Court Opinion

ID: 4155872
Source: CourtListenerOpinion
Date Created: 2017-03-27 20:00:52.807134+00
Date Added: 2024-06-11T14:24:10.075274
License: Public Domain

FILED
                                                                            MAR 27 2017
                            NOT FOR PUBLICATION
                                                                         MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS
                     UNITED STATES COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

CARMELO GALEA,                                   No.   15-56468

              Plaintiff-Appellant,               D.C. No. 3:11-cv-01218-CAB

 and
                                                 MEMORANDUM*
ANTHONY W. IMBIMBO, Trustee of the
Carmelo Galea Family Insurance Trust,

              Plaintiff,

 v.

STEVEN BURGESS, individually; THE
BURGESS GROUP,

              Defendants-Appellees,

 and

LINCOLN NATIONAL
CORPORATION; THE LINCOLN
NATIONAL LIFE INSURANCE
COMPANY, INC.,

              Defendants.

       *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
                    Appeal from the United States District Court
                       for the Southern District of California
                  Cathy Ann Bencivengo, District Judge, Presiding

                        Argued and Submitted March 9, 2017
                               Pasadena, California

Before: PAEZ, BERZON, and CHRISTEN, Circuit Judges.

      In this diversity-based action, Carmelo Galea appeals the district court’s

grant of summary judgment to defendant Steven Burgess on his California state

law claims alleging fraud and deceit and professional negligence. We affirm.

      1.     The district court did not err in granting summary judgment to

Burgess on Galea’s claim for fraud and deceit. Under California law, the tort of

deceit or fraud requires “(a) misrepresentation (false representation, concealment,

or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e.,

to induce reliance; (d) justifiable reliance; and (e) resulting damage.” Charpentier

v. Los Angeles Rams Football Co., Inc., 75 Cal. App. 4th 301, 312 (1999) (citation

omitted).

       Galea alleges that in 2008, he obtained three life insurance policies from

Lincoln National Life Insurance Company with a combined value of $25 million.

Galea further alleges that he sought a non-recourse loan to finance the payments,

and that Lincoln National’s representatives enlisted Burgess to obtain such a loan.

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Although Burgess allegedly promised those representatives that the loan would

indeed be non-recourse, the loan Burgess ultimately secured held Galea personally

liable. But Galea signed a personal guaranty agreement. He maintains that he did

not know that he would be personally liable on the loan, and that had he been

apprised of the terms of the loan he would never have agreed to it.

      There is a genuine dispute of material fact as to whether Burgess ever

represented that he would obtain a non-recourse loan. Moreover, as the district

court observed, “[e]xcept in the rare case where the undisputed facts leave no room

for a reasonable difference of opinion, the question of whether a plaintiff’s reliance

is reasonable is a question of fact.” Blankenheim v. E.F. Hutton & Co., 217 Cal.

App. 3d 1463, 1475 (1990).

      We agree with the district court, however, that this is such a rare case.

Whatever representations Burgess may have made to Lincoln promising that he

would obtain a non-recourse loan, we cannot conclude that a reasonable juror

could find that Galea justifiably relied on them. Galea examined the personal

guaranty himself, which declared in capital letters on the front page of the

document that it was a “GUARANTY AGREEMENT.” The agreement was a

relatively short eight-page document which identified Galea as the guarantor on the

first page, as well as on the final page where Galea affixed his signature. Galea

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apparently recognized the nature of the guaranty agreement, as he asked his

accountant whether the document was a personal guaranty. In fact, Galea declared

that his understanding was that he would be personally liable for repayment of the

loan if he cancelled the life insurance policy, which is essentially what happened

when he failed to renew it and the policy lapsed. Given these facts, the district

court did not err in concluding that any reliance by Galea on Burgess’s alleged

representations to others was not justifiable as a matter of law.

      2.     The district court did not err in granting summary judgment to

Burgess on Galea’s negligence claim. In the first place, Galea has failed to

demonstrate that Burgess owed him a professional duty of care, particularly since

Burgess was not in privity with Galea. Galea correctly observes that California

courts have, in some instances, recognized that a professional may owe a duty of

care to a third party with whom he or she is not in privity. See Biakanja v. Irving,

49 Cal. 2d 647, 650-51 (1958). The bulk of the cases on which Galea relies

concerned an attorney’s potential professional liability to third parties not in

privity. See, e.g., Lucas v. Hamm, 56 Cal. 2d 583 (1961). A few cases, however,

have held that other professionals may owe a similar duty in some circumstances.

See, e.g., Goonewardene v. ADP, LLC, 5 Cal. App. 5th 154, 181 (2016), as

modified on denial of reh’g (Nov. 29, 2016) (holding that “a financial services

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provider may be subject to a duty of care to a third party beneficiary of the contract

between the provider and its client.”).

      But Galea does not, in his Second Amended Complaint, suggest in what

professional capacity Burgess was acting, aside from observing generally that

Burgess presented himself as a “specialist and expert in the field of life insurance

premium financing.” It is not alleged, for example, that Burgess was acting as an

attorney, or as a financial advisor. Although Galea observes that Burgess is

registered as an insurance agent, and proposes that his conduct fell below the

standard of care for a life insurance agent, he was not acting as Galea’s insurance

agent (or anyone else’s) at any point in the transaction. In fact, Galea obtained the

relevant life insurance policies before anyone at Lincoln contacted Burgess.

Burgess’s role in this particular drama was limited to brokering the loan, not the

underlying insurance. Without some indication of the professional capacity in

which Burgess was acting, we cannot conclude that he owed a professional duty of

care to a third party such as Galea.

      AFFIRMED.

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