Hawkins

Filed 10/25/07 Hawkins CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SECOND APPELLATE DISTRICT

DIVISION FIVE

APPEAL from a judgment of the Superior Court of Los Angeles County, Peter D. Lichtman, Judge. Affirmed in part; reversed in part.

Robins, Kaplan, Miller & Ciresi, Bernice Conn, and Roman M. Silberfeld for Plaintiffs and Appellants.

Munger, Tolles & Olson LLP, Marc T.G. Dworsky, Mark H. Epstein, and Randall G. Sommer for Defendants and Respondents Merrill Lynch, Pierce, Fenner & Smith, Inc., Merrill Lynch & Co., Inc., Merrill Lynch Life Agency Inc., and Merrill Lynch Insurance Group Services, Inc.

Tatro Tekosky Sadwick LLP, Ren P. Tatro and Juliet A. Markowitz for Respondent Jonathan H. Pardee.

I. INTRODUCTION

Plaintiffs, Takako Hawkins, Clive Hawkins, and Stan Mandell, the conservator of the Estate of Thelma Jean Fenter, appeal from a final judgment resulting from the entry of two orders in favor defendants: Merrill Lynch, Pierce, Fenner & Smith, Inc.; Merrill Lynch Co. Inc.; Merrill Lynch Life Agency, Inc.; Merrill Lynch Insurance Group Services, Inc. (sometimes referred to collectively as the Merrill Lynch defendants); and John H. Pardee. Plaintiffs challenge an order sustaining the demurrer to certain causes of action in the first amended complaint. Plaintiffs also challenge a later order granting defendants summary judgment motion. This litigation involves Treasury Investment Growth Receipts. The Third Circuit described Treasury Investment Growth Receipts as follows: Zero-coupon bonds are debt securities on which no interest is paid prior to maturity. At maturity, a one-time payment incorporating the principal repayment and accrued interest is made. These securities are therefore sold at a discount from face value. [] [Treasury Investment Growth Receipts] . . . are a proprietary product of Merrill Lynch. [Treasury Investment Growth Receipts] consist of United States Treasury bonds that have been repackaged by Merrill Lynch into zero-coupon securities. Specifically, a [Treasury Investment Growth Receipt] is a receipt that evidences ownership of a future payment of interest or principal on Treasury bonds which are purchased by Merrill Lynch and are held by a custodian for the benefit of the [Treasury Investment Growth Receipt] holder. (Ettinger v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (3rd Cir. 1987) 835 F.2d 1031, 1032, fn. 1.) We conclude: the demurrers to the first amended complaint should not have been sustained as to the sixth, seventh, eighth, and eleventh causes of action; the order granting summary judgment as to the Merrill Lynch defendants should not have been entered; and the order granting summary judgment as to Mr. Pardee must be deemed to be an order entering summary adjudication of the fifth cause of action in the second amended complaint.

II. THE DEMURRER DISMISSAL OF CERTAIN CAUSES OF ACTION IN THE FIRST AMENDED COMPLAINT

A. The First Amended Complaint.

1. The Merrill Lynch defendants purchase the settlement company

In 1969, Robert and Ray Schultz founded IBAR which engaged in the business of arranging structured settlements funded by annuities or United States Treasury Bonds held in trust. The structured settlements were designed to comply with Internal Revenue Code section 130 in order to provide tax benefits to settling plaintiffs. So as to assure the safety of settlements funded by United States Treasury Bonds, IBAR placed them in trust. On March 31, 1982, Merrill Lynch Life Agency, Inc. acquired the stock of IBAR from the Schultzes. The company was renamed Merrill Lynch IBAR Inc. In February, 1984, the Schultzes left Merrill Lynch IBAR, Inc. Thereafter, the company was renamed Merrill Lynch Settlement Services, Inc.

2. The Fenter settlement

On February 10, 1981, Thelma Fenter filed suit against the County of Los Angeles. A guardian ad litem was appointed for Ms. Fenter. A settlement was entered into between Ms. Fenters guardian ad litem and the County of Los Angeles (the county). The first amended complaint alleges: Pursuant to the settlement, Ms. Fenters claims against the county were assigned to Merrill Lynch IBAR, Inc., and pursuant to a separate written Assignment Agreement to which Ms. Fenter and Merrill Lynch IBAR, Inc. were parties, Merrill Lynch IBAR, Inc. assumed the obligation to make settlement payments over time to Ms. Fenter, or, in the event of her death, to her estate. Some of the structured settlement payments owed to Ms. Fenter were funded with United States Treasury Bonds purchased at the time of settlement and placed into trust for the sole purpose of providing principal and income sufficient to make these payments to Ms. Fenter; the settlement payments that were backed by a Treasury Bond Trust were the subject of separate litigation before this Court.

Additionally, part of the structured settlement called for a deferred payment stream of $3,750, payable twice a year concluding on November 15, 2010. On that date, an additional $60,000 was to be paid to Ms. Fenter. This deferred payment stream was not to be funded by either annuities of United States Treasury Bonds. Rather, this payment stream was to be funded by the purchase of Treasury Investment Growth Receipts. Treasury Investment Growth Receipts were a proprietary investment product of Merrill Lynch & Company, Inc. or Merrill Lynch, Pierce, Fenner & Smith, Inc., which were trademarked and offered for public sale. Treasury Investment Growth Receipts were a zero-coupon or stripped treasury bond derivative, which were sold at a discount and redeemed for face value at maturity. According to the settlement agreement, the Treasury Investment Growth Receipts were to assure the deferred payments due to Ms. Fenter were paid. Unlike the treasury bonds, the Treasury Investment Growth Receipts were not placed in trust. Rather, they were held in a brokerage and/or cash management account managed by the Merrill Lynch defendants or their agents.

