Ross v. Alley

Filed 6/18/07 Ross v. Alley CA5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

APPEAL from a judgment of the Superior Court of Fresno County. M. Bruce Smith, Judge.

Gilmore, Wood, Vinnard & Magness, David M. Gilmore and Marcus D. Magness for Plaintiff and Appellant.

McCormick, Barstow, Sheppard, Wayte & Carruth, Timothy L. Thompson and William H. Littlewood for Defendant and Respondent.

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Appellant Rick Ross (Ross) filed an independent action in equity based on extrinsic fraud to set aside a final order entered in a prior probate proceeding of his fathers estate. He now appeals from the judgment dismissing his case after the trial court sustained a demurrer to his second amended complaint without leave to amend. As we shall explain, the fraud alleged constituted only intrinsic fraud and Ross failed to adequately plead that he exercised diligence in pursuing this action. We therefore will affirm the judgment.

FACTUAL AND PROCEDURAL HISTORIES

The Probate Proceeding

Rosss father, Earl Jackson Ross (Jack Ross), died in February 1996. At the time of his death, Jack Ross was married to defendant Susan Clarke Ross Alley (Alley).^[1]Alley was appointed the executrix of Jack Rosss estate in accordance with the terms of his will. The will called for the establishment of two trusts -- a marital trust and a family trust -- to be funded with Jack Rosss one-half of his and Alleys community property, with Alley designated as the trustee for both trusts.

Jack Ross, Alley and Ross together owned all of the stock of Ross & Sons Refrigeration Inc. (Ross & Sons), a business that Ross and his father operated. In 1990, Ross and his father acquired property in Idaho (the Idaho property). In late 1992 or early 1993, Jack Ross retired from active participation in the company and moved to Idaho without Alley, where he lived until his death. Ross took over management of Ross & Sons. Alley had no part in the companys management or operation. In January 1996, Ross and his father decided to sell some of Ross & Sonss assets to the Stellar Group (Stellar), and Ross went to work for Stellar. Ross also undertook to wind down Ross & Sons, which had two lawsuits pending against it, and to complete the work in progress that Ross & Sons did not sell to Steller, all for no compensation. Ross also was in charge of dissolving two other businesses Ross and his father owned, Ross Topper, Inc. and Veggie Vac, for no compensation.

After Jack Rosss death, Ross and Alley agreed Ross would assume full responsibility for the dissolution and winding up of the three companies, as well as manage the ongoing litigation, without compensation, in order to maximize the value going into the trusts and Idaho property, and that all of Rosss efforts would contribute to the equity in the Idaho property and the trusts principal. In exchange for Ross taking care of the businesses, Alley agreed to handle the probate of Jack Rosss estate, including making sure that the Idaho property, cash and all other assets were properly protected for the family and to maximize the Estate. Alley represented to [Ross] and others that the property in Idaho, cash and other assets were in irrevocable trusts both as to her own shares of the community property and for Jack Ross to ensure its ownership for the family and assured [Ross] she would take care of everything in the Probate.

Jack Rosss will was admitted to probate in April 1996 and the estate closed in September 1997 when an order for final distribution was filed. The order states that the estate consists of Jack Rosss one-half interest in the community property of Jack Ross and Alley, and the administration of the estate be brought to a close without requiring an accounting. The order further states Alley was not required to provide a rendition and settlement of the administration of the estate because the beneficiary executed a waiver of accounting; all of Alleys acts and transactions relating to the matters set forth in the waiver of accounting, report and petition are confirmed and approved; and the estate in Alleys possession remaining for distribution consisted of stock in Ross & Sons. The order directed distribution of the Ross & Sons stock between Alley, the marital trust and the family trust. Alley also stated to the court that the stock was distributed to the trusts. Ross has no recall of receiving the Final Order at the time it was issued.

Between Jack Rosss death and the closing of probate, Alley represented to Ross [a]t various times that things were being taken care of and that the Idaho property, cash and other assets were being preserved for the Ross family as agreed. Since Ross was busy with the businesses and litigation, he relied on Alley to do what she promised. During the probate of the estate, Alley sent out notices to the beneficiaries of the Estate including [Ross]. In these notices, Alley represented the estate was all of Jack Rosss one-half interest in the community property. These notices also stated that the inventory and appraisement of the estate was just over $1,000,000, which contained all of the estates assets, there were no cash assets in the estate, and the estates assets consisted solely of 4,850 shares of Ross & Sons. Ross possessed financial statements that Alley and Jack Ross prepared, however, which stated the Idaho property was community property and community property other than the Ross & Sons stock existed. Ross & Sons paid for an appraisal of the Idaho property for the estate. Ross also was aware that the liquidation of Ross & Sons was generating funds that were to benefit the estate and trusts. Based on Alleys representations that those items were in the estate, Ross understood all was as agreed.

Ross did not finish winding up Ross & Sons until January 1998, after the estate closed. Ross was not involved with the accounting for the estate, did not participate in the decisions Alley and the certified public accountant made as to what assets were in the estate, and was not provided with copies of any accountings or work papers. Although Alley represented to the court that Ross & Sons stock was transferred into the two trusts, actually cash or investment accounts were transferred into the trusts. Alley made no effort to ensure the corporations assets went to the estate, and failed to disclose to the court or the beneficiaries, including Ross, that the Ross & Sons stock was never distributed to the trusts, that the stock was now Ross Mule Farms, and that the corporation was being wound up at the time of the alleged stock transfer.

