Court Opinion

ID: 3184543
Source: CourtListenerOpinion
Date Created: 2016-03-10 19:12:57.819298+00
Date Added: 2024-06-11T13:14:07.443616
License: Public Domain

Filed 3/10/16 Vanacore and Assoc. v. Rosenfeld CA3
                                           NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                      THIRD APPELLATE DISTRICT
                                                      (El Dorado)
                                                            ----

VANACORE AND ASSOCIATES, INC.,                                                               C076017

                   Plaintiff and Appellant,                                    (Super. Ct. No. PC20130167)

         v.

KENNETH ROSENFELD,

                   Defendant and Respondent.

         This case arises under California’s Unclaimed Property Law (Unclaimed Property
Law or UPL). Plaintiff Vanacore and Associates, Inc., dba Vanacore International
(Vanacore), a private investigation firm that specializes in the recovery of unclaimed
property, entered into a memorandum of understanding (MOU) with defendant Kenneth
Rosenfeld. The MOU contemplated that Vanacore would locate and recover shares of
stock belonging to Rosenfeld in exchange for a fee. After signing the agreement,
Rosenfeld found and recovered the shares himself and refused to pay Vanacore’s fee.
Vanacore sued for breach of contract, fraud, and unjust enrichment. Rosenfeld demurred
on the ground that the MOU violates the Unclaimed Property Law, which precludes

                                                             1
certain asset recovery agreements. The trial court sustained the demurrer without leave to
amend, finding the MOU illegal and unenforceable. We affirm.
                                   I. BACKGROUND
       Because this appeal is from an order sustaining a demurrer, we take the facts from
the complaint, the allegations of which are deemed true for the limited purpose of
determining whether Vanacore has stated a viable cause of action. (See Stevenson v.
Superior Court (1997) 16 Cal. 4th 880, 885.) We also consider matters that are properly
the subject of judicial notice. (Serrano v. Priest (1971) 5 Cal. 3d 584, 591.)
       Vanacore “locates lost assets and the reputed owners thereof and then contacts the
reputed owners notifying them of assets that were reported as unclaimed, lost, or
otherwise.” On April 5, 2011, Vanacore personnel saw a notice on the State Controller’s
website entitled, “Notice of Property Being Held by Business” (SCO notice). A copy of
the SCO notice is attached as Exhibit A to Vanacore’s complaint.
       The SCO notice reads, in part: “As the administrator of the State’s Unclaimed
Property Program, this notice is intended to reunite you with your property before it is
sent to the State. The business named below has notified our office that it has property
that appears to belong to you and has been unsuccessful in contacting you. . . . [¶] To
claim your property, you must contact the business listed below and present proof that
you are the owner of the property. Otherwise, the business is required to send your
property to the State Controller’s Office, Unclaimed Property Division. We urge you to
contact the business to claim your property. To stop your property from being sent to
the State, you must contact the business. The State Controller’s Office does not
have your property at this time.”
       The SCO notice goes on to say, “If you do not contact the business by
5/31/2011[], the business is required by state law to send it to the State Controller’s
Office for safekeeping.” The SCO notice explains that the owner of the property may file
a claim for the property with the Controller, however, the Controller is required to sell
securities after a specified time. The SCO notice reiterates, “Again, to stop your

                                              2
property from being sent to the State, you must contact the business below. The
State Controller’s Office does not have your property at this time.”
         The SCO notice identifies the “business” as Penson Financial Services Inc.
(Penson), and the property held by Penson as 394 shares of Apple stock. The SCO notice
identifies Rosenfeld as the owner of the Apple stock and provides Rosenfeld’s last known
address. The SCO notice also recites two dates: “Date Reported: 11/12/2010” and
“Date of Last Contact: 5/31/2007.”
         Vanacore located Rosenfeld and contacted him. Vanacore explained that it had
located assets that appeared to belong to Rosenfeld. Vanacore also explained that the
assets would be turned over to the Controller unless claimed. Rosenfeld responded that
he wanted to retain Vanacore to recover the assets for him.
         The parties entered into the MOU on April 5, 2011. Under the MOU, Vanacore
agreed to notify Rosenfeld in writing of the name of the business holding the unclaimed
property, and Rosenfeld agreed to pay Vanacore a 10% finder’s fee. The MOU does not
disclose the nature or value of the property, or the name and address of the entity in
possession of the property.
         Vanacore identified Penson as the holder of the Apple stock in a facsimile to
Rosenfeld dated April 5, 2011. Armed with the name of the holder, Rosenfeld then
contacted Penson directly, reclaimed the Apple stock, and refused to pay Vanacore.
Vanacore commenced the present action against Rosenfeld on March 27, 2013.
Vanacore’s complaint asserts causes of action for breach of contract, fraud, and unjust
enrichment. The complaint attaches copies of the SCO notice and MOU as exhibits.
         Rosenfeld demurred to Vanacore’s complaint on June 20, 2013. Rosenfeld
argued, inter alia, that the MOU violates Code of Civil Procedure section 1582,1 which
invalidates certain agreements to locate, deliver or recover property. Specifically, section

