Judge: Richard Y. Lee, Case: 30-2020-01137619, Date: 2022-10-06 Tentative Ruling

Defendants U.S. Bank National Association (“U.S. Bank”) and JPMorgan Chase Bank, N.A. (“JPMorgan”) (collectively, the “Bank Defendants”) move for an order sustaining their demurrer to the entire Second Amended Complaint (“SAC”) and the Sixth through Eighth Causes of Action of the SAC filed by Plaintiff, Dimar Enterprises, Inc. dba Drymaster (“Plaintiff”).

The Court initially notes that Plaintiff filed an Amendment to Complaint on 3/28/22, naming Doe 1 as U.S. Bank. (ROA 83.)

The Bank Defendants assert that during the meet and confer process, Plaintiff agreed to dismiss its Sixth Cause of Action for Breach of Warranty and Eighth Cause of Action for Negligence, leaving only the Seventh Cause of Action for Conversion at issue, and providing that it was pursuing the conversion cause of action solely as an assignee of FMC. The Bank Defendants contend that FMC does not have a valid conversion cause of action against either of them because Plaintiff has no interest in the funds at issue, and cannot state a cause of action either in its own capacity or as an assignee of Freedom Mortgage Corporation (“FMC”). The Bank Defendants assert that JPMorgan has no liability to FMC as the “payor” bank. Commercial Code section 3420 specifically exempts payor banks from liability under circumstances alleged in the Complaint, and assert that the SAC does not plead the elements of common law conversion as to JPMorgan as JP Morgan did not take any wrongful actions, and did not interfere with FMC’s property rights. They also contend that FMC does not claim an interest in the State Farm funds that were transferred as Plaintiff specifically alleges that the entirety of the funds were earmarked solely for Plaintiff such that FMC was never an intended recipient of the funds and did not incur any damages. As to U.S. Bank, the Bank Defendants argue that while the Commercial Code does contemplate a conversion cause of action against the depository bank in a “missing endorsement” situation such as this one, this is only if the plaintiff claims an interest in the funds at issue, and Plaintiff does not claim an interest in the funds as Plaintiff alleges that none of the funds were ever going to be paid to FMC. They further argue that the same lack of alleged damages to FMC as to JPMorgan apply equally to U.S. Bank.

As of 9/28/22, Plaintiff has not filed an opposition.

Failure to oppose the demurrer may be construed as having abandoned the claims.  (See Herzberg v. County of Plumas (2005) 133 Cal. App. 4th 1, 20 [“Plaintiffs did not oppose the County's demurrer to this portion of their seventh cause of action and have submitted no argument on the issue in their briefs on appeal.  Accordingly, we deem plaintiffs to have abandoned the issue”].) In addition, it is axiomatic the failure to challenge a contention in a brief results in the concession of that argument. (DuPont Merck Pharmaceutical Co. v. Sup. Ct. (2000) 78 Cal.App.4th 562, 566 [“By failing to argue the contrary, plaintiffs concede this issue”]; Westside Center Associates v. Safeway Stores 23, Inc. (1996) 42 Cal.App.4th 507, 529 [“failure to address the threshold question ... effectively concedes that issue and renders its remaining arguments moot”]; Glendale Redevelopment Agency v. Parks (1993) 18 Cal.App.4th 1409, 1424 [issue is impliedly conceded by failing to address it].)

Here, as a threshold matter, the papers submitted to the Court indicate that Plaintiff agreed to dismiss its causes of action for Breach of Warranty [Sixth Cause of Action] and Negligence [Eighth Cause of Action]. (Declaration of Matthew E. Lilly (“Lilly Decl.”), ¶¶ 3-4.; Exs. A and B.) As to the remaining Seventh Cause of Action for Conversion, Plaintiff confirmed that it is asserting this claim solely in its capacity as an assignee of FMC. (Lilly Decl., ¶ 4; Ex. B.)

The Court construes Plaintiff’s failure to oppose the arguments raised in defendant’s demurrer as an abandonment of its Sixth through Eighth Causes of Action against the Bank Defendants, and as a concession to the Bank Defendants’ arguments that Plaintiff has no interest in the funds at issue, and cannot state a cause of action either in its own capacity or as an assignee of FMC for its Seventh Cause of Action for Conversion, and more specifically, that Plaintiff fails to plead the elements of common law conversion; that JPMorgan has no liability to FMC as the “payor” bank under Commercial Code section 3420; that Plaintiff does not claim an interest in the funds as Plaintiff alleges that none of the funds were ever going to be paid to FMC; and that as Plaintiff alleges FMC was never an intended recipient of the funds, it did not incur any damages.

Lastly, the Court notes that the Seventh Cause of Action is brought against Defendants JPMorgan and US Bankcorp only. Plaintiff filed a Request for Dismissal which was entered on 4/15/22, dismissing US BANKCORP, a Delaware corporation, without prejudice. (ROA 85.) The SAC does not allege this cause of action against any Doe defendants. (See SAC, 7:16-17.) As noted above, U.S. Bank was named as Doe 1. In turn, the only remaining defendant that Seventh Cause of Action is alleged to be brought against is JPMorgan, and thus, the Seventh Cause of Action is only relevant as to JPMorgan.

Based on the foregoing, the Court SUSTAINS, without leave to amend, the demurrer to the Sixth and Eighth Causes of Action, particularly in light of Plaintiff’s apparent agreement to dismiss these causes of action.

However, the Court SUSTAINS, with 10 days’ leave to amend, the demurrer to the Seventh Cause of Action.

The Bank Defendants to give notice.