Judge: Mel Red Recana, Case: 21STCV40831, Date: 2024-03-01 Tentative Ruling

Case Number: 21STCV40831    Hearing Date: March 1, 2024    Dept: 45

Superior Court of California

County of Los Angeles

Hearing Date:             Friday, March 1, 2024 

Moving Party:             Defendants Irene Luna and Araceli Leon

Responding Party:      Plaintiff Petra Amaya De Garcia

Motion: Defendants’ Demurrer and Motion to Strike    

The Court considered the moving papers, opposition, and reply. Defendants’ Demurrer to Plaintiff’s First Amended Complaint is SUSTAINED in part and OVERRULED in part. The Demurrer is sustained as to the second cause of action but is overruled as to the first and third cause of action. Defendants’ Motion to Strike Portions of Plaintiff’s First Amended Complaint is GRANTED. Plaintiff is granted 20 days leave to amend.

BACKGROUND

Procedural History -

            Petra Amaya De Garcia (Plaintiff) filed an initial Complaint against two of her daughters Irene Luna and Araceli Leon (Defendants) on November 5, 2021. It was followed by a First Amended Complaint (FAC) filed on August 8, 2022. The FAC contains three causes of action aimed at both Defendants: (1) Elder Financial Abuse, (2) Fraudulent Concealment, and (3) Conversion.

            The motions before the Court are Defendants’ Demurrer and Motion to Strike Portions of Plaintiff’s First Amended Complaint (collectively, the Motions). Both Motions were filed on October 28, 2022. On September 11, 2023, Defendants filed a notice of non-opposition to both motions[1] noting that based on the initial hearing date of September 19, 2023, Plaintiff was required to serve Defendants an opposition no later than September 6, 2023. The initial hearing for the Motions was continued once to October 10, 2023 (see Notice Re: Continuance of Hearing and Order filed on September 18, 2022). After the notice regarding the first continuance was filed, Plaintiff late-filed her oppositions to the Motions on September 27, 2023. The hearing was continued a second time (see Notice Re: Continuance of Hearing and Order filed on November 6, 2023) to March 1, 2024. Defendants then filed replies for both Motions on October 3, and then again for both Motions on October 31, 2023.   

Factual Background -

            This case stems from accusations of fraud arising out of the management of Plaintiff’s finances by Defendants. Defendants began managing Plaintiff’s finances in 2007. (FAC, ¶ 6.) Plaintiff alleges that during this time, Plaintiff executed various legal documents without truly understanding the nature of the documents as they were presented to her in English, and Plaintiff is a monolingual Spanish-speaker. (FAC, ¶ 7.)

            Plaintiff alleges that due to neglect from Defendants, Plaintiff turned to her daughter and son-in-law Graciela Melendez and Angel Melendez (Graciela and Angel, respectively) for assistance with her medical and financial matters. (FAC, ¶ 8,) It was then that Graciela discovered finances had been mismanaged, particularly, the withdrawal of large amounts of money Plaintiff was unaware of. (FAC, ¶¶ 9-10.) Plaintiff alleges that over $87,000.00 was withdrawn in 2021 alone and transferred to the accounts belonging to Defendants. (FAC, ¶ 11.) When no satisfactory explanation of these withdrawals was provided to Plaintiff by Defendants, Plaintiff filed a police report on August 22, 2021, then filed suit with this Court. (FAC, ¶ 14.)

DISCUSSION

Meet and Confer –

Legal Standard & Analysis for Meet and Confer

            “Before filing a demurrer…the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (CCP § 430.41(a); see also CCP § 435.5 (imposing similar requirements for a motion to strike).) Defendants present the Declaration of Michael J. Armenta (Armenta Decl.)  which states that on October 6, 2022, Defense counsel spoke with Plaintiff’s counsel and discussed the grounds for demurring, however, the parties were unable to reach an agreement. (Armenta Decl., ¶ 4.) Nonetheless, the requirements for both CCP § 430.41(a) and CCP § 435.5 have been met. Therefore, the Court will turn its attention to the Motions.

Demurrer -

Legal Standard for Demurrer

            “[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967.)

Analysis for Demurrer

            Upon Demurrer, Defendants raise two main arguments: first that the FAC must fail because the statute of limitations on each cause of action has expired, and second that the FAC does not contain facts sufficient to sustain the causes of action.

