1

Filed 3/30/16; pub. order 4/28/16 (see end of opn.)

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

D. CUMMINS CORPORATION et al.,

Plaintiffs and Appellants,

v.

UNITED STATES FIDELITY AND 

GUARANTY COMPANY et al.,

Defendants and Respondents.

 A142985

 (Alameda County

 Super. Ct. No. RG14711136)

D. Cummins Holding LLC (Holding Co.) appeals from the trial court’s order 

sustaining without leave to amend the demurrer of United States Fidelity and Guarantee 

Company (U.S. Fidelity) and United States Fire Insurance Company (U.S. Fire)

(collectively, the insurers or defendants),

1

to the complaint for declaratory relief filed by 

Holding Co. and D. Cummins Corporation (Cummins Corp.) (collectively, plaintiffs), 

dismissing Holding Co.’s claims. Holding Co. now contends the trial court erred when it 

found that Holding Co. did not have standing to participate in the declaratory relief

action, which involved interpretation of insurance policies the insurers had previously 

issued to Cummins Corp. Holding Co. further contends the court abused its discretion 

when it found that Holding Co. could not successfully amend the complaint. We shall 

affirm the judgment. 

 

1

In the trial court, U.S. Fire joined in the demurrer of U.S. Fidelity and, on appeal, 

it adopts by reference the respondent’s brief filed by U.S. Fidelity. 
2

FACTUAL AND PROCEDURAL BACKGROUND

The complaint in this matter alleged the following facts. Cummins Corp., a 

California corporation formerly known as Valley Asbestos Company, installed asbestos 

containing products in California, and had received hundreds of asbestos bodily injury 

claims, including many lawsuits, based on exposure to its asbestos containing materials. 

Cummins Corp. purchased 19 insurance policies issued by U.S. Fidelity between July 1, 

1969 and January 1, 1987, and purchased four insurance policies issued by the 

predecessor to U.S. Fire between February 1, 1988 and January 1, 1992. These policies 

include “primary, umbrella, and or excess insurance policies,” some of which “may be 

missing or only partially documented.” 

Holding Co. is a Delaware limited liability company, formed on January 17, 

2014.2 It is the parent and controlling shareholder of Cummins Corp. 

On January 23, 2014, plaintiffs filed a complaint for declaratory relief against the 

insurers, in which they sought, in a single cause of action and pursuant to Code of Civil 

Procedure section 1060,3a “declaratory judgment that defendants are obligated to defend 

and/or indemnify Cummins [Corp.], in full, including, without limitation, payment of the 

cost of investigation, defense, settlement and judgment . . . , for past, present and future 

Asbestos Suits under each of the Policies triggered by the Asbestos Suits.” Plaintiffs also 

sought additional, detailed declarations regarding the duties of the insurers with respect to 

asbestos actions against Cummins Corp.4 The complaint further alleged that the 

insurance companies “dispute the relief [plaintiffs] assert is available under the Policies. 

 

2 On June 12, 2015, we granted U.S. Fidelity’s unopposed request for judicial 

notice of Holding Co.’s January 17, 2014 Certificate of Formation, filed with the 

Delaware Secretary of State. 

3 All further statutory references are to the Code of Civil Procedure unless 

otherwise indicated. 

4

In its opening brief, Holding Co. states that, “[i]n particular, declarations are 

sought as to the manner in which the policies’ aggregate limits of liability apply, or do

not apply, to the ongoing asbestos litigation against Cummins Corp.” 
3

Consequently, an actual and justiciable controversy exists between [plaintiffs] and 

defendants concerning defendants’ respective obligations under their Policies.”

