BLEASE, Acting P. J. —
This is an appeal from a cross-defendant's summary judgment granted First American Title Insurance Company (First American) in a cross-action to recover moneys under a policy of title insurance following a default on a real estate loan to purchase and rehabilitate a residence. The property was subject to a notice of abatement action issued by San Joaquin County requiring repair of defects in the rehabilitation of the residence. The principal claim is that First American breached the title insurance policy by failing to provide coverage for the notice of abatement action.
Plaintiffs, investors in a real estate loan, sued defendants and cross-complainants Stockton Mortgage Real Estate Loan Servicing Corporation (SMRELS), Stockton Mortgage, Inc. (Stockton Mortgage), Stockton Management & Development, Inc. (Stockton Management), and Ross F. Cardinalli, Jr. (collectively cross-complainants), for damages arising from cross-complainants' alleged failure to follow up on the status of the release of a notice of abatement action. Cross-complainants, in turn, initiated the instant action against First American, Alliance Title Company (Alliance), and two of Alliance's employees for damages, indemnity, and declaratory relief arising out of First American's refusal to provide coverage under the title insurance policy, and Alliance's alleged representation, on behalf of First American, that it would obtain a release of the notice of abatement action prior to the close of escrow.
First American moved for summary judgment on the principal grounds that the notice of abatement action is not covered under the title insurance policy, cross-complainants are not insured under the title insurance policy, and the preliminary title report relied on by cross-complainants is not a contract. The trial court granted First American's motion and entered summary judgment in its favor. Cross-complainants appeal. We shall affirm the judgment.
Stockton Management loaned $315,000 to Joshua Prinze to "assist with the purchase and rehabilitation of" a single-family home located at 2447 West Michigan Avenue in Stockton. SMRELS solicited the money used to fund the loan from various investors. Prospective investors were advised that the property "is being purchased as a shell and is to be completely remodeled ...." The purchase price of the property was $230,000. $72,575 in construction funds were to be held by SMRELS and disbursed on a work progress basis. The seller carried a second of $25,000.
The loan was secured by a deed of trust encumbering the property. The deed of trust was recorded November 4, 2005, and lists Prinze as the borrower, Stockton Mortgage as the trustee, and Stockton Management as the lender/beneficiary.
On November 21, 2005, Stockton Management assigned all of its beneficial interest under the deed of trust to the investors.
On September 29, 2005, in response to the title insurance application, Alliance issued a preliminary title report, which stated in pertinent part: "[T]his Company ... is prepared to issue, or cause to be issued, as of the date hereof, a Policy or Policies of Title Insurance ... insuring against loss which may be sustained by reason of any defect, lien or encumbrance not shown or referred to as an Exception herein or not excluded from coverage pursuant to the printed Schedules, Conditions and Stipulations of said Policy forms...." Among the exceptions to coverage listed in the preliminary title report was a notice of abatement action, recorded June 17, 2004, along with the following statement:
The notice of abatement action referenced in the preliminary title report, read as follows: "The owner of record was most recently notified of the aforementioned non-complying conditions on May 25, 2004. [¶] Pursuant to provisions of Section 17985 of the California Health & Safety Code, this NOTICE OF ABATEMENT ACTION has been caused to be recorded in the office of the County Recorder. [¶] The Enforcement Agency may declare this notice null and void by filing a Release of Notice of Abatement Action. The
On June 9, 2005, Alliance wrote to the San Joaquin County Environmental Health Department (County) concerning the notice of abatement action. The letter read in pertinent part: "It is the intent of the parties to the above referenced escrow to pay the above referenced lien in full upon closing. [¶] In order to comply with these intentions, you are requested to provide our office with your satisfaction of matured installment, which will be recorded only when we have funds necessary to satisfy your demand, if any. [¶] If the above lien has been paid, please send a release for recording along with this letter stating the lien has been paid in full." Alliance sent an identical letter on July 27, 2005.
On September 26, 2005, the County faxed a response to Alliance, stating: "Unfortunately a Release of Abatement Action
The outstanding enforcement costs in the amount of $2,005 were paid by Alliance on November 7, 2005. The notice of abatement action, however, was not released because the violations had not been corrected.
