Unpublished Disposition, 907 F.2d 155 (9th Cir. 1989)

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U.S. Court of Appeals for the Ninth Circuit - 907 F.2d 155 (9th Cir. 1989)

Thomas P. NARDUCCI; Dorothy A. Narducci, Plaintiffs-Appellants,v.James NEIGHBOR, et al., Defendants,andThiessen, Gagen & McCoy, a Calif. professional corporation,et al. Defendants-Appellees.

No. 89-15075.

United States Court of Appeals, Ninth Circuit.

Argued and Submission Deferred March 14, 1990.Resubmitted March 27, 1990.Decided June 25, 1990.

Before CHOY, TANG and BEEZER, Circuit Judges.


MEMORANDUM* 

Appellants Thomas P. Narducci and Dorothy A. Narducci ("the Narduccis") appeal the district court's decision granting summary judgment to appellees Thiessen, Gagan and McCoy ("Thiessen") as well as appellees Albert C. Stillwell, individually and formerly d/b/a Security Plan of California; Vieux Desert Ltd., d/b/a Security Plan of California; Interim, Inc.; and David Mason ("the Stillwell appellees"). The Narduccis argue that they have introduced sufficient evidence to support their claims of Rule 10b-5 violations, violations of the antifraud provisions of the California Corporations Code, professional malpractice, and fraud. We affirm.

* The Narduccis are debtors in possession in a case presently pending under Chapter 11 of the Bankruptcy Code before the Bankruptcy Court for the Northern District of California. Their plan of reorganization, confirmed by the bankruptcy court, is to be funded from any recovery on the claims asserted against the Thiessen and Stillwell appellees. These claims arise from the offering during the years 1980 and 1981 of limited partnership interests in the Eagle One Limited Partnership ("Eagle One").

Eagle One was formed and operated for the construction and sale of four luxury homes at the Blackhawk development in Contra Costa County, California. The Narduccis purchased two partnership units in Eagle One at $29,500 each, for a total investment of $59,000.

Former defendant James Neighbor ("Neighbor"), a promoter and general partner of Eagle One, solicited the Narduccis' investment. As a real estate broker, agent or salesman, Neighbor had assisted the Narduccis in the purchase and sale of their two prior residences.

Prior to purchasing the units, the Narduccis discussed the investment with their own attorney, Mr. Bruzzone, who was apparently given a copy of the Limited Partnership Offering Memorandum ("LPOM") to review.1  Mr. Bruzzone identified some areas of concern in the document and discussed these with the Narduccis. But, ultimately, he advised them that their decision to invest should turn on whether or not they trusted the people involved in the limited partnership (i.e. Neighbor).

The Narduccis apparently decided that they wished to invest in Eagle One, but advised Neighbor that they lacked the funds to do so. Consequently, Neighbor arranged for them to be contacted by defendant Mason, an independent contractor who solicited loan applications for Security Plan of California ("Security Plan"). The parties disagree on the facts surrounding the subsequent meeting with Mason.

The Narduccis claim that they met with both Neighbor and Mason at the Narduccis' residence on October 5, 1980. During the meeting, Neighbor allegedly made various representations to the Narduccis as to the projected profit for Eagle One. He allegedly assured them that the partnership would be liquidated and the proceeds distributed within two years. He also allegedly stated that he believed the Narduccis' residential property was worth at least $550,000.2 

The Narduccis claim that Mason concurred in Neighbor's estimate of the value of their residential property, and also, when asked by the Narduccis, stated that he believed the purchase of the Eagle One units was a good investment. They claim that they told Mason that the loan proceeds would be used to invest in Eagle One.

However, the Stillwell appellees claim that neither Neighbor nor Mr. Narducci was present at the meeting. They claim that only Mason and Mrs. Narducci were present, that Mrs. Narducci represented that the loan proceeds were to be used for improvements to the Narduccis' property and to pay off another loan,3  and that she was the only person who expressed an opinion as to the value of the residence.

In any event, Mrs. Narducci alone signed an application for a $175,000 loan premised on their property being worth $550,000. Subsequently, Security Plan appraised the value of the property at only $400,000 and, therefore, agreed to arrange for a loan of only $125,000. The loan, secured by a second deed of trust on the Narducci property, was funded on January 26, 1981. The Narduccis used some of those proceeds to invest in Eagle One.

