Opinion
A162799
04-14-2023
PATRICK T. GALLIGAN, Plaintiff and Appellant, v. CHICAGO TITLE INSURANCE COMPANY et al., Defendants and Respondents
NOT TO BE PUBLISHED
(Alameda County Super. Ct. No. RG19020569)
STREETER, J.
Patrick T. Galligan appeals from a judgment entered upon the trial court's sustaining of demurrers by defendants Eden Toothman, Chicago Title Company (CTC), Chicago Title Insurance Company (CTIC), and Fidelity National Title Group (FNTG) to Galligan's Third Amended Complaint (TAC). In his TAC, Galligan sought to recover attorney fees and costs he incurred in his separate, successful lawsuit against a client, Diane Arancibia (who is not a party here), for the recovery of compensation he was due under his fee agreement with her for legal services rendered. Galligan alleged in his TAC that defendants were responsible for those fees and costs, as well as for mental and emotional distress damages, because of their alleged misconduct in handling an escrow for the sale of certain real property to Arancibia, in which escrow he was entitled to be a principal, and from which sale he was due compensation for the legal services he provided to Arancibia.
We affirm the trial court's judgment because (1) for most of the 14 causes of action in his TAC, Galligan failed to allege facts sufficient to show that he had any right to buy the real property or independently control its escrow, and (2) for the remainder of his causes of action, Galligan failed to allege facts sufficient to show defendants' alleged misconduct caused the harm Galligan alleged he suffered.
I. BACKGROUND
In May 2019, Galligan filed his initial complaint in this action in Alameda County Superior Court. In October 2019, he filed a first amended complaint. In February 2020, the parties stipulated to Galligan's filing of a second amended complaint (SAC), which he filed in March 2020, and in which he alleged 13 causes of action.
CTIC and FNTG in one filing, and CTC and Toothman in another, demurred on a variety of grounds to the causes of action Galligan asserted against them in his SAC. The trial court sustained these demurrers with leave to amend. Defendants CTC and Toothman also filed a motion to strike certain allegations, which the court granted.
A. Galligan's Third Amended Complaint Allegations
In his TAC, Galligan again identified as defendants Toothman, CTC, CTIC, and FNTG. He alleged the relevant events began when he entered into an attorney-client fee agreement with Arancibia (Fee Agreement) in August of 2016 concerning residential real property located in Oakland, California (Property) owned by a third party, Rosemary Griffiths. Galligan defended Arancibia, who lived at the Property, against an unlawful detainer action that Griffiths brought against her and represented Arancibia in a separate lawsuit she brought against Griffiths, which included claims for specific performance and quiet title regarding the Property.
According to Galligan, the Fee Agreement, which he attached to the TAC and incorporated into it by reference, provided that he would receive "a contingency fee of one-third of all amounts recovered and a 1/6th ownership interest in the Property if he was successful in establishing Arancibia's 50% ownership interest in the Property, among other things." Arancibia "executed a grant deed in favor of Galligan conveying the 1/6th ownership interest in the Property (the 'Galligan Grant Deed'), to be recorded upon the successful completion of the litigation." Galligan, "[t]o protect the interests of Arancibia and himself, recorded, as attorney of record, a lis pendens against the Property."
Galligan alleged that in December 2016, Arancibia and Griffiths entered into a written settlement of the two lawsuits (Settlement Agreement), which Galligan also attached to the TAC and incorporated into it by reference. The Settlement Agreement allegedly provided that "Griffiths would sell the Property to Arancibia and Arancibia's investors/co-buyers for an agreed price less cash credits in the amount of about 50% of the net equity in the Property."
Galligan claimed this settlement "achieved the goals and satisfied the conditions of Galligan's fee agreement. Accordingly, upon execution of the Settlement Agreement, Galligan had earned his fee, and the contingency was satisfied and removed." As a result, he and Arancibia "became partners in a joint venture to acquire or sell said Property, where Galligan (a) would be a co-buyer of the Property with Arancibia and (b) would receive a 1/6th ownership interest in the Property when Arancibia purchased the Property as provided in the Settlement Agreement. Pursuant to the Settlement Agreement, the buyers would receive a cash credit of $380,000 toward the purchase price, with Galligan being entitled to one-third of that cash credit, i.e., $126,666. Galligan intended to deposit the Galligan Grant Deed into escrow and to have it recorded as part of the purchase transaction. If Arancibia did not effectuate a purchase of said Property, the Property would be sold to a third party and Galligan would receive one-third of Arancibia's share of the net sale proceeds."
According to Galligan, defendant CTC opened an escrow for the purchase of the Property in May 2017. Defendant Toothman, an escrow officer, notary public, and "assistant vice president of [d]efendants," handled the escrow and, upon closing, the title policy. The Settlement Agreement was deposited into the escrow. Galligan further alleged, "Said Settlement Agreement constituted and included escrow instructions, which among other things specifically abrogated the parties' right to sell or handle the escrow of said Property, with that right being delegated to their respective attorneys, including Galligan. The Settlement Agreement further provided . . . that title insurance would be obtained for the benefit of the buyers of the Property."
