Boyd v. Freeman

• Decision Date: 19 May 2015
• Docket Number: B253500
• Court: California Court of Appeals
• Parties: PAULA BOYD, Plaintiff and Appellant, v. DAVID FREEMAN, Defendant and Respondent.

PAULA BOYD, Plaintiff and Appellant, v. DAVID FREEMAN, Defendant and Respondent.

B253500

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FOUR

May 19, 2015

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. BC486054)

APPEAL from a judgment of the Superior Court of Los Angeles County, Mary H. Strobel, Judge. Affirmed.

Damon L. Hobdy for Plaintiff and Appellant.

The Jamison Law Firm, Guy E. Jamison and Amy Duncan for Defendant and Respondent.

In the underlying action, appellant Paula Boyd sued respondent David Freeman for breach of fiduciary duty and unfair business practices. The trial court sustained Freeman's demurrer to the first amended complaint without leave to amend, concluding that appellants' claims were time-barred and otherwise legally untenable. We affirm.

RELEVANT FACTUAL AND PROCEDURAL BACKGROUND

On June 5, 2012, Boyd filed her original complaint against attorney Freeman for legal malpractice, breach of contract, breach of fiduciary duty, fraud, and declaratory relief.¹ The claims were predicated on allegations that after Boyd hired Freeman to represent her in a matter, he made a "usurious" loan to her secured by a deed of trust for a property in Glendale. According to the complaint, in 2007, after Freeman attempted to arrange for a foreclosure sale of the Glendale property, Boyd and Freeman entered into a "purported" settlement agreement. The complaint asserted that Boyd's claims were for "violations that . . . continued to occur after the settlement," alleging that Freeman "continued to use his legal status and his usurious loan terms to try to take the property illegally and wrongfully from [Boyd]." Attached to the complaint were copies of the deed of trust for the Glendale property and the note secured by that deed.

Freeman demurred to the complaint, contending that Boyd's claims were time-barred under the applicable statutes of limitations. In addition, Freeman argued that the claims failed in light of the complaint's allegations regarding the 2007 settlement, viewed along with the note and trust deed, which Freeman maintained demonstrated the nonusurious nature of the loan. The trial courtsustained the demurrer, but afforded Boyd leave to amend her claims, with the exception of her request for declaratory relief.

On March 11, 2013, Boyd filed her first amended complaint (FAC). The complaint asserted a claim for breach of fiduciary duty predicated on allegations that Freeman breached his professional obligations as an attorney in making the secured loan to Boyd, a claim for breach of fiduciary duty predicated on allegations that the loan was usurious, and a claim for restitution under the unfair competition law (UCL; Bus. & Prof. Code, § 17200 et seq.) predicated on violations of the Consumers Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq.).

Freeman demurred to the FAC on the grounds that its claims were untimely under the applicable statutes of limitations, and were otherwise legally untenable. Freeman noted that Boyd's original complaint referred to a 2007 settlement agreement, and requested judicial notice of that agreement.

The trial court sustained the demurrer to the FAC without leave to amend, concluding that it stated no viable claims. In ruling, the court took notice of the original complaint's allegations regarding the existence of the 2007 settlement agreement, but otherwise denied Freeman's request for judicial notice. On October 29, 2013, the court entered an order dismissing Boyd's action. This appeal followed.

DISCUSSION

Boyd contends the trial court erred in sustaining the demurrer to the FAC without leave to amend. For the reasons discussed below, we disagree.

A. Standard of Review

"Because a demurrer both tests the legal sufficiency of the complaint and involves the trial court's discretion, an appellate court employs two separate standards of review on appeal. [Citation.] . . . Appellate courts first review the complaint de novo to determine whether or not the . . . complaint alleges facts sufficient to state a cause of action under any legal theory, [citation], or in other words, to determine whether or not the trial court erroneously sustained the demurrer as a matter of law. [Citation.]" (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 879, fn. omitted (Cantu).) Moreover, "[i]f another proper ground for sustaining the demurrer exists, this court will still affirm the demurrer[] even if the trial court relied on an improper ground . . . ." (Id. at p. 880, fn. 10.)