On February 28, 2014, U.S. Fidelity removed the case to federal court, alleging 

that Holding Co. had been “fraudulently joined” as a plaintiff and that its citizenship 

should be ignored for diversity purposes. On May 28, 2014, the United States District 

Court found that complete diversity did not exist and that it therefore did not have 

subject-matter jurisdiction, requiring that the matter be remanded to the state trial court.5

On July 8, 2014, U.S. Fidelity demurred to Holding Co.’s cause of action for 

declaratory relief on the ground that it failed to state facts sufficient to constitute a cause 

of action, in that “[t]he Complaint is devoid of any allegation that [Holding Co.] is an 

insured under any of the insurance policies alleged in the Complaint or otherwise in 

privity with [U.S. Fidelity] and, consequently, [Holding Co.] lacks standing. . . .”

On September 3, 2014, the trial court sustained the demurrer without leave to 

amend,

6

explaining: “[U.S. Fidelity] asserts that the complaint fails to state sufficient 

 

5

In its order remanding the case, the district court stated: “Whether the owner of 

an insured corporation qualifies as an interested person under Section 1060 appears to be 

an unresolved question of California state law.” After finding several cases cited by U.S. 

Fidelity inapplicable to the present circumstances, the court continued: “With no 

California authority interpreting the ‘interested person’ standard in this context, the court 

must conclude that whether the shareholder of an insured corporation has standing to sue 

the corporation’s insurer for declaratory relief under Section 1060 is not a well-settled 

matter of California law.” Because it was “not obvious according to California law that 

Plaintiffs fail to state a claim against [the insurers],” the district court declined to find 

fraudulent joinder, which precluded the court from ignoring Holding Co.’s presence in 

the case for diversity purposes. (Fn. omitted.) 

6

The trial court first observed that, at the then current stage of the proceedings, it 

was “not clear how a demurrer lies, procedurally. However, [U.S. Fidelity], having 

answered the complaint, may move for judgment on the pleadings on the same grounds, 

under the same legal standards. Thus, the court addresses the merits.” (See IMO 

Development Corp. v Dow Corning Corp. (1982) 135 Cal.App.3d 451, 457 [“a defendant 

may move for judgment on the pleadings on the ground that the complaint fails to state a 

legally cognizable cause of action”].) We presume the court was referring to the fact that 

U.S. Fidelity filed the demurrer more than 30 days after service of the complaint. (See 

§ 430.40.) 
4

facts as to the holding company plaintiff, [Holding Co.], for a claim for declaratory relief 

under [section] 1060. [U.S. Fidelity] argues that the complaint does not state that 

Holding Co. was an insured under any alleged insurance policies, state that it was an 

additional insured, or otherwise demonstrate privity with [U.S. Fidelity]. Rather, the 

complaint admits that the subsidiary, [Cummins Corp.], an installer of insulation, was the 

insured. [U.S. Fidelity] argues that Holding Co. cannot be ‘interested’ under a ‘written 

instrument’ as required by section 1060, and that there is no legal theory under [which]

Holding Co[.] could assert any underlying claim against [U.S. Fidelity].

“The court agrees that Plaintiffs have not pleaded, and apparently cannot plead 

facts needed for Holding Co[.] to be a ‘person interested under a written instrument’ such 

that Holding Co[.] has standing to seek a declaration of its rights under such an 

instrument. [¶] While most of [U.S. Fidelity’s] authorities are not on point, the court is 

somewhat persuaded, not just by the plain language of section 1060, but by dictum in 

Otay Land Co. v. Royal Indem. Co. (2008) 169 Cal.App.4th 556, which suggests that 

while section 1060 is broad, to have standing a party must show that it has some . . . 

cognizable legal theory. . . . 

“Plaintiffs have not demonstrated that they can amend to address this issue, and in 

light of the facts already pleaded, it would appear to be futile.” The court then granted 

the joinder of U.S. Fire and dismissed Holding Co.’s claims. 

On September 9, 2014, Holding Co. filed a notice of appeal.7

DISCUSSION

Holding Co. contends the trial court incorrectly concluded it did not have standing 

to participate in the declaratory relief action. Holding Co. further contends the court 

abused its discretion when it found that Holding Co. could not successfully amend the 

complaint. 