3. The Hawkins settlement.

On August 21, 1979, Ms. Hawkins and her minor son, Clive, filed a wrongful death suit against American Airlines (the airline), McDonnell Douglas and (the manufacturer), and other defendants arising from an airplane crash in Chicago. Thereafter, a settlement was reached. A separate written assignment agreement was entered into in which plaintiffs and Merrill Lynch IBAR Inc. were parties. Pursuant to the settlement, Ms. Hawkins and her son Clive were to receive monthly payments between November 1, 1982, and October 1, 2002. The settling defendants in the Hawkins litigation, the airline and the manufacturer, paid Merrill Lynch IBAR, Inc. $1.014 million to fund certain payments. Those payments are not the subject of the present litigation. In addition, on November 15, 2002, Ms. Hawkins and her son Clive were to receive $2,466,232.50 and $1,231,267.50 respectively. In order to fund these final lump sum payments, the settling defendants and their insurers transferred to Merrill Lynch IBAR, Inc., additional funds. The first amended complaint alleges, According to the terms of the settlement agreement, the [Treasury Investment Growth Receipts] were to serve as a medium for payment of the structured settlement payments and to assure the payment of such funds to Takako and Clive Hawkins. As in the case of the Fenter settlement, the Treasury Investment Growth Receipts were not placed in trust. Rather, the Treasury Investment Growth Receipts were placed in brokerage accounts maintained by the Merrill Lynch defendants or their agents.

4. In concert allegations

The first amended complaint alleged that the various defendants acted in concert with one another. According to the first amended complaint: In committing the wrongful acts alleged herein, the defendants have at various times pursued or joined in the pursuit of, a common course of conduct and acted in concert with and conspired with one another, in furtherance of their common plan, scheme or design. In addition to the wrongful conduct herein alleged as giving rise to primary liability, the defendants further aided and abetted and knowingly assisted each other in breach of their respective duties as herein alleged. . . . The first amended complaint also alleged: all defendants conspired to commit, aided and abetted and rendered substantial assistance in the wrongs complained of herein; defendants conspired to commit, and substantially assist in the commission of the alleged wrongdoing; defendants acted with knowledge of the wrongdoing of each other; and each of the acts engaged in were in furtherance of the conspiracy and a common course of conduct.

Moreover, the first amended complaint contained allegations concerning joint marketing conduct: In marketing to the plaintiffs and to the general public the settlement services offered by Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc. . . . , Defendant Merrill Lynch authorized, consented to and/or ratified the use of its name, its logo, and its trademarks by the [Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc]. In addition to the name of [Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc.], the correspondence, checks and brokerage trade receipts and used and issued by [Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc.] in providing its structured settlement services to plaintiffs displayed the name Merrill Lynch next to depictions of the globally recognized Merrill Lynch bull logo. [Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc.] also expressly represented [themselves] to the public as a wholly-owned subsidiary of Merrill Lynch & Co. Inc. and the checks used by [Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc.] in connection with structured settlements were issued from a Merrill Lynch Cash Management Account(s). [] One or more of the Merrill Lynch Defendants also authorized, consented to and/or ratified advertisements regarding [Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc.] and its structured settlement services to be published and circulated in California and promotional materials to be distributed to plaintiffs and to plaintiffs counsel.

There were allegations concerning advertising by the various Merrill Lynch defendants: The promotional brochures authorized, consented to and/or ratified by one or more of the Merrill Lynch Defendants for distribution to tort victims such as plaintiffs, and to their counsel, were designed to induce them to enter into structured settlements with [Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc.] based on the reputation and financial strength of Merrill Lynch. The Merrill Lynch [D]efendants also expressly authorized, consented to and/or ratified the use of the Merrill Lynch name, strength and reputation by [Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc.] in marketing, advertising and sales activities. For example, one such brochure stated that the respected name of Merrill Lynch inspires the confidence of plaintiffs and their counsel. The brochures also touted that plaintiffs and their counsel were more likely to agree to utilize [Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc.] for structured settlements because it was an affiliate of Merrill Lynch, a name they know and trust. [] In marketing its structured settlement services, [Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc.] represented that Merrill Lynch & Co., Inc. maintained appropriate control over the operating activities of all of its subsidiaries and that it was subject to regular management review to assure its compliance with Merrill Lynchs high ethical and operating standards.

The purpose of the promotional materials was alleged to be: The foregoing advertising and promotional materials authorized and distributed by the Merrill Lynch Defendants were designed to assure settling plaintiffs and their counsel that if they entered into structured settlements which called for plaintiffs to agree to have their settlement funds delivered to [Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc.] and to agree to the assignment of the settling defendants settlement payment obligations to [Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc.], the safety of the financial instruments used to fund their long-term structured settlements, and the future payment of such settlements would be backed by the strength and reputation of the Merrill Lynch Defendants and the Merrill Lynch Defendants would be responsible for making the structured settlement payments throughout the term of the settlement. [] By engaging in the aforesaid advertising, marketing and business activities, and by making the aforesaid representations which were authorized, consented to and/or ratified by the Merrill Lynch Defendants, the [Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc.] held [themselves] out to be and [were], the actual and ostensible agent[s] of the Merrill Lynch Defendants at all times.

5. Allegations of joint action and account mismanagement

According to the first amended complaint, the settling defendants in the underlying lawsuits paid in settlement monies to Merrill Lynch IBAR, Inc. or Merrill Lynch Settlement Services, Inc. This was done in accordance with the settlement agreements. The first amended complaint alleged: [The Treasury Investment Growth Receipts] purchased for the benefit of the plaintiffs were not placed into trust, as were the U.S. Treasury Bonds, based on the express and/or implied representations of the Settlement Company and/or the Merrill Lynch Defendants that because the [Treasury Investment Growth Receipts] were a proprietary investment product of one or more of the Merrill Lynch Defendants, they would be held inviolate by one or all of the Merrill Lynch Defendants and/or their appointed agents in accounts held and/or managed by one or more of the Merrill Lynch Defendants and/or their appointed agents, that the product was backed by the financial strength and reputation of the Merrill Lynch Defendants and that therefore, the integrity and safety of the [Treasury Investment Growth Receipts] and plaintiffs future structured settlement payments was guaranteed.

