Judge: Mark H. Epstein, Case: 22SMCV01455, Date: 2023-06-22 Tentative Ruling
Case Number: 22SMCV01455 Hearing Date: July 21, 2023 Dept: R
This is defendant’s demurrer, which follows the denial of
defendant’s Special Motion to Strike (SMS).
It is also cross-defendant’s demurrer to the cross complaint. Defendant’s demurrer is OVERRULED. Cross-defendant’s demurrer is SUSTAINED IN
PART WITH LEAVE TO AMEND AND OVERRULED IN PART.
Plaintiff Cobbs is the current trustee of a trust. In her capacity as trustee, she brings an action against Maccabee, who had represented the former trustee in that capacity, Henderson. The suit is for malpractice, breach of fiduciary duty, assorted other torts. Defendant previously brought an SMS. In it, he contended that plaintiff was suing him for constitutionally protected activity in that all of his actions were in the context of Henderson’s representation. The court denied the motion, largely concluding that Maccabee’s actions arose in his capacity as counsel for the trustee, and that it was the office he represented, not the individual in the individual’s personal capacity. The court analogized to the representation of a corporation. Where an attorney represents a corporation or other jural business entity, it is the entity that is the client, not whomever happens to be the manager or CEO at the time. If leadership changes, the new leadership is invested with all of the entity’s rights including the right to sue for malpractice on the entity’s behalf. Because a trust is not a jural entity in that it can neither sue nor be sued, the trustee acts as the legal representative of the trust. Where a lawyer represents the trustee in that capacity, it is the office that is the client—that is, the lawyer has a legal and ethical duty to help the trustee fulfill the trustee’s fiduciary duties to the trust and its stakeholders. If the trustee’s personal interests and the trustee’s official interests collide, then counsel must step away because that is a conflict. (Or, at a minimum, obtain independent representation for the trustee in at least one of those capacities.) Because Cobbs has now become the trustee, the court held, Cobbs stood in the trust’s shoes and had the right to bring an action against Maccabee for any violation of Maccabee’s duties owed to the trustee qua trustee, such as suing for malpractice that allegedly resulted in harm to the trust. The court was careful not to make any findings that Maccabee actually breached any such duty; the court merely found that Cobbs had presented enough to defeat the SMS. (The court’s recitation above is not meant to supersede or even supplement its prior ruling. To the extent that there is a conflict between this order’s recitation of the court’s prior ruling and its prior ruling, the prior ruling is the definitive statement.)
Maccabee now demurs. And the demurrer fails for much the same reason as did the SMS. Plaintiff alleges that Maccabee worked with Henderson to sell trust property and divert the money to Henderson and Maccabee personally rather than have it reside in the trust. Plaintiff also contends that Maccabee refused to provide an accounting to Cobbs (then in her capacity as a beneficiary), falsely claiming that it would be forthcoming. Plaintiff also contends that Maccabee falsely filed papers to reinstate Henderson as trustee (without Henderson’s knowledge or permission) after Cobbs had been named trustee, and that Maccabee did so to hide his misdeeds. Those allegations are sufficient. (Again, the court makes no finding or implication that the allegations are true. This is a pleading motion, so they must be assumed to be true.) The fact is that even if he owed no duties to the beneficiaries (something that is far from clear to the court given Osornio v. Weingarten (2004) 124 Cal.App.4th 304, 330 [discussing Biakanja factors]), he did owe a duty to the trust. As the trust’s current representative, Cobbs can sue for violations of his duties to the trust. For the same reasons as set forth in the SMS ruling, the litigation privilege offers him no shield for purposes of the demurrer. Turning to more specific arguments, they fail as well. Maccabee argues that to show negligence, plaintiff will need to show damages, meaning that the result would be different (and better) but for the malpractice. That might well be true, but it cannot be tested on demurrer. As to conspiracy, the cause of action is not for conspiracy, it is for conspiracy to breach fiduciary duty. The basic cause of action is breach of fiduciary duty, and the court so interprets the complaint in that light. The conspiracy allegation broadens the scope of liability to all co-conspirators if both the conspiracy and the underlying tort are proven. The declaratory relief cause of action survives. It causes no mischief and may be needed to determine if any fee is owed to Maccabee. As to the return of fees, it is adequately pled. If Maccabee needs more information, he can use discovery to get it. The conversion claim survives. It is true that money cannot necessarily be converted. But if the money is specific, it can serve to be the res for conversion. Here it is money that was (or should have been, or both) in the trust or that resulted from the property sale. That is sufficiently identifiable. Plaintiff has an interest in an identifiable sum, and that is all that is needed. The court has reviewed the fraud cause of action, and it is sufficiently pled as well. Maccabee’s demurrer is OVERRULED. He has 30 days to answer.