1   Undesignated statutory references are to the Code of Civil Procedure.

                                              3
1582 invalidates agreements “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.” Under section 1582, 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.” Vanacore opposed the demurrer, arguing that
section 1582 does not apply because the Apple stock had not been delivered to the
Controller, and therefore, Vanacore claimed, had not escheated at the time the parties
entered the MOU.
       Rosenfeld’s demurrer was heard on November 8, 2013. On November 21, 2013,
the trial court issued a nine-page order sustaining the demurrer without leave to amend.
In the order, the trial court reviewed the applicable provisions of the Unclaimed Property
Law, noting that “[Vanacore] confuses the concept of escheat with the requirement of
delivery of the property to the [SCO] after the property is reported to have escheated
under the applicable provisions of the Unclaimed Property Law.”
       The trial court explained, “The complaint alleges the MOU was signed by
[Rosenfeld] 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 . . . 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.” Accordingly, the trial court concluded, “The complaint fails to allege
sufficient facts to establish a valid contract was entered into.”
       Turning to the question of whether leave to amend should be granted, the trial
court explained, “The defect concerning whether or not the agreement was executed after

                                              4
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 [Penson] would be required by law to turn the asset over to the State Controller.
[Citation.] 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 trial court continued, “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.” Accordingly, the trial court sustained the demurrer to the breach of
contract cause of action without leave to amend.
       The trial court then considered Vanacore’s fraud cause of action. The trial court
observed that, “the underlying premise of the fraud cause of action is to recover damages
for an intent not to perform an agreement where [Vanacore] admittedly refused to
identify the holder of the funds until [Rosenfeld] signed and returned to [Vanacore] 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 [Vanacore] who had a duty mandated by statute to
disclose that information in the agreement.” Relying on the rule that “a contract against
public policy . . . may not be made the foundation of any action, either in law or in
equity” (Hooper v. Barranti (1947) 81 Cal. App. 2d 570, 574), the trial court concluded
that Vanacore failed to state a cause of action for fraud and there was no reasonable
possibility the defect could be cured by amendment.

                                              5
       The trial court then considered Vanacore’s claim for unjust enrichment. The trial
court observed that Vanacore’s claim for unjust enrichment, like the rest of the
complaint, “is solely based upon an invalid, illegal agreement.” The trial court
recognized that illegal contracts may be enforced in “compelling cases” in order to
“avoid unjust enrichment and a disproportionately harsh penalty upon the plaintiff.”
(Corrie v. Soloway (2013) 216 Cal. App. 4th 436, 450.) Nevertheless, the trial court
observed, “There are no allegations of compelling circumstances where a
disproportionately harsh penalty would be imposed upon [Vanacore].” Rather, the trial
court continued, “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.” Furthermore, the trial
court concluded, “The Legislature must have clearly foreseen exactly such a result when
declaring agreements that do not meet the requirements of Section 1582 are invalid.”
Accordingly, the trial court sustained the demurrer to the claim for unjust enrichment
without leave to amend.
       The trial court entered a judgment of dismissal on March 5, 2014. Vanacore filed
a timely notice of appeal.
                                    II. DISCUSSION
A.     Standard of Review
       “It is well established that a demurrer tests the legal sufficiency of the complaint.
[Citations.] On appeal from a dismissal entered after an order sustaining a demurrer, we
review the order de novo, exercising our independent judgment about whether the
[complaint] states a cause of action as a matter of law. [Citations.] We give the
[complaint] a reasonable interpretation, reading it as a whole and viewing its parts in
context. [Citations.] We deem to be true all material facts that were properly pled.
[Citation.] We must also accept as true those facts that may be implied or inferred from
those expressly alleged. [Citation.] We may also consider matters that may be judicially
noticed, but do not accept contentions, deductions or conclusions of fact or law.