"When [so] reviewing a demurrer on appeal, appellate courts generally assume that all facts pleaded in the complaint are true. [Citation.]" (Cantu, supra, 4 Cal.App.4th at p. 877, fn. omitted.) However, "[t]he complaint should be read as containing the judicially noticeable facts, 'even when the pleading contains an express allegation to the contrary.'" (Id. at p. 877, quoting Chavez v. Times-Mirror Co. (1921) 185 Cal. 20, 23.)

"Second, if a trial court sustains a demurrer without leave to amend, appellate courts determine whether or not the plaintiff could amend the complaint to state a cause of action. [Citation.]" (Cantu, supra, 4 Cal.App.4th at p. 879, fn. 9.)

B. Facts

The FAC alleges the following facts: Prior to August 2005, Boyd entered into an agreement with Pierre and Kelly Chatelain to purchase an income-producing residential property in Tujunga. Pursuant to the agreement, she made a $70,000 "good faith deposit" into an escrow. In mid-2005, the Chatelains declinedto complete the sale, refused to return Boyd's deposit, and agreed to sell the Tujunga property to another party.

In an effort to facilitate the purchase of a "surrogate investment," Boyd hired Freeman and directed him to secure her $70,000 deposit. In August 2005, he wrote to the Chatelains requesting that they return the deposit. In addition, Freeman discussed other potential investments with her, including the Alondra Coin Laundry and Market (Alondra Laundry). After assessing alternative investment opportunities, Boyd entered into an agreement to buy the Alondra Laundry.

Boyd's agreement to buy the Alondra Laundry required her to deposit $20,000 into an escrow. When Freeman's initial efforts to secure the return of Boyd's $70,000 deposit failed, he offered to make a "bridge loan" to her to be repaid from that deposit, and advised her to obtain an appraisal of the Glendale property, which she owned. After the appraisal showed that Boyd's equity in the Glendale property was significant, Freeman proposed a $425,000 loan to her, secured by that property.

In offering to make the loan, Freeman did not ensure that its terms were "fair and reasonable," disclose them fully to Boyd, advise her to seek independent advice from another attorney, or obtain her informed written consent to the transaction. Although the pertinent promissory note facially identified the principal sum as $425,000 and the annual interest rate as 10 percent the maximum permitted under the California Constitution for specified types of loans -- the effective annual interest rate was 10.22864 per cent because the purported principal sum included fees and costs totaling $9,500.

In December 2005, Boyd executed the note and trust deed regarding the loan. Thereafter, Freeman "received from [Boyd] installment payments on the obligations evidenced in the [n]ote, including the interest component . . . ." Freeman continued to represent Boyd through at least April 27, 2006, when he toldher that he might have a conflict that required him to withdraw as her counsel, and that he would take no further action to recover her $70,000 deposit, absent further instructions.

In February 2007, Freeman advised Boyd that her loan payments -- including certain fees -- were past due, and that he would initiate foreclosure proceedings unless she made them. Later, in May 2007, Freeman arranged for the publication of a notice of foreclosure sale. Thereafter, the threatened foreclosure proceedings were terminated "through the assistance of counsel at no cost to [Boyd] . . . ."

In July 2012, Freeman again initiated foreclosure proceedings regarding the Glendale property, which were interrupted by Boyd's intervening bankruptcy proceedings. In November 2012, after the foreclosure sale of the Glendale property, Freeman "dealt with [that] [p]roperty as would an owner . . . while precluding [Boyd] from receiving . . . rental income" from it.

C. Claims for Breach of Fiduciary Duty

We begin by examining the claims for breach of fiduciary duty in the FAC, which are predicated on Freeman's attorney-client relationship with Boyd. As explained below, we conclude that the claims, as pleaded, are time-barred under Code of Civil Procedure section 340.6, which constitutes the statute of limitations for legal malpractice claims.²

1. Breach of Fiduciary Duty By An Attorney

In actions against attorneys, the elements of a cause of action for breach of fiduciary duty are: "(1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach. [Citation.] [¶] The scope of an attorney's fiduciary duty may be determined as a matter of law based on the Rules of Professional Conduct which, 'together with statutes and general principles relating to other fiduciary relationships, all help define . . . the fiduciary duty which an attorney owes to his [or her] client.' [Citations.]" (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086-1087.)

The FAC contains two claims for breach of fiduciary duty against Freeman, each of which arises from his loan to Boyd. The first claim asserts that Freeman, in making the December 2005 loan,...