Maccabee also moves to strike the punitive damages allegations. Those allegations are sufficient and, if all of the facts alleged are true, the facts would give rise to a potential punitive damages recovery. The motion to strike is DENIED.
Cobbs demurs to the cross complaint. The gist of the demurrer is that the cross-complaint is time-barred. Under Probate Code section 9353, where a claimant submits a claim to the probate estate and receives a Notice of Rejection, the time to challenge the rejection is 90 days irrespective of the general statute of limitations. There are certain exceptions, but none appear to be the case here. The cross-complaint was filed over 90 days after the Notice of Rejection. Maccabee claims that section 9353 only applies to claims against a decedent, not as to claims against a trust. It is true that courts have applied the 90 day statute to trusts. For example, in Anderson v. Anderson (1995) 41 Cal.App.4th 135, one party sued the other party. The party being sued was the executor of the father’s estate but also the trustee of the trust. The complaint alleged that the defendant breached certain duties as trustee of the testamentary trust. The court found the 90 day statute applicable and discussed it. But the court does not think Anderson or cases like it answer the question. To answer the question, the court looks at the Probate Code’s organization. The statutes in question—sections 9100 and 9353—appear in Division 7, entitled “Administration of Estates of Decedents.” Part 4 of that Division is “Creditor Claims,” and that is the Part in which these statutes are found. Chapter 3 of Part 4 sets forth the “Time for Filing Claims,” and section 9100 is the general statute setting forth when claims must be filed. But as seems apparent to the court from the organization just described, those are claims against the decedent’s estate, not against a trust qua trust (through the trustee). Among other things, the statute refers to the date that letters are issued to the “personal representative” or delivered to the creditor. That applies more to decedents than to trustees. Where a claim is filed, it can be allowed or rejected pursuant to Chapter 6. Chapter 8 discusses “Claims in Litigation.” Article 1 of that Chapter applies to claims where there is no pending action or proceeding. Context makes it plain that by “no pending action” it means no action pending at the time that probate opened (like an auto accident against the decedent where litigation was ongoing at the time of death). That much is plain in section 9350, which states that the article applies to “any claim other than a claim on an action or proceeding pending against the decedent at the time of death.” The Article goes on to say that no action may be commenced against the personal representative unless a claim is first filed. At that point, the personal representative may accept or reject the claim. If it is accepted, well and good. If it is rejected in whole or in part, then the 90 day clock in section 9353 starts to tick. That clock takes precedence over the more general statutes of limitations in the Code of Civil Procedure. But because all of this is in the context of decedent’s estates, the court does not believe that this section is meant to preempt the more general statutes of limitations found in the Code of Civil Procedure. The court understands the argument that Maccabee, having elected to utilize the claim procedure set forth in this part of the Probate Code, must be viewed as having voluntarily agreed to the 90 day limitations period as well. The court has seen no case law so holding. If Cobbs has such authority, the court will not preclude her from bringing a MJOP on this point. In short, reading Article 1 in the context of the Probate Code’s organization, the court must agree with Maccabee that the 90 day statute does not bar the case. Accordingly, the demurrer as it relates to the statute of limitations is OVERRULED.
Cobbs also demurs on the basis that the cross-complaint sues her in her individual capacity but she has no retainer agreement with Maccabee. That is correct. To the extent that Cobbs is being sued in her individual capacity and not as trustee, no breach of contract action can be stated because Cobbs and Maccabee were not in privity. The same cannot be said to the extent that Cobbs is sued only in her capacity as trustee, though. Because Henderson had a contract with Maccabee as trustee, Maccabee can sue the current trustee to enforce that contract, but only in the trustee’s capacity as trustee. Maccabee argues that there is no legal distinction between Cobbs as successor trustee and Cobbs as an individual. That is not so. As a successor trustee being sued for breach of a contract between Maccabee and the former trustee, Cobbs need only pay a resulting judgment from trust assets. She need not pay from her own personal bank account. On the other hand, if Cobbs is found personally liable in her individual capacity only, the trust assets would not be available to pay the judgment (although her interest in any distributions could be levied) but her personal bank account would be fair game. It is a distinction with a difference. Cobbs is correct to the extent that she cannot be sued in her individual capacity for a breach of the contract between Maccabee and Henderson in Henderson’s capacity as trustee. Thus, to the extent that Cobbs is demurring in her capacity as an individual, the demurrer is SUSTAINED WITH 30 DAYS’ LEAVE TO AMEND.
Maccabee also claims that Cobbs’ demurrer is procedurally improper. The court will exercise its discretion and overlook that issue.
Cobbs’ demurrer is therefore SUSTAINED WITH LEAVE TO AMEND. Maccabee has 30 days’ leave to amend.