                                              6
[Citation.]” (City of Morgan Hill v. Bay Area Air Quality Management Dist. (2004) 118
Cal. App. 4th 861, 869-870; see also Blank v. Kirwan (1985) 39 Cal. 3d 311, 318; Bock v.
Hansen (2014) 225 Cal. App. 4th 215, 226.) “If the allegations in the complaint conflict
with the exhibits, we rely on and accept as true the contents of the exhibits.” (SC
Manufactured Homes, Inc. v. Liebert (2008) 162 Cal. App. 4th 68, 83; accord, Holland v.
Morse Diesel Internat., Inc. (2001) 86 Cal. App. 4th 1443, 1447 [“If facts appearing in the
exhibits contradict those alleged, the facts in the exhibits take precedence”].)
B.     Overview of the Unclaimed Property Law
       “The UPL governs the state’s handling and disposition, generally through the
controller, of property such as bank accounts and securities, held by entities such as
banks, brokerage firms, and insurance companies, the owners of which have not
acknowledged or claimed their interest in for several years, generally three. Such
property by statute escheats, nonpermanently, and the holder must transfer it to the
controller.” (Morris v. Chiang (2008) 163 Cal. App. 4th 753, 755-756.) “ ‘The UPL is not
a permanent or “true” escheat statute. Instead, it gives the state custody and use of
unclaimed property until such time as the owner claims it. Its dual objectives are “to
protect unknown owners by locating them and restoring their property to them and to
give the state rather than the holders of unclaimed property the benefit of the use of it,
most of which experience shows will never be claimed.” ’ [Citations.]” (Azure Ltd. v. I-
Flow Corp. (2009) 46 Cal. 4th 1323, 1328 (Azure).)
       The present case involves shares of stock, which are governed by section 1516.
(Azure, supra, 46 Cal.4th at p. 1328.) Under section 1516, “Stock will escheat to the
state if (1) its owner has neither claimed a dividend nor corresponded in writing or
otherwise indicated an interest in the stock for over three years, and (2) the corporation
does not know the owner’s location at the end of the three-year period. (§ 1516, subd.
(b).) With respect to this stock, the statute provides that the corporation ‘shall be deemed
the holder.’ (Ibid.)” (Azure, supra, at p. 1328.)

                                              7
       Under section 1516, the holder “must make reasonable efforts to notify the stock’s
owner of the impending escheat. (§ 1516, subd. (d).) The [holder] must give this notice
between six and 12 months before the stock becomes reportable to the Controller.
(Ibid.)” (Azure, supra, 46 Cal.4th at p. 1329.)
       If the owner does not respond to the holder’s notice, the property is deemed
unclaimed, and the holder must report to the Controller “the name, if known, and last
known address, if any, of each person appearing from the records of the holder to be the
owner of any property of value of at least fifty dollars ($50) escheated under this
chapter.” (§ 1530, subd. (b)(1).)
       After the holder reports the unclaimed property to the Controller, but before the
property is transferred, “the Controller shall mail a notice to each person having an
address listed in the report who appears to be entitled to property of fifty dollars ($50) or
more escheated under this chapter.” (§ 1531, subd. (d).) The Controller’s notice must
state that property is being held, provide the name and the address of the person who may
be entitled to it, and give the name and address of the holder. (§ 1531, subd. (e).)
       If the owner does not respond to the notice, the property is transferred to the
Controller. (§ 1532, subds. (a)-(b).) Under section 1532, subdivision (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.” If the owner
claims the stock during the approximately seven month period, the holder does not
deliver the property to the Controller, but instead files a different report. (§ 1532, subd.
(b); Azure, supra, 46 Cal.4th at p. 1329.)
       “The Controller assumes custody of escheated property it has received and, if it
has commercial value, eventually sells it. (§§ 1560, subd. (a), 1563.) ‘Securities listed
on an established stock exchange shall be sold at the prevailing prices on that exchange.’
(§ 1563, subd. (b).) A person who claims an interest in the property ‘may file a claim to
the property or to the next proceeds from its sale.’ (§1540, subd. (a).) ‘If the Controller

