant demurs to the second cause of action for constructive trust on the grounds that it is also barred by the statute of limitations, the claim is a remedy (not a cause of action), and the cause of action fails to allege sufficient facts to state a claim.

The Complaint’s second cause of action for constructive trust alleges that Weiss “wrongfully transferred Plaintiff’s interest in the Subject Property to Mission without Gelff’s permission.” (Compl., ¶ 43.) As a result of the “above pled wrongful transfer”, the Complaint asks this Court to declare that a constructive trust has been formed in which Defendant is an involuntary trustee for the benefit of Plaintiff concerning the wrongful transfers. (Compl., ¶¶ 44-45.)

The case law is not entirely settled on whether a constructive trust claim should be treated as a cause of action or remedy.

For example, certain case authority suggests a constructive trust “is not an independent cause of action but merely a type of remedy for some categories of underlying wrong. [Citation.]” (Glue–Fold, Inc. v. Slautterback Corp. (2000) 82 Cal.App.4th 1018, 1023, fn. 3.) As an equitable remedy, a claim for a constructive trust has no separate viability if the plaintiff's other causes of action are barred. (Ibid.; see also Communist Party v. 522 Valencia, Inc. (1995) 35 Cal.App.4th 980, 990 [“A constructive trust is an involuntary equitable trust created by operation of law as a remedy to compel the transfer of property from the person wrongfully holding it to the rightful owner.”].)

However, in Higgins v. Higgins (2017) 11 Cal.App.5th 648, the Court of Appeal explained “[t]o the extent Glue-Fold, Inc. v. Slautterback Corp. (2000) 82 Cal.App.4th 1018, 1023, fn.3, 98 Cal.Rptr.2d 661, suggests no cause of action for constructive trust exists, the suggestion would be inconsistent with the weight of authority.” (Id. at 659, fn. 2 [citing see, e.g., Flores v. Arroyo (1961) 56 Cal.2d 492, 494–495, [complaint stated a cause of action to declare a constructive trust]; Day v. Greene (1963) 59 Cal.2d 404, 411 [statute of limitations applicable to action to impose a constructive trust is determined by the nature of the underlying substantive right, not the form of the action or the remedy sought]; Olson v. Toy (1996) 46 Cal.App.4th 818, 823 [claim for constructive trust is effectively an action for possession of property].)^{^[1]}

However, even if the Court were to treat this claim as a cause of action, it fails under the statute of limitations.

A constructive trust is an equitable remedy to compel restoration of property by one who is not justly entitled to it. (Day v. Greene (1963) 59 Cal.2d 404, 411; Allen v. Meyers (1936) 5 Cal.2d 311, 313-314; Meister v. Mensinger (2014) 230 Cal.App.4th 381, 396, 399.)

The general principles for the imposition of a constructive trust are set forth in Civil Code sections 2223 and 2224. (Higgins v. Higgins (2017) 11 Cal.App.5th 648, 659-660.) Civil Code section 2223 provides: “One who wrongfully detains a thing is an involuntary trustee thereof, for the benefit of the owner.” Civil Code section 2224 provides, “One who gains a thing by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act, is, unless he or she has some other and better right thereto, an involuntary trustee of the thing gained, for the benefit of the person who would otherwise have had it.”

“Since ‘[a] constructive trust is not a substantive device but merely a remedy to compel a person not justly entitled to property to transfer it to another who is entitled thereto’ [citation], an action seeking to establish a constructive trust is subject to the limitation period of the underlying substantive right.’ [Citations.]” (Davies v. Krasna (1975) 14 Cal.3d 502, 515.)

The statute of limitations for a constructive trust action is three years if based on fraud or mistake, or four years if it falls within the catchall provision of the statute. (Code Civ. Proc., §§ 338, subd. (d), 343.) Both provisions begin the statute running when the wronged party discovers or should have discovered the fraud, mistake or breach of fiduciary duty. (Calkins v. Calkins (1923) 63 Cal.App. 292, 302; Truesdail v. Lewis (1941) 45 Cal.App.2d 718, 723.)

“In the case of an involuntary [constructive] trust the statute of limitations begins to run ... from the time when the wrongful or fraudulent acts are performed by the trustee, except that the statute is tolled as to the [equitable] owner of the property until he actually acquires knowledge of the wrongful acts, or, by the exercise of reasonable care, until he is charged with such notice. [Citation.]” (Truesdail v. Lewis (1941) 45 Cal.App.2d 718, 723; see also Bainbridge v. Stoner (1940) 16 Cal.2d 423, 429 [cause of action to impose constructive trust arose when defendant wrongfully acquired property, “and the statute commenced to run against the [plaintiffs] at least as soon as they knew, or should have known, what he had done”].)

This claim relies on the same allegations as the quiet title cause of action and, therefore, is also barred by the statute of limitations. The demurrer to the second cause of action is sustained.

Defendant demurs to the third cause of action for resulting trust on the grounds that it is also barred by the statute of limitations, the claim is not a cause of action, and the cause of action fails to allege sufficient facts to state a claim.

Based on similar allegations to support the constructive trust claim, the third cause of action for resulting trust requests a declaration from the Court that an involuntary trust has been created for the benefit of Plaintiff. (Compl., ¶¶ 46-48.)

Like the constructive trust claim, the law suggests that a resulting trust is merely an equitable remedy. (Marvin v. Marvin (1976) 18 Cal.3d 660, 665 [resulting trust is an equitable remedy]; Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 76 [resulting trust is a remedy, not a cause of action].)

However, even if the Court were to treat the claim as a cognizable cause of action – as opposed to a remedy – the claim fails for the same reasons as the constructive trust claim. That is, the claim is barred on the face of the Complaint.

“The applicable statute of limitations on an action to establish a resulting trust is the four-year statute found in Code of Civil Procedure section 343. [Citation.] The statute of limitations does not run on a beneficiary of a resulting trust until he has actual knowledge of repudiation or breach of trust.” (Martin v. Kehl (1983) 145 Cal.App.3d 228, 240; see Berniker v. Berniker (1947) 30 Cal.2d 439, 447-448 [“In the absence of a repudiation by the trustee, the statute of limitations does not begin to run against a voluntary resulting trust.”]; Estate of Yool (2007) 151 Cal.App.4^th 867, 875 [same].)

Thus, for the same reasons, as the constructive trust, the statute of limitations appears to bar the claim here. The demurrer to the third cause of action is sustained for this reason.

[1] A prerequisite to imposition of a constructive trust is a property right. “We conclude that regardless of whether a constructive trust is viewed as a remedy, cause of action, or doctrine, it requires a property right. (See Glue-Fold, Inc. v. Slautterback Corp. (2000) 82 Cal.App.4th 1018, 1023, fn. 3 [constructive trust “is not an independent cause of action but merely a type of remedy”]; Higgins v. Higgins (2017) 11 Cal.App.5th 648, 658, 659, fn. 2 [disagreeing with Glue-Fold; action for “constructive trust is a suit in equity to compel a person holding property wrongfully to transfer” it to the rightful owner].) Thus, a constructive trust cannot establish a property interest.

Judge Bruce G. Iwasaki

Department 58