Smith v. Stewart Title

Filed 3/28/07 Smith v. Stewart Title CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment and postjudgment orders of the Superior Court of Orange County, Andrew P. Banks, Judge. Affirmed.

Jerome D. Stark for Plaintiffs and Appellants.

Hall & Bailey, John L. Bailey and Therese Bailey-Nelson for Defendant and Respondent Stewart Title of California, Inc.

Lee A. Morrison for Defendant and Respondent Pacifica Reo, LLC.

* * *

Plaintiffs Chad J. Smith and Laura L. Smith[1] appeal from a judgment in favor of defendants Stewart Title of California, Inc. (Stewart Title), and Pacifica REO, LLC (Pacifica). The Smiths also appeal from the courts postjudgment orders awarding attorney fees to Stewart Title and Pacifica. The Smiths (real estate purchasers) sued the seller, Pacifica, for fraud, and the escrow company, Stewart Title, for negligence and breach of fiduciary duty, asserting they (the Smiths) intended to acquire two buildable lots, but were conveyed one lot with two assessor parcel numbers. On appeal the Smiths challenge several evidentiary rulings as well as the attorney fee orders. We affirm the judgment and the postjudgment orders.

FACTS

When the Smiths first saw the residential property they would later purchase, the existing house sat on an upper parcel, while down below lay a level pad with a gate and driveway. The upper parcel (assessor parcel number 6 or parcel 6) measured over 13,700 square feet, while the lower parcel (assessor parcel number 7 or parcel 7) measured 5,159 square feet. The listing for the property (Multiple Listing Service the MLS listing) identified the property by a single address for sale at a single price, but also referred to a separate assessors parcel number. The reference to the assessors parcel number appeared in the following description of the property: Gorgeous View From Living Rm & Upper Deck, family Rm in 2nd Flr Has City Lights View And Cozy Fireplace pool View of Lving Rm And Deck Opens 2nd Sep Ap# Courtyard . . . .[2] Laura testified she could not recall whether she saw the MLS listing before the Smiths made their purchase offer; Chad testified he did not see the MLS listing before negotiating the acquisition of the property.[3]

The Smithss realtor advised the Smiths of parcel 7s separate assessors parcel number after learning about it from Pacificas agent, but never told them parcel 7 could be separately conveyed or that they could build on it. The Smiths made their first purchase offer in a purchase agreement dated May 3, 2002, on which their agent handwrote, Purchase includes lot with AP #503-203-06.[4] By this language the Smiths wanted to ensure that both lots were included at the time of purchase so as to fulfill their plans to build a house on [the second lot] for [Chads mother] and to then use that house as collateral to apply for a future loan. Within a couple of weeks after signing the purchase agreement, the Smiths informed their agent they not only wanted to build a second house, but they wanted to have their folks live in it and later sell it off as a separate house. The Smiths agent did not recall ever advising his clients to check the zoning ordinance or contact the county, a title company or a lawyer to determine whether parcel 7 was buildable. In fact, the neighborhood was zoned R-4, 20,000, with minimum 20,000-square-feet estate lots. The property in question was a legal nonconforming lot (with less than 20,000 square feet) due to a lot line adjustment made by the Orange County Subdivision Committee in 1982, i.e., 18 years before Pacifica purchased the property in 2000 by a single grant deed. Chad, who holds a masters degree in urban planning, did not learn of the R-4, 20,000 zoning until after the close of escrow; he never inquired into the subject because he didnt care. It didnt matter to [him].

The transaction proceeded into escrow with Stewart Title acting as the title and escrow company. At this point, Chad contemplated he would ultimately receive a single deed for the entire property. But almost two months after escrow opened, the Smithss mortgage broker informed Stewart Title that the lender did not want the vacant portion of the lot described in their loan. The mortgage broker therefore requested that parcels 6 and 7 be handled in separate escrows. Sheila Terrell, a title officer at Stewart Title, testified that Chad wanted her to generate two [preliminary title reports] off of one lot. Terrell advised Chad that separating the two parcels would create an illegal lot split. A few days later Chad told Terrell he wanted [her] to put this lot on two prelims; that he had spoken with several other people at the assessors office, someone at another title company, his agent, and that everybody told him that it could be split; that [she] was being difficult; why couldnt [she] split it up; [she] was holding up his loan. Terrell complied with Chads request. Pacifica, suspecting this was a delaying tactic by the Smiths, agreed to two escrows only on condition Pacifica would not pay for the second escrow or title report and would receive per diem late charges on each parcel. The Smiths then reviewed two sets of documents, including separate escrow instructions, preliminary title reports, and deeds for parcels 6 and 7.

