Aghaian v. Minassian ( 2020 )

Filed 12/31/20
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
SEDA GALSTIAN AGHAIAN, B300726
Individually and as Trustee, etc.,
et al., (Los Angeles County
Super. Ct. No. LC107510)
Plaintiffs and Appellants,
v.
ALICE MINASSIAN et al.
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Huey P. Cotton, Judge. Reversed.
Kinsella Weitzman Iser Kump & Aldisert, Gregory J.
Aldisert, David W. Swift; Aldisert Law and Gregory J. Aldisert
for Plaintiffs and Appellants Seda Galstian Aghaian and Aida
Galstian Norhadian, Individually and as Trustees, etc.
Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup,
Caroline E. Chan; and Robert Craig Woodbury for Defendant
and Respondent Alice Minassian.
Law Offices of Lee David Lubin and Lee David Lubin
for Defendant and Respondent Shahen Minassian.
Arthur Minassian, in pro. per., for Defendant and
Respondent Arthur Minassian.
Seda Galstian Aghaian and Aida Galstian Norhadian,
Individually and as Trustees of The Galstian Trust II U/A/D
October 26, 1982, as amended and restated July 1, 2005
(plaintiffs) sued Alice Minassian (Alice), Shahen Minassian
(Shahen) and Arthur Minassian (Arthur), asserting four causes
of action arising out of alleged fraudulent transfers.1 The court
sustained defendants’ demurrers to two causes of action and
plaintiffs voluntarily dismissed the remaining causes of action.
After the court entered a judgment of dismissal, plaintiffs
appealed. We reverse.
FACTUAL SUMMARY2
Plaintiffs are trustees and beneficiaries of a trust
established in 1982 by their now deceased parents. In 2013 they
sued Shahen based on actions Shahen took beginning in 1996
pertaining to trust properties located in Iran (the underlying
action).3 Plaintiffs sought $105 million in damages.
On March 2, 2016, Arthur—Shahen’s son and an
attorney—applied ex parte to have the court appoint him as
Shahen’s guardian ad litem in the underlying action. According
1To avoid confusion, we will refer at times to the
defendants by their first names. We intend no disrespect.
2In accordance with our standard of review, our factual
summary assumes the truth of the operative complaint’s properly
pleaded factual allegations (Blue Cross of California, Inc. v.
Superior Court (2009) 180 Cal.App.4th 1237, 1242, fn. 1) and
matters that have been judicially noticed (Evans v. City of
Berkeley (2006) 38 Cal.4th 1, 6).
3 Plaintiffs’ brother, Andranik Galstian, was also a trustee
and beneficiary under the trust and a plaintiff in the underlying
action. He passed away while that action was pending.
2
to his application, Shahen was “unable to comprehend the nature
of the proceedings of [the underlying action] and [could not],
therefore, adequately assist his counsel in the defense of [the
underlying] action.” The court granted the application.
Shahen and Alice were married in 1964 and have since
lived together continuously. In 2004 they purchased their
Sherman Oaks residence (the residence), taking title together in
their names as “Husband and Wife as Joint Tenants.” In 2008
they purchased property across the street from their residence
(the second property), taking title in the same manner. Arthur
lived in the second property.
While the underlying action was pending, Arthur, Shahen,
and Alice “concocted” a “scheme . . . to hinder, delay or defraud
Shahen’s creditors, particularly [p]laintiffs, by putting the
two houses . . . into Alice’s name only, and thereby making it
more difficult for [p]laintiffs to levy on them.” In furtherance
of this scheme, Alice filed a petition for the dissolution of her
marriage on September 26, 2016.
According to the dissolution petition, Shahen and Alice
separated on April 1, 1991—a date that preceded the events that
gave rise to the underlying action. About three weeks after Alice
filed the petition, the family court granted Arthur’s application
to be appointed Shahen’s guardian ad litem in the dissolution
proceeding.
