UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF CALIFORNIA
IMMOBILIARE, LLC, a California Limited 1:19-cv-00680-LJO-SKO Liability Company, MEMORANDUM DECISION AND Plaintiff, ORDER GRANTING CROSS- DEFENDANT’S MOTION TO DISMISS v. UNDER RULES 9(b) and 12(b)(6). (ECF NO. 13) WESTCOR LAND TITLE INSURANCE COMPANY, a South Carolina Corporation, and DOES 1-50, Defendants. WESTCOR LAND TITLE INSURANCE COMPANY, a South Carolina Corporation,
Cross-Complainant,
v.
IMMOBILIARE, LLC, a California Limited Liability Company; CORPORATE AMERICA LENDING, INC., a California Corporation, and ROES 1-20, Cross-Defendants.
I. PRELIMINARY STATEMENT TO PARTIES AND COUNSEL
Judges in the Eastern District of California carry the heaviest caseloads in the nation, and this
Court is unable to devote inordinate time and resources to individual cases and matters. Given the
shortage of district judges and staff, this Court addresses only the arguments, evidence, and matters
necessary to reach the decision in this order. The parties and counsel are encouraged to contact the
accommodate the parties and this action. The parties are required to reconsider consent to conduct all
further proceedings before a Magistrate Judge, whose schedules are far more realistic and
accommodating to parties than that of any District Judge in the Eastern District of California, who must
prioritize criminal and older civil cases.
Civil trials in the Eastern District of California trail until the District Judge becomes available
and are subject to suspension mid-trial to accommodate criminal matters. Civil trials are no longer reset
to a later date if the District Judge is unavailable on the original date set for trial.
After Defendant Westcor Land Title Insurance Company (“Westcor”) removed this action brought by Plaintiff Immobiliare, LLC1 (“Immobiliare”) in the Fresno Superior Court to this Court
based on diversity jurisdiction, Westcor filed a Cross-Complaint against Immobiliare and Corporate
American Lending, Inc. (“CAL”) (collectively, “Cross-Defendants”) on June 7, 2019. ECF No. 1, Exh.
A; id. No. 8. The Cross-Complaint asserts four causes of action: (1) fraudulent concealment, (2) breach
of implied covenant of good faith and fair dealing, (3) declaratory relief, and (4) rescission. ECF No. 8.
In response, CAL brought the instant Motion to Dismiss (the “Motion”) the Cross-Complaint under
Federal Rule of Civil Procedure 9(b) and 12(b)(3) as to the first, third, and fourth causes of action on
August 1. Id. No. 13. Westcor, however, stipulated with CAL to dismiss its third and fourth cross-
claims on August 21, leaving only the first cross-claim for fraudulent concealment to be subject to this
Motion. Id. No. 15. Westcor then filed its Opposition on August 21, id. No. 16, and CAL replied on
August 29, id. No. 17.
Pursuant to Local Rule 230(g), the Court finds this matter suitable for a decision on the papers.
Immobiliare is a company that has only one corporate member. ECF No. 8 ¶ 3. law, the Court GRANTS the Motion.
The following facts are drawn from the Cross-Complaint and are accepted as true only for the
purposes of this Motion. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). This entire action
originates from Immobiliare’s purchase of a parking lot property (the “parking lot”) located in the City
of Fresno and owned by Cedar Avenue Professional Offices Owners Association (“Cedar”) through a
tax sale for $11,322 on April 28, 2015. ECF No. 8 ¶¶ 7, 10. Cedar was unaware of the tax sale had
taken place because the notice of the sale was sent to an incorrect address. Id. ¶ 10.
Cedar subsequently learned about the tax sale, and its attorney sent a letter to Immobiliare on
July 30, 2015 “advising [Immobiliare] of the situation and offering to buy back” the parking lot, and if
Immobiliare refused, Cedar threatened to demand arbitration to resolve their dispute pursuant to a
documents for conditions, covenants and restrictions, which ran with the land and had been recorded in
the Fresno County Recorder’s Office. Id. ¶¶ 8, 12, 14. Immobiliare, through its agent CAL, “placed an
order with Tax Title Services (‘TTS’) for title insurance” on the same day Cedar sent its letter. Id. ¶¶
15-16. When Immobiliare, through its agent CAL, submitted an application for title insurance four
months later, it misrepresented that the parking lot was vacant when it was actually being used, and that
it had not been made aware or advised of any threat of legal action regarding the validity of ownership
of the parking lot. Id. ¶¶ 14, 16. Based on the misrepresentations, Westcor, in February 2016, “issued a
title policy to Immobiliare with policy limits of $11,322 – the amount Immobiliare paid” for the parking
lot. Id. ¶ 18, 42-45.
