Campbell v. Scripps Bank
| Decision Date | 14 March 2000 |
| Docket Number | No. D030864.,D030864. |
| Citation | 78 Cal.App.4th 1328,93 Cal.Rptr.2d 635 |
| Parties | Leon E. CAMPBELL, as Trustee, etc., et al., Plaintiffs and Appellants, v. SCRIPPS BANK, Defendant and Respondent. |
| Court | California Court of Appeals |
Leon E. Campbell, Richard K. Livett and Robert J. Hill (collectively Campbell) appeal a judgment for Scripps Bank entered after the trial court granted its motion for summary judgment on the basis Campbell is collaterally estopped from prosecuting the action. Campbell contends the action is not barred by collateral estoppel; Scripps Bank should be equitably estopped from asserting collateral estoppel; there exist triable issues of material fact; and the attorney fees award under Civil Code section 1717 was erroneous. As we shall explain, because we conclude Scripps Bank is not entitled to attorney fees under the general escrow instructions, we reverse the attorney fees award. Determining that Campbell's remaining contentions are without merit, we affirm the judgment in all other respects.
In 1989, Campbell agreed to sell certain unimproved real property in La Jolla to G. Milam Hall for $650,000. The parties contemplated Hall borrowing $450,000 from John M. Sachs to enable him to purchase the property and that Campbell would loan Hall the remainder of the purchase price. In order to induce other lenders to loan Hall funds to develop the property, Campbell and Hall entered into a subordination agreement by which Campbell agreed to subordinate its position as Hall's secured creditor in favor of other lenders, conditioned upon such acquisition and development loans complying with certain terms regarding maturity and points charged. Sachs's agreement to make the acquisition loan was conditioned on his note being secured by a first deed of trust. Scripps Bank handled the escrow for the real property transaction, which closed May 15, 1989. Scripps Bank informed the title company that Campbell's deed of trust was a second trust deed and was to be recorded subject to the Sachs deed of trust. When the sale closed, the Sachs deed of trust, the Campbell deed of trust and the subordination agreement were recorded concurrently, with Campbell's trust deed reciting it was "second and subsequent in lien to [the Sachs] deed of trust recorded concurrently herewith." When Hall's development plans failed, secured creditors foreclosed their security interests in the property, rendering Campbell a sold-out junior lienholder whose security interest in the property was destroyed when the sale produced insufficient proceeds to repay Campbell.
Campbell then sued Sachs for declaratory and injunctive relief to stop the foreclosure and to determine the priority between the two concurrently recorded purchase money deeds of trust. (Campbell v. Sachs (Super. Ct. San Diego County, 1991, No. 643725).) The trial court ruled the parties intended the Sachs trust deed to have priority over the Campbell trust deed and entered judgment accordingly. Campbell appealed. (Campbell v. Sachs (July 14, 1995, D018994) [nonpub. opn.].) On July 14, 1995, we affirmed the judgment, holding that substantial evidence supports the trial court's factual determination Sachs's trust deed was intended to be and was senior to Campbell's trust deed.
On May 14, 1993, Campbell sued Scripps Bank for negligence and declaratory relief, alleging it had negligently caused the escrow to close with the loan terms not complying with the terms of the subordination agreement. Campbell's first amended complaint for breach of contract and declaratory relief was dismissed without prejudice on May 5, 1994, abating the matter while the appeal in Campbell v. Sachs, supra, D018994, was pending. After our ruling in that case, the parties stipulated to set aside the dismissal and reopen the matter in October 1997. Scripps Bank then moved for summary judgment. In granting the motion, the trial court reasoned:
The trial court later awarded attorneys fees to Scripps Bank. Campbell timely appealed.1
Campbell contends the trial court erred in ruling the doctrine of collateral estoppel bars them from litigating whether Scripps Bank breached its contractual duty to them by causing the escrow to close without compliance with the terms of the subordination agreement. Campbell specifically asserts the doctrine is inapplicable because Scripps Bank was not a party to the Sachs litigation and, in any event, the issues in this litigation were not actually litigated in the prior action. As we shall explain, Campbell's assertions are incorrect.
"The doctrine of collateral estoppel precludes relitigation of an issue previously adjudicated if: (1) the issue necessarily decided in the previous suit is identical to the issue sought to be relitigated; (2) there was a final judgment on the merits of the previous suit; and (3) the party against whom the plea is asserted was a party, or in privity with a party, to the previous suit." (Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d 903, 910, 226 Cal.Rptr. 558, 718 P.2d 920.) Contrary to Campbell's assertion, a stranger to the prior judgment may assert defensive issue preclusion. (Bernhard v. Bank of America (1942) 19 Cal.2d 807, 813, 122 P.2d 892; see Fairchild v. Bank of America (1958) 165 Cal.App.2d 477, 482, 332 P.2d 101.)
Similarly, the issues in this matter were actually litigated in the prior action. In the Sachs case, the trial court found the parties intended the Sachs deed of trust to have priority over the Campbell deed of trust. On appeal, a panel of this court held that substantial evidence supported the trial court's finding the parties intended the Sachs deed of trust to have priority over the Campbell deed of trust regardless whether the Sachs loan complied with the terms of the subordination agreement. Our decision conclusively resolved that issue. (Campbell v. Sachs, supra, D018994.) Consequently, Campbell's cause of action for breach of contract here seeking relief for Scripps Bank's closing of escrow without obtaining compliance with the terms of the subordination agreement lacks the potential of damages to Campbell. Because the subordination agreement had no legal effect on the relative priority of the two trust deeds (as it was not intended to apply to the Sachs loan), Campbell could not have been damaged by Scripps Bank's alleged failure "to obtain compliance with the terms of the subordination agreement." Accordingly, the final judgment in the Sachs case resolving that Campbell intended the Sachs trust deed to be senior to theirs regardless whether it complied completely with the subordination agreement terms conclusively resolves the issue of whether Scripps Bank is liable to Campbell for any alleged breach of contract regarding the relative priority of the two trust deeds.
Campbell asserts Scripps Bank should be equitably estopped3 from relying on the doctrine because its conduct intentionally and deliberately misled Campbell to believe the Sachs loan complied with the subordination agreement upon the close of escrow. Additionally, Campbell asserts the doctrine of collateral estoppel cannot be applied in favor of a party if that party's own negligence led to the adjudication upon which such party seeks to utilize as a defense. (Ruffalo v. Patterson (1991) 234 Cal.App.3d 341, 344, 285 Cal.Rptr. 647.)
As to traditional equitable estoppel, the complaint is devoid of any allegations of any intentional or deliberate misrepresentation by Scripps Bank upon which an equitable estoppel could be founded. Granted, actual fraudulent intent is not necessary to raise estoppel, as negligence that is careless and culpable as a matter of law is equivalent to an intent to deceive (Crestline Mobile Homes Mfg. Co. v. Pacific Finance Corp. (1960) 54 Cal.2d 773, 778, 8 Cal.Rptr. 448, 356 P.2d 192) and silence where there is a duty to speak will suffice (Skulnick v. Roberts Express, Inc. (1992) 2 Cal.App.4th 884, 891, 3 Cal.Rptr.2d 597). Moreover, as noted above, a party cannot assert collateral estoppel if that party's negligence led to the adjudication sought to be used defensively. However, even assuming without deciding that Scripps Bank had a contractual duty to review and require compliance of the trust deeds with the subordination agreement, its alleged negligent recordation of the documents did not result in the Sachs judgment. Rather, the record is painfully clear from the Sachs case that although the Sachs loan...
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