Judge: Joel L. Lofton, Case: 23AHCV02996, Date: 2024-05-30 Tentative Ruling

Case Number: 23AHCV02996    Hearing Date: May 30, 2024    Dept: X

   Tentative Ruling

Judge Joel L. Lofton, Department X

HEARING DATE:     May 30, 2024                         TRIAL DATE:  not set

CASE:                         SACHIKO SAIJO v. WELLS FARGO BANK, N.A.   

CASE NO.:                 23AHCV02996

DEMURRER

MOVING PARTY:               Defendant Wells Fargo Bank, N.A. (“Defendant”)

RESPONDING PARTY:     Plaintiff Sachiko Saijo (“Plaintiff”)

SERVICE:                             OK; Filed February 15, 2024

OPPOSITION:                      Filed May 15, 2024

                                                Notice of Errata filed May 23, 2024 [correcting hearing date]

REPLY:                                 Filed May 22, 2024

RELIEF REQUESTED

            Defendant demurs to Plaintiff’s two causes of action for financial elder abuse and breach of contract.

BACKGROUND

            This is an action for contractual fraud. On December 28, 2023, Plaintiff filed a complaint against Defendant alleging two causes of action for (1) financial elder abuse under Welfare & Institutions Code § 15610.30, and (2) breach of contract.

            The complaint alleges the following. Plaintiff was born in 1952 and is an elder under Welfare & Institutions Code § 15610.07. (Compl., ¶ 39.) On January 2, 2019, Plaintiff opened a personal checking account with Defendant Wells Fargo. (Id., ¶ 4.) The contract governing the parties is a Deposit Account Agreement (the “Agreement”), attached to the complaint as Exhibit A. (Id., ¶ 11; Exh. A.) On November 30, 2022, Plaintiff attempted to make property tax payment by check in the amount of $30,366.02. (Id., ¶¶ 4-5.) The check was intercepted by a wrongdoer, the payee on the check was altered to “Kierra Anderson”, and, on December 13, 2022, the check was deposited into Kierra Anderson’s account. (Id., ¶¶7, 9.) On March 4, 2023, Plaintiff was contacted by the Los Angeles County Assessor about her delinquent property tax payments. (Id., ¶ 22.) On March 6, 2023, Plaintiff filed a fraud claim with Wells Fargo. (Id., ¶ 24.) The claim was denied. (Id., ¶ 25.) Plaintiff initiated an internal appeal, which was also denied on the ground that Plaintiff only had thirty days to inform Wells Fargo of the altered check under the Agreement, and the 30-day period has lapsed. (Id., ¶ 27.)

TENTATIVE RULING

Defendant’s demurrer to Plaintiff’s first and second causes of action for financial elder abuse and breach of contract is OVERRULED. 

LEGAL STANDARD

A general demurrer may be taken to a complaint where “[t]he pleading does not state facts sufficient to constitute a cause of action.” (Code of Civ. Proc. § 430.10(e).) A demurrer for sufficiency tests whether the complaint states a cause of action.  (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice.  (Code Civ. Proc. section 430.30(a).)  A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.  (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.)  The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.  (Hahn v. Mirda, supra, 147 Cal.App.4th 740, 747.)

Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike a pleading or any part thereof.  (Code Civ. Proc., § 435, subd. (b)(1).)  The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading.  (Code Civ. Proc., § 436, subd. (a).)  The court may also strike all or any part of any pleading not drawn or filed in conformity with California law, a court rule, or an order of the court.  (Code Civ. Proc., § 436, subd. (b).)  An immaterial or irrelevant allegation is one that is not essential to the statement of a claim or defense; is neither pertinent to nor supported by an otherwise sufficient claim or defense; or a demand for judgment requesting relief not supported by the allegations of the complaint.  (Code Civ. Proc., 431.10, subd. (b).)  The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice.  (Code Civ. Proc., § 437.)   

DISCUSSION

Demurrer

Financial Elder Abuse

Financial abuse of an elder adult “occurs when a person or entity takes, secretes, appropriates, obtains, or retains real or personal property of an elder for a wrongful use or with intent to defraud, or both, or assists in such conduct. (Welf. & Inst. Code, § 15610.30, subd. (a).)

“The Legislature enacted the [Elder Abuse and Dependent Adult Civil Protection] Act to protect elders by providing enhanced remedies to encourage private, civil enforcement of laws against elder abuse and neglect. An elder is defined as ‘any person residing in this state, 65 years of age or older.’ The proscribed conduct includes financial abuse. The financial abuse provisions are, in part, premised on the Legislature’s belief that in addition to being subject to the general rules of contract, financial agreements entered into by elders should be subject to special scrutiny.” (Bounds v. Superior Court (2014) 229 Cal.App.4th 468, 478, internal citations omitted.)

“[A] party may engage in elder abuse by misappropriating funds to which an elder is entitled under a contract.” (Paslay v. State Farm General Ins. Co. (2016) 248 Cal.App.4th 639, 656; CACI no. 3100.)

Plaintiff’s allegations are sufficient at the pleading stage. Wells Fargo had a contractual duty to reimburse Plaintiff for “any unauthorized, missing or altered endorsements”. (Compl., ¶ 11.) Plaintiff timely notified Wells Fargo of the unauthorized endorsement. (Id., ¶ 34.) Wells Fargo failed to indemnify Plaintiff for the funds that were transferred out of Plaintiff’s personal account due to the unauthorized endorsement. (Id., ¶¶ 27, 36.) Wells Fargo manifested an intent to fraudulently retain the funds that were due to Plaintiff under the Agreement by insisting on sending Plaintiff her notices electronically rather than by mail as she requested, and by claiming that Plaintiff failed to timely inform Wells Fargo of the unauthorized endorsements. (Id., ¶ 37.)

