Hawkins v. Oakland Title Ins. & Guaranty Co.

• Decision Date: 14 November 1958
• Docket Number: No. 17776,17776
• Citation: 331 P.2d 742,165 Cal.App.2d 116
• Court: California Court of Appeals Court of Appeals
• Parties: John H. HAWKINS, Landona Hawkins and Bayshore Investment Corporation, a corporation, Plaintiffs and Appellants, v. OAKLAND TITLE INSURANCE AND GUARANTY COMPANY, a corporation, Defendant and Respondent.

Page 742

331 P.2d 742

165 Cal.App.2d 116

John H. HAWKINS, Landona Hawkins and Bayshore Investment Corporation, a corporation, Plaintiffs and Appellants, v. OAKLAND TITLE INSURANCE AND GUARANTY COMPANY, a corporation, Defendant and Respondent.

No. 17776.

District Court of Appeal, First District, Division 1, California.

Nov. 14, 1958.

M. F. Hallmark, Gilbert D. Calden, Oakland, for appellants.

Price, MacDonald & Knox, Robert W. MacDonald, Oakland, for respondent.

ST. CLAIR, Justice pro tem.

Plaintiffs appeal from a judgment entered after the sustaining of a demurrer to their complaint without leave to amend.

Statement of the Case

The first cause of action in the complaint alleged that in 1943 plaintiffs Hawkins purchased certain real property in Berkeley for $13,000 and that concurrently with the purchase of the property plaintiffs paid defendant for a title insurance policy for that amount on the property.

On November 6, 1953, plaintiffs Hawkins transferred the property to plaintiff Bayshore Investment Corporation in return for shares of capital stock of the corporation.

Prior to the discovery hereinafter referred to, plaintiffs Hawkins built a service station on the property at a cost of $25,000.

On December 3, 1954, plaintiffs discovered a deed recorded on March 22, 1938, from Marie Bullard to the State of California deeding 'the access rights from the property hereinbefore described to the said Eastshore Highway save and except through a service road,' a deed not mentioned in the title policy.

As to damages, the only allegation in count one read, 'That solely by reason of the defendant's failure to advise plaintiffs John H. Hawkins and Landona Hawkins of the deed granting said access and plaintiffs John H. Hawkins' and Landona Hawkins' construction of said service station, plaintiffs, John H. Hawkins and Landona Hawkins have been damaged in a sum in excess of $13,000.00.'

The prayer to count one was that the plaintiffs Hawkins be granted judgment against defendant for $13,000 and general relief.

The second cause of action alleged that in the title policy defendant falsely represented to plaintiffs in and by the title policy that their property was free and clear of all encumbrances except those specifically disclosed in the title policy; that said representations were carelessly and recklessly made by defendant in a manner not warranted by the information available to it, to wit, the public records of Alameda County; that by the exercise of ordinary care defendant would have known the falsity of said representations; that in reliance upon these representations plaintiffs spent $13,000 for the property and $25,000 for improvements. The allegation as to damage is solely by reason of said representations plaintiffs John H. and Landona Hawkins were damaged in the sum of $38,000. The prayer is by the Hawkins for damages in the amount of $38,000 and general relief.

In the third cause of action (the first count for plaintiff Bayshore Investment Corporation) plaintiff Bayshore Investment Corporation brought forward and incorporated the allegations of the first cause of action and alleged that it acquired the land by reason of the Hawkins plaintiffs 'consolidating and merging their interest in said land into and with plaintiff Bayshore Investment Corporation, a corporation; that in said merger and consolidation, plaintiff Bayshore Investment Corporation, a corporation, issued shares of its capital stock equally to John H. Hawkins and Landona Hawkins, of a value in excess of the sum of $13,000; that plaintiff Bayshore Investment Corporation, a corporation, by issuing its said stock and by reason of defendant's failure to notify John H. Hawkins and Landona Hawkins and by reason of Bayshore Investment Corporation's, a corporation issuance of said stock, plaintiff Bayshore Investment Corporation, a corporation, has been damaged in a sum in excess of $13,000.00.'

The Bayshore Investment Corporation then goes on to further plead: 'That solely by reason of defendant's failure to advise plaintiffs John H. Hawkins and Landona Hawkins and Bayshore Investment Corporation, a corporation, of the deed granting said access, plaintiff Bayshore Investment Corporation, a corporation, has been damaged in a sum in excess of $13,000.00.'

The prayer is by Bayshore Investment Corporation for damages in the amount of $13,000.

