Case Number: BC533744 Hearing Date: June 23, 2014 Dept: 34

Moving Party: Defendant LBS Financial Credit Union (“defendant” or “LBS”)

Resp. Party: Plaintiff Ronnie Lee (“plaintiff’)

Defendant’s demurrer to the first cause of action is OVERRULED. Defendant’s demurrer to the fourth and sixth causes of action is SUSTAINED.

Defendant’s Request for Judicial Notice is DENIED because Exh. 1 is not relevant to the instant action. (See Kashian v. Harriman (2002) 98 Cal.App.4th 892, 90, fn.3 [judicial notice may be denied for lack of relevance].)

PRELIMINARY COMMENTS:

The Court would suggest that having pleadings that read as if they were closing arguments to a jury is generally not helpful to the Court.

The Court also notes that in numerous places in plaintiff’s opposition, there appears the letters “AA.” (See, e.g., Opp., p. 3:5, p.4:5, p. 4:7; p. 4:10.) The Court assumes that these are simply typographical errors.

BACKGROUND:

Plaintiff commenced this action on 1/21/14 against defendants for: (1) violation of Unruh Civil Rights Act and racial discrimination; (2) fraud; (3) conversion; (4) breach of fiduciary duty; (5) breach of contract; (6) breach of implied covenant of good faith and fair dealing; (7) IIED; (8) negligence; and (9) negligent hiring. Plaintiff is a 54-year-old, permanently disabled, African American man. (Compl., ¶ 2.) Plaintiff was a customer and client of LBS. (Ibid.) On 10/2/13, plaintiff went to LBS’s Lakewood branch to deposit a check for $12,495.47. (Id., ¶ 7.) Plaintiff alleges that he asked for $10,000.00 to be given to him in cash, but that LBS’s employee attempted to give him only $9,000.00 after representing that it was $10,000.00. (Id., ¶¶ 8-10.) Plaintiff asked the employee to re-count it, and the employee once again counted $9,000.00 instead of $10,000.00. (Id., ¶¶ 11-12.) The employees insisted that plaintiff accept the miscounted $9,000.00 as the $10,000.00 withdrawal. (Id., ¶ 13.) After the employees left and came back, plaintiff counted the money and it totaled $10,000.00. (Id., ¶ 14.) Thereafter, on 10/11/13, plaintiff discovered that $1,095.00 was missing from a checking account he had opened during the transaction at the Lakewood branch. (Id., ¶ 16.) Plaintiff learned that a cash withdrawal of $11,095.00, instead of $10,000.00, was made from the account. (Id., ¶ 17.) Plaintiff alleges that the Lakewood employees had taken the extra $1,095.00. (Ibid.) On 10/14/13, plaintiff went back to the Lakewood branch and spoke with a customer service representative. (Id., ¶ 19.) The employees denied any wrongdoing. (Id., ¶¶ 19-21.) The branch performed an audit and confirmed the existing balances as accurate. (Id., ¶¶ 21-23.) Higher level employees also performed an investigation and told plaintiff that they concluded there was no wrongdoing and that LBS would not return the funds. (Id., ¶¶ 24-26.) Plaintiff alleges that LBS authorized, ratified, or condoned the alleged theft. (Id., ¶ 31.)

ANALYSIS:

Defendant demurs to the first, fourth, and sixth causes of action in the complaint on the ground that the complaint fails to allege sufficient facts.

First Cause of Action for Violation of the Unruh Civil Rights Act (“Unruh Act”)

The Unruh Act provides that “[a]ll persons within the jurisdiction of this state are free and equal, and no matter what their sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, or sexual orientation are entitled to the full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever.” (Civ. Code, § 51(b).) Plaintiff alleges that LBS owned and operated a public business establishment. (Compl., ¶ 33.) Plaintiff alleges he was denied full and equal access to LBS’s services when the employees stole the $1,095.00, falsified financial statements, and failed to protect plaintiff’s accounts. (Id., ¶¶ 34-35.) Plaintiff alleges that LBS and the employees were motivated by plaintiff’s protected status as a permanently-disabled African American. (See id., ¶¶ 10, 12-14, 35.) Plaintiff alleges he was harmed as a result. (Id., ¶ 35.)

Defendant argues that the alleged theft “does not fit within the scope” of the Unruh Act. Defendant provides no authority to support this argument. The Unruh Act “is to be given a liberal, and not a strict, construction with a view to effect its object and to promote justice.” (Winchell v. English (1976) 62 Cal.App.3d 125, 128.) Without any authority stating that plaintiff’s claims cannot fall under the Act, defendant’s demurrer can not stand

Accordingly, defendant’s demurrer to the first cause of action is OVERRULED.

