Silliman v. Silliman CA4/3 ( 2015 )

Filed 4/7/15 Silliman v. Silliman CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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
FOURTH APPELLATE DISTRICT
DIVISION THREE
RUSSELL SILLIMAN,
Plaintiff and Appellant, G050731
v. (Super. Ct. No. CIVDS917272)
DEAN C. SILLIMAN et al., OPINION
Defendants and Respondents.
Appeal from a judgment of the Superior Court of San Bernardino County,
Gilbert G. Ochoa, Judge. Affirmed.
Robert J. Spitz for Plaintiff and Appellant.
Fullerton, Lemann, Schaefer & Dominick, Michael R. Schaefer and
Lee B. Madinger for Defendants and Respondents.
* * *
INTRODUCTION
Russell Silliman contended his son and daughter-in-law, Dean C. Silliman
and Kylene Silliman, misappropriated his money and real property. 1 Following a bench
trial on the equitable causes of action in Russell’s complaint, the trial court found Russell
and Dean had entered into an oral partnership agreement, by virtue of which they owed a
fiduciary duty to each other, and that the real properties at issue were owned by the
partnership. The court also found that Dean had not breached his fiduciary duty to
Russell. The court therefore found in favor of Dean and Kylene, and against Russell, on
all equitable causes of action.
Following the bench trial, the court entered judgment on several legal
causes of action, concluding that Russell could not establish those causes of action in
light of the findings made in connection with the equitable causes of action. The court
also sustained Dean and Kylene’s demurrer to the remaining legal causes of action, and
denied Russell leave to file an amended complaint.
On appeal, Russell argues the trial court erred by entering judgment on the
legal claim for elder financial abuse. The court properly concluded Russell could not
establish the cause of action in light of the findings at the bench trial that the real
properties and the proceeds of their sales belonged to Russell and Dean’s real estate
investment partnership, and that Dean had not breached any fiduciary duties in
connection with the partnership and its assets.
We further reject Russell’s argument that the trial court lacked jurisdiction
to allocate assets to the partnership. The real properties at issue were within the trial
court’s jurisdiction, and the court did not exceed its jurisdiction in entering its judgment.
1
We will refer to the parties by their first names to avoid confusion; we
intend no disrespect.
2
Finally, we conclude the trial court did not err in sustaining the demurrer to
the first amended complaint, or in denying leave to file a second amended complaint.
We therefore affirm the judgment.
STATEMENT OF FACTS
Russell and Dean were joint tenants on three pieces of property, located in
Norwalk, Whittier, and Cedar Glen. The Norwalk and Whittier properties were sold in
2001, and the proceeds were used to buy a property in Lake Arrowhead known as the
Aleutian property.
In 2003, a forest fire destroyed the structures on the Cedar Glen property.
Dean and Russell decided not to rebuild on the Cedar Glen property, but rather to take the
insurance proceeds and buy and “flip” new tract homes. Russell refused to put in writing
his agreement with Dean regarding the real estate partnership. Insurance proceeds
totaling $578,683.52 were paid by checks written solely to Russell, and were deposited in
a bank account in the names of Russell and Dean.
In August 2004, money from Russell and Dean’s account was used to buy a
property in Lake Elsinore; title to this property was taken in the names of Dean and
Kylene because Russell had bad credit. The Aleutian property was sold in November
2004, and the proceeds were placed in Russell and Dean’s account. A property in
Fontana was purchased in December 2004; the money for the all-cash purchase came
from Russell and Dean’s bank account, and title was taken in Dean’s and Kylene’s
names.
The Lake Elsinore property was sold in June 2005, and the proceeds were
placed in a newly opened account in the names of Russell and Dean.
A property in Beaumont was purchased in July 2005, and title was taken in
Dean’s and Kylene’s names. The Beaumont property was financed, and the mortgage
3
was only in Dean’s and Kylene’s names. The downpayment for the purchase came from
Russell and Dean’s account.
