Opinion
No. CV-F-05-0874 REC SMS, (Doc. 37).
March 16, 2006
ORDER DENYING DEFENDANT'S MOTION TO DISMISS PLAINTIFFS' FIRST AMENDED COMPLAINT.
On Monday, March 13, 2006, the Court heard Defendant's Motion to Dismiss Plaintiffs' First Amended Complaint (the "Motion"). Upon due consideration of the written and oral arguments of the parties and the record herein, the Court DENIES the Motion as set forth herein.
I. Background
The facts, as set forth in the First Amended Complaint ("FAC") are as follows. On January 28, 1988, Plaintiff Harry M. Reynolds ("Mr. Reynolds") obtained a life insurance policy bearing policy number 786 447 846 (the "Policy") from Defendant Allstate Life Insurance Company ("Allstate"). Mr. Reynolds is the named insured under the Policy. Plaintiff Rebecca J. Reynolds ("Ms. Reynolds") is the beneficiary under the policy. On August 28, 1989, an amendment increased the face amount of the policy.
In August 1989, Mr. Reynolds authorized Allstate to make automatic payment deductions from his bank account. On August 29, 1989, Allstate sent Mr. Reynolds a letter indicating that, as a result of processing difficulties, it would stop drafting from Mr. Reynolds's account. Thereafter, from time to time, Allstate sent Mr. Reynolds a statement directing him to pay certain premiums. Mr. Reynolds mailed payments in response to these statements. Mr. Reynolds has no record of receiving statements in late 2002 and 2003. He did not notice that he had stopped receiving statements until March 2003.
Mr. Reynolds's premium payment was due January 28, 2003. The Policy provided for a thirty-day grace period in which Plaintiffs could make a late payment and allow the Policy to remain in force. The grace period expired February 28, 2003.
The Policy provides, on page 8:
Grace Period — If you do not make your premium payment by its due date, we will allow a grace period of 31 days. This contract will be inforce [sic] during the grace period. If you do not make your premium payment by the end of the grace period, this contract will stop unless there is a paid-up benefit as defined in the section called CASH VALUES AND PAID UP BENEFITS.
FAC Ex. A.
On March 24, 2003, John Corr, a Life Agent for Allstate, spoke to Ms. Reynolds on the telephone. He stated that it was necessary that Mr. Reynolds pay $1,322.80 to reinstate the Policy. Shortly thereafter, Mr. Reynolds delivered a check for $1,322.80 to Mr. Corr. FAC Ex. D. Mr. Corr accepted the check. Mr. Reynolds believed that he forwarded it to Allstate. On April 18, 2003, Allstate deposited the check in to its bank account. FAC Ex. E. On June 11, 2003, Allstate refunded $1,322.80 to Mr. Reynolds on the grounds that coverage had terminated. FAC Ex. F.
On June 7, 2005, Plaintiffs Mr. Reynolds and Ms. Reynolds (collectively "Plaintiffs") filed a Complaint in the Kern County Superior Court against Allstate. The Complaint was removed to this court.
Mr. Reynolds, who is an attorney, is representing himself and his wife in this action.
Allstate previously filed a motion to dismiss for failure to state a claim, which the Court granted with leave to amend on August 30, 2005. On December 12, 2005, Plaintiffs filed the FAC. On February 6, 2006, Allstate filed this Motion. Plaintiffs have not filed an opposition brief. On March 6, 2006, Allstate filed a reply brief.
II. Discussion
A. Legal Standard
Dismissal of a complaint pursuant to Rule 12(b)(6) is proper if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957). In testing the sufficiency of a complaint against a Rule 12(b)(6) challenge, a court must "accept all material allegations in the complaint as true and construe them in the light most favorable to the plaintiff." N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 580 (9th Cir. 1983). The Court need not, however, "accept legal conclusions cast in the form of factual allegations if those conclusions cannot reasonably be drawn from the facts alleged." Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994).
