Howe v. City Title Ins. Co.

• Citation: 63 Cal.Rptr. 119,255 Cal.App.2d 85
• Court: California Court of Appeals
• Decision Date: 16 October 1967
• Parties: John R. HOWE, Plaintiff and Respondent, v. CITY TITLE INSURANCE COMPANY, a corporation, Defendant and Appellant. Civ. 23469.

Page 119

63 Cal.Rptr. 119

255 Cal.App.2d 85

John R. HOWE, Plaintiff and Respondent, v. CITY TITLE INSURANCE COMPANY, a corporation, Defendant and Appellant.

Civ. 23469.

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

Oct. 16, 1967.

Ruffo & Oneto, San Jose, for appellant.

Johnson, Speed & Bamford, San Jose, for respondent.

ELKINGTON, Associate Justice.

Defendant City Title Insurance Company appeals from a judgment of $6,250, plus interest, recovered by plaintiff John R. Howe in a negligence action. The negligence consisted of the failure of defendant to record a request for notice of default and sale under a trust deed as authorized by Civil Code section 2924b. As a result, plaintiff, holder of a junior trust deed on real property, was denied an opportunity to cure a default (as permitted by Civ.Code, § 2924c) under a superior trust deed. The real property was sold December 6, 1962 under a power of sale of the prior instrument, thus wiping out the security of plaintiff's note for $6,250.

Plaintiff's note and deed of trust had been executed to secure payment of the payment of the purchase price of real property and under Code of Civil Procedure section 580b he had no right to a deficiency judgment. Payment of the note, however, had been guaranteed by the husband of the maker, against whom no proceedings for collection were taken.

The first assignment of error is: 'The court erred in finding the note was valueless after its security was lost.'

Defendant concedes that the note's maker was not personally obligated thereon. It insists, however, that there was no evidence that the note was uncollectible from its guarantor.

The evidence showed that the guarantor and his wife had much difficulty meeting the required payments on the two trust deed obligations. It also established that an unsatisfied judgment for $6,000 had been outstanding against the guarantor for several months. No evidence of the guarantor's ability to meet the guarantee was offered by defendant. There was sufficient evidentiary support for the criticized finding.

The instant assignment of error assumes a requirement that plaintiff must unsuccessfully proceed against the guarantor before asserting his negligence claim against defendant. We do not find this to be the law. Nor do we find the alleged erroneous finding necessary to support the judgment.

But for defendant's negligence plaintiff would have had the security of the real property. His claim against defendant was a substitute for that security. No reason appears why the plaintiff here should first be required to enforce the debt by action against the guarantor, and then if necessary, resort to the security substitute.

In a case concerning somewhat similar facts the court in Stephans v. Herman, 225 Cal.App.2d 671, 673, 37 Cal.Rptr. 746, 748, stated: 'Although the title company is liable only for the loss of security, we do not accept its contention that plaintiffs must exhaust every means of realizing upon their judgment against the Hermans before resorting to that against the title company. * * * Save for the negligent reconveyance by the company, plaintiffs would have immediate recourse to lots 8 and 9 as security, and normally would be not only entitled, but required, to proceed first against that security (citation). We find no reason to hold that the company's negligence compels plaintiff now to exhaust the general assets of the debtors, or to prove uncollectibility of the note, before resorting to the company liability which substitutes for the security.'

The second assignment of error before us is: 'The court erred in finding that plaintiff was damaged in the full face amount of the note.'

The trial court determined that the real property had a fair market value of $20,500, which was greater than the combined face amounts of the two trust deeds. The foregoing assignment of error seems premised...