Galligan alleged that Arancibia and defendants deliberately manipulated the escrow to cheat him out of the compensation he and Arancibia agreed he would receive under the Fee Agreement. He contended that Toothman knew the Property was being purchased pursuant to the Settlement Agreement, to which she had access. Further, she knew the Settlement Agreement provided that the parties' "respective counsel would be involved in all matters necessary to market and sell the Property, specifically including the escrow," and "knew or should have known that Galligan was owed legal fees, and had been granted an interest in the Property as a form of payment of his legal fees."
Nonetheless, Galligan continued, Toothman and Arancibia "were business associates and close personal friends," which caused Toothman to "agree[] to assist Arancibia in avoiding Arancibia's obligations to Galligan under Galligan's fee agreement." Toothman allegedly told Arancibia on May 24, 2017, that, in order to close escrow and complete the purchase of the Property, the lis pendens Galligan had previously filed in the underlying lawsuit against Griffiths had to be withdrawn and a notice of withdrawal recorded with the Alameda County Recorder. Further, "[t]o clear title, the notice of withdrawal had to appear as if it was being submitted by Galligan, the attorney of record" in the lawsuit against Griffiths, and it had to be notarized. Toothman advised Arancibia that the original lis pendens Galligan had filed "should be altered" to indicate withdrawal of it, and "provided Arancibia with certain language that needed to be included in the notice." In his TAC, Galligan recited deposition testimony by Arancibia in which she said Toothman told her to take Galligan's "masthead" in creating the notice of withdrawal of lis pendens (Withdrawal of Lis Pendens), and that there was nothing wrong with doing so.
Galligan continued, "[t]hereafter, and at the direction of and with the advice, assistance, and encouragement of Toothman, Arancibia and Toothman forged . . . a document entitled Withdrawal of Lis Pendens, which was supposedly prepared in Galligan's name, using Galligan's caption and, in particular, Galligan's California State Bar number, and was made to appear as if Galligan prepared and approved it, when Galligan in fact had no knowledge of the document and did not approve it." Arancibia signed the document and, on May 25, 2017, Toothman notarized it, although she "knew that the document had been forged and that Galligan had no knowledge of or participation in its preparation," that the purchase of the Property was made pursuant to a settlement of litigation in which Galligan represented Arancibia, and that the Settlement Agreement provided that the parties' respective counsel would be involved in the escrow.
According to Galligan, this misconduct cleared the way for the escrow of the Property to close. On May 26, 2017, defendants allegedly received a grant deed from Griffiths, money from a lender and others, and cash credits from the Settlement Agreement, which included Galligan's $126,666. On May 30, 2017, "defendants recorded the forged Withdrawal of Lis Pendens with the Alameda County Recorder, closed said escrow, and transferred the Property to Arancibia and her co-buyer, to the exclusion of Galligan." Galligan received neither payment of his credit of $126,666 nor his one-sixth interest in the Property.
Galligan also alleged that upon closing, Toothman "caused to be placed an ALTA Homeowners Policy of Title Insurance, issued by [CTIC] and underwritten by [FNTG], which was intended to insure all buyers of the Property and which purportedly provided title insurance to the buyers of the Property .... Arancibia, [a third party], and Galligan were the buyers of the Property." Despite his ownership interest in the Property Galligan was not included on this policy as an insured due to Toothman's fraud.
Galligan sued Arancibia and her co-buyer "to reclaim his interest in the Property and recover the economic benefits he lost (the 'San Mateo Action')," and defended against Arancibia's cross-complaint for legal malpractice. Galligan prevailed in the San Mateo Action and was awarded title to a onesixth interest in the Property and a dismissal of the cross-complaint. But he was not awarded attorney fees (for outside counsel), which totaled approximately $140,000. He tendered a claim under the ALTA Homeowners Policy of Title Insurance (title insurance policy) to CTIC for these attorney fees, costs, and for his own time spent in the litigation of the San Mateo Action. CTIC and FNTG (the alleged claims adjuster and underwriter for the title insurance policy), denied the claim and his subsequent request for reconsideration.
Galligan brought 14 causes of action against one, some or all of defendants, alleging misconduct in the handling of the escrow of the Property and regarding the title insurance policy. He contended that the proximate result of the alleged misconduct was that he neither received his one-third percentage ($126,666) of the cash credit Arancibia received in purchasing the Property nor his one-sixth interest in the Property, requiring him to bring the San Mateo Action against Arancibia and incur attorney fees, costs, and lost time as damages. He sought relief in the form of compensatory damages, reform of the title insurance policy to include him, treble damages under Penal Code section 496, attorney fees and costs, punitive damages, mental and emotional distress damages, prejudgment interest, and whatever further legal or equitable relief that the court deemed just and proper. He alleged as follows in his causes of action:
First Cause of Action-Breach of Escrow Instructions, Against CTC: CTC breached escrow instructions regarding Galligan, including by excluding him from escrow, although he was a buyer of the Property with the right under the Settlement Agreement to control the escrow and transfer of the Property.
Second Cause of Action-Breach of Fiduciary Duties, Against All Defendants: Toothman, acting on behalf of CTC, CTIC, and FNTG, violated fiduciary duties to Galligan in her handling of the escrow. FNTG and CTIC knew or should have known the Withdrawal of Lis Pendens was forged, yet approved the closing of the escrow and issued a title insurance policy that failed to include Galligan as an insured.
