Galligan v. Chi. Title Ins. Co.

• Decision Date: 14 April 2023
• Docket Number: A162799
• Parties: PATRICK T. GALLIGAN, Plaintiff and Appellant, v. CHICAGO TITLE INSURANCE COMPANY et al., Defendants and Respondents
• Court: California Court of Appeals Court of Appeals

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PATRICK T. GALLIGAN, Plaintiff and Appellant, v. CHICAGO TITLE INSURANCE COMPANY et al., Defendants and Respondents

A162799

California Court of Appeals, First District, Fourth Division

April 14, 2023

NOT TO BE PUBLISHED

(Alameda County Super. Ct. No. RG19020569)

STREETER, J.

Patrick T. Galligan appeals from a judgment entered upon the trial court's sustaining of demurrers by defendants Eden Toothman, Chicago Title Company (CTC), Chicago Title Insurance Company (CTIC), and Fidelity National Title Group (FNTG) to Galligan's Third Amended Complaint (TAC). In his TAC, Galligan sought to recover attorney fees and costs he incurred in his separate, successful lawsuit against a client, Diane Arancibia (who is not a party here), for the recovery of compensation he was due under his fee agreement with her for legal services rendered. Galligan alleged in his TAC that defendants were responsible for those fees and costs, as well as for mental and emotional distress damages because of their alleged misconduct in handling an escrow for the sale of certain real property to Arancibia, in which escrow he was entitled to be a principal, and from which sale he was due compensation for the legal services he provided to Arancibia.

We affirm the trial court's judgment because (1) for most of the 14 causes of action in his TAC, Galligan failed to allege facts sufficient to show that he had any right to buy the real property or independently control its escrow, and (2) for the remainder of his causes of action, Galligan failed to allege facts sufficient to show defendants' alleged misconduct caused the harm Galligan alleged he suffered.

I. BACKGROUND

In May 2019, Galligan filed his initial complaint in this action in Alameda County Superior Court. In October 2019, he filed a first amended complaint. In February 2020, the parties stipulated to Galligan's filing of a second amended complaint (SAC), which he filed in March 2020, and in which he alleged 13 causes of action.

CTIC and FNTG in one filing, and CTC and Toothman in another demurred on a variety of grounds to the causes of action Galligan asserted against them in his SAC. The trial court sustained these demurrers with leave to amend. Defendants CTC and Toothman also filed a motion to strike certain allegations, which the court granted.

A. Galligan's Third Amended Complaint Allegations

In his TAC, Galligan again identified as defendants Toothman, CTC, CTIC, and FNTG. He alleged the relevant events began when he entered into an attorney-client fee agreement with Arancibia (Fee Agreement) in August of 2016 concerning residential real property located in Oakland, California (Property) owned by a third party, Rosemary Griffiths. Galligan defended Arancibia, who lived at the Property, against an unlawful detainer action that Griffiths brought against her and represented Arancibia in a separate lawsuit she brought against Griffiths, which included claims for specific performance and quiet title regarding the Property.

According to Galligan, the Fee Agreement, which he attached to the TAC and incorporated into it by reference, provided that he would receive "a contingency fee of one-third of all amounts recovered and a 1/6th ownership interest in the Property if he was successful in establishing Arancibia's 50% ownership interest in the Property, among other things." Arancibia "executed a grant deed in favor of Galligan conveying the 1/6th ownership interest in the Property (the 'Galligan Grant Deed'), to be recorded upon the successful completion of the litigation." Galligan, "[t]o protect the interests of Arancibia and himself, recorded, as attorney of record, a lis pendens against the Property."

Galligan alleged that in December 2016, Arancibia and Griffiths entered into a written settlement of the two lawsuits (Settlement Agreement), which Galligan also attached to the TAC and incorporated into it by reference. The Settlement Agreement allegedly provided that "Griffiths would sell the Property to Arancibia and Arancibia's investors/co-buyers for an agreed price less cash credits in the amount of about 50% of the net equity in the Property."