The Narduccis allege that they relied on Neighbor's representation that Eagle One would be liquidated within two years of its formation and that each limited partner would then receive proceeds equal to at least three times his initial investment. The Narduccis allege that they planned to use the liquidation proceeds to repay the loan. Eagle One had not been liquidated when the loan matured in January, 1983 and the Narduccis failed to make payment. Their property eventually was sold through nonjudicial foreclosure.

On November 5, 1984, the Narduccis filed a complaint in the United States District Court for the Northern District of California against, among others, the Stillwell appellees. The Narduccis alleged, among other things, (a) violation of section 10 of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (1934), and Rule 10b-5 thereunder, 17 C.F.R. Sec. 240.10(b) (5) (1988) ("Rule 10b-5"), (b) violation of sections 25400(d), 25401 and 25504.1 of the California Corporations Code, and (c) Fraud. On November 21, 1984, they filed an amended complaint, virtually identical to the original except that it included allegations against Thiessen. These allegations included, among other things, (a) violation of section 10 of the 1934 Act and Rule 10b-5, (b) violation of sections 25400(d), 25401 and 25504.1 of the California Corporations Code, and (c) professional malpractice.

The district court granted the summary judgment motions by the Stillwell appellees and Thiessen by orders entered on October 31, 1988 and November 7, 1988, respectively. Separate judgments were entered on November 23, 1988. The Narduccis' motion for reconsideration was denied on December 16, 1988. The Narduccis filed a timely notice of appeal on January 13, 1989.

II

A grant of summary judgment is reviewed de novo. Kruso v. International Telephone & Telegraph Corp., 872 F.2d 1416, 1421 (9th Cir. 1989). We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Tzung v. State Farm Fire and Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir. 1989).

Rather than merely showing that there is some evidence to support a claim, the plaintiff must show that there are "genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 106 S. Ct. 2505, 2511 (1986).

Further, as we have stated:

if the factual context makes the non-moving party's claim implausible, that party must come forward with more persuasive evidence than would otherwise be necessary to show that there is a genuine issue for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S. Ct. 1348, 1356 (1986). No longer can it be argued that any disagreement about a material issue of fact precludes the use of summary judgment.

California Architectural Bldg. Products, Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987), cert. denied, 108 S. Ct. 698 (1988) (emphasis in original).

III

The Narduccis argue that the district court erred in granting Thiessen's summary judgment motion with respect to their Rule 10b-5 claim. To establish a violation of section 10(b) of the 1934 Act and Rule 10b-5, a plaintiff must show that a fraud has been committed "in connection with the purchase or sale of any security." 15 U.S.C. § 78j(b) (1934). The "connection with" element requires a causal relationship between the fraud and the resulting injury. See In re Financial Corp. of America Shareholder Litigation, 796 F.2d 1126, 1130 (9th Cir. 1986). The term "purchase or sale" in turn requires an "actual purchase or sale of securities, or a contract to purchase or sell...." Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 735 (1975).

Although the Narduccis acknowledge that Thiessen did not itself actually participate in the sale of Eagle One interests, they argue that Thiessen is liable "as an aider and abettor to Neighbor's use of offering documents which contained false, misleading or deceptive information." As we have held:

The elements of a cause of action for aiding and abetting under section 10(b) are: (1) the existence of an independent primary wrong; (2) actual knowledge by the aider and abettor of the wrong and of his or her role in furthering it; and (3) substantial assistance in the wrong.

Harmsen v. Smith, 693 F.2d 932, 943 (9th Cir. 1982), cert. denied, 464 U.S. 822 (1983).

The Narduccis do not allege that Thiessen prepared the LPOM, which they claim contains misleading omissions. Rather, they argue that Thiessen either reviewed the document or recklessly failed to do so in preparing the subscription agreement. The Narduccis claim that Thiessen thus knew, or should have known, of the omissions and that it had a duty to disclose this knowledge to them.

In determining whether such a duty exists, we apply the "flexible duty" test set forth in White v. Abrams, 495 F.2d 724, 735-36 (9th Cir. 1974). The following five factors must be considered under this test:

[a] the relationship of the defendant to the plaintiff, [b] the defendant's access to the information as compared to the plaintiff's access, [c] the benefit that the defendant derives from the relationship, [d] the defendant's awareness of whether the plaintiff was relying upon their relationship in making his investment decisions, and [e] the defendant's activity in initiating the securities transaction in question.