Alliance issued a lender's title insurance policy, underwritten by First American, which stated in part, "SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B, AND THE CONDITIONS AND STIPULATIONS, FIRST AMERICAN ... insures, as of Date of Policy shown in Schedule A [(Nov. 4, 2005)], against loss or damage, not exceeding the Amount of Insurance stated
In 2006 Prinze defaulted on the loan. At that time, all rehabilitation funds ($72,575) had been distributed, and none of the work on the property had been completed. The investors foreclosed on the property and purchased it at a trustee's sale. The beneficiaries under the trustee's deed upon sale are the investors.
On July 14, 2008, Stockton Mortgage submitted a claim to First American on behalf of itself and the investors under the title insurance policy for the costs associated with obtaining a release of the notice of abatement action. On October 27, 2008, First American denied the claim. It found the notice of abatement action was not a defect in or lien or encumbrance on the title and did not affect the marketability of title, and thus, was not covered under the policy. As for the claim that the notice of abatement action was listed in the preliminary title report along with the notation that
On June 9, 2009, some of the investors (plaintiffs) sued cross-complainants for breach of contract, misrepresentation, fraud, breach of fiduciary duty, and
On October 16, 2009, cross-complainants in turn filed the instant action against First American, Alliance, two Alliance employees, and others.
First American moved for summary judgment on the cross-complaint, or in the alternative summary adjudication as to each of the causes of action alleged against it (second through ninth causes of action). First American argued in part (1) the breach of written contract (title insurance policy) cause of action has no merit because cross-complainants are not insured under the policy, and even if they are, the notice of abatement action is not covered under the policy; (2) the breach of written contract (preliminary title report) cause of action has no merit because the preliminary title report is not a contract but an offer to issue title insurance; (3) the breach of oral contract cause of action has no merit because there is no evidence of a separate oral agreement, and even if there was, Alliance acted outside the scope of its agency when it made the alleged agreement; (4) the negligence and negligent misrepresentation causes of action have no merit because First American had no independent tort duty to cross-complainants; (5) the implied indemnity cause of action has no merit because there was no contractual relationship between cross-complainants and First American; (6) the equitable indemnity cause of action has no merit because the underlying claim of negligence against First American has no merit; (7) the declaratory relief cause of action has no merit because cross-complainants do not have any rights under the title insurance policy; and (8) each of the causes of action against First American is time-barred.
The trial court granted First American's motion and entered summary judgment in its favor. It found (1) the breach of written contract (title insurance policy) and declaratory relief causes of action have no merit because cross-complainants are not insured under the title insurance policy, and "[t]he Notice of Abatement Action is not a defect in, or lien or encumbrance on title," and, thus, is not covered under the policy, (2) the breach of written contract (preliminary title report) has no merit because a preliminary title report "is just an offer to issue a title policy ...; it is not a representation regarding the condition of title ... and cannot be relied upon like an abstract of title," (3) the breach of oral contract cause of action has no merit because "there is no competent evidence that [cross-complainants] had any separate oral agreement with First American; the preliminary title report is merely an offer, not a contract," (4) the negligence and negligent misrepresentation causes of action have no merit because "there is no evidence that First American had or breached any separate tort duty to" cross-complainants, and (5) the indemnity causes of action have no merit "[b]ecause First American committed no breach of contract or tort against [cross-complainants]." The trial court also found each of the causes of action against First American are time-barred under Code of Civil Procedure section 339, subdivision 1. The trial court did not rule on First American's claim concerning the scope of Alliance's agency.
The standard of review for an order granting a motion for summary judgment is de novo. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860 [107 Cal.Rptr.2d 841, 24 P.3d 493] (Aguilar).) The trial court's stated reasons for granting summary judgment are not binding on the reviewing court, "which reviews the trial court's ruling, not its rationale." (Ramalingam v. Thompson (2007) 151 Cal.App.4th 491, 498 [60 Cal.Rptr.3d 11].)