On or about April 28, 1988, Merrill Lynch & Company, Inc., transferred 80 percent of its stock in Merrill Lynch Settlement Services, Inc. to Laugharn Associates, Inc. The principals in Laugharn Associates, Inc. were C. John Laugharn (Mr. Laugharn), and Hubert F. Laugharn. In about June, 1988, Merrill Lynch Settlement Services, Inc. changed its name to ML Settlement Services, Inc. On or about October 18, 1991, Merrill Lynch & Company, Inc. sold its remaining interests in ML Settlement Services, Inc. to Mr. Laugharn and Mr. Pardee. In early 1992, Mr. Laughren transferred his remaining interest in ML Settlement Services, Inc. to Mr. Pardee. Mr. Pardee change the name of ML Settlement Services, Inc. to Settlement Services Treasury Assignments, Inc. Mr. Pardees company, Settlement Services Treasury Assignments, Inc., owed all of the duties and obligations to plaintiffs that existed under the original settlement agreements and related documents. Mr. Pardee reviewed the pertinent settlement documents and knew, or should have known, the Treasury Investment Growth Receipts were being held for the sole purpose of ensuring payments due under the settlement documents. Mr. Pardee also knew, or should have known: a critical component of the settlement agreements was to enter into structured settlements; this would provide deferred in lieu of a lump-sum payments; and in order to preserve the right to receive deferred payments, it was necessary to preserve the Treasury Investment Growth Receipts. Finally, Mr. Pardee knew that plaintiffs were the sole to intended beneficiaries of the Treasury Investment Growth Receipts. Even after the sale of ML Settlement Services, Inc., the Merrill Lynch defendants or their agents retained custody of the Treasury Investment Growth Receipts.

At some point in time, Mr. Pardee sold the Treasury Investment Growth Receipts. The Treasury Investment Growth Receipts were being held by one of the Merrill Lynch defendants or their agents. Despite the fact the Treasury Investment Growth Receipts were to be held for purposes of paying the moneys due under the settlements, the Merrill Lynch defendants sold them. One or more of the Merrill Lynch defendants received a brokerage or commission fee for executing Mr. Pardees sell order. Plaintiffs were never advised that the Treasury Investment Growth Receipts had been sold. Nor was any court approval sought to permit liquidation of the Treasury Investment Growth Receipts even though Clive was still a minor. On November 15, 2000, Mr. Pardees firm, Settlement Services Treasury Assignments, Inc., defaulted on payments due to Ms. Fenter. In December, 2000, plaintiffs were advised that the United States Treasury Bonds held in trust for the benefit of the structured settlement payees had been lost. The letter did not disclose that the Treasury Investment Growth Receipts had been liquidated in 1993 for the benefit of Mr. Pardee and his company. Settlement Services Treasury Assignments, Inc. secured the protection of the bankruptcy courts on June 25, 2001.

6. Individual causes of action

a. first cause of action for intentional contract interference

Plaintiffs alleged in the first cause of action claims for intentional contract interference against: Merrill Lynch, Pierce, Fenner & Smith Incorporated; Merrill Lynch & Co., Inc.; Merrill Lynch Light Agency, Inc.; and Mr. Pardee. The first cause of action alleged the Merrill Lynch defendants interfered with the settlement agreement by failing to protect the Treasury Investment Growth Receipts. Also, it was alleged Mr. Pardee interfered with the settlement and assignment agreements by selling the Treasury Investment Growth Receipts which were intended to be for the benefit of plaintiffs.

b. second cause of action for negligent contract interference

The second cause of action named: Merrill Lynch, Pierce Fenner & Smith Inc.; Merrill Lynch & Co. Inc.; and Merrill Lynch Life Agency, Inc. The second cause of action alleged that the Merrill Lynch defendants negligently interfered with plaintiffs contract rights by allowing the Treasury Investment Growth Receipts to be liquidated.

c. third cause of action for contract breach

The third cause of action for contract breach was brought against: Merrill Lynch, Pierce, Fenner & Smith, Incorporated; Merrill Lynch & Co., Inc.; Merrill Lynch Life Agency, Inc.; and Mr. Pardee. Plaintiffs alleged that the Merrill Lynch defendants breached the assignment contracts by permitting the sale of the Treasury Investment Growth Receipts prior to maturity. Further, plaintiffs alleged they were third party beneficiaries of the Treasury Investment Growth Receipts and were damaged in the amount that remain unpaid. As the successor in interest to Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc., Mr. Pardee breached the assignment contracts by: selling the Treasury Investment Growth Receipts prior to maturity; using the sale proceeds for his own benefit; and by failing to make the settlement payments owed to the Hawkinses.

d. fourth and fifth causes of action for implied covenant breach

The fourth and fifth causes of action realleged all of the contract breach and negligent interference claims. In addition, the fourth and fifth causes of action alleged that the Merrill Lynch defendants had breached the implied covenant of good faith and fair dealing by allowing the Treasury Investment Growth Receipts to be liquidated. As a result, plaintiffs sought tort and punitive damages.

e. sixth and seventh causes of action for fiduciary duty breach.

The sixth cause of action was brought against all the Merrill Lynch defendants. The sixth cause of action alleged that: a confidential relationship existed between plaintiffs and the Merrill Lynch defendants; plaintiffs had reposed trust and confidence in the honesty, financial strength, reputation, integrity, and fidelity of the Merrill Lynch defendants; and the Merrill Lynch defendants took receipt of the settlement funds and agreed to make all the payments due thereunder. Eventually, the Merrill Lynch defendants breached their fiduciary duties by allowing Mr. Pardee access to the proceeds from the sales of the Treasury Investment Growth Receipts. The seventh cause of action for fiduciary duty breach was alleged against Mr. Pardee. According to the seventh cause of action, Mr. Pardee breached his fiduciary duties owed to plaintiffs by: selling the Treasury Investment Growth Receipts and retaining the proceeds for himself; concealing the sale from plaintiffs; failing to pay the Hawkinses of their settlement funds; and depriving Ms. Fenter of her future settlement payments.

f. eighth cause of action for constructive fraud

The eighth cause of action asserted all defendants had the fiduciary obligation to advise plaintiffs that: the Treasury Investment Growth Receipts were possibly not qualified funding assets under governing tax law; the Treasury Investment Growth Receipts had been purchased and were being held in the name of Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc.; and the Treasury Investment Growth Receipts had been transferred to Mr. Pardee and later liquidated. According to the eighth cause of action, defendants concealed the foregoing events from plaintiffs. Further, it was alleged the Merrill Lynch defendants engaged in the foregoing misconduct in order to earn fees and commissions.

