Opinion
E037665
12-6-2006
NANCY L. GRUENEWALD, Plaintiff and Appellant, v. FRANCES JOYCE HARTMAN, Defendant and Respondent.
Law Offices of Thomas W. Gillen and Thomas W. Gillen for Plaintiff and Appellant. Law Offices of Louis A. Stearns and Louis A. Stearns, Sr., for Defendant and Respondent.
In this action, plaintiff Nancy L. Gruenewald seeks to cancel an alleged fraudulent transaction. Plaintiff appeals from the judgment of dismissal entered after the trial court sustained without leave to amend defendant Frances Joyce Hartmans demurrer to the second amended complaint. The trial court sustained Hartmans demurrer on the ground that the action was barred by the three-year statute of limitations for actions alleging fraud set forth in the Code of Civil Procedure section 338, subdivision (d).
All further statutory references will be to the Code of Civil Procedure unless otherwise indicated.
PROCEDURAL HISTORY
The trial court sustained two demurrers based on the statute of limitations in section 338, subdivision (d). On August 16, 2004, a demurrer to the first amended complaint was sustained with leave to amend. On November 9, 2004, a demurrer to the second amended complaint was sustained without leave to amend because the trial court was satisfied plaintiff would be unable to amend her complaint to plead facts sufficient to establish her cause of action was timely. The trial court then dismissed defendant Hartman from the action with prejudice, and entered judgment in Hartmans favor and against plaintiff. Plaintiff filed a timely notice of appeal.
BACKGROUND
The second amended complaint includes causes of action for fraud and for an accounting. Plaintiff alleges she and her father, H.S. Osborne (Osborne), owned all of the interests in a limited partnership known as "The Cardono Square, Ltd." (Cardono Partnership). On April 5, 2000, Osborne transferred his interest in the Cardono Partnership to the Osborne Trust.
On June 25, 2000, plaintiff was notified her father was in the hospital on life support following a massive heart attack. When family members advised her they intended to withdraw life support, plaintiff objected and indicated she was on her way to the hospital. Plaintiff arrived at the hospital on June 26, 2000.
Plaintiff alleges that sometime on June 27 or 28, 2000, she had a conversation with her older sister, defendant Hartman. Defendant allegedly told plaintiff she had seen a handwritten letter from their father addressed to plaintiff asking her to transfer her interest in the Cardono Partnership to the Osborne Trust to save probate costs. Defendant allegedly "pressed" plaintiff to transfer her interest and stated she would provide plaintiff with a copy of the letter as soon as she could retrieve it. Relying on Hartmans representations, plaintiff executed the requested assignment.
Plaintiffs father died on July 1, 2000, shortly after plaintiff assigned her interest in the Cardono Partnership to the Osborne Trust. As a result, plaintiff and defendant Hartman became cotrustees of the Osborne Trust. Although it is not clearly alleged in the second amended complaint, both plaintiff and defendant Hartman were also beneficiaries of the Osborne Trust, along with their two brothers. On February 21, 2002, both plaintiff and defendant were removed as cotrustees, and the probate court appointed Melodie Z. Scott as successor trustee of the Osborne Trust.
The second amended complaint also names as defendants the Osborne Trust and the successor trustee of the Osborne Trust, as well as plaintiffs two brothers, John Louis and Gary Allen Osborne. The successor trustee of the Osborne Trust was dismissed from the action without prejudice by stipulation but can be renamed if plaintiff prevails on this appeal. Defendant Gary Allen Osborne was also dismissed by stipulation. A default was entered as to defendant John Louis Osborne. These parties are not involved in the current appeal.
On October 10, 2001, during a deposition of defendant Hartman on another trust-related matter, plaintiff alleges she learned her sister had lied to her and there was no letter from her father asking her to transfer her interest in the Cardono Partnership to the Osborne Trust. Plaintiff alleges she advised the successor trustee of her discovery. She also asked the successor trustee to resolve the dispute involving her interest in the Cardono Partnership. In early 2004, plaintiff claims she learned the successor trustee was going to file a "final report without resolving the Cardono dispute." As a result, plaintiff filed this action on March 5, 2004.
Plaintiff alleges she would not have consented to transfer her interest in the Cardono Partnership to the Osborne Trust if she had known the truth. As a result, plaintiff claims the transfer of her interest is invalid and voidable.
DISCUSSION
"When reviewing a judgment dismissing a complaint after the granting of a demurrer without leave to amend, courts must assume the truth of the complaints properly pleaded or implied factual allegations." (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081, citing Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) "If the trial court has sustained the demurer [sic], we determine whether the complaint states facts sufficient to state a cause of action. If the court sustained the demurrer without leave to amend, as here, we must decide whether there is a reasonable possibility the plaintiff could cure the defect with an amendment." (Schifando v. City of Los Angeles, supra, at p. 1081.) "The plaintiff has the burden of proving that an amendment would cure the defect." (Ibid.)
