Superior Court of California

County of Los Angeles

Department 50

GLK EXPRESS, INC., Plaintiff, vs. WELLS FARGO BANK, N.A., et al., Defendants.	Case No.:	23STCV31854
	Hearing Date:	May 20, 2024
	Hearing Time:	2:00 p.m.
	[TENTATIVE] ORDER RE: DEMURRER TO COMPLAINT

Background

Plaintiff GLK Express, Inc. (“Plaintiff”) filed this action against Defendant Wells Fargo Bank, N.A. (“Defendant”) on December 29, 2023. The Complaint alleges causes of action for (1) breach of contract, (2) negligence, (3) conversion, (4) money had and received, and (5) unfair and deceptive business practices.

Defendant now demurs to each of the causes of action of the Complaint. The demurrer is unopposed.

Discussion

A. Legal Standard

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. ((Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” ((C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. ((Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” ((Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

B. Allegations of the Complaint

In the Complaint, Plaintiff alleges that “[w]hen Plaintiff originally applied for and deposited money into his account at [Defendant], [Defendant] agreed to safeguard and protect his private information and funds deposited and to timely and accurately notify Plaintiff if his data had been breached and compromised.” (Compl., ¶ 5.) “Upon accepting and storing Plaintiff’s Private Information in their computer database systems, [Defendant]…undertook and owed a duty to Plaintiff to exercise reasonable care to secure and safeguard that information and to utilize commercially reasonable methods to do so. [Defendant] further agreed with Plaintiff, that it would not transfer substantial funds from his account without first notifying Plaintiff of suspicious or other activity that was outside the normal range of transactions that Plaintiff conducted through [Defendant].” (Compl., ¶ 6.)

Plaintiff alleges that “[o]n or about January 20, 2023, Defendant Bank, without Plaintiff’s knowledge, consent or authorization, electronically transferred the sum of $24,500 to person or persons unknown out of Plaintiff’s account.” (Compl., ¶ 7.) “Plaintiff immediately, upon discovering the unauthorized electronic transfer of money from his account, notified Defendant Bank, orally and in writing that he disputed the transfer and had not authorized said transfer. Defendant Bank refused to resolve the issue and allowed the charge to remain against his account.” (Compl., ¶ 8.) Plaintiff alleges that Defendant “breached the implied covenant of good faith and fair dealing implied, if not expressed, in every contract by failing to safeguard and protect Plaintiff’s private information and funds in its account.” (Compl., ¶ 13.)

C. First Cause of Action for Breach of Contract

Defendant asserts that the first cause of action does not state facts sufficient to constitute a cause of action. Defendant cites to Chazen v. Centennial Bank (1998) 61 Cal.App.4th 532, 537, where the Court of Appeal noted that “[t]he relationship of bank and depositor is founded on contract, which is ordinarily memorialized by a signature card that the depositor signs upon opening the account.” (Internal quotations and citation omitted.) Defendant also notes that “[t]o state a cause of action for breach of contract, a party must plead the existence of a contract, his or her performance of the contract or excuse for nonperformance, the defendant’s breach and resulting damage. If the action is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” ((Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307 [internal citation omitted].)

Defendant asserts that here, “Plaintiff fails to attach the deposit agreement (or any other contract between the parties), or allege its material terms.” (Demurrer at p. 2:11-12.) Plaintiff does not oppose the instant demurrer, and thus does not respond to this point or dispute that the first cause of action is based on an alleged written contract.

As discussed, to the extent Plaintiff is alleging the breach of a written contract, “the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” ((Ibid.) The Complaint here does not do so.

Based on the foregoing, the Court sustains Defendant’s demurrer to the first cause of action, with leave to amend.

D. Second Cause of Action for Negligence

In the second cause of action for negligence, Plaintiff alleges, inter alia, that “Defendants, Bank and Does 1 through 25, owed a duty to Plaintiff to protect it against digital fraud and to stop and prevent further dissipation of its financial property and identity theft; and, knew or should have known that their computer systems and data security practices were inadequate to safeguard Plaintiff’s Private Financial Information and account and that the risk of a data breach or theft was highly likely. Defendants’ actions in engaging in the above-named unlawful practices and acts were negligent and reckless with respect to Plaintiff’s rights.” (Compl., ¶ 17.)

