Kelly v. Teeters CA1/2 ( 2015 )

Filed 1/6/15 Kelly v. Teeters CA1/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
PATRICK KELLY,
Plaintiff and Appellant,
A141503
v.
JACK EUGENE TEETERS, As Executor, (San Francisco County
etc. et al., Super. Ct. No. GCG-13-535823)
Defendants and Respondents.
This is the second appeal arising from an alleged employment relationship
between appellant Patrick Kelly and Thomas White, now deceased. Appellant’s first case
against White resulted in a judgment in favor of White’s estate, which this court recently
affirmed. (Case No. A138423.) The present case arises from the same underlying facts
and asserts some of the same and some different causes of action. The trial court
sustained demurrers to all causes of action without leave to amend and entered judgment
for respondents. Appellant contends the court abused its discretion. We affirm the
judgment as to six of the eight causes of action alleged in the complaint. As to two
causes of action, however, we agree with appellant that the trial court erred. We reverse
the judgment with respect to these causes of action and remand the matter for further
proceedings.
STATEMENT OF THE CASE AND FACTS
The factual background, as described in appellant’s complaint, begins with Kelly
meeting White in Los Angeles in 2002, and White agreeing to fund improvements to
1
Kelly’s “public affairs” website. At White’s suggestion, Kelly went to Thailand and
hired programmers and artists to make website improvements. In 2003, Kelly learned
that White had been incarcerated in Thailand due to an extradition request by Mexico,
where he had been charged with sexually abusing 10 boys. White told Kelly that he was
innocent and that he could not continue to fund the website until after he was released;
Kelly stated his intention to return to California. In subsequent meetings at the jail, Kelly
suggested he might be able to help White and White proposed paying Kelly a monthly
“stipend” of $2,000; both parties understood that Kelly would be paid “considerably
more” from bonus agreements they anticipated making after identifying specific projects
Kelly would undertake to help White obtain release. White hired Kelly on December 23,
2003, to provide internet research services, visit White, take his instructions and advise
him.
The complaint alleged that at the time they entered their agreements, appellant and
White were both United States citizens who understood their stays in Thailand and
subsequently Mexico would be temporary and expected their agreements would be
governed by California law. Appellant alleged that his work at White’s direction was
performed in San Francisco, Thailand, Cambodia, and Mexico.
The complaint alleged that throughout appellant’s employment by White, White’s
attorneys, family, and friends advised him to sever ties with Kelly due to rumors and
suspicions that Kelly was an FBI agent or a pedophile whose involvement with White
could make White look guilty of the charges against him. Appellant alleged that his
responsibility to give White his opinion on the quality of White’s legal representation
often put him “at odds” with White’s attorneys, and that White’s friends and family
members requested gifts and money from White and resented appellant’s involvement
because it made White less dependent upon them.
According to the complaint, after White’s United States passport was revoked on
June 30, 2004, White’s attorneys unsuccessfully attempted to acquire second citizenship
for him. White did not want to be deported to the United States due to his lack of valid
travel documents if he won his extradition case, because he had been indicted in the
2
United States on charges related to sex tourism. Appellant had ideas for how to obtain
second citizenship for White, including convincing “people in high places” that White
was innocent based upon evidence he was being falsely accused as part of an extortion
plan, and having White move his multimillion dollar charitable foundation from Mexico
to the country that would offer citizenship. Appellant alleged that the task of acquiring
second citizenship for White involved “considerable risk” including being falsely arrested
or kidnapped due to White’s wealth.
White told appellant that if he succeeded in obtaining second citizenship, White
would buy appellant “a brand new Mercedes S-500 as a bonus.” Appellant preferred a
cash equivalent, and the two reached an oral agreement under which, among other
detailed terms, after appellant acquired legal citizenship and a legal passport for White,
White would pay appellant a bonus of $350,000. White did not want the agreement
reduced to writing because he did not want his friends to know what he agreed to pay
appellant and because everything he signed was reviewed by prison officials who might
forward an agreement to federal officials.
White was extradited to Mexico on July 31, 2005. As part of his effort to obtain
second citizenship for White, appellant brought the Attorney General of Cambodia to the
jail because the Attorney General wanted to judge White’s character before proceeding
with a citizenship application.
On or about June 9, 2006, appellant acquired legal citizenship for White along
with a valid passport containing a Thai visa. White failed to pay the promised bonus.
Appellant sent White several emails asking why his bonus was not being paid. White
sent appellant an “angry email” stating he was going to give appellant a $25,000 bonus
and double his $2,000 monthly salary. In a telephone call, White said he was not going
to give appellant the full $350,000 at that time because he was worried appellant would
abandon him if he was no longer financially dependent upon him. White reiterated his
concerns that others not find out how much he was paying appellant. When appellant
reminded White of their agreement, White reminded appellant of his promise to finish
funding website improvements and other plans to partner in businesses with appellant
3
once he was released from prison. White “represented and guaranteed” that appellant
“would eventually be paid the full amount of $350,000 at a time no later than the date
White was released from prison.” Having no other option, appellant “agreed to extend
payment terms on the contract conditional upon . . . understandings” that appellant would
be paid $25,000 “now,” that appellant’s agreement to modify the original payment terms
was “conditional upon White’s guarantee” that appellant “would eventually be paid the
full outstanding balance of $325,000 in any circumstance and without White imposing
any further conditions or delay,” that White would continue to employ appellant at least
until he was released from prison, and that White would continue funding the website
improvements, with funding to “recommence on a date no later than the date he was
release [sic] from prison.” White paid appellant $25,000.
In the period 2005 to 2007, appellant traveled to Mexico and San Francisco on
multiple occasions, assisting White at White’s request. Appellant “engaged in numerous
important projects on White’s behalf” for which it was “understood” he would receive a
bonus, but it was difficult to discuss additional compensation because appellant “had
taken on very important roles in White’s defense and did not want to appear as using that
circumstance to place unfair pressure upon White in any bonus negotiation.” When
appellant raised the subject, White said he would discuss it later.
On May 31, 2007, after White had been convicted in Mexico, appellant suggested
White raise his monthly salary to $9,000 and pay him a bonus of $300,000. White
responded that he would rather give appellant a large bonus than a large raise. The two
entered an oral agreement under which appellant would convince a new legal team he had
located to represent White on an appeal of the rape conviction and successfully negotiate
a retainer agreement; White would pay appellant a bonus of 15 to 20 percent of the total
retainer agreement if the new team succeeded in getting the rape conviction overturned;
appellant would forfeit any right to a bonus for the work he had already done if the
conviction was not overturned; and White would raise appellant’s monthly salary to
$5,000.