Notwithstanding the dissolution proceeding and ostensible
separation, Shahen and Alice continued to live together and hold
themselves out as husband and wife. In January 2017, Shahen
and Alice obtained a reverse mortgage on their residence in the
amount of $938,250.
3
In June 2017, Arthur, as Shahen’s guardian ad litem,
and Alice stipulated to a division of property in the dissolution
proceeding that allocated the two Sherman Oaks properties
to Alice; Shahen assumed the entire obligation to pay any
judgment against him in the underlying action. On June 27,
2017, the family court entered a judgment in accordance with
the stipulation.
On August 24, 2017, Arthur, acting as Shahen’s “attorney-
in-fact,” executed quitclaim deeds to Alice of Shahen’s interest
in their two Sherman Oaks properties, including their residence.
Shahen, however, “retained control of the two properties.”
On September 6, 2017, a bench trial in the underlying
action began, and lasted six weeks. Shahen participated in
the trial, including testifying during 12 days of the trial, without
showing signs of diminished mental capacity.
On September 21, 2017, Arthur’s quitclaim deeds to the
Sherman Oaks properties were recorded.
On June 12, 2018—after the trial in the underlying
action had concluded and before the court issued its statement
of decision—Alice sold the second Sherman Oaks property to
a third party for $970,000, with net proceeds to Alice of at least
$500,000. Three days later, Alice used the proceeds from the
sale to purchase, in her and Arthur’s name, a condominium in
Sherman Oaks for $389,500 in an “all-cash transaction.” Arthur
thereafter lived in the condominium. In August 2018, Arthur
deeded his interest in the condominium to Alice.
In November 2018, the court issued its final statement
of decision in the underlying action, awarding plaintiffs
4
$34,506,989.4 The following month, the court entered judgment
for plaintiffs in that amount.
Shahen and Alice continue to live together in the
Sherman Oaks residence they bought in 2004. Indeed, they
never actually separated.
PROCEDURAL HISTORY
Plaintiffs commenced this action by filing a complaint
in July 2018. They filed the operative first amended complaint
in December 2018. They alleged causes of action for fraudulent
transfer (against Shahen and Alice) under Civil Code
section 3439.04, subdivision (a)(1)5, constructive fraudulent
transfer (against Shahen and Alice) under section 3439.04,
subdivision (a)(2), aiding and abetting fraudulent transfer
(against Arthur), and constructive trust (against Alice).
Plaintiffs alleged the facts we summarized above and
further alleged: The divorce between Shahen and Alice is a
“complete sham”; plaintiffs are creditors within the meaning
of California’s enactment of the Uniform Voidable Transactions
Act (UVTA) (section 3439 et seq.); and Shahen, in making the
alleged transfers, acted with “ ‘an actual intent to hinder, delay
4 According to the final statement of decision, the trial
was closed to evidence on October 12, 2017. Closing arguments
were heard in November and December 2017. The court
thereafter reopened the matter for briefing and argument on
specified issues, which was heard in March 2018, and the matter
submitted at that time.
5 Subsequent unspecified statutory references are to the
Civil Code.
5
or defraud any creditor of the debtor,’ ” for purposes of the
UVTA (see § 3439.04, subd. (a)(1)).
The cause of action against Arthur incorporated all
the foregoing allegations and added that “Arthur concocted
the entire scheme (along with his parents Shahen and Alice)
to hinder, delay or defraud Shahen’s creditors, particularly
[p]laintiffs, by putting the two houses [in Sherman Oaks]—
which were community property assets of Shahen and Alice—
into Alice’s name only, and thereby making it more difficult for
[p]laintiffs to levy on them.” Arthur also “devised the ‘divorce
strategy’ and came up with the date of separation . . . so as
to create an argument that the judgment in the [u]nderlying
[a]ction was Shahen’s separate property debt.”