Third Cause of Action-Fraud, Against All Defendants: Toothman, acting as an employee and agent of the other defendants and in order to deceive and mislead Galligan, did not disclose to Galligan that defendants were not going to abide by the terms of the Settlement Agreement or recognize him as a principal to the escrow entitled to control it, and were going to prepare and record a Withdrawal of Lis Pendens in his name but without his consent.
Fourth Cause of Action-Misconduct of Notary Public-Document Falsification by Notary, Against CTC, CTIC, and Toothman.
Fifth Cause of Action-Notary Misconduct-Identity Theft, Against CTC, CTIC, and Toothman.
Sixth Cause of Action-Notary Misconduct-Misappropriation and Theft, Against CTC, CTIC, and Toothman.
Galligan alleged in these three causes of action that the misconduct engaged in by Toothman, acting for CTC and CTIC, in forging and notarizing the Withdrawal of Lis Pendens violated certain Business and Professions Code, Government Code, and Penal Code provisions.
Seventh Cause of Action-Conversion, Against CTC and Toothman: CTC and Toothman fraudulently converted Galligan's portion of the cash credits that Arancibia received in purchasing the property.
Eighth Cause of Action-Intentional Tort, Against CTC and Toothman: Toothman's misconduct in handling the escrow was an intentional tort that violated Penal Code section 496.
Ninth Cause of Action-Intentional Interference with Attorney/Client and Contractual Relations, Against All Defendants: Defendants knew Galligan was the attorney of record in the lawsuit against Griffiths, who had filed a lis pendens regarding the Property, and that he "had an attorney/client and economic relationship with Arancibia which would result in an economic benefit to Galligan." Defendants' misconduct regarding the escrow of the Property disrupted that relationship and harmed him economically.
Tenth Cause of Action-Violation of Business and Professions Code section 17200 et seq., Against CTC, CTIC and FNTG: The misconduct of the institutional defendants as alleged in the previous paragraphs violated various provisions of the Penal Code, Business and Professions Code, and Government Code, and constituted an unlawful business act or practice.
Eleventh Cause of Action-Breach of Contract, Against CTIC: Galligan should have been, and was, insured under the title insurance policy because he was one of the Property's buyers, and the parties to the policy intended to cover all buyers. CTIC breached its contractual obligation to him by declining to accept his tender regarding his litigation of the San Mateo Action.
Twelfth Cause of Action-Fraud, Against CTIC and FNTG: CTIC and FNTG committed fraud via Toothman's false representations to Arancibia, Galligan's joint venture partner, and to her co-buyer that a title insurance policy for all the buyers of the Property would be obtained when escrow closed.
Thirteenth Cause of Action-Reformation of Contract, Against CTIC: Sought reformation of the title insurance policy to include Galligan as an insured in order to reflect the true intent of the parties to insure all the Property buyers.
Fourteenth Cause of Action-Bad Faith Denial of Insurance Coverage, Against CTIC and FNTG: The failure to provide coverage to Galligan under the title insurance policy for his litigation of the San Mateo Action and related actions constituted a bad faith denial.
B. Defendants' Demurrers to Galligan's TAC
Again, CTIC and FNTG filed one demurrer and CTC and Toothman filed another regarding Galligan's causes of actions against them. The trial court sustained these demurrers without leave to amend. Relying heavily on a reading of subject agreements attached to the TAC and incorporated by reference into it, the court concluded that Galligan was not a buyer of the Property or a party to the escrow, and that defendants owed no duties to him regarding the escrow (including its closing) or the title insurance policy.
The court filed a judgment of dismissal and then an amended judgment of dismissal in favor of defendants. Galligan filed a timely notice of appeal.
During the pendency of this appeal, defendants filed a request for judicial notice of three attached exhibits that they filed in the trial court in support of their demurrers. The trial court granted defendants' request. We deferred ruling on defendants' request, and we hereby grant it under Evidence Code sections 452, subdivision (d) and 459, subdivision (a).
II. DISCUSSION
In the briefs, Galligan and defendants devote considerable attention to a host of issues relating to the trial court's sustaining of defendants' demurrers to Galligan's TAC, including whether Galligan met the elements of each cause of action; whether the Settlement Agreement was a part of the escrow instructions as a matter of law; whether Galligan breached ethical duties as an attorney representing Arancibia; whether Galligan was barred from recovering tort damages under the tort of another doctrine; whether the Withdrawal of a Lis Pendens was a forgery; and whether certain terms of the title insurance policy were ambiguous.
It is not necessary for us to address all of the issues raised and debated in the parties' briefs because we conclude that, as defendants assert and as we will soon discuss, two overarching problems with Galligan's TAC render his 14 causes of action susceptible to demurrer: (1) for most of his causes of action, Galligan failed to allege facts sufficient to show that he had any right to buy the Property or independently control its escrow, and (2) for the remainder of his causes of action, Galligan failed to allege facts sufficient to show causation.
A. Legal Standards
" 'In reviewing an order sustaining a demurrer, we examine the operative complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory.' [Citation.] '"' "We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law...." . . . Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.'" '" (Mathews v. Becerra (2019) 8 Cal.5th 756, 768.)" 'Reversible error is committed if the facts alleged show entitlement to relief under any possible legal theory. [Citation.]' (Duggal v. G.E. Capital Communications Services, Inc. (2000) 81 Cal.App.4th 81, 86, italics added.)" (Davies v. Sallie Mae, Inc. (2008) 168 Cal.App.4th 1086, 1090 (Davies).)" 'However, the judgment will be affirmed if it is proper on any of the grounds raised in the demurrer, even if the court did not rely on those grounds.'" (Jackson v. Doe (2011) 192 Cal.App.4th 742, 750-751.)