Galligan claimed this settlement "achieved the goals and satisfied the conditions of Galligan's fee agreement. Accordingly, upon execution of the Settlement Agreement, Galligan had earned his fee, and the contingency was satisfied and removed." As a result, he and Arancibia "became partners in a joint venture to acquire or sell said Property, where Galligan (a) would be a co-buyer of the Property with Arancibia and (b) would receive a 1/6th ownership interest in the Property when Arancibia purchased the Property as provided in the Settlement Agreement. Pursuant to the Settlement Agreement, the buyers would receive a cash credit of $380,000 toward the purchase price, with Galligan being entitled to one-third of that cash credit, i.e., $126,666. Galligan intended to deposit the Galligan Grant Deed into escrow and to have it recorded as part of the purchase transaction. If Arancibia did not effectuate a purchase of said Property, the Property would be sold to a third party and Galligan would receive one-third of Arancibia's share of the net sale proceeds."

According to Galligan, defendant CTC opened an escrow for the purchase of the Property in May 2017. Defendant Toothman, an escrow officer, notary public, and "assistant vice president of [d]efendants," handled the escrow and, upon closing, the title policy. The Settlement Agreement was deposited into the escrow. Galligan further alleged, "Said Settlement Agreement constituted and included escrow instructions, which among other things specifically abrogated the parties' right to sell or handle the escrow of said Property, with that right being delegated to their respective attorneys, including Galligan. The Settlement Agreement further provided . . . that title insurance would be obtained for the benefit of the buyers of the Property."

Galligan alleged that Arancibia and defendants deliberately manipulated the escrow to cheat him out of the compensation he and Arancibia agreed he would receive under the Fee Agreement. He contended that Toothman knew the Property was being purchased pursuant to the Settlement Agreement, to which she had access. Further, she knew the Settlement Agreement provided that the parties' "respective counsel would be involved in all matters necessary to market and sell the Property, specifically including the escrow," and "knew or should have known that Galligan was owed legal fees, and had been granted an interest in the Property as a form of payment of his legal fees."

Nonetheless, Galligan continued, Toothman and Arancibia "were business associates and close personal friends," which caused Toothman to "agree[] to assist Arancibia in avoiding Arancibia's obligations to Galligan under Galligan's fee agreement." Toothman allegedly told Arancibia on May 24, 2017, that, in order to close escrow and complete the purchase of the Property, the lis pendens Galligan had previously filed in the underlying lawsuit against Griffiths had to be withdrawn and a notice of withdrawal recorded with the Alameda County Recorder. Further, "[t]o clear title, the notice of withdrawal had to appear as if it was being submitted by Galligan, the attorney of record" in the lawsuit against Griffiths, and it had to be notarized. Toothman advised Arancibia that the original lis pendens Galligan had filed "should be altered" to indicate withdrawal of it, and "provided Arancibia with certain language that needed to be included in the notice." In his TAC, Galligan recited deposition testimony by Arancibia in which she said Toothman told her to take Galligan's "masthead" in creating the notice of withdrawal of lis pendens (Withdrawal of Lis Pendens), and that there was nothing wrong with doing so.

Galligan continued, "[t]hereafter, and at the direction of and with the advice, assistance, and encouragement of Toothman, Arancibia and Toothman forged . . . a document entitled Withdrawal of Lis Pendens, which was supposedly prepared in Galligan's name, using Galligan's caption and, in particular, Galligan's California State Bar number, and was made to appear as if Galligan prepared and approved it, when Galligan in fact had no knowledge of the document and did not approve it." Arancibia signed the document and, on May 25, 2017, Toothman notarized it, although she "knew that the document had been forged and that Galligan had no knowledge of or participation in its preparation," that the purchase of the Property was made pursuant to a settlement of litigation in which Galligan represented Arancibia, and that the Settlement Agreement provided that the parties' respective counsel would be involved in the escrow.

According to Galligan, this misconduct cleared the way for the escrow of the Property to close. On May 26, 2017, defendants allegedly received a grant deed from Griffiths, money from a lender and others, and cash credits from the Settlement Agreement, which included Galligan's $126,666. On May 30, 2017, "defendants recorded the forged Withdrawal of Lis Pendens with the Alameda County Recorder, closed said escrow, and transferred the Property to Arancibia and her co-buyer, to the exclusion of Galligan." Galligan received neither payment of his credit of $126,666 nor his one-sixth interest in the Property.

Galligan also alleged that upon closing, Toothman "caused to be placed an ALTA Homeowners Policy of Title Insurance, issued by [CTIC] and underwritten by [FNTG], which was intended to insure all buyers of the Property and which purportedly provided title insurance to the buyers of the Property .... Arancibia, [a third party], and Galligan were the buyers of the Property."...