Court Opinion

ID: 9390027
Source: CourtListenerOpinion
Date Created: 2023-04-26 18:03:04.822986+00
Date Added: 2024-06-11T17:18:31.140143
License: Public Domain

Filed 4/26/23 Kirby v. First American Title CA2/6

     NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                         DIVISION SIX

SUSAN KIRBY,                                                  2d Civ. No. B322898
                                                           (Super. Ct. No. 20CV00913)
     Plaintiff and Appellant,                                 (Santa Cruz County)

v.

FIRST AMERICAN TITLE,
INC., et al.,

     Defendants and Respondents.

      This action involves an alleged “foreclosure rescue scam” in
which defendant Patrick Oliver convinced plaintiff Susan Kirby
to transfer title to her home in Watsonville, California (the
Property) to his company, defendant Seville Development Group,
LLC (Seville). Seville took out a $720,000 loan against the
Property and allegedly converted Kirby’s equity to its own
benefit. Kirby claims defendants First American Title, Inc.
(FirstAm), RushMyFile, Inc. (RMF) and SDC Capital, LLC (SDC)
aided the “scam.”
       The trial court sustained RMF’s demurrer to Kirby’s fourth
amended complaint (4AC) without leave to amend and dismissed
RMF from the action. Kirby contends that even if the 4AC did
fail to state a cause of action against RMF, the court abused its
discretion by denying leave to amend. We agree. The allegations
in Kirby’s sixth amended complaint (6AC) and seventh amended
complaint (7AC) demonstrate that she can state a valid claim
against RMF for conspiracy to commit fraud. We reverse and
remand.1
          FACTUAL AND PROCEDURAL BACKGROUND
        In 2018, Kirby had difficulty making her mortgage
payments. Unable to qualify for a home renovation loan, Kirby
arranged for Oliver to “refinance” the Property. She alleges that
“Oliver represented to [her] that: the refinance would bring
[Kirby] current on her mortgage obligations and other debts; he
would make improvements to the Property; and then . . . sell it;
and then divide the remaining equity with [Kirby].” (Italics
omitted.) To facilitate the “refinance,” Kirby transferred title to
the Property to Seville.
       RMF brokered a $720,000 loan between Seville and SDC.
“Upon closing of the escrow, Seville . . . received approximately
$160,000 and [Kirby] received $30,000 since the only
consideration paid toward the [transaction] was the $720,000
loan provided by SDC.”

      1Even though RMF’s demurrer to the 4AC was sustained
without leave to amend, the trial court has allowed Kirby to
continue to treat RMF as a named defendant pending the
outcome of this appeal.

                                 2
       After two unsuccessful attempts to state a cause of action
against RMF,2 Kirby filed the 4AC, in which she alleged breach of
contract, breach of fiduciary duty, negligence, fraud and
declaratory relief claims against RMF, FirstAm and SDC. Kirby
alleged: “Based on the final distributions and the credit of [her]
net equity to Seville, the transaction was a sham which allowed
[Kirby’s] substantial equity to be converted by Seville. Seville
retained its distribution from the escrow and did not contribute
any monies to the improvement of the Property nor did it make
any payments on the loan to SDC.”
       Kirby further alleged “on information and belief” that RMF
“monitored and managed the FirstAm escrow” and “knew that
Seville was not helping refinance [Kirby’s] Property but instead
engaging in a scheme to convert [her] equity to itself.”
       The trial court sustained RMF’s demurrer to the 4AC
without leave to amend, stating: Kirby “has not alleged facts to
support her allegations that RMF knew or should have known of
Seville’s scheme or the allegedly inconsistent modifications to the
transaction to sell [Kirby’s] property to Seville. She has not
sufficiently alleged how RMF ‘participated’ in the transaction,
and has not alleged facts demonstrating that RMF owed [Kirby]
(who had already transferred title to Seville) any duty to disclose
the loan terms. Any misrepresentation by RMF to SDC as to
Seville’s creditworthiness or the terms of the sales agreement
was a fraud on SDC, not [Kirby].”
       The court further found that Kirby had not pled a
conspiracy among all the defendants, as she had claimed, and

      2Kirby did not name RMF as a defendant in her first two
complaints. The trial court sustained RMF’s demurrers to the
second and third amended complaints with leave to amend.

