THE FISHER FAMILY TRUST vs. TIMOTHY LEFEVER

Truck Ins. Exchange (2005) 132 Cal.App.4th 1076, 1099.) Legal conclusions are insufficient. (Id. at 1098–1099; Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 551, fn. 5 [ultimate facts sufficient].) The Court “assume[s] the truth of the allegations in the complaint, but do[es] not assume the truth of contentions, deductions, or conclusions of law.” (California Logistics, Inc. v. State of California (2008) 161 Cal.App.4th 242, 247.)

Sham Pleading Doctrine. Under the sham pleading doctrine, plaintiffs are forbidden to amend complaints to omit harmful allegations from previous complaints or add allegations inconsistent with those of earlier complaints, unless a satisfactory explanation for the changes is made. (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425.) If a party attempts to avoid the defects of an earlier complaint by filing an amended complaint with such unexplained omissions or additions the court may take judicial notice of the earlier pleading and disregard inconsistent allegations. (Colapinto v. County of Riverside (1991) 230 Cal.App.3d 147, 151.)

Plaintiff’s original complaint in this matter and the 1AC do not contain meaningfully inconsistent allegations; the 1AC is not a sham pleading. Allegations in the original complaint such as those at paragraph 50 stating that Defendant caused his business LeFever Mattson to conduct transactions that damaged Plaintiff are not inconsistent with matching allegations in the 1AC such as those at paragraph 93 stating that Defendant caused transactions that damaged Plaintiff. The original complaint and 1AC also consistently allege that Defendant was personally involved in promoting and conducting certain real estate transactions at issue, which were then managed via his businesses. (See, e.g., Complaint at ¶ 7 [investments “made with and through” Defendant and “managed by” LeFever Mattson], 22 [Fulton Property investment with Mattson acting on behalf of Defendant and LeFever Mattson]; 1AC at ¶ 10 [to original paragraph 7], 52 [to original paragraph 22].)

Plaintiff explains that the slight alterations clear up a previous misunderstanding of which of Defendant’s business entities were involved in what transactions; the thrust of the allegations – that Defendant exerted control over transactions that damaged Plaintiff – remains the same.

Breach of Fiduciary Duty. The elements of breach of fiduciary duty are (1) the existence of a fiduciary duty, (2) its breach, and (3) damages. (O’Neal v. Stanislaus County Employees’ Retirement Assn. (2017) 8 Cal.App.5th 1184, 1215.)

Defendant was allegedly Plaintiff’s real estate broker with regard to all of the property transactions described in the 1AC. (1AC at ¶ 8.) However, the 1AC does not allege a breach of a real estate broker’s fiduciary duty to his client, as the alleged wrongs do not concern the brokering of a real estate transaction. The alleged trouble with the Modesto Property was that Defendant allegedly later deceived Plaintiff into transferring its interest to his company, the alleged trouble with the Lompoc Property was that it was sold in 2022 without Plaintiff’s consent, the alleged trouble with the Ceres Property was that Plaintiff’s deed was never recorded and the property was later sold without Plaintiff’s consent, the alleged trouble with the Walmart Property was that it was not sold quickly as promised and the property was transferred without Plaintiff’s consent, and the alleged trouble with the Fulton Property was that Plaintiff was not told the truth about where the investment money was going.

Three of these deals – those for the Lompoc, Walmart, and Fulton Properties – do not implicate Defendant as a real estate broker because Plaintiff does not allege that Plaintiff purchased real estate. Rather, Plaintiff alleges that it invested in businesses of Defendant’s that in turn acquired those pieces

of real estate. This fact also underpins Defendant’s standing argument, addressed below.

With regard to the CERES property, though, Plaintiff alleges it directly purchased an interest in real property and Defendant failed to inform Plaintiff that the property was encumbered by a bank loan. Plaintiff was only told that Mattson had a small personal note against the Ceres Property and the Ceres Property was “essentially unencumbered.” (1AC at ¶ 41.) The 1AC states a breach of a real estate broker’s fiduciary duty with regard to the Ceres Property.

