RESPONDING PARTY(S): Plaintiffs Mihana Mitchell, as Trustee for the Restatement of the Trust Agreement for the Kent Sherwood 2011 Trust; Mihana Mitchell, an individual; and Chelsea Sherwood, an individual
There are three related cases arising over the right to insurance proceeds from a mobile home located at 30473 Mulholland Highway, No. 104, Agoura, CA 91301, which was destroyed by the Woolsey Fire in November 2018.
20STCP02196 (the “Interpleader Action”) is an interpleader action filed pursuant to Code of Civil Procedure § 386, by American Modern Home Insurance Group, Inc (“American”). Respondents are Vicki Laken (“Laken”) and the Kent Sherwood 2011 Trust (“the Trust”) through its Trustee, Mihana Mitchell (“Mitchell”). On May 10 and 11, 2022, this court held the Phase One Non-Jury trial to determine which party is entitled to recovery of the interpleaded funds. This court found that Laken is solely entitled to the interpleaded funds at issue, but that the funds are not to be released until there has been a final resolution or determination of the remaining claims.
20STCV39624 (the “Laken Action”) is an action filed by Vicki Laken against American and J.E. Brown & Associates based on the insurers’ failure to provide Plaintiff benefits under the insurance policy. Plaintiff alleges that American was not an innocent stakeholder in the interpleader action, and asserts claims for (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) negligence, (4) tort of another, and (5) declaratory relief. The action was stayed pending resolution of the Interpleader Action.
23VECV02522 (the “Mitchell Action”) is an action filed by Mihana Mitchell, as trustee, also against American and J.E. Brown & Associates based on the insurers’ having added Laken to the insurance policy. Mitchell asserts causes of action for (1) professional negligence, (2) breach of implied covenant of good faith and fair dealing, (3) bad faith breach of insurance contract, (4) breach of contract, and (5) intentional interference with expected inheritance.
Defendants (1) LDE, Inc. dba Ehrmann Insurance Agency and (2) Hull & Company LLC dba JE Brown & Associates Insurance Services, Inc., now separately demurrer to the First Amended Complaint. Plaintiffs opposed.
TENTATIVE RULING:
Defendants’ Demurrers to the First Amended Complaint are SUSTAINED in its entirety. Unless Plaintiffs can demonstrate a reasonable possibility of a successful amendment, vis-à-vis a sufficient offer of proof at the hearing, then leave to amend will be denied as to the First, Second, Third, and Fourth causes of action. No leave to amend is given as to the Fifth Cause of Action.
Defendant Ehrmann’s Motion to Strike is MOOT.
Moving parties are ordered to give notice, unless waived.
DISCUSSION:
Demurrer by Defendant Ehrmann
I. Judicial Notice
Pursuant to Defendant’s request, the court takes judicial notice of Exhibits 1 through 5.
Pursuant to Plaintiffs’ request, the court takes judicial notice of Exhibits 1 through 8.
II. Meet and Confer
The Declaration of Attorney Cynthia D. Kinney reflects that the meet and confer requirement was satisfied. (CCP § 430.41.)
III. Legal Standard
A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal. App. 4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (CCP § 430.30(a).) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.) Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Id.) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, 147 Cal.App.4th at 747.)
IV. Analysis
Defendant demurrers to each cause of action in the First Amended Complaint on the grounds they fail to state facts sufficient to constitute a cause of action. Each is addressed in turn.
A. Statute of Limitations as to First, Second, Third, and Fourth Causes of Action
First, Defendants argue all causes of action in the First Amended Complaint are time barred. The statute of limitations for professional negligence is two years. (See CCP § 339(1); Hydro-Mill Co. v. Hayward, Tilton & Rolapp Ins. Assocs., Inc. (2004) 115 Cal. App. 4th 1145, 1154.) “A cause of action for professional negligence does not accrue until the plaintiff (1) sustains damage and (2) discovers, or should discover, the negligence.” (Id. at 1161.) “It is the fact of damage, rather than the amount, that is the relevant consideration.... Consequently, the [insured] may suffer ‘appreciable and actual harm’ before he or she sustains all, or even the greater part, of the damages occasioned by the professional negligence.” (Van Dyke v. Dunker Aced (1996) 46 Cal.App.4th 446, 452, citation omitted.)