 

7

The declaratory relief action continues in the trial court, with Cummins Corp. 

and the insurers as parties. 
5

“For purposes of analyzing the ruling on demurrer, we give the pleading a 

reasonable interpretation, reading it as a whole, its parts in their context, to determine 

whether sufficient facts are stated to constitute a cause of action or a right to the relief 

requested. [Citation.] If a demurrer was sustained without leave to amend, but the defect 

was curable by amendment, we would find an abuse of discretion in that ruling. 

However, if the order is correct as a matter of law, we would not reverse it. [Citation.]”

(Otay Land Co. v. Royal Indem. Co., supra, 169 Cal.App.4th at pp. 561-562 (Otay), 

citing Blank v. Kirwan (1985) 39 Cal.3d 311, 318 (Blank).) 

Section 1060 provides in relevant part: “Any person interested under a written 

instrument . . . or under a contract, or who desires a declaration of his or her rights or 

duties with respect to another, or in respect to, in, over or upon property . . . may, in cases 

of actual controversy relating to the legal rights and duties of the respective parties, bring 

an original action or cross-complaint in the superior court for a declaration of his or her 

rights and duties in the premises, including a determination of any question of 

construction or validity arising under the instrument or contract. He or she may ask for a 

declaration of rights or duties, either alone or with other relief; and the court may make a 

binding declaration of these rights or duties, whether or not further relief is or could be 

claimed at the time. . . .” 

While section 1060’s language “appears to allow for an extremely broad scope of 

an action for declaratory relief” (Otay, supra, 169 Cal.App.4th at p. 562), “an actual 

controversy that is currently active is required for such relief to be issued, and both 

standing and ripeness are appropriate criteria in that determination. [Citation.]” (Id. at 

p. 563.) “One cannot analyze requested declaratory relief without evaluating the nature 

of the rights and duties that plaintiff is asserting, which must follow some recognized or 

cognizable legal theories that are related to subjects and requests for relief that are 

properly before the court.” (Ibid.) In the context of a demurrer, the court will evaluate 

“whether the factual allegations of the complaint for declaratory relief reveal that an 

actual controversy exists between the parties. [Citation.]” (Id. at p. 562.)
6

In addition, under section 1061, “The court may refuse to exercise the power 

granted by this chapter in any case where its declaration or determination is not necessary 

or proper at the time under all the circumstances.” Section 1060 must be read together 

with section 1061. (Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 647.) The trial 

court’s determination that a declaration is not necessary or proper in the circumstances is 

discretionary, subject to reversal only for an abuse of that discretion. (Ibid.; Otay, supra, 

169 Cal.App.4th at p. 563.) 

In Otay, the plaintiff was an owner of real property who brought a declaratory 

relief action against the liability insurer of the property’s former owner regarding the 

insurer’s anticipated coverage with respect to contamination problems at the property. 

(Otay, supra, 169 Cal.App.4th at p. 558.) The plaintiff admitted that it did “not fit into 

the usual categories for establishing it has standing to sue, in light of its lack of 

contractual privity with the insurer (e.g., such exceptions exist where the third party 

plaintiff has a judgment against the insured, or where the insurer has sued the third party 

in its own right for declaratory relief, or where there was an assignment by the insured of 

its rights under the policy to the third party).” (Id. at p. 565; accord, Royal Indemnity Co.

v. United Enterprises, Inc. (2008) 162 Cal.App.4th 194, 211 (Royal) [earlier related case

relied on by Otay court].) The plaintiff nonetheless argued that it had standing to bring a

declaratory relief action against the insurer of a policyholder on the ground “that 

declaratory relief should be ‘expansively’ allowed.” (Otay, at p. 565.) The appellate 

court disagreed, explaining that section 1060 “has never been interpreted as no longer 

requiring appropriate standing to seek declaratory relief . . . .” (Otay, at p. 565.) The 

court therefore held that the trial court had properly sustained the defendant insurer’s 

demurrer without leave to amend because the plaintiff could not plead sufficient facts to 

establish it had standing to sue the insurer to determine the applicability of the former 

owner’s insurance. (Id. at pp. 558, 567-568.)

