A.B. Concrete Coating Inc. v. Wells Fargo Bank, Nat'l Ass'n

• Decision Date: 30 September 2020
• Docket Number: No. 2:20-cv-211-EFB,2:20-cv-211-EFB
• Citation: 491 F.Supp.3d 727
• Parties: A.B. CONCRETE COATING INC., Plaintiff, v. WELLS FARGO BANK, NATIONAL ASSOCIATION; and Does 1-50, inclusive, Defendants.
• Court: U.S. District Court — Eastern District of California

491 F.Supp.3d 727

A.B. CONCRETE COATING INC., Plaintiff,

v.WELLS FARGO BANK, NATIONAL ASSOCIATION; and Does 1-50, inclusive, Defendants.

No. 2:20-cv-211-EFB

United States District Court, E.D. California.

Signed September 30, 2020

Keith D. Cable, Cable Law, APC, Folsom, CA, for Plaintiff.

Samuel R. Melamed, Severson & Werson, APC, San Francisco, CA, for Defendants.

ORDER

EDMUND F. BRENNAN, UNITED STATES MAGISTRATE JUDGE

This case is before the court on defendant Wells Fargo Bank, N.A.’s ("Wells Fargo") motion to dismiss plaintiff A.B. Concrete Coating Inc.’s complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6).¹ ECF No. 7. For the following reasons, defendant's motion is granted.²

I. Background

Plaintiff originally commenced this action in the California Superior Court for the County of Placer. ECF No. 1. The complaint alleges that in December 2018, plaintiff discovered that Amber Clark, plaintiff's former volunteer bookkeeper, had been writing company checks made payable to herself and her husband, Kai Clark. Id. ¶¶ 8-9. The Clarks allegedly forged the signature of plaintiff's owner, Brian Fenno, and then cashed the checks at various Wells Fargo branches located in Placer County, California. Id. In all, Ms. Clark cashed checks totaling $482,244,76, while her husband cashed checks totaling an additional $32,939.66. Id. In January 2019, plaintiff notified defendant that forged company checks had been cashed at its branches. Id. ¶ 10. Wells Fargo allegedly responded by informing plaintiff it should seek reimbursement from the Clarks. Id.

The complaint alleges the following eight claims: (1) conversion under California Commercial Code § 3420, (2) fraud, (3) breach of contract, (4) constructive trust, (5) breach of fiduciary duty, (6) declaratory relief, (7) preliminary and permanent injunctive relief, and (8) negligence. Id. at 9-17.

Defendant timely removed the case to this court on the basis of diversity jurisdiction. ECF No. 1. It now moves to dismiss the complaint for failure to state a claim pursuant to Rule 12(b)(6). ECF No. 7.

II. Rule 12(b)(6) ’s Standards

A complaint may be dismissed for "failure to state a claim upon which relief may be granted." Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss for failure to state a claim, a plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim has "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). The plausibility standard is not akin to a "probability requirement," but it requires more than a sheer possibility that a defendant has acted unlawfully. Iqbal , 556 U.S. at 678, 129 S.Ct. 1937.

Dismissal under Rule 12(b)(6) may be based on either: (1) lack of a cognizable legal theory, or (2) insufficient facts under a cognizable legal theory. Chubb Custom Ins. Co. , 710 F.3d at 956. Dismissal also is appropriate if the complaint alleges a fact that necessarily defeats the claim. Franklin v. Murphy , 745 F.2d 1221, 1228-1229 (9th Cir. 1984).

Pro se pleadings are held to a less-stringent standard than those drafted by lawyers. Erickson v. Pardus , 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam). However, the Court need not accept as true unreasonable inferences or conclusory legal allegations cast in the form of factual allegations. See Ileto v. Glock Inc. , 349 F.3d 1191, 1200 (9th Cir. 2003) (citing Western Mining Council v. Watt , 643 F.2d 618, 624 (9th Cir. 1981) ).

For purposes of dismissal under Rule 12(b)(6), the court generally considers only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice, and construes all well-pleaded material factual allegations in the light most favorable to the nonmoving party. Chubb Custom Ins. Co. v. Space Sys./Loral, Inc. , 710 F.3d 946, 956 (9th Cir. 2013) ; Akhtar v. Mesa , 698 F.3d 1202, 1212 (9th Cir. 2012).

III. Discussion

Defendant argues that plaintiff's complaint must be dismissed because plaintiff, a dissolved corporation, lacks the capacity to bring this action. ECF No. 7 at 4-6. Defendant further argues that dismissal is appropriate because each of plaintiff's claims are deficiently plead. Id. at 6-15.

