Judge Nathan Vu, Case 2020-01168105 2022-09-12 Tentative Ruling

Judge: Nathan Vu, Case: 2020-01168105, Date: 2022-09-12 Tentative Ruling

Demurrer of Cross-Defendants Cho, Lee, and O’Connell

The demurrer of Cross-Defendants Wilson Choe, Jennifer Mi Suk Lee, and Kevin O’Connell to the first amended cross-complaint is OVERRULED as to the first cause of action, and SUSTAINED as to the second and third causes of action.

Plaintiffs/Cross-Defendants Wilson Choe, Jennifer Mi Suk Lee, and Kevin O’Connell (collectively, Moving Cross-Defendants) demur to all three causes of action contained in the First Amended Cross-Complaint (FACC) of Defendant/Cross-Complainant Ira Hermann (Cross-Complainant).

In ruling on a demurrer, a court must accept as true all allegations of fact contained in the complaint. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) A demurrer challenges only the legal sufficiency of the affected pleading, not the truth of the factual allegations in the pleading or the pleader’s ability to prove those allegations.) Cundiff v. GTE Cal., Inc. (2002) 101 Cal.App.4th 1395, 1404-05.)

Questions of fact cannot be decided on demurrer. (Berryman v. Merit Prop. Mgmt., Inc. (2007) 152 Cal.App.4th 1544, 1556.) Because a demurrer tests only the sufficiency of the complaint, a court will not consider facts that have not been alleged in the complaint unless they may be reasonably inferred from the matters alleged or are proper subjects of judicial notice. (Hall v. Great W. Bank (1991) 231 Cal.App.3d 713, 718 n.7.)

First Cause of Action for Equitable Indemnity

The Complaint in this matter alleges that various defendants (including Defendant/Cross-Complainant Hermann) induced the Plaintiffs “to purchase tens of million dollars in life insurance as an investment and financial plan using financing institutions to fund the premiums even though Plaintiffs had no reasonable need for such exorbitant insurance and could not afford the premiums or the excessive finance charges.” (Compl., ¶ 1.) The insurance policies were held by the Choe Family Irrevocable Trust, U/T/D April 26, 2022 (“Family Trust”) and Wilson Choe Legacy Trust, U/T/D April 24, 2014 (“Legacy Trust”), and the Plaintiffs were trustees of one or another of these trusts. (See Compl., ¶¶ 6-8, 33, & 38.)

The first cause of action of FACC alleges that if Cross-Complainant Hermann is found liable on the Complaint, then his liability is directly attributable to the conduct of the Moving Cross-Defendants and members of an “advisory team”; “their joint decision to abandon the premium finance strategy”; and “[b]ut for the Cross-Defendants’ acts and omissions, the allegations against [Defendant] Hermann would not arisen.” (FACC, ¶ 69.)

“’The doctrine of comparative equitable indemnity is designed to do equity among defendants.’ The purpose of equitable indemnification is to avoid the unfairness, under the theory of joint and several liability, of holding one defendant liable for the plaintiff's entire loss while allowing another potentially liable defendant to escape any financial responsibility for the loss.” (Bailey v. Safeway, Inc. (2011) 199 Cal.App.4th 206, 212, quoting GEM Developers v. Hallcraft Homes of San Diego, Inc. (1989) 213 Cal.App.3d 419, 426.)

The FACC alleged the elements of equitable indemnity, which are: “(1) a showing of fault on the part of the indemnitor and (2) resulting damages to the indemnitee for which the indemnitor is . . . equitably responsible.” (Id. at p. 217.)

Moving Cross-Defendants first argue that they are also the plaintiffs in this matter; that they cannot be liable for injuries caused to themselves; and that this court has already held as such on 04/18/2022.

Cross-Complainant asserts that the Moving Cross-Defendants were named as plaintiffs in the Complaint in their capacities as trustees of the Family Trust and Legacy Trust, whereas the FACC alleges that Moving Cross-Defendants are liable in their individual capacities and not as trustees.