In the present case, Holding Co., like the plaintiff in Otay, asserts that it is an 

interested person under section 1060, despite the fact that it is not a party to or directly 

affected by the insurance policies that are the subject of the declaratory relief action, and 
7

despite the fact that it does not otherwise fit into any of the categories of exceptions to the 

requirement of contractual privity. (Otay, supra, 169 Cal.App.4th at p. 565.) Holding 

Co. maintains that it nonetheless has a “practical interest in the proper interpretation of 

Cummins Corp.’s insurance policies given its relationship to, and its central role in the 

pursuit of those insurance assets.” Holding Co. further claims that it “is, most

importantly the sole entity responsible for managing the affairs of Cummins Corp., 

including making decisions as to litigation strategy, resolution and settlement.” (See City 

of Santa Monica v. Stewart (2005) 126 Cal.App.4th 43, 60 [“Standing is measured not 

just by a plaintiff’s stake in the resolution of an action, but by the force with which it 

presents its case”]; see also California Water & Telephone Co. v. Los Angeles County

(1967) 253 Cal.App.2d 16, 22-23 [“One who invokes the judicial process does not have 

‘standing’ if he, or those whom he properly represents, does not have a real interest in the 

ultimate adjudication because the actor has neither suffered nor is about to suffer any 

injury of sufficient magnitude reasonably to assure that all of the relevant facts and issues 

will be adequately presented”].) Therefore, according to Holding Co., it is “[a]ny person 

interested under a written instrument . . . or under a contract, or who desires a declaration 

of his or her rights or duties with respect to another” for purposes of participating in a

declaratory relief action against the insurers. (§ 1060.) 

This argument is not persuasive. While Holding Co. may, as it says, have a 

“practical interest” in the success of Cummins Corp.’s litigation with the insurers by 

virtue of its relationship with the corporation, it has not shown how that indirect

interest—no matter how enthusiastic it may be (see City of Santa Monica v. Stewart, 

supra, 126 Cal.App.4th at p. 60)—translates into “a legally cognizable theory of 

declaratory relief.” (Otay, supra, 169 Cal.App.4th at p. 562; see Royal, supra, 162 

Cal.App.4th at p. 212 [“Only abstract rights and interests have been asserted by 

[appellant], and they are too indirect, remote, and consequential”].) Rather, as the trial 

court found, it is the corporation itself that has a direct interest in the interpretation of the 

policies in question. 
8

It is also notable that California courts have held that a corporation’s shareholders 

generally do not have standing to sue the corporation’s insurer. For example in Seretti v. 

Superior Nat. Ins. Co. (1999) 71 Cal.App.4th 920, 922-924 (Seretti), the sole 

shareholders of a corporation filed a cross-complaint against the corporation’s workers’

compensation insurance carrier, alleging bad faith. The appellate court affirmed the trial 

court’s sustaining of the carrier’s demurrer, explaining: “In accordance with the 

overwhelming weight of authority, we affirm the trial court’s ruling on appellants’ lack of 

standing to assert a claim against the corporation’s insurer. [¶] . . . Ignoring a 

corporation’s separate existence is a rare occurrence, particularly where it is the 

shareholders who seek to pierce its veil, and the courts will do so only ‘to prevent a grave 

injustice.’. . . The corporation itself, as named insured, can pursue its own rights, and the 

shareholders will profit indirectly. [¶] Individuals are free to operate their business in 

their own names and accept all its debts and liabilities as their own. Having elected to 

avail themselves of the benefits of the corporate structure, as appellants did here, they 

cannot be heard to complain of their inability to take personal advantage of a right 

belonging to the corporation alone.” (Id. at p. 931; accord, C & H Foods Co. v. Hartford 

Ins. Co. (1984) 163 Cal.App.3d 1055, 1068 [no abuse of discretion in sustaining 

demurrers without leave to amend to claims of two 50 percent shareholders who alleged 

bad faith and negligent infliction of emotional distress by corporation’s insurer, where 

neither shareholder was an insured or a beneficiary under policy].)

