Opinion
F079177
12-03-2020
GARY C. CLAWSON, as Trustee, etc., Plaintiff and Appellant, v. DONALD LAWRENCE FULBRIGHT, et al., Defendants and Respondents.
David P. Weilbacher for Plaintiff and Appellant. Christopher Lionel Haberman for Defendants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. VCU259027)
OPINION
APPEAL from a judgment of the Superior Court of Tulare County. David C. Mathias, Judge. David P. Weilbacher for Plaintiff and Appellant. Christopher Lionel Haberman for Defendants and Respondents.
-ooOoo-
Plaintiff Gary C. Clawson, as the trustee of the Mary L. Clawson living trust, appeals from a judgment of dismissal entered by the trial court after the court had sustained a demurrer by defendants Donald L. Fulbright, Castlewood Development, Inc. and Castlewood Partners, Inc. (defendants) to plaintiff's complaint. The demurrer was sustained in part with leave to amend and in part without leave to amend; the dismissal was entered on the ground plaintiff failed to file an amended complaint as permitted in the demurrer ruling. In the present appeal, plaintiff challenges the portion of the trial court's demurrer ruling that denied leave to amend with respect to two of the three promissory notes upon which the entire complaint was founded. The trial court concluded that plaintiff, as trustee, lacked standing to sue regarding the two promissory notes because they were apparently not trust assets. Plaintiff contends the trial court erred in denying leave to amend as to the two promissory notes, and consequently he should be given an opportunity to file a first amended complaint premised upon all three promissory notes. Defendants counter that plaintiff's appeal has failed to challenge the other grounds upon which the demurrer was sustained, and therefore any amendment to the complaint must be limited accordingly.
We conclude that plaintiff is entitled to file a first amended complaint, but the right to amend is qualified as explained in this opinion. Accordingly, the judgment of the trial court is reversed, and the matter is remanded to the trial court where plaintiff will be permitted to file an amended complaint consistent with this opinion.
FACTS AND PROCEDURAL HISTORY
The Trust and Other Background
Mary L. Clawson established the Mary L. Clawson living trust (the trust) on March 27, 1997. She died on May 11, 2010, and was survived by three adult children, Richard, James and Gary Clawson. Richard Clawson was the successor trustee of the trust after Mary's death. Subsequently, following a probate court proceeding, Gary Clawson was appointed to act as trustee in 2014. The parties do not dispute that Mary L. Clawson was a real estate broker who occasionally financed real estate transactions with loans secured by deeds of trust. As will be seen, the complaint in this case relates to three such loans or investments.
Plaintiff's Complaint Filed
On December 22, 2014, plaintiff's complaint for damages under both contract and tort causes of action was filed against defendants. The complaint alleged that Mary L. Clawson and defendants had "entered into many loans and transactions." In particular, three promissory notes allegedly constituted "the basis" for plaintiff's entire complaint, each of which was attached as an exhibit to the complaint. Pursuant to our review of the complaint and its exhibits, the three promissory notes in question were as follows:
(1) A promissory note dated August 4, 1999, in which Castlewood Partners, Inc. promised to pay to Mary Clawson, a widow, the sum of $169,000, plus interest until paid at a rate of 12 percent, payable monthly and continuing until October 14, 2001, at which time the entire unpaid principal balance with interest was due and payable. The complaint referred to this as the Blain note, and the trial court's demurrer ruling referred to it as Note 1.
(2) A promissory noted dated May 29, 2008, in which Castlewood Partners, Inc. promised to pay to "Mary L. Clawson, Trustee of the Mary L. Clawson Living Trust" the sum of $100,000, plus interest at a rate of 10 percent per annum, all due and payable on or before August 20, 2011. The complaint referred to this as the Maddox note, and the trial court's demurrer ruling referred to it as Note 2.
(3) A promissory noted dated April 1, 2010, in which Castlewood Partners, Inc. promised to pay to "Richard S. Clawson, Trustee or his successor in trust, under the Clawson Living Trust dated March 21, 2001, as to an undivided 25.954% interest and Mary Clawson, an Unmarried Woman, as to an undivided 45.802% interest and April Clawson, a married Woman as her separate property as to an undivided 28.244% interest" the sum of $655,000 plus interest at the rate of 6 percent per annum. The entire unpaid principal and any accrued interest was all due and payable in full on April 1, 2014. The
complaint referred to this as the River Run Ranch note, and the trial court's demurrer ruling referred to it as Note 3.