Money in the bank account in Russell’s and Dean’s names was transferred
to a new account in Dean’s and Kylene’s names because Dean was concerned about a
negative balance in Russell’s individual account that could have negatively affected the
joint account. When the Fontana property was sold in October 2006, the proceeds were
deposited in the account in Dean’s and Kylene’s names. Dean used some of those
proceeds to make a downpayment on the purchase of a home for himself in Yucaipa.
After the real estate market collapsed, Russell and Dean were unable to sell
the Beaumont property because its value was less than the amount owed on the mortgage.
PROCEDURAL HISTORY
In December 2009, Russell sued Dean and Kylene for numerous causes of
action, including breach of contract, fraud, conversion, and elder financial abuse. The
trial court bifurcated trial of the case, with the equitable issues to be tried first to the
court, and remaining legal issues, if any, to be tried to a jury.
Following a bench trial in July 2011, the court entered a verdict in favor of
Dean and Kylene, and against Russell, on the causes of action for breach of fiduciary
duty; to quiet title to the Cedar Glen property; to quiet title to the Yucaipa property; for
an accounting; for unjust enrichment; and to partition the Cedar Glen and Yucaipa
properties.2 Dean and Kylene filed a motion for entry of judgment on all causes of
action, arguing the issues resolved in their favor at the bench trial required entry of
judgment on all legal causes of action as well. The court granted the motion for entry of
judgment as to the causes of action for breach of oral contract, conversion, declaratory
relief, fraud, and money had and received. The court initially took the motion under
2
No party requested a statement of decision from the trial court.
4
submission as to the cause of action for elder financial abuse; the court later granted that
portion of the motion as well. The court denied the motion as to the causes of action for
intentional and negligent infliction of emotional distress.
In May 2012, Dean and Kylene filed a motion for judgment on the
pleadings of the causes of action for intentional and negligent infliction of emotional
distress. After briefing and a hearing, the court granted the motion for judgment on the
pleadings, with 30 days’ leave to amend.
Russell filed a first amended complaint in August 2012; the first amended
complaint alleged not only the causes of action for intentional and negligent infliction of
emotional distress, but also for negligence, professional negligence, constructive fraud,
and elder financial abuse and neglect. Dean and Kylene filed a demurrer to the causes of
action for infliction of emotional distress, and a motion to strike all other causes of
action. Russell dismissed the newly added causes of action, but later filed a motion for
leave to file a second amended complaint, which would add back in the causes of action
for negligence, constructive fraud, and elder financial abuse. Dean and Kylene’s
demurrer to the infliction of emotional distress claims remained on calendar.
At a hearing on all pending motions, the trial court (1) sustained the
demurrer to the first amended complaint without leave to amend, (2) determined the
motion to strike was moot, and (3) denied the motion for leave to file a second amended
complaint. Judgment was entered in favor of Dean and Kylene on all claims, and Russell
filed a timely notice of appeal.
DISCUSSION
I.
ELDER FINANCIAL ABUSE
Russell argues the trial court erred by entering judgment on his claim for
elder financial abuse, depriving him of a jury trial on that cause of action.
5
Elder financial abuse occurs when a person takes, secretes, appropriates,
obtains, or retains any property belonging to a person age 65 or older, or assists in doing
so, for a wrongful use, or with intent to defraud, or by undue influence. (Welf. & Inst.
Code, §§ 15610.27, 15610.30.)
Russell’s complaint alleged that Dean and Kylene committed elder
financial abuse through the following acts:
“a. By financially abusing [Russell] by transferring funds belonging to
[Russell] that were being held in [Russell]’s Trust Account into their own accounts,
without having [Russell]’s name on it and denying [Russell] access to his Retirement
Funds[.]
“b. By co-mingling [Russell]’s Retirement Funds with their own funds, so
as to disguise and cover up their personal use of [Russell]’s funds.
“c. By failing to make the funds belonging to [Russell] available to him
upon demand.
“d. By purchasing real property using his Retirement Funds as the
downpayment and then refusing and failing to convey title to the properties upon his
request and refusing to sell the properties and refusing to place the proceeds from the
sales into his Trust Account.
