19 Cal.4th 253B, Quelimane Co. v. Stewart Title Guar. Co.

• Citation: 19 Cal.4th 26,77 Cal.Rptr.2d 709
• Decision Date: 27 August 1998
• Docket Number: No. S055144,S055144
• Court: United States State Supreme Court (California)
• Parties: B, 19 Cal.4th 26, 960 P.2d 513, 1998-2 Trade Cases P 72,285, 98 Cal. Daily Op. Serv. 6674, 98 Daily Journal D.A.R. 9230 QUELIMANE COMPANY, INC. et al., Plaintiffs and Appellants, v. STEWART TITLE GUARANTY COMPANY et al., Defendants and Respondents

Page 709

77 Cal.Rptr.2d 709

19 Cal.4th 253B, 19 Cal.4th 26, 960 P.2d 513,

1998-2 Trade Cases P 72,285,

98 Cal. Daily Op. Serv. 6674,

98 Daily Journal D.A.R. 9230

QUELIMANE COMPANY, INC. et al., Plaintiffs and Appellants, v. STEWART TITLE GUARANTY COMPANY et al., Defendants and Respondents.

No. S055144.

Supreme Court of California

Aug. 27, 1998.

As Modified Sept. 23, 1998.

[19 Cal.4th 33] [960 P.2d 516] Steve White, H. Peter Young, Judith A. Routledge, Rastegar & Matern, Los Angeles, and Dennis Wilson, for Plaintiffs and Appellants.

Levinson, Lieberman & Snyder, Levinson, Lieberman & Maas, Peter M. Hebert, Burton S. Levinson and Lawrence R. Lieberman, Beverly Hills, for Defendants and Respondents.

Horvitz & Levy, Lisa Perrochet, David M. Axelrad, Encino, Heller, Ehrman, White & McAuliffe, Paul Alexander, Vanessa Wells, Palo Alto, Greines, Martin, Stein & Richland, Robin Meadow and Feris M. Greenberger, Beverly Hills, as Amici Curiae on behalf of Defendants and Respondents.

BAXTER, Justice.

In this case we are again called upon to construe and apply the unfair competition law (UCL). (Bus. & Prof.Code, §§ 17200-17209.) ¹ The principal question here is whether the Insurance Code displaces the UCL and provides the only remedies for plaintiffs who have been harmed by an alleged conspiracy among title insurers to refuse to sell title insurance on real property acquired at a tax sale.

We conclude that the Insurance Code does not displace the UCL except as to title company activities related to rate setting. We shall reverse the judgment of the Court of Appeal which reached a contrary conclusion.

[19 Cal.4th 34]

I BACKGROUND

Although plaintiffs' first amended complaint set out seven causes of action against several defendants, only those in which First American Title Insurance Co. (First American) is a defendant are in issue here. Defendants Stewart Title Guaranty Company (Stewart Title) and Placer Title Company (Placer Title) have been dismissed from the action, without prejudice, by stipulation. ²

In the allegations ³ in support of the first and second, which incorporates the first, causes of action, the first amended complaint alleges the following:

[960 P.2d 517] Plaintiffs Quelimane Company, Inc., Mannix Investments, Inc. (doing business as Western Land Bank Auctions), Western Land Capital Co., Port Kendall, Inc., and Western Land Bank, Inc., are engaged in the holding, ownership, and financing of real property. All have purchased properties at tax sales in El Dorado County.

Stewart Title, Placer Title, and First American are the only companies offering title insurance in El Dorado County. ⁴ All are subject to provisions of the Insurance Code and regulations of the California Department of Insurance.

[19 Cal.4th 35] On September 8, 1991, Western Land Bank sold at auction a parcel of El Dorado County real estate to Naina and Fathima Rahman. Title to the property was then in plaintiff Port Kendall, Inc., which had acquired it by tax deed more than one year before the auction sale at which the Rahmans purchased the property. The contract gave the purchasers the option of acquiring title insurance at their own expense. The purchasers were unable to secure title insurance from Placer Title and Stewart Title, which intentionally refused to issue a policy of title insurance. The Rahmans instituted mediation proceedings as provided in their contract of sale and sought rescission of the land sale contract.

Placer Title and Stewart Title knew, and prior to the purchase by the Rahmans, Placer Title had issued a preliminary title report to the Rahmans stating that the land was unencumbered by any trust deed or claim of ownership by any party other than the seller. Placer Title had also issued a written report declaring readiness to issue a title insurance policy on the parcel.

