Judge: Douglas W. Stern, Case: 21STCV41144, Date: 2023-04-13 Tentative Ruling
Case Number: 21STCV41144 Hearing Date: April 13, 2023 Dept: 68
Lorey Andres, et al. vs. First American Title Insurance
Company, 21STCV41144
MOVING PARTY: Defendant First American Title Insurance
Company
RESPONDING PARTIES: Plaintiffs Lorey Andres and Sandra
Andres
Demurrer to Third Amended Complaint with Motion to Strike
Plaintiffs Third Amended Complaint alleges four causes of
action against Defendants for (1) Breach of Contract; (2) Intentional
Misrepresentation; (3) Negligent Misrepresentation; and (4) Bad Faith. This demurrer and motion to strike relate only
to the two misrepresentation claims.
This action arises from a boundary dispute between
Plaintiffs and their neighbor. Plaintiffs
had purchased title insurance from Defendant First American Title Insurance. (TAC ¶ 7.)
Plaintiffs made a claim for coverage. (TAC ¶ 9.)
Coverage was provided, and the Defendant title company provided counsel
for Plaintiffs in the underlying case (although Plaintiffs also had their own
independent counsel). (TAC ¶ 9.) Plaintiffs settled the underlying case but
now claim that they were lied to by their insurance company provided counsel,
Mr. Reider. (TAC ¶ 12.) Plaintiffs’ claim that attorney Reider
induced them to sign a Settlement Agreement with the neighbor by making
misrepresentations to Plaintiffs about the meaning of that settlement
agreement, misrepresentations about what First American would do to compensate
Plaintiffs, and other related misrepresentations. (TAC ¶ 12.)
“11. After litigation of the Quiet Title Action for
almost a year, the parties to the Quite Title Case engaged in settlement
efforts in late 2016 and early 2017. These
efforts included a visit to view the Plaintiffs’’ Property and Neighboring
Property in the presence of a mediator on or about November 16, 2016. Reider negotiated an agreement with the
Neighbor…” (TAC ¶ 11.) (Bold added.)
“12. Reider, with the specific intent to induce
Plaintiffs into signing the Settlement Agreement, made several oral
misrepresentations to Plaintiffs at Plaintiffs’ residence on or about November
16, 2016 outside the presence of the mediator and of Plaintiffs’
independent counsel retained to allege the tort claims not covered under the
Policy. First, Reider
misrepresented the new boundary line between the Plaintiffs’ Property and the
Neighboring Property referenced in the Settlement Agreement. In this regard, the boundary line identified
by Reider on November 16, 2016, was reflective of the boundary depicted in the
map attached hereto as Exhibit D and incorporated herein by reference. Second, Reider told Plaintiffs
that, in addition to all other compensation provided for in the Settlement
Agreement including the adjustment of the boundary line, that Plaintiffs would
receive at least ten thousand dollars ($10,000.00) from Defendant as additional
compensation for the Claim. * * * Reider specifically affirmed the
representation regarding the additional compensation of ten thousand dollars
($10,000.00) by email on October 12, 2017 and December 11, 2018 … Third, Reider advised
Plaintiffs that if Plaintiffs were dissatisfied with the adjusted boundary
lines after they were prepared, that under the terms of the Settlement
Agreement a judge could determine the boundary line. Fourth, Reider informed
Plaintiffs that their attorneys fees for independent counsel Plaintiffs
retained in relation to the Quiet Title Action would be covered and paid for by
Defendant. When Plaintiffs continued to
resist signing the Settlement Agreement despite these oral representations,
Reider told Plaintiffs to just sign the Settlement Agreement, and if Plaintiffs
were dissatisfied then Defendant would assist Plaintiffs in having a judge
determine the boundary line in accordance with Plaintiffs’ understanding.” (TAC ¶ 12.)
(Bold and italics added.)
Plaintiffs allege that the misrepresentations were made
to them by Reider for the purpose of inducing Plaintiffs to sign the Settlement
Agreement which was negotiated at the mediation. They claim that Defendant desired to bring the
Quiet Title Action to a swift and inexpensive conclusion so that First American
could mitigate its expenses in the performance of its obligations. (TAC, ¶ 34.)