During the dissolution of Ross & Sons, Alley took substantial sums of money from the companys accounts and the estate. Some of the money was used to construct improvements on the Idaho property and some was used for Alleys personal benefit, including the purchase of at least one car. Alley told Ross the money was being used to improve the Idaho property for the family, which she still represented was in various trusts, including an irrevocable trust as to Alleys community property interest and into the testamentary trusts as to Jack Rosss share. Ross believed by improving the property, Alley was acting in accordance with the will, since Ross & Sons stock was community property and the money was being used to improve community property. According to Ross, Alleys repeated representations about the status of the property, cash and other assets lulled him into believing these assets were protected in the estate, and that he trusted Alley as his stepmother and as a fiduciary. When the estate closed, Ross understood that all of his fathers share of the community property, including the Idaho property, the improvements thereon, and the cash and other assets, were in the marital and family trusts, and Alleys share of the community property was in an irrevocable trust in her name for the ultimate benefit of Ross and his siblings.

The Idaho Litigation

Both before and after Jack Rosss death, Ross invested time and his own money to construct improvements to the Idaho property, including constructing a shop building and a second home on the property. In October 2000, Alley told Ross he was no longer welcome on the Idaho property.^[2] Before that time, Ross, his siblings and family friends had used the property to hunt, fish and vacation, without Alleys objection. Alley had assured Ross and others the property was in the Ross family forever. Although Ross asked Alley for an explanation as to why he was no longer welcome on the property, none was forthcoming. Despite this, Ross continued to believe the property was in the testamentary trusts and Alleys irrevocable trust.

Alley subsequently relayed a message to Ross that she did not really mean what she said and she would do whatever was necessary to put it right. Consequently, in late 2000 or early 2001, Alley retained legal counsel to prepare the documentation necessary to ensure her share of the community property was in an irrevocable trust, but she refused to sign the paperwork once it was prepared. Alley did not tell Ross at that time that Jack Rosss share was not in the testamentary trusts.

On December 27, 2001, Ross filed suit in Idaho to protect his investment in the Idaho property. Ross did not file suit in California at that time because he still had no knowledge the trusts were not properly funded. In the Idaho litigation, Ross asserted Alley engaged in fraud and failed to probate the estate in Idaho. In his complaint, Ross alleged that Alley fraudulently probated his fathers estate in California, which prevented him from raising any claims against the estate in the proper forum as the probate legally should have occurred in Idaho since his father was an Idaho resident. Ross also alleged that from the time the Idaho property was purchased, his father, Alley and he agreed that regardless of who held legal title to the property, upon the death of his father and Alley, he and his siblings would receive the property and he would receive compensation for improvements he made to the property in the form of equity. Ross claimed that he was advised and believed the property eventually was placed into an irrevocable trust which would provide for Alley during her lifetime, and for Ross and his siblings thereafter, and that he was satisfied with this arrangement as a way of repaying him for his investment and labors in the property.

Ross further alleged that after Alley advised him in October 2000 that he could no longer use the Idaho property, he learned his father had quitclaimed the Idaho property to Alley sometime prior to his death, although Ross claimed the transfer was subject to his interests and contemplated the creation by Alley of an irrevocable trust. Ross alleged Alley held legal title to the property in her name only, and she refused to recognize he had any interest in the property. By this lawsuit, Ross sought restitution for the improvements he made to the property as well as an order requiring Alley to convey the Idaho property into an irrevocable trust, retaining a beneficial life interest for herself and providing for conveyance of the property to Ross and his siblings on her death.

In late 2001, Ross was informed Alley cancelled a life insurance trust that she had set up to cover estate taxes that might be incurred on Jack Rosss death when the property in the trusts and all the other property, including the Idaho property, were to go to the beneficiaries. Alley had made annual payments on the life insurance trust from 1997 to 2001. When Alley was asked in early 2002 why she cancelled the trust, Alley responded because she felt like it. Ross knew the life insurance trust was part of the overall estate plan created by Jack Ross and Alley to ensure all of the family property, including the Idaho property, stayed in the family. Several months after the Idaho litigation commenced, Ross learned for the first time that Alley claimed she had owned the Idaho property outright since 1992, when Jack Ross allegedly gave her a quit claim deed.

The California Accounting Action

Based on the information discovered in the Idaho suit about Alleys title claims, Ross sought information from Alley about the status of the trusts in California, since he was concerned Alley had failed to account for more than just the Idaho property and Alley deliberately had misled him about what was going on in the probate. In July 2002, Ross formally demanded an accounting of both trusts from Alley, but Alley refused and provided only account statements on certain investment accounts. On December 12, 2002, Ross filed a petition to compel an accounting, which Alley finally provided in January 2003. The accounting failed to show the Idaho property, account for the money taken during the probate, account for the credits Alley claimed she had made to account for the money taken before the estate closed, failed to reconcile the stock with cash, failed to show all community property, and was not in compliance with the law.