Shahen, Alice, and Arthur filed separate demurrers on
the grounds that the alleged causes of action asserted against
them failed to state a cause of action. They supported the
demurrers with requests for judicial notice of, among other
documents, the judgment in the marital dissolution petition and
the orders appointing Arthur guardian ad litem for Shahen in
the underlying action and in the marital dissolution proceeding.6
The court sustained the demurrers as to the first cause of
action for fraudulent conveyance without leave to amend because
Arthur made the challenged transfer as Shahen’s guardian
ad litem “under the supervision of the family court.” Plaintiffs,
therefore, “will not be able to demonstrate that transfer was
made by Shahen with intent to defraud.”
6It does not appear from our record that the court
expressly granted the requests for judicial notice. The court’s
references to the orders and judgment in its ruling on the
demurrers, however, imply that the requests were granted.
6
The plaintiffs’ inability to establish Shahen’s fraudulent
intent also defeated the third cause of action against Arthur
for aiding and abetting fraudulent transfer. In addition, the
court explained, “Arthur enjoys judicial immunity for his acts
as guardian ad litem . . . [and,] [e]ven if . . . the applications for
[guardian ad litem] and the filing of the dissolution actions were
a sham, those acts are protected by the litigation privilege under
[section] 47.”
The court overruled the demurrers to the second and fourth
causes of action. Plaintiffs subsequently dismissed these causes
of action without prejudice. The court thereafter entered a
judgment of dismissal, and plaintiffs timely appealed.7
DISCUSSION
A. Fraudulent Transfer
In their first cause of action, plaintiffs seek relief on
the ground that Shahen’s transfers of the Sherman Oaks
properties constitute voidable transfers under section 3439.04,
subdivision (a)(1).8 Under that statute, a transfer of property
7 After the court entered the judgment of dismissal, Alice
filed a motion to expunge a lis pendens plaintiffs filed against
the Sherman Oaks residence and the condominium purchased
with the proceeds from the second property. The court denied
the motion, explaining that it would maintain the status quo
because “there is a real probability that [its ruling sustaining
the defendants’ demurrers] will be reversed.”
8 In 2015 the Legislature amended what had previously
been known as the Uniform Fraudulent Transfer Act (UFTA).
(Stats. 2015, ch. 44, §§ 1–16, pp. 1452–1458.) The amendment
went into effect in January 2016. Among other changes, the
7
by a debtor is voidable if the debtor made the transfer “[w]ith
actual intent to hinder, delay, or defraud any creditor of the
debtor.” (§ 3439.04, subd. (a)(1); see Lyons v. Security Pacific
Nat. Bank (1995) 40 Cal.App.4th 1001, 1020 [a fraudulent
transfer cause of action “does not require proof of anything more
than actual intent to defraud”].)9
“The purpose of the UVTA is to prevent debtors from
placing, beyond the reach of creditors, property that should
be made available to satisfy a debt.” (Chen v. Berenjian (2019)
33 Cal.App.5th 811, 817 (Chen).) In furtherance of the state’s
“general policy of protecting creditors from fraudulent transfers,
including transfers between spouses,” the UVTA applies to
property transfers made pursuant to a marital settlement
agreement incorporated into a judgment of dissolution. (Mejia v.
Reed (2003) 31 Cal.4th 657, 668.)
Legislature replaced the word “fraudulent” with “voidable” and
specified certain burdens of proof. (Id., §§ 1–3, p. 1453, §§ 6–7,
pp. 1454–1455, § 10, pp. 1456–1457.) The enactment did not
alter the essential elements of a cause of action for a fraudulent
or voidable transfer. Thus, for purposes of analyzing the
sufficiency of the pleading, we may rely on opinions addressing
the UFTA. (See § 3439.14, subd. (d) [provisions in the UVTA that
“are substantially the same as the provisions” under the UFTA
are to “be construed as restatements and continuations” of the
former law].)
9 A creditor is defined in the UVTA as “a person that has
a claim.” (§ 3439.01, subd. (c).) A claim is “a right to payment,
whether or not the right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured.” (§ 3439.01,
subd. (b).) A “debt” is “liability on a claim”; and a “debtor” is “a
person that is liable on a claim.” (§ 3439.01, subds. (d) & (e).)