On the closing date (but prior to closing), Terrell submitted the file to Thomas Bernath, the title department manager, for approval. Bernath immediately determined a lot split would violate the Subdivision Map Act. Terrell alerted the Smithss agent that [i]t would be an illegal lot split to separate the property into two lots and therefore the conveyance had to be recorded on one instrument. According to Terrells testimony, the Smithss agent instructed Terrell to do whatever it takes to get the thing closed and that he would contact Mr. Smith. Terrell then contacted the Smithss lender who advised her it was okay to close this as one lot. The transaction closed in a single escrow with a single deed recorded. That evening Bernath apologized to Chad for the issue coming up at the last minute and promised to investigate the situation. Chad insisted the property should be two separate lots and said he (Chad) talked to the county assessors office. Bernath then phoned the assessors office who advised him the assessor did not have the authority to make that decision, and referred him to the county planning department. The planning department advised Bernath the zoning was R-20,000, and that this property cannot be split and must remain the size that it is.[5]

The Smiths originally filed suit against Pacifica, Stewart Title, their agent, his employer, and Pacificas broker, then made good faith settlements with Pacificas broker and their own agents employer. The Smiths then filed a second amended complaint against Pacifica for fraud and Stewart Title for negligence and breach of fiduciary duty, alleging, inter alia, (1) Pacifica misrepresented that the property consisted of two separate and distinct lots and could be conveyed separately by two grant deeds, and (2) Stewart Title negligently recorded one deed to convey the property without the Smithss authorization and thereby breached its fiduciary duty to the Smiths. The jury rendered special verdicts that (1) Pacifica did not misrepresent an important fact to Chad; (2) Stewart Title did not breach a fiduciary duty to the Smiths; and (3) Stewart Title was not negligent. The court ordered the Smiths to pay attorney fees of $79,978 to Stewart Title and $56,613 to Pacifica.

DISCUSSION

I. Substantial Evidence Supports the Verdicts

Under an argument heading asserting the standard of review of the judgment is the substantial evidence rule (capitalization omitted), the Smiths contend the facts on the record fail to meet [the] burden of credible evidence to support a judgment in favor of [defendants]. The Smiths then recite evidence, without citation to the record, of facts they contend support their argument. But the Smiths do not mention Chads testimony acknowledging that nobody in the entire world ever told [him he] could build on that . . . vacant lot. Nor do they mention Chads testimony agreeing that initially he didnt object to the one escrow and one deed, because it was primarily a lenders requirement . . . . Nor do they mention his testimony that the only thing that was provided to [the Smiths] was that this piece of property had two assessor parcel numbers. Nor do they mention Chads testimony that he decided the vacant parcel was buildable based on [his] own knowledge and experience. Nor do they mention that Stewart Title closed the escrow using a single deed only after receiving express authorization to do so from both the Smithss agent and their lender.

It is not clear whether the Smiths intended to argue that substantial evidence does not support the jurys findings that Pacifica made no false representations and that Stewart Title was not negligent and did not breach its fiduciary duty.[6] If they did, we deem the argument waived. [A]ppellants who challenge the decision of the trial court based upon the absence of substantial evidence to support it are required to set forth in their brief all the material evidence on the point and not merely their own evidence. Unless this is done the error is deemed waived. (Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246.) Without question the evidence we recite above supports the jurys decision.

II. The Challenged Evidentiary Rulings

Standard of Review

We review the challenged evidentiary rulings for an abuse of discretion. (People v. Rowland (1992) 4 Cal.4th 238, 264.) A court abuses its discretion by exceeding the bounds of reason under all the circumstances. (Denham v. Superior Court (1970) 2 Cal.3d 557, 566.) The complaining party bears the burden of proof and must show a clear case of abuse and a resulting miscarriage of justice. (Ibid.)

The Court Did Not Abuse its Discretion by Excluding Testimony That Stewart Title Violated a Criminal Statute

The Smiths contend the court improperly granted Stewart Titles motion in limine to exclude as inflammatory and prejudicial under Evidence Code section 352 any testimony that STEWART TITLE forged any document and/or violated any criminal statute . . . . The Smiths argue Stewart Title violated Penal Code section 115 (section 115) and thereby committed negligence per se under Evidence Code section 669.[7] Under section 115, recording a false or forged instrument is a felony; the Smiths allege Stewart Title violated section 115 by recording a single deed with an altered legal description.

