NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

AARON, J.

I.

INTRODUCTION

Earl B. Rideau and Marina Rideau (the Rideaus) entered into an agreement with a developer, BGJB de Mexico, S. de R.L. de C.V. (BGJB), to purchase a condominium in a building to be constructed in Mexico. The Rideaus deposited $239,700 toward the purchase price with an escrow company, defendant Stewart Title of California (Stewart Title). The escrow instructions provide in relevant part:

Stewart Title released the Rideaus' deposit, together with the deposits of other purchasers, to entities other than California Fund Control, including to BGJB. BGJB failed to construct the condominium building, and neither Stewart Title nor BGJB returned the Rideaus' deposit.

The Rideaus brought this action against Stewart Title. Among other claims, the Rideaus brought causes of action for breach of contract and negligence in which they alleged that Stewart Title had breached the escrow instructions by releasing their deposited funds to entities other than California Fund Control. The trial court held a bench trial, interpreted the escrow instructions, and concluded that, "[Stewart Title] had no obligation to send funds to [California Fund Control]." The court entered a judgment in favor of Stewart Title on all of the Rideaus' claims.

On appeal, the Rideaus claim that the trial court misinterpreted the escrow instructions and erred in failing to find that Stewart Title breached the escrow instructions by releasing their funds to entities other than California Fund Control. With respect to their negligence claim, the Rideaus argue that Stewart Title breached its duty "to comply with the [Escrow Instructions]. . . ."

We conclude that the most reasonable interpretation of the escrow instructions is that they implicitly required Stewart Title to release the Rideaus' funds only to California Fund Control. In light of this interpretation, we conclude that Stewart Title breached the escrow instructions by releasing the Rideaus' funds to entities other than California Fund Control and that the Rideaus were entitled to judgment in their favor on their breach of contract claim. However, we conclude that the Rideaus cannot prevail on their tort claim for negligence based on Stewart Title's breach of contractual duties. We reverse the judgment and direct the trial court to enter a new judgment in favor of the Rideaus on their breach of contract claim and in favor of Stewart Title on the Rideaus' remaining causes of action.

II.

FACTUAL AND PROCEDURAL BACKGROUND

A. The first amended complaint

In March 2011, the Rideaus filed a first amended complaint against Stewart Title and GJL, S. de R.L. de C.V., a Mexican corporation (GJL).1 In the operative complaint, the Rideaus alleged that on or about May 2, 2007, they entered into a written agreement (Purchase Agreement) with BGJB, a Mexican corporation, for the purchase of a condominium in a building to be constructed, called "The Falls" (the Project). The Project was to be built in the city of Playas de Rosarito, Mexico.

The Rideaus alleged that they entered into this agreement based upon the assurances of Shane Delmer, a salesperson for the Project. According to the Rideaus, Delmer told them that their deposits for the purchase of the condominium would be held in an escrow account with Stewart Title, in the United States. The Rideaus further alleged that "Stewart Title would distribute the funds to a fund control company [that] would periodically inspect the project and release the funds on an `as work is done' basis utilizing a pre-approved voucher system. . . ."

The Rideaus claimed that a few days after entering in the Purchase Agreement, they delivered Sale Escrow Instructions (Escrow Instructions), together with an initial deposit of $5,000, to Stewart Title. According to the Rideaus, they read and reviewed the Escrow Instructions and concluded that the instructions were consistent with Delmer's representations concerning the manner by which their deposits would be released. The Rideaus alleged that on or about June 13, 2007, they wired $234,700— the balance of their required deposit toward the purchase of the condominium, to Stewart Title.

The Rideaus further alleged that, "Although [BGJB] failed to enter into an agreement with California Fund Control, defendant Stewart Title failed to request and obtain further instructions from [the Rideaus] and [BGJB] as to the disposition of the deposited funds and instead released the deposited funds to [BGJB] or its principals." The Rideaus also claimed that BGJB failed to commence construction of the Project and that BGJB would be unable to commence construction in the foreseeable future due to a lack of funding.

In a negligence cause of action, the Rideaus alleged that Stewart Title negligently failed to: (1) determine whether BGJB had entered into an agreement with California Fund Control; (2) to inform the Rideaus regarding the lack of a fund control agreement; (3) to release the deposited funds only to California Fund Control; and (4) to request further instructions from BGJB and the Rideaus concerning the release of the deposited funds if release of the funds to California Fund Control was not possible. The Rideaus further alleged:

The Rideaus alleged that Stewart Title had refused to return their deposits and that they had suffered damages in the amount of $239,700 as a result of Stewart Title's negligence.

