Judge: Jon R. Takasugi, Case: 20STCV23395, Date: 2022-09-19 Tentative Ruling

Case Number: 20STCV23395    Hearing Date: September 19, 2022    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

            Defendants’ demurrer is SUSTAINED, without leave to amend as to the first, second, and third causes of action.

On June 19, 2020, Plaintiff Tim Stordahl (Plaintiff) filed suit against Jerry Johnson (Johnson).

On October 14, 2021, Plaintiff filed a third amended complaint (TAC) against Johnson.

On May 13, 2022, the Court sustained Johnson’s demurrer to the TAC, with leave to amend.

On April 14, 2022, Plaintiff amended the TAC to substitute Wells Fargo Bank (Wells Fargo) and Sean Bryant (Bryant) for the defendants sued fictitiously as Does 1 and 2, respectively.

On May 25, 2022, Plaintiff filed his fourth amended complaint (4AC) against the Defendants asserting three causes of action for (1) breach of fiduciary duty (against all defendants), (2) resulting trust (against all defendants) and (3) breach of fiduciary duty (against Wells Fargo and Bryant).

The 4AC alleges the following, among other things. This action involves certain assets of Michael D. Swoope (Swoope) who was the owner of Wells Fargo Brokerage accounts in California. (4AC,   ¶¶ 5, 6.) Prior to his death, Swoope changed the pay on death beneficiary (or joint account holder) on the accounts from his nephew Richard Swoope, to Johnson. (4AC, ¶¶ 7, 15.) Swoope intended, directed, and even advised Johnson, Wells Fargo, and Bryant, that the funds in those accounts were to be distributed to certain relatives and others outside probate administration. (4AC, ¶ 17, 18.) Plaintiff is Swoope’s grandson and one of the individuals for whom the funds were intended to be held in trust and distributed. (4AC, ¶ 29.) Plaintiff is also the assignee of Richard Swoope through a written assignment. (4AC, ¶ 23.) However, following the death of Swoope, (1) Defendants, Wells Fargo, and Bryant asserted that Johnson was the sole owner of the accounts and (2) Johnson refused to distribute the funds to the beneficiaries. (4AC, ¶ 24.) Plaintiff believes that the value of the Wells Fargo Brokerage acocunts was and is in excess of $1 million. (4AC, ¶ 33.) Defendants wrongfully retained all funds in those accounts (4AC, ¶ 33) and, therefore, Plaintiff is entitled to those funds (4AC, ¶ 26).

            Wells Fargo and Bryant (collectively, Defendants) now demur to Plaintiff’s 4AC contending that each of its three causes of actions fail to state facts sufficient to constitute a cause of action. Plaintiff opposes.

Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power¿(2006) 144 Cal.App.4th 1216, 1228.)¿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.”¿(SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.)¿“The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, 147 Cal.App.4th at p. 747.) 

Discussion

I.                   Meet and Confer

The Court finds that the Defendants have satisfied the meet and confer requirement. (Demurer, filed August 2, 2022, declaration of Catherine L. Dellecker, ¶¶ 2-6.)

II.               First and Second Causes of Action

In his opposition, Plaintiff acknowledges that the first cause of action for breach of fiduciary duty and second cause of action for resulting trust were not meant to be directed at Wells Fargo or Bryant. (Opposition, filed September 9, 2022, p. 2: 7-10.) Plaintiff also states that before the hearing on this motion, he intended to file a Request for Dismissal dismissing those claims against the Defendants. (Opposition, p. 2:13-15.) However, as of September 15, 2022, Plaintiff has yet to dismiss those claims.

Accordingly, the Defendants’ demurrer to the first and second causes of action in the 4AC is SUSTAINED, without leave to amend.

III.            Third Cause of Action for Breach of Fiduciary Duty

Defendants demur the third cause of action contending that it does not state facts sufficient to constitute a cause of action for the following reasons.

First, Plaintiff’s standing is premised on the allegation that he is the assignee of a former beneficiary of the Wells Fargo accounts at issue. (See 4AC, ¶ 23 [“Plaintiff is the assignee of Richard Swoope by written assignment and Plaintiff is the proper Plaintiff”].) However, even if Richard Swoope had standing to bring this action against the Defendants for breach of fiduciary duty, Plaintiff does not because such claims cannot be assigned and, therefore, the demurrer should be sustained. (Demurrer, p. 4:5-14.)

