Cross v. Bonded Adjustment Bureau

• Decision Date: 09 July 1996
• Docket Number: No. B087247,B087247
• Court: California Court of Appeals Court of Appeals
• Parties: , 96 Daily Journal D.A.R. 9780 Billy CROSS et al., Plaintiffs and Appellants, v. BONDED ADJUSTMENT BUREAU, Defendant and Respondent.

Page 801

55 Cal.Rptr.2d 801

48 Cal.App.4th 266, 96 Daily Journal D.A.R. 9780

Billy CROSS et al., Plaintiffs and Appellants, v. BONDED ADJUSTMENT BUREAU, Defendant and Respondent.

No. B087247.

Court of Appeal, Second District, Division 1, California.

July 9, 1996.

As Modified Aug. 8, 1996.

Law Offices of Kevin Meenan and Kevin Meenan, Pasadena, for Plaintiffs and Appellants.

Scott D. Raphael, Santa Ana, for Defendant and Respondent.

MASTERSON, Associate Justice.

Plaintiffs Billy and Delores Cross retained Bonded Adjustment Bureau ("Bonded"), a collection agency, to enforce a judgment in the principal amount of approximately $150,000. Based on Bonded's advice, the Crosses gave the judgment debtor a full satisfaction of judgment in exchange for $40,000.

Later, the Crosses brought this action against Bonded and others, alleging that defendants had engaged in wrongful conduct in attempting to collect on the judgment. The second amended complaint contained causes of action for negligence, breach of contract, breach of fiduciary duty, and intentional infliction of emotional distress.

The trial court sustained a demurrer without leave to amend as to the fiduciary duty and emotional distress claims, concluding that the Crosses had failed to state facts sufficient to constitute those causes of action. The court granted summary judgment on the negligence and contract claims, finding them barred by the statute of limitations. The Crosses appeal these rulings. We reverse.

BACKGROUND

On March 4, 1993, the Crosses filed suit against Bonded, Robert Susnow, an attorney, and Susnow's firm, alleging that the defendants had been retained to collect on a judgment and had committed several wrongful acts in the course thereof. Susnow filed a general demurrer to the complaint, in which Bonded joined. Before the hearing on the demurrer, the Crosses filed a first amended complaint. Susnow then demurred to the first amended complaint; Bonded did not respond to the new pleading or join in Susnow's demurrer. The trial court sustained Susnow's demurrer with leave to amend. In October 1993, the Crosses filed a second amended complaint. ¹

A. Allegations in the Operative Complaint

The second amended complaint alleged as follows. In May 1979, the Crosses obtained a judgment in Sacramento County Superior Court against Winston Christensen and others for $150,182.98. In September 1987, they retained Susnow to collect on the judgment. Having previously appeared in the Sacramento action in propria persona, the Crosses substituted Susnow in as their counsel of record. In June 1988, the Crosses assigned their rights in the judgment to Bonded, with the understanding that Bonded and Susnow would receive 40 percent of the amount collected and the Crosses would receive the remainder.

The second amended complaint contained four causes of action. The negligence claim alleged that Susnow had acted as the attorney for both the Crosses and Bonded. Together, Susnow and Bonded failed to preserve the Crosses' lien on the judgment debtor's (Christensen's) real property. The lien expired in approximately April 1989, when defendants renewed the judgment. At that time, the judgment (principal plus interest) totaled $244,812.22. Although defendants renewed the judgment, they failed to record a certified copy of the renewal application in the county where Christensen's property was located. (See Code Civ.Proc., § 683.180, subd. (a).) ² In addition, defendants failed to serve Christensen with a notice of renewal of the judgment. ³ These failures caused the Crosses to lose their lien priority on Christensen's property and allowed Christensen to quitclaim the property to his wife as her sole property. Defendants concealed these failures from the Crosses and convinced them to give Christensen a full satisfaction of judgment in exchange for $40,000. Had defendants properly recorded and served notice of the renewal of judgment, the Crosses' lien would have been preserved, and they would have been able to satisfy the lien either in full or in an amount significantly greater than $40,000.

