Court Opinion

ID: 6317751
Source: CourtListenerOpinion
Date Created: 2022-02-25 20:02:21.745837+00
Date Added: 2024-06-11T09:00:44.015502
License: Public Domain

Filed 2/25/22 Hekmat v. MidFirst Bank CA2/8
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                        SECOND APPELLATE DISTRICT

                                     DIVISION EIGHT

CYRUS HEKMAT,                                                 B305801

        Plaintiff and Appellant,                             (Los Angeles County
                                                             Super. Ct. No. SC126852)
         v.

MIDFIRST BANK,

        Defendant and Respondent.

     APPEAL from a judgment of the Superior Court of Los
Angeles County, Craig D. Karlan, Judge. Affirmed.

     Ervin Cohen & Jessup and David N. Tarlow for Plaintiff
and Appellant.

     Hinshaw & Culbertson and Michael A. S. Newman for
Defendant and Respondent.

                           _____________________________
       Plaintiff and appellant Cyrus Hekmat sued his cousin
Jonathan Mahboubi, Candice Hassid, and MidFirst Bank, among
others, alleging claims arising from a loan plaintiff made to
Mr. Mahboubi. Plaintiff alleged Mr. Mahboubi made
misrepresentations to induce him to make the loan.
      Ms. Hassid, who worked for a division of MidFirst Bank, is
Mr. Mahboubi’s fiancée. She set up two wire transfers by which
plaintiff made the loans to Mr. Mahboubi. Plaintiff alleged
Ms. Hassid knew about her fiancé’s fraud when she made the
wire transfers. Ms. Hassid also told plaintiff she could assist him
in obtaining a line of credit from the bank, but she never did.
      Plaintiff alleged the bank had respondeat superior liability
for Ms. Hassid’s tortious conduct. The bank did not lend any
funds to plaintiff or Mr. Mahboubi. Plaintiff opened a bank
account at the division where Ms. Hassid worked, through which
he made the wire transfers to Mr. Mahboubi. MidFirst Bank had
no other creditor/lender relationship with plaintiff.
      The trial court sustained the bank’s demurrer without
leave to amend, entered a judgment of dismissal, and plaintiff
appealed. We affirm.
                                FACTS
      Plaintiff sued his cousin Jonathan Mahboubi, the cousin’s
fiancée Candice Hassid, and MidFirst Bank, which is the only
respondent in this appeal. After many rounds of pleading and
demurrers (where the court rejected plaintiff’s theory that the
bank was vicariously liable for Ms. Hassid’s alleged torts),
plaintiff’s fifth amended complaint stated only one cause of action
against the bank for negligence.
      The fifth amended complaint alleged that on September 17,
2016, Mr. Mahboubi asked plaintiff for a short-term loan of

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$2 million for an “embarrassing personal emergency.” Plaintiff
did not know his cousin was a compulsive gambler, with millions
of dollars in gambling debts.
       Mr. Mahboubi agreed to repay the loan within nine
months, or immediately upon demand by plaintiff, and in no
event later than October 31, 2016, because plaintiff needed the
funds for pending real estate transactions. Mr. Mahboubi told
plaintiff he was owed a $5 million finder’s fee for a real estate
transaction. In reliance on this representation, plaintiff agreed
to make the loan. Plaintiff told Mr. Mahboubi he himself would
have to borrow money to finance the loan to his cousin, and they
agreed Mr. Mahboubi would reimburse plaintiff for the interest
and closing costs plaintiff incurred to borrow funds.
       Mr. Mahboubi introduced plaintiff to Ms. Hassid, a
business development officer and employee of 1st Century Bank,
“a division of MidFirst Bank.” Neither Mr. Mahboubi nor
Ms. Hassid disclosed their dating relationship to plaintiff.
Plaintiff and Ms. Hassid discussed plaintiff’s need to secure a line
of credit of $2 million to $4 million to refinance the loans he was
obtaining elsewhere to fund the loan to Mr. Mahboubi. Plaintiff
told Ms. Hassid he would open an account at her bank only if the
bank offered him the line of credit. Ms. Hassid informed plaintiff
that the bank “could provide Plaintiff with the required $2-
$4 million line of credit upon approval based on plaintiff’s
personal financial assets and his deposits at [the bank], and that
it would take 45-60 days to complete the credit line application
review process.”
       Plaintiff opened an account with 1st Century Bank,
Ms. Hassid’s employer. He gave Ms. Hassid various documents
in support of his credit line application but alleged she “failed to