In a breach of contract cause of action, the Rideaus incorporated by reference their previous allegations and contended that Stewart Title had failed to perform its obligations as set forth in the Escrow Instructions. The Rideaus alleged that Stewart Title's breach of the Escrow Instructions had damaged them in the amount of $239,700—the amount of their deposits.2

B. The court trial

After the parties waived their right to a jury trial, the trial court held a bench trial on the Rideaus' first amended complaint.

1. The Rideaus' evidence

Section IV of the Escrow Instructions provides:

The Rideaus presented evidence that they deposited $239,700 with Stewart Title pursuant to the Escrow Instructions, that Stewart Title distributed the Rideaus' funds to entities other than California Fund Control, and that Stewart Title had not returned the Rideaus' deposits.

Earl Rideau also testified concerning his interpretation of the Escrow Instructions, as follows:

The Rideaus also offered in evidence Delmer's affidavit.3 Delmer testified in relevant part:

The Rideaus offered in evidence the Purchase Agreement between the Rideaus and BGJB, which provides in relevant part:

The Rideaus also presented the expert testimony of Judy Lydick, an escrow officer and consultant to escrow companies. Lydick offered her opinion concerning what the Escrow Instructions required of an escrow officer in order for the officer to comply with the standard of care in the escrow industry. Lydick testified in part:

Lydick also stated that, in her opinion, the Escrow Instructions were "misleading" if the parties intended to permit Stewart Title to release the deposited funds to BGJB.

The Rideaus also presented the expert testimony of Jeff Katzer, a real estate broker and former chief executive officer of a bank that specialized in construction lending, who testified concerning the use of voucher and fund control systems in the construction finance industry. Katzer testified in relevant part as follows:

2. The defense

Stewart Title presented the expert testimony of Donna Grosso, an escrow officer and manager of an escrow company. Grosso testified concerning whether Stewart Title had met the standard of care for performing escrow services. Grosso stated that she interpreted the Escrow Instructions as permitting Stewart Title to release the buyers' funds upon the seller's instruction, without further limitation. Grosso further testified that language pertaining to California Fund Control in the Escrow Instructions was "a thing between the buyer and the seller."

C. The trial court's statement of decision

The trial court issued a statement of decision in which it found for Stewart Title on all of the Rideaus' causes of action. With respect to the Rideaus' breach of contract cause of action, the trial court noted that the Rideaus claimed that Stewart Title had breached the Escrow Instructions in numerous ways, including "failing to release the [Rideaus] funds to California Fund Control." With respect to the Rideaus' contention that Stewart Title was required to release their funds only to California Fund Control, the trial court stated:

With respect to the Rideaus' breach of contract claim, the trial court stated the following:

In addition to finding in favor of Stewart Title on the Rideaus' breach of contract cause of action, the trial court found in favor of Stewart Title on the Rideaus' causes of action for negligence, breach of fiduciary duty, and fraud. The court also found that the Rideaus were not entitled to prevail on their breach of contract claim premised on the GJL Agreement.

D. The judgment and the appeal

A few weeks after issuing its statement of decision, the trial court entered judgment in favor of Stewart Title. The Rideaus timely appealed from the judgment.

III.

DISCUSSION

A. Stewart Title breached the Escrow Instructions by releasing the Rideaus' funds to entities other than California Fund Control

The Rideaus claim that the trial court erred in failing to find that Stewart Title breached the Escrow Instructions by releasing their funds to entities other than California Fund Control. Resolution of the Rideaus' claim requires that we interpret the Escrow Instructions.

1. Standard of review

We must first determine the appropriate standard of review to apply in interpreting the Escrow Instructions. In People v. Paredes (2008) 160 Cal.App.4th 496, 507, this court discussed the applicable law governing this determination:

In this case, both parties contend that this court should apply the de novo standard of review on appeal.5 We agree that, as Stewart Title states in its brief, the trial court's "conclusions, as expressed in the Statement of Decision, were based on the plain language of the [Escrow] Instructions," and that the de novo standard of review therefore applies on appeal.