Id. Further, a violation may not be premised on mere negligence; rather, a plaintiff must establish "scienter," i.e., intent, by the defendant, to support a violation of Rule 10b-5. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 194, 197-99 (1976). However, this requirement may also be met by a showing of "recklessness." Nelson v. Serwold, 576 F.2d 1332, 1337 (9th Cir.), cert. denied, 439 U.S. 970 (1978).

The district court held that factors [a], [c] and [e] did not apply to Thiessen as it had no relationship with the Narduccis and did not initiate the sale of the Eagle One interests. The court also held that while Thiessen may have been in a superior position to obtain financial information, the Narduccis failed to establish that Thiessen had actual knowledge of the misleading or fraudulent nature of the LPOM. Further, the court held that the Narduccis did not even claim to rely on any information in the LPOM. "Instead, ... they relied upon their trust in ... Neighbor and the fact that the partnership was 'drawn up legally'.... Thus, the 'reliance' factor hardly constitutes strong support for finding a duty to disclose on Thiessen's part." Consequently, the court refused to imply such a duty.

The Narduccis argue that the district court erred as there was some evidence that Thiessen may have reviewed the LPOM and because specific reliance is not required to establish liability. The Narduccis' claim is without merit.

The Narduccis' first obstacle is the requirement of an "independent wrong." It is clear that, based on the Narduccis' allegations and the evidence in the record, the independent wrong in this case was the misrepresentations allegedly made by Neighbor. They claim that he assured them that Eagle One would be liquidated in two years and that each limited partner would receive profits equal to at least three times his initial investment. They claim to have relied on these assurances in taking out a loan which would come due in two years.

The Narduccis' allegations with respect to the LPOM do not establish an independent wrong. They argue that the failure to include a statement indicating that the stated lot sizes are subject to change, a definition of "pro forma," and a description of the origin of the stated anticipated construction costs renders the LPOM misleading. However, they have failed to offer any evidence to support this contention. For instance, they have failed to show that offering memoranda generally include such information or that the omission of this information would influence investors. They have failed to cite a single case or offer any evidence to support their claim that the LPOM is clearly misleading on its face. In fact, the evidence suggests that their own lawyer examined the document and discussed the transaction with the Narduccis. Therefore, they could hardly have been prejudiced by such omissions.

But the Narduccis do not even claim to have relied on the LPOM generally or any specific information it contained. In fact, they do not even claim that they would have chosen not to invest in Eagle One had they known of the omitted information. In sum, they have failed to establish any casual connection at all between the alleged omissions and their injury. Such a connection is requisite to a finding of liability under 10b-5. See In re Financial Corp. of America Shareholder Litigation, 796 F.2d at 1130; Hazen, The Law of Securities Regulation 461-65 (1985).4 

The second obstacle to the Narduccis' claim is the requirement that Thiessen have "actual knowledge ... of the wrong and of his role in furthering it." Harmsen, 693 F.2d at 943. As mentioned above, the district court acknowledged that it was unclear whether Thiessen had seen the LPOM, but held that the Narduccis had nevertheless failed to establish that Thiessen had actual knowledge of the alleged fraud. The Narduccis argue that because there was some evidence that Thiessen had reviewed the LPOM it could be inferred that it had actual knowledge of the fraud. Alternatively, they argue that a jury could find that Thiessen was reckless in failing to review the LPOM. This argument also fails.

Even assuming Thiessen reviewed the LPOM, there is no evidence that it would thus have acquired information indicating fraud on the part of Neighbor and the Eagle One partnership. As described above, the Narduccis have introduced no evidence to support their claim that the LPOM is misleading on its face. Further, the Narduccis have failed to show any casual connection between the alleged omissions and their injury. Instead, their injury appears to stem from the alleged misrepresentations by Neighbor. The Narduccis have introduced no evidence to show that Thiessen had any knowledge of these representations or any reason to have had such knowledge. They cite no case to support a duty on the part of an attorney to investigate the actions and representations of its client flowing from the attorney's role in draftng a contractual form. The cases cited by the Narduccis, Roberts v. Peat, Marwick, Mitchell & Co., 857 F.2d 646 (9th Cir. 1988), and Rudolph v. Arthur Anderson & Co., 800 F.2d 1040 (11th Cir. 1986), are distinguishable as both involve defendants alleged to have had actual knowledge of the alleged fraud.