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that her allegations “are vague, and place RMF in a very
different role than that of a traditional mortgage broker.”
       Kirby contends this was error and that, even if the 4AC did
not adequately plead conspiracy, she did state a cause of action
for conspiracy to commit fraud in both the fifth amended
complaint (5AC) and the 6AC. She claims they demonstrate
[“RMF’s] participation in the conspiracy to defraud [Kirby] by
working directly with . . . Oliver and [FirstAm].”3
                            DISCUSSION4
                          Standard of Review
       “We review a judgment of dismissal after an order
sustaining a demurrer de novo, exercising our independent
judgment about whether the complaint states a cause of action as
a matter of law. [Citation.] We ‘assume the truth of all facts
properly pleaded by the plaintiffs, as well as those that are
judicially noticeable.’ [Citation.] ‘We may affirm on any basis
stated in the demurrer, regardless of the ground on which the
trial court based its ruling.’” (Hanouchian v. Steele (2020) 51
Cal.App.5th 99, 106.)
       “It is an abuse of discretion to sustain a demurrer without
leave to amend if there is a reasonable probability that the defect

      3  We grant Kirby’s unopposed request to take judicial notice
of the 5AC and 6AC. On our own motion, we take judicial notice
of the 7AC, filed on August 23, 2022. (Evid. Code, §§ 452, subd.
(d)(1), 459.)
      4Our review of the issues on appeal has been hindered by
the lack of record references in RMF’s brief. (See Cal. Rules of
Court, rule 8.204(a)(1)(C); Liberty National Enterprises, L.P. v.
Chicago Title Ins. Co. (2011) 194 Cal.App.4th 839, 846 [court may
disregard assertions and arguments that lack record references].)

                                 4
can be cured by amendment. [Citation.] The burden is on the
plaintiff to demonstrate how the complaint can be amended to
state a valid cause of action. [Citation.] The plaintiff can make
that showing for the first time on appeal.” (Chapman v. Skype
Inc. (2013) 220 Cal.App.4th 217, 226; Hamilton v. Greenwich
Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1608-1609.)
                The Trial Court Abused Its Discretion
           by Sustaining RMF’s Demurrer to Kirby’s Fraud
              Claim in the 4AC Without Leave to Amend
       Kirby admits she agreed to transfer title to the Property to
Seville to facilitate a loan. Her plan was (1) to obtain the loan
based on Seville’s credit, (2) to pay her mortgage arrearages and
other debts from the loan proceeds, (3) to use the remaining
proceeds to renovate the Property to prepare it for sale and (4) to
split the sale proceeds with Seville. Kirby explains that
“[i]nitially the Property was to remain in [her] name though
Oliver later represented that the escrow would close in Seville’s
name and then be transferred back to [her]. [Kirby] only
eventually consented to the transfer to Seville because she
believed it was a formality needed to . . . refinance her Property
and fund the planned improvements.” (Italics and underlining
omitted.)
       Seville obtained the loan, which paid off Kirby’s debts and
mortgage arrearages and provided Seville with a $160,000 equity
payment. Kirby anticipated that Seville would use those funds to
renovate the Property and then split the proceeds of its sale.
Instead, “Seville retained its distribution from the escrow and did
not contribute any monies to the improvement of the Property.”

                                 5
       Seville and Oliver are not parties to this appeal.5 The sole
question on appeal is whether Kirby has stated or can state a
claim for relief against RMF.
              The 7AC States a Claim Against RMF for
                    Conspiracy to Commit Fraud
       “In California, fraud must be pled specifically; general and
conclusory allegations do not suffice.” (Lazar v. Superior Court
(1996) 12 Cal.4th 631, 645.) The normal policy of liberally
construing pleadings against a demurrer will not be invoked to
sustain a fraud cause of action that fails to set forth such specific
allegations. (Ibid.) The heightened pleading standard for fraud
requires “‘pleading facts which “show how, when, where, to
whom, and by what means the representations were tendered.”’
[Citation.]” (Ibid, italics omitted.) The specificity requirement
serves two purposes: (1) to furnish the defendant with certain
definite charges that can be intelligently met, and (2) to ensure
the complaint is specific enough so that the court can “weed out
nonmeritorious actions on the basis of the pleadings.”
(Committee on Children’s Television, Inc. v. General Foods Corp.
(1983) 35 Cal.3d 197, 216-217.)
       “Civil conspiracy is not an independent tort. [Citation.]
‘Standing alone, a conspiracy does no harm and engenders no tort
liability. It must be activated by the commission of an actual
tort.’ [Citation.]” (Favila v. Katten Muchin Rosenman LLP
(2010) 188 Cal.App.4th 189, 206.)
       To adequately plead a claim for civil conspiracy, the
plaintiff must plead facts showing “(1) the formation and

      5  Kirby reached a settlement with Oliver in which he
agreed to return title to the Property in exchange for a release of
liability.

