Case Name: Philip L.B. Scott, et al. v. Miller, Morton, Caillat & Nevis, LLP, et al.
Case No.: 17-CV-311567

I. Background

Plaintiffs Philip L.B. Scott (“Scott”) and Andre Hary, his guardian ad litem and “successor trustee of the Philip L.B. Scott Declaration of Trust Agreement dated December 15, 2006,” (collectively, “Plaintiffs”) brought this action against defendants Miller, Morton, Caillat & Nevis, LLP and its attorneys “SCA,” “DIK,” and “JLK” (collectively, “Defendants”). (Second Amended Complaint (“SAC”), ¶¶ 14-15.) In brief, Plaintiffs allege Defendants mishandled a lawsuit that Scott’s former business partner brought against him for breach of fiduciary duty after Scott tried to unilaterally take over their failing self-storage business.

For context, Walter E. Parks (“Parks”) and his wife began operating AAA Mini Storage in Watsonville, California in 1989. (SAC, ¶ 24.) When they divorced in 1999, Parks bought out his wife’s interest and refinanced the business by taking out a loan for $1,250,000 secured by a deed of trust on the two parcels of land used for storage. (SAC, ¶ 24.) In 2007, Parks took out another loan from a different bank in the amount of $270,000, which was secured by a deed of trust on the same two parcels of land. (SAC, ¶ 26.)

A mortgage broker introduced Scott to Parks in 2009, when the second loan came due, because he needed additional collateral to extend or refinance the second loan. (SAC, ¶ 27.) Scott agreed to co-sign the loan, now in the amount of $320,000, and provided real property he owned in Campbell as additional security. (SAC, ¶ 27.) In exchange, Parks gave Scott a 25 percent interest in the business, including a 25 percent interest in one of the two parcels of land used for storage, although both believed Parks was giving Scott a 25 percent interest in both parcels of land. (SAC, ¶ 28.) Plaintiffs claim the mortgage broker who introduced them prepared a deed for a 25 percent interest in only one of the parcels of land. (SAC, ¶ 28.)

In 2010, Parks defaulted on both loans. (SAC, ¶¶ 29-30.) Scott learned of the defaults in February 2011 and engaged Defendants to assist him with some form of self-help. (SAC, ¶ 32.) Scott devised a plan to take over the business by creating Willscott LLC and assigning the second deed of trust to this entity so he could take control of AAA Mini Storage and exclude Parks. (SAC, ¶ 32.) In the meantime, Parks was working on his own reorganization plan to save the business. (SAC, ¶ 33.) Before Parks could implement his reorganization plan, Scott paid off the second loan, and the bank assigned the second deed of trust to his newly-formed entity, Willscott LLC. (SAC, ¶ 34.) Parks filed for bankruptcy, but Scott and Defendants obtained relief from the bankruptcy stay and sold the storage property at a trustee’s sale. (SAC, ¶ 34.) In July 2011, Willscott LLC purchased the property by making a credit bid at the trustee’s sale. (SAC, ¶ 34.)

Parks sued Scott for breach of fiduciary duty based on the takeover. (SAC, ¶ 35.) Scott filed a cross-complaint against Parks and the mortgage broker for indemnity, contribution, negligence, breach of fiduciary duty, and fraud. (SAC, ¶ 43.) Scott lost at trial and became liable for a judgment in the amount of $1,382,700. (SAC, ¶ 50.) Plaintiffs allege Defendants erred in the underlying litigation by taking the position that Scott was a creditor who did not owe Parks any fiduciary duties, as distinct from a business partner. (SAC, ¶ 36.) Plaintiffs allege Defendants should have known Scott and Parks were in a partnership, as distinct from a creditor-debtor relationship, because Scott and Parks believed they effectuated a transfer of both an interest in the business and the parcels of land. (SAC, ¶ 36.) Plaintiffs claim Defendants failed to propound written discovery and designate an expert to appraise the real property at issue, and that their assessment of the business relationship, and thus ultimate liability, resulted in a trial rather than a settlement for an amount far less than the damages awarded by the jury. (SAC, ¶¶ 46-47.)

Plaintiffs assert causes of action against Defendants for: (1) professional negligence; (2) breach of contract; (3) breach of fiduciary duty; and (4) financial elder abuse. Currently before the Court is Defendants’ demurrer to the third and fourth causes of action on the ground of failure to state facts sufficient to constitute a cause of action. (See Code Civ. Proc., § 430.10, subd. (e).)