“e. By purchasing the Beaumont Property in their own names, using funds
in [Russell]’s Trust Account, without his authorization or approval. By failing to place
[Russell]’s name on the title to this real property, despite the fact that funds in his Trust
Account were used for the purchase. They failed and refused to sell the Beaumont
Property at a time that they were instructed by [Russell] to do so, causing [Russell] to
lose the equity that had been paid out of his Retirement Funds for the purchase of the
property. [Dean and Kylene] have continued to use Retirement Funds from the Trust
Account to pay the deficit each month on the payments for mortgage, property taxes,
insurance and other expenses.
6
“f. [Dean and Kylene] have used and continue to use [Russell]’s
Retirement Funds from the Trust Account for their own use and purpose without
authorization from [Russell] and despite [Russell]’s objections and instructions to the
contrary.
“g. [Russell] has requested and demanded repeatedly that all of his funds in
the Trust Account be returned to him and [Dean and Kylene] have failed and refused to
do so.
“h. [Russell] has a variety of medical and health problems. All of
[Russell]’s Retirement Funds are being held by the Defendants, Dean and Kylene. They
have failed and refused, despite repeated demands to make any of these Retirement Funds
that they are holding in the Co-Mingled Account and otherwise, available to [Russell] to
take care of his health and medical needs.” (Some capitalization omitted.)
The complaint defined “Retirement Funds” as the fire insurance proceeds,
funds from the sale of properties, Social Security benefits, and other funds and income
belonging to Russell. The complaint defined “Trust Account” as the bank account in
which Dean and Kylene promised to place and hold in trust Russell’s retirement funds.
A trial court’s findings at the conclusion of a trial on equitable issues are
conclusive and may be dispositive of remaining legal issues. (Nwosu v. Uba (2004) 122
Cal. App. 4th 1229, 1244.) Following the bench trial in this case, the court found that
Russell and Dean entered into a real estate investment partnership, and all of the property
at issue in the case was property of the partnership. The court also found that Dean owed
a fiduciary duty to Russell as his investment partner, and Dean did not violate his
fiduciary duty. The court found that Russell had received almost $270,000 of the
partnership’s funds for his own personal use, while Dean and Kylene had received almost
$125,000 of those funds for their personal use.
7
The statute defining elder financial abuse provides, as follows: “A person
or entity shall be deemed to have taken, secreted, appropriated, obtained, or retained
property for a wrongful use if, among other things, the person or entity takes, secretes,
appropriates, obtains, or retains the property and the person or entity knew or should have
known that this conduct is likely to be harmful to the elder or dependent adult.” (Welf. &
Inst. Code, § 15610.30, subd. (b).)
Could Dean have taken, secreted, appropriated, obtained, or retained
Russell’s property for a wrongful use, with an intent to defraud, or by undue influence
when Russell and Dean entered into a partnership to hold and manage that property, and
when Dean was found not to have violated any fiduciary duty to Russell? Given the
evidence before the trial court, the court’s findings, and the allegations in the complaint
regarding the cause of action for elder financial abuse, we conclude Dean could not.
In ruling on the motion for entry of judgment, the trial court concluded:
“The elder abuse action again was dealt with in my findings that there was no breach of
fiduciary duty on [Dean’s] part. Also, the finding is that they had an investment
partnership agreement between them which they operated under over several years. I
also made the finding in my ruling that I thought Russell—although he was 79-years old,
I thought he was clear-minded. I didn’t think he had any memory problems in dealing
with his testimony. And I specifically noted that because I felt that was the case based on
his testimony. So I didn’t find anything in there, which really takes care of the elder
financial abuse.”
All the allegations regarding elder financial abuse assumed that all pieces of
real property, and the rents and sales proceeds from those properties, belonged
exclusively to Russell, and that Dean and Kylene financially abused Russell by using,
withholding, and commingling those properties and funds. The court’s finding that all
the real properties and funds were the property of a real estate investment partnership of
which Russell and Dean were partners, and that Dean did not breach his fiduciary duty to
8
Russell in his handling of the properties and funds, prohibits a finding that Dean and
Kylene committed elder financial abuse against Russell.