Holding Co. attempts to distinguish Seretti and C & H Foods Co., observing that 

those cases involved causes of action for bad faith insurance practices, whereas, here, 

Holding Co. is requesting declaratory relief under section 1060. The principles discussed 

in those cases are nonetheless relevant to this declaratory relief action in which Holding 

Co. has presented no additional facts or legal authority showing that it has standing as 

Cummins Corp.’s controlling shareholder to pursue a declaratory relief action against 

Cummins Corp.’s insurers. (See Fladeboe v. American Isuzu Motors, Inc. (2007) 150 

Cal.App.4th 42, 55 [sole shareholder did not have standing to seek declaratory relief on 

behalf of corporation, except in a derivative action].) Holding Co. formed a limited 
9

liability company making it the controlling shareholder of Cummins Corp. just days 

before the present action was filed. Cummins Corp., however, remains the named 

insured, which “can pursue its own rights, and [Holding Co.] will profit indirectly.” 

(Seretti, supra, 71 Cal.App.4th at p. 931.) Holding Co. claims its involvement is needed

to pursue the action and obtain a declaration of the rights and duties both of the insurers 

and of Cummins Corp., which has no assets of its own. The evidence, however, shows 

that the action continues in the trial court despite dismissal of Holding Co. from the case.8 

Hence, Holding Co. has not shown that its participation in the declaratory relief action is 

necessary “ ‘to prevent a grave injustice.’ ” (Seretti, at p. 931; cf. California Water & 

Telephone Co. v. Los Angeles County, supra, 253 Cal.App.2d at pp. 22-23.)9 

Holding Co. relies on several cases for the proposition that a party can have 

sufficient interest in a matter to bring a declaratory relief action even though it is not 

directly affected by the contract or regulation that is the subject of the action. (See Olson 

v. Toy (1996) 46 Cal.App.4th 818, 824-825 [decedent’s heirs had standing to maintain an

action for declaratory relief regarding validity of decedent’s trust even though they were 

 

8 We take judicial notice of the Alameda County Superior Court’s Register of 

Actions, showing continuing case management activity in this matter. (See Evid. Code, 

§ 452, subd. (d)(1) [judicial notice may be taken of “[r]ecords of . . . any court of this 

state”]; Blank, supra, 39 Cal.3d at p. 318 [in reviewing sufficiency of a complaint against 

a general demurrer, we “ ‘consider matters which may be judicially noticed’ ”].) 

9 Holding Co. also attempts to distinguish Seretti by citing Mycogen Corp. v. 

Monsanto Co. (2002) 28 Cal.4th 888, 899-900, in which the California Supreme Court 

referred to a comment in the Restatement Second of Judgments, which provides: “When 

a plaintiff seeks solely declaratory relief, the weight of authority does not view him as 

seeking to enforce a claim against the defendant. Instead, he is seen as merely requesting 

a judicial declaration as to the existence and nature of a relation between himself and the 

defendant.” (Rest.2d Judgments, § 33, com. c, p. 335.) The context of the discussion in 

that case, however, was whether a judgment granting a party’s request for declaratory 

relief and specific performance of a contract precluded, under the doctrine of res judicata, 

that party’s subsequent suit for damages for breach of that same contract, a question not 

relevant to the issue before us in this case. (Seretti, at p. 897.) Moreover, Holding Co. 

has not shown that there exists “a relation between [it] and the defendant[s]” pursuant to 

which a declaratory judgment would be warranted. 
10

not beneficiaries of trust, since question of trust’s validity directly affected their legal 

rights to property under decedent’s will]; Sperry & Hutchinson Co. v. California State 

Board of Pharmacy (1966) 241 Cal.App.2d 229, 233 [plaintiff, a trading stamp vendor 

who had contracts with 900 pharmacists for sale of its trading stamps was an interested 

person under section 1060 for purposes of declaratory relief action regarding a regulation 

that, if enforced, would deprive plaintiff of benefit to be derived from such contracts]; 

