Judge: Melvin D. Sandvig, Case: 20CHCV00631, Date: 2023-06-20 Tentative Ruling

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Case Number: 20CHCV00631    Hearing Date: February 9, 2024    Dept: F47

Dept. F47

Date: 2/9/24

Case #20CHCV00631

 

DEMURRER & MOTION TO STRIKE TO FIRST AMENDED CROSS-COMPLAINT

 

Demurrer and Motion to Strike filed on 10/11/23.

 

MOVING PARTY: Cross-Defendant Stewart Title Guaranty Company

RESPONDING PARTY: Cross-Complainants Roshmore Development Inc. and Cochran, Inc.

NOTICE: ok

 

Demurrer is to the entire First Amended Cross-Complaint:

(1)   Breach of Contract

(2)   Breach of  Duty of Good Faith and Fair Dealing

(3)   Indemnity

(4)   Declaratory Relief

(5)   Negligence

 

RELIEF REQUESTED IN MOTION TO STRIKE: An order striking portions of the First Amended Cross-Complaint relating to attorneys’ fees, punitive damages and treble damages.

 

RULING: The demurrer is sustained without leave to amend.  The motion to strike is placed off calendar. 

 

SUMMARY OF FACTS & PROCEDURAL HISTORY

 

This action arises out of a dispute regarding real property commonly known as 28212 Kelly Johnson Parkway #215 and #225 which are medical office suites (the Property). 

 

On or 5/3/18, Cochran, Inc. (Cochran) purchased the Property from Modern Diagnostics Medical Services, Inc. (MDMS), a company controlled by Mark Liker (Liker).  (First Amended Cross-Complaint (FAXC) ¶¶ 1, 5, 13).  The grant deed from MDMS to Cochran was recorded on 5/9/18.  (FAXC ¶¶1, 13).  The purchase price was $1,150,000.  (FAXC ¶34).  The May 2018 sale to Cochran was insured by Stewart Title Guarantee Company (Stewart).  (FAXC ¶43).

 

On 6/7/18, Liker’s partner in MDMS, Thomas Smith (Smith), filed an action against Liker and Cochran (LASC Case No. BC679714) (Smith Action).  (FAXC ¶14).  In the Smith Action, Smith alleged that Liker had sold the Property to Cochran without authorization and without receiving equivalent value.  Id.  Liker and Smith settled the Smith Action, and Smith dismissed all parties with prejudice.  (FAXC ¶16).  Cochran and Roshmore allege that Stewart defended Cochran in the Smith Action (because that was a lawsuit that “challenged the title in the name of Cochran”). (FAXC ¶43).

 

On 5/15/19, Cochran sold and transferred the Property to Roshmore via grant deed recorded on 5/22/19.  (FAXC ¶¶17, 37).  Cochran and Roshmore  allege that the May 2019 sale to Roshmore was insured by Fidelity National Title Group (Fidelity).  (FAXC ¶44).

 

On 10/15/20, Liker (Liker) filed the underlying complaint in this action for Breach of Contract against Cochran and Roshmore.  Liker’s complaint only seeks monetary relief and alleges no real property claims.  (RJN, Ex.A).  On 1/26/21, Liker recorded a Notice of Pendency of Action (Lis Pendens) against the Property, which was then owned by Roshmore.  (FAXC ¶¶30, 42; RJN, Ex.B). 

 

Cochran and Roshmore allege that the title companies insuring title for Cochran (Stewart) and Roshmore (Fidelity) initially refused to defend them against Liker’s complaint on the ground that “it did not challenge the title but was merely seeking monetary damage.”  (FAXC ¶30).  Cochran and Roshmore allege that even after Liker recorded the Lis Pendens, neither Stewart nor Fidelity would step in to defend “the title to the hand of Roshmore the then owner of record of the subject property.”  (FAXC ¶30).  Cochran and Roshmore also allege that Stewart refused to provide a defense to Liker’s complaint on the ground that once the Property transferred to Roshmore, Stewart’s obligation had terminated pursuant to the terms of the policy.  (FAXC ¶46). 

 

Cochran and Roshmore allege that, although Fidelity initially refused to take action, Fidelity eventually filed a motion to expunge the Lis Pendens on 8/20/21, which was later expunged by stipulation and was withdrawn on 9/21/21.  (FAXC ¶50).  Once the Lis Pendens was expunged, Fidelity advised that their role was complete.  (FAXC ¶52).  Cochran and Roshmore allege that Fidelity failed to properly defend Roshmore against the Liker Complaint and the Lis Pendens. (FAXC ¶55).  Cochran and  Roshmore allege that Stewart had an obligation to defend them against the Liker Complaint and the Lis Pendens which Stewart did not do.  (FAXC ¶54).  

 

Cochran and Roshmore’s operative First Amended Cross-Complaint against Liker; Lucy Holdings, LLC; Fidelity and Stewart alleges causes of action for: (1) Breach of Contract, (2) Breach of Duty of Good Faith and Fair Dealing, (3) Indemnity, (4) Declaratory Relief and (5) Negligence. 

 

After meet and confer efforts failed to resolve the issues Stewart had with the First Amended Cross-Complaint, on 10/11/23, Stewart filed and served the instant demurrer to the entire First Amended Cross-Complaint on the grounds that it fails to allege sufficient facts to constitute a cause of action and is uncertain.  CCP 430.10(e), (f).  On the same date, Stewart filed and served the instant motion to strike which seeks to strike portions of the First Amended Cross-Complaint relating to attorneys’ fees, punitive damages and treble damages.  No opposition or other response to the demurrer and/or motion to strike has been filed. 

