Vanacore International Judge rules that Vanacore violates the Unclaimed Property Laws of California El Dorado Hills California

Vanacore sued Defendant for breaching their Memorandum of Understanding.  Defendant claimed the MOU was invalid pursuant to California law and the court agreed.  The next step is for their complaint against Defendant to be dismissed and judgment will be entered in Defendant's favor.  Defendant, fortunately, will keep all of his money.  Vanacore cannot recover the 10% they charge because their agreement is invalid. You can look up this case at the court in Cameron Park, California, for more information.  You could get a similar favorable result if your case is similar.

Here is the court's ruling.   

3. VANACORE ANDASSOCIATES, INC. v. ROSENFELD PC-20130167

Demurrer to Complaint.

Plaintiff filed an action against defendant asserting causes of action for breach of contract,

fraud and unjust enrichment related to a memorandum of understanding wherein defendant

allegedly agreed to pay plaintiff 10% of the value of unclaimed property plaintiff recovered on

behalf of defendant.

Defendant demurs to all causes of action on the following grounds: the agreement/MOU is

unenforceable, because it is unlawful and against public policy in that it violates the

requirements of Code of Civil Procedure, § 1582 of the Unclaimed Property Law; the fraud

cause of action lacks the required specificity of allegations of fact; plaintiff could not have

justifiably relied on the terms of an invalid contract that was unlawful and against public policy;

plaintiff’s alleged conduct in justifiable reliance of the promise to pay by disclosing the account

holder’s identity after the contract was executed is not reasonable reliance, because Section

1582 mandated such disclosure prior to entry into the subject agreement; and defendant was

not unjustly enriched, because plaintiff’s receipt of 10% of the value of the unclaimed property

recovered would violate the law.

Plaintiff opposes the demurrers on the following grounds: the subject property had not

escheated at the time the agreement was executed, because the property had not yet been

delivered to the State Controller’s Office, therefore the requirements of Code of Civil

Procedure, § 1582 did not apply to the agreement/MOU; no public policy is identified, other

than Section 1582; the fraud cause of action is adequately pled; defendant was unjustly

enriched by receiving his unclaimed property prior to it being turned over to the State

Controller.

Defendant replied to the opposition.

 

Unclaimed Property Law and Breach of Contract Cause of Action

Plaintiff’s argument that Section 1582 did not apply is premised upon a notice posted on the

State Controller’s website, which states the property had not yet been sent to the State and

“The State Controller’s Office does not have your property at this time.” (See Complaint,

Exhibit A.) Plaintiff contends that this establishes that the property had not escheated to the

State. Plaintiff confuses the concept of escheat with the requirement of delivery of the property

to the State Controller’s Office after the property is reported to have escheated under the

applicable provisions of the Unclaimed Property Law.

“Every person holding funds or other property escheated to this state under this chapter

shall report to the Controller as provided in this section.” (Emphasis added.) (Code of Civil

Procedure, § 1530(a).) Therefore, the holder of the property is not required to report to the

State Controller until after the property had escheated.

The holder of the escheated property is not even mandated by statute to turn over the

property to the State until seven months and 15 days after the report is filed. “(a) Every person

filing a report as provided by Section 1530 shall, no sooner than seven months and no later

than seven months and 15 days after the final date for filing the report, pay or deliver to the

Controller all escheated property specified in the report. Any payment of unclaimed cash in an

amount of at least twenty thousand dollars ($20,000) shall be made by electronic funds

transfer pursuant to regulations adopted by the Controller. The Controller may postpone the

date for payment or delivery of the property, and the date for any report required by subdivision

(b), upon his or her own motion or upon written request by any person required to pay or

deliver the property or file a report as required by this section.” (Emphasis added.) (Code of

Civil Procedure, § 1532(a).)

Exhibit A, the notice posted on the web site, merely effectuates the intent of Section 1531 to

inform owners about the possible existence of unclaimed property identified as escheated to

the State pursuant to the Unclaimed Property Law (See Code of Civil Procedure, § 1531(f).)

and provides such information to allow recovery of the property prior to the escheated property

being delivered to the State. (See Code of Civil Procedure, §§ 1531(d) and 1531(e).)