Moving Cross-Defendants claim that this is incorrect, pointing to allegations that they are liable as both individuals and as trustees. (See FACC, ¶¶ 56 & 57.) However, in the same paragraphs of the FACC, Cross-Complainant makes it clear that “Hermann is not suing Choe, Lee, or O’Connell in their capacities as Trustees of the Wilson Choe Trust, Family Trust, or Legacy Trust.” and “Hermann is not seeking any money damages from the Wilson Choe Trust, Family Trust, Legacy Trust or attempting to reach into the Trusts to access trust property in any way.” (Ibid.; see Civil Proc. Code, § 452 [pleadings should be construed liberally with view to substantial justice between parties].)

In any case, the allegations assert that the Moving Cross-Defendants are responsible in both their individual and trustee capacities. The allegations of individual capacity are sufficient to support the claim, even if the allegations of trustee capacity are not. (See Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119 [“A demurrer must dispose of an entire cause of action to be sustained.”].)

Moving Cross-Defendants also argue 1) that the FACC’s allegations amount to no more than claims “that Plaintiffs as individual gave themselves as trustees bad advice” or 2) that there were no allegations Cross-Defendant Choe took any actions other than to rely on the advice of other parties.

This is untrue as Cross-Defendant Choe was the trustee of the Family Trust while Cross-Defendants Lee and O’Connell were trustees of the Legacy Trust. Therefore, the FACC could be read to allege Cross-Defendant Choe taking actions with respect to the Legacy Trust and Cross-Defendants Lee and O’Connell taking action with respect to the Family Trust. Further, a trustee can be held personally liable to a trust for the trustee’s negligent or intentional acts. (See Prob. Code, §§ 18001-18002.)

In any case, these are matters of proof and evidence that are not suitable for determination at this stage. (See Association for Los Angeles Deputy Sheriffs v. County of Los Angeles (2021) 60 Cal.App.5th 327, 274 [“A demurrer tests the legal sufficiency of the complaint.”].)

It is sufficient that there facts as plead could make out a claim even if it might be difficult to prove that claim. (See San Diego Hospital Assn. v. Superior Court (1994) 30 Cal.App.4th 8, 12 [A demurrer admits “all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.”].)

Moving Cross-Defendants also argue that the FACC does not allege that any of them were involved in the same wrongful conduct as Cross-Complainant. However, the Cross-Defendants are not required to act in concert with Cross-Complainant Hermann.

“[U]nder the common law equitable indemnity doctrine a concurrent tortfeasor may obtain partial indemnity from cotortfeasors on a comparative fault basis.” (American Motorcycle Ass’n v. Superior Ct. (1978) 20 Cal.3d 578, 607-608.) Further, “it matters not whether the tortfeasors acted in concert to create a single injury, or successively, in creating distinct and divisible injury.” (Blecker v. Wolbart (1985) 167 Cal.App.3d 1195, 1203.) Cross-Complainant need only plead fault on the part of Cross-Defendants that caused damage to Cross-Complainant for which Cross-Defendants are equitably responsible.

Relying on Jaffe v. Huxley Architecture (1988) 200 Cal.App.3d 1188, Moving Cross-Defendants next argue that equitable indemnity was intended to correct potential injustice and is not appropriate in this case.

However, Jaffe v. Huxley Architecture is inapposite. There, the Court of Appeal held that “[s]ince the acts and omissions by the board which the Developers claim exacerbated the original defects were, in legal effect, the acts of the Association itself they could be asserted by the Developers against the Association under either the doctrine of comparative negligence or the doctrine of avoidable consequences. Thus, fairness to the Developers in this case does not depend on the availability of equitable indemnification. An apportionment of their culpability with regard to the acts and omissions of the board could be accomplished without the use of that doctrine and without suit being filed against the individual board members.” (Id. at pp. 1192-1193, citations omitted.)

