Judge: Upinder S. Kalra, Case: 22STCV39245, Date: 2023-08-30 Tentative Ruling
Case Number: 22STCV39245 Hearing Date: August 30, 2023 Dept: 51
Tentative Ruling
Judge Upinder S.
Kalra, Department 51
HEARING DATE: August
30, 2023
CASE NAME: Raul Cabrera, et al. vs. O’Gara Coach
Company, LLC, et al.
CASE NO.: 22STCV39245
DEMURRER
MOVING PARTY: Cross-Defendant JPMorgan Chase Bank,
N.A.
RESPONDING PARTY(S): Cross-Complainant O’Gara Coach
Company, LLC
REQUESTED RELIEF:
1. An
order sustaining the demurrer to the 1st, 2nd, 11th,
and 13th causes of action of the Cross-Complaint.
TENTATIVE RULING:
1. Demurrer
is SUSTAINED, without leave to amend, as to the 1st, 2nd,
and 13th causes of action and with leave to amend as to the 11th
cause of action.
STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:
On December 19, 2022, Plaintiffs Raul Cabrera and Yany E.
Acosta Pena (“Plaintiffs”) filed a complaint against Defendants O’Gara Coach
Company, LLC, and Feng Li (“Defendants.”) The complaint alleged five causes of
action: (1) Fraud, (2) Conversion, (3) Negligence, (4) Intentional Infliction
of Emotional Distress, and (5) Unjust Enrichment. The complaint alleges that
Plaintiffs purchased a 2018 Lamborghini for $182,000 that was advertised on
Defendant O’Gara’s website. Defendant Li was introduced as an authorized
representive to negotiate the sale of the vehicle. Plaintiffs then wire
transferred $182,000 to an account identified as belonging to Defendant O’Gara.
However, Plaintiffs learned that the account was in Defendant Li’s name, not
O’Gara.
On February 28, 2023, Plaintiffs filed a First Amended
Complaint naming Defendant Chase in the 1st, 2nd, 11th,
and 13th causes of action.
On March 30, 2023, Defendant O’Gara Coach Company, LLC filed
an Answer.
On April 13, 2023, Cross-Complainant O’Gara Coach Company
filed a Cross-Complaint against Cross-Defendants Feng Li, JPMorgan Chase Bank,
N.A., and Bank of America, N.A, alleging 13 various causes of action, including,
but not limited to, fraud, indemnity, and conversion.
On June 14, 2023, Cross-Defendant JPMorgan Chase Bank, N.A.,
filed a Demurrer. Cross-Complainant’s Opposition was filed on August 17, 2023.
Cross-Defendant’s Reply was filed on August 23, 2023.
LEGAL STANDARD
Demurrer
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. In a demurrer proceeding, the defects must be apparent on the
face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968,
994.) “A demurrer tests the pleadings alone and not the evidence or other
extrinsic matters. …. 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.)
Meet and Confer:
Prior to filing a demurrer, the demurring party is required
to satisfy their meet and confer obligations pursuant to Code of Civ. Proc.
§430.41, and demonstrate that they so satisfied their meet and confer
obligation by submitting a declaration pursuant to Code of Civ. Proc.
§430.41(a)(2) & (3). The Declaration of Layal L.
Bishara indicates that the parties met and conferred telephonically but were
unable to reach a resolution. (Dec. Bishara ¶ 2.)
ANALYSIS:
1st , 2nd
and 13th Cause of Action
Cross-Defendant Chase argues that
Division 11 of the UCC preempts Cross-Complainants claims against Chase. Here,
Chase, as the beneficiary bank, was instructed by Bank of America via the wire
instructions to credit the account and directed the funds into the account
listed. (Demurrer 3-6; X-Comp. ¶¶ 18, 20.)
Defendant relies on Zengen, Inc, v. Comerica Bank. The Court
of Appeal there stated that “division 11 provides that common law causes of
action based on allegedly unauthorized funds transfers are preempted in two
specific areas: (1) where the common law claims would create rights, duties, or
liabilities inconsistent with division 11; and (2) where the circumstances
giving rise to the common law claims are specifically covered by the provisions
of division 11.” (Zengen, Inc. v.
Comerica Bank (2007) 41 Cal.4th 239, 253.)
Cross-Complainants
argue that the claims are not preempted by Division 11 of the UCC.
Specifically, cross-complainants argue that the two specific areas in Zengen do not apply. First, the common
law claims – equitable indemnity, apportionment and contribution, and
declaratory relief – do not create “rights, duties, and liabilities
inconsistent with division 11” as these claims are equitable in nature. (Opp.
10: 16-17.) If Chase did not know the instructions were different individuals,
then it would only have to credit the account identify by the number. However,
if Chase did know, then no one has the rights to receive the payment, except
those entitled to. (Opp. 11: 11-14.) Second, the acts are not covered under §
11201-11212. Here, Cross-Complainants allege that Chase did have knowledge that
the names were in conflict, as their system alerted the FBI. (Opp. 12: 2-7;
X-Comp. ¶¶ 29, 92-94. Thus, Cross-Complainants argue that §§ 11201-11212 do not
apply when a bank has actual knowledge of discrepancies concerning the name and
number of the account.
After
reviewing the Cross-Complaint, the Court finds that the claims raised by
Cross-Complainant are barred under the UCC.