g. ninth cause of action for fraud

Plaintiffs realleged the foregoing facts in their fraud cause of action which was asserted against all defendants. The true facts were: the Merrill Lynch defendants knew that the only assets from which tax-free interest income could be generated under then governing tax laws were United States Treasury Bonds and other annuities; the Merrill Lynch defendants did not intend to hold the Treasury Investment Growth Receipts for plaintiffs benefit; the Treasury Investment Growth Receipts were held in the name of Merrill Lynch IBAR, Inc. and Merrill Lynch Settlement Services, Inc.; because the Treasury Investment Growth Receipts were negotiable instruments, they should have been placed in trust; and the Merrill Lynch defendants did not intend to comply with the payment obligations of Merrill Lynch IBAR, Inc., and Merrill Lynch Settlement Services, Inc. to plaintiffs. According to the first amended complaint: the foregoing misrepresentations were knowingly made by the Merrill Lynch defendants; plaintiffs detrimentally relied on these misrepresentations; had plaintiffs known the true facts, they would not have relied on the misrepresentations; and plaintiffs were damaged as a result. Finally, Mr. Pardee concealed the fact he had acquired control of the Treasury Investment Growth Receipts and he ordered they be sold for his own benefit.

h. tenth cause of action for conversion

The tenth cause of action asserted a conversion claim against all defendants. According to the tenth cause of action, [The Merrill Lynch defendants] wrongfully caused the [Treasury Investment Growth Receipts] purchased with plaintiffs settlement funds to be purchased and held in the name of [Merrill Lynch IBAR, Inc., and Merrill Lynch Settlement Services, Inc.], wrongfully transferred control of the [Treasury Investment Growth Receipts] to [Mr.] Pardee and . . . permitted [Mr.] Pardee to obtain and use for his own benefit the proceeds from the [Treasury Investment Growth Receipts]. Mr. Pardee was alleged to have wrongfully converted the Treasury Investment Growth Receipts for his own benefit by selling them in 1993.

i. eleventh cause of action for negligence.

The eleventh cause of action for negligence was asserted against all defendants. The eleventh cause of action alleged The Merrill Lynch Defendants and [Mr.] Pardee owed plaintiffs duties of reasonable care in performance of their duties and obligations related to the structured settlements, including but not limited to, properly structuring the settlements to conform with existing tax-law in order to ensure that plaintiffs would receive all tax advantages of such structured settlements and preserving and protecting the [Treasury Investment Growth Receipts] purchased with plaintiffs settlement funds. This duty of reasonable care exists because the [Treasury Investment Growth Receipts] were purchased with plaintiffs settlement funds and were intended solely to be used to fund future settlement payments owed to plaintiffs, who were persons who would be [foreseeably] endangered by the breach of the duty of reasonable care if such future payments were not made. The eleventh cause of action further alleged: [D]efendants breached their duty of due care owed to plaintiffs by using [Treasury Investment Growth Receipts], which were possibly not qualified funding assets, to fund future settlement payments, by failing to place the [Treasury Investment Growth Receipts] in trust, by selling the [Treasury Investment Growth Receipts] and by permitting the sales proceeds to be used for purposes other than to pay plaintiffs their structured settlement payments and by failing to disclose such facts to plaintiffs.

j. twelfth cause of action for unjust enrichment.

The twelfth cause of action alleged that the Merrill Lynch defendants were unjustly enriched because they acquired the settlement funds used to purchase the Treasury Investment Growth Receipts and received sales commissions and brokerage fees in connection with the transactions. Also, Mr. Pardee acquired the full value of Treasury Investment Growth Receipts at the time of their sale in 1993. Plaintiffs allege that defendants would be unjustly enriched. As result, plaintiffs requested that a constructive trust be imposed on the monies and benefits wrongly secured by defendants.

k. judicially noticed materials

The trial court granted defendants judicial notice motion. The trial court judicially noticed the Hawkins settlement agreement with the airline and the manufacturer. Pursuant to that agreement, the airline and the manufacturer were released from all liability for the accident. After the payment of various sums, $1.39 million were to be used to purchase Treasury Investment Growth Receipts. The Treasury Investment Growth Receipts were to be used in part to fund monthly payments to Ms. Hawkins. On November 15, 2002, Ms. Hawkins was to receive a lump-sum payment of $2,466,232.50, which was to be funded exclusively from the Treasury Investment Growth Receipts. Further, Clive was to receive a lump sum payment of $1,231,267.50 on November 15, 2002. The Treasury Investment Growth Receipts were to be assigned to Merrill Lynch IBAR, Inc. and were to serve as a medium for payment and assure the payment of the monies due under the settlement agreement including the November 15, 2002 lump sums. Once the assignment to Merrill Lynch IBAR, Inc. was executed, the settling defendants, the airline in the manufacturer, were released from all liability. Plaintiffs, Ms. Hawkins and Clive, were to have no ownership interest in the Treasury Investment Growth Receipts; rather, their rights were merely those of creditors.

Further, the settlement agreement contained an express statement of liability on the part of Merrill Lynch IBAR, Inc. until all payments were made: Notwithstanding any other provision of this Settlement Agreement, Merrill Lynch IBAR, Inc. following an assignment pursuant to Paragraph 2 hereof, shall at all times remain directly responsible for the payment of all sums and obligations contained in the Settlement Agreement until such time as the terms of the Settlement Agreement are fully satisfied.

Accompanying the settlement agreement was a separate Assignment and Assumption Agreement. The assignment agreement was between the airline and the manufacturer, on one hand, and Merrill Lynch, IBAR, Inc., and Ms. Hawkins on the other. Under the terms of the assignment agreement, Merrill Lynch IBAR, Inc., assumed all obligations to make the November 15, 2002 lump sum payments to Ms. Hawkins and Clive. As noted, these payments were funded by the Treasury Investment Growth Receipts. Additionally, the assignment agreement provided that Merrill Lynch IBAR, Inc. would fund the payments in part with Treasury Investment Growth Receipts. Ms. Hawkins, on behalf of herself and her son Clive, approved of the assignment. Finally, the assignment stated in part, This Agreement . . . shall be binding upon and inure to the benefit of the parties hereto, jointly and severally, the . . . successors . . . and assigns of each.

