Case Name: Susan Bassi v. Nat (Ned) E. Hales, Jr.
Case No.: 17-CV-320164

Currently before the Court is the demurrer by defendant Nat (Ned) E. Hales, Jr. (“Defendant”) to the first amended complaint (“FAC”) of plaintiff Susan Bassi (“Plaintiff”).

Factual and Procedural Background

This action arises out of a marital dissolution case, Robert A. Bassi v. Susan H. Bassi (Santa Clara County Superior Court, Case No. 2012-6-FL-009065) (“Dissolution Case”). (FAC, ¶¶ 2-10.)

Defendant was appointed as a referee in the Dissolution Case pursuant to a court order filed on April 28, 2014. (FAC, ¶ 2.) Defendant was appointed “to hear and determine all future discovery motions and judgments and to oversee the allocation of fees and costs” pursuant to Family Code section 2032, subdivision (b). (Ibid.) Subsequently, a court order containing the terms and conditions of Defendant’s appointment was filed on June 25, 2014. (Id., at ¶ 3.)

These two court orders allegedly “gave rise to a number of legal duties owed by Defendant to Plaintiff ….” (FAC, ¶ 4.) Specifically, Defendant had a duty to: “provide a conflict of interest disclosure to each party concurrently with their execution of the stipulation that contained the terms and conditions of his appointment”; “take and subscribe the oath of office and certify that he was aware of and would comply with the applicable provisions of Canon 6 of the Code of Judicial Ethics”; “comply with Canon 6D(5)” and “disclose in writing or on the record information as required by law, or information that is reasonably relevant to the question of disqualification under Canon 6D(3), including personal or professional relationships known to” him that he or his law firm “had with a party, lawyer, or law firm in the current proceeding” even if he concluded that there is no actual basis for disqualification; “certify in writing that he consented to serve as provided in the order of appointment and to file that certification with the court”; and refuse “any compensation in the absence of an agreement in writing by the parties on the rate of compensation they would pay him.” (Ibid.)

Defendant allegedly breached each and every one of these duties. (FAC, ¶ 5.) Plaintiff alleges that Defendant did not provide a conflict of interest disclosure statement to each party concurrently with their execution of the stipulation that contained the terms and conditions of his appointment; Defendant failed to take and subscribe the oath of office and certify that he would comply with the applicable provisions of Canon 6 of the Code of Judicial Ethics; Defendant failed to disclose information as required by law or reasonably relevant to the question of disqualification under Canon 6D(3); Defendant failed to certify in writing that he consented to serve as provided in the order of appointment; Defendant failed to file the requisite certification; and Defendant accepted compensation from Plaintiff in the absence of a written agreement regarding his rate of compensation. (Ibid.) When Defendant breached these duties, he allegedly “gained an advantage over” Plaintiff “by his misleading both Plaintiff and her husband to their prejudice.” (Id., at ¶ 6.) Defendant’s breaches of duty allegedly constitute constructive fraud and Plaintiff seeks to have Defendant “declared … an involuntary trustee of all community funds of Plaintiff and her husband paid to him as [r]eferee” in the Dissolution Case. (Id., at ¶¶ 13-14.)

In addition, Plaintiff alleges that “[a]n actual controversy has arisen and now exists” between the parties “concerning their respective rights and duties in that Plaintiff contends that Defendant is not entitled to retain any of the fees paid to him by the community for his services as a [r]eferee because an attorney may not recover for services rendered if those services are rendered in contradiction to the requirements of professional responsibility, and any services rendered by an attorney while simultaneously being in violation of Rule 1-710 of Rules of Professional Conduct are, by definition, services rendered in contradiction to the requirements of professional responsibility, whereas Defendant disputes all of Plaintiff’s contentions and contends he is under no legal obligation to return anything he was paid ….” (FAC, ¶ 7.) Plaintiff further alleges that “[a] judicial declaration is necessary and appropriate at this time under the circumstances in order that Plaintiff may ascertain her rights and Defendant’s duties regarding all of the community money he was paid for services he rendered as an unauthorized [r]eferee in” the Dissolution Case. (Id., at ¶ 9.)

Based on the foregoing allegations, Plaintiff filed the operative FAC against Defendant, alleging causes of action for (1) constructive trust and (2) declaratory relief.

On March 8, 2018, Defendant filed the instant demurrer to the FAC. Plaintiff filed an opposition to the demurrer on March 21, 2018. Defendant filed a reply on April 19, 2018.

Discussion

Defendant demurs to each and every cause of action of the FAC on the ground of failure to allege sufficient facts to constitute a cause of action. (See Code Civ. Proc., § 430.10, subd. (e).)

I. Request for Judicial Notice

Defendant asks the Court to take judicial notice of the notice of withdrawal and various orders filed in the Dissolution Case.

The court records identified by Defendant are generally proper subjects of judicial notice under Evidence Code section 452, subdivision (d). 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.” (People v. Woodell (1998) 17 Cal.4th 448, 455.) Consequently, the existence of the subject court records and the truth of the results reached in orders may be judicially noticed.

