Judge Kristin S. Escalante , Case Number: 22STCV29409, Date: 2023-05-19 Tentative Ruling

Judge: Kristin S. Escalante , Case: 22STCV29409, Date: 2023-05-19 Tentative Ruling

DEPARTMENT 24 - LAW AND MOTION RULINGS

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The Demurrer to Defendants' Cross-Complaint ID: 770084249499 filed by Cross-Defendant Gomez Law, APC on 04/03/2023 is OVERRULED in part and SUSTAINED in part.

The court sustains with leave to amend the demurrer to the fourth (negligent misrepresentation), fifth (constructive fraud), sixth (fraud and fraudulent misrepresentation), seventh (unjust enrichment), and ninth (conversion) causes of action. The court overrules the demurrer to the first (breach of contract), second (breach of duty of good faith and fair dealing), third (breach of fiduciary duty), and eighth (tortious interference with contract) causes of action.

Plaintiff/Cross-Defendant Gomez Law APC, (“Gomez Law”) demurrers to the first (breach of contract), second (breach of duty of good faith and fair dealing), third (breach of fiduciary duty), fourth (negligent misrepresentation), fifth (constructive fraud), sixth (fraud and fraudulent misrepresentation), seventh (unjust enrichment), eighth (tortious interference with contract), and ninth (conversion) causes of action in the first amended cross-complaint (“FAXC”) filed by Defendant/Cross-Complainants Dorothy Kelly (“Dorothy”) and Gerald Kelly (“Gerald”) (collectively “the Kellys”). (Notice of Demurrer, at pp. 3-5.) Gomez Law demurrers on the grounds that the Kellys have failed to allege facts sufficient to state a cause of action. (Notice of Demurrer, at p. 1.)

The Kelly’s 5/12/2013 improper “further opposition” to Gomez Law’s reply was filed without leave of the court. Accordingly, the court does not consider it.

The court notes that Gomez Law failed to submit a declaration that it complied with the Code of Civil Procedure section 430.41’s meet and confer requirement.

By way of background, on September 9, 2022, Gomez Law filed suit against the Kellys regarding the parties’ attorney-client relationship. Specifically, the Kellys retained Gomez law to protect their interest in the real property located at 11602 Terradell Street, Santa Fe Springs, CA (“subject property”). The Kellys had an ongoing dispute with the co-owner of the subject property—Yolanda Rodriguez (“Rodriguez”). Gomez Law alleges that after representing the Kellys interest in the ongoing litigation, the Kellys refused to pay Gomez Law’s attorneys fees pursuant to the parties’ agreement.

The Kellys, in pro per, filed a cross-complaint against Gomez Law. They allege they retained Gomez Law to represent them in a quiet title with Rodriguez. The crux of the cross-complaint is Gomez Law’s failure to adequately represent the Kellys. For example, during the representation Gomez Law advised the Kellys to remove Rodriguez’s belongings from the subject property. (FAXC, ¶16.) However, the presiding commissioner stated the Kellys action was “disturb[ing]” and that they should have filed a motion to modify the restraining. (FAXC, ¶¶ 18, 19-22.) Throughout the litigation, Gomez Law failed to follow the Kellys’ instructions, or represent their interests in the litigation about the subject property. (FAXC., ¶¶22-23.) Further, Gomez Law pressured the Kellys to settle their litigations with Rodriguez against their will and to sign away the Kellys’ rights to the subject property. (FAXC, ¶¶34-39) The Kellys also argue that Gomez Law falsely inflated the attorney billings and charged excessive billing rates for straightforward matters. (FAXC, ¶¶ 43-56.)

Discussion

Gomez Law makes two arguments: (1) that the breach of contract claim is barred by the statute of limitations, and (2) that the allegations are insufficient to state a claim because the Kellys have not alleged damages.

