491 F.Supp.3d 727
E.D. Cal.2020Background
- Plaintiff A.B. Concrete Coating Inc. discovered in Dec. 2018 that its volunteer bookkeeper Amber Clark (and her husband) cashed company checks with forged endorsements at Wells Fargo branches in Placer County, totaling about $515,184.42.
- Plaintiff notified Wells Fargo in Jan. 2019; Wells Fargo allegedly told plaintiff to seek recovery from the Clarks.
- Plaintiff filed a certificate of dissolution with the California Secretary of State in Apr. 2019 (verifying the corporation was wound up) and then sued Wells Fargo in state court; defendant removed the action to federal court.
- Complaint asserts eight causes of action: conversion (Cal. Com. Code § 3420), fraud, breach of contract, constructive trust, breach of fiduciary duty, declaratory relief, injunctive relief, and negligence.
- Wells Fargo moved to dismiss under Fed. R. Civ. P. 12(b)(6), arguing (among other things) that the dissolved corporation lacks capacity and that the claims are defectively pleaded.
- The court granted the motion: the conversion claim was dismissed with prejudice; all other claims were dismissed with leave to amend (except the constructive trust claim, which was dismissed without leave to amend as an independent cause of action). Plaintiff was given 21 days to file an amended complaint.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Capacity to sue (dissolved corp.) | A.B. Concrete can sue as part of winding up predissolution claims. | Dissolution certificate verified fully wound up, so no capacity to bring suit. | Court: plaintiff has capacity; dissolution does not preclude winding-up claims or recovery of omitted assets. |
| Conversion (Cal. Com. Code § 3420) | Wells Fargo, as collecting bank, is liable for accepting/cashing forged endorsements. | A drawer/issuer (plaintiff) cannot bring a conversion claim under § 3420. | Court: conversion claim barred for issuer under California law as interpreted by Ninth Circuit (dismissed with prejudice). |
| Fraud (Rule 9(b)) | Wells Fargo knew or should have known checks were forged (large volume) and was complicit. | Allegations fail to plead who, what, when, where, how with specificity. | Court: fraud allegations inadequate under Rule 9(b); dismissed with leave to amend. |
| Breach of contract | Plaintiff alleges a written agreement requiring Wells Fargo to responsibly handle account. | Complaint fails to identify specific contract terms, formation, or obligations. | Court: breach claim inadequately pleaded; dismissed with leave to amend. |
| Constructive trust / Declaratory / Injunctive relief | Requests independent causes of action for these remedies. | These are remedies, not standalone causes of action. | Court: constructive trust is a remedy (dismissed as independent cause without leave); declaratory and injunctive relief not independent causes and dismissed (may be sought as remedies in amended complaint). |
| Breach of fiduciary duty | Bank owed quasi-fiduciary duties to plaintiff. | Relationship between bank and depositor is contractual, not fiduciary. | Court: no fiduciary relationship established; claim dismissed with leave to amend. |
| Negligence | Wells Fargo negligently breached duties of care to plaintiff. | Complaint fails to plead any duty or factual basis for negligence. | Court: negligence claim inadequately pleaded; dismissed with leave to amend. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim).
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standards require factual content plausibly showing liability).
- Penasquitos, Inc. v. Superior Court, 53 Cal. 3d 1180 (1991) (dissolved corporation continues to exist to wind up affairs, including litigation of predissolution claims).
- Lewis v. Telephone Employees Credit Union, 87 F.3d 1537 (9th Cir. 1996) (drawer/issuer may not maintain conversion claim against collecting bank).
- Sehremelis v. Farmers & Merchant Bank, 6 Cal. App. 4th 767 (1992) (distinguishing payee and drawer rights against collecting banks).
- Tedesco v. Crocker Nat’l Bank, 148 Cal. App. 3d 1211 (1983) (earlier authority on collecting-bank liability; court declined to follow in light of later authorities).
- Mattel, Inc. v. MGA Entm’t, Inc., 616 F.3d 904 (9th Cir. 2010) (constructive trust is an equitable remedy, not an independent cause).
- In re Daou Sys., Inc., 411 F.3d 1006 (9th Cir. 2005) (leave to amend required unless amendment would be futile).
- Intri-Plex Techs., Inc. v. Crest Grp., Inc., 499 F.3d 1048 (9th Cir. 2007) (leave to amend may be denied if amendment is futile).
- Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149 (9th Cir. 1989) (denial of leave to amend where amendment would be futile).
- Copesky v. Superior Court, 229 Cal. App. 3d 678 (1991) (banks are not fiduciaries for depositors).
- Catalina Inv’rs, Inc. v. Jones, 98 Cal. App. 4th 1 (2002) (dissolution leaves corporation in existence solely for winding-up of affairs).