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properly proceed with submittal of Plaintiff’s credit line
application for review and approval pursuant to the standard
operating procedures of [the bank].”
      Plaintiff lent Mr. Mahboubi a total of $1,862,388.89
through two intrabank transfers from plaintiff’s 1st Century
Bank account to his cousin’s account at the same bank. The first
transfer of $1,262,388.89 was made on September 23, 2016. The
second transfer of $600,000 was made on October 21, 2016.
Plaintiff and his cousin agreed Ms. Hassid would arrange for both
wire transfers. They also agreed Mr. Mahboubi would return the
$600,000 by wire transfer not later than October 31, 2016.
      On October 25, 2016, plaintiff texted Ms. Hassid, asking
her to confirm with Mr. Mahboubi that Mr. Mahboubi was setting
up the wire transfer to return the $600,000 as they had agreed.
Ms. Hassid agreed to follow up with Mr. Mahboubi, but she
“ultimately failed to notify Plaintiff that [Mr. Mahboubi] was not
setting up a wire transfer for the repayment of the $600,000 . . . .”
According to the complaint, Ms. Hassid knew Mr. Mahboubi
would not repay the $600,000.
      The complaint included some general allegations against
the bank. Despite “red flags” raised by Mr. Mahboubi and
Ms. Hassid’s conduct, MidFirst Bank continued to provide
services to Mr. Mahboubi which facilitated the fraud perpetrated
on plaintiff. Ms. Hassid and the bank were aware of the nature
of Mr. Mahboubi’s business activities, and “nevertheless turned a
blind eye to his suspicious activities.” The complaint also alleged
Ms. Hassid violated the bank’s internal policies and procedures,
and the bank “aided and abetted [Mr. Mahboubi] by repeatedly
providing [him] with banking services despite Hassid’s
knowledge of the misrepresentation regarding the ‘finder’s fee.’

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MidFirst Bank and Hassid repeatedly and willfully disregarded
their own guidelines and allowed transactions to occur which
should have been investigated and reported as suspicious
activity.”
      Plaintiff’s cousin did not repay the loan by October 31,
2016. Mr. Mahboubi told plaintiff the loan proceeds had been
withdrawn in cash, which was stolen from his home. On
November 21, 2016, his cousin told plaintiff he would not be
repaying him. Plaintiff learned from his uncle that his cousin
had never earned a finder’s fee and had millions of dollars in
gambling debts.
      On November 2, 2016, Ms. Hassid told plaintiff that she
had not yet submitted his credit line application for processing,
and texted plaintiff seeking information about the property he
proposed as collateral. Just a minute after texting that she was
starting to process the application, she texted that the bank
“won’t do it” and she was working with her mentor to “find the
perfect fit” and “get this done.”
      In the single cause of action for negligence against the
bank, plaintiff alleged the bank owed him a duty of care in
processing his credit line application. The bank breached that
duty by failing to “assess, process and complete” plaintiff’s
application “within the 45-60 days timeframe that Hassid had
informed Plaintiff it would take.” Plaintiff alleged Ms. Hassid did
not begin processing his application until 41 days after he
submitted it. The bank violated “customary banking standards”
by repeatedly failing to assess plaintiff’s creditworthiness.
Plaintiff was damaged because he had to seek a loan elsewhere,
when his creditworthiness had diminished, and he was unable to
qualify for an adequate loan. He did not have sufficient funds for