Here, Plaintiffs clearly knew in July of 2018 that the named insured on the Policy had been changed from Kent Sherwood to Vicki Laken. (FAC ¶¶ 39-42.) Thus, Plaintiffs certainly discovered the negligence at that time. Therefore, the dispositive question is: When did Plaintiffs sustain actual damage as a result of the alleged negligence of the Defendants, in order to commence the applicable statute of limitations?
Defendant argues Plaintiff suffered damage by no later than November 18, 2020, because “[b]y that time, the Interpleader Action and Laken’s Cross-Complaint had been filed and served, and the Trust had been forced to incur attorneys’ fees to defend those actions.” (Dem. 13: 22-24.)
Plaintiffs argue they did not yet sustain damages when American Modern filed the interpleader action on July 9, 2020. Instead, they contend actual injury did not occur until April 26, 2024, when this court entered a final judgment in Laken’s favor in the Phase 1 trial. Plaintiffs reason that “until this time, it was unknown whether the Trust would suffer damages as a result of the Defendants’ actions because there was a chance that the TRUST could have received all of the insurance funds in the Interpleader action.” (Opp. 6: 13-15.) Alternatively, Plaintiffs argue they did not sustain an actual injury until January 4, 2021, when they first incurred costs in the Interpleader action by filing a Cross-complaint. [FN 1]
Here, Plaintiffs allege that as “a result of Defendants' breach, Plaintiff has suffered damages based on the amount of the total loss dwelling coverage of $317,978.00 and the years of attorneys' fees and litigation costs in its attempt to properly receive the funds.” (FAC ¶ 80 [emphasis added].) Plaintiffs similarly allege the Trust “was forced to employ the services of an attorney in an attempt to secure payments to which it was entitled, all to the detriment of all Plaintiffs in an amount according to proof at the time of trial.” (Id. 106.) These attorney’s fee damages would have necessarily occurred between November 18, 2020, when the Trust was served with the Interpleader Action. (See D’s RJN, Exh. 4.) and January 4, 2001, when the Trust filed its Cross-complaint in that action. Therefore, as currently pled in the alternative, the statute of limitations began running at the very latest on that date (January 4, 2001).
This Court rejects Plaintiffs’ initial theory that it didn’t suffer actual damages from the Defendants’ action until April 26, 2024. They clearly had suffered an actual injury well before that date from their obligation to pay attorney’s fees and costs in the interpleader action.
[FN 2] (See Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal. 4th 739, 752 [holding plaintiff sustained “actual injury” in legal malpractice action against attorney when plaintiff expended defense costs].) [FN 3]
This means, even under the Plaintiffs’ alternative theory, that under a two-year statute of limitations, the Plaintiffs needed to file this case on or before January 4, 2023. It is a fact that this action wasn’t filed until June 8, 2023.
Where the “gravamen” of the lawsuit is for professional negligence and all causes of action are based on the same facts, courts will apply the two-year statute of limitations to all causes of action. (See Hydro-Mill Co., supra, 115 Cal. App. 4th at 1159.) Invoking that rule, Defendants argue the two-year statute of limitations applies to all causes of action. Plaintiffs concede in opposition that the two-year statute of limitations of section 339(1) applies to the First, Second, Third, and Fourth Causes of Action.
Plaintiffs contend, however, that the Fifth Cause of Action for Intentional Interference with Expected Inheritance is governed by a four-year statute of limitations under CCP § 337. They reason that because the “inheritance here was expected through the Trust document” (Opp. 9: 22-24), the fifth cause of action is “an action…founded upon an instrument in writing.” (CCP § 337(a).) The court need not address that argument now because, as addressed below, the IIEI cause of action fails on other grounds.
Accordingly, Defendant’s Demurrer to the First, Second, Third, and Fourth Causes of Action are SUSTAINED.
It is well established that generally speaking, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)
Plaintiffs did not address this possibility in their opposition pleadings. Hence, unless Plaintiffs can demonstrate such a reasonable possibility at the hearing, vis-à-vis a sufficient offer of proof, then leave to amend will be denied as to this cause of action.
