AUTO FINANCE SOLUTIONS, LLC. vs. WELLS FARGO BANK, NATIONAL ASSOCIATION, et al.

CASE NO.: 26NWCV01310 HEARING: 8/26/26 @ 9:30 AM #14

Defendant Wells Fargo Bank, N.A's Demurrer is OVERRULED in part and SUSTAINED in part with 20 days leave to amend, as set forth below. Defendant's Motion to Strike is GRANTED with 20 days leave to amend. Plaintiff to give NOTICE. Defendant Wells Fargo Bank, N.A (Wells Fargo) generally demurs to Plaintiff AUTO FINANCE SOLUTIONS, LLC.'s (AFS) First Amended Complaint (FAC) as to the first through eighth causes of action for uncertainty and failure to state sufficient facts to constitute a cause of action pursuant to sections 430.10(e) and 430.10(f) of the California Code of Civil Procedure.

Background

In the operative FAC filed on May 7, 2026, AFS alleges that it is a secured inventory lender engaged in the business of financing motor-vehicle inventory for automobile dealerships, commonly known as floorplan financing. Wells Fargo was engaged in the business of motor-vehicle retail financing, by directly

extending consumer credit or acquiring retail installment sale contracts, chattel paper, accounts, or other payment rights arising from dealer vehicle sales. (FAC, P. 10.) In connection with AFS's floorplan financing, Dealers acquired motor-vehicle inventory financed by AFS. (FAC P. 11.) AFS obtained and held rights in the AFS Vehicles and their proceeds, retained original title documents, filed a UCC-1 financing statement, and did not authorize the AFS Vehicles to be sold, financed, assigned, titled, or registered free and clear of its rights unless AFS was first paid or released its interest. (FAC P.P. 14-20, Exh. 2.)

The FAC further alleges that the Dealers sold one or more AFS Vehicles in out-of-trust transactions, and that Wells Fargo engaged in transactions in which it either funded the retail sales or acquired the resulting Retail Paper. (FAC P.P. 21-24.) Wells Fargo allegedly did so without confirming whether the Dealers possessed original title documents, whether AFS held title rights or security interests, or whether payoff to AFS was required before the vehicles could be transferred free and clear of AFS's rights. (FAC P.P. 25-30.)

As a result, AFS alleges that Wells Fargo received or retained proceeds, Retail Paper, payment rights, reserves, credits, deposits, and other benefits generated by those transactions. (FAC P.P. 28-34.) Based thereon AFS asserts the following causes of action: 1. Conversion; 2. Recovery of Identifiable Proceeds (Cal. Comm. Code Sec.Sec. 9315, 9607); 3. Impairment of Security Interest (Cal. Comm. Code Sec.Sec. 9315, 9607); 4. Negligence; 5. Unfair Business Practices (Bus. & Prof. Code Sec. 17200); 6.

Unjust Enrichment / Restitution; 7. Accounting; 8. Declaratory Relief; 9. Injunctive Relief Against DMV. Meet and Confer The Court finds the parties adequately met and conferred as required under Code of Civil Procedure Sec. 430.41. (Dressel Decl., P. 2.)

Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian

v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (CCP Sec.Sec. 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A "demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law." (S.

Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732, internal citations omitted.) "Liberality in permitting amendment is the rule, if a fair opportunity to correct any defect has not been given." (Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227.) It is an abuse of discretion for the court to deny leave to amend where there is any reasonable possibility that plaintiff can state a good cause of action. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) The burden is on plaintiff to show¿ in what manner ¿plaintiff can amend the complaint, and¿ how ¿that amendment will change the legal effect of the pleading. ¿(Id.)

Discussion

First Cause of Action: Conversion The basic elements of the tort of conversion are (1) the plaintiff's ownership or right to possession of personal property; (2) the defendant's disposition of the property in a manner that is inconsistent with the plaintiff's property rights; and (3) resulting damages. (Regent Alliance Ltd. v. Rabizadeh (2014) 231 Cal.App.4th 1177.) Wells Fargo argues that AFS's conversion claim fails to identify specific, identifiable property or money that Wells Fargo allegedly converted.

