LDI Growth Partners v. JPMorgan  Chase Bank

 

 

 

 

 

 

 

 

 

 

Filed 11/5/13  LDI Growth Partners v. JPMorgan  Chase Bank CA1/5

 

 

 

 

 

 

 

NOT TO BE
PUBLISHED IN OFFICIAL REPORTS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opinion has not been certified for publication or ordered published for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

 

FIRST APPELLATE
DISTRICT

 

DIVISION FIVE

 

 

 
>

LDI GROWTH PARTNERS LLC,             Plaintiff and Respondent,                         v. JPMORGAN CHASE BANK, N.A.,             Defendant and Appellant.

A136021               (>Contra> Costa >County>             Super. >Ct.> No. CIVMSC10-01453)

 

 

            Defendant
JPMorgan Chase Bank, N.A. (Chase), appeals from the trial court’s rulings on
the parties’ cross-motions for summary judgment and summary adjudication.  Chase contends the court erred in denying its
motion for summary adjudication as to plaintiff LDI Growth Partners LLC’s (LDI)
cause of action for statutory conversion,
and in granting LDI’s motion for summary adjudication on that claim.  Chase argues LDI’s claim fails as a matter of
law because LDI admitted in response to a request for admissions that the
entity who received certain checks allegedly converted by Chase was not acting
as an agent for LDI; it is undisputed that LDI must have directly or through an
agent received delivery of the checks to state a claim for conversion.  (Cal. U. Com. Code, § 3420.)  We reverse, concluding that LDI’s admissions
are dispositive.

Factual Background

            The following facts are undisputed.

            LDI
is in the factoring business, which means it purchases accounts receivable from
clients and then obtains payment from the clients’ customers.  In August 2008, LDI entered into a “Factoring
and Security Agreement” (Agreement) with Sola Systems, Inc. (Sola).  LDI purchased accounts receivable from Sola,
including those of John Muir Health Systems (John Muir Health).

            The
Agreement identified Sola as “Seller” and LDI as “Purchaser.”  Among other things, section 7.1(g) of the
Agreement authorized LDI to “notify any Account Debtor obligated with respect
to any Account, that the underlying Account has been assigned to Purchaser by
Seller and that payment thereof is to be made to the order of and directly and
solely to Purchaser.”  Consistent with
that provision, at the end of August 2008, LDI sent John Muir Health a written
notice directing John Muir Health to remit all payments due on Sola’s invoices
directly to LDI.  The notice states it
“will remain effective until you are again notified by [LDI] in writing to the
contrary.”  The notice was not revoked in
writing.  The Agreement provides for a 15
percent “Misdirected Payment Fee” for any payment “which has been received by
Seller and not forwarded in kind to Purchaser on the next business day
following the date of receipt by Seller.”

            John
Muir Health provided three checks issued in December 2009 and January 2010
directly to Sola instead of mailing them to LDI.  The checks were made out to “LDI GROWTH
PARTNERS LLC FOR THE ACCT OF SOLA SYSTEMS” and in the amount of $76,760.40, $14,444.30,
and $4,530.00.  In January 2010, Sola
deposited the three checks into its bank account with Chase.  Chase accepted the checks and credited Sola’s
account with the proceeds.

Procedural
Background

            LDI
filed the present action in May 2010 and filed its second amended and operative
complaint (Complaint) in January 2012. 
LDI alleged causes of action for statutory conversion (Cal. U. Com. Code,
§ 3420) and negligence.

            In
September 2011, LDI responded to Chase’s first set of requests for admission
and admitted Sola was not an agent of LDI authorized to receive any checks
directly from John Muir Health. 
Specifically, Chase asked LDI to admit that Sola “was not an agent of
[LDI] who was authorized to receive from John Muir Health” each of the three
checks at issue this action.  LDI
responded, “Admitted that [Sola] was not authorized to receive any checks
directly from John Muir Health.”

            Both
Chase and LDI filed motions for summary judgment and summary adjudication of
the causes of action in the Complaint. 
In an April 2012 declaration, LDI’s president, Melissa Donald, stated,
“[i]n order to expedite Sola’s cash flow, I, on behalf of LDI, granted Sola the
authority to physically pick up the checks at John Muir Health and transport
them directly to LDI for deposit into the LDI account.  In other words, Sola was authorized to
transport, but not receive (as in keep) John Muir Health checks.”  (Fn. omitted.)  Donald provided a similar explanation in a
March 2012 deposition.