General Ins. Co. v. Whitmore (1965) 235 Cal.App.2d 670, 673-675 [insurer, which had 

sought a declaratory judgment regarding its rights and liabilities under insurance policy 

with respect to intentional acts of insured’s son, could join as parties those allegedly 

injured by insured’s son to determine proportionate contribution due each claimant if 

recovery of damages were later ordered].) These cases are plainly distinguishable in that 

all of the parties included in the declaratory relief actions had a legal interest in, or would 

be directly affected by, any interpretation of the terms of the insurance policies or 

regulation in question. As we have discussed, Holding Co. has not alleged any facts or 

legal theory giving it more than an indirect interest in the policies at issue. (Royal, supra,

162 Cal.App.4th at p. 212; see also Otay, supra, 169 Cal.App.4th at p. 562.) 

Likewise, the present matter is not comparable to the cases cited by Holding Co. in 

support of its argument that an actual controversy exists between it and the insurers. 

(See, e.g., McClain v. Octagon Plaza, LLC (2008) 159 Cal.App.4th 784, 800 [tenant’s 

declaratory relief claim against landlord adequately alleged controversy regarding 

tenant’s obligations to pay rent under lease].) Again, Holding Co. has not demonstrated 

the existence of an actual controversy between it and the insurers. Hence, the only proper 

parties to this declaratory relief action are Cummins Corp. and the insurers. 

In conclusion, given that Holding Co., the controlling shareholder of Cummins 

Corp., does not have a contractual relationship with the insurers and is not otherwise 

interested in the contract between the corporation and the insurers (see § 1060), the trial 

court acted within its discretion when it concluded that a declaration of Holding Co.’s 

rights was “not necessary or proper at the time under all of the circumstances.” (§ 1061.) 

In addition, because Holding Co. has not shown that there is a reasonable possibility it 
11

could amend the complaint to plead facts showing that it is a “person interested under a 

written instrument” or demonstrated the existence of an “actual controversy relating to 

the legal rights and duties” of it and the insurers (§ 1060), the court did not abuse its 

discretion when it sustained the demurrer without leave to amend. (See Blank, supra, 39 

Cal.3d at p. 318; Otay, supra, 169 Cal.App.4th at pp. 561-562.) 

DISPOSITION

The judgment is affirmed. Costs on appeal are awarded to defendants U.S. 

Fidelity and U.S. Fire. 

_________________________

Kline, P.J.

We concur:

_________________________

Richman, J.

_________________________

Stewart, J.
1

Filed 4/28/16

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

D. CUMMINS CORPORATION et al.,

Plaintiffs and Appellants,

v.

UNITED STATES FIDELITY AND 

GUARANTY COMPANY et al.,

Defendants and Respondents.

 A142985

 (Alameda County

 Super. Ct. No. RG14711136)

 ORDER CERTIFYING OPINION

 FOR PUBLICATION

THE COURT:

The opinion in the above-entitled matter filed on March 30, 2016, was not 

certified for publication in the Official Reports. For good cause, the request for 

publication is granted.

Pursuant to California Rules of Court, rules 8.1120 and 8.1105(b), the opinion in 

the above-entitled matter is ordered certified for publication in the Official Reports.

Dated: _____________________ _________________________

Kline, P.J.
2

Trial Court: Alameda County Superior Court

Trial Judge: Hon. George C. Hernandez, Jr.

Attorneys for Plaintiffs and Appellants: Morgan, Lewis & Bockius LLP

Thomas M. Peterson

Jeffrey S. Raskin

Peter F. McAweeney

Paul A. Zevnik

Attorneys for Defendants and Respondents: Dentons US LLP

Ronald D. Kent

Susan M. Walker

Nicolaides, Fink, Thorpe, Michaelides, 

 Sullivan LLP

Sara M. Thorpe

Seth J. Manfredi