Prentice v. North Am. Title Guaranty Corp., Alameda Division

• Decision Date: 21 May 1963
• Citation: Prentice v. North Am. Title Guaranty Corp., Alameda Division, 30 Cal.Rptr. 821, 59 Cal.2d 618, 381 P.2d 645 (Cal. 1963)
• Parties: , 381 P.2d 645 John J. PRENTICE et al., Plaintiffs and Respondents, v. NORTH AMERICAN TITLE GUARANTY CORPORATION, ALAMEDA DIVISION, Defendant and Appellant. S. F. 20954.
• Court: California Supreme Court

Page 821

30 Cal.Rptr. 821

59 Cal.2d 618, 381 P.2d 645

John J. PRENTICE et al., Plaintiffs and Respondents, v. NORTH AMERICAN TITLE GUARANTY CORPORATION, ALAMEDA DIVISION, Defendant and Appellant.

S. F. 20954.

Supreme Court of California, In Bank.

May 21, 1963.

Sidney L. Weinstock, Harold J. Chase and Weinstock, Anderson, Maloney & Chase, San Francisco, for defendant and appellant.

John R. Forde, Jr., Walnut Creek, and Robert T. Eshleman, Richmond, for plaintiffs and respondents.

McCOMB, Justice.

Defendant appeals from a judgment in favor of plaintiffs in an action to recover damages for negligence in the closing of a sale of real property.

Facts: Plaintiffs agreed to sell certain land to Robert J. Horton and Mary R. Horton, to accept the Hortons' deed of trust for most of the purchase price, and to subordinate their interest to any loan the Hortons might obtain for the purpose of constructing an apartment building on the land.

The Hortons obtained a loan from Blanche Pope Neal and gave their note in the amount of the loan, secured by a first deed of trust on the property.

Defendant acted as escrow holder and closed the transaction pursuant to written instructions from the parties.

Upon completion of the sale, the Hortons had title to the land, subject to a first deed of trust in favor of Neal and a second deed of trust in favor of plaintiffs for the balance due on the purchase price.

The Hortons did not use the proceeds of the loan from Neal to construct an apartment house, but devoted the money to other purposes, later filing a petition in bankrupcy.

Plaintiffs then brought this action against the Hortons, Neal, and defendant.

Plaintiffs' complaint contained various counts against defendants Horton and Neal, and the trial court granted relief against these defendants by a decree quieting plaintiffs' title against their claims.

The counts against defendant were based purely on the ground of negligence. The trial court found that defendant had been negligent in closing the sale and awarded plaintiffs as damages the amount of attorney's fees incurred by them in the prosecution of the counts in the complaint against defendants Horton and Neal.

Questions: First. When a vendor of land has been required, because of the negligence of a paid escrow holder, to protect his interests by bringing a successful quiet title action against the purchaser and the holder of a first deed of trust, may he recover from the escrow holder the amount of attorney's fees paid in the quiet title action?

Yes. General rule: In the absence of some special agreement, statutory provision, or exceptional circumstances, attorney's fees are to be paid by the party employing the attorney. (Code Civ.Proc. § 1021; Reid v. Valley Restaurants, Inc., 48 Cal.2d 606, 610(5), 311 P.2d 473; Estate of Reade, 31 Cal.2d 669, 671(2), 191 P.2d 745; Estate of Williamson, 150 Cal.App.2d 334, 341(8), 310 P.2d 77.)

Exception: A person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney's fees, and other expenditures thereby suffered or incurred. (Stevens v. Chisholm, 179 Cal. 557, 564, 178 P. 128; Nelson v. Kellogg, 162 Cal. 621, 623, 123 P. 1115; Contra Costa County Title Co. v. Waloff, 184 Cal.App.2d 59, 67(9a), 7 Cal.Rptr. 358; Rest., Torts (1939) § 914; 15 Am.Jur. (1938) Damages, § 144, p. 552; 25 C.J.S. (1941) Damages § 50c, p. 534; cf. Estate of Williamson, supra, 150 Cal.App.2d 334, 341, 310 P.2d 77.)

It is urged that this exception is not applicable in this case because of the provisions of section 1021 of the Code of Civil Procedure. That section provides: 'Except as attorney's fees are specifically provided for by statute, the measure and mode of compensation of attorneys * * * is left to the agreement * * * of the parties * * *.'

This section undoubtedly prohibits the allowance of attorney fees against a defendant in an ordinary two-party lawsuit. (Reid v. Valley Restaurants, Inc., supra; American Aeronautics Corp. v. Grand Central Aircraft Co., 155 Cal.App.2d 69, 83(9), 317 P.2d 694.) Section 1021 is merely a statement of the general rule. (See Rest., Torts (1939) § 914, com. c.)

The section is not applicable to cases where a defendant has wrongfully made it necessary for a plaintiff to sue a third person. (Stevens v. Chisholm, supra; Nelson v. Kellogg, supra; Contra Costa County Title Co. v. Waloff, supra; Peebler v. Olds, 71 Cal.App.2d 382, 389(8), 162 P.2d 953.) In this case we are not dealing with 'the measure and mode of compensation of attorneys' but with damages wrongfully caused by defendant's improper actions.

When a paid escrow holder has, as in this case, negligently made it necessary for the vendor of land to file a quiet title action against a third person, attorney's fees incurred by the vendor in prosecuting such action are recoverable as an item of the vendor's damages in an action against the escrow holder.

Here the natural and proximate consequence of defendant's negligence was to require plaintiffs to...