Judge: Mark A. Young, Case: 20SMCV00839, Date: 2024-06-18 Tentative Ruling

Case Number: 20SMCV00839    Hearing Date: June 18, 2024    Dept: M

CASE NAME:           Ashworth, et al., v. J. Arthur Greenfield & Co., LLP, et al.

CASE NO.:                20SMCV00839

MOTION:                  Motion for Summary Judgment

HEARING DATE:   6/18/2024

 

Legal Standard

 

A party may move for summary judgment in any action or proceeding if it is contended the action has no merit or that there is no defense to the action or proceeding. (CCP, § 437c(a).) “The purpose of the law of summary judgment is to provide courts with a mechanism to cut through the parties' pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.)  

 

“A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in¿Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs.”¿(CCP,¿§ 437c(f)(1).)¿If a party seeks summary adjudication as an alternative to a request for summary judgment, the request must be clearly made in the notice of the motion. (Gonzales v. Superior Court¿(1987) 189 Cal.App.3d 1542, 1544.)¿ “[A] party may move for summary adjudication of a legal issue or a claim for damages other than punitive damages that does not completely dispose of a cause of action, affirmative defense, or issue of duty pursuant to” subdivision (t). (CCP,¿§ 437c(t).)¿ 

 

To prevail, the evidence submitted must show there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.¿(CCP, §¿437c(c).)¿The motion cannot succeed unless the evidence leaves no room for conflicting inferences as to material facts; the court has no power to weigh one inference against another or against other evidence. (Murillo v. Rite Stuff Food Inc. (1998) 65 Cal.App.4th 833, 841.) In determining whether the facts give rise to a triable issue of material fact, “[a]ll doubts as to whether any material, triable, issues of fact exist are to be resolved in favor of the party opposing summary judgment…” (Gold v. Weissman (2004) 114 Cal.App.4th 1195, 1198-99.) “In other words, the facts alleged in the evidence of the party opposing summary judgment and the reasonable inferences there from must be accepted as true.” (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 179.) However, if adjudication is otherwise proper the motion “may not be denied on grounds of credibility,” except when¿a material fact is the witness’s¿state of mind and “that fact is sought to be established solely by the [witness’s] affirmation thereof.” (CCP, § 437c(e).)¿ 

 

Once the moving party has met their burden, the burden shifts to the opposing party “to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.” (CCP § 437c(p)(1).) “[T]here¿is no obligation on the opposing party... to establish anything by affidavit unless and until the moving party has by affidavit stated facts establishing every element... necessary to sustain a judgment in his favor.”¿(Consumer Cause, Inc. v.¿SmileCare¿(2001) 91 Cal.App.4th 454, 468.)¿ 

¿ 

“The pleadings play a key role in a summary judgment motion. The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues and to¿frame¿the outer measure of materiality in a summary judgment proceeding.” (Hutton v. Fidelity National Title Co.¿(2013) 213 Cal.App.4th 486, 493, quotations and citations omitted.) “Accordingly, the burden of a defendant moving for summary judgment only requires that he or she negate plaintiff's theories of liability¿as alleged in the complaint; that is, a moving party need not refute liability on some theoretical possibility not included in the pleadings.” (Ibid.)¿ 

 

EVIDENTIARY ISSUES

 

Plaintiff’s objection is SUSTAINED to the Hromadka Declaration paragraph 13. The cited paragraph is merely a legal conclusion.

 

Defendants’ objection to the Krueger declaration is SUSTAINED. 

 

Analysis

 

Defendants Donald Hromadka and Hromadka Gaulke & Coutee LLP (the “Hromadka Defendants”) move for summary judgment against Plaintiffs Virginia Coats Ashworth, Nancy Coats Routh and Christy Lynn Coats. The Hromadka Defendants assert that the claims for professional negligence and breach of fiduciary duty against them are meritless because they never represented Plaintiffs and never served as trust administration counsel for the trustees of the QTIP Trust at any relevant period. To the extent that there was a duty, Hromadka claims to have never “actively participated” in any alleged misconduct.

 

“To state the obvious, an attorney’s duty to his or her client depends on the existence of an attorney-client relationship. If that relationship does not exist, the fiduciary duty to a client does not arise.” (Fox v. Pollack (1986) 181 Cal.App.3d 954, 959.) “Except for those situations where an attorney is appointed by the court, the attorney-client relationship is created by some form of contract, express or implied, formal or informal.” (Id. at 959.) “The question of whether an attorney-client relationship exists is one of law.” (Responsible Citizens v. Superior Court (1993) 16 Cal.App.4th 1717, 1733.)