Defendant argues the breach of contract statute of limitations is four years. It is true that the statute of limitations for a breach of written contract case is four years from the time the claim accrued. (Code Civ. Proc., §337.) However, for a breach of contract claim premised on attorney wrongdoing, the statute of limitations is one year. (Code Civ. Proc., §340.6; see also Foxen v. Carpenter (2016) 6 Cal.App.5th 284 ,290-292 [applying Code Civ. Proc., § 340.6 to a claim for breach of contract, and breach of the implied covenant of good faith and fair dealing claims arising from allegations of attorney misconduct].) A claim “against an attorney for a wrongful act or omission other than actual fraud, arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.” (Code Civ. Proc., §340.6.)

Gomez Law premises its statute of limitations argument on the dates the parties entered into retainer agreements. (Demurrer, at p. 9:13-25.) However, the question of accrual does not turn on when the parties entered into the agreement but on when the Kellys “discover[ed], or through the use of reasonable diligence should have discovered the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.” (Code Civ. Proc., §340.6.) Gomez Law provides no argument on when the wrongful act occurred. The court cannot determine on the face of the complaint when the alleged wrongful conduct occurred. Thus, the court will not sustain the demurrer based on the statute of limitations. As the court does not sustain the demurrer on this ground, it does not address the Kellys’ argument regarding delay discovery. However, the court notes that there are no allegations of delayed discovery in the complaint.

Gomez Law next argues the breach of contract claim fails because the Kellys have not alleged damages. “To establish a cause of action for breach of contract, the plaintiff must plead and prove (1) the existence of the contract, (2) the plaintiff’s performance or excuse for nonperformance, (3) the defendant’s breach, and (4) resulting damages to the plaintiff.” (Maxwell v. Dolezal (2014) 231 Cal.App.4th 93, 97-98 [internal citation omitted].) For a written contract, the plaintiff may “plead the legal effect of the contract rather than the price language.” (Ibid.)

Here the Kellys have alleged a claim for breach of contract. They allege they retained Gomez Law to represent them in litigation regarding the subject property. (FAXC, ¶¶ 12-15.) They allege they provided Gomez Law a retainer and that all the conditions required for Gomez Law’s performance occurred. (FAXC, ¶¶ 15, 61-62) During that representation, the Kellys “asked Mark Gomez to restore her title, and he completely did not follow her instructions.” (FAXC, ¶22) Gomez Law also misrepresented the Kellys’ position during the litigation. (FAXC, ¶25.) The Kellys specifically allege that Gomez Law failed to file an Ex parte motion that would have protected their interest under their breach of contract claim. (FAXC, ¶63) The court does not opine on whether this specific conduct fell within what was required within the representation agreement. Finally, the Kellys allege they were damaged generally. Contrary to Gomez Law’s argument, they do not premise their damages on the dispute about the amount of legal fees. Gomez Law’s argument in unconvincing.

Gomez Law makes two arguments: (1) that the breach of duty of good faith and fair dealing claim is barred by the statute of limitations, and (2) that the allegations are insufficient to state a claim because the Kellys have not alleged any conduct beyond a breach of conduct claim.

To state a claim for the breach of the covenant of good faith and fair dealing, the plaintiff must allege “that the conduct of the defendant. . . demonstrates a failure or refusal to discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.) To decide if this has occurred, the court looks at the “contractual purposes and reasonably justified expectations of the parties.” (Ibid.) Again, for a claim premised on attorney wrongdoing, the statute of limitations is “within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.” (Code Civ. Proc., §340.6; see also Foxen, supra, 6 Cal.App.5th at pp. 290-292.)

The demurrer on the grounds of the statute of limitations fails for the same reasons discussed above—Gomez Law has presented no argument regarding when the wrongful conduct giving rise to the claim occurred. Instead, Gomez Law argues the statute of limitations has passed based on the date the parties entered into the retainer agreement. Thus, the court will not sustain the demurrer based on the statute of limitations.

Gomez Law also argues the claim fails because the second cause of action is premised on a breach of the contract—not any separate conduct. The court disagrees. The Kellys alleges that Gomez Law breach its duty of good faith and fair dealing when its “legal invoices to Dorothy were altered or fabricated in anticipation of this potential claim. After comparing the old and new invoices, Cross-Complainants discovered that the former had been significantly modified.” (FAXC, ¶74.) This goes beyond the alleged breach of contract and amounts to allegation that Gomez Law acted deliberately to obtain more funds from the Kellys then Gomez Law was actually entitled to.

