Opinion
E081427
05-20-2024
MICHAEL FREEMAN, Plaintiff and Appellant, v. CALIFORNIA BANK AND TRUST, Defendant and Respondent.
Law Offices of Michael S. Geller and Michael S. Geller for Plaintiff and Appellant. Solomon Ward Seidenwurm & Smith, Michael D. Breslauer, and Matthew T. Arvizu for Defendant and Respondent.
NOT TO BE PUBLISHED
APPEAL from the Superior Court of San Bernardino County No. CIVDS1923153, Janet M. Frangie, Judge. Affirmed.
Law Offices of Michael S. Geller and Michael S. Geller for Plaintiff and Appellant.
Solomon Ward Seidenwurm & Smith, Michael D. Breslauer, and Matthew T. Arvizu for Defendant and Respondent.
OPINION
RAPHAEL, J.
This appeal arises out of a dispute between an elderly bank customer and his bank. The bank mistakenly denied the customer access to his funds for four days, which left him isolated and ruined plans with his friends and family over a long holiday weekend. The customer sued the bank, alleging its conduct was negligent, breached their contract, constituted elder abuse, and violated consumer protection laws.
The trial court sustained a demurrer to the consumer protection claim and granted summary adjudication for the bank on the elder abuse claim. Following a bench trial, the bank prevailed on the negligence claim, but the court allowed the customer to add a breach of contract claim and awarded him contract damages. On appeal, the customer challenges the rulings on the consumer protection and elder abuse claims.
We conclude the customer's bank deposit account does not fall under the consumer protection statute, and he showed no triable issue of material fact on the elder abuse claim because he could not connect the bank's depriving him of access to his money with knowledge he would likely be injured by that act. We therefore affirm the judgment.
I
FACTS
A. The Bank Transactions
Plaintiff and appellant Michael Freeman opened a deposit account with California Bank & Trust (the bank) on March 1, 2016, at its branch in Crestline.
On the Friday before Memorial Day in 2019, Freeman visited the Crestline branch and deposited a $10,000 check. A bank teller advised Freeman the deposit was subject to a "split-hold," meaning he would have immediate access to only $200 of the deposited funds, would have access to another $4,800 of the deposited funds after two business days, and would have access to the remaining $5,000 after seven business days. The bank applied the split-hold because the $10,000 deposit exceeded the average balance in Freeman's account by a significant amount. Freeman agreed to the hold under those terms. Freeman had approximately $1,180 in his account at the time he made the deposit, and the holds should not have affected his access to those funds.
The teller who assisted Freeman initially placed two seven-day $5,000 holds rather than one seven-day $5,000 hold and one two-day $4,800 hold. When she realized her error, she applied the correct two-day $4,800 hold but failed to remove the duplicate $5,000 hold. As a result, Freeman's available balance became negative, which meant he could withdraw neither the $1,180 he already had on deposit nor the $200 from the new deposit that was not supposed to be subject to a hold.
Freeman realized the problem only when he viewed his account online the next morning, Saturday, May 25, 2019. He called the bank's customer service line and spoke with a customer service agent and her supervisor. They investigated the claim and attempted to contact the Crestline branch. However, the branch was not open on Saturdays and would remain closed through the Memorial Day holiday. The bank's policies allowed only employees at the branch to apply or remove deposit holds. The customer service agents could not remove them. As a result, though the bank confirmed the hold was incorrect, they told Freeman they would be unable to release the holds and make his funds available until Tuesday, May 28. Freeman had only five dollars in cash and a quarter tank of gas at the time. Though he did not tell the agents those details, he did tell them the hold would cause him to cancel all his plans for the long weekend. The customer service agent commiserated and reassured Freeman all holds would be removed from his deposit on Tuesday, but she said they could not help him gain access to any funds until then.
Freeman regained access to his funds that Tuesday, including the funds that were originally subject to the split-hold. However, he was denied access, from Friday through Tuesday morning, to $1,380 that he should have been able to withdraw. The hold on his funds caused him to cancel plans to go to a festival with a friend, attend his granddaughter's birthday party, and attend a Memorial Day family gathering.
B. The Trial Court Orders and Trial
Freeman's first amended complaint alleged the bank violated statutes protecting against consumer deception and elder abuse. In February 2020, the trial court sustained the bank's demurrer to Freeman's consumer deception claim on the ground that financial services like placing a hold on a deposit checking account are not covered by the statute. The court denied Freeman leave to amend the consumer claim, but later allowed him to amend the complaint by adding a cause of action for negligence.
