Garton v. Title Ins. & Trust Co.

• Decision Date: 30 May 1980
• Citation: 106 Cal.App.3d 365,165 Cal.Rptr. 449
• Court: California Court of Appeals Court of Appeals
• Parties: Charles P. GARTON and Burleen Garton, Individually and as husband and wife, Plaintiffs and Appellants, v. TITLE INSURANCE AND TRUST COMPANY and Stephen Craig Hunter, Defendants and Respondents. Civ. 18379.

Page 449

165 Cal.Rptr. 449

106 Cal.App.3d 365

Charles P. GARTON and Burleen Garton, Individually and as husband and wife, Plaintiffs and Appellants, v. TITLE INSURANCE AND TRUST COMPANY and Stephen Craig Hunter, Defendants and Respondents.

Civ. 18379.

Court of Appeal, Third District, California.

May 30, 1980.

As Modified on Denial of Rehearing June 27, 1980.

Mikacich, Schenk & Gale and James H. Schenk, Sacramento, for plaintiffs and appellants.

McDonough, Holland, Schwartz & Allen and Richard W. Nichols, Sacramento, for defendants and respondents.

REYNOSO, Associate Justice.

We consider whether a cause of action was stated on the basis of (1) a false acknowledgment on a deed of trust, and (2) for breach of contract and negligent performance of duties as title searcher and escrow holder in a transaction dealing with real property. Plaintiffs Charles P. and Burleen Garton appeal from a judgment of dismissal with prejudice in favor of defendants Title Insurance and Trust Company (TI&T) and Stephen Craig Hunder. The Superior Court of Sacramento County sustained a demurrer to their second amended complaint without leave to amend. We reverse and remand. ¹

A summary of the complaint's allegations follow. The appeal, of course, deals only with the causes of action against TI&T and Hunter. Defendant Pioneer Realty is the corporate employer of defendants Miller, Silva and Munoz. Silva and Munoz are licensed real estate salespersons, and Miller is a licensed real estate broker. TI&T is the corporate employer of Hunter and Reed. Hunter is a commissioned Notary Public, and Reed is an escrow officer.

The factual background is this: In 1977 Charles Jeffries was the owner of real property located in Sacramento County. Jeffries entered into two written contracts to sell two parcels of his property to plaintiffs and Charles and Anita Murphy. The properties to be sold were designated Parcels 1 and 2, and each contained approximately 5,001 acres. Parcel 1 was entirely within a portion of a larger parcel recorded in the Sacramento County Assessor's (County Assessor) map as parcel number 136-18-10. The western one-half of Parcel 2 was included within the same parcel number; however, the eastern one-half was included within another parcel recorded in the County Assessor's map as number 136-18-11. This may be illustrated as follows:

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Previously, in 1953 the parcel of property which may be identified as County Assessor's number 136-18-11, was conveyed by Hartford and Gladys Archibald to Frank and Sonoma Smith. The Archibalds reserved unto themselves "all of the gas, oil, minerals in and under said land, and all rights thereto, including, but not limited to, the perpetual rights of ingress and egress to and from said land for the purpose of drilling, exploring and mining, and in every way operating for such oil, gas and minerals and removing the same." Jeffries was a successor in interest of the Smiths and, as plaintiffs would later discover, Jeffries could convey full title to parcel 1 and to the western one-half of parcel 2. He could not convey full title to the eastern one-half of parcel 2 since the Archibalds owned the reservation of oil, gas and mineral rights.

The contracts of the sale of the Jeffries property provide that Pioneer Realty was to receive a brokerage commission upon the sale of each parcel, and that escrow for the sale of each parcel was to be opened with TI&T. Escrow was opened. Pursuant to application by Pioneer Realty, TI&T prepared four title reports.

The first title report, denominated the initial report and dated February 18, 1977, listed plaintiffs and the Murphys as purchasers and reported only on the title of the property lying within County Assessor's parcel 136-18-10. It did not show the reservation of oil, gas and mineral rights in the Archibalds; those reservations were in parcel 136-18-11. The second report, denominated the first amended title report dated May 6, 1977, listed only the Murphys as purchasers and reported only on the property contained in County Assessor's parcel number 136-18-10. The second amended report, dated July 6, 1977, likewise listed only the Murphys as purchasers and only reported on the title of the property within Assessor's parcel number 136-18-10.

The third amended title report was dated July 15, 1977. It listed both the Murphys and plaintiffs as the purchasers. This report was made on the property contained in Assessor's parcel number 136-18-11 as well as 136-18-10, and did disclose the reservation of oil, gas and mineral rights in the Archibalds.