" 'We do not assume the truth of contentions, deductions, or conclusions of fact or law and may disregard allegations that are contrary to the law or to a fact which may be judicially noticed.'" (Jackson v. Doe, supra, 192 Cal.App.4th at p. 751.) "We also 'accept as true both facts alleged in the text of the complaint and facts appearing in exhibits attached to it. If the facts appearing in the attached exhibit contradict those expressly pleaded, those in the exhibit are given precedence.'" (Sarale v. Pacific Gas &Electric Co. (2010) 189 Cal.App.4th 225, 245.)
Further," '[w]here a written contract is pleaded by attachment to and incorporation in a complaint, and where the complaint fails to allege that the terms of the contract have any special meaning, a court will construe the language of the contract on its face to determine whether, as a matter of law, the contract is reasonably subject to a construction sufficient to sustain a cause of action for breach.' [Citation.] Moreover, '[t]he rule on demurrer is simply a variation on the well-recognized theme that "It is . . . solely a judicial function to interpret a written instrument unless the interpretation turns upon the credibility of extrinsic evidence." '" (Davies, supra, 168 Cal.App.4th at p. 1091.)
B. Most of Galligan's Causes of Action Fail Because He Did Not State Facts Sufficient To Show He Had Any Right To Buy the Property or Independently Control Its Escrow
We conclude that Galligan's first through third, seventh through ninth, and eleventh through fourteenth causes of action fail because they are rooted in one or more of his factual and legal allegations that he had rights regarding the escrow of the Property that defendants violated. That is, Galligan alleged that, because of his Fee Agreement with Arancibia and her entering into the Settlement Agreement with Griffiths, he became a joint venture partner with her in the purchase of the Property and thereby held the rights of a buyer, entitling him to a portion of the "cash credits" received by her in the purchase of the Property, to be a principal in the escrow, and to be a party to the title insurance policy or, in the alternative, that, if he was a not a party to the transaction between Arancibia and Griffiths, defendants nonetheless owed him fiduciary duties regarding the escrow as alleged in his second cause of action under J'Aire Corp. v. Gregory (1979) 24 Cal.3d 799. He further alleged that, regardless of whether he was a joint venture partner with Arancibia, paragraph 5 of the Settlement Agreement gave him the sole, independent right to control the Property's escrow on behalf of the buyers. Galligan did not allege facts sufficient to support these allegations.
As we have discussed, Galligan alleged in his first cause of action that CTC breached the escrow instructions; in the second, that Toothman, acting on behalf of CTC, CTIC, and FNTG, violated fiduciary duties to Galligan in her handling of the escrow; in the third, that Toothman, acting as an employee and agent of the other defendants and in order to deceive and mislead Galligan, did not disclose to Galligan that defendants were not going to abide by the terms of the Settlement Agreement or recognize him as a principal to the escrow entitled to control it, and were going to prepare and record a Withdrawal of Lis Pendens in his name but without his consent; in the seventh, that Toothman fraudulently converted Galligan's portion of the "cash credits" that Arancibia allegedly received in purchasing the property; in the eighth, that Toothman's misconduct in handling the escrow was an intentional tort in violation of Penal Code section 496; in the ninth, that defendants' misconduct during escrow, such as regarding the lis pendens, disrupted his attorney/client and economic relationship with Arancibia; and in the eleventh through the fourteenth, that institutional defendants engaged in misconduct regarding the title insurance policy issued upon close of escrow, which should have named Galligan as an insured because he was, or was entitled to be, a buyer of the Property.
To the extent Galligan's allegations require that we construe the terms of the Fee Agreement and Settlement Agreement, he did not allege that any of their terms have a special meaning. We construe the language of these agreements by their plain terms to determine whether, as a matter of law, they are reasonably subject to his construction. (Davies, supra, 168 Cal.App.4th at p. 1091.)
"A joint venture is defined as an undertaking by two or more persons, or entities, jointly to carry out a single business enterprise for profit. [Citations.] It requires an agreement under which the parties have (1) a joint interest in a common business, (2) an understanding that profits and losses will be shared, and (3) a right to joint control." (Ramirez v. Long Beach Unified School Dist. (2002) 105 Cal.App.4th 182, 193.) Also, "[a] joint venture may be formed by parol agreement or may be assumed as a reasonable deduction from the acts and declarations of the parties." (Scottsdale Ins. Co. v. Essex Ins. Co. (2002) 98 Cal.App.4th 86, 91.)
Galligan's joint venture allegations fail to meet any of these requirements. He merely alleged that he became partners in a "joint venture" with Arancibia to purchase or sell the Property upon Arancibia and Griffiths executing the Settlement Agreement, without stating anything more about his and Arancibia's purported arrangement. He did not allege that they held a joint interest, shared profits and losses, or had a right of joint control, nor did he allege anything about a parol agreement or acts and declarations from which a joint venture should be assumed. Therefore, we turn to the subject agreements themselves.