Additionally, the trial court judicially noticed the settlement agreement involving Ms. Fenter. That settlement agreement likewise required part of the settlement be paid with funds derived from the purchase of Treasury Investment Growth Receipts by Merrill Lynch IBAR, Inc. As in the case of the Hawkinss settlement, Merrill Lynch IBAR, Inc. was responsible for the payments of monies due under the agreement: Notwithstanding any other provision of this Settlement Agreement, Merrill Lynch IBAR, Inc., following an assignment, pursuant to Paragraph 2 hereof, shall at all times remain directly responsible for the payment of all sums and obligations contained in the Settlement Agreement until such time as the terms of the Settlement Agreement are fully satisfied.

Also, the trial court judicially noticed the assignment agreement entered into between the county, Merrill Lynch IBAR, Inc., and Ms. Fenters guardian ad litem. Under the terms of the assignment agreement: all of the countys obligations were assigned to Merrill Lynch IBAR, Inc.; the assignment contemplated the purchase by Merrill Lynch IBAR, Inc. of Treasury Investment Growth Receipts; and Ms. Fenters guardian ad litem approved of the assignment. As in the case of the agreement with the Hawkinses, the agreement was binding on the successors of the parties: This Agreement contains the entire Agreement between the parties with regard to the matter set forth in it and shall be binding upon and inure to the benefit of the parties hereto, jointly and severally, and the . . . successors . . . and assigns of each.

B. The Demurrer Rulings

The Merrill Lynch defendants demurred to and moved to strike certain portions of the first amended complaint. The Merrill Lynch defendants demurred to the first amended complaint on the ground they had not engaged in any wrongful conduct. The Merrill Lynch defendants argued they were not parties to any contract relating to any obligation to make payments to plaintiffs. The Merrill Lynch defendants further argued that they did not play any role in the actions that led to the breach of the payment obligations over a decade after they sold their stock in the structured settlement company. Mr. Pardee also demurred and moved to strike certain portions of the to the first amended complaint. Mr. Pardee also joined in parts of the Merrill Lynch defendants demurrer.

The trial court sustained without leave to amend the demurrers to the claims for: negligent interference with a contract; breach of the good faith and fair dealing implied covenant; fiduciary duty breach; constructive fraud; conversion; negligence; and unjust enrichment. The trial court sustained with leave to amend the demurrer to the fraud claim. The trial court overruled the demurrers to the claims for intentional interference with contract and breach of contract. The trial court granted defendants motions to strike plaintiffs conspiracy allegations and an attorney fees prayer.

C. Standard Of Review

In reviewing an order after a demurrer is sustained without leave to amend, all well-pleaded factual allegations must be assumed as true. (Naegelev. R. J. Reynolds Tobacco Co. (2002) 28 Cal.4th 856, 864-865; Kaskyv. Nike, Inc. (2002) 27 Cal.4th 939, 946.) The Supreme Court has defined our task as follows, Our only task in reviewing a ruling on a demurrer is to determine whether the complaint states a cause of action. (People ex rel. Lungrenv. Superior Court (1996) 14 Cal.4th 294, 300; Moorev. Regents of University of California (1990) 51 Cal.3d 120, 125.) We assume the truth of allegations in the first amended complaint which have been properly pleaded and give them a reasonable interpretation by reading it as a whole and with all its parts in their context. (Stop Youth Addiction, Inc.v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 558; People ex rel. Lungrenv. Superior Court, supra, 14 Cal.4th at p. 300.) The Supreme Court has held: On appeal from a judgment of dismissal entered after a demurrer has been sustained without leave to amend, unless failure to grant leave to amend was an abuse of discretion, the appellate court must affirm the judgment if it is correct on any theory. [Citations.] If there is a reasonable possibility that the defect in a complaint can be cured by amendment, it is an abuse of discretion to sustain a demurrer without leave to amend. [Citation.] The burden is on the plaintiff, however, to demonstrate the manner in which the complaint might be amended. [Citation.] (Hendy v. Losse (1991) 54 Cal.3d 723, 742; Goodmanv. Kennedy (1976) 18 Cal.3d 335, 349.)

D. Negligent Interference With Contract

In the second cause of action in the first amended complaint, plaintiffs asserted a claim for negligent interference with contract. We agree with defendants that the trial court properly sustained the demurrer to this cause of action without leave to amend. In Fifield Manor v. Finston (1960) 54 Cal.2d 632, 636, the California Supreme Court refused to recognize the existence of a cause of action for negligent interference with a contract. No doubt, our Supreme Court subsequently recognized a cause of action for negligent interference with prospective economic advantage. (JAire Corp. v. Gregory (1979) 24 Cal.3d 799, 804-805; see Integrated Healthcare Holdings, Inc. v. Fitzgibbons (2006) 140 Cal.App.4th 515, 531.) But Fifield Manor has not been overruled. (See LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 349; compare Woods v. Fox Broadcasting Sub., Inc. (2005) 129 Cal.App.4th 344, 350 [stating negligent interference with contract claim exists without citing or discussing Fifield Manor]; SCEcorp. v. Superior Court (1992) 3 Cal.App.4th 673, 677 [concluding negligent interference with contract claim exists without reference to Fifield Manor].) Fifield Manor controls the disposition of this issue and, as such, the trial court properly sustained the demurrer to this cause of action without leave to amend.