We apply the same three-step process as the trial court. "Because summary judgment is defined by the material allegations in the pleadings, we first look to the pleadings to identify the elements of the causes of action for which relief is sought.... We then examine the moving party's motion, including the evidence offered in support of the motion." (Baptist v. Robinson (2006) 143 Cal.App.4th 151, 159 [49 Cal.Rptr.3d 153].) A cross-defendant moving for summary judgment has the initial burden of showing that a cause of action lacks merit because one or more elements of the cause of action cannot be established or there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (p)(2); Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 168-169 [92 Cal.Rptr.3d 696] (Teselle).) If the cross-defendant fails to make this initial showing, it is unnecessary to examine the cross-complainant's opposing evidence and the motion must be denied. (Code Civ. Proc., § 437c, subd. (p)(2); Teselle, at p. 169.) However, if the moving papers make a prima facie showing that justifies a judgment in the cross-defendant's favor, the burden shifts to the cross-complainant to make a prima facie showing of the existence of a triable issue of material fact. (Code Civ. Proc., § 437c, subd. (p)(2); Teselle, at p. 169.)
In determining whether the parties have met their respective burdens, the court must "`consider all of the evidence' and `all' of the `inferences' reasonably drawn therefrom [citation], and must view such evidence [citations] and such inferences [citations], in the light most favorable to the opposing party." (Aguilar, supra, 25 Cal.4th at p. 843.) "There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." (Id. at p. 850, fn. omitted.) Thus, "a party cannot avoid summary judgment by asserting facts based on mere speculation and conjecture, but instead must produce admissible evidence raising a triable issue of fact." (LaChapelle v. Toyota Motor Credit Corp. (2002) 102 Cal.App.4th 977, 981 [126 Cal.Rptr.2d 32].)
Cross-complainants contend the trial court erred in entering summary judgment as to the second and ninth causes of action for breach of written contract (title insurance policy) and declaratory relief, respectively, because, contrary to First American's assertions and the trial court's ruling, the notice of abatement action constitutes a lien or encumbrance, and, thus, is covered under the policy, and cross-complainants are insured under the title insurance policy.
With respect to the breach of contract cause of action, the cross-complaint alleges First American "entered into a written Policy of Title Insurance agreement with SMRELS (erroneously identified as `Stockton Mortgage, Inc.' in the Policy of Title Insurance) and its successors and/or assigns"; under that policy, "First American ... agreed to insure SMRELS, and/or [its] successors and/or assigns, against any loss or damage sustained by reason of, among other things, any defect in or lien or encumbrance on the title of the Subject Property" and "to pay the costs, attorneys' fees, and expenses in defense of the title or the lien of the insured mortgage on the Subject Property"; First American breached the title insurance policy by refusing to "provide coverage for the Notice of Abatement Action"; and as a result of First American's breach, "SMRELS has suffered damages in an amount to be proved at trial."
As for the declaratory relief cause of action, the cross-complaint alleges that "[a]n actual controversy has arisen and now exists between Cross-Complainants and First American Title concerning their respective rights and duties under the Policy of Title Insurance," and seeks "a judicial determination of [such] rights and duties."
First American's summary judgment motion asserted that "the policy does not provide coverage for any damages arising out of the Notice of Abatement,
In their opposition to the motion for summary judgment, cross-complainants argued the notice of abatement action constituted a lien or encumbrance because it accrued penalties and other assessments.
Even assuming for argument's sake that the notice of abatement action does constitute a defect in or lien or encumbrance on title, cross-complainants' second and ninth causes of action would still fail because cross-complainants are not insured under the policy.
First American's summary judgment asserted cross-complainants are not insured, and, thus, lack standing to assert a claim under the policy. In support of their assertion, First American pointed to the policy itself, which defines "`insured'" as "the insured named in Schedule A," and "the owner of any indebtedness secured by the insured mortgage and each successor in ownership of the indebtedness ...." The policy further provides: "The coverage of this policy shall continue in force as of Date of Policy in favor of an insured only so long as the insured retains an estate or interest in the land, or holds an indebtedness secured by a purchase money mortgage given by a purchaser from the insured, or only so long as the insured shall have liability by reason of covenants of warranty made by the insured in any transfer or conveyance of the estate or interest." Schedule A describes the "insured mortgage" as the deed of trust recorded November 4, 2005. The insured named in schedule A is Stockton Mortgage; however, Stockton Mortgage never had an interest in the land or held an indebtedness secured by a purchase money mortgage or
In their opposition to the summary judgment motion, cross-complainants claimed that First American's argument "overlooks the fact that [cross-complainants] had an insurable interest in the property both when the policy took effect and at the time of the loss ...." According to cross-complainants, "the claim arose prior to the assignment since the [notice of abatement action] on title as of the date of the Title Policy, and the lien[] had accrued assessments and penalties." Cross-complainants relied on Insurance Code section 301, which states: "A change of interest in a subject insured, after the occurrence of an injury which results in a loss, does not affect the right of the insured to indemnity for the loss." (Italics added.) Cross-complainants, however, failed to identify any loss they suffered prior to the assignment on November 21, 2005, much less cite to any evidence that would support such a finding.
