Auto Finance Solutions, LLC v. Prestige Kia Riverside

Counsel for Plaintiff is to give notice of this ruling.

11. Auto Finance Solutions, LLC v. Prestige Kia Riverside 25-1500766 A) Los Angeles Federal Credit Union

1) Demurrer

Defendant Los Angeles Federal Credit Union’s (“LAFCU”) demurrer to Auto Finance Solutions, LLC’s (“Plaintiff”) First Amended Complaint (“FAC”) is SUSTAINED.

LAFCU demurs to causes of action (“COA”) six through nine on the basis they fail to state sufficient facts. (Civ. Proc. Code § 430.10(e).)

a) COA No. 6 – Conversion and Replevin

“Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages....[Citation omitted.]” (Lee v. Hanley (2015) 61 Cal. 4th 1225, 1240 (“Lee”).) The term ‘dominion’ is defined by Black’s as: “1. Control; possession <dominion over the car>.” (DOMINION, Black’s Law Dictionary (12th ed. 2024).)

Plaintiff alleged it held prior recorded liens on the Vehicles by virtue of its contractual rights and possession of the original titles. (FAC ¶ 82.) Lenders exercised dominion and control of the Vehicles by accepting and recording liens thereon using fraudulent titles created by Prestige/Akbar, relying on tainted DMV records, withholding vehicles and titles from Plaintiff, receiving payments and benefits from vehicles transferred in violation of Plaintiff’s rights. (FAC ¶ 83.) Plaintiff has been deprived of its rights in the vehicles and titles, lost value of collateral, and suffered monetary damages. (FAC ¶ 85.) Plaintiff seeks compensatory damages for conversion or alternatively for an immediate return of the vehicles and original certificates of title, punitive damages, and costs. (FAC ¶ 86.)

Plaintiff did not allege specific vehicle(s) which LAFCU ‘converted,’ nor did Plaintiff allege facts showing LAFCU has or ever had control or possession over any specific vehicle(s).

Plaintiff has not pled sufficient facts to support this COA. The demurrer is SUSTAINED with leave to amend as to this COA.

b) COA No. 7 – Quiet Title/Wrongful Lien Invalidation

“The complaint shall be verified and shall include all of the following: (a) A description of the property that is the subject of the action. In the case of tangible personal property, the description shall include its usual location. In the case of real property, the description shall include both its legal description and its street address or common designation, if any. (b) The title of the plaintiff as to which a determination under this chapter is sought and the basis of the title. If the title is based upon adverse possession, the complaint shall allege the specific facts constituting the adverse possession. (c) The adverse claims to the title of the plaintiff against which a determination is sought. (d) The date as of which the determination is sought.

If the determination is sought as of a date other than the date the complaint is filed, the complaint shall include a statement of the reasons why a determination as of that date is sought.

(e) A prayer for the determination of the title of the plaintiff against the adverse claims.” [Emphasis added.] (Civ. Proc. Code § 761.020.)

Although LAFCU states that quiet title is only available in real property cases, Civ. Proc. Code § 761.020(a) specifically states it is available for the determination of rights to ‘personal property’ as well. (See also, Koerber v. Superior Ct. of City & Cnty. of San Francisco (1922) 57 Cal. App. 31; Indep. Iron Works v. Am. President Lines (1950) 35 Cal. 2d 858; Lloyd v. Los Angeles Cnty. (1940) 41 Cal. App. 2d 808; Boldemann Chocolate Co. v. Price (1936) 5 Cal. 2d 200.)

As a COA for quiet title can relate to personal property, which would include the subject vehicles, the motion cannot be sustained on the ‘real property’ argument. But, Plaintiff has not verified the FAC, has not specifically identified which vehicle(s) it is alleging quiet title against which of the subject lenders, and has not included the vehicle(s) usual location(s) as required under the code.

Plaintiff has not pled sufficient facts to support this COA. The demurrer is SUSTAINED with leave to amend as to this COA.

c) COA No. 8 – Unjust Enrichment/Constructive Trust

“Unjust enrichment is not a cause of action, however, or even a remedy, but rather “ ‘ “a general principle, underlying various legal doctrines and remedies” ’ .... [Citation.] It is synonymous with restitution. [Citation.]” [Citation.] Unjust enrichment has also been characterized as describing “ ‘the result of a failure to make restitution....’ ” ‘ “ (McBride v. Boughton (2004) 123 Cal. App. 4th 379, 387 (“McBride”).) “There are several potential bases for a cause of action seeking restitution.