A complaint may be dismissed as a matter of law if there is a lack of a cognizable legal theory or if there are insufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). The Court must determine whether or not it appears to a certainty under existing law that no relief can be granted under any set of facts that might be proved in support of a plaintiff's claims.De La Crux v. Tormey, 582 F.2d 45, 48 (9th Cir. 1978), cert. denied, 441 U.S. 965, 99 S. Ct. 2416, 60 L. Ed. 2d 1072 (1979). The Court may consider the complaint itself along with any material properly considered as part of the complaint. Hal Roach Studios, Inc. v. Richard Feiner Co., 896 F.2d 1542, 1555 n. 19 (9th Cir. 1989). Where the complaint fails to state a claim on which relief can be granted, leave to amend "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a); Allen v. Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990).
B. First Cause of Action for Breach of Contract
Allstate argues that dismissal of the breach of contract claim is appropriate because the FAC does not establish the existence of a contract. "To state a cause of action for breach of contract, a party must plead the existence of a contract, his or her performance of the contract or excuse for nonperformance, the defendant's breach and resulting damage." Harris v. Rudin, Richman Appel, 74 Cal. App. 4th 299, 307 (1999). California courts construe insurance contracts, like contracts generally, to give effect to the mutual intentions of the parties. Boghos v. Certain Underwriters at Lloyds of London, 36 Cal. 4th 495, 501 (2005). Contractual language governs where it is "clear and explicit." Id. (quoting Bank of the W. v. Super. Ct., 2 Cal. 4th 1254, 1264 (1992)). Ambiguous terms are interpreted to protect the "'objectively reasonable expectations of the insured.'" Bank of the W., 2 Cal. 4th at 1265 (quoting AIU Ins. Co. v. Super. Ct., 51 Cal. 3d 807, 822 (1990)). Where a federal court considers contractual documents beyond the face of the complaint in the context of a motion to dismiss for failure to state a claim, it should "strive to resolve any contractual ambiguities in [the nonmoving party's] favor." Int'l Audiotext Network, Inc. v. ATT, 62 F.3d 69, 72 (2d Cir. 1995). "[T]he construction of ambiguous contract provisions is a factual determination that precludes dismissal on a motion for failure to state a claim." Martin Marietta Corp. v. Int'l Telecomms. Satellite Org., 991 F.2d 94, 97 (4th Cir. 1992).
Allstate contends that the Policy terminated when the grace period lapsed on February 28, 2003, after Plaintiffs failed to pay the premium due January 28, 2003. Plaintiffs do not allege that they paid the premium before the grace period ended. Rather, they claim that they made a payment of $1,322.80 to Mr. Corr on March 24, 2003, almost a month after the end of the grace period. FAC ¶ 17. Allstate deposited the check into its bank account. FAC ¶ 25.
It appears that Plaintiffs are contending that the late payment entitled them to reinstatement of the Policy. Page 8 of the Policy provides:
Reinstatement — You may reinstate this contract up to 5 years past the due date of the first payment not made by the end of the grace period. You may not use this right if you stopped this contract by asking us to pay you the cash value. We will reinstate the contract if you:
1. Give us the proof we require that the insured is still insurable;
2. Pay all due payments not yet made with compound interest from the due date of each premium payment; and
3. Pay or ask us to reinstate any loan with compound interest from the due date of the first payment not yet made.
FAC Ex. A.
Allstate contends that Plaintiffs are not entitled to reinstatement because they have not alleged that they have met, or attempted to meet, the first requirement. The first requirement provides that Allstate will reinstate the contract if Plaintiffs "[g]ive us the proof we require that the insured is still insurable; . . ." FAC Ex. A. Allstate contends that this language puts the onus on Plaintiffs to take some affirmative step to provide certain "proof [Allstate] requires."
The word "require" can mean "[t]o have as a requisite," which could refer to compulsion under an existing predefined obligation. Webster's II: New Riverside University Dictionary 999 (1988). On the other hand, it can also have the meaning "[t]o call for as appropriate: DEMAND" or "[t]o command," definitions which imply the act of asking or ordering something of someone.Id. 999. Under the latter category of meanings, a plausible reading of the first requirement for reinstatement is that Plaintiffs must give Allstate whatever proof of insurability that Allstate requests of them.