Accordingly, Defendant’s request for judicial notice is GRANTED as to the existence of the subject court records and the truth of the results reached in orders filed in the Dissolution Case.

II. Legal Standard

The function of a demurrer is to test the legal sufficiency of a pleading. (Trs. Of Capital Wholesale Elec. Etc. Fund v. Shearson Lehman Bros. (1990) 221 Cal.App.3d 617, 621.) Consequently, “[a] demurrer reaches only to the contents of the pleading and such matters as may be considered under the doctrine of judicial notice.” (South Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732, internal citations and quotations omitted; see also Code Civ. Proc., § 430.30, subd. (a).) “It is not the ordinary function of a demurrer to test the truth of the [ ] allegations [in the challenged pleading] or the accuracy with which [the plaintiff] describes the defendant’s conduct. [ ] Thus, [ ] the facts alleged in the pleading are deemed to be true, however improbable they may be.” (Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 958, internal citations and quotations omitted.)

III. Declaratory Relief

Defendant argues that Plaintiff fails to state a claim for declaratory relief because declaratory relief operates prospectively; declaratory relief is not available to redress past wrongs when there are no future relations between the parties; and Plaintiff’s claim only alleges a dispute regarding referee fees that have already been paid. Defendant further argues that the claim is time-barred by the one-year statute of limitations set forth in Code of Civil Procedure section 340.6.

In opposition, Plaintiff asserts, in a conclusory manner, that she properly alleged all of the elements of a claim for declaratory relief.

“[D]eclaratory relief operates prospectively, and not merely for the redress of past wrongs. It serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights or commission of wrongs; in short, the remedy is to be used in the interests of preventive justice, to declare rights rather than execute them.” (Gafcon, Inc. v. Ponsor & Associates (2002) 98 Cal.App.4th 1388, 1403.) Hence, where there is an accrued cause of action for an actual breach of contract or other wrongful act, declaratory relief may be denied. (5 Witkin, California Procedure (4th ed. 1997) Pleading, §823, p. 279; Code Civ. Proc., § 1061 [“The court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances.”].)
Here, there are no facts are alleged that would render necessary or proper a declaration with respect to the future conduct of the parties. Plaintiff’s claim for declaratory relief alleges that “[a]n actual controversy has arisen and now exists” between the parties “concerning their respective rights and duties in that Plaintiff contends that Defendant is not entitled to retain any of the fees paid to him by the community for his services as a [r]eferee ….” (FAC, ¶¶ 7 and 16.) Thus, the claim, as pleaded, merely seeks to redress past wrongs. Furthermore, Plaintiff does not allege any facts indicating that: declaratory relief will regulate future conduct by the parties; the parties’ relationship is ongoing; or there is any possibility of a continued relationship between the parties. (See Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 367-68, 371-72, and 374-75 [a demurrer may properly be sustained when a claim for declaratory relief seeks only redress of past wrongs and there are no allegations suggesting declaratory relief will regulate future conduct by the parties].) Therefore, Plaintiff fails to allege sufficient facts to state a claim for declaratory relief.

Accordingly, the demurrer to the second cause of action for declaratory relief is SUSTAINED, with 10 days’ leave to amend.

IV. Constructive Trust

Defendant argues that the first cause of action for constructive trust fails to allege sufficient facts to state a claim because constructive trust is a remedy not a cause of action; a claim for constructive trust is not independently viable when no cause of action has otherwise been stated; and the only other claim alleged in the FAC fails. Defendant further argues that the claim for constructive trust is time-barred by the one-year statute of limitations set forth in Code of Civil Procedure section 340.6.

In opposition, Plaintiff asserts that, notwithstanding the fact that the claim is labeled as one for constructive trust, the first cause of action states a claim for constructive fraud.

In reply, Defendant argues that even if the Court construes the first cause of action as one for constructive fraud, Plaintiff fails to allege sufficient facts to state such a claim because, among other things, Plaintiff does not allege that she had a fiduciary or confidential relationship with him.

Defendant’s arguments are generally well-taken. 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.”].)

In her papers, Plaintiff asserts that the underlying wrongful act is Defendant’s alleged constructive fraud. However, Plaintiff does not allege sufficient facts to state a claim for constructive fraud. “Constructive fraud is a unique species of fraud applicable only to a fiduciary or confidential relationship. Constructive fraud arises on a breach of duty by one in a confidential or fiduciary relationship to another which induces justifiable reliance by the latter to his prejudice.” (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1131, internal citation and quotation marks omitted; Feeney v. Howard (1889) 79 Cal. 525, 529; Peterson Dev. Co. v. Torrey Pines Bank (1991) 233 Cal.App.3d 103, 116 [“[i]t is essential to the operation of the doctrine of constructive fraud there exists a fiduciary or special relationship”].) There are no allegations in the FAC establishing that Plaintiff and Defendant had a fiduciary or confidential relationship. Therefore, Plaintiff fails to allege sufficient facts to state a claim for constructive trust and/or constructive fraud.

Accordingly, the demurrer to the first cause of action for constructive trust is SUSTAINED, with 10 days’ leave to amend.