In the hearing on the motion, the court asked whether plaintiffs agree that its not a forged instrument; the Smithss counsel replied he would like just to take a look at this. The court stated its tentative was to grant the motion, but reserved the issue until the following day to give the plaintiffs a chance to look at case authorities . . . . The next day the Smithss counsel stated he would not mention the issue at trial unless he could first convince the court that [he could] use it, to which the court replied, Fair enough. The record does not reflect, nor do the Smiths contend, that they ever resurrected the issue below. Accordingly, they cannot now complain.

The Court Did Not Abuse Its Discretion by Excluding Evidence Stewart Title Delayed Releasing the Sale Proceeds to Pacifica

The Smiths contend the court improperly (1) excluded testimony Stewart Title did not immediately release the sale proceeds to Pacifica after recording the deed, and (2) in the course of making that ruling stated in the jurys presence that recordation was the last official act under the law to make public that title to the [property] has transferred from the seller to the buyer.

During the trial the Smiths asked the escrow officer about Stewart Titles release of funds to Pacifica, but Stewart Title objected on relevancy grounds. The Smiths asked to make an offer of proof. The court inquired, Sidebar or here? to which the Smithss attorney replied, You can do it wherever you prefer. Having invited the court to discuss the issue in the jurys presence, the Smiths are estopped from complaining about the jury hearing the courts statements. (Redevelopment Agency v. City of Berkeley (1978) 80 Cal.App.3d 158, 167.)

Equally meritless is the Smithss contention the court improperly excluded evidence Stewart Title delayed the release of funds. They argue the evidence was relevant to show Stewart Title knew it made a mistake in recording the [property] as one lot, and hesitated to complete the transaction due to a sense of liability. But the Smiths never made this argument below.[8] In any event, any error would have been harmless since the jury heard Chads testimony that Bernath stated a mistake had been made and Stewart Title should never have opened two escrows or generated two preliminary title reports.

Any Error in Limiting the Opinions of Smithss Appraisal Expert Was Harmless

The Smiths contend the court improperly granted Pacificas motion in limine to limit the Smithss appraisal expert, Michael Waldron, to an opinion of the propertys value on the closing date, thereby precluding Waldron from opining the Smiths suffered damages of $205,000, measured by the difference between (1) the value of the property the Smiths received and (2) the propertys value if parcel 7 could be develop[ed] and sold off separately. We need not determine whether the exclusion of this evidence constituted error because any error in that regard was harmless. The excluded evidence was relevant only to the issue of damages an issue the jury was not required to address because it found no liability on any basis; Pacifica had not misrepresented a material fact and Stewart Title was neither negligent nor had it breached a fiduciary duty. Without liability, the measure of damages is wholly beside the point. Appellate courts are not permitted to reverse unless the asserted error is prejudicial. (Cal. Const., art. VI, 13 [judgments not reversible unless, after an examination of the entire cause, including the evidence, the court shall be of the opinion that the error complained of has resulted in a miscarriage of justice]; Evid. Code, 354 [judgment shall not be reversed by reason of erroneous exclusion of evidence unless the asserted error resulted in a miscarriage of justice].) We thus reject the Smithss argument.

Any Error in Excluding Chads Speculative Testimony Was Harmless

The Smiths contend the court erred by precluding Chad from testifying he relied on Pacificas alleged misrepresentations. At trial, Chad tried several times to testify he would not have bought the property if he had known he would receive only one lot, but the court sustained Pacificas objection that the testimony was speculative. The court stated: This is classic. Speculation to say, if this, would you have done that. . . .  Thats pure speculation under the Evidence Code.

Again, we need not decide whether the courts ruling was correct. Without a finding of misrepresentation, the jury was not required to determine any issue of reliance.

III. Attorney Fees

The Court Did Not Abuse Its Discretion by Awarding Attorney Fees to Pacifica and Stewart Title

The Smiths contend the courts postjudgment orders awarding attorney fees to Stewart Title and Pacifica were improper because the Smiths sought tort (not contract) recovery. We review the attorney fees awards for abuse of discretion. (Lerner v. Ward (1993) 13 Cal.App.4th 155, 158 (Lerner).)

Pacifica moved for attorney fees pursuant to, inter alia, Code of Civil Procedure sections 1032 and 1033.5.[9] Stewart Title moved for attorney fees under those sections and section 1021. Section 1021 provides: Except as attorneys fees are specifically provided for by statute, the measure and mode of compensation of attorneys . . . is left to the agreement, express or implied, of the parties; but parties to actions or proceedings are entitled to their costs, as hereinafter provided. Section 1032, subdivision (b) entitles a prevailing party to recover costs, and section 1033.5, subdivision (a)(10) includes attorney fees as an item of recoverable costs where the right to fees is authorized by contract or by statute.