            Chase
argued to the trial court that LDI was bound by its admission that Sola was not
an agent authorized to receive the John Muir Health checks.  LDI argued Donald’s declaration and
deposition testimony were consistent with LDI’s admissions, because “receive”
did not mean the same thing as “receive delivery.”  The trial court denied the parties’
cross-motions for summary judgment; granted Chase’s motion for summary
adjudication on the negligence cause of action and denied LDI’s motion with
respect to that claim; and denied Chase’s motion for summary adjudication on
the statutory conversion cause of action and granted LDI’s motion with respect
to that claim.  In a May 2012 minute
order, the court reasoned: “Under California Uniform Commercial Code section
3420, for a payee to recover for conversion of an instrument, the payee must have
actual or constructive possession of the stolen instrument bearing the payee’s
name.  [Citation.]  However, ‘delivery to an agent is delivery to
the payee.’  [Citation.]  [¶] In this case, there is
uncontradicted evidence that LDI had granted Sola limited authority to pick up
checks from John Muir Health on a routine basis, to expedite the delivery of
checks to LDI.  Ms. Donald consistently
stated in LDI discovery responses, in her deposition testimony and in her
declaration, that Sola did not have authority to ‘receive’ checks on its own
account, but that Sola did have authority to expedite the delivery of checks to
LDI by physically picking up and delivering the checks to LDI. . . . â€

            On
May 15, 2012, the trial court entered judgment in favor of LDI in the amount of
$117,776.18, including interest.  This
appeal followed.

Discussion

            Chase
contends the trial court erred in denying its motion for summary adjudication
on the conversion claim and in granting LDI’s motion on that claim.  Chase asserts LDI’s claim fails as a matter
of law because LDI is bound by its admission that Sola lacked authority to
receive John Muir Health checks; it argues the trial court erred in considering
Donald’s declaration and deposition testimony contradicting that
admission.  We review the trial court’s
ruling de novo.  (Smith v. Wells Fargo Bank, N.A. (2005) 135 Cal.App.4th 1463, 1471.)

            “Judicial
admissions may be made in a pleading, by stipulation during trial, or by
response to request for admission. 
[Citations.]  Facts established by
pleadings as judicial admissions ‘ â€œare conclusive concessions of the
truth of those matters, are effectively removed as issues from the litigation,
and may not be contradicted by the party whose pleadings are used against him
or her.”  [Citations.]  . . .’  [Citation.]” 
(Myers v. Trendwest Resorts, Inc.
(2009) 178 Cal.App.4th 735, 746.)  “In
moving for summary judgment, a party may rely on the doctrine of judicial
admission by utilizing” admissions “to eliminate triable issues of material
fact.”  (Id. at p. 747.)  “[W]here a
party in discovery has made an admission which justifies summary judgment in
favor of his opponent, he cannot attempt to defeat the summary judgment motion
by submitting a declaration contradicting the admission.”  (Prilliman
v. United Air Lines, Inc. (1997) 53 Cal.App.4th 935, 961.)

            The
California Supreme Court in D’Amico v.
Board of Medical Examiners (1974) 11 Cal.3d 1, explained that admissions
made in discovery “have a very high credibility value,” because they are
“obtained not in the normal course of human activities and affairs but in the
context of an established pretrial procedure whose purpose is to elicit
facts.  Accordingly, when such an
admission becomes relevant to the determination, on motion for summary judgment,
of whether or not there exist triable issues of fact (as opposed to legal issues) between the parties, it is
entitled to and should receive a kind of deference not normally accorded
evidentiary allegations in affidavits.” 
(Id. at p. 22.)  Where a declaration submitted in opposition
to a motion for summary judgment contradicts a prior “ â€˜clear and
unequivocal admission,’ â€ the trial court is bound to disregard the
declaration and “ â€˜conclude there is no substantial evidence of the existence of a triable issue of
fact.’  [Citation.]”  (Id.
at p. 21.)  Admissions made in the
context of a response to a request for admissions are particularly significant
because the procedure is “specially designed to pare down disputed issues in a
lawsuit” and a party’s admissions in that context, “are ‘ â€œa studied
response, made under sanctions against easy denials,” that occur “under the
direction and supervision of counsel, who has full professional realization of
their significance” â€™ [citation].” 
(Scalf v. D. B. Log Homes,
Inc. (2005) 128 Cal.App.4th 1510, 1522 (Scalf).)