A. Plaintiff's Capacity to Sue

Defendant's argument that a dissolved corporation lacks the capacity to bring suit is predicated on its contention that under California law a corporation may only bring an action related to winding up its affairs. According to defendant, because plaintiff's certificate of dissolution, executed prior to commencement of this action, verified that the corporation was completely wound up, California law precludes plaintiff from bringing this action. ECF No. 7 at 4-6.

A corporation's capacity to bring suit in federal court is determined "by the law under which it was organized." Fed. R. Civ. P. 17(b)(2). Under California law, a dissolved corporation "continues to exist for the purpose of winding up its affairs, prosecuting and defending actions by or against it and enabling it to collect and discharge obligations, dispose of and convey its property and collect and divide its assets, but not for the purpose of continuing business except so far as necessary for the winding up thereof." Cal. Corp. Code § 2010(a). "Thus, a corporation's dissolution is best understood not as its death, but merely as its retirement from active business." Penasquitos, Inc. v. Superior Court , 53 Cal. 3d 1180, 1190, 283 Cal.Rptr. 135, 812 P.2d 154 (1991).

Here, plaintiff filed a certificate of dissolution with the California Secretary of State in April 2019, prior to commencing this action.³ Def.’s Req. Judicial Notice (ECF No. 8), Ex. 1. As required by California law, plaintiff's certificate of dissolution verified that all known assets had been distributed and the corporation was completely wound up. Id. ; see Cal. Corp. Code § 1905(a). In light of that verification, defendant contends that plaintiff cannot reasonably claim this action is brought for the purpose of winding up the corporation's affairs. ECF No. 7 at 5. This is especially true, according to defendant, because the plaintiff knew of the alleged forgeries in December 2018, several months prior to filing its certificate of dissolution. Id.

Defendant's reliance on the verification in plaintiff's certificate of dissolution is misplaced. For a corporation to voluntarily dissolve, it is required to file with the California Secretary of State a certificate of dissolution verifying "the corporation has been fully wound up." Cal. Corp. Code § 1905(a) ; see Cal. Corp. Code § 1905.1 ("[T]he corporation shall be dissolved as of the date of filing the certificate of dissolution."). After filing a certificate of dissolution, a corporation's existence ceases "except for the limited purpose of further winding up of its affairs." Catalina Invs. Inc. v. Jones , 98 Cal. App. 4th 1, 7, 119 Cal.Rptr.2d 256 (2002) (emphasis in original). Thus, the filing of the certificate of dissolution only marked the end of plaintiff's normal business activities, not the completion of its winding-up process, as defendant contends. Indeed, the California Corporations Code specifically provides that "[a]ny assets inadvertently or otherwise omitted from the winding up continue in the dissolved corporation for the benefit of the persons entitled thereto ...." Cal. Corp. Code. § 2010(c) ; see L A Ramco Jewelry Company Inc. v. Chase Bank USA NA , 2012 WL 13013416, *3 (C.D. Cal. July 10, 2012) (rejecting argument that a dissolved corporation lacked capacity to bring suit to recover debt because the debt was not disclosed in the corporation's certificate of dissolution).

Through this action plaintiff seeks to recover damages for injuries it sustained prior to dissolution and, thus, it is part of the winding-up process. See Penasquitos , 53 Cal.3d at 1180, 283 Cal.Rptr. 135, 812 P.2d 154 (1991) ("a claim for damages based on the corporation's predissolution activities is an affair of the corporation needing to be wound up after the corporation's normal business activities have ceased. Participating in a judicial resolution of such claims is part of the winding-up process for which section 2010 expressly requires the dissolved corporation's existence to continue."). Accordingly, plaintiff has the capacity to bring this case.

B. Plaintiff's Claims

1. Conversion

Plaintiff alleges that defendant, as the collecting bank, is liable for conversion based on its acceptance and cashing of the fraudulently endorsed checks. ECF No. 1 ¶ 13. Defendant argues that plaintiff's conversion claim fails because plaintiff, as the "issuer" of the checks, is precluded from asserting a conversion claim under California Commercial Code § 3420. ECF No. 7 at 6-7.

"An instrument is ... converted if it is taken by transfer, other than a negotiation, from a person not entitled to enforce the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment." Cal. Com. Code § 3420(a). A claim for conversion of an instrument may be not be asserted by "the issuer or acceptor of the instrument ...." Cal. Com. Code § 3420(a). The California Commercial Code defines an "issuer" as the maker or drawer of the check. Cal. Com. Code 3105(c). In turn, a "drawer" is defined as the "person who signs or is identified in a [check] as a person ordering payment." Plaintiff's claim is predicated on the conversion of its company checks. ECF No. 1 ¶¶ 8-9. Accordingly, it is the issuer of the instrument and therefore may not bring a...