Court Opinion

ID: 9956651
Source: CourtListenerOpinion
Date Created: 2024-04-02 18:02:02.676237+00
Date Added: 2024-06-11T08:17:44.364192
License: Public Domain

Filed 4/2/24 Zagaris v. Farmers Insurance Group Federal Credit Union CA5

                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 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 This opinion has not been certified for publication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

                                       FIFTH APPELLATE DISTRICT

 KAY ZAGARIS et al.,
                                                                                             F084758
           Plaintiffs and Appellants,
                                                                             (Super. Ct. No. CV-20-001252)
                    v.

 FARMERS INSURANCE GROUP FEDERAL                                                          OPINION
 CREDIT UNION,

           Defendant and Respondent.

         APPEAL from a judgment of the Superior Court of Stanislaus County. John R.
Mayne, Judge.
         McCormick, Barstow, Sheppard, Wayte & Carruth and Todd W. Baxter for
Plaintiffs and Appellants.
         Clyde & CO US, Douglas J. Collodel; Weintraub Zolkin Talerico & Selth and
James R. Selth for Defendant and Respondent.
                                                        -ooOoo-
       Appellants, Kay Zagaris (Kay) and Neal Groesbeck (Neal),1 appeal after the trial
court sustained respondent’s, Farmers Insurance Group Federal Credit Union (the Credit
Union), demurrer and dismissed three causes of action asserted against the Credit Union.
Appellants contend they have viable causes of action against the Credit Union arising out
of a trust dispute between appellants and Bette Groesbeck (Bette). Bette is appellants’
father’s, Bernard Groesbeck (Ben), second wife. Ultimately, we agree that the trial court
erred in dismissing at least one cause of action on demurrer and therefore reverse the trial
court’s order and remand for further proceedings.
                   FACTUAL AND PROCEDURAL BACKGROUND
       As this case was decided on a demurrer, the relevant facts come from the operative
pleading, appellants’ second amended complaint. This complaint was filed after an
action originally filed against Ben was consolidated with an action against Kay that had
been filed by the Credit Union. In the first amended complaint—filed prior to
consolidation—the Credit Union was added as a defendant under a cause of action
alleging it assisted in financial elder abuse conducted by Bette. After consolidation and a
demurrer to the first amended complaint that was sustained with leave to amend
regarding claims against the Credit Union, the second amended complaint (the complaint)
dropped the elder abuse claim but added three new causes of action, which we discuss
below. The complaint also contains claims against both Bette and the Credit Union. As
the claims against Bette and the counter claims against Kay were voluntarily dismissed to
effectuate this appeal, we do not discuss them in detail.
       The complaint begins with a recitation of general background facts purportedly
relating to all causes of action. The trust in this case was originally created by Ben and
his first wife, Elsie Groesbeck, in 1993. When Elsie died in 1994, the complaint

1       We refer to individuals by their first name for clarity, as several parties share the same
last name.

                                                 2.
contends Ben and Elsie’s assets were divided under the general trust into an exemption
trust and a survivor’s trust. The exemption trust was purportedly designed so it was
irrevocable and provided Ben with income for the rest of his life, before being split
between Kay and Neal.
       Ben later met Bette, and the two married in 1997. Both had substantial assets
prior to marriage and allegedly sought to maintain their assets separately throughout their
marriage.
       In 2017, Ben replaced Kay as the successor trustee to the survivor’s trust with
Bette. At the same time, he granted Bette a life estate in their personal residence. In
2019, Ben suffered a stroke, and his health began to decline. This decline in health
exacerbated existing problems in the family and allegedly led to serious conflicts between
Ben, Kay, and Bette regarding Ben’s care. The complaint alleges that during this time,
Bette began taking advantage of Ben, including by diverting Ben’s assets to Bette’s
personal use.
       More directly relevant to the claims brought against the Credit Union, the relevant
trust accounts were established with the Credit Union. Ben was the original trustee and
Kay and Neal were the original beneficiaries.
       The complaint alleges Ben became physically and mentally impaired after his
2019 stroke, such that he was locked out of his online account multiple times and
required the Credit Union’s assistance to use his account. In addition, the Credit Union’s
records show Ben gave his password and other confidential information to an unknown
third party in July 2019.
       Then, in March 2020, a Credit Union employee purposefully blocked an attempt
by Ben to transfer $77,000 from the exemption trust to Ben’s checking account because
Ben “was being coached to make the transfer.” This action was documented by the
employee. By April 2020, the complaint alleges Ben required assistance to complete any