We acknowledge that the trial court stated that the testimony of Grosso, concerning the "custom and practice in the industry," supported the court's interpretation of the Escrow Instructions. However, our review of the record reveals that Grosso's testimony was not based on extrinsic evidence of the custom and practice in the escrow industry that might be "admissible to interpret the written words" of the Escrow Instructions. (Hayter Trucking, Inc. v. Shell Western E&P, Inc. (1993) 18 Cal.App.4th 1, 20.) Rather, Grosso's opinion was based on her own interpretation of the Escrow Instructions. Grosso stated that her opinion was based on her "read[ing] . . . of the escrow instructions," and a review of her testimony makes clear that such testimony was based on an examination of the language of the Escrow Instructions. (See e.g., "[w]e had a paragraph here that say's we're authorized and instructed to release funds as instructed by seller"; "[i]t says `From buyers' deposit in escrow, escrow holder is authorized and instructed to release funds as instructed by the seller"; "if the seller instructed us to disburse to California Fund Control, we would do so. But all the instructions state here [is] it comes from the seller"; "[y]ou have a semicolon after `buyers' which starts a new thought process.")

Even assuming that Grosso's testimony was admissible for the purpose of interpreting the Escrow Instructions (but see Summers v. A.L. Gilbert Co. (1999) 69 Cal.App.4th 1155, 1180 ["[e]xpert opinion on the legal interpretation of contracts has . . . been found to be inadmissible"]), it is clear that a proper interpretation of the Escrow Instructions does not turn on the credibility of Grosso's testimony. Thus, we conclude that the parties are correct that the de novo standard of review applies. (See People v. Paredes, supra, 160 Cal.App.4th at p. 507.)

2. Governing law

a. The duties of an escrow holder

In Summit Financial Holdings, Ltd. v. Continental Lawyers Title Co. (2002) 27 Cal.4th 705 (Summit), the Supreme Court described the duties of an escrow holder as follows:

"An escrow holder has an implied obligation to do all of the things normally done by an escrow agent which were not expressly excluded by the escrow instructions. [Citation.] Upon the escrow holder's breach of an instruction that it has contracted to perform or of an implied promise arising out of the agreement with either party, the injured party acquires a cause of action for breach of contract. ([Citation]; Claussen v. First American Title Guaranty Co. (1986) 186 Cal.App.3d 429, 435 [(Claussen)].) As noted in Claussen, supra, at page 436, `. . . some escrow instructions may be implicit in the express instructions given. (Gordon v. D & G Escrow Corp. (1975) 48 Cal.App.3d 616, 621-623 [(Gordon)]—escrow instructions implicitly required proceeds of sale to be paid to both sellers.) In the event of a conflict or apparent error in instructions, the escrow holder is obliged to take corrective steps before obeying questionable instructions. [Citations.]'" (Kirk Corp. v. First American Title Co. (1990) 220 Cal.App.3d 785, 807.)

b. Principles of contract interpretation

"Escrow instructions are interpreted under the rules applicable to contracts." (Claussen, supra, 186 Cal.App.3d at p. 437.)

The general principles of contract interpretation are well established:'"

In addition, and of particular relevance to this case, is the following statutory rule of contract interpretation:

This principle is embodied in case law in numerous formulations, all of which guide our interpretation of the Escrow Instructions. (See e.g., Jones v. Jacobson (2011) 195 Cal.App.4th 1, 18 ["We must view the language of a contract as a whole, avoiding a piecemeal, strict construction approach"]; Sprinkles v. Associated Indem. Corp. (2010) 188 Cal.App.4th 69, 82 ["`[t]he character of a contract is not to be determined by isolating any single clause or group of clauses'"]; In re Quantification Settlement Agreement Cases (2011) 201 Cal.App.4th 758, 799 ["[E]ven if one provision of a contract is clear and explicit, it does not follow that that portion alone must govern its interpretation; the whole of the contract must be taken together so as to give effect to every part"]; Advanced Network, Inc. v. Peerless Ins. Co. (2010) 190 Cal.App.4th 1054, 1063 (Advanced Network) ["`We must give significance to every word of a contract, when possible . . .'"]); Hayden v. Robertson Stephens, Inc. (2007) 150 Cal.App.4th 360, 367 ["`A construction rendering some words surplusage is to be avoided'"].)

3. The Escrow Instructions implicitly required Stewart Title to release the Rideaus' funds only to California Fund Control

a. The Escrow Instructions

The Escrow Instructions provide in relevant part:

b. The most reasonable interpretation of the Escrow Instructions is that they implicitly require that, upon instruction from seller, the escrow holder release the buyers' funds to California Fund Control for disbursement by California Fund Control

The signed Escrow Instructions clearly and unambiguously permitted Stewart Title to release the Rideaus' funds upon an instruction from BGJB and clearance of the Rideaus' funds. Further, reading the instruction as a whole, as we must (Civ. Code, § 1641), the Escrow Instructions implicitly authorized Stewart Title to release the Rideaus' funds to only one entity—California Fund Control.

