RED ROCK TRANSPORATION, INC. v. SPIREON, INC., et al.

submitted by Plaintiff between May 22, 2015, and April 2019. Each Lease Option Order continued for three

years subject to renewal. Around July 20, 2021, Plaintiff notified Defendant it was not renewing any Lease

Option Orders and was discontinuing the support services; each Lease Option Order had a different

termination date spanning September 1, 2021, to April 1, 2022. After each individual Lease Option Order

was terminated, Defendant continued to bill Plaintiff for monthly support service fees, which Plaintiff

inadvertently continued to pay. Defendant accepted the erroneous payments and refused to issue refunds

despite Plaintiff’s request when it discovered the accounting error and overpayment in November 2023. The

instant action ensued.

On February 23, 2026, Plaintiff filed the instant Motion for Leave to File Third Amended Complaint (Motion),

supported by a declaration from Damian M. Moos (Moos). Defendant filed its Opposition to the Motion

(Opposition) on May 14, 2026. Plaintiff filed its Reply on May 20, 2026.

The California Code of Civil Procedure section 473, subdivision (a)(1), provides, in pertinent part, as follows:

“The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend

any pleading or proceeding by adding or striking out the name of any party, or by correcting a

mistake in the name of a party, or a mistake in any other respect.... The court may likewise, in its

discretion, after notice to the adverse party, allow, upon any terms as may be just, an amendment

to any pleading or proceeding in other particulars....”

Leave to amend is within the court’s sound discretion. (Code Civ. Proc., §473.) Since judicial policy favors

resolution on the merits, courts liberally grant leave to amend. (Nestle v. Santa Monica (1972) 6 Cal.3d

920, 939.) If a motion to amend is timely made and the granting of the motion will not prejudice the opposing

party, it is an error to refuse permission to amend, and, where the refusal also results in a party being

deprived of the right to assert a meritorious cause of action or a meritorious defense, it is not only error but

abuse of discretion. (Morgan v. Superior Court (1959) 172 Cal.App.2d 527, 530.)

The following must be included in a moving party’s motion to amend a pleading: (1) a copy of the proposed

amended pleading, which must be serially numbered to differentiate it from previous pleadings or

amendments, (2) a statement of what allegations in the previous pleading are deleted or added (if any) and

where, by page, paragraph, and line number, the deleted or additional allegations are located, and (3) a

separate declaration specifying (a) the effect of the amendment, (b) why the amendment is necessary and

proper, (c) when the facts discovered that give rise to the amended allegations, and (d) the reasons why

the request for amendment was not made earlier. (California Rules of Court, Rule 3.1324(a)-(b).)

Plaintiff herein motions under section 473(a) of the Code of Civil Procedure for leave to file the proposed

Third Amended Complaint (TAC) attached to the declaration of Moos. Plaintiff argues the interests of justice

favors the proposed amendment as the addition of a cause of action for conversion is simply an alternative

legal theory based on the same facts previously pled. Plaintiff argues that Defendant will not be prejudiced

by the proposed amendment as no discovery has commenced and no trial date has been set in the instant

proceedings.

In its Opposition, Defendant cites to Holguin Fam. Ventures, LLC v. Cnty. of Ventura (2024) 104 Cal. App.

5th 157, 179 for authority that leave to amend should be denied as the subject amendment is futile as a

matter of law. Defendant argues the proposed conversion claim is barred under the economic loss rule,

just like the previously dismissed fraud claim, as it seeks economic damages stemming from Defendant’s

alleged tortious breach of contract. Defendant argues the proposed TAC’s conversion claim adds no new

facts and as such, fails to allege any exception to the economic loss rule. Further, citing Spates v. Dameron

Hosp. Ass’n (2003) 114 Cal. App. 4th 208, 222 and Bush v. Lane (1956) 139 Cal. App. 2d 376, 378,

Defendant argues the proposed conversion claim also fails as a matter of law because it cannot allege

wrongful possession of any amount invoiced and accepted or wrongful intent to interfere with Plaintiff’s

possessory rights.

Plaintiff replies maintaining that Plaintiff is entitled to plead alternative theories. Here, Plaintiff argues as it

is disputed when the contracts between the parties were terminated, if the contracts were terminated, then

the subject conversion claim is based on funds mistakenly paid when no contract was in effect. Plaintiff

contends it pleads sufficient facts to support its claim for conversion including identifying $335,324.09 in

“Converted Funds,” which were the monthly payments made between approximately September 2021 and

October 27, 2023 after Defendant’s contractual entitlement to payments had ended, Plaintiff’s right to

possession of those funds, Plaintiff’s demand for return, and Defendant’s refusal and continued retention.

Further, Plaintiff cites to Rattagan v. Uber Techs., Inc. (2024) 17 Cal. 5th 1, 20 for authority that an exception

to the economic loss rule exists if defendant’s injury-causing conduct violated a duty that is independent of

the duties and rights assumed by the parties when they entered the contract and defendant’s conduct

caused injury to persons or property. Plaintiff contends Defendant’s retention of the funds violated a duty

independent of the parties’ contracts, namely the duty to return funds, upon demand, to the rightful owner

and Defendant’s misconduct caused injury to the Plaintiff. Finally, citing Cerra v. Blackstone (1985) 172

Cal. App. 3d 604, 609, Plaintiff argues wrongful possession is properly pled as possession initially obtained

lawfully may become wrongful if the withholding party refuses to return the property to the party entitled to

possession after demand is made. As to Defendant’s argument that wrongful intent is not alleged, Plaintiff

cites to Taylor v. Forte Hotels Int'l (1991) 235 Cal. App. 3d 1119, 1124 for authority that wrongful intent is

not an element of conversion and instead, the complaint merely needs to allege facts that support a showing

that the act was knowingly or intentionally done.

The court intends to grant Plaintiff’s Motion as judicial policy favors resolution of cases on their merits and

such requests are liberally construed. (Nestle v. Santa Monica, supra, 6 Cal.3d at p. 939.) Defendant does

not argue that the filing of the proposed TAC will prejudice it and prejudice is unlikely given the trial for this

matter has not been set. Instead, Defendant’s sole argument advanced in its Opposition is that the TAC

pleads a conversion claim that fails as a matter of law. The court finds such arguments premature.

(Kittredge Sports Co. v. Superior Court (Marker, U.S.A.) (1989) 213 Cal.App.3d 1045, 1048.) The elements

of a conversion are the plaintiff's ownership or right to possession of the property at the time of the

conversion, the defendant's conversion by a wrongful act or disposition of property rights, and damages.

(Spates v. Dameron Hospital Assn. (2003) 114 Cal.App.4th 208, 220.) The proposed TAC pleads facts

alleging Plaintiff is the owner of the disputed $335,324.09, which was erroneously paid to Defendant and

Defendant had no contractual, legal, or equitable right to receive or retain any portion of this sum as Plaintiff

terminated the parties’ contract on April 1, 2022. The TAC further pleads Defendant refused to return the

disputed funds despite Plaintiff’s demands. Based on the foregoing, the court finds the proposed pleading

on its face states facts that are sufficient to constitute a cause of action. (Foxborough v. Van Atta (1994)

26 Cal.App.4th 217, 230.)

TENTATIVE RULING

Plaintiff’s Motion for Leave to File and serve the Third Amended Complaint is granted and the TAC is to be

filed within ten days of the court’s order.