For example, restitution may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason. (See generally 3 Witkin, Cal. Procedure (4th ed. 1996) Actions, §§ 148–150, pp. 218–220; 1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, §§ 112, 118, pp. 137–138, 142–144.) Alternatively, restitution may be awarded where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or similar conduct.

In such cases, the plaintiff may choose not to sue in tort, but instead to seek restitution on a quasi-contract theory (an election referred to at common law as “waiving the tort and suing in assumpsit”).” (McBride, supra, 123 Cal. App. 4th at 388.) “Under the law of restitution, “[a]n individual is required to make restitution if he or she is unjustly enriched at the expense of another. [Citations.] A person is enriched if the person receives a benefit at another’s expense. [Citation.]” [Citation.]

However, “[t]he fact that one person benefits another is not, by itself, sufficient to require restitution. The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals, it is unjust for the person to retain it. [Citation.]” ‘ “ (McBride, supra, 123

Cal. App. 4th at 389.) “Moreover, a person otherwise entitled to restitution may lose that entitlement if “restitution would seriously impair the protection intended to be afforded by common law or by statute to persons in the position of the transferee or of the beneficiary, or to other persons.” (Rest., Restitution, § 62, p. 241.)” (McBride, supra, 123 Cal. App. 4th at 389.)

“In such circumstances, restitution is required “only if the following three conditions are met: [¶] (a) Liability in restitution may not subject the defendant to a forced exchange .... This condition is likely to be satisfied if the benefit realized by the defendant [¶] ... [¶] ... saves the defendant an otherwise necessary expense .... [¶] (b) Absent liability in restitution, the claimant will not be compensated for the performance in question, and the defendant will retain the benefit of the claimant’s performance free of any liability to pay for it. [¶] (c) Liability in restitution will not subject the defendant to an obligation from which it was understood by the parties that the defendant would be free.” (§ 25, subd. (2), p. 368, citation omitted.)” (Pro. Tax Appeal v. Kennedy-Wilson Holdings, Inc. (2018) 29 Cal. App. 5th 230, 239 (“Pro. Tax”).)

“ ‘ “[A] bona fide purchaser is generally not required to make restitution.” [Citation.] But, “[a] transferee with knowledge of the circumstances surrounding the unjust enrichment may be obligated to make restitution.” ‘ “ (Pro. Tax, supra, 29 Cal. App. 5th at 241.)

Plaintiff alleges Lenders received payment, proceeds, or other benefits from vehicles which Plaintiff held superior rights in. (FAC ¶ 94.) Lenders accepted the benefits by accepting and relying on fraudulent, counterfeit, or manipulated titles created and submitted by Prestige/Akbar. (FAC ¶¶ 30, 95.) The Lender’s interests are tainted by fraud and manipulation of titles and DMV records. (FAC ¶ 31.)

Plaintiff failed to identify any specific vehicle(s) purchased by, controlled by, or possessed by LAFCU. Plaintiff failed to allege any benefit Plaintiff provided to LAFCU, or any benefit LAFCU received due to any performance, service, or actions by Plaintiff. Instead, Plaintiff alleges Lenders received or continue to receive payments from nonparty purchasers under LAFCU’s direct contracts with the purchasers. (FAC ¶ 32.) Plaintiff also stated that it does not allege Lenders participated in the creation or manipulation of title records and fraudulent titles. (FAC ¶¶ 94-95, 99.) Plaintiff made no allegations that LAFCU and the other lenders were aware of the fraudulent title records or how they would have been aware as they were not the purchasers of the subject vehicles.

Plaintiff has not pled sufficient facts to support this COA. The demurrer is SUSTAINED with leave to amend as to this COA.

d) COA No. 9 – Commercial Reasonableness/Negligence

There is no COA for ‘commercial reasonableness’ and Plaintiff does not cite to any statute of case which states otherwise.

“The elements of a cause of action for negligence are well established. They are ’(a) a legal duty to use due care; (b) a breach of such legal duty; [and] (c) the breach as the proximate or legal cause of the resulting injury.' ” (Ladd v. Cty. of San Mateo (1996) 12 Cal. 4th 913, 917.) “[T]he existence of a duty is a question of law for the court.” (Kentucky Fried Chicken of Cal., Inc. v. Superior Court (1997) 14 Cal. 4th 814, 819.)

LAFCU argues there was no duty owed to Plaintiff, and Plaintiff has not alleged one. The matter cited by Plaintiff, Quartz of Southern California, Inc. v. Mullen Bros., Inc. (2007) 151 Cal. App. 4th 901, involved a cross-complaint with a negligent misrepresentation claim against a third party and not between the plaintiff and the defendant. Although there is discussion of commercial reasonableness in that case, it was in relation to a declaratory relief cause of action wherein the court determined the actions of taking a vehicle without the title were not commercially reasonable.