                                             3.
transaction because he could hardly see, could no longer read, could not recall passwords,
could not use a computer, and suffered from dementia.
       At that same time, in April 2020, the complaint alleges, “Bette first made contact
with [the Credit Union] to gain control over the [exemption and survivor’s trusts].” The
complaint states that Bette “informed Debra Whitfield a [Credit Union employee], that
Ben was incapacitated, and she was his wife who wanted to disinherit Plaintiff Kay
Zagaris and gain control over the accounts as Trustee.”
       According to the complaint, Whitfield agreed to help and “painstakingly directed”
Bette on how to complete beneficiary forms to delete Kay. In addition, the complaint
asserts that Whitfield and others at the Credit Union created a new system for
modifications to trust accounts that relied on electronic signatures rather than physical
signatures to effectuate changes and used this system for the first time to make Bette’s
changes. This system allowed Bette’s daughter from a different marriage to create an e-
mail account on Ben’s behalf and sign the documents for him. These documents installed
Bette as the trustee for all of the trust assets and named her as the beneficiary for those
assets. They were purportedly signed by Ben between April 7 and May 2, 2020.
       Ben died on June 22, 2020. In October 2020, Neal went to the Credit Union in
order to obtain the assets due to him and Kay as beneficiaries. At the time, the Credit
Union issued checks to both Neal and Kay. Neal and Kay were both members at the
Credit Union aside from their interests in the trust assets. However, a problem with
Neal’s check meant it couldn’t be cashed and he had to return to the Credit Union
multiple times to obtain a proper check.
       On the third of these visits, Neal was met by a “Branch Lead Counselor” he had
previous interactions with and with whom “there was obvious tension” due to prior
interactions. The Credit Union refused to issue a corrected check and froze the remaining
assets in the trust accounts. Branch Support Operations Manager Myra Morales sent an
internal e-mail the same day the accounts were frozen to multiple people who were

                                              4.
involved with the disputed withdrawals. In that e-mail, Morales wrote, “Neal lied; he is
not a successor trustee.”
       Ultimately, the Credit Union conducted some form of an investigation and
determined internally that Bette was the proper beneficiary and successor trustee. It
released the remaining funds to Bette and filed a lawsuit to recover those funds that had
been issued to Kay.
       Appellants eventually sued to recover what they contend are their trust assets as
the proper beneficiaries and successor trustees to the relevant accounts. Three causes of
action were brought against the Credit Union, labeled the sixth through the eighth causes
of action in the complaint. The sixth cause of action alleges the Credit Union was liable
for aiding and abetting fraud and breach of fiduciary duty.2 The seventh cause of action
alleges the Credit Union was negligent in its actions. And the eighth cause of action
alleges the Credit Union defamed Neal in the aforementioned e-mail.
       The Credit Union demurred to the three causes of action brought against it, and the
trial court sustained the demurrer without leave to amend. The parties then dismissed the
remaining claims without prejudice, and this timely appeal followed.
                                        DISCUSSION
       The three causes of action asserted against the Credit Union all depend on
different factual and legal principles. Accordingly, we first consider our general standard
of review on an appeal from an order sustaining a demurrer before specifically discussing
each of the three causes of action. We conclude by considering whether leave to amend
was required on any cause of action properly subject to demurrer.

2      Notably, the fourth cause of action alleged against Bette claims a breach of fiduciary duty
based on Bette acting “against Neal and Kay’s interest in connection with the trust when she
changed the beneficiary of the trust to herself and excluded Kay from the trust” while making
“Neal a residual beneficiary after Bette.”