There are statutory requirements applicable to any agreement to locate, deliver, recover, or

assist in the recovery of property reported pursuant to Section 1530, which if not met result in

the invalidity of the agreement.

“No agreement to locate, deliver, recover, or assist in the recovery of property reported

under Section 1530, entered into between the date a report is filed under subdivision (d) of

Section 1530 and the date of publication of notice under Section 1531 is valid. Such an

agreement made after publication of notice is valid if the fee or compensation agreed upon is

not in excess of 10 percent of the recoverable property and the agreement is in writing and

signed by the owner after disclosure in the agreement of the nature and value of the property

and the name and address of the person or entity in possession of the property. Nothing in this

section shall be construed to prevent an owner from asserting, at any time, that any agreement

to locate property is based upon an excessive or unjust consideration. ¶ Notwithstanding any

other provision of law, records of the Controller's office pertaining to unclaimed property are not

available for public inspection or copying until after publication of notice of the property or, if

publication of notice of the property is not required, until one year after delivery of the property

to the Controller.” (Emphasis added.) (Code of Civil Procedure, § 1582.)

The complaint alleges the MOU was signed by defendant on or about April 5, 2011. While

Exhibit A indicates that the subject property was reported to the State Controller as escheated

property on November 12, 2010, there are no allegations in the complaint concerning the date

of the publication of the notice mandated by Section 1531.

In addition, the agreement/MOU attached to the complaint as Exhibit B does not disclose in

the agreement the nature and value of the property and the name and address of the person or

entity in possession of the property. This violates the statutory requirement that such

information be disclosed in the written agreement.

The complaint fails to allege sufficient facts to establish a valid contract was entered into.

The question becomes whether or not the fatal defect can be remedied by amendment.

“It is an abuse of discretion to deny leave to amend if there is a reasonable possibility that

the pleading can be cured by amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349,

134 Cal.Rptr. 375, 556 P.2d 737.) Regardless of whether a request therefore was made,

unless the complaint shows on its face that it is incapable of amendment, denial of leave to

amend constitutes an abuse of discretion. (McDonald v. Superior Court (1986) 180 Cal.App.3d

297, 303-304, 225 Cal.Rptr. 394.) The burden is on the plaintiff to demonstrate how he or she

can amend the complaint. It is not up to the judge to figure that out. (Blank v. Kirwan, supra, 39

Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.)” (Roman v. County of Los Angeles (2000)

85 Cal.App.4th 316, 322.)

The defect concerning whether or not the agreement was executed after the date of

publication of notice by the State Controller’s Office does not appear reasonably capable of

being remedied by amendment in light of the allegations of the complaint and Exhibit A.

Plaintiff admits that the notice of property being held by business (Exhibit A) stated that if the

property was not claimed before May 31, 2011, then Pension Financial Services, Inc. would be

required by law to turn the asset over to the State Controller. (Complaint, paragraph 10.) The

State Controller’s statutory duty to publish notice does not arise until after the property is

delivered. (Code of Civil Procedure, § 1531(a).) Therefore, plaintiff has expressly admitted in

the complaint that the Section 1531 publication could not have taken place and has not offered

the court any explanation as to what facts could be alleged to remedy the defect that the

agreement was entered into prior to the publication of notice to owners of unclaimed property

by the State Controller.

Furthermore, the defect of failure to state in the agreement the nature and value of the

property and the name and address of the person or entity in possession of the property does

not appear to be reasonably capable of remedy by amendment. Plaintiff has not explained how

this defect can be remedied by amendment.

The demurrer to the breach of contract cause of action is sustained without leave to amend.

 

Fraud Cause of Action

The fraud cause of action is solely premised on allegations that defendant executed the

agreement/MOU with the intent to induce plaintiff to reveal the name of the account holder of

the unclaimed assets in order to circumvent plaintiff’s 10% compensation provided in the

agreement by defendant reclaiming the assets himself. (See Complaint, paragraphs 29-31.)