In June 2021, the trial granted the bank's motion for summary adjudication on the financial elder abuse claim. The court explained the bank "didn't take the property" and the parties "both concede that when there's a deposit, the property - it becomes the property at least temporarily of the bank. So you both agree with that, so there is no taking. The funds were available within two days. [¶] And more importantly, you don't meet the elements of the elder abuse that at the time of the taking, there was a wrongful[] use or there was an intent to defraud, which are requirements of the elder abuse factor."
On November 7, 2022, the case went to trial on Freeman's negligence claim. The trial court found Freeman had not established negligence, but allowed him to amend his complaint to conform to the proof and add a cause of action for breach of contract. The court found the bank had breached its agreement with Freeman and awarded him $1,380.16 in damages-the amount Freeman should have been, but was not, able to access to over the Memorial Day weekend. The judgment incorporates the order granting the bank's motion for summary adjudication on elder abuse, the court's verdict on negligence and breach of contract, and the damages award.
Freeman argues on appeal that the court erred in sustaining the demurrer on the consumer protection claim and summarily adjudicating the elder abuse claim. Neither party challenges the negligence or breach of contract rulings.
II
ANALYSIS
A. Consumer Legal Remedies Act
Freeman argues the trial court erred by determining the bank's activity in maintaining a hold on deposited funds does not involve a good or service subject to the Consumers Legal Remedies Act, Civil Code, section 1750 et seq. (CLRA).
We review an order sustaining a demurrer de novo. (Morales v. 22nd Dist. Agricultural Assn. (2018) 25 Cal.App.5th 85.) "We assume the truth of the facts alleged in the complaint. [Citation.] In addition, we consider judicially noticed matters. [Citation.] We accept all properly pleaded material facts but not contentions, deductions, or conclusions of fact or law. [Citation.] We determine de novo whether the complaint alleges facts sufficient to state a cause of action under any legal theory. [Citation.] We read the complaint as a whole and its parts in context to give the complaint a reasonable interpretation." (Ring v. Harmon (2021) 72 Cal.App.5th 844, 850.)
Freeman does not appeal the part of the order denying him leave to amend the CLRA claim.
The CLRA prohibits "unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or that results in the sale or lease of goods or services to any consumer." (Civ. Code, § 1770, subd. (a), unlabeled statutory citations in part II.A. refer to this code.) Unlawful practices include representing that goods or services have "sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have" (§ 1770, subd. (a)(5)), that they "are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another" (§ 1770, subd. (a)(7)), and "[a]dvertising goods or services with intent not to sell them as advertised" (§ 1770, subd. (a) (9)). The statute provides for a mandatory award of attorney fees to a prevailing plaintiff. (§ 1780, subd. (e).)
Freeman alleged the bank violated these provisions when they told him they would apply holds of $9,800 to his $10,000 deposit, but in fact applied holds of $14,800, blocking his access to all funds in his account. He alleged this conduct violated the CLRA because the bank's employees represented the bank's goods or services had characteristics and qualities they did not have, and the employees advertised goods or services while intending not to sell them as advertised. (§ 1770, subd. (a)(5), (7), (9).) These provisions apply to representations intended to mislead consumers, which may not be consistent with the trial evidence but aligns with the complaint, because Freeman alleged the bank and its employees "did the aforesaid actions with the intent to deprive Freeman of his funds and [the bank] at all times herein referenced intended to injure Freeman."
The bank argues the CLRA does not apply because neither the taking and holding of Freeman's deposit nor the application of the hold policy to Freeman's deposit was "a transaction intended to result or which result[ed] in the sale or lease of goods or services to [a] consumer." Indeed, they argue the CLRA does not apply as a general matter to banking services as a category because the bank does not provide "goods" or offer "services" as those terms are defined in the CLRA.
The statute defines "goods" as "tangible chattels bought or leased for use primarily for personal, family, or household purposes, including certificates or coupons exchangeable for these goods, and including goods that, at the time of the sale or subsequently, are to be so affixed to real property as to become a part of real property, whether or not they are severable from the real property." (§ 1761, subd. (a).) It defines "services" as "work, labor, and services for other than a commercial or business use, including services furnished in connection with the sale or repair of goods." (§ 1761, subd. (b).)
