Case Name: Lorie Williams and Ronald Lamb v. David Kraft
Case No.: 17CV312746

I. Background

This action brought by Lorie Williams (“Williams”) and Ronald Lamb (“Lamb”) (collectively, “Plaintiffs”) against defendant David Kraft (“Defendant”), individually and dba as David Kraft, Attorney at Law, stems from legal representation provided in a prior lawsuit.

According to the allegations in the Amended Complaint, Plaintiffs employed Defendant, an attorney, to initiate a lawsuit (“Underlying Lawsuit”) to recover damages from a former employee, Andres Anguiano (“Anguiano”), who gained access to their home and stole $1,300 in cash and medications belonging to Lamb along, with multiple items of jewelry belonging to Williams. The Underlying Lawsuit was also brought against Anguiano’s girlfriend, Maria Madrigal (“Madrigal”) and Rosalba Velazquez (“Velazquez”), the owner of a jewelry business who bought the stolen jewelry from Anguiano.

Plaintiffs believed the jewelry was worth $50,000 and explained to Defendant they did not believe Anguiano had the financial ability to pay for the theft damages. Plaintiffs also explained to Defendant they were unfamiliar with Velazquez’s financial condition. Additionally, Plaintiffs relayed their apprehension about incurring extensive litigation costs and Defendant assured Plaintiffs it would not be the case. Defendant further assured Plaintiffs it would determine whether Velazquez had insurance and whether Velazquez and Anguiano had assets that could be used to satisfy a judgment.

Prior to trial, Plaintiffs received a settlement offer from Anguiano and Madrigal pursuant to which who agreed to pay $25,000 in a structured plan of $250 a month. Defendant urged Plaintiffs to reject the offer because it was wholly unreasonable and inadequate and expressed to Plaintiffs that they would recover more at trial. Plaintiffs claim Defendant concealed the fact that it did not make a reasonably diligent effort to locate any assets owned by Anguiano or Madrigal that could be available for levy in the event a satisfactory judgment or to confirm that Velazquez had liability insurance to indemnify her from a judgment.

Plaintiffs further claim Defendant failed to provide timely or reasonable advice about the likelihood of prevailing in the Underlying Lawsuit and did not provide an evaluation of the evidence that would support or detract from Plaintiffs’ claims at trial. Specifically, Plaintiffs allege Defendant failed to advise Williams that her testimony would be problematic due to the variance in her previous statements made in a police report and bankruptcy case.

As a result of the alleged concealments, Plaintiffs accepted Defendant’s advice and rejected the settlement offer. In the Underlying Action, Lamb was ultimately awarded $1,300 for the cash and medications that were stolen. In addition, Williams obtained a judgment against Velazquez and Anguiano for $3,000 and $23,000, respectively. Plaintiffs believe the measure of damages awarded was due to the deficiencies in Williams’ testimony regarding the valuation of the jewelry. Plaintiffs claim the deficiencies were avoidable because Defendant assured Plaintiffs it would obtain a competent witness experienced in the valuation of jewelry but failed to present such testimony.

Furthermore, Plaintiffs allege Defendant concealed the reasons for dismissing Madrigal from the Underlying Lawsuit and failed to disclose the difficulty of collecting judgments from Anguiano or Velazquez’s insurance. Finally, Plaintiffs allege Defendant failed to provide a reasonable opinion concerning the expected expenses of continuing to litigate the Underlying Lawsuit.

In sum, Plaintiffs allege Defendant failed to disclose the material facts articulated above to induce Plaintiffs to proceed to trial and incur substantial attorney fees for Defendant’s benefit. Plaintiffs further claim that but for Defendant’s concealments, they would have accepted the settlement offer from Anguiano and Madrigal and avoided incurring a substantial amount of attorney fees.

Based on the foregoing allegations, Plaintiffs assert the following causes of action: (1) fraudulent concealment ; (2) negligent misrepresentation (3) breach of fiduciary duties; and (4) breach of contract.

The demurrer is accompanied by a request for judicial notice. Plaintiff opposes the demurrer and Defendant filed a reply thereto.

II. Judicial Notice

Defendant asks the Court to take judicial notice of court records filed in the case of Williams v. Valazquez (Santa Clara County Superior Court, Case No. 13CV253995) and the Complaint filed in the current action. The requested documents from the first action include the complaint, decision, and attorney fees lien.

