author: SILER, Chief Judge.

text:
    STATE FARM FIRE & CASUALTY CO., Plaintiff, v. CONTINENTAL INSURANCE CO., Defendant.
    Civ. A. No. C-83-0187 BG(S).
    United States District Court, W.D. Kentucky.
    Jan. 25, 1985.
    James D. Harris, Jr., Parker & Rudloff, Bowling Green, Ky., for defendant.
   SILER, Chief Judge.

Chester and Sandra Whorbley owned a home, in Bee Springs, Kentucky, that was destroyed by fire. The Whorbleys had an insurance policy with the plaintiff, State Farm Fire and Casualty Company, and State Farm promptly paid the Whorbleys’ claim on their loss. In the present case, State Farm seeks a pro rata contribution on the amount that it paid the Whorbleys from the defendant, Continental Insurance Company, alleging that the Whorbleys had additional insurance with Continental when the fire occurred. In response, Continental argues that its policy with the Whorbleys was terminated by their failure to pay a renewal premium. Both parties have moved for summary judgment. For the reasons set out below, Continental’s motion will be sustained and State Farm’s motion will be denied.

The following facts are not in dispute. The Whorbleys did have an insurance policy with Continental that covered their home and their vehicles. This policy was effective from March 22, 1981, through March 22, 1982. The Continental policy could be renewed annually for up to five years. On March 23, 1982, Mr. Whorbley made arrangements to insure his property with State Farm. His policy with State Farm was effective from March 23, 1982, through March 23, 1983. The Whorbleys’ fire loss occurred on March 24, 1982. This was during the term of their policy with State Farm, but two days after the expiration of their policy with Continental.

On the night of the fire, Mr. Whorbley called his State Farm agent, Billy Basham. The next day, Mr. Whorbley met with Basham and Basham advised him that State Farm was on the claim. After their meeting, Mr. Whorbley went to the office of the Continental agent, Rudd Kerr. Mr. Kerr was not in the office, but Mr. Whorbley told Kerr’s secretary about the fire and asked her what he should do. She advised him to pay the premium, and Mr. Whorbley left his check with her. This check was forwarded to Continental’s home office in Glen Falls, New York.

When Mr. Kerr returned, he arranged for an adjuster to investigate the fire. The adjuster found that Mr. Whorbley had obtained insurance with State Farm and included this information in his report. Mr. Whorbley stated that the adjuster told him that Continental would pay a part of his loss but the adjuster denies this.

At a time uncertain, Mr. Whorbley did receive the following notice from Continental:

We have not received the payment due in response to our recent billing of March 29, 1982. Unless payment is received promptly, your policy will not remain in force. If payment was recently made, please disregard this notice.

However, the record shows that Rudd Kerr also sent Mr. Whorbley a letter on March 29, 1982. That letter is set out below:

March 29, 1982
Dear Mr. Whobrey,
Chester I have been informed that you had taken insurance with State Farm, effective 3/23/82.
As you know I was out of town when you came in to pay your insurance premium, after the loss you had occurred; which we would have customarily taken and covered your loss; which you are aware that we had already sent an adjustor to inspect your loss.
However, since it was your intent to let this policy expire on 3/22/82 and had already taken out a $45,000 Homeowners HO 3 with State Farm your check is being returned to you by the Continental Insurance Company and there will be no coverage under this policy for your loss.
Sincerely,
Rudd A. Kerr

In addition, Continental returned Mr. Whorbley’s check, on April 1, 1982, and advised him that his policy had expired, on March 22, 1983.

Mr. Whorbley testified that he did not intend to relinquish any rights that he might have had under his policy with Continental. However, his testimony clearly indicates that he had received a notice from Continental that his premium was due before the fire occurred, but chose not to pay it. He testified that he wanted to replace his Continental policy with less expensive coverage from State Farm, and he states repeatedly that he did not intend to carry both policies before the fire. Even when his testimony is considered in a light most favorable to the plaintiff, it remains clear that Mr. Whorbley did not intend to renew his policy with Continental, when it expired on March 22, 1982.

State Farm’s motion for summary judgment relies heavily on the case of Home Insurance Co. of New York v. Caudill, 366 S.W.2d 167 (Ky.1963). In that case, the plaintiff/appellee had an insurance contract with the defendant/appellant for a term of five years. The defendant’s agent had collected Vs of the total premium and had issued a promissory note for the rest, which was payable in four annual installments. The plaintiff’s property was destroyed by fire during a period when one of these installments was past due. After the fire, the plaintiff made the late payment on his note, but the defendant denied liability.

The appellate court affirmed a jury verdict for the plaintiff. The Court found that there was sufficient evidence that the defendant’s agent was authorized to accept the late payment because of his prior course of dealing with the plaintiff. Id. at 168-169. The Court held that the acceptance of this overdue installment automatically revived the policy back to the date when the payment was due. Id. at 170. Thus, the policy was found to be effective at the time that the plaintiff suffered his loss.

However, the Home Insurance case is not apposite to the facts presented by the case at hand. In the present case, the claimants were not merely late in paying an installment that came due during the term of their contract. Instead, the Whorbleys failed to renew their contract with Continental, when the term of that contract expired, on March 22, 1983. Because of this distinction, the instant case is controlled by Troutman v. Nationwide Mutual Insurance Co., 400 S.W.2d 215 (Ky.1966).

In Troutman, the claimant had purchased automobile insurance for a term of six months. This policy was renewable conditioned on advance payment of subsequent premiums. The claimant allowed the policy to lapse and was later involved in an accident. After the accident, the claimant made the payment that was required for renewal, to his insurance agent. The agent forwarded the claimant’s check to the main office of the insurance company. The company cashed the check, but later mailed the claimant a refund check and advised him that his policy had been cancelled for nonpayment.

On appeal, the Court affirmed an entry of summary judgment for the insurance company. The Court distinguished the failure to make renewal payments from the failure to make an installment payment during the terms of the contract.

The cases relied upon by the appellant (Kentucky Live Stock Insurance Co. v. Stout, 175 Ky. 343, 194 S.W. 318 [(1917)], and Glens Falls Insurance Company v. Elliott, 223 Ky. 205, 3 S.W.2d 219 [ (1928) ] holding that acceptance by the insurance company of the premium payment, with knowledge of a ground of forfeiture, estops the company from asserting forfeiture, are not in point because they deal with a situation in which the company is already contractually bound and is seeking to avoid the contract. In the instant case there was no contract when the premium check was cashed. For the same reason we find inapplicable Home Insurance Co. of New York v. Caudill, Ky., 366 S.W.2d 167, which holds that acceptance of late payment of a premium note estops the company from asserting a forfeiture of the policy for delinquency in payment of premium.

Id. at 217. The Court found that the company was not estopped from refusing to renew the policy, because the company had done nothing before the accident that would have led the claimant to believe that the policy would continue beyond its expiration date. Id. at 216-217.

As previously stated, the record indicates that the Whorbley’s policy with Continental expired on March 22, 1982. With regard to renewal, the policy provides as follows:

FIVE YEAR RENEWAL GUARANTEE
1. The company guarantees to renew this policy from year to year for a total period of five years from the original inception date stated in the Declarations, provided however that the company may decline to renew whenever it would be entitled to cancel this policy as provided in B2b(l), B2b(2) or B2b(3) above.
2. When the company elects not to renew this policy, it shall mail notice not less than thirty days in advance of its intention not to renew to the named insured and to any mortgagee or loss payee named in the Declarations, provided that the number of days notice shall not be less than that required by law; but even though the company has not given notice of its intention not to renew, this policy shall terminate automatically on the expiration date stated in the Declarations if the insured has failed to discharge when due any of his obligations in connection with the payment of premium for this policy of any installment thereof whether payable directly to the company or its agent or indirectly under any premium finance plan or extension of credit. (Emphasis added.)