                                 6
operation of the conspiracy, (2) wrongful conduct in furtherance
of the conspiracy, and (3) damages arising from the wrongful
conduct.” (Kidron v. Movie Acquisition Corp. (1995) 40
Cal.App.4th 1571, 1581.) Where, as here, “fraud is alleged to be
the object of the conspiracy, the claim must be pleaded with
particularity.” (Prakashpalan v. Engstrom, Lipscomb & Lack
(2014) 223 Cal.App.4th 1105, 1136.)
       As the trial court observed, the 4AC’s fraud cause of action
does not mention a conspiracy. Nor does it satisfy the specific
pleading requirements for fraud. (See Tarmann v. State Farm
Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.) Both the 6AC
and 7AC overcome these deficiencies.
       The trial court ruled that the 6AC had sufficiently pled
facts to state a cause of action against FirstAm for conspiracy to
commit fraud and overruled FirstAm’s demurrer on that basis.
The allegations name RMF as one of the co-conspirators. Kirby
alleged: “Oliver could not defraud the Plaintiff without the
participation of the defendant, FirstAm, with which [RMF] was a
knowing participant in a civil conspiracy with a common plan for
each party to financially gain from defrauding Plaintiff. FirstAm
earned fees from processing the transaction and placing the title
insurance. [RMF] earned a mortgage broker commission by
finding a lender for Seville.”6
       The 7AC, which is now the operative complaint, reiterates
and expands upon the fraud and conspiracy allegations against
RMF, FirstAm and SDC. Among other things, it alleges that

      6We take judicial notice of the trial court’s Order After
Hearing dated June 6, 2022, overruling FirstAm’s demurrer to
the 6AC. (Evid. Code, §§ 452, subd. (d)(1), 459.)

                                 7
RMF’s “knowledge of the conspiracy is evidenced by its
recruitment of lender SDC without informing its principal Steven
Chlavin that the purported ‘buyer’ Seville was not investing any
money into the transaction and was not creditworthy.”
       To state a claim for conspiracy to commit fraud, a plaintiff
need not allege facts to support an independent fraud cause of
action against each actor. As noted above, a conspiracy claim
imposes liability on persons who did not actually commit the tort.
(Applied Equipment Corp. v. Litton Saudi Arabia Ltd (1994)
7 Cal.4th 503, 510-511.) “‘[T]he major significance of the
conspiracy lies in the fact that it renders each participant in the
wrongful act responsible as a joint tortfeasor for all damages
ensuing from the wrong, irrespective of whether or not he was a
direct actor and regardless of the degree of his activity.’”
(Doctors’ Co. v. Superior Court (1989) 49 Cal.3d 39, 44.)
       Kirby adequately alleges that FirstAm and RMF, as co-
conspirators, “are fully liable for the fraudulent acts of Oliver as
if they had committed those acts themselves.” We conclude the
trial court abused its discretion by dismissing RMF from the
lawsuit after sustaining its demurrer to the 4AC.
                            DISPOSITION
       The trial court’s order dated November 23, 2021, sustaining
RMF’s demurrer to the fourth amended complaint (4AC) without
leave to amend and dismissing RMF from the action is reversed.
The causes of action alleged against RMF in the operative
seventh amended complaint (7AC) are hereby stricken except for
the fifth cause of action for conspiracy to commit fraud, which
Kirby has adequately pleaded against RMF. RMF shall have 60
days from the date of this opinion to answer or otherwise plead to

                                 8
that remaining cause of action. Kirby shall recover her costs on
appeal.
       NOT TO BE PUBLISHED.

                                    GILBERT, P. J.

We concur:

      YEGAN, J.

      BALTODANO, J.

                                9
                   Paul Marigonda, Judge
             Superior Court County of Santa Cruz
               ______________________________

      Thornton Davidson; Law Office of Simmons & Purdy,
Pamela D. Simmons and William Purdy, for Plaintiff and
Appellant, Susan Kirby.
      Law Offices of Edward T. Weber, Edward T. Weber and
Kristi M. Wells, for Defendant and Respondent, RushMyFile, Inc.

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