Dark Hall Productions
v. Bank of America>











Filed 12/13/12
Dark Hall Productions v. Bank of America CA2/2







>NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS





California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b). This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.





IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND
APPELLATE DISTRICT

DIVISION
TWO


>

DARK HALL PRODUCTIONS, LLC et al., Plaintiffs and Appellants, v. BANK OF AMERICA, N.A., Defendant and Respondent.

B235831 (Los Angeles County Super. Ct. No. BC395825)

APPEAL
from a judgment of the Superior Court
of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Los Angeles
County. Kevin C.
Brazile, Judge. Affirmed.



The
Law Office of Jason B. Cruz and Jason Cruz; Lynch Cox Gilman & Goodman and
Donald L. Cox for Plaintiffs and Appellants.



Reed
Smith, Margaret M. Grignon, Scott H. Jacobs, and Brandon W. Corbridge for
Defendant and Respondent.







Plaintiffs
and appellants Dark Hall Productions, LLC (Dark Hall) and Matthew Arnold
(Arnold) (collectively plaintiffs) appeal from the judgment entered in favor of
defendant and respondent Bank of America, N.A. (BOA) after the trial court
granted BOA’s motion to strike, without leave to amend, certain causes of
action in plaintiffs’ fourth amended complaint (4AC) and sustained, without
leave to amend, BOA’s demurrer as to the remaining causes of action. We affirm the judgment.

>BACKGROUND

1. The original complaint and
first amended complaint

Plaintiffs
filed their original complaint on August
5, 2008, alleging a single cause of action for negligence based on
BOA’s alleged improper transfer of $1,945,000 to Sun Jee Yoo (Yoo) from a joint
account Arnold had opened with Yoo
at BOA. Before BOA filed its answer,
plaintiffs filed a first amended
complaint, which, like the original complaint, alleged a single negligence
claim based on Yoo’s unauthorized withdrawal of funds.

2. The second amended complaint

Plaintiffs
filed a second amended complaint on October
14, 2008. The second amended
complaint, like its predecessors, alleged a single cause of action for
negligence. It set forth the following
factual allegations: On July 31, 2007, Arnold and Yoo visited
a BOA branch to open a bank account “for business purposes” related to a
venture involving Dark Hall. Arnold and
Yoo asked that the account be established to require the approval of both of
them before any funds could be withdrawn from the account. The BOA agent opened a joint savings account
for Arnold and Yoo and input instructions in the account notes stating that
“‘[t]wo signers must be present [in
order] to make any withdrawals’” and “‘[c]hecks must have two signatures in order to negotiate them.’” The account was opened with a cashier’s
check, issued by Dark Horse, in the amount of $1,945,000. On August
22, 2007, Yoo transferred the entire sum of $1,945,000 from the
joint account to another BOA account without Arnold’s
approval or signature.

>3.
BOA’s motion for judgment on the pleadings and motion for summary
judgment

BOA filed a motion for judgment on
the pleadings, arguing that the second amended complaint failed to state a
claim for negligence because that claim was displaced by the California Uniform
Commercial Code (hereafter Commercial Code).
In addition, BOA filed a motion for summary judgment, in which it argued
that the deposit agreement and signature card signed by Arnold and Yoo
expressly excluded any obligation on BOA’s part to require two signatures for a
withdrawal or a funds transfer. BOA accordingly
argued that it had not acted negligently by permitting Yoo to transfer funds
without Arnold’s signature.

4. Hearing on BOA’s motion for
judgment on the pleadings

At
the January 18, 2011
hearing on the motion for judgment on the pleadings, the trial court issued a
tentative ruling in BOA’s favor, on the ground that plaintiffs’ sole cause of
action for negligence was displaced by the Commercial Code. In response, plaintiffs argued that the
tentative ruling addressed only one of three relevant time periods pertaining
to the subject bank account, namely operation of the account. Plaintiffs maintained that two additional
time periods were at issue—opening the account and closing the account, and
that the Commercial Code did not displace their claims with respect to these
two time periods. Plaintiffs claimed to
have recently obtained a document in discovery concerning BOA’s account closing
procedures and that they intended “to amend the complaint based on this third
portion of time.”