For these same reasons, the Narduccis have failed to establish the third element of a cause of action for aiding and abetting--the rendering of substantial assistance. In this case, the Narduccis must show that Thiessen had a duty to disclose the fraud. Because there is no evidence to support the inference that it had actual knowledge of fraud or that it was reckless in failing to acquire such knowledge, it cannot be held liable for failing to disclose the information.

IV

The Narduccis also argue that the district court erred in granting Thiessen's motion for summary judgment with respect to its claim under the antifraud provisions of the California Corporations Code. Specifically, they claim that Thiessen violated sections 25400(d) and 25504.1. Section 25400(d) provides:

It is unlawful for any person, directly or indirectly, in this state:

.............................................................

...................

* * *

If such person is a broker-dealer or other person selling or offering for sale or purchasing or offering to purchase the security, to make, for the purpose of inducing the purchase or sale of such security by others, any statement which was, at the time and in the light of the circumstances under which it was made, false or misleading with respect to any material fact, or which omitted to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and which he knew or had reasonable ground to believe was so false or misleading.

(Emphasis added.) The district court correctly held that the Narduccis had failed to state a claim under this section as they do not allege that Thiessen was a "broker-dealer or other person selling or offering for sale" the Eagle One limited partnership interests.

However, sections 25504.1 provides:

Any person who materially assists in any violation of Section 25110, 25120, 25130, 25133, or 25401, or a condition of qualification under Chapter 2 (commencing with Section 25110) of Part 2 of this division imposed pursuant to Section 25141, or a condition of qualification under Chapter 3 (commencing with Section 25120) of Part 2 of this division imposed pursuant to Section 25141, or an order suspending trading issued pursuant to Section 25219, with intent to deceive or defraud, is jointly and severally liable with any other person liable under the chapter for such violation.

(Emphasis added.) The district court held that the Narduccis had "not offered any evidence to support a contention that Thiessen knowingly participated in the alleged fraud committed by Neighbor. Thiessen cannot be held liable for its alleged failure to ascertain that statements made by Neighbor were false or misleading." The Narduccis argue that the evidence they provided that Thiessen may have reviewed the LPOM meets this requirement.

The district court did not err in rejecting this argument and in granting Thiessen's motion for summary judgment. Again the Narduccis are confusing the alleged omissions in the LPOM with the fraudulent misrepresentations allegedly made by Neighbor. The latter were the source of their injury and are apparently what the court was focusing on in rejecting any liability on Thiessen for "fail [ing] to ascertain that statements made by Neighbor were false or misleading."

V

Additionally, the Narduccis argue that the district court erred in granting Thiessen's motion for summary judgment as to their professional malpractice claim. They do not claim that Thiessen has represented them at any time. Rather, they claim that Thiessen owed them a duty as third parties.

California law extends an attorney's duty of care to two classes of third party plaintiffs: (a) persons a testator-client intended to benefit under his will, Heyer v. Haig, 449 P.2d 161, 165 (Cal.1969), and persons supplied with the attorney's advice with the attorney's knowledge and with the intent that they will rely on it to confer a benefit upon the attorney's client. See Goodman v. Kennedy, 556 P.2d 737, 743 (Cal.1976); Roberts v. Ball, Hunt, Hart, Brown & Baerwitz, 128 Cal. Rptr. 901, 905-06 (1976).

In Goodman, an attorney negligently advised certain officers of a corporation who were also shareholders that they could sell their stock without jeopardizing the corporation's exemption from the registration requirements of the federal securities laws. The plaintiffs purchased the stock from the officers and were harmed when the stock decreased in value due to the loss of the registration exemption as a result of the sale. 556 P.2d at 740. The court held that

[t]he present defendant had no relationship to plaintiffs that would give rise to his owing plaintiffs any duty of care in advising his clients that they could sell the stock without adverse consequences. There is no allegation that the advice was ever communicated to plaintiffs and hence no basis for any claim that they relied upon it in purchasing or retaining the stock.

Id. at 743.

In Roberts, an attorney provided his client with a letter stating that it was his opinion that his client's organization was a general partnership, but failed to disclose that this status was in doubt. The attorney knew that the client would show the letter to the plaintiff and that the plaintiff would rely on it in choosing to extend credit to the attorney's client. The court held that

[t]he defendants' opinion concerning the status of the partners was rendered for the purpose of influencing plaintiff's conduct, and harm to him was clearly foreseeable. We have no difficulty, therefore, in determining that the issuance of a legal opinion intended to secure benefit for the client, either monetary or otherwise, must be issued with due care, or the attorneys who do not act carefully will have breached a duty owed to those they attempted or expected to influence on behalf of their clients.