We will follow the trial court's terminology by referring to the three promissory notes as Note 1, Note 2 and Note 3.
According to the complaint, defendants have failed to pay the sums due as agreed under the three promissory notes. Additionally, the complaint alleges that defendants fraudulently induced Mary Clawson to loan the money memorialized in the three promissory notes. Also, as to Note 3, it is alleged that the true provisions of the loan were "not explained to MARY CLAWSON on or about April 1, 2010"[,] and she "had suffered a stroke" and was "unable to provide consent to this transaction." Based on these allegations, the complaint purported to set forth the following causes of action: (1) breach of contract, (2) common counts, (3) fraud, (4) financial elder abuse, (5) constructive fraud, (6) negligent misrepresentation, and (7) violation of unfair competition law.
Defendants' Demurrer to Complaint
On October 6, 2015, defendants filed their general demurrer to the complaint. The grounds asserted for demurrer included, among others, that plaintiff "lacks legal capacity" and/or standing to sue, and that each of the causes of action was barred by the applicable statute of limitations. In their points and authorities filed in support of the demurrer, defendants argued that as to Note 1 and Note 3, the language of the promissory notes reflected the money was due and payable to Mary Clawson as an individual, and not to the trust. Thus, according to defendants, plaintiff as trustee of the trust would not have standing to pursue any claims based on Note 1 and Note 3.
Additionally, defendants argued the applicable statute of limitations expired as to each of the causes of action, including the four-year statute of limitations for breach of written contract and common counts (Code Civ. Proc., § 337), the three-year statute of limitations for fraud or misrepresentation (Code Civ. Proc., § 338), and the four-year statutes of limitations for financial abuse of an elder (Welf. & Inst. Code, § 15657.7) and unfair business practices (Bus. & Prof. Code, § 17208).
Defendants' demurrer included a request for judicial notice of an April 1, 2014, decision of the probate court, issued by Judge Paul Vortmann, in a proceeding entitled "In the Matter of Mary L. Clawson Living Trust" (case No. VPR045711), in which Richard Clawson was apparently removed as trustee of the trust. In that decision, Judge Vortmann noted: "Mary L. Clawson while lacking formal education was a Real Estate Broker for 30 years who bought and sold real estate and also carried trust deeds on real property she sold. Donald Fulbright is a builder and developer who has known Richard Clawson for 25 years and had known Mary L. Clawson for 15 years. Mary L. Clawson began investing with Mr. Fulbright in one or more of his companies beginning in the late 1990's." Judge Vortmann's decision described the promissory notes involved and indicated that three promissory notes were part of the trust. The decision also indicated that Fulbright's real estate development "was in trouble in 2009 and in 2010" and that Mary Clawson had not received interest payments on certain loans "since May of 2009."
Due to an intervening appeal, plaintiff's opposition to the demurrer was not filed until March 7, 2018. Plaintiff's opposition maintained the promissory notes were in the trust, and therefore no defect of standing existed. In support, plaintiff referred to Judge Vortmann's decision that stated three promissory notes were part of the trust. As to the statutes of limitations, plaintiff argued the causes of action were timely under Civil Code section 882.020, a provision relating to when certain liens expire on real property.
On March 14, 2018, defendants filed their reply in support of the demurrer. The reply explained that Civil Code section 882.020 was inapplicable, and therefore the demurrer on statutes of limitations grounds should be sustained. Regarding the issue of plaintiff's capacity to sue, defendants "concede[d] that Judge Vortmann's opinion in the probate matter states that the three obligations at issue in this Complaint were in the Mary L. Clawson Living Trust, so it appears the Trustee has standing to sue for the obligations that were incurred by Mary L. Clawson, as an individual."
Defendant's reply also included a further request for judicial notice, seeking judicial notice of a July 2013 order instructing trustee Richard Clawson in the probate proceedings. The order authorizes and instructs the trustee to proceed with something like a short sale, where certain trust deeds were to be reconveyed in exchange for a reduced pay-off of the full amount owed on the notes. The promissory notes involved were referred to as the "Blain One" and "Maddox 6" notes.