The
trial court responded by stating it could not consider documents outside of the
pleadings. The court, however, asked
plaintiffs: “Do you think you can amend
the complaint? Is that what you are
arguing?” Plaintiffs affirmed that they
wished “to file a motion to amend” based on “this third period of time,”
arguing that the Commercial Code “deals with transferring negotiable
instruments” and not “closing an account.”

When
the trial court asked BOA to address plaintiffs’ request for leave to amend,
BOA’s counsel responded: “I don’t have a
problem with that. We’ll meet whatever
issues they want to raise.” The trial
court then granted BOA’s motion for judgment on the pleadings but accorded
plaintiffs 20 days leave to amend.

5. Third amended complaint

Plaintiffs
filed a third amended complaint concurrently with their opposition to BOA’s
motion for summary judgment. The third
amended complaint asserted 15 causes of action:
(1) Negligence in opening the account; (2) negligence in operating the
account; (3) negligence in closing the account; (4) negligence under the
Commercial Code; (5) breach of contract; (6) negligent misrepresentation under
the Commercial Code; (7) intentional misrepresentation; (8) misrepresentation
pursuant to section 552c of the Restatement Second of Torts; (9) bad faith
under the Commercial Code; (10) promissory estoppel; (11) negligent
supervision/negligent training; (12) aiding and abetting breach of fiduciary
duties; (13) violation of section 11-203 of the Commercial Code; (14) bad faith
denial of the existence of contract; and (15) breach of the duty of good faith
and fair dealing. Plaintiffs opposed
BOA’s summary judgment motion, in part, on the ground that the third amended
complaint rendered the motion moot.

At
the February 16, 2011 hearing
on BOA’s motion for summary judgment, the trial court took the motion “off
calendar” in light of the third amended complaint. The trial court noted that the third amended
complaint “went beyond what the court allowed in terms of the amendment” and
told plaintiffs “you were granted leave to amend as to the one cause of action
and then there were all these additional cause[s] of action brought in
. . . . You exceeded the
scope of what my order was in terms of what you can do.” The court then advised plaintiffs to “[f]ile
a motion to amend the complaint to bring in those new causes of action and
establish, under the rules, why . . . you hadn’t brought them
before.”

6. Plaintiffs’ motion for leave
to file the third amended complaint and BOA’s motion to strike

Plaintiffs
brought a motion for leave to file the third amended complaint on March 9, 2011. In support of their motion, plaintiffs relied
on BOA’s late production of its account closing policies, as well as href="http://www.fearnotlaw.com/">deposition testimony, elicited in January
2011, that at the time the BOA agent entered instructions into the account
notes requiring both Arnold’s and Yoo’s signatures for account withdrawals, BOA
knew it would not enforce that requirement.

BOA
opposed plaintiffs’ motion for leave to file the third amended complaint and
filed a motion to strike the third amended complaint. In its opposition, BOA argued that the
allegedly late disclosure of its account closing procedures could explain
plaintiffs’ delay in asserting only the first three causes of action in the
third amended complaint—negligence in opening, operating, and closing the
account. BOA further argued that
plaintiffs had presented no justification for their delay in asserting 12 new
causes of action. BOA pointed out that
the January 2011 deposition testimony cited by plaintiffs as justification for
their intentional misrepresentation claim was simply a reiteration of testimony
given by the same witness at a prior deposition in October 2009. Finally, BOA argued that allowing plaintiffs
to file the third amended complaint would result in significant prejudice. BOA noted that the only damages plaintiffs
had sought to recover in all previous iterations of their complaint were the
costs incurred in a related action against Yoo.
In their third amended complaint, plaintiffs were seeking by their new
causes of action to recover punitive damages and interest on the allegedly
unauthorized $1,945,000 funds transfer.
BOA argued that it would suffer prejudice if plaintiffs were allowed to
file the third amended complaint because BOA’s entire defense strategy had been
premised on a single cause of action for negligence, and for which the only
relief sought was recovery of costs incurred in the action against Yoo.