Fourth Cause of Action for Breach of Fiduciary Duty

“The elements of a cause of action for breach of fiduciary duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach.” (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086.) Defendant argues that it did not owe a fiduciary duty to plaintiff.

At least one court has found that “[t]he relationship of a bank to depositor is at least quasi-fiduciary.” (Barrett v. Bank of America (1986) 183 Cal.App.3d 1362, 1369.) Plaintiff basis his opposition on this case. However, Barrett has been criticized in later cases. (See Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465, 476 [overruled on other grounds in Riverisland Cold Storage Inc. v. Fresno-Madera Production Credit Ass’n (2013) 55 Cal.4th 1169].) The court in Price characterized the determination that the relationship between a bank and depositor is quasi-fiduciary as an “innovative assertion.” (Ibid.)

The issue in Barrett was the duty of the court to give an instruction on constructive fraud. The court noted that constructive fraud “usually arises from a breach of duty where a relation of trust and confidence exists.” [Citation.] Citing [Commercial Cotton Co. v. United California Bank (1985) 163 Cal.App.3d 551] as authority for a “quasi-fiduciary” relationship between a bank and depositor, the court found that “a similar relationship of trust and confidence exists between a bank and its loan customers ….” [Citation.]

The holdings of Commercial Cotton and Barrett are inconsistent with both past authority and current trends in the law. [Fn. omitted.] It has long been regarded as “axiomatic that the relationship between a bank and its depositor arising out of a general deposit is that of a debtor and creditor.” [Citation.] “A debt is not a trust and there is not a fiduciary relation between debtor and creditor as such.” [Citation.]

(Price, 213 Cal.App.3d at p. 476.) The court in Price looked to Lawrence v. Bank of America (1985) 163 Cal.App.3d 431, a case decided shortly before Commercial Cotton, where the court dismissed a breach of fiduciary duty cause of action brought by a plaintiff against a bank for dishonoring a check. (Price, 213 Cal.App.3d at p. 476.) The court stated, ‘[U]nder ordinary circumstances the relationship between a bank and its depositor is that of debtor-creditor, and is not a fiduciary one; and appellant has failed to allege any facts which would support a finding that a fiduciary relationship existed between appellant and any of the respondents in this case.’ ” (Id. at p. 477 [quoting Lawrence, 163 Cal.App.3d at p. 437].)

Commercial Cotton was also criticized in Copesky v. Superior Court (1991) 229 Cal.App.3d 678.

Of most concern, however, is the statement made in Commercial Cotton … that “[t]he relationship of bank to [its] depositor is at least quasi-fiduciary.” This statement is severely criticized in Price at page 476, and its assertion countered by the citation of well-established authority for the proposition that the relationship between a bank and its depositor is not a fiduciary relationship, but that of debtor-creditor. [Citations.] We note that the statement in Commercial Cotton was made without benefit of citation of authority. Presuming that the court was aware of … authorities which had established the bank-depositor relationship as merely debtor-creditor, and that the Commercial Cotton court did not purport to classify the relationship actually as “fiduciary,” we are led to a search for what might have been meant by the phrase “quasi-fiduciary.” In Garner, A Dictionary of Modern Legal Usage (1987) page 457, “quasi” is defined as “seeming or seemingly; in the nature of; nearly,” and its use demeaned by a quote from 1 Corbin on Contracts (1963 ed.) section 19, pages 45-46 that “the term quasi is introduced as a weasel word that sucks all the meaning of the word that follows it.” (Italics in original.)

We conclude both from the manner of use and the omission of any citation that when the court in Commercial Cotton used “quasi-fiduciary” it intended not to question prior authority establishing that banks in ordinary deposit relationships are not fiduciaries, but sought only a shorthand phrase to describe attributes in the relationship which are similar to some of the attributes of a true fiduciary relationship. The court was, simply, grappling with the criteria described in Egan and Seaman’s (elements of public interest, adhesion and fiduciary responsibility) for establishing “special relationship,” and noting that some contractual features of a banking relationship establish elements of reliance and trust which “seem like” or are “in the nature of” (to refer to our dictionary definition) obligations resulting from a true fiduciary relationship. [Fn. omitted.]