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his pending real estate transactions and lost his escrow deposits
and profits on those deals. Plaintiff also alleged the bank was
negligent because Ms. Hassid failed to advise plaintiff that
Mr. Mahboubi did not intend to repay the $600,000 wire transfer
he had promised to repay within two weeks.
       The bank demurred to the fifth amended complaint,
arguing that it owed plaintiff no duty, because there was no
lender/creditor relationship between plaintiff and the bank; there
was no breach of any duty, because the complaint alleged
plaintiff’s application was timely processed; and any alleged
failure to timely process the credit line application did not cause
plaintiff damages since the bank had no obligation to issue a line
of credit to plaintiff. Regarding the $600,000 wire transfer, the
bank argued it had no duty to inform plaintiff whether or not
Mr. Mahboubi had set up a wire transfer to repay the funds, and
the alleged failure to inform plaintiff did not cause him damages;
instead, his damages were caused by Mr. Mahboubi failing to
repay the loan.
       The trial court sustained the demurrer without leave to
amend, finding the bank had no duty to extend credit to plaintiff,
and the bank was not liable under respondeat superior for
Ms. Hassid’s alleged torts because she did not act in the course or
scope of her employment. This appeal timely followed the
resulting judgment of dismissal.
                            DISCUSSION
       A demurrer tests the legal sufficiency of a complaint. We
review the complaint de novo to determine whether it alleges
facts sufficient to state a cause of action. For purposes of review,
we accept as true all material facts alleged in the complaint, but
not contentions, deductions or conclusions of fact or law. We also

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consider matters that may be judicially noticed. (Blank v.
Kirwan (1985) 39 Cal.3d 311, 318.) When a demurrer is
sustained without leave to amend, “we decide whether there is a
reasonable possibility that the defect can be cured by
amendment: if it can be, the trial court has abused its discretion
and we reverse; if not, there has been no abuse of discretion and
we affirm.” (Ibid.)
1.     Negligence
       The elements of a cause of action for negligence are
defendant’s breach of a duty of care that was the proximate or
legal cause of the resulting injury. (Nally v. Grace Community
Church (1988) 47 Cal.3d 278, 292–293.) Here, plaintiff’s
negligence claim is based on the bank’s failure to assess his
creditworthiness and process his credit line application. These
allegations, as a matter of law, do not support a negligence claim
because plaintiff has not articulated a legal theory to support his
claim the bank owed him a duty to extend him a line of credit.
On the facts alleged, the bank had no obligation to approve
plaintiff’s credit line application. (Accord, Wagner v. Benson
(1980) 101 Cal.App.3d 27, 35 [bank owed no duty of care to
borrower in approving loan; liability to a borrower for negligence
in making a loan “arises only when the lender ‘actively
participates’ in the financed enterprise ‘beyond the domain of the
usual money lender’ ”].)
       Plaintiff also did not allege facts or a legal theory to
support his claim the bank caused him damages, either for failing
to give him a line of credit, or for Ms. Hassid failing to confirm
that Mr. Mahboubi had set up a wire transfer to return the
$600,000 to plaintiff. These omissions did not cause plaintiff’s
damages. Mr. Mahboubi caused plaintiff’s damages by failing to

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repay the money he borrowed from plaintiff. There is simply no
causal nexus between Mr. Mahboubi’s default on the loan, and
the bank’s or Ms. Hassid’s conduct.
       We are not persuaded by plaintiff’s argument the complaint
stated sufficient facts to show the bank has respondeat superior
liability for plaintiff’s claims that Ms. Hassid aided and abetted
fraud, negligence, and negligent interference with prospective
economic advantage.
       The doctrine of respondeat superior imposes liability upon
an employer for an employee’s torts committed in the course and
scope of their employment. (Lisa M. v. Henry Mayo Newhall
Memorial Hospital (1995) 12 Cal.4th 291, 296–297.) Respondeat
superior liability is not strict liability, and the employer is not
liable for every tortious act committed by its employee while
working. (Bailey v. Filco, Inc. (1996) 48 Cal.App.4th 1552, 1560.)
       Plaintiff contends Ms. Hassid acted within the scope of her
authority to open new accounts, coordinate intrabank wire
transfers, and process plaintiff’s application for a line of credit.
But the employer is not liable under the doctrine of respondeat
superior if the employee’s tortious actions are not required or
incident to the performance of his or her duties, and are not a
generally foreseeable consequence of the employer’s activity.
(Bailey v. Filco, Inc., supra, 48 Cal.App.4th at p. 1559.) “If an
employee’s tort is personal in nature, mere presence at the place
of employment and attendance to occupational duties prior or
subsequent to the offense will not give rise to a cause of action
against the employer under the doctrine of respondeat superior.”
(Alma W. v. Oakland Unified School Dist. (1981) 123 Cal.App.3d
133, 140.) “ ‘[E]mployees do not act within the scope of
employment when they abuse job-created authority over others