As to the CERES property, the 1AC implicates other forms of fiduciary duty as well. A cotenant of real property owes a fiduciary duty to other tenants not to profit at the expense of the other tenants’ interests in the real property. (Wilson v. S.L. Rey, Inc. (1993) 17 Cal.App.4th 234, 242.) Plaintiff alleges that Defendant and Mattson’s business K.S. Mattson Partners was Plaintiff’s cotenant in the Ceres Property. (1AC at ¶ 39.) The cotenancy placed a fiduciary duty on Defendant and Mattson via the company Plaintiff alleges they entirely controlled not to do any harm to the communal property interest, so Plaintiff states a breach of that fiduciary duty where it alleges that Defendant and Mattson transferred ownership of the Ceres Property to their other business Valley Oak Investments without soliciting Plaintiff’s approval or at least compensating it for its lost ownership interest. (1AC at ¶ 43.)

There is also a breach of fiduciary duty in Defendant and Mattson’s alleged use of Ceres Property money to finance their separate dealings. (Id. at ¶ 42.)

As to MODESTO property, Plaintiff fails to allege a breach of fiduciary duty. Plaintiff alleges that Defendant and Mattson’s business LeFever Mattson was Plaintiff’s cotenant in the Modesto Property. (1AC at ¶ 11.) However, Plaintiff’s allegations are not about harm to the cotenancy. (See Hendrickson v. California Talc Co. (1942) 55 Cal.App.2d 467, 474 [duty of parties in common enterprise is to not deal with subject matter of enterprise to personal advantage].) Plaintiff’s allegations are that Defendant duped trustee Virginia Fisher into deeding away Plaintiff’s interest in the Modesto Property. (1AC at ¶¶ 15-16.) This is a fraud claim, not a claim that a cotenant diminished the communal interest in real property.

As to the MODESTO, LOMPOC, CERES, AND WALMART properties, Plaintiff fails to allege a breach of fiduciary duty arising from the trust that one party places in another. A fiduciary relationship can arise from the trust one party places in another. Specifically, a fiduciary relationship will arise only where one party reposes a confidence in the integrity of another and the other voluntarily accepts that confidence and knowingly undertakes to act on behalf of or for the benefit of the trusting party. (Ashburn v.

AIG Financial Advisors, Inc. (2015) 234 Cal.App.4th 79, 100 (Ashburn).) The essence of a fiduciary relationship is that the parties do not deal on equal terms but the person accepting the confidence of another has a superior position to exert unique influence over the dependent party. (Ibid.) The Fishers, settlors of the plaintiff trust, allegedly trusted Defendant as a good friend. (1AC at ¶ 4.) The 1AC repeatedly states that Defendant promoted investments to the Fishers but more specificity is needed in

alleging how Defendant became their fiduciary. In Ashburn the defendant was found to have a fiduciary relationship with the plaintiffs where the plaintiffs were Pacific Bell retirees deciding what to do with their retirement payments and who made their final decisions based on the defendant’s recommendations at financial advice seminars. (Ashburn at pp. 83-84.) The defendant “held herself out as an expert in helping Pacific Bell retirees, marketing herself as a knowledgeable resource for prospective retirees who faced significant life decisions. [Defendant] provided specific advice to each of the appellants regarding these decisions...[Defendant] influenced each of the appellants to retain her (and her company) to handle their retirements and their retirement investments.” (Id. at p. 101.)

By contrast, the 1AC only states that Defendant “promoted” investments to the Fishers. Not every piece of advice offered or opportunity presented creates a fiduciary relationship. All of the investments but the Fulton Property were promoted to James Fisher, too, who the complaint specifically alleges was a savvy investor. (1AC at ¶ 14.) There is a lack of facts showing how special trust was placed in Defendant such that he had unique and unequal power over Plaintiff’s property or affairs.

As to the FULTON property, however, Plaintiff sufficiently alleges a breach of fiduciary duty based upon the trust that one places in another and the resulting acceptance of that confidence. The FULTON property involved a deal that occurred only after the savvy real estate investor James Fisher had passed away. Mattson dealt only with the naïve Virginia Fisher then. (1AC at ¶¶ 14, 51-52, 58 [differences in Fishers’ expertise].) Virginia specifically met with Mattson to review her financial assets and heard advice from him to use her life insurance and IRA funds to invest in his recommended real estate opportunities, which would supposedly insulate her from the volatile stock market. (Id. at ¶ 52.)

She allowed Defendant and Mattson to manage her financial affairs without asking to see documentation. (Id. at ¶ 58.) The circumstances alleged here are much more akin to those seen in Ashburn, supporting a finding that Mattson was Virginia Fisher’s fiduciary for the Fulton Property dealings. Mattson, not Defendant, allegedly wheedled Virginia into the deal but the 1AC alleges that Mattson was acting on Defendant’s behalf and in the interests of his business partnership with Defendant in their company LeFever Mattson.