                                                5.
General Standard of Review and Applicable Law
       “A demurrer tests the legal sufficiency of the factual allegations in a complaint.”
(Regents of University of California v. Superior Court (2013) 220 Cal.App.4th 549, 558.)
“When a demurrer is sustained, appellate courts conduct a de novo review to determine
whether the pleading alleges facts sufficient to state a cause of action under any possible
legal theory.” (Gutierrez v. Carmax Auto Superstores California (2018) 19 Cal.App.5th
1234, 1242.) “When conducting this independent review, appellate courts ‘treat the
demurrer as admitting all material facts properly pleaded, but do not assume the truth of
contentions, deductions or conclusions of law.’ ” (Esparza v. Kaweah Delta Dist.
Hospital (2016) 3 Cal.App.5th 547, 552.) We may also consider matters subject to
judicial notice and will affirm the judgment if any ground for the demurrer is well taken.
(Ramirez v. Tulare County Dist. Attorney’s Office (2017) 9 Cal.App.5th 911, 924.)
Sixth Cause of Action—Aiding and Abetting Fraud and Breach of Fiduciary Duty
       Appellants sixth cause of action asserts that the Credit Union’s conduct aided and
abetted fraud and breach of fiduciary duty on the part of Bette. In its demurrer and again
on appeal, the Credit Union contends the facts alleged do not and cannot show that the
Credit Union had actual knowledge it was assisting in either fraud or breach of fiduciary
duty. We do not agree.
       Applicable Law
       “California has adopted the common law rule for subjecting a defendant to
liability for aiding and abetting a tort. ‘ “Liability may … be imposed on one who aids
and abets the commission of an intentional tort if the person (a) knows the other’s
conduct constitutes a breach of duty and gives substantial assistance or encouragement to
the other to so act or (b) gives substantial assistance to the other in accomplishing a
tortious result and the person’s own conduct, separately considered, constitutes a breach
of duty to the third person.” ’ ” (Casey v. U.S. Bank Nat. Assn. (2005) 127 Cal.App.4th

                                             6.
1138, 1144.) Knowledge is the critical element in the claim, as even ordinary business
transactions can constitute substantial assistance. (Id. at p. 1145.)
       “California courts have long held that liability for aiding and abetting depends on
proof the defendant had actual knowledge of the specific primary wrong the defendant
substantially assisted.” (Casey v. U.S. Bank Nat. Assn., supra, 127 Cal.App.4th at
p. 1145.) Accordingly, one alleging such a tort must be able to allege that the aider and
abettor had actual knowledge of a specific primary violation of the law—not just
generalized concerns that conduct might be improper. (Id. at p. 1148.) Thus, to test the
complaint, one must first identify the underlying tortious conduct or breach of fiduciary
duty allegedly aided and abetted. (Id. at p. 1149.)
       Appellants Have Properly Stated an Aiding and Abetting Cause of Action
       The complaint contains a wide-ranging set of allegations against Bette and the
Credit Union. However, within that set of allegations exists a proper indication of the
underlying offenses alleged and of the Credit Union’s actual knowledge of those wrongs.
Specifically, the complaint and the documents submitted show the Credit Union knew
Ben was the current trustee of the disputed trust accounts both because he was the one
attempting to move money from the accounts and because his signature was required to
change the beneficiaries and to make Bette the designated trustee on the account. The
complaint then alleges that the Credit Union knew Ben was being improperly coached as
of March 20, 2020, when a Credit Union employee “documented fraud and undue
influence in [Ben]’s home” after refusing a request to transfer $77,000 because Ben “was
being coached to make the transfer.” The allegations continue that the next month, in
April 2020, Bette worked with the Credit Union to execute several documents on behalf
of Ben that added Bette as the active trustee of the Trust and that disinherited Kay. As
part of these allegations, the complaint specifically alleges that Bette “informed Debra
Whitfield a [Credit Union employee], that Ben was incapacitated, and she was his wife

                                              7.
who wanted to disinherit Plaintiff Kay Zagaris and gain control over the accounts as
Trustee.”
       The first underlying primary wrong alleged is fraudulent conduct on behalf of a
nontrustee to gain control of the trust of an incapacitated trustee in order to disinherit
existing beneficiaries.3 The Credit Union was made aware of this conduct because, it is
alleged, Bette told the Credit Union Ben was incapacitated and that she wanted to be
named trustee to disinherit a beneficiary. Any alleged directives for such actions, given
by the incapacitated Ben, would likely be either invalid or fraudulent in nature. And an
unsupported claim Ben is incapacitated, warranting removal as trustee shortly after Ben
was prohibited from making a massive transfer on claims he was being improperly
coached, clearly indicates potential fraud. Finally, after learning Ben was incapacitated,
the Credit Union still drafted documents at Bette’s request for Ben’s signature and
accepted Ben’s electronic signature on those documents—further indicating it knew of
the fraud.
       While the truth of such a direct admission by Bette to the Credit Union is certainly
going to be heavily contested, at the pleading stage it is sufficient to indicate the Credit
Union knew of the underlying wrong of fraud by Bette in claiming she could currently be
designated by Ben as the trustee. (See Robinson Helicopter Co., Inc. v. Dana Corp.
(2004) 34 Cal.4th 979, 990 [“The elements of fraud are: (1) a misrepresentation (false
representation, concealment, or nondisclosure); (2) knowledge of falsity (or scienter);
(3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting
damage.”].)