128 Cal. Rptr. at 906.

Most recently, in Courtney v. Waring, 237 Cal. Rptr. 233 (1987), a California court of appeals held that an attorney may be held liable for failing to disclose material information in a prospectus which he has prepared for the purpose of inducing prospective investors to purchase franchises from his client. The court held that

[w]e ... have no difficulty in concluding that the present case presents a Roberts rather than Goodman-type situation. Plaintiffs allege that defendants negligently prepared a franchise prospectus which failed to disclose material information known to defendants but unknown to plaintiffs. Defendants knew that the prospectus would be shown to prospective franchisees and that the information contained in it would be used to induce these persons to purchase TRU franchises. In simple terms, defendants are alleged to have prepared a false and/or misleading document, the purpose of which was to influence plaintiffs' conduct.

Id. at 239 (emphasis added).

These cases do not support the Narduccis' claim that Thiessen owed them a duty of care. The Narduccis do not allege that Thiessen prepared the LPOM. In fact, Thiessen only prepared the subscription agreement, which is not alleged to contain any misleading or fraudulent statements. However, the Narduccis argue that Thiessen "ratified" the misrepresentations in the offering memorandum since the subscription agreement refers to the existence of the LPOM.

The subscription agreement simply requires the purchaser to certify that he or she has "received a copy of the Limited Partnership Agreement for said limited partnership and a copy of the Private Placement Memorandum dated October 25, 1980 (the LPOM), prepared by the General Partner for the Partnership Units described in this Agreement." The subscription agreement offers no opinion as to the accuracy or completeness of the LPOM. In fact, it does not even state the name of the law firm that prepared the LPOM (Thiessen) or even the fact that it was prepared by a law firm. The Narduccis fail to cite a single case for the proposition that an attorney who prepares a contract assumes a responsibility for the accuracy of all documents mentioned in the contract or for the representations of his client.

Although there is some evidence to suggest that Thiessen may have reviewed the LPOM, the district court correctly held that "there is no evidence that Thiessen was aware of the misleading or fraudulent nature of representations made by Neighbor regarding the Eagle One Partnership." Again, the Narduccis' conduct was not influenced by the alleged omissions in the LPOM. The alleged fraud in this case consists of oral misrepresentations by Neighbor. There is no evidence to suggest Thiessen had any knowledge of these alleged misrepresentations.

VI

The final two issues on appeal involve the Narduccis' claims against the Stillwell appellees. In the first of these, the Narduccis contend that the court erred in granting the appellees' motion for summary judgment as to their Rule 10b-5 claim. The Narduccis argue that the Stillwell defendants are liable "as ... aider(s) and abettor(s) to Neighbor's fraudulent representation as to the value of [the Narduccis'] residence." They claim that Mason represented to them that their property was worth at least $550,000 and that he endorsed Neighbor's identical representation. They claim to have relied on these misrepresentations in choosing to invest in Eagle One. The elements of a claim for aiding and abetting and the "flexible duty test" for imposing a duty to disclose are discussed above in part I.

The district court found that " [t]he evidence put forward by the [appellants] makes [the Narduccis'] claim implausible in many respects." Consequently, consistent with Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986), the court held that they were required "to come forward with more evidence to show that there is a genuine issue for trial." Ultimately, the court rejected the aiding and abetting claim as to Mason's alleged representation because the court found that the Narduccis had failed to show that Mason had known of the fraud being perpetrated by Neighbor and had knowingly and substantially acted to further the fraud. The court also refused to imply a duty to disclose based on its analysis under the "flexible duty" test described in White.

The district court did not err in rejecting the Narduccis' 10b-5 claim with respect to Mason and the other Stillwell appellees. As the court held, "the factual context makes the [Narduccis'] allegations regarding the October 5 meeting implausible." The Narduccis' own statements were inconsistent as to whether Mason actually stated a value for their residential property and the exact figure allegedly given.5  Their version of the meeting with Mason was directly contradicted by both Neighbor and Mason. Mason's account--that he alone met only with Mrs. Narducci--is substantiated by the fact that only her signature appears on the loan application. Mason's statement that he was not told of the Narduccis' plan to use the proceeds to invest in Eagle One is supported by the notations on the application, consistent with his claim that Mrs. Narducci told him the funds were going to be used to pay off a second loan and make improvements to the property. Further, the amount of the loan the Narduccis eventually received was reduced because Security Plan actually appraised their property at only $400,000.