Because Immobiliare refused to resell the parking lot back to Cedar, Cedar filed a petition for
rescission of sale of property pursuant to improperly noticed tax sale (the “petition for rescission”) on
April 28, 2016. Id. ¶¶ 14, 22, 29. The Fresno County Tax Collector contacted Immobiliare about the
petition for rescission sometime shortly after April 28, then again in May and on June 9, 2016. Id. ¶ 23, Immobiliare sought, through its agent CAL, for policy limits increases twice to $150,000 then again to
$485,000, which Westcor approved on April 15 and June 20, 2016, respectively. Id. ¶¶ 20-21, 30, 32.
Westcor claims that Cross-Defendants knew about both the potential legal challenge to the ownership of
the parking lot when Immobiliare applied for title insurance and the petition for rescission when it
sought to increase its policy limits. Id. ¶¶ 14-32, 41.
On July 12, 2016, Fresno County Board of Supervisors (the “Board”) held a hearing on whether
to rescind the tax sale of the parking lot in which Immobiliare appeared and participated. Id. ¶ 33. After
the hearing, the Board rescinded the tax sale and returned Immobiliare’s $11,793 payment. Id. ¶ 34. On
August 4, Immobiliare filed with Westcor “a false claim for policy benefits in the amount of $485,000
based on the rescission of the tax sale” stating that it “had no knowledge of any claim or the Petition
prior to the day before [the July 12, 2016] hearing.” Id. ¶ 35 (internal quotation marks omitted).
Westcor proceeded to investigate Immobiliare’s claim only to discover the fraudulent concealment, so it
brought the instant cross-action after Immobiliare had filed the original action to recover on the title
insurance. Id. ¶¶ 36-37.
A motion to dismiss under Rule 12(b)(6) challenges the legal sufficiency of the opposing party’s
pleadings. Dismissal of an action under Rule 12(b)(6) is proper where there is either a “lack of a
cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.”
Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). When considering a motion to
dismiss for failure to state a claim under Rule 12(b)(6), “[a]ll factual allegations in the complaint are
accepted as true, and the pleadings construed in the light most favorable to the nonmoving party.” Doe I
v. Nestle USA, Inc., 766 F.3d 1013, 1018 (9th Cir. 2014) (internal quotation marks and citation omitted).
“In reviewing the sufficiency of a complaint, [courts are limited] to the complaint itself and its attached
exhibits, documents incorporated by reference, and matters properly subject to judicial notice.” In re Rule 8(a)(2) requires a complaint to provides “only ‘a short and plain statement of the claim
showing that the pleader is entitled to relief’ in order to ‘give the defendant fair notice of what the . . .
claim is and the grounds upon which it rests.’” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A sufficiently pled claim “does not need detailed
factual allegations [but] a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitlement to relief’
requires more than labels and conclusions, and a formulaic recitation of the element of a cause of action
will not do.” Id. (citations omitted).
A claim is sufficiently pled when it is “plausible on its face,” meaning that there are enough facts
alleged to “allow[ ] the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). This determination is “a context-
specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id.
at 679. A claim which is possible, but which is not supported by enough facts to “nudge [it] across the
line from conceivable to plausible . . . must be dismissed.” Twombly, 550 U.S. at 570. Rule 8 does not
“unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Ashcroft, 556
U.S. at 678-79.
CAL seeks to dismiss the remaining claim for fraudulent concealment on three grounds. First, it
contends that Westcor has failed to allege what duty it owed to Westcor to disclose the concealed
information. ECF No. 13 at 7-9. Second, Westcor has failed to allege the identity of the CAL employee
who committed the fraudulent concealment as required by Federal Rule of Civil Procedure 9(b). Id. at
7. Third, Westcor has failed to allege that CAL knew and how it knew about the concealed information.
Id.
