Case Number: BC642842 Hearing Date: March 26, 2018 Dept: 46

Case Number: BC642842
REFLECTIONS DIAMONDS INC ET AL VS LLOYD’S OF LONDON ET AL

Filing Date: 12/05/2016
Case Type: Contractual Fraud (General Jurisdiction)

03/26/2018

Demurrer of Interested Underwriters to SAC

Motions to Strike SAC

(Corrected)

TENTATIVE RULING

Plaintiffs’ opposition is well over 15 pages long, in violation of CRC Rule 3.1113(d). Plaintiffs are advised that the court is empowered to disregard oversized memoranda and will do so in the future. CRC Rules 3.1113(g); 3.1300(d).

Pursuant to CCP §430.10(e), Underwriters demurrer to the SAC is SUSTAINED without leave to amend as to the 3rd, 4th, 5th, 6th, 7th, and 9thcauses of action. The 10th cause of action for breach of fiduciary duty is ordered stricken as the court had previously sustained the demurrer without leave to amend as to this cause of action on 12/14/2017. Remaining causes of action as to Underwriters are the 1st, 2nd, 8th, and 11th causes of action.

Underwriters Motion to Strike is GRANTED pursuant to CCP §§435 and 436

DISCUSSION

3rd CAUSE OF ACTION: Fraud

The parties appear to be in different universes when it comes to argument on this cause of action. Underwriters attempt to parse out and examine the various fraud theories contained in the Second Amended Complaint (“SAC”). Plaintiffs spend their time alternately re-arguing issues already decided by this court, discussing the pleading standard itself, and making the general assertion that fraud claims are available in the insurance context.

However, the pertinent point of the matter is that the court previously sustained the demurrer to this same CAUSE OF ACTION, and gave specific instructions that Plaintiffs were to amend it to state only a claim for promissory fraud. Instead, it appears that Plaintiffs have simply re-alleged the same statements that were contained in the First Amended Complaint (“FAC”). Plaintiffs have failed to follow the instructions of this court, and for that reason as well as the reasons previously given, Defendant

Underwriters’ demurrer is SUSTAINED WITHOUT LEAVE TO AMEND as to this cause of action. See Harris v. Wachovia Mortg., FSB (2010) 185 C.A.4th 1018, 1023.

4th CAUSE OF ACTION: Negligent Misrepresentation

This cause of action is based on identical allegations to the cause of action for Fraud, above. (FAC ¶¶71-72). The analysis which applies to that CAUSE OF ACTION applies to this, with certain differences. A false promise can support a claim for fraud, but not negligent misrepresentation. Stockton Mortgage, Inc. v. Tope (2014) 233 C.A.4th 437, 458 (citing Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 C.A.4th 153, 158–159). Therefore, even if Plaintiffs could preserve a promissory fraud theory, Plaintiffs cannot go forward on this cause of action. Moreover, Plaintiffs neglected to address this cause of action in their opposition, thereby tacitly conceding the merits of the demurrer. See CRC Rule 3.1113(a).

The demurrer is therefore SUSTAINED WITHOUT LEAVE TO AMEND as to this cause of action.

5th CAUSE OF ACTION: Statutory Violation

Penal Code §496 states in relevant part as follows:

“(a) Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained, shall be punished by imprisonment in a county jail for not more than one year, or imprisonment pursuant to subdivision (h) of Section 1170…

A principal in the actual theft of the property may be convicted pursuant to this section. However, no person may be convicted both pursuant to this section and of the theft of the same property.

…

(c) Any person who has been injured by a violation of subdivision (a) or (b) may bring an action for three times the amount of actual damages, if any, sustained by the plaintiff, costs of suit, and reasonable attorney’s fees.”

“A criminal conviction likewise is not a prerequisite to recovery of treble damages by any person injured by a violation of section 496(a)… when the Legislature enacted section 496(c), it presumably understood that the phrase “a violation of subdivision (a)” would include theft by false pretense.” Bell v. Feibush (2013) 212 C.A.4th 1041, 1046, 1048.

It does not appear that Plaintiffs have actually amended this cause of action at all; the allegations of the SAC and the FAC are virtually identical.

For that reason, the demurrer to this cause of action is SUSTAINED without leave to amend.