On February 24, 2003, Ross filed objections to the accounting. Ross asserted that the accounting did not provide an appropriate reconciliation of the distribution of the estate and commencement of the trusts as the decree of distribution stated the trusts were funded with Ross & Sons stock, but the accounting showed Ross & Sons was dissolved before the final order of distribution and the trusts were funded with cash, the amount of which appeared to be substantially less than the cash that was in Ross & Sons. Ross also asserted there was approximately $300,000 that was in Ross & Sons that was supposed to go into the trusts that was unaccounted for in the funding of the trusts, that Alley had taken non-income distributions in violation of the trusts terms, and the accounting failed to comply with the Probate Code. No specific objection was made to the exclusion of the Idaho property from the trusts.

Alley filed an amended accounting, to which Ross filed objections on August 8, 2003. Ross asserted the amended accounting failed to resolve the objections he asserted to the first accounting, that there was at least $400,000 in cash, property and other assets in Idaho, as well as cash and real property located in Fresno County, that were not included in the estate or accounted for in the trusts, and that Alley had removed cash and other assets belonging to the trusts sometime between his fathers death and the funding of the trusts which were not accounted for in the amended accounting. Ross also filed a petition to remove Alley as trustee.

In a 2003 deposition, Alley admitted the Idaho property and most of Jack Rosss property was community property, but claimed she had a right to it despite the wills provisions. On November 18, 2004, trial commenced on Rosss objections and his petition to remove Alley as trustee. The court, however, granted a motion in limine prohibiting introduction of evidence to show Alleys defalcations because there was a final order in probate that had not been set aside.

This Lawsuit and the First Demurrer

On December 1, 2004, Ross filed this action to set aside the final order, alleging Alleys actions amounted to extrinsic fraud. Alley filed a demurrer to the complaint on the ground it failed to state facts sufficient to constitute a cause of action as it did not adequately allege facts of (1) extrinsic fraud, (2) an underlying civil wrong for which recovery can be obtained, or (3) diligence in seeking to set aside the final order. In support of the demurrer, Alley asked the court to take judicial notice of various documents, including notices and reports filed in the probate action that stated the estate was comprised of only the Ross & Sons stock. The trial court sustained the demurrer with leave to amend, pointing out that the complaint failed to adequately plead facts showing extrinsic fraud, why Ross could not have discovered the fraud earlier (i.e. the time and manner of discovery and the inability to have made earlier discovery despite reasonable diligence), that he was free from fault in the entry of the final order, a meritorious claim regarding the probate judgment, or the absence of a remedy at law.

The Demurrer to the First Amended Complaint

Ross filed a first amended complaint, which again asserted one cause of action to set aside the final order and compel an accounting based on allegations Alleys actions amount to extrinsic fraud. Ross added allegations regarding his agreement with Alley whereby she agreed to ensure the Idaho property and other assets were properly protected for the family in exchange for his handling the dissolution of the businesses, her representations during the probate of the estate that she was taking care of things and the Idaho property was being preserved for the Ross family, and the events that led to his filing of the Idaho litigation and the California accounting action. Alley filed a demurrer to the first amended complaint on the same grounds as the demurrer to the original complaint. Alley asked the court to judicially notice the documents submitted with her request for judicial notice filed with the first demurrer.

The court sustained the demurrer with leave to amend. The court explained that while the first amended complaint included some of the allegations the court found to be missing in sustaining the demurrer to the original complaint, it did not deny receipt of the notices Alley originally asked the court to judicially notice, which specifically state the estate consisted solely of the Ross & Sons stock, and did not claim that Ross specifically asked Alley before the final distribution why the Idaho property and other assets were not included. The court noted that with respect to Rosss claim that there was no stock to distribute, his allegations that he was responsible for winding up Ross & Sons show he was in the best position to know the stock could not be distributed as Alley claimed. The court further found that Ross did not diligently seek to protect his rights, since the position he took in the Idaho case demonstrates he knew the Idaho property was not included in the trust but his first petition for an accounting fails to mention the Idaho property. Finally, the court explained that since Ross appeared to have been relatively well informed of the true state of the community property and specifically knew about the assets he now claims Alley failed to include in the trust, he was not free of negligence in failing to compare that knowledge with the notices he admitted having received. The court explained that it nevertheless allowed Ross leave to amend in the event [Ross] can truthfully deny having received notice and/or can explain why he did not simultaneously seek to set aside the final order when he filed the action in Idaho seeking reimbursement for his $452,000.00 investment in the Idaho property.

The Demurrer to the Second Amended Complaint

Ross filed a second amended complaint. Among other things, Ross added allegations that notices were not mailed to the correct addresses for Tina Ross and Richard Ross, but he did not deny receiving notices except for the final accounting, which he did not recall receiving, and that he did not file suit in California when he filed the Idaho action because he did not know the trusts were not properly funded.

Alley filed a demurrer to the second amended complaint, asserting it did not state sufficient facts to constitute a cause of action on the same grounds as the two prior demurrers. Alley again requested the court take judicial notice of the documents submitted with her demurrer to the original complaint.