Plaintiffs’
motion for leave to file the third amended complaint and BOA’s motion to strike
were both heard on April 13, 2011. The trial court granted BOA’s motion to
strike, noting that “the added causes of action exceed the scope of the leave
contemplated by this Court when it granted that leave. Although Plaintiff does add new causes of
action to clarify the negligence cause of action, the additional causes of
action concerning misrepresentations, breach of contract, bad faith, and aiding
and abetting the breach of fiduciary duties cannot be considered to be within
the purview of the leave to amend a single cause of action for negligence.”

With
regard to the motion for leave to amend, the trial court concluded that
plaintiffs had failed to demonstrate when the facts giving rise to the amended
allegations were discovered and why their request to add the new causes of
action had not been made earlier. The
court rejected plaintiffs’ argument that recent deposition testimony supported
the new allegations, based on the court’s review of that testimony and its
determination that it was duplicative of testimony given by the same witness in
October 2009. The trial court further
determined that the BOA account closing procedures plaintiffs had recently obtained
“would not support the addition of the numerous other causes of action,
including allegations of fraud, aiding and abetting, etc.” The trial court denied plaintiffs’ motion,
without prejudice, and noted that “[p]laintiffs may still file a third amended
complaint that complies with the leave granted by this Court, and the
allegations of negligence are within the scope of that leave.”

7. Fourth amended complaint

Plaintiffs
filed a fourth amended complaint on May 10, 2011. The fourth amended complaint set forth the
following factual allegations: Arnold
and Yoo opened the subject account with instructions that no withdrawals could
be made without both providing their authorizations. Notes were placed on the account stating that
Arnold and Yoo must be present in order to make any withdrawals and both their
signatures must be on checks in order to negotiate them. After the account was opened, Yoo, without
Arnold’s signature or authorization, withdrew the entire amount and transferred
the funds to another account. BOA’s
procedures required a review of the “notations/instruction/warnings” on the
account before completing any transaction, including a withdrawal or the
closing of the account, and BOA failed to properly train and supervise its
employees with respect to these policies.
BOA had a duty under the Commercial Code to properly process
transactions on the account, and BOA violated this duty by processing an
account transfer that it knew was not authorized.

Based
on these allegations, the fourth amended complaint asserted six causes of
action: (1) negligence in opening the
account; (2) negligence in operating the account; (3) negligence in closing the
account; (4) negligence under the Commercial Code; (5) negligent
misrepresentation; and (6) negligent supervision/negligent training. As to each cause of action, plaintiffs
alleged they were forced to incur attorney fees in their efforts to recover the
$1,945,000 withdrawn by Yoo. Plaintiffs
also prayed for interest on the $1,945,000 at the maximum legal rate for the
period of time the funds were improperly withheld.

8. BOA’s demurrer and motion to
strike

BOA
filed a demurrer and motion to strike the fourth amended complaint. The demurrer challenged all six causes of
action on the ground that all were displaced by division 11 of the Commercial
Code, as the gravamen of each claim was that BOA had acted negligently in
executing the unauthorized funds transfer requested by Yoo. BOA’s motion to strike challenged the causes
of action for negligent misrepresentation, negligent violation of the
Commercial Code, and negligent supervision/training on the ground that addition
of these claims exceeded the scope of the amendment allowed by the trial court.

The
trial court granted BOA’s motion to strike, noting that it had expressly
excluded any claim for “misrepresentations”
when it had granted the previous motion to strike the third amended
complaint. The court determined that the
cause of action for negligence under the Commercial Code was not an allegation
of negligence, but an attempt to plead a statutory violation. The trial court further determined that
allegations concerning negligent hiring and supervision were an “attempt to
allege negligence of an entirely different character and scope than were
originally contained within the complaint and that were contemplated when leave
[to amend] was granted.”

The
trial court also sustained BOA’s demurrer to the causes of action for
negligence in opening, operating, and closing the account on the ground that
each claim was preempted by division 11 of the Commercial Code.