            Accordingly,
LDI is bound by its judicial admission that Sola was not an agent “authorized
to receive any checks directly from John Muir Health.”  This is critical because LDI’s direct or
constructive receipt of the checks at issue is an element of LDI’s conversion
cause of action.  Section 3420,
subdivision (a) of the California Uniform Commercial Code provides:  “The law applicable to conversion of personal
property applies to instruments.  An
instrument is also converted if it is taken by transfer, other than a
negotiation, from a person not entitled to enforce the instrument or a bank
makes or obtains payment with respect to the instrument for a person not
entitled to enforce the instrument or receive payment.  An action for conversion of an instrument may
not be brought by (1) the issuer or acceptor of the instrument or (2) >a payee or indorsee who did not receive
delivery of the instrument either directly or through delivery to an agent or a
copayee.”  (Italics added; see also Hagedorn,
Brady On Bank Checks (2013) ¶ 30.03[4], p. 30-43 (rev. 6/10) [“In
general, recovery by a payee whose indorsement is forged will be denied where
it is shown that no delivery of the check took place.  In other words, delivery or at least some
sort of constructive delivery to the payee is necessary to enable the payee
whose name is forged as indorser to proceed against any bank that handled the
instrument for collection or payment. . . .”  (Fn. omitted.)].)  It is undisputed that LDI, the payee on the
John Muir Health checks, did not directly receive the checks from John Muir
Health.  Thus, if Sola, which apparently
received delivery of the checks directly from John Muir Health, was not acting
as an agent of LDI in receiving delivery of the checks, then LDI’s conversion
claim fails.

            LDI
does not dispute that it is bound by its admissions, or that it must show
actual or constructive receipt of the John Muir Health checks to prevail on its
conversion claim.  Instead, LDI argues
Donald’s declaration and deposition testimony do not contradict its admissions
because, although Sola lacked authority to “receive” the John Muir Health
checks, it did have authority to “receive delivery” of the checks.  In making this argument, LDI suggests the
word “receive” implies that the recipient has the right or intent to keep the
item received, while the phrase “receive delivery” does not.

            “Trial
courts have the discretion to consider parol evidence that explains an
admission.  [Citation.]  However, while courts may utilize evidence to
elucidate and explain an admission, they cannot use such evidence to contradict
the plain meaning of a response to a request for admissions.  [Citation.] 
If a response to a request for admission is unambiguous, and is not
subject to different meanings, the matter admitted is conclusively
established.  [Citation.]”  (Monroy
v. City of Los Angeles (2008) 164 Cal.App.4th 248, 260 (>Monroy).)

            LDI’s
response to Chase’s request for admissions was not ambiguous.  In particular, the word “receive” in Chase’s request
for admissions and LDI’s response cannot reasonably be understood to mean only
receipt with the right or intent to retain ownership.  The Merriam-Webster’s Collegiate Dictionary
broadly defines “receive” as “to come into possession of.”  (Merriam-Webster’s Collegiate Dict. (11th ed.
2003) p. 1038.)  The Oxford English
Dictionary defines “receive” in a similarly broad manner that is also >expressly inconsistent with LDI’s narrow
definition: “[t]o take in one’s hand, or into one’s possession . . . ;
to take delivery of (a thing) from another, either for oneself or for a third
party.”  (13 Oxford English Dict. (2d ed.
1989) p. 314.)  Regardless of which
definition one adopts, it is clear the word “receive” does not necessarily
imply anything about the right or intent to retain ownership of the item.  In other words, although sometimes those who
receive an item have the right or intent to keep it, the plain meaning of
“receive” does not imply such a right or intent.