8
Whether a debtor had the actual intent to hinder, delay,
or defraud a creditor is a question of fact. (Nautilus, Inc. v.
Yang (2017) 11 Cal.App.5th 33, 40; Annod Corp. v. Hamilton
& Samuels (2002) 100 Cal.App.4th 1286, 1294.) Among other
so-called “badges of fraud” indicating such intent (Filip v.
Bucurenciu (2005) 129 Cal.App.4th 825, 834), the fact finder
may consider whether: (1) the debtor made the transfer to an
“insider”; (2) the debtor retained possession or control of the
property after the transfer; (3) the debtor had been sued before
making the transfer; (4) the debtor removed or concealed assets;
(5) the value of the consideration received by the debtor was
reasonably equivalent to the value of the asset transferred;
and (6) the transfer occurred shortly before or shortly after a
substantial debt was incurred. (§ 3439.04, subd. (b).) None of
these factors is determinative, and no minimum or maximum
number of factors is required. (Filip v. Bucurenciu, supra,
129 Cal.App.4th at p. 834; In re Ezra (Bankr. 9th Cir. 2015)
537 B.R. 924, 931.)
Here, the plaintiffs pleaded facts sufficient to constitute
a cause of action under section 3439.04, subdivision (a)(1). They
alleged that Shahen made the subject transfers with “ ‘an actual
intent to hinder, delay or defraud any creditor of the debtor,’ ”
within the meaning of the UVTA, and alleged with particularity
the existence of several badges of fraud: Shahen made the
transfers to an “insider,” namely, his wife Alice and his son
Arthur; he “retained control of the two properties after the
transfers”; the plaintiffs had sued Shahen before he made the
transfers; and Shahen “did not receive reasonabl[y] equivalent
value from Alice for his transfer of the two properties.”
9
Defendants contend that plaintiffs have failed to state a
cause of action because Shahen received from Alice reasonably
equivalent value in exchange for the transferred properties.
They rely on the terms of the settlement in the dissolution
proceeding, which provides that Shahen will receive (1) the
“net sale[ ] proceeds” (in an unspecified amount) from the sale
of the couple’s apartment in Nice, France, (2) an apartment
(of unspecified value) in Tehran, Iran, (3) an apartment in
“Papazian” (in an unidentified country and of unspecified value);
(4) the right to certain tax credits, (5) one-half of certain bank
accounts (with unspecified balances); and (6) 80 percent of “all
income received by [Shahen] from Iran,” which “is estimated to
be approximately $5,600,000.” Defendants therefore conclude
that Shahen “obviously received a reasonably equivalent value
in exchange for the Sherman Oaks properties given to Alice.”
As plaintiffs point out, to state a cause of action for
fraudulent transfer under section 3439.04, subdivision (a)(1),
they are not required to allege that Shahen failed to receive a
reasonably equivalent value for the properties he transferred;
it is sufficient to allege that the defendant made the transfer
“with ‘actual intent to hinder, delay, or defraud any creditor
of the debtor.’ ” (Optional Capital, Inc. v. DAS Corp. (2014)
222 Cal.App.4th 1388, 1401.)10
10 A defendant’s failure to receive reasonably equivalent
value is an element of establishing a violation of the UVTA by
constructive fraud. (§ 3439.04, subd. (a)(2); Optional Capital, Inc.
v. DAS Corp., supra, 222 Cal.App.4th at p. 1401.) It is also one
of the badges of fraud for purposes of establishing a defendant’s
intent under section 3439.04, subdivision (a)(1). (§ 3439.04,
subd. (b)(8).) But it is not an element of a cause of action based
10
Defendants further contend that the litigation privilege,
codified in section 47, subdivision (b), bars plaintiffs’ cause of
action because “most of ” Alice’s and Shahen’s actions “were
conducted in the course of a judicial proceeding.” We disagree.