Plaintiff’s financial elder abuse claim is properly pled.

Breach of Contract

To state a cause of action for breach of contract, Plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

The parties disagree as to the terms of the Agreement. The section of the Agreement entitled “Your responsibility to review account statements and notices and notify us of errors” provides that the account holder is obligated to “[n]otify us within 30 days after we have made your account statement available to you of any unauthorized transaction on your account” and to “[n]otify us within six months after we have made your account statement available to you if you identify any unauthorized, missing, or altered endorsements on your items.” (Compl., Exh. A, page 29.) The Agreement defines endorsement as “a signature, stamp, or other mark on the back of a check to transfer, restrict payment, or make the signer responsible for the check.” (Id., page 40.)

Wells Fargo contends that the 30-day deadline rather than the 6-month deadline applies in this situation, therefore Plaintiff’s claim cannot meet the elements of Plaintiff’s performance and Wells Fargo’s breach. However, Plaintiff explicitly alleged that Anderson, the third-party wrongdoer, “endorsed” the check without Plaintiff’s authorization (Compl., ¶ 9), thereby triggering the 6-month deadline. Plaintiff sufficiently alleged compliance with the 6-month deadline to notify. (See Compl., ¶¶ 33-34.)

Plaintiff’s breach of contract claim is properly pled.

CONCLUSION

Defendant’s demurrer to Plaintiff’s first and second causes of action for financial elder abuse and breach of contract is OVERRULED.   Defendant is ordered to file their ANSWER within 10 days’ notice of this ruling.

MOTION FOR SANCTIONS

RELIEF REQUESTED

            Plaintiff moves for an order imposing monetary and terminating sanctions against Defendant under CCP §§ 1281.97 and 1281.99.

TENTATIVE RULING

Plaintiff’s motion for monetary sanctions is DENIED. Plaintiff’s motion for terminating sanctions is DENIED. Plaintiff should be prepared to provide a specific amount in monetary damages at the hearing and explain why the requested amount is reasonable.

LEGAL STANDARD

CCP § 1281.97 provides:

(a) (1) In an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration provider, the drafting party to pay certain fees and costs before the arbitration can proceed, if the fees or costs to initiate an arbitration proceeding are not paid within 30 days after the due date the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel arbitration under Section 1281.2. . . .

(b) If the drafting party materially breaches the arbitration agreement and is in default under subdivision (a), the employee or consumer may . . . [w]ithdraw the claim from arbitration and proceed in a court of appropriate jurisdiction. . . .

(d) If the employee or consumer proceeds with an action in a court of appropriate jurisdiction, the court shall impose sanctions on the drafting party in accordance with Section 1281.99.

            CCP § 1281.99 provides:

(a) The court shall impose a monetary sanction against a drafting party that materially breaches an arbitration agreement pursuant to subdivision (a) of Section 1281.97 . . . by ordering the drafting party to pay the reasonable expenses, including attorney’s fees and costs, incurred by the employee or consumer as a result of the material breach.

(b) In addition to the monetary sanction described in subdivision (a), the court may order any of the following sanctions . . . unless the court finds that the one subject to the sanction acted with substantial justification or that other circumstances make the imposition of the sanction unjust.

(1) An evidence sanction by an order prohibiting the drafting party from conducting discovery in the civil action.

(2) A terminating sanction . . .

DISCUSSION

            Defendant admits that it failed to timely pay arbitration fees. The parties do not dispute that Defendant paid the fees on December 7, 2023. (See Opp’n, 1:5-6.) Defendant urges the Court to deny Plaintiff’s motion on several grounds.

            First, Defendant argues that the Federal Arbitration Act (“FAA”) preempts any state rule that singles out arbitration agreements for disfavored treatment, such as the CCP sections that Plaintiff relies on. The Court will not address this argument and reaches its decision on separate grounds.

            Second, Defendant argues that entering terminating sanctions over a 10-day late arbitration payment would be severe and unjust. The Court agrees with Defendant. The facts here are different from the egregious situation that prompted the Legislature to enact the bill that became CCP § 1281.99 making terminating sanctions available. In her motion, Plaintiff cites to the Senate Judiciary Committee’s observation of “a concerning and troubling trend . . . : employers are refusing to pay required fees to initiate arbitration, effectively stymieing the ability of employees to assert their legal rights.” (Sen. Com. On Judiciary, Analysis of Sen. Bill No. 707 (2019-2020 Reg. Sess.) p. 6.) The Committee cited the example from Uber: “Of the 12,500 arbitration demands filed by Uber drivers, the company has paid the requisite JAMS initial filing fee in just 296 cases… So far, arbitrators have been appointed in only 47 of the cases drivers have brought against Uber – and Uber has paid the arbitrator’s nonrefundable $1,500 retainer fee in a mere six cases.” (Id. at 7.) Unlike Uber, Defendant promptly resolved the issue by paying the arbitration fee, almost immediately after it was notified by the American Arbitration Association of its failure to pay. (See Motion, Exhs. D and E.) Thus, imposition of terminating sanctions would be unjust.

            Monetary sanctions normally would have been warranted and mandatory under CCP § 1281.99(a). However, in this case the plaintiff failed to request a specific amount.  For this reason the court declines to award monetary sanctions .

CONCLUSION

Plaintiff’s motion for monetary sanctions is DENIED. Plaintiff’s motion for terminating sanctions is DENIED. 

            Moving party to give notice.

Dated:   May 30, 2024                                                ___________________________________

                                                                                    Joel L. Lofton

                                                                                    Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court indicating their

intention to submit.  alhdeptx@lacourt.org