The
trial court granted the motion to strike and sustained the demurrer without
leave to amend, reasoning that plaintiffs had failed to show how the negligence
causes of action could be amended so that they would not be preempted by the
Commercial Code. An order of dismissal
and judgment in favor of BOA were subsequently entered, and this appeal
followed.

>DISCUSSION

I. Standard of review

“On appeal from a judgment dismissing an action after
sustaining a demurrer without leave to amend, the standard of review is well
settled. The reviewing court gives the
complaint a reasonable interpretation, and treats the demurrer as admitting all
material facts properly pleaded.
[Citations.] The court does not,
however, assume the truth of contentions, deductions or conclusions of
law. [Citation.] The judgment must be affirmed ‘if any one of
the several grounds of demurrer is well taken.
[Citations.]’ [Citation.] However, it is error for a trial court to
sustain a demurrer when the plaintiff has stated a cause of action under any
possible legal theory. [Citation.]
And it is an abuse of discretion to sustain a demurrer without leave to
amend if the plaintiff shows there is a reasonable possibility any defect
identified by the defendant can be cured by amendment. [Citation.]”
(Aubry v. Tri-City Hospital Dist. (1992)
2 Cal.4th 962, 966–967.) The legal
sufficiency of the complaint is reviewed de novo. (Montclair
Parkowners Assn. v. City of Montclair (1999) 76 Cal.App.4th 784, 790.)

We
review the trial court’s decision to strike an improper pleading under Code of
Civil Procedure section 436 and its denial of leave to amend under the abuse of
discretion standard. (>Leader v. Health Industries of America, Inc.
(2001) 89 Cal.App.4th 603, 612 [order striking pleading]; >Branick v. Downey Savings & Loan Assn. (2006)
39 Cal.4th 235, 242 [denial of leave to amend].)

>II.
Motion to strike and denial of leave to file third amended complaint

“Following an order sustaining a
demurrer or a motion for judgment on the pleadings with leave to amend, the
plaintiff may amend his or her complaint only as authorized by the court’s order. [Citation.]”
(Harris v. Wachovia Mortgage, FSB (2010)
185 Cal.App.4th 1018, 1023 (Harris).) Under these circumstances, “such granting of
leave to amend must be construed as permission to the pleader to amend the
cause of action which he pleaded in the pleading to which the demurrer has been
sustained.” (People ex rel. Dept. of Pub. Wks. v. Clausen (1967) 248 Cal.App.2d
770, 785–786.) A “plaintiff may not
amend the complaint to add a new cause of action without having obtained
permission to do so, unless the new cause of action is within the scope of the
order granting leave to amend.
[Citation.]” (>Harris, supra, at p. 1023.) An amended complaint that exceeds the scope
of an order granting leave to amend may be stricken by a trial court in its own
discretion or upon a motion to strike by the opposing party. (Code Civ. Proc., §§ 435, 436.)

To
obtain leave of court to add new causes of action, a noticed motion is
generally required. (Code Civ. Proc., §
473, subd. (a)(1).) A motion for leave
to amend must be supported by a declaration specifying the effect of the
amendment, why the amendment is necessary and proper, when the facts giving
rise to the amended allegations were discovered, and reasons why the request
for amendment was not made earlier.
(Cal. Rules of Court, rule 3.1324.)
“[A] long unexcused delay is sufficient to uphold a trial judge’s
decision to deny the opportunity to amend pleadings, particularly where the new
amendment would interject a new issue which requires further discovery. [Citation.]”
(Green v. Rancho Santa Margarita
Mortgage Co. (1994) 28 Cal.App.4th 686, 692; Rainer v. Community Memorial Hosp. (1971) 18 Cal.App.3d 240,
258.) “Unwarranted delay, without more
can be a valid reason for denying a motion to amend [citation].” (Englert
v. IVAC Corp. (1979) 92 Cal.App.3d 178, 190.) Delay coupled with prejudice to the opposing
party may compel such denial. (>Magpali v. Farmers Group, Inc. (1996) 48
Cal.App.4th 471, 487.)