 

Generally, when a cause of action is prosecuted on behalf of an express trust, the trustee is the real party in interest. (Pillsbury v. Karmgard (1994) 22 Cal.App.4th 743, 753; Saks v. Damon Raike & Co. (1992) 7 Cal.App.4th 419, 427.) Generally, the beneficiary of a trust, having no legal title or ownership interest in the trust assets, is not the real party in interest and may not sue in the name of the trust. (Id. at 427.) A trust beneficiary's “right to sue is ordinarily limited to the enforcement of the trust, according to its terms.” (Ibid.)

 

Courts have recognized an exception to this general rule. (Wolf v. Mitchell, Silberberg & Knupp (1999) 76 Cal. App. 4th 1030, 1036-1040 [trial court reversed in granting summary judgment in favor of defendants on the ground that the trust beneficiary was not the real party in interest and only the trustee could bring the action].) For example, there is a “well-established common law rule that a beneficiary of a trust may bring an action against a third party to recover property transferred to the third party by the trustee in breach of trust.” (Id. at 1036.) Furthermore, trust beneficiaries may bring an action where the trustee has failed to bring suit against a third party on behalf of a trust. (Id., citing Pillsbury and Saks.) Critically, an attorney may be liable to a trust beneficiary for the attorney's “active participation in a trustee's breach of duty if the attorney acted in furtherance of his or her own financial gain, or committed actual fraud by making express misrepresentations to the beneficiary.” (Id., at 1040; Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1104-1106.)

 

Here, the beneficiaries allege that the Hromadka Defendants actively participated with the trustee in breaches of fiduciary duty. (Compl, ¶ 24.) Beginning before 2009, and continuing to at least December 2019, the Hromadka Defendants were law firms or licensed attorneys providing legal services to either Laura Coats individually or to her personal estate after she died in December 2017 (i.e., they were the personal attorneys for Laura Coats, the QTIP Trust's income beneficiary) and provided legal services to the QTIP Trust's trustees (i.e., Laura Coats, Nancy Derian, and Glenna Cadmus). (¶¶ 24-27.) Defendants were allegedly negligent in allowing trustees to make investments that favored the income beneficiary (Laura) over the remainder beneficiaries (Plaintiffs), in allowing the trustees to pay management fees to REC, and in allowing Cadmus and Derian to serve as a trustees as they had conflicts of interest. (¶29.) When those services were provided, the complaint alleges that the Hromadka Defendants knew that Plaintiffs were the remainder beneficiaries of the QTIP Trust who had vested rights and interests in the related estate, and it was reasonably foreseeable to said defendants that potential harm could occur to Plaintiffs if those services were not performed in a proper, legal, and ethical manner. (¶ 28.) In collaboration with the trustees, the Hromadka Defendants “actively participated” in breaches of trust that resulted in the improper promotion of the rights and interests of the QTIP Trust's income beneficiary (Laura) over the rights and interests of the remainder beneficiaries (Plaintiffs). (Id.) For instance, Defendants failed to obtain various conflict-of-interests waivers from Plaintiffs regarding their selection of the co-trustees of the QTIP Trust, their work as Laura’s personal attorneys, and their employment of REC Management. (¶29.) As a result, Plaintiffs have been deprived of receiving the full extent of their rights and interests in the QTIP Trust as the remainder beneficiaries. (¶30.)

 

The Hromadka Defendants present evidence that they did not “actively participate” in any breaches because they only had limited assignments and duties regarding the administration of the QTIP trust and therefore had no knowledge of conflicts of interest or other breaches by the QTIP trustees. The Hromadka Defendants evidence that they began providing estate planning services related to her personal trust in 2002. (Hromadka Decl. ¶ 3.) As part of the Hromadka Defendants' representation of Laura Coats, the QTIP Trust “was reviewed” on July 16, 2002. (Hrornadka Decl., ¶ 4.) The Hromadka Defendants claim to have not served as trust administration counsel and Laura did not regularly consult with the Hrornadka Defendants about administration matters. (UMF 12; Hromadka Decl., ¶ 3.) They represented Laura Coats in her individual capacity, and not as trustee. (UMF 13.) The Hromadka Defendants never reviewed the QTIP Trust's investments or fiduciary tax returns. (UMF 18.) All of the complained-of loans pre-dated any involvement by the Hromadka Defendants. (UMF 20-21.) Also, the Hromadka Defendants had no knowledge about the type of services REC Management provided in connection with the QTIP Trust. (UMF 17.) Hromadka admits to assisting Laura with “limited mechanical issues” related to the QTIP Trust, such as the appointment of successor trustees and preparation of documentation relating to loans to Plaintiffs. (Hromadka Decl., ¶5.) The Hromadka Defendants reason that because they were not involved with the administration of the QTIP Trust, the Hromadka Defendants could not have actively participated in the pled breaches or known about said breaches.

