SONDRA WISE KUMARAPERU, Plaintiff and Appellant, v. JOHN FELDSTED et al., Defendants and Respondents.
No. B253978
Second Dist., Div. One.
May 26, 2015
June 23, 2015
237 Cal. App. 4th 60
Sylvester, Oppenheim & Linde, Richard D. Oppenheim, Jr., and David A. Seeley for Plaintiff and Appellant.
Jacks & Maybaum, Bradley W. Jacks and Russell W. Clampitt for Defendants and Respondents.
OPINION
CHANEY, Acting P. J.—In this legal malpractice action, plaintiff Sondra Wise Kumaraperu alleges her attorneys negligently advised her to draw a check on an account that she owned but on which she was not a signatory and deposit the funds into another account she owned, which she alleges exposed her to a criminal forgery prosecution. The trial court sustained the attorneys’ demurrer without leave to amend on the grounds that Kumaraperu bore unclean hands and failed to allege she had been found factually innocent of forgery. We affirm, but on a different ground: Transferring one‘s own funds from one account to another cannot be the basis of a forgery prosecution absent intent to defraud, even if the transfer is effected by means of a false signature. Therefore, plaintiff‘s criminal prosecution could not reasonably have been foreseen by defendants, and any damages she incurred defending against it were not caused by them.
BACKGROUND
We take the facts from plaintiff‘s first amended complaint, which is operative. Plaintiff and her husband, Neil Kumaraperu, owned a private daycare center and school in Montrose, California, known as the Pennsylvania Avenue Montessori Infant Care and Preschool (the school). At one point,
The school maintained a checking account and an operating account. Neil and the Niyarapolas were the only signatories on the checking account, the latter remaining so even after their interest in the school reverted to the Kumaraperus. Plaintiff was a signatory only on the operating account.
Neil died on January 17, 2012, leaving plaintiff as the sole owner and operator of the school; no other person owned an interest in the school or its assets or had any capacity to operate it, and Ananda and Ranjini Niyarapola expressly disclaimed any interest in the money in the school‘s checking account.
While operating the school, plaintiff discovered the school‘s director had inadvertently deposited approximately $36,500 in tuition checks into the checking account rather than the operating account, funds that were needed immediately to pay operating expenses such as rent and salaries. Having no access to the checking account, plaintiff sought legal advice from defendants as to how to move the money into the operating account. Defendants advised her to draw a check on the checking account payable to herself in the amount of $36,500, sign it with Ranjini Niyarapola‘s name, and deposit the check into the operating account. Defendants informed plaintiff this transfer would be legal and proper.
Plaintiff did as defendants advised, and used the funds to operate the school. She was later charged by the Los Angeles County District Attorney with forgery, after which defendants denied having advised her to make the transfer and indicated they would neither assist with nor provide testimony in her criminal defense.
Plaintiff sued defendants for professional negligence, breach of contract, and fraud, alleging they breached their agreement to represent her “properly and competently” and knowingly misrepresented that forgery was legal. She alleged defendants’ actions put her in legal jeopardy, in that she became the object of a criminal prosecution, and caused monetary damages in the form of attorneys fees expended to defend against that prosecution. She also suffered “emotional distress, worry, anxiety, chagrin, pain, suffering, humiliation, and harm to her personal reputation in the community.”
On January 8, 2015, a preliminary hearing was held in the criminal action against plaintiff, at the end of which Judge Patrick J. Hegarty dismissed the case on the basis of insufficient evidence. (People v. Kumaraperu (Super. Ct. L.A. County, 2015, No. GA088431).) We grant plaintiff‘s request for judicial notice of the minute order dismissing the case and the court‘s finding therein of insufficient evidence. (
On February 19, 2015, we sent a letter to the parties asking for supplemental briefing answering, among other questions, how defendants’ conduct injured plaintiff. Both sides responded with letter briefs, which we have considered.
