Filed 2/7/22 Estate of Harden CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, Gerald G. Johnston, Judge. Affirmed.

Charles K. Mills for Plaintiff and Appellant.

Law Offices of Stephen M. Magro, Stephen M. Magro, and Andrew C. Kemper for Defendant and Respondent.

This case involves a creditor’s claim filed by William Tyler Harden as trustee (Trustee) of the Exemption Sub-Trust of the Harden Family Trust (Trust), in the estate of the decedent in this matter, Michael R. Harden (Decedent). In summary, Trustee alleged Decedent, in his former capacity as trustee of the Trust, misappropriated assets from the trust and improperly transferred assets to Margaret M. Griffith. This appeal arises after a complicated series of procedural facts that are discussed in detail below. In essence, Trustee alleges the trial court improperly denied his motion to vacate based on excusable neglect by his trial counsel. His contentions have no merit, and we affirm the court’s judgment of dismissal.

FACTS

I. History of the Trust

Decedent and Laurel B. Harden were married in 1980. The couple formed the Harden Family Trust in 1994. The Trust was subsequently amended, and Laurel passed away in 2002. Decedent died on July 5, 2016. Trustee is the adult son of Decedent and Laurel. With his father’s passing, he became the trustee and was also a beneficiary.

Griffith is Decedent’s divorced spouse. They were married from 2004 until 2012. Griffith was a beneficiary of Decedent’s will.

II. Creditor’s Claim

In 2017, Trustee filed a creditor’s claim in Decedent’s estate for $1,000,000. He asserted that under the terms of the Trust, Decedent was required to fund the Trust with the maximum federal estate tax exemption, which he stated was $1,000,000. The personal representative of Decedent’s estate rejected Trustee’s creditor’s claim in full in December 2019.

III. Initial Petition and Demurrer

In June 2019, Trustee filed an initial petition against Decedent’s estate and Griffith. Trustee alleged breaches of fiduciary duty by Decedent against the beneficiaries of the Trust during Decedent’s lifetime and sought an unspecified award of damages against Decedent’s estate. Griffith demurred.

IV. First Amended Petition and Demurrer, Stipulation to Demurrer

Before the hearing on Griffith’s demurrer to the initial petition, Trustee filed a first amended petition (FAP). Accordingly, the trial court did not rule on the first demurrer.

The FAP alleged the same causes of action and sought the same relief against Decedent’s estate as was sought in the initial petition, with more detailed allegations. Griffith again demurred to and moved to strike portions of the FAP. In response, Trustee filed a stipulation to demurrer with request for leave to amend (Stipulation), and an opposition to the motion to strike. In his Stipulation and opposition, Trustee did not oppose the merits of Griffith’s demurrer and motion to strike. Instead, he stipulated to sustaining the demurrer and requested leave to file a proposed further amended pleading adding a cause of action for voidable conveyance against Trustee. The proposed amendment did not set forth how the underlying deficiencies in the FAP might be cured and did not include an amended petition.

On January 10, 2020, the trial court sustained Griffith’s demurrer to the FAP, and granted her motion to strike portions of it, both without leave to amend. It also granted Trustee leave to “bring a noticed motion for leave to amend the [FAP] to add one or more causes of action against [Griffith] in this proceeding.”

V. Motion for Leave to Amend and Proposed Second Amended Petition

On December 20, 2019, Griffith filed a motion for leave to file a second amended petition (Motion for Leave to Amend). Griffith sought leave to file a proposed second amended petition for breach of trust against Decedent’s estate and voidable conveyance against Decedent’s estate and Griffith. Subsumed within the action for voidable conveyance was a cause of action to recover a Morgan Stanley Former Financial Advisor agreement (FFA) and proceeds under Probate Code section 850, which was not listed as a trust asset. Instead, the proposed second amended petition alleged Decedent’s will provided: “I direct that the balance of all payments due me under my Former Financial Advisor (“FFA”) Agreement with Morgan Stanley Smith Barney shall be paid to my ex-wife Margaret Mary Griffith (“Peggy”) during her lifetime.”

Griffith opposed the Motion for Leave to Amend, arguing the trial court had already ruled on the first cause of action for breach of trust in connection with Griffith’s demurrer to and motion to strike the FAP, by sustaining the demurrer without leave to amend.

