Judge: Stephen P. Pfahler, Case: 23STCV24250, Date: 2024-03-11 Tentative Ruling


Case Number: 23STCV24250    Hearing Date: March 11, 2024    Dept: 68

Dept. 68

Date:  3-11-24

Case: 23STCV24250

Trial Date: Not Set

 

DEMURRER TO THE COMPLAINT

 

MOVING PARTY: Defendant, Allianz Life Insurance Company of North America

RESPONDING PARTY: Plaintiffs, Layne Kramer, et al.

 

RELIEF REQUESTED

Demurrer to the Complaint

·         2nd Cause of Action: Breach of Fiduciary Duty

·         3rd Cause of Action: Professional Negligence

 

Motion to Strike

 

SUMMARY OF ACTION

On an unspecified date, but sometime after November 2012 and presumably before November 2018, plaintiffs Layne Kramer, et al. invested in two annuity contracts provided by defendant Allianz Life Insurance Company of North America. The annuities were acquired with inheritance money following the passing of Layne Kramer’s father. Layne sought a source of income for the care of her elderly, ill mother. The transaction was arranged/brokered by insurance agent defendant David Neuman.

 

Again, presumably following the purchase of the annuities, Neuman was convicted on one count of felony embezzlement, and his insurance license revoked on November 13, 2018. A new agent was assigned by Allianz to Plaintiffs’ account. Notwithstanding the termination of any relationship between Neuman and Allianz, Neuman, as a continuing authorized agent on the account, was subsequently able to arrange for the disbursement of $330,000 from the annuities for personal use. Plaintiffs allege Allianz neither informed Plaintiffs of the prior conviction and loss of license by Neuman, nor properly inquired on the requested disbursements by Neuman.

 

On October 4, 2023, Plaintiffs filed their complaint for Financial Elder Abuse, Breach of Fiduciary Duty, Professional Negligence, and Receipt and Possession of Stolen Property (David Neuman only named defendant in this cause of action). David Neuman answered on December 12, 2023.

 

RULING

Demurrer: Sustained with Leave to Amend.

Defendant Allianz Life Insurance Company of North America (Allianz) brings the subject demurer to the second and third causes of action in the complaint for Breach of Fiduciary Duty and Professional Negligence. Allianz submits the demurrer on grounds that Allianz, as an insurer owed no fiduciary duty or professional duty of care to its insureds. Plaintiffs, Layne Kramer, Kramer Family Irrevocable Grant Trust by trustee Layne Kramer (Kramer) in opposition contends the operative complaint alleges a relationship beyond a conventional insurer, thereby demonstrating the undertaking of additional fiduciary and professional duties. Allianz in reply reiterates the lack of any basis of duty, and maintains the lack of sufficient facts distinguishing the conduct of Newman from Allianz.

 

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . . .” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated.  (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

 

“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616; Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139 [“[U]nder our liberal pleading rules, where the complaint contains substantive factual allegations sufficiently apprising defendant of the issues it is being asked to meet, a demurrer for uncertainty should be overruled or plaintiff given leave to amend.]

 

2nd Cause of Action: Breach of Fiduciary Duty

To plead a cause of action for breach of fiduciary duty, a plaintiff must allege facts showing the existence of a fiduciary duty owed to that plaintiff, a breach of that duty and resulting damage. (Pellegrini v. Weiss (2008) 165 Cal.App.4th 515, 524.) A fiduciary duty is founded upon a special relationship imposed by law or under circumstances in which “confidence is reposed by persons in the integrity of others” who voluntarily accept the confidence. (Tri-Growth Centre City, Ltd. v. Silldorf, Burdman, Duignan & Eisenberg (1989) 216 Cal.App.3d 1139, 1150; City of Hope National Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 386.) “A fiduciary or confidential relationship can arise when confidence is reposed by persons in the integrity of others, and if the latter voluntarily accepts or assumes to accept the confidence, he or she may not act so as to take advantage of the other's interest without that person's knowledge or consent.” (Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1101–02.)

 

In the insurance coverage context, “[a]n insurer is not a fiduciary, and owes no obligation to consider the interests of its insured above its own.” (Morris v. Paul Revere Life Ins. Co. (2003) 109 Cal.App.4th 966, 973; Village Northridge Homeowners Assn. v. State Farm Fire & Casualty Co. (2010) 50 Cal.4th 913, 929.) Allianz relies on this general presumption, as well as the lack of facts establishing any alternative basis demonstrating a voluntary undertaking of duties through the relationship of the parties. The contractual relationship established through the annuities insufficiently establishes such a basis. (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 30-31.)

 

Plaintiff relies on a characterization of the relationship with Allianz as one of investor advisor or principal to agent. (Hasso v. Hapke (2014) 227 Cal.App.4th 107, 140; Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1575-1576.) Plaintiff cites to argument regarding four factors potentially determining a fiduciary duty listed as: “(1) one party entrusts its affairs, interests or property to another; (2) there is a grant of broad discretion to another, generally because of a disparity in expertise or knowledge; (3) the two parties have an “asymmetrical access to information,” meaning one party has little ability to monitor the other and must rely on the truth of the other party's representations; and (4) one party is vulnerable and dependent upon the other.” (City of Hope National Medical Center v. Genentech, Inc., supra, 43 Cal.4th at pp. 387–388.) Consistent with the California Supreme Court, however, the court declines to find allegations fitting description of the four factors presented, especially within a contractual relationship, establishes the existence of fiduciary duty. (Id. at pp. 388-389.) Even considering the factors, the court finds the allegations in the operative complaint insufficiently articulate any contractual based fiduciary duty simply based on the purchase of the two annuity contracts.

