NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

COFFEE, J.

Appellants Anthony and Vivian Stonich sold a home to Micah and Scott Hudson. The Hudsons executed a $75,000 promissory note in appellants' favor, secured by a deed of trust on the house. The note was in second position behind the mortgage. The Hudsons defaulted on the mortgage and foreclosure proceedings began. They chose to refinance and were able to obtain a new loan. An escrow was opened with First American Title Company (First American).

During refinancing, First American provided a document for appellants' signatures, which reconveyed their interest in the home to the Hudsons. Appellants believed that First American would disburse $75,000 to them from the proceeds of the refinance. First American recorded the reconveyance without paying off the note, and appellants filed a lawsuit against it for negligence and breach of trust. The trial court ruled in favor of First American. We affirm.

FACTS

Purchase of Home

Micah and Scott Hudson are the daughter and son-in-law of appellant Anthony Stonich. He has been a licensed real estate agent since 1966 and a licensed broker since 1985. Stonich and his wife, Vivian Stonich, sold the Hudsons a home located at 633 Jeanette Court in Oakdale, Stanislaus County. To finance the purchase, the Hudsons obtained a $220,000 mortgage with Security National Bank (SN Servicing). The Hudsons signed a promissory note agreeing to repay appellants the sum of $75,000, which was secured by a deed of trust on the property. The note was in second position to the mortgage and was recorded.

Refinancing

In late 2006, foreclosure proceedings had been instituted and the Hudsons attempted to refinance. They contacted a mortgage broker, Jonathan Aiello, with Clear Credit Capital. Escrow was opened at First American with escrow officer Leah Oestreich. A preliminary title report revealed the existence of the second deed of trust.1 Aiello determined that the refinancing would not generate sufficient funds to pay off both deeds of trust and cover the refinancing costs.

Aiello emailed Oestreich, informing her that there was a $75,000 lien on the house held by Micah Hudson's father, which needed to be removed from title so Aiello could "do a clean refinance." Aiello asked Oestreich for the necessary forms for him to give to Micah Hudson and Mr. Stonich to remove the lien.

Execution of Reconveyance at First American Branch Office

First American prepared a substitution of trustee and deed of reconveyance which it gave to Micah Hudson with directions that appellants sign the document, have it notarized, and return it to First American. The document identified appellants as present beneficiaries of the deed of trust, the Hudsons as trustors and First American as the original trustee.

Believing that the Oakdale branch was handling the escrow, appellants visited that branch, which was near Modesto. Mr. Stonich learned that escrow was being handled instead at the Oxnard branch, several hundred miles to the south. Escrow officer Jackie Ventimiglia, in the Oakdale branch, notarized the reconveyance. Mr. Stonich claims he told Ventimiglia to hold the document until First American paid off their deed of trust. Ventimiglia sent the reconveyance to the Oxnard office. There is no evidence that she transmitted any instructions along with it.

New Loan with Quality Home Loans

Aiello obtained a thirty-year adjustable rate mortgage of $276,000 from Quality Home Loans at an interest rate of 11.440 percent. A final settlement statement indicated that First American paid off the existing $220,000 loan from SN Servicing and disbursed $24,101.41 to the Hudsons. The $75,000 note was not listed on the settlement statement, but a $19.00 fee was charged to "Record Substitution of Trustee — First American Title Company." Escrow closed on December 28, 2006. First American recorded the reconveyance on January 2, 2007, without having paid off appellants' note.

Allocation of Funds at Close of Escrow

When appellants learned that escrow had closed, they asked Oestreich when they would be paid. Oestreich prepared an internal document, reciting the events that occurred after the close of escrow. She stated that, after receiving the substitution of trustee and reconveyance, "[First American] proceeded with the refinance as normal."

Oestreich indicated that the Hudsons were provided with an Estimated Settlement Statement at the time of signing the loan documents, showing a cash out of $41,958.72. The statement did not include the payment of any funds to appellants. First American wired proceeds of $24,101.41 to the Hudsons' bank account. The dollar amount represented the difference between the estimated and actual payoff amount to SN Servicing.

In the document, Oestreich stated that Mr. Stonich called her on January 9, 2007, asking about the status of the refinance. She told him the file had been closed and all the funds disbursed. The funds generated by the refinancing were insufficient to satisfy the lien. Mr. Stonich then inquired why he had not received a beneficiary statement.

Oestreich recounted that she contacted First American Lenders Advantage in Concord and was advised to let the matter "`fizzle out.'" Lenders Advantage subsequently told Oestreich to advise appellants to open a claim with the underwriter for First American Lenders Advantage. Oestreich told appellants that, if First American satisfied the lien, it would then take legal action against Micah Hudson to recover the funds.