On appeal, Russell argues the finding of no breach of fiduciary duty in
connection with his and Dean’s partnership agreement “does not obviate the requirement
that . . . Dean’s behavior . . . be scrutinized under the more statutorily stringent standard
set forth in the Elder Abuse Act.” Russell fails to cite any authority supporting his
contention that the fiduciary duty owed under the Elder Abuse Act (Welf. & Inst. Code,
§ 15600 et seq.) is different from the fiduciary duty owed in any other situation.
Russell also argues the presumption of bad faith arising under Welfare and
Institutions Code section 15610.30, subdivision (b), was never litigated in the trial court.
The trial court’s findings regarding a partnership agreement between Russell and Dean
would prevent a counterfinding that Dean took, appropriated, secreted, obtained, or
retained Russell’s property, much less that he did so knowing such a taking would be
harmful to Russell. There would be no way for any reasonable trier of fact to conclude
the presumption of bad faith had arisen. At oral argument in this court, Russell’s counsel
focused on the likelihood that Russell would be harmed, based on Dean’s knowledge of
Russell’s limited income without distributions from their joint and other bank accounts.
Counsel ignored that the claim for violation of the elder abuse law failed based on the
lack of any wrongful taking or appropriating by Dean.
Russell also argues the evidence presented during the bench trial
established a prima facie case of elder financial abuse. However, the evidence Russell
cites is based on his own testimony, which was rejected by the trial court as not credible:
“It [is] apparent to the Court that [Russell’s] credibility was completely lacking. [¶] . . .
[¶] All of these factors, taken as a whole, led the court to conclude that [Russell]’s
testimony should be rejected.” When considering the evidence in toto, we conclude the
evidence at the bench trial did not constitute a prima facie case of elder financial abuse.
9
Russell argues, for the first time in his reply brief on appeal, that the trial
court’s findings cannot support the judgment because they were based on substantial
evidence rather than a preponderance of the evidence. The preponderance of the
evidence standard is the appropriate one for initial factfinding in the trial court.
(Wollersheim v. Church of Scientology (1999) 69 Cal. App. 4th 1012, 1017.) Given the
detailed factual findings by the trial court in its lengthy written decision, we conclude the
court made its findings by a preponderance of the evidence, and the reference to
“substantial evidence” in the decision was simply a misnomer. (Id. at pp. 1017-1018
[appropriate to assume trial court applied preponderance of the evidence test where the
record does not reflect significant argument took place in the trial court regarding the
difference between preponderance and substantial evidence standards].)
Russell also argues, for the first time in his appellate reply brief, the trial
court erred by failing to assign to Dean and Kylene the burden of proving he did not
breach his fiduciary duty to Russell, and by failing to make a finding that Dean did not
breach his fiduciary duty to Russell. The trial court found that a fiduciary relationship
existed between Russell and Dean, but that Dean had not violated a fiduciary duty to
Russell. In making this finding, the court imposed on Russell the burden of proof of a
breach: “The Court finds that [Russell] has not met his burden to show that either Dean
or Kylene violated their fiduciary duty.”3
The general rule that a party has the burden of proof on every fact essential
to his or her claim for relief applies “[e]xcept as otherwise provided by law.” (Evid.
Code, § 500.) The law provides that where a plaintiff has proven the existence of a
3
In Dean and Kylene’s trial brief, they advised the trial court that “Russ
bears the burden of proof on all issues of fact.” In Russell’s trial brief, he advised the
court: “Where such a fiduciary relationship exists between parties, based upon a
relationship of trust and confidence, there is a presumption of undue influence by reason
of such relationship and that a substantial advantage has been gained, then the burden of
proof is shifted.”
