Judge Holly J. Fujie, Case 22STCV22542 2023-04-07 Tentative Ruling

MOVING PARTY: Defendants Patricia V. Lewis (“Lewis”); and Amos Delone and Almita Delone (the “Delone Defendants”) (collectively, “Moving Defendants”)

The Court has considered the moving and opposition papers. No reply papers were filed. Any reply papers were required to have been filed and served at least five court days before the hearing under California Code of Civil Procedure (“CCP”) section 1005, subdivision (b).[2]

This action arises out of a dispute over the sale of real property (the “Property”) that was held in a trust. The currently operative second amended complaint (the “SAC”) alleges: (1) fraud; and (2) emotional distress.

In relevant part, the SAC alleges: Dorothy M. Vaughn (“Settlor” or “Dorothy”) conveyed the Property to the Dorothy M. Vaughn Revocable Trust (the “Trust”) in October 2000. (SAC ¶ 8.) The Trust named Plaintiff Wayne Vaughn (“Wayne”) and Lewis (“Lewis”) as successor trustees of the Trust. (SAC ¶ 9, Exhibit 1.) Section 3.03 of the Trust provides that upon Settlor’s death, the Trust shall terminate and the Trustee shall, as soon as reasonably possible, distribute the net income and principal remaining in the Trust to the identified beneficiaries, which included Plaintiff’s 15 percent interest. (See SAC, Exhibit 1.)

Between 2008 and 2019, Lewis participated in several transfers of the Property. (See SAC ¶¶ 7-18.)^{^[3]} On or around October 28, 2008, Lewis transferred the Property to herself, depriving the Trust’s beneficiaries of their interest in the Property. (See SAC ¶ 11.) Lewis then encumbered the Property with a mortgage and in 2012, conveyed the Property to the Delone Defendants to prevent a foreclosure sale. (See SAC ¶¶ 12-16.) After she transferred the Property to the Delone Defendants, Lewis continued to live at the Property, did not pay rent, and paid property taxes. (SAC ¶ 27.) In addition, because Lewis transferred the Property to the Delone Defendants, she did not list it as an asset when she filed for bankruptcy. (SAC ¶¶ 30-31.)

In 2019, after Lewis’s bankruptcy was discharged, the Delone Defendants reconveyed the Property to her. (SAC ¶ 33.) The Delone Defendants were aware that the purposes of the Property transfers were to evade Lewis’s duties to Plaintiff under the Trust and to protect the asset from Lewis’s bankruptcy proceedings. (See SAC ¶¶ 28-34.) Throughout this time, Lewis did not provide the beneficiaries of the Trust with an annual accounting as was required under Section 7.02 of the Trust. (SAC ¶ 27.) Because Lewis continued to hold herself out as the rightful owner of the Property, Plaintiff was not aware of the alleged wrongdoing until September 26, 2020, when Lewis wrote her a letter purporting to detail their respective rights to possess and occupy the Property. (See SAC ¶ 36, Exhibit 2.)

Moving Defendants filed a demurrer (the “Demurrer”) to the first cause of action on the grounds that the SAC fails to state sufficient facts to allege fraud and is barred by the statute of limitations.

A demurrer tests the sufficiency of a complaint as a matter of law. (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.) The court accepts as true all material factual allegations and affords them a liberal construction, but it does not consider conclusions of fact or law, opinions, speculation, or allegations contrary to law or judicially noticed facts. (Shea Homes Limited Partnership v. County of Alameda (2003) 110 Cal.App.4th 1246, 1254.) With respect to a demurrer, the complaint must be construed liberally by drawing reasonable inferences from the facts pleaded. (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) A demurrer will be sustained without leave to amend if there exists no reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

The elements of fraudulent concealment are: (1) the defendant must have concealed or suppressed a material fact; (2) the defendant must have been under a duty to disclose the fact to the plaintiff; (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff; (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact; and (5) as a result of the concealment or suppression of the fact, the plaintiff suffered damage. (Boschma v. Home Loan Center, Inc (2001) 198 Cal.App.4th 230, 248.) There are four circumstances that impose a duty on the defendant such that nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant has exclusive knowledge of material facts not known to plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts. (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 310-11.) Fraud claims have a three-year statute of limitations. (CCP § 338, subd. (d).) The cause of action does not accrue until the plaintiff discovers the facts constituting the fraud. (Id.)

