Case Name: Maria Estella Courtis v. Barbara L. Wright, individually and as trustee of the Callahan Family Trust A dated April 9, 1987 as amended
Case No.: 16-CV-301611

Currently before the Court is the motion by defendant Barbara L. Wright (“Defendant”), individually and as trustee of the Callahan Family Trust A dated April 9, 1987 as amended, for judgment on the pleadings.

Factual and Procedural Background

This is an action brought by plaintiff Maria Estella Courtis (“Plaintiff”) against Defendant for constructive trust, breach of trust and related fiduciary duties under Probate Code section 16000, et seq., and unjust enrichment. Plaintiff alleges that Carol L. Callahan (“Carol”) and Dale E. Callahan (“Dale”) were the settlors and original trustees of Callahan Family Trust A (“Trust A”), which “was administered in Santa Clara County State of California (Case No. 1-13-PR-173670).” (Complaint, ¶¶ 1 and 3.)

After Dale passed away on May 13, 2007, Carol became the sole income beneficiary of Trust A and continued to serve as the trustee of Trust A. (Complaint, ¶¶ 1, 3, and 5.) Under the terms of the trust, Carol “could invade the principal of Trust A if necessary and had the power to revoke and or amend Trust A which consisted of [her] interest in the community property of the Settlors and [her] separate property.” (Id. at ¶ 5, emphasis omitted.) “According to the terms of the Third Amendment to the Trust, dated September 25, 2012, upon Carol’s death the Trust A was to be distributed as follows: [¶] A. The sum of $25,000 to Edward J. Kikta and if he failed to survive the surviving Settlor, the gift shall lapse; [¶] B. The sum of $50,000 to [Plaintiff]; [¶] C. The sum of $50,000 to The Arthur A. Dugoni Dental School, University of Pacific, San Francisco, California; [¶] D. One half (1/2) of the balance to Settlor’s daughter [Defendant], and; [¶] E. One half (1/2) of the balance to Settlor’s daughter Lee Ann Callahan.” (Ibid., emphasis omitted.)

On October 11, 2012, Carol called her attorney and informed him that “she wanted to modify her Living Trust to leave her long-time friend and caregiver, [Plaintiff], one-third (1/3) of the Trust A assets.” (Complaint, ¶ 6, emphasis omitted.) Carol’s counsel advised her about the special requirements imposed under California law when a person wants to leave part of an estate to a caregiver and the legal consequences of signing such a document. (Id. at ¶ 7.) Counsel also told Carol that “he did not know any attorneys would be willing to meet with [her] at her home and sign a certificate of independent review in this situation, especially in view of the highly likely litigation which [might] ensue upon [her] death.” (Id. at ¶ 8.) As an alternative, Carol’s counsel “discussed with [Carol] leaving instructions to [her] two daughters to give [Plaintiff] one-third of Trust A assets.” (Id. at ¶ 9, emphasis omitted.) Carol indicated that she trusted, Defendant, “to follow up on this bequest to [Plaintiff] and informed her attorney that, because of that trust, she was considering the idea of leaving two-thirds (2/3) of the Trust A assets to [Defendant] and one-third to her other daughter, Lee Ann Callahan and would discuss this with [Defendant].” (Ibid., emphasis omitted.)

Following this conversation, Carol and Defendant “discussed this idea and Carol agreed to amend her trust to provide that Defendant would receive two-thirds (2/3) of Trust A and Defendant in turn agreed to transfer that additional one-third (1/3) of the Trust A to [Plaintiff] in keeping with her mother’s wishes.” (Complaint, ¶ 9, emphasis omitted.)

On October 15, 2012, Carol called her counsel and told him that “after having a discussion with [Defendant] she wanted to modify her trust to leave … Defendant two thirds of the Trust A assets an Defendant’s sister, Lee Ann Callahan, one-third of the Trust A assets.” (Complaint, ¶ 10, emphasis omitted.) Carol also told her counsel that “she would hand write her wishes on a piece of paper so that there would be a written record of her intentions in case something happened to her before a more formal amendment to Trust A could be finalized.” (Ibid., emphasis omitted.)

Carol passed away on October 16, 2012, before she was able to prepare a formal document amending Trust A. (Complaint, ¶¶ 4 and 11.) Upon Carol’s passing, Defendant became the sole trustee of Trust A. (Id. at ¶¶ 1 and 3-4.)

On December 2, 2013, Defendant filed a petition in the probate division of the Santa Clara County Superior Court “to confirm that a handwritten document dated October 16, 2012 … would in fact constitute an amendment to [Trust A] and would thereby revoke the provisions of the Third Amendment dated September 25, 2012 and as a result distribute Trust A, one-third (1/3) to Lee Ann Callahan and two-thirds (2/3) to [Defendant].” (Complaint, ¶ 12.) The probate court issued an order confirming the validity and construction of the handwritten document as a trust amendment on January 2, 2014. (Id. at ¶ 13.)