The complaint appears to assert an action for constructive fraud by intentional nondisclosure

of intent to breach the agreement and defraud plaintiff of its alleged rightful

compensation. “To state a claim for constructive fraud, a party must allege (1) a fiduciary or

confidential relationship; (2) an act, omission or concealment involving a breach of that duty;

(3) reliance; and (4) resulting damage. Assilzadeh v. California Federal Bank, 82 Cal.App.4th

399, 414, 98 Cal.Rptr.2d 176 (2000) (“Constructive fraud is a unique species of fraud

applicable only to a fiduciary or confidential relationship. As a general principle constructive

fraud comprises any act, omission or concealment involving a breach of legal or equitable duty,

trust or confidence which results in damage to another even though the conduct is not

otherwise fraudulent.” (citations omitted)). See also In re Harmon, 250 F.3d 1240, 1249, n. 10

(9th Cir.2001) (citing Assilzadeh, supra).” (Dealertrack, Inc. v. Huber (C.D.Cal.,2006) 460

F.Supp.2d 1177, 1183.) Fraud causes of action, including actions for constructive fraud, must

be pleaded with specificity. (Schauer v. Mandarin Gems of California, Inc. (2005) 125

Cal.App.4th 949, 961.)

There are no specific allegations of fact to establish a fiduciary or confidential relationship

between plaintiff and defendant.

More importantly, the underlying premise of the fraud cause of action is to recover damages

for an intent not to perform an agreement where plaintiff admittedly refused to identify the

holder of the funds until defendant signed and returned to plaintiff the MOU/agreement, which

as stated earlier in this ruling rendered the agreement invalid and unlawful. (See Code of Civil

Procedure, § 1582 and Civil Code, § 1167.) Under the allegations of the complaint, it was the

plaintiff who had a duty mandated by statute to disclose that information in the agreement.

“The general rule is that a void contract, a contract against public policy or against the

mandate of a statute, may not be made the foundation of any action, either in law or in equity.

In re Groome, 94 Cal. 69, 29 P. 487; Chateau v. Singla, 114 Cal. 91, 45 P. 1015, 33 L.R.A.

750, 55 Am.St.Rep. 63; Moore v Moore, 130 Cal. 110, 62 P. 294, 80 Am.St.Rep. 78.” (Hooper

v. Barranti (1947) 81 Cal.App.2d 570, 574.) The court system can not in effect enforce an

illegal, invalid contract that violates statutory law by means of an action for fraud.

As stated earlier in this ruling, there does not appear to be a reasonable possibility that the

pleading can be cured by amendment, the fraud cause of action appears to be incapable of

amendment to cure the defects that render the agreement/MOU invalid and unlawful, and

plaintiff has not demonstrated how the fraud cause of action can be amended to cure the

defects. (See Roman v. County of Los Angeles (2000) 85 Cal.App.4th 316, 322.)

The demurrer to the fraud cause of action is sustained without leave to amend.

 

Unjust Enrichment Cause of Action

The unjust enrichment cause of action is solely premised upon defendant obtaining the

benefit of delivery of all the unclaimed property without payment of the 10% fee agreed to be

paid to plaintiff in the MOU/Agreement, which allegedly unjustly enriched defendant to the

extent defendant retained the 10% plaintiff was entitled to receive. (See Complaint, paragraphs

34-38.)

“There is no separate cause of action in California for unjust enrichment. Unjust enrichment

is synonymous with restitution. (Levine v. Blue Shield of Calif. (2010) 189 C.A.4th 1117, 1138,

117 C.R.3d 262.)” (1 Witkin, Summary of California Law (10th ed. 2012 supp.) Contracts, §

1013, supp. Page 182.) “The elements of an unjust enrichment claim are the “receipt of a

benefit and [the] unjust retention of the benefit at the expense of another.” (Lectrodryer v.

SeoulBank (2000) 77 Cal.App.4th 723, 726, 91 Cal.Rptr.2d 881.)” (Peterson v. Cellco

Partnership (2008) 164 Cal.App.4th 1583, 1593.)

“The equitable remedy of restitution to avoid ‘unjust enrichment’ has its roots in the common

law. ‘[O]ne person should not be permitted unjustly to enrich himself at the expense of another,

but should be required to make restitution of or for property or benefits received, retained, or

appropriated, where it is just and equitable that such restitution be made, and where such

action involves no violation or frustration of law or opposition to public policy, either directly or

indirectly.’ [Citation.]” (Gardiner Solder Co. v. SupAlloy Corp., Inc. (1991) 232 Cal.App.3d

1537, 1542, 284 Cal.Rptr. 206.)” (Emphasis added.) (Dunkin v. Boskey (2000) 82 Cal.App.4th

171, 195.) However, “In compelling cases, illegal contracts will be enforced in order to ‘avoid

unjust enrichment to a defendant and a disproportionately harsh penalty upon the plaintiff.’ ”

(Asdourian v. Araj (1985) 38 Cal.3d 276, 292, 211 Cal.Rptr. 703, 696 P.2d 95.)” (Corrie v.

