LiMandri v. Judkins, No. D022106

• Court: California Court of Appeals
• Writing for the Court: BENKE
• Citation: 60 Cal.Rptr.2d 539,52 Cal.App.4th 326
• Parties: , 97 Cal. Daily Op. Serv. 690, 97 Daily Journal D.A.R. 1037 Charles S. LIMANDRI, Plaintiff and Appellant, v. Greg D. JUDKINS, Defendant and Respondent.
• Docket Number: No. D022106
• Decision Date: 28 January 1997

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60 Cal.Rptr.2d 539 52 Cal.App.4th 326, 97 Cal. Daily Op. Serv. 690, 97 Daily Journal D.A.R. 1037 Charles S. LIMANDRI, Plaintiff and Appellant,
v.
Greg D. JUDKINS, Defendant and Respondent. No. D022106. Court of Appeal, Fourth District, Division 1, California. Jan. 28, 1997.
Review Denied April 16, 1997.

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[52 Cal.App.4th 333] Charles S. LiMandri, Rancho Santa Fe, and R. Timothy Ireland, San Diego, for Plaintiff and Appellant.

Douglas Alan Pettit, Klinedinst, Fliehman, McKillop & Jones, San Diego, for Defendant and Respondent.

BENKE, Acting Presiding Justice.

Plaintiff Charles S. LiMandri appeals from a judgment of dismissal entered after the court sustained defendant Greg D. Judkins's demurrer to LiMandri's complaint without leave to amend as to all causes of action. ¹

52 Cal.App.4th 334

FACTUAL AND PROCEDURAL BACKGROUND

Because this is an appeal of a judgment of dismissal entered after the sustaining of a general demurrer, "we accept as true all the material allegations of the complaint." (Shoemaker v. Myers (1990) 52 Cal.3d 1, 7, 276 Cal.Rptr. 303, 801 P.2d 1054.) LiMandri's complaint discloses the following facts:

LiMandri represented multiple plaintiffs in litigation arising out of environmental contamination of 34 acres of real property owned by the plaintiffs. The litigation consisted of a state court action, Sesi v. Signal Landmark, County of San Diego Superior Court case No. 624243, and an action brought by the same plaintiffs against Signal Landmark, Inc., and others in federal district court under

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the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). (42 U.S.C. § 9601 et seq.) Among the plaintiffs represented by LiMandri were Wadie and Mary-Lynn Deddeh (the Deddehs). The plaintiffs and LiMandri entered into a written fee agreement whereby LiMandri was to be paid $75 per hour for his services in addition to 20 percent of any recovery the plaintiffs might obtain.

In early February 1992, while the state action was pending, Judkins contacted LiMandri and told him he was counsel for Security Trust Company (Security) and that Security had extended a loan in the amount of $1,450,000 to the Deddehs. The loan was made through Security by an investor group and was arranged by Dendy Real Estate and Investment Company, Inc. (Dendy). Judkins asked LiMandri about the status and settlement value of the pending state action and specifically asked him about his fee arrangement with the plaintiffs. Judkins did not tell LiMandri that the Deddehs, in connection with the loan transaction, had granted Security a lien against their share of any judgment or settlement proceeds obtained in the state action against Signal Landmark.

On March 30, 1992, Judkins filed a notice of lien in the state court action. The notice of lien provided: "Any and all proceeds from this action, including any settlement payments or proceeds of any amounts paid in full or partial satisfaction of any judgment obtained in this action, otherwise payable to Mr. and Mrs. Wadie Deddeh, or either of them, shall be paid directly to Security Trust Company." Although LiMandri had no knowledge of [52 Cal.App.4th 335] Security's lien until its notice of lien was filed, the notice of lien appeared to have been prepared by LiMandri himself, as it bore his name, address and state bar number.

In April 1992, a judgment was entered in the state court action awarding the Deddehs and their co-plaintiffs damages in the amount of $2.5 million. Signal Landmark filed a notice of appeal of that judgment. However, in April 1993, under the supervision of a federal magistrate, the Deddehs and their co-plaintiffs entered into a settlement agreement with Signal Landmark whereby Signal Landmark paid $2.5 million to settle both the state action and its involvement in the federal CERCLA action. Half of that amount plus six percent interest was to be paid in cash to the plaintiffs and their attorney; the remaining half plus six percent interest was to be paid into a trust account and used for the remediation of the subject contaminated property.