3       We note the trial court appeared to conclude from the pleadings that Bette was already
the trustee when she acted. We do not agree that such a conclusion is mandated by the pleadings
as drafted. However, even if true, the primary wrong would still be properly pleaded as the
documents submitted identifying Bette as trustee in 2020 were electronically signed by Ben after
Bette informed the Credit Union he was incapacitated. Even if already installed as trustee, the
pleadings adequately disclose a claim the Credit Union knew Bette was committing fraud in
submitting documents signed by one she told the Credit Union was incapacitated.

                                               8.
       The second underlying primary wrong alleged is a planned breach of fiduciary
duty by a trustee acting to the detriment of the beneficiaries of an irrevocable trust and
contrary to the duty owed to the settlor of a revocable trust. (See Estate of Giraldin
(2012) 55 Cal.4th 1058, 1066, 1071 [explaining that trustee owed duty to settlor of
revocable trust while competent and that beneficiaries obtain standing to sue after death
of settlor if that duty is breached]; McMillin v. Eare (2021) 70 Cal.App.5th 893, 912 [“A
trustee has a duty to administer the trust, diligently and in good faith, in accordance with
the terms of the trust and applicable law. [Citation.] A trustee also owes a duty of
loyalty in that he [or she] has a duty to administer the trust solely in the interest of the
beneficiaries; this duty is frequently invoked as protection against creating conflicts
between a trustee’s fiduciary duties and personal interests.”].) Again, the core factual
assertion relevant to this is Bette’s alleged confession that Ben was incapacitated and that
she wished to become trustee to disinherit Kay. To the extent the trust was irrevocable—
either due to the death of Ben’s first wife or Ben’s incapacitation—such a change by a
trustee would violate the duty of loyalty to the existing beneficiaries. And to the extent
the trust was revocable, Ben’s incapacity meant that any actions taken after the change in
trustee would violate the trustee’s duty to act in conformity with the settlor’s intent.
       With respect to both allegations of an underlying primary wrong, the complaint
also adequately alleges the Credit Union supported Bette’s efforts by working with her to
make the changes after becoming aware of her tortious intent. Indeed, the complaint goes
further, claiming the Credit Union initiated unique procedures that had never been
completed electronically before in order to ensure Ben did not have to physically sign any
documents making the requested changes. As such, the complaint adequately states a
cause of action for aiding and abetting fraud or breach of fiduciary duty, and the trial
court erred in sustaining the demurrer.
       The Credit Union’s arguments in opposition to finding it had the relevant
knowledge and intent to assist focus on assertions the facts show the Credit Union was

                                               9.
operating under an assumption that Bette was the current trustee and could properly
request the changes made or that the trusts in question were not as immutable as the
pleadings suggest. Were the facts focused on by the Credit Union the exclusive facts
pleaded, its argument might carry the day. However, in none of the Credit Union’s
arguments does it tackle how it would lack knowledge of Bette’s tortious activities after
being directly told that Ben was incapacitated, that Bette wanted to become trustee, and
that Bette wanted to disinherit a beneficiary. Further, the Credit Union’s arguments do
not explain why, if it believed Bette was the correct trustee at the time because Ben was
incapacitated, it required Ben’s signature to make changes to the relevant accounts.
Taking the pleadings in the light most favorable to appellants, the facts alleged are
sufficient to support the sixth cause of action.
Seventh Cause of Action—Negligence
         Appellants’ seventh cause of action alleges negligence against the Credit Union.
In the demurrer and on appeal, the Credit Union contends no facts can support a
negligence cause of action because the Credit Union owes no duty to appellants. We
agree.
         Applicable Law
         “There is a wealth of case law defining the duties a bank owes to account holders.
Those duties do not include ‘policing’ other depositors’ accounts for fraud.” (Kurtz-
Ahlers, LLC v. Bank of America, N.A. (2020) 48 Cal.App.5th 952, 956 (Kurtz-Ahlers).)
The court in Kurtz-Ahlers provides a detailed summary of this case law, including a
discussion explaining that the duty owed to depositors is contractual in nature. This
limited duty is applied in a long line of cases confirming that banks owe no duty to those
that are not deposit holders when it comes to monitoring account activities. (Id. at
pp. 956–957.) The lone existing exception to this duty comes in a case limited primarily
to its facts that holds a bank cannot ignore, and must make a minimal inquiry regarding,
large checks written to the bank that are being deposited into an individual’s personal