“13. At all material times both Reider and
Defendant knew the above representations identified in paragraph 12 of this
Complaint were false. In the
alternative, both Reider and Defendant reasonably should have known the
representations were false and were reckless to the truth or falsity of such
representations. Plaintiffs
reasonably and justifiably relied on the above representations to Plaintiffs’
detriment, which induced Plaintiffs into signing the Settlement Agreement. To
be sure, all of the oral representations identified in paragraph 12 were made
outside the presence of Plaintiffs’ independent counsel, who had no
knowledge of such representations until after the Settlement Agreement was
signed. Had none of these
representations been made, Plaintiffs would not have signed the Settlement
Agreement.” (TAC ¶ 13.) (Bold added.)
Further, the Settlement Agreement also required First
American to fulfill various obligations to Plaintiffs, but First American
failed to do so prior to the Neighbor’s property being foreclosed upon in
2019-2020. (TAC, ¶ 20.). (It is not
clear what the Plaintiffs are alleging in this regard. The allegations of the Complaint do not make
clear what remaining obligations were imposed on the neighbors that were
adversely impacted by the foreclosure on the neighboring property.)
In November 2020, First American sent Plaintiffs a check for
$35,000, which was what First American said the claim was worth. The letter stated that First American would
no longer be representing Plaintiffs in the Quiet Title Action. (TAC ¶ 22.) Plaintiffs allege that this $35,000 payment was
less than what First American was obligated to pay under the terms of their
policy, and it did not include the additional $10,000 that Reider had promised on
November 16, 2016 when the mediation took place. (Plaintiffs note that Reider made reference
to that amount being paid to Plaintiffs on other occasions, including in an
email exchange on October 12, 2017.)
The damages that Plaintiffs have claimed are the loss of the
$10,000 they were promised, First American’s failure to pay the attorney’s fees
for their independent counsel as they were promised, and monetary damages as a
result of the unfavorable Settlement Agreement and First American’s failure to
fulfill their obligations under the Agreement.
American Title has demurred and filed a motion to strike as
to the Plaintiffs’ second and third causes of action for misrepresentation.
This action was originally filed by Plaintiffs on November
8, 2021. Defendant First American
demurred to Plaintiffs’ Second Amended Complaint, and this Court partially
sustained the Demurrer with leave to amend on December 7, 2022. The Demurrer was sustained with leave to amend
as to the two causes of action now before the Court: intentional
misrepresentation and negligent misrepresentation. Plaintiffs filed a Third Amended Complaint on
January 27, 2023. Defendant demurred to
the TAC on March 1, 2023, and also filed a Motion to Strike. Plaintiffs oppose this Demurrer.
Defendant has requested the Court take judicial notice of
several court documents related to this case, including prior iterations of the
complaint and prior court orders. The
Court declines to take judicial notice of these documents, as it is
unnecessary to make a formal request for judicial notice for the Court to
take judicial notice of documents in this case file. The Court may and shall review appropriate
documents in this case file.
Defendant has also requested that the Court take judicial
notice of a Notice of Pendency of Action (Lis Pendens) that was recorded
in connection with the property at issue in this case. The Court takes judicial notice of this
document for the purpose of noting that it was recorded.
Cal. Evidence Code § 1119 – The Mediation
Because it appears to be largely dispositive, the Court
shall begin with the Defendant’s assertion that Evidence Code § 1119 et
seq. and the Supreme Court’s decision in Cassel v. Superior Court (2011)
51 Cal.4th 113 is dispositive to the intentional misrepresentation and
negligent misrepresentation claims.
The misrepresentations alleged in the Complaint, paragraph
12, arose from statements that Reider made to Plaintiffs in connection with the
mediation settlement discussions that he had with Plaintiffs’ neighbor on
November 16, 2016. The allegations quoted
above make it clear that as part of a mediation the mediator and the attorneys
were present at the property on November 16, 2016 for the purpose of attempting
to mediate a settlement of the case.
Plaintiffs are precise in noting that on that date their attorney met
with them to discuss the proposed settlement that was being discussed at the
mediation. It was as that time and place
that Reider is alleged to have made the four misrepresentations detailed in TAC
¶ 12.
Such statements, if made for the purpose of, in the course
of, or pursuant to a mediation would not be admissible pursuant to Evidence
Code § 1119, even if they were statements made between only a party and
their attorney. (Cassel v. Superior
Court (2011) 51 Cal.4th 113, 117.)