The litigation privilege “ ‘applies to any communication
(1) made in judicial or quasi-judicial proceedings; (2) by litigants
or other participants authorized by law; (3) to achieve the objects
of the litigation; and (4) that have some connection or logical
relation to the action. [Citations.]’ [Citation.]” (Rusheen v.
Cohen (2006) 37 Cal.4th 1048, 1057.) “Because the litigation
privilege protects only publications and communications, a
‘threshold issue in determining the applicability’ of the privilege
is whether the defendant’s conduct was communicative or
noncommunicative. [Citation.] The distinction between
communicative and noncommunicative conduct hinges on
the gravamen of the action. [Citations.] That is, the key in
determining whether the privilege applies is whether the injury
allegedly resulted from an act that was communicative in its
essential nature.” (Id. at p. 1058.)
Defendants point to Alice’s “filing and prosecution of the
divorce action,” to what Shahen “said and did in the litigation
of the divorce action,” and to “the filing of the petitions for
appointment of a guardian ad litem for [Shahan].” These actions,
they argue, “were all communications made during the course
of judicial proceedings,” and they are therefore “insulated from
liability arising from the plaintiffs’ allegations that the divorce
on actual fraud. (Lo v. Lee (2018) 24 Cal.App.5th 1065, 1071;
Reddy v. Gonzalez (1992) 8 Cal.App.4th 118, 122–123.)
11
was a sham or that the appointments of a guardian ad litem
was improper.” We reject these arguments.
Chen, supra, 33 Cal.App.5th 811 is instructive. In that
case, Shazad owed a judgment debt to Chen. (Id. at p. 815.)
Shazad and his brother Sharmad agreed that Sharmad would
file a lawsuit against Shazad and obtain a judgment against
him. (Ibid.) Sharmad filed the sham lawsuit and the brothers
stipulated to a judgment. Sharmad then executed upon Shazad’s
property, thereby defeating Chen’s efforts to enforce his judgment
against Shazad. (Id. at p. 816.) When Chen sued Shazad and
Sharmad under the UVTA, the brothers argued that Chen’s
action was barred by the litigation privilege. The Court of Appeal
disagreed, and explained: “Under the UVTA, it is the transfer
made or the obligation incurred by the debtor which, when made
with the requisite intent or without sufficient consideration,
is wrongful and, therefore, voidable. [Citation.] Thus, the acts
causing injury to Chen were the agreement to defraud him and
the transfer of the [property] from Shazad to Sharmad by means
of executing on [Sharmad’s] judgment. The acts of filing the
sham complaint and agreeing to the stipulated judgment,
though communicative in nature, were not the gravamen of
Chen’s fraudulent transfer cause of action. . . . [Sharmad’s] levy
was the allegedly voidable transfer producing the injury and
was, therefore, the gravamen of the cause of action for fraudulent
conveyance.” (Id. at p. 821.)
The Chen court also explained that its conclusion was
consistent with the purposes of the litigation privilege and the
UVTA. “The litigation privilege’s purposes are ‘ “to encourage
open channels of communication and zealous advocacy, to
promote complete and truthful testimony,” ’ and ‘to promote
12
effective judicial proceedings by encouraging full
communication.’ [Citation.] Thus, the privilege does not
extend to noncommunicative conduct that is not of necessity
related to communicative conduct. Levying on property as
part of a scheme to defeat a creditor’s rights in violation of
the UVTA is not communicative conduct; therefore, extending
the litigation privilege to such conduct advances none of the
privilege’s purposes. [¶] The UVTA serves the valuable purpose
of protecting creditors from schemes to place assets beyond
their reach.” (Chen, supra, 33 Cal.App.5th at pp. 821–822.)
The court concluded that if it extended the litigation privilege to
the facts alleged by Chen, it “would be providing a road map to
circumventing the UVTA and defeating the rights of creditors.”
(Id. at p. 822.)