The court sustained the demurrer without leave to amend. The court found that Ross had not met either of the stated requirements of the prior order. With respect to the notices, the court found they contradicted any representations Alley allegedly made that the property was in the estate, since they stated there was no real property in the estate and the only property to be distributed was stock in Ross & Sons. The court explained that while Ross claimed he was entitled to rely on Alleys representations as a fiduciary, those misrepresentations constituted intrinsic rather than extrinsic fraud. The court noted that while Ross now claimed he had no way of knowing about the cash withdrawals when the Idaho action was filed, it was not clear he had established a meritorious claim since the will clearly states income from the estate was to go to Alley during her lifetime and she was authorized to withdraw principal she considered necessary for her support and comfort. With respect to why Ross did not seek to set aside the final order when he filed the Idaho action, the court found Rosss explanation insufficient as Ross was aware that as of 2001, Alley was claiming the real property was hers and he had no interest in it, yet he did not mention the omission of the Idaho property when he filed the first petition for an accounting a year later. The court declined to grant leave to amend, as Ross had not explained what additional allegations he could offer to cure these defects.

DISCUSSION

Standard of Review

A general demurrer presents the same question to the appellate court as to the trial court, namely, whether the plaintiff has alleged sufficient facts in the complaint to justify relief on any legal theory. (Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1811-1812.) Consequently, we independently review the ruling on a demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of action. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded, and matters of which judicial notice has been taken. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 (Schifando).) We construe the pleading in a reasonable manner and read the allegations in context. (Ibid.) However, we will not assume the truth of contentions, deductions, or conclusions of law or fact. (People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 300-301; Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.) Facts appearing in exhibits attached to the complaint are also accepted as true and given precedence over inconsistent allegations in the complaint. (Barnett v. Firemans Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505; Holland v. Morse Diesel Internat., Inc. (2001) 86 Cal.App.4th 1443, 1447.)

We affirm the judgment if it is correct on any ground stated in the demurrer, regardless of the trial courts stated reasons. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.) It is Rosss burden, however, to demonstrate the trial court sustained the demurrer erroneously. (Smith v. County of Kern (1993) 20 Cal.App.4th 1826, 1829-1830.) It is also Rosss burden to show that further amendment could cure the complaints defects. (Schifando, supra, 31 Cal.4th at p. 1081.) If we find that an amendment could cure the defect, we conclude that the trial court abused its discretion and we reverse; if not, no abuse of discretion has occurred. (Ibid.)

Extrinsic Fraud

A court has equitable jurisdiction to set aside a judgment on the basis of extrinsic fraud or mistake. (Olivera v. Grace (1942) 19 Cal.2d 570, 575.) A party seeking relief based on extrinsic fraud may do so through a motion in the same action or by an independent lawsuit. (Id. at pp. 575-576; see Bogacki v. Board of Supervisors (1971) 5 Cal.3d 771, 780; Tomlinson v. Qualcomm, Inc. (2002) 97 Cal.App.4th 934, 945, fn. 13.) One challenging a judgment on the basis of extrinsic fraud must show that some act has prevented a fair adversary hearing, with the aggrieved party being deliberately kept in ignorance of the action or proceeding, or in some other way fraudulently prevented from presenting his claim or defense. (Parage v. Couedel (1997) 60 Cal.App.4th 1037, 1044.) Although extrinsic fraud is a broad concept that tend[s] to encompass almost any set of extrinsic circumstances [that] deprive a party of a fair adversary hearing (Parsons v. Tickner (1995) 31 Cal.App.4th 1513, 1531-1532), it generally does not include fraud that is intrinsic to the judgment, namely fraud that goes to the actual merits of the litigation. (Edwards v. Centex Real Estate Corp. (1997) 53 Cal.App.4th 15, 41.)

Fraud is intrinsic and not a valid ground for setting aside a judgment when the party has been given notice of the action and has had an opportunity to present his case and to protect himself from any mistake or fraud of his adversary, but has unreasonably neglected to do so. [Citation.] Such a claim of fraud goes to the merits of the prior proceeding which the moving party should have guarded against at the time. Where the defrauded party failed to take advantage of liberal discovery policies to fully investigate his or her claim, any fraud is intrinsic fraud. [Citation.] [Citation.] (In re Marriage of Varner (1997) 55 Cal.App.4th 128, 140.) The rule declaring intrinsic fraud to be insufficient has been established so that there may be an end to litigation. (Stiebel v. Roberts (1941) 42 Cal.App.2d 434, 439.) Applying these principles, California courts have held that a judgment will not be set aside because it is based on perjured testimony, false documents, or the concealment of material evidence, since such fraud both as to the court and the party against whom judgment is rendered is not fraud extrinsic to the record for which relief may be had. (Kachig v. Boothe (1971) 22 Cal.App.3d 626, 634; see also Burch v. Hibernia Bank (1956) 146 Cal.App.2d 422, 432-433.)

The courts also have recognized, however, a limited exception to the extrinsic fraud rule in certain instances where a party conceals material evidence he is obligated to disclose based on the existence of a fiduciary relationship with the other party. (See Jorgensen v. Jorgensen (1948) 32 Cal.2d 13, 19-20 (Jorgensen); In re Marriage of Stevenot (1984) 154 Cal.App.3d 1051, 1060-1072 (Stevenot).) Alternatively, some courts consider this exception to be [a] second species of extrinsic fraud. (See Lazzarone v. Bank of America (1986) 181 Cal.App.3d 581, 596 (Lazzarone).)