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for purely personal reasons.’ ” (M.P. v. City of Sacramento (2009)
177 Cal.App.4th 121, 132.)
       The facts alleged here are that Ms. Hassid abused her
authority as a business development officer and employee of
1st Century Bank in order to help her fiancé swindle
approximately $2 million from his cousin, with whom the bank
had no previous relationship. Her acts conferred no benefit upon
the bank but were, instead, in violation of bank policies and
procedures. On these facts, Ms. Hassid did not act within the
course and scope of her employment.
2.     Leave to Amend
       “The plaintiff bears the burden of proving there is a
reasonable possibility of amendment. . . . [¶] To satisfy that
burden on appeal, a plaintiff ‘must show in what manner he can
amend his complaint and how that amendment will change the
legal effect of his pleading.’ . . . The plaintiff must clearly and
specifically set forth the ‘applicable substantive law’ . . . and the
legal basis for amendment, i.e., the elements of the cause of
action and authority for it. Further, the plaintiff must set forth
factual allegations that sufficiently state all required elements of
that cause of action. . . . Allegations must be factual and specific,
not vague or conclusionary. . . . [¶] The burden of showing that a
reasonable possibility exists that amendment can cure the defects
remains with the plaintiff; neither the trial court nor this court
will rewrite a complaint. . . . Where the appellant offers no
allegations to support the possibility of amendment and no legal
authority showing the viability of new causes of action, there is
no basis for finding the trial court abused its discretion when it
sustained the demurrer without leave to amend. . . .” (Rakestraw

                                 9
v. California Physicians’ Service (2000) 81 Cal.App.4th 39, 43–44,
citations omitted.)
       On appeal, the plaintiff must state in the opening brief
what new or different facts can be alleged to cure the defective
pleading. “A party may propose amendments on appeal where a
demurrer has been sustained, in order to show that the trial
court abused its discretion in denying leave to amend. [Citation.]
However, the vague claim that ‘concerns’ could be ‘address[ed]’ by
an amendment or there may be a type of relief ‘that will not
conflict with the [ground relied upon by the court in sustaining
the demurrer]’ does not satisfy an appellant’s duty to spell out in
his brief the specific proposed amendments on appeal.” (People ex
rel. Brown v. Powerex Corp. (2007) 153 Cal.App.4th 93, 112.)
       “[T]here is nothing in the general rule of liberal allowance
of pleading amendment which ‘requires an appellate court to hold
that the trial judge has abused his discretion if on appeal the
plaintiffs can suggest no legal theory or state of facts which they
wish to add by way of amendment.’ [Citation.]” (Careau & Co. v.
Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371,
1387–1388.)
       Plaintiff says nothing in his opening brief about what new
or different facts he could add to cure the defects in the fifth
amended complaint. He says only in the concluding paragraph of
his opening brief that he should be given leave to amend to add
causes of action for aiding and abetting fraud and negligent
interference with prospective economic advantage. To
demonstrate an abuse of discretion, plaintiff was required to
state specific facts he could add and provide legal authorities
showing the new and different facts would support each element

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of the proposed new causes of action. Plaintiff has failed to show
the trial court abused its discretion.
                          DISPOSITION
       The judgment is affirmed. MidFirst Bank may recover its
costs on appeal.

                        GRIMES, Acting P. J.

      WE CONCUR:

                        STRATTON, J.

                        HARUTUNIAN, J.*

*     Judge of the San Diego Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.

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