Case Number: KC065753    Hearing Date: August 05, 2014    Dept: J

Re: Boahua Zheng v. Rex Spirits, Inc., etc., et al. (KC065753)

DEMURRER TO SAL ORTIZ’S FIRST AMENDED CROSS-COMPLAINT

Moving Party: Cross-Defendant East West Bank

Respondent: No timely opposition filed

POS: Moving OK

The Complaint alleges that Plaintiff and Defendant entered into an agreement wherein the parties agreed that Plaintiff would loan $1,000,000 to Defendant to use to develop and establish liquor distribution business in China and give Plaintiff exclusive marketing rights to the liquor business in China, and Defendant would repay Plaintiff the $1,000,000 loan within one year; and that Defendant breached the agreement by failing to repay $700,000 of the outstanding principal balance. The Complaint, filed on 3/4/13, asserts causes of action for:

1. Breach of Contract
2. Breach of Contract
3. Common Counts

The First Amended Cross-Complaint by Sal Ortiz against Bin Li and East West Bank on 4/29/14 asserts causes of action for Breach of Fiduciary Duty.

Cross-Defendant East West Bank (“EWB”) demurs to the First Amended Cross-Complaint (“FAXC”) of Cross-Complainant Sal Ortiz (“Ortiz”) on the ground that it fails to allege facts sufficient to state a cause of action.

The FAXC asserts a single cause of action for breach of fiduciary duty. To assert a cause of action for breach of fiduciary duty, plaintiff must allege the following elements: (1) the existence of a fiduciary duty; (2) breach of the duty; and (3) damage caused by the breach. (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 182.)

The relationship of bank and depositor is that of debtor and creditor and is founded on contract, and this contractual relationship does not involve any implied duty to supervise account activity or to inquire into purpose for which funds are being used.
(Grover v. Bay View Bank (2001) 87 Cal.App.4th 452, 456.) Further, the relationship between bank and account holder entails no contractual obligation to persons other than the account holder. (Ibid.)

The FAXC alleges that EWB, as the bank for Rex Sprits, Inc. and holding an account for Rex Spirits Inc. with instructions as to the signatories for the account and signatures required for checks and wires, stood in a fiduciary position to Rex Spirits, Inc. and its signatory, Ortiz. (FAXC ¶ 16.) However, such allegations are inadequate to demonstrate that EWB owed a fiduciary duty to Ortiz because: (1) a bank does not owe account holders/depositors a fiduciary duty, and (2) even if a bank owed account holders/depositors a fiduciary duty, Ortiz was not an account holder in his individual capacity. Ortiz did not oppose the demurrer thereby impliedly conceding to the merits of the demurrer. Thus, the demurrer is sustained without leave to amend.