            That
Chase was using the word in its ordinary, broad meaning is clear because Chase
asked LDI to admit Sola “was not an agent . . . who was authorized to
receive” the checks from John Muir Health. 
In the context of the Agreement, if Sola was acting as an >agent for Chase in receiving the checks
then it necessarily would not have
been receiving the checks for the purpose of keeping them itself.  (Civ. Code, § 2295 [“An agent is one who
represents another, called the principal, in dealings with third
persons.”].)  If one reads Chase’s
request for admissions through the prism of LDI’s narrow definition of
“receive,” the request for admissions makes no sense:  if Sola was acting as an agent of LDI, then
it necessarily was not authorized to
“receive” the checks (i.e., receive delivery of them with the intent to keep
them).  That is, under LDI’s definition
of “receive,” it is senseless to ask whether an entity is an agent authorized
to “receive” checks for a principal.  The
answer must be no; otherwise the entity would not be acting as an agent.  Thus, the only reasonable interpretation of
Chase’s request, and LDI’s response, is that “receive” referred simply to
coming into possession of the checks, regardless of Sola’s ultimate right or
intent to retain ownership of the checks.

            If
LDI was defining “receive” narrowly in its response, it was obligated to
indicate it was doing so.  Under section
2033.220 of the Code of Civil Procedure, an answer to a request for admission
“shall be as complete and straightforward as the information reasonably
available to the responding party permits” (subd. (a)) and “[a]dmit so much of
the matter involved in the request as is true, either as expressed in the
request itself or as reasonably and clearly qualified by the responding party”
(subd. (b)(1)), or “[d]eny so much of the matter involved in the request as is
untrue” (subd. (b)(2)).  LDI did not
qualify its responses by explaining that Sola had authority to receive the
checks for the purpose of expediting delivery to LDI, but Sola did not have
authority to receive the checks for the purpose of keeping them.  (See Applera
Corp. v. MP Biomedicals, LLC (2009) 173 Cal.App.4th 769, 778 [defendant
bound by plain language of its admissions where it “simply admitted each of the
referenced statements without any objection to [the] defined term or
explanation as to whether the admissions applied to defendant or one of its
‘affiliates’ â€].)

            Finally,
even if LDI’s admissions were reasonably susceptible to different meanings, the
other evidence in the record does not support LDI’s proffered
interpretation.  Although a finding there
is a genuine issue of material fact may not be based on a party’s declaration
that contradicts its own discovery responses, a party may rely on “other
credible evidence that contradicts or explains that party’s answers or
otherwise demonstrates there are genuine issues of factual dispute.”  (Scalf,
supra, 128 Cal.App.4th at pp.
1524-1525; see also Fredericks v. Kontos
Industries, Inc. (1987) 189 Cal.App.3d 272, 277 [“In those cases in which
the court determines that an admission may be susceptible of different
meanings, the court must use its discretion to determine the scope and effect
of the admission so that it accurately reflects what facts are admitted in the
light of other evidence.”]; accord, Monroy,
supra, 164 Cal.App.4th at p. 260.)

            In
the present case, LDI points to no evidence in the record, other than Donald’s self-serving declaration and deposition
testimony, that supports its interpretation of its admissions.  In fact, the other evidence in the record
undermines this interpretation.  Most
instructive is the fact that LDI’s proffered distinction between “receive” and
“receive delivery” is inconsistent with the use of the word “receive” in the
Agreement.  In particular, the Agreement
imposes a “misdirected payment fee” for any payments “received by” Sola and not
forwarded to LDI by the next business day. 
Clearly, the Agreement uses “received” in its ordinary meaning as coming
into possession of a payment, with no implication of a right or intent to
retain the payment.  Furthermore, LDI’s
purported authorization of Sola to “receive delivery” of checks from John Muir
Health conflicts with the August 2008 written notice to John Muir Health that,
consistent with the Agreement, instructed that all payments be mailed directly
to LDI.

            For
the reasons above, we conclude LDI’s admissions precluded the trial court from
concluding there is an issue of material fact as to whether Sola acted as an
agent for LDI in receiving delivery of the John Muir Health checks.  Thus, the court erred in denying Chase’s
motion for summary adjudication as to the conversion claim.  Because both claims in the Complaint fail as
a matter of law, we will direct the trial court to grant Chase’s motion for
summary judgment.

Disposition

            The
trial court’s judgment in favor of LDI is reversed.  On remand, the trial court is directed to
grant Chase’s motion for summary judgment and enter judgment in favor of
Chase.  Costs on appeal are awarded to
Chase.

 

 

                                                                                                                                                           

                                                                                    SIMONS,
J.

 

 

 

We concur.

 

 

 

                                                                       

JONES, P.J.

 

 

 

                                                                       

NEEDHAM, J.