Evidence Code section 452, subdivision (d) states that the court may take judicial notice of “[r]ecords of any court of this state.” That provision permits the trial court to “‘take judicial notice of the existence of judicial opinions and court documents, along with the truth of the results reached—in the documents such as orders, statements of decision, and judgments—but [the court] cannot take judicial notice of the truth of hearsay statements in decisions or court files, including pleadings, affidavits, testimony, or statements of fact.’ [Citations.]” (People v. Woodell (1998) 17 Cal.4th 448, 455.)

Consequently, the Court will only take judicial notice of the existence of the subject documents and the truth of the results reached in any court order. The Court will not take judicial notice of the truth of hearsay statements in those documents. Additionally, the documents are relevant to arguments raised in the demurrer. (See People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2 [a “precondition” to the taking of judicial notice is that the documents “must be relevant to a material issue”].) The requested documents are therefore judicially noticeable.

Accordingly, Defendant’s request for judicial notice is GRANTED as to the existence of the subject documents and the truth of the results reached in any court order.

II. Merits of Demurrer

Defendant demurs to each cause of action in the Amended Complaint on two grounds: 1) uncertainty and 2) failure to state sufficient facts to constitute a cause of action. (See Code Civ. Proc., § 430.10, subds. (e), (f).)

A. Uncertainty

Defendant argues Plaintiffs’ referral to “Plaintiffs” collectively is uncertain because it cannot ascertain “which claims are being made by which Plaintiff.” (Mem., p. 6:23-27; 16-19) Defendant further claims, “Plaintiffs’ allegations are so muddled and unintelligible that the Defendant can barely parse out their meaning.” (Mem., p. 7:1-2.)

Demurrers for uncertainty are disfavored and will be sustained only where the allegations of the pleading are so unintelligible the defendant cannot reasonably respond them, i.e., he or she cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her. (Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) “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.” (Ibid.; see also Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139 fn. 2.)

While uncertainty is a disfavored ground for demurrer, a demurrer on this ground may lie where multiple claims are asserted against multiple defendants and the plaintiff has failed to identify which claims are asserted against which defendants. (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.) In such instances, if a defendant cannot reasonably ascertain which issues must be admitted or denied or what counts or claims are directed against it, the complaint will be deemed uncertain. (Ibid.)

Here, Defendant’s argument is unpersuasive as Plaintiffs’ claims are not unintelligible. Although imperfect at times, the pleading reflects both plaintiffs are alleging claims for intentional and negligent concealment of material facts, breach of fiduciary duties, and breach of contract based on a previous attorney-client relationship in the Underlying Action. As a result, Defendant can reasonably respond or determine what claims are against it.

Therefore, the demurrer to the each cause of action on the ground of uncertainty is OVERRULED.

B. Failure to State Sufficient Facts

“In reviewing the sufficiency of a complaint against a general demurer, we are guided by long settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. We also consider matters which may be judicially noticed.’” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213–14.)

1. First Cause of Action

Defendant raises multiple arguments in an effort to show no claim has been stated. The court observes that Defendant’s presentation of those arguments lack meaningful clarity and organization. Defendant initially recites the elements for fraud by concealment and proceeds to make a series of arguments without directly tethering them to particular elements and allegations in the pleading. The court will endeavor to ascertain what arguments correspond with particular aspects of the claim and elements.

With regard to its demurrer on failure to state sufficient facts to constitute a cause of action, Defendant makes the following arguments: (a) Plaintiffs knew the financial condition of Anguiano and Velazquez; (b) Plaintiffs are not damaged because the judgment from the Underlying Lawsuit is uncollectible; (c) Defendant was under no duty to conduct an asset search for Anguiano; (d) several allegations are meritless; (e) attorney fees incurred in the Underlying Lawsuit cannot form the basis of damages in the tort claims; (f) Plaintiffs obtained a favorable judgment in the Underlying Lawsuit; and (g) the damages alleged are speculative. These allegations will be addressed in turn.

The general elements of a fraud claim are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (or “scienter”); (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)

Where a fraud claim is predicated on concealment or nondisclosure, the following elements are essential: (1) the defendant had a duty to disclose the concealed or suppressed fact to the plaintiff; (2) the defendant intentionally concealed or suppressed the fact with the intent to defraud the plaintiff; and (3) the plaintiff was damaged as a result. (Jones v. ConocoPhillips (2011) 198 Cal.App.4th 1187, 1198.) Fraud must be pleaded with particularity and the doctrine of liberal construction of the pleadings does not apply. (Lazar, supra, 12 Cal.4th at 638.)

