Judge Malcolm Mackey, Case 22STCV29846 2023-04-04 Tentative Ruling

Judge: Malcolm Mackey, Case: 22STCV29846, Date: 2023-04-04 Tentative Ruling

Case Number: 22STCV29846 Hearing Date: April 4, 2023 Dept: 55

AJRAB v. COMMONWEALTH LAND TITLE INSURANCE CO, 22STCV29846

Hearing Date: 4/4/23, Dept. 55.

#8: DEMURRER TO COMPLAINT; MOTION TO STRIKE.

Notice: Okay

Opposition

MP: Defendants

RP: Plaintiff

Summary

On 9/13/22, Plaintiff filed a Complaint alleging that, as Plaintiff’s title insurer, defendants are obligated to convey good title to Plaintiff to the residential property located at 333 Linden Avenue, Unit 1, Long Beach, because title failed to include Carport Number 1, or Plaintiff wants at least $100,000.00 to cover losses, instead of the $20,000.00 Defendant attempted to provide.

The causes of action are:

1. BREACH OF CONTRACT.

2. NEGLIGENCE.

MP Positions

Moving parties request an order sustaining the demurrer to the Complaint, and granting the motion to strike allegations regarding attorneys’ fees, on grounds including the following:

· The contract claim is uncertain. It is impossible for these defendants to: (a) determine whether there is one or more contracts alleged and which provision(s) of any contract(s) are alleged to have been breach by either or both of the defendants; (b) ascertain from the Complaint whether the contract(s) at issue in Plaintiff’s First Cause of Action for alleged “Breach of Contract” are written, oral, or implied by conduct; and (c) what, if any separate conduct specifically alleged against either defendant is contended to be sufficient to maintain a cause of action for negligence against either Commonwealth or Lawyers Title.

· A title insurance company does not owe any duty in negligence to the purchaser of a policy of title insurance.

· Plaintiff failed to allege any proper basis for recovery of attorney’s fees.

RP Positions

Opposing party advocates overruling and denying, for reasons including the following:

· The subject policy was sufficiently referenced in the Complaint, and portions of the written agreement were cited in the Complaint, along with the legal effect of the contract. Plaintiff alleged that Defendants, as title insurers, failed to insure Plaintiff’s actual losses, including attorneys’ fees and expenses that resulted from the occurrence of a “Covered Risk”, and that was a material breach of the contract.

· Negligence is sufficiently pled. The title insurer is obligated to indemnify the insured under the terms of the policy.” (Lawrence v. Chicago Title Ins. Co. (1987) 192 Cal.App.3d 70, 75). Defendants failed to use due care in promising, guaranteeing, representing, and warranting the Subject Property and losses that would occur. Defendants had a duty to indemnify Plaintiff for defects to the title to the Subject Property, and they failed to perform that duty by using due care, which caused further damage.

· The subject Title Insurance Policy expressly allows for recovery of attorneys’ fees in a breach of contract action, in addition to actual losses.

· The demurrer was late. There was no specificity as to demonstrating meet-and-confers, and thus the 30-day extension to demurrer should not be allowed.

Tentative Ruling

The demurrer is overruled.

The motion is denied.

Twenty days to answer.

Contract

The Complaint clearly describes a written title insurance policy, and not oral or implied (e.g., Complaint, ¶ 12).

A demurrer lies as to an “action founded upon a contract,” if one cannot ascertain “whether the contract is written, is oral, or is implied by conduct.” CCP §430.10(g); Holcomb v. Wells Fargo Bank, N.A. (2007) 155 Cal. App. 4th 490, 501. A Court rejected a demurrer attacking the failure to allege whether the contract was in writing, oral or implied, where the demurring party knew, and the alleged terms inferred a writing. See Miles v. Deutsche Bank Nat’l Trust Co. (2015) 236 Cal.App.4th 394, 401.

Any other referenced contract uncertainties properly are handled via discovery.

Regarding uncertainty, "[t]here is no need to require specificity in the pleadings because 'modern discovery procedures necessarily affect the amount of detail that should be required in a pleading.'” Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 608.

Negligence

There are some viable negligence theories against title insurers, as summarized in the treatise excerpt below:

[6:2805] Tort Actions Against Title Insurers: In appropriate cases, a title insurer may be subject to tort damages, including emotional distress, financial losses, expenses in clearing title and attorney fees, under various tort theories.

Cross-refer: See detailed discussion in Ch. 13, Damages.

a. [6:2806] Breach of implied covenant (“bad faith”): As with all insurance contracts, “unreasonable” insurer conduct in connection with the claim may be actionable in tort as a breach of the insurer's implied covenant of good faith and fair dealing. [White v. Western Title Ins. Co. (1985) 40 C3d 870, 885, 221 CR 509, 516]

Cross-refer: See detailed discussion in Ch. 12A, Bad Faith—General Principles.

b. [6:2807] Negligence in searching title: The insured may seek recovery for damages in excess of the policy limits on a negligence theory.

(1) [6:2808] No action based on title policy alone: A title insurance policy is not a representation as to the status of title; it merely indemnifies the insured against adverse claims (see ¶ 6:2502). Thus, so long as the title insurer performs its contractual duty when an adverse claim arises (i.e., indemnifying the insured against the adverse claim or lien), no greater recovery is available for its negligence in searching the title originally.