The subject agreements undermine rather than support Galligan's joint venture allegation. The Fee Agreement is entitled, "Attorney Contingency Fee Agreement." It provides that, "if" Arancibia's interest in the property is recovered, Galligan would be entitled to one-third of that interest, with Arancibia "deeding said interest" to him, and it indicates that Arancibia had signed deeds regarding these interests that were to be recorded only in the event she recovered her interest in the Property. It gives Galligan the right, if he obtained an interest in the Property, to be bought out by Arancibia within three months of his request that she do so; otherwise, the Property would be sold. The Fee Agreement further provides regarding a claim of fees by Galligan, "[Arancibia] hereby gives and grants unto [Galligan] a lien on said claim and [Arancibia] expressly assigns to [Galligan] any proceeds and any judgment relative to said claim, to the extent of [Galligan]'s fees, costs and disbursements."
We fail to see how any of these Fee Agreement terms can be construed as forming a joint venture between Arancibia and Galligan to purchase the Property. The Fee Agreement makes no mention of anything even suggesting that Arancibia and Galligan intended to form a joint venture; it merely sets out the fee arrangement between an attorney and his client. It also makes plain that Arancibia and Galligan anticipated that Arancibia alone would recover her interest in the Property. Only if and when that happened would she be contractually obligated to deed a portion of it to Galligan. Under the Fee Agreement terms, Galligan arguably would be entitled to enforce a lien or assignment if she failed to so. And since Arancibia's obligation to deed a portion of the Property to Galligan was contingent on her recovery of the Property first, the Fee Agreement did not give Galligan any rights with regard to the escrow of the Property because, according to Galligan's own TAC allegations, she did not recover an interest in the Property until defendants transferred the Property to her (and her third-party co-buyer) at the close of the Property's escrow on May 30, 2017.
In his opening brief, Galligan concedes that he did not allege in his TAC that this meant he became a person holding a beneficial interest in the underlying litigation with Griffiths, and California law does not support such an assertion. (See Isrin v. Superior Court of Los Angeles (1965) 63 Cal. 2d 153, 158-161 [attorney's lien rights in an attorney-client contingent fee contract did not give him the beneficial rights of a real party in interest in the underlying litigation]; Cooper v. Equity Gen. Insurance (1990) 219 Cal.App.3d 1252, 1260 ["A contingent fee contract does not transfer to the attorney any rights to the client's cause of action, but rather gives the attorney a lien on the client's prospective recovery"].)
As for the Settlement Agreement, Arancibia and Griffiths are the only parties to it. It provides that the Property would be placed on the market for sale at an initial price to be determined by Griffiths, which price thereafter could be changed "with the consent of both the parties['] attorneys, or if they can not [sic] agree, by order of the Court." Further, paragraph 5 of the Settlement Agreement provides in relevant part, "The parties' attorneys shall select the brokers for the sale, the escrow, the asking price, and whatever else needs to be done to properly market and sell the subject property. If no agreement can be reached on this or related topics, the matter shall be submitted by motion to the Superior Court and the Judge assigned to this matter will make the final decision."
According to the Settlement Agreement, Griffiths kept "all built up equity in the subject property up to $800,000 ...." Upon a bona fide offer to purchase the Property being made that Griffith intended to accept, "Arancibia shall have the right to purchase said property at the same price," subject to certain modifications. These modifications include that, "[i]f [Arancibia] purchases the subject property, the price for [Arancibia]'s purchase shall be equal to $800,000 plus 50% of the amount of the initial offer that exceeds $800,000 ...." Further, "[i]f [Arancibia] does not purchase the subject property, [Arancibia] shall receive 45% of the purchase price that exceeds $800,000 . . . on close of escrow."
In other words, nothing stated in the Settlement Agreement even remotely suggests that Arancibia-should she choose to purchase the Property-would do so as part of a joint venture with Galligan. Rather, the Settlement Agreement gives Arancibia, and Arancibia alone, the right-but not the obligation-to purchase the Property under a particular formula as part of the settlement of her legal dispute with Griffiths (and also provides for compensation to her in the event she did not exercise this right). This is directly contrary to Galligan's contention that he was a buyer of the property as part of a joint venture with Arancibia, and it controls. (Davies, supra, 168 Cal.App.4th at p. 1091.)
The Settlement Agreement's paragraph 5 does refer to the exercise of certain authority by the parties' attorneys, authorizing them to "select the brokers for the sale, the escrow . . . and whatever else needs to be done to . . . sell the subject property," but it does so only in order to carry out the parties' settlement agreement. Galligan alleged in his TAC that this provision "abrogated the parties' right to sell or handle the escrow of said Property, with that right being delegated to their respective attorneys, including Galligan." There is no support whatsoever for this allegation in the Settlement Agreement. Rather, it is apparent from the face of that agreement that the parties intended and agreed that their attorneys would act on the parties' behalf in handling the escrow rather than based on any independent authority of their own; the fact that the parties agreed the court "assigned to this matter," an apparent reference to the parties' litigation, would resolve any disagreements between their attorneys plainly shows this intent and agreement that the attorneys were authorized to act as the parties' agents. (See Cooper v. Equity Gen. Insurance, supra, 219 Cal.App.3d at p. 1260 ["Because the client can fire the attorney at any time, and because the attorney has no enforceable rights of his own in the action, the attorney whose fee is contingent on the success of his client's lawsuit is merely an agent of the client"]; Hoffmann v. Young (2022) 13 Cal.5th 1257, 1270 ["An agent 'is one who represents another, called the principal, in dealings with third persons' "], quoting Civ. Code, § 2295.) Such a relationship does not make Galligan a joint venture partner of Arancibia. (See, e.g., Sheble v. Turner (1941) 46 Cal.App.2d 762, 766 [the plaintiff, contractually obligated to act as the defendant's agent in erecting residences upon defendant's lots and assisting in the sale of those lots under a contract that made no mention of a joint venture, was an agent, not a joint venture partner, of the defendant].) Further, Galligan's approval of the form and content of the Settlement Agreement was as Arancibia's attorney, not as a party to the agreement. (See Freedman v. Brutzkus (2010) 182 Cal.App.4th 1065, 1070 [such an attorney statement is an assertion "that the document is in the proper form and embodies the deal that was made between the parties"].)