Here, Plaintiff alleged Lenders relied upon fraudulent documents which Lenders had no hand in creating. (FAC ¶ 99.) Plaintiff alleged Lenders ignored clear red flags, failed to conduct due diligence, and relied upon DMV records what were the product of fraud, manipulation, or statutory noncompliance. (FAC ¶ 100.) Lenders allegedly failed to inquire into the true chain of title or circumstances of the transfers. Lenders recorded liens based on these documents despite Plaintiff having the originals. (FAC ¶ 101.)

Even if there were a cause of action for ‘commercial reasonableness,’ which there does not appear to be, Plaintiff has only pled legal conclusions regarding LAFCU and the other lenders’ reasonableness and has actually pled facts that support the lenders and the DMV were unaware the titles were fraudulent, which would suggest the non-party purchasers were bona fide purchasers of value for the subject vehicles. Additionally, Plaintiff has only alleged economic damages. “In general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Rattagan v. Uber Techs., Inc. (2024) 17 Cal. 5th 1, 20.) As there are only allegations of economic damages, there cannot be a COA for negligence.

Plaintiff has not pled sufficient facts to support this COA. The demurrer is SUSTAINED with leave to amend as to this COA.

2) Motion to Strike

LAFCU’s motion to strike portions of the FAC is GRANTED in part and DENIED in part.

LAFCU moves to strike the following portions of the FAC pursuant to Civ. Proc. Code §§ 435 and 436(a):

- Paragraph 86(c) claim for punitive damages and exemplary damages; - Paragraph 92 claim for attorney fees; - The words reasonable attorney fees in item 11 of the Prayer; - The words post-judgment interest in item 12 of the Prayer; - The words pre-judgment interest in item 12 of the Prayer.

Plaintiff does not oppose the motion regarding the first three items as to LAFCU alone. (Opposition p. 2:3-6.) Plaintiff does seek punitive damages and attorney fees against defendants Prestige Kia Riverside dba Prestige Autos (“Prestige”) and Khalid Mohammed Akbar (“Akbar”). FAC ¶ 86c seeks punitive damages under the COA for conversion, which is pled only against the lender defendants (Lenders). Even if the Prayer only seeks punitive damages against Prestige/Akbar, FAC ¶ 86c still requests punitive damages against the Lenders.

Plaintiff has alleged no facts supporting malice, oppression, or fraud on the part of the Lenders (Civ. Code § 3294) to support punitive damages. There are also no allegations of contracts between Plaintiff and Lenders or any statement of code section that would permit Plaintiff to recover attorney fees from Lenders. The motion is GRANTED as to the first three items.

LAFCU argues post-judgment interest is improper as no judgment has been entered against LAFCU. However, post-judgment interest is permitted by law upon entry of judgment. The inclusion of a prayer for relief for post-judgment interest is proper even if it has not accrued. The motion is DENIED as to post-judgment interest.

As to prejudgment interest, there are no allegations of a specific amount owed to Plaintiff by LAFCU. ““ ‘Damages are deemed certain or capable of being made certain within the provisions of CC section 3287(a) where there is essentially no dispute between the parties concerning the basis of computation of damages if any are recoverable but where their dispute centers on the issue of liability giving rise to damage.’ [Citations].” [Citation.] Thus, “ ‘ “[t]he test for recovery of prejudgment interest under [Civil Code] section 3287, subdivision (a) is whether defendant actually know[s] the amount owed or from reasonably available information could the defendant have computed that amount. [Citation.]” [Citations.] “The statute ... does not authorize prejudgment interest where the amount of damage, as opposed to the determination of liability, ‘depends upon a judicial determination based upon conflicting evidence and it is not ascertainable from truthful data supplied by the claimant to his debtor.’ [Citations.]” [Citation.]

Thus, where the amount of damages cannot be resolved except by verdict or judgment, prejudgment interest is not appropriate. [Citation.]' [Citation.]” ‘ “ (Duale v. Mercedes-Benz USA, LLC (2007) 148 Cal. App. 4th 718, 729.)

The motion is GRANTED as to pre-judgment interest.

B) SchoolsFirst Federal Credit Union

1) Demurrer

Defendant SchoolsFirst Federal Credit Union (“Schools”) demurrer to the FAC is SUSTAINED.

Schools demurs to COA Nos. 5-9 based on failure to state a COA and a defect/misjoinder of parties. (Civ. Proc. Code § 430.10(d) and (e).)