DISCUSSION
A. Standard of Review
When a demurrer is sustained, we review the complaint de novo to determine whether it alleges facts stating a cause of action under any legal theory. (Rakestraw v. California Physicians’ Service (2000) 81 Cal.App.4th 39, 43 [96 Cal.Rptr.2d 354].) We accept as true all properly pleaded material facts, but not contentions, deductions, or conclusions. (Id. at pp. 42-43.) “[W]hen [a demurrer] is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment . . . .” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [216 Cal.Rptr. 718, 703 P.2d 58].) A plaintiff has the burden to show what facts she could plead to cure defects in the complaint. (Ibid.; Total Call Internat., Inc. v. Peerless Ins. Co. (2010) 181 Cal.App.4th 161, 166 [104 Cal.Rptr.3d 319].) To meet this burden on appeal, the plaintiff must enumerate the facts and demonstrate how they establish a cause of action. (Blank, at p. 318; Total Call, at p. 166.) “On appeal from a judgment of dismissal entered after a demurrer has been sustained without leave to amend, unless failure to grant leave to amend was an abuse of discretion, the appellate court must affirm the judgment if it is correct on any theory.” (Hendy v. Losse (1991) 54 Cal.3d 723, 742 [1 Cal.Rptr.2d 543, 819 P.2d 1].)
B. Imposture Without Fraud Is Not Forgery
Plaintiff alleges she retained defendants to advise her how to transfer money from her own business checking account to her own business operating account. She alleges defendants breached the duty of care by failing to advise how to do so properly, instead advising her to sign another‘s name on a check and deposit it into the operating account, which exposed her to a criminal prosecution for forgery.
By accepting employment to give legal advice, an attorney “impliedly agrees to use such skill, prudence, and diligence as lawyers of ordinary skill and capacity commonly possess and exercise in the performance of the tasks which they undertake.” (Lucas v. Hamm (1961) 56 Cal.2d 583, 591 [15 Cal.Rptr. 821, 364 P.2d 685].) To state a cause of action for legal malpractice, a plaintiff must plead “(1) the duty of the attorney to use such skill, prudence, and diligence as members of his or her profession commonly possess and exercise; (2) a breach of that duty; (3) a proximate causal connection between the breach and the resulting injury; and (4) actual loss or damage resulting from the attorney‘s negligence.” (Coscia v. McKenna & Cuneo (2001) 25 Cal.4th 1194, 1199 [108 Cal.Rptr.2d 471, 25 P.3d 670].)
When poor legal advice proximately results in otherwise avoidable litigation, a client may recover as damages attorney fees she incurs in that litigation. (Ishmael v. Millington (1966) 241 Cal.App.2d 520, 525-526 [50 Cal.Rptr. 592].) A plaintiff seeking to recover such damages must allege a causal connection between the defendant‘s breach of duty and the injury. (Christensen v. Superior Court (1991) 54 Cal.3d 868, 900 [2 Cal.Rptr.2d 79, 820 P.2d 181].) Where the pleaded facts do not naturally give rise to an inference of causation, the plaintiff must plead specific facts affording such an inference. (Id. at pp. 900-901; see Bockrath v. Aldrich Chemical Co. (1999) 21 Cal.4th 71, 78 [86 Cal.Rptr.2d 846, 980 P.2d 398].)
Plaintiff adequately alleges negligent conduct by defendants, because when a signatory on a financial account dies, the proper course is for the account owner to update the account card, not to pose as another signatory. But plaintiff fails to allege causation because signing another‘s name on a check
The negotiation of a check is a matter of private contract between a financial institution and a depositor. (Estate of Fisher (1988) 198 Cal.App.3d 418, 429 [244 Cal.Rptr. 5] [“The account card serves as a contract between the depositor and the financial institution . . . .“].) A check is a signed instrument by which the depositor (the drawer) instructs the financial institution (the drawee) to transfer the depositor‘s funds to a check bearer in accordance with the account agreement. (
To make imposture a crime requires intent to defraud. “Every person who, with the intent to defraud, knowing that he or she has no authority to do so, signs the name of another person” to a check or, “with the intent to defraud, falsely” passes a forged check, is guilty of forgery. (
To maintain an action for damages based on the wrongful act or neglect of another, a plaintiff must allege the wrongful act was a direct and proximate cause of the injury. “It is reasonably well settled . . . that the causation inquiry has two facets: whether the defendant‘s conduct was the ‘cause in fact’ of the injury; and, if so, whether as a matter of social policy the defendant should be held legally responsible for the injury.” (Osborn v. Irwin Memorial Blood Bank (1992) 5 Cal.App.4th 234, 252 [7 Cal.Rptr.2d 101].) To determine causation in fact, California has adopted the substantial factor test set forth in the Restatement Second of Torts, section 431. (Mitchell v. Gonzales (1991) 54 Cal.3d 1041, 1052 [1 Cal.Rptr.2d 913, 819 P.2d 872]; Rest.2d Torts, § 431 [negligent conduct is a legal cause of harm if it is a substantial factor in bringing about the harm].) An event will be considered a substantial factor in bringing about harm if it is “recognizable as having an appreciable effect in bringing it about.” (Rest.2d Torts, § 433, com. d, p. 433.)
