Judge: Mark H. Epstein, Case: 24SMCV05474, Date: 2025-05-28 Tentative Ruling
Case Number: 24SMCV05474 Hearing Date: May 28, 2025 Dept: I
This is a claim by plaintiff against his former lawyer and
another client of that lawyer. More
specifically, plaintiff alleges that Atabek asked him to make a $300,000 loan
to help fund litigation in which Atabek represented a different
client—Itkin. At the time he made the
request, Atabek purportedly represented plaintiff in other, unrelated,
matters. The loan was to be repaid at a
particular time and was to be secured by real property Atabek owned. To that end, Atabek was supposed to record a
Deed of Trust (DOT). What Atabek
allegedly did not disclose was that his co-counsel, Kabataeck, was owed money
on the case and that part of the proceeds were to pay him. Further, plaintiff contends that the lien
that was a part of the deal was to be signed by all attorneys (and Itkin), but
that when Kabateck later substituted out and a new lawyer substituted in, the
new lawyer did not sign the lien. In
addition, plaintiff contends that Atabek did not tell him that Itkin was the defendant
in the litigation, not the plaintiff, and as such, even if Itkin was successful
there might not be a monetary recovery.
And Atabek allegedly did not disclose that he was already owed legal
fees in that case and that Itkin had a history of not paying his
creditors. And further, Atabek allegedly
said that Itkin’s claims were a slam dunk such that Itkin was surely going to
win—and win quickly—a monetary sum sufficient to repay the loan, when he knew
that he had no basis to make that claim.
Plaintiff alleges that he relied on Atabek’s statements and assumed no
material concealment to his detriment and that he never would have made the
loan had he known the truth. The loan
was made in February 2020, and the sums were wired due to an alleged urgency
recounted by Atabek before the DOT was recorded. And, in fact, the DOT was never
recorded. When things began to unravel,
the parties discussed a “Plan B” in which the loan would be secured by Itkin’s
property (or his mother’s property) rather than Atabek’s property. However, plaintiff alleges that Itkin and
Atabek just strung plaintiff along and that Itkin never intended to record a
DOT against that property, and in fact, he never did. In the meantime, substantial liens were
recorded against Atabek’s property, such that even were a DOT to be recorded
now, plaintiff contends that there is not enough equity in the property to
repay the debt. Eventually, Atabek
withdrew from the Itkin matter and now seeks to wash himself out of the whole
thing.
Atabeck demurs to the second and fifth causes of action for
fraud and concealment, respectively.
Plaintiff opposes.
The second cause of action is predicated on the following
misrepresentations/concealments: “Plaintiff is informed and believes and
thereon alleges that, Atabek – a fiduciary of Plaintiff – concealed material
information known to him from Plaintiff concerning the Loan and DOT, including
the fact that: (a) Itkin has refused and continues to refuse to sign the DOT;
and (b) Itkin instructed Atabek to delay and give Plaintiff the run around,
kicking the can down the road, vis-à-vis Plaintiff’s repeated demands and
follow ups on this issue. This is shown
by the fact that in 2024—after extensive negotiations and documentation
(discussed above)—Itkin again promised, by and through Atabek, that he would
grant the DOT lien, but reneged on that promise for a second time without
explanation.” (FAC, ¶100.) Atabek contends that the second cause of
action for constructive fraud fails because there is no actual concealment
regarding Itkin’s failure to sign the DOT.
Atabek points out that plaintiff claims he already knew about the
failure as early as July 2022, and so there can be no nondisclosure. (FAC, ¶44.)
Atabek further states that the allegation that Itkin instructed him to
delay and give plaintiff the run around does not make sense. According to Atabek, the fact that Itkin did
not sign the DOT does not mean that Atabek was instructed to deceive plaintiff.
That argument is best reserved for an evidentiary
motion. At this juncture, the court must
take plaintiff’s allegations as true. As
alleged, Atabek repeatedly promised plaintiff that the DOT would get signed and
plaintiff’s security interest would be perfected, all while buying extra time
for Itkin. “Atabek continuously and
repeatedly kicked the can down the road, made excuses, bought time, and
delayed. All the while, Atabek
represented, both orally and in writing, that recordation of the DOT would indeed
occur and that Atabek would get that done.”