6th CAUSE OF ACTION: Negligence

“Actionable negligence is traditionally regarded as involving the following: (a) a legal duty to use due care; (b) a breach of such legal duty; (c) the breach as the proximate or legal cause of the resulting injury.” Seo v. All-Makes Overhead Doors (2002) 97 C.A.4th 1193, 1202.

The same arguments which apply to the 3rd-5th CAUSES OF ACTIONs above apply to this one as well. “[N]egligence is not among the theories of recovery generally available against insurers.” Sanchez v. Lindsey Morden Claims Services, Inc. (1999) 72 C.A.4th 149, 254.

Therefore, the demurrer is SUSTAINED without leave to amend as to this CAUSE OF ACTION.

7th CAUSE OF ACTION: Breach of Oral and Implied Contract

The same arguments which apply to the 3rd-5th CAUSE OF ACTIONs above apply to this one as well. The demurrer is SUSTAINED, without leave as to this CAUSE OF ACTION.

9th CAUSE OF ACTION: Conversion

“’”Conversion is the wrongful exercise of dominion over the property of another.”’(Farmers Ins. Exchange v. Zerin (1997) 53 C.A.4th 445, 451). The elements of a claim for conversion are (1) ‘the plaintiff’s ownership or right to possession of the property at the time of the conversion,’ (2) ‘the defendant’s conversion by a wrongful act or disposition of property rights,’ and (3) damages. (Ibid.). ‘It is not necessary that there be a manual taking of the property,” only “an assumption of control or ownership over the property, or that the alleged converter has applied the property to his [or her] own use.’ (Id. at pp. 451-452).” Prakashpalan v. Engstrom, Lipscomb and Lack (2014) 223 C.A.4th 1105, 1135.

“’To establish a conversion, plaintiff must establish an actual interference with his ownership or right of possession.’ (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 C.A.3d 593, 610). To do so, the plaintiff must have ‘either ownership and the right of possession or actual possession [of the property] at the time of the alleged conversion thereof.’ (General Motors A. Corp. v. Dallas (1926) 198 Cal. 365, 370). ‘[A] mere contractual right of payment, without more, will not suffice’ to support a claim for conversion. (Farmers Ins. Exchange v. Zerin [(1997)] 53 C.A.4th [445,] at p. 452).” Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 C.A.4th 221, 232-233.

Additionally, “the simple failure to pay money owed does not constitute conversion.” Kim v. Westmoore Partners, Inc. (2011) 201 C.A.4th 267, 284.

“[A] conversion claim does not require that a specific lump sum of money be entrusted to defendant; the plaintiff must merely prove a specific, identifiable sum of money that was taken from it. ‘California cases permitting an action for conversion of money typically involve those who have misappropriated, commingled, or misapplied specific funds held for the benefit of others. [Citations.]’ (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP [(2007)] 150 C.A.4th [384,] at pp. 396, italics added.).” Welco Electronics, Inc. v. Mora (2014) 223 C.A.4th 202, 216.

The basis for Plaintiffs’ conversion claim is not at all clear from the conclusory allegations contained under that heading. (SAC ¶¶122-124). Insofar as Plaintiffs’ claim for conversion is based on the failure to pay benefits, it cannot go forward. Kim, supra, 201 C.A.4th at 284. Insofar as Plaintiff’s claim is based on payment of premiums, there is no wrongful act properly alleged in connection thereto. Plaintiffs bought insurance and paid the premiums. It was not conversion for Defendants to accept their money.

The demurrer is SUSTAINED, without leave to amend as to this CAUSE OF ACTION

10th CAUSE OF ACTION: Breach of Fiduciary Duty

Plaintiffs represent that they inadvertently included Defendant Underwriters as a defendant in this CAUSE OF ACTION. The court previously sustained Defendant Underwriters’ demurrer to this CAUSE OF ACTION, without leave to amend.

Underwriters is STRICKEN from this CAUSE OF ACTION.

MOTION #2—MTS (UNDERWRITERS)

The court previously granted Defendant Underwriters’ similar motion as to the FAC on the subjects of conversion damages and class claims.

As to punitive damages, Plaintiff makes no specific argument regarding what allegations support the punitive damages claim against Underwriters; with the fraud and other tort CAUSES OF ACTION eliminated, no basis appears for an award of punitive damages.

IT IS SO ORDERED:

____________________________
Frederick C. Shaller, Judge