                                             10.
account. (See id. at p. 957, discussing Sun ’n Sand, Inc. v. United California Bank (1978)
21 Cal.3d 671 (plur. opn. of Mosk, J.) (Sun ’n Sand).)
       The Credit Union Owed No Duty to Appellants to Prevent Fraudulent Conduct
       In the course of critiquing the trial court’s order, appellants recognize and
reference cases holding banks have no duty to police accounts, even when those accounts
are fiduciary or trust accounts. (See Chazen v. Centennial Bank (1998) 61 Cal.App.4th
532, 537 (Chazen).) However, appellants contend those cases are “clearly
distinguishable” because appellants were “account holders, successor trustees on one of
the trusts, and beneficiaries of the two trusts before being disinherited.” According to
appellants, failing to acknowledge a duty to prevent their fraudulent disinheriting because
they were fraudulently disinherited is improperly circular reasoning.
       We do not agree. For appellants’ claim of circular reasoning to stand, one must
assume that a duty was owed to appellants prior to their disinheriting. Thus, appellants
would need to identify a case or principle by which a non-signatory to a trust account
would be owed the same or similar duty owed to the signatory on the account.
Appellants have cited no such case or principle, and the court has found none. Rather, as
explained in Kurtz-Ahlers and Chazen, a bank’s duty is only contractual in nature and
only extends to the person that contracted with the bank regarding the relevant account.
(Chazen, supra, 61 Cal.App.4th at p. 537.) Thus, appellants’ status as contractual parties
to different accounts, as successor trustees on the underlying trusts, and as beneficiaries
of the trusts, are legally insufficient bases to claim a duty owed by the Credit Union to
appellants regarding an account contractually bound to a third party—even if that third
party is related to appellants.
       We further reject appellants’ argument that the facts of this case fall within the
limited exception requiring minimal inquiry contained in Sun ’n Sand and as applied in
Joffe v. United California Bank (1983) 141 Cal.App.3d 541. Both of those cases
involved situations where a bank accepted a check made out to one payee but deposited

                                             11.
into a different payee’s account without objective indicia showing the transaction was
proper. As Sun ’n Sand explained, “an attempt by a third party to divert the proceeds of a
check drawn payable to the order of a bank to the benefit of one other than the drawer or
drawee suggests a possible misappropriation” that creates a foreseeable risk of fraud that
a bank depositing the check ignores at its own peril. (Sun ’n Sand, supra, 21 Cal.3d at
pp. 694–695.) The risk of harm is so foreseeable in such circumstances that it definitely
outweighs any impact that additional inquiry would have on the banking system. (Id. at
p. 695.) No such similar facts exist here which would meet the limited exception defined
in Sun ’n Sand.
          Finally, we see no basis to create such a duty. In this case, the allegations contend
the Credit Union was presented with an improper attempt by the account holder to change
documents related to their account and that the Credit Union had information sufficient to
determine the change was fraudulently induced by the current trustee of the account.
While a potential basis exists to hold the Credit Union liable for damage done to the
account holder or to hold the trustee liable to those harmed by the fraud, we do not see an
exception to the general rule that the Credit Union has no general duty to supervise
account activities. Presented with an attempt by the account holder to make changes to
their own account, the foreseeability of harm to others is insufficient to warrant a general
duty of care and the burden on the banking system in scrutinizing all changes made by
elderly or otherwise at-risk account holders to their accounts is too great to justify such a
duty even if such harm was reasonably foreseeable. (See Sun ’n Sand, supra, 21 Cal.3d
at p. 695 [describing policy considerations balanced when imposing a duty to exercise
reasonable care in given circumstances].)
          The trial court therefore correctly sustained the demurrer on the seventh cause of
action.