When a complaint shows on its face or on the basis of judicially noticed facts that the cause of action alleged therein is barred by the statute of limitations, the plaintiff must plead facts which show an excuse, tolling, or some other basis for avoiding the statutory bar. (Ponderosa Homes, Inc. v. City of San Ramon (1994) 23 Cal.App.4th 1761, 1768.) To invoke the delayed discovery doctrine in order to stop the accrual of the statute of limitations, a plaintiff must plead: (1) facts showing reasonable diligence; and (2) the time and manner of discovery. (WA Southwest 2, LLC v. First American Title Ins. Co. (2015) 240 Cal.App.4th 140, 156-57.) The delayed discovery doctrine only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action. (Id.) In assessing the sufficiency of the allegations of delayed discovery, the court places the burden on the plaintiff to show diligence; conclusory allegations will not withstand demurrer. (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808.) In the case of fraud, where a fiduciary duty exists, nondisclosure is treated as fraud and a delayed discovery rule is more liberally applied, but such rule is nonetheless subjected to a reasonable diligence standard. (Britton v. Girardi (2015) 235 Cal.App.4th 721, 730.)

The SAC does not clearly allege Moving Defendants’ respective duties to disclose their allegedly fraudulent concealment of the Property transfers. Although labeled as fraud, the cause of action appears to be rooted in Lewis’s alleged failure to adhere to her fiduciary duties as trustee of the Trust. The SAC and attached Trust documents suggest that Lewis was under a fiduciary duty as trustee of the Trust, but it is not clearly alleged when these duties commenced. The SAC does not articulate facts to show what duty to disclose should be imposed on the Delone Defendants. Furthermore, while the SAC alleges that between 2008 and 2020, Plaintiff was unaware of the transfers of the Property because Lewis continued to live there and hold herself out as its owner, the SAC is not clear as to whether Plaintiff was aware of the Trust, her status as a beneficiary, or the responsibilities of the trustees to provide an accounting. Lewis’s alleged fraud began in 2008 and the action was not initiated until 2022, and the Court finds that under the circumstances, the SAC does not allege sufficient facts to show that Plaintiff exercised reasonable diligence to allow her to invoke the delayed discovery rule to avoid the three-year statute of limitations. Accordingly, the Court SUSTAINS the Demurrer with 20 days leave to amend. If Plaintiff files an amended pleading that is successfully challenged by a demurrer, the Court will consider denying Plaintiff further leave to amend.

In consideration of the current COVID-19 pandemic situation, the Court strongly encourages that appearances on all proceedings, including this one, be made by LACourtConnect if the parties do not submit on the tentative. If you instead intend to make an appearance in person at Court on this matter, you must send an email by 2 p.m. on the last Court day before the scheduled date of the hearing to SMC_DEPT56@lacourt.org stating your intention to appear in person. The Court will then inform you by close of business that day of the time your hearing will be held. The time set for the hearing may be at any time during that scheduled hearing day, or it may be necessary to schedule the hearing for another date if the Court is unable to accommodate all personal appearances set on that date. This rule is necessary to ensure that adequate precautions can be taken for proper social distancing.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

[1] The Court uses first names to distinguish persons with the same last name and intends no disrespect in so doing.

[2] The Court exercises its discretion and has considered Plaintiff’s opposition (the “Opposition”) despite its late filing. California Rules of Court, rule 3.1113(d) limits the length of opposition memoranda to 15 pages. The Opposition exceeds 15 pages, and the Court has not considered Plaintiff’s arguments beyond the fifteenth page.

[3] The SAC does not allege when Settlor died and Moving Defendant’s duties as trustee began. Nor does the SAC allege if Plaintiff was aware of her beneficiary status under the Trust during the relevant times.