Cross-complainants also asserted that coverage continued despite the assignment because they have "potential liability for warranties and of covenants made in connection with its assignment of the Deed of Trust to the Investors ...." In support of their assertion, they relied on the policy's provision that "[t]he coverage of this policy shall continue in force as of Date of Policy in favor of an insured ... only so long as the insured shall have liability by reason of covenants of warranty made by the insured in any transfer or conveyance of the estate or interest." Cross-complainants again failed to identify what warranties or covenants they gave the investors as part of the assignment, much less point to any evidence of such.
Finally, cross-complainants claimed they had standing as third party beneficiaries under the title insurance policy. More particularly, they argued that "the Servicing Agreement governs the relationship between [cross-complainants] and the Investors, and the Investors' attempts to hold [cross-complainants] liable for title-related issues arising out of such relationship would give [cross-complainants] standing to assert claims under the Title Policy ...." This novel argument goes nowhere.
The trial court did not err in entering summary judgment as to the second cause of action for breach of written contract (title insurance policy) and the ninth cause of action for declaratory relief, which seeks a declaration of the parties' rights under the title insurance policy.
Cross-complainants do not appear to challenge the entry of summary judgment as to the third cause of action for breach of written contract (preliminary title report) on appeal, focusing instead on the breach of oral contract cause of action. We address the breach of oral contract cause of action below but pause to observe that summary judgment was properly entered as to the third cause of action for breach of written contract.
The cross-complaint alleges in pertinent part: "By the Preliminary Title Report ... Alliance Title ... agreed in writing that `Prior to close of Escrow Alliance Title will require that a FULL RELEASE be obtained' of the Notice of Abatement Action recorded against the Subject Property," and "Alliance Title and First American Title breached the agreement with SMRELS by failing to obtain a full release of the Notice of Abatement Action."
First American's summary judgment motion asserted the third cause of action for breach of written contract has no merit because, among other things, the preliminary title report is merely an offer and not a contract. Cross-complainants did not specifically address this cause of action in their opposition to the motion for summary judgment, and the trial court entered summary judgment as to this cause of action on the grounds urged by First American.
Because the preliminary title report is not a contract, the trial court did not err in entering summary judgment as to the third cause of action for breach of written contract.
Cross-complainants contend the trial court erred in entering summary judgment as to the breach of oral contract cause of action because, contrary to First American's claim and the trial court's finding, there is evidence Alliance verbally agreed to remove the notice of abatement action prior to the close of escrow.
The cross-complaint alleges in pertinent part: "48. On or about September of 2005, SMRELS and Alliance ... entered preliminary negotiations regarding issuance of a policy of title insurance for the Subject Property. [¶] 49. By the Preliminary Report ... Alliance ... agreed in writing that `Prior to the close of Escrow Alliance ... will require that a FULL RELEASE be obtained' of the Notice of Abatement Action recorded against the Subject Property.... [¶] ... [¶] 51. Alliance Title and First American Title breached the agreement with SMRELS by failing to obtain a full release of the Notice of Abatement Action. [¶] 52. As a result of Alliance Title and First American Title's breach of contract, SMRELS has suffered damages in an amount to be proven at trial."
First American's summary judgment motion argued that the breach of oral contract cause of action has no merit because, among other things, there is no evidence of an oral contract. More particularly, First American asserted that
In their opposition to the motion for summary judgment, cross-complainants asserted that "Alliance Title, on behalf of First American, represented that certain liens would be removed from title." The only evidence cited in support of their assertion was the preliminary title report. Likewise, in response to First American's statement that it "did not have an oral contract with [any cross-complainant] in connection with the subject property, the loan, [or] the title policy," cross-complainants claimed that "Alliance Title, acting as an agent of First American, agreed to remove certain notices from title prior to the close of escrow. This agreement is reflected in the preliminary title report issued by Alliance Title on behalf of First American." In other words, the only evidence cited by cross-complainants to establish the existence of an oral contract was the preliminary title report.