 

The actual cause of action however dedicates allegations to the existence of a principal agent relationship, and therefore a basis for an imposed fiduciary duty. [Comp., ¶¶ 58-59.] Allianz generally describes the allegations as a conflation of facts without sufficient knowledge, while Plaintiff maintains the doctrine of imputed knowledge to the principal of the personal situation of Plaintiffs establishes a basis of agency liability effectively via the fiduciary duty with Neuman. [Id., ¶¶ 60-63.] (Hale v. Depaoli (1948) 33 Cal.2d 228, 232-233.)

 

The validity of the legal argument remains undisputed. Allianz carefully points out that the alleged transfer of funds by Neuman occurred after cessation of the relationship with the insurer, thereby effectively severing any principal agent relationship. [Comp., ¶¶ 32-38.] (Civ. Code, § 2343; Peredia v. HR Mobile Services, Inc. (2018) 25 Cal.App.5th 680, 691.) The court concurs.

 

The facts, as presented in the current complaint, insufficiently establish the basis for a continuing principal agent relationship via Neuman, and otherwise fails to present an alternative basis for the finding of a fiduciary duty against Allianz. The court therefore sustains the demurrer with leave to amend.

 

3rd Cause of Action: Professional Negligence

Allianz challenges the subject claim on the failure to allege an independent basis of duty separate and apart from the alleged conduct of Neuman. Plaintiff relies on the principal agent basis of liability for establishment of a basis of imposed duty.

 

“To state a cause of action for professional negligence, a party must show ‘(1) the duty of the professional to use such skill, prudence and diligence as other members of the profession commonly possess and exercise; (2) breach of that duty; (3) a causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the professional negligence.’” (Giacometti v. Aulla, LLC (2010) 187 Cal.App.4th 1133, 1137.) The operative complaint alleges the elements of the claim. [Comp., ¶¶ 70-73.] As addressed in the breach of fiduciary claim, the court finds the factually reliant but flawed agency relationship seeking to impose a duty of care after Allianz’s termination of the relationship with Neuman and disqualification of Neuman’s insurance license renders the demurrer valid. The demurrer is sustained with leave to amend.

 

 

Motion to Strike

Allianz moves to strike paragraphs 7-9, 25-27, and 49 of the Complaint on grounds that said claims improperly seek relief beyond the scope of the financial elder abuse statute. More specifically, Layne Kramer alleges wrongful conduct before turning 65 years old, as well as challenges to the specific types of conduct relied upon in support of the elder abuse claim. Plaintiffs in opposition maintains the motion sweeps too broadly, and all challenged claims are relevant. Any and all conduct before Plaintiff turned 65 should also remain as part of the action. Allianz in reply reiterates the lack of a valid claim for anything accruing prior to age 65, as well as the lack of actionable facts.

 

Allianz proactively contends the motion to strike is the proper means for challenging the subject claims, even though the arguments read as a substantive challenge to the basis of the cause of action itself in regards to the basis of liability. (PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682-1683 [While a demurrer is not the exclusive means to challenge a cause of action, a motion to strike generally applies to parts of a cause of action, claim for damages, or where the cause of action or primary right is barred as a matter of law.]; Quiroz v. Seventh Ave. Center (2006) 140 Cal.App.4th 1256, 1281 [“Where a whole cause of action is the proper subject of a pleading challenge, the court should sustain a demurrer to the cause of action rather than grant a motion to strike”].) Plaintiffs offer no apparent response to the procedural basis of the challenge. The court therefore considers the identified allegations within context of entire complaint.

 

The court only considers the identified paragraphs in the notice of motion, and declines to make a general finding of a barred claim for conduct occurring before Layne Kramer turned 65. [See Comp., ¶ 31.] Furthermore, such an argument regarding the propriety of a claim accruing before age 65 constitutes a legal challenge to the entire cause of action and therefore the subject matter of a demurrer. The motion to strike is denied as to this argument.

 

On the identified paragraphs, the court finds the allegations in paragraphs 7-9 are in no way strictly limited to the elder abuse claim and therefore factually improper. The motion is denied as to these items.

 

Paragraphs 25-27 on the other hand fail to allege elder abuse simply based on the improper recommendation of the annuity options due to the lack of liquidity and risk factors. (Welf. & Inst. Code, § 15610.30.) Nevertheless, like paragraphs 709, the subject paragraphs are not exclusively part of the elder abuse claim in that all prior paragraphs are incorporated. While such allegations could be a part of the fiduciary duty, and professional negligence causes of action, and Plaintiffs’ reliance on the allegations remains unclear as to the other causes of action, the court finds no basis for striking the general allegations based on a challenge under the elder abuse statute. The motion is therefore denied as to these paragraphs.

 

On paragraph 49, however, the court finds no basis for the subject claim within the scope of the elder abuse claim. (Welf. & Inst. Code, § 15610.30.) The motion to strike is therefore granted as to paragraph 49 only.

 

 

In summary, the demurrer is sustained with 30 days leave to amend as to the breach of fiduciary duty and professional negligence causes of action. The motion to strike is granted as to paragraph 49 only, and denied on the remainder.

 

Plaintiff may not add any new causes of action without leave of court. (Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023.) Material changes to the operative complaint seeking to alter or omit the material terms or dates may also be subject to a demurrer under the sham pleading standard. Given the case presents the first review of the action, the court declines to consider Plaintiffs’ potential inability to factually present a claim without omitting or altering certain key facts. (See Code Civ. Proc., § 430.41, subd. (e)(1); Youngman v. Nevada Irr. Dist. (1969) 70 Cal.2d 240, 245.) The court will consider potential alternative theories of liability upon the request of Plaintiffs, however.

 

The court will concurrently conduct the Case Management Conference.

 

Defendant Allianz to give notice.