In Fairbanks v. Superior Court (2009) 46 Cal.4th 56, 60 (Fairbanks), the California Supreme Court examined whether life insurance is either a good or a service under these statutory definitions. The Court explained that life insurance "is a contract of indemnity under which, in exchange for the payment of premiums, the insurer promises to pay a sum of money to the designated beneficiary upon the death of the named insured." (Id. at p. 61.) Such a product, the Court held, is not a "good" under the CLRA because it "is not a 'tangible chattel.'" (Ibid.) Here, the trial court was right to reach the same conclusion about Freeman's deposit account. (See Com. Code, § 9102(a)(44) [excluding deposit accounts from the definition of goods]; Pacific Decision Sciences Corp. v. Superior Court (2004) 121 Cal.App.4th 1100, 1105 [deposit account is intangible for purposes of attachment law].) Indeed, Fairbanks identified deposit accounts as an example of an "intangible goods" not covered by the CLRA. (Id. at p. 65.)
As for whether a bank's role in providing and administering deposit accounts constitutes a "service," Fairbanks strongly suggests it does not. There, the Court determined life insurance is not a service because "[a]n insurer's contractual obligation to pay money under a life insurance policy is not work or labor, nor is it related to the sale or repair of any tangible chattel." (Fairbanks, supra, 46 Cal.4th at p. 61.) The same reasoning applies to a deposit account. A contractual obligation to disburse money held in a depositor's account is neither work nor labor and is unrelated to the sale or repair of any tangible chattel.
Nor does the bank's providing ancillary services in administering deposit accounts qualify the bank's activities as services under the CLRA. In Fairbanks, the Court explained that "ancillary services are provided by the sellers of virtually all intangible goods-investment securities, bank deposit accounts and loans, and so forth. The sellers of virtually all these intangible items assist prospective customers in selecting products that suit their needs, and they often provide additional customer services related to the maintenance, value, use, redemption, resale, or repayment of the intangible item. Using the existence of these ancillary services to bring intangible goods within the coverage of the Consumers Legal Remedies Act would defeat the apparent legislative intent in limiting the definition of 'goods' to include only 'tangible chattels.'" (Fairbanks, supra, 46 Cal.4th at p. 65, italics added.)
Many courts have extended the reasoning in Fairbanks to conclude loans do not qualify as goods or services under the CLRA. (E.g., Alborzian v. JPMorgan Chase Bank, N.A. (2015) 235 Cal.App.4th 29, 40 ["A mortgage loan is not a 'good' because it is not a 'tangible chattel'; it is not a 'service' because it is not 'work, labor, [or] services . . . furnished in connection with the sale or repair of goods"]; Jamison v. Bank of America, N.A., 194 F.Supp.3d 1022, 1031-32 (E.D.Cal. 2016) ["mortgage services do not fall within the coverage of the CLRA"]; Consumer Solutions Reo, LLC v. Hillery, 658 F.Supp.2d 1002, 1016-17 (N.D.Cal. 2009) ["loans are intangible goods and . . . ancillary services provided in the sale of intangible goods do not bring these goods within the coverage of the CLRA"].)
Hughes v. Wells Fargo Bank, N.A. (C.D.Cal. Apr. 26, 2010) 2010 WL 11549573 extends the reasoning of Fairbanks to deposit accounts. Hughes involved a dispute over fee waivers and service agreements related to the plaintiff's deposit accounts. The parties agreed the deposit accounts themselves were not goods or services under the CLRA, but disputed whether the bank's agreement, entered after the accounts had been established, to waive service fees if the depositor agreed to maintain minimum balances in his accounts, brought the transaction within the scope of the CLRA. The federal district court applied Fairbanks to conclude those agreements were services ancillary to the administration of the deposit accounts, and therefore did not constitute services governed by the CLRA. (Id. at p. *3.)
We find Hughes persuasive and conclude the same logic applies to the deposit accounts and related services here. The bottom line is the CLRA applies to "transaction[s] intended to result or which result[] in the sale or lease of goods or services to [a] consumer." (§ 1770, subd. (a).) Deposit accounts are intangible goods, making a deposit to such an account does not make the account tangible, and any services related to selling or administrating such financial goods are not "services provided in connection with" any goods or services. (Hughes v. Wells Fargo Bank, supra, 2010 WL 11549573, *3; see also Consumer Solutions Reo, LLC v. Hillery, supra, 658 F.Supp.2d at pp. 1016-17.) The trial court was therefore correct to grant the demurrer and dismiss Freeman's CLRA claim.