B. Fifth Cause of Action for Intentional Interference with Expected Inheritance
Defendant argues the Fifth cause of action fails because IIED requires that the interference induce the testator—e.g. Kent Sherwood—to take some action to deprive Plaintiffs of their inheritance. In other words, to state a valid claim for IIED, Plaintiffs had to allege that Defendant Ehrmann induced Kent Sherwood to take some action that deprived Plaintiffs of their expected inheritance.
Defendant’s argument is consistent with the Court of Appeal’s statement of the tort in Beckwith v. Dahl (2012) 205 Cal. App. 4th 1039, which was the first court to recognize the tort in California. There, the Court explained that “an IIEI defendant must direct the independently tortious conduct at someone other than the plaintiff. The cases firmly indicate a requirement that ‘[t]he fraud, duress, undue influence, or other independent tortious conduct required for this tort is directed at the testator. The beneficiary is not directly defrauded or unduly influenced; the testator is.’ [Citation]. In other words, the defendant's tortious conduct must have induced or caused the testator to take some action that deprives the plaintiff of his expected inheritance.” (Beckwith v. Dahl (2012) 205 Cal. App. 4th 1039, 1057–58 [emphasis in original].)
Here, there are no allegations that Defendant Ehrmann directed his conduct at the testator, Kent Sherwood. Indeed, Mr. Sherwood was deceased by the time Defendant modified the policy. (FAC ¶¶ 13, 117.)
Accordingly, Defendant’s Demurrer to the Fifth Cause of Action is SUSTAINED, without leave to amend.
(3) Motion to Strike by Defendant Ehrmann
I. Legal Standard
A motion to strike lies either (1) to strike any irrelevant, false or improper matter inserted in any pleading; or (2) to strike any pleading or part thereof not drawn or filed in conformity with the laws of this state, a court rule or order of court. (CCP § 436.)
II. Analysis
Defendant moves to strike portions of the First Amended Complaint. Because Defendant’s Demurrer to the FAC is sustained in its entirety, the motion to strike is MOOT.
Demurrer by Defendant Hull & Company, LLC
I. Judicial Notice
Pursuant to Defendant’s request, the court takes judicial notice of Exhibits 1 through 5.
Pursuant to Plaintiffs’ request, the court takes judicial notice of Exhibits 1 through 8.
II. Meet and Confer
The Declaration of Attorney Alexis T. King reflects that the meet and confer requirement was satisfied. (CCP § 430.41.)
III. Analysis
Defendant Hull & Company demurrers to each cause of action in the First Amended Complaint. The arguments advanced by Defendant are the same as those made by Defendant Ehrmann in its demurrer. (See Ruling on Ehrmann Demurrer, supra.) This court therefore incorporates that ruling by reference here.
As discussed supra, the First through Fourth Causes of Action are barred by the two-year statute of limitations of CCP § 339(1) Additionally, the Fifth Cause of Action—to the extent not governed by a two year statute of limitations—also fails because Plaintiffs have not alleged interference directed at the testator.
Accordingly, Defendant’s Demurrer to the FAC is SUSTAINED in its entirety. It is well established that generally speaking, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)
Plaintiffs did not address this possibility in their opposition pleadings. Hence, unless Plaintiffs can demonstrate such a reasonable possibility at the hearing, vis-à-vis a sufficient offer of proof, then leave to amend will be denied as to this cause of action.
IT IS SO ORDERED.
Dated: September 23, 2024 ___________________________________
Randolph M. Hammock
Judge of the Superior Court
FN 1 - It must be noted that nothing prevented the Trust from including Defendant LDE, Inc. dba Ehrmann Insurance Agency in that Cross-complaint, at that time. That Cross-complaint clearly sues only American Modern Home Insurance Company and Vicki Laken for various causes of action in connection with the substitution of Kent Sherman by Laken as the beneficiary of the subject insurance policy. Frankly, this Court is unsure as to whether that Cross-complaint may still be viable at this time.
FN 2 - It might be fair to say that the Plaintiffs may have suffered increased or greater damages when this Court ruled against the Plaintiffs on April 26, 2024.
FN 3 - In opposition, Plaintiffs argue the Trust did not sustain actual injury by defending the interpleader action because its attorneys worked on contingency. The court need not address that argument at this time, because a demurrer tests the pleadings alone and not the evidence or other extrinsic matters. (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.) In the FAC, Plaintiffs allege they incurred “years of attorneys’ fees and litigation costs.” (FAC ¶ 80.)