As for Galligan's argument that he should be allowed to prosecute his second cause of action against defendants for breach of fiduciary duties under J'Aire Corp., that case held that a plaintiff may recover damages from a third party who negligently interfered with the plaintiff's prospective economic advantage. (JAire Corp. v. Gregory, supra, 24 Cal.3d at pp. 804-808.) J'Aire Corp. determined that a duty of care was owed to a third party if the following six factors were met: "(1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to the plaintiff, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant's conduct and the injury suffered, (5) the moral blame attached to the defendant's conduct and (6) the policy of preventing future harm." (Id. at p. 804.) Assuming the J'Aire Corp. factors apply here (which defendants dispute), Galligan did not allege facts sufficient to show he met these criteria.
As defendants point out, "Recognition of a duty to manage business affairs so as to prevent purely economic loss to third parties in their financial transactions is the exception, not the rule, in negligence law." (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 58; quoted in Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (2016) 1 Cal.5th 994, 1013.) "In the business arena it would be unprecedented to impose a duty on one actor to operate its business in a manner that would ensure the financial success of transactions between third parties." (Quelimane Co., at p. 59.) With this general principle in mind here, we conclude that defendants owed no duty to Galligan as a third party. His sole interest was as provided for in the Fee Agreement, which specified the compensation he was to receive for providing legal services from Arancibia. Under the Fee Agreement, Arancibia had no obligation to even buy the Property. Rather, she was merely required to pay Galligan for his legal services if she recovered an interest in the Property (i.e., upon the closing of the escrow of the Property) or received financial compensation from Griffiths. Thus, her obligations, and Galligan's contractual rights, were unrelated to the escrow of the Property. Therefore defendants owed Galligan no duty in escrow under J'Aire Corp.
Galligan contends that defendants harmed him because their misconduct prevented him from depositing into escrow the deed Arancibia gave him for an interest in the Property or seeking to enforce the terms of the Settlement Agreement via a motion under Code of Civil Procedure section 664.6, but he failed to allege facts showing that he had the right to do so. Indeed, the Fee Agreement indicates he did not have such a right because his interest in the Property did not mature until the completion of the escrow; that is, the Fee Agreement gave him the right to record his deed only if and when Arancibia recovered an interest in the Property, which, again, according to Galligan's own TAC allegations, did not occur until the close of the escrow of the Property.
In short, the subject agreements are not reasonably subject to Galligan's allegations (1) that he held the rights of a joint venture partner with Arancibia in the purchase of the Property and thereby held the rights of a buyer, entitling him to receive in escrow a one-sixth interest in the Property and a portion of the "cash credits" Arancibia received in purchasing the Property, to be a principal in the escrow, and to be a party to the title insurance policy, and (2) that paragraph 5 of the Settlement Agreement gave him the sole and independent right to control the Property's escrow on behalf of the buyers. This is sufficient reason to affirm the trial court's sustaining of defendants' demurrers to Galligan's first, second, third, seventh, eighth, ninth, eleventh, twelfth, thirteenth, and fourteenth causes of action.
C. The Remainder of Galligan's Causes of Action Fail Because He Did Not State Facts Sufficient To Show Causation
The remainder of Galligan's causes of action-his fourth (misconduct by notary public-document falsification by notary), fifth (notary misconduct- identity theft), sixth (misconduct of notary public-misappropriation and theft), and tenth (violation of Business and Professions Code section 17200 et seq.), as well as his first (breach of escrow instructions), second (breach of fiduciary duties), third (fraud), and ninth (intentional interference with attorney/client and contractual relations) causes of action (which we have already addressed)-fail for the separate and independent reason that Galligan did not allege facts sufficient to show the alleged misconduct proximately caused him the harm he claimed to have suffered.
The fourth through sixth causes of action do not rely on allegations that Galligan had the right to buy the Property or independently control the escrow in alleging certain notary public misconduct, and the tenth cause of action, to the extent it incorporates that misconduct, also at least in part does not rely on those allegations.
The trial court did not rely on lack of causation in sustaining defendants' demurrers, but defendants raised the issue in their demurrers to Galligan's third, fourth, fifth, sixth, ninth, and tenth causes of action, and do so in their respondents' brief regarding Galligan's first, second, third, fourth, fifth, sixth, ninth, and tenth causes of action. Again, we affirm a trial court's sustaining of a demurrer "if it is proper on any of the grounds raised in the demurrer, even if the court did not rely on those grounds." (Jackson v. Doe, supra, 192 Cal.App.4th at pp. 750-751.)