(a) Plaintiffs knew the financial condition of Anguiano

Defendant first argues there can be no concealment or suppression of facts that Plaintiffs admit they knew. Defendant asserts Plaintiffs knew Anguiano had no assets and knew Velazquez did not have insurance. This argument is unpersuasive. Plaintiffs allege Defendant agreed that he would independently determine whether either Anguiano or Velazquez had assets or insurance to pay any potential judgment. What Plaintiffs knew or believed is irrelevant to the fact that Defendant knew he did not investigate or perform due diligence on the availability of assets before recommending Plaintiffs reject the settlement offer from Anguiano and Madrigal. Plaintiffs allege they would not have proceeded to trial if they knew Defendant did not confirm there were assets to pay the judgment.

(b) Plaintiffs were not damaged because the judgment was uncollectible

With regard to its second argument, Defendant asserts Plaintiffs failed to allege the judgment in the underlying case is collectible. In support, Defendant cites Garretson v. Harold I. Miller (2002) 99 Cal.App.4th 563, 571-73 (Garretson) for the proposition that an attorney “who obtains a judgment that is not collectable because of the inability of the judgment debtor to pay the judgment has not committed legal malpractice.” (Mem., 9:6-8.) Defendant further argues the Garretson rule also applies to Plaintiffs’ claims of fraudulent concealment and breach of fiduciary duty and a “but for” test is applied to determine causation. (Mem., 9:11-16.) This argument is unpersuasive. The applicability of Garretson is unclear as Defendant has not explained how a standard of proof in a legal malpractice action applies to a pleading requirement for fraudulent concealment. Defendant cites no authority for the proposition that Plaintiffs must plead that a judgment is collectible in order to state a cause of action for fraud.

These arguments do not provide bases on which to sustain the demurrer to the first cause of action.
(c) Defendant was under no duty to conduct an asset search for Anguiano

Next, Defendant argues that “as a matter of law” it was under no duty to conduct an asset search for Anguiano and that this allegation cannot support a claim for fraudulent concealment. Also, it appears Defendant is arguing Plaintiffs knew Anguiano did not have the ability to pay damages and therefore, Defendant was relieved of the responsibility to conduct an asset search. Defendant provides no legal authority for any part of this argument. As such, the demurrer is unsubstantiated. (See People v. Dougherty (1982) 138 Cal.App.3d 278, 282 [a point asserted without authority in support is without foundation and requires no discussion].)

(d) Several allegations are meritless

Defendant next asserts there is no merit to Lamb’s claim that he did not know recovering a judgment against Anguiano would be difficult. Defendant refers to the lien from the Underlying Action to support his claim that Plaintiff Lamb has personal knowledge of this difficulty. The Court declines to impute knowledge from a judicially noticed document in this manner.

It appears Defendant is arguing it did not have to independently discover Williams’ prior statements regarding the value of her jewelry. This argument goes to the merits of the allegations and is inappropriate for demurrer. Plaintiffs allege Defendant knew or reasonably should have known about the prior statements. For purposes of a demurrer, this fact must be accepted as true. (Owens v. Kings Supermarket (1988) 198 Cal.App.3d 379, 383.) (Owens)

It also appears Defendant is arguing that Plaintiffs’ claim regarding the concealment of a reasonable opinion concerning the expected expenses of continuing to litigate the Underlying Lawsuit is meritless. Defendant argues Plaintiffs knew the attorney fees incurred in prosecuting the case would be expensive and they have not paid the fees in the first instance. Plaintiffs’ knowledge is a question of fact that is not properly resolved on demurrer. (See People v. Durham (1969) 70 Cal.2d 171, 181 [knowledge is a question of fact for the jury].)

These arguments do not provide bases on which to sustain the demurrer to the first cause of action.

(e) Attorney fees incurred in the Underlying Lawsuit cannot form the basis of damages in Plaintiffs’ tort claims

Defendant relies on Orrick Herrington & Sutcliff v. Superior Court (2003) 107 Cal.App.4th 1052 (Orrick Herrington) for the proposition that a plaintiff cannot plead or prove tort damages merely by seeking to recover fees paid to the alleged negligent attorney. The court in Orrick Herrington held that fees paid to an attorney in excess of the value of the legal services received are contract damages, not tort damages. While Defendant’s argument is well taken, Plaintiffs do not allege that that was the sole damage they incurred from Defendant’s alleged concealments. Plaintiffs allege they were also damaged by Defendant failing to advise Plaintiff Williams that her testimony would be problematic due to the variance in her previous statements which contributed to obtaining a reduced judgment in the Underlying Lawsuit.