Rule 9(b) requires a party alleging fraud to “state with particularity the circumstances
constituting fraud.” Fed. R. Civ. P. 9(b). “[W]hile a federal court will examine state law to determine requirement that the circumstances of the fraud must be stated with particularity is a federally imposed
rule.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009) (internal quotation marks and
citation omitted). “Averments of fraud must be accompanied by ‘the who, what, when, where, and how’
of the misconduct charged. ‘[A] plaintiff must set forth more than the neutral facts necessary to identify
the transaction. The plaintiff must set forth what is false or misleading about a statement, and why it is
false.’” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (citations omitted).
“[A]llegations of fraud must be specific enough to give defendants notice of the particular misconduct
which is alleged to constitute the fraud charged so that they can defend against the charge and not just
deny that they have done anything wrong.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007)
(citation omitted).
Under California law, “[o]ne who assumes to act as an agent is responsible to third persons as a
principal for his acts in the course of his agency . . . [¶] [w]hen his acts are wrongful in their nature.”
Civ. Code § 2343 (emphasis added). “Stated another way, the fact that the principal becomes liable
under the rules of vicarious liability or otherwise does not exonerate an agent from liability for a tortious
act committed by the agent while acting under the authority of the principal,” but “in contrast to the
vicarious liability of principals, agents are not vicariously liable for the torts of their principals.”
Peredia v. HR Mobile Servs., Inc., 25 Cal. App. 5th 680, 692 (2018). As applied here, Westcor must
allege with particularity that CAL committed the fraudulent concealment independent of its principal
Immobiliare’s misconduct; facts showing that Immobiliare committed fraudulent concealment do not
vicariously implicate CAL, nor do they satisfy the particularity requirement of Rule 9(b).
A. First Cause of Action for Fraudulent Concealment
Fraudulent concealment is one of the four forms of fraud recognized under California law. Finch
Aerospace Corp. v. City of San Diego, 8 Cal. App. 5th 1248, 1252-53 (2017) (citation omitted). “The
elements of fraudulent concealment are: (1) the defendant concealed or suppressed a material fact; (2) concealed or suppressed the fact with the intent to defraud the plaintiff; (4) the plaintiff was unaware of
the fact and would not have acted as he did if he had known of the concealed or suppressed fact; and (5)
as a result of the concealment or suppression of the fact, the plaintiff sustained damage. [Citation.]”
Burch v. CertainTeed Corporation, 34 Cal. App. 5th 341, 348 (2019) (emphasis added). The Court
begins with the preliminary element of duty to disclose.
1. CAL’s Duty to Disclose
“To maintain a cause of action for fraud through nondisclosure or concealment of facts, there
must be allegations demonstrating that the defendant was under a legal duty to disclose those facts.” Los
Angeles Memorial Coliseum Com. v. Insomniac, Inc., 233 Cal. App. 4th 803, 831 (2015) (emphasis
added). There are four circumstances under which that duty arises: “(1) when the defendant is in a
fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material
facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the
plaintiff; and (4) when the defendant makes partial representations but also suppresses some material
facts. The latter three circumstances presuppose[ ] the existence of some other relationship between the
plaintiff and defendant in which a duty to disclose can arise. This relationship has been described as a
‘transaction,’ such as that between seller and buyer, employer and prospective employee, doctor and
patient, or parties entering into any kind of contractual arrangement.” Burch, 34 Cal. App. 5th at 349-50
(internal quotation marks and citations omitted) (emphasis added).
Here, Westcor’s fraudulent concealment claim is premised on two circumstances: (1) that CAL
had exclusive knowledge of material facts not known to Westcor and (2) that CAL was actively
concealing material facts from Westcor. ECF No. 8 ¶¶ 42-43. However, to establish liability for
fraudulent concealment against CAL under either of these two circumstances, Westcor must plead facts
to demonstrate the existence of some transactional relationship between it and CAL in which CAL had a
duty to disclose. Bigler-Engler v. Breg, Inc., 7 Cal. App. 5th 276, 312 (2017) (“a duty to disclose arises Where, as here, a sufficient relationship or transaction does not exist, no duty to disclose arises even
when the defendant speaks.”). While the alleged facts show that Immobiliare had a duty to disclose to
Westcor under the then-extant contractual relationship between them, there are no facts show that CAL
had a contractual relationship with Westcor or the existence of any other transactional relationship that
would give rise to a duty to disclose to Westcor the concealed information. See ECF No. 8. Thus,
Westcor has failed to allege sufficiently the element of duty.