                                              8
grants the claim, the Controller returns the property or the proceeds from its sale to the
claimant . . . .’ [Citation.]” (Azure, supra, 46 Cal.4th at p. 1330.)
       Within one year of after payment or delivery of escheated property, “the
Controller shall cause a notice to be published, in a newspaper of general circulation
which the Controller determines is most likely to give notice to the apparent owner of the
property.” (§ 1531, subd. (a).) The purpose of the notice is “to inform owners about the
possible existence of unclaimed property identified pursuant to this chapter.” (§ 1531,
subd. (f).)
C.     Section 1582
       Section 1582 precludes asset recovery agreements during the window of time
between the filing of a holder’s report under section 1530 and when the Controller
publishes notice that the state has received delivery of unclaimed property under section
1531: “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.” (§ 1582.) The trial court correctly determined that section
1582 invalidates the MOU.
       As noted, the complaint attaches the SCO notice, which states, “Date Reported:
11/12/2010.” The trial court interpreted the SCO notice to mean that Penson reported the
Apple stock as unclaimed pursuant to section 1530 on November 12, 2010. The trial
court’s interpretation of the SCO notice was reasonable. The SCO notice indicates the
report was filed some three years after the last contact with Rosenfeld, an interval that
coincides with the three year period in which stock escheats. (§ 1516.) The SCO notice
also indicates the report was filed on November 12, 2010, a date that roughly coincides

                                               9
with the November 1 deadline for filing section 1530 reports.2 (§ 1530, subd. (d).) Thus,
the SCO notice sets forth a chronology that strongly suggests that Penson filed a section
1530 report on November 12, 2010, thereby triggering section 1582.
       The complaint does not specify whether the Controller published notice pursuant
to section 1531, subdivision (a). Nevertheless, the trial court reasonably inferred that the
Controller would not have published the section 1531 notice until after the parties entered
into the MOU on April 5, 2011.3 The SCO notice clearly states that the shares of Apple
stock were in Penson’s custody, and would not be delivered to the Controller until after
May 31, 2011. The Controller’s statutory duty to publish notice pursuant to section 1531
does not arise until after the property is delivered. (§ 1531, subd. (a).) Thus, the SCO
notice, which is incorporated into the complaint, confirms that the section 1531 notice
could not have been published at the time the parties entered into the MOU. We
therefore conclude that the MOU was “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.” (§ 1582.) Furthermore, even assuming the MOU was entered after the
publication of the section 1531 notice, the MOU fails to disclose “the nature and value of
the property and the name and address of the person or entity in possession of the

2 We acknowledge that Penson’s section 1530 report appears to have been filed 12 days
late.
3 In the order, the trial court opined, “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 [UPL]
[citation], and provides such information to allow recovery of the property prior to the
escheated property being delivered to the State. [Citations.]” Vanacore takes the trial
court to task for suggesting that the SCO notice was published pursuant to section 1531.
However, the trial court did not say that the SCO notice was published pursuant to
section 1531. The trial court merely stated that the SCO notice “effectuates the intent of
section 1531.” Section 1531 “is intended to inform owners about the possible existence
of unclaimed property identified pursuant to this chapter.” (§ 1531, subd. (f).) We
perceive no error in the trial court’s observation that the SCO notice was intended to
inform owners about the possible existence of unclaimed property.

                                             10
property.” (§ 1582.) We therefore conclude, on the face of Vanacore’s complaint, that
the MOU is invalid under section 1582.
       Vanacore attempts to avoid this conclusion in two ways. First, Vanacore argues
that the delivery of unclaimed property to the Controller is a “mandatory condition
precedent to the application of section 1582” and the limitations that statute places on
asset recovery agreements. Second, Vanacore claims that the SCO notice was published
pursuant to section 1531.5 of the Unclaimed Property Law, prior to delivery, escheat and
the filing of the section 1530 report. We address these contentions in turn.

