2012-00127062-CU-FR

Aspen Trust vs. Estate of Donald F Neuhaus

Nature of Proceeding: Hearing on Demurrer (West Coast Life Insuance)

Filed By: Gutenplan, Daniel R.

Defendant West Coast Life Insurance Company’s (“WCL”) demurrer to the second
amended complaint (“SAC”) of Plaintiffs Aspen Trust, Dated March 28, 1994, by and
through its Trustee, Clark Stevens, and Clark Stevens, individually (collectively
“Plaintiffs”) is ruled upon as follows.

This case involves viatical settlements, i.e., investments based upon insureds’ sale of
life insurance policies in exchange for current, discounted cash values. Plaintiffs’ FAC
contains a single cause of action for “Fraud- Conspiracy,” by which Plaintiffs allege a
large conspiracy among numerous entities and individuals in the viatical settlement
industry. Plaintiffs allege that WCL issued a life insurance policy (“Policy”) that was
sold in the viatical settlement market. Plaintiffs further allege that they were
fraudulently induced into investing in the Policy and the investment caused damages
rather than yielding financial benefits. Plaintiffs allege that Richard Wezner (“Wezner”)
was an employee and/or agent of WSL during the sale of the Policy to Plaintiffs in
2003 and at least through 2009. (FAC, ¶14.) Plaintiffs allege that Wezner originally
sold the Last Survivor Life Insurance Policy to Harry and Patricia Bonk in 2000 and
convinced them to surrender the insurance policies and purchase new ones, including
the Policy at issue here. (Id. ¶¶ 14, 21.) The Policy was thereafter sold to the
Neuhaus Defendants, and then sold to Plaintiffs. (Id. ¶¶ 26-27.) Plaintiffs allege that
WCL knew that Wezner was involved in a fraudulent scheme to sell and resell policies
which would never pay out. (Id. ¶ 30.) They allege that Defendants knowingly devised
and intended to devise a scheme and conspiracy to defraud Plaintiffs. (Id. ¶ 20.)

WCL demurs on the grounds that Plaintiffs fail to allege that WCL or Wezner, acting as
WCL’s agent, made any fraudulent statements to Plaintiffs. Rather, the SAC only
contains allegations of fraudulent activity directed towards the Bonks, who are not
Plaintiffs in this lawsuit. (See Conroy v. Regents of University of California (2009) 45
Cal. 4th 1244, 1257 [finding that plaintiff could not plead reliance because statements
were made to her husband and that defendant’s representations did not cause her to
alter her legal relations.].) WCL further demurs on the grounds that Plaintiffs fail to
plead fraud with the requisite specificity.

In opposition, Plaintiffs argue that because this is an action for conspiracy, they need
not plead with specificity or allege that WCL or Wezner made any misrepresentations
to them. They argue instead that WCL may be liable even if it was not the direct actor
and did not commit an overt act. (See Unruh v. Truck Insurance Exchange (1972) 7
Cal.3d 616, 631 [in a conspiracy, each participant is liable as a joint tortfeasor,
regardless of whether he was a direct actor and irrespective of the degree of
involvement.].)

The Court disagrees with Plaintiffs that they were not required to allege fraud with
specificity. There is no separate tort of civil conspiracy, and there is no civil action for
conspiracy to commit a recognized tort unless the wrongful act itself is committed and
damage results therefrom. (Richard B. LeVine, Inc. v. Higashi (2005) 131 Cal. App. 4th
566; Mehrtash v. Mehrtash (2001) 93 Cal. App. 4th 75.) Where fraud is the object of the conspiracy, the claim must be pled with specificity. (Favila v. Katten Muchin
Rosenman LLP (2010) 188 Cal. App. 4th 189, 211.) Plaintiffs must plead the specific
facts establishing each and every element of a fraud-based claim. (Lazar v. Superior
Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631, 638.) Plaintiffs must plead facts
which show, among other things, how, when, where, to whom and by what means any
misrepresentations were made. (Citizens of Humanity, LLC v. Costco Wholesale Corp.
(2009) 171 Cal.App.4th 1, 20.) Furthermore, fraud-based allegations against
corporate defendants must set forth the names of the individuals who made the
misrepresentations, their authority to speak, to whom they spoke, what they said or
wrote, and when it was said or written. (Id.) Here, Plaintiffs’ allegations are insufficient
to state a fraud-based cause of action for conspiracy. Although Plaintiffs counter that
they should be relieved of the obligation to plead fraud with specificity because WCL is
likely to have full knowledge of facts, the Court is not persuaded that this is the case.

Accordingly, the demurrer is SUSTAINED without leave to amend. Plaintiffs have had
multiple opportunities to cure the noted defects, but have been unable to do so.

The Court does not address the parties’ other arguments in support of and in
opposition to the demurrer.

Defendants shall submit a formal order and judgment of dismissal pursuant to CRC
3.1312.