10
fiduciary or confidential relationship, and that the fiduciary has obtained an advantage
over the plaintiff, the burden of proof shifts to the fiduciary to prove he or she acted in
good faith. “Where it is established as a fact that a confidential relation exists . . . , the
rules governing confidential relations apply, and a presumption of undue influence arises
from any transaction by which the person in the superior position gains an advantage over
the other. [Citations.] Such transactions are constructively fraudulent, and the burden is
cast upon the party who has gained the advantage to show fairness and good faith in all
respects. [Citations.]” (Johnson v. Clark (1936) 7 Cal. 2d 529, 534-535; see In re
Marriage of Haines (1995) 33 Cal. App. 4th 277, 296.) Although the trial court found
Russell and Dean were in a fiduciary relationship, it did not find that Dean was in a
superior position or gained an advantage over Russell. To the contrary, the court
specifically found Dean did not gain any undue advantage over Russell. As relevant to
this argument, the court found:
“ . . . That Plaintiff Russell Silliman and Defendant Dean Silliman owed a
fiduciary duty to each other with regard to use and investment of the funds. [¶] . . . [¶]
“ . . . By virtue of the confidential relationship that existed between
[Russell] and [Dean], the Court finds that a fiduciary relationship did exist for the
purposes of use of this investment account. The Court finds that [Russell] has met his
burden to establish that there was a fiduciary relationship.
“ . . . The Court having reviewed the accounting, incorporated the
accounting all the summaries of the flow of funds from the investment accounts, find[s]
that Dean Silliman has not breached any fiduciary duty to the Plaintiff Russell Silliman.
[¶] . . . [¶]
“ . . . The Court finds that Dean and Kylene Silliman were not unjustly
enriched by the way they managed the funds and property of the investment partnership.
“ . . . The court finds that Dean Silliman did not commit constructive fraud
against Russell Silliman and did not fail to disclose any relevant matters to Russell
11
Silliman during the course of their transactions within their investment partnership. The
Court finds that [Russell] has not met his burden to show that either Dean or Kylene
violated their fiduciary duty.”
Russell argues that once a fiduciary relationship is established, the burden
shifts to the defendant to prove there was no breach of that duty. Russell’s argument
skips a critical step, namely, proof that Dean gained an advantage over Russell in the real
estate or other transactions. Because the court found a fiduciary duty but no breach and
no undue advantage, the burden never shifted to Dean to show good faith. Accordingly,
we reject Russell’s argument that the trial court applied the wrong burden of proof to
Russell’s claim for breach of fiduciary duty.
II.
DID THE TRIAL COURT ACT IN EXCESS OF ITS JURISDICTION BY ALLOCATING ASSETS?
Russell argues the trial court acted in excess of its jurisdiction by allocating
assets—both real property and monetary—to the parties. We review this question
de novo. (Burke v. California Coastal Com. (2008) 168 Cal. App. 4th 1098, 1106
[whether the trial court acted in excess of the jurisdiction granted to it by statute is a legal
issue subject to independent review].)
Among the causes of action before the court in the bench trial were causes
of action to quiet title to and/or partition the Cedar Glen and Yucaipa properties.
Allocation of those assets was unquestionably within the court’s jurisdiction. All other
items of real and personal property were properly before the court in connection with
Russell’s various claims that Dean breached his fiduciary duties. The trial court did not
act in excess of its jurisdiction.
Russell’s argument really amounts to a claim that the judgment was not
supported by substantial evidence. When raised in this manner, the argument still fails.
In the first place, Russell is incorrect when he states in his appellate briefs that the trial
12
court allocated assets to Dean and Kylene. To the contrary, the court found the assets
belonged to the partnership, of which Russell and Dean are partners.
The trial court’s finding that a partnership to invest in real estate was
formed verbally between Russell and Dean is supported by substantial evidence.
