Judge Jill Feeney, Case Number: 23STCV16772, Date: 2024-06-06 Tentative Ruling

This is an action for professional negligence, breach of fiduciary duty, and financial elder abuse. Plaintiff Bonnie Bull alleges that Defendant Michael Donnelly represented her during her divorce proceedings. (FAC ¶ 1.) Plaintiff’s spouse, Charles Spence, refused to work on their marriage unless she deposited $2 million in separate funds into their joint checking account. (FAC ¶3.) Spence thereafter spent the money in the account. (FAC ¶3.) Donnelly failed to make claims for elder abuse, failed to conduct discovery about the $2 million, and failed to freeze the money despite Plaintiff’s requests that Donnelly recover the funds. (FAC ¶5.) Because Defendants failed to recover the funds for four years, finding the money will be more difficult and more expensive. (FAC ¶7.) After Donnelly retired, Plaintiff was forced to hire new counsel at her own expense. (FAC ¶9.)

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Proc., §§ 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 (internal citations omitted).)

The elements for a breach of fiduciary duty cause of action are “the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach.” (Thomson v. Canyon (2011) 198 Cal.App.4th 594, 604.) “Before a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which imposes that undertaking as a matter of law.” (Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 246.)

A party filing a demurrer “shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc., section 430.41(a).) “The parties shall meet and confer at least five days before the date the responsive pleading is due. If the parties are not able to meet and confer at least five days prior to the date the responsive pleading is due, the demurring party shall be granted an automatic 30-day extension of time within which to file a responsive pleading, by filing and serving, on or before the date on which a demurrer would be due, a declaration stating under penalty of perjury that a good faith attempt to meet and confer was made and explaining the reasons why the parties could not meet and confer.” (Code Civ. Proc., section 430.41(a)(2).) A failure to meet and confer does not constitute grounds to sustain or overrule a demurrer. (See Code Civ. Proc., sections 430.41 (a)(4).)

To prevail on legal malpractice a party must prove four elements: “(1) the duty of the attorney to use such skill, prudence, and diligence as members of his or her profession commonly possess and exercise; (2) a breach of that duty; (3) a proximate causal connection between the breach and the resulting injury; and (4) actual loss or damage resulting from the attorney's negligence.”¿¿(Namikas¿v. Miller¿(2014) 225 Cal.App.4th 1574, 1581.)

“[T]he elements of causation and damage are particularly closely linked” for legal malpractice claims.¿(Id. at 1582.) “The¿plaintiff must prove, by a preponderance of the evidence, that but for the attorney's negligent acts or omissions, he would have obtained a more favorable judgment or settlement in the action in which the malpractice allegedly occurred.”¿(Id.)

In the legal malpractice context, actual injury occurs, and the cause of action accrues “when the client suffers an adverse judgment or order of dismissal, not upon conclusion of a subsequent appeal.” (Baltins v. James (1995) 36 Cal.App.4th 1193, 1203 (citing Laird v. Blacker (1992) 2 Cal.4th 606, 615).)

Here, the FAC states that due to Defendants’ negligence, it will be more difficult to trace the $2 million Plaintiff deposited in her joint account with Spence. (FAC ¶¶7, 9.) Plaintiff’s new counsel is still making attempts to locate and recover the missing funds. (FAC ¶31.) It is reasonable to infer from these facts that Plaintiff’s divorce proceedings are ongoing, meaning there has been no adverse judgment or dismissal. Thus, the cause of action for professional negligence has not accrued. Therefore, the cause of action is not ripe.

Defendants also argue that Plaintiff has not proven that she is entitled to the funds or that the funds are no longer available. These are disputes of fact that may not be considered on demurrer. Although Defendants contend Plaintiff recently took a motion to recover the funds off calendar in the dissolution case. However, Defendants failed to file a request for judicial notice with this demurrer. Therefore, the Court will not consider this evidence.