The Court notes that Defendants initially state, in an introductory sentence in their “Notice of Demurrer,” their demurrer is also on the ground the SAC is uncertain. (Notice of Demurrer at p. 2:10-12.) Uncertainty is a statutory ground for demurring to a pleading that is uncertain, ambiguous, or unintelligible. (See Code Civ. Proc., § 430.10, subd. (f).) Even so, immediately after this introduction, Defendants identify each ground for their demurrer in a separate paragraph, as required by rule 3.1320(a) of the California Rules of Court, and state the demurrer is to the third and fourth causes of action on the ground of failure to state sufficient facts, citing only Code of Civil Procedure section 430.10, subdivision (e); they do not separately identify uncertainty as a ground for their demurrer to the third and fourth causes of action. (Notice of Demurrer at p. 2:14-23.) Similarly, Defendants do not mention uncertainty in their memorandum of points and authorities and cite only Code of Civil Procedure section 430.10, subdivision (e). (See Cal. Rules of Court, rule 3.1113(b) [required contents of memorandum of points and authorities].) Defendants do not clearly advance uncertainty as a ground for their demurrer. Thus, the Court does not construe the demurrer as being predicated on that particular statutory ground.

II. Demurrer

A. Third Cause of Action

The central argument in support of Defendants’ demurrer to the third cause of action for breach of fiduciary duty is that Plaintiffs cannot assert causes of action for breach of fiduciary duty and professional negligence at the same time. Their analysis, however, is not a model of clarity. To the extent Defendants take the position that a plaintiff simply cannot assert both theories as a matter of law, their argument is unsubstantiated because they do not cite and the Court is otherwise unaware of any authority espousing such a rule. (See, e.g., Charney v. Cobert (2006) 145 Cal.App.4th 170, 172 [treating claims for malpractice and breach of fiduciary duty as independent of one another].)

Defendants otherwise take the position that the third cause of action is duplicative of the first cause of action for malpractice. Defendants’ position is problematic for the following reasons.

First and foremost, Defendants do not explain or cite authority demonstrating their position that the causes of action are duplicative justifies sustaining a demurrer on the ground of failure to state facts sufficient to constitute a cause of action. While Defendants identify failure to state sufficient facts as the ground for their demurrer, they proceed as though duplication is itself a statutory ground.

As the Sixth District has explained, the fact that causes of action are duplicative “is not a ground on which a demurrer may be sustained.” (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 889-90, citing Code Civ. Proc., § 430.10.) For context, “[a] quarter-century ago the code authorized a motion to strike ‘irrelevant and redundant’ matter from a pleading. [Citation.]” (Id. at p. 890, original italics.) “But the parallel provision now empowers the court only to “[s]trike out any irrelevant, false, or improper matter inserted in any pleading.” (Ibid., quoting Code Civ. Proc., § 436, subd. (a).) “The elimination of the reference to redundancy may have rested on the irreproachable rationale that it is a waste of time and judicial resources to entertain a motion challenging part of a pleading on the sole ground of repetitiveness. (See Civ. Code, § 3537 [‘Superfluity does not vitiate.’].)” (Ibid.) “This is the sort of defect that, if it justifies any judicial intervention at all, is ordinarily dealt with most economically at trial, or on a dispositive motion such as summary judgment.” (Ibid.)

The Court acknowledges the Fourth District has affirmed decisions by lower courts sustaining demurrers to duplicative causes of action. (Palm Springs Villas II Homeowners Assn. v. Parth (2016) 248 Cal.App.4th 268, 290, citing Award Metals, Inc. v. Super. Ct. (1991) 228 Cal.App.3d 1128, 1135 [finding cause of action “add[ed] nothing to the complaint by way of fact or theory.”].) Yet, Defendants do not cite these decisions or discuss the soundness of their reasoning and applicability here. (See, e.g., Award Metals, supra, 228 Cal.App.3d at 1135 [holding demurrer lies to duplicative cause of action], citing Rodrigues v. Campbell Industries (1978) 87 Cal.App.3d 494, 498 [holding trial court properly sustained demurrer without leave to amend to cause of action “combin[ing] all the preceding causes, alleging they are joint and concurrent causes of plaintiffs’ damages” because it was not a recognized cause of action].) Accordingly, the Court will not follow these decisions. The demurrer therefore is not sustainable on the basis the third cause of action is duplicative.

