Judge: Teresa A. Beaudet, Case: 24STCV25462, Date: 2025-05-21 Tentative Ruling

Case Number: 24STCV25462    Hearing Date: May 21, 2025    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

Plaintiff Melinda Lee (“Plaintiff”) filed this action against defendant City National Bank (“CNB”) on October 1, 2024, asserting claims for (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) tortious interference with contractual relations, (4) tortious interference with prospective economic relations, (5) negligence, and (6) unfair competition.

Plaintiff alleges she was, at relevant times, the co-owner of businesses called Hero Dogs Season One LLC (“HDS1”) and Nuriya Entertainment LLC (“Nuriya”) (“the Companies”) with her business partner, Simon Swart (“Swart”). Swart employed an accountant and business manager named Dean Avedon (“Avedon”). At relevant times, the Companies maintained accounts with CNB.

Plaintiff contends she was the victim of an embezzlement scheme perpetrated by Swart and Avedon. Although she reported her suspicions of embezzlement to CNB personnel, CNB negligently failed to investigate her allegations and took action to protect Swart and Avedon from Plaintiff’s scrutiny. As a result, Plaintiff suffered considerable financial, professional, and emotional injury.

On March 21, 2025, CNB demurred, arguing (1) Plaintiff’s claims are barred by issue preclusion, (2) Plaintiff lacks standing to bring her claims, (3) Plaintiff’s claims are barred by the applicable statutes of limitations, and/or (4) Plaintiff has failed to allege facts sufficient to state each of her claims.

Plaintiff filed and served an untimely opposition on May 15, 2025, six days prior to the hearing. CNB filed a reply the prior day, apparently upon service of the opposition, objecting to Plaintiff’s untimely filing.

            Procedural Matters

            Code of Civil Procedure section 430.41 requires a demurring party to meet and confer with its opponent in person or by telephone before filing. CNB’s counsel filed a declaration that establishes his office’s multiple good-faith attempts to meet and confer with Plaintiff’s counsel. (Hosp Decl., ¶¶ 9-17 and Exhs. 8-11.) Section 430.41 is satisfied.

            The Court declines to consider Plaintiff’s untimely opposition or materials supporting it. The papers were filed only one calendar day before the deadline for CNB’s reply, depriving CNB of a meaningful opportunity to respond.

            Evidentiary Matters

            CNB’s requests for judicial notice are granted.

            Discussion

Legal Standard

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. ((Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff's proof need not be alleged.” ((C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. ((Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” ((Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

Preclusion

“The tenets of res judicata prescribe the preclusive effect of a prior final judgment on the merits. [Citation.] The doctrine has two distinct aspects: claim preclusion and issue preclusion.  . . . Claim preclusion, often referred to as res judicata, provides that ‘a valid, final judgment on the merits precludes parties or their privies from relitigating the same ‘cause of action’ in a subsequent suit.’ [Citation.] Issue preclusion, or collateral estoppel, ‘ “precludes relitigation of issues argued and decided in prior proceedings.” ’ [Citation.]” ((City of Oakland v. Oakland Police & Fire Retirement System (2014) 224 Cal.App.4th 210, 227-228 (City of Oakland).) Both require that (1) a claim or issue raised in the present action is identical to a claim litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in in privity with a party to the prior proceeding. (Brinton v. Bankers Pension Services, Inc. (1999) 76 Cal.App.4th 550, 556.)

The theory of issue preclusion “thwarts the relitigation of issues previously argued and resolved in an earlier proceeding. For the doctrine to apply, the issue must be identical to an issue that was actually litigated and necessarily decided in a prior proceeding, and the decision therein must have been final and on the merits. Moreover, issue preclusion must be sought against a person who was a party, or in privity with a party in the earlier proceeding. [Citations omitted.] A prior judgment operates as a collateral estoppel on issues which were raised, notwithstanding that some factual matters or legal arguments which could have been presented in the prior case were not.” (Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1202 (overruled in part on unrelated issue).)

As to the latter two elements of preclusion, the Court finds Plaintiff is in privity with HDS1 and Nuriya, the plaintiffs in the Avedon Lawsuit. Her complaint relies on the premise that wrongs perpetrated against HDS1 and Nuriya were also perpetrated against her. There was also a final judgment in the Avedon Lawsuit; the Court has taken judicial notice of the Hon. Daniel S. Murphy’s Statement of Decision, rendered December 6, 2022. (See Hosp. Decl., Exh. 4 [“SOD”].)

The dispositive question is whether issues necessary to Plaintiff’s claims against CNB were actually litigated and necessarily decided on the merits in the Avedon Lawsuit. The Court finds they were.