       1.     Section 1582 Focuses on the Filing of the Section 1530 Report, Not the
              Delivery of the Property
       The Legislature amended the Unclaimed Property Law in 2007. (Stats. 2007,
ch. 179, § 1, eff. Aug. 24, 2007.) Among other things, the Legislature modified section
1532, which sets forth the procedure for delivering unclaimed property to the Controller.
(Stats. 2007, ch. 179, § 4.) Prior to amendment, former section 1532 required holders to
“pay or deliver to the Controller all escheated property specified in the [section 1530]
report at the same time the report is filed.” (Former § 1532, subd. (a).) Section 1532,
subdivision (a) now requires the holder to deliver the property to the Controller “no
sooner than seven months and no later than seven months and 15 days after the final date
for filing the [section 1530] report.” (§ 1532, subd. (a).) Thus, the Unclaimed Property
Law now contemplates that holders will retain the property for approximately seven
months after the section 1530 report is filed.
       Relying on the above-described amendment, Vanacore argues: “There is no
restriction on asset recovery agreements during this pre-delivery period, because the
property is still in the hands of private parties and not in the custody of the Controller.”
We are not persuaded.
       Although the Legislature introduced a seven month interval between the filing of
the section 1530 report and the delivery of the property to the Controller, and made
extensive changes elsewhere, section 1582 was not changed. Had the Legislature

                                              11
intended to create a seven-month window for asset recovery agreements, as Vanacore
suggests, it would have amended section 1582 to specifically state that the prescribed
period begins on the date of delivery. Having made no such changes to section 1582, we
must assume that the Legislature intended for the statute to continue to be triggered by
the filing of the section 1530 report, despite the fact that the holder does not deliver the
property to the Controller for approximately seven months. (See Rosenthal v. Cory
(1977) 69 Cal. App. 3d 950, 953 [“The Legislature is presumed to know the existing law
and have in mind its previous enactments when legislating on a particular subject”].) We
therefore reject Vanacore’s contention that section 1582 does not apply to agreements
entered prior to delivery of the property.
       We likewise reject Vanacore’s suggestion that the Legislature cannot regulate
asset recovery agreements prior to the time unclaimed property is delivered to the
Controller. We need not consider Vanacore’s implied challenge to the Legislature’s
power to regulate asset recovery agreements prior to delivery, as Vanacore fails to
support the argument with reasoned analysis and authority. (Dabney v. Dabney (2002)
104 Cal. App. 4th 379, 384 [“We need not consider an argument for which no authority is
furnished”]; Badie v. Bank of America (1998) 67 Cal. App. 4th 779, 784-785 [failure to
support contention with reasoned argument and citations to authority results in waiver].)
       We further observe that the Court of Appeal for the First District, Division 1,
rejected a similar challenge to section 1582 in Goodman v. Cory (1983) 142 Cal. App. 3d
737, 742 (Goodman). In Goodman, a licensed private investigator challenged section
1582 on constitutional grounds, arguing, inter alia, that the statute infringed upon his
right to pursue a lawful business. (Goodman, supra, at p. 741.) The court of appeal
rejected the investigator’s constitutional challenge, stating: “While the state cannot
suppress or prohibit legitimate business relationships [citation,] there is no fundamental
vested right to conduct business entirely free of reasonable governmental rules and
regulations. [Citations.] The state in the exercise of its police power has the recognized
authority to enact laws to promote the public health, safety, morals and general welfare.

                                              12
[Citation.] . . . [¶] . . . We recognize that section 1582 imposes certain restrictions upon
appellant’s right to engage in the business of private probate searches. But the statute on
its face neither precludes appellant from pursuing his occupation nor imposes
unreasonable limitations [on] the performance of his business activities. As appellant
concedes, the statute was enacted to protect the public from overcharging for recovery of
unclaimed property by unscrupulous probate searchers. Thus, we conclude that the
statute furthers a legitimate goal by rational means.” (Goodman, supra, at pp. 741-742,
footnote omitted.) Applying the reasoning set forth in Goodman, we would reject
Vanacore’s implied challenge to section 1582, assuming the issue was properly before us,
which it is not.
       2.     Vanacore Misinterprets Section 1531.5
       Next, Vanacore contends that the SCO notice was published pursuant to section
1531.5, which was promulgated in 2007 and requires the Controller to implement a
notification program for owners of unclaimed property. (§ 1531.5, subd. (a), added by
Stats. 2007, ch. 179, § 3, eff. Aug. 24, 2007.) According to Vanacore, the “newly
created notification program” requires the Controller to give notice before the property
escheats and before the holder files the section 1530 report. Taking the argument a step
further, Vanacore also suggests that the SCO notice predates the section 1530 report. We
perceive several problems with Vanacore’s argument.
       At the outset, we reject Vanacore’s contention that the SCO notice was published
prior to escheat. We reiterate that shares of stock escheat to the state if (1) the owner has
neither claimed a dividend nor corresponded in writing or otherwise indicated an interest
in the stock for over three years, and (2) the corporation does not know the owner’s
location at the end of the three-year period. (§ 1516, subd. (b).) The holder’s duty to file
a section 1530 report does not arise until after the unclaimed property escheats. (§ 1530,
subd. (a) [“Every person holding funds or other property escheated to this state under this
chapter shall report to the Controller as provided in this section”].)