 

ANALYSIS

 

Stewart’s Request for Judicial Notice (RJN) is granted. 

 

1st cause of action – Breach of Contract

 

The First Amended Cross-Complaint does not allege that Stewart issued any title insurance policy (the contract which underlies Cochran’s and Roshmore’s cross-claims) to Roshmore.  (See FAXC ¶¶43-44).  A copy of  the subject policy/contract is also not attached to the First Amended Cross-Complaint.  Since Roshmore was not a party to a contract (title insurance policy) with Stewart, Roshmore lacks standing to bring the cross-claims against Stewart.  See Hatchwell (1988) 198 CA3d 1027, 1034.

 

With regard to Cochran, it has failed to allege sufficient facts to support the elements of a breach of contract claim which are: (1) a contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach and (4) damage to plaintiff as a result.  Walsh (1998) 66 CA4th 1532, 1545.

 

A copy of the contract/policy is not attached to the First Amended Cross-Complaint nor are the material terms of the contract alleged.  Additionally, Cochran has failed to identify any policy provision that provides it with coverage or any policy provision that was breached by Stewart.

 

The breach of contract claim is uncertain in that Cochran and Roshmore make general allegations against both Stewart and Fidelity when each provided separate insurance policies to each of them.  (FAXC ¶¶58-66).  Further, the damages alleged in the First Amended Cross-Complaint allegedly occurred after Cochran sold the Property to Roshmore.  (FAXC ¶¶63, 66).  As noted above, Roshmore lacks standing to bring a claim against Stewart. 

 

A title insurance policy indemnifies the insured against actual loss attributable to matters for which coverage is afforded under the policy.  Siegel (1996) 46 CA4th 1181, 1191.  Title insurance is not prospective in nature and does not insure against title defects or liens that arise after the effective date and time of the policy.  Elysian Investment Group (2002) 105 CA4th 315, 322.  A title insurance policy insures against specified defects in title and remains in effect as long as the insured owns the property.  Safeco Title Insurance Company v. Moskopoulos (1981) 116 CA3d 658, 666; Wolschlager (2003) 111 CA4th 784, 789.  Title insurance does not insure matters involving personal dealings between individuals.  Barczewski (1989) 210 CA3d 406, 410.

 

Liker’s complaint alleges that Liker sued Cochran and Roshmore for conduct – i.e., Cochran’s alleged failure to pay Liker $2,000,000 pursuant to an oral contract.  (RJN, Ex.A).  The First Amended Cross-Complaint confirms that Liker’s complaint only seeks monetary relief and does not allege a property claim.  (FAXC ¶41).  Since Liker is not suing Cochran and Roshmore for a defect in title or asserting any claim that affects the title to the Property, Liker’s claims are not covered by the title insurance policy issued by Stewart to Cochran. 

 

Similarly, the recording of the lis pendens by Liker did not trigger any obligation by Stewart under the policy as the lis pendens merely republished Liker’s complaint which as noted above did not trigger any coverage under the policy.  See Estates of Collins & Flowers (2012) 205 CA4th 1238, 1254.  Further, the lis pendens was recorded on 1/26/21, more than two years after Cochran sold the Property.  As such, the recording is not covered under the policy issued by Stewart to Cochran.  See Moskopoulos, supra at 666.

 

2nd cause of action – Breach of Duty of Good Faith and Fair Dealing

 

The breach of duty of good faith and fair dealing cause of action is dependent on the breach of contract claim.  If the breach of contract claim fails, so does the breach of good faith and fair dealing claim.  Love (1990) 221 CA3d 1136, 1153; Hovannisian (2017) 14 CA5th 420, 437.

 

Even if Cochran and Roshmore could state a claim for breach of contract, the bad faith claim fails because the First Amended Cross-Complaint does not allege facts which show that Stewart acted unreasonably and with a conscious and deliberate intention to deprive Cochran and Roshmore of policy benefits.  See Major (2009) 169 CA4th 1197, 1209; Chateau Chamberay Homeowners Association (2001) 90 CA4th 335, 345.

 

3rd cause of action – Indemnity

 

The indemnity cause of action is duplicative of the 1st cause of action for breach of contract and fails for the same reasons.  (See FAXC ¶80). 

 

4th cause of action – Declaratory Relief

 

The declaratory relief cause of action alleges that a controversy exists regarding Cochran and Roshmore’s alleged right to be defended by cross-defendants, including Stewart, and regarding the validity of the cross-claims.  (FAXC ¶84).  As such, the 4th cause of action is also essentially duplicative of the 1st cause of action for breach of contract and fails because Stewart had no obligation to defend or indemnify Cochran and/or Roshmore. 

 

5th cause of action – Negligence

 

The negligence cause of action is based on the alleged manner Stewart investigated, administered and otherwise handled Cochran and Roshmore’s title insurance claim.  (FAXC ¶¶87-90, 96).  As such, the cause of action merely restates the breach of contract and breach of covenant of good faith and fair dealing causes of action.  In California, there is no separate cause of action for negligent claims handling.  See Everett Associates, Inc. (9th Cir. 2002) 35 Fed.Appx. 450, 452; Sanchez (1999) 72 CA4th 249, 255; Huber (2012) 881 F.Supp.2d 1195, 1199.

 

CONCLUSION

 

The demurrer is sustained.  Since Cochran and Roshmore have not opposed the demurrer or given any indication that they can cure the defects in their First Amended Cross-Complaint, the demurrer is sustained without leave to amend.

 

The motion to strike is placed off calendar as moot due to the ruling on the demurrer.