Plaintiffs submitted escrow instructions jointly with the Murphys on March 15, 1977, and for themselves alone on August 17, 1977. Plaintiffs allege that on August 17, 1977, defendant Silva represented to them that the second amended title report was the report to which the escrow instructions referred, and that the second and third amended title reports were the same. Plaintiffs further allege that Silva failed to inform them that the third amended report showed a reservation of oil, gas and mineral rights in the Archibalds.

When plaintiffs submitted their escrow instructions to TI&T they also submitted a note secured by deed of trust and a deed of trust. Plaintiffs signed the note and deed of trust in the presence of defendant Silva alone, and neither the note nor deed of trust contained an exception for the reservation of oil, gas and mineral rights in the Archibalds. On August 18, 1977, defendant Hunter, as Notary Public, took the acknowledgment of the deed of trust. Such acknowledgment was false since plaintiffs did not appear before Hunter to acknowledge their signatures thereon.

After plaintiffs signed the deed of trust Hunter and TI&T appended an exception setting forth the reservation of oil, gas and mineral rights in the Archibalds. When the deed of trust was recorded it contained such an exception. This action was taken without the knowledge, consent, or permission of the plaintiffs, and was not done in their presence.

Plaintiffs completed the transaction and took title to parcel 2. ² They were prevented from using the property in the manner they had planned due to the reservation of oil, gas and mineral rights in the Archibalds.

In their first, second, and third causes of action plaintiffs assert liability against defendants TI&T and Hunter for the fraud, deceit, and/or misrepresentation of Silva on an agency theory. In the fifth cause of action plaintiffs assert liability against defendants for falsely taking the acknowledgment of the deed of trust without which the transaction could not have been completed. Plaintiffs further assert that defendants, as escrow holder, title searcher, and title insurer, had an obligation to inform plaintiffs of the reservation of oil, gas and mineral rights, and that they failed to so inform plaintiffs and further prevented plaintiffs from learning of the reservation by taking a false acknowledgment and by appending the exception to the deed of trust without plaintiffs' knowledge.

In their sixth cause of action plaintiffs assert that TI&T had a fiduciary duty as escrow holder, title searcher and title insurer, to find and report to plaintiffs the reservation of the oil, gas and mineral rights. Plaintiffs allege that TI&T failed to discover the reservation in a timely manner and further failed to report the reservation to them. In their seventh cause of action plaintiffs allege that TI&T and Hunter acted in a negligent, careless, and reckless manner in the handling of the escrow and in taking the acknowledgment of the deed of trust.

In their ninth cause of action plaintiffs allege that when they discovered the reservation of oil, gas and mineral rights they instructed Hunter to attempt to obtain a release of those rights. They seek an injunction ordering defendants to obtain a release of the oil, gas and mineral rights in the property.

TI&T and Hunter successfully demurred to the allegations of the complaint. A demurrer tests the pleading alone and not the evidence or other extrinsic matters and for this reason will lie only where the defects appear on the face of the pleading. (Code Civ.Proc., § 430.30.) "(I)t is wholly beyond the scope of the inquiry to ascertain whether the facts stated are true or untrue. That is always the ultimate question to be determined by the evidence upon a trial of the questions of fact. Obviously, the complaint, when appropriately challenged, whether for want of sufficient facts or for an insufficient or inartificial (sic) statement of the facts, must stand or fall by its own force. Nothing dehors the pleading itself can be considered to determine whether it is obnoxious to objections made against it as a pleading." (Colm v. Francis (1916) 30 Cal.App. 742, 753, 159 P. 237, 241.) For purposes of the demurrer, and hence this appeal, TI&T and Hunter have admitted all material, issuable facts properly pleaded in the complaint, however improbable they may be. (McHugh v. Howard (1958) 165 Cal.App.2d 169, 174, 331 P.2d 674; Griffith v. Department of Public Works (1956) 141 Cal.App.2d 376, 381, 296 P.2d 838.) We proceed to consider whether the complaint is sufficient.

I

Causes of action one through three of the second amended complaint are based upon the acts of defendant Silva. Plaintiffs claim a cause against defendants for the alleged misrepresentation of Silva through the doctrine of respondeat superior. Simply stated, the doctrine of respondeat superior imposes liability upon an innocent principal or employer for the torts of his agent or employee which are committed within the scope of employment whether or not the agent or employee acts in excess of his authority or contrary to his instructions. (1 Witkin, Summary of Cal. Law (8th ed. 1973) Agency and Employment, § 155, pp. 754-755.) Moreover, a principal may become liable for the fraud and/or misrepresentation of...