Doyle v. Surety Title & Guaranty Co.

• Court: California Court of Appeals
• Writing for the Court: DEVINE
• Citation: Doyle v. Surety Title & Guaranty Co., 68 Cal.Rptr. 177, 261 Cal.App.2d 525 (Cal. App. 1968)
• Decision Date: 24 April 1968
• Parties: Thomas L. DOYLE and Mary S. Doyle, Plaintiffs and Respondents, v. SURETY TITLE & GUARANTY COMPANY, Defendant and Appellant. Civ. 23288.

Page 177

68 Cal.Rptr. 177

261 Cal.App.2d 525

Thomas L. DOYLE and Mary S. Doyle, Plaintiffs and Respondents, v. SURETY TITLE & GUARANTY COMPANY, Defendant and Appellant Civ. 23288.

Court of Appeal, First District, Division 4, California.

April 24, 1968.

Timothy A. O'Connor, San Jose, for appellant.

Ruffo & Oneto, Jerome A. Smith, San Jose, for respondents.

DEVINE, Presiding Justice.

This is an appeal from a judgment in the amount of $17,085.49 which was rendered against defendant Surety Title & Guaranty Company for negligent reconveyance of property which had been subject to a deed of trust.

Thomas L. Doyle and his wife owned a ranch which they conveyed to Jacke Construction Co., which later conveyed to Frederick Clark, a subdivider. Jacke Construction Co. executed a deed of trust for the benefit of the Doyles, which Clark assumed. Defendant was not the original trustee, but became trustee and assumed the obligations of trustee. In the deed of trust, a price of $4,340 was set for each lot of the parcel to be sold, except Lot 37 on which the Doyles had their home. The release price for Lot 37 was $25,000. The release prices, as the lots would be sold, were to be sent to the Bank of America, which had advanced something in excess of $80,000 for offsite improvements, until the bank would be paid in full. After that, payments were to be made to the Doyles. The deed of trust was recorded.

The subdivision map was changed from its original form to create an additional lot, and the numbers were changed. Lot 37 became Lot 38. The recorded map showed the alteration; the deed of trust was not corrected. Clark, with one Dato, proceeded to build homes on the subdivision. Some of the lots were sold and the release price on each was paid (it had been increased to $4,500) to the bank. As each sale was made, a copy of the letter transmitting payment to the bank was sent to the Doyles. When Lot 37 (new series) was sold, the payment was made and confirming letter was sent to the Doyles. Mr. Doyle testified that the description was such that there was no question that this was not his house.

At one point, Clark obtained a buyer for plaintiffs' home and lot, thinking that plaintiffs wanted to sell. Doyle told him they did not want to sell. Since the loan commitment on plaintiffs' house had already been made, Clark, finding himself short of cash, asked the title company if he could put a loan on Lot 38. He was told he could. He consummated the loan in his name and that of his wife. It was his intention to repay the loan from the proceeds to be received on the remaining unsold lots. Clark did not inform Surety that he was dealing with the Doyle homestead when he arranged with them for a reconveyance. He referred to the property only as Lot 38. The title company, through its officer, knew that Clark was not selling Lot 38, but was encumbering it, the funds to be paid to him. The encumbrance was $17,000, a figure almost four times as much as the release price for the sale of the other lots. The title company's letter of transmittal went to Clark, not to the Doyles, as it had in the case of sales.

Clark received the net proceeds from the loan, amounting to $16,315, by defendant's check. Later, he was adjudged a bankrupt. He deeded Lot 38 back to the Doyles. At the time of the trial, he testified he had no means with which to pay what he regards as his moral obligation to plaintiffs because of the encumbrance on Lot 38. The Doyles have been paying off the encumbrance.

Breach of Duty by Trustee

The trial judge's finding that the trustee breached its duty to the Doyles as beneficiaries is amply supported by the evidence. The breach is shown by:

1. The failure of the trustee to ascertain that the Doyle residence was located on Lot 38, as shown on the final recorded tract map. The title company's own witness, its former controller and treasurer, admitted that it was normal procedure for the trustee to refer to the recorded tract map when executing a reconveyance and that this was not done in this case.

2. Partial reconveyances were to have been made, according to the deed of trust, only upon sales of lots. There was, of course, no provision in the deed of trust for reconveyances to be made for the purpose of encumbering the property in order to secure loans for the trustors. Surety's officer knew that this was a loan transaction.

3. The deed of trust allowed reconveyances only upon written request of the beneficiaries and presentation of the deed of trust and the note evidencing the obligation. No such written request was made for the reconveyance of Lot 38. Instead, the trustee accepted the directions of the trustor, Clark. It was not defendant's normal practice to do this.

When a trustee executes a partial reconveyance without proper authorization, the trustee is liable to the beneficiary for the full amount of the beneficiary's loss. (Jeanese, Inc. v. Surety Title & Guaranty Co., 176 Cal.App.2d 449, 453--454, 1 Cal.Rptr. 752, 90 A.L.R.2d 495.)

Appellant says something about contributory negligence or assumption of risk on the...