(Id. at pp. 692-693.) The court concluded that “Commercial Cotton’s characterization of a bank-depositor relationship as quasi-fiduciary is now inappropriate.” (Id. at p. 693.)

Plaintiff does not provide any later authority which characterized the relationship between and bank and depositor as fiduciary in nature. The bulk of the authority goes against plaintiff’s position.

Accordingly, defendant’s demurrer to the fourth cause of action is SUSTAINED.

Sixth Cause of Action for Breach of Implied Covenant of Good Faith and Fair Dealing

“In every contract there is an implied covenant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract, which means that in every contract there exists an implied covenant of good faith and fair dealing.” (Universal Sales Corp. v. California Press Mfg. Co. (1942) 20 Cal.2d 751, 771.) Tort recovery for the breach of the covenant of good faith and fair dealing had previously been sanctioned in the insurance and employment contexts. (See Copesky v. Superior Court (1991) 229 Cal.App.3d 678, 685-686.)

In Wallis v. Superior Court (1984) 160 Cal.App.3d 1109 [overruled by Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654], the court analyzed the “special relationship” needed for the tort of breach of the covenant of good faith and fair dealing. The court noted that the following characteristics must be present in the contract in order to predicate tort liability:

(1) the contract must be such that the parties are in inherently unequal bargaining positions; (2) the motivation for entering the contract must be a nonprofit motivation, i.e., to secure peace of mind, security, future protection; (3) ordinary contract damages are not adequate, because (a) they do not require the party in the superior position to account for its actions, and (b) they do not make the inferior party “whole”; (4) one party is especially vulnerable because of the type of harm it may suffer and of necessity places trust in the other party to perform; and (5) the other party is aware of this vulnerability.

(Id. at p. 1118.) Though Wallis involved the employment context, the “court’s identification of factors leading to a determination of ‘special relationship’ was not at all limited by employment concepts,” and the “‘similar characteristics’ which would signal the existence of a ‘special relationship’ could be found in almost any ‘special’ kind of commercial contractual relationship. (Copesky, supra, 229 Cal.App.3d at p. 687.)

The California Supreme Court overruled Wallis in Foley, supra, 47 Cal.3d 654. The court noted that “we are not convinced that a ‘special relationship’ analogous to that between insurer and insured should be deemed to exist in the usual employment relationship.” (Id. at p. 692.) Following Foley, the insurance context was the only context “definitively amendable to tort actions for breach of contract.” (See Copesky, supra, 229 Cal.App.3d at p. 690) However, it is unlikely that the court rejected the Wallis factors for determining a special relationship. (Id. at p. 689, fn. 10.)

The relationship between a lender and a commercial borrower has been found not to constitute a “special relationship” for the purposes of the breach of the implied covenant of good faith and fair dealing. (See, e.g., Copesky, 229 Cal.App.3d at pp. 691-694; Price, 213 Cal.App.3d at p. 478; Kim v. Sumitomo Bank (1993) 17 Cal. App. 4th 974, 979.) In dicta, the court in Copesky noted that under special circumstances, banks could undertake obligations of a special relationship with customers, outside of ordinary relationships, such as specific fiduciary services. (Copesky, 229 Cal.App.3d at p. 691, fn. 12.) Therefore, the ordinary bank-depositor relationship does not give rise to a special relationship. (Copesky, 229 Cal.App.3d at p. 694.) However, a lender may still be found to have tort liability if the Wallis characteristics are contained in the contract. (See id. at pp. 691-694 [analyzing the Wallis characteristics in order to determine that the bank-commercial borrower contract in that action did not give rise to a special relationship].)

Here, plaintiff has not alleged sufficient facts to show that the contract at issue in this action gives rise to a “special relationship” such that would impose tort liability on defendant. Plaintiff has not alleged facts which show that the contract at issue here contained the characteristics outlined in Wallis. In the opposition, plaintiff acknowledges that the allegations are not sufficient to support a tort claim. (See Opp., p. 8.)

To the extent that the sixth cause of action is based in contract, not tort, defendant is correct that it is superfluous. “If the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated. Thus, absent those limited cases where a breach of a consensual contract term is not claimed or alleged, the only justification for asserting a separate cause of action for breach of the implied covenant is to obtain a tort recovery.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.) Plaintiff’s sixth cause of action is based on the same facts as the breach of contract claim, e.g., that defendants stole $1,095.00. (See Compl., ¶¶ 60, 65-66.)

Accordingly, defendant’s demurrer to the sixth cause of action is SUSTAINED.