Louisville Title Ins. Co. v. Surety Title & Guar. Co.

• Decision Date: 06 August 1976
• Citation: 132 Cal.Rptr. 63,60 Cal.App.3d 781
• Court: California Court of Appeals Court of Appeals
• Parties: LOUISVILLE TITLE INSURANCE COMPANY, a Kentucky Corporation, Plaintiff and Appellant, v. SURETY TITLE & GUARANTY COMPANY, a California Corporation, et al., Defendants and Respondents. Civ. 35594.

Page 63

132 Cal.Rptr. 63

60 Cal.App.3d 781

LOUISVILLE TITLE INSURANCE COMPANY, a Kentucky Corporation, Plaintiff and Appellant, v. SURETY TITLE & GUARANTY COMPANY, a California Corporation, et al., Defendants and Respondents.

Civ. 35594.

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

Aug. 6, 1976.

Tobin & Tobin, John L. Hosack, San Francisco, for plaintiff and appellant.

Johnston, Miller & Giannini, San Jose, for defendants and respondents.

SIMS, Associate Justice.

Plaintiff, a title insurance company incorporated in Kentucky and duly qualified to do business in the State of California, has appealed from a judgment entered on a verdict in favor of defendants in an action in which it sought to recover on an agreement under which defendant title company, a title company underwritten by plaintiff (see Ins.Code, § 12340.5 and former § 12402), and the latter's president, who held 99.9 percent of its stock, agreed to hold plaintiff harmless from any loss on an appeal bond, or a specific indemnity agreement given by plaintiff to a corporate surety for the issuance of such bond, in connection with a judgment then entered against the title company. Plaintiff has also appealed from an order denying its motion for judgment notwithstanding the verdict. (See Code Civ.Proc., § 904.1, subd. (d).)

The principal issues raised by the pleadings and presented to the jury were (1) whether the agreement entered into by the defendants (then and now referred to as 'Surety' and 'Macredes') was without legal consideration, (2) whether that agreement was entered into by reason of economic compulsion which plaintiff ('Louisville') brought to bear on the defendants, and (3) whether Louisville suffered any loss within the terms of the agreement. On appeal the plaintiff has undertaken to demonstrate that as a matter of law there was not sufficient evidence to sustain the defendants' contentions that the agreement was unenforceable, and that the evidence compelled a finding that it suffered a loss as a matter of law. Collateral issues raised by Louisville are alleged errors in the exclusion and admission of evidence, alleged errors in the instructions given by the court, and a theory that the defendants were estopped from attacking the validity of the indemnity agreement.

In the absence of any special verdicts, we are bound by the rule that where several issues are tried a general verdict will not be disturbed by an appellate court if a single one of those issues, sufficient to sustain the judgment, is supported by substantial evidence and is uneffected by error, even though another issue leading to a similar general verdict and judgment was erroneously submitted to the jury. (See Gillespie v. Rawlings (1957) 49 Cal.2d 359, 368--369, 317 P.2d 601; McCloud v. Roy Riegels Chemicals (1971) 20 Cal.App.3d 928, 935--937, 97 Cal.Rptr. 910; and Posz v. Burchell (1962) 209 Cal.App.2d 324, 325--337, 25 Cal.Rptr. 896.) In addition the scope of our review is limited by principles which were enunciated in Crawford v. Southern Pacific Co. (1935) 3 Cal.2d 427, 45 P.2d 183, as follows: 'In reviewing the evidence on such an appeal all conflicts must be resolved in favor of the respondent, and all legitimate and reasonable inferences indulged in to uphold the verdict if possible. It is an elementary, but often overlooked principle of law, that when a verdict is attacked as being unsupported, the power of the appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the conclusion reached by the jury. When two or more inferences can be reasonably deduced from the facts, the reviewing court is without power to substitute its deductions for those of the trial court. (Citations.)' (3 Cal.2d at p. 429, 45 P.2d at p. 184.)