California law provides that a partnership agreement need not be in writing, even if the
purpose of the partnership is to own and sell real property. “It is well settled in California
that a partnership may be formed by parol even though its sole purpose is to deal in real
estate. If a partnership is formed and real property is dedicated to partnership use and is
used by the partnership for its sole benefit the fact that title was acquired by one or more
of the partners with their private funds or was owned by them as tenants in common prior
to the formation of the partnership will not necessarily defeat the claim of the partnership
to ownership of the property in the absence of an express agreement that it should remain
property of those in whose names title stood. Under such circumstances the owners of
the legal title hold the property in trust for the partnership. [Citation.] . . . [¶] . . . [¶] Nor
does the statute of frauds prevent proof of the existence of a trust in favor of the
partnership where title stands in the names of the partners or in that of a third person.”
(Swarthout v. Gentry (1943) 62 Cal. App. 2d 68, 78-79.) Thus, the lack of a written
partnership agreement did not affect the trial court’s finding that a partnership was
verbally formed by Russell and Dean.
California law also provides that title to property need not be in the name of
a partnership to be the property of that partnership. “Property is presumed to be
partnership property if purchased with partnership assets, even if not acquired in the
name of the partnership or of one or more partners with an indication in the instrument
transferring title to the property of the person’s capacity as a partner or of the existence of
a partnership.” (Corp. Code, § 16204, subd. (c).) Dean’s testimony that he and Russell
agreed to use the fire insurance proceeds and the sales proceeds of other properties to buy
investment properties, then flip them in a growing real estate market supported the trial
13
court’s finding that a partnership was formed, and that all the real property holdings of
the parties would be the assets of that partnership.
The testimony regarding Russell and Dean’s real estate investments also
supported the trial court’s refusal to partition or quiet title in Russell to the Cedar Glen
and Yucaipa properties. Because these properties were found to belong to the
partnership, the court properly declined to quiet title to them in Russell, or to determine
that they were owned by Russell, Dean, and Kylene as tenants in common and partition
them by sale.
As far as we can tell, based on the appellate record, the real estate
investment partnership the trial court found to exist between Russell and Dean is still in
effect. One would assume, given the record, that the partnership is unlikely to have a
long and productive life. But to this point, the parties have neither themselves dissolved
the partnership nor sought assistance by the courts to do so. Issues of return of capital
contributions and full and complete accountings will be resolved at that time, and the lack
of such procedures at this time is not fatal to the judgment. At this point, the trial court
has properly ruled on the issues before it, and its judgment is supported by substantial
evidence.
III.
DEMURRER TO THE FIRST AMENDED COMPLAINT
Russell argues the trial court erred by sustaining the demurrer to the first
amended complaint without leave to amend. We review Russell’s claim de novo.
(Bardin v. DaimlerChrysler Corp. (2006) 136 Cal. App. 4th 1255, 1264.) “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. [Citation.] We also consider
judicially noticeable matters. [Citation.] If we see a reasonable possibility that the
14
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. [Citation.] The plaintiff has the burden of proving that an amendment would
cure the defect. [Citation.]” (Campbell v. Regents of University of California (2005) 35
Cal. 4th 311, 320.)
The demurrer was addressed to the two causes of action remaining in the
first amended complaint—intentional and negligent infliction of emotional distress.4 The
first amended complaint alleged Dean and Kylene mishandled Russell’s money and
failed and refused to provide money to him from his own retirement funds, causing
emotional harm to Russell who was forced to live in poverty and without appropriate
medical care.
The elements of a cause of action for intentional infliction of emotional
distress are (1) the defendant engages in extreme and outrageous conduct with the intent
to cause, or with reckless disregard for the probability of causing, emotional distress;
(2) the plaintiff suffers extreme or severe emotional distress; and (3) the defendant’s
extreme and outrageous conduct was the actual and proximate cause of the plaintiff’s
extreme or severe emotional distress. (Potter v. Firestone Tire & Rubber Co. (1993) 6
Cal. 4th 965, 1001.) “[T]here is no independent tort of negligent infliction of emotional
distress. [Citation.] The tort is negligence, a cause of action in which a duty to the
plaintiff is an essential element.” (Id. at p. 984.)
