Hashim v. Cohen

• Decision Date: 28 February 2023
• Docket Number: A161478
• Parties: AARON HASHIM et al., Plaintiffs and Appellants, v. MALIA M. COHEN, as State Controller, etc., et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

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AARON HASHIM et al., Plaintiffs and Appellants, v. MALIA M. COHEN, as State Controller, etc., et al., Defendants and Respondents.

A161478

California Court of Appeals, First District, Fourth Division

February 28, 2023

NOT TO BE PUBLISHED

(San Francisco City &County Super. Ct. No. CGC-13-531294)

BROWN J.

Plaintiffs filed this purported class action lawsuit in 2013, alleging that the State Controller^[1] (the Controller or defendant) violated their constitutional rights with respect to property governed by the Unclaimed Property Law (UPL) (Code Civ Proc.^[2], § 1500 et seq.). Among other allegations, they asserted causes of action under 42 United States Code section 1983 claiming that the Controller violated their rights under the takings and due process clauses of the United States Constitution.

After many years of litigation, the trial court sustained defendant's demurrer to plaintiffs' third amended complaint without leave to amend and entered the judgment at issue. Because plaintiffs have failed to satisfy their burden of demonstrating reversible error, we affirm.

BACKGROUND

Plaintiffs' lawsuit stems from the Controller's allegedly unconstitutional treatment of plaintiffs' property under the UPL. Plaintiffs alleged that they were the owners of certain unclaimed property-specifically, money in an amount less than $50. Plaintiffs also alleged that the Controller does not request owneridentifying information for unclaimed property with a value of less than $50, violating the UPL and effecting a permanent deprivation and taking of their property without constitutional "Mullane-style"^[3] notice. They asserted causes of action for: (1) declaratory relief; (2) deprivation of the constitutional right to procedural due process in violation of 42 United States Code section 1983^[4]; (3) unconstitutional taking of personal property in violation of 42 United States Code section 1983; (4) violation of the UPL; and (5) breach of fiduciary duty. The court sustained a demurrer with leave to amend as to plaintiffs' first, second, and fourth causes of action and without leave to amend as to their third and fifth causes of action.

Plaintiffs filed a first amended complaint, then a second amended complaint following defendant's successful demurrer and motion to strike.

The court sustained defendant's demurrer to plaintiffs' second amended complaint without leave to amend on the claim that the Controller violated the UPL by failing to request identifying information for owners of unclaimed property valued at less than $50. The court granted plaintiffs leave to amend their remaining claims for declaratory relief and deprivation of procedural due process under 42 United States Code section 1983. With respect to the latter claim, the court found that plaintiffs could not state a claim against the Controller individually due to the doctrine of qualified immunity, but it granted plaintiffs leave to amend as they "may be able to amend the [second amended complaint] to state a cause of action against the State directly to the extent they seek damages equal to the amount of the property held in trust only or an injunction."

Plaintiffs filed a third amended complaint (TAC) in December 2014 against the Controller in his official capacity, alleging claims for declaratory relief and deprivation of procedural due process in violation of 42 United States Code section 1983. Defendant demurred to the TAC and moved to strike it for noncompliance with the order allowing plaintiffs leave to amend. The trial court granted defendant's motion to strike and ruled that the demurrer was moot. In an unpublished opinion, this court reversed the judgment that followed the trial court's grant of defendant's motion to strike, but we did not pass on the merits of defendant's demurrer to the TAC in light of the trial court's ruling that the demurrer was moot. (Hashim v. Yee (Sept. 4, 2019, A147670) [nonpub.].)

On remand, defendant demurred to the TAC. Prior to the demurrer hearing, plaintiffs filed a motion for a temporary restraining order (TRO) and preliminary injunction. The trial court denied plaintiffs' motion and it subsequently sustained defendant's demurrer without leave to amend. In its order sustaining the demurrer, the court reviewed federal decisions in similar litigation initiated by plaintiffs' counsel challenging the constitutionality of the UPL (the Taylor decisions discussed, post), and it found that the claims in the TAC had been previously rejected in its own prior decisions and those of the Ninth Circuit. Plaintiffs timely appealed from the subsequent judgment.