The policy does not provide for any grace period which would extend the time for payment of the renewal premium beyond the expiration date. The Whorbleys were not told that the renewal deadline would be extended by Continental or any of its agents, before the policy expired. Continental did send Mr. Whorbley a premium notice with regard to the March 29th billing. Mr. Kerr’s letter, denying liability, does state that Continental would “customarily” have covered the loss. Mr. Whorbley did testify that the adjuster stated that Continental would pay part of the loss, and Mr. Kerr’s secretary did accept Mr. Whorbley’s check. But none of these events occurred before the expiration date of Mr. Whorbley’s policy. Nor had they occurred before the fire on March 24, 1982. Mr. Whorbley testified that he intended to let his policy with Continental lapse. It cannot be said that he relied on these statements when he failed to make the payment that was required for renewal on March 22, 1982.

Regardless of whether Continental’s agents were authorized to accept Mr. Whorbley’s cheek, there is no evidence that Mr. Kerr, his secretary or the claims adjuster had any authority to waive Continental’s right of non-renewal. In this regard, the Whorbley’s policy provides as follows:

WAIVER PROVISION
Notice to any agent or knowledge possessed by any agent or by any other person shall not effect a waiver or a change in any part of this policy or estop the company from asserting any right under the terms of this policy; nor shall the terms of this policy be waived or changed, except by endorsement issued to form a part of this policy, signed by a duly authorized representative of the company. No provision, stipulation, or forfeiture shall be held to be waived by any requirement or proceeding on the part of the company relating to appraisal or to any examination provided for herein.

Continental did nothing, before the fire, that would have led the Whorbleys to believe that their policy would continue in force beyond March 22, 1983, if they did not make timely payment of their renewal premium. The premium notice that was received after the fire is not evidence that Continental had waived its right to refuse renewal, especially when payment was not tendered until after the loss occurred, and was subsequently returned. 13 J. Apple-man, INSURANCE LAW AND PRACTICE § 7641, at 387-388 (1976). There is no evidence that Mr. Kerr’s secretary was authorized to extend the term of coverage and no evidence that she represented to Mr. Whorbley that she could do so. See Mutual Fire Insurance Co. v. Candler, 327 S.W.2d 20 (Ky.1959). The policy had terminated by its own provisions when the Whorbleys failed to make their renewal premium on time. See International Har vester Credit Corp. v. Wilkie, 695 F.2d 231, 235 (6th Cir.1982). The brief time that Continental held the Whorbleys’ check before returning it with a notice of termination did not cause the Whorbleys to suffer any detriment or to change their position in any way. Thus, there are no equitable considerations that would estop Continental from refusing to renew its policy. Troutman v. Nationwide Mutual Insurance Co., 400 S.W.2d 215 (Ky.1966).

Rule 56(c) of the Federal Rules of Civil Procedure “authorized a summary judgment only where the moving party is entitled to judgment as a matter of law, where it is quite clear what the truth is, that no genuine issue remains for trial____” Sartor v. Arkansas Natural Gas Corp., 321 U.S. 620, 627, 64 S.Ct. 724, 728, 88 L.Ed. 967 (1944). The burden of showing the absence of a genuine issue of material fact is on the moving party. Weinberger v. Hynson, Westcott & Dunning, Inc., 412 U.S. 609, 622, 93 S.Ct. 2469, 2479, 37 L.Ed.2d 207 (1973). In making a determination as to whether this burden has been met, all inferences drawn from underlying facts contained in materials submitted to the Court “must be viewed in the light most favorable to the party opposing the motion.” United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). See also Bohn Aluminum & Brass Corp. v. Storm King Corp., 303 F.2d 425, 527 (6th Cir.1962). “[A] trial judge should be slow in disposing of a case of any complexity on a motion for summary judgment ... a party should not be deprived of an opportunity to fully develop his case by witnesses and a trial____” S.J. Groves & Sons Co. v. Ohio Turnpike Commission, 315 F.2d 235, 237 (6th Cir. 1963), cert. denied, 375 U.S. 824, 84 S.Ct. 65, 11 L.Ed.2d 57 (1963). “The summary judgment standard in this circuit is a stringent one.” Cincinnati Riverfront Coliseum, Inc. v. Cincinnati, 556 F.Supp. 664, 666 (S.D.Ohio 1983). But an adverse party may not rest on its pleadings when a motion for summary judgment is made. Instead, its response must show that there is factual evidence in the record that creates a genuine issue for trial. FED.R.CIV.P. 56(e).

The Whorbleys’ policy clearly indicates that the policy would terminate automatically if the renewal premium was not paid on time. The Whorbleys did not pay the premium on March 22, 1982, when it came due, and Mr. Whorbley’s testimony clearly indicates that he intended to let the Continental policy lapse at that time. State Farm has not presented any evidence that would create a genuine issue of fact as to whether Continental was estopped from terminating or refusing to renew its policy. Accordingly, Continental’s motion for summary judgment will be sustained by an appropriate Order of even date.

      . Continental also argues that its policy was cancelled by substitution when the Whorbleys took out their policy with State Farm. See Potomac Insurance Co. v. Motorist Mutual Insurance Co., 598 S.W.2d 461 (Ky.App.1980). But application of the doctrine of cancellation by substitution in Kentucky has been limited to cases that involve a temporary insurance binder. Travelers Insurance Co. v. Motorist Mutual Insurance Co., 649 S.W.2d 414, 415 (Ky.App. 1982). As this Court’s ruling is based on the Whorbley’s failure to renew their contract, it will not be necessary to reach the issue of whether their option to renew was analogous to a binder in the case at hand.


source: Caselaw Access Project

author: SUSAN H. BLACK, District Judge.

license: Public Domain

text:
    STATE OF FLORIDA DEPARTMENT OF ENVIRONMENTAL REGULATION, Plaintiff, v. SILVEX CORPORATION, a Florida corporation; Christine L. Ellis; Kimberly Ann Benner; Julia Lynn Nicely; Dexter Benner; Pepper Industries, a California corporation; and the United States Navy, Defendants.
    No. 83-926-Civ-J-14.
    United States District Court, M.D. Florida, Jacksonville Division.
    Jan. 28, 1985.

      Thomas K. Maurer, Richard P. Lee, Asst. Gen. Counsel, Tallahassee, Fla., for plaintiff.
    Dorothea Beane, Jacksonville, Fla., F. Henry Habicht, II, & John L. Wittenborn, Wadhington, D.C., for Navy.
    George D. Gabel, Jr., Mitchel E. Wood-lief, Jacksonville, Fla., for Pepper.
    James A. Blesoe, Jr., Harold S. Lippes, Jacksonville, Fla., for Silvex, et al.
   ORDER GRANTING MOTION TO DISMISS

SUSAN H. BLACK, District Judge.

This case is before the Court on defendant United States Navy’s (hereinafter “Navy”) Motion to Dismiss and memorandum in support. The plaintiff State of Florida Department of Environmental Regulation (hereinafter “DER”) filed a memorandum in opposition to which the Navy replied.

The Navy moves to dismiss the action against it on grounds that there has been no waiver of sovereign immunity authorizing the Court to entertain this suit by a state agency against a federal entity. The Court, having reviewed the file in this action, particularly the extensive memoranda of the parties, agrees with the Navy’s position.

The plaintiff’s claim against the Navy is based on the allegedly negligent release of hazardous waste materials. The Navy’s co-defendant, Pepper Industries, Inc. (hereinafter “Pepper”) was responsible for removing waste materials generated by the Navy at its naval air station in Jacksonville, Florida. The waste was transported to Silvex’s facilities where it was stored and then incinerated. In December, 1981, the contents of a 25,000 gallon storage tank owned by Pepper were released onto the ground at the Silvex site.

