Court Opinion

ID: 5138041
Source: CourtListenerOpinion
Date Created: 2021-12-21 14:49:31.036291+00
Date Added: 2024-06-11T08:24:05.817575
License: Public Domain

2015 UT App 19
_________________________________________________________

              THE UTAH COURT OF APPEALS

        FIDELITY NATIONAL TITLE INSURANCE COMPANY,
                   Plaintiff and Appellant,
                               v.
                   KENTON WORTHINGTON,
                  Defendant and Appellee.

                            Opinion
                        No. 20130799-CA
                     Filed January 29, 2015

          Third District Court, Salt Lake Department
              The Honorable Tyrone E. Medley
                         No. 110908756

        Bryce D. Panzer, Brett N. Anderson, and Scott R.
                Taylor, Attorneys for Appellant

        Michael D. Mayfield and Caroline L. Hermeling,
                    Attorneys for Appellee

 JUDGE JOHN A. PEARCE authored this Opinion, in which JUDGE
MICHELE M. CHRISTIANSEN and SENIOR JUDGE RUSSELL W. BENCH
                        concurred.1

PEARCE, Judge:

¶1    A homeowner sought the assistance of his sister and her
husband in refinancing his house. The three worked with a title

1. The Honorable Russell W. Bench, Senior Judge, sat by special
assignment as authorized by law. See generally Utah R. Jud.
Admin. 11-201(6).
        Fidelity National Title Insurance Co. v. Worthington

company partly owned by the sister to secure a loan from a
bank. After the refinancing loan closed, a mechanic’s lien was
recorded upon the house. The title company’s underwriter paid
out to the bank to satisfy the lien and then sued the homeowner,
his sister, his sister’s husband, and the sister’s title company. For
a variety of reasons, including bankruptcies and the dissolution
of the title company, the only parties left standing in the
litigation are the homeowner and the underwriter. The
underwriter alleged that the homeowner committed fraud and
participated in his sister’s breach of fiduciary duty. The question
before us is whether the district court erred in dismissing the
underwriter’s complaint against the homeowner. Because the
underwriter did not plead any false representation made by the
homeowner and did not plead any duty to disclose owed by the
homeowner, we conclude that the fraud claim against him was
improperly pleaded and therefore properly dismissed. Because
the underwriter did not allege that the homeowner took any
specific action to further his sister’s alleged breach of fiduciary
duty, we conclude that the district court did not err by
dismissing the breach of fiduciary duty claim.

                         BACKGROUND

¶2      Kenton Worthington—the homeowner—purchased a
half-finished house (the Property) from a construction company
with the understanding that the construction company would
complete it. To finance the purchase, Worthington granted a first
trust deed to a lender for $1,100,000 and a second trust deed to
the construction company for $585,000. Worthington later sought
to refinance these obligations and obtain additional capital to
finish construction. To this end, Worthington’s brother-in-law
(Brother-in-Law), a mortgage broker, helped him obtain a
refinancing loan from a second bank (the Bank). The loan was
for $2,596,000 and was characterized as a refinance of existing
obligations rather than as a construction loan. Priority Title
Insurance Agency, a company partly owned by Worthington’s
sister (Sister), handled the closing of the refinancing loan.

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        Fidelity National Title Insurance Co. v. Worthington

Priority Title was an agent of its underwriter, Fidelity National
Title Insurance Company (Fidelity).

¶3      According to Fidelity’s complaint, the refinancing loan’s
closing was conditioned upon, ‚among other things, obtaining
assurance that [the Bank] would have a first priority lien on the
Property, that there would be no other liens of record on the
title, and that there was no subordinate financing.‛ When the
loan closed, Priority Title disbursed funds to pay off the trust
deeds held by the first lender and the construction company.
Both of those entities reconveyed their trust deeds. Priority Title
also issued a lender’s title-insurance policy in favor of the Bank
in the amount of $2,596,000. The policy provided coverage to the
Bank against potential mechanic’s liens claiming priority over
the Bank’s trust deed.