During the next two years, Defendant as trustee of Trust A “made various distributions to … Plaintiff in fulfillment of the agreement that [she] entered into with her mother that … Plaintiff was to receive one-third (1/3) of the total trust estate.” (Complaint, ¶ 14.) During that time period, Defendant, on more than one occasion, acknowledged her agreement with Carol and “provided Plaintiff with a Schedule K-1 partnership tax form showing Plaintiff’s share of the tax liability on the income from the Palo Alto property for the 2013 tax year.” (Ibid.)

In December 2015, Defendant stopped corresponding with Plaintiff and would not answer her phone calls. (Complaint, ¶ 15.)

The following month, Plaintiff discovered that Defendant had closed a Wells Fargo bank account held in the name of Trust A containing $101,378.96. (Complaint, ¶ 15.) Plaintiff “was also on title to that account under a Power of Attorney granted to her.” (Ibid.) The account funds were transferred to Defendant’s personal account on January 15, 2016. (Ibid.) Plaintiff alleges that the funds in the Wells Fargo bank account belonged to Trust A and should have been distributed pursuant to Defendant’s agreement with Carol, whereby Plaintiff would have received one-third of the subject funds. (Ibid.)

Plaintiff further alleges that “Trust A also has an interest in certain commercial property located in Palo Alto, California,” which is held by Stanford Financial Square. (Complaint, ¶ 16.) Trust A has a 5.392 percent interest in Stanford Financial Square. (Ibid.) Since 2013, “[n]either the partnership interest nor any income from that property … has been distributed to Plaintiff.” (Ibid.) Plaintiff also alleges that Trust A contains additional assets, in which she has an interest, that have not been distributed. (Id. at ¶ 17.)

Based on the foregoing, Plaintiff filed a complaint against Defendant, alleging causes of action for: (1) constructive trust; (2) breach of trust and related fiduciary duties under Probate Code section 16000, et seq.; and (3) unjust enrichment.

On October 19, 2017, Defendant filed the instant motion for judgment on the pleadings pursuant to Code of Civil Procedure section 438. Plaintiff filed papers in opposition to the motion on January 22, 2018. On January 30, 2018, Defendant filed a reply.

Discussion

I. Procedural Issue

As articulated above, Defendant brings the instant motion under Code of Civil Procedure section 438. Pursuant to this statute, a defendant may move for judgment on the pleadings as to the entire complaint or any cause of action therein on the grounds of failure to state sufficient facts to constitute a cause of action or lack of subject matter jurisdiction. (Code Civ. Proc., § 438, subds. (c)(1)-(2).)

Defendant’s motion suffers from anomalies in terms of identifying the subject of the motion. Defendant indicates she is moving for judgment on the pleadings of the complaint (Ntc. of Mtn., pp. 1:27-2:2), thereby denoting she is moving for judgment on the pleadings to the pleading as a whole. However, at times, Defendant’s memorandum of points and authorities suggests an intention to move for judgment on the pleadings as to individual causes of action. (D’s Mem. Ps. & As., pp. 4:1-7 and 6:26-9:10.) The distinction is significant because a motion attacking the entire pleading should be denied if any cause of action is not vulnerable to objection. (See Lord v. Garland (1946) 27 Cal.2d 840, 850 [“a demurrer which attacks an entire pleading should be overruled if one of the counts therein is not vulnerable to the objection”]; see also Fire Ins. Exchange v. Superior Court (2004) 116 Cal.App.4th 446, 452 [“A motion for judgment on the pleadings is the functional equivalent of a general demurrer.”].)

In view of the nature of the arguments advanced in support of the motion, the Court will treat the instant motion as seeking judgment on the pleadings as to each cause of action of the complaint on the grounds of lack of subject matter jurisdiction and failure to state sufficient facts to constitute a cause of action. Defendant is admonished to clearly and properly identify the subject matter of any given motion filed by her in the future.

II. Substantive Merits of the Motion

A. Lack of Subject Matter Jurisdiction

Defendant argues that the Court lacks subject matter jurisdiction over Plaintiff’s claims because the claims, and specifically the second cause of action for breach of trust and related fiduciary duties under Probate Code section 16000, et seq., concern the internal affairs of Trust A over which the probate division has exclusive jurisdiction. Defendant further argues that the Court lacks jurisdiction over the subject of Plaintiff’s claims under the doctrine of prior exclusive jurisdiction as the probate division of the Santa Clara County Superior Court already exercised jurisdiction over Trust A and its assets.