The plaintiff seeks to hold the Navy liable for damages and injunctive relief under Fla.Stat. §§ 403.727(4), and 403.726. Section 403.727(4) holds strictly liable for removal costs and resource damage those, among others, who owned or possessed the released hazardous waste. Section 403.726 empowers the DER to take emergency action when the spillage of hazardous waste materials poses an imminent hazard to the public health, safety and welfare.

Before the Court can determine liability under the above-referenced state statutes, it must first find that the federal government has consented to be sued. United States v. Mitchell, 463 U.S. 206, 103 S.Ct. 2961, 2965 & n. 9, 77 L.Ed.2d 580 (1983); United States v. Sherwood, 312 U.S. 584, 586-87, 61 S.Ct. 767, 769-70; 85 L.Ed. 1058 (1941). Consent to suit cannot be implied, but must be unequivocally expressed. Block v. North Dakota ex rel. Board of University and School Lands, 461 U.S. 273, 103 S.Ct. 1811, 75 L.Ed.2d 840 (1983). The government’s consent, when given, must be strictly construed and may not be modified by implication. United States v. King, 395 U.S. 1, 4, 89 S.Ct. 1501, 1502, 23 L.Ed.2d 52 (1969); Soriano v. United States, 352 U.S. 270, 273-276, 77 S.Ct. 269, 271-273, 1 L.Ed.2d 306 (1957). Like any legal entity, states are barred under the doctrine of federal sovereign immunity from suing the federal government except upon express waiver. Block v. North Dakota, 461 U.S. at 280, 103 S.Ct. at 1816.

The DER contends that the federal government has waived its sovereign immunity in an action involving hazardous waste, pursuant to 42 U.S.C. § 6961 of the Resource Conservation and Recovery Act (hereinafter “RCRA”). That section of the RCRA states in part that:

Each department, agency, and instrumentality of the executive, legislative, and judicial branches of the Federal Government (1) having jurisdiction over any solid waste management facility or disposal site, or (2) engaged in any activity resulting, or which may result, in the disposal or management of solid waste or hazardous waste shall be subject to and comply with all Federal, State, interstate, and local requirements both substantive and procedural (including any requirement for permits or reporting or any provisions for injunctive relief and such sanctions as may be imposed by a court to enforce such relief), respecting control and abatement of solid waste or hazardous waste disposal in the same manner, and to the same extent, as any person is subject to such requirements, including the payment of reasonable service charges. Neither the United States, nor any agent, employee, or officer thereof, shall be immune or exempt from any process or sanction of any State or Federal Court with respect to the enforcement of any such injunctive relief.

The Navy responds that this waiver is expressly limited to subjecting federal agencies to liability for a failure to comply with the substantive and procedural requirements of the State of Florida. The Navy contends the provisions of the state statutes on which the DER bases its claims against the Navy are not “requirements” as envisioned by Congress.

To ascertain what Congress meant by “requirements” and whether these state statutes set requirements for which a federal entity could be liable, the Court will conduct a two-part examination. First, the Court will briefly explore the legislative history of the RCRA and similar waiver provisions to determine Congress’ intended definition of the term. Secondly, the case law interpreting requirements will be examined. This language of the RCRA has not been the subject of judicial interpretation, therefore the Court will examine the approach of courts which have interpreted requirements as that term is used in the waiver provisions of analogous federal environmental control legislation.

A legislative report discussing the preRCRA bill then before the Senate indicates the RCRA was intended to force federal agencies dealing with hazardous waste “to comply with State and local controls on solid waste and hazardous waste disposal as if they were private citizens.” This includes compliance with all substantive and procedural requirements, and specifically any requirements to obtain permits.” Senate Report No. 94-988, 70th Cong., 2nd Session, at 24 (1976); 122 Cong. Rec. 32,631 (Sept. 27, 1976). The requirements referred to in the Senate report are more in the nature of regulatory guidelines and ascertainable standards that a federal agency dealing with hazardous waste would have to meet.

Senate Report No. 94-988 further states that section 6961 parallels the waiver provisions of the Clean Air Act, 42 U.S.C. § 7418, and the Federal Water Pollution Control Act, 33 U.S.C. § 1323. See supra footnote 3. The legislative history of these provisions demonstrates a similar intent to have requirements defined as objective state standards of control. See, e.g., Hancock v. Train, 426 U.S. 167, 188-189 & n. 2, 96 S.Ct. 2006, 2017 & n. 2, 48 L.Ed.2d 555 (1976) (legislative history of Clean Air Act discloses that various preliminary drafts and committee reports used requirements interchangeably with “emission requirements” and “emission standards”). EPA v. California ex rel. State Water Resources Board, 426 U.S. 200, 215 & n. 28, 96 S.Ct. 2022, 2029 & n. 28, 48 L.Ed.2d 578 (1976) (legislative history of the FWPA indicates requirements refers to “effluent limitations” and similar “control requirements”).

The courts interpreting requirements as used in federal environmental legislation have also limited the term to a state’s regulatory requirements. Courts reviewing the waiver provisions of the Clean Air Act, the FWPA, and the Noise Control Act, 42 U.S.C. § 4903(b), the language of which, as noted above, directly parallels section 6961, consistently have held that requirements is a limited term which cannot be expanded to include the kinds of state law liability provisions that the DER relies on in this case. See, e.g., United States v. Commonwealth of Puerto Rico, 721 F.2d 832 (1st Cir.1983); Romero-Barcelo v. Brown, 643 F.2d 835 (1st Cir.1981), reversed on other grounds, sub nom. Weinberger v. Romero-Barcelo, 456 U.S. 305, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982); EPA v. California State Water Resources Control Board, 426 U.S. 200, 96 S.Ct. 2022, 48 L.Ed.2d 578 (1976); Hancock v. Train, 426 U.S. 167, 96 S.Ct. 2006, 48 L.Ed.2d 555 (1976).

Although these cases typically have focused on whether requirements include a need for federal agencies to obtain state permits, they demonstrate the narrow reading given the federal waiver provisions by the judiciary. These courts initially recognize the limited nature of the waiver of federal sovereignty in the case of environmental control. States are entrusted with the “primary responsibility” of assuring the quality of the environment. Train v. Natural Resources Defense Council, 421 U.S. 60, 64, 95 S.Ct. 1470, 1474, 43 L.Ed.2d 731 (1975). To achieve uniformity and consistency in state environmental regulation, sovereign immunity is partially waived to require federal entities to comply with state standards. This narrow intrusion into federal sovereign immunity has required that courts strictly define requirements as objective and ascertainable state regulations; e.g., state pollution standards or limitations, compliance schedules, emission standards, and control requirements. See, e.g., United States ex rel. Tennessee Valley Authority v. Tennessee Water Quality Control Board, 717 F.2d 992, 997 (6th Cir.1983); EPA v. California, 426 U.S. at 215 & n. 28, 96 S.Ct. at 2029 & n. 28; Hancock, 426 U.S. at 186, 96 S.Ct. at 2016. Consistent with this case law, the Fifth Circuit recently interpreted “requirements” as used in the Noise Control Act to mean those “relatively precise standards capable of uniform application____” Romero-Barcelo v. Brown, 643 F.2d at 855. In light of these cases, the Court finds the provision of the Florida statutes herein fail to set forth the specific, precise standards which the term requirements encompasses.