Ross contends the fiduciary exception is applicable here because as the executor of his fathers estate and trustee of the trusts, Alley had a duty to disclose to the court and the other beneficiaries (1) the existence of the Idaho property, that she considered the property to be community property, and that the trusts money was being spent to improve it; and (2) that she was taking trust money and investing it in her own real and personal property. Ross argues her failure to make these disclosures violated her fiduciary obligations and constituted extrinsic fraud that would justify setting aside the final order. To determine the merits of Rosss contention, we must review the cases applying the fiduciary exception.

The fiduciary exception to the extrinsic fraud rule most commonly is invoked where fraud by an executor of a will prevents a prospective beneficiary from participating in the proceedings. For example, in Estate of Sanders (1985) 40 Cal.3d 607, 615-617 (Sanders), our Supreme Court held the executor committed extrinsic fraud where he had the deceased change her will to leave most of the estate to him, unbeknownst to the deceaseds daughter-in-law and mother of the deceaseds two grandsons, who were the beneficiaries under the deceaseds original holographic will, and deceived the prospective beneficiaries into believing they did not need to appear in the probate proceedings because he was taking care of their interests. The executors misrepresentations and concealments included (1) statements that the original will had been put into legal form to avoid problems in probate, when it actually insured he would inherit certain property at the grandsons expense; (2) failing to disabuse the mother of her stated belief that the property was bequested to her sons; (3) telling the mother he would take care of everything and she had no reason to contact the attorney who was handling the probate proceedings; (4) emphasizing he would contact her if her involvement was necessary; and (5) specifically telling the mother she need not attend the hearing on the petition for final distribution. (Id. at pp. 616-617.) The court rejected the executors argument that the beneficiaries receipt of all legal notices precluded a finding of extrinsic fraud, explaining that where a fiduciary relationship exists and the fiduciary has led the aggrieved party to believe that his interests will be protected, receipt of legal notice of the proceeding will not preclude equitable relief. The aggrieved party has a right to rely on the trust created by the special relationship and may assume that the fiduciary will abide by his duty to act in good faith. (Id. at p. 619.)

Other cases have held that the exception is applicable where the executor of a will concealed from the court the existence of a known heir (Stevens v. Torregano (1961) 192 Cal.App.2d 105, 123), or failed to give notice of the proceedings to a known heir (Carney v. Simmonds (1957) 49 Cal.2d 84, 93). The exception also has been applied where an heir failed to disclose the existence of other known heirs when asked by attorneys for the administrator (Harkins v. Fielder (1957) 150 Cal.App.2d 528, 535, 537), in a petition asserting a claim to escheated property (Estate of McGuigan (2000) 83 Cal.App.4th 639, 649), and in a petition to determine heirship (State of California v. Broderson (1967) 247 Cal.App.2d 797, 799-800, 803-804.) In each of these cases, the party seeking to challenge the judgment or order was prevented from participating in the proceedings as a result of the fiduciarys fraud and thus the facts would have established extrinsic fraud even in the absence of the fiduciary relationship.

In very limited circumstances, courts also have applied the exception or found extrinsic fraud where there is a fiduciary relationship between the parties and one party conceals or misrepresents information that does not preclude the other party from participating in the proceedings, but does prevent that party from fully presenting his or her case. This application of the exception has occurred primarily in connection with dissolution proceedings in which one spouse managed and controlled marital asserts and fraudulently concealed the existence of such assets or made material misrepresentations concerning them in circumstances where the other spouse would not have been able to discover the falsity of the misrepresentations through reasonable investigation. (See Stevenot, supra, 154 Cal.App.3d at pp. 1060-1068, and cases cited therein; Kuehn v. Kuehn (2000) 85 Cal.App.4th 824, 832; In re Marriage of Modnick (1983) 33 Cal.3d 897, 905-906.)

In Estate of Anderson (1983) 149 Cal.App.3d 336 (Anderson), the court found extrinsic fraud even though the deceived party was not prevented from participating in the proceedings. In that case, the life beneficiaries of a trust established by the decedents will were permitted to set aside an order the executor of the decedents estate had obtained, which confirmed the sale of estate property, based on a finding the executor committed extrinsic fraud. (Id. at p. 346.) In upholding the trial courts finding of extrinsic fraud, the appellate court concluded the executors conduct, which included failing to advise the beneficiaries that a federal estate tax audit was pending that could result in higher valuation, obtaining a written waiver of special notice of the hearing to the beneficiaries attorney and instead providing notice directly to the beneficiaries without explaining any adverse substantial potential tax consequences from the sale, its advice to the beneficiaries that the sale was in their best interests and its studious[] avoid[ance] of the beneficiaries attorney, who might otherwise have become aware of the situation and protested, effectively deprived the beneficiaries of their day in court even though they had notice of the hearing and one beneficiary actually was present at the hearing without counsel, but did not participate in it. (Id. at pp. 348-350.) The court reasoned that the executors acts in failing to disclose material information coupled with its avoidance of the beneficiaries attorney effectively prevented the beneficiaries from discovering and presenting the full case in support of their interests. (Id. at p. 350.)