4
Appellant successfully negotiated a $3.3 million retainer agreement, and on
November 1, 2007, the Mexican Supreme Court overturned White’s rape conviction.
When appellant requested payment of the promised bonus, White initially refused to
discuss it and attempted to delay payment by suggesting that appellant “might attempt to
have White killed if [appellant] knew what was in White’s will.”
A few days later, White had a party at the jail for the legal team. White
announced that when he was released he would fly everyone to Cambodia for a
celebration party at which “he would provide several young virgins for each attorney . . .
so they could have the time of their lives.” Appellant was “shocked and embarrassed”
because the attorneys had relied upon his assertions that White was a good man; he felt
“shaken and numbed by the unthinkable possibility that White may have actually been
guilty of the charges against him.”
Near the end of November, White offered to pay appellant a bonus of $100,000
instead of the minimum $495,000 to which they had agreed. Appellant rejected this offer
and White insisted he would deal with the issue later. Appellant submitted invoices for
November and December showing the salary increase from $4,000 to $5,000 pursuant to
his agreement with White. In January 2008,1 appellant became aware that White was
assigning to others tasks that had previously been appellant’s, and was interfacing with
the new legal team through his friend Wray Pomeroy rather than through appellant. In
February 2008, White refused to pay appellant’s January and February invoices or $3,000
appellant had loaned him in December. On or about February 12, 2008, White withdrew
his previous offer of a $100,000 bonus he “conceded was earned.” He made no further
offers to settle this debt. White terminated appellant’s employment on February 19,
2008, which appellant took to mean White had repudiated their past agreements. White
owed appellant “not less than $831,795.” Despite enumerated good faith efforts by
appellant, in a February 27 email to a third party, White accused appellant of extortion
1
The complaint alleges January 2007, but in context it is clear that this was a
mistake and the intended year was 2008.
5
and damaging or stealing personal property belonging to White. Appellant was thereafter
informed that White refused to accept email correspondence from him, and on November
12, in response to a final demand letter from appellant, White’s attorney informed
appellant that White rejected all appellant’s requests for money and did not owe appellant
money under any legal theory.
Appellant originally filed suit against White on November 6, 2009, alleging causes
of action for wrongful termination in violation of public policy, breach of an oral contract
entered in 2005 (the citizenship contract), breach of an oral contract entered on May 31,
2007 (the appeal contract), promissory estoppel, and breach of the implied covenant of
good faith and fair dealing (San Francisco County Superior Court No. CGC-494198). In
December 2011, the trial court sustained White’s demurrer to the cause of action for
promissory estoppel without leave to amend. Appellant filed an amended complaint
containing the remaining four causes of action on March 21, 2012.
White moved for summary adjudication of the second cause of action for breach
of the 2005 contract. Granting this motion, the trial court stated, “Defendant denied the
existence of the oral contract alleged by plaintiff but argued that even if plaintiff’s
allegations and proffered evidence were taken as true, defendant’s obligation to perform
had not arisen. Plaintiff contended that defendant’s obligation to pay was extended to the
time of his release from prison. Given plaintiff’s allegation that he fully performed his
obligations under the contract, it became a unilateral contract for which anticipatory
breach does not apply. Since it is undisputed that defendant has not been released from
prison, there is no obligation on his part to perform under either party’s theory of the case
and therefore no triable issue of material . . . fact exists a[s] to the Second Cause of
Action.”
Over appellant’s objections, the trial court held that the remaining causes of action
should be decided under Mexican law, as the underlying contract—the May 31, 2007
appeal contract—was made and substantially performed in Mexico. Finding that
Mexican law required a contract of this type to be in writing and the contract therefore
was not enforceable, the trial court granted White’s motion for nonsuit and entered
6
judgment in White’s favor. After an unsuccessful motion to vacate judgment, appellant
appealed, focusing on the third cause of action for breach of the 2007 appeal contract.
This court affirmed. The appeal did not challenge the summary adjudication of the
second cause of action.
White died during the pendency of the prior appeal, while still in prison in
Mexico.
Appellant filed his complaint in the present case on December 2, 2013. He
describes it as a “more detailed version of the original complaint filed on November 6,
2009, minus the breach of contract claim previously ruled invalid under Mexican law.”
The first cause of action, for wrongful termination in violation of public policy, was in
essence the same as in the prior case, alleging that White terminated appellant’s
employment in retaliation for appellant’s complaints that he was not being compensated
as promised (albeit with more detailed factual allegations in the present complaint). The
eighth cause of action for breach of the covenant of good faith and fair dealing was nearly
identical to the corresponding claim in the prior case, with the addition of an allegation of
slander.
The fourth cause of action, for breach of the 2005 citizenship contract, expanded
upon the second cause of action in the prior case. In the prior case, appellant alleged
entry of the contract and performance by appellant of everything required on his part,
then alleged that White’s termination of appellant’s employment accelerated the date the
deferred bonus payment was due from the date White was released from prison to the
date the employment was terminated. In the present complaint, appellant alleged
formation of the contract, performance on his part, and agreement to extend the date of
payment, then alleged that after White died, his executor denied appellant’s creditor’s
claim, and that respondents breached the 2005 agreement in that appellant was paid only
$25,000 of the promised $350,000.
The sixth cause of action for promissory estoppel partially resurrected a claim
appellant had asserted in his original complaint in the prior case. Appellant alleged that
White promised appellant did not need to worry about being paid the outstanding
7
$325,000 on the 2005 citizenship contract because White would pay the full amount “no
later than the date he was released from prison,” and that appellant agreed to defer
payment “with the clear and unambiguous understanding that [appellant] would
eventually be fully paid for the services he had already fully rendered to White.” 2
The remaining four causes of action were newly presented in the current case.
The second cause of action alleged breach of the 2003 employment contract. The third
cause of action for anticipatory breach of contract alleged that White repudiated all the
parties’ contracts—the 2003 employment contract, the two bonus contracts, and the
agreement to extend payment of $325,000 on the 2005 bonus contract—when he
terminated appellant’s employment and denied owing appellant money under the alleged
contracts. 3 The fifth cause of action for misrepresentation alleged that White negotiated
the two bonus agreements either knowing he did not intend to pay appellant the promised
amounts or with reckless disregard of whether he intended to pay them. In the seventh
cause of action, for quantum meruit, appellant alleged that White promised to pay him a
minimum of $845,000 but, after appellant fully performed the agreed upon services, from
which White benefitted, paid only $25,000 and failed to compensate appellant in the
amount of $820,000. Appellant further alleged that White received the benefit of work
appellant performed at his request, for which appellant submitted invoices totaling $8,795
that White refused to pay, and that White was unjustly enriched in the amount of
$828,795.