            Before addressing the key arguments on Demurrer, the Court notes that both oppositions to the Demurrer and Motion to Strike were untimely filed. Nevertheless, the Court will rule on the merits. California has a strong public policy in favor of deciding cases on the merits, especially if the opposing party has suffered no prejudice. (Oliveros¿v. County of Los Angeles¿(2004) 120 Cal.App.4th 1389, 1398-1399. Also see CCP § 583.130.)

            As explained below, each cause of action is within the applicable statute of limitations. Additionally, the first and third cause of action contain sufficient facts to survive demurrer, however, the second cause of action for fraudulent concealment does not meet the heightened pleading requirements, and therefore falls to demurrer.   

Statute of Limitations –

            Upon Demurrer, the first argument Defendants present is that each cause of action is outside of their respective statute of limitations. The Court disagrees. The FAC clearly alleges that although the Defendants began to manage Plaintiff’s finances in 2007, this only stopped in the middle of 2021 after Plaintiff felt Defendants were neglecting her needs. (FAC, ¶¶ 6 & 8.) Under the general rule, a cause of action accrues when the wrongful act is done, not when a plaintiff discovers they have a cause of action to pursue. (Moreno v. Sanchez (2003) 106 Cal.App. 4th 1415, 1423.) Here, the wrongful acts are alleged to have occurred throughout the management of Plaintiff’s finances, which only stopped in 2021. The statute of limitations for the first cause of action is four years, and for the second and third cause of action, three years. The initial Complaint was filed on November 5, 2021, well within the statute of limitations for all three causes of action.     

Causes of Action within FAC

1. Elder Financial Abuse

            “Financial abuse” of an elder or dependent adult occurs when a person or entity takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult, or assists in so doing, for a wrongful use or with intent to defraud, or both, or when the taking, secreting, appropriating, obtaining, or retaining is accomplished by undue influence. (WIC § 15610.30(a).)

            Here, the FAC alleges that in 2021 alone there were over $87,000.00 of transfers from Plaintiff’s checking and savings accounts to Defendants. (FAC, ¶ 11.) Plaintiff was unaware of these withdrawals. (FAC, ¶ 10.) There is no dispute that Plaintiff meets the definition of an elder, here the dispute is whether the FAC appropriately pleads that these monies were taken for a wrongful use, with the intent to defraud, or by undue influence. The FAC states that “Defendants further misappropriated and used said funds for their personal use, benefit, and expenses.” (FAC, ¶ 26.) This is sufficient to mee the element of wrongful use. Defendants’ Demurrer is silent on this point. Consequently, the first cause of action survives demurrer as it pleads facts sufficient to constitute a cause of action. The Demurrer to the first cause of action is overruled.        

2. Fraudulent Concealment

            “The required elements for fraudulent concealment are (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would not have acted as he or she did if he or she had known of the concealed or suppressed fact; and (5) plaintiff sustained damage as a result of the concealment or suppression of the fact.” (Hambrick v. Healthcare Partners Medical Group, Inc. (2015) 189 Cal.Rptr.3d 31, at 36, citing Graham v. Bank of America, N.A., supra, 226 Cal.App.4th at p. 606, 172 Cal.Rptr.3d 218.)

            The traditional rule is that fraud actions are subject to a stricter pleading standard, because they involve a serious attack on defendant's character. Fairness requires that allegations of fraud be pleaded “with particularity” so that the court can weed out nonmeritorious actions before a defendant is required to answer. (Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216)

            The FAC pleads that Plaintiff was harmed because Defendants concealed information regarding the misappropriation and misuse of Plaintiff’s funds. (FAC, ¶ 32.) To adequately plead active concealment, plaintiff must describe defendant's affirmative acts that concealed information from plaintiff. (Torres v. Adventist Health System/West (2022) 77 Cal.5th 500, 514-515.)

            Here, the cause of action fails because it is unclear how the misappropriation was concealed. There are no facts indicating that Plaintiff was too ill to review her finances, nor that Plaintiff was incapable of accessing information regarding her bank accounts.

            Additionally, the FAC pleads that Defendants intentionally failed to disclose to Plaintiff the misappropriation of Plaintiff’s funds. (FAC, ¶ 34.) If a fraud claim is based upon failure to disclose, and the duty to disclose arises from the making of representations that were misleading or false, those allegations regarding representations should be described. (Morgan v. AT & T Wireless Services, Inc. (2009) 177 Cal.4th 1235, 1262.) The FAC fails to detail what misrepresentations were made that were misleading or false. On opposition, Plaintiff argues that Defendants became fiduciaries in 2007 when they started to manage Plaintiff’s finances. However, there is no indication of a relationship that would carry fiduciary duties. The FAC does not allege that Defendants were financial advisors, trustees managing an estate, nor agents of a principal. Moreover, Plaintiff provides no case law demonstrating that a relationship where adult children assisting their parents with their finances carries fiduciary duties, outside of a legally recognized conservatorship.