Ross relies on Sanders and Anderson, as well as broad language in the California Supreme Courts decision in Jorgensen, supra, 32 Cal.2d at p. 19, in arguing that the exception rather than the rule applies in the present action. Ross asserts the allegations in the second amended complaint are similar to the facts of these cases, and therefore he has adequately alleged extrinsic fraud. The mere fact that a fiduciary misrepresents or conceals material information, however, does not establish extrinsic fraud. (See, e.g., Id. at pp. 32, 22-23 [husband and wife in marital dissolution proceeding had fiduciary duty to each other; husbands claim that certain assets were his separate property and not community property was not extrinsic fraud; husband was entitled to take a position favorable to his own interest; wife must take her own position and if necessary investigate the facts]; In re Marriage of Melton (1994) 28 Cal.App.4th 931, 937-938 [no extrinsic fraud where both parties were represented by counsel; husband did not conceal existence of his retirement plan, but did misrepresent the present value of his future pension benefits; wifes counsel had a copy of the plan and could have conducted discovery regarding husbands projected future benefits].)

Here, Ross admitted he knew from financial statements provided him before his fathers death that his fathers estate was comprised of the Idaho property, as well as other property, cash and assets. Through the notices sent to Ross during the course of the probate proceedings, which Ross did not deny receiving, he should have known that Alley was claiming the estate was comprised solely of Ross & Sons stock.^[3] Having received these notices, Ross is charged with the information disclosed by them. (Lazzarone, supra, 181 Cal.App.3d at p. 597.)^[4] Had Ross reviewed the notices, he would have seen that the property he believed to be part of his fathers estate, namely the Idaho property, cash and other assets, was not included in the probated estate. This should have prompted Ross to inquire further into the possibility of negligent or fraudulent conduct by Alley. As explained in Lazzarone, [o]nce plaintiff became aware of facts which would make a reasonably prudent person suspicious, [he] had a duty to investigate further, and [he] was charged with knowledge of matters which would have been revealed by such an investigation. [Citation.] This is so even though [the trustee] occupied the position of a fiduciary. [Citation.] (Ibid.)

Ross asserts he had no obligation to act until he either had actual knowledge of Alleys malfeasance or Alley repudiated her fiduciary position, citing Eisenbaum v. Western Energy Resources, Inc. (1990) 218 Cal.App.3d 314, 325, and Estate of Clary (1928) 203 Cal. 335, 341. It is true that our high court has stated that [w]here a fiduciary relationship exists the usual duty of diligence to discover facts does not exist. (United States Liab. Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586, 598.) In such cases, facts which would ordinarily require investigation may not excite suspicion, and [ ] the same degree of diligence is not required. (Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412, 440.) But while the plaintiffs duty of inquiry may be diminished by dint of a fiduciary relationship with the defendant, it does not disappear entirely. Even in the context of a fiduciary relationship, while the duty to investigate may arise later by reason of the fact that the plaintiff is entitled to rely upon the assumption that his fiduciary is acting in his behalf ..., once the plaintiff becomes aware of facts which would make a reasonably prudent person suspicious, the duty to investigate arises and the plaintiff may then be charged with the knowledge of facts which would have been discovered by such an investigation [citation]. (Bedolla v. Logan & Frazer (1975) 52 Cal.App.3d 118, 131 (Bedolla); see also Miller v. Bechtel Corp. (1983) 33 Cal.3d 868, 875.) The rule is further explained: The fact that a confidential ... relationship exists does not excuse a party who has notice of facts from investigating those facts. If he fails to pursue those facts of which he has notice, he is nevertheless held to have knowledge of each and every fact that he would have discovered had he pursued the facts [of which] he did have knowledge.... (Bedolla, supra, 52 Cal.App.3d at p. 131, fn. 12, italics omitted.)

Here, through the notices, Ross was apprised that Alley claimed the estate being probated consisted only of Ross & Sons stock.^[5] Since Ross believed the estate should have been comprised of property in addition to the stock, the notices provided him with information sufficient to make him aware of his fraud claims. Moreover, since the notices directly contradicted Alleys alleged statements to him that the additional property was in the trusts, his reliance on her representations was unreasonable. (See, e.g., Sanders, supra, 40 Cal.3d at pp. 615-616 [mother of estate beneficiaries reasonably relied on executor since he was a member of the family and purported to act on the beneficiaries behalf].) Significantly, Ross does not allege that Alley told him he need not participate in the probate proceedings, that he had no reason to consult the attorney handling the probate, or otherwise prevent Ross from discovering what she was claiming belonged in the estate. Ross himself admitted he did not participate in the proceedings because he was busy winding up the businesses and believed Alley would do what she promised, namely make sure the property and assets were properly protected and preserved for the family.

An executors or trustees representation that an estate is being administered properly, however, does not constitute extrinsic fraud excusing attendance at a probate hearing. (Lazzarone, supra, 181 Cal.App.3d at p. 599.) As the court in Lazzarone explained in rejecting the beneficiarys claim he was prevented from participating in a probate hearing because the trustee stated it was handling the trust funds properly, nearly all executors and trustees expressly or impliedly represent that they are lawfully doing their jobs. Consequently, as a practical matter, [the beneficiarys] view would simply allow the widespread avoidance of probate hearings by aggrieved parties who could assert [the beneficiarys] theory to avoid the res judicata effect of probate orders. That result, in turn, would inject an unacceptable degree of uncertainty into the business of administering trusts and estates. Consequently, we will not promulgate a rule containing such potential for the erosion of the jurisdiction of the probate court. (Ibid.)