In opposition, Westcor seems to misinterpret California Civil Code § 2343 (“Section 2343”) to
argue that CAL had a duty to third parties as an agent to disclose information that Immobiliare was
concealing. ECF No. 16 at 14. Section 2343 simply states that “an agent is responsible to third persons”
when “his acts are wrongful in their nature.” Westcor is still required by Rule 9(b) to plead sufficiently
the wrongful act, namely the fraudulent concealment, that CAL committed. By failing to allege
sufficiently the element of duty to disclose, Westcor has failed to state a plausible claim for fraudulent
concealment.
Westcor then cites to various California cases discussing liability for affirmative
misrepresentation in support of its theory of liability based on omissive misrepresentation (or fraudulent
concealment). ECF No. 16 at 14 (citing Shafer v. Berger, Kahn, Shafton, Moss, Figler, Simon &
Gladstone, 107 Cal. App. 4th 54 (2003); Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th
503, 512 (1994)). Westcor appears to misunderstand the different forms of fraud under California and
how each form requires a different set of elements. “California law generally recognizes four forms of
deceit: intentional misrepresentation, negligent misrepresentation, concealment, and failure to perform a
promise.” Finch Aerospace, 8 Cal. App. 5th at 1252-53. “[Deceit] may be negative as well as
affirmative; it may consist of suppression of that which it is one’s duty to declare as well as of the
declaration of that which is false.” Jones v. ConocoPhillips Co., 198 Cal. App. 4th 1187, 1198 (2011)
(internal quotation marks and citation omitted) (emphasis added). “[A] cause of action for Orsi, 15 Cal. App. 5th 1089, 1102 (2017) (citation omitted). While a claim for fraudulent concealment
requires a duty to disclose, a claim for affirmative misrepresentation does not. See, e.g., Cansino v.
Bank of America 224 Cal. App. 4th 1462, 1469 (2014) (setting out the elements for affirmative
misrepresentation in which a duty to disclose is not required); Burch, 34 Cal. App. 5th at 348 (providing
the elements for fraudulent concealment where allegations of a duty to disclose is required). Because
Westcor is asserting a claim for fraudulent concealment, the cases it cites concerning affirmative
misrepresentation is inapplicable here. Westcor is required to allege the element of duty to disclose,
which it has failed to do here as discussed above.
2. Rule 9(b)’s Particularity Requirement of “Who”
“Where fraud has allegedly been perpetrated by a corporation, moreover, plaintiffs must allege
the names of the employees or agents who purportedly made the fraudulent representations or
omissions, or at a minimum identify them by their titles and/or job responsibilities.” UMG Recordings,
Inc. v. Glob. Eagle Entm’t, Inc., 117 F. Supp. 3d 1092, 1108 (C.D. Cal. 2015) (citing United States ex
rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1051 (9th Cir. 2001)).
As CAL correctly argues, ECF No. 13 at 7; id. No. 17 at 4, even though CAL is a corporate
cross-defendant, Westcor has failed to identify the CAL’s employee who committed the fraudulent
concealment as required by Rule 9(b), ECF No. 8. “As such, [CAL] is hindered in its ability to
adequately defend against the accusation through the testimony of the [CAL’s] employees involved.”
Garrison v. Oracle Corp., 159 F. Supp. 3d 1044, 1075 (N.D. Cal. 2016). Accordingly, Westcor has
failed to satisfy the particularity requirement of “who” under Rule 9(b).
3. CAL’s Knowledge of the Concealed Information
CAL also takes issue with the first element of knowledge. ECF No. 13 at 7. It contends that
Westcor has failed to allege sufficient facts to show that it knew and how it knew about the concealed
information. Id. The Court disagrees. set out sufficient factual matter from which a defendant’s knowledge of a fraud might reasonably be
inferred.” United States ex rel. Anita Silingo v. WellPoint, Inc., 904 F.3d 667, 679-80 (9th Cir. 2018).