 

            Plaintiffs, however, submit a dispute of material fact concerning Defendants’ active participation in the alleged breach of fiduciary duties by showing that Defendants had far more involvement and knowledge regarding the QTIP trust and the alleged breaches. Plaintiffs present evidence that the Hromadka Defendants were counsel for the QTIP Trust and its trustees throughout the entire period of 2002 to 2017, and that they had regular participation in the trust despite their representations in their moving papers. For example, Hromadka reviewed the QTIP Trust instrument and related court documents, reviewed and prepared documents regarding removal/successor trustees, and reviewed long term loans made by the trust to Laura. (Donald Hromadka Depo., Ex. 3, at 22:10-25:5, 26:22-27:10, 32:4-17, 34:2-7, 34:11-14, 40:8-42:6, 50:9-24, 57:12-60:2.) The foregoing evidence directly contradicts Hromadka’s declaration claiming to only have certain limited interactions with the QTIP trust.

 

Trustees have also testified that Hromadka was more involved than he suggests in the motion. Cadmus testified at deposition that Hromadka replaced Plaintiff’s previous attorney handling her trust affairs in 2000. Casmus claimed that throughout the entire period, the Hromadka Defendants were the attorneys for Laura and her personal trust, as well as the attorneys for the QTIP Trust and its trustees. (Cadmus Depo., at 59:11-17, 61:9-63:10.) During this period, the Hromadka Defendants would attend meetings with Bessin, Derian, Laura, Schulz and/or Cadmus at least once per year, in Greenfield's office, to review matters related to the administration of both Laura Coat's personal trust and the QTIP Trust, including an update of developments relating to both trusts since the last meeting. (Id. at 63:10-64:23, 65:15-68:18, 70:1-71:17.) The meetings included discussions about the long-term loans and REC’s fees from the QTIP trust, which are the subject of the current suit. (Id., at 69:4-8, 69:21-25.) Schulz also testified that Hromadka was the lawyer for Laura's personal trust and the OTIP Trust and that Hromadka was hired for both purposes by Laura. (Schulz Depo at 33:19-34:12.) He also noted that Hromadka was the attorney for REC. (Id., at 34.)

 

Another Hromadka attorney also testified that the firm had more involvement with the QTIP trust than the “limited” roles cited by the moving papers. Although he initially testified that he did not recall having any involvement with the QTIP Trust until the aftermath of Laura Coat's death, Duncan Hromadka recalled performing services directly related to the "Coats QTIP Trust Administration" before Laura's death. (Duncan Hromadka Depo., at 25:15-19.) Specifically, Duncan assisted Laura, Derian, and Cadmus in preparing a response on their behalf to Ms. Ashworth's request for information about the QTIP Trust. (Id. at 26-35.) Donald Hromadka was copied on all communications and aware of billing in connection with this work. (Id., at 32-34, Ex. 6.) Duncan Hromadka admits that he reviewed the trust instruments as a part of ensuring the co-trustees were carrying out their fiduciary responsibilities pursuant to the trust. (Id., at 39.) Ultimately, he drafted a letter asserting that Ms. Ashworth was not entitled to the sought after information as a remainder beneficiary. (Id.)

 

            If credited, the above evidence would put into dispute Hromadka Defendants’ denial of knowledge of, and participation in, the QTIP trustee’s breach of fiduciary duties. A reasonable fact finder may conclude that Hromadka Defendants advised the trustees concerning the long-term loans and REC’s fees from the QTIP trust. This evidence puts into dispute UMFs 12-18, 20-21. Therefore, there is a dispute of material fact as to whether Hromadka Defendants actively participated in the alleged breaches.

 

Accordingly, the motion is DENIED.