Judge Melvin D. Sandvig, Case Number: 24CHCV01791, Date: 2024-09-26 Tentative Ruling

Judge: Melvin D. Sandvig, Case: 24CHCV01791, Date: 2024-09-26 Tentative Ruling

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Case Number: 24CHCV01791 Hearing Date: September 26, 2024 Dept: F47

DEMURRER TO THE FIRST AMENDED COMPLAINT

Demurrer filed on 8/21/24.

MOVING PARTY: Defendants Bank of America, N.A. and Carla Jaco

RESPONDING PARTY: Plaintiff Edgar Buniatyan

NOTICE: ok

Demurrer is to 2^nd, 4^th and 5^th causes of action in the First Amended Complaint:

1. Violation of California Commercial Code 4401

2. Violation of California Commercial Code 4103

3. Breach of Contract

4. Negligence

5. Conversion

RULING: The demurrer is sustained without leave to amend as to the 2^nd and 4^th causes of action and overruled as to the 5^th cause of action. Answer(s) is(are) due within 30 days.

SUMMARY OF FACTS & PROCEDURAL HISTORY

This action arises out of Plaintiff Edgar Buniatyan’s (Plaintiff) claim that there were $206,594.89 in unauthorized transactions from 2/7/24 through 3/1/24 debited from Plaintiff’s Bank of America, N.A. (BANA) checking account. (FAC ¶11). On 3/11/24, Plaintiff reported the alleged unauthorized transactions to Defendant Carla Jaco (Jaco), a banker and employee of BANA, who allegedly promised that she would close Plaintiff’s checking account and would process Plaintiff’s claim for investigation. (FAC ¶13). Plaintiff immediately received a temporary credit to his checking account in the amount of $82,494.81. (FAC ¶12). Because BANA determined that Plaintiff authorized the remaining charges, the remaining charges were not credited to Plaintiff’s account. (FAC ¶¶14, 16).

Based on the foregoing, on 5/9/14, Plaintiff filed this action against BANA and Does 1-50 for: (1) Violation of California Commercial Code 4401, (2) Violation of California Commercial Code 4103, (3) Breach of Contract, (4) Negligence and (5) Conversion. On 6/7/24, Plaintiff filed the subject First Amended Complaint alleging the same five causes of action and including Jaco as a defendant in the 4^th cause of action for negligence. After meet and confer efforts failed to resolve the issues BANA and Jaco (collectively, Defendants) had with the First Amended Complaint, on 8/21/24, Defendants filed and served the instant demurrer to the 2^nd, 4^th and 5^th causes of action in the First Amended Complaint on the ground that the claims do not state facts sufficient to constitute a cause of action. CCP 430.10(e). Plaintiff has opposed the demurrer and Defendants have filed a reply to the opposition.

ANALYSIS

2^nd cause of action – Violation of California Commercial Code 4103

California Commercial Code 4103 provides:

“(a) The effect of the provisions of this division may be varied by agreement, but the parties to the agreement cannot disclaim a bank's responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure. However, the parties may determine by agreement the standards by which the bank's responsibility is to be measured if those standards are not manifestly unreasonable.

(b) Federal Reserve regulations and operating circulars, clearing house rules, and the like have the effect of agreements under subdivision (a), whether or not specifically assented to by all parties interested in items handled.

(c) Action or nonaction approved by this division or pursuant to Federal Reserve regulations or operating circulars is the exercise of ordinary care and, in the absence of special instructions, action or nonaction consistent with clearing house rules and the like or with a general banking usage not disapproved by this division, is prima facie the exercise of ordinary care.

(d) The specification or approval of certain procedures by this division is not disapproval of other procedures that may be reasonable under the circumstances.

(e) The measure of damages for failure to exercise ordinary care in handling an item is the amount of the item reduced by an amount that could not have been realized by the exercise of ordinary care. If there is also bad faith it includes any other damages the party suffered as a proximate consequence.”