The trial court granted the Motion for Leave to Amend in part and denied it in part in its February 19, 2020, order. Specifically, the court determined, consistent with its prior ruling sustaining Griffith’s demurrer to the FAP, Trustee could only bring an action for voidable conveyance to contest “specific conveyances made by the [D]ecedent to [Griffith] which [Trustee] contends should be set aside.” It also ruled Trustee was “barred from filing” a breach of trust action against Decedent’s estate because the court had previously sustained Griffith’s demurrer to the FAP without leave to amend, and such claims were therefore barred.

VI. Third Amended Petition, Demurrer, and Motion to Strike

In March 2020, Trustee filed a third amended petition for voidable conveyance pursuant to the trial court’s February 19, 2020, order. In the third amended petition, Trustee sought to void conveyances of assets allegedly made by Decedent during his lifetime to Griffith. It alleged the conveyances resulted in Decedent’s estate becoming insolvent and unable to pay purported debts owed to Trustee and the Trust on the causes of action for breach of trust. Consistent with the trial court’s February 19, 2020, order, the third amended petition contained only causes of action against Griffith, and did not contain causes of action against Decedent’s estate.

Griffith moved to strike and demurred to the third amended petition. She argued Trustee did not have legal capacity under Civil Code section 3439.07 to maintain a suit for voidable conveyance against her as the alleged transferee, because Trustee was not a creditor of Decedent or the Decedent’s estate. Griffith also asserted certain asset transfers from Decedent to her were barred by res judicata because they were ordered to be made in a judgment for dissolution in marital dissolution proceedings between Decedent and Griffith.

VII. Motion to Vacate

In April 2020, Trustee filed a motion to vacate the trial court’s orders of January 10, 2020, and February 19, 2020 (Motion to Vacate). Trustee sought to vacate the court’s January 10, 2020, order sustaining Griffith’s demurrer to the FAP, and the February 19, 2020, order partially denying the Motion for Leave to Amend.

Trustee argued the trial court’s unfavorable rulings on these motions were made in part due to alleged excusable neglect by Trustee’s trial counsel. In his Motion to Vacate, Trustee essentially sought leave to file his proposed second amended petition in full, which the court had previously granted in part and denied in part.

VIII. Motion for Leave to File Fourth Amended Petition

In April 2020, Trustee filed a motion for leave to file a fourth amended petition (Motion for Fourth Amended Petition). It asserted additional allegations on the voidable conveyance cause of action.

IX. Trial Court Rulings on Motions

On September 4, 2020, the trial court concurrently heard, considered, and ruled on Griffith’s demurrer to the third amended petition, the motion to strike, the Motion for Fourth Amended Petition, and the Motion to Vacate. The court sustained Griffith’s demurrer to the third amended petition without leave to amend. The court reasoned Trustee could not, as a matter of law, establish he had any right to recovery from the Decedent’s estate due to the fact that the court had previously sustained the demurrer to the FAP, without leave to amend. This included all of Trustee’s causes of action for breach of trust against Decedent. The court previously determined Decedent owed no legally enforceable underlying debt to Trustee. As a result, Trustee could not seek to recover from Griffith, as a transferee of assets by Decedent, through a cause of action for voidable conveyance.

Concurrently, the court denied the Motion to Vacate and Motion for Fourth Amended Petition. As to the Motion to Vacate, the court reasoned: “the court finds that discretionary relief is not warranted. The court is not persuaded that any aspect of the 12/04/19 and/or 02/19/20 orders were entered because of any mistake, inadvertence, surprise, or excusable neglect within the meaning of [Code of Civil Procedure] section 473, subdivision (b). [¶] On the contrary, the record reveals that . . . [Trustee] was clearly informed by the court repeatedly that he was denied leave to re-plead a claim against Decedent’s estate because he stipulated to an order sustaining [the] demurrer to the entirety of his [FAP], and asked only for leave to re-plead claims against [Decedent]. The court first informed . . . [Trustee] of that fact during oral argument on [the] demurrer to the FAP. It was reiterated in the court’s final order on that demurrer. It was reiterated again in the court’s order denying . . . [Trustee’s] motion for leave. The court does not find credible any assertion or implication that . . . [Trustee’s] counsel was mistaken or surprised by the effect the court gave to the 11/19/19 Stipulation, or that the 02/19/20 and 12/04/19 orders were entered because of any inadvertence or excusable neglect. They were entered because of the 11/19/19 Stipulation.” The court also denied Trustee’s motion to strike as moot in light of its ruling sustaining the demurrer to the third amended petition without leave to amend.