For the purposes of demurrer that is sufficient.

CONCLUSION: The court finds that Defendant breached fiduciary duties to Plaintiff as a real estate broker and as a cotenant with regard to the CERES Property. The court finds that Defendant breached a fiduciary duty to Plaintiff as a financial advisor with regard to the FULTON Property. The court does not find a stated or breached fiduciary relationship in the 1AC with regard to Defendant and the MODESTO, LOMPOC, or WALMART Properties.

Derivative and Direct Claims by Shareholders. Generally, a corporation that suffers losses by the wrongdoing of its officers or directors must bring suit itself to recover those losses; if it fails to do so, a shareholder may file a derivative suit on behalf of the corporation. (Nelson v. Anderson (1999) 72 Cal.App.4th 111, 124 (Nelson).) An individual may not maintain a suit in his own right for damage to a corporation’s value. (Ibid.) An individual cause of action may co-exist with a derivative cause of action, but

an individual cause of action only exists where the individual’s damages are not merely incidental to the corporation’s damages; that is to say an action is individual and not derivative only where it appears that injury resulted from some special duty owed the shareholder by the wrongdoer and having its origin in circumstances independent of the plaintiff’s status as a shareholder. (Ibid.)

Comparison to Schrage v. Schrage (2021) 69 Cal.App.5th 126 (Schrage) supports finding that Plaintiff’s claims concerning the Lompoc, Walmart, and Fulton Properties are derivative. In Schrage one brother among three equal co-owners of a car dealership business alleged breach of fiduciary duty against the other two via allegations of using dealership funds to seed a separate company, misappropriation of company assets for personal use, denying the brother access to company books, and general mismanagement, all of which allegedly damaged the dealership and thereby shrank the value of the brother’s interest. (Id. at p. 151.) All of this made for a textbook derivative claim of damage to the corporation causing damage to the brother only incidentally and through his ownership stake. (Id. at p. 152.)

Plaintiff here alleges with regard to the Lompoc, Walmart, and Fulton Properties that Defendant’s corporate entities transferred away corporate property or encumbered corporate property for Defendant’s personal gain, diminishing if not outright eliminating the value of corporate property and giving Plaintiff no value for its ownership interests. These are derivative claims for harm to the corporate entities.

Professional Negligence. The elements of a claim for professional negligence are a (1) a professional’s duty to use such skill, prudence, and diligence as other members of his profession commonly possess and exercise, (2) a breach of that duty, (3) causation, and (4) damages. (Paul v. Patton (2015) 235 Cal.App.4th 1088, 1095.) Per the above Defendant was negligent in his duties as a real estate broker concerning the Ceres Property in that he did not inform Plaintiff of a substantial institutional loan against the property at time of purchase.

Motion to Strike. Defendant’s motion to strike does not include a memorandum of points and authorities providing directed argument.

A demurrer is not proper against only part of a cause of action. (Fremont Indemnity Co. v. Fremont General Corp. (2017) 148 Cal.App.4th 97, 119.) A motion to strike, on the other hand, has limited use to attack a part of a cause of action. For example, it is widely accepted as a proper way to attack a complaint’s prayer for punitive damages. (PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1683.) When a substantive defect is clear from the face of a complaint – examples being a violation of the statute of limitations or a purported but legally invalid claim of right – a motion to strike may properly challenge that defect. (Id. at pp. 1682-1683.) A motion to strike is meant to address deficiencies in form and procedure or to excise superfluous or abusive allegations. (Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 528.)

Per the above, Plaintiff sufficiently states causes of action for breach of fiduciary duty and negligence only via reference to the facts regarding the Ceres Property. Though the court finds the allegations support Defendant owing Virginia Fisher a fiduciary duty as to the Fulton Property, Plaintiff lacks standing to bring a derivative action regarding the Fulton Property. Plaintiff’s allegations regarding the Modesto, Lompoc, Walmart, and Fulton Properties are superfluous and appropriately struck.

Conclusion. Defendant’s demurrer is overruled. Defendant’s motion to strike is granted as follows: the factual allegations concerning the Modesto, Lompoc, Walmart, and Fulton Properties (paragraphs 11 to 36 and 51 to 56) are struck. Plaintiff is granted leave to amend. Plaintiff is to file an amended complaint within 30 days of this hearing date.

MICHAEL G. JONES vs. KAISER FOUNDATION HOSPITALS; ET AL.