In sum, the legislative history and the case law interpreting federal statutes with similar waiver language have strictly defined requirements as synonymous with state objective regulations. The DER does not seek to hold the Navy liable for a failure to comply with state requirements. Although certain of the statutes apply liability to those failing to meet regulatory requirements, the statutes themselves are not requirements and no failure on the part of the Navy to meet the requirements referred to is anywhere alleged. The DER has merely alleged an act of spillage and stated that the Navy is liable under various Florida statutes. The Court finds after reviewing the provisions of the state statutes that the DER has failed to demonstrate that 42 U.S.C. § 6961 clearly and unambiguously permits the Navy to be subjected to liability under these state statutes. Commenting on similar waiver language appearing in the Clean Air Act and whether that language included permit requirements, the Supreme Court stated:

In view of the undoubted congressional awareness of the requirement of clear language to bind the United States, our conclusion with respect to subjecting federal installations to state permit requirements, the Clean Air Act does not satisfy the traditional requirement that such intention be evinced with satisfactory clarity. Should this nevertheless be the desire of Congress, it need only amend the Act to make its intention manifest.

Hancock, 426 U.S. at 198, 96 S.Ct. at 2021 (footnotes omitted). The waiver of immunity as to these Florida statutes is ambiguous at best, therefore, the Navy will be dismissed as a party defendant to this action. Pursuant to this dismissal, the Court will by separate order entered on this date remand this case to state court.

Upon consideration, it is

ORDERED that the defendant United States Navy’s Motion to Dismiss is granted, and the Court will enter a judgment dismissing the United States Navy.

      . The history of this action since the filing of Navy's reply memorandum deserves brief review. On March 6, 1984, the defendants Silvex Corporation (hereinafter "Silvex"), Christine L. Ellis, Kimberly Ann Benner, Julia Lynn Nicely, and Dexter Benner moved to consolidate this case with Case No. 82-1020-CÍV-J-16 (hereinafter "Case No. 82-1020”), then before the Honorable John H. Moore, II. Judge Moore, having the lower-numbered case, ruled on the motion. Although Judge Moore found that the issues in his case and the case now before this Court arose from the same factual situation, he denied the motion to consolidate so that Case No. 82-1020 could proceed to trial without delay. As trial was set to commence with the trial term of June 18, 1984, and because the trial could resolve issues involved in the Motion to Dismiss, this Court on May 18, 1984, notified the parties that it would defer ruling on the pending motion until judgment was entered in Case No. 82-1020. On July 6, 1984, the parties in Case No. 82-1020 filed their Stipulation of Dismissal and notified this Court that any unresolved claims would be brought into Case No. 83-926 via a motion to amend. Subsequently, on August 1, 1984, the defendants Silvex, Christine L. Ellis, Kimberly Ann Benner, Julia Lynn Nicely, and Dexter Benner moved this Court for leave to file cross-claims against co-defendants, Navy and Pepper Industries, Inc. in this case. These claims were those remaining from Case No. 82-1020 which were not resolved pursuant to the stipulated dismissal. The defendant Pepper Industries, Inc. filed an objection to the motion to file cross-claims on August 10, 1984.

        . It is unclear on the face of the Complaint which statutes the Navy is alleged to have violated. Pursuant to the Court’s order for clarification, the DER has stated that it “seeks to assert only the claim brought pursuant to Section 403.-727(4), Florida Statutes appearing in Count V and the claim brought pursuant to Section 403.-726, Florida Statutes, appearing in Count VI....” Response to Order dated January 7, 1985.

      . A comparison of the waiver provisions appearing in federal environmental control legislation demonstrates their similarity: though, both the Clean Air Act and the FWPA have broader waiver language than section 6961. These provisions have been amended since the legislative history noted in the case law, however there is "no evidence that the amendments were intended to expand the category of applicable substantive requirements” beyond those recognized and noted further in this opinion. Romero-Barcelo v. Brown, 643 F.2d 835, 854 n. 36 (1st Cir.1981), rev’d on other grounds, sub nom. Weinberger v. Romero Barcelo, 456 U.S. 305, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982).
      The waiver provisions of both the Clean Air Act and the FWPA provide in part as follows:
      Each department, agency, and instrumentality of the executive, legislative, and judicial branches of the Federal Government (1) having jurisdiction over any property or facility, or (2) engaged in any activity resulting, or which may result, in the discharge [or runoff] of air pollutants, and each officer, agent, or employee thereof, shall be subject to, and comply with, all Federal, State, interstate, and local requirements, administrative authority, and process and sanctions respecting the control and abatement of air [water] pollution in the same manner, and to the same extent as any nongovernmental entity. The preceding sentence shall apply (a) to any requirement whether substantive or procedural (including any recordkeeping or reporting requirement, any requirement respecting permits and any other requirement whatsoever), (B) to the exercise of any Federal, State or local administrative authority, and (C) to any process and sanction, whether enforced in Federal, State, or local courts or in any other manner. This subsection shall apply notwithstanding any immunity of such agencies, officers, agents, or employees under any law or rule of law. No officer, agent, or employee of the United States shall be personally liable for any civil penalty for which he is not otherwise liable.
      42 U.S.C. § 7418 and 33 U.S.C. § 1323. (Portions bracketed are peculiar to the FWPA and portions underlined are peculiar to the Clean Air Act).

      . The waiver language in both the Clean Air Act and the FWPA were subsequently amended to include permit requirements by making those provisions applicable to procedural as well as substantive requirements. Romero-Barcelo v. Brown, 643 F.2d at 859 n. 36; see also United States ex rel. Tennessee Valley Authority v. Tennessee Water Quality Board, 717 F.2d 992, 997 (6th Cir.1983).


author: ENRIGHT, District Judge.

text:
    Agnes KOEHLER, et al., Plaintiffs, v. Daniel L. PULVERS, et al., Defendants.
    Civ. No. 82-1076-E.
    United States District Court, S.D. California.
    Jan. 30, 1985.
    As Amended April 8, 1985.

      Law Offices of Michael J. Aguirre, Michael J. Aguirre, San Diego, Cal., for plaintiffs.
    Lewis, D’Amato, Brisbois & Bisgaard, R. Gaylord Smith, Hector E. Salitrero, San Diego, Cal, for defendant Jeffrey M. Cheyne.
   MEMORANDUM DECISION

ENRIGHT, District Judge.

BACKGROUND

Plaintiffs filed this action on August 25, 1982, alleging registration violations and misrepresentations in the sale of securities in the “21-31” limited partnership. The developer defendants formed this partnership to own and develop real property consisting of an office building and adjacent lots situated at 2131 Third Avenue, San Diego, California, including Lots A-D inclusive, of block 246, and Lots H, I, and J of block 247.

Three types of security interests were sold: limited partnership interests in 21-31, fractionalized trust deed interests in Lots A-D secured by the office building, and fractionalized trust deed interests in Lot J, a parcel adjacent to the office building. According to the Fourth Amended Complaint, the Lot J securities were sold during October 1981, the Lot A-D securities were sold from April to July 1980, while the 2131 limited partnership interests were sold from August to December 1980.

The complaint alleges that the developer defendants issued securities in violation of sections 5 and 12(1) of the Securities Act of 1933, and sections 25110, 25120, 25130, and 25503 of the California Corporations Code. It also alleges issuance by means of misrepresentations, omissions, and fraudulent practices in violation of sections 17(a) and 12(2) of the Securities Act of 1933, section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5, and section 25401 of the California Corporations Code. Defendants are alleged to have overencumbered the project, diverted funds to other projects, purchased the realty at an inflated price and in an interested transaction, concealed the interrelated nature of the 21-31 limited partnership and trust deed offerings, concealed the unlawful status of the claimed registration and qualification exemptions, and misrepresented the amount of financing secured and the intended use of proceeds received.

On December 10,1984, defendant Jeffrey Cheyne’s motion for summary judgment came on for hearing. This motion sought an adjudication that there were no federal claims pending against him, and dismissal of the pendent state claims or, in the alternative, clarification of the federal claims pending, and summary judgment as to the pendent claims.

Because the Third Amended Complaint appeared to lack the particularity required by Federal Rule of Civil Procedure 9(b), this court directed plaintiffs to file a Fourth Amended Complaint to reflect evidence adduced by discovery and submitted in opposition to Mr. Cheyne’s motion. The hearing was continued to January 9, 1985, permitting Mr. Cheyne to renew his motion or otherwise challenge the Fourth Amended Complaint at that time.