Defendant’s motion on the ground of lack of subject matter jurisdiction is not well-taken. Lack of subject matter jurisdiction means a total absence of power by a court to hear or determine a case. (Cummings v. Stanley (2009) 177 Cal.App.4th 493, 503 citing Totten v. Hill (2007) 154 Cal.App.4th 40, 46.) Thus, “[t]he principle of ‘subject matter jurisdiction’ relates to the inherent authority of the court involved to deal with the case or matter before it.” (Harnedy v. Whitty (2003) 110 Cal.App.4th 1333, 1343-44 (Harnedy).) Typically, a California court only lacks subject matter jurisdiction when the action arises from claims where federal courts exercise exclusive jurisdiction. (See, e.g., Lockwood v. Sheppard, Mullin, Richter & Hampton (2009) 173, Cal.App.4th 675, 683-684 [state courts lack subject matter jurisdiction over patent matters]; Ross v. Universal Studios Credit Union (2002) 95 Cal.App.4th 537, 542 [state courts lack subject matter jurisdiction over matters arising out of bankruptcy].)

It is unquestionable that the superior courts in California are vested with jurisdiction to hear and determine matters regarding the administration of trusts. (See Harnedy, supra, 110 Cal.App.4th at p. 1345 [“Probate Code sections 17000 and 17001 … were enacted [ ] to make clear that the probate departments of the California superior courts could exercise the full and complete jurisdiction of a regular superior court when hearing and deciding a probate matter.”].)

Here, Defendant mistakes the question of subject matter jurisdiction with the decision of the superior court to organize itself into multiple departments. There is no separate subject matter jurisdiction between the different departments of a superior court. (B.F. v. Super. Ct. (2012) 207 Cal.App.4th 621, 628 [the distinction between a juvenile department and a probate department is administrative and does not change subject matter jurisdiction].) The division of the superior court into departments is a matter of convenience, and does not impact the subject matter jurisdiction of the court as a whole. (Ibid; Estate of Bowles (2008) 169 Cal.App.4th 684, 695 (Bowles).) The question of whether an action has been filed in the wrong department does not implicate a court’s power to hear the case and act. (See Bowles, supra, 169 Cal.App.4th at p. 695; see also Harnedy v. Whitty, supra, 110 Cal.App.4th at p. 1344.) Even though Plaintiff’s claims, as currently pleaded, involve the internal affairs of Trust A such that exclusive jurisdiction over the claims lies with the probate division (see Probate Code §§ 17000 and 17200, subd. (b)(12)), this Court does not lack fundamental subject matter jurisdiction over the claims as the probate division of the Santa Clara County Superior Court has “primary” jurisdiction and this Court has “secondary” jurisdiction. (See Harnedy, supra, 110 Cal.App.4th at pp. 1342-45 [finding that by hearing a matter within the probate court’s exclusive jurisdiction, a trial court in equity acts merely in excess of jurisdiction, not without jurisdiction]; see also Fisher v. Super. Ct. of Ventura County (1937) 23 Cal.App.2d 528, 531; Dowdall v. Super. Ct. of San Francisco (1920) 183 Cal. 348, 353.)

Because this Court does not lack subject matter jurisdiction over Plaintiff’s action, the motion for judgment on the pleadings on the ground of lack of subject matter jurisdiction is DENIED.

B. Failure to Allege Sufficient Facts to Constitute a Claim

1. Second Cause of Action

In the second cause of action for breach of trust and related fiduciary duties under Probate Code section 16000, et seq., Plaintiff alleges that Defendant “had a confidential, fiduciary and contractual relationship with [Carol]”; the Probate Code imposes various duties on Defendant with respect to her administration of Carol’s trust; and Defendant breached those duties “in violation of the terms of the constructive trust created by the agreement between [Defendant] and [Carol].” (Complaint, ¶¶ 22-24.)

As Defendant persuasively argues, Plaintiff lacks standing to bring this claim for breach of trust and fiduciary duties. The complaint, and the exhibits attached thereto, establish that Defendant and Lee Ann Callahan are the only named beneficiaries of Trust A, of which Defendant is trustee. (Complaint, ¶¶ 10-13 and Exs. A and B.) Plaintiff is not a beneficiary of Trust A. (Ibid.) Instead, Plaintiff alleges that she was the intended beneficiary of a separate agreement between Defendant and Carol, whereby Carol agreed to amend Trust A so Defendant would receive two-thirds of the Trust A assets and Defendant agreed to give Plaintiff “that additional one-third (1/3) of [Trust A].” (Id. at ¶¶ 9 and 14-15.) Because Plaintiff is not a beneficiary of Trust A, Defendant does not owe Plaintiff any duty as trustee of Trust A. (See Prob. Code, § 16400 [“A violation by the trustee of any duty that the trustee owes the beneficiary is a breach of trust.”].)

