Court Opinion

ID: 3190030
Source: CourtListenerOpinion
Date Created: 2016-03-30 20:00:59.062325+00
Date Added: 2024-06-11T07:39:05.647244
License: Public Domain

NOT FOR PUBLICATION                           FILED
                       UNITED STATES COURT OF APPEALS                        MAR 30 2016
                                                                         MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS
                              FOR THE NINTH CIRCUIT

 RICHARD SUTHERLAND, as Assignee of                 No. 14-15438
 Nigel Allen; as Assignee of Fred Pilster; as
 Assignee of Sal Ruiz; as Assignee of Judith        D.C. No. 5:12-cv-05110-LHK
 Lavendar; ANTHONY MALFATTI,
 Individually,
                                                    MEMORANDUM*
               Plaintiffs - Appellants,

    v.

 THOMAS E. FRANCIS,

               Defendant - Appellee.

                      Appeal from the United States District Court
                        for the Northern District of California
                        Lucy H. Koh, District Judge, Presiding

                         Argued and Submitted March 16, 2016
                              San Francisco, California

Before: FERNANDEZ, GOULD, and FRIEDLAND, Circuit Judges.

         Plaintiffs appeal from the district court’s judgment dismissing for failure to

state a claim their diversity action alleging contract claims under California law.

We have jurisdiction under 28 U.S.C. § 1291. We affirm in part, reverse in part,

         *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
and remand.

      The district court properly dismissed Plaintiffs’ action because Plaintiffs

failed to allege facts sufficient to show the breach of an oral sales contract. See

Walsh v. W. Valley Mission Cmty. Coll. Dist., 78 Cal. Rptr. 2d 725, 733 (Cal. Ct.

App. 1998) (setting forth elements of a breach of contract claim); see also Ashcroft

v. Iqbal, 556 U.S. 662, 678 (2009). Plaintiffs allege that they purchased only

fractional interests in certain heavy machinery. Although the California

Commercial Code specifically provides for “sale of a part interest in existing

identified goods,” Cal. Com. Code § 2105(3), Plaintiffs have not adequately

alleged facts showing that the alleged oral contracts involved the sale of goods

because such a sale requires the passing of title from the seller to the buyer for a

price.1 See id.; see also Cal. Com. Code § 2106 (defining “sale”); Cal. Com. Code

§ 2401(3) (providing for how title passes). While factual allegations must be

accepted as true, legal conclusions—such as Plaintiffs’ bare assertion that each

1
  A transaction in the form of a sale that really is “intended to operate only as a
security transaction” is not covered by the California Commercial Code’s sales
division. Cal. Com. Code § 2102. Thus, as the district court correctly
recognized, Plaintiffs cannot state a claim for breach of a contract for the sale of
goods by alleging a failure to abide by promises to pay interest or return principal.

                                           2
contract with Defendant was a “sale of goods pursuant to the provisions of the

Uniform Commercial Code”—are not entitled to an assumption of truth. Iqbal,
556 U.S. at 679. The district court thus properly dismissed Plaintiffs’ claims

because, among other things, Plaintiffs had not alleged that they had taken or were

supposed to take title to the machinery pursuant to the oral contracts, or how

Defendant breached the agreements by not transferring title to Plaintiffs.

      The district court erred, however, in denying leave to amend on the ground

that amendment would be futile. “Dismissal without leave to amend is improper

unless it is clear, upon de novo review, that the complaint could not be saved by

any amendment.” Krainski v. Nev. ex rel. Bd. of Regents of Nev. Sys. of Higher

Educ., 616 F.3d 963, 972 (9th Cir. 2010) (quoting Thinket Ink Info. Res., Inc. v.

Sun Microsystems, Inc., 368 F.3d 1053, 1061 (9th Cir. 2004)).

      At this point in the proceedings, although Plaintiffs’ ability to save their

claims by amendment is far from certain, it is not clear that they lack that ability. 2

2
  The district court appears to have believed that Plaintiffs had had two
opportunities to remedy their pleading defects, which might have supported a
conclusion that Plaintiffs could not allege new facts. See Allen v. City of Beverly
Hills, 911 F.2d 367, 374 (9th Cir. 1990) (failure to supply new facts within an
amended complaint supports a denial of further leave to amend). At the time of
dismissal, however, the district court had given Plaintiffs only one chance to
amend to cure defects. Plaintiffs amended their original complaint within twenty-

                                            3
Defendant does not dispute that types of machinery Plaintiffs discuss in their

complaint may be considered “goods.” Plaintiffs identified, by specific vehicle

identification numbers, the machinery to which they allegedly contracted. The

only issue is whether Plaintiffs can allege that they contracted with Defendant to

purchase partial interests in these goods.3 Plaintiffs’ counsel represented on

appeal that Plaintiffs could allege that they were to receive an assignment of title

for their interests in the machinery, and that written bills of sale reflecting

fractional ownership interests could be attached to an amended pleading.

      To survive dismissal on remand, Plaintiffs must allege and have factual

support for their contention that Defendant was supposed to transfer title to partial

interests in the machinery to Plaintiffs before Defendant was to resell the pieces of

equipment but Defendant did not do so.

one days of serving it merely to add a party, prior to Defendant’s motion to dismiss
or any ruling by the court. See Fed. R. Civ. P. 15(a)(1) (“A party may amend its
pleading once as a matter of course within: (A) 21 days after serving it[.]”).
3
   There is no statutory requirement under California’s Commercial Code that full
title to goods must pass from the buyer to the seller. Cal. Com. Code § 2105(3);
see also Leal v. Holtvogt, 702 N.E.2d 1246, 1255 (Ohio Ct. App. 1998)
(concluding that the sale of a half-interest in a horse is a sale of goods under the
Uniform Commercial Code).

                                            4
The parties shall bear their own costs on appeal.

AFFIRMED in part, REVERSED in part, and REMANDED.

                                   5