On December 14, 1984, plaintiffs filed their Fourth Amended Complaint, alleging against defendant Cheyne the sale of unregistered securities in the First Cause of Action, the sale of unqualified securities in the Second Cause of Action, federal and state securities fraud in the Third Cause of Action, breach of fiduciary duty in the Fourth Cause of Action, negligent misrepresentation in the Seventh Cause of Action, and legal malpractice in the Tenth Cause of Action.

On January 9, 1985, Mr. Cheyne’s renewed and alternative motions for summary judgment or dismissal, as well as motions for a continuance of trial and a reopening of discovery, came on for hearing. After considering oral argument, this court vacated the dates for pretrial hearing and trial set for January 14, 1985 and January 22, 1985, resetting them March 4, 1985 and March 19, 1985, respectively. The remaining issues were taken under submission and are addressed herein.

DISCUSSION

I.

Motion for Summary Judgment

Defendant Cheyne urges summary adjudication on the purported grounds that this court lacks subject matter jurisdiction. It is his position that no federal claims are pending against him and that, in the absence of an independent basis for federal jurisdiction, the pendent claims should also be dismissed. Owen Equipment and Erection Co. v. Kroger, 437 U.S. 365, 376, 98 S.Ct. 2396, 2404, 57 L.Ed.2d 274 (1978).

While the federal antifraud claims of the Third Amended Complaint may have lacked the particularity required by Federal Rule of Civil Procedure 9(b), plaintiffs’ evidence in opposition to defendant’s summary judgment motion indicated controverted issues of fact to Mr. Cheyne’s participant and aider and abettor liability under federal securities fraud and registration provisions. Accordingly, plaintiffs were granted leave to file a Fourth Amended Complaint. As the discussion below indicates, the Fourth Amended Complaint’s federal claims largely survive defendant Cheyne’s accompanying motion to dismiss. The motion for summary judgment for lack of subject matter jurisdiction accordingly lacks , merit.

II.

Motion to Dismiss

Mr. Cheyne’s moving papers and argument at hearing urge the court to treat portions of his motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) as one for partial summary judgment. The court will indicate in each instance where it goes beyond the complaint and treats the motion as one for partial summary judgment.

A. Section 12(1) Claim

The First Cause of Action of the Fourth Amended Complaint alleges participant liability against Mr. Cheyne for the sale of securities in violation of the registration provision of section 12(1) of the Securities Act of 1933 (15 U.S.C. § 771). Defendant Cheyne contends this claim must be dismissed as barred under the applicable one year statute of limitations, section 13 of the 1933 Securities Act (15 U.S.C. § 77m).

This issue was previously considered on defendant Cheyne’s motion to dismiss the Second Amended Complaint [See Memorandum Decisions dated March 29, 1984 and October 5, 1984]. Those decisions indicate that section 13’s one year statute of limitations is absolute, and not subject to equitable tolling. This conclusion of law is hereby reaffirmed. Because the purchase dates in the Fourth Amended Complaint appear to vary in part from those alleged in the Second Amended Complaint, however, clarification of prior holdings is in order.

Plaintiffs originally filed this action on August 25, 1982. Accordingly, the determination with regard to the Lot J investors’ section 12(1) claims is reaffirmed. They purchased their interests in October 1981, clearly within the applicable one year limitations period. [See Memorandum Decision dated March 29, 1984].

With regard to all other investors, this court’s prior rulings indicate that their section 12(1) claims are time barred if they purchased their interests before August 25, 1981. From the purchase dates listed on the face of the Fourth Amended Complaint, this appears to exclude the claims of all investors, except those of the Lot J plaintiffs.

Mr. Cheyne additionally contends that the section 12(1) claim should be dismissed as to the fractionalized trust deed investors because he did not draft any offering memorandum or prospectus for the fractionalized trust deed sales. In support of this contention, Mr. Cheyne submits his own declaration. That declaration states, in pertinent part, that he was never retained by the developer defendants to advise in connection with the trust deed sales, that he was never retained to prepare offering documents in connection with the trust deed offerings, and that he provided no assistance regarding the trust deed sales.

On this issue, defendant Cheyne goes beyond the Fourth Amended Complaint’s allegations. Because plaintiffs have submitted opposing evidence, the court treats this issue as a motion for partial summary judgment. Fed.R.Civ.P. 12(b).

It appears to be defendant’s premise that if one does not communicate directly or by writing with the investor, he cannot incur participant liability under section 12 of the 1933 Securities Act. Only if this were an accurate statement of the law would Mr. Cheyne’s declaration entitle him to favorable summary adjudication, assuming of course that his declaration stood uncontroverted. His premise, however, appears inaccurate.

The fact that Mr. Cheyne did not directly sell the trust deed interests, and the fact that he did not draft the applicable prospectus does not insulate him from liability. The Ninth Circuit Court of Appeals held in S.E.C. v. Murphy, 626 F.2d 633, 649-52 (9th Cir.1980), that one not in privity of contract with an investor may be liable under section 12 if his acts were a substantial factor in bringing about the transaction. Liability based on this substantial factor test, called “participant” liability, has been likened to aider and abettor liability: “We note little difference between the scope of liability under aider and abettor theory and that under the participation theory relied upon in S.E.C. v. Murphy ----” Admiralty Fund v. Jones, 677 F.2d 1289, 1295 n. 4 (9th Cir.1982) (reversing summary judgment under § 12(2) in favor of an attorney alleged responsible for issuer’s decision that security not bear a restrictive legend).

This court has serious doubt whether Mr. Cheyne’s declaration adequately carries his initial burden of demonstrating the absence of a genuine issue to his alleged nonparticipation in the trust deed offerings. His declaration states primarily what he was not retained to do; it is ambiguous as to what he actually did. It is questionable whether it forecloses all conduct potentially supportive of participant liability under the First Cause of Action. The court need not decide this question, however, because plaintiffs’ opposing evidence controverts Mr. Cheyne’s declaration in large measure.

Plaintiffs’ documentary and declaratory evidence indicates that, at a minimum, Mr. Cheyne played a greater role in the trust deed offerings than his statement that he did not assist in the trust deed “sales” might otherwise suggest. Plaintiffs’ evidence indicates that Mr. Cheyne knew that CSCC principals were selling limited partnership and trust deed interests in the same project, and that he advised them to sell the fractionalized trust deeds through a separate entity, Western Investors Network, Inc., to avoid the appearance of an integrated offering, and preclude monitoring of the trust deed sales. It also indicates that he handled the escrow negotiations and drafted the escrow instructions enabling the 2131 partnership to purchase the 2131 Third Street realty, knowing that funds raised from the trust deed investors were being used wrongfully to finance the downpayment. Plaintiffs’ evidence further indicates that Mr. Cheyne advised CSCC and Western Investors Network, Inc. concerning the preparation of the fractionalized trust deeds, and that he prepared the form fractionalized trust deed used to record the Lot I fractionalized trust deed.

It is the court’s opinion that plaintiffs controvert in significant part Mr. Cheyne’s statement that he did not assist the sale of trust deed interests. Accordingly, material issues of fact remain regarding the extent of his participation in the trust deed transactions as a whole.

B. Section 25503, California Corporations Code

California Corporations Code section 25503 creates a cause of action in rescission for the sale of securities in violation of the Code’s qualification requirements. This court previously held the two year limitations provision of California Corporations Code section 25507 to be absolute, and not subject to tolling by proof of fraudulent concealment. [See Memorandum Decision dated October 5, 1983]. Because this action was filed on August 25, 1982, the section 25503 claims of all plaintiffs purchasing prior to August 25, 1980 are time barred.