From the face of the FAC and the exhibits that Plaintiffs have attached thereto, however, the Court cannot locate any language that defines what proof, if any, Allstate requires of a party seeking reinstatement. Such language, if present, would indicate that "proof we require" refers to specific preexisting obligations. From the face of the FAC, however, it does not appear that the "proof we require" language imposes an obligation to produce proof beyond what Allstate demands. Even in its briefs supporting the Motion, Allstate does not point to any existing requirement that Plaintiffs submit any particular proof that Mr. Reynolds was still insurable. Nor do the FAC and the attached documents indicate that Allstate has demanded any proof from Plaintiffs.
Plaintiffs allege that Mr. Reynolds "has duly performed each and every condition and obligation of the policy issued by [Allstate] required to be performed by Plaintiff except for those which have been excused. . . ." FAC ¶ 28. In the context of a motion to dismiss for failure to state a claim, the Court will not rule out a plausible reading of the Policy that supports Plaintiffs' claim. See Int'l Audiotext Network, 62 F.3d at 72. The Court finds that under a conceivable set of facts, Allstate did not require Plaintiffs to submit any proof that Mr. Reynolds was insurable. Under those facts, the allegations in the FAC establish that Plaintiffs fulfilled all the requirements for reinstatement. Thus, by alleging that Allstate refused to reinstate the Policy, Plaintiffs have stated a claim for breach of contract.
The Court finds that Plaintiffs have stated a claim that they met the requirements for reinstatement of the Policy under its present terms. Therefore, the Court need not decide whether Mr. Corr's statements modified the terms of reinstatement or whether reinstatement is appropriate under an estoppel theory.
Therefore, Allstate's motion to dismiss this cause of action is DENIED.
C. Second Cause of Action for Fraud
"The elements of fraud, which give rise to the tort action for deceit, are (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."Agosta v. Astor, 120 Cal. App. 4th 596, 603 (2004).
Allstate contends that this claim fails because Plaintiffs attribute a different statement to Mr. Corr in the FAC from what they alleged in the Complaint. In the Complaint, Plaintiffs alleged, "On or about March 24, 2003, Plaintiff Rebecca J. Reynolds received a telephone call from John Joseph Corr . . . stating that a payment of $1,322.80 was due on said policy in order to keep it in force." Compl. ¶ 12. In the FAC, the allegation states,
March 24, 2003 and prior to the time that Plaintiff Harry M. Reynolds paid the premium as demanded, Defendant Allstate . . . made false representations that the life insurance policy would be reinstated if Plaintiff Harry M. Reynolds paid the sum of $1,322 to Defendant Allstate. The false representations were made orally and in person to Plaintiff Rebecca J. Reynolds.
FAC ¶ 32. Allstate contends that the alleged promise that the "policy would be reinstated" (FAC ¶ 32) is inconsistent with the promise that the payment would "keep it in force" (Compl. ¶ 12), and so the latest claim should be disregarded.
The Court does not agree that the FAC contradicts the Complaint. The fact that Mr. Corr made a certain representation on or around March 24, 2004, does not logically foreclose that he made a separate similar statement. In other words, Mr. Corr might have promised that payment would cause the Policy to "be reinstated" and gone on to also say that reinstatement would have the result of keeping it "in force." While one of these statements might have been technically false, Mr. Corr may nevertheless have made both. Furthermore, it would not necessarily be an outright falsehood, though it might be slightly inaccurate, for Plaintiffs to have characterized an offer to reinstate the Policy as an offer to keep the Policy "in force." The Court accepts as true Plaintiffs' allegation that Mr. Corr stated that Allstate would reinstate the Policy upon payment of the premium. See N. Star Int'l, 720 F.2d at 580.
Allstate contends that Plaintiffs' fraud claim is not actionable because they do not allege a misrepresentation of a past or existing fact, but rather a future fact. Representations about future events are deemed to be opinions and generally are not actionable. Neu-Visions Sports v. Soren, 86 Cal. App. 4th 303, 309-10 (2000). A promise to perform in the future, however, implies the present intention to perform. Agosta, 120 Cal. App. 4th at 603 (citing Lazar v. Super. Ct., 12 Cal. 4th 631, 638 (1996)). Courts view a false promise of future performance as an implied misrepresentation of fact that can be actionable fraud.Id. (citing Lazar, 12 Cal. 4th at 638).