¶4      Worthington and the construction company were unable
to agree on the balance still owing for construction. Two months
after the refinancing loan closed, their dispute boiled over into
litigation. The construction company filed a Notice of Lien
against the Property, asserting a $600,000 mechanic’s lien.
Because construction on the Property had commenced before the
initial sale to Worthington, the construction company asserted
that its lien had priority over the refinancing loan. The Bank was
joined to the litigation and tendered its claim to Fidelity under
the title-insurance policy. Fidelity settled that case by paying the
construction company approximately $490,000.

¶5      Fidelity then filed suit against Worthington, Sister,
Brother-in-Law, and Priority Title (collectively, the Defendants).
Fidelity’s complaint identified two claims for relief that are
pertinent to this appeal: (1) one titled ‚Fraud, Intentional
Misrepresentation, and Civil Conspiracy‛ and (2) one for
‚Breach of Fiduciary Duty.‛ Sister, Brother-in-Law, and Priority
Title are no longer in the case and are not parties to this appeal.

¶6    Worthington moved to dismiss Fidelity’s claims against
him, arguing that they were barred by the economic loss

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        Fidelity National Title Insurance Co. v. Worthington

doctrine and that the claims should be dismissed for failing to
state a claim upon which relief could be granted. See Utah R. Civ.
P. 12(b)(6). In particular, Worthington argued that the fraud
claim failed because Fidelity did not plead ‚the circumstances
constituting fraud . . . with particularity.‛ See id. R. 9(b). The
district court agreed with Worthington and dismissed the claims
against him with prejudice. The court also determined that the
claims were ‚based solely and inextricably on alleged
contractual duties‛ and were therefore the type of ‚tort claims
barred by the economic loss rule, because the claimed duties
[were] not independent of the contract.‛2 The court further
stated that it could not ‚find that . . . Mr. Worthington owed any
legal duties to *Fidelity+.‛ The court incorporated by reference
‚all of the case law authorities and remaining grounds set forth
in *Worthington’s+ Memoranda in support and reply, which
serve as the basis of the Court’s decision.‛ Fidelity appeals.

             ISSUE AND STANDARD OF REVIEW

¶7     Fidelity argues that the district court erred when it
dismissed Fidelity’s complaint against Worthington. The court
dismissed Fidelity’s complaint after it determined that Fidelity
failed to state claims upon which relief could be granted, see
Utah R. Civ P. 12(b)(6), and that the economic loss rule barred
Fidelity’s claims. For the purposes of a rule 12(b)(6) dismissal,
we accept the complaint’s factual allegations as true. Snow v.
Chartway Fed. Credit Union, 2013 UT App 175, ¶ 2 n.2, 306 P.3d
868. As a result, an appeal from a rule 12(b)(6) dismissal presents
only questions of law, and we review the district court’s ruling
for correctness. Simmons Media Group, LLC v. Waykar, LLC, 2014
UT App 145, ¶ 8, 335 P.3d 885.

2. Because we affirm based upon the pleading deficiencies, we
do not address the economic loss doctrine arguments.

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        Fidelity National Title Insurance Co. v. Worthington

                            ANALYSIS

                      I. Fraud-Based Claims

¶8      Fidelity’s first claim for relief is a mélange of fraud-based
causes of action under the title ‚Fraud, Intentional
Misrepresentation, and Civil Conspiracy.‛ Rule 12(b)(6) of the
Utah Rules of Civil Procedure permits the dismissal of
complaints that fail to state claims upon which relief can be
granted. In the context of fraud-based causes of action, rule 9(b)
provides that the circumstances constituting fraud must be
pleaded with particularity in order to state a claim. Utah R. Civ.
P. 9(b).