The FAC describes the allegedly converted property through generic terms and comprehensive lists, which include "proceeds, Retail Paper, payment rights, reserves, credits, and other benefits generated by the disposition or financing of AFS's collateral," and even identifies proceeds to include "funding amounts, assigned Retail Paper, receivables, reserves, credits, deposits, and payment streams traceable to each vehicle." (FAC P.P. 36, 39.) Additionally, Wells Fargo argues that a conversion claim fails where the plaintiff cannot establish a specific, identifiable sum. (PCO, Inc. v.

Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal. App. 4th 384, 396-97.) Here, the FAC alleges damages without specifying any dollar amount attributable to any individual vehicle. In opposition, AFS argues that the conversion claim does not seek to impose liability on retail purchasers in their capacity as purchasers of AFS Vehicles. (FAC P. 36.) Instead, the First Cause of Action is directed at Wells Fargo's alleged exercise of dominion and control over proceeds, Retail Paper, payment rights, reserves, credits, and other benefits generated by the disposition or financing of AFS's collateral. (FAC P. 36.)

Moreover, Plaintiff argues that the FAC does not allege a generalized debt. It alleges specific and identifiable

proceeds generated by particular Wells Fargo Transactions involving the AFS Vehicles, including funding amounts, assigned Retail Paper, receivables, reserves, credits, deposits, and payment streams traceable to each vehicle identified in Exhibit 1. (FAC P. 39.) The FAC further alleges that Wells Fargo engaged in Wells Fargo Transactions without paying AFS, without obtaining a payoff from AFS, and without obtaining a release of AFS's rights. (FAC P.P. 40-42.) The Court finds that AFS has alleged sufficient facts to constitute this cause of action.

The Court finds that Wells Fargo's reliance on PCO is unpersuasive. The PCO court considered a motion for summary judgment where money could not be the subject of a conversion action unless a specific sum capable of identification was involved. (PCO, Inc., supra, 150 Cal. App. 4th at 396-97.) The Court reasoned that the gravamen of the tort is the defendant's hostile act of dominion or control over a specific chattel to which the plaintiff has the right of immediate possession. Money can only be treated as specific property subject to being converted when it is "identified as a specific thing." (Ibid.)

By contrast, here, AFS's allegations at the pleading stage are sufficient as to the specific vehicles identified in Exhibit 1 to the FAC. AFS alleges an ownership interest in "specific and identifiable proceeds generated by particular Wells Fargo Transactions involving the AFS Vehicles, including funding amounts, assigned Retail Paper, receivables, reserves, credits, deposits, and payment streams traceable to each vehicle identified in Exhibit 1." (FAC P. 39, Exh. 1.) AFS alleges Wells Fargo's disposition of the property in a manner that is inconsistent with AFS's property rights. "Wells Fargo nevertheless engaged in a Wells Fargo Transaction and paid value in connection with the sale of one or more AFS Vehicles before AFS was paid and before the Dealers had authority to transfer those vehicles free and clear of AFS's rights." (FAC P. 27.)

The Court notes that the property need not be appropriated to the defendant; it may be destroyed, or merely damaged. (See Hernandez v. Lopez (2009) 180 Cal.App.4th 932, 939 [cause of action labeled "intentional tort" stated claim for conversion; business owners alleged that prospective buyers sold business that did not belong to them to third party.]) Finally, AFS alleges resulting damages in that "Defendant Wells Fargo's conduct materially impaired AFS's ability to realize upon its collateral position and recover the proceeds, Retail Paper, payment streams, reserves, credits, and other benefits generated by the sale and financing of the AFS Vehicles." (FAC P. 32.)

Accordingly, the demurrer to the first cause of action is OVERRULED. Second Cause of Action: Recovery of Identifiable Proceeds; Third Cause of Action: Impairment of Security Interests California Uniform Commercial Code section 9607, subdivision (a), permits a secured party

to "(2) [t]ake any proceeds to which the secured party is entitled under Section 9315 [of the Commercial Code][;] [P.] [and] [e]nforce the obligations of an account debtor or other person obligated on collateral and exercise the rights of the debtor with respect to the obligation of the account debtor or other person obligated on collateral to make payment or otherwise render performance to the debtor, and with respect to any property that secures the obligations of the account debtor or other person obligated on the collateral."