In the Avedon Lawsuit, the Court found HDS1 and Nuriya failed to establish causes of action for professional malpractice, breach of fiduciary duty, and conversion against Avedon. (SOD, 15:14-22.) The Court based its ruling on a thorough review of the facts that showed that during what Plaintiff characterizes as Avedon and Swart’s embezzlement scheme, Swart, in consultation with Avedon, responsibly managed the finances of HDS1 and Nuriya, and Plaintiff was fully apprised of the Companies’ operations, except to the extent she failed or refused to participate in the businesses. (SOD, 2:8-9:2.) The Court also found that Plaintiff “failed to produce any credible evidence that Avedon’s actions damaged [HDS1] or Nuriya.” (SOD, 9:1-2.) All of these findings were actually litigated and necessary to the Court’s findings in Avedon’s favor in all causes of action in that complaint.

Here, all of Plaintiff’s claims against CNB depend on the theory that CNB assisted in an embezzlement scheme that injured Plaintiff, and that she would have uncovered the scheme if CNB had behaved responsibly. But the Court already determined in the Avedon Lawsuit that (1) the embezzlement scheme did not occur, (2) HDS1 and Nuriya were not injured, and (3)  Plaintiff was aware of HSD1 or Nuriya’s relevant operations.[1]

Plaintiff’s claims against CNB here depend on issues that were actually litigated and necessarily decided as to Plaintiff’s privies in prior litigation. Thus, based on the allegations in the FAC and judicially-noticed materials, her FAC fails and cannot be cured.

Statutes of Limitations

Plaintiff’s FAC is also time-barred on its face.

“[T]he statute of limitations exists to promote the diligent assertion of claims, ensure defendants the opportunity to collect evidence while still fresh, and provide repose and protection from dilatory suits once excess time has passed. [Citations.] The duration of the limitations period marks the legislatively selected point at which, for a given claim, these considerations surmount the otherwise compelling interest in adjudicating on their merits valid claims. [Citations.]” ((Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191.)

“The limitations period … runs from the moment a claim accrues. [Citations.] Traditionally at common law, a ‘cause of action accrues “when [it] is complete with all of its elements” – those elements being wrongdoing, harm, and causation.’ [Citations.] This is the ‘last element’ accrual rule: ordinarily, the statute of limitations runs from ‘the occurrence of the last element essential to the cause of action.’ [Citations.]” (Aryeh, supra, 55 Cal.4th at p. 1191-1192.)

The FAC, accepted as true, concedes that CNB wronged Plaintiff, at the latest, on October 22, 2018, which Plaintiff terms “the culmination of CNB’s failure to provide the necessary documentation that could have exposed Mr. Avedon’s fraudulent activities much earlier.” (FAC, ¶ 68.) Absent any tolling doctrine, Plaintiff’s claims accrued on that date. She filed her complaint here nearly six years later. All of her claims are long expired.

 “To align the actual application of the limitations defense more closely with the policy goals animating it, the courts and the Legislature have over time developed a handful of equitable exceptions to and modifications of the usual rules governing limitations periods.” (Aryeh, supra, 55 Cal.4th at p. 1192.) Plaintiff may suggest some equitable tolling doctrine preserves her claims. The allegations in the complaint and the noticed materials from the Avedon Lawsuit demonstrate that no tolling doctrine can do so.

The “‘most important’ [of the tolling doctrines] is the discovery rule.” (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397, citation omitted.) The discovery rule “postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action. [Citations.]” ((Ibid., italics added) In this regard, Plaintiff dates the discovery of her claims to a CNB manager’s testimony in the Avedon Lawsuit “that he failed to properly investigate Ms. Lee’s allegations of embezzlement”. (Id., ¶ 69.) But even assuming her characterization of the testimony is correct, the accrual of a cause of action does not date from the wrongdoer’s absolute confession. It dates from the moment when the plaintiff had reason to discover the wrong. Plaintiff alleges she already hotly disputed her access to the Companies’ records and the sufficiency of CNB’s responses to her inquiries in 2018. She had reason to investigate further, discover her cause of action, and sue, if necessary, in 2018.

Alternatively, the doctrine of fraudulent concealment may toll the statute of limitations while a defendant fraudulently conceals the accrual of a cause of action against him. ((See Regents of University of California v. Superior Court (1999) 20 Cal.4th 509 (superseded by statute on other grounds)) But Plaintiff does not allege facts showing CNB fraudulently concealed its alleged negligence for long enough that her claims would be timely. Moreover, among the issues litigated and decided in the Avedon Lawsuit was Plaintiff’s awareness of the operations of the Companies. The fraudulent concealment and delayed discovery rules share a crucial premise that defeats Plaintiff’s claims here: that the plaintiff invoking them has not actually discovered the claims she seeks to assert.

As well as being precluded, Plaintiff’s claims are time-barred on their face. Her complaint, read alongside the Court’s decision in the Avedon Lawsuit, demonstrates the complaint cannot be cured by amendment.

Conclusion

The demurrer is sustained without leave to amend. CNB is ordered to file and serve a proposed judgment within 10 days of the date of this Order.

DATED:  May 21, 2025                                 ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court