Ross asserts that even if the notices imparted knowledge that the Idaho property was not in the estate, the notices did not inform him that Alley was taking money from the estate and spending it on her personal property. The issue here, however, is whether Ross has alleged sufficient facts to show that Alley engaged in extrinsic fraud, i.e. that she fraudulently prevented him from participating in the proceedings or from fully presenting his case. As we have explained, since the notices showed Ross that Alley was claiming the estate was comprised only of Ross & Sons stock and Ross knew the estate consisted of much more than that, it was unreasonable for him to rely on any of Alleys alleged representations to conclude all of the property, cash and assets were in the trusts. In addition, as Ross admits, he knew Alley was taking money from the company and the estate and using it to improve the Idaho property, which he also had notice was not in the probate estate. Since Ross should have been aware of facts that directly contradicted Alleys statements and showed the only property in the estate was the stock, his decision not to participate in the proceedings was not based on either any representation Alley made or his belief that money was in the trusts which Alley secretly had siphoned off for her own purposes.

Consequently, to the extent Alley improperly failed to include property in the estate that belonged there or improperly used cash from the estate for her personal benefit, her actions amounted only to intrinsic fraud, since Ross was not prevented from participating in the probate proceedings. As we have explained, in the absence of some representation or concealment by the defendant which prevented the plaintiff from having his day in court, the use of forged documents or perjured testimony constitutes intrinsic fraud and cannot be the basis for an attack upon the judgment by way of relief in equity. (Gale v. Witt (1948) 31 Cal.2d 362, 366-367 [executor alleged to have obtained decree of distribution by extrinsic fraud because executor represented to court that will had been properly witnessed when it had not; held complaint insufficient to allege extrinsic fraud where there was no allegation the plaintiffs were not given notice of the proceedings, that they did not have knowledge of the proceedings]; see also McLaughlin v. Security-First National Bank, supra, 20 Cal.App.2d at p. 606 [trustees allegedly false representations regarding certificates in which trust funds were invested in trustee reports and accounts went to merits of the cause submitted to judgment and therefore did not constitute extrinsic fraud].) As explained in Gale v. Witt: Fraud perpetrated under such circumstances [i.e. when the party has received proper notice of the proceedings and has not been prevented from fully participating therein] is intrinsic, even though the unsuccessful party does not avail himself of his opportunity to appear before the court. Having had an opportunity to protect his interest, he cannot attack the judgment when the time has elapsed for appeal or other direct attack. [Citations.] (Gale v. Witt, supra, 31 Cal.2d at p. 367.)

For the foregoing reasons, we conclude that Ross has not alleged facts that establish the existence of extrinsic fraud that would justify setting aside the final probate order.

Reasonable Diligence

Ross also contends the trial court erred when it sustained the demurrer on the ground he failed to allege facts to show he diligently pursued his claim to set aside the final order. An indispensable condition of equitable relief from a judgment is the plaintiffs freedom from negligence or other fault contributing to the rendition of the judgment against him. He must allege and prove (1) a satisfactory excuse for not having discovered the facts prior to the entry of the judgment; and (2) diligence in seeking relief after discovery of the facts. [Citations.] (Page v. Insurance Co. of North America (1969) 3 Cal.App.3d 121, 128-129; See 8 Witkin, Cal. Procedure (4th ed. 1997) 239, pp. 753-754.)

Here, Rosss second amended complaint shows that as of December 2001, when he filed the Idaho litigation, Ross knew that Alley held title to the Idaho property in her name only and she refused to recognize he held any interest in the property. Thus, Ross should have known that the Idaho property was not included in the estate. Had he promptly investigated the facts, he would have discovered that the only property Alley represented as having been included in the probate estate was the Ross & Sons stock. Ross, having been responsible for dissolving Ross & Sons, certainly also would have known that the stock could not have been transferred into the trust. While Ross alleges that he did not know at the time the trusts were not properly funded, the allegations he made in the Idaho action, as well as his knowledge that his fathers estate consisted of more than Ross & Sons stock and the Idaho property, directly contradict that allegation. Instead of seeking at that time to have the final order set aside, Ross filed suit in Idaho to seek to have the property placed into an irrevocable trust. It was not until February 2003 that he filed the petition for an accounting, and even then, he did not seek to have the final order set aside. On these facts, we agree with the trial court that Ross has failed to allege he diligently sought relief after discovery of the facts.