In their opening brief on appeal, cross-complainants repeatedly assert that they "asked" or "requested" that the notice of abatement action be removed prior to the close of escrow, and that Alliance "verbally agreed" to obtain a release. Again, their sole support for their assertions is the preliminary title report. In their reply brief, cross-complainants claim that while there is no witness testimony regarding a separate oral agreement, the existence of such can be inferred from the preliminary title report and Alliance's attempts to obtain a release: "If there was no agreement to release the notices, why does the preliminary title report state, in bold print beneath the notices,
Cross-complainants contend the trial court erred in entering summary judgment as to the fifth cause of action for negligence because "even absent an agreement, First American owed a duty of care to [cross-complainants] by affirmatively undertaking to remove the [notice of abatement action]."
The cross-complaint alleges in pertinent part: "SMRELS engaged the professional services of [First American, Alliance, and Alliance's employees] to prepare and issue a policy of title insurance," and "[a]s a result of that engagement, ... had a duty to use and exercise reasonable care and skill in providing services to SMRELS," which they "breached ... by, among other things, failing to obtain a full release of the Notice of Abatement Action ...."
First American's summary judgment motion asserted that the negligence cause of action lacks merit because "[t]here is no evidence that First American had any duty to [cross-complainants], other than the duty under the policy. Hence, the alleged duty is contractual only, not an independent duty arising from tort." (Italics omitted.)
The trial court did not err in entering summary judgment as to the fifth cause of action for negligence.
Cross-complainants contend the trial court erred in entering summary judgment as to the negligent misrepresentation cause of action because it is undisputed that Alliance represented it would have the notice of abatement action released prior to the close of escrow and then failed to do so.
The operative cross-complaint alleges in pertinent part that Alliance represented to SMRELS in the written preliminary title report that it would obtain a release of the notice of abatement action prior to the close of escrow; First American represented to SMRELS in the title insurance policy that no notice of abatement action was recorded against the property; these representations
First American's summary judgment motion argued and the trial court found that the negligent misrepresentation cause of action lacked merit because there is no evidence First American had or breached a duty to cross-complainants. We review the trial court's ruling, not its rationale. (Ramalingam v. Thompson, supra, 151 Cal.App.4th at p. 498.) As we shall explain, the representations upon which cross-complainants rely are not actionable as a matter of law.
The trial court did not err in entering summary judgment as to the sixth cause of action for negligent misrepresentation.
Finally, cross-complainants contend the trial court erred in entering summary judgment as to the seventh and eighth causes of action for implied and equitable indemnity, respectively, because cross-complainants "raised a triable issue of material fact as to whether First American is responsible in part for plaintiff's [sic] damages. Although First American denies that it directly agreed to obtain [a] release of the notices, it cannot deny the evidence that Alliance ... actually undertook to obtain releases of the notices."
Cross-complainants' causes of action for implied contractual and equitable indemnity both are premised on the following allegations: (1) plaintiffs sued cross-complainants to recover damages for the notice of abatement action, (2) any damages recovered by plaintiffs against cross-complainants "were caused primarily and ultimately by the breach of contracts [and/or negligence], as herein alleged" by Alliance and First American, (3) cross-complainants' liability, if any, for these damages arose not as a result of any actual fault on their part, but solely by operation of law.
The judgment is affirmed. First American shall recover its costs on appeal. (Cal. Rules of Court, rule 8.278(a).)
Robie, J., and Mauro, J., concurred.
1/6/2005 Substandard Housing Abatement Activity $1088.10
1/6/2005 Recording Fee — Notice of Abatement Action $13.00
1/6/2005 Title Search Expense $125.00
1/6/2005 Recording Fee — Release of Abatement $7.00
4/14/2005 Substandard Housing Abatement Activity $167.40
6/14/2005 Substandard Housing Abatement Activity $325.50
8/2/2005 Substandard Housing Abatement Activity $18.60
8/2/2005 Invoice/Abatement — Rush $93.00
9/19/2005 Substandard Housing Abatement Activity $74.40
10/14/2005 Invoice/Abatement — Rush $93.00
TOTAL DUE: $2005.00