¶9      Fidelity pleaded that each of the Defendants knew that a
mechanic’s lien could be filed against the Property and knew
that Fidelity would not underwrite an insurance policy for a
property subject to a possible mechanic’s lien. Fidelity claimed
that ‚*e+ach of the Defendants failed to disclose, or require the
disclosure of the [potential lien] to Fidelity for the purpose of
inducing Fidelity to issue the lender’s policy of title insurance to
*the Bank+.‛ Fidelity also alleged that ‚Priority Title and *Sister+
had a specific duty to disclose to Fidelity all facts and
information [relevant] to the issuance of the lender’s policy of
title insurance, and intentionally failed to do so.‛ Although the
complaint lumped fraud, intentional misrepresentation, and civil
conspiracy together, we will consider fraud and intentional
misrepresentation together and civil conspiracy separately.

A.     Fraud

¶10    A claim of fraud requires the plaintiff to allege:

       (1) that a representation was made (2) concerning a
       presently existing material fact (3) which was false
       and (4) which the representor either (a) knew to be
       false or (b) made recklessly, knowing that there
       was insufficient knowledge upon which to base

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        Fidelity National Title Insurance Co. v. Worthington

       such a representation, (5) for the purpose of
       inducing the other party to act upon it and (6) that
       the other party, acting reasonably and in ignorance
       of its falsity, (7) did in fact rely upon it (8) and was
       thereby induced to act (9) to that party’s injury and
       damage.

Webster v. JP Morgan Chase Bank, NA, 2012 UT App 321, ¶ 16, 290
P.3d 930 (citation and internal quotation marks omitted); see also
Armed Forces Ins. Exch. v. Harrison, 2003 UT 14, ¶ 16, 70 P.3d 35
(reiterating that, in the context of a motion for summary
judgment, conclusory allegations of those elements,
unsupported by relevant surrounding facts, are insufficient).

¶11 Here, Fidelity’s complaint fails to allege the elements of a
fraud claim with the particularity our rules require. See Utah R.
Civ. P. 9(b) (‚In all averments of fraud or mistake, the
circumstances constituting fraud or mistake shall be stated with
particularity.‛). Rule 9(b)’s specificity requirement modifies the
general rule that requires only a ‚short and plain‛ statement of
the claim demonstrating entitlement to relief and a demand for
judgment identifying the relief sought. See id. R. 8(a). A number
of reasons have been advanced to justify the more stringent
pleading requirement. Commentators have explained that rules
analogous to our rule 9(b) exist to discourage ‚lightly made
claims charging the commission of acts that involve some degree
of moral turpitude.‛ See 5A Charles Alan Wright & Arthur R.
Miller, Federal Practice and Procedure § 1296 (3d ed.). Others have
suggested that the rule stems from the common law’s historical
reluctance to reopen transactions. John P. Villano Inc. v. CBS, Inc.,
176 F.R.D. 130, 131 (S.D.N.Y. 1997) (citing William M. Richman,
Donald E. Lively & Patricia Mell, The Pleading of Fraud: Rhymes
Without Reason, 60 S. Cal. L. Rev. 959, 960–67 (1987)). The rule
also serves to deter filing exploratory suits with little
information in the hopes that discovery will uncover
information to support the allegations. See Republic Bank & Trust
Co. v. Bear Stearns & Co., 683 F.3d 239, 255 (6th Cir. 2012) (‚Rule
9(b) [of the Federal Rules of Civil Procedure] is designed, not

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        Fidelity National Title Insurance Co. v. Worthington

only to put defendants on notice of alleged misconduct, but also
to prevent fishing expeditions . . . .‛ (citation and internal
quotation marks omitted)); Cornejo v. JPMorgan Chase Bank, No.
CV 11-4119 CAS(VBKx), 2012 WL 628179, at *4 (C.D. Cal. Feb. 27,
2012) (‚Plaintiffs’ assertion that they will ‘not know until
discovery’ the specific misrepresentations made is precisely
what Rule 9(b) [of the Federal Rules of Civil Procedure] seeks to
prevent.‛).

¶12 Here, Fidelity did not identify any false representation
Worthington made to Fidelity; rather, it asserted only that the
Defendants as a group had failed to disclose information to
Fidelity. Our supreme court has explained that a cause of action
for     fraud       against     multiple     defendants       must
‚supply . . . information regarding *each defendant’s+ personal
participation in fraud.‛ Armed Forces Ins. Exch., 2003 UT 14, ¶ 21.
For this reason, the district court did not err by dismissing the
fraud claim.