Accordingly, the demurrer to the breach of duty of good faith and fair dealing claim is overruled.

Gomez Law makes two arguments: (1) that the breach of fiduciary duty claim is barred by the statute of limitations, and (2) that the allegations are insufficient to state a claim because the Kellys have not alleged damages.

The statute of limitations for a breach of fiduciary duty claim related to conduct falling within the scope of providing legal services is one year where it necessarily involves a violation of a professional obligation. (Code Civ. Proc., §340.6; see also ESG Capital Partners, LP v. Stratos (9th Cir. 2016) 828 F.3d 1023, 1036-1037.) The demurrer on the grounds of the statute of limitations fails for the same reasons discussed above—Gomez Law has presented no argument regarding when the wrongful conduct giving rise to the claim occurred. Instead, Gomez Law argues the statute of limitations has passed based on the date the parties entered into the retainer agreement. Thus, the court will not sustain the demurrer based on the statute of limitations.

To establish a cause of action for breach of fiduciary duty, plaintiff must plead “(1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach.” (Gutierrez v. Girardi (2011) 194 Cal. App. 4th 925, 932.) A fiduciary relationship requires that a relation existing between parties to a transaction wherein one of the parties is duty bound to act with the utmost good faith for the benefit of the other party. (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 29 [internal citations omitted].) A relationship ordinarily exists when “a con¿dence is reposed by one person in the integrity of another, and . . . the party in whom the con¿dence is reposed, if he voluntarily accepts or assumes to accept the con¿dence, can take no advantage from his acts relating to the interest of the other party without the latter’s knowledge or consent.’” (Ibid.)

Gomez Law also argues the Kellys have not been alleged damages. The court disagrees. The FAXC incorporates by reference all prior allegations, which includes the Kellys allegation that Gomez Law failed to properly assist the Kellys such that the “rights of Dorothy Kelly have been rendered null and void. They no longer have any control over the property, and they cannot live in it either. As a result the Kelly sno longer have title rights.” (FAXC, ¶40.) The Kellys also allege Gomez Law “signed away all of Dorothy’s true interests, which included her Title,” and “misrepresented the situation and made the Kelly sign a settlement agreement that they didn’t understand.” (FAXC, ¶¶ 41-42.) Accordingly, the Kellys have alleged damages.

Gomez Law argues the Kellys’ negligent misrepresentation claim fails because it is conclusory.

The elements of a claim for negligent misrepresentation are a misrepresentation of fact, lack of reasonable grounds, a duty to plaintiff, intent to induce reliance, reliance, causation and harm. (Majd v. Bank of America, N.A. (2015) 243 Cal.App.4th 1293, 1307) “[F]raud must be pled specifically; general and conclusory allegations do not suffice. . . .This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) However, it is not clear whether the specific pleading requirements applicable to fraud apply to negligent misrepresentation claims. (See B.L.M. v. Sabo & Deitsch (1997) 55 Cal.App.4th 823, 845, dissent, [“Since allegations of negligent misrepresentation, as opposed to intentional fraud, do not question the defendant's character, it is doubtful that the same requirement applies to them” (emphasis omitted) (but noting that strict pleading standard applied without discussion in Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 215-216].)

Assuming the specificity standard applies, the allegations are insufficiently plead. Regarding the misrepresentations, the Kelly allege “Cross-Defendant negligent misrepresented the true facts concerning the matters misrepresented with intent to defraud and intent to induce reliance thereon by Cross-Complaints.” (FAXC, ¶ 105.) The Kellys do no state what misrepresentations Gomez Law made specifically. The allegations fail to “show how, when, where, to whom, and by what means the representations were tendered.” (Lazar, supra, 12 Cal.4th at p. 638.) However, the court disagrees with Gomez Law’s argument that the Kellys have not alleged damages. As discussed previously, they have.

