Amen v. Merced County Title Co.

• Decision Date: 09 October 1962
• Citation: 25 Cal.Rptr. 65,375 P.2d 33,58 Cal.2d 528
• Parties: , 375 P.2d 33 Anne S. AMEN, Plaintiff and Appellant, v. MERCED COUNTY TITLE COMPANY et al., Defendants and Respondents. S. F. 21082.
• Court: California Supreme Court

Page 65

25 Cal.Rptr. 65

58 Cal.2d 528, 375 P.2d 33

Anne S. AMEN, Plaintiff and Appellant, v. MERCED COUNTY TITLE COMPANY et al., Defendants and Respondents.

S. F. 21082.

Supreme Court of California, In Bank.

Oct. 9, 1962.

T. N. Petersen, Merced, and Guernsey Carson, San Francisco, for plaintiff and appellant.

Preston, Braucht & George and H. C. George, Merced, for defendants and respondents.

TRAYNOR, Justice.

Plaintiff appeals from a judgment of dismissal entered after the sustaining of defendants' demurrers to her amended complaint without leave to amend. Her first cause of action alleged that defendant Merced County Title Company breached a contract with her to act as escrow holder. Her second cause of action, based on negligence, alleged the same acts and omissions as did the first. ^*

The amended complaint alleges that on April 2, 1958 plaintiff and her husband entered into a written contract to purchase a tavern. The contract, in the form of escrow instructions, was typed on forms provided by defendant and was signed by the sellers and by plaintiff and her husband. The initials of D. M. Guest, defendant's agent, were typed at the top of the form. The purchase price of $74,300 was to be paid $10,000 in cash, $54,300 by a note and deed of trust, and $10,000 by the buyers' assumption of certain debts. The instructions to defendant stated that: 'Any debts over $10,000 will be paid by the Merced County Title Company out of the proceeds of the sale' and that '* * * this escrow is accepted by your company (defendant) subject to all terms and conditions set forth herein and printed on the back hereof, which terms, conditions and the instructions given herein have been read by and agreed to by all parties signing these escrow instructions.' On April 14, 1958, before the escrow closed, the State Board of Equalization mailed to plaintiff in care of defendant a notice that plaintiff should obtain a tax clearance certificate to avoid liability for state sales taxes owed by the seller. (See Rev. & Tax.Code, §§ 6811, 6812.) One of the board's auditors also called Guest on the telephone, repeated the warning, and asked whether a certificate would be requested. Guest replied that it would not. Plaintiff was never informed of the written notice or of the telephone conversation; no certificate was requested, and on June 26, 1958, the escrow closed. The sellers failed to pay the sales taxes, which amounted to $4,749.84, and on October 31, 1959, plaintiff received notice of her liability to the state as successor to the sellers. Six days later the state filed a lien for the taxes due. Since plaintiff had already assumed $10,000 of the debts of the business, she ultimately found herself with a liability of $14,749.84 despite the fact that she had instructed defendant to pay debts exceeding $10,000 out of the proceeds.

Plaintiff did not file her complaint until July 29, 1960, more than two years after defendant allegedly breached an express provision of its contract and an implied promise to inform her of the potential tax liability. The trial court sustained the demurrer apparently on the ground that the two-year statute of limitations applicable to 'an action upon a contract, obligation or liability not founded upon an instrument of writing * * *' barred plaintiff's action. (Code Civ.Proc. § 339.) Plaintiff contends, however, that her action was on a written contract, that the four-year statute of limitations therefore applies (Code Civ.Proc. § 337), and that in any event, the statute did not begin to run until October 31, 1959, when she first received notice of the state's lien.

An escrow holder must comply strictly with the instructions of the parties. (Rianda v. San Benito Title Guarantee Co., 35 Cal.2d 170, 173, 217 P.2d 25; Shreeves v. Pearson, 194 Cal. 699, 711, 230 P. 448; Dawson v. Bank of America, 100 Cal.App.2d 305, 309, 223 P.2d 280.) 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 the buyer or seller, the injured party acquires a cause of action for breach of contract. (See Francis v. Eisenmayer, 171 Cal.App.2d 221, 225-227, 340 P.2d 54; Karras v. Title Ins. & Guarantee Co., 118 Cal.App.2d 659, 665-666, 258 P.2d 866; Chicago Title & Trust Co. v. Cleary, 319 Ill.App. 83, 48 N.E.2d 576, 578; Rest. 2d Agency, § 14D, Comment a.) Similarly, if the escrow holder acts negligently, 'it would ordinarily be liable for any loss occasioned by its breach of duty.' (Rianda v. San Benito Title Guarantee Co., supra; Karras v. Title Ins. & Guarantee Co., supra; see Rest. 2d Agency, §§ 399(b), 401.)