Additionally, even assuming duplication was a ground for demurrer, the disjointed assertions Defendants advance in support of their argument lack merit and do not clearly or logically show the causes of action are in fact duplicative.

First, Defendants assert Plaintiffs must allege they breached a fiduciary duty, not a professional duty, to state a cause of action for breach of fiduciary duty. (Mem. of Pts. & Auth. at p. 9:4-5.) In other words, Defendants appear to take the position that the attorney-client relationship is somehow distinct from a fiduciary relationship. It is true that the existence of a fiduciary relationship is an essential element of a claim for breach of fiduciary duty. (Meister v. Mensinger (2014) 230 Cal.App.4th 381, 395 [“The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach.”].) But the cases Defendants cite do not actually support their characterization of the attorney-client relationship as something other than a fiduciary relationship. Rather, the cases they cite specifically state “‘[t]he relation between attorney and client is a fiduciary relation of the very highest character, and binds the attorney to most conscientious fidelity . . . .’” (Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1102, quoting Cox v. Delmas (1893) 99 Cal. 104, 123; accord Jalali v. Root (2003) 109 Cal.App.4th 1768, 1779; Buehler v. Sbardellati (1995) 34 Cal.App.4th 1527, 1544 [An attorney owes his or her client a “fiduciary, professional duty . . . .”].) Moreover, even crediting Defendants’ assertion as to the distinctness of these relationships and their attendant duties, it is unclear how this lends support to their argument that the third cause of action is duplicative.

Next, Defendants state “‘[a] breach of fiduciary duty is a tort claim entirely distinct from a malpractice claim based on professional negligence.’ [Citations.]” (Mem. of Pts. & Auth. at p. 10:5-6.) Defendants misattribute this quotation, which is actually from a depublished opinion by the Second District in Broadway Victoria, LLC v. Norminton, Wiita & Fuster (2017) 217 Cal.Rptr.3d 414, 419, which may not be cited. (See Cal. Rules of Court, rule 8.115(a).) Defendants then present an out-of-context quote from a published opinion. Specifically, Defendants cite Buehler for the proposition that claims for legal malpractice and breach of fiduciary duty are duplicative. Yet, the appellate court explicitly declined to address that issue when considering whether a plaintiff was entitled to separate instructions for his causes of action for malpractice and breach of fiduciary duty, finding any error in failing to instruct the jury on the latter was harmless. (Buehler, supra, 34 Cal.App.4th at 1544.) In reaching this conclusion, the appellate court noted “there is authority for the view the breach of fiduciary duty theory is separate from the professional negligence theory,” but ultimately found the error was harmless because the trial court instructed the jury on the attorney’s duty as relevant to both theories of liability and allowed the plaintiff to argue both theories before the jury such that he was afforded consideration of all theories alleged. (Id. at p. 1545, fn. 9.) In sum, Defendants misattribute one quotation and misrepresent the precedential value of the other, and in any event, do not explain how the distinct nature of the legal theories renders the causes of action duplicative.

Finally, Defendants also state “[w]here the injury is suffered by reason of an attorney’s professional negligence, the gravamen of the claim is legal malpractice, regardless of how it is pled” because both causes of action are based on the same “‘primary right.’” (Mem. of Pts. & Auth. at p. 9:12-19.) Defendants’ analysis is underdeveloped.

Defendants do not address how California’s primary rights theory is relevant here. California courts apply the primary rights theory “[t]o determine whether two proceedings involve identical causes of action for purposes of claim preclusion.” (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797.) Defendants do not, however, advance any claim preclusion arguments. Moreover, their reliance on this theory is misplaced because “for purposes of applying the doctrine of [claim preclusion], the phrase ‘cause of action’ has a more precise meaning: The cause of action is the right to obtain redress for a harm suffered, regardless of the specific remedy sought or the legal theory (common law or statutory) advanced.” (Id. at p. 798.) This use of the term “cause of action” is distinct from the way it is commonly used to refer to different counts (based on different legal theories) of the same cause of action for pleading purposes. (Ibid.) Consequently, a finding that a cause of action is identical based on the primary rights theory for purposes of claim preclusion does not demonstrate two theories of liability presented in two separate causes of action or counts are identical for pleading purposes.