Respondents demurred to the complaint on the grounds that there was another
action pending between the same parties on the same causes of action and that the
complaint failed to state facts sufficient to constitute a cause of action and was uncertain.
2
The promissory estoppel claim in the prior case addressed both the 2005 and
2007 bonus contracts, and was not included in the amended complaint filed after the
court sustained White’s demurrer on the ground that appellant’s “reliance was bargained
for and is governed by contractual principles.”
3
Although the amended complaint in the prior case did not contain these
allegations, the trial court treated the cause of action for breach of the 2005 citizenship
contract as alleging anticipatory breach of that contract.
8
Respondents argued that all of appellant’s claims were barred by res judicata in that the
present complaint contained the same causes of action as in the prior case, along with
“related” claims that could have been pled in that case; that there was no basis for
liability against the defendants sued as trustees of White’s trust; and that the claims
against the executor of White’s estate had to be abated until the appeal in the prior case
was final. Additionally, respondents urged a variety of grounds for sustaining the
demurrer to individual causes of action. 4
On February 5, 2014, the trial court sustained respondents’ demurrer to all the
causes of action without leave to amend. The court found the complaint was not timely
with regard to the wrongful termination and anticipatory breach of contract causes of
action, in that the causes of action accrued on February 19, 2008, when White terminated
appellant’s employment, and the complaint was filed on December 2, 2013. As to the
4
Specifically, respondents alleged that the causes of action for wrongful
termination, breach of the 2003 employment contract, anticipatory breach of contract and
breach of the implied covenant of good faith and fair dealing were barred by the statute of
limitations; that appellant “failed to state facts sufficient to constitute a cause of action
under California law” with respect to the causes of action for wrongful termination,
breach of the 2003 employment contract, quantum meruit and breach of the covenant of
good faith and fair dealing in that because appellant alleged that the employment contract
was entered in Thailand, it was governed by Thai law; that because appellant alleged that
White breached all of the contracts by terminating appellant’s employment in February
2008, he failed to state a cause of action for anticipatory breach of contract; that White’s
performance of the 2005 citizenship contract was excused due to impossibility because
appellant alleged White’s “obligation to pay would arise ‘no later than the date White
was released from prison’ ” and White’s death before being released from prison meant
that the condition precedent to payment had not yet arisen and would never arise; that the
causes of action for promissory estoppel and for quantum meruit were premised upon
claims that White breached two oral contracts and wrongfully terminated appellant’s
employment and, therefore were “derivatively . . . legally deficient for the same reasons
that the underlying claims are deficient”; that promissory estoppel was inapplicable
where the promisor requested the promisee’s performance at the time the promise was
made; that the cause of action for quantum meruit did not contain required allegations in
that it was based on the alleged contract prices rather than on the reasonable value of the
services; and that the cause of action for breach of the implied covenant was barred in
that it was entirely dependent upon the deficient wrongful termination and breach of
contract claims.
9
causes of action for breach of the December 2003 employment contract, breach of the
2005 citizenship contract, misrepresentation, quantum meruit and breach of the implied
covenant, the court stated, “The complaint alleges that Mr. White’s duty to pay arose
once he was released from prison. The complaint also alleges that Mr. White died while
incarcerated. Plaintiff cannot recover because the condition precedent did not occur.”
The court found the theory of promissory estoppel did not apply because appellant’s
“reliance was bargained for and is governed by contractual principles.” Finally, the court
found that the complaint did not state sufficient facts to show that the defendants sued as
trustees of the White, Thomas F. 1991 Trust, were parties to the alleged contracts or
could be held liable for any of the alleged tortuous acts.5
The court’s judgment was filed on February 13, 2014.
On February 14, appellant filed a motion for reconsideration, stating that the
motion was timely because filed within 10 days of the date of the order sustaining the
demurrer as required by Code of Civil Procedure section 1008, subdivision (a).6
Respondents argued that the reconsideration motion was untimely because the court
lacked jurisdiction to rule on it after judgment was entered; that appellant had not offered
new evidence to justify reconsideration; and that the excuses appellant offered for not
addressing the condition precedent issue were unjustified. Respondents also asked the
court to hold appellant in contempt for violating section 1008.
On March 13, the court denied the motion for reconsideration as untimely because
the court had entered judgment. The court also stated that appellant did not comply with
the “new law or declaration requirements” of section 1008, and that appellant failed to
demonstrate a basis for relief under section 473 and “should have raised the reply issue at
the hearing.” The court denied respondents’ request that appellant be held in contempt.
5
The court found res judicata inapplicable because the judgment in the prior case
was not final and the judgment concerning the 2005 contract was not on the merits.
6
Further statutory references will be to the Code of Civil Procedure unless
otherwise specified.
10
Appellant filed a petition for writ of mandate challenging both the sustaining of
the demurrer and the denial of his motion for reconsideration (A141337). This court
denied the petition on April 1, 2014.
Appellant’s notice of appeal was timely filed on April 2, 2014.
DISCUSSION
The standard of review on appeal following the sustaining of a demurrer is de
novo. (Barroso v. Ocwen Loan Servicing, LLC (2012) 208 Cal.App.4th 1001, 1008;
Sprinkles v. Associated Indemnity Corp. (2010)188 Cal. App. 4th 69, 75-76.) “When
reviewing a judgment dismissing a complaint after a successful demurrer, we assume the
complaint’s properly pleaded or implied factual allegations are true, and we give the
complaint a reasonable interpretation, reading it in context. (Schifando v. City of Los
Angeles (2003) 31 Cal.4th 1074, 1081 (Schifando).) We also consider judicially
noticeable matters. (Ibid.) If we see a reasonable possibility that the plaintiff could cure
the defect by amendment, then we conclude that the trial court abused its discretion in
denying leave to amend. If we determine otherwise, then we conclude it did not. (Ibid.)
The plaintiff has the burden of proving that an amendment would cure the defect.
(Ibid.)” (Campbell v. Regents of University of California (2005) 35 Cal.4th 311, 320.)
We “ ‘may . . . consider new theories on appeal from the sustaining of a demurrer
to challenge or justify the ruling.’ ” (Alfaro v. Community Housing Improvement System
& Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1396 (Alfaro).) “If another proper
ground for sustaining the demurrer exists, this court will still affirm the demurrers even if
the trial court relied on an improper ground, whether or not the defendants asserted the
proper ground in the trial court.” (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th
857, 880, fn. 10.) “ ‘We review the validity of the ruling and not the reasons given.’ ”
(Alfaro, at p. 1397.)
I.
The trial court found that appellant’s causes of action for wrongful termination and
anticipatory breach of contract were barred by the applicable statutes of limitations. An
action for wrongful termination in violation of public policy must be filed within one year
11
of the date of discharge. (Barton v. New United Motor Manufacturing, Inc. (1996) 43
Cal.App.4th 1200, 1209; Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 501.)
