Judge: H. Jay Ford, III, Case: 23SMCV03514, Date: 2024-06-20 Tentative Ruling

Case Number: 23SMCV03514    Hearing Date: June 20, 2024    Dept: O

  Case Name:  City National Bank, N.A. v. Citadel Community Development Corporation

SUBJECT:                DEMURRER TO CROSS-COMPLAINT WITHOUT MOTION TO                                                STRIKE

MOVING PARTY:   Cross-Defendant City National Bank, N.A.

RESP. PARTY:         No opposition filed.

TENTATIVE RULING

            Cross-Defendant City National Bank, N.A.’s Demurrer without motion to strike as Cross-Plaintiff’s claim for professional negligence is SUSTAINED WITHOUT LEAVE TO AMEND.  Defendant is to submit the judgment of dismissal.

            Cross-Defendant City National Bank, N.A. RJN is GRANTED.

I.                General Demurrer to Cross-Plaintiff’s Claim for Professional Negligence – SUSTAINED WITHOUT LEAVE TO AMEND.

            To state a cause of action for professional negligence, a party must show “(1) the duty of the professional to use such skill, prudence and diligence as other members of the profession commonly possess and exercise; (2) breach of that duty; (3) a causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the professional negligence.” (Giacometti v. Aulla, LLC (2010) 187 Cal.App.4th 1133, 1137, citing

Nichols v. Keller (1993) 15 Cal.App.4th 1672, 1682, 19 Cal.Rptr.2d 601.) “The threshold element of a cause of action for negligence is the existence of a duty to use due care toward an interest of another that enjoys legal protection against unintentional invasion.” (Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 397, 11 Cal.Rptr.2d 51, 834 P.2d 745 (Bily ).) “Where there is no legal duty, the issue of professional negligence cannot be pled because with the absence of a breach of duty, an essential element of the cause of action for professional negligence is missing.” (Major Clients Agency v. Diemer (1998) 67 Cal.App.4th 1116, 1132, 79 Cal.Rptr.2d 613.) In this case, the duty element is the employees' obstacle.

            The relationship between a bank and its depositor is not fiduciary in character but, rather, founded on contract, [citation] which is ordinarily memorialized by a signature card that the depositor signs upon opening the account. (Kurtz-Ahlers, LLC v. Bank of America, N.A. (2020) 48 Cal.App.5th 952, 956, citing Chazen v. Centennial Bank (1998) 61 Cal.App.4th 532, 537 [“banks ‘are not fiduciaries for their depositors’ ”].)

            Citadel does not state facts to claim a fiduciary duty exists between CNB and Citadel. Citadel alleges:

Cross-Defendant acted in a fiduciary capacity for Cross-Complainant, in which Cross-Complainant entrusted large amounts of funds to Cross-Defendant for the purpose of managing and paying employees and bills from their accounts. This includes making payments to the Credit Card and Promissory Note.

(Cross-Complaint, ¶ 7.)

            A fiduciary duty is generally not created between a bank and a customer as a depositor, rather this relationship is usually “founded on contract, [citation] which is ordinarily memorialized by a signature card that the depositor signs upon opening the account.” (Chazen, supra, 61 Cal.App.4th at p. 537.) “This contractual relationship does not involve any implied duty to supervise account activity [citation] or to inquire into the purpose for which the funds are being used” (Ibid.) In order to state a claim that a fiduciary duty exists Citadel needs to allege more facts that would give rise to a fiduciary relationship between a bank and a customer. (See Chazen v. Centennial Bank (1998) 61 Cal.App.4th 532, 540 [”banks may in some extreme circumstances engage in wrongdoing affecting a fiduciary account that would merit the imposition of liability.”]

            Additionally, Citadel does not plead damages beyond purely economic loss for their negligence claim. The economic loss rule states, “[i]n general, there is no recovery in tort for negligently inflicted “purely economic losses,” meaning financial harm unaccompanied by physical or property damage.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922, reh'g denied (June 1, 2022).) This economic loss rule bars “claims in negligence for pure economic losses in deference to a contract between litigating parties.” (Ibid.)

            Citadel pleads:

“Cross-Defendants multiple breaches caused significant damages to Cross-Complainant as they could not pay their employees or their bills, resulting in the foreclosure issue brought by Cross-Defendant in this action”

(Cross-Claim, ¶ 31.)

            Not being able to pay “employees or their bill” is pure economic loss, and Citadel does not allege any non-monetary harm within the cross-complaint. Furthermore, Citadel does not plead a “special relationship” to circumvent the economic loss rule. (See Sheen, supra, 12 Cal.5th at p. 938 [“Where a special relationship exists between the parties, a plaintiff may recover for loss of expected economic advantage through the negligent performance of a contract although the parties were not in contractual privity”]; see also Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194, 1229 [“Determining whether such a relationship exists involves an examination of the following criteria:“(1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to the plaintiff, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant's conduct and the injury suffered, (5) the moral blame attached to the defendant's conduct and (6) the policy of preventing future harm. [Citation.]”].)

            Leave to amend should not be granted unless plaintiff can establish that facts exist sufficient to state a cause of action.  (Community Assisting Recovery, Inc. v. Aegis Security Ins. Co. (2001) 92 Cal. App. 4th 886, 895.)  Plaintiff has the burden of establishing in what manner it would be possible to amend the complaint.  (Fuller v. First Franklin Financial Corp (2013) 216 Cal.App.4th 955, 962-963.)  Citadel did not file an opposition and therefore has not shown how amending the complaint would state a cause of action. CNB’s general demurrer to Citadel’s professional negligence cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.