Defendants additionally assert that fiduciary breach allegations that do not implicate a duty of confidentiality or loyalty, are merely duplicative of a negligence cause of action and thus, do not support a cause of action for fiduciary breach. (Mem., p. 12:4-7.) However, the import of this argument is unclear and further, Defendant cites a depublished opinion by the Second District, which may not be cited. (See Cal. Rules of Court, rule 8.115(a).) As such, the argument is unsubstantiated.

(f) Plaintiffs obtained a favorable judgment in the Underlying Lawsuit

Next, Defendant asserts Lamb recovered what he prayed for in the Underlying Lawsuit. Defendant also asserts that Williams’ claim that she would have settled the case is without merit and that she suffered no damages because she obtained a $23,000 non-dischargeable judgment.

These arguments are without merit because they relate to the substantive merits of the claim and it is not appropriate for demurrer. Plaintiffs adequately alleged they rejected the settlement offer in reliance of Defendant’s advice. Plaintiffs allege Defendant advised them to proceed to trial knowing he concealed the fact that there were problems with Williams’ testimony and knowing he did not determine whether Anguiano or Velazquez had assets or insurance to pay for the judgment.

Therefore, Plaintiffs allege sufficient facts showing how they are worse off than they would have been had they accepted the settlement offer at an earlier stage of the litigation.

(g) Damages alleged are speculative

Lastly, Defendant argues the damages alleged are too speculative to be recoverable. This argument is without merit. While it is true that speculative harm does not support a cause of action, there is no authority which provides that a plaintiff must expressly allege damages can be collected in order to state a claim for fraud. (See Thompson v. Halvonik (1995) 36 Cal.App.4th 657, 661-62.)

As none of the foregoing arguments have merit, the demurrer to the first cause of action on the ground of failure to state sufficient facts to constitute a cause of action is OVERRULED.

2. Second and Third Cause of Action

The second and third causes of action are predicated on the same facts as the first cause of action regarding Defendant’s legal representation in the Underlying Lawsuit. Plaintiffs claim Defendant negligently failed to disclose material facts resulting in a breach of its fiduciary duties.

Defendant recites elements and simply states that the claims fail for reasons already discussed with respect to the first cause of action, but these two claims have entirely different elements and Defendant has not elaborated on how its arguments apply to the different elements. Because the Court concluded the arguments for the first cause of action fail, it necessarily follows the demurrer to the second and third cause of action is not sustainable.

Therefore, the demurrer to the second and third cause of action on the ground of failure to state sufficient facts to constitute a cause of action is OVERRULED.

3. Fourth Cause of Action

The fourth cause of action is a breach of contract claim predicated on the same allegations as the breach of fiduciary duty and fraud claims. Plaintiffs claim Defendant breached the contract when it failed to exercise reasonable care, skill, and diligence in representing them in the Underlying Action. (Amended Complaint, ¶ 71.)

At best as the Court can discern, Defendant is arguing that Plaintiffs have failed to plead the existence of a breach, and references its previous arguments regarding the lack of damages. Specifically, Defendant argues Lamb and Williams knew of Anguiano’s financial condition and therefore, was under no duty to conduct an asset search. Defendant’s argument is based on a factual issue that is not properly resolved on demurrer. (See People v. Durham (1969) 70 Cal.2d 171, 181 [knowledge is a question of fact for the jury].)

A complaint for the breach of contract must include allegations of the following elements: (1) the existence of a contract, (2) plaintiff’s performance or excuse for non-performance, (3) defendant’s breach, and (4) damages to plaintiff therefrom.” (Acoustics, Inc. v. Trepte Construction Co. (1971) 14 Cal.App.3d 887, 913.)

Defendant’s argument is without merit. “In accepting employment to render legal services, an attorney impliedly agrees to use such skill, prudence, and diligence as lawyers of ordinary skill and capacity commonly possess, and he is subject to liability for damage resulting from failure so perform.” (Lucas v. Hamm (1961) 56 Cal.2d 583, 591.)

Here, Plaintiffs allege Defendant failed to exercise prudence and diligence when it failed to conduct an asset search after offering to do. For purposes of a demurrer, this fact must be accepted as true. (Owens 198 Cal.App.3d at 383.) Consequently, Defendant’s argument does not dispose of the claim in its entirety. (See PHII, supra, Cal.App.4th at p. 1682 [a demurrer does not lie to only a portion of a claim].)

Therefore, the demurrer to the fourth cause of action on the ground of failure to state sufficient facts to constitute a cause of action is OVERRULED.