The fourth cause of action (the second for Bayshore Investment Corporation) incorporated the allegations of the second and further alleged that 'plaintiffs John H. Hawkins and Landona Hawkins, in reliance upon said representations of defendant, expended $13,000.00 on the purchase of said real property and in addition expended the sum of $25,000.00 in the construction of a service station on said property; that thereafter, plaintiffs John H. Hawkins and Landona Hawkins, merged and consolidated their interest in said real property and improvements with plaintiff, Bayshore Investment Corporation, a corporation, and plaintiff, Bayshore Investment Corporation, a corporation, issued 400 shares of its capital stock to each of the plaintiffs, John H. Hawkins and Landona Hawkins on the basis that said real property and improvements were of a value in excess of $38,000.00; that said capital stock was issued to John H. Hawkins and Landona Hawkins solely by said representations and plaintiff Bayshore Investment Corporation, a corporation, would not have issued said stock save and except for said representations and that by reason of the issuance of said capital stock plaintiff Bayshore Investment Corporation, a corporation, has been damaged in the sum of $38,000.00.'

The title policy which is appended as an exhibit to the complaint provides that the defendant 'does hereby insure John H. Hawkins and Landona Hawkins together with each successor in ownership of any indebtedness secured by any mortgage or deed of trust shown in Schedule B, the owner of which is named as an insured, and any such owner or successor in ownership of any such indebtedness who acquires the land described in Schedule C, or any part thereof, by lawful means in satisfaction of said indebtedness or any part thereof, and any person or corporation deriving an estate or interest in said land, as an heir or devisee of a named insured, or by reason of the dissolution, merger, or consolidation of a corporate named insured, against loss or damage not exceeding thirteen thousand and no/100 ($13,000.00) dollars, which any insured shall sustain * * * by reason of any defect in, or lien or encumbrance on said title, existing at the date thereof, not shown in Schedule B; * * * all subject, however, to Schedules A, B, and C and the stipulations herein all of which schedules and stipulations are hereby made a part of this policy.'

The property is described in Schedule C as certain lots 'excepting therefrom that portion thereof conveyed by Marie Sellar Bullard to the State of California, by deed dated February 20, 1936, recorded April 8, 1936 in book 3296 of Official Records of Alameda County, page 307.'

In the 'Stipulations' portion of the policy, paragraph one provides that the policy does not insure against '(a) defects, liens, claims, encumbrances, or other matters which result in no pecuniary loss to the insured * * *'

First Cause of Action

The first count is for damages for breach of the contract of title insurance. The policy was pleaded and examination thereof indicates it insures against 'pecuniary loss.'

In the case of Title Insurance & Trust Co. v. Los Angeles, 61 Cal.App. 232, 214 P. 667, the Court in holding that a title insurance policy was a contract of guaranty and that the title insurance company was liable as a guarantor, said at page 236, of 61 Cal.App. at page 669 of 214 P.: 'But in the case of a certificate like that now before us, the party entitled to the benefit of the guaranty has a right of action to recover upon the contract contained in the certificate itself, and the liability is one that does not accrue until discovery of the loss that may be incurred if the title is not as represented in the certificate.'

The fact that a title company was liable for all damages proximately caused by a breach of contract was established in the case of Mitchell v. California-Pacific T. Ins. Co., 79 Cal.App. 45, at page 50, 248 P. 1035, at page 1037: 'As against respondent Bakersfield Abstract Company, whose obligation was contractual [cases cited], the relief to which appellant would be entitled, a breach of duty under the contract being shown, is the amount which would compensate for all the detriment proximately caused thereby (Civ.Code, § 3300).'

The defendant contends that the Hawkinses suffered no pecuniary loss under the policy because they exchanged the land for stock of a par value equal to the value of the land plus the improvements. The Hawkinses argue that the value of the stock reflects the value of the corporate assets, and if the assets are depressed in value through a defect in the title of the property, the value of the stock is similarly depressed. Their position is that the diminution in value of the stock, if any, is a matter of proof at the trial. If the corporation were the Hawkinses' alter ego, or the property its only asset, the Hawkinses would have suffered a pecuniary loss even though a paper transaction had been completed that would have resulted in no loss had the realities of the situation been different.

In Going v. Dinwiddie, 86 Cal. 633, 637, 25 P. 129, the court stated that a 'complaint, to be sufficient, must contain a statement of facts which, without the aid of other conjectured facts not stated, shows a complete cause of action.' In the instant case, it is only with the aid of conjecture that it can be concluded that the Hawkins, plaintiffs, might have sustained some loss. Only the exchange is alleged, and had the plaintiffs proved only this at the trial, they would not be entitled to...