Second, even if Plaintiff has standing, Plaintiff fails to plead facts sufficient to constitute a cause of action for breach of fiduciary duty agains the Defendants. In order to sustain such a claim, Plaintiff must plead the existence of a fiduciary duty, breach, and damages. Here, Plaintiff has failed to plead what fiduciary duty (if any) Wells Fargo or Bryant owed him. If the Defendants owed any fiduciary duty, it was towards the decedent, Swoope, not Plaintiff. In addition, the scope of that duty was limited to the execution of Swoope’s securities transanctions which are not at issue here. Plaintiff has also failed to allege breach of any duty against the Defendants (i.e., that they failed to exercise the required level of care with respect to their investment advice to the decedent, Swoope). (Demurrer, pp. 4:17-5:28.)

In sum, Defendants argue, because Plaintiff does not have standing and cannot state a cause of action for breach of fiduciary duty against the Defendants, the Court should sustain the demurrer.

In opposition, Plaintiff argues that with regards to the Defendants’ arguments concerning Plaintiff’s standing, Defendants focus on the fact that the 4AC alleges that Plaintiff is Richard Swoope’s assignee but ignore that the 4AC also alleges that Plaintiff was one of the intended beneficiaries of the accounts. Under case law, a trust beneficiary has standing to sue a third person that transferred property in breach of the trust. Therefore, even without the Richard Swoope assignment, Plaintiff is a proper party because Defendants’ breach of their fiduciary duty directly impacted him as he did not receive of the distribution that was intended for him. (Opposition, pp. 5:13-9:24.) In any event, once a claim has been assigned, the assignee is the owner and he has the right to sue on the claim as the real party in interest. For example, in City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1988) 68 Cal.App.4th 445 (“Atascadero”), participants of a financial plan assigned their rights to a county, and the Court of Appeal held that the county’s complaint against a broker and financial advisor based on that assignment was valid. Here, Plaintiff has a right to sue based on the assignment Richard Swoope gave him. Defendants have not cited any authority establishing that a claim against a financial advisor cannot be assigned. (Opposition, pp. 9:26-11:5.) Plaintiff is also suing as a successor in interest under Code of Civil Procedure section 377.11, and alleges that the funds in the accounts were to be (but were not) held in trust for the benefit of Swoope’s relatives as he had intended. (Opposition, pp. 11:6-12:16.)

Plaintiff also argues that he has pled facts sufficient to maintain a breach of fiduciary claim against the Defendants for the following reasons. The 4AC alleges that Swoope relied on the advice of the Defendants to set up an account that would benefit the Swoope’s relatives but completely failed in providing reasonable advice, which resulted in Johnson’s retaining funds that belonged to Plaintiff and others.

For those reasons, Plaintiff asks the Court to overrule the demurrer but in the event the Court sustains the demurrer, to do so with leave to amend.

On September 12, 2022, the Defendants filed their reply arguing the following.

Plaintiff’s status as an assignee of a former account beneficiary does not confer standing on Plaintif to sue the Defendants for breach of fiduciary duty. In Baum v. Duckor, Spradling & Metzger (1999) 72 Cal.App.4th 54, the Court of Appeal held that breach of fiduciary claims (not just legal malpractice claims as Plaintiff contends) are not assignable. (Reply, p. 3:19-23.) Plaintiff misapplies Atascadero. In that case, the defendant “voluntarily accepted and assumed” a direct fiduciary duty to the assigness, had a separate “direct broker-dealer relationships” with several of the assignees, and agreed in writing to the assignment. (Reply, pp. 3:27-4:4.) Here, the 4AC makes no such allegations. (Reply, p. 4:4.) Therefore, because a breach of fiduciary claim that Plaintiff asserts against the Defendants cannot be assigned, Plaintiff lacks standing to maintain his third cause of action and the demurrer can be sustained. (Reply, p. 4:9-11.)

Plaintiff’s claim that he is an “intended beneficiary” is also insufficient to establish standing because the 4AC unequivocally alleges that Johnson was the beneficiary of the accounts at the time of the decedent’s death. (Reply, p. 4:17-18.) Plaintiff is not one of the beneficiaries alleged to have been designated by the decedent. (Reply, p. 4:22.) Moreover, as explained in Johnson’s Demurrer filed on June 27, 2022, Plaintiff cannot be a beneficiary of the accounts as a matter of law. (Reply, p. 4:23-25; (Evid. Code, § 452, subd. (d) [providing that a court may take judicial notice of court records]; Johnson Demurrer, p. 7:2-22 [arguing that (1) Probate Code section 5302, subdivision (a), provides that sums remaining on deposit at the death of a party to a joint account belong to the surviving party unless there is a clear and convincing evidence of a different intent, (2) Swoope named Johnson and Johnson remained the joint account holder at Swoope’s death, (3) therefore, Johnson became the sole owner of the accounts pursuant to the statute, especially since (5) there are no allegations of contrary intent expressed after account creation to negate the right of survivorship].) The case that Plaintiff cites (Wolf v. Mitchell, Silberberg & Knupp (1999) 76 Cal.App.4th 1030) to support his argument that a trust beneficiary can sue a third party that breaches a trust is inapplicable here, wehre there is no trust involved and Plaintiff is suing to obtain assets of a decedent’s brokerage accounts. (Reply, pp. 4:26-5:7.) Therefore, because Plaintiff is not a real party in interest for his breach of fiduciary claim, he lacks standing to maintain his third cause of action. (Reply, p. 5:8-10.)