In its minute order sustaining the demurrer to the first amended complaint,
the trial court wrote: “Although Plaintiff was granted leave to amend after Defendants’
motion for judgment on the pleadings as to these two claims, nothing in the FAC states
4
Originally, the first amended complaint also included causes of action for
negligence, professional negligence, constructive fraud, and elder financial abuse and
neglect. After Dean and Kylene filed a motion to strike those causes of action, and
served a notice of motion for sanctions under Code of Civil Procedure section 128.7,
Russell requested dismissal of those causes of action from the first amended complaint.
15
any new allegations or provides any substantive changes in the already litigated and
discredited theories upon which Plaintiff is currently basing his NIED and IIED causes of
action. This is essentially Plaintiff’s second bite at the apple of attempting to properly
plead these claims, yet Plaintiff has explicitly refused to acknowledge the fact that the
Court has already expended considerable judicial resources in considering and rejecting
the very same issues that are being alleged in the FAC. Since Plaintiff has made no
attempt to affirmatively cure these causes of action, and has refused to do so, the Court
Sustains Defendants’ demurrer without leave to amend and dismisses the case.”
On appeal, Russell does not argue that the trial court erred by concluding
that the first amended complaint was not substantively different from the original
complaint, the facts and issues of which had been determined against Russell in the bench
trial. Rather, Russell argues that the proposed second amended complaint, which was
before the court in connection with the motion for leave to file the second amended
complaint, shows he had a reasonable possibility of curing the defects in the complaint by
amendment. We therefore conclude the trial court did not err by sustaining the demurrer,
and turn to the separate issue of the trial court’s denial of the motion for leave to file a
second amended complaint.
IV.
DENIAL OF MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT
Russell argues the trial court erred by denying his motion for leave to file a
second amended complaint. We review Russell’s claim for abuse of discretion. (Branick
v. Downey Savings & Loan Assn. (2006) 39 Cal. 4th 235, 242.)
The second amended complaint would have alleged causes of action for
negligence; negligent and intentional infliction of emotional distress; constructive fraud;
and elder financial abuse, neglect, mental suffering, and abandonment. Russell argues
that the proposed second amended complaint alleges facts and issues regarding Dean’s
16
“higher duty” to Russell, based on Dean’s position as Russell’s attorney and real estate
broker, which allegations were not previously pleaded in, or adjudicated by, the trial
court.
Leave to file an amended pleading may be denied where the party seeking
amendment has been dilatory and the delay has prejudiced the opposing party. (M&F
Fishing, Inc. v. Sea-Pac Ins. Managers, Inc. (2012) 202 Cal. App. 4th 1509, 1534.) In this
case, the parties proceeded through an entire trial with no mention of an attorney-client
relationship or real estate broker-client relationship between Russell and Dean. Russell’s
motion for leave to file a second amended complaint did not provide any explanation why
he did not assert the alleged professional relationships with Dean earlier. The proposed
amendment would allege new facts requiring additional discovery. (See Green v. Rancho
Santa Margarita Mortgage Co. (1994) 28 Cal. App. 4th 686, 693-694 [the defendant lost
in the first trial; on remand after appeal, trial court did not abuse its discretion in denying
leave to amend to assert different defense on retrial because the defendant offered no
explanation for the delay in asserting the new defense, the new defense contradicted the
defendant’s position in the first trial, and the new defense would have required additional
discovery].) The trial court did not abuse its discretion in denying the motion for leave to
file a second amended complaint.
The trial court denied the motion for leave to file a second amended
complaint on the ground the new causes of action were barred by the doctrine of res
judicata. Res judicata would not apply under these circumstances, as there was no final
judgment in a prior lawsuit. “‘“‘Res judicata’ describes the preclusive effect of a final
judgment on the merits.” [Citation.] It “prevents relitigation of the same cause of action
in a second suit between the same parties or parties in privity with them.” [Citation.]
Under the doctrine of res judicata, “all claims based on the same cause of action must be
decided in a single suit; if not brought initially, they may not be raised at a later date.”