(FAC, ¶43.) Further examples of
this delay are the failed attempts to get a DOT for the Itkin property and
later a junior lien on the Atabeck property, only for Atabek to wash his hands
of the transaction at the last minute. (Id.
at ¶¶59-71.) Plaintiff alleges various
concealments within the context of these DOT negotiations. These allegations indicate that Atabek
intended to deceive plaintiff, until he was left with nothing. As for whether the misrepresentations were
made at Itkin’s direction, that is a question to be resolved after
discovery. The court will not require
plaintiff to prove what is in Itkin and Atabek’s exclusive knowledge.
In reply, Atabek argues that if the evidence of intent is
within the knowledge of Itkin and Atabek, the claim must fail because it relies
on attorney-client communications that Atabek cannot disclose. In some cases,
suits against an attorney must be dismissed because the attorney cannot defend
the case without breaching privilege. (Solin
v. O’Melveny & Myers LLP (2001) 89 Cal.App.4th 451, 467.) This argument is premature, as there is
nothing on the face of the FAC that indicates that the circumstances in Solin
definitively apply here. Further,
plaintiff has alleged enough to demonstrate application of the crime-fraud
exception, which would vitiate any claim of privilege. (See Favila v. Katten Muchin Rosenman LLP
(2010) 188 Cal.App.4th 189, 220.) Atabek
further challenges whether plaintiff’s concealment portion of the claim is
properly alleged. He asserts that
pleading based on information and belief requires that the plaintiff specify
what information leads the plaintiff to believe the statements are true. But plaintiff has done so. Plaintiff contends that Atabek was his
attorney. That fiduciary relationship,
standing alone, gives plaintiff good reason to trust the statements from
Atabek. Atabeck also claims that there
are no details alleging scienter. The
court believes scienter is adequately pled.
The same is true of damages.
On the fifth cause of action for fraudulent concealment,
Atabek contends that it is time-barred.
“ ‘The defense of statute of limitations may be asserted by general
demurrer if the complaint shows on its face that the statute bars the
action.’ [Citations.] ¿There is an important
qualification, however: ‘In order for the bar of the statute
of limitations to be raised by demurrer, the defect must clearly and
affirmatively appear on the face of the complaint; it is not enough that the
complaint shows merely that the action may be barred.’ [Citations.]” ¿(E-Fab.,
Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308,
1315-1316.) In evaluating whether a
claim is time-barred, the court must determine (1) which statute of limitations
applies and (2) when the claim accrued. (Id. at p. 1316.) The statute of limitations for plaintiff’s
fifth cause of action is three years.
(See Code Civ. Proc., § 338(d) [three-year limitations period for fraud
claims].) Atabek argues the claim should
have accrued at a couple points. First,
he contends that the case caption in the AFB action should have alerted
plaintiff that Itkin was the defendant, not the plaintiff. The argument fails. Cross-complaints exist and the caption of a
case never reveals the existence of a cross-complaint. Next, Atabek contends that the claim accrued
under the agreement more than three years before suit was filed because section
1.4 stated that a nonperformance would have been deemed to have occurred if
litigation proceeds were not recovered thirteen months after the effective date
of the agreement, which essentially meant April 3, 2021. (FAC, ¶31.)
That, Atabek argues, was one accrual date, which meant the action should
have been filed in April 2024, but was not.
Atabek argues that plaintiff had a duty to investigate the
misrepresentations after this breach.
“Exhibit B to the LFA (‘Exh. B’), at Section 1.4, provides: ‘To the
extent the Litigation Proceeds are not recovered in the Litigation, or if the
Litigation Proceeds are not received after the date thirteen (13) months from
the Effective Date of the [LFA (i.e., by April 3, 2021)], an event of
“Non-Performance” shall be deemed to have occurred, and [Plaintiff] may . . .
exercise his rights to the Investment Return Protection under Section 3 below .