Section 338, subdivision (d), provides a three-year period of limitations for the commencement of actions for fraud or mistake. However, a claim of fraud or mistake "is not to be deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake." (§ 338, subd. (d).) "The courts interpret discovery in this context to mean not when the plaintiff became aware of the specific wrong alleged, but when the plaintiff suspected or should have suspected that an injury was caused by wrongdoing. The statute of limitations begins to run when the plaintiff has information which would put a reasonable person on inquiry." (Kline v. Turner (2001) 87 Cal.App.4th 1369, 1374.) "A plaintiff whose complaint shows on its face that [her] claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence." (McKelvey v. Boeing North American, Inc. (1999) 74 Cal.App.4th 151, 160.)
Plaintiff argues the discovery rule set forth in McKelvey and other similar cases, does not apply under the facts of this case, because she and defendant Hartman had a fiduciary or confidential relationship. Plaintiff claims that as a result of this fiduciary or confidential relationship, she had no duty to investigate and was entitled to rely on defendants duty as a trustee of the Osborne Trust to fully disclose all material facts, including the true facts about the letter. To support her argument, plaintiff cites Hobbs v. Bateman Eichler, Hill Richards, Inc. (1985) 164 Cal.App.3d 174, 201-202 which, in pertinent part, states as follows: "Where a fiduciary relationship exists, facts which ordinarily require investigation may not incite suspicion [citation] and do not give rise to a duty of inquiry. [Citation.] Where there is a fiduciary relationship, the usual duty of diligence to discover facts does not exist. [Citation]. [¶] Thus, a plaintiff need not establish that she exercised due diligence to discover the facts within the limitations period unless she is under a duty to inquire and the circumstances are such that failure to inquire would be negligent. [Citations.] Where the plaintiff is not under such duty to inquire, the limitations period does not begin to run until she actually discovers the facts constituting the cause of action, even though the means for obtaining the information are available." (Ibid.; see alsoHobart v. Hobart Estate Co. (1945) 26 Cal.2d 412, 437-438.)
Plaintiffs reliance on Hobbs and other similar cases is misplaced. The facts alleged in the second amended complaint are insufficient to establish the existence of a fiduciary or confidential relationship which would justify the application of a more relaxed standard of discovery. "`A fiduciary [or confidential] relationship is created where a person reposes trust and confidence in another and the person in whom such confidence is reposed obtains control over the other persons affairs." (Richard B. LeVine, Inc. v. Higashi (2005) 131 Cal.App.4th 566, 586, quoting Lynch v. Cruttenden & Co. (1993) 18 Cal.App.4th 802, 809.) The typical case involves a significant disparity in position and knowledge in addition to the relationship of trust and confidence. (See, e.g., Hobbs v. Bateman Eichler, Hill Richards, Inc., supra, 164 Cal.App.3d 174.)
Here, the facts alleged in the second amended complaint indicate plaintiff and defendant, as cotrustees, occupied positions of relative equality to one another. Unless otherwise provided in the trust instruments, they were by statute equally responsible for managing the trust. Plaintiff acknowledges both had a duty under the Probate Code to "participate in the administration of the trust" and to "take reasonable steps to prevent a cotrustee from committing a breach of trust or to compel a cotrustee to redress a breach of trust." (Prob. Code, § 16013, subds. (a) & (b).) Powers exercised under the trust required "their unanimous action." (Prob. Code, § 15620.)
Plaintiff cites no evidence indicating she could amend her complaint to plead the existence of a fiduciary or confidential relationship. Plaintiff merely cites certain orders in the underlying probate action which show she and defendant Hartman continued to cooperate in managing the trust until March 12, 2001. However, for the reasons outlined above, these court orders do not support the existence of a fiduciary or confidential relationship. Even if plaintiff could establish the existence of a fiduciary or confidential relationship, she would not be absolved of her duty of due diligence or be entitled to the benefit of late discovery. A plaintiff has a duty to inquire even if a wrongdoer is a fiduciary as long as she has information which would put a reasonable person on notice of wrongdoing. (Miller v. Bechtel Corp. (1983) 33 Cal.3d 868, 874-875; Noggle v. Bank of America (1999) 70 Cal.App.4th 853, 860-861.)
Plaintiff argues the trial court was in error when it declined to take judicial notice of orders in the underlying probate action dated March 5, 2001 and March 12, 2001. However, based on the foregoing discussion, the issue of judicial notice by the trial court is moot because the referenced orders would not be sufficient to establish a fiduciary or confidential relationship between plaintiff and defendant Hartman. (See, e.g., City of Lodi v. Randtron (2004) 118 Cal.App.4th 337, 363 [appellate courts need not render opinions on questions which would not affect the matters at issue].)