If the escrow instructions are in writing and the escrow holder accepts them or if the escrow holder prepares the instructions, offers to perform them, and the buyer and seller accept the offer, an action for failure to comply with the instructions is on a written contract. The contract may be 'in writing' for purposes of the statute of limitations even though it was accepted orally or by an act other than signing. (Cleveland Trust Co. v. Elbrecht, 137 Ohio St. 358, 30 N.E.2d 433, 436; McCormick v. Taft, 61 Ohio App. 200, 22 N.E.2d 510, 511; Fey v. Loose-Wiles Biscuit Co., 147 Kan. 31, 75 P.2d 810, 812-813; First Nat. Bank of Berwyn, Okl. v. Raymer, 180 Okl. 529, 71 P.2d 485, 487-488; Atlanta, K. & N. Ry. Co. v. McKinney, 124 Ga. 929, 53 S.E. 701, 704, 6 L.R.A.,N.S., 436; Schmucker v. Sibert, 18 Kan. 104, 111; see 38 Mich.L.Rev. 257, 258; 1 Corbin on Contracts, § 31 at pp. 84-86; cf. Remsberg v. Hackney Mfg. Co., 174 Cal. 799, 164 P. 792; California Jewelry Co. v. Provident Loan Ass'n, 6 Cal.App.2d 506, 510-511, 45 P.2d 271.) An action is on a written contract, even though it is based on a promise implied from the writing. (See Comunale v. Traders & General Ins. Co., 50 Cal.2d 654, 662, 328 P.2d 198, 68 A.L.R.2d 883; Lawrence Barker, Inc. v. Briggs, 39 Cal.2d 654, 661, 248 P.2d 897; Simmons v. Birge Co., D.C., 52 F.Supp. 629, 633-634; Indian Territory Illuminating Oil Co. v. Rosamond, 190 Okl. 46, 120 P.2d 349, 354, 138 A.L.R. 246; Home Ins. Co. v. Mercantile Trust Co., 219 Mo.App. 645, 284 S.W. 834, 835-836; 1 Corbin on Contracts, § 31 at p. 84; but see Grant v. Williams, 158 Neb. 107, 62 N.W.2d 532, 536.)

A longer period of limitations applies to actions on written contracts than to actions on oral contracts, since the writing is clear evidence in permanent form of the terms of the agreement. (See Homire v. Stratton & Terstegge Co., 157 Ky. 822, 164 S.W. 67, 69; 38 Mich.L.Rev. 257, 259.) When a party has agreed to the writing, there is no reason to invoke the two-year statute of limitations applicable to oral agreements. The four-year statute of limitations, unlike the statute of frauds, does not require that the writing be signed by the party to be charged. Had the Legislature meant to make a signature mandatory for a writing to qualify for the longer period of limitations it would have so provided as it did in section 360 of the Code of Civil Procedure, which requires that a new promise to perform under an old contract be signed to start the statute running anew. Plaintiff's action was therefore on a written contract.

Defendant invokes Shumaker v. Rippy, 138 Cal.App.2d 815, 816, 292 P.2d 536, in which the court held that 'The two-year statute of limitations * * * is applicable either to an action for breach of an escrow agreement or to an action for damages on account of negligence in the performance thereof.' Similar holdings appear in Roberts v. Carter & Potruch, 140 Cal.App.2d 370, 373, 295 P.2d 515, and in Howard v. Security Title Ins. & Guarantee Co., 20 Cal.App.2d 226, 228-229, 66 P.2d 1247. (But see Simmons v. Bank of America, 159 Cal.App.2d 566, 569, 323 P.2d 1043.) In the Roberts case, however, the instructions to the escrow holder were oral. In the Howard case the court rejected the plaintiff's contention that an action based on the violation of escrow instructions was on a written contract and viewed the cause of action as one for negligence. (Howard v. Security Title Ins. & Guarantee Co., supra, 20 Cal.App.2d at p. 229, 66 P.2d 1247.) The holdings in the Shumaker and Howard cases appear to be based upon a misreading of Lattin v. Gillette, 95 Cal. 317, 30 P. 545. There this court held that when the defendants were employed to search the title of certain premises and made a report that included a written certificate that title was vested in one Birnhaum, free of encumbrances, 'the written certificate * * * although an instrument in writing is not an instrument upon which * * * (defendants') liability is founded.' (Id. at p. 322, 30 P. at page 547.) In the Lattin case the contract of employment was oral and the title report was mere 'evidence relied upon by * * * (plaintiff) to establish the breach of * * * contract * * *.' (Id. at p. 323, 30 P. at page 547.) In the Shumaker and Howard cases, however, it was alleged that the escrow holder had breached an actual or implied provision of a written contract. Although in both these cases the writing was a...