As stated above, the Court in Zengen determined that division 11
preempts common law causes of action in two areas: “(1) where the common law
claims would create rights, duties, or liabilities inconsistent with division
11; and (2) where the circumstances giving rise to the common law claims are
specifically covered by the provisions of division 11.” (Zenge, supra, 41
Cal.4th at 253.) The Court finds Cross-Defendant’s argument that the UCC does
not preempt the common law claims because they do not create rights and duties
as they are “equitable in nature” inapposite. As the Court in Chino Commercial
Bank, N.A. stated:
[T]he Uniform Commercial Code is
the primary source of commercial law rules in areas that it governs....
Therefore, while principles of common law and equity may supplement provisions
of the Uniform Commercial Code, they may not be used to supplant its
provisions, or the purposes and policies those provisions reflect, unless a
specific provision of the Uniform Commercial Code provides otherwise. In the
absence of such a provision, the Uniform Commercial Code preempts principles
of common law and equity that are inconsistent with either its provisions or
its purposes and policies.”
(Chino Commercial
Bank, N.A. v. Peters (2010) 190 Cal.App.4th 1163, 1170, emphasis added.)
11th Cause of Action Negligence under CUCC §
11207
Cal. U. Com. Code, § 11207 provides in part:
(b) If a payment order received by
the beneficiary's bank identifies the beneficiary both by name and by an
identifying or bank account number and the name and number identify different
persons, the following rules apply:
(1) Except as
otherwise provided in subdivision (c), if the beneficiary's bank does not know
that the name and number refer to different persons, it may rely on the number
as the proper identification of the beneficiary of the order. The beneficiary's bank need not determine
whether the name and number refer to the same person. (Emphasis added.)
(2) If the
beneficiary's bank pays the person identified by name or knows that the name
and number identify different persons, no person has rights as beneficiary
except the person paid by the beneficiary's bank if that person was entitled to
receive payment from the originator of the funds transfer. If no person has
rights as beneficiary, acceptance of the order cannot occur.
“The safe harbor provision applies so long as the bank does
not know that the beneficiary's name and account number refer to different
persons. “Know” means to have actual knowledge.” (TME Enterprises, Inc. v. Norwest Corp. (2004) 124 Cal.App.4th 1021,1031
(TME).)
The Cross-Complaint does not
provide sufficient facts to indicate that Cross-Defendant Chase had actual
knowledge, which would trigger (b)(2). The allegations in the Cross-Complaint,
paragraphs 25-27, merely state that Chase “should have known” that there was a
complete disconnect.
Moreover, the Cross-Complaint’s
argument that the Cross-Defendant had acknowledge because the transaction was
reported to the FBI fails. While the Cross-Complaint indicates the FBI was
informed after Chase received the funds, there are no facts to support how long
after. In TME, the Court found that there was no evidence to demonstrate that
prior to withdrawing the money that the bank in that case knew or should have
known that the funds were a result of fraud. Likewise, the allegations contain
conclusory statements that Chase “knew or should have known,” but does not
provide any details as to how Chase would know.
“The standard
format, however, may also allow the inclusion of the name of the beneficiary
and other information which can be useful to the beneficiary's bank and the
beneficiary but which plays no part in the process of payment. If the
beneficiary's bank has both the account number and the name of the beneficiary
supplied by the originator of the funds transfer, it is possible for the
beneficiary's bank to determine whether the name and number refer to the same
person, but if a duty to make that determination is imposed on the beneficiary's
bank the benefits of automated payment are lost....” (TME Enterprises, Inc., supra, 124 Cal.App.4th at 1032.)
Thus, based on the allegations,
Plaintiffs provided wire instructions to Bank of America to transfer over
$180,000 to the Chase account. (X-Comp. ¶ 15-19.) Here, the allegations
indicate that Chase was provided a name and account number in the wire instructions
and transferred those funds. Accordingly, based on the UCC, a bank can rely on
the instructions that were identified and “need not determine whether the name
and number refer to the same person.” (Cal. U. Com. Code, § 11207(b)(1).)
Demurrer
as to the 1st, 2nd, 11th, and 13th
Causes of Action is SUSTAINED.
Leave to Amend:
Leave to amend should be liberally
granted if there is a reasonable possibility an amendment could cure the
defect. (County of Santa Clara v. Superior Court (2022) 77 Cal.App.5th 1018,1035.)
The Plaintiff has the
burden of demonstrating that leave to amend should be granted, and that the
defects can be cured by amendment. (“Plaintiff must show in what manner he can
amend his complaint and how that amendment will change the legal effect of his
pleading.” Goodman v. Kennedy (1976)
18 Cal.3d 335, 349). Here, the Court finds that it is unlikely that
Cross-Complainant will be able to amend the cross-complaint as to the 1st,
2nd and 13th Causes of Action. However, it is reasonably
possible that additional facts can be pled as to the 11th cause of
action. as the UCC preempts the common law causes of action.
Leave to Amend is
DENIED in part and GRANTED in part..
CONCLUSION:
For the foregoing reasons, the
Court decides the pending motion as follows:
Demurrer is
SUSTAINED, without leave to amend, as to the 1st, 2nd, and
13th causes of action and with leave to amend as to the 11th
cause of action, within 20 days service of this order.
Moving party is to give notice.
IT IS SO ORDERED.
Dated: August
30, 2023 __________________________________ Upinder
S. Kalra
Judge
of the Superior Court