            Lastly, Plaintiff’s conclusory statement that stockbrokers owe a fiduciary duty to their customers does not satisfy the pleading requirements for the breach of fiduciary duty cause of action for two reasons. (Reply, p. 6:15-17.) First, Plaintiff was not a customer of Wells Fargo or Bryant. (Reply, p. 6:20.) Second, Plaintiff failed to plead facts showing the existence of a legal fiduciary duty in this case and Defendants’ breach. (Reply, p. 6:21-22.)

            For those reasons, Defendants conclude, the Court should sustain the demurrer.

            The 4AC alleges the following under the third cause of action. Bryant is an employee of Wells Fargo. (4AC, ¶ 73.) At all times relevant, Wells Fargo and Swoope acted as financial advisors and stockbrokers of decedent Swoope. (FAC, ¶ 76.) California law has established that a financial advisor/stockbroker owes a fiduciary duty to the customer. (FAC, ¶ 77.) Specifically, an investment advisor/client relationship is a relationship that, as a matter of law, gives rise to fiduciary duty as established in Hosso v. HAPKA (2014) 227 Cal.App.4th 107. (FAC, ¶ 84.) Swoope placed trust and confidence in the advice provided by the Defendants. (FAC, ¶ 78.) Swoope discussed the named beneficiaries in the accounts and advised the Defendants that he wanted the funds to be distributed to certain specific relatives on his death. (FAC, ¶ 80.) The account was originally set up with third party Richard Swoope as the beneficiary who testified that he understood from conversing with Swoope that he, Richard Swoope, would act as trustee and distribute the funds to certain specific relatives following Swoope’s death. (FAC, ¶ 81.) Later, the designated account beneficiary was changed from Richard Swoope and replaced by Johnson, but Johnson was to act in the same constructive trustee role as Richard Swoope and distribute the funds to Swoope’s relatives. (FAC, ¶ 82.) Indeed, Bryant spoke with three individuals including attorneys William Beverly and Robert Schachter in telephone conversations and told them that the funds in the accounts were to be distributed to certain relatives following the death of Swoope. (FAC, ¶¶ 83(a)-(c).) However, despite those conversations, Bryant falsely testified during his deposition that he never had any of those conversations with the attorneys so that he can avoid imposition of liability upon him and Wells Fargo. (FAC, ¶¶ 83(d)-(e).) Following the death of Swoope, Johnson refused and still refuses to distribute the funds and all defendants have now colluded in breaching Johnson’s fiduciary duties, as a constructive trustee, by allowing Johnson to retain the funds. (FAC, ¶¶ 86, 87.)

            The Court finds that the 4AC alleges facts sufficient to show that Plaintiff has standing to sue the Defendants.

“Only a real party in interest has standing to prosecute an action, except as otherwise provided by statute. (Code Civ. Proc., § 367.)” (Redevelopment Agency of San Diego v. San Diego Gas & Electric Co. (2003) 111 Cal.App.4th 912, 920.) “A party who is not the real party in interest lacks standing to sue.” (Ibid.) “‘A real party in interest ordinarily is defined as the person possessing the right sued upon by reason of the substantive law.’ [Citation.]” (Id. at pp. 920–921.) “A complaint filed by someone other than the real party in interest is subject to general demurrer on the ground that it fails to state a cause of action.” (Id. at p. 921.)

Stated differently, “‘[t]he question of standing to sue is one of the right to relief and goes to the existence of a cause of action against the defendant [citation].’ [Citation.]” (Killian v. Millard (1991) 228 Cal.App.3d 1601, 1605.) “‘The right to relief ... goes to the existence of a cause of action ... Where the complaint states a cause of action in someone, but not in the plaintiff, a general demurrer for failure to state a cause of action will be sustained.’ [Citation.]” (Ibid.)

