Judge Elaine Lu, Case Number: 23STCV05681, Date: 2023-09-18 Tentative Ruling

On March 13, 2023, Plaintiffs Naser Rabizadeh and Sharon Rabizadeh (jointly “Plaintiffs”) filed the instant action against Defendants Provident Title Company (“Provident”) and Commerce Escrow Company (“Commerce”) (jointly “Defendants”). On May 9, 2023, Plaintiffs filed the operative first amended complaint (“FAC”) against Defendants Provident and Commerce. The FAC asserts six causes of action for (1) Breach of Contract, (2) Breach of Fiduciary Duty, (3) Negligence, (4) Slander of Title, (5) Negligent Infliction of Emotional Distress, and (6) Tort of Another.

On June 23, 2023, Defendant Provident filed the instant demurrer to the FAC. On October 11, 2023, Plaintiffs filed an opposition. On October 17, 2023, Defendant Commerce filed a reply.

In January 2021, Plaintiffs were the owners of two real properties – 5811 Topeka Drive, Tarzana, California and 5815 Topeka Drive, Tarzana, California. (FAC ¶ 9.)

In January 2021, Plaintiffs contracted with Defendants to assist with the sale of the real property located at 5815 Topeka Drive, Tarzana, California. (FAC ¶ 10.) “In or about March 2021, Defendants made an egregious error in the legal description attached to the Grant Deed for the conveyance of the 5815 Topeka Drive residence and mistakenly conveyed both of Plaintiffs’ homes in the sale, instead of one, and failed to discover or remedy the mistake in a timely manner.” (FAC ¶ 11, Exh. 1.)

In 2022, Plaintiffs became aware of this issue due to not receiving their tax bills for the 5811 Topeka Drive property – which Plaintiffs continued to pay online. (FAC ¶¶ 12-13.) Upon contacting the Tax Assessor’s office, Plaintiffs were informed that the Tax Assessor’s files did not show Plaintiffs as the owners of 5811 Topeka Drive any longer. (FAC ¶ 14.)

Plaintiffs hired an attorney to investigate this problem. Plaintiffs’ attorney discovered the issue with the 2021 Grant Deed erroneously transferring both properties and not merely just the 5815 Topeka Drive property. (FAC ¶¶ 15-16.)

“Plaintiffs' attorney notified Defendants of the error in 2022 and spent many further months of work on this matter, including but not limited to, further investigation, management of the remediation process including continuously prompting Defendants to work on rectifying their egregious mistake and assisting them in such, consulting real property and tax experts on the proper remedy for the mistaken sale as well as the property tax implications, substantive work with the County Assessor's Office, going through all proper steps and procuring documents necessary to rectify the chain of title to meet the County Assessor's requirements in order to reverse all negative tax implications, including the vastly increased tax liability as well as all interest and penalties.” (FAC ¶ 17.)

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal 3d 311, 318.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). (Ion Equipment Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.)

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dep’t of Water & Power (2006) 144 Cal. App. 4th 1216, 1228.) 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 pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Ct. (1984) 153 Cal. App. 3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, 147 Cal.App.4th at 747.)

Code of Civil Procedure § 430.41, subdivision (a) requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring party shall meet and confer¿in person or by telephone¿with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” The parties are to meet and confer at least five days before the date the responsive pleading is due and if they are unable to meet the demurring party shall be granted an automatic 30-day extension. (CCP § 430.41(a)(2).) The demurring party must also file and serve a declaration detailing the meet and confer efforts. (Id.¿at (a)(3).)¿ If an amended pleading is filed, the parties must meet and confer again before a demurrer may be filed to the amended pleading. (Id.¿at (a).)

Defendant Provident has satisfied the meet and confer requirement. (Johnson Decl. ¶¶ 2-3.)

Defendant Provident contends that the first cause of action for breach of contract fails because Provident is not a party to the written contract.

“The elements of a cause of action for breach of contract are: ‘(1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff.’” (Coles v. Glaser (2016) 2 Cal.App.5th 384, 391 [internal citations omitted].) “A contract is an agreement to do or not to do a certain thing.” (Civ. Code, § 1549.) The essential elements of a contract are parties capable of contracting; their consent; a lawful object; and a sufficient cause or consideration. (Civ. Code, § 1550.) “To state a cause of action for breach of contract, it is absolutely essential to plead the terms of the contract either in haec verba or according to legal effect.” (Progressive West Ins. Co. v. Yolo County Superior Court (2005) 135 Cal.App.4th 263, 270, Fn. 1.)

Here, the FAC alleges in relevant part that “Plaintiffs and Defendants Provident, Commerce, and DOES 1-10, entered into a written agreement.” (FAC ¶ 19, Exh. 2.) However, the attached written agreement consists of the supplemental and amended escrow instructions between Plaintiffs and Defendant Commerce. (FAC, Exh. 2.) The attached exhibits take precedence over contrary allegations of the FAC. (Moran v. Prime Healthcare Management, Inc. (2016) 3 Cal.App.5th 1131, 1145–1146, [“While the ‘allegations [of a complaint] must be accepted as true for purposes of demurrer,’ the ‘facts appearing in exhibits attached to the complaint will also be accepted as true and, if contrary to the allegations in the pleading, will be given precedence.’ ”].) Thus, the attached exhibits make clear that Defendant Provident is not a party to the alleged written contract between Plaintiffs and Defendant Commerce.