Mr. Corr's alleged statement that Allstate would reinstate the Policy upon payment of the premium was the statement of an existing fact: that Allstate at that time intended to perform the action of reinstating the policy. See Lazar, 12 Cal. 4th at 639 (holding that false representation to prospective employee that his job would be "permanent and secure" and that he would receive "significant increases in salary" supported recovery in tort on a misrepresentation theory);Agosta, 120 Cal. App. 4th at 607 (holding that defendant's promise of a compensation package that he never intended to provide plaintiff was an actionable misrepresentation). The Court finds that Plaintiffs have alleged that Allstate made a misrepresentation of an existing fact under a promissory fraud theory.
Allstate also argues that Plaintiffs could not justifiably rely on Mr. Corr's assertion inasmuch as it was inconsistent with the policy. Allstate argues that Plaintiffs knew that (1) no agent could modify the terms of the Policy; (2) that they had not complied with the requirements for reinstatement under the Policy; and (3) that no Allstate officer had approved the reinstatement. As the Court held above, however, under a conceivable set of facts, Plaintiffs have met the Policy's requirements for reinstatement. If they met those requirements, then they would have no reason to be aware that Mr. Corr's statement that Allstate would reinstate the Policy was false, and they would be justified in relying on his assertion.
Allstate also contends that Plaintiffs have failed to meet the heightened pleading requirements for allegations of fraud. To satisfy Rule 9(b) of the Federal Rules of Civil Procedure, a complaint for fraud must "'state the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation.'" Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004). This requirement is read in conjunction with Rule 8, which requires a "short and plain statement of the claim," and calls for "simple, concise, and direct" allegations. Fed.R.Civ.P. 8; see Michaels Bldg. Co. v. Ameritrust Co., N.A., 848 F.2d 674, 679 (6th Cir. 1988).
Plaintiffs allege that on or about March 24, 2003, Mr. Corr called Ms. Reynolds. FAC ¶ 15, 32. At that time, Mr. Corr told her that it was necessary to pay $1,322.80 to reinstate the Policy. FAC ¶ 16. The Court finds that these allegations sufficiently set forth the time, place, and content of and parties to the misrepresentation.
Accordingly, Allstate's motion to dismiss the fraud claim is DENIED.
D. Third Cause of Action for Declaratory Relief
Allstate again moves to dismiss this cause of action on the ground that Plaintiffs have failed to allege facts that demonstrate that the Policy remained in effect or that Plaintiffs met the requirements for reinstatement. For the reasons mentioned above, Plaintiffs have alleged facts sufficient to support a claim that they were entitled to reinstatement of the Policy. Accordingly, Allstate's motion to dismiss this cause of action is DENIED.
E. Punitive Damages
Though a breach of contract claim cannot support a claim for punitive damages, a court may award such damages on a fraud claim that plaintiff brings in the same proceeding as a claim for breach of contract. Walker v. Signal Cos., 84 Cal. App. 3d 982, 996 (1978). Under California Civil Code section 3294, punitive damages, termed "exemplary damages," are available based on "clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice,. . . ." Cal. Civ. Code § 3294(a) (emphasis added). Under that section, "'[f]raud means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury." Cal. Civ. Code § 3294(c)(3).
Plaintiffs have alleged that Allstate purposefully misrepresented its intention to reinstate the Policy. The alleged intent of Allstate was to induce Plaintiffs to "pay the premium demanded." FAC ¶ 34. Thus, Allstate's alleged intent was to "depriv[e] a person of property," specifically, to deprive the Plaintiffs' of their premium payment. See Cal. Civ. Code § 3294(c)(3). The Court finds that Plaintiffs have stated a claim for punitive damages.
ACCORDINGLY, Allstate's Motion to Dismiss Plaintiffs' First Amended Complaint is DENIED.
IT IS SO ORDERED.