To begin with, in the same sentence in which the Escrow Instructions authorize Stewart Title to release the Rideaus' funds, the instructions state that "said funds" would be disbursed by California Fund Control. California Fund Control could not disburse "said funds" without having received those funds. Further, the disbursement clause of the sentence pertaining to California Fund Control is separated from the remainder of the sentence pertaining to Stewart Title's release of the funds by only a semicolon. A semicolon is used to separate parts of a sentence that "are too closely connected to be made into separate sentences." (Bryan A. Garner, A Dictionary of Modern Legal Usage (2d Ed. 1995) p. 717.) By using a semicolon and the phrase "said funds," the text and grammar of the Escrow Instructions indicate that Stewart Title was authorized, upon BGJB's instruction, to release the Rideaus' funds to California Fund Control.

The structure of the Escrow Instructions supports this interpretation. The references to California Fund Control appear in Section IV of the Escrow Instructions, entitled "RELEASE OF FUNDS"—the portion of the instructions that expressly imposes duties on Stewart Title. Further, Stewart Title's contention that it was authorized to "release funds as instructed by BGJB" without any limitation, would render the bulk of this section surplusage because if Stewart Title were authorized to release the funds to any entity merely upon BGJB's instruction, there would be no reason to include any of the language in the Release of Funds section pertaining to California Fund Control.

An interpretation rendering such a large portion of the Release of Funds section of the Escrow Instructions surplusage should be avoided. (See National City Police Officers' Assn. v. City of National City (2001) 87 Cal.App.4th 1274, 1279 ["An interpretation which renders part of the instrument to be surplusage should be avoided"].) Rather, we should interpret that portion of the Escrow Instructions authorizing Stewart Title to "release funds as instructed by SELLER," in light of the remainder of the sentence, which provides, "said funds to be disbursed by California Fund Control. . . ." (See In re Quantification Settlement Agreement Cases, supra, 201 Cal.App.4th at p. 799.)

Further, "In determining the meaning of a written instrument, we are permitted to consider not only its language, but also "`the circumstances under which [it] was made and the matter to which it relates."'" (See PV Little Italy, LLC v. MetroWork Condominium Assn. (2012) 210 Cal.App.4th 132, 152.) Our interpretation of the Escrow Instructions fully comports with the purpose for which the principals to an escrow agreement would use a fund control agent. A fund control agent is used to ensure that funds intended for the construction of real property are actually and properly used by the owner-builder to construct that property. (See e.g., Summit, supra, 27 Cal.4th at p. 713 ["a lender agreed to fund an owner-builder's construction of homes, and to ensure that the loan funds would actually be used to pay the construction costs, the lender deposited the funds with the plaintiff fund control agent"].)

The Escrow Instructions expressly provided that the fund control agent (California Fund Control) would "inspect[] the project site and authorize[] payment of construction costs to contractor, sub-contractors and suppliers according to a pre-approved voucher control system." In order for a fund control agent to perform this function, it is essential that the fund control agent receive the funds that it is to disburse for the payment of construction costs. The Rideaus' interpretation of the Escrow Instructions is fully consistent with this purpose: upon instruction from BGJB, the escrow holder was authorized and instructed to release the Rideaus' funds to California Fund Control for disbursement by California Fund Control to pay direct costs, commissions and construction costs.

In contrast, Stewart Title's interpretation of the Escrow Instructions to the effect that, upon BGJB's instruction, it was authorized to release the funds to any entity that BGJB selected—including BGJB itself—is completely inconsistent with the purpose of having a funds control agent disburse the funds. We can think of no reason, and neither the trial court nor Stewart Title has offered any, as to why principals to an escrow agreement who intended to use a fund control agent to disburse funds for a construction project, would intend to permit the escrow holder to release funds directly to entities other than the fund control agent. As noted above, the entire raison d'&ecircum;tre of a fund control agent is to act as an intermediary between those funding a construction project and those building the project. To put it simply, a fund control agent cannot disburse a project's funds if the builder directs the disbursal of the funds instead.