The sham lawsuit and stipulated judgment in Chen
are analogous to the alleged sham dissolution proceeding and
stipulated judgment perpetrated in this case. Just as Shazad and
Sharmad used the judgment in Chen and enforcement procedures
as a means for transferring Shazad’s property to Sharmad, in
the instant case Shahen and Alice (with Arthur’s aid) used the
dissolution judgment to authorize and justify Shahen’s transfer
of the Sherman Oaks properties to Alice. As in Chen, it is
the transfer of the property, not the sham judicial proceedings
used to provide legal cover for the transfer, that constitutes the
gravamen of the action. Shahen’s transfer of the Sherman Oaks
properties, like the transfer of Shazad’s property to Sharmad, is
not protected by the litigation privilege.
13
B. Third Cause of Action Against Arthur for Aiding
and Abetting Shahen’s Fraudulent Transfer
Plaintiffs’ third cause of action is asserted against
Arthur based on allegations that he aided and abetted Shahen’s
fraudulent transfer of the Sherman Oaks properties. (See
Berger v. Varum (2019) 35 Cal.App.5th 1013, 1025 [California
law recognizes liability for aiding and abetting a fraudulent
transfer]; Taylor v. S & M Lamp Co. (1961) 190 Cal.App.2d
700, 706 [“a debtor and those who conspire with him to conceal
his assets for the purpose of defrauding creditors are guilty of
committing a tort and each is liable in damages”].) In particular,
plaintiffs alleged that Arthur “provided substantial assistance
to Shahen and Alice in order to hinder, delay and defraud
Shahen’s creditors, including [p]laintiffs. Among other things,
Arthur orchestrated the ‘divorce strategy’ which he knew was a
sham, and then signed the quitclaim deeds as Shahen’s ‘attorney-
in-fact’ to transfer title of the [Sherman Oaks properties] to Alice.
Arthur knew of the fraudulent transfers given his knowledge
and participation in the [u]nderlying [a]ction, and provided
substantial assistance to the fraudulent transfer scheme.” These
allegations are sufficient to state a cause of action for aiding and
abetting a fraudulent transfer. (See Taylor v. S & M Lamp Co.,
supra, at pp. 705–706.)
Defendants argue that the action against Arthur is
barred because he has immunity for actions he took as Shahen’s
guardian ad litem. Plaintiffs do not dispute that a guardian
ad litem has immunity from liability for “acts within the scope
of the guardian’s authority” (McClintock v. West (2013) 219
Cal.App.4th 540, 552), but argue that Arthur’s appointment in
the marriage dissolution action as Shahen’s guardian ad litem “is
14
not a get-out-of-jail-free card that provides blanket quasi-judicial
immunity” for his conduct in this case. We agree.
Plaintiffs did not sue Arthur because of actions he took as
Shahen’s guardian ad litem; they sued him because he “concocted
the entire scheme (along with his parents Shahen and Alice),”
including “the ‘divorce strategy,’ ” “to hinder, delay or defraud
Shahen’s creditors, particularly [p]laintiffs, by putting the
[Sherman Oaks properties] . . . into Alice’s name only.” He
fulfilled the scheme by executing the challenged quitclaim deeds
as Shahen’s attorney-in-fact. Arthur’s actions to become and
act as Shahen’s guardian ad litem in the dissolution proceedings
may have facilitated the scheme he concocted, but they are
merely incidental to it. Stated differently, his involvement in
“concoct[ing]” and “orchestrat[ing]” a “sham” divorce proceeding
with the intent to “hinder, delay or defraud Shahen’s creditors”
occurred outside the scope of the authority he had as Shahen’s
guardian ad litem. He is not, therefore, entitled to immunity
for that involvement.
We also reject Arthur’s argument that he is protected
by the litigation privilege for the reasons expressed above.
Arthur further contends that plaintiffs failed to comply
with the pre-filing requirements under section 1714.10. That
section provides: “No cause of action against an attorney for a
civil conspiracy with his or her client arising from any attempt
to contest or compromise a claim or dispute, and which is based
upon the attorney’s representation of the client, shall be included
in a complaint or other pleading unless the court enters an order
allowing the pleading that includes the claim for civil conspiracy
to be filed after the court determines that the party seeking
to file the pleading has established that there is a reasonable
15
probability that the party will prevail in the action.” (§ 1714.10,
subd. (a).)