Here, the facts alleged in the second amended complaint lead to one conclusion alone: plaintiff was suspicious of wrongdoing beginning on or about June 27, 2000. The second amended complaint alleges plaintiff was "surprised," "unsure," and "hesitant" when defendant told her about the letter on June 27 or 28, 2000, because this "was not what she understood was Dads desires." "At all times, plaintiff was of the opinion that her father . . . intended her to receive her interest in the [Cardono] Partnership in recognition of her work for his benefit, her love and affection, and his pre-death distribution of property to his four children." Plaintiffs suspicion triggered the commencement of the three-year statute of limitations, but she did not file suit until more than three years later on March 5, 2004.
Other evidence cited by the parties in the record on appeal supports the conclusion plaintiff was suspicious of wrongdoing on June 27 or 28, 2000, and confirms plaintiff would be unable to amend her complaint to allege otherwise. In response to an interrogatory, plaintiff stated her sister called her "vindictive" and "a liar" during their conversation on June 28, 2000, when plaintiff said she had not seen a letter from their father. Plaintiff states she believed defendants representations about the letter during the conversation on June 27 or 28, 2000, despite her sisters harsh words because she concluded her sisters anger was probably the result of the emotionally charged situation they faced at the time. Yet, before she transferred her interest in the Cardono Partnership to the Osborne Trust, plaintiff asked the attorney who prepared the transfer documents whether she had seen the letter. The attorney replied she had not seen the letter, but stated she thought plaintiffs father would have wanted her to transfer her interest to the Osborne Trust.
The trial court took judicial notice of various documents submitted by the parties in connection with the hearings on defendants demurrers. As plaintiff requests, we take judicial notice of "each matter properly noticed by the trial court." (Evid. Code, § 459, subd. (a).) Neither party disputes the referenced documents may be considered in this appeal.
Although plaintiff has not specifically addressed how the second amended complaint could be amended to avoid the statute of limitations, it appears she contends she could add allegations indicating it was not possible for her to discover the truth about the letter despite due diligence until defendants deposition on October 10, 2001. Plaintiff claims she asked defendant to provide her with access to missing trust documents three times following her fathers death during the period July 1, 2000 to March 5, 2001. Each time, defendant allegedly replied she would have to locate the documents and needed more time. Plaintiff also suggests she had no means to discover the truth despite due diligence because her relationship with defendant gradually deteriorated, and defendant began refusing to discuss issues related to the Osborne Trust. However, plaintiffs claims would still be barred by the statute of limitations even if plaintiff amended her complaint to include these allegations. The commencement of the statute of limitations is not delayed even if a defendant conceals wrongdoing as long as the plaintiff is on notice of a potential claim (i.e., plaintiff has information which would put a reasonable person on notice of wrongdoing). (Snapp & Associates Ins. Services, Inc. v. Robertson (2002) 96 Cal.App.4th 884, 890-891.) In other words, plaintiff would not be entitled to a delay in the commencement of the three-year statute of limitations even if she could show defendant concealed the truth about the letter until her deposition on October 10, 2001, because plaintiff was suspicious of wrongdoing as early as June 27 or 28, 2000.
In sum, plaintiffs alleged discovery of the truth about the letter during defendants deposition on October 10, 2001, is not determinative. Even without specific knowledge of this critical fact, plaintiff was suspicious of wrongdoing from the beginning and was aware of all facts necessary to state a cause of action for fraud long before she allegedly discovered the truth about the letter. As the Supreme Court stated in Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1111: "A plaintiff need not be aware of the specific `facts necessary to establish the claim; that is a process contemplated by pretrial discovery. Once the plaintiff has a suspicion of wrongdoing, and therefore an incentive to sue, she must decide whether to file suit or sit on her rights. So long as a suspicion exists, it is clear that the plaintiff must go find the facts; she cannot wait for the facts to find her."
Based on the foregoing, we conclude the facts alleged in the second amended complaint establish plaintiff was suspicious of wrongdoing on or about June 27 or 28, 2000, when defendant told her about the letter from their father asking her to transfer her interest in the Cardono Partnership to the Osborne Trust. Plaintiffs suspicion of wrongdoing at that time was all that was necessary to commence the running of the three-year statute of limitations in section 338, subdivision (d). Plaintiffs fraud cause of action is therefore barred because the three-year limitations period began to run on or about June 28, 2000, and expired three years later on or about June 28, 2003, long before plaintiff filed her complaint in this action on March 5, 2004. Although she had the burden to do so, plaintiff presented no facts which could be added to the complaint to cure this defect.
DISPOSITION
The judgment is affirmed. Respondent is entitled to her costs on appeal.
We concur:
HOLLENHORST, J.
MILLER, J.