                                               12.
Eighth Cause of Action—Defamation
       Appellants’ eighth cause of action alleges defamation by the Credit Union based
on an internal e-mail sent to employees. The Credit Union demurred on the ground the
facts alleged demonstrate as a matter of law that the common interest privilege applied
and that there was no allegation of malice. On appeal, appellants contend the alleged
defamatory communication does not fall within the privilege both because it was not
made in the course of the relevant business relationship and because the facts
demonstrate malice. The Credit Union contends the factual allegations regarding malice
are insufficient to overcome the privilege and that the identified communication is true,
regardless.
       Applicable Law
       “The tort of defamation ‘involves (a) a publication that is (b) false, (c) defamatory,
and (d) unprivileged, and that (e) has a natural tendency to injure or that causes special
damage.’ ” (Taus v. Loftus (2007) 40 Cal.4th 683, 720.)
       The common interest privilege, as set forth in Civil Code section 47,
subdivision (c), states that a privileged communication is one made “without malice, to a
person interested therein, (1) by one who is also interested, or (2) by one who stands in
such a relation to the person interested as to afford a reasonable ground for supposing the
motive for the communication to be innocent, or (3) who is requested by the person
interested to give the information.” The qualified privilege is recognized where the
common interest is “something other than mere general or idle curiosity, such as where
the parties to the communication share a contractual, business or similar relationship.”
(Hawran v. Hixson (2012) 209 Cal.App.4th 256, 287.)
       Malice, in the defamation context, is “a reckless or wanton disregard for the truth.”
(Hailstone v. Martinez (2008) 169 Cal.App.4th 728, 740.) It cannot be presumed from
the fact of the communication itself; a claim of malice must be supported by evidence.
(Barker v. Fox & Associates (2015) 240 Cal.App.4th 333, 354.) Further, the failure to

                                             13.
conduct a thorough investigation, alone, is insufficient to demonstrate malice. Rather, the
facts alleged must show something more, for example, the failure to investigate was in
purposeful avoidance of the truth or because there was no conflict in the available
evidence showing falsity. (Balla v. Hall (2021) 59 Cal.App.5th 652, 685.)
       The Common Interest Exception Applies Under the Facts as Pleaded
       The facts pleaded regarding the challenged communication make clear that the
common interest exception applies in this case. Appellants allege that one Credit Union
employee e-mailed another Credit Union employee in a manner allowing several other
Credit Union employees that were working on or aware of various aspects of the
withdrawal dispute to see the communication. Although the communication is alleged to
be defamatory, it also relates clearly to the ongoing dispute regarding who is a successor
trustee to the relevant account or accounts. While appellant attempts to label the
communication as mere “gossip,” this label does nothing to dispel the specific facts
alleged showing each recipient was an employee of the Credit Union and that the
communication was related to ongoing activities at the Credit Union. These facts satisfy
the statutory requirement that the relationship between those communicating affords
reasonable grounds for supposing the communication innocent. Even under the most
favorable reading to appellants, the communication falls generally within the common
interest exception.
       Appellants seek to overcome the general applicability by arguing they properly
pleaded malice. Appellants recognize that mere conclusions are insufficient to properly
plead malice. Yet, appellants argue an allegation that one failed “to use reasonable care
to determine truth or falsity of the statement before it was made” is “sufficient for
alleging malice for purposes of a demurrer.” Appellants then point to an assertion there
was “obvious tension” between Neal and one of the employees that heard the
communication and contend the facts permit an inference that “Morales had grounds to