The Trial Court's Order Sustaining the Demurrer
On March 22, 2018, the trial court issued its order on the demurrer. The trial court sustained the demurrer without leave to amend as to all causes of action related to Note 1 and Note 3, because "[i]t is apparent that these two notes were held by Mary Clawson, individually ... and not [as] an asset of her trust." The trial court explained that Judge Vortmann's April 1, 2014 ruling did not indicate otherwise because the only issue being adjudicated in that proceeding was whether to remove and substitute a trustee, not the determination of trust assets.
On the statute of limitations, the trial court rejected plaintiff's argument that Civil Code section 882.020 was applicable, noting that the causes of action here were based on the underlying debt, i.e., the promissory notes, and did not involve the duration of any real property lien. Thus, the four-year statute of limitations was applicable to the contract and common count causes of action. However, as to Note 2, since it had a "due in full date of August 20, 2011," the four-year statute of limitations had not expired when the complaint was filed on December 22, 2014. Accordingly, the trial court overruled the demurrer to the first and second causes of action based on the statute of limitations. As to the remaining causes of action in the complaint (the third through seventh causes of action), the trial court sustained defendants' demurrer based on the statute of limitations, with leave to amend.
The trial court also sustained the demurrer to the first and second causes of action by all defendants other than Castlewood Partners, Inc., without leave to amend, because only Castlewood Partners, Inc. was contractually obligated under the promissory notes.
On the matters for which leave to amend was granted, the trial court's order gave plaintiff 30 days from notice of the ruling to file an amended complaint. Notice of the trial court's ruling was served by mail on April 24, 2018. Adding the five-day period for service by mail (Code Civ. Proc., § 1013, subd. (a)), the deadline for filing the amended complaint was May 29, 2018.
Motion for Reconsideration
On May 3, 2018, plaintiff filed a motion for reconsideration of the trial court's order sustaining demurrer. In support of the motion, plaintiff sought to show that all of the promissory notes were trust assets by presenting to the court a copy of Mary Clawson's last will, which had a pour-over provision causing any assets in her estate at the time of her death to be transferred into her living trust. Plaintiff's motion for reconsideration also attached a copy of a proposed first amended complaint. The proposed first amended complaint set forth further allegations to show standing (i.e., the pour-over provision of the will) as to all three promissory notes, and also stated additional facts apparently relating to the statutes of limitations.
On June 12, 2018, defendants filed opposition to the motion for reconsideration, arguing the statutory requirements of Code of Civil Procedure section 1008 were not met.
The trial court's tentative ruling was to deny the motion. Neither party requested oral argument or appeared, and the trial court adopted the tentative ruling as its order — i.e., the motion was denied.
Request for Extension of Time to Amend Complaint
On May 23, 2018, plaintiff filed a request for an extension of time to file a first amended complaint. The request was made by James Weilbacher, an administrative law judge, on behalf of his father David Weilbacher, plaintiff's attorney of record. According to a declaration presented by James Weilbacher in support of the request, his father had an emergency heart valve replacement surgery on May 12, 2018, and had not been released from the hospital. The declaration further stated: "My Father asked me to request this extension to allow for the First Amended Complaint to be filed after the Motion for Reconsideration is heard which would allow him to have additional recovery time and to have clarity in his First Amended Complaint."
On May 25, 2018, the trial court issued a "Memorandum" stating: "In re Request for Extension to File First Amended Complaint: Matter to be addressed at June 21, 2018 hearing; Motion for Reconsideration to be heard on that day; deadline to file Amended Complaint is already well past; no proposed order submitted." (Italics added.) It is not disputed that the trial court's assumption that the deadline for filing the amended complaint was "already well past" was mistaken.
Neither party appeared at the hearing of the motion for reconsideration on June 21, 2018, and the request for extension of time was not raised or addressed in connection therewith.
Defendants' Dismissal Motion Granted
After the motion for reconsideration was denied, plaintiff filed an appeal from both the order sustaining demurrer and the denial of the motion for reconsideration. That appeal was dismissed as premature due to lack of a final judgment, and remittitur was issued on February 26, 2019. (Clawson v. Fulbright, F077757.)