Plaintiff in opposition argues that she suffered damages because she incurred expenses hiring another lawyer to take over for Defendants. (Opp. p.6.) However, the issue is not whether Plaintiff incurred damages, but whether the cause of action for professional negligence has accrued. The cause of action has not accrued because the divorce proceedings are ongoing.

The elements for a breach of fiduciary duty cause of action are “the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach.” (Thomson v. Canyon (2011) 198 Cal.App.4th 594, 604.) “Before a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another or must enter into a relationship which imposes that undertaking as a matter of law.” Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 246.

“‘The attorney-client relationship is a fiduciary relation of the very highest character imposing on the attorney a duty to communicate to the client whatever information the attorney has or may acquire in relation to the subject matter of the transaction.’” (Slovensky v. Friedman (2006) 142 Cal.App.4th 1518, 1534 (quoting Beery v. State Bar (1987) 43 Cal.3d 802, 813.) A “breach of fiduciary duty is a species of tort distinct from a cause of action for professional negligence.” (Id at p.1534.) “‘The scope of an attorney’s duty may be determined as a matter of law based on the Rules of Professional Conduct which, ‘together with statutes and general principles relating to other fiduciary relationships, all help define the duty component of the fiduciary duty which an attorney owes to his [or her] client.’’” (Id. at pp.1534-35 (quoting Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086-87).)

Here, Plaintiff alleges Defendants breached their fiduciary duty to Plaintiff by (1) failing to identify the assets not disclosed by Spence and (2) causing Plaintiff to incur costs for attorney’s fees. (FAC ¶30.) Donnelly misrepresented to Plaintiff that he would recover the undisclosed funds. (FAC ¶30.) Additionally, Defendants charged fees for legal services that were negligently performed. (FAC ¶¶9, 36.)

Here, the FAC alleges that Defendants charged legal fees despite failing to make any efforts to recover the missing funds. The FAC states facts sufficient to support a cause of action for breach of fiduciary duty because it alleges Defendants breached their fiduciary duties to Plaintiff by charging fees for services not performed. Therefore, the demurrer is overruled as to this cause of action.

Financial elder abuse occurs when a person takes the property of an elder for a wrongful use or with intent to defraud or by undue influence. (Welf. & Inst. Code, section 15610.30(a).) A person is deemed to have taken the property when he or she has deprived an elder of any property right. (See Welf. & Inst. Code section 15610.30(c).) Although bad faith or intent to defraud is no longer required, wrongful use of property must still be alleged. (Stebley v. Litton Loan Servicing, LLP (2011) 202 Cal.App.4th 522, 527-28.) “A person . . . shall be deemed to have taken . . . property for a wrongful use if . . . the person . . . takes . . . the property and the person . . . knew or should have known that this conduct is likely to be harmful to the elder . . . .” (Id., section 15610.30(b).)

A person or entity takes, secretes, appropriates, obtains, or retains real or personal property when an elder or dependent adult is deprived of any property right, including by means of agreement, donative transfer, or testamentary bequest, regardless of whether the property is held directly or by a representative of an elder or dependent adult. (Id., section 15610.30(c).)

Here, the FAC argues that Defendants committed financial elder abuse by charging fees for legal services that were negligently performed and depriving Plaintiff of her rights to the missing funds by failing to recover the funds. (FAC ¶36.)

Defendants argue that charging attorney’s fees do not amount to a taking, citing (Wood v. Jamison (2008) 167 Cal.App.4th 156, 164-165.) However, the holding of Wood was that a finder’s fee paid to an attorney for referring an elderly client to obtain a home mortgage loan was the client’s property and that the attorney taking the fee was sufficient to constitute a taking under elder abuse statutes. (Wood at p. 165.) The case does not state attorney’s fees do not constitute a taking.

As discussed above, the FAC alleges that Defendants charged Plaintiff attorney’s fees despite failing to take action to recover the $2 million in missing funds. Therefore, the FAC sufficiently alleges Defendants took Plaintiff’s personal property, the attorney’s fees, despite not performing the work they represented they would perform. The facts alleged support the cause of action for elder financial abuse.