                                             14.
believe Neal, but consciously chose not to, instead, defaming him with her malicious, and
reckless disregard for the truth .…”
       We find none of these factual allegations or arguments sufficient to demonstrate
appellants properly pleaded malice in this case. The lack of a meaningful investigation is
insufficient to demonstrate malice. (Balla v. Hall, supra, 59 Cal.App.5th at p. 685.) And
the facts allegedly showing more than a mere lack of investigation are neither specific nor
directly tied to the making of the communication. That Neal had some “obvious tension”
with the hearer of the communication sheds no light on the motive of the speaker.
Further, Neal’s attempt to collect as a successor trustee while potentially supporting his
claim of legitimacy does nothing to eliminate the contradictory evidence that Neal had
been removed as successor trustee. Appellants’ allegations that such a removal was
fraudulent do not indicate the communication made by Morales was malicious, as no
facts pleaded indicate Morales knew of the alleged fraud, participated in it, or otherwise
wished to support it. Absent additional factual support, the pleadings are mere
conclusions that do not permit even an inference that Morales’s e-mail statement was
made with malice and therefore falls outside of the common interest privilege.
       The trial court thus correctly sustained the demurrer on the eighth cause of action.4
Leave to Amend
       The trial court denied appellants an opportunity to amend the complaint. As this
court has upheld the demurrer with respect to the seventh and eighth causes of action, we
next consider whether the denial of leave to amend constituted an abuse of discretion.

4        The Credit Union argues the pleadings do not demonstrate the statement that Neal is a
liar to be false. We do not agree. The allegations sufficiently support the inference that Neal
was telling the truth regarding his status due to the fraud allegedly perpetrated to remove him.
We take no position, however, on the veracity of the underlying statements.

                                                15.
       Applicable Law
       “[A] reviewing court must determine whether there is a reasonable possibility that
a pleading as to which a demurrer has been sustained without leave to amend is capable
of amendment to cure the defect. And it is the plaintiff who bears the burden of
establishing that it is.” (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th
1020, 1048.) We review the trial court’s decision for an abuse of discretion. (Id. at
p. 1035.)
       “ ‘[F]or an original complaint, regardless of whether the plaintiff has requested
leave to amend, it has long been the rule that a trial court’s denial of leave to amend
constitutes an abuse of discretion unless the complaint “shows on its face that it is
incapable of amendment.” ’ ” (Tarrar Enterprises, Inc. v. Associated Indemnity Corp.
(2022) 83 Cal.App.5th 685, 688.) “ ‘ “Denial of leave to amend [an initial complaint] is
appropriate only when it conclusively appears that there is no possibility of alleging facts
under which recovery can be obtained.” ’ ” (Id. at p. 689.)
       Leave to Amend Was Properly Denied
       Appellants generally argue that they could have added multiple facts to their
allegations based on discovery that had taken place. In addition, having been granted
leave to amend the first amended complaint to add new claims, appellants contend that
the complaint was technically new and should be treated as an initial complaint rather
than an amended complaint for purposes of determining whether the trial court abused its
discretion.
       With respect to the seventh cause of action, even considering the pleading in the
context of an original complaint, we see no abuse of discretion on the part of the trial
court. Appellants’ cause of action relies on a claim that the Credit Union owed a general
duty to Kay and Neal with respect to an account under which they were only
beneficiaries. As discussed above, the law does not impose such a duty. It is thus

                                             16.
conclusively apparent that there is no possibility of alleging facts under a negligence
theory for which recovery can be obtained in this case.
       With respect to the eighth cause of action, we find appellants have failed to
demonstrate they could amend to state a cause of action. As discussed above, the facts
pleaded demonstrate that the common interest privilege is applicable to the e-mail
supporting the defamation claim. Thus, to state a claim, appellants must be able to allege
malice on the part of the employee who wrote the e-mail. Appellants allege vaguely that
there were issues with other employees at the Credit Union which caused tension, but in
no portion of the complaint do appellants indicate those same concerns apply to the
employee that wrote the disputed e-mail. Further, on appeal, appellants only vaguely
allege that discovery they undertook could be beneficial to their claims, and their
arguments are made exclusively to the sixth and seventh causes of action. Even treating
the complaint as if it were the original, appellants’ failure to identify any factual basis for
amending the eighth cause of action supports the trial court’s decision not to allow further
amendment.
                                       DISPOSITION
       The judgment is reversed. The matter is remanded to the trial court for further
proceedings consistent with this opinion. Costs are awarded to appellants.

                                                                                   HILL, P. J.
WE CONCUR:

POOCHIGIAN, J.

DE SANTOS, J.

                                              17.