Soloway (2013) 216 Cal.App.4th 436, 450.)

The allegations and exhibits of the complaint clearly establish the unjust enrichment cause

of action is solely based upon an invalid, illegal agreement. To allow recovery of damages for

violation of the agreement in equity would violate and/or frustrate the law related to

agreements to recover unclaimed property for the property owners under the Unclaimed

Property Law. There are no allegations of compelling circumstances where a

disproportionately harsh penalty would be imposed upon plaintiff. Plaintiff alleges it did not

receive the compensation agreed to, because defendant did the work to reclaim his property

after receipt of notice of where the property was being held. The allegations of fact in the

complaint merely set forth the normal circumstances that arise when an agreement to recover

unclaimed property is invalid due to the failure to comply with the requirements of Section

1582. The Legislature must have clearly foreseen exactly such a result when declaring

agreements that do not meet the requirements of Section 1582 are invalid. To hold that while

the contract is not enforceable as an invalid agreement, the plaintiff may recover the fee or

compensation stated in the agreement as the defendant was unjustly enriched would render

the statutory requirements meaningless and frustrate the purpose of the statute. The complaint

does not set forth compelling circumstances that would result in a disproportionately harsh

penalty would be imposed upon plaintiff. In fact, the penalty imposed, nonpayment of the 10%

fee, is exactly the type of penalty the Legislature must have envisioned in declaring such

agreements invalid if the statutory requirements were not met.

As stated earlier in this ruling, there does not appear to be a reasonable possibility that the

pleading can be cured by amendment, the unjust enrichment cause of action appears to be

incapable of amendment to cure the defects that render the agreement/MOU invalid and

unlawful, and plaintiff has not demonstrated how the unjust enrichment cause of action can be

amended to cure the defects. (See Roman v. County of Los Angeles (2000) 85 Cal.App.4th

316, 322.)

The demurrer to the unjust enrichment cause of action is sustained without leave to amend.

 

TENTATIVE RULING # 3: THE DEMURRERS TO THE BREACH OF CONTRACT, FRAUD,

AND UNJUST ENRICHMENT CAUSES OF ACTION ARE SUSTAINED WITHOUT LEAVE

TO AMEND. NO HEARING ON THIS MATTER WILL BE HELD (LEWIS V. SUPERIOR

COURT (1999) 19 CAL.4TH 1232, 1247.), UNLESS A NOTICE OF INTENT TO APPEAR AND

REQUEST FOR ORALARGUMENT IS TRANSMITTED ELECTRONICALLY THROUGH THE

COURT’S WEBSITE OR BY TELEPHONE TO THE COURT AT (530) 621-5867 BY 3:00 P.M.

ON THE DAY THE TENTATIVE RULING IS ISSUED. NOTICE TO ALL PARTIES OF AN

INTENT TO APPEAR MUST BE MADE BY TELEPHONE OR IN PERSON. PROOF OF

SERVICE OF SAID NOTICE MUST BE FILED PRIOR TO OR AT THE HEARING. MATTERS

IN WHICH THE PARTIES’ TOTAL TIME ESTIMATE FOR ARGUMENT IS 15 MINUTES OR

LESS WILL BE HEARD ON THE LAW AND MOTION CALENDAR AT 10:00 A.M. ON

FRIDAY, NOVEMBER 8, 2013 IN DEPARTMENT NINE UNLESS OTHERWISE NOTIFIED

BY THE COURT. ALL OTHER LONG CAUSE ORALARGUMENT REQUESTS WILL BE

SET FOR HEARING WITHIN TEN COURT DAYS OF THE ISSUANCE OF THE TENTATIVE

RULING. (EL DORADOCOUNTY SUPERIOR COURT LOCAL RULES, RULE 7.10.05, et

seq.)