E. Breach Of The Good Faith And Fair Dealing Implied Covenant

The first amended complaint alleged that plaintiffs were intended beneficiaries of a contract between Merrill Lynch IBAR, Inc. and one or more named Merrill Lynch entities. According to plaintiffs, they were obligated to purchase and hold the Treasury Investment Growth Receipts for 20 years. In the fourth cause of action, both the Merrill Lynch defendants and Mr. Pardee were alleged to have had an implied contractual obligation not to deprive plaintiffs of benefits of their settlement agreements or to render performance impossible. It was alleged that defendants breached the implied covenant of good faith and fair dealing by: failing to place Treasury Investment Growth Receipts in trust; prematurely liquidating the Treasury Investment Growth Receipts; allowing Mr. Pardee access to the proceeds from the sale; concealing the sale from plaintiffs; and failing to pay plaintiffs sums owed or depriving them of future payments. In the fifth cause of action, which is against the Merrill Lynch defendants, plaintiffs alleged they were injured by inadequate advice about and the consequences of using the Treasury Investment Growth Receipts as tax free funding vehicles. Plaintiffs further alleged that the Merrill Lynch defendants are liable for marketing the Treasury Investment Growth Receipts in order to fund the structured settlement agreements and then depriving plaintiffs of the funds and the tax advantages. Although plaintiffs did not label the fourth and fifth causes of action as claims for tortious breach of the implied covenant, they sought tort remedies. On appeal, plaintiffs assert it was error to sustain the demurrer to the tortious of breach of contract claim. Plaintiffs do not assert a contract breach claim was stated in the fourth and fifth causes of action. Defendants counter that California law does not recognize a tort for breach of the implied covenant.

The Supreme Court has explained: Every contract imposes upon each party a duty of good faith and fairdealing in its performance and its enforcement. [Citation.] . . . .  Because the covenant is a contract term, however, compensation for its breach has almost always been limited to contract rather than tort remedies. As to the scope of the covenant, [the] precise nature and extent of the duty imposed by such an implied promise will depend on the contractual purposes. [Citation.] Initially, the concept of a duty of good faith developed in contract law as a kind of safety valve to which judges may turn to fill gaps and qualify or limit rights and duties otherwise arising under rules of law and specific contract language. [Citation.] As a contract concept, breach of the duty led to imposition of contract damages determined by the nature of the breach and standard contract principles. (Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 683-684; accord Jonathan Neil & Associates Inc. v. Jones (2004) 33 Cal.4th 917, 937.) In Freeman v. Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th 85, 102, the California Supreme Court in overruling Seamans Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 767-774 held that as a general rule tort recovery is not allowed for contract breach outside the insurance context. (Accord Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 515.) In Erlich v. Menezes (1999) 21 Cal.4th 543, 551-552, our Supreme Court explained that tort damages have only been permitted in contract cases where: a breach of duty directly causes physical injury; there is a breach of the implied good faith and fair dealing covenant in insurance contracts; an employee sues for wrongful discharge in violation of fundamental public policy; or where the contract was fraudulently induced. Erlich further explained, [T]he duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm. (Id. at p. 552.) Erlich explained: Generally, outside the insurance context, a tortious breach of contract . . . may be found when (1) the breach is accompanied by a traditional common law tort, such as fraud or conversion; (2) the means used to breach the contract are tortious, involving deceit or undue coercion or; (3) one party intentionally breaches the contract intending or knowing that such a breach will cause severe, unmitigable harm in the form of mental anguish, personal hardship, or substantial consequential damages. [Citation.] (Id. at pp. 553-554.)

Here, plaintiffs did not label the claims as one for tortious breach of the implied covenant. However, they sought tort remedies for breach of the implied covenant which is not available outside of the insurance context. The label of a cause of action does not control; rather the substance of the claim and the rights at issue determine what a plaintiff is seeking. (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 845; Paularena v. Superior Court (1965) 231 Cal.App.2d 906, 911-912.) Plaintiffs do not assert in their briefs that cause of actions exist because of the incorporation by reference of other facts which establish the existence of third party beneficiary rights. Further, any contention that valid causes of action exist because of the incorporation by reference of other contract based claims has been waived. (Tiernan v. Trustees of Cal. State University & Colleges (1982) 33 Cal.3d 211, 216, fn. 4; Johnston v. Board of Supervisors (1947) 31 Cal.2d 66, 70, disapproved on another point in Bailey v. County of Los Angeles (1956) 46 Cal.2d 132, 139.) As noted, plaintiffs have not alleged sufficient facts to permit recovery on a tortious contract breach theory. The order sustaining the demurrers to the fourth and fifth causes of action may therefore not be reversed.

F. Fiduciary Duties Breach

The trial court sustained demurrers to alleged fiduciary breach claims against the Merrill Lynch defendants (sixth) and Mr. Pardee (seventh). A fiduciary breach cause of action contains the following elements: the existence of a fiduciary duty; the breach of that duty; and damages legally caused by that breach. (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086; accord Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1405.)

As we previously noted plaintiffs claims against the Merrill Lynch defendants are predicated in part on the conduct of Merrill Lynch IBAR, Inc. under agency theories. However, plaintiffs also sought recovery against one or more of the Merrill Lynch defendants for the marketing and sale of its own proprietary investment product, the Treasury Investment Growth Receipts, with the settlement funds provided by the county, airline, and manufacturer in the underlying litigation. The sixth cause of action against the Merrill Lynch defendants sought relief on a fiduciary breach theory based on the following: plaintiffs placed trust and confidence in the Merrill Lynch defendants; this confidence was based in part on the name and reputation of the Merrill Lynch defendants; the Merrill Lynch defendants received settlement funds paid pursuant to the settlement agreements in the underlying litigation; the Merrill Lynch defendants had knowledge of the settlement and assignment agreements and agreed to make payments as required by them; the Merrill Lynch defendants had control of and held the Treasury Investment Growth Receipts which were purchased with plaintiffs settlement funds and intended to fund in part the structured settlements; the Merrill Lynch defendants marketed and sold their proprietary product which was to be held by them in lieu of placing it in a trust; and the Merrill Lynch defendants represented the Treasury Investment Growth Receipts were qualified funding assets under governing tax law which would be safe and held exclusively for plaintiffs benefit. The sixth cause of action further alleged: the Merrill Lynch defendants sold the Treasury Investment Growth Receipts prior to maturity; the Merrill Lynch defendants gave Mr. Pardee access to the proceeds of the sale; plaintiffs were not notified of the sale or transfer of the Treasury Investment Growth Receipts to Mr. Pardee even though they had been purchased with their settlement funds; the Merrill Lynch defendants failed to disclose the sale or transfer of their proprietary investment product or to place the Treasury Investment Growth Receipts in trust; and they were damaged by the loss of the assets as well as the liquidation of the Treasury Investment Growth Receipts prior to maturity. Plaintiffs asserted that the Merrill Lynch defendants were guilty of oppression, fraud, and malice and engaged in conduct intended to cause injury to plaintiffs. These allegations were sufficient to state a claim as to one or more the Merrill Lynch defendants.