Accordingly, the demurrer to the negligent misrepresentation claim is sustained with leave to amend.

Gomez Law makes two arguments: (1) that constructive fraud claim is barred by the statute of limitations, and (2) that the allegations are insufficient to state a claim because the Kellys’ allegations are conclusory and do not allege damages.

A claim for fraud is subject to a three year statute of limitations. (See Code Civ. Proc., §338, subd. (d).) “It is established that the three-year period of limitation of Section 338, Subsection 4, of the Code of Civil Procedure which provides that the cause is not ‘deemed to have accrued until the discovery’ applies to cases of constructive fraud and undue influence.” (Tidwell v. Richman (S.D. Cal. 1953), 127 F. Supp. 526, 534 modified, 234 F.2d 361 (9th Cir. 1956).) “Where the gist of an action is fraud, regardless of its form, the three year period prescribed by § 338(4) of the Code of Civil Procedure applies, but does not commence to run until the aggrieved party knows or should know of that fraud.” (Sec. First Nat. Bank v. Ross, (1963) 214 Cal.App.2d 424, 429.) The demurrer on the grounds of the statute of limitations fails for the same reasons discussed above.

Constructive fraud “consists [of]: (1) In any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, or one claiming under him, by misleading another to his prejudice, or to the prejudice of any one claiming under him; or (2) [i]n any such act or omission as the law specially declares to be fraudulent, without respect to actual fraud.” (Civ. Code, § 1573.)

Gomez Law argues the Kellys have not alleged facts regarding Gomez Law’s intent to deceive them. (Demurrer at pp. 13:24-14:02.) The Kellys allege Gomez Law “abused the confidential and fiduciary relationships existing among the parties and has resulted in an unconscionable advantage being taken by the Cross-Defendant over the Cross-Complainants, and the Cross-Complainants have suffered damages resulting therefrom.” (FAXC, ¶131.) They also alleged the acts were “accomplished in bad faith, through the sue of intentional deceit and deception, and in reckless disregard of Cross-complainants’ rights for the Cross-defendant’s own financial gain.” (FAXC, ¶132.) This allegations amount to intent to deceive. Nevertheless, the court sustains the demurrer on the grounds that the Kellys have not alleged an specific action regarding Gomez Law misleading the Kellys. Again, the allegations fail to “show how, when, where, to whom, and by what means the representations were tendered.” (Lazar, supra, 12 Cal.4th at p. 638.)

Gomez Law makes two arguments: (1) that fraud and fraudulent misrepresentation claim is barred by the statute of limitations, and (2) that the allegations are insufficient to state a claim because the Kellys’ allegations are conclusory and do not allege damages.

The demurrer to the fraud and fraudulent misrepresentation claim is sustained with leave to amend.

Gomez Law argues the unjust enrichment claim fails because it is not a cause of action.

“The elements of an unjust enrichment claim are the receipt of a benefit and the unjust retention of the benefit at the expense of another.” (Peterson v. Cellco P’ship (2008) 164 Cal.App.4th 1583, 1593 [internal brackets and quotations omitted].) “Unjust enrichment is not a cause of action, however, or even a remedy, but rather a general principle, underlying various legal doctrines and remedies. It is synonymous with restitution.” (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231. [internal quotations, ellipses, and citations omitted].) Gomez Law’s citation to Rutherford, is inapt. Rutherford states restitution “may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason.” (Ibid.) “Thus, a party to an express contract can assert a claim for restitution based on unjust enrichment by alleging in that cause of action that the express contract is void or was rescinded.” (Ibid [internal quotations and brackets omitted].)

The Kellys have not alleged a claim for unjust enrichment. They allege they entered into a contract with Gomez Law. (FAXC, ¶136.) But they have not alleged that the express contract is void or rescinded. They also do not allege what benefit Gomez Law retained such that an unjust enrichment claim is appropriate. They simply allege “Cross-Defendants have been damages as a direct and proximate result of Cross-Defendant’s retention of the benefits described herein.” (FAXC, ¶140.)