" 'Ordinarily, proximate cause is a question of fact which cannot be decided as a matter of law from the allegations of a complaint.... Nevertheless, where the facts are such that the only reasonable conclusion is an absence of causation, the question is one of law, not of fact.'" (State Dept. of State Hospitals v. Superior Court (2015) 61 Cal.4th 339, 353; see id. at p. 357 [sustaining demurrer because the theory of causation was conjectural]; followed in Amiodarone Cases (2022) 84 Cal.App.5th 1091 [Division Two of this court affirming the sustaining of a demurrer in part based on failure to allege facts sufficient to show proximate causation].)
"[P]roximate cause" has two aspects,"' "cause in fact" '" and" '" 'various considerations of policy that limit an actor's responsibility for the consequences of his conduct.'" '" (State Dept. of State Hospitals v. Superior Court, supra, 61 Cal.4th at pp. 352-353, italics omitted.) We focus here on cause in fact."' "An act is a cause in fact if it is a necessary antecedent of an event."' [Citation.] This is sometimes referred to as 'but for' causation." (Id. at p. 352.)
In his first, second, third, fourth, fifth, sixth, ninth, and tenth causes of action, Galligan alleged that, as a proximate result of defendants' misconduct, Galligan received neither payment of his portion of Arancibia's "cash credit," $126,666, nor his one-sixth interest in the Property at the close of escrow. He was, therefore, allegedly required to institute the San Mateo Action and incur attorney fees, costs, and lost time, for which he seeks damages from defendants. Regarding his third through sixth and ninth causes of action, Galligan also alleged that, as a further proximate result of defendants' misconduct, he "suffered and continues to suffer humiliation, embarrassment, mental and emotional distress, and discomfort ...."
1. Galligan Did Not Allege Facts Sufficient To Show the Alleged Misconduct Proximately Caused Him Economic Harm
Galligan asserts that as a result of defendants' misconduct, Arancibia did not fulfill her obligation under the Fee Agreement to give him the economic compensation he was due for representing her, requiring him to pursue and, ultimately, prevail in litigation against her, thereby incurring economic damages, meaning his attorney fees and costs. All of the misconduct alleged by Galligan relates to defendants' purported mishandling of the Property's escrow, such as by ignoring his right to control escrow or by forging the Withdrawal of Lis Pendens so that it appeared he had approved of it.
Specifically, Galligan alleged in his first cause of action that CTC breached the escrow instructions; in the second, that Toothman, acting on behalf of CTC, CTIC, and FNTG, violated fiduciary duties to Galligan in her handling of the escrow; in the third, that Toothman, acting as an employee and agent of the other defendants and in order to deceive and mislead Galligan, did not disclose to Galligan that defendants were not going to abide by the terms of the Settlement Agreement or recognize him as a principal to the escrow entitled to control it, and were going to prepare and record a Withdrawal of Lis Pendens in his name but without his consent; in the fourth through sixth, that the misconduct engaged in by Toothman, acting for CTC and CTIC, in forging and notarizing the Withdrawal of Lis Pendens violated certain Business and Professions Code, Government Code, and Penal Code provisions; in the ninth, that defendants' misconduct during escrow, such as regarding the lis pendens, disrupted his attorney-client and economic relationship with Arancibia; and in the tenth, that defendants' misconduct as alleged in the previous paragraphs violated various provisions of the Penal Code, Business and Professions Code, and Government Code, and constituted an unlawful business act or practice.
The problem with Galligan's proximate cause allegations is that they do not show a relationship between defendants' alleged misconduct during escrow and the harm he alleged he suffered. We certainly do not condone the forgery of the Withdrawal of Lis Pendens that Galligan alleged. If such a forgery occurred, it may expose any wrongdoers to criminal penalties under the Penal Code statutes relied on by Galligan for his fourth through sixth civil causes of action, an issue we do not determine here. But as egregious as this alleged misconduct may have been, Galligan did not allege facts sufficient to show that it caused the harm he claimed to have suffered. (See, e.g., Siry Investment, L.P. v. Farkhondehpour (2020) 45 Cal.App.5th 1098, 1141 [Where an" 'injury" 'would have happened anyway, whether [or not] the defendant'"' engaged in tortious behavior, then that tort '" 'was not a cause in fact, and of course cannot be the legal or responsible cause'"' of that injury"], revd. in part on other grounds, Siry Investment, L.P. v. Farkhondehpour (2022) 13 Cal.5th 333, 361-367.) Under Galligan's allegations, including the subject agreements he incorporated into the TAC by reference, his only injuries and damages could occur if and when Arancibia obtained an interest in the Property, i.e., upon the close of the escrow of the Property.
That is, Galligan alleged in his TAC that he was harmed by his failure to obtain from Arancibia a one-sixth interest in the Property and his purported share of the "cash credit" she received in purchasing the Property. But as we have already discussed in part II.B. above, Galligan was not entitled to receive a one-sixth interest or a portion of any "cash credit" during escrow. Rather, the Fee Agreement provides that Arancibia only is obligated to deed a portion of her interest in the Property upon her recovery of that interest, which can only mean, given Galligan's TAC allegations, when the Property was transferred to her at the close of escrow. It follows that she could only purportedly owe Galligan a portion of the "cash credit" she received in purchasing the Property at that time as well, especially given that she had the alternative to forego purchase of the Property in favor of a payment by Griffiths of a percentage of the Property's purchase price upon close of escrow of its sale to a third party.