Plaintiffs appear to adopt for the first time in opposition to this motion the position that the date the securities were delivered, rather than the date of payment, begins the running of the limitations period. It is their position that the date plaintiffs paid for their interests constituted an “order,” and that the purchase date for limitations purposes is the date of delivery which is said to “consummate” the sale. Competitive Associates, Inc. v. Children’s World, Inc., CCH Fed.Sec.L.Rep., p. 94,063 (S.D.N.Y.1973). The Competitive Associates decision on which plaintiffs rely, however, is not controlling.

That case considered the one year limitations period applicable to a federal section 12(1) action, not the two year limitations period applicable to the section 25503 action at issue. Moreover, to the extent the Competitive Associates decision is offered as analogous authority, it is not persuasive.

First, section 12(1) of the Securities Act of 1933 predicates liability on the delivery of unregistered securities in addition to their offer and sale — if such unlawful delivery is alleged as the basis of the claim. See, e.g., Eriksson v. Galvin, 484 F.Supp. 1108, 1119 (S.D.N.Y.1980). In contrast, section 25503 of the California Corporations Code creates liability only for the sale of unlawfully unqualified securities. Accordingly, where delivery may take on independent significance in a section 12(1) action, this is not generally the case in a section 25503 action.

Second, the finding in Competitive Associates that payment constitutes only an offer is not a necessary conclusion; at best, it is a permissive inference which, in this instance, flies in the face of plaintiffs’ own statement of their claim.

The Fourth Amended Complaint alleges the sale by defendants, and purchase by plaintiffs, of unlawfully unqualified securities. It lists as date of purchase the date plaintiffs paid for their securities. Absent persuasive authority to the contrary, this court is not inclined to adopt for statute of limitations purposes a purchase date different from that pleaded in the complaint.

Finally, California courts have stated that a short limitations period is necessary in light of section 25503’s rather simple remedy in order to prevent investors from shifting the risk of investing to the seller. Bowden v. Robinson, 67 Cal.App.3d 705, 136 Cal.Rptr. 871 (1977). The two year limitations period for section 25503 actions is already twice as long as that available under the arguably analogous federal cause of action at issue in Competitive Associates. California courts faced with this longer statute of limitations at the outset would appear to have less reason to adopt the expansive analysis of Competitive Associates, particularly in light of the articulated policy favoring a short and absolute limitations period for the action.

Accordingly, this court declines to adopt the purchase analysis urged by plaintiffs. The payment date is the purchase date and the date from which the limitations period runs. Section 25503 claims based on purchases prior to August 25, 1980 are dismissed as time barred.

C. Antifraud Claims

The Third Cause of Action alleges that defendant Cheyne both directly participated in and aided and abetted fraud in the sale of securities, in violation of sections 12(2) and 17(a) of the Securities Act of 1933 (15 U.S.C. §§ 77i(2) and 77q(a) respectively), section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. § 78j(b)), Rule lob-5, 17 C.F.R. § 240.10b-5, and California Corporations Code section 25401. This cause of action is alleged in such particularity that it borders on the evidentiary. The basis for the alleged fraud includes detailed allegations of fraudulent business practices, fraudulent concealment, and misrepresentations and omissions in the sale of both the 2131 limited partnership interests and the fractionalized trust deed interests.

Mr. Cheyne’s instant motion asserts that this cause of action should be dismissed as to all theories and all investors, but for different reasons.

1) Trust Deed Investors

It is defendant’s position that the section 12(2) claim must be dismissed because he was not a “seller” of the fractionalized trust deed interests, and because his involvement in the offerings does not support participant liability as a substantial factor in the sales. The issue of participant liability under section 12 of the Securities Act of 1933 is fully addressed above with regard to the First Cause of Action. There remain material issues of fact regarding the extent of Mr. Cheyne’s participation in the trust deed transactions. On this state of the record it is not possible to rule as a matter of law that Mr. Cheyne was not a “seller” of trust deed interests within the meaning of section 12(2). See Admiralty Fund v. Jones, 677 F.2d 1289, 1294-95 (9th Cir.1982).

Defendant contends with regard to section 17(a) and Rule 10b-5 that there can be no liability to the trust deed purchasers because he did not write the prospectus, was not aware that anything was “incorrect,” and even if he knew something was incorrect, that he owed no duty of disclosure to those investors. Mr. Cheyne’s argument on this motion to dismiss is cast as if aider and abettor liability were not alleged, or was otherwise unavailable. Aider and abettor liability is clearly available under Rule 10b-5 and section 17(a) (Admiralty Fund v. Tabor, 677 F.2d 1297, 1299 (9th Cir.1982); cf. Stephenson v. Calpine Conifers II, Ltd., 652 F.2d 808, 815 (9th Cir. 1981) (§ 10(b) and 17(a) are similar in nature)), and it is alleged. Mr. Cheyne may be liable as an aider and abettor if he knew that those for whom he worked were committing a fraud and he substantially aided the overall enterprise. Admiralty Fund v. Jones, 677 F.2d 1289, 1296 (9th Cir.1982).

While his motion is fashioned as one pursuant to Fed.R.Civ.P. 12(b)(6), Mr. Cheyne does not challenge the adequacy of pleading. Rather, he argues facts without specifically referencing his declaration, stating that he did not submit written statements to the trust deed investors, and that he was not aware that the investors were being misled.

By placing his knowledge at issue, however, Mr. Cheyne does not show that plaintiffs have failed to state a claim; he merely raises an issue of material fact which, on this state of the record, stands controverted at least in part by opposing proof. Similarly, the asserted lack of direct communication with investors is equally ineffectual. This court has already indicated in discussion above that material issues of fact remain concerning the scope of Mr. Cheyne’s involvement in the sale of the trust deed securities.

Whether Mr. Cheyne’s motion on this issue is treated as one to dismiss or for partial summary judgment, he is not entitled to relief. The trust deed investors’ section 17(a) and 10b-5 claims are well pleaded, and on the current state of the record, it can not be said that Mr. Cheyne did not knowingly and substantially aid the developer defendants’ commission of the alleged fraud.

2) The 2131 Limited Partnership Interests

Defendant Cheyne contends that the 2131 limited partnership investors’ securities fraud claims must be dismissed because his opinion letter, which became part of the prospectus and indicated that the offering was exempt from registration and qualification, was true and correct on its face. The plaintiffs have contended from the outset of this litigation that the prospectus contained numerous false statements, omissions and half truths, including the conclusion that the offering was exempt from registration.

Defendant submits a copy of his opinion letter in support of his contention. Plaintiffs have been afforded an opportunity to respond with opposing evidence. Accordingly, the motion on this issue will be treated as one for partial summary judgment. Fed.R.Civ.P. 12(b).

Mr. Cheyne fails to carry his initial burden of demonstrating the absence of a genuine issue of material fact to the limited partner investors' Rule 10b-5, and section 12(2), 17(a), and 25401 claims. It is his position that because his opinion of exempt status is conditioned upon representations attributed to the general partner, as well as the manner of offering and selection of prospective investors, that in no event can it result in direct, participant, or aider and abettor liability. He offers neither affidavits nor other proof, however, to substantiate the truth or utterance of the statements upon which the opinion is conditioned or to establish that he had a reasonable basis for accepting them as true.

Because defendant fails to carry his initial burden of showing that there is no genuine issue of fact with evidence which, if uncontroverted, would entitle him to a directed verdict at trial, his motion must fail. British Airways Bd. v. Boeing Co., 585 F.2d 946, 950-51 (9th Cir.1978), cert. denied 440 U.S. 981, 99 S.Ct. 1790, 60 L.Ed.2d 241 (1979). Moreover, plaintiffs respond with declarations and other proof suggesting that Mr. Cheyne knew but failed to disclose that the offering could be integrated with the trust deed sales in the same project, which integration would render the asserted exemption inapplicable. The opposing evidence also indicates that Mr. Cheyne had reason to know that the limited partnership interests were being offered in a manner contrary to that upon which the opinion letter conditioned exemption, and that prior to the close of all sales, Mr. Cheyne knew that partnership funds were being unlawfully diverted to other projects.