                                              13
       Here, the SCO notice indicates that unclaimed shares of stock were “reported” on
November 12, 2010, three years after the last contact with Rosenfeld. Again, as a matter
of law, shares of stock are typically deemed to have escheated after contact is lost with
the owner for three years. (§1516.) As discussed, the trial court reasonably interpreted
the SCO notice to mean that Penson reported the shares as unclaimed pursuant to section
1530 on November 12, 2010. Because the holder’s duty to file a section 1530 report does
not arise until after unclaimed property escheats, and because, as the trial court
reasonably concluded, the SCO notice refers to the filing of the report, the SCO notice in
this case could not have been provided “pre-escheat.” More importantly, the SCO notice
at issue here could not have been provided prior to the filing of the section 1530 report.
       We also reject Vanacore’s contention that shares of stock do not escheat until they
are delivered to the Controller. Vanacore’s argument is inconsistent with the statutory
scheme, which contemplates that (1) shares escheat by operation of law after three years
(§ 1516, subd. (b)), (2) the holder reports the escheated shares to the Controller pursuant
to section 1530 (§ 1530, subd. (a)), and (3) the holder delivers the shares to the Controller
approximately seven months later (§ 1532, subd. (a)). Moreover, and more to the point,
Vanacore’s argument ignores the plain meaning of section 1582. As previously
discussed, section 1582 focuses on the filing of the section 1530 report, not the delivery
of unclaimed property to the Controller. The trial court reasonably determined—and
Vanacore does not deny—that Penson filed the section 1530 report on November 12,
2010, before the parties entered into the MOU and before the publication of notice
pursuant to section 1531. Thus, the MOU was “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.” (§ 1582.) Under section 1582, the MOU was invalid, regardless of the
fact that the Apple shares had not been delivered to Controller.
       The trial court concluded that section 1582 operates as a complete defense to
Vanacore’s complaint. Although Vanacore challenges the trial court’s conclusion that
section 1582 applies, Vanacore does not challenge the further conclusion that section

                                             14
1582 operates as a complete defense. Accordingly, having independently concluded that
section 1582 applies, we further conclude that section 1582 bars Vanacore’s complaint.
       D.     First Amendment
       Vanacore contends the trial court’s interpretation of section 1582 “creates direct
encumbrances on commercial free speech in the form of solicitations by [Vanacore] that
cannot withstand constitutional scrutiny under the framework established in Central
Hudson Gas & Elec. Corp. v. Public Serv. Comm. of N.Y. (1980) 447 U.S. 557 [(Central
Hudson)] and Zauderer v. Office of Disciplinary Counsel of Sup. Ct. of Ohio (1985) 471
U.S. 626 [(Zauderer)].” Vanacore offers no explanation as to how the trial court’s
interpretation of section 1582 encumbers commercial speech. Consequently, Vanacore’s
First Amendment challenge to section 1582 has been waived. (Moulton Niguel Water
Dist. v. Colombo (2003) 111 Cal. App. 4th 1210, 1215 [“Contentions are waived when a
party fails to support them with reasoned argument”].)
       Furthermore, we perceive nothing in the trial court’s interpretation of section 1582
that restricts or penalizes speech. Though section 1582 invalidates certain asset recovery
agreements, the statute does not target speech. Even assuming that section 1582 has an
incidental effect on speech, the First Amendment does not protect commercial speech
that proposes an illegal transaction. (See Central Hudson, supra, 447 U.S. at pp. 563-564
[“The government may ban . . . commercial speech related to illegal activity”]; Zauderer,
supra, 471 U.S. at p. 638 [“The States and the Federal Government are free to prevent the
dissemination of commercial speech that . . . proposes an illegal transaction”]; see also
Fla. Bar v. Went For It, Inc. (1995) 515 U.S. 618, 623-24 [“Under Central Hudson, the
government may freely regulate commercial speech that concerns unlawful activity”].)
       Here, the complaint describes only one instance of commercial speech:
Vanacore’s invitation to enter into the MOU. As previously discussed, the MOU violates
section 1582, and is therefore invalid. It follows that Vanacore’s invitation to enter into
the MOU constitutes an invitation to enter into an illegal transaction, which is not entitled
to First Amendment protection. (Pittsburgh Press Co. v. Pittsburgh Com. on Human