Notably, the judgment Galligan obtained in the San Mateo Action gives him a one-sixth interest in the Property or, in the alternative, damages for non-payment of attorney fees, but makes no mention of and does not award him a portion of any "cash credit." The record is insufficient for us to determine whether Galligan sought such an award in that action.
Further, Galligan alleged that Arancibia gave him a deed regarding his one-sixth interest in the Property when they executed the Fee Agreement. Nothing in the Fee Agreement prohibited him from filing it upon Arancibia's recovery of her interest. Galligan alleges in his opening brief that after the close of escrow, he demanded that Arancibia and her co-buyer convey a one-sixth interest to him, that Arancibia objected to his recording of the grant deed he held, and that it would be a violation of professional ethics for him to record the grant deed over her objection. These factual contentions are outside the pleadings and, therefore, we disregard them. (Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 482 ["Because a demurrer challenges defects on the face of the complaint, it can only refer to matters outside the pleading that are subject to judicial notice"].) But even if we were to consider them, they undermine his proximate cause allegations because they indicate only that he was harmed as a result of Arancibia's postclosing objection, not as a result of defendants' alleged misconduct during escrow.
In short, Galligan did not allege facts sufficient to show a connection between defendants' alleged misconduct during escrow and his alleged failure to obtain the compensation he was due under the Fee Agreement, which, under his allegations and the subject agreements, he could only obtain from Arancibia upon the close of the escrow of the Property. We therefore conclude he did not allege facts sufficient to show defendants' alleged misconduct proximately caused him any economic harm.
2. Galligan Did Not Allege Facts Sufficient To Show the Alleged Misconduct Proximately Caused Him Mental or Emotional Distress
Galligan's allegations in his third through sixth and ninth causes of action that he suffered mental and emotional distress, humiliation, and embarrassment as a result of defendants' alleged misconduct also fail because he did not allege facts sufficient to show defendants engaged in misconduct that was the proximate cause of these injuries. As defendants correctly point out," 'unless the defendant has assumed a duty to plaintiff in which the emotional condition of the plaintiff is an object, recovery is available only if the emotional distress arises out of the defendant's breach of some other legal duty and the emotional distress is proximately caused by [breach of the independent duty]. Even then, with rare exceptions, a breach of the duty must threaten physical injury, not simply damage to property or financial interests.'" (Erlich v. Menezes (1999) 21 Cal.4th 543, 555; see O'Neil v. Spillane (1975) 45 Cal.App.3d 147, 158-159 [no mental distress damages for the fraudulent purchase, sale or exchange of real property]; Gravillis v. Coldwell Banker Residential Brokerage Co. (2006) 143 Cal.App.4th 761, 776-777 [no emotional distress damages based on real estate broker's alleged failure to disclose property's termite damage to buyers], citing Devin v. United Services Auto. Assn. (1992) 6 Cal.App.4th 1149, 1161-1162 [noting, regarding an insurance dispute over real property damage, "[n]umerous courts . . . have repeatedly advised that damages for emotional distress do not constitute a recoverable item of damages for fraud"].) Galligan's mental and emotional distress allegations do not meet any of these requirements, if only because Galligan fails to allege facts sufficient to show he suffered mental and emotional distress as a proximate result of defendants' failure to fulfill any duty they owed to him, particularly in light of our conclusion, which we have discussed in part II.B. above, that he had no rights regarding the Property's escrow that were separate and independent from Arancibia's rights.
D. Galligan Fails To Show the Trial Court Abused Its Discretion in Sustaining Defendants' Demurrers Without Leave To Amend
Galligan also requests that we reverse the trial court's denial of his requests for leave to amend his TAC, should we conclude the trial court did not err in sustaining defendants' demurrers.
" '[W]hen [a demurrer] is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse. [Citation.]' [Citation.] 'The plaintiff has the burden of proving that an amendment would cure the defect. [Citation.]' ([Citation], italics added.)" (Davies, supra, 168 Cal.App.4th at p. 1090.)
In his opening brief, Galligan bases his request entirely on his citation to the arguments he made to the trial court that it grant him leave to amend his TAC. But he cites to a page in the record that does not exist. His opposition to defendants' demurrers included requests for leave to amend in the event the trial court sustained defendants' demurrers, but no argument for why these requests should be granted. In his reply brief, Galligan slightly improves this effort to argue he should have been allowed to amend the TAC, but he still fails to address the trial court's conclusion, with which we agree, that Galligan did not allege facts sufficient to show that he was a buyer of the Property or a party to the escrow.
The trial court sustained the demurrers without leave to amend because Galligan had had multiple opportunities to amend his complaint and had been unable to state any viable claims against defendants. Galligan has not met his burden of showing the court abused its discretion in denying him leave to amend. Accordingly, we will affirm that part of the trial court's ruling as well.
III. DISPOSITION
The judgment is affirmed. Defendants are awarded their costs of appeal.
WE CONCUR: BROWN, P. J. GOLDMAN, J.