            The heightened pleading requirements for the second cause of action have not been met, therefore making them vulnerable to demurrer. The Demurrer to the second cause of action is sustained.

3. 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.)

            Here, the third cause of action survives demurrer because the FAC has alleged facts that satisfy each element of the cause of action for conversion. The FAC alleges that the monies transferred belonged to Plaintiff. (FAC, ¶¶ 9 & 13.) The FAC then alleges that the conversion of the monies was wrongful as Plaintiff did not know nor consent to the transfer of case. (FAC, ¶ 10.) Finally, the damages are alleged to total $205,032.38

            Defendants’ contention against the cause of action for conversion is that monies cannot be used to form the basis of a conversion claim. With this contention, Defendants rely on McKell v. Washington Mutual Inc., (2006) 142 Cal.App.4^th 1457, 1491 (“McKell”). Defendants go further and argue that if the evidence is inconsistent and conflicting as to the amount of cash taken, a cause of action cannot be stated, relying on PCO, Inc. v. Christensen, Miller, Fink , Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4^th 384, 395-396 (“PCO”). Reliance on McKell and PCO is misplaced. McKell stood for the proposition that “Money cannot be the subject of a cause of action for conversion unless there is a specific, identifiable sum involved…” (McKell, supra, at 1491, emphasis added.) Plaintiff here identifies a specific sum, $205,032.38. The PCO Court mirrored this same proposition when they ruled on the appeal to a summary judgment motion. However, there was evidence at the summary judgment stage in PCO, the Court here is at the pleadings stage where evidence to prove or disprove claims in inappropriate. (See Committee on Children's Television, Inc, supra, at 213-214. [“It is not the ordinary function of a demurrer to test the truth of the plaintiff's allegations or the accuracy with which he describes the defendant's conduct.”])

            Accordingly, the third cause of action survives demurrer, and the Demurrer to the third cause of action for conversion is overruled.

Motion to Strike –

Legal Standard for Motion to Strike

            The court may, upon motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (CCP § 436, subd. (a).) The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (CCP § 436, subd. (b).) The grounds for a motion to strike are that the pleading has irrelevant, false, or improper matter, or has not been drawn or filed in conformity with laws. (CCP § 436.) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (CCP § 437.)

            A motion to strike any pleading must be filed “within the time allowed to respond to a pleading”—e.g., 30 days after service of the complaint or cross-complaint unless extended by court order or stipulation. [CCP § 435(b)(1)]. This does not affect the court's power to strike sua sponte. Courts are specifically authorized to strike a pleading upon a motion or at any time in the court's discretion. (CCP § 436)

            The Court notes that motions to strike punitive damages may be granted, where the alleged facts do not support conclusions of malice, fraud or oppression. (Turman v. Turning Point of Central Calif., Inc. (2010) 191 Cal.App.4th 53, 63.)

Analysis for Motion to Strike

            The Motion to Strike takes aim at the punitive damages request within the Complaint, arguing that the Complaint fails to plead its claims with sufficient specificity. The Court agrees. CIV § 3294 governs punitive damages and provides the following:

            “In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.” (CIV § 3294(a).)

            CIV § 3294(c)(1) provides the following definitions shall apply to this section:

(1) “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

(2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.

(3) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

            As aforementioned, the second cause of action has been successfully demurred to because it did not meet the heightened pleading requirements. Additionally, the FAC failed to specify the alleged misrepresentation or concealment. It also did not provide facts that support a finding of malice, oppression, or fraud.  

Leave to Amend –

Legal Standard and Analysis for Leave to Amend

            Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”]. As there is reasonable possibility of successful amendment, the Court shall grant Plaintiff 20 days leave to amend.

CONCLUSION

            Accordingly, Defendants’ Demurrer to Plaintiff’s First Amended Complaint is SUSTAINED in part and OVERRULED in part. The Demurrer is sustained as to the second cause of action but is overruled as to the first and third cause of action. Defendants’ Motion to Strike Portions of Plaintiff’s First Amended Complaint is GRANTED. Plaintiff is granted 20 days leave to amend.

            It is so ordered.

Dated: March 1, 2024

_______________________

Rolf Treu

Judge of the Superior Court