“Upon information and belief, the acts of Defendants were done knowingly and intentionally and were willful, malicious, outrageous, oppressive, fraudulent and in conscious and reckless disregard of the rights of Bonnie so as to merit an award of punitive damages against them in favor of Bonnie. Upon information and belief Defendants’ conduct was fraudulent in that Defendants knowingly and intentionally concealed material facts from Bonnie, and led Bonnie to believe that her interests were being protected by competent representation, by misleading statements, with the intention to deprive Bonnie of material financial rights for the direct benefit of Mr. Spence.”

“The acts herein alleged of Defendants, and each of them, were done knowingly and intentionally and were willful, malicious, outrageous, oppressive, fraudulent and in conscious and reckless disregard of the rights of Bonnie, and aided and abetted the nefarious plans of Mr. Spence described hereinabove.”

Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof. (Code Civ. Proc., section 435, subd. (b)(1); Cal. Rules of Court, rule 3.1322, subd. (b).) The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (Code Civ. Proc. section 436, subd. (a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782.)

Plaintiff has not pled the existence of a contract, statute or law which would provide for attorney’s fees as to this cause of action. Nor has Plaintiff cited to any support for the imposition of attorney’s fees as to this cause of action in Plaintiff’s opposition to this motion.

In order to state a prima facie claim for punitive damages, a complaint must set forth the elements as stated in the general punitive damage statute, Civil Code section 3294. (College Hospital, Inc. v. Superior Court (1994) 8 Cal.4th 704, 721.) These statutory elements include allegations that the defendant has been guilty of oppression, fraud or malice. (Civ. Code, § 3294, subd. (a).)

“Malice is defined in the statute as conduct intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (College Hospital, Inc., supra, 8 Cal.4th at p. 725 [examining Civ. Code § 3294, subd. (c)(1)].) “A conscious disregard of the safety of others may constitute malice within the meaning of section 3294 of the Civil Code. In order to justify an award of punitive damages on this basis, the plaintiff must establish that the defendant was aware of the probable dangerous consequences of his conduct, and that he willfully and deliberately failed to avoid those consequences.” (Taylor v. Superior Court (1979) 24 Cal.3d 890, 895-896.)

“As amended to include [despicable], the statute plainly indicates that absent an intent to injure the plaintiff, ‘malice’ requires more than a ‘willful and conscious’ disregard of the plaintiffs’ interests. The additional component of ‘despicable conduct’ must be found.” (College Hospital, Inc., supra, 8 Cal.4th at p. 725.) The statute’s reference to despicable conduct represents a “new substantive limitation on punitive damage awards.” (Ibid.) Despicable conduct is “conduct which is so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people. Such conduct has been described as ‘having the character of outrage frequently associated with crime.’” (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1287.)

A breach of a fiduciary duty alone without malice, fraud or oppression does not permit an award of punitive damages. The wrongdoer must act with the intent to vex, injure, or annoy, or with a conscious disregard of the plaintiff's rights. Punitive damages are appropriate if the defendant's acts are reprehensible, fraudulent or in blatant violation of law or policy. The mere carelessness or ignorance of the defendant does not justify the imposition of punitive damages. Punitive damages are proper only when the tortious conduct rises to levels of extreme indifference to the plaintiff's rights, a level which decent citizens should not have to tolerate. (Lackner v. North (2006) 135 Cal.App.4th 1188, 1210; quoting Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1287.)

As discussed above, the facts alleged in the FAC state that Defendants failed to locate and recover the missing funds in Plaintiff’s divorce proceedings, charged fees for work they did not perform, and did not represent Plaintiff as promised. The Court finds these allegations at most show Defendants were incompetent in performing their representation of Plaintiff. The conduct alleged does not support a demand for punitive damages because it does not rise to the requisite level of malice and despicable conduct.