An action for anticipatory breach of contract is subject to a two-year statute of
limitations. (§ 339.) These claims were based on White’s alleged termination of
appellant’s employment on February 19, 2008, and appellant’s complaint was not filed
until December 2, 2013.
Appellant attempts to avoid the bar of the statute of limitations by arguing that it
was tolled due to the summary adjudication ruling in the prior case, which found he could
not recover on his claim for breach of the 2005 citizenship contract because White had
not yet been released from prison. Appellant quotes the statement in Elkins v. Derby
(1974) 12 Cal.3d 410, 418 (Elkins) that courts have “liberally applied tolling rules or their
functional equivalents to situations in which the plaintiff has satisfied the notification
purpose of a limitations statute,” for example, the “rule ‘relating back’ an amended
complaint to the date the original complaint was filed” and rules suspending the running
of the statute of limitations of a second action “during the pendency of a first action
found to be procedurally defective.” (Id. at p. 419.)
Elkins held that the statute of limitations on a personal injury action was tolled for
the period during which the plaintiff pursued a worker’s compensation claim against the
defendant. (Elkins, supra, 12 Cal.3d at p. 412.) This conclusion was based on the
principle that “if the defendant is not prejudiced thereby, the running of the limitations
period is tolled ‘[w]hen an injured personal has several legal remedies and, reasonably
and in good faith, pursues one.’ [Citations.]” (Id. at p. 414; see, Collier v. City of
Pasadena (1983) 142 Cal.App.3d 917, 923 [statute of limitations for disability pension
claim tolled by filing of worker’s compensation claim based on same injury].) In Elkins,
the employer was apprised of the claim against it by the filing of the worker’s
compensation claim, and the court explained that requiring the plaintiff to file a tort
action before resolution of the worker’s compensation claim would undermine the
worker’s compensation scheme’s purpose of providing a “simple and nontechnical path
12
to relief,” as well as result in inefficient duplicative proceedings. (Elkins, at pp. 419-
420.)
“Under equitable tolling, the statute of limitations in one forum is tolled as a claim
is being pursued in another forum. (Addison v. State of California (1978) 21 Cal.3d 313,
317; Elkins[, supra,] 12 Cal.3d [at pp.] 413, 420.)” (Martell v. Antelope Valley Hospital
Medical Center (1998) 67 Cal.App.4th 978, 985.) “The doctrine of equitable tolling,
however, only applies where the plaintiff has alternate remedies and has acted in good
faith.” (Thomas v. Gilliland (2002) 95 Cal.App.4th 427, 434.) It does not apply to
successive claims in the same forum. (Martell, at p. 985.) In the present case,
appellant’s present causes of action for wrongful termination and anticipatory breach of
contract sought relief based on the same underlying facts—White’s termination of his
employment in violation of the alleged employment and bonus contracts—are being
pursued in the same forum. Equitable tolling does not apply.
Referring to the summary adjudication of the second cause of action in the prior
case as having found the claimed breach of the 2005 contract “premature,” appellant
contends that he had a right to file a new complaint when White died and, therefore, a
right to also assert all related claims. He relies upon section 427.10, subdivision (a), for
the latter proposition. Section 427.10, subdivision (a), provides, “A plaintiff who in a
complaint, alone or with coplaintiffs, alleges a cause of action against one or more
defendants may unite with such cause any other causes which he has either alone or with
any coplaintiffs against any of such defendants.” But this statutory authority for joining
multiple causes of action in a complaint does not extend to authorizing pursuit of claims
barred by the applicable statute of limitations. Appellant also relies upon section 1048,
subdivision (b), concerning the court’s authority to order a separate trial of any cause of
action or issue. The relevance of this statute to the present case is not apparent to us, and
appellant offers no explanation.
The trial court correctly found appellant’s causes of action for wrongful
termination and anticipatory breach of contract barred by the statute of limitations.
13
II.
Appellant contends the trial court erred in finding he could not recover for breach
of the 2005 contract because a condition precedent to payment—White’s release from
jail—had not and could not occur due to White’s death. Appellant argues that the
agreement to extend payment of the balance of his bonus under the 2005 contract
involved a simple promise and cannot properly be understood to impose a condition
precedent—that is, to make payment of the deferred bonus amount contingent upon
White being released from prison before he died.
“In contract law, a ‘condition precedent’ is ‘either an act of a party that must be
performed or an uncertain event that must happen before the contractual right accrues or
the contractual duty arises.’ (Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 313.)”
(Wm. R. Clarke Corp. v. Safeco Ins. Co. (1997) 15 Cal. 4th 882, 885; Civ. Code, § 1436.)
“Conditions precedent are not favored in the law.” (Frankel v. Board of Dental
Examiners (1996) 46 Cal.App.4th 534, 550.) “ ‘ “The rule is that provisions of a contract
will not be construed as conditions precedent in the absence of language plainly requiring
such construction. [Citations.]” (Rubin v. Fuchs (1969) 1 Cal.3d 50, 53.)’ (Fireman’s
Fund Ins. Co. v. Sizzler USA Real Property, Inc. (2008) 169 Cal.App.4th 415, 421.)”
(Barroso v. Ocwen Loan Servicing, LLC, supra, 208 Cal.App.4th at p. 1010; Frankel, . . .
at p. 550.) This is “ ‘particularly so when the result would be to work a forfeiture. . . .
The parties must be supposed to have made the contract in the belief that its terms would
be fulfilled, that the payments stipulated would be made. . . .’ (San Diego Construction
Co. v. Mannix (1917) 175 Cal. 548, 556.)” (Division of Labor Law Enforcement,
Department of Industrial Relations v. Ryan Aeronautical Co. (1951) 106 Cal.App.2d
Supp. 833, 835-836.) “In resolving doubts as to whether an event is made a condition of
an obligor’s duty, and as to the nature of such an event, an interpretation is preferred that
will reduce the obligee’s risk of forfeiture, unless the event is within the obligee’s control
or the circumstances indicate that he has assumed the risk.” (Rest.2d Contracts, § 227,
subd. (1).) “In case of doubt, an interpretation under which an event is a condition of an
obligor’s duty is preferred over an interpretation under which the non-occurrence of the
14
event is a ground for discharge of that duty after it has become a duty to perform.”
(Rest.2d Contracts, § 227, subd. (3).)
