Sehremelis

Plaintiffs, George and Athena Sehremelis, appeal from a judgment of dismissal entered following the sustaining without leave to amend of demurrers to their fourth amended complaint as against defendant Farmers and Merchants Bank of Long Beach (FMB). Plaintiffs, borrowers under construction loans, sued FMB on account of its negotiating checks, drawn by the lender upon plaintiffs’ loan accounts, which allegedly were deposited with “forged, missing, or otherwise unauthorized endorsements.” The trial court ruled that plaintiffs could not state a cause of action against FMB on any of four theories advanced: breach of warranty, conversion, equitable subrogation, and negligence. We conclude that the causes of action for conversion and equitable subrogation were properly dismissed, but that existing law and policy sustain the legal sufficiency of the breach of commercial warranty and negligence causes of action. We therefore reverse the dismissal as to them.

Facts

This case arises out of the diversion of sums from plaintiffs’ construction loans by a general contractor and his associates, who obtained checks from the lending bank and negotiated and deposited them, with allegedly…