Moreover, Defendants appear to conflate the concept of an “injury” with the concept of a “primary right.” To be fair, “under the primary rights theory, the determinative factor is the harm suffered.” (Boeken, supra, 48 Cal.4th at p. 798, citing Agarwal v. Johnson (1979) 25 Cal.3d 932.) Nevertheless, “California’s primary rights theory can be complicated, and [courts] have cautioned against wielding the ‘primary right brush . . . too carelessly’” because “‘different primary rights may be violated by the same wrongful conduct.’” (Furnace v. Giurbino (9th Cir. 2016) 838 F.3d 1019, 1024, quoting San Diego Police Officers’ Assn. v. San Diego City Employees Ret. System (9th Cir. 2009) 568 F.3d 725, 734.)

For the reasons set forth above, Defendants fail to substantiate their argument that the third cause of action is duplicative of the first cause of action. Even if they had, a demurrer is not sustainable on that basis. Defendants do not otherwise explain how their argument supports their demurrer on the ground of failure to state sufficient facts or argue Plaintiffs fail to allege an essential element of their claim. Consequently, the demurrer to the third cause of action is OVERRULED.

B. Fourth Cause of Action

The fourth cause of action is for financial elder abuse.

To state a cause of action for financial elder abuse, a plaintiff must allege with particularity: (1) he or she was an “elder” at the time of his or her injury; (2) the defendant took, secreted, appropriated or retained, or assisted another in taking, secreting, appropriating or retaining, real or personal property; and (3) the defendant wrongfully used the property or intended to defraud the elder plaintiff. (Welf. & Inst. Code, § 15610.30; see also Covenant Care, Inc. v. Super. Ct. (2004) 32 Cal.4th 771, 790 [a plaintiff must plead an elder abuse claim with particularity].)

Defendants argue “Plaintiffs’ claim for financial elder abuse essentially boils down to an allegation that [Scott] paid Defendants attorney’s fees for allegedly negligent legal advice and representation and that he did so at the age of 88,” but that professional negligence alone does not constitute a taking for a wrongful use or with intent to defraud. (Mem. of Pts. & Auth. at p. 13:16-21.)

As Defendants articulate, Plaintiffs’ claim apparently “boils down” to a claim based on their alleged professional negligence, but Plaintiffs do not actually allege what property Defendants took. For example, Plaintiffs do not allege Defendants took money from Scott in the form of attorney’s fees. Instead, Plaintiffs broadly allege Defendants acted for their own financial benefit. This is insufficient for purposes of pleading a statutory elder abuse claim with particularity.

Additionally, even presuming Plaintiffs’ claim is in fact based on the payment of attorney’s fees, they fail to allege with particularity Defendants wrongfully used the attorney’s fees or accepted the fees with the intent to defraud. Plaintiffs allege in a conclusory manner Defendants acted unconscionably, intentionally, and with reckless disregard for Scott’s rights and safety. (SAC, ¶¶ 65-66.) Plaintiffs do not allege, either in a conclusory manner or with particularity, Defendants took money with the intent to use it for some unauthorized purpose. Plaintiffs do not allege Defendants simply stole money without intending to provide legal services. To the extent Plaintiffs’ theory is that Defendants intended to defraud Scott or wrongfully took his property because they accepted attorney’s fees for unnecessary legal services arising from the position they took in the underlying litigation, they do not clearly plead such a theory with particularity.

As an example, courts have held that an attorney engaged in financial elder abuse when he facilitated a fraudulent loan transaction. (Wood v. Jamison (2008) 167 Cal.App.4th 156, 158-59.) The attorney received a finder’s fee for brokering a loan secured by an elderly woman’s home, the proceeds of which went entirely to a third party who falsely claimed to be her nephew and took, in addition to the loan proceeds, thousands of dollars from her. (Ibid.) Plaintiffs do not allege a similar taking for a wrongful use or with intent to defraud.

In conclusion, Plaintiffs do not plead facts with particularity sufficient to state a cause of action for financial elder abuse. The demurrer to the fourth cause of action is SUSTAINED with 10 days’ leave to amend.