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Tentative Ruling
Judge Pauline Maxwell
Department 6 SB-Anacapa
1100 Anacapa Street P.O. Box 21107 Santa Barbara, CA 93121-1107

CIVIL LAW & MOTION

Eric B Gans vs Caroline Hepburn-O'Brien

Case No: 17CV00925
Hearing Date: Wed Feb 14, 2018 9:30

Nature of Proceedings: Demurrer to Cross-Complaint

TENTATIVE RULING:

For the reasons set forth herein, the demurrer of cross-defendant Eric B. Gans to the cross-complaint of Caroline Hepburn-O’Brien is sustained with leave to amend. Hepburn-O’Brien shall file and serve her first amended cross-complaint on or before March 1, 2018.

 

Background:

On March 1, 2017, plaintiff Eric B. Gans filed his original complaint against defendant Caroline Hepburn-O’Brien asserting causes of action for breach of contract, open book account, account stated, and quantum meruit based on allegations that Gans rendered legal services to Hepburn-O’Brien for which Hepburn-O’Brien had failed to pay.

On September 26, 2017, Hepburn-O’Brien filed her answer to the complaint and concurrently filed a cross-complaint against Gans. The cross-complaint is on a Judicial Council form and asserts one cause of action, which contains the following allegations in their entirety:

“Negligence/Legal malpractice: During Cross-Defendant’s representation of Cross-Complainant, he failed to exercise due care to protect her rights, and she suffered severe economic damage as a result. As well, she suffered physically and emotionally as a consequence of the negligence.” (Cross-complaint, ¶ 10.)

On January 2, 2018, Gans filed his demurrer to the cross-complaint, arguing that the cross-complaint fails to allege sufficient facts to state a cause of action.

On January 18, 2018, Hepburn-O’Brien filed a notice of stay of proceedings. The stay is based upon Hepburn-O’Brien’s filing of a petition for bankruptcy in the United States Bankruptcy Court for the Eastern District of North Carolina.

The demurrer was originally set for hearing on February 7. On February 7, Gans argued that the bankruptcy stay did not apply to the cross-complaint and that the demurrer should go forward.

Hepburn-O’Brien has not filed an opposition or other response to the demurrer apart from the notice of bankruptcy stay.

Analysis:

(1)        Bankruptcy Stay

Before the court can address the merits of the demurrer, it is first necessary to determine whether the automatic bankruptcy stay is effective to stay this demurrer.

“Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of—[¶] (1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title ….” (11 U.S.C. § 362(a).)

In the case of In re Merrick (B.A.P. 9th Cir. 1994) 175 B.R. 333 (Merrick), the court addressed the following issue: “The essential issue is whether a defendant violates the automatic stay of § 362 by defending claims brought by a plaintiff debtor. This issue is distinct from whether the bankruptcy court can stay state court proceedings in its discretion.” (Id. at p. 336.) “It is clear that § 362 does not stay the hand of the trustee from continuing to prosecute a pre-bankruptcy lawsuit instituted by the debtor.” (Id. at p. 337.) “Given this freedom for the debtor or the trustee to prosecute the debtor’s claims, an equitable principle of fairness requires a defendant to be allowed to defend himself from the attack without imposing on him a gratuitous impediment in dealing with an adversary who suffers no correlative constraint. The automatic stay should not tie the hands of a defendant while the plaintiff debtor is given free rein to litigate.” (Id. at p. 338.) The Merrick court consequently found that there was no violation of the automatic stay by the hearing and granting of the defendant’s motion for summary judgment disposing of the debtor-plaintiff’s state court action against the defendant. (Id. at pp. 334-335, 338.)

In Merrick, the action was brought pre-bankruptcy-petition by the debtor against the moving defendant. Here, the plaintiff-creditor brought this action pre-petition against the defendant-debtor. There is no question that the automatic stay applies to the plaintiff’s action against the defendant. Defendant Hepburn-O’Brien filed her cross-complaint pre-petition against plaintiff Gans. As held in Merrick, it is not a violation of the automatic stay for a party to defend against an action brought by the debtor. The automatic stay does not apply to prevent the court from hearing the demurrer to debtor Hepburn-O’Brien’s cross-complaint against Gans. The court does not now consider whether a discretionary stay of further proceedings on the cross-complaint would be appropriate.

(2)        Demurrer

The cross-complaint asserts one cause of action for legal malpractice/ professional negligence.

“In a legal malpractice action arising from a civil proceeding, the elements are (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.)

The elements of breach and causation are wholly missing. What is Gans alleged to have done that was a failure to exercise due care? How did that failure cause harm to Hepburn-O’Brien? There is nothing in the cross-complaint to answer these questions. Because basic elements are missing from the cross-complaint, the demurrer will be sustained. This is a demurrer to Hepburn-O’Brien’s original cross-complaint and the court will grant leave to amend.

 
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