Complaint

Appellants filed their original complaint against First American in March 2008. In their second amended complaint, they alleged that First American, Clear Credit Capital and Quality Home Loans conspired to induce them to reconvey their deed of trust without paying appellants anything from escrow. They asserted that First American had a duty to act in a reasonably competent manner on behalf of appellants, who were its beneficiaries under the deed of trust. Appellants contended that First American negligently failed to inform them of the lack of funds in escrow and negligently recorded appellants' reconveyance without first obtaining a beneficiary demand statement. Appellants prayed for general damages of $75,000 plus interest at the rate of 4 percent per annum, from February 23, 2006, and attorney's fees.

Trial

The matter proceeded to a court trial on the causes of action for negligence and breach of express trust. Appellants' primary theory was that Jackie Ventimiglia was negligent and First American, as her employer, was liable for her conduct. At trial, Ventimiglia testified that she knew Mr. Stonich through the community. He would sometimes visit the Oakdale office and she was aware that he was a licensed real estate agent and broker.

Ventimiglia recalled appellants coming into her office in December 2006. They signed a document, entitled "Substitution of Trustee and Full Reconveyance," releasing their interest in the property. Ventimiglia notarized it as an accommodation to the Oxnard office. She testified that she had a short conversation with appellants at the front desk. She remembered exchanging pleasantries, but denied that Mr. Stonich told her that he must be paid before the reconveyance could be recorded.

Statement of Decision

The trial court rejected appellants' claim that Ventimiglia was negligent, finding her to be a credible witness and crediting her testimony that she did not remember the content of her conversation with Mr. Stonich. In its statement of decision, the court determined that First American's duty was limited to "be[ing] careful in sending [the reconveyance] to the proper escrow office, and First American did so." Ventimiglia bore no duty to transmit information regarding the reconveyance to the Oxnard office, thus there could be no breach.

The trial court was troubled by the fact that Mr. Stonich, with his real estate background, would have released his interest without first being paid. It wrote that "[i]t was known" in the Oxnard office that "the lender did not want a trust deed, even a second on the subject property. Consistent with such a transaction, it followed that the father, Mr. Stonich, as a family member holding the second, would have been approached to release his interest. This would be the only way the daughter could get refinanced."

The court concluded that the deposit into escrow of the document did not create a trust, stating that "[t]here was no discussion of a trust. There was no undertaking by [a] trustee, and no promises made."

First American had cross-complained for declaratory relief, indemnity and constructive trust, and requested damages and attorney's fees of $200,000. Following the bench trial, the court ruled in favor of First American. The court deemed the cross-complaint moot, and awarded First American costs and attorney's fees on the complaint.

DISCUSSION

Appellants appeal from the judgment entered on their causes of action for negligence and breach of express trust. They argued at trial that First American failed to obtain a payoff demand statement before recording the reconveyance. On appeal, they claim that this constitutes a violation of Civil Code sections 2941 and 2943, entitling them to damages.

A reconveyance removes a lien that is security for a note or deed of trust. (Greenwald & Asimov, Cal. Practice Guide: Real Property Transactions (The Rutter Group 2010) ¶ 6:406, pp. 6-79 to 6-80.) It is utilized when a lender desires to release its security interest in real property. (Ibid.) Appellants claim that First American violated Civil Code section 2941,2 which regulates the process for recording the reconveyance of a deed of trust. (See State of California ex rel. Bowen v. Bank of America Corp. (2005) 126 Cal.App.4th 225, 232-233.) They assert they were unaware the property was being refinanced because First American did not send them a written request for a payoff demand, as required by section 2943. Appellants claim that, pursuant to section 2941, they are entitled to damages in the amount of the lien, plus interest.

We reject this argument because Mr. Stonich was put on notice that there was activity on the loan, as evidenced by his receipt and execution of the reconveyance. He would have learned of the refinance when Micah brought him the reconveyance for his signature. Given his years of real estate experience, Mr. Stonich was charged with understanding the effect of signing this document. He would have known that his deed of trust would need to be forgiven in order for his daughter to refinance. Ventimiglia testified that Mr. Stonich did not tell her that he must be paid before the reconveyance could be recorded. The trial court credited her testimony and found that Mr. Stonich said nothing to prevent the recordation of the reconveyance.3

Breach of Trust

Appellants argued at trial that they had entered into an express trust agreement when they gave Ventimiglia the reconveyance accompanied by Mr. Stonich's oral instructions to hold the document and record it only when his lien was repaid. They claim that, by virtue of First American's acceptance of the document, it became the trustee to hold the deed for the appellants' benefit. Instead, First American breached the trust by recording the reconveyance without obtaining funds to pay off the obligation.

The trial court concluded that depositing a document into escrow by third parties did not create a trust. Appellants have failed to cite any authority that suggests that a trust relationship could have been created under the circumstances present here.

DISPOSITION

The judgment is affirmed. Costs on appeal are awarded to First American.

GILBERT, P.J. and PERREN, J., concurs.