In the demurrer, Defendant asserts that it “owed no duty to Plaintiff to protect against fraud or identify theft.” (Demurrer at p. 3:23-24.) Defendant cites to Chazen v. Centennial Bank, supra, 61 Cal.App.4th at page 537, where the Court of Appeal noted that “[t]he relationship of bank and depositor is founded on contract, which is ordinarily memorialized by a signature card that the depositor signs upon opening the account. This contractual relationship does not involve any implied duty to supervise account activity or to inquire into the purpose for which the funds are being used and entails no contractual obligation to persons other than the account holder. It follows that [c]ommercial banks have no duty to police their fiduciary accounts and are not liable for the misappropriation of trust funds by the trustee.” (Internal quotations and citations omitted.)

Defendant also cites to Software Design & Application v. Hoefer & Arnett (1996) 49 Cal.App.4th 472, 481, where the Court of Appeal noted that “[a]ppellants suggest that the frequency with which the McDonalds deposited and simultaneously withdrew hundreds of thousands of dollars from the Phony LP accounts was a sharp indicator of money laundering or other illegal activity. They cite no authority for the proposition that, in the absence of suspicious instruments, a bank has a duty to supervise account activity or otherwise track frequent and/or large dollar transactions in deposit accounts, nor are we aware of any such duty.” (Internal quotations and emphasis omitted.) As discussed, Plaintiff does not oppose the demurrer. Thus, Plaintiff does not dispute Defendant’s assertion that it owes no duty of care to Plaintiff.

Based on the foregoing, the Court sustains Defendant’s demurrer to the second cause of action, with leave to amend.

///

E. Third Cause of Action for Conversion

In the third cause of action, Plaintiff alleges, inter alia, that “Defendants, and each of them, wrongfully took, misappropriated and converted plaintiff’s money in the sum of $24,500 and converted it to their own use or the use by others.” (Compl., ¶ 23.) “Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim 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.” ((Los Angeles Federal Credit Union v. Madatyan (2012) 209 Cal.App.4th 1383, 1387 [internal quotations omitted].)

Defendant asserts that “[Defendant] a depository institution; once funds are deposited into it, it has title over those funds and therefore may not be charged with conversion.” (Demurrer at p. 5:4-5.) Defendant cites to Morse v. Crocker Nat’l Bank (1983) 142 Cal.App.3d 228, 232, where the Court of Appeal noted that “[i]t is axiomatic that the relationship between a bank and its depositor arising out of a general deposit is that of a debtor and creditor. Such a deposit is in effect a loan to the bank. Title to the deposited funds passes immediately to the bank which may use the funds for its own business purposes. The bank does not thereby act as trustee and cannot be charged with converting the deposit to its own use. It is, however, obligated to pay the debt reflected by the balance of the deposited funds upon its depositor’s demand.” (Internal citations omitted.) Plaintiff does not oppose the instant demurrer and thus does not address this point.

Based on the foregoing, the Court sustains Defendant’s demurrer to the third cause of action, with leave to amend.

F. Fourth Cause of Action for Money Had and Received

Defendant asserts that the fourth cause of action also fails. Defendant cites to Avidor v. Sutter’s Place, Inc. (2013) 212 Cal.App.4th 1439, 1454, where the Court of Appeal noted that “[a] cause of action for money had and received is stated if it is alleged [that] the defendant is indebted to the plaintiff in a certain sum for money had and received by the defendant for the use of the plaintiff. The claim is viable wherever one person has received money which belongs to another, and which in equity and good conscience should be paid over to the latter.” (Internal quotations and citations omitted.)

In the demurrer, Defendant asserts that “there are no facts that indicate [Defendant] received any money on the Plaintiff’s behalf that Plaintiff is entitled to.” (Demurrer at p. 5:23-24.) But in the fourth cause of action, Plaintiff alleges that “[w]ithin the last two years at Los Angeles County, California, [Defendant]…became indebted to Plaintiff in the sum of $24,500.00, for money had and received by said defendants for Plaintiff’s use and benefit.” (Compl., ¶ 28.) Plaintiff alleges that it has “demanded…payment of said sum, but said Defendants, and each of them, have refused and failed to pay said sum, or any portion thereof, and there is presently due, owing and unpaid from said defendants, and each of them, to Plaintiff, the sum of $24,500, plus interest thereon at the legal rate from in or about January 20, 2023.” (Compl., ¶ 29.)

The Court does not find that Defendant has demonstrated that the fourth cause of action fails to state facts sufficient to constitute a cause of action. Thus, the Court overrules Defendant’s demurrer to the fourth cause of action.

G. Fifth Cause of Action for Unfair and Deceptive Business Practices

In the fifth cause of action, Plaintiff alleges, inter alia, that “[t]he conduct and practices of Defendants, and each of them, as herein alleged, were and are unlawful, unfair and/or fraudulent and constitute unfair business practices within the meaning of said statutes.” (Compl., ¶ 32.)