Freeman cites several cases using the phrase "banking services," but those cases do not support concluding that providing or administering a deposit account constitutes a service as defined in the CLRA. It of course makes sense to speak of banks as providing a service to their depositors by opening and administering deposit accounts, but that sense is colloquial or arises under statutes that do not match the statutory definition in the CLRA. (Ball v. FleetBoston Financial Corp. (2008) 164 Cal.App.4th 794, 799 [holding a court's determination that extending credit is a service within the meaning of Civil Code section 1671 "does not inform the interpretation of provisions of separate sections in the Civil Code containing the CLRA"].) "When the Legislature has provided a statutory definition for a term, . . . courts must apply that definition when interpreting the statute." (Fairbanks, supra, 46 Cal.4th at p. 63.)
B. Elder Abuse
Freeman argues the trial court erred by determining he did not raise a triable issue of fact that the bank's conduct involved taking his property or that the bank acted with a wrongful purpose.
We review the trial court's order granting summary adjudication de novo to ascertain from the papers whether there is a triable issue of material fact. (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 630.) We consider "the evidence the parties offered in connection with the motion (except that which the court properly excluded) and the uncontradicted inferences the evidence reasonably supports." (Ibid.)
The Legislature enacted the Elder Abuse and Dependent Adult Civil Protection Act "to protect elders, defined as 'any person residing in this state, 65 years of age or older' [citation], and dependent adults from abuse and neglect. [Citation.] The Act protects against both '[p]hysical abuse' and '[f]inancial abuse.'" (Ring v. Harmon, supra, 72 Cal.App.5th at pp. 852; see also Welf. & Inst. Code, § 15600 et seq., unlabeled statutory citations in part II.B. refer to this code.) The statute provides for a mandatory award of attorney fees to a plaintiff who proves financial elder abuse. (§ 15657.5.)
Financial abuse claims, such as the one Freeman alleges, "are authorized in the Elder Abuse Act by section 15657.5, which works hand-in-hand with a set of defined terms in sections 15610.30 and 15610.70. As provided in Section 15610.30, subdivision (a),' "[f]inancial abuse" of an elder . . . occurs when a person or entity . . . [¶] (1) Takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both. [¶] (2) Assists in taking, secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both. [¶] (3) Takes, secretes, appropriates, obtains, or retains, or assists in taking, secreting, appropriating, obtaining, or retaining, real or personal property of an elder or dependent adult by undue influence,' as defined in section 15610.70." (Mahan v. Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 841, 856-857.)
The statute defines the phrase "[t]akes, secretes, appropriates, obtains, or retains" broadly as occurring "when an elder or dependent adult is deprived of any property right, including by means of an agreement, donative transfer, or testamentary bequest, regardless of whether the property is held directly or by a representative of an elder or dependent adult." (§ 15610.30, subd. (c), italics added.) It also defines culpability broadly so that a person may be liable if they deprive the victim of property for a wrongful use, meaning "the person or entity knew or should have known that this conduct is likely to be harmful to the elder or dependent adult." (§ 15610.30, subd. (b), italics added.)
The trial court granted summary adjudication on the elder abuse claim, concluding Freeman did not show a triable issue of material fact whether the bank deprived him of property. The court explained that under California law when a person deposits money with a bank "it becomes the property at least temporarily of the bank" and concluded that the bank's hold on the funds and failure to remove the hold until the local branch was open did not result in a taking of Freeman's property. The bank makes the same argument on appeal.
We disagree with this reasoning. The statute defines deprivation of property broadly. The question of who holds title to property or an asset is not dispositive. This is evident from the statutory text itself, which does not refer to deprivation of "property" but to deprivation of "any property right." (§ 15610.30, subd. (c).) As we explained in Ring, the statute's focus on the deprivation of property rights means the deprivation of an elderly person's interest in property triggers the statutory protections, even if the person does not hold title to the property or possess all the rights associated with ownership. (Ring v. Harmon, supra, 72 Cal.App.5th at p. 855.)