An event that enables harm ultimately to occur need not necessarily be a substantial factor in bringing about the harm. “[C]are must be taken to avoid confusing two elements which are separate and distinct, namely, that which causes the injury, and that without which the injury would not have happened. For the former the defendant may be liable, but for the latter he may not; that is to say, in order to make a defendant liable his wrongful act must be the causa causans [(immediate cause)], and not merely the causa sine qua non [(necessary antecedent)] [citation].” (Johnson v. Union Furniture Co. (1939) 31 Cal.App.2d 234, 237 [87 P.2d 917].) “In a philosophical sense the causes of any accident or event go back to the birth of the parties and the discovery of America; but any attempt to impose responsibility upon such a basis would result in infinite liability, and would ‘set society on edge and fill the courts with endless litigation.’ As a matter of practical necessity, legal responsibility must be limited to those causes which are so close to the result, or of such significance as causes, that the law is justified in making the defendant pay.” (Prosser, Proximate Cause in California (1950) 38 Cal.L.Rev. 369, 375, fn. omitted.)
Ordinarily, foreseeability is a question of fact for the finder of fact, but it may be decided as a question of law if under the undisputed facts there is no room for a reasonable difference of opinion. (Cicone v. URS Corp. (1986) 183 Cal.App.3d 194, 206 [227 Cal.Rptr. 887]; Basin Oil Co. v. Baash-Ross Tool Co. (1954) 125 Cal.App.2d 578, 603 [271 P.2d 122].)
Here, an attorney could not reasonably foresee that the district attorney would prosecute a depositor for manipulating her own accounts containing her own money to which no one else had any claim. Such a result would be highly extraordinary under the circumstances plaintiff alleges because a key element to the crime of forgery is intent to defraud, and a depositor cannot intend to defraud herself. We therefore conclude as a matter of law that plaintiff failed to allege defendants’ conduct was a substantial factor in bringing about her injury.
Plaintiff‘s causes of action for fraud and breach of contract similarly fail. To state a cause of action for fraud, a plaintiff must plead an intentional misrepresentation of material fact with knowledge of its falsity and intent to induce reliance, actual reliance, and damages proximately caused by the reliance. (Gonsalves v. Hodgson (1951) 38 Cal.2d 91, 100-102 [237 P.2d 656];
We recognize that plaintiff faced an impossible task. On the one hand she was required to allege lack of intent to defraud so as to deny criminal liability and avoid an unclean hands defense, but at the same time allege a reasonably foreseeable risk of criminal liability, which could only be predicated on her intent to defraud. (The trial court‘s dismissal of the action based on the doctrines of unclean hands and in pari delicto rested on the latter allegation—prosecution for fraud—but ignored the former—absence of intent to defraud.) Plaintiff‘s simultaneous allegation of necessary but mutually exclusive facts created a logical impossibility that led to the legal impossibility of defendants being liable in negligence for damages caused by an unforeseeable event.
The judgment is affirmed. Respondents are to recover their costs on appeal.
Johnson, J., and Bendix, J.,* concurred.
A petition for a rehearing was denied June 23, 2015, and appellant‘s petition for review by the Supreme Court was denied August 19, 2015, S227656.