“The policy of title insurance … does not constitute a representation that the contingency insured against will not occur … Accordingly, when such contingency occurs, no action for negligence or negligent misrepresentation will lie against the insured based upon the policy of title insurance alone.” [Lawrence v. Chicago Title Ins. Co. (1987) 192 CA3d 70, 75, 237 CR 264, 266-267 (emphasis added)]

(2) [6:2809] No action based on post-1981 preliminary title report: Any “preliminary report” or “binder” or “commitment” issued after 1981 is merely an offer to insure title. It is not a representation as to the status of title. [Ins.C. § 12340.11; see ¶ 6:2523]

The proposed insured is not entitled to rely thereon and the insurer is not liable for negligence in its preparation. [Southland Title Corp. v. Sup.Ct. (Nye) (1991) 231 CA3d 530, 537-538, 282 CR 425, 429; see ¶ 6:2524]

(3) [6:2810] Negligence in other reports: However, a negligence action against a title insurer may lie in connection with other reports: e.g., abstracts of title, lot book reports, litigation guarantees, etc. These are paid-for representations of title upon which the insured is entitled to rely (see ¶ 6:2530 ff.). [See Jarchow v. Transamerica Title Ins. Co. (1975) 48 CA3d 917, 940, 122 CR 470, 486, fn. 13 (overruled on other grounds by Soto v. Royal Globe Ins. Corp. (1986) 184 CA3d 420, 299 CR 192)—action for negligent misrepresentation may lie (dictum)]

(a) [6:2811] Abstractor's duty of care: An abstractor of title “must report all matters which could affect his client's interest and which are readily discoverable from those public records ordinarily examined when a reasonably diligent title search is made.”[Contini v. Western Title Ins. Co. (1974) 40 CA3d 536, 545-546, 115 CR 257, 263]

1) [6:2812] Conditional use permits: Failure to include a recorded conditional use permit (CUP) in an abstract of title constitutes negligence if the permit restricts the owner's ability to convey title. [1119 Delaware v. Continental Land Title Co. (1993) 16 CA4th 992, 999, 20 CR2d 438, 442]

Such a permit is, in effect, a governmentally-imposed “encumbrance” on title and must be recorded in order to impart constructive notice of the restriction. [Gov.C. § 27281.5]

Compare: But not every conditional use permit restricts the owner's ability to convey title and therefore needs to be recorded (and an abstractor would thus owe no duty to list it):

• [6:2813] A CUP that limits occupancy or development of the property (e.g., for senior citizens housing) restricts the owner's ability to convey a fee title to the property and therefore must be recorded. [1119 Delaware v. Continental Land Title Co., supra, 16 CA4th at 999, 20 CR2d at 442]

• [6:2814] But a CUP that merely limits the right to convert individual apartments for use as condominiums (as opposed to the right to convey the units) need not be recorded under Gov.C. § 27281.5. [City of West Hollywood v. Beverly Towers, Inc. (1991) 52 C3d 1184, 1194, 278 CR 375, 381]

(b) [6:2815] Compare—no liability where report not read: Any claim of negligence must be predicated upon actual reliance on the report. If the insured never read the report before dealing with the property, the title insurer's negligence is not a proximate cause of any loss to the insured. [Lawrence v. Chicago Title Ins. Co. (1987) 192 CA3d 70, 77-78, 237 CR 264, 268-269—pre-1982 preliminary title report treated as abstract of title]

(c) [6:2816] Measure of damages: As with any other case of negligence, the measure of damages for an abstractor's negligence is the amount “which will compensate for all the detriment proximately caused thereby.” [Civ.C. § 3333; see Barthels v. Santa Barbara Title Co. (1994) 28 CA4th 674, 678, 33 CR2d 579, 581]

(d) [6:2817] Proximate cause limitation: No recovery is allowed for losses not proximately caused by the title insurer's negligence … even though such negligence may have misled the insured as to the value of the property. [Barthels v. Santa Barbara Title Co., supra, 28 CA4th at 679, 33 CR2d at 581]

1) [6:2818] Example: Insured purchased ocean front lot on which he planned to build a home, together with an easement for access. Title Insurance showed the easement was 15 feet wide. But the easement turned out to be only 7.5 feet, which was too narrow to obtain a building permit. Title Insurer was liable for the original purchase price ($43,000) plus the time and money spent by Insured in preparing building plans. But it was not liable for the value the lot would have had with a 15 foot wide easement for access ($800,000 at time of trial). [Barthels v. Santa Barbara Title Co., supra, 28 CA4th at 678, 33 CR2d at 581]

2) [6:2819] Compare—action on title insurance policy: The result may be different in an action on the title insurance policy, in which case diminution in value caused by the defect in title is a proper measure of damages (see ¶ 6:2762 ff.). [See Barthels v. Santa Barbara Title Co., supra, 28 CA4th at 679, 33 CR2d at 581.

California Practice Guide: Insurance Litigation (The Rutter Group 2022) § 6:2805 et seq.

Attorneys Fees

Even completely unsupported attorneys’ fees allegations need not be stricken pursuant to a motion to strike, since later discovery may reveal a basis for their recovery. Camenisch v. Sup. Ct. (1996) 44 Cal.App.4th 1689, 1699. “There is no requirement that a party plead that it is seeking attorney fees, and there is no requirement that the ground for a fee award be specified in the pleadings.” Yassin v. Solis (2010) 184 Cal.App.4th 524, 533. Accord Snatchko v. Westfield LLC (2010) 187 Cal.App.4^th469, 497 (error to strike attorney fees sought under Code of Civil Procedure Section 1021.5, because there is no pleading requirement involved.); Chinn v. KMR Property Management (2008) 166 Cal.App.4th 175, 194 ("We agree that the complaint need not include a prayer for attorney fees, and that due process is satisfied by notice to the opposing party of the motion for attorney fees."), disapproved on other grounds by DeSaulles v. Cmty. Hosp. of Monterey Peninsula (2016) 62 Cal. 4th 1140, 1144. Courts may strike prayers for attorney fees if a party has demonstrated no potential basis for their recovery. Agricultural Ins. Co. v. Sup. Ct. (1999) 70 Cal.App.4^th 385, 404.