In the present case, appellant alleged that he and White entered an oral contract in
2005 pursuant to which White would pay a bonus of $350,000 if appellant secured
second citizenship for White, with payment of the bonus due the day Kelly took
possession of White’s new passport; that Kelly completed his obligations under the
contract in June 2006; that White then refused to pay the full $350,000 but “represented
and guaranteed” that Kelly “would eventually be paid the full amount of $350,000 at a
time no later than the date White was released from prison”; and that Kelly agreed “to
extend payment terms on the contract” upon conditions that he would be paid $25,000
immediately, that his “agreement to modify the original payment terms on their contract
was conditional upon White’s guarantee to Kelly that Kelly would eventually be paid the
full outstanding balance of $325,000 in any circumstance and without White imposing
any further conditions or delay,” that White would continue to employ Kelly “at least
until the date he was released from prison” and that White would recommence funding
the improvements to Kelly’s website “on a date no later than the date he was release[d]
from prison.”
By alleging that payment of the $350,000 bonus was due on the day appellant
completed his obligations under the contract, as demonstrated by his acquiring possession
of White’s new passport, and that these obligations were complete on or about June 9,
2006, the complaint clearly alleged that White’s obligation to pay the $350,000 bonus
arose on June 9, 2006. The complaint further alleged that appellant subsequently agreed
to “modify the original payment terms” to extend the time for payment of all but $25,000
“until no later than the date White was released from prison.” The fair reading of these
allegations is that appellant agreed to modify the original contract only with regard to
when full payment of the bonus would be due, not if it would come due.
Respondents, however, argue that appellant agreed to “defer White’s obligation to
pay the remaining $325,000” until no later than the date of White’s release from prison
and that by so doing he necessarily assumed the risk that White might never be released.
15
According to respondents, after fully completing the tasks required of him under the
alleged bonus contract, appellant agreed to modify the original agreement by providing
that he would be paid the vast majority of his already-earned bonus only when and if
White was released from prison—that is, to make White’s obligation to pay conditional
upon White’s release.
It is fundamental that a contract “must be so interpreted as to give effect to the
mutual intention of the parties as it existed at the time of contracting, so far as the same is
ascertainable and lawful.” (Civ. Code, § 1636.) Appellant alleged that “[d]ue to the
temporary nature of White’s incarceration along with the expectation that his attorneys
could succeed at having him released at any time, there was always the understanding at
any given point that it was reasonable to assume he would be released in less than one
year.” Appellant also alleged that at the time he agreed to the extension of time for
payment of the balance of the bonus, White “reminded” him of his previous promise to
finish funding appellant’s website and to partner in various businesses with appellant
once he was released from prison. These allegations portray an expectation that White’s
incarceration would not be long-lasting. Combined with the allegations that appellant
had fully earned the promised $350,000 before he agreed to defer payment, it is simply
not reasonable to view the contract as making White’s release from prison a condition
precedent rather than a simple promise as to time of payment. As we have said, courts
are particularly “ ‘ “disinclined to construe the stipulations of a contract as conditions
precedent, unless compelled by the language of the contract plainly expressed” . . . when
the result would be to work a forfeiture.’ ” (Division of Labor Law Enforcement,
Department of Industrial Relations v. The Ryan Aeronautical Co., supra,106 Cal.App.2d
Supp. at pp. 835-836, quoting San Diego Construction Co. v. Mannix, supra,175 Cal. at
p. 556.)
Respondents urge that even if the agreement to defer payment is viewed as a
promise rather than as a condition precedent, White’s obligation to pay (and therefore his
estate’s) was excused because his death rendered his performance impossible. They rely
upon Civil Code section 1511, subdivision (2), which provides, “The want of
16
performance of an obligation, or of an offer of performance, in whole or in part, or any
delay therein, is excused by the following causes, to the extent to which they operate:
[¶] . . . [¶] When it is prevented or delayed by an irresistible, superhuman cause, or by
the act of public enemies of this state or of the United States, unless the parties have
expressly agreed to the contrary . . .”7
But “[t]he enforceability of contracts in general (other than those for personal
services) survives the death of a contracting party.” (Walgren v. Dolan (1990) 226
Cal.App.3d 572, 579.) “ ‘The general rule is that it is the duty of an administrator to
perform the contracts of his intestate unless the acts to be performed are personal, such as
an author to compose a particular work, an artist to paint a particular painting, a sculptor
to produce a particular piece of statuary or other work of art, or a lawyer or physician to
render services. Contracts to perform such personal acts are discharged by death or by
the disability of the person who was to perform said acts. This rule, however, does not
apply where the services are of such a character that they may be as well performed by
others [citations], nor where the contract by its terms shows that performance by others
was contemplated. [Citation.]’ ” (Didier v. American Casualty Co. (1968) 261
Cal.App.2d 742, 750, quoting Estate of Burke (1926) 198 Cal. 163, 167.) Here, the only
outstanding performance called for under the contract was the payment of money. Other
than their contention that White’s release from prison was a condition precedent,
respondents suggest no reason for finding White’s (and his estate’s) obligation to pay
excused by his death.
The trial court thus erred in granting respondents’ demurrer to the cause of action
for breach of the 2005 contract on the ground that a condition precedent had not been
7
Respondents’ also cite Glenn R. Sewell Sheet Metal, Inc. v. Loverde (1969) 70
Cal.2d 666, 678. In that case, the lessee assumed the risk of certain occurrences (failure
of a septic system and consequent inability to use premises as trailer park) under various
covenants in a lease, and therefore could not rely upon these occurrences to excuse his
obligation to continue paying rent. It is not apparent how the case furthers respondents’
argument.
17
satisfied.8 Respondents offer no other argument for upholding the trial court’s ruling as
to this cause of action.
III.
The erroneous conclusion that White’s release from prison was a condition
precedent to his obligation to pay the balance of appellant’s earned bonus was also the
basis for the trial court’s sustaining of the demurrer to the causes of action for breach of
the 2003 employment contract, misrepresentation, quantum meruit, and breach of the
implied covenant of good faith and fair dealing. Since the court’s ruling as to these
causes of action cannot be upheld on this ground, we must consider whether there is any
other basis for upholding it.9
Appellant’s cause of action for breach of the 2003 employment contract alleged
that the contract was breached when White wrongfully terminated appellant’s
employment on February 19, 2008. The present complaint not having been filed until
8
Having determined that appellant alleged a contract including a promise to pay
later, rather than a condition precedent requiring White’s release from prison, we need
not address appellant’s alternative contentions that the contract included a superseding
condition for payment “in any circumstance,” that the condition precedent of release from
prison was void, or that the contract—including any condition precedent—was
invalidated when White breached and repudiated it by terminating appellant’s
employment in 2008.