Plaintiffs
contend the 14 new causes of action in their third amended complaint came
within the scope of the order granting them leave to amend because the trial
court’s ruling on BOA’s motion for judgment on the pleadings did not limit the
scope of the leave to amend. They
maintain that “[o]nly later did the Trial Court limit that scope to negligence
claims.” The record does not support
plaintiffs’ version of events.

At
the January 11, 2011 hearing on BOA’s motion for judgment on the pleadings,
plaintiffs did not request leave to amend their second amended complaint to add
new causes of action or theories of recovery, and the trial court did not
accord them such unlimited leave to amend.
Discussion at that hearing concerning leave to amend was limited to
BOA’s alleged negligence in opening and closing the subject bank account and
why such a negligence claim was not barred by the Commercial Code. It is evident from the context of those
discussions that the parties and the trial court understood that the scope of
leave to amend encompassed only plaintiffs’ existing negligence claim. Plaintiffs’ argument that BOA waived any
objection to the third amended complaint is therefore unsupported by the
record. Because plaintiffs exceeded the
scope of the leave to amend, the trial court did not abuse its discretion by
granting BOA’s motion to strike the third amended complaint. (Code Civ. Proc., § 435, subd. (b).)

The
trial court’s denial of leave to file the third amended complaint was also not
an abuse of discretion. There is ample
support in the record for the trial court’s determination that plaintiffs
failed to justify the two and one-half year delay in seeking leave to assert 14
new causes of action. Plaintiffs’
explanation for the delay—BOA’s late disclosure of its account closure policy
“revealing [three] separate time periods” applies only to the three causes of
action for negligence in opening, operating, and closing the subject
account. The BOA account closure policy
did not support the addition of plaintiffs’ numerous other claims for fraud,
intentional misrepresentation, aiding and abetting breach of fiduciary duty,
and breach of the duty of good faith and fair dealing. As support for these claims, plaintiffs
relied on the January 2011 deposition testimony of a BOA witness, but that
testimony was duplicative of testimony given by the same witness nearly two
years earlier in October 2009.
Plaintiffs’ proffered reasons did not explain their belated assertion of
11 of the 14 additional causes of action.

The
record also supports the trial court’s finding that allowing plaintiffs such an
expansive and extensive revision of the allegations in the case would prejudice
BOA. BOA adopted a defense strategy
premised on plaintiffs’ assertion of a single cause of action for negligence
and for which the sole remedy sought was the recovery of attorney fees in a
related action against Yoo. Plaintiffs
sought to add new causes of action which sought to substantially expand BOA’s
potential liability to include punitive damages.

The
trial court’s denial of the motion for leave to file the third amended
complaint was not abuse of discretion.

>III.
Demurrer and motion to strike fourth amended complaint

A. Motion to strike

When
granting the motion to strike the third amended complaint, the trial court made
clear that it had accorded plaintiffs leave to amend only the single cause of
action for negligence they had initially asserted. The trial court expressly found that
additional causes of action “concerning misrepresentations, breach of contract,
bad faith, and aiding and abetting the breach of fiduciary duties cannot be
considered to be within the purview of the leave to amend a single cause of
action for negligence.” The trial court
reiterated the limited scope of plaintiffs’ leave to amend in the ruling
denying, without prejudice, plaintiffs’ motion for leave to file the third
amended complaint: “Plaintiffs may still
file a third amended complaint that complies with the leave granted by this
Court, and the allegations of negligence are within the scope of that leave.”

Despite
these admonitions, plaintiffs filed a fourth
amended complaint that exceeded the scope of the trial court’s orders by
purporting to assert claims for violation of the Commercial Code,
misrepresentation, and negligent hiring and supervision. The trial court struck the first two claims
as outside the scope of its previously granted leave to amend, and struck the
third claim for negligent hiring and supervision as an “attempt to allege
negligence of an entirely different character and scope than were originally
contained within the complaint” and thus outside the scope contemplated when
leave to amend was granted. The trial
court did not abuse its discretion by granting BOA’s motion to strike these causes
of action.