Notwithstanding, “Rule 9(b) may be relaxed with respect to matters within the opposing party’s
knowledge. In such situations, plaintiffs cannot be expected to have personal knowledge of the relevant
facts.” Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993).
Here, Westcor alleges that “Cross-Defendants intentionally and fraudulently concealed the
Concealed Facts from TTS and Westcor” and “intended for Westcor to rely on its fraudulent
concealment” of material facts. ECF No. 8 ¶¶ 42, 44. Reading these allegations in light most favorable
to Westcor, the Court finds that Westcor has alleged sufficiently and generally the element of knowledge
under Rule 9(b)—that is, to intend to conceal a material fact, CAL must necessarily have had knowledge
of the concealed information.
CAL then cites to and misconstrues Swartz, 476 F.3d 756, for the proposition that when there are
multiple defendants involved in a fraud scheme, a plaintiff must always allege fraud against each
defendant separately. ECF No. 13 at 6-7. Based on this, CAL contends that Westcor must separately
allege that CAL and Immobiliare had knowledge of the concealed information and cannot lump their
knowledge together as “Cross-Defendants.” Id. This argument is unavailing. Correctly read, Swartz
stands for the proposition that “[i]n the context of a fraud suit involving multiple defendants, a plaintiff
must, at a minimum, identif[y] the role of [each] defendant[ ] in the alleged fraudulent scheme.” Swartz,
476 F.3d at 764. Here, Westcor has satisfied this minimum requirement by alleging that Immobiliare
was the purchaser of the title insurance and that CAL was the agent who helped with the purchase. ECF
No. 8 ¶¶ 14-16.
Furthermore, Swartz was later clarified by the Ninth Circuit in United States ex rel. Anita Silingo
v. WellPoint, Inc. (“WellPoint”), 904 F.3d 667 (2018), in which it held that where several defendants are
sued in connection with an alleged fraudulent scheme, “a complaint need not distinguish between fraudulent scheme” is different, then such distinct role must be separately identified and alleged.
WellPoint, 904 F.3d at 677. Given that CAL and Immobiliare are alleged to possess the same concealed
information, Westcor need not allege their knowledge separately in the Cross-Complaint.
CAL also argues that Westcor has failed to allege how CAL knew of the concealed information.
ECF No. 13 at 7. The argument is unpersuasive. As Westcor correctly points out, because how CAL
knew of the concealed information is within CAL’s knowledge, ECF No. 16 at 13 n.13, Westcor “cannot
be expected to have personal knowledge of the relevant facts,” Neubronner, 6 F.3d at 672. Thus, the
application of Rule 9(b) is relaxed. Westcor alleges that each time Immobiliare was in contact with the
Fresno County Tax Collector and Cedar about the ownership of the parking lot and the petition for rescission, CAL was instructed by Immobiliare to purchase title insurance or increase the policy limits.2
ECF No. 8 ¶¶ 14-32, 41. Because Westcor does not know how CAL knew about the concealed
information, these facts are sufficient to satisfy a relaxed application of Rule 9(b).
Although Westcor has sufficiently alleged the element of knowledge, it has failed to allege
sufficiently the element of duty and the identity of CAL’s employee who committed the fraudulent
concealment. Accordingly, the Motion is GRANTED. “As with Rule 12(b)(6) dismissals, dismissals
for failure to comply with Rule 9(b) should ordinarily be without prejudice. [L]eave to amend should be
granted if it appears at all possible that the plaintiff can correct the defect.” Vess, 317 F.3d at 1108
2 Westcor also improperly submits email exchanges between the parties for the Court to consider in determining the
sufficiency of the Cross-Complaint without asking the Court to take judicial notice. See ECF No. 16 at 12 n.2 (citing Exhibit
1). This is highly improper. “[W]hen the legal sufficiency of a complaint’s allegations is tested by a motion under Rule
12(b)(6), ‘[r]eview is limited to the complaint.’” Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (citation omitted). The Co urt therefore declines to consider email exchanges. may be able to cure the pleading defects identified herein, Westcor is GRANTED twenty days to amend
the first cause of action from electronic service of this Order. Alternatively, Westcor may give notice
that it will stand on the current Cross-Complaint within twenty days.
Dated: December 13, 2019 /s/ Lawrence J. O’Neill _____ UNITED STATES CHIEF DISTRICT JUDGE