The second cause of action, for breach of contract, alleged that the Crosses had separate contracts, oral or implied, with Susnow and Bonded, respectively. The purpose of each contract was to pursue collection activities for the benefit of the Crosses. Defendants breached those contracts by failing to act in a manner consistent with their fiduciary duties and with the standard practice ordinarily followed by other attorneys and collection agencies.

The third cause of action, for breach of fiduciary duty, alleged that defendants had breached their fiduciary duties, as imposed by the Business and Professions Code and the common law of the State of California.

The last cause of action, for intentional infliction of emotional distress, alleged that defendants intentionally engaged in conduct which caused the Crosses to suffer extreme emotional distress.

Finally, the second amended complaint alleged that defendants had willfully concealed the facts concerning their wrongful conduct and that such concealment had tolled the running of the statute of limitations. The Crosses did not discover defendants' wrongful conduct until approximately April 1992, when they received their files from defendants.

B. Bonded's Demurrer

In November 1993, Bonded demurred to the fiduciary duty and emotional distress claims (third and fourth causes of action) on the ground that they failed to state facts sufficient to constitute causes of action.

As to the fiduciary duty claim, Bonded argued that although such a duty had existed under Business and Professions Code section 6926, that statute had been repealed before the Crosses filed their lawsuit. ⁴ Consequently, section 6926 did not create an enforceable fiduciary relationship between the parties because the Crosses' claim had not been reduced to final judgment before the date of the statute's repeal. (See Los Angeles Unified School Dist. v. State of California (1991) 229 Cal.App.3d 552, 556-557, 280 Cal.Rptr. 237.) As to the emotional distress claim, Bonded argued that the lack of a fiduciary relationship and the lack of outrageous conduct rendered the cause of action defective. The trial court agreed with these arguments and sustained the demurrer without leave to amend as to both claims.

The Crosses sought reconsideration of the ruling on the demurrer. They contended that, in dismissing the fiduciary duty claim, the trial court ignored the existence of a fiduciary duty imposed by common law. This duty, they asserted, was not affected by the enactment or repeal of Business and Professions Code section 6926. The trial court rejected this contention, stating that "there is no fiduciary duty owing to the Plaintiffs from Defendant Bonded."

C. Summary Judgment

In March 1994, Bonded moved for summary judgment as to the remaining claims, for negligence and breach of contract (first and second causes of action), on the ground that they were barred by the two-year statute of limitations contained in section 339 of the Code of Civil Procedure. ⁵ The trial court found as an undisputed fact that Mr. Cross was "concerned about the renewal of the subject [judgment] and lien priority in January 1991." The court concluded that the two-year period commenced to run at that time. Thus, the negligence and contract claims, filed in March 1993, were time-barred.

Judgment was entered in favor of Bonded on July 22, 1994. The Crosses filed a timely appeal from the judgment, seeking review of the rulings on the demurrer as well as the summary judgment.

DISCUSSION

In sustaining the demurrer, the trial court concluded that there was no fiduciary relationship between Bonded and the Crosses. Because the resolution of this issue affects the disposition of the rest of the appeal, we begin by examining whether Bonded owed a fiduciary duty to the Crosses. We conclude that such a duty existed.

A. Breach of Fiduciary Duty

In reviewing the ruling on a demurrer, "we are guided by long-settled rules. 'We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.... We also consider matters which may be judicially noticed.' ... Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.... When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action.... And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm.... The burden of proving such reasonable possibility is squarely on the plaintiff...." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58, citations omitted.)

We agree with the trial court's conclusion that the fiduciary relationship created by former Business and Professions Code section 6926 did not provide a basis for the Crosses' third cause of action, for breach of fiduciary duty. Section 6926 was repealed operative June 30, 1992, over eight months before the Crosses filed suit. It is well settled that when a cause of action rests upon a statute, "the repeal of the statute destroys the right unless the right has been reduced to final judgment or unless the repealing statute contains a saving clause protecting the right in a pending litigation." (Los Angeles Unified School Dist. v. State of California, supra, 229 Cal.App.3d at p. 557, 280 Cal.Rptr. 237.) Here, there was no saving clause, nor had the Crosses reduced their claim to final judgment before the statute was repealed.

Nevertheless, despite the repeal of section 6926, the Crosses may rely on the common law to the extent it created a fiduciary duty between the parties. As our Supreme...