As to COA numbers six through nine, the demurrer is SUSTAINED with leave to amend as noted in the LAFCU ruling above.

At to COA number five for declaratory relief, the demurrer is also SUSTAINED with leave to amend as discussed below.

“To qualify for declaratory relief, [a party] would have to demonstrate its action presented two essential elements: ‘(1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to [the party’s] rights or obligations.’ ”” (Jolley v. Chase Home Fin., LLC (2013) 213 Cal. App. 4th 872, 909.) “Declaratory relief generally operates prospectively to declare future rights, rather than to redress past wrongs.” [Emphasis added.] Id. “A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the respective parties under a written instrument and requests that these rights and duties be adjudged by the court.” (Maguire v.

Hibernia Sav. & Loan Soc. (1944) 23 Cal. 2d 719, 728.) “The purpose of a declaratory judgment is “to serve some practical end in quieting or stabilizing an uncertain or disputed jural relation.”’” (Id., at 729.) “Unlike coercive relief (such as damages, specific performance, or an injunction) in which a party is ordered by the court to do or to refrain from doing something, a declaratory judgment merely declares the legal relationship between the parties.” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal. 4th 888, 898.)

Plaintiff alleges there is an existing controversy between Plaintiff and Lenders concerning the rights and interests in the disputed vehicles, titles of the vehicles, and proceeds derived from the sale. (FAC ¶ 72.) Plaintiff states it is in possession of the original and legitimate title certificates and holds superior rights in the vehicles. (FAC ¶¶ 73-74.) The conflicting claims and titles create uncertainty as to the validity, priority, and enforceability of Plaintiff’s security interest and the rights of the Lenders. (FAC ¶¶ 75-76.) A judicial determination of the rights and duties of the parties is necessary. (FAC ¶ 77.)

Schools argues the Commercial Code and Vehicle Code extinguished Plaintiff’s interest in the subject vehicles once the vehicles were purchased in the ordinary course of business. (Comm. Code §§ 1201(a)(9) and 9320(a).) Further, “[t]he interest of a bona fide purchaser of a vehicle subject to registration under the Vehicle Code prevails over a technically perfected security interest which is not

disclosed on the certificate of ownership.” (T & O Mobile Homes, Inc. v. United California Bank (1985) 40 Cal. 3d 441, 455.)

Schools argues this is an issue that can be determined at the demurrer stage. “Generally, questions of reasonableness are regarded as questions of fact or mixed questions of law and fact. (See Schwartz v. Helms Bakery Limited (1967) 67 Cal.2d 232, 237, fn. 3, 60 Cal.Rptr. 510, 430 P.2d 68 [in the tort context, reasonableness is a mixed question of law and fact traditionally answered by juries].) Similarly, “courts generally treat commercial reasonableness as a question of factual determination for the jury, although some courts view it as a mixed question of law and fact.” (Abyad, Commercial Reasonableness in Karl Llewellyn’s Uniform Commercial Code Jurisprudence, supra, 83 Va.

L.Rev. at p. 451, fns. omitted.) In addition, “the question whether a buyer is in the ordinary course of business is indeed one of fact for purposes of appellate review.” ‘ “ (Brasher’s Cascade Auto Auction v. Valley Auto Sales & Leasing (2004) 119 Cal. App. 4th 1038, 1059.)

However, as noted by Schools, the purchasers of the subject vehicles are not parties to this action. It appears that they may need to be added to determine whether they were bona fide purchasers for value and whether their interests in the subject vehicles and/or payments is valid.

The demurrer is SUSTAINED with leave to amend as to this COA.

2) Motion to Strike

Schools’ motion to strike portions of the FAC is GRANTED in part and DENIED in part as noted in the ruling on LAFCU above.

C) Navy Federal Credit Union

Defendant Navy Federal Credit Union’s (“Navy”) demurrer to the FAC is SUSTAINED.

As to COA numbers six through nine, the demurrer is SUSTAINED with leave to amend as noted in the LAFCU ruling above.

As to COA number five, the demurrer is SUSTAINED with leave to amend as noted in the Schools ruling above. The court will also note that while Navy argues this COA is derivative of the other COA, Plaintiff is permitted to plead in the alternative (Mendoza v. Cont’l Sales Co. (2006) 140 Cal. App. 4th 1395, 1402) even though Plaintiff has failed to plead sufficient facts to support this COA.

Plaintiff is granted leave to file an amended complaint within 10 days of written notice of the ruling.

LAFCU to give notice.

12. Frank v. SchoolsFirst Federal Credit Union 24-1400014 (Off calendar)