Contrary to Plaintiff’s assertion, California Commercial Code 4103(e) does not establish that a bank, such as BANA, owes a duty of care to its customers or authorize a cause of action for violation of any duty. See Mills (2008) 166 CA4th 871, 888-889. Commercial Code 4103(e), merely prescribes the measure of damages for failure to exercise ordinary care.

In the opposition, Plaintiff also argues that the allegations in the First Amended Complaint are sufficient to state a claim for violation of Commercial Code 3103 and/or 1304. However, the 2^nd cause of action only references Commercial Code 4103. Even if Commercial Code 3103 and/or 1304 were referenced in the 2^nd cause of action, the claim would fail. Neither Commercial Code 3103 nor 1304 set forth any duty of care. Commercial Coe 3103 merely defines “ordinary care” and Commercial Code 1304 provides that where a duty exists, it must be performed in good faith. No obligation of good faith exists with regard to Commercial Code 4103 because that statute does not establish that a bank owes a duty of care to its customers. See Mills, supra.

4^th cause of action – Negligence

The elements of a negligence cause of action are: (1) existence of a legal duty, (2) breach of that duty and (3) breach as the proximate cause of injury. See Federico (1997) 59 CA4th 1207, 1211.

The relationship between a bank, such as BANA, and its customer, such as Plaintiff, is contractual and banks do not have a common law fiduciary duty to their customers. Kurtz-Ahlers, LLC 48 CA5th 952, 956-961; Chazen (1998) 61 CA4th 532, 537. The facts alleged do not show that BANA or Jaco owed Plaintiff any duty of care aside from the contractual agreement between a bank and its customer.

Additionally, the negligence claim is barred by the economic loss rule which precludes recovery for tort damages if the defendant’s alleged wrongful conduct results only in economic loss. See Erlich (1999) 21 C4th 543, 552; Butler-Rupp (2005) 134 CA4th 1220, 1228. No special relationship exists between Plaintiff and Defendants which would support the imposition of tort damages in this case. See Southern California Gas Leak Cases (2019) 7 C5th 391, 400; Kurtz-Ahlers, supra at 956. Plaintiff’s relationship with Defendants is purely contractual and Plaintiff seeks to recover economic losses. (FAC ¶¶58-62, 71, 75). Plaintiff’s negligence claim depends on the contractual relationship between the parties; therefore, Plaintiff’s recovery is covered by and limited to the breach of contract cause of action. See Robinson Helicopter Company, Inc. (2004) 34 C4th 979, 991; Sheen 12 C5th 905, 922.

5^th cause of action – Conversion

The elements of a conversion cause of action are: (1) the plaintiff’s ownership or right to possession of the property, (2) the defendant’s conversion by a wrongful act or disposition of property rights and (3) damages. Lee (2015) 61 C4th 1225, 1240.

Relying on several decades old cases, BANA argues that a depositor such as Plaintiff cannot have a claim for conversion against it because once the depositor deposits the money in the bank, the depositor is no longer the owner or entitled to possession of any specific money. (See Demurrer, p.6:17-p.7:4). However, the opposition cites a 2018 case, Fong (2018) 19 CA5th 224, which states “that there is no special rule preventing a depositor from pursuing a conversion action against a bank that holds his or her money.” Id. at 232. BANA fails to address Fong in its reply.

Based on the foregoing, BANA has failed to establish that Plaintiff cannot pursue a conversion claim against it as a matter of law.

CONCLUSION

The demurrer is sustained without leave to amend as to the 2^nd and 4^th causes of action. While Plaintiff requests leave to amend if the demurrer is sustained, Plaintiff has already had two opportunities to plead these claims and Plaintiff has failed to indicate how the defects in the causes of action can be cured by amendment as is his burden. See Goodman (1976) 18 C3d 335, 349.

The demurrer is overruled as to the 5^th cause of action.

Answer(s) is(are) due within 30 days.