Wells Fargo argues that the Second and Third Causes of Action fail because AFS's proceeds claim is allegedly extinguished or subordinate under Cal. Com. Code Sec.Sec. 9320 and 9330, and because the FAC allegedly fails to plead identifiable, traceable proceeds. (Demurrer, pp. 7-8.) The Court finds that AFS fails to state sufficient facts to constitute a cause of action. Here, Wells Fargo is not the "account debtor" - that is, "a person obligated on an account, chattel paper, or general intangible."

Cal. Com. Code Sec. 9102(a)(3). An "obligor" is defined as a person who "owes payment or other performance of the obligation" secured by the collateral. Cal. Com. Code Sec. 9102(a)(59). Indeed, AFS alleges the account debtors to be the Dealers. Therefore, section 9607, subdivision (a) is inapplicable to Wells Fargo. (FAC P.P. 21-24.) Accordingly, the demurrer to the second and third causes of action is SUSTAINED with 20 days leave to amend. Fourth Cause of Action: Negligence NEGLIGENCE: The elements are: 1) Legal duty owed to plaintiffs to use due care; 2) breach of duty; 3) causation; and 4) damage to plaintiff. (Ladd v.

County of San Mateo (1996) 12 Cal.4th 913, 917.) There is no recovery in tort for "negligently inflicted 'purely economic losses,' meaning financial harm unaccompanied by physical or property damage." (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal. 5th 905, 922; see Aas v. Sup. Ct. (2000) 24 Cal. 4th 627, 636 ["In actions for negligence, a manufacturer's liability is limited to damages for physical injuries; no recovery is allowed for economic loss alone."].) "[T]he rule functions to bar claims in negligence for pure economic losses in deference to a contract between litigating parties." (Sheen, 12 Cal. 5th at 922; see Robinson Helicopter Co., Inc. v.

Dana Corp. (2004) 34 Cal. 4th 979, 988 ["Quite simply, the economic loss rule 'prevent[s] the law of contract and the law of tort from dissolving into the other.'"].) The Court finds that AFS has sufficiently plead negligence at this stage of the proceedings. California law imposes a general duty to exercise due care to avoid causing foreseeable harm to others. (Civil Code section 1714(a).) AFS alleges that reasonable care required Wells Fargo to inquire whether the vehicles were subject to another party's title rights, security interests, or payoff requirements before engaging in a Wells Fargo Transaction. (FAC P. 73.)

Wells Fargo allegedly failed to to determine whether AFS held title documents

or security interests, and engaged in Wells Fargo Transactions before AFS was paid or released its rights. (FAC P.P. 74-76.) The negligence cause of action is not barred by the economic loss rule because AFS has alleged a property interest in the Vehicles. (FAC P. 39, Ex. 1.) AFS alleges its physical property interest has been damaged given the "impairment of its secured position." (FAC P. 80.) The Court determines that AFS has adequately alleged negligence at the pleading stage. Accordingly, the demurrer to the fourth cause of action is OVERRULED.

Fifth Cause of Action: Unfair Competition Law; Sixth Cause Of Action: Unjust Enrichment Unfair business practices under Business and Professions Code Section 17200 et seq., also known as the Unfair Competition Law (UCL), "shall mean and include any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." (Bus. & Prof. Code Sec. 17200.) "A plaintiff alleging unfair business practices . . . must state with reasonable particularity the facts supporting the statutory elements of the violation." (Khoury v.

Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 619.) Because "there is no cause of action in California for unjust enrichment," the demurrer to the sixth cause of action is SUSTAINED without leave to amend. (Levine v. Blue Shield of California (2010) 189 Cal.App.4 th 1117, 1138.) Standing under the UCL is established only where the plaintiff "has suffered injury in fact and has lost money or property" as a result of the alleged unfair practices. (B&P Code Sec. 17204.) Plaintiff pursues claims based on the "unlawful," "unfair," and "fraudulent" prongs. "Unlawful" conduct includes any business practice or act forbidden by local, state or federal statutes or by regulations or case law. (Munson v.

Del Taco, Inc. (2009) 46 Cal.4th 661, 676.) With regard to the fraudulent prong, a plaintiff " 'proceeding on a claim of misrepresentation as the basis of his or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions.' " (Kwikset Corp v. Superior Court (2011) 51 Cal.4th 310, 362; see also Bus. & Prof. Code Sec. 17204.) Put another way, "a UCL fraud plaintiff must allege he or she was motivated to act or refrain from action based on the truth or falsity of a defendant's statement, not merely on the fact it was made." (Id. at p. 326, fn. 10.)