9
Respondents urge that as appellant did not challenge the trial court’s order
sustaining the demurrer to the causes of action for promissory estoppel, quantum meruit,
or breach of the implied covenant of good faith and fair dealing in his opening brief, we
should not entertain any arguments he might raise in his reply brief. As to promissory
estoppel, the point is well-taken: Appellant accepted the trial court’s ruling as to this
cause of action and offers no argument on appeal that the trial court erred in this regard.
The quantum meruit and breach of the implied covenant causes of action, however, are
encompassed within appellant’s overall challenge to the trial court’s condition precedent
ruling. Appellant did not present separate arguments as to any of the specific five causes
of action the trial court found untenable on this basis; rather, he argued generally that the
court erred in viewing the agreement to extend payment on the 2005 citizenship contract
as including a condition precedent.
18
December 2013, this cause of action was barred by the two-year statute of limitations.
(§ 339.)10
The cause of action for misrepresentation alleged that White negotiated the 2005
and 2007 bonus agreements either knowing he did not intend to pay appellant the
promised amounts or with reckless disregard of whether he intended to pay them, and
repudiated the contracts and terminated appellant’s employment without paying the
promised bonuses after appellant had performed all the tasks required of him by those
contracts. We will assume the applicable statute of limitations is three years, as provided
for fraud actions by section 338, subdivision (d).11 The cause of action accrues on “the
date the complaining party learns, or at least is put on notice, that a representation was
false.” (Brandon G. v. Gray (2003) 111 Cal.App.4th 29, 35; § 338, subd. (d) [cause of
action for fraud “is not to be deemed to have accrued until the discovery, by the
aggrieved party, of the facts constituting the fraud or mistake”].) “ ‘[T]he statute of
limitations begins to run when the plaintiff suspects or should suspect that her injury was
caused by wrongdoing, that someone has done something wrong to her. . . . [T]he
limitations period begins once the plaintiff “ ‘ “has notice or information of
circumstances to put a reasonable person on inquiry. . . .’ ” ’ ” (Rivas v. Safety-Kleen
10
The trial court’s application of the condition precedent reasoning to this cause
of action is perplexing. Appellant alleged in this cause of action that his and White’s
“understandings” related to his employment were “reaffirmed as part of the parties’
agreement that Kelly would accept delayed payment of an earned bonus conditional upon
White continuing to employ Kelly until he was released from prison . . . .” But this cause
of action was based on the February 2008 termination of employment, not the agreement
to defer payment of the 2005 bonus until White’s release.
11
Negligent misrepresentation is a form of fraud. (Ventura County Nat. Bank v.
Macker (1996) 49 Cal.App.4th 1528, 1530.) The statute of limitations for fraud is three
years. (§ 338, subd. (d).) Although the two-year statute of limitations of section 339,
subdivision 1, may apply where the “essence” of the cause of action is negligence
(Ventura County Nat. Bank, at pp. 1530-1531), the three-year statute will be applied
where the allegations are based on deceit. (Ferguson v. JPMorgan Chase Bank, N.A.
(E.D. Cal. May 21, 2014) 2014 U.S. Dist. LEXIS 70013, *17-18; see, Broberg v.
Guardian Life Ins. Co. of America (2009) 171 Cal.App.4th 912, 920.) Here, as we will
see, it makes no difference which statute applies.
19
Corp. (2002) 98 Cal.App.4th 218, 225, quoting Jolly v. Eli Lilly & Co. (1998) 44 Cal.3d
1103, 1110.)
In the present case, the cause of action for misrepresentation accrued on the date
White “repudiated the contracts and went on to terminate Kelly’s employment without
paying Kelly the promised amounts or anything.” After this point, appellant had notice
that White did not intend to honor the alleged agreements. This is true with respect to the
2005 citizenship contract, despite appellant’s allegations that he agreed to extend the time
for payment until White’s release from prison, because once White terminated his
employment and communicated to appellant that he did not owe him any money “under
any legal theory,” appellant was necessarily aware of the facts underlying his claim that
White entered the bonus contract without the intent to pay the promised amounts.
Accordingly, this cause of action, too, was barred by the statute of limitations.12
The cause of action for quantum meruit sought compensation for the work
appellant performed in connection with the 2005 citizenship contract, the 2007 appeal
contract, and two invoices appellant alleged White refused to pay. “ ‘The statute of
limitations for quantum meruit claims is two years (see Code Civ. Proc., § 339 [action
upon an “obligation” . . . not founded upon an instrument in writing]).’ (Maglica v.
Maglica (1998) 66 Cal.App.4th 442, 452.)” (Iverson, Yoakum, Papiano & Hatch v.
12
Respondents have not argued that the claimed breach of the 2005 contract is
barred by the statute of limitations, presumably recognizing that because of the alleged
extension of time for payment, this cause of action did not accrue until White died and
appellant’s creditor’s claim was rejected by the estate. While the alleged repudiation of
all the parties’ contracts in 2008 triggered the statute of limitations for appellant’s
misrepresentation claims, as discussed above, it was not similarly fatal to the cause of
action for breach of the 2005 contract. “When a promisor repudiates a contract, the
injured party faces an election of remedies: he can treat the repudiation as an anticipatory
breach and immediately seek damages for breach of contract, thereby terminating the
contractual relation between the parties, or he can treat the repudiation as an empty threat,
wait until the time for performance arrives and exercise his remedies for actual breach if
a breach does in fact occur at such time.” (Taylor v. Johnston (1975) 15 Cal.3d 130, 137-
138.) Appellant’s cause of action for breach of the 2005 contract, in effect, followed the
second of the above alternatives while his claimed anticipatory breach of contract
followed the first.
20
Berwald (1999) 76 Cal.App.4th 990, 996.) When the statute of limitations begins to run
depends upon the nature of the parties’ relationship and expectations as to when
compensation would be due. (Maglica, at pp. 452-454.) For example, where services are
rendered to an elderly person with the expectation that compensation will come from that
person’s estate, the statute of limitations begins to run upon termination of the services.
(Id. at p. 453 & fn. 7.) Where the circumstances demonstrate an expectation of
immediate payment as services are rendered, the statute begins to run on the date each
payment is due. (Id. at p. 453 & fn. 8.)
Here, appellant alleged that White refused to pay his invoices for January 2008
and February 2008. Since any cause of action for quantum meruit would have accrued at
the time the invoices were submitted and payment was refused, the claim asserted in
2013 was not timely. Similarly, as the complaint alleged that payment of the 2007 appeal
bonus was due on the date White’s conviction was overturned, November 1, 2007, the
quantum meruit claim based on services performed under that agreement was not timely.