DISCUSSION

As best we can glean from plaintiffs' briefing, plaintiffs seek to challenge the trial court's rulings that they did not state a claim under 42 United States Code section 1983 for violations of the takings and due process clauses of the United States Constitution.^[5]

"Our standard of review is well established. We accept as true the well-pleaded allegations in the operative complaint. [Citation.] '"' "We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed." [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.]'" [Citation.] We likewise accept facts that are reasonably implied or may be inferred from the complaint's express allegations. [Citations.]"' "A demurrer tests the legal sufficiency of the complaint ...." [Citations.] On appeal from a dismissal after an order sustaining a demurrer we review the order de novo, exercising our independent judgment about whether the complaint states a cause of action as a matter of law.'" '" (Amiodarone Cases (2022) 84 Cal.App.5th 1091, 1100.)

"Although our review is de novo, it is plaintiffs' burden to affirmatively demonstrate that [a ruling on] demurrer was erroneously sustained as a matter of law, which means that plaintiffs must show that they pleaded facts sufficient to establish each element of each cause of action." (Amiodarone Cases, supra, 84 Cal.App.5th at pp. 1100-1101.)

A. The UPL

Because this lawsuit involves the UPL, we begin with a discussion of that statutory scheme." 'The UPL establishes the conditions under which certain unclaimed personal property escheats to the state. The UPL is not a permanent or "true" escheat statute. Instead, it gives the state custody and use of unclaimed property until such time as the owner claims it. Its dual objectives are "to protect unknown owners by locating them and restoring their property to them and to give the state rather than the holders of unclaimed property the benefit of the use of it, most of which experience shows will never be claimed." '" (Azure Limited v. I-Flow Corp. (2009) 46 Cal.4th 1323, 1328.)

Title to certain categories of unclaimed property escheats to the state when the conditions of non-use specified by statute occur. (See, e.g., §§ 1300, subd. (c), 1510-1511, 1513-1520.) Prior to escheat, and subject to an exception not relevant here^[6], the holder of certain properties "shall make reasonable efforts" to notify property owners by mail, or, if the owner has consented to electronic notice, electronically, that the owner's property will escheat. (§§ 1513.5, subds. (a)-(c) [notice for property valued at $50 or more for deposit, account, shares, or other interest in banking or financial organization]; 1514, subds. (a), (b) [notice for safe deposit box or repository]; 1516, subds. (a), (b), (d) [notice for dividends and securities]; 1520, subds. (a), (b) [notice for tangible and other intangible personal property valued at $50 or more].)

The holder of property must also report to the Controller "the name, if known, and last known address, if any, of each person appearing from the records of the holder to be the owner of any property of value of at least twenty-five dollars ($25) escheated under this chapter." (§ 1530, subd. (b)(2).)^[7] The statute mandates specific dates, depending on the property's classification, by which a holder must report the escheated property to the Controller. (§ 1530, subd. (d).)

After the holder has reported the property under section 1530, but before the property is given to the Controller, "[t]he Controller shall mail a notice to each person having an address listed in the report who appears to be entitled to property of the value of fifty dollars ($50) or more escheated under this chapter." (§ 1531, subd. (b).)^[8] The Controller's notice must state that property is being held, name the addressee who may be entitled to it, and give the name and address of the holder. (§ 1531, subd. (c).) The notice must also include "[a] statement that, if satisfactory proof of claim is not presented by the owner to the holder by the date specified in the notice, the property will be placed in the custody of the Controller and may be sold or destroyed pursuant to this chapter, and all further claims concerning the property or, if sold, the net proceeds of its sale, must be directed to the Controller." (§ 1531, subd. (c)(3).)

If the owner fails to timely establish his or her right to receive any property specified in the section 1530 report to the satisfaction of the holder, then the property must be transferred to the Controller in the time specified by the statute. (§ 1532, subds. (a)-(b).) As noted, the transferred property does not "permanently escheat to the state." (§ 1501.5, subd. (a).) Rather, the Controller assumes custody of the property, and the owner" 'may file a claim to the property or to the net proceeds from its sale.'" (Azure Limited v I-Flow Corp., supra, 46 Cal.4th at p. 1330; see...