An "unfair business practice" under California law, for purposes of a claim under Unfair Competition Law (UCL), is one that either offends an established public policy or is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers. (McDonald v. Coldwell Banker (9th Cir.2008) 543 F.3d 498, 506.) The Court finds that AFS fails to plead the fifth cause of action under the Unfair Competition Law. AFS fails to plead fraud with the required specificity. Fraud must be pleaded with specificity rather than with general

and conclusory allegations. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4 th 167, 184.) AFS fails to allege facts showing how, when, or where Wells Fargo misrepresented something to AFS, omitted a fact that was contrary to a representation that Wells Fargo made to Plaintiff, or omitted a fact that Wells Fargo had an obligation to disclose to AFS. Similarly, AFS fails to allege an unfair or unlawful business practice by Wells Fargo. As to the unlawful prong, AFS fails to allege with specificity which statutes or regulations were violated by Wells Fargo.

As to the unfair prong, there are no allegations that Wells Fargo's conduct was so harmful as to violate public policy. Accordingly, the demurrer to the fifth cause of action is SUSTAINED with 20 days leave to amend. Seventh Cause of Action: Accounting; Eighth Cause of Action: Declaratory Relief An action for an accounting has two elements: (1) that a relationship exists between the plaintiff and defendant that requires an accounting and (2) that some balance is due the plaintiff that can only be ascertained by an accounting. (Sass v.

Cohen (2020) 10 Cal.5th 861, 869.) The Court finds that AFS fails to demonstrate that a relationship existed between it and Wells Fargo sufficient to state a cause of action for accounting. Declaratory relief operates prospectively, serving to set controversies at rest. If there is a controversy that calls for a declaration of rights, it is no objection that past wrongs are also to be redressed; but there is no basis for declaratory relief where only past wrongs are involved. Hence, where there is an accrued cause of action for an actual breach of contract or other wrongful act, declaratory relief may be denied. (See Osseous Technologies of America v.

DiscoveryOrtho Partners, LLC (2010) 191 Cal.App.4th 357, 366.) Here, AFS alleges harm which has already accrued: "one or more of the AFS Vehicles were sold or otherwise disposed of without first paying AFS the amounts required to satisfy the corresponding AFS floorplan advances." (FAC, P. 133.) Thus, AFS fails to state facts sufficient to constitute a cause of action for declaratory relief. Accordingly, the demurrer to the seventh and eighth causes of action is SUSTAINED with 20 days leave to amend.

Motion to Strike The grounds for a motion to strike are that the pleading has irrelevant, false or improper matter, or has not been drawn or filed in conformity with laws. (CCP Sec.436.) When the defendant is a business entity, Sec. 3294(b) requires authorization, ratification, or personal malice by an officer, director, or managing agent. Whether an individual is a "managing agent" turns on substantial discretionary authority over corporate policy, a fact question rarely resolvable on the pleadings. (White v.

Ultramar, Inc. (1999) 21 Cal.4th 563, 577; Roby v. McKesson Corp. (2009) 47 Cal. 4th 686, 714-715.) In order to plead a prima facie claim for punitive damages, a plaintiff must plead the ultimate facts from which it can reasonably be

inferred that a defendant acted with "oppression, fraud, or malice" against the plaintiff within the meaning of Civil Code Sec. 3294. (Coil. Hosp., Inc. v. Superior Court (1994) 8 Cal.4th 704, 721; Cyrus v. Haveson (1976) 65 Cal.App.3d 306, 316-317.) Wells Fargo moves to strike punitive and/or exemplary damages allegations from the FAC. California Civil Code section 3294 authorizes the recovery of punitive damages in non-contract cases where "the defendant has been guilty of oppression, fraud, or malice . . . ." (Civ. Code Sec. 3294(a).) Because the Court SUSTAINED the demurrer to the fraud-derived causes of action, the motion to strike punitive damages is GRANTED with 20 days leave to amend. Case Number: 26NWCV01693 Hearing Date: August 26, 2026 Dept: C LUBEN vs DAMCO CUSTOMS SERVICES INC., et al.