Accordingly, even if the defendant had shown that his opinion was not false standing in isolation, omissions and half truths are asserted which leave material issues of fact for trial, particularly concerning issues relevant to aider and abettor liability.

D. Common Law Claims

The Fourth Amended Complaint alleges against Mr. Cheyne three common law torts: breach of fiduciary duty (Fourth Cause of Action); negligent misrepresentation (Seventh Cause of Action); and legal malpractice (Tenth Cause of Action). Defendant seeks dismissal of each of these claims on the grounds that he owed plaintiffs no duty, and in the absence of a duty, there was no tort. The motion is only directed to the claims of trust deed investors.

1) Breach of Fiduciary Duty

This claim alleges that Mr. Cheyne owed a fiduciary duty to plaintiffs as counsel to the 2131 limited partnership. It also alleges that the developer defendants owed a fiduciary duty to plaintiffs, and that Mr. Cheyne conspired in their breach of this duty by advising them how to violate their obligations while maintaining the appearance of propriety. The developer defendants’ wrongful acts include diverting 2131 funds, overencumbering the 2131 project, taking excessive fees, and concealing the fact that the securities had not been sold in a manner making registration unnecessary.

Defendant relies on his declaration wherein he states that, in contrast to the 2131 limited partnership offering, he drafted no opinion or prospectus ultimately distributed to the trust deed investors. He argues that because he did not communicate directly with those investors, no fiduciary duty, and thus no duty of disclosure, arose. As with each of the common law claims, he urges that the decision Goodman v. Kennedy, 18 Cal.3d 335, 134 Cal. Rptr. 375, 556 P.2d 737 (1976), compels summary adjudication.

As previously mentioned, the initial burden on this motion requires that defendant come forward and show that there is no genuine issue of fact with evidence which, if uncontroverted, would entitle him to a directed verdict at trial. British Airways Bd. v. Boeing Co., supra, 585 F.2d at 950-51.

Assuming for argument sake that defendant owed no independent fiduciary duty, the Fourth Cause of Action alleges that he conspired in the developer defendants’ breach of their fiduciary duty. Under California’s law of civil conspiracy, “[a]s long as two or more persons agree to perform a wrongful act, the law places civil liability for the resulting damage on all of them, regardless of whether they actually commit the tort themselves. [Citations.]” Wyatt v. Union Mortgage Co., 24 Cal.3d 773, 784, 157 Cal.Rptr. 392, 598 P.2d 45 (1979) (emphasis in original). “California has long adopted the view that an attorney-may not with impunity, either conspire with a client to defraud or injure a third person or engage in intentional tortious conduct toward a third person. [Citations.]” Roberts v. Ball, Hunt, Hart, Brown & Baerwitz, 57 Cal.App.3d 104, 109, 128 CaLRptr. 901 (1976). Defendant submits no evidence or argument to this conspiracy aspect of the claim. Absent a more comprehensive showing which precludes liability for civil conspiracy, defendant fails to carry his initial burden, and his motion on this issue necessarily fails.

2) Negligent Misrepresentation and Malpractice

The Tenth Cause of Action in malpractice is directed against defendant Cheyne only, while the Seventh Cause of Action for negligent misrepresentation is also directed against the developer defendants and contains allegations of conspiracy among all defendants. As to Mr. Cheyne, however, the alleged culpable conduct is coterminous under each claim. Both defendant and plaintiffs brief the motion on these claims as one for summary judgment. It will be treated as such. Fed.R.Civ.P. 12(b).

Under California law, an attorney’s liability for negligent legal advice is limited to those plaintiffs to whom he owes a duty of care. Such duty extends to third persons not his clients, “if the third person ... was intended to be benefitted by his performance [and] is injured by his negligent execution of that duty.” Roberts v. Ball, Hunt, Hart, Brown & Baerwitz, 57 Cal.App.3d 104, 110, 128 Cal.Rptr. 901 (1976). The existence of such a duty is a question of law and depends upon a judicial weighing of policy considerations for and against imposing liability under the circumstances. Goodman v. Kennedy, 18 Cal.3d 335, 342, 134 Cal.Rptr. 375, 556 P.2d 737 (1976). Among the factors to be balanced are the following:

[T]he extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, and the policy of preventing future harm.

Id. at 343, 134 Cal.Rptr. 375, 556 P.2d 737.

At present, California decisional law extends the attorney’s duty of care to third persons not clients to two classes of plaintiffs: persons a testator intended to benefit under his will (see Heyer v. Flaig, 70 Cal.2d 223, 74 Cal.Rptr. 225, 449 P.2d 161 (1969); Lucas v. Hamm, 56 Cal.2d 583, 15 Cal.Rptr. 821, 364 P.2d 685 (1961)); and, persons supplied with the attorney’s advice with the attorney’s knowledge and with the intent that they rely on it to confer a benefit upon the client (see Roberts v. Ball, Hunt, Hart, Brown & Baerwitz, supra, 57 Cal.App.3d 104, 128 Cal.Rptr. 901) (providing letter opining that client organization was a general partnership, without revealing doubt to this conclusion, knowing that plaintiff was to rely on this representation by loaning money to the client).

Defendant Cheyne seeks dismissal of the claims of the trust deed investors on the grounds that they were never his clients and, in contrast to the limited partnership investors, that he never authored an opinion or prospectus intended for their reliance. His argument is supported by his own declaration, and his position is well taken. While plaintiffs have supplied controverting evidence indicating Mr. Cheyne contributed to the trust deed offering, this evidence does not controvert Mr. Cheyne’s denial that his advice concerning the trust deed transactions was ever communicated to or relied upon by the trust deed investors. Plaintiffs’ opposition to this aspect of the claim is limited to legal argument.

Plaintiffs contend that this case falls within the umbra of the holding of Roberts v. Ball, Hunt. That case is distinguishable, however. In Roberts v. Ball, Hunt, the attorneys gave a written opinion for the express purpose of its being shown to and relied upon by plaintiff. Here, in contrast, there stands Mr. Cheyne’s uncontroverted statements that his advice affecting the trust deed transactions was not communicated to the investors. This lack of intent to influence the nonclient plaintiffs distinguishes the instant matter from the Roberts v. Ball, Hunt decision, just as it distinguishes that case from the decision in Goodman v. Kennedy, supra, 18 Cal.3d 335, 134 Cal.Rptr. 375, 556 P.2d 737.

In Goodman v. Kennedy, the defendant attorney negligently advised his clients, officers of a corporation, that their sale of stock issued as dividends would not jeopardize the corporation’s registration exemption. It did, however, resulting in a depreciation of the stock’s value. Those who purchased from the selling officers sued the opining counsel for, inter alia, negligence. In holding that, as a matter of law, defendant did not owe plaintiffs a duty, the court distinguished the Roberts v. Ball, Hunt precedent:

We are therefore not concerned with such cases as Roberts v. Ball, Hunt, Hart, Brown & Baerwitz, (citation), in which an attorney gives his client a written opinion with the intention that it be transmitted to and relied upon by the plaintiff in dealing with the client.

Id. at 343 n. 4, 134 Cal.Rptr. 375, 556 P.2d 737.

Policy considerations articulated in Goodman v. Kennedy weighing against the imposition of a duty are relevant to the facts at hand.

To make an attorney liable for negligent confidential advice not only to the client who enters into a transaction in reliance upon the advice but also to the other parties to the transaction with whom the client deals at arm’s length would inject undesirable self-protective reservations into the attorney’s counselling role. The attorney’s preoccupation or concern with the possibility of claims based on mere negligence (as distinct from fraud or malice) by any with whom the client might deal “would prevent him from devoting his entire energies to his client’s interests.” [citations omitted].