“In order to encourage the candor
necessary to a successful mediation, the Legislature has broadly provided for
the confidentiality of things spoken or written in connection with a mediation
proceeding. With specified statutory
exceptions, neither “evidence of anything said,” nor any “writing,” is
discoverable or admissible “in any arbitration, administrative adjudication,
civil action, or other noncriminal proceeding in which ... testimony can be
compelled to be given,” if the statement was made, or the writing was prepared,
“for the purpose of, in the course of, or pursuant to, a mediation....”
(Evid.Code, § 1119, subds. (a), (b).)1 “All communications, negotiations, or
settlement discussions by and between participants in the course of a mediation
... shall remain confidential.” (Id., subd. (c).) We have repeatedly said that these
confidentiality provisions are clear and absolute. Except in rare circumstances, they must be
strictly applied and do not permit judicially crafted exceptions or
limitations, even where competing public policies may be affected. (Simmons v. Ghaderi (2008) 44 Cal.4th
570, 580, 80 Cal.Rptr.3d 83, 187 P.3d 934 (Simmons); Fair v.
Bakhtiari (2006) 40 Cal.4th 189, 194, 51 Cal.Rptr.3d 871, 147 P.3d 653 (Fair
); Rojas v. Superior Court (2004) 33 Cal.4th 407, 415–416, 15
Cal.Rptr.3d 643, 93 P.3d 260 (Rojas); Foxgate Homeowners' Assn. v.
Bramalea California, Inc. (2001) 26 Cal.4th 1, 13–14, 17, 108 Cal.Rptr.2d
642, 25 P.3d 1117 (Foxgate).)” Cassel
v. Superior Court (2011) 51 Cal.4th 113, 117–118 [119 Cal.Rptr.3d 437,
440–441, 244 P.3d 1080, 1083]
“The obvious purpose of the
expanded language is to ensure that the statutory protection extends beyond
discussions carried out directly between the opposing parties to the dispute,
or with the mediator, during the mediation proceedings themselves. All oral or written communications are
covered, if they are made “for the purpose of” or “pursuant to” a mediation. (§ 1119, subds.(a), (b).) It follows that, absent an express statutory
exception, all discussions conducted in preparation for a mediation, as well as
all mediation-related communications that take place during the mediation
itself, are protected from disclosure. Plainly,
such communications include those between a mediation disputant and his or her
own counsel, even if these do not occur in the presence of the mediator or
other disputants.” Cassel v. Superior
Court (2011) 51 Cal.4th 113, 128 [119 Cal.Rptr.3d 437, 449, 244 P.3d 1080,
1090–1091]
The Supreme Court made it clear in Cassel that even
when the impact of Evidence Code § 1119 et seq. is to foreclose a
claim by the client against his own attorney for misrepresentations made by the
attorney to the client at or in connection with a mediation, the Legislative
choice to insulate those communications from both discovery and evidentiary
value overrides the interest of the client in seeking redress for the claimed
wrong of the attorney.
In this case the factual allegations of Plaintiffs are very
clear. They claim that as part of the
mediation process, in order to induce them to sign the settlement agreement
negotiated by the attorney at the mediation, their own attorney lied to them. This was done by Reider in order to induce
them to accept the mediation settlement agreement. They were so induced.
Plaintiffs allege (and attach) an email exchange between their
independent attorney, Debby Doitch and Reider 11 months after the November 16,
2016 mediation meeting where Reider explains that First American will be paying
$10,000 pursuant to the settlement agreement negotiations. (Exhibit E.)
While that confirmation took place 11 months after the mediation event,
and is claimed to have been made in order to induce Plaintiffs to sign the
settlement agreement, the Court does not deem the repetition of that claimed
misrepresentation to remove it from the consequences of Evidence Code § 1119.
While Cassel involved a motion in limine to
preclude the evidence, there is no logical reason that the Court cannot and
should not accept the well pled facts in the Third Amended Complaint that show
that the Plaintiffs are basing their misrepresentations claims on the
communications made in connection with the mediation. The specificity mandated in order to plead a
claim of fraud has resulted in allegations that establish the necessary factual
basis for making a determination that the representations were made in connection
with the mediation. Those facts precluded
Plaintiffs from both conducting discovery on those assertions and from seeking
to introduce any evidence at trial to prove those communications. Therefore, the Court may strike from the
pleading allegations that Plaintiff shall, as a matter of law, be prevented
from proving.