As to the services performed in connection with the 2005 bonus agreement, however,
payment was not due until White was released from prison. The cause of action for
quantum meruit based on these services, asserted in the complaint filed within two
months of White’s death and the rejection of appellant’s creditor’s claim by the executor
of White’s estate, was timely. (§ 366.2.)13
Respondents argue that the demurrer was properly sustained because appellant
relied upon the contract prices he and White agreed to rather than the reasonable value of
his services. “The measure of recovery in quantum meruit is the reasonable value of the
services, provided they were of direct benefit to the defendant. (Palmer v. Gregg (1967)
65 Cal.2d 657, 660.) The burden is on the person making the quantum meruit claim to
show the value of the services. (Miller v. Campbell, Warburton, Fitzsimmons, Smith,
Mendel & Pastore (2008) 162 Cal.App.4th 1331, 1344.) [¶] The ‘reasonable value’ of
13
As explained in footnote 12, ante, in connection with the claimed breach of the
2005 contract, the alleged earlier repudiation of the parties’ agreement did not preclude
appellant’s assertion of this alternative claim.
21
the services has been described as the ‘going rate’ for the services (Maglica v. Maglica,
[supra], 66 Cal.App.4th [at p.] 446) or the ‘reasonable market value at the current market
prices’ (Punton v. Sapp Bros. Construction Co. (1956) 143 Cal.App.2d 696, 701).
Reasonable market value, or fair market value, is the price that ‘ “a willing buyer would
pay to a willing seller, neither being under compulsion to buy or sell, and both having full
knowledge of all pertinent facts.” ’ (Alameda County Flood Control & Water
Conservation Dist. v. Department of Water Resources (2013) 213 Cal.App.4th 1163,
1174–1175, fn. 9.)” (Children’s Hospital Central California v. Blue Cross of California
(2014) 226 Cal.App.4th 1260, 1274.) Contrary to respondent’s suggestion, however,
“there is no reason a court may not consider an agreed price when ascertaining the
reasonable value of services.” (Maglica, at p. 452; Watson v. Wood Dimension, Inc.
(1989) 209 Cal.App.3d 1359, 1365.) Moreover, any deficiency of the allegations in
failing to expressly state that the agreed amounts reflected the reasonable value of the
services was capable of being cured by amendment.
Respondents further assert that appellant’s claim “satisfie[d] none of the requisite
averments for quantum meruit,” but they do not identify what averments were missing
and did not do so in the trial court. “Quantum meruit refers to the well-established
principle that ‘the law implies a promise to pay for services performed under
circumstances disclosing that they were not gratuitously rendered.’ (Long v. Rumsey
(1938) 12 Cal.2d 334, 342.) To recover in quantum meruit, a party need not prove the
existence of a contract (Maglica v. Maglica[, supra,] 66 Cal.App.4th [at p.] 449;
Mayborne v. Citizens Trust & Savings Bank (1920) 46 Cal.App. 178, 182), but it must
show the circumstances were such that ‘the services were rendered under some
understanding or expectation of both parties that compensation therefor was to be made’
(Estate of Mumford (1916) 173 Cal. 511, 523; see Long[, at p.] 342; Crane v. Derrick
(1910) 157 Cal. 667, 672; see generally 1 Witkin, Summary of Cal. Law (9th ed. 1987)
Contracts, § 113, p. 138).” (Huskinson & Brown v. Wolf (2004) 32 Cal.4th 453, 458.)
Appellant alleged that White promised to pay the specified sum for the services appellant
performed, and that White benefitted from those services.
22
The above discussion, of course, is based upon California law. Respondents urge
that because the contract underlying appellant’s claim was entered in Thailand, appellant
was required to show that quantum meruit recovery is recognized under Thai law and
allege the requisite elements under Thai law. The assertion that the contract is governed
by Thai law is based on Civil Code section 1646, which provides: “A contract is to be
interpreted according to the law and usage of the place where it is to be performed; or, if
it does not indicate a place of performance, according to the law and usage of the place
where it is made.” Respondents maintain, without explanation or support, that “since
Thai law governs the employment contract, Thai law also governs whether quantum
meruit is recognized and if so the requisite elements.”
The question is less straightforward than respondents would have it. Civil Code
section 1646 is the choice-of-law rule that determines the law governing the
interpretation of “a contract.” (Frontier Oil Corp. v. RLI Ins. Co. (2007) 153 Cal.App.4th
1436, 1442-1443, 1448 (Frontier Oil Corp.).) But “other choice-of-law issues,” such as
whether public policy precludes a particular type of liability, are determined under the
government interest analysis. (Id. at pp. 1459-1460.) Since a claim for quantum meruit
is not based upon interpretation of a contract, this latter test, rather than section 1646,
would appear to apply. Under the government interest analysis, the court considers
whether multiple jurisdictions with differing laws have an interest in applying their law to
the case and, if so, applies the law of the jurisdiction whose interest would be more
significantly impaired if its law were not applied. (Frontier Oil Corp., at pp. 1454-
1455.)14
14
Under the government interest test, “the court first determines whether
the applicable rules of law of the potentially concerned jurisdictions are the same or
different. If the applicable rules of law are identical, the court may apply California law.
If the applicable rules of law differ materially, the court proceeds to the second step,
which involves an examination of the interests of each jurisdiction in having its own law
applied to the particular dispute. If each jurisdiction has an interest in applying its own
law to the issue, there is a ‘true conflict’ and the court must proceed to the third step.
In the third step, known as the comparative impairment analysis, the court determines
which jurisdiction has a greater interest in the application of its own law to the issue or,
23
Respondent’s argument does not adequately present for our resolution the question
whether Thai law applies to the claim for quantum meruit. The issue was not addressed
by the trial court and was not seriously pressed or briefed below. In any event, given
appellant’s attempt to plead a cause of action for quantum meruit under California law, a
conclusion that Thai law applies would not warrant sustaining a demurrer without leave
to amend. “ ‘ “[G]enerally speaking the forum will apply its own rule of decision unless
a party litigant timely invokes the law of a foreign state.” ’ ” (Washington Mutual Bank
v. Superior Court, supra, 24 Cal.4th at p. 919.) The correct response to a conclusion that
Thai law governs this issue would have been to give appellant an opportunity to amend
his complaint to properly state the cause of action.