In the seventh cause of action against Mr. Pardee, plaintiffs alleged a confidential relationship existed because: Mr. Pardee assumed the payment obligations owed to them; he took control of the Treasury Investment Growth Receipts which had been purchased with their settlement funds; the Treasury Investment Growth Receipts were intended to benefit the structured settlements; and they had no control over and were not provided any information about the sale and transfer of possession of the funds to Mr. Pardee for his own benefit. Plaintiffs further alleged: Mr. Pardee failed to disclose and concealed the facts of the transfer and sale of the Treasury Investment Growth Receipts to him; and Mr. Pardee allowed the Treasury Investment Growth Receipts which were purchased with their funds and earmarked for their structured settlements to be sold, transferred, and lost to plaintiffs detriment. The allegations were sufficient to withstand a demurrer which should have been overruled. (Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 271; Lynch v. Cruttenden & Co. (1993) 18 Cal.App.4th 802, 809.)

G. Constructive Fraud

The eighth cause of action alleged that defendants were liable for constructive fraud. In Estate of Gump (1991) 1 Cal.App.4th 582, 601, constructive fraud was explained as follows: Civil Code section 1573 defines constructive fraud. Constructive fraud consists: [] 1. In any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, or anyone claiming under him, by misleading another to his prejudice, or to the prejudice of any one claiming under him; or [] 2. In any such act or omission as the law specially declares to be fraudulent, without respect to actual fraud. Constructive fraud arises on a breach of duty by one in a confidential or fiduciary relationship to another which induces justifiable reliance by the latter to his prejudice. [Citation.] [Citations.] In its generic sense, constructive fraud comprises all acts, omissions and concealments involving a breach of legal or equitable duty, trust, or confidence, and resulting in damages to another. [Citations.] Constructive fraud exists in cases in which conduct, although not actually fraudulent, ought to be so treated-that is, in which such conduct is a constructive or quasi fraud, having all the actual consequences and all the legal effects of actual fraud. [Citation.] Constructive fraud usually arises from a breach of duty where a relation of trust and confidence exists. [Citation.] [Citation.] (Original italics; see Jones v. Wagner (2001) 90 Cal.App.4th 466, 471.)

The first amended complaint alleged: plaintiffs were intended beneficiaries of a contract between Merrill Lynch IBAR, Inc. and one or more named Merrill Lynch defendants; the contract required Merrill Lynch IBAR, Inc. to purchase and hold the Treasury Investment Growth Receipts for 20 years; Merrill Lynch IBAR, Inc. used funds received from the settling plaintiffs to purchase Treasury Investment Growth Receipts which had been marketed by one or more of the Merrill Lynch defendants as an investment to fund future payment obligations owed under the structured settlement agreements; the Merrill Lynch defendants sold the rights to the liquidated Treasury Investment Growth Receipts to Mr. Pardee; and Mr. Pardee took control of the assets obtained from the liquidation and used them for his own benefit. Plaintiffs sufficiently alleged: a fiduciary relationship premised on an agency or trust relationship; breach of the duty by failing to disclose material facts within defendants knowledge; and prejudice to plaintiffs from the premature liquidation and loss of the assets from the Treasury Investment Growth Receipts which were purchased with the settlement proceeds for the express purpose of funding the structured settlements including the lump sum payments. The demurrer to this cause of action should have been overruled.

H. Conversion

The following analysis concerning the tenth cause of action does not constitute the judgment of this court. Associate Justice Sandy R. Kriegler has filed a concurring and dissenting opinion. In the dissenting portion of his opinion, Justice Kriegler has concluded that the demurrer to the tenth cause of action in the first amended complaint for conversion was correctly sustained without leave to amend. Coupled with the dissenting opinion which would affirm the judgment in its entirety, there are two justices who would enter judgment on plaintiffs conversion claims. Thus, the following views in the lead opinion do not constitute the judgment of the court. The disposition portion of this lead opinion reflects that the order sustaining the demurrer to the tenth cause of action in the first amended complaint for conversion is affirmed.

The applicable principles when an agent is alleged to have converted funds after the principal has relinquished possession for an express purpose was described in National Bank of New Zealand, Ltd. v. Finn (1927) 81 Cal.App. 317, 345 as follows, An agent may be guilty of the conversion of chattels intrusted to him by his principal so as to render him liable in trover to the principal, or the action may be maintained by the principal against third persons who wrongfully acquire the property from the agent. The National Bank of New Zealand, Ltd. decisionfurther explained that a conversion right of action may be maintained even where the owner of a chattel has parted with its possession for a definite period of time if the bailee puts the property to a use different from that for which it was bailed. (Ibid.) The Court of Appeal held, [W]here a bailee, during the term of the bailment, has put the chattel to a different use from that for which it was bailed, the owner thereupon becomes entitled to immediate possession . . . and may maintain trover for its conversion. (Ibid.)

The settlement agreements do not permit any other entity or person to sell, transfer, reinvest, or otherwise dispose of the Treasury Investment Growth Receipts at any time after their acquisition, much less in a manner inconsistent with the purpose for which they were purchased. The settlement agreements only give the county, the airline, or the manufacturer the right to determine to whom the payment obligation is to be assigned. The purpose of the Treasury Investment Growth Receipts was to provide a fund to make the lump sum payments to plaintiffs. The funds were to be held in such manner for 20 years so as to allow plaintiffs to avoid certain tax consequences.