B. Demurrer

The
issue presented in the demurrer to the fourth amended complaint is whether the
Commercial Code displaces plaintiffs’ remaining causes of action for
negligence. The Commercial Code
displaces common law claims when the code provisions are intended to be the
exclusive means for determining the rights, duties and liabilities of the
affected parties in a given transaction.
(Zengen, Inc. v. Comerica Bank (2007)
41 Cal.4th 239, 252 (Zengen).)

In
Zengen, the California Supreme Court addressed the displacement of common
law claims based on an allegedly unauthorized funds transfer under division 11
of the Commercial Code. In that case, a
company’s chief financial officer (CFO) embezzled $4.6 million by directing
fraudulent funds transfers from the company’s bank accounts to an account he
controlled. (Zengen, supra, 41 Cal.4th at p. 243.) The company sued the bank under various
common law theories, including negligence in permitting the CFO to make the
funds transfers without proper authorization.
The company alleged that when it opened the accounts, its chief
executive officer (CEO) and CFO executed a business signature card and a funds
transfer authorization agreement requiring the authorization of both the CEO
and CFO for any funds transfer greater than $50,000. (Id. at
p. 244.) During the ensuing two years,
the bank processed four payment orders to transfer funds from the company’s
accounts to an account controlled solely by the CFO. (Id. at
p. 245.) Although the payment orders
appeared to have been signed by the CEO, they had been fraudulently executed by
the CFO alone. (Ibid.) After the CFO
absconded with the embezzled funds, the company sued the bank, claiming it was
liable for the $4.6 million loss because it should not have accepted the
unauthorized payment orders. (>Id. at p. 246.)

The
Supreme Court framed as the issue “whether a cause of action under the
California Uniform Commercial Code displaces other common law causes of action
such that the company must recover from the bank under the [Commercial] Code or
not at all.” The court concluded: “Because the [Commercial] Code provides
detailed rules and procedures concerning funds transfers that squarely cover
the transactions at issue, we conclude that the [Commercial] Code does displace
common law causes of action.” (>Zengen, supra, 41 Cal.4th at p.
244.) In support of its conclusion, the
Supreme Court noted that division 11 of the Commercial Code provides “‘a
detailed scheme for analyzing the rights, duties and liabilities of banks and
their customers in connection with the authorization and verification of
payment orders. Analysis of a funds
transfer under these sections results in a determination of whether or not the
funds transfer was “authorized,” and provides a very specific scheme for
allocation of loss.’” (>Zengen, supra, at pp. 251–252.)href="#_ftn1" name="_ftnref1" title="">^[1] The court also quoted the Code Comment to
division 11 of the Commercial Code, which provides in part as follows:

“‘Funds transfers
involve competing interests—those of the banks that provide funds transfer
services and the commercial and financial organizations that use the services,
as well as the public interest. These
competing interests were represented in the drafting process and they were
thoroughly considered. >The rules that emerged represent a
careful and delicate balancing of those interests and are intended to be the exclusive means of determining the rights,
duties and liabilities of the affected parties in any situation covered by particular provisions of the
Article. Consequently, resort to principles of law or equity outside of Article
4A [i.e., division 11] is not
appropriate to create rights, duties, and liabilities inconsistent with those
stated in this Article.’ (Code Com.,
reprinted at 23D West’s Ann. Cal. U. Com. Code (2002) foll. §§ 11102, pp.
27–28, italics added.)”



(Zengen, supra, 41 Cal.4th at p. 252.)



The court further
noted that “this Code Comment is persuasive in interpreting” division 11
because “in enacting division 11, the Legislature adopted article 4A of the
Uniform Commercial Code exactly as written.”
(Zengen, supra, 41 Cal.4th at
p. 248.)

In
light of the Legislature’s express intent to fully occupy the field, the
Supreme Court held that “‘division 11 provides that common law causes of action
based on allegedly unauthorized funds transfers are preempted in two specific
areas: (1) where the common law claims
would create rights, duties, or liabilities inconsistent with division 11;
and (2) where the circumstances giving rise to the common law claims are
specifically covered by the provisions of division 11.’” (Zengen,
supra, 41 Cal.4th at
p. 253.) The Supreme Court
concluded that because the gravamen of each of the company’s causes of action
in Zengen was the bank’s acceptance
and execution of an unauthorized funds transfer, those causes of action were
preempted by division 11 of the Commercial Code. (Zengen,
supra, at p. 250.)