¶13 Even if we could read the group allegations as directed
solely at Worthington, the complaint avers only that
Worthington ‚failed to disclose‛ the potential for a mechanic’s
lien. A defendant’s failure to disclose must implicate the breach
of a duty to be actionable. See Russell/Packard Dev., Inc. v. Carson,
2003 UT App 316, ¶ 33, 78 P.3d 616 (noting that, generally,
silence in the absence of a duty to speak does not of itself
constitute fraud), aff’d, 2005 UT 14, 108 P.3d 741; see also Gilbert
Dev. Corp. v. Wardley Corp., 2010 UT App 361, ¶ 21, 246 P.3d 131
(holding that a fraudulent nondisclosure claim required the
plaintiff to show that the defendant had a legal duty to
communicate the information at issue). Fidelity’s complaint does
not identify what duty Fidelity asserts Worthington owed to
Fidelity that would have required him to disclose that there was
a possibility (1) that a mechanic’s lien might one day be filed

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        Fidelity National Title Insurance Co. v. Worthington

against the Property and (2) that the priority of such a lien might
predate the Bank’s interest.3

¶14 Because Fidelity’s complaint did not identify any false
representation Worthington made and did not identify any duty
Worthington breached by failing to disclose information to
Fidelity, Fidelity failed to plead fraud with the particularity rule
9(b) requires.

B.     Conspiracy to Commit Fraud

¶15 Fidelity’s first claim for relief also alleged a civil
conspiracy amongst the Defendants to commit fraud. The
complaint asserted that the Defendants’ ‚acts and omissions‛
‚were undertaken as part of a conspiracy to defraud Fidelity,
and to intentionally misrepresent the facts and circumstances, in
order to induce Fidelity to issue a lender’s policy of title
insurance to *the Bank+.‛ Fidelity claimed that ‚Priority Title and
[Sister] were part and parcel of the conspiracy to mislead and
defraud Fidelity‛ and that Worthington knew that neither Sister
nor Priority Title would inform Fidelity or the Bank of the
potential mechanic’s lien.

¶16 A claim for civil conspiracy must allege the following
elements: ‚(1) a combination of two or more persons, (2) an
object to be accomplished, (3) a meeting of the minds on the
object or course of action, (4) one or more unlawful, overt acts,
and (5) damages as a proximate result thereof.‛ Israel Pagan
Estate v. Cannon, 746 P.2d 785, 790 (Utah Ct. App. 1987).

3. Fidelity did not allege that Worthington withheld information
from Priority Title; to the contrary, the complaint asserts that the
possibility of a mechanic’s lien was ‚known to each of the
Defendants,‛ including Priority Title.

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        Fidelity National Title Insurance Co. v. Worthington

¶17 Here, Fidelity has not alleged facts to support its
allegations. Specifically, the complaint lacks any facts showing a
meeting of the minds. Rather, it states conclusorily that, ‚since
each of the Defendants knew that *Sister+ was *Worthington’s+
sister, and that [Brother-in-Law+ was *Worthington’s+ brother-in-
law, each of the Defendants knew that neither [Sister] nor
[Brother-in-Law+ would inform *Fidelity+‛ of the possibility of a
mechanic’s lien being filed. Thus, the complaint implied that
familial relationships alone give rise to an inference of
conspiracy when a sibling or her spouse is alleged to have
breached a duty to disclose. Fidelity must do more to allege a
meeting of the minds than simply imply that this element is
satisfied when the defendants are related by blood or marriage.

¶18 Because Fidelity’s complaint did not assert facts to show
that Worthington, Sister, Brother-in-Law, and Priority Title
agreed on a course of fraudulent behavior, Fidelity failed to
plead civil conspiracy to commit fraud with the particularity
required by rule 9(b). See Utah R. Civ. P. 9(b); see also Coroles v.
Sabey, 2003 UT App 339, ¶ 39 & n.23, 79 P.3d 974 (explaining that
rule 9(b)’s particularity requirement extends to civil conspiracy
claims predicated on fraud and possibly even to non-fraud civil
conspiracy claims).