Accordingly, the demurrer to the unjust enrichment cause of action is sustained with leave to amend.

Gomez Law makes to arguments (1) that the tortious interference with contract claim is barred by the statute of limitations, and (2) that the allegations are insufficient to state a claim because the Kellys’ cannot establish they were harmed.

The statute of limitations on an action for intentional interference with contractual relations is two years. (Code Civ. Proc., § 339, subd. (1); Knoell v. Petrovich (1999) 76 Cal.App.4th 164, 168.) The cause of action accrues on the date of the wrongful act, and in no event later than breach of the contract tortiously interfered with. (Trembath v. Digardi (1974) 43 Cal.App.3d 834, 836,) The demurrer on the grounds of the statute of limitations fails for the same reasons discussed previously.

“The elements of an action for tortious interference are (1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (Hahn v. Diaz-Barba (2011) 194 Cal. App. 4th 1177, 1196 [internal quotations omitted].) The Kellys do not explicitly they are making a claim for intentional interference with contractual relations; however, there is no cause of action for negligent interference with contractual relations. (Davis v. Nadrich (2009) 174 Cal.App.4th 1, 9.) The demurrer for failure to establish they were damaged is overruled for the reasons previously discussed; the Kellys have Gomez Law’s caused them harm.

Accordingly, the demurrer to the tortious interference with contract claim is overruled.

Gomez Law makes to arguments (1) that the conversion claim is barred by the statute of limitations, and (2) that the allegations are insufficient to state a claim because the Kellys’ have not alleged any personal property over which a conversion claim can be made.

The statute of limitations for a conversion claim is three years (Code Civ. Proc., 338 § subd. (c).) The cause of action generally accrues on the date of the wrongful taking or other act constituting conversion, “even if the owner is ignorant of the wrong committed.” (Naftzger v. American Numismatic Soc. (1996) 42 Cal.App.4th 421, 429.) Gomez Law argues the complaint’s conversion claim is premised on the retainer fee the Kellys paid Gomez Law upon entering into the agreement. (Demurrer at p. 10:13-16; See FAXC., ¶116) However, the cited allegation relates the Kellys’ fraud claim. Regarding the conversion claim, the Kellys allege “Cross Defendant has constructive and physical possession, dominion, and control over, and has interfered with Cross-complainants funds” (FAXC., ¶151.) This may refer to the retainer funds, in which case Gomez Law would be correct that the statute of limitations has passed. However, it is not clear from the complaint what “funds” the Kellys are referring to. The court cannot establish on the face of the complaint that the statute of limitations is a bar to this cause of action. Thus, the demurrer on the grounds of the statute of limitations is overruled.

However, the Kellys have not stated a claim for conversion. “Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages.” (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240; see also Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 451.) Normally, money cannot be converted unless it is a specific and identifiable sum. (See 5 Witkin, Summary of California Law, Torts §815; See also Voris v Lampart (2019) 7 Cal.5th 1141, 1151)

They allege that “Cross Defendant has constructive and physical possession dominion, and control over, and has interfered with Cross-Complainants’ funds.” (FAXC, ¶151.) It is unclear why these “funds” are properly the subject of a conversion claim. To the extent it is the retainer fees, the court refers back to the statute of limitations argument. To the extent there are some other funds at issue, the general allegations do not support this claim. There are no allegations that Gomez Law exercised dominion over any of the Kellys’ “funds”. Additionally, this appears to be a generalized claim for money that would not be subject to a conversion claim. (See Voris, supra, 7 Cal.5th at p. 1151 [stating “money cannot be the subject of an action for conversion unless a specific sum capable of identification is involved. Where the money or fund is not identified as a specific thing the action is to be considered as one upon contract or for debt—or perhaps upon some other appropriate theory—but not for conversion.” (internal brackets and quotations omitted)].)

Though it is unclear if the Kellys can amend the conversion claim, the court nevertheless will provide the Kellys with one further chance to allege a conversion claim and sustains the demurrer with leave to amend.