“[S]ection 1714.10 was enacted to combat ‘the use of
frivolous conspiracy claims that were brought as a tactical ploy
against attorneys and their clients and that were designed to
disrupt the attorney-client relationship. [Citations.]’ [Citation.]”
(Stueve v. Berger Kahn (2013) 222 Cal.App.4th 327, 329.) When
it applies, “the plaintiff must make a prima facie showing [of
a reasonable probability of prevailing] before being allowed to
assert the claim.” (Klotz v. Milbank, Tweed, Hadley & McCloy
(2015) 238 Cal.App.4th 1339, 1350.)
Plaintiffs acknowledge in their first amended complaint
that Arthur is an attorney, but allege that he “was not
functioning as [Shahen’s] lawyer in engaging in” his wrongful
conduct “because Arthur signed the quitclaim deeds for the
[Sherman Oaks properties] . . . as Shahen’s ‘attorney in fact,’
and not his attorney at all [sic].”11 The allegation is consistent
with court documents filed in the underlying action and the
dissolution action showing that Shahen was represented by
attorneys other than Arthur. Because plaintiffs have not alleged
an attorney-client relationship between Shahen and Arthur,
section 1714.10 does not apply.
Furthermore, under section 1714.10, subdivision (c), even
if plaintiffs had alleged an attorney-client conspiracy, the pre-
filing requirement does not apply when the “[attorney’s] acts go
beyond the performance of a professional duty to serve the client
and involve a conspiracy to violate a legal duty in furtherance of
11The plaintiffs’ reference to “attorney at all” is probably a
typographical error; plaintiffs probably meant “attorney at law.”
16
the attorney’s financial gain.” (§ 1714.10, subd. (c).) Here,
plaintiffs alleged that “Arthur acted for his own personal
financial gain because he lived at the [second] property and
acted to prevent that property from being levied upon by
arranging the quitclaim deed from Shahen to Alice. After
that property was sold, Arthur arranged the purchase of the
[c]ondominium (where Arthur now resides) with the proceeds
from the sale of [the second property], and acted to prevent the
[c]ondominium from being levied upon by first arranging for
title to be held in his name and Alice’s name and subsequently
solely in Alice’s name. Moreover, Arthur committed these acts
in order to preserve these assets for his inheritance, and for this
additional reason, Arthur acted to further his personal financial
gain.” These allegations, which we must assume are true for
purposes of demurrer, are sufficient to satisfy the exception to
the pre-filing requirement under section 1714.10, subdivision (c).
Lastly, Arthur makes a cursory argument that he cannot
be liable for aiding and abetting Shahen’s wrongful conduct
“because he was a disclosed agent.” He relies on Lippert v. Bailey
(1966) 241 Cal.App.2d 376 for the proposition that “[w]here the
signature as agent and not as a principal appears on the face
of the contract, the principal is liable and not the agent.” (Id. at
p. 382.) The rule is a principle of agency law that applies when
one enters into a contract with the agent of a principal; when
the agent has actual or apparent authority to make the contract
on behalf of the principal, the principal, and not the agent, is
bound. (3 Witkin, Summary of Cal. Law (11th ed. 2017) Agency
& Employment, § 209, p. 271; Rest.3d Agency, § 6.01.) Here,
plaintiffs’ cause of action does not arise from a contract with
17
either Shahen or Arthur. The disclosed agent rule has no
application here.
DISPOSITION
The judgment is reversed. The court shall vacate its
order sustaining the defendants’ demurrers and enter a new
order overruling the demurrers.
Appellants are awarded their costs on appeal.
CERTIFIED FOR PUBLICATION.
ROTHSCHILD, P. J.
We concur:
BENDIX, J.
FEDERMAN, J.*
* Judge of the San Luis Obispo County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6
of the California Constitution.
18