Grayson Servs., Inc. v. Wells Fargo Bank, No. F059773.

CourtCalifornia Court of Appeals
Writing for the CourtFRANSON, J.
Citation199 Cal.App.4th 563,131 Cal.Rptr.3d 789
Parties GRAYSON SERVICES, INC., Plaintiff and Appellant, v. WELLS FARGO BANK, Defendant and Respondent.
Docket NumberNo. F059773.
Decision Date26 September 2011

199 Cal.App.4th 563
131 Cal.Rptr.3d 789

GRAYSON SERVICES, INC., Plaintiff and Appellant,
v.
WELLS FARGO BANK, Defendant and Respondent.

No. F059773.

Court of Appeal, Fifth District, California.

Sept. 26, 2011.


Certified for Partial Publication.*

131 Cal.Rptr.3d 790

Mahaffey & Associates, Douglas L. Mahaffey, Irvine, Susan B. Ghormley and Daniel Willett for Plaintiff and Appellant.

Barton, Klugman & Oetting and Thomas E. McCurnin, Los Angeles, for Defendant and Respondent.

OPINION

FRANSON, J.

199 Cal.App.4th 565

INTRODUCTION

Based on a default judgment, a judgment creditor served a writ of execution and notice of levy on Wells Fargo Bank (Wells Fargo) in an

199 Cal.App.4th 566

attempt to obtain two certificates of deposit and related interest payments that the judgment creditor believed were the property of its judgment debtor. The certificates of deposit in question were in the possession of, and made payable to, a public entity. The accrued interest had been delivered to a

131 Cal.Rptr.3d 791

creditor with a competing levy. Consequently, Wells Fargo's memorandum of garnishee stated it had nothing to report and no certificates or funds were delivered in response to the levy. A second writ of execution and levy were served on Wells Fargo, with essentially the same response.

The judgment creditor sued Wells Fargo in a separate action alleging (1) the bank's response to the levies violated its duties under California's Enforcement of Judgments Law (EJL)1 and (2) the bank conspired with its customer and others to fraudulently transfer assets and hinder the judgment creditor's attempts to levy on those assets.

The trial court eliminated both claims at the pleading stage. First, the court sustained a demurrer to the conspiracy claim, concluding there was no allegation that a fraudulent transfer (the wrongful act underlying the conspiracy) had occurred. Later, the court granted a motion for judgment on the pleadings, concluding the claim alleging a violation of the EJL could not be pursued against a financial institution. The judgment creditor appealed.

In the published portion of this opinion, we conclude that a bank chartered as a national association is a "person" as defined in section 680.280 and, accordingly, is subject to the duties and liabilities imposed on "third person [s]" by the EJL, particularly sections 701.010 (duty of garnishee), 701.020 (liability for noncompliance with levy), and 701.030 (garnishee's memorandum).

In the unpublished portions, we conclude the allegations that Wells Fargo failed to deliver funds representing interest accrued on the certificates of deposit were sufficient to state a claim under the EJL. In addition, we conclude that the allegations in the conspiracy claim (1) were insufficient to allege a violation of the Uniform Fraudulent Transfer Act (Civ.Code, §§ 3439 –3439.12 ) and (2) failed to allege with the requisite particularity all the elements of a general fraud claim based on false representations or concealment. These allegations, however, were sufficient to allege all the elements of a claim for conversion of personal property.

Therefore, the judgment of dismissal is reversed and the matter remanded for further proceedings.

199 Cal.App.4th 567

FACTUAL AND PROCEDURAL BACKGROUND

In July 2001, Grayson Services, Inc. (Grayson) filed a complaint against New Chaparral Petroleum, Inc. (New Chaparral) in Kern Superior Court, alleging New Chaparral had not paid for oil and gas well work performed by Grayson. In February 2002, Grayson obtained a default judgment against New Chaparral for $94,115.83.