“The UCL defines ‘unfair competition’ as ‘any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.’ By proscribing ‘any unlawful’ business act or practice, the UCL ‘borrows’ rules set out in other laws and makes violations of those rules independently actionable. However, a practice may violate the UCL even if it is not prohibited by another statute. Unfair and fraudulent practices are alternate grounds for relief.” ((Zhang v. Superior Court (2013) 57 Cal.4th 364, 370 [internal citations omitted].) The Court notes that “[b]ecause¿¿Business and Professions Code section 17200¿¿is written in¿the disjunctive, it establishes three varieties of unfair competition—acts or practices which are unlawful, or unfair, or fraudulent. An act can be alleged to violate any or all of the three prongs of the UCL—unlawful, unfair, or fraudulent.” (¿Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1554 [internal quotations and citation omitted].)

Defendant asserts that “Plaintiff’s failure to allege any sufficient cause of action dooms its claim under the UCL’s unlawful prong.” (Demurrer at p. 6:14-15.) However, as set forth above, the Court overrules Defendant’s demurrer to the fourth cause of action of the Complaint.

Defendant also asserts that the fifth cause of action fails because Plaintiff is not entitled to any relief. Defendant cites to Madrid v. Perot Systems Corp. (2005) 130 Cal.App.4th 440, 452, where the Court of Appeal noted that “[t]he UCL limits the remedies available for UCL violations to restitution and injunctive relief (and civil penalties, which are not at issue in this appeal)…[T]he UCL is not an all-purpose substitute for a tort or contract action…Instead, the act provides an equitable means through which both public prosecutors and private individuals can bring suit to prevent unfair business practices and restore money or property to victims of these practices…[T]he overarching legislative concern [was] to provide a streamlined procedure for the prevention of ongoing or threatened acts of unfair competition…Because of this objective, the remedies provided are limited. While any member of the public can bring suit under the act to enjoin a business from engaging in unfair competition, it is well established that individuals may not recover damages.” (Internal quotations and citations omitted.)

Defendant asserts that Plaintiff is not entitled to injunctive relief because “there is no ongoing misconduct to enjoin. The disputed transfer already occurred.” (Demurrer at p. 7:6-8.) However, in the fifth cause of action, Plaintiff alleges that “[a]s a direct and proximate result of the unfair and unlawful act or business practices of Defendants, and each of them, Plaintiff seek [sic] injunctive relief to prohibit Defendants from such actions in the future which might in any manner effect [sic] Defendants’ customers and to compel Defendants, and each of them, to impose standards and practices that will prevent and stop future unauthorized use of a person’s identity and theft of property.” (Compl., ¶ 33.) Defendant does not appear to address this allegation in the demurrer.

In addition, in the prayer for relief as to the fifth cause of action, Plaintiff alleges that it seeks, inter alia, “[r]estitution of Plaintiffs’ funds that were wrongfully, fraudulently and illegally transferred out of his bank account which occurred through the Defendants’ failure to act as impliedly and expressly provided by law and contract…” (Compl., p. 7:11-14.) Defendant asserts that “Plaintiff is not entitled to restitution because [Defendant] did not receive any money that it was not entitled to (Plaintiff does not allege that [Defendant] is in receipt of the disputed transfer).” (Demurrer at p. 7:4-6.) The Court notes that Defendant does not cite any legal authority to support this assertion. In addition, the Court notes that ¿¿“a demurrer cannot rightfully be sustained to part of a cause of action or to a particular type of damage or remedy.¿¿” (¿Kong ¿v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047¿¿; ¿see also ¿PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682 [“A demurrer does not lie to a portion of a cause of action.”]¿¿.)

The Court does not find that Defendant has demonstrated that the fifth cause of action fails to state facts sufficient to constitute a cause of action. Thus, the Court overrules Defendant’s demurrer to the fifth cause of action.

Conclusion

Based on the foregoing, the Court sustains Defendant’s demurrer to the first, second, and third causes of action of the Complaint, with leave to amend. The Court overrules Defendant’s demurrer to the fourth and fifth causes of action of the Complaint.The Court orders Plaintiff to file and serve an amended complaint, if any, within 20 days of this Order. If no amended complaint is filed within 20 days of this Order, Defendant is ordered to file and serve its answer within 30 days of this Order. Defendant is ordered to give notice of this Order.

DATED: May 20, 2024

________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court