Because plaintiffs fail to allege any contract between Plaintiffs and Defendant Provident, there can be no breach of said nonexistent contract. To the extent that Plaintiffs contend that they are third party beneficiaries of some unspecified agreement to which Defendant Provident is a party, Plaintiffs have not alleged nor identified such a contract. Accordingly, Defendant Provident ’s demurrer to the first cause of action is SUSTAINED.

Defendant Provident asserts that the second cause of action for breach of fiduciary duty fails because Plaintiffs fail to allege facts giving rise to a fiduciary duty.

“‘The elements of a cause of action for breach of fiduciary duty are: (1) the existence of a fiduciary duty; (2) the breach of that duty; and (3) damage proximately caused by that breach.’” (IIG Wireless, Inc. v. Yi (2018) 22 Cal.App.5th 630, 646, [internal citation omitted].) A fiduciary duty is founded upon a special relationship imposed by law or under circumstances in which “confidence is reposed by persons in the integrity of others” who voluntarily accept the confidence. (Tri-Growth Centre City, Ltd. v. Silldorf, Burdman, Duignan & Eisenberg (1989) 216 Cal.App.3d 1139, 1150; see CACI 4100, et seq.)

“‘[B]efore a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which

imposes that undertaking as a matter of law.’” (City of Hope Nat'l Med. Ctr. v. Genentech (2008) 43 Cal.4th 375, 386.) Facts giving rise to a confidential, fiduciary or trustee relationship must be pled, and a “bare allegation that defendants assumed a fiduciary relationship” is a conclusion. (Zumbrun v. Univ. of So. Cal. (1972) 25 Cal.App.3d 1, 13.)

Here, the FAC alleges that “[b]y virtue of handling Plaintiffs’ real estate transaction and agreeing and being paid by Plaintiffs to do so, Defendants, and each of them, assumed and owed a fiduciary duty to Plaintiffs at all times relevant herein.” (FAC ¶ 24.) However, being merely involved in a real estate transaction does not make one a fiduciary. (See e.g., Summit Financial Holdings, Ltd. v. Continental Lawyers Title Co. (2002) 27 Cal.4th 705, 711-714.)

Undoubtedly, the escrow holder is a fiduciary to Plaintiffs. (Id. at p.711, [“An escrow holder is an agent and fiduciary of the parties to the escrow.”].) However, there is no allegation that Defendant Provident was the escrow holder. The FAC merely alleges that “[i]n or about March 2021, Defendants made an egregious error in the legal description attached to the Grant Deed for the conveyance of the 5815 Topeka Drive residence and mistakenly conveyed both of Plaintiffs’ homes in the sale, instead of one, and failed to discover or remedy the mistake in a timely manner.” (FAC ¶ 11.) As shown in the attached exhibits, Defendant Provident recorded the erroneous grant deed, (FAC, Exh. 1), and it appears from the amended and supplemental escrow instructions that Defendant Commerce was the escrow holder, (FAC Exh. 2).[1] However, Defendant Provident is not a party to the attached escrow agreement.

As Defendant Provident is not a party to the escrow agreement, and Plaintiffs fail to allege facts that Defendant Provident was acting as a fiduciary, Defendant Provident’s demurrer to the second cause of action is SUSTAINED.

Defendant Provident asserts that the sixth cause of action for tort of another fails as a matter of law. The Court agrees.

“A person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney's fees, and other expenditures thereby suffered or incurred.” (Prentice v. North Am. Title Guaranty Corp., Alameda Division (1963) 59 Cal.2d 618, 620.) “In the usual case, the attorney's fees will have been incurred in connection with a prior action; but there is no reason why recovery of such fees should be denied simply because the two causes (the one against the third person and the one against the party whose breach of duty made it necessary for the plaintiff to sue the third person) are tried in the same court at the same time.” (Id. at p.621.) The claim for tort of another must be pleaded and proven. (Hsu v. Abbara (1995) 9 Cal.4th 863, 869, Fn. 4 [“Unless the parties stipulate otherwise, a claim for attorney fees under the ‘tort of another’ doctrine may not be asserted by post-trial motion but rather must be pleaded and proved to the trier of fact.”].)

However, “[t]he tort of another doctrine does not allow a party to recover the fees and costs involved in litigating directly with a negligent defendant.” (Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44, 80.) Similarly, “the tort of another doctrine does not apply to the situation where a plaintiff has been damaged by the joint negligence of codefendants.” (Ibid.) “The rule of Prentice was not intended to apply to one of several joint tortfeasors in order to justify additional attorney's fee damages. If that were the rule there is no reason why it could not be applied in every multiple tortfeasor case with the plaintiff simply choosing the one with the deepest pocket as the ‘Prentice target.’ Such a result would be a total emasculation of Code of Civil Procedure section 1021 in tort cases.” (Vacco Industries, Inc. v. Van Den Berg (1992) 5 Cal.App.4th 34, 57.)