Here,
as in Zengen, the gravamen of each of
plaintiffs’ causes of action against BOA is the execution of an unauthorized
funds transfer. In their first cause of
action for common law negligence in opening the account, plaintiffs allege that
BOA “knew or should have known that failure to exercise their duty of care
would allow funds to be withdrawn contrary to the terms of the parties’
specifications, i.e., on less than the required number of authorizations.”

Plaintiffs
similarly allege in their second cause of action for common law negligence in
operating the account that BOA “negligently and in violation of their duties
permitted [Yoo] to withdraw the entire $1,945,000 amount when [BOA] had actual
notice not to permit any withdrawal on less than the required number of
signatures. [BOA] also failed to observe
and exercise ordinary care in operating, managing, and controlling the
Account’s withdrawal procedures as to permit and facilitate [Yoo’s]
misappropriation.”

In
their third cause of action for common law negligence in closing the account,
plaintiffs allege that “[t]he actions of BOA . . . in closing
the account as they allowed the withdrawal of all the funds in the account
despite the fact that no Account activity was permitted without the presence of
both [Arnold] and [Yoo], constitute common law negligence.”

In
all three causes of action, plaintiffs’ claimed damages are the result of the
allegedly unauthorized funds transfer, causing them to incur attorney fees in
efforts to recover the $1,945,000 withdrawn by Yoo. Because the gravamen of each cause of action
is an unauthorized funds transfer, each cause of action is displaced by the
Commercial Code as a matter of law. (>Zengen, supra, 41 Cal.4th at p. 250.)

Plaintiffs’
attempt to distinguish the Supreme Court’s holding in Zengen by relying on case authority from other jurisdictions or on
cases that predate Zengen is not
persuasive. (See, e.g., >Danning v. Bank of America (1984) 151
Cal.App.3d 961; E. F. Hutton & Co. v.
City National Bank (1983) 149 Cal.App.3d 60; Bullis v. Security Pac. Nat’l Bank (1978) 21 Cal.3d 801; >Eisenberg v. Wachovia Bank, N.A. (4th
Cir. 2002) 301 F.3d 220.) The gravamen
of each of plaintiffs’ causes of action is BOA’s allegedly unauthorized
transfer of funds, and Zengen is
controlling authority in this case.

Plaintiffs’
argument that the trial court’s ruling should be reversed because it was based
on facts outside the pleadings is equally unpersuasive. As support for this argument, plaintiffs cite
certain comments made by the trial court at the January 18, 2011 hearing on
BOA’s motion for judgment on the pleadings as to the second amended
complaint. The reporter’s transcript of
those proceedings indicates that the trial court (who also presided over
plaintiffs’ related action against Yoo) remembered some of the underlying facts
from that related action. There is no
indication, however, that the trial court relied on its recollection of facts
from the related action in ruling on BOA’s motion for judgment on the
pleadings. To the contrary, the trial
court expressly stated at the January 18, 2011 hearing that it would not
consider matters outside the pleadings when ruling on BOA’s motion. Moreover, although the trial court granted
BOA’s motion for judgment on the pleadings, it did so without prejudice and
accorded plaintiffs 20 days leave to amend.
Nothing in the record indicates that the trial court relied on its
recollection of facts from the previous related case in ruling on BOA’s
demurrer to the fourth amended complaint.

The
trial court did not err by sustaining the demurrer to the fourth amended
complaint.

>

>DISPOSITION

The
judgment is affirmed. BOA is awarded its
costs on appeal.

NOT
TO BE PUBLISHED IN THE OFFICIAL REPORTS.





____________________________,
J.

CHAVEZ



We concur:







_____________________________, P. J.

BOREN







_____________________________, J.

DOI TODD