Judge Randolph M. Hammock, Case 22STCV29736 2023-03-06 Tentative Ruling

Judge: Randolph M. Hammock, Case: 22STCV29736, Date: 2023-03-06 Tentative Ruling

Plaintiff Suretec Insurance Company brings the instant case against Defendants Luis Alfonso Felix Apodaca and J.B. Casas, Jr. Plaintiff alleges that on March 14, 2017, Defendant Apodaca was administrator in the matter of Estate of Adelina Bejarano dba Adelina Apodaca Bejarano, (LASC Case No. 16STPB05763) (the “Estate Matter”). Defendant Casas, a licensed California attorney, represented Apodaca in the Estate Matter.

As a condition of the issuance of Letters of Administration, Apodaca obtained from Plaintiff Suretec an Administrator Bond in the principal amount of $300,000.00. Defendant Apodaca executed a written Indemnification Agreement in favor of Plaintiff Suretec by which he agreed to exonerate and indemnify Suretec. Similarly, Defendant/Cross-Complainant Casas executed and entered into a Joint Control Agreement (“JCA”) in favor of Suretec in which he agreed to indemnify and provide legal services for the benefit of Suretec. Pursuant to the terms of the JCA, Defendants were to deposit the estate funds into an account controlled jointly by Apodaca and Casas.

On December 12, 2019, Apodaca was removed as the Administrator of the Estate. Following a final accounting, it was revealed that Apodaca had held over $300,000 in estate funds in a Bank of America account not jointly controlled by Apodaca and Casas. Defendant Apodaca allegedly made unauthorized disbursements and withdrawals from the account. Plaintiff alleges Casas had knowledge of the Bank of America account but failed to monitor and manage the Estate Funds in a jointly managed account as required under the agreements.

Following a court order in the Estate matter requiring Bank of America to turn over the remaining estate funds, the Estate sought a surcharge against Suretec as surety for Apodaca due to Apodaca’s unauthorized disbursements. Suretec paid the estate $65,740.95. Suretec now brings causes of action against Apodaca for (1) breach of contract/express indemnity, (2) equitable/implied indemnity, (3) statutory reimbursement, and against Casas for (4) breach of contract and (5) negligence.

Defendant/Cross-Complainant Casas has filed a Cross-Complaint against Cross-Defendant Bank of America, N.A. Casas alleges Bank of America was negligent in allowing Defendant Apodaca to open an account with the Bank without following the proper procedures or regulations.

Cross-Defendant’s Demurrer to the Cross-Complaint is SUSTAINED in its entirety. Generally speaking, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) Cross-Complainant must demonstrate this possibility at the hearing.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal. App. 4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (CCP § 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.) Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Id.) 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, 147 Cal.App.4th at 747.)

As an initial matter, the caption of the Cross-Complaint states: “Cross Complaint for Negligence and Failure to Comply with Banking Regulation.” The body of the Cross-Complaint, however, does not expressly list any causes of action. This much is certain: the Cross-Complaint attempts to allege negligence against the bank, as confirmed by the Opposition.

Whether Cross-Complainant also attempts to allege additional causes of action for “failure to comply with banking regulation[s]” is not clear. Perhaps, Plaintiff merely alleges Bank of America was negligent for failing to comply with said regulations.

In any event, the pleading is unambiguous or uncertain in this respect. Moreover, to the extent Cross-Complainant does, in fact, attempt to assert one or more additional causes of action for “failure to comply with banking regulation[s],” it is unclear from the pleading which regulations were allegedly violated. Thus, again assuming the Cross-Complaint attempts to assert one or more causes of action for violations of banking regulations, they fail due to uncertainty. (See CCP §430.10(f).)

Accordingly, the Demurrer to the Cause(s) of Action for failure to comply with banking regulation(s) is SUSTAINED. Generally speaking, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) Cross-Complainant must demonstrate this possibility at the hearing.

Cross-Defendant next demurs to the negligence cause of action. To state a cause of action for negligence, a plaintiff must allege (1) the defendant owed the plaintiff a duty of care, (2) the defendant breached that duty, and (3) the breach proximately caused the plaintiff's damages or injuries. (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal. App. 4th 49.) Determining duty is primarily a question of law which can be resolved by demurrer. (Bloomberg v. Interinsurance Exch. (1984) 162 Cal. App. 3d 571, 575.)

