2011-00114517-CU-BC

Northgate Property vs. Travelers Property Casualty Co

Nature of Proceeding: Hearing on Demurrer

Filed By: Barrows, Marjie D.

Defendant and Cross-Defendant Travelers Property Casualty Co.’s Demurrer to the
Defendant and Cross-complainant Wells Fargo Bank’s First Amended Cross-
Complaint is OVERRULED.

Second Amended Complaint

Plaintiffs in the underlying action are Northgate Property Investment, LLC and
individuals Parviz Mouzooni and Keikhosrow Behziz.

Travelers issued a commercial insurance policy, for the Northgate Shopping Center,
commercial retail shopping complex. (Second Amended Complaint (“SAC”), para.16).
The policy included Plaintiffs Parviz Mouzooni and Keikhosrow Behziz as named
insureds, and JPMorgan Chase Bank, as the mortgagee.

On or about May 4, 2010, a fire occurred at Northgate Shopping Center, and Plaintiffs
filed an insurance claim with Travelers. After the fire, on July 21, 2010, this Court
appointed Richard L. Sweeney Receiver for the Northgate Shopping Center. The
Northgate Shopping Center was sold in a Trustee’s Sale on November 22, 2010.

Travelers investigated and adjusted Plaintiffs’ fire loss claim and issued an insurance
benefits check payable to “JPMorgan Chase Bank, NA ISAOA and Parviv Mouzooni &
Keikhosrow Behziz.” (SAC, paras. 16, 45 and Exh. “B”). Travelers sent the insurance
check to the Receiver’s business address. (SAC, para. 45 and Exh. “B”). After the
claim had been adjusted and paid, the claim was closed.

Unbeknownst to Travelers, Receiver Mr. Sweeney of Preferred Realty Advisors, Inc.
endorsed the check, and deposited the check into a Wells Fargo account held by
Preferred. (SAC, para. 63). Wells Fargo thus served as the depositing bank, accepting
the check for deposit into Preferred’s Wells Fargo account, allegedly without an
endorsement or agreement from Plaintiff Behziz, a named payee on the check. (SAC,
63, 66). Following the deposit, Wells Fargo paid transfers drawn on Preferred’s
account to JPMorgan Chase and Global Capital.

In its SAC, Plaintiff Behziz alleges that Wells Fargo has committed the tort of
conversion of the entire sum of insurance check. (SAC, 62-64). Plaintiff Behziz claims
that Wells Fargo improperly accepted for deposit the insurance proceeds check into an
account held by Preferred Realty, despite the lack of proper endorsement. Plaintiffs’
causes of action against Travelers are for breach of insurance contract.

First Amended Cross-complaint

Wells Fargo’s First Amended Cross-complaint (FACC) against Travelers is for both
comparative indemnity and equitable indemnity. Indemnity may be defined as the
obligation resting on one party to make good a loss or damage another party has
incurred. Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal. 3d 622, 628. In
California there is a single cause of action for comparative fault indemnity, which
includes the entire range of indemnity from no right to any apportionment to complete
indemnity.

Here, moving party Travelers demurs on the grounds that Wells Fargo fails to allege
facts to show that Travelers is a joint tortfeasor for the alleged tort of conversion. Wells
Fargo’s Cross-complaint alleges that: (1) Travelers issued the insurance check; (2)
Travelers named as payees the insureds Plaintiffs Behziz and Mouzooni and the
mortgagee, JPMorgan Chase Bank; and (3) Travelers delivered the check to an
address belonging to JPMorgan Chase and the appointed Receiver Sweeney. None of
these facts support the allegation that Travelers contributed to Wells Fargo’s deposit of
the check, which Plaintiff Behziz has alleged is conversion.

In opposition Cross-complainant Wells Fargo contends that it has alleged that
Travelers delivered the check to the Receiver (FACC, para. 12), Travelers is deemed
to have notice of the endorsement on the check and Travelers never notified Wells
Fargo that the endorsement on the check was not authorized. (FACC, para. 16) By
delivering the check to Wells Fargo, Travelers represented to Wells Fargo that the
Receiver was entitled to endorse the check, resulting in the litigation. (FACC, para. 17)

Wells Fargo asserts that Travelers may be considered a joint tortfeasor, for the
purposes of comparative equitable indemnity. The doctrine of comparative equitable
indemnity is available to apportion liability among wrongdoers based on their relative
culpability provided only that the actions of the parties combined to create an
indivisible injury to the plaintiff. Willdan v. Sialic Contractors Corp. (2007) 158 Cal.
App. 4th 47, 56. It is not significant in this regard that Wells Fargo and Travelers may
not have acted in concert. Id.

Commercial Code § 3414(c) does not insulate Travelers from comparative equitable
indemnity. It only discharges Travelers as the drawer of a draft is accepted by a bank,
from any guarantee of the bank’s solvency.

The demurrer is therefore overruled. Travelers shall file and serve its Answer to the
Frist Amended Cross-complaint not later than Monday, June 2, 2014.