The Court GRANTS the Motion to Strike the allegation
regarding the communications made by Reider connected to the mediation. (Motion to Strike listing in paragraph 1-14.)
The Lis Pendens
Plaintiffs allege that Reider recorded a lis pendens on
Plaintiff’s property, not on the neighbors property. Defendant seeks to strike the allegations
relating to the lis pendens. (Motion paragraphs 15-19.). The Court does not believe that it is
appropriate to strike these allegations. The claimed lis pendens error is not
subject to a similar protection like that provided by Evidence Code §
1119. The fact that the recording of the
lis pendens may be privileged does not relieve Defendant of what is
essentially the claimed malpractice of its alleged agent. The claimed liability flows not from the fact
of recording the lis pendens on Plaintiffs’ own property, but from the
alleged error failing to record the lis pendens against the neighbor’s
property. In that regard, this is no
different that if the attorney committed malpractice by filing deficient
pleadings with the Court. Those filings
would be privileged. But if they constitute
malpractice, the attorney cannot insulate himself by noting that the document
is privileged The liability arises not
from the lis pendens, but from the incompetent actions of the attorney
in representing the client.
That said, it is not clear how Plaintiffs suffered damage
from the alleged recordation of the lis pendens against their property. They seem to be alleging both that it clouded
their title (a very easily remedied problem entirely within their own control
with virtually no discernible impact) and that it somehow damaged them by not
clouding their neighbor’s property thereby ….. [what????].
As a general matter, in a demurrer proceeding, the defects
must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004)
116 Cal.App.4th 968, 994.) “A demurrer
tests the pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc.
Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the
complaint’s properly pleaded or implied factual allegations. (Id.) The
only issue a demurrer is concerned with is whether the complaint, as it stands,
states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th
740, 747.)
Where a demurrer is sustained, leave to amend must be
allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d
335, 348.) The burden is on the
plaintiff to show the court that a pleading can be amended successfully. (Id.; Lewis v. YouTube, LLC (2015)
244 Cal.App.4th 118, 226.) However,
“[i]f there is any reasonable possibility that the plaintiff can state a good
cause of action, it is error to sustain a demurrer without leave to amend.” (Youngman
v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245).
Defendant demurs to Plaintiffs’ cause of action for
intentional misrepresentation on the basis that it fails to state facts
sufficient to constitute a cause of action under CCP § 430.10(e).
The essential elements of fraud are (1) a misrepresentation,
(2) knowledge of falsity, (3) intent to induce reliance, (4) actual and
justifiable reliance, and (5) resulting damage. (Chapman v. Skype, Inc. (2013)
220 Cal.App.4th 217, 230-231, citing Lazar v. Sup. Court (1996) 12
Cal.4th 631, 638.) Every element of the
cause of action must be alleged in full: factually and specifically. The policy of liberal construction of
pleadings will not be invoked to sustain a defective pleading in any material
respect. (Wilhelm v. Pray, Price,
Williams & Russell (1986) 186 Cal.App.3d 1324, 1332.) General and conclusory allegations of fraud do
not suffice. “This particularity
requirement necessitates pleading facts which ‘show how, when, where, to whom,
and by what means the representations were tendered.’ [Citation.]” (Lazar, supra, 12 Cal.4th at
645.)
This time around, Plaintiffs have included specific details regarding
when, where, and how the misrepresentations were made to them regarding the
property boundary lines, the attorney’s fees, and the additional $10,000 that
they were promised. They alleged that
Reider first made the misrepresentations to them in person at their home on
November 16, 2022, just after he attended mediation discussions on their
behalf. (TAC, ¶ 12.)
Accordingly, Plaintiffs have pled facts sufficient to maintain
a cause of action for intentional misrepresentation.
But now that the facts are pleaded with the requisite
specificity, it has become clear that the Plaintiffs’ claims cannot be proven
as a result of Evidence Code § 1119 et seq. Therefore, since the Motion to Strike should
be GRANTED, the demurrer shall also be SUSTAINED as the Plaintiff cannot state
a valid claim once the allegations are stricken.
The Same result applies to the negligent misrepresentation
claim as the intestinal misrepresentation claim.