Id. at 344, 134 Cal.Rptr. 375, 556 P.2d 737.

While plaintiffs have controverted Mr. Cheyne’s showing that he did not assist the trust deed sales, they have not controverted his showing that his advice was never transmitted to the trust deed purchasers for their reliance. Accordingly, defendant Cheyne’s motion for summary judgment on the Seventh and Tenth Causes of Action against the fractionalized trust deed investors appears well taken.

III.

Motion for Continuance of Trial and Reopening of Discovery

As indicated at the outset, when these matters came on for hearing, this court vacated the January 22, 1985 trial date, resetting it for March 19, 1985 and reopening discovery for the primary and limited purpose of permitting Mr. Cheyne to refocus his interrogatories in view of the Fourth Amended Complaint’s detailed allegations of securities fraud. It was further indicated that this discovery would again be monitored by the Honorable Roger C. McKee. Except for this relief already granted, no additional relief appears justified at this time.

Contrary to defendant Cheyne’s argument, the court finds that the Third Amended Complaint largely informed defendant of the facts underlying the securities claims now particularly pleaded in conformity with Fed.R.Civ.P. 9(b) by the Fourth Amended Complaint.

Mr. Cheyne’s purported unpreparedness to go to trial on the misrepresentations underlying the multiple theories of securities fraud lacks persuasive support. His position in this regard is inconsistent. First, the facts supporting the securities fraud claims are largely the same as those underlying the negligence claim. The negligence claim has been pending against him from the initiation of this action, and his counsel acknowledged at the hearing that he was prepared to go to trial on this theory. Second, Mr. Cheyne’s counsel also indicated at the hearing that he was prepared to go to trial on the Fourth Amended Complaint’s Rule 10b-5 claim, but not the section 12(2) or section 17(a) claims. The factual allegations underlying these claims, however, are identical, as are the elements of aider and abettor liability where available. Moreover, participant liability under section 12(2) requires a showing substantively similar to that required for aider and abettor liability under Rule 10b-5 and section 17(a).

The court is informed that defendant has deposed each of the representative plaintiffs, as well as a significant number of similarly situated class members. At this juncture it would appear that any additional information necessary to defend against the Fourth Amended pleading could be adduced by interrogatory rather than deposition. Accordingly, despite the complaint’s recent amendment, substantial additional discovery does not appear justified. The trial date of March 19, 1985 stands confirmed.

CONCLUSION

Upon due consideration of the parties’ memoranda and exhibits, the arguments advanced at the hearing, and for the reasons set forth herein, the court grants defendant Cheyne’s motion to dismiss as time barred the section 12(1) claims of investors’ purchasing interests prior to August 25, 1981. Similarly, the California Corporations Code section 25507 claims of plaintiffs investing prior to August 25, 1980 are time barred and dismissed. In all other aspects, defendant Cheyne’s motions to dismiss or for summary judgment as to the First, Second, Third, and Fourth Causes of Action of the Fourth Amended Complaint are denied. Defendant Cheyne’s motion for summary judgment for lack of federal jurisdiction is also denied.

Additionally, the court grants defendant Cheyne’s motion for summary judgment on the Seventh and Tenth Causes of Action as to the claims of the fractionalized trust deed investors.

Excepting the relief granted at the hearing, the motion for a six month continuance of the date for trial is denied. The March 19, 1985 trial date shall stand, and discovery may reopen for the limited purpose discussed above.

      . The evidence submitted on this motion indicates that defendant Cheyne acted as counsel to the general partner of the 2131 partnership (Common Sense Capital Corporation (herein "CSCC”)), as well as some of its officers, from approximately February 1979 to September 1982. It also indicates that he served as counsel to the 2131 limited partnership from approximately May 1980 to September 1982. Plaintiffs allege that defendant Cheyne, as legal counsel, aided and abetted, or participated in, the alleged fraudulent acts and registration and qualifications violations more particularly described above.

      . Federal Rule of Civil Procedure 12(b)(6) provides in pertinent part:
      If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.

      . Because plaintiffs base their section 12(1) claims on allegations of unlawful offer and sale, as opposed to unlawful delivery, the date of payment properly commences the running of the limitations period. Eriksson v. Galvin,-484 F.Supp. 1108, 1119 (S.D.N.Y.1980); cf. Katz v. Amos Treat & Co., 411 F.2d 1046, 1054 n. 7 (2d Cir.1969).

      . Summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to prevail as a matter of law. See Fed.R.Civ.P. 56(c). Once the moving party has met his initial evidentiary burden of showing that his motion is properly supported, the adverse party must come forward with specific facts showing that there remains a genuine factual issue for trial. See Fed.R.Civ.P. 56(e). The opponent may not rest on his pleadings; he must offer some significant evidence as to any fact claims to be disputed. See, e.g., British Airways Bd. v. Boeing Co., 585 F.2d 946, 951 (9th Cir.1978), cert. denied, 440 U.S. 981, 99 S.Ct. 1790, 60 L.Ed.2d 241 (1979).

      . From what the court is able to gather, it appears that the Lot J investors were told that they were purchasing an interest secured by a trust deed on Lot J, but that their interest was first recorded on Lot I, only to be subsequently rerecorded on Lot J.

      . This conclusion is in accord with that reached in the only published decision known to the court which applies Cal.Corp.Code section 25507’s limitation period to even remotely similar circumstances. "The latest event that serves to start the applicable statute of limitations running on these securities transactions was the receipt and acceptance by [defendants] of plaintiffs' checks which was the same event used herein to date the individual transactions.” Malik v. Universal Resources Corp., 425 F.Supp. 350, 361 n. 48 (S.D.Cal.1976).

      . Mr. Cheyne goes beyond the complaint and relies on his declaration to support his contentions on this issue. The court treats defendant’s motion on this issue as one for partial summary judgment. Fed.R.Civ.P. 12(b).

      . Defendant’s reliance on Chiarella v. United States, 445 U.S. 222, 100 S.Ct. 1108, 63 L.Ed.2d 348 (1980), and Dirks v. S.E.C., 463 U.S. 646, 103 S.Ct. 3255, 77 L.Ed.2d 911 (1983), appears entirely misplaced. Those cases are inapposite. They consider the affirmative disclosure duty of a corporate insider, or of his “tippee,” when trading publicly held stock on nonpublic or inside information. This case, in contrast, does not concern the insider's duty to disclose or refrain from trading.

      . Mr. Cheyne fashions his motion as one both to dismiss and for partial summary judgment. His counsel urged at the hearing that it be treated as a motion for summary judgment. Because the court takes into consideration proof offered by defendant, the motion on these claims is treated as one for summary judgment. Fed.R.Civ.P. 12(b).

      . While the negligent misrepresentation claim incorporates an allegation of civil conspiracy among all defendants, this basis of liability appears unavailable. Unlike actual fraud, the tort of negligent misrepresentation does not include the elements of knowledge of false statement with intent to deceive. The act of conspiracy requires two or more persons agreeing to commit intentionally a wrongful act. See, e.g., Wyatt v. Union Mortgage Co., 24 Cal.3d 773, 784-85, 157 Cal.Rptr. 392, 598 P.2d 45 (1979). This court is unaware of California decisional law imposing liability for conspiring to commit negligence. The allegation of civil conspiracy appears inherently inconsistent with the allegation of an underlying act of negligence. Additionally, the same policy considerations limiting an attorney's liability for negligent misrepresentation (see discussion supra) would apply equally where plaintiff alleges a conspiracy pursuant to such negligence.

      . The decision to the permissible scope of additional discovery in each particular instance remains, of course, with the monitoring magistrate, the Honorable Curtis McKee. This would include additional depositions.