Here, the FAC alleges that “[a]s a direct and proximate result of Defendants' tortious and wrongful conduct, Plaintiffs were required to act in the protection of their interests by hiring an attorney to investigate and help repair the then unidentified problem with their home title.” (FAC ¶ 43.) Further, the FAC alleges that based on the tort of another doctrine, “Plaintiffs had no choice but to bring the current action against Defendants in order to protect their interests, and are entitled to the reimbursement of all reasonable costs they incurred, including the attorney’s fees expended to investigate and then right Defendants' wrong, as well as attorney’s fees and costs incurred by Plaintiffs in connection with this action.” (FAC ¶ 48.) This is plainly improper. As noted in the authority above, “[t]he tort of another doctrine does not allow a party to recover the fees and costs involved in litigating directly with a negligent defendant.” (Gorman, supra, 178 Cal.App.4th at p.80.) Further, Plaintiffs cannot claim tort of another for conduct for which Defendants are allegedly jointly liable. (Ibid.)

Plaintiffs’ reliance on Third Eye Blind, Inc. v. Near North Entertainment Ins. Services, LLC (2005) 127 Cal.App.4th 1311 is misplaced. In Third Eye Blind, members of a band were sued by a former band member for right of publicity and trademark violations. (Id. at pp.1315–1316.) Their liability insurance carrier denied coverage based on an ambiguous exclusion in the policy, and the band members defended the lawsuit on their own, expending over $3 million to settle the case, including attorney's fees. (Id. at p.1316.) Thereafter, the band members sued the insurance carrier for refusing to defend and to indemnify in the trademark lawsuit. (Ibid.) The band members also sued their broker for negligence, seeking “ ‘all covered defense costs’ [the band members] had incurred.” (Ibid.)

After summary judgment was entered in favor of the band members finding that there was a duty for the insurance carrier to defend in the underlying trademark suit, the broker moved for judgment on the pleadings, which the trial court granted finding that the claims against the broker were predicated on finding that the insurance policy was insufficient to provide coverage in the underlying trademark action. (Id. at p.1317.) The Court of Appeal reversed reasoning – in relevant part – that “[a]s a result of [the broker’s] allegedly negligent failure to advise [the band members] about the [the ambiguous policy exclusion] and the need for errors and omissions insurance, [the band members] were required to sue [the insurance carrier] for coverage. [The band members] allege that if they had been competently advised they would have obtained an errors and omissions policy, which would have provided more definite coverage for the [underlying trademark action]. Because [the band members] had no errors and omissions policy to rely on, [the band members] were required to litigate coverage with [the insurance carrier] as a direct result of [the broker’s] alleged negligence; thus, the attorneys fees and costs incurred in the coverage litigation may be recovered as damages if [the band members] prevail in their claims against [the broker].” (Id. at p.1325.)

Notably in Third Eye Blind, the tort of another doctrine was not interchangeable and could only be asserted against the broker defendant due to a separate duty and obligation to the band members. In contrast, in the instant action, there is no allegation that Defendant Provident owed some duty to Plaintiffs that if avoided would have removed the need for suit against Defendant Commerce. Rather, the underlying basis for liability against the Defendants is identical. (See e.g., FAC ¶ 11.) The instant action does not involve a separate and distinct basis for liability against each Defendant. Moreover, there is no underlying litigation or of a tort of another allegedly caused by Defendants’ conduct – such as a separate suit with third parties regarding the 5811 Topeka Drive property due to the title error.

Accordingly, Defendant Provident’s demurrer to the sixth cause of action 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. (Goodman v. Kennedy, supra, 18 Cal.3d at p.348; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.)

Here, as to the sixth cause of action, Plaintiffs cannot state a claim based on the need for Plaintiffs to initiate the instant suit against Defendants. However, the pleading is unclear, and Plaintiffs may have a basis for such a claim that has not yet been alleged. Similarly, it is unclear what contract or basis for fiduciary duty exists as to Defendant Provident. Significantly more facts could potentially be alleged that may support such claims. Moreover, this is the first time that a demurrer has been sustained against Plaintiffs’ FAC on these grounds. Accordingly, the court finds it is proper to allow Plaintiffs an opportunity to cure the defects discussed in this order. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349; Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037.)

Based on the foregoing, Defendant Provident Title Company’s demurrer to the first amended complaint is SUSTAINED WITH LEAVE TO AMEND as to the first, second, and sixth causes of action.

[1] Inexplicably, Plaintiffs do not attach the full escrow instructions but instead only the amended and supplemental instructions. Thus, the identity of the escrow holder is not clearly specified in the FAC.

Superior Court of California

County of Los Angeles

Department 26