In fact, although the Narduccis' claim that they would not have bought the Eagle One interests if they had known their property was not worth over $500,000, they did not buy the interests until after they had received the proceeds of the loan. However, the loan was not approved until January 25, 1981 and not funded until January 30, 1981. Yet, on January 26, 1981--four days before the loan proceeds were available--they apparently represented on a Bank of America loan application that they believed their property was worth only $425,000.

Where "the factual context makes the non-moving party's claim implausible, that party must come forward with more persuasive evidence that would otherwise be necessary to show that there is a genuine issue for trial." Cal.Arch.Bldg.Prod. v. Franciscan Ceramics, 818 F.2d 1466, 1468 (9th Cir. 1987) (citing Matsushita Elec. Indus. Co., 475 U.S. 574, 587), cert. denied, 484 U.S. 1006 (1988) (emphasis in original). The Narduccis failed to meet this burden. They have only their own inconsistent statements as evidence that Neighbor was present at the meeting with Mason. There is no evidence linking Mason with Eagle One. Further, there is no evidence that Mason was aware of the fraud allegedly perpetrated by Neighbor or knowingly and substantially acted to further it.

The court was also correct in refusing to imply a duty to disclose under the White factors (see part I). Even assuming that Neighbor was at the meeting and Mason failed to point out the inaccuracy of Neighbor's estimate, there was no relationship between Mason and the Narduccis that would give rise to such a duty. Additionally, the Narduccis have failed to introduce any evidence to show that Mason had superior knowledge of Neighbor's trustworthiness or of the value of their property. There is also no evidence that Mason knew the Narduccis were relying on the estimate of their property's value in choosing to invest in Eagle One. Finally, the Narduccis do not even allege that Mason initiated or was even directly involved in the securities transaction.

VII

Finally, the Narduccis argue that the district court erred in granting the Stillwell appellees' motion for summary judgment as to their fraud claim. The Narduccis claim that in choosing to invest in Eagle One they justifiably relied on the fraudulent representation of their property's value allegedly made by Mason.

The elements of fraud are:

(a) misrepresentation;

(b) knowledge of falsity ("scienter");

(c) intent to defraud, i.e., to induce reliance;

(d) justifiable reliance; and

(e) resulting damage.

See 5 Witkin, Summary of Cal. Law, Torts, Sec. 676, p. 778 (9th ed. 1988). The district court correctly held that the Narduccis failed to establish the elements of their claim.

Even assuming that Mason made the misrepresentation or concurred in Neighbor's, it is doubtful that the Narduccis have offered sufficient evidence of reliance. The implausibility of their claim is described above.

Further, they admit

[i]t is true that appellants have not adduced specific evidence as to why their reliance upon the representations of Mason, or upon his acquiescence, or both, should be justified.

Nevertheless, they argue that they could reasonably rely on his opinion simply because Neighbor allegedly introduced him to them as someone who could assist them in obtaining a loan. The Narduccis' claim lacks merit.

As previously stated, there is no evidence of any previous relationship between the Narduccis and Mason. Additionally, there is no evidence of his having any knowledge of real property appraisal or of his representing that he had such knowledge. Even if the Narduccis did rely on his alleged misrepresentation, there is no evidence to support the justification of such reliance.

AFFIRMED.

 *

This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3

 1

Thomas Narducci stated that he gave a document to his attorney and asked him "to look it over and to advise us." Although he could not remember whether it was the LPOM, he did recall that the front page resembled that of the LPOM and designated the copy as "number so-and-so of so many issues." The LPOM is the only document in the record that is numbered in this way

 2

The Narduccis' recollection of this alleged misrepresentation varies between $550,000 and $600,000. In fact, Mrs. Narducci stated that Mason did not give an estimate

 3

Notations on the original loan application are consistent with Mason's version

 4

In face-to-face transactions between seller and purchaser, where the defendant purchaser fails to disclose material facts, courts have held that reliance can be presumed from the materiality of the omissions. Upon a finding of materiality it is then up to the defendant to prove that the plaintiffs had not in fact relied on the material omissions. See Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 153-54 (1972); Hazen at 463. Here the Narduccis have failed to show the materiality of the alleged omissions and, in any event, the appellees have clearly rebutted any presumption of reliance

 5

See footnote 2