To avoid this result, Ross urges us to apply the principle of equitable tolling. Under the judicially created doctrine of equitable tolling, the statute of limitations is suspended in carefully considered situations to prevent the unjust technical forfeiture of causes of action, where the defendant would suffer no prejudice. (Lantzy v. Centex Homes (2003) 31 Cal.4th 363, 370 (Lantzy).) The doctrine applies in cases where the plaintiff, possessing several legal remedies[ ], reasonably and in good faith, pursues one designed to lessen the extent of his injuries or damage. (Addison v. State of California (1978) 21 Cal.3d 313, 317 (Addison).) Also known as the several remedies principle, the doctrine applies when a litigant has made a rational decision to pursue one remedy before attempting the alternative. (Freeman v. State Farm Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 489, fn. 6.) To warrant equitable tolling, there must be timely notice, and lack of prejudice, to the defendant, and reasonable and good faith conduct on the part of the plaintiff in pursuing an alternate legal remedy. (Addison, supra, 21 Cal.3d at p. 319.) The effect of equitable tolling is that the limitations period stops running during the tolling event, and begins to run again only when the tolling event has concluded. As a consequence, the tolled interval, no matter when it took place, is tacked onto the end of the limitations period, thus extending the deadline for suit by the entire length of time during which the tolling event previously occurred. (Lantzy, supra, 31 Cal.4th at pp. 370-371, fn. omitted.)

Assuming equitable tolling can be properly applied to the question of diligence in seeking to set aside a final order or judgment, the doctrine still would be inapplicable here. While Ross asserts he had several legal avenues available and in good faith chose to pursue the Idaho action, whereby he sought to have the Idaho property placed in an irrevocable trust, and then the California accounting action, Ross also claims he did not discover the full extent of Alleys fraud until after he filed the California accounting action. Since Ross claims he was not aware of Alleys fraud until after the filing of both of these actions, he cannot in good faith assert he pursued one remedy in lieu of another. Moreover, the claims asserted in the Idaho action and this action differ, since in the Idaho action Ross sought relief only with respect to the Idaho property, which mentioned nothing about the trusts being improperly funded, and by this action, Ross seeks to set aside the final probate order, contending the trusts were improperly funded.

Ross does not offer any properly pled facts which would cure the defects with respect to the elements of extrinsic fraud or diligence. Accordingly, the trial court did not abuse its discretion in sustaining the demurrer to the second amended complaint in its entirety without leave to amend.

DISPOSITION

The judgment is affirmed. Alley is awarded her costs on appeal.

_____________________

Gomes, J.

WE CONCUR:

_____________________

Wiseman, Acting P.J.

_____________________

Cornell, J.

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^[1]Our summary of facts is derived from the second amended complaint and attached exhibits, as well as documents the trial court judicially noticed.

^[2]In an October 27, 2000 letter to Ross from Alleys attorney, which is attached as an exhibit to the complaint in the Idaho action, Ross was advised that Alley had revoked any permission he may have had to enter upon her real property.

^[3]In the absence of any allegation to the contrary, we presume proper notice of the probate proceeding was given. (Huron College v. Yetter (1947) 78 Cal.App.2d 145, 149-150; McLaughlin v. Security-First National Bank of Los Angeles (1937) 20 Cal.App.2d 602, 604.)

^[4]In Lazzarone, the Court of Appeal held that the beneficiary of a testamentary trust did not state a claim for extrinsic fraud by the trustee, a bank, who he claimed misrepresented the investment performance of the trust and concealed the poor rate of return on the investments, where the beneficiary did not allege the bank encouraged him not to attend the hearing or suggested he not make a claim, or that the bank failed to provide the required notice or told him it would look out for his interest in the judicial proceeding. (Lazzarone, supra, 181 Cal.App.3d at pp. 587, 597.) With respect to the beneficiarys claim that the bank concealed the poor rate of return on the investments, the court explained that the accountings the bank filed with the court showed the losses on the trust accounts, and having received notice of them, the beneficiary was charged with the information they disclosed, namely that the trust funds had sustained economic losses, which, in turn, should have prompted him to inquire further into the possibility of negligent or fraudulent conduct by the bank. (Id. at p. 597.)

^[5]The trial court impliedly took judicial notice of the notices Ross admitted Alley sent, which state that the estate was comprised of only the Ross & Sons stock, as shown by the trial courts statement that the notices contradicted Alleys representations. In his opening brief, Ross does not contend the trial court erred in doing so, and even relies on the contents of the notices in pointing out that they also state the estate consists of his fathers one-half share of the community property. In response to Alleys assertion in her brief that judicial notice of the facts in the notices is proper, Ross argues in his reply brief that judicial notice cannot be taken of the notices contents because the contents are being used to show the truth of the statements, that the notices imparted notice to Ross of certain specific facts. We agree with Alley that judicial notice of the statements in the notices was proper, as they are not being considered for their truth, i.e. that the estate was actually comprised only of Ross & Sons stock, but to show that Ross had notice that Alley was claiming the estate was comprised only of Ross & Sons stock, which is the proper subject of judicial notice. (See e.g., Magnolia Square Homeowners Assn. v. Safeco Ins. Co. (1990) 221 Cal.App.3d 1049, 1056-1057 [holding that the court could take judicial notice of a partys complaint in an earlier action involving the same subject matter for the purpose of proving the partys notice and knowledge].) Since judicial notice was not taken for the purpose of establishing the truth of the notices contents, the cases Ross relies on are distinguishable. (Lockley v. Law Office of Cantrall, Green, Pekach, Cruz & McCort (2001) 91 Cal.App.4th 875, 885-886; Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1567-1568.) Thus, the trial court did not err in taking judicial notice of the notices or their contents.