X. Motion to Dismiss and Judgment

Although the trial court sustained Griffith’s demurrer to the third amended petition without leave to amend, it did not dismiss the third amended petition. On

October 1, 2020, Griffith filed a motion to dismiss the third amended petition (Motion to Dismiss). Griffith requested dismissal of the sole remaining claim with prejudice, on the grounds that the court had sustained her demurrer to the third amended petition without leave to amend. The court granted the Motion to Dismiss and entered a judgment for dismissal of the third amended petition.

DISCUSSION

I. Issues on Appeal

Given the procedural complexity of this case, we first set forth what is at issue before us. Trustee seeks reversal of the trial court’s judgment of dismissal. This arises from its orders sustaining Griffith’s demurrers to the first and third amended petitions, denying Trustee’s Motion to Vacate, Motion for Leave to Amend, and Motion for Fourth Amended Petition. Trustee also requests we order the trial court to grant him leave to file his proposed second amended petition, which he initially proposed to file in the Motion for Leave to Amend and was denied by the trial court.

Out of this mélange of issues, Trustee’s appeal is ultimately limited to contesting the trial court’s denial of the motion to vacate and its partial denial of the motion for leave to amend. (See Golden Day Schools, Inc. v. Department of Education (1999) 69 Cal.App.4th 681, 695, fn. 9 [arguments not preceded by an appropriate heading are waived].) The only affirmative relief Trustee seeks is to order the trial court to grant him leave to file his proposed second amended petition.

II. Standard of Review

We review a trial court’s order on a motion to vacate, particularly when excusable neglect or mistake is alleged, for abuse of discretion. (Zamora v. Clayborn

Contracting Group, Inc. (2002) 28 Cal.4th 249, 257-258.) Similarly, the standard of review on the grant or denial of a motion for leave to amend a pleading is also abuse of discretion. (Record v. Reason (1999) 73 Cal.App.4th 472, 486.) Generally, we will only overturn a trial court ruling subject to the abuse of discretion standard upon a showing of a “clear case of abuse” and “a miscarriage of justice.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 331.)

III. Analysis

The principal thrust of Trustee’s appeal concerns the denial of his Motion to Vacate. Specifically, he argues the trial court’s orders sustaining the demurrer to the FAP without leave to amend, and partially denying the Motion for Leave to Amend, were attributable to excusable neglect by Trustee’s trial counsel. As a result, Trustee contends the court’s orders should be vacated. His arguments lack merit.

Trustee claims the excusable neglect at issue involved Trustee’s trial counsel’s Stipulation to Griffith’s demurrer to the FAP. Specifically, he asserts his trial counsel signed and filed the Stipulation because of being engrossed in discovery. Trustee’s trial counsel’s conduct, even if believed, does not warrant mandatory relief. Code of Civil Procedure section 473, subdivision (b) (section 473(b))[1] provides that whenever a moving party accompanies a request for relief under section 473(b) with a sworn affidavit by the party’s attorney attesting to their mistake, inadvertence, surprise, or neglect, the trial court “shall . . . vacate any (1) resulting default entered by the clerk against his or her client, and which will result in entry of a default judgment, or (2) resulting default judgment or dismissal entered against his or her client, unless the court finds that the default or dismissal was not in fact caused by the attorney’s mistake, inadvertence, surprise, or neglect.” (§ 473(b).) However, based on the language of the statute, such a mandatory remedy is available only where a default is entered against the party; the statute does not mandate vacating a court’s order that is something other than a default. (§ 473(b).)

This case, however, does not involve a default judgment. Trustee does not, because he cannot, assert he is entitled to mandatory relief from default, default

judgment, or dismissal. Instead, any relief would be discretionary under section 473. (Jackson v. Kaiser Foundation Hospitals, Inc. (2019) 32 Cal.App.5th 166, 174 [“various Courts of Appeal have concluded the mandatory relief provision is intended to reach only those dismissals that are ‘procedurally equivalent to a default’”].) The trial court specifically discredited Trustee’s claims of mistake or neglect in its ruling. “[W]e do not reweigh evidence or reassess the credibility of witnesses. [Citation].” (Johnson v. Pratt & Whitney Canada, Inc. (1994) 28 Cal.App.4th 613, 622.) Accordingly, the trial court did not abuse its discretion by denying Trustee’s Motion to Vacate where there was no mistake or neglect.