On February 27, 2019, defendants filed an application for an order dismissing the entire action and entering judgment for defendants. The application was made on the ground that the demurrer was sustained with 30 days' leave to amend, but no amended complaint had ever been filed. (See Code Civ. Proc., § 581, subd. (f)(2).) On March 1, 2019, the trial court granted the application and the action was dismissed. The order includes a notation that plaintiff's counsel appeared "and did not oppose the request." Judgment of dismissal was entered on March 1, 2019.
Following the entry of judgment, plaintiff timely filed his notice of appeal.
DISCUSSION
I. Standard of Review
In the instant appeal, plaintiff argues the trial court abused its discretion when, in sustaining the demurrer based on standing to sue, it denied leave to amend the complaint regarding the status of Note 1 and Note 3 as trust assets. According to plaintiff, a reasonable factual basis existed for alleging that all three promissory notes were assets of the trust and that plaintiff did not lack standing to pursue claims based on Notes 1 and 3.
On appeal from a judgment of dismissal following the sustaining of a demurrer, we determine whether the complaint states facts sufficient to constitute a cause of action. (Finch Aerospace Corp. v. City of San Diego (2017) 8 Cal.App.5th 1248, 1251-1252.) Where, as here, the demurrer is sustained on certain grounds without leave to amend, we decide whether a reasonable possibility exists that the defect can be cured by amendment: if it can be, the trial court abused its discretion in denying leave to amend, and we reverse. (Id. at. p. 1252.) "The burden of proving such reasonable possibility is squarely on the plaintiff." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
II. Plaintiff Has Shown a Reasonable Basis for Amendment Regarding Standing
In its order sustaining the demurrer, the trial court denied leave to amend as to causes of action based on Note 1 and Note 3, on the ground that plaintiff as trustee lacked standing because such promissory notes did not appear to be trust assets.
Plaintiff has shown on appeal, as he did in the trial court, that a reasonable basis exists for alleging that all three of the promissory notes upon which the complaint was founded were trust assets, and therefore leave to amend should not have been denied as to Note 1 and Note 3. Support for allowing plaintiff leave to amend the complaint to allege a basis for standing to sue on Note 1 and Note 3 included evidence that Mary Clawson's last will had a pour-over provision that would cause all of her estate to be transferred into the trust. Additionally, plaintiff also provided records filed in the probate court proceedings apparently indicating the promissory notes were trust assets. On this record, we conclude the trial court erred in denying leave to amend with respect to Note 1 and Note 3 as bases for liability. Because the complaint is predicated on the promissory notes, including Note 1 and Note 3, the denial of leave to amend significantly impacted the entire complaint. As a result, we conclude that plaintiff has established that amendment should be allowed.
However, as correctly argued by defendants, other grounds for demurrer were sustained but plaintiff's appeal has failed to address such matters. As explained below, this failure on plaintiff's part restricts the nature and extent of the amendment to the complaint that may be filed on remand.
III. Impact of Other Grounds on Which Demurrer Was Sustained on Plaintiff's Right to File Amended Complaint on Remand
When a demurrer is sustained with leave to amend, and the plaintiff declines to amend, an appeal from the ensuing dismissal may challenge the validity of the ruling sustaining demurrer. (Lyles v. Sangadeo-Patel (2014) 225 Cal.App.4th 759, 764.) In such an appeal, it is presumed that the complaint states as strong a case as is possible, and the judgment of dismissal must be affirmed if the unamended complaint is objectionable on any ground raised by the demurrer. (Soliz v. Williams (1999) 74 Cal.App.4th 577, 585.)
Here, however, plaintiff's appeal has failed to challenge the validity of the trial court's order sustaining demurrer on grounds other than standing to sue. As indicated previously herein, the trial court sustained the demurrer to the third through seventh causes of action, with leave to amend, on statutes of limitations grounds. According to the trial court, additional factual allegations were needed to show that these causes of action came within the applicable statutory periods. The trial court also sustained, without leave to amend, the demurrer to the first and second causes of action as to all defendants except Castlewood Partners, Inc. on the ground that only Castlewood Partners, Inc. was contractually liable on the promissory notes. Neither of these rulings are addressed or challenged in plaintiff's opening brief on appeal. To the extent they are mentioned at all in the reply brief, it is at most in a perfunctory and inadequate manner. Consequently, we conclude that any challenge to these aspects of the trial court's demurrer ruling are waived or forfeited. Although our review of an order sustaining demurrer is de novo, that review " 'is limited to issues which have been adequately raised and supported in [appellants' opening] brief.' " (WA Southwest 2, LLC v. First American Title Ins. Co. (2015) 240 Cal.App.4th 148, 155.) Issues not raised or supported by adequate legal argument in an appellant's brief are deemed forfeited, waived or abandoned. (Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, 956; State Water Resources Control Bd. Cases (2006) 136 Cal.App.4th 674, 836.)