                                             15
Relations (1973) 413 U.S. 376, 389 [“Any First Amendment interest which might be
served by advertising an ordinary commercial proposal and which might arguably
outweigh the governmental interest supporting the regulation is altogether absent when
the commercial activity is itself illegal and the restriction on advertising is incidental to a
valid limitation on economic activity”].) Therefore, even assuming that Vanacore’s First
Amendment challenge to section 1582 was properly before us, we would reject it.
       E.     State and Federal Securities Laws
       Next, Vanacore contends the trial court’s “interpretation of the UPL . . . interferes
with the state and federal laws that regulate securities, because it proposes to regulate the
relationship of shareholders and their stock ‘pre-escheat.’ ” As previously discussed,
Rosenfeld’s Apple shares escheated by operation of law before the parties entered into
the MOU, thereby negating Vanacore’s premise that section 1582 regulates securities
“pre-escheat.” We therefore reject Vanacore’s contention that the trial court’s
interpretation of the Unclaimed Property Law impermissibly regulates securities “pre-
escheat,” or otherwise interferes with the operation of state or federal securities laws.
       F.     Leave to Amend
       Finally, Vanacore contends “the complaint in question could have been amended.”
Vanacore bears the burden of showing the defects in its complaint are capable of being
cured by amendment. (Schifando v. City of Los Angeles (2003) 31 Cal. 4th 1074, 1081;
Arce v. Children’s Hospital Los Angeles (2012) 211 Cal. App. 4th 1455, 1497, fn. 19.)
“ ‘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.”
[Citation.] The assertion of an abstract right to amend does not satisfy this burden.’
[Citation.] The plaintiff must clearly and specifically state ‘the legal basis for
amendment, i.e., the elements of the cause of action,’ as well as the ‘factual allegations
that sufficiently state all required elements of that cause of action.’ [Citation.]” (Maxton
v. Western States Metals (2012) 203 Cal. App. 4th 81, 95.)

                                              16
       Vanacore’s proposed amendment to the complaint is premised upon the allegation
that “Penson was merely the clearing house or transfer agent for the stock.” According to
Vanacore, “[i]t is highly unusual for the owner of stock to contact the clearing house as
the owner’s contact point is his or her broker.” Therefore, Vanacore concludes, “the
Apple stock likely was not subject to escheat as the date of last contact listed in the [SCO
notice] (May 31, 2007) was inaccurate.”
       Vanacore has failed to show how the complaint might be amended to state a cause
of action. The allegation that Penson was a clearing house or transfer agent does not,
without more, establish that the “Date of Last Contact” in the SCO notice was inaccurate.
Vanacore merely speculates that the “Date of Last Contact” was supplied by Penson (as
opposed to Rosenfeld’s broker) and further speculates that the date was incorrect. Mere
speculative allegations are not enough to carry Vanacore’s burden of showing how the
complaint could be amended, particularly when Vanacore’s new allegations contradict
the exhibits to Vanacore’s complaint. (See Shuster v. BAC Home Loans Servicing, LP
(2012) 211 Cal. App. 4th 505, 513 [rejecting speculative allegations about note's forgery
where the plaintiffs were “unable to articulate any facts supporting this theory or
demonstrating prejudice”].) We therefore conclude that Vanacore has failed to
demonstrate how the complaint could be amended to state a cause of action.

                                             17
                                    III. DISPOSITION
      The judgment is affirmed. Respondent Kenneth Rosenfeld shall recover his costs
on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)

                                                            /S/

                                                 RENNER, J.

We concur:

        /S/

RAYE, P. J.

           /S/

HULL, J.

                                            18