As a result of Security's lien and notice of lien filed in the state action, the settlement agreement was amended to require Signal Landmark to bring an interpleader action in federal district court and deposit the Deddehs' share of the settlement funds ($543,972.60) with the court in an interpleader account without any prior payment to LiMandri of the Deddehs' share of his attorney fees. The interpleader action tied up fees owing to LiMandri from the Signal Landmark litigation for over seven months and caused him to incur over $110,000 in fees and costs.

Based on these facts, LiMandri filed the instant action against Judkins and other attorneys who allegedly represented Security in connection with its loan to the Deddehs. ² LiMandri's complaint asserted four causes of action: fraud and deceit based on suppression of fact; negligent failure to disclose and suppression of fact; intentional interference with prospective economic advantage; and negligent interference with prospective economic advantage.

The court sustained Judkins's general demurrer without leave to amend as to all causes of action and denied LiMandri's subsequent motion for reconsideration of that ruling.

DISCUSSION

In reviewing a judgment of dismissal following the sustaining of a general demurrer without leave to amend, our task "is to determine whether the complaint states, or can be amended to state, a cause of action. For that purpose we accept as true the properly pleaded material factual allegations of the

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complaint, together with facts that may properly be judicially noticed. [52 Cal.App.4th 336] [Citations.]" (Crowley v. Katleman (1994) 8 Cal.4th 666, 672, 34 Cal.Rptr.2d 386, 881 P.2d 1083.) I

Liability for Nondisclosure

In his first and second causes of action, LiMandri seeks to hold Judkins liable for intentionally or negligently failing to disclose the following facts to LiMandri during the parties' February 1992 conversation: (1) Security was claiming an interest in the judgment or settlement proceeds obtained in the state court action; (2) Security intended to assert superior lien rights to the Deddehs' share of such proceeds; (3) Judkins had prepared the notice of lien bearing LiMandri's name and state bar number and intended to file it in the state action; and (4) Judkins was taking active steps on behalf of Security to interfere with LiMandri's contractual fee arrangement with his clients in the state and federal actions. Regarding LiMandri's nondisclosure causes of action, the court ruled: "Notwithstanding considerations of professional courtesy and ethical obligations, attorneys for the lien claimant [Security] were under no legal duty to advise [LiMandri] of an intention to assert superiority of the lien."

There are "four circumstances in which nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts. [Citation.]" (Heliotis v. Schuman (1986) 181 Cal.App.3d 646, 651, 226 Cal.Rptr. 509.) None of these circumstances apply in the instant case.

Clearly, there was no fiduciary relationship between Judkins as counsel for Security and LiMandri as counsel for the Deddehs. ³ Each of the other three circumstances in which nondisclosure may be actionable presupposes the existence of some other relationship between the plaintiff and [52 Cal.App.4th 337] defendant in which a duty to disclose can arise. As set forth in BAJI No. 12.36 (8th ed.1994), "where material facts are known to one party and not to the other, failure to disclose them is not actionable fraud unless there is some relationship between the parties which gives rise to a duty to disclose such known facts." (Italics added.)

As a matter of common sense, such a relationship can only come into being as a result of some sort of transaction between the parties. (See Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294, 85 Cal.Rptr. 444, 466 P.2d 996 ["In transactions which do not involve fiduciary or confidential relations, a cause of action for non-disclosure of material facts may arise in at least three instances"], italics added; Goodman v. Kennedy (1976) 18 Cal.3d 335, 347, 134 Cal.Rptr. 375, 556 P.2d 737 ["duty of disclosure ... may exist when one party to a transaction has sole knowledge or access to material facts and knows that such facts are not known to ... the other party"], italics added.) Thus, a duty to disclose may arise from the relationship between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement. (CIV.CODE, § 1572⁴, subd. 3.) All of these relationships are created by transactions between parties from which a duty to disclose facts material

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to the transaction arises under certain circumstances.

The fundamental problem with LiMandri's nondisclosure causes of action is that he alleges no such transaction or relationship with Judkins. The only "transaction" underlying LiMandri's nondisclosure claims is the February 7, 1992, conversation in which Judkins asked LiMandri about the state court action against Signal Landmark. LiMandri alleges no existing or anticipated contractual relationship or any other relationship with Judkins that would give rise to a duty to disclose.

It is noteworthy that section 1572, one of two California statutes codifying the elements of a fraud cause of action, applies only to fraud "committed by a party to the contract ... with intent to deceive another party thereto, or to induce him to enter into the contract." (Italics...