The doctrines of comparative negligence and avoidable consequences are essentially defenses that a defendant may interpose against a plaintiff who is responsible for some or all of its own injuries.

In this case, the Plaintiffs are the individuals acting as trustees on behalf of the trust. To interpose these doctrines, Defendant/Cross-Complainant Hermann would have to allege that the Plaintiffs acting as trustees on behalf of the trusts injured the trusts (in other words, the trust caused some or all of their own damages).

However, that is not what Cross-Complainant Hermann is alleging in the FACC. Rather, he is alleging that the Moving Cross-Defendants in their individual capacity caused some or all of the damages that Defendant Hermann is accused of causing to the trusts. Thus, the doctrines of comparative negligence or avoidable consequences would not apply here.

Moving Cross-Defendants also argue that Cross-Defendant O’Connell’s status as an attorney bars equitable indemnity. However, Cross-Defendant O’Connell is being sued in his capacity as a business advisor, not as an attorney.

Goodman v. Kennedy (1976) 18 Cal.3d 335 is inapplicable because Cross-Complainant is not alleging that Cross-Defendant O’Connell owes any duty based on his role as an attorney.

Nor does this case arise out of a situation where successive attorneys are suing each other. (See Holland v. Thacher (1988) 199 Cal.App.3d 924, 930 [“Lawsuits between the successive attorneys of a client may engender conflict that will preclude or discourage the successor lawyer from participating in the case. . . . Several courts have observed that the allowance of cross-complaints would frequently result in the plaintiff's lawyer feeling he or she can no longer participate in the litigation.”].)

Second Cause of Action for Comparative Negligence and Third Cause of Action for Contribution

Cross-Complainant concedes that his crossclaims for comparative negligence and contribution are duplicative of the crossclaim for equitable indemnity. The court will therefore sustain the demurrer to these causes of action.

Cross-Complainant has not indicated that he intends to amend the FACC. The Court therefore reserves on the issue of leave to amend the cross-complaint.

Demurrer of Cross-Defendant Hollinger

The demurrer of Cross-Defendant Dana Hollinger to the first amended cross-complaint is OVERRULED as to the first cause of action, and SUSTAINED as to the second and third causes of action.

Cross-Defendant Dana Hollinger demurs to all three causes of action contained in the FACC.

First Cause of Action for Equitable Indemnity

Cross-Defendant Hollinger argues that a cause of action for equitable indemnity only lies between joint tortfeasors and the allegations of the FACC do not show that she is a joint tortfeasor.

As explained above, the FACC does not need to allege that the indemnitor and the indemnitee were involved in the same conduct. It is sufficient to plead that their separate acts united in causing an injury or series of injuries to the trust(s).

In this case, the Complaint alleges that Defendant/Cross-Complainant recommended the purchase of an unaffordable life insurance policy. The FACC pleads that any injury or out-of-pocket costs that Plaintiffs suffered by purchasing the allegedly unaffordable policy were significantly exacerbated when Cross-Defendant Hollinger pressured Plaintiff Choe and the trusts to surrender the Mass Mutual Policy and abandon the premium financing strategy. (See FACC, ¶ 67.)

Further, the allegation that parties may have acted intentionally does not bar equitable indemnity. As the Court of Appeal has held:

“Comparative equitable indemnification exists to correct potential injustice. . . . [T]he doctrine has been applied to allow a negligent defendant to shift the loss to an intentional tortfeasor. . . . Consistent with the Supreme Court's view, we conclude comparative fault principles [also] should be applied to intentional torts, at least to the extent that comparative equitable indemnification can be applied between concurrent intentional tortfeasors.”

(Baird v. Jones (1993) 21 Cal.App.4th 684, 689–690.)

Second Cause of Action for Comparative Negligence and Third Cause of Action for Contribution

Cross-Complainant has not indicated that he intends to amend the FACC. The Court therefore reserves on the issue of leave to amend the cross-complaint.

Moving Cross-Defendants and/or Cross-Defendant Hollinger shall give notice of this ruling.