This scenario is a bailment relationship. (See Software Design & Application, Ltd. v.Hoefer & Arnett, Inc. (1996) 49 Cal.App.4th 472, 485 [funds which are held in a brokerage account are in the nature of a bailment]; Band v. Wilson (1931) 118 Cal.App. 101, 103 [unauthorized delivery or use of bonds and stocks raised bailment issue]; Nichols v. Leach (1931) 114 Cal.App. 545, 550 [same].) Retired Presiding Associate Justice Vaino Spencer, has explained: A bailment is made by one giving to another with his consent, the possession of personal property to keep for the benefit of the former, or of a third party. (Civ. Code, 1814.) (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1490.) Another Court of Appeal has held: In a broad sense a bailment is the delivery of a thing to another for some special object or purpose, on a contract, express or implied, to conform to the objects or purposes of the delivery which may be as various as the transactions of men. [Citation.] Ordinarily the identical thing bailed or the product of, or substitute for, that thing, together with all increments and gains, is to be returned or accounted for by the bailee when the use to which it is to be devoted is completed or performed or the bailment has otherwise expired. . . .  [Citations.] (Niiya v. Goto (1960) 181 Cal.App.2d 682, 687; see also People v. Cohen (1857) 8 Cal. 42, 43; Gebert v. Yank (1985) 172 Cal.App.3d 544, 550-551; Windeler v. Scheers Jewelers (1970) 8 Cal.App.3d 844, 851; H.S. Crocker Co. v. McFaddin (1957) 148 Cal.App.2d 639, 643.) Pursuant to Civil Code section 1822, A depository must deliver the thing to the person for whose benefit it was deposited, on demand, whether the deposit was made for a specific time or not, unless he has a lien upon the thing deposited, or has been forbidden or prevented from doing so by the real owner thereof, or by the act of law, and has given the notice required by section 1825. (See 14 pt. 2 Cal.Jur.3d (1999) Conversion,  23, pp. 219-221.) Civil Code section 1825 states, A depository must give prompt notice to the person for whose benefit the deposit was made, of any proceedings taken adversely to his interest in the thing deposited, which may tend to excuse [the bailee] from delivering the thing to him. Civil Code section 1822 et seq. has been held applicable in bailment situations. (See Witkin, 13 Summary of Cal. Law (10th ed. 2005) Personal Property, 166, pp. 178-180; Todd v. Dow (1993) 19 Cal.App.4th 253, 261; Branch v. Bekins Van & Storage Co. (1930) 106 Cal.App. 623, 632.) The failure to give plaintiffs the benefit of the personalty entrusted to Merrill Lynch, IBAR, Inc., subjects the contracting defendants to liability for damages for conversion, contract breach, and negligence. (See Byer v. Canadian Bank of Commerce (1937) 8 Cal.2d 297, 300-301 [conversion]; Edwards v. Jenkins (1932) 214 Cal. 713, 716 [contract breach and conversion]; Messerall v. Fulwider (1988) 199 Cal.App.3d 1324, 1329 [conversion]; Greenberg Bros., Inc. v. Ernest W. Hahn, Inc. (1966) 246 Cal.App.2d 529, 533-534 [contract breach and negligence].)

Here, it was alleged that defendants liquidated the Treasury Investment Growth Receipts prior to the 20-year period. In so doing, they were acting in manner inconsistent with plaintiffs right to have the payment obligations satisfied by the Treasury Investment Growth Receipts. The allegations of the first amended complaint established that defendants conduct in liquidating the Treasury Investment Growth Receipts and giving the funds to parties other than Merrill Lynch IBAR, Inc. gave rise to a conversion cause of action.

Furthermore, the first amended complaint sufficiently raised an issue as to whether Mr. Pardees conduct amounted to a conversion. Plaintiffs alleged that Mr. Pardee ordered the sale of the Treasury Investment Growth Receipts without the right to do so. The Court of Appeal has explained, One who buys property in good faith from a party lacking title and the right to sell may be liable for conversion. (State Farm Mut. Auto. Ins. Co. v. Department of Motor Vehicles (1997) 53 Cal.App.4th 1076, 1081; Messerall v. Fulwider, supra, 199 Cal.App.3d at p. 1329; Culp v. Signal Van & Storage (1956) 142 Cal.App.2d Supp. 859, 861-862.) Mr. Pardee is alleged to have assumed control over the Treasury Investment Growth Receipts and directed a sale and reinvestment without plaintiffs consent or knowledge. Moreover, it is further alleged that Mr. Pardee then wrongfully transferred to different parties the funds which were to be held for plaintiffs benefit until maturity.

In response to our request for additional briefing on issues related to the conversion claim, defendants argue that, as brokers, they are statutorily immune from liability for conversion under former Commercial Code section 8318 which was in effect when the Treasury Investment Growth Receipts were sold. Defendants argue that former Commercial Code section 8318 supplants the common law conversion claim as a matter of law. Former Commercial Code section 8318 provides that defendants are potentially subject to liability for conversion if they lacked good faith in transferring and selling the Treasury Investment Growth Receipts. Prior to January 1, 1997, Commercial Code section 8318 provided: An agent of bailee who in good faith (including observance of reasonable commercial standards if he or she is in the business of buying, selling, or otherwise dealing with securities) has received certificated securities and sold, pledged, or delivered them or has sold or caused the transfer or pledge of uncertificated securities over which he or she had control according to the instructions of his or her principal, is not liable for conversion or for participation in the breach of fiduciary duty although the principal had no right so to deal with the securities. (Stats. 1984, ch. 927,  6, p. 3117; repealed by Stats.1996, ch. 497,  8, p. 2904.)

Despite defendants contentions to the contrary, former Commercial Code section 8318 does not preclude liability as a matter of law for conversion. Rather, former Commercial Code section 8318 provided a qualified immunity from liability for conversion when the broker has acted in good faith. The determination of whether or not a broker acted in good faith under former Commercial Code section 8318 is factual. (Martinez v. Dempsey-Tegeler & Co., Inc. (1974) 37 Cal.App.3d 509, 515; see also Sunn Sand, Inc. v. United California Bank (1978) 21 Cal.3d 671, 690 [defense of good faith is not properly raised as a demurrer ground]; Everest Investors 8 v. McNeil Partners (2003) 114 Cal.App.4th 411, 432 [defense of good faith is factual in nature and not properly resolved as a matter of law].) In this case, the issue of defendants liability for conversion was raised in the context of a demurrer to the first amended complaint. The first amended complaint alleged facts that, if true, established that defendants did not act good faith. In any event, the existence or lack of defe