Trustee also contends the trial court erred by failing to grant him leave to amend. A court may deny leave to amend in circumstances where the proposed amended pleading is fatally deficient or barred as a matter of law and cannot be cured through further amended pleading. (Yee v. Mobilehome Park Rental Review Bd. (1998) 62 Cal.App.4th 1409, 1429 [denial of leave to amend appropriate when claims would be barred by statute of limitations and res judicata].)

In the proposed second amended petition, Trustee seeks to maintain causes of action for (1) breach of trust against Decedent’s estate and (2) voidable conveyance against Decedent’s estate and Griffith. The first cause of action for breach of trust was identical to the cause of action for breach of trust brought in the FAP, to which the trial court sustained Griffith’s demurrer and granted her motion to strike, both without leave to amend. (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1165 [“A former judgment entered after a general demurrer is sustained with leave to amend “‘is a judgment on the merits to the extent that it adjudicates that the facts alleged do not constitute a cause of action’”].)

The trial court explicitly denied Trustee leave to amend his pleading to assert causes of action against Decedent in its rulings on Griffith’s demurrer and motion to strike. In its rulings, the court stated Trustee could only seek leave to amend his pleadings to assert causes of action for voidable conveyance against Griffith, alone. The court later emphasized this ruling by denying Trustee leave to file the proposed second amended petition in part, as to those portions asserting causes of action against Decedent and Decedent’s estate. The court’s repeated rulings sustaining Griffith’s demurrer to the FAP without leave to amend and subsequently partially denying Trustee leave to file the proposed second amended petition, make clear the court rejected Trustee’s causes of action against the Decedent and Decedent’s estate. Those decisions preclude Trustee from reasserting such claims.

Similarly, Trustee’s claim for voidable conveyance also relies on his status as a creditor. A petitioner may only seek remedies under the Uniform Voidable Transactions Act (Civil Code § 3439, et seq.), if they are a creditor of the transferor who made the allegedly voidable transfer. (Weisenberg v. Cragholm (1971) 5 Cal.3d 892, 896-897.) Furthermore, the trial court instructed Trustee he was barred from filing an action as to Decedent’s conduct. Only specific allegations relating to the alleged fraudulent transfers of property to Griffith would be entertained. However, nothing in the proposed second amended petition properly alleges any specific Trust assets were fraudulently transferred to Griffith.

The claim against Griffith stems from her purported status as a transferee of assets by Decedent as an alleged debtor of Trustee and the Trust. However, Trustee is not Decedent’s creditor, and his actions for voidable conveyance against Griffith cannot survive. A person must have an existing, viable underlying creditor’s claim against a debtor in order to maintain an action for voidable conveyance against a transferee of the debtor’s assets. (Estate of Blanco (1978) 86 Cal.App.3d 826, 838.) The court previously determined Decedent owed no legally enforceable underlying debt to Trustee. As a result, Trustee could not seek to recover from Griffith, as a transferee of assets by Decedent, through a cause of action for voidable conveyance.

Finally, while the proposed second amended petition only lists two causes of action, subsumed within the action for voidable conveyance is a cause of action to recover the FFA agreement and proceeds under Probate Code section 850. This cause of action, however, fails to allege the FFA agreement was an asset of or can be traced to the Trust. As such, Trustee failed to allege sufficient facts to substantiate a cause of action. Accordingly, all of Trustee’s proposed claims could not be cured by amendment.

The trial court properly denied Trustee’s Motion to Vacate because none of the orders were entered due to excusable neglect, and because reversing those orders would prejudice Griffith by denying her the benefits of the trial court’s previous rulings. Furthermore, the court properly denied Trustee’s Motion for Leave to Amend because the proposed second amended petition does not allege sufficient facts to constitute any viable causes of action.

DISPOSITION

The judgment is affirmed. Respondent shall recover her costs on appeal.

O’LEARY, P. J.

WE CONCUR:

GOETHALS, J.

ZELON, J.*

*Retired Justice of the Court of Appeal, Second Appellate District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

[1] All further statutory citations are to the Code of Civil Procedure, unless otherwise indicated.