In February 2005, Grayson filed a notice of judgment lien with the California Secretary of State that listed New Chaparral as the judgment debtor. Grayson alleges it obtained a writ of execution in April 2006, which it later served, along with a notice of levy, on a Wells Fargo branch in Bakersfield, California. Wells Fargo returned the levy to the Kern County Sheriff noting in the memorandum of garnishee report there were no assets in its possession responsive to the writ of execution and levy.

In October 2007, Grayson filed a separate complaint against Wells Fargo, New

131 Cal.Rptr.3d 792

Chaparral, and Core Energy, LLC.2 The only cause of action against Wells Fargo alleged the bank had violated the EJL by failing to deliver a $150,000 certificate of deposit to the levying officer in response to Grayson's April 2006, writ of execution. Grayson later obtained a second writ of execution and served a second levy on Wells Fargo in September 2008, seeking to levy on the two certificates of deposit listed below and accrued interest. The memorandum of garnishee again reported there were no assets to report or release, but did note that $11,735 was being held in an interest account, pending further order from the Kern County Sheriff because a third party, Core Energy, was also claiming an interest in the funds.

Following successful demurrers by Wells Fargo, Grayson filed a second amended complaint in April 2009, containing two causes of action.3 The first cause of action alleged Wells Fargo violated the EJL by failing to deliver monies it held for the account of New Chaparral and failing to provide correct information in the garnishee's memorandum. The second cause of action alleged Wells Fargo participated in a conspiracy to fraudulently convey certificates of deposit and other money accounts subject to Grayson's levy to

199 Cal.App.4th 568

third parties to hinder or defeat Grayson's attempts to collect the judgment against New Chaparral. The second amended complaint is the operative pleading in this appeal.

As alleged in the second amended complaint, Wells Fargo had previously issued two certificates of deposit (CD). The first, dated April 22, 1998, referenced account 1892029489–000, and was for $100,000. That CD was issued with monies deposited by Capital Acquisition, Inc., for Chaparral Petroleum, Inc., and was payable to the California Division of Oil, Gas and Geothermal Resources (DOGGR). The CD was for a term of 12 months and stated it would automatically renew at maturity. The interest on the CD, $4,870 per year, was to be paid at maturity and credited to another account, 0900–919598, in the name of Capital Acquisition, Inc.

The second CD referenced account 1892–029547–000, was for $150,000, was dated April 10, 2000, was payable to DOGGR, and was from funds deposited by New Chaparral. The certificate was to automatically renew, with interest paid monthly with an annual return of $6,555 per year, credited to account 6867–538787, in the name of New Chaparral. The first cause of action alleges that Wells Fargo failed to honor the 2006 and 2008 levies and turn over the two CD's and accrued interest accounts to Grayson.

Wells Fargo demurrered to the second cause of action, contending Grayson's conspiracy claim failed to state a cognizable cause of action because (1) Grayson had suffered no damages, (2) the allegations state the alleged fraudulent conveyance was unsuccessful, (3) Wells Fargo's knowledge of the fraud was not pled with sufficient specificity, and (4) Grayson had failed to join indispensable parties.

131 Cal.Rptr.3d 793

In June 2009, the trial court rejected the failure to join indispensable parties argument, but sustained the demurrer to the conspiracy claim on the other three grounds, without leave to amend.

In July 2009, Wells Fargo filed a motion for judgment on the pleadings on the first cause of action for failure to comply with the EJL, asserting Grayson had suffered no damages, because the underlying judgment against New Chaparral had been satisfied and Grayson lacked standing under section 367 to assert account irregularities concerning the two CD's that were alleged to have occurred prior to the levy. The trial court granted the motion without leave to amend, concluding that Grayson's suit was barred by the satisfaction of the underlying judgment, and Grayson lacked standing to assert a claim concerning account irregularities.

In October 2009, Grayson filed a motion for new trial, asserting that its allegations were sufficient to state a claim under the EJL and the court's

199 Cal.App.4th 569
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