As Defendant’s initial argument disposes of the second cause of action in its entirety, the Court need not address Defendant’s remaining arguments.

In light of the foregoing, the motion for judgment on the pleadings as to the second cause of action is GRANTED with 30 days’ leave to amend. Because Plaintiff cannot properly allege a cause of action for breach of trust and related fiduciary duties under Probate Code section 16000, et seq. as a matter of law, Plaintiff is given leave to amend only so she may attempt to allege some other viable cause of action based on the alleged agreement between Defendant and Carol regarding the distribution of Trust A assets.

2. First Cause of Action

In the first cause of action for constructive trust, Plaintiff alleges that she demanded Defendant “distribute one-third (1/3) of the remaining assets of Trust A to [her] and Defendant … refused to do so.” (Complaint, ¶ 19, emphasis omitted.) Plaintiff further alleges that Defendant holds her interest in the remaining assets of Trust A as a constructive trustee for her benefit “[b]y virtue of Defendant’s wrongful acts previously described.” (Id. at ¶ 20.)

A constructive trust is an equitable remedy, not a cause of action in and of itself, which can be imposed against one who wrongfully detains a thing by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act. (See Civ. Code, §§ 2223 and 2224; see also Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga (2009) 175 Cal.App.4th 1306, 1332; PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 398; Meister v. Mensinger (2014) 230 Cal.App.4th 381, 399.) A cause of action seeking to impose a constructive trust will generally be allowed so long as it is predicated upon an underlying claim of fraud, breach of fiduciary duty, or other wrongful act entitling the plaintiff to some relief. (See Ehret v. Ichioka (1967) 247 Cal.App.2d 637, 642; see also Michaelian v. State Comp. Ins. Fund (1996) 50 Cal.App.4th 1093, 1114 [“A cause of action for constructive trust is not based on the establishment of a trust, but consists of fraud, breach of fiduciary duty or other act which entitles the plaintiff to some relief. Relief, in a proper case, may be to make the defendant a constructive trustee with a duty to transfer to the plaintiff. [Citation.] Pleading requirements are: (1) facts constituting the underlying cause of action, and (2) specific identifiable property to which defendant has title.”].)

As Defendant persuasively argues, Plaintiff fails to allege that she acquired the property by some wrongful act. (See Optional Capital, Inc. v. Das Corporation (2014) 222 Cal.App.4th 1388, 1402 [“[I]n order to create a constructive trust as defined in [Civil Code] section 2224, three conditions must be satisfied: the existence of a res (property or some interest in the property); the plaintiff’s right to that res; and the defendant’s acquisition of the res by some wrongful act.”].) The only wrongful act currently alleged in the complaint is the breach of trust and other fiduciary duties set forth in the second cause of action. However, for the reasons set forth above, the underlying claim of breach of trust and fiduciary duties fails. Therefore, the first cause of action fails as well.

Accordingly, the motion for judgment on the pleadings as to the first cause of action is GRANTED with 30 days’ leave to amend.

3. Third Cause of Action

In the third cause of action for unjust enrichment, Plaintiff alleges that Defendant unlawfully removed and retained a portion of the non-distributed assets of Trust A for her own personal benefit. (Complaint, ¶ 26.) She further alleges that allowing Defendant to retain all or a portion of the ill-gotten gains would constitute unjust enrichment. (Id. at ¶ 27.)

Although there “is no cause of action in California for unjust enrichment” (Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 793), unjust enrichment is synonymous with restitution (Dinosaur Development, Inc. v. White (1989) 216 Cal.App.3d 1310, 1314) and courts will overlook the label of a cause of action to determine whether a claim warranting restitution has been stated (McBride v. Houghton (2004) 123 Cal.App.4th 379, 387-88 (McBride)). Notably, there are several potential bases for a cause of action seeking restitution; for example, restitution “may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason. [Citation.] Alternatively, restitution may be awarded where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or ‘similar conduct’ and the plaintiff elects not to sue in tort but seek restitution on a quasi-contractual theory.” (McBride, supra, 123 Cal.App.4th at p. 388.)

Here, Defendant persuasively argues that the third cause of action for unjust enrichment fails because Plaintiff fails to allege that she acquired the property by some wrongful act. As previously stated, the only wrongful act currently alleged in the complaint is the breach of trust and related fiduciary duties set forth in the second cause of action. However, for the reasons set forth above, the underlying claim of breach of trust and fiduciary duties fails. The third cause of action is dependent on the viability of the underlying claim for breach of trust and fiduciaries duties, and, therefore, the third cause of action fails as well.

Accordingly, the motion for judgment on the pleadings as to the third cause of action is GRANTED with 30 days’ leave to amend.