Since these aspects of the demurrer ruling only address a portion of the entire action, this is not a situation in which the judgment may be affirmed by simply deciding the original complaint was and is objectionable on such grounds. --------
By failing to challenge the trial court's rulings in sustaining the demurrer, plaintiff has forfeited his right to do so. Accordingly, we conclude that in any amendment to the complaint on remand, plaintiff is bound by the trial court's determination that plaintiff must allege additional facts to show that the third through seventh causes of action are within the applicable statutes of limitation; and furthermore, plaintiff's contractual causes of action (i.e., the first and second causes of action) are limited to asserting liability against Castlewood Partners, Inc.
IV. Failure to Pursue Further Remedies in Trial Court Not Fatal to this Appeal
Defendants argue plaintiff did not diligently pursue relief in the trial court. Defendants note that when, in response to plaintiff's request for an extension of time to file an amended complaint due to plaintiff's counsel's emergency heart surgery, the trial court erroneously stated the time for amendment had already long passed, plaintiff could have appeared at the hearing on the motion for reconsideration and sought to correct the trial court's error. Further, defendants also point out that plaintiff could have sought to explain his failure to timely amend the complaint by presenting opposition to defendants' motion to dismiss, for example by raising grounds of excusable neglect under Code of Civil Procedure section 473. According to defendants, such failures to act mean that plaintiff abandoned any potential justification for his failure to timely amend the complaint concerning those matters for which leave to amend was granted. Of course, ordinarily an appellate court will not consider erroneous rulings where an objection or other relief could have been but was not pursued in the trial court. (See Harding v. Collazo (1986) 177 Cal.App.3d 1044, 1057.)
In his reply brief, plaintiff argues he should be granted an opportunity to file an amended complaint, not only because the trial court erroneously denied leave to amend with respect to Note 1 and Note 3, but also because the trial court made a ruling that the time for amending the complaint had already passed. As we have discussed, the latter point refers to the trial court's response to the request for an extension of time to file the amended complaint, which request was presented to the trial court because plaintiff's attorney had undergone an emergency heart valve surgery. The request was made approximately one week before the deadline to file the amended complaint, but the trial court's response was a memorandum indicating, among other things, that the deadline to file an amended pleading was "already well past." Plaintiff argues this reflected that further effort in the trial court relating to amendment would be futile. As a result of this apparent futility, rather than pursuing further action in the trial court, plaintiff immediately appealed after the motion for reconsideration was denied. When we dismissed his appeal as premature due to a lack of a final judgment and the remittitur was filed in the trial court, plaintiff did not object to defendants' dismissal motion since entry of judgment would allow the issue of amendment of the complaint to be raised on appeal.
In the unique circumstances and procedural history of this matter, we conclude that plaintiff did not, by any failure to take further action in the trial court, abandon his right to pursue the issue of amendment to his complaint in the present appeal. Plaintiff is entitled to file an amended complaint alleging liability under all three promissory notes, subject to the qualifications stated herein.
DISPOSITION
The judgment is reversed, and the case is remanded to the trial court. Upon remand, plaintiff shall be permitted to file an amended complaint, consistent with this opinion. In any amendment to the complaint on remand, plaintiff is bound by the trial court's determination that plaintiff must allege additional facts to show that the third through seventh causes of action are within the applicable statutes of limitation; and furthermore, plaintiff's contractual causes of action (i.e., the first and second causes of action) are limited to asserting liability against Castlewood Partners, Inc. Plaintiff is awarded costs on appeal.
SNAUFFER, J. WE CONCUR: SMITH, Acting P.J. MEEHAN, J.