The last cause of action the trial court found barred on the basis of its conclusion
that White’s release from prison was a condition precedent to payment of the bonus due
to appellant was the eighth, for breach of the implied covenant of good faith and fair
dealing. The specific breaches appellant alleged were terminating his employment
without cause, preventing him from carrying out his responsibilities under the
employment agreement, unfairly preventing him from obtaining the benefits of the
employment relationship, depriving him of the benefits of the agreements, including the
two promised bonuses, and slandering him by falsely claiming he was trying to extort
money and had stolen valuables from White. To the extent it is based on the termination
of employment and slander, both of which were alleged to have occurred in February
2008, this cause of action was barred by the statute of limitations. (§ 339.) The only
aspect of the claim not precluded by the statute of limitations is the alleged breach of the
implied covenant based on failure to pay the balance of the bonus under the 2005
citizenship contract.
conversely, which jurisdiction’s interest would be more significantly impaired if its law
were not applied. The court must apply the law of the jurisdiction whose interest would
be more significantly impaired if its law were not applied.” (Kearney v. Salomon Smith
Barney, Inc. (2006) 39 Cal.4th 95, 107-108; Washington Mutual Bank v. Superior Court
(2001) 24 Cal.4th 906, 919-920.)” Frontier Oil Corp., supra, 153 Cal.Ap.4th at pp.
1454-1455.)
24
The allegations that respondents breached the implied covenant by depriving
appellant of the already-earned bonus payment, however, added nothing to the cause of
action for breach of the 2005 citizenship contract. “A breach of the contract may also
constitute a breach of the implied covenant of good faith and fair dealing. But insofar as
the employer’s acts are directly actionable as a breach of an implied-in-fact contract term,
a claim that merely realleges that breach as a violation of the covenant is superfluous.
This is because, as we explained at length in Foley [v. Interactive Data Corp. (1988) 47
Cal.3d 654], the remedy for breach of an employment agreement, including the covenant
of good faith and fair dealing implied by law therein, is solely contractual. In the
employment context, an implied covenant theory affords no separate measure of
recovery, such as tort damages. (Foley, [at pp.] 682-700.) Allegations that the breach
was wrongful, in bad faith, arbitrary, and unfair are unavailing; there is no tort of ‘bad
faith breach’ of an employment contract.” (Guz v. Bechtel National, Inc. (2000) 24
Cal.4th 317, 352.) The trial court did not err in sustaining the demurrer to this cause of
action.
In sum, the demurrer was properly sustained as to all causes of action except the
fourth cause of action for breach of the 2005 contract and the seventh cause of action for
quantum meruit, to the extent it is based on services rendered in connection with the 2005
contract. As to these two causes of action, the trial court abused its discretion in
sustaining the demurrer without leave to amend.
IV.
The trial court sustained the demurrer without leave to amend as to all eight causes
of action asserted against defendants Shane White and Jack Eugene Teeters as Trustees
of the White, Thomas F. 1991 Trust on the basis that the complaint stated insufficient
facts to show either was a party to or legally responsible for breaching any of the alleged
contracts, or that either committed or was legally responsible for any of the alleged
tortuous acts. Appellant contends this ruling was an abuse of discretion.
The complaint alleged that “Thomas White was the trustee of the revocable
White, Thomas F. 1991 Trust that held most of Thomas White’s assets at the time of his
25
death” and that according to documents filed in the probate court, White’s will directed
that “all assets currently held within the Thomas F. White Estate are to be transferred into
the White, Thomas F. 1991 Trust leaving the estate without assets plaintiff can rely upon
to satisfy a judgment the court may award in this case.”
Respondents argued in support of the demurrer that the complaint failed to state
facts supporting liability against the trustees and that their position as trustees of a trust
holding White’s assets did not give rise to liability for any of the claims alleged.
Appellant argued that naming the trustees as defendants was proper because “virtually
all” of White’s assets were held by the trust and legal title to trust property is held by the
trustee. Appellant attached as an exhibit to his opposition to the demurrer a copy of the
petition for probate of White’s will, which included as attachments a copy of the will,
directing that the residue of White’s estate be added to the trust, and a statement that at
the time of his death, all White’s assets were held in the trust and none in his individual
name. As authority for his position, appellant cited Probate Code section 18004. After
the trial court sustained the demurrer without leave to amend, in his motion for
reconsideration, appellant sought to amend to name defendants Shane White and Jack
Eugene Teeters as successors to Thomas White in their capacities as trustees, stating that
“the semantics error in properly naming them as successors was easily corrected.”
Probate Code section 18004 does not support appellant’s argument. The statute
provides, “A claim based on a contract entered into by a trustee in the trustee’s
representative capacity, on an obligation arising from ownership or control of trust
property, or on a tort committed in the course of administration of the trust may be
asserted against the trust by proceeding against the trustee in the trustee’s representative
capacity, whether or not the trustee is personally liable on the claim.” This provision is
inapplicable to the present case because all of appellant’s claims were based on White’s
actions in his individual capacity. And because none of the claims were based on
White’s conduct as trustee, there was no reason for the trial court to grant appellant’s
request to amend the complaint to name the current trustees as successors to White.
26
Appellant named the trustees as defendants not because he sought to hold them
responsible for the conduct alleged in the complaint but because he believed he would not
be able to satisfy a judgment from trust assets if he did not do so. He cites no authority
supporting this belief.
“In the event the assets of a probate estate are insufficient to satisfy creditor claims
(or estate expenses), such claims may be paid from assets placed in the decedent’s
revocable trust which could have otherwise been reached during the settlor’s lifetime.”
(Dobler v. Arluk Medical Ctr. Indus. Group (2001) 89 Cal.App.4th 530, 538; Prob. Code,
§ 19001.) Where a creditor files a timely claim in the probate proceedings and, after its
rejection, pursues a lawsuit to establish the claim—as appellant alleges he did here—it is
not necessary for the creditor to also timely sue the trustees of the decedent’s trust.
(Dobler, at pp. 540-541.) “A judgment against a decedent becomes a valid claim against
both the decedent’s estate and, where necessary, against assets placed in an inter vivos
trust which was subject to revocation during the settlor’s lifetime. In the event estate
assets are insufficient to satisfy creditor claims of the deceased, section 19001 provides
such claims may be satisfied from assets the deceased settlor placed in a revocable inter
vivos trust. Thus, to be entitled to invoke the payment procedure of section 19001, a
judgment creditor need only establish it has a money judgment against the
decedent/settlor. Thereafter, the judgment is paid in the normal course of administration
of the trust.” (Dobler, at pp. 540-541, fns. omitted.)
The trial court did not abuse its discretion in sustaining the demurrer without leave
to amend on this basis.15
DISPOSITION
The judgment is affirmed with respect to the first, second, third, fifth, sixth, and
eighth causes of action.
15
As appellant acknowledges, our review of the trial court’s rulings on the
demurrer makes it unnecessary for us to consider his argument that the trial court abused
its discretion in denying his right to file a motion for reconsideration.
27
With respect to the fourth and seventh causes of action, the judgment is reversed
and the matter remanded for proceedings consistent with the views expressed herein.
Parties to bear their own costs.
_________________________
Kline, P.J.
We concur:
_________________________
Richman, J.
_________________________
Stewart, J.
28