Cross-Defendant argues the negligence claim fails as a matter of law because the Bank owes no duty to Cross-Complainant. Cross-Defendant contends it is “well-settled in California that banks do not owe any duty of care to noncustomers.” (Dem. 6: 12.)

The gist of the Cross-Complaint is that Bank of America was negligent in permitting Apodaca to open the account without proper documentation. Had the Bank required the proper forms—those which only Casas allegedly possessed—the bank would have contacted Casas, and “Casas would have informed [Bank of America] that Casas had a Joint Control Agreement with Apodaca which requires the estate account to be opened by both Casas and Apodaca” jointly. (Cross-Complaint ¶ 17.) And had the bank done so, Casas could have prevented Apodaca from making unpermitted withdrawals from the account. (Id. ¶ 18.)

“[A]bsent extraordinary and specific facts, a bank does not owe a duty of care to a noncustomer.” (Software Design & Application, Ltd. v. Hoefer & Arnett, Inc. (1996) 49 Cal. App. 4th 472, 479; Gil v. Bank of Am., N.A. (2006) 138 Cal. App. 4th 1371, 1379 [imposing duty would be “directly contrary to case law which holds that ‘a bank owes no duty to nondepositors to investigate or disclose suspicious activities on the part of an accountholder.’”].) In addition, “absent a duty, the defendant's care, or lack of care, is irrelevant.” (Id. at 482.)

Cross-Complainant apparently concedes he was not a customer of Bank of America, but argues, essentially, that he would have been a customer but-for the Bank’s negligence. In other words, had the Bank followed proper procedures, he would have been listed on the account.

Cross-Complainant’s only authority, which precedes those discussed above, is inapposite. As cited by Cross-Complainant, in Bullis, a plaintiff was co-executor on an estate account and alleged that the bank was negligent because it improperly allowed the co-executor to create an account to withdraw funds from that account without the signatures of both executors. (Bullis v. Sec. Pac. Nat. Bank (1978) 21 Cal. 3d 801, 806-807.) After the bank was found liable for negligence at trial, the California Supreme Court affirmed the judgment. The Supreme Court found the bank had a duty to exercise reasonable care in its transactions with the estate. The court also found that the bank failed to exercise reasonable care by neglecting to follow its own internal procedures and those customary among banks when it opened and maintained the account without both signatures. (Id. at 810.)

Here, unlike in Bullis, Cross-Complainant was not an executor of the estate. Moreover, Defendant also fails to allege with any particularity which regulations the Bank allegedly violated in allowing Apodaca to open the account. To the extent the Bank violated its own rules, more recent authority suggests such fact would not be enough to impose a duty. Indeed, even “violation of a self-imposed rule does not create actionable negligence unless plaintiff (1) suffers the type of harm sought to be prevented by the rule and (2) is a member of the class of people for whose protection the rule was promulgated.” (Software Design & Application, Ltd., supra, 49 Cal. App. 4th at 482 [citing Fireman's Fund Ins. Co. v. Security Pacific Nat. Bank (1978) 85 Cal.App.3d 797, 829].) Such is not the case here, because “account opening or screening procedures exist” only “to protect the banks,” not “to protect strangers with whom they do no business.” (Id.)

Thus, Cross-Complainant presents no authority suggesting he alleges the “extraordinary or specific facts” necessary to impose a negligence duty in this case. In other words, “the relationship between the banks' alleged malfeasance and the harm [Cross-Complainant] suffered is tenuous,” and Cross-Complainant therefore cannot allege the essential elements of negligence. (Software Design & Application, Ltd., supra, 49 Cal. App. at 478–79.)

Accordingly, Cross-Defendant’s Demurrer to the Negligence Cause of Action is SUSTAINED. It would appear unlikely that Cross-Complainant can successfully amend this cause of action. Be that as it may, Cross-Complainant will be given the opportunity at the hearing to justify leave to amend.