            Here, the 4AC alleges that although Johnson replaced Richard Swoope as the designated account beneficiary, Johnson was to act in the same constructive trustee role as Richard Swoope and distribute the funds to Swoope’s relatives including Plaintiff. (FAC, ¶¶ 81, 82.) Instead, “Defendants . . . wrongfully retained all funds in such jointly held Wells Fargo Brokerage account(s) from Plaintiff . . .” (FAC, ¶ 25), and have now colluded in breaching Johnson’s fiduciary duties, as a constructive trustee, by allowing Johnson to retain the funds (FAC, ¶ 87). Imposition of “‘[a] constructive trust is an equitable remedy to compel the transfer of property by one who is not justly entitled to it to one who is.’ [Citation.]” (American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1485.) Therefore, to the extent that Plaintiff alleges that he is entitled to funds that Defendants are wrongfully withholding, then Plaintiff has standing to sue for such a claim. Whether Plaintiff can ultimately prove (1) that he is entitled to the funds and (2) how Defendants wrongfully withheld such funds, are separate issues from standing.

            Accordingly, the Court declines to sustain the demurrer on the ground that Plaintiff lacks standing.

However, the Court agrees with Defendants that Plaintiff has failed to allege facts showing breach of fiduciary duty.

“‘The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) its breach, and (3) damage proximately caused by that breach.’ [Citation.]” (O’Neal v. Stanislaus County Employees’ Retirement Assn. (2017) 8 Cal.App.5th 1184, 1215.)

Here, the 4AC alleges that a financial advisor/stockbroker owes a fiduciary duty to the customer. (FAC, ¶ 77.) In addition, that Swoope placed trust and confidence in the advice provided by the Defendants. (FAC, ¶ 78.)

However, even if those allegations were true, Plaintiff does not allege that he was (1) Wells Fargo or Bryant’s customer or (2) in an investment advisor/client relationship with the Defendants. Therefore, even if Bryant allegedly told three people that Swoope intended those funds to be distributed to other relatives, it still does not change the fact that Plaintiff has failed to allege any fidicuary relationship between him and the Defendants.

Accordingly, the Court finds that the 4AC fails to allege any fiduciary relationship between Plaintiff and the Defendants.

Plaintiff also argues that he is suing as Swoope’s “successor in interest.”

However, even if Plaintiff was Swoope’s successor in interest, that identity would not support his claim for breach of fiduciary duty against the Defendants.

 “Code of Civil Procedure section 377.11 provides that ‘“decedent’s successor in interest” means the beneficiary of the decedent’s estate or other successor in interest who succeeds to a cause of action or to a particular item of the property that is the subject of a cause of action.’” (Lickter v. Lickter (2010) 189 Cal.App.4th 712, 722 [emphasis added].)

Here, it is clear from the 4AC, that Swoope’s cause of action and property are not the ones at issue in this case. The 4AC does not allege that Defendants gave Swoope the wrong investment advice in breach of their fiduciary duty, advised Swoope to remove Richard Swoope as the joint account holder and appoint Defendant Johnson, or that they wrongfully withheld Swoope’s money. Instead, Plaintiff’s entire action against all defendants has consistently been premised on the allegation that the defendants failed to distribute to him funds that he (not Swoope) was entitled to. Therefore, Plaintiff cannot now argue that he is now suing on behalf of Swoope.

            Accordingly, the Court finds that the 4AC fails to allege the breach element of Plaintiff’s breach of fiduciary cause of action.

            Based on the foregoing, the demurrer to the third cause of action is SUSTAINED, for failure to state facts sufficient to constitute a cause of action.

            The burden is on the Plaintiff “to articulate how [he] could amend [his] pleading to render it sufficient.” (Palm Springs Villas II Homeowners Assn., Inc. v. Parth (2016) 248 Cal.App.4th 268, 290.) To satisfy that burden, the Plaintiff “must show in what manner [he] can amend [his] complaint and how that amendment will change the legal effect of [his] pleading.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)

Here, Plaintiff has failed to articulate how he could amend his pleading to allege a fiduciary relationship between the parties and the Defendants’ breach. Indeed, the Court does not see how Plaintiff can possibly amend the 4AC to allege those elements given the discussion above.

 For those reasons, the Court sustains the demurrer, without leave to amend.

Conclusion

            Defendants Wells Fargo Bank and Sean Bryant’s Demurrer to the first, second, and third causes of action in Plaintiff Tim Stordahl’s Fourth Amended Complaint is sustained, without leave to amend.

The Court orders the Fourth Amended Complaint filed by Plaintiff Tim Stordahl against Defendants Wells Fargo Bank and Sean Bryant dismissed, without prejudice.

            Defendants to give notice.

Dated:  September    , 2022

   Hon. Jon R. Takasugi
   Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative.  If all parties to a motion submit, the court will adopt this tentative as the final order.  If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar. 

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