Where a contractual attorney fee provision is phrased broadly enough . . . , it may support an award of attorney fees to the prevailing party in an action alleging both contract and tort claims: [P]arties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves, whether such litigation sounds in tort or in contract. (Santisas v. Goodin (1998) 17 Cal.4th 599, 608.)

We thus examine whether the courts awards of attorney fees to Pacifica and Stewart Title are supported by contractual attorney fee provisions. Paragraph 22 of the purchase agreement between the Smiths and Pacifica states: ATTORNEY FEES: In any action . . . between Buyer and Seller arising out of this Agreement, the prevailing [party] shall be entitled to reasonable attorney fees and costs from the non-prevailing [party], except as provided in paragraph 17A [governing mediation]. The Smiths sued Pacifica for fraud, alleging they (the Smiths) entered into the purchase agreement in justifiable reliance on misrepresentations made by Pacifica. Thus, their lawsuit arises out of the agreement and is squarely covered by the contractual attorney fees provision. (See Lerner, supra, 13 Cal.App.4th at pp. 158-159 [attorney fees awarded on successful defense of fraudulent inducement claim where contract permitted attorney fees [i]n any action or proceeding arising out of this agreement].)

Similarly, paragraph 27 of the escrow instructions states: INDEMNITY FOR ATTORNEYS FEES AND COSTS. In the event suit is brought by any party or parties to this escrow . . . as against each other or others . . . which results in a dismissal of or judgment in favor of [Stewart Title], the parties hereto agree to hold harmless, reimburse and indemnify [Stewart Title] from any . . . attorneys fees incurred. Under Paragraph 27s express terms, the Smiths as a party to the escrow who brought suit against Stewart Title, which suit resulted in a judgment in favor of Stewart Title are obligated to reimburse Stewart Title for its fees incurred.

The Smiths, however, contend an award of attorney fees is only proper where the plaintiffs brought specific causes of action against defendants for breach of contract and/or rescission of the purchase agreement. For this proposition the Smiths rely on Lerner, supra, 13 Cal.App.4th 155. Lerner involved a contract provision allowing for the recovery of attorney fees to the prevailing party in any action . . . arising out of the agreement. (Lerner, supra, 13 Cal.App.4th at p. 157.) Although the plaintiffs in Lerner initially sued the defendants for contract and tort causes of action, they dismissed the contract claims prior to trial. (Ibid.) The Lerner court held the plaintiffs were entitled to recover attorney fees under sections 1021 and 1033.5: The parties to a contract may validly agree to allow for the award of attorneys fees, even though the suit is based on tort rather than contract. (Lerner, at pp. 160-161.) The Smiths contend Lerner supports an attorney fees award only where contract claims are initially filed, even though eventually dismissed. But the Lerner plaintiffs defunct contract claims had no bearing on the appellate courts holdings under sections 1021 and 1033.5 that they were entitled to attorney fees on their tort causes of action.

In sum, the court did not abuse its discretion by awarding attorney fees to Pacifica and Stewart Title on their tort claims.

DISPOSITION

The judgment and the postjudgment orders awarding attorney fees are affirmed. Stewart Title and Pacifica are awarded their costs on appeal.

IKOLA, J.

WE CONCUR:

RYLAARSDAM, ACTING P. J.

ARONSON, J.

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[1] Hereafter, we refer to the plaintiffs collectively as the Smiths and individually by their first names. We intend no disrespect; our practice simply facilitates ease of reference.

[2] Pacificas realtor testified the phrase, and deck opens second separate APN courtyard, is missing a comma and basically . . . says that the deck opens to second story. And then theres a separate APN number for the courtyard.

[3] Although Chad testified he believed he saw a different MLS listing with a similar reference to a second assessor parcel number, no evidence of a different MLS listing was admitted at trial.

[4] Laura testified the reference to parcel 6 was meant to convey the Smithss intention to acquire parcel 7.

[5] Chad acknowledged that while negotiating the purchase, he never visited the county planning department. He was aware the two separate assessor parcel numbers meant the county assessed taxes on each parcel.

[6] See HeavenlyValley v. El Dorado County Bd. of Equalization (2000) 84 Cal.App.4th 1323, 1345, fn. 17 (refusing to consider argument under a subheading inappropriate to the argument).

[7] Evidence Code section 669, subdivision (a)(1) provides: The failure of a person to exercise due care is presumed if: [] He violated a statute, ordinance, or regulation of a public entity.

[8] The Smithss offer of proof was that Stewart Title intentionally withheld the money during the period of time they were trying to work this out and it would have been very easy to have reversed the transaction if [Pacifica] hadnt received its money.

[9] All further statutory references are to the Code of Civil Procedure unless otherwise stated.