Stewart Title's contention that references in the Escrow Instructions pertaining to California Fund Control implicates only BGJB's duty to the Rideaus not only fails to make practical sense, it is also in conflict with the fact that this language appears in the Escrow Instructions, which describe and control Stewart Title's release of the funds deposited into escrow.6

Contrary to Stewart Title's contention, its interpretation finds no support in the Purchase Agreement. As noted previously, the Purchase Agreement provides in relevant part:

We reject Stewart Title's suggestion that this provision "unequivocally stated that BGJB would instruct Stewart Title to release funds." To begin with, the reference to "said company" in the provision is ambiguous, and may reasonably be read to refer to the company with which BGJB would enter into a Construction Supervision and Resource Management Contract, rather than to BGJB itself. In any event, even if "said company" is interpreted as referring to BGJB, the provision is fully consistent with our interpretation of the Escrow Instructions that Stewart Title was authorized, upon BGJB's instruction, to release the Rideaus' funds to California Fund Control. Moreover, the provision expressly states that "the release of the payment of the PRICE by Stewart Title shall be made in accordance with the Construction Supervision and Resource Management Contract." (Italics added.) It is undisputed that BGJB never entered into a Construction Supervision and Resource Management Contract (i.e. a fund control agreement). It is thus clear that Stewart Title did not release the Rideaus' deposits "in accordance with" a fund control agreement. This provision of the Purchase Agreement therefore does not support Stewart Title's contention that it complied with the Escrow Instructions.

3. Stewart Title breached the Escrow Instructions

It is undisputed that Stewart Title released the Rideaus' funds in the amount of $239,700 to entities other than California Fund Control.7 In light of our interpretation of the Escrow Instructions provided above, the release of the Rideaus' funds to entities other than California Fund Control constituted a breach of the instructions.

Accordingly, we conclude that the trial court erred, as a matter of law, in entering judgment in favor of Stewart Title on the Rideaus' breach of contract cause of action.

B. The judgment may not be affirmed on the basis of the exculpatory provisions in the Escrow Instructions

Stewart Title contends that the judgment may be affirmed based on the following provisions in the Escrow Instructions:

Stewart Title argues that it contended in the trial court that these provisions "stated that Stewart Title would be held harmless from any losses caused by distributing funds in accord with the [Escrow] Instructions." (Italics added.) Similarly, on appeal, Stewart Title contends that "the Rideaus agreed that Stewart Title would not be held liable for any `loss or damage' for disbursing monies in accord with the [Escrow] Instructions." (Italics added.) Stewart Title also contends, "The hold-harmless clause did not absolve Stewart Title from wrongdoing or negligence. Instead, the clause protected Stewart Title for complying with the [Escrow] Instructions. . . ." (Italics added.)

We concluded in parts III.A.2 and III.A.3, that Stewart Title breached the Escrow Instructions in the manner by which it released the Rideaus' funds. In light of Stewart Title's acknowledgement that the exculpatory provisions in the Escrow Instructions do not "absolve Stewart Title from wrongdoing," and apply, if at all, only in the event that Stewart "compl[ied] with the [Escrow] Instructions," and released funds "in accord with the [Escrow] Instructions" (italics added), the judgment may not be affirmed on the basis of these provisions.8

C. The Rideaus are not entitled to reversal of the judgment on their negligence cause of action

The Rideaus claim that the trial court erred in ruling in Stewart Title's favor on their negligence cause of action. In support of this contention, the Rideaus argue that Stewart Title breached its duty "to comply with the [Escrow Instructions] . . . ." This argument fails because a plaintiff may not prevail on a tort cause of action for negligence based on the defendant's breach of contractual duties, in the absence of an independent violation of tort law. (Money Store Investment Corp. v. Southern California Bank (2002) 98 Cal.App.4th 722, 731 (Money Store).) As the Money Store court explained:

In a separate one-sentence section of their brief, the Rideaus also contend that they are entitled to reversal of judgment on their negligence cause of action because Stewart Title "fail[ed] to disclose its on-going relationship with [BGJB], the fact that [BGJB]] was its client, that it met with [BGJB] on several occasions, yet never once spoke to the Rideaus." The Rideaus fail to present any legal argument or authority in support of this contention. Accordingly, we deem the contention forfeited. (See, e.g., People ex rel. Reisig v. Acuna (2010) 182 Cal.App.4th 866, 879 ["`An appellate brief "should contain a legal argument with citation of authorities on the points made. If none is furnished on a particular point, the court may treat it as [forfeited], and pass it without consideration.' [Citation.]" [Citation.]'"].)

IV.

DISPOSITION

The judgment is reversed and the matter is remanded to the trial court. On remand, the trial court shall enter a new judgment in favor of the Rideaus on their breach of contract cause of action and in favor of Stewart Title on the remaining causes of action in the first amended complaint, in a manner consistent with this opinion. The trial court may also conduct any further ancillary proceedings that it deems necessary in order to enter the judgment. The Rideaus are entitled to costs on appeal.

McCONNELL, P. J. and O'ROURKE, J., concurs.