[Citation.]’ [Citations.] ‘“‘Res judicata precludes piecemeal litigation by splitting a
17
single cause of action or relitigation of the same cause of action on a different legal
theory or for different relief.’”’ [Citation.] [¶] Res judicata bars a cause of action that
was or could have been litigated in a prior proceeding if ‘(1) the present action is on the
same cause of action as the prior proceeding; (2) the prior proceeding resulted in a final
judgment on the merits; and (3) the parties in the present action or parties in privity with
them were parties to the prior proceeding. [Citation.]’ [Citation.]” (Federal Home Loan
Bank of San Francisco v. Countrywide Financial Corp. (2013) 214 Cal. App. 4th 1520,
1527.) “The doctrine of res judicata applies only to judgments and orders that are final in
the sense that no further judicial act remains to be done to end the litigation. Intermediate
determinations, such as rulings on motions and interlocutory orders, are not conclusive.
[Citations.]” (7 Witkin, Cal. Procedure (5th ed. 2008) Judgment, § 363, p. 985.)
At the time the motion for leave to file a second amended complaint was
ruled on, there was no final judgment in the case. The court’s ruling granting the motion
for entry of judgment as to the causes of action for constructive fraud and elder financial
abuse was not final, and was subject to modification. The order sustaining the demurrer
as to the causes of action for negligent and intentional infliction of emotional distress,
which was entered at the same hearing at which the court ruled on the motion for leave to
file the second amended complaint, was similarly not a final judgment or judgment of
dismissal. Res judicata was not a proper ground for denying the motion for leave to file a
second amended complaint.
However, the law prohibits a party from relitigating issues in one portion of
a trial, which were decided in an earlier part of a trial. “Just as the parties are bound by
collateral estoppel where issues are litigated in a prior action, so, too, do issues decided
by the court in the equitable phase of the trial become ‘conclusive on issues actually
litigated between the parties.’ [Citation.] . . . [A] form of quasi-collateral estoppel
occurred here; the prior disposition of the related claims by the court in equity estopped
[the plaintiff] from relitigating the already determined issues in his claims at law.”
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(Nwosu v. Uba, supra, 122 Cal.App.4th at p. 1244.) The causes of action for constructive
trust and elder financial abuse were litigated in the bench trial, and quasi-collateral
estoppel prevented them from being tried again.
Russell does not provide any authority for his position that some fiduciary
duties are “higher” than others. The trial court found a fiduciary duty existed between
Russell and Dean, and Dean did not breach that fiduciary duty. Even if Russell were to
amend his complaint to add allegations regarding Dean’s fiduciary duty to him based on
Dean’s role as an attorney or real estate broker, Russell would not be able to make out a
claim for breach of that duty.
Russell relies on the State Bar Rules of Professional Conduct, rule 3-300,
which provides: “A member shall not enter into a business transaction with a client; or
knowingly acquire an ownership, possessory, security, or other pecuniary interest adverse
to a client, unless each of the following requirements has been satisfied: [¶] (A) The
transaction or acquisition and its terms are fair and reasonable to the client and are fully
disclosed and transmitted in writing to the client in a manner which should reasonably
have been understood by the client; and [¶] (B) The client is advised in writing that the
client may seek the advice of an independent lawyer of the client’s choice and is given a
reasonable opportunity to seek that advice; and [¶] (C) The client thereafter consents in
writing to the terms of the transaction of the terms of the acquisition.” A violation of a
rule of professional conduct does not itself create a civil cause of action. (Rules Prof.
Conduct, rule 1-100(A) [“These rules are not intended to create new civil causes of
action. Nothing in these rules shall be deemed to create, augment, diminish, or eliminate
any substantive legal duty of lawyers or the non-disciplinary consequences of violating
such a duty.”].)
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DISPOSITION
The judgment is affirmed. Respondents to recover costs on appeal.
FYBEL, J.
WE CONCUR:
BEDSWORTH, ACTING P. J.
IKOLA, J.
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