¶19 Because we determine that Fidelity’s complaint did not
state the fraud and civil conspiracy claims with particularity, we
hold that the district court correctly dismissed those claims for
failure to state a claim upon which relief could be granted.

                   II. Breach of Fiduciary Duty

¶20 Fidelity’s second claim for relief alleged breach of
fiduciary duty. Specifically, Fidelity argued that Priority Title
and Sister breached the fiduciary duties they owed to Fidelity as
insurance agents. With respect to Worthington, Fidelity alleged
that he knew of that fiduciary relationship, that he knew that the
refinancing loan could only close if the possibility of a
mechanic’s lien was concealed from Fidelity, and that he

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        Fidelity National Title Insurance Co. v. Worthington

‚actively participated in Priority Title’s and *Sister’s+
concealment‛ of that possibility. Fidelity asserted that
Worthington was therefore ‚jointly and severally liable for the
breach of fiduciary duty.‛

¶21 The district court’s ruling stated that the court could not
find that Worthington owed any legal duties to Fidelity. It also
noted that ‚the claim that *Worthington+ aided and abetted a
fraud and conspiracy are not allegations pled in the Amended
Complaint.‛ On appeal, Fidelity argues that ‚[a]n independent
duty exists not to participate in the breach of a fiduciary duty‛
and that the allegations in the complaint were ‚sufficient to state
a claim against [Worthington] for participating in (aiding and
abetting) the breach of fiduciary duty claim.‛

¶22 We note that the complaint does not expressly plead an
aiding and abetting cause of action. Rather, the section of the
complaint Fidelity relies upon is titled ‚Breach of Fiduciary
Duty.‛ That section does not contain the phrase ‚aiding and
abetting.‛ On appeal, Fidelity attempts to shoehorn the meaning
of ‚aiding and abetting‛ into its use of the word ‚participated.‛
Even assuming that this is sufficient to plead an aiding and
abetting cause of action, Fidelity’s complaint fails to state a claim
upon which relief can be granted.

¶23 The sufficiency of the pleadings within a complaint ‚must
be determined by the facts pleaded rather than the conclusions
stated.‛ Franco v. Church of Jesus Christ of Latter-day Saints, 2001
UT 25, ¶ 26, 21 P.3d 198 (citation and internal quotation marks
omitted); Foster v. Saunders, 2005 UT App 264U, at para. 3 (per
curiam). Here, Fidelity’s complaint asserts that Priority Title and
Sister breached their fiduciary duties to Fidelity. But the
complaint does not allege any act Worthington performed in
furtherance of those breaches. Fidelity’s complaint claims only
that Worthington ‚actively participated‛ in the breach. This
allegation is purely conclusory rather than factual and is
therefore insufficient to support a claim for relief. See Chapman v.
Primary Children’s Hosp., 784 P.2d 1181, 1186 (Utah 1989) (‚We

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        Fidelity National Title Insurance Co. v. Worthington

have stressed, and continue to hold, that mere conclusory
allegations in a pleading, unsupported by a recitation of relevant
surrounding facts, are insufficient to preclude dismissal or
summary judgment.‛). Accordingly, dismissal pursuant to rule
12(b)(6) of the Utah Rules of Civil Procedure was appropriate.

                         CONCLUSION

¶24 Fidelity’s complaint did not allege fraud or conspiracy to
commit fraud with the particularity rule 9(b) of the Utah Rules of
Civil Procedure requires. Fidelity’s complaint also failed to
allege facts to support a claim that Worthington aided and
abetted Sister, or Priority Title, in breaching a fiduciary duty
owed to Fidelity. The district court therefore correctly granted
Worthington’s motion to dismiss for failure to state a claim upon
which relief could be granted. As a result, we need not consider
whether the district court correctly applied the economic loss
rule to Fidelity’s fraud and breach of fiduciary duty claims. We
affirm the district court’s order dismissing the complaint.

¶25   Affirmed.

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