In Ring, an 80-year-old mother was named as a beneficiary of her deceased daughter's will and set to inherit a house. However, two other relatives working with financial advisors "used probate proceedings as a means to extract equity from the house to use for their own purposes." (Ring v. Harmon, supra, 72 Cal.App.5th at p. 848.) Ring sued for financial elder abuse, and defendants argued she did not own the house, which was still in probate, either directly or through a representative. (Id. at p. 854.) We disagreed this was a basis for dismissal and explained it was sufficient that Ring had an "interest in the house" even though she "did not immediately receive all the sticks in the proverbial bundle of individual rights" that constitute property. (Id. at p. 855.)
Similarly, in Mahan, the defendants tried to escape liability for elder abuse because the life insurance policies that were the subject of misleading financial advice were held by a trust and the victims' daughter, not the victim, was the trustee. The court of appeal rejected this narrow construction and held "a statutory 'insurable interest' is properly considered a 'property right' within the meaning of section 15610.30." (Mahan, supra, 14 Cal.App.5th at p. 863.)
The same logic applies in this case. The funds deposited by Freeman belong to him, and he retained the right to withdraw and use the funds. The technicalities of title that allow the banking system to function do not determine whether attempts to divest an elderly person of funds held in a bank constitute attempts to deprive the victim of a property right. Indeed, such a technical view would likely hamstring attempts to protect elders against financial abuse and is inconsistent with the principle that we should construe a remedial statute liberally to benefit the class of persons it is designed to protect. (Mahan, supra, 14 Cal.App.5th at pp. 860-861.)
Nevertheless, we conclude the trial court correctly granted summary adjudication. The trial court concluded Freeman did not "meet the elements of . . . elder abuse . . . at the time of the taking" because he did not show a triable issue of fact on whether "there was a wrongful use or there was an intent to defraud" when the bank placed the hold. The parties agree that on May 24, 2019, a bank teller told Freeman they "would place a 'hold' on $5,000 of the funds" he deposited "for 7 banking days and a 'hold' on $4,800 for 2 banking days," but instead "placed a 'hold' on $10,000 for 7 banking days, and a 'hold' on $4,800 for 2 banking days." It is uncontested that the way the teller placed the hold was a "processing error," which she attempted to fix. Freeman agreed to this characterization and has not alleged or presented any evidence to suggest the teller knew she had left in place a second $5,000 hold. Thus, there is no support for finding the bank teller acted intentionally to deprive Freeman of his funds.
Freeman also fails to establish the bank misused the funds. He says the teller's mistake left him with no available funds to participate in his weekend plans, but neither his complaint nor the evidence he submitted to the trial court suggest the teller misused the funds in the statutory sense that she "knew or should have known that this conduct is likely to be harmful." (§ 15610.30, subd. (b), italics added.) Indeed, there was no cause for Freeman to inform the teller of his financial situation when he deposited the check, and she processed the hold. The elder abuse claim cannot stand without some evidence the bank knew depriving him of access to his funds would likely cause him an injury.
The allegations and evidence of the customer service agents' inability to remove the hold do not resuscitate Freeman's claim. Freeman did tell those agents of his plight- and therefore established they knew or should have known the holds would harm him at the time he asked them to fix the problem. But there is no suggestion that these agents acted to deprive him of a property right. On the contrary, it is uncontested that the customer service agents could not remove the hold but tried to ensure Freeman would regain access to all his funds-including the full $10,000 deposit-as soon as someone authorized to release the holds was available on Tuesday morning. That means Freeman failed to show a triable issue of material fact that these agents did anything to deprive him of funds, even though they did know the holds were likely to cause him a temporary hardship.
The case would be different if Freeman could connect the act depriving him of access to his funds to knowledge of the harm doing so would inflict. Freeman might have had an elder abuse claim if he had realized the mistake occurred while making the deposit and the teller had declined to fix it despite Freeman explaining the hardship he would suffer. Similarly, he might have had an elder abuse claim if the customer service agents had in fact been authorized to remove the hold when he called to complain and informed them of his plight. Those are not the facts of this case, however, and without drawing a connection between the act depriving him of his funds and knowledge of the harm, Freeman does not have a viable elder abuse claim.
The trial court also seemed to suggest that Freeman's claim might not be viable because he was deprived of access to his funds for only a few days. We can imagine situations where an elder is the victim of consequential financial abuse based on a temporary deprivation of property, so we decline to decide whether the temporary nature of the deprivation means Freeman's claim is not cognizable.
III
DISPOSITION
We affirm the judgment. The parties shall bear their own costs on appeal.
We concur: RAMIREZ, P. J., CODRINGTON, J.