On September 20, 1992, Western Land Bank sold to SAR at auction two lots in El Dorado County that the seller had acquired at a tax sale. Placer Title and Stewart Title each informed SAR that the lots were uninsurable and therefore unmarketable. They refused to issue title insurance on the property. At the time they did this, these defendants knew there was no cloud on the seller's title, and that any possible clouds on title had been nullified by operation of law one year after the seller took title by tax sale.

On February 10, 1991, Robert Constant agreed to purchase at a Western Land Bank auction a parcel of Fresno County realty. Western Land Bank had acquired the property by tax deed. First American issued a commitment for title insurance on the property, but conditioned it on commencement of a quiet title action. Because First American refused to issue the policy without a quiet title action, Constant did not complete payment for the property.

The complaint also alleged that defendants engaged in a practice of interfering with land sale contracts by refusing to issue title insurance on parcels purchased by tax sale in which title was deeded free and clear by operation of law. Defendants were aware that ability to obtain title insurance is an important part of any real estate transaction in California and had individually and jointly undertaken marketing programs stressing the necessity of such insurance, attempting to convince members of the general public [19 Cal.4th 36] that the insurance is essential to protect purchasers. Defendants had represented to the public that they would insure any real estate that had good title.

Based on these allegations the complaint asserted interference by Stewart Title and Placer Title with contractual relations of plaintiffs with Rahman, SAR, and Constant; conspiracy among defendants to refuse to issue title insurance policies on real property obtained pursuant to a tax sale; and intentional, willful and deliberate interference by all defendants with contractual relations of members of the general public for the sale of land purchased through tax sales.

[960 P.2d 518] The second cause of action restated some of the above allegations and also alleged that defendants had agreed among themselves to " redline" all property acquired by tax sale, had engaged in a scheme to deny title insurance to parcels of land purchased at a land auction when the seller of the parcels had acquired title at a tax sale, and had conspired together to deny title insurance to property obtained by tax sale. It also asserted that, by agreeing to refuse to issue title insurance to such property while making efforts to convince members of the public that title insurance was necessary, defendants had manipulated the market in the El Dorado County area in which they were the only title insurers. This cause of action asserted that in the three specific sales described in the first cause of action, defendants had engaged in unlawful, unfair and fraudulent business practices, conduct that constitutes an unfair business practice as the term is used in section 17200, and that the conduct described in the second cause of action also constituted an unfair business practice. Defendants allegedly engaged in this conduct without economic, actuarial, or other justification.

As a result of defendants' conduct the value of plaintiffs' land is greatly reduced in value and is difficult to market, and plaintiffs are unable to transfer title to some real estate they own.

The fifth cause of action, for negligence, alleges that defendants had a duty to members of the general public to issue title insurance to any parcel of land without discrimination, to report the legal status of the title of any parcel and to use known and accepted legal, actuarial, and statutory criteria to determine the legal status of land. It alleges they breached that duty by failing to insure title to any parcel purchased by tax sale regardless of the merits of the chain of title.

First American demurred to the first, second and fifth causes of action for the reason that each failed to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).) The demurrer was sustained as [19 Cal.4th 37] to all causes of action against First American without leave to amend and judgment was entered for First American.

Plaintiffs appealed, arguing that they had sufficiently pled causes of action for interference with contract, violation of section 17200, and breach of a duty to issue title insurance policies without discrimination, and that, if not, leave to amend should have been granted. The Court of Appeal disagreed and affirmed the judgment for defendant First American.

Relying in part on Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 393, 45 Cal.Rptr.2d 436, 902 P.2d 740, the Court of Appeal held that the allegations did not state a cause of action for intentional interference with contractual relations because First American's refusal to issue title insurance was not wrongful for a reason other than the impact on the plaintiffs' contracts with the Rahmans and SAR. The court reasoned that no law or administrative regulation prohibits title insurers from denying a policy. The allegation of a conspiracy did not overcome the absence of any obligation to issue title insurance.

The court noted that Speegle v. Board of Fire Underwriters (1946) 29 Cal.2d 34, 172 P.2d 867 held that concerted activities for an unlawful purpose such as activities in restraint of trade could form the basis of a cause of action for interference with contractual relations. However, believing that Manufacturers Life Ins. Co. v. Superior Court (1995) 10 Cal.4th 257, 267, 41 Cal.Rptr.2d 220, 895 P.2d 56 (Manufacturers Life ) supported its conclusion, the court held that the Insurance Code, and in particular Insurance Code section 12414.26, now limits actions against insurers for unlawful business practices to the remedies provided in that code, displacing other existing rights and remedies for unlawful business practices in the insurance...