Stewart Title Guaranty v. Bedik

Filed 2/7/07  Stewart Title Guaranty v. Bedik CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b).  This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

          APPEAL from a judgment of the Superior Court of Los Angeles County, Alexander H. Williams, III, Judge.  Reversed and remanded.

          The Law Offices of J. Grant Kennedy and J. Grant Kennedy for Defendants and Appellants.

          Marcus, Watanabe, Snyder & Dave, Patricia M. Snyder and Daniel J. Enowitz for Plaintiff and Respondent.

          Appellants Michael and David Bedik, the successor trustees and co-beneficiaries of a testamentary trust known as the Bedik Family Trust (the Trust) were held liable for an overpayment of proceeds from the sale of Trust property.  The overpayment resulted from an erroneous payoff demand submitted to escrow by the deceased's lender.  Section 2943 of the Civil Code (section 2943) sets out the procedures that are to be followed in this situation:  the lender reconveys the deed of trust and proceeds against the obligor as an unsecured creditor.  If the lender fails to file the reconveyance, the title insurer may prepare and record a release of obligation under Civil Code section 2941 (section 2941), subdivision (b)(3).  Here, rather than follow the statutory procedures, the title insurer, respondent Stewart Title Guaranty Company, paid the lender and sought reimbursement by pursuing claims for breach of contract, breach of warranty, unjust enrichment, and money paid by mistake against appellants individually and in their capacities as successor trustees of the Trust.  The court granted respondent's motion for summary judgment, holding appellants jointly and severally responsible for the entire amount of the overpayment under both contract and restitutionary theories. 

          We conclude that the summary judgment must be reversed.  The breach of contract and warranty claims, premised on the alleged failure of the Trust to transfer unencumbered title to the buyer, have no merit.  Under section 2943, when the seller's lender errs by submitting an understated payoff demand to escrow, any amounts remaining due on the loan are no longer secured by the property after the demand is satisfied and escrow has closed.  The lender's deed of trust may remain of record, but respondent could have cleared the title records by a simple filing under section 2941.  Under these provisions and the undisputed facts, respondent could not, as a matter of law, prevail on the breach of contract and warranty claims.

          Moreover, the undisputed facts did not establish a basis for summary judgment on any restitutionary theory.  First, respondent failed to demonstrate either that appellants were legally at fault or had knowledge of the error when, acting as trustees, they distributed the sales proceeds to the beneficiaries of the Trust.  This left appellants in the position of innocent recipients, and where a windfall is divided among multiple innocent recipients, each recipient is subject, at most, to liability for restitution based on the actual benefit received.  There were no facts presented in the motion for summary judgment indicating the value of the benefit received by each appellant.  Second, by disregarding the governing statutes which permit a title company to clear title records without additional payment to the lender, respondent potentially placed itself in the position of a â€