. . .’ [¶] Exh. B, at Section 3.1
provides: ‘In the event [Plaintiff] exercises his rights to the Investment
Return Protection . . . [Itkin] agrees that [Plaintiff] shall . . . be paid
$350,000, plus $4,000 per month, commencing from the date of Non-Performance,
until paid in full (“Investment Return Protection Amount”). . . .’ [¶] Exh. B, at Section 3.2, provides that the
Investment Return Protection Amount shall be secured by a deed of trust against
[the Mulholland Property].” (FAC,
¶¶31-33.)
Plaintiff had the option to exercising his rights to the
Investment Return Protection but that protection was to be secured by the
DOT. And that is the important point
here. The DOT was a way to guarantee
repayment after nonpayment. As such, the
operative date is not necessarily the date of
repayment, but whenever the failure to record the DOT that
would secure the Investment Return Protection became apparent to
plaintiff. “Under Jolly, which
relies on decisions such as Gutierrez and Sanchez, the plaintiff
discovers the cause of action when he at least suspects a factual basis, as
opposed to a legal theory, for its elements, even if he lacks knowledge
thereof—when, simply put, he at least ‘suspects . . . that someone has done something wrong’ to him
(Jolly v. Eli Lilly & Co., supra, 44 Cal.3d at p. 1110), ‘wrong’
being used, not in any technical sense, but rather in accordance with its ‘lay
understanding’ (id. at p. 1110, fn. 7).”
(Norgart, supra, 21 Cal.4th at pp. 397–398, parallel citations
omitted.)
Plaintiff first learned of the failure to record the DOT on
July 18, 2022. (FAC, ¶44.) For pleading purposes, that is when the
statute of limitations accrued and began to run. The FAC was filed within three years of that
date, and so it is not time-barred.
Atabek takes issue with these allegations of knowledge in his moving and
reply papers. He insists that this
contradicts other allegations indicating that plaintiff continuously “pinged”
Atabek about the DOT not being signed.
“For many months, indeed years, after Plaintiff funded the Loan Atabek
was repeatedly pinged by Plaintiff on this issue (including in 2020 through
2024), both in writing and orally. In each instance, Plaintiff reminded him
that it was Atabek’s obligation to get the DOT signed and recorded. [¶] Atabek continuously and repeatedly kicked
the can down the road, made excuses, bought time, and delayed. All the while, Atabek represented, both
orally and in writing, that recordation of the DOT would indeed occur and that
Atabek would get that done. [¶] By way
of illustration, on July 18, 2022, Plaintiff emailed Atabek concerning the DOT
not having been signed or recorded. In
that email, Plaintiff writes: ‘We sent numerous emails regarding this at the
time. Please draft [the DOT] and record.’
That same day, in response, Atabek wrote an email to Plaintiff stating:
‘My sincere apologies, I was so busy getting ready for trial, I never realized
the [DOT] was missing.’ (Emphasis
added.) This was the first time that Plaintiff understood that the DOT did not
exist and was never signed.” (Id.
at ¶¶42-44, internal emphasis omitted.)
In addition, the court can view these allegations as the
first time plaintiff understood that Atabek was not pursuing the DOT as he
should have. That is enough for present
purposes to justify delayed discovery due to Atabek’s repeated promises to the
contrary. Atabek will have to take
discovery to determine whether this was the actual point plaintiff understood
that Atabek was not serious about getting the DOT recorded, or whether it was
some other point. The court also notes
that Atabek does not adequately recognize the effect of his fiduciary
status. Even though Atabek was not
representing plaintiff in the loan transaction, he was representing plaintiff
in other capacities. As such, he was a
fiduciary, and plaintiff was therefore more reasonable in relying on his
repeated assurances than might otherwise be the case. True, inquiry notice is inquiry notice, and
even a fiduciary can be put on inquiry notice.
The point is, though, that it is more reasonable to be lulled by false
assurances when the assurance is made by a person in a position of trust, like
a fiduciary. Therefore, the demurrer as
to the fraud causes of action are OVERRULED.
Because those demurrers failed, the motion to strike is DENIED. As for the allegations that July 2022 was the
first time plaintiff understood that the DOT did not exist and that Atabek
concealed the fact that Itkin would not sign the DOT, the court does not
believe that a motion to strike is the proper way to get at that issue.