The applicable rules upon which the plaintiff must rely are found in Walters v. Bank of America, etc., Assn. (1937) 9 Cal.2d 46, 69 P.2d 839, as follows: 'The trial court, in a proper case, may direct a verdict in favor of a party upon whom rests the burden of proof, in this case the plaintiff. Substantially the same rules apply to directed verdicts in favor of plaintiffs as apply to such verdicts in favor of defendants. (Citations.) A directed verdict may be granted, when, disregarding conflicting evidence, and indulging every legitimate inference which may be drawn from the evidence in favor of the party against whom the verdict is directed, it can be said that there is no evidence of sufficient substantiality to support a verdict in favor of such party, if such a verdict has been rendered. (Citations.) In passing on the propriety of the trial court's action in directing a verdict, the doctrine of scintilla of evidence has been rejected in this state. (Citation.) A motion for a directed verdict may be granted upon the motion of the plaintiff, where, upon the whole evidence, the cause of action alleged in the complaint is supported, and no substantial support is given to the defense alleged by the defendant. (Citations.)' (9 Cal.2d at p. 49, 69 P.2d at p. 840. Accord: Newing v. Cheatham (1975) 15 Cal.3d 351, 358--359, 124 Cal.Rptr. 193, 540 P.2d 33.)

As outlined below, we find that the trial court erred in applying the law to the uncontroverted facts. The cause of action alleged in the complaint is supported, and no substantial support is given to the defenses alleged by the defendants. This being so our action is prescribed by section 629 of the Code of Civil Procedure which provides in pertinent part: 'If the motion for judgment notwithstanding the verdict be denied and if a new trial be denied, the appellate court shall, when it appears that the motion for judgment notwithstanding the verdict should have been granted, order judgment to be so entered on appeal from the judgment or from the order denying the motion for judgment notwithstanding the verdict.' Because the record reflects that plaintiff has made collections which mitigate damages, the matter is remanded to the trial court for entry of judgment for plaintiff for such damages as may be properly established.

Surety Title and Guaranty Company at all times material herein was a corporation organized and existing under the laws of this state carrying on a business as a title company (see Ins.Code, § 1234.3 and former § 12402) in Santa Clara County. Louisville Title Insurance Company at all times material herein was a corporation organized and existing under the laws of the State of Kentucky and authorized to underwrite title insurance for title companies in the State of California. Prior to 1960, Surety's title insurance business was underwritten by Pacific Coast Title Insurance Company pursuant to an agreement executed May 1, 1958. In 1960, because of questions raised in connection with Pacific Coast, the Insurance Commissioner requested Louisville to authorize certain of the title companies underwritten by Pacific Coast, including Surety, to issue Louisville's policies. Subsequently, the commissioner determined that Pacific Coast could not be salvaged, it was liquidated, and Louisville was authorized to negotiate formal underwriting agreements with the title companies formerly underwritten by Pacific Coast.

On December 1, 1962, Louisville and Surety entered into a formal underwriting agreement. Amendments to the agreement were dated September 24, 1973, December 1, 1964, June 1, 1965, and December 1, 1969. On April 1, 1971, Louisville gave Surety written 30-day notice of its intent to cancel the then existing underwriting agreement and the agency of Surety to issue its policies, except as provided in the notice of cancellation and an addendum thereto. The provisions of the underwriting agreement and the amendments thereto which bear on the issues of this case are discussed below.

Sometime in 1962 a claim was made against Surety by A. J. Raisch Paving Co. predicated on Surety's failure to pay that company for paving work in a development. It appeared that the title company had represented to the contractor that it was holding $28,780 for off-site developments, when in fact it only held a check of the developers which was dishonored when presented for payment. Raisch on April 4, 1963, filed an action against United Pacific Insurance Company, the surety on the developer's performance bond, Surety and others. United Pacific filed a cross-complaint against Surety, Tri-Valley Developers, Inc., a corporation, the developer, Sinnot Murphy and Jeanette Murphy the principals in that development, and sought to foreclose a mechanics' lien upon lots in the subdivision, some of which were the subject of title insurance either issued by Louisville, or assumed by that insurer in taking over some of the business of Pacific Coast. The action was tried in 1965 and 1966 and had been decided adversely to Surety. On March 20, 1968, judgment was entered for $50,246 against Surety and the other defendants, including the foreclosure of the mechanics' lien on some 35 lots, of which more than half had title insurance which was the responsibility of Louisville. Surety was given judgment on a cross-complaint against Sinnot Murphy.

Louisville at one time owned a substantial block of Surety's stock. Defendant Macredes, who had started a program of buying shares in Surety, acquired Louisville's stock and that of other minor shareholders, and gained control of Surety. He became president on February 17, 1964, and by December 1964 he had acquired and retained 34,610 shares, representing 99.94 percent of ownership of the company in April 1968.

On April 1 and 2, 1968, Harrison H. Jones, a senior vice-president of Louisville, and Frank E. Good, apparently its West Coast representative, met with Macredes, president of Surety, in San Jose (1) to review Surety's litigation report from 1961 through November 30, 1967, including the Raisch suit, case-by-case in order to define the liability on each...