Opinion
A130205
02-16-2012
COUNTRYWIDE HOME LOANS, INC., Plaintiff and Appellant, v. FIRST AMERICAN TITLE INSURANCE COMPANY, Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Alameda County Super. Ct. No. HG08409534)
I. INTRODUCTION
Countrywide Home Loans, Inc. (Countrywide) filed a complaint against First American Title Insurance Company (First American), alleging breach of a title insurance policy and related contract claims. The trial court granted First American summary judgment on the ground that undisputed evidence established that Countrywide breached a notice provision in the title insurance policy which resulted in prejudice to First American. Countrywide appeals, contending triable issues of material fact exist. We disagree and, therefore, affirm the judgment.
II. STATEMENT OF FACTS
A. The Countrywide Loan Transaction
In January 2006, Romulo and Yvonne Cruz refinanced their Union City home by taking a $520,000 loan from Countrywide. The loan was secured by a deed of trust on their home (the Countrywide deed of trust). Alliance Title Company (Alliance) was the escrow holder for the 2006 loan transaction. Prior to closing, Alliance provided Countrywide with a Closing Protection Letter that had been issued by First American.
The November 18, 2005, Closing Protection Letter states, in part: "When title insurance of First American Title Insurance Company (the 'Company') is provided for your protection in connection with closing of real estate transactions in which you are . . . a lender secured by a mortgage or an assignee of a mortgage (including any other security instrument) of an interest in land, the Company, subject to the Conditions and Exclusions set forth below hereby agrees to reimburse you for actual loss incurred by you in connection with such closing, when such closings are conducted by any title office as specified in Exhibit 'A' . . . and where such loss arises out of: [¶] (A) Failure of the Title Agent to comply with your written closing instructions received by Title Agent prior to closing to the extent that they relate to the particular transaction and apply to: [¶] (1) The status of the title to said interest in land or the validity, enforceability, and priority of the lien of said mortgage on said interest in land . . . ."
Item "E" on the list of conditions and exclusions included in the Closing Protection Letter states: "Claims shall be made promptly to the Company at its principal office . . . . When the failure to give prompt notice shall prejudice the Company, then liability of the Company hereunder shall be reduced to the extent of such prejudice."
The appellate record contains an unsigned copy of a set of written closing instructions for the 2006 Countrywide loan to the Cruzes. Taken as a whole, those instructions contemplate that the Countrywide deed of trust would be in the first lien position. In fact, though, prior to the close of escrow on the Countrywide loan, the Cruzes obtained a home equity line of credit from Bank of America which was secured by a deed of trust that was recorded November 23, 2005 (the Bank of America deed of trust).
The Countrywide deed of trust was recorded on January 30, 2006. That same day, Countrywide purchased a First American ALTA Lender's Policy which insured, subject to its terms and conditions, that the Countrywide deed of trust was a first lien against the Cruzes' property (The Lender's policy).
The Lender's policy contains the following "prompt notice" provision: "The insured shall notify the Company promptly in writing . . . (ii) in case knowledge shall come to an insured hereunder of any claim of title or interest which is adverse to the title to the estate or interest of the lien of the insured mortgage, as insured, and which might cause loss or damage for which the Company may be liable by virtue of this policy. . . . If prompt notice shall not be given to the Company, then as to the insured all liability of the Company shall terminate with regard to the matter or matters for which prompt notice is required; provided, however, that failure to notify the Company shall in no case prejudice the rights of any insured under this policy unless the Company shall be prejudiced by the failure and then only to the extent of the prejudice."
B. The 2008 Foreclosure
In March 2008, Bank of America initiated a non-judicial foreclosure proceeding against the Cruzes after they defaulted on their home equity line of credit which was secured by the Bank of America deed of trust. A notice of default on the Bank of America line of credit was recorded and served on March 18, 2008 and a Notice of Trustee's Sale was recorded and served on June 24, 2008.
Countrywide was timely served with both the Notice of Default and the Notice of Trustee's Sale. The Notice of Default expressly stated that the Bank of America deed of trust was dated October 14, 2005, and that it was recorded on November 23, 2005.
There is no evidence that Countrywide took any action in response to the Bank of America notices. To explain this inaction, Countrywide presented evidence that, in 2008, it "received approximately 2,000 notices of default and notices of sale every business day for properties on which Countrywide held a security interest" and that many of those notices pertained to "junior liens on properties where Countrywide held the senior lien." Therefore, during that period, Countrywide followed a policy pursuant to which a notice of default or notice of sale would be checked against a computer database and if the database reflected that Countrywide had a first lien priority, no further action would be taken.
Jacqui Whitney, an assistant vice president at Countrywide, admitted during her deposition that the function and purpose of this policy was to confirm that Countrywide had a valid policy insuring its lien in the first position, and that once that fact was confirmed, the bank was no longer concerned because if there was a lien with a senior interest, Countrywide could make a claim against its policy.
On July 16, 2008, Community Fund LLC purchased the Cruzes' home for $21,400.01, at a trustee's sale conducted pursuant to the terms of the Bank of America deed of trust. A few months later, Romulo Cruz filed a complaint to quiet title against Community Fund LLC, alleging he did not receive proper notice of the foreclosure sale (the quiet title action). In November 2008, Cruz amended his complaint, adding causes of action for negligence and fraud and naming Countrywide and others as additional defendants. C. Countrywide's Claim against First American
On January 9, 2009, Countrywide tendered a claim to First American under the Lender's policy. Countrywide demanded that First American defend and indemnify Countrywide in the quiet title action in which it was now a named defendant.
By letter dated January 15, 2009, First American accepted coverage under the Lender's policy and sent Countrywide a check for $21,400.01, the amount that was due under the Bank of America deed of trust and that was paid for the Cruz property by the successful bidder at the foreclosure sale. In its letter, First American explained that it had been prejudiced by Countrywide's late tender and, therefore, the covered loss was limited to the amount First American would have had to pay to satisfy the Bank of America deed of trust.
In February 2009, Countrywide entered into a settlement agreement with Romulo Cruz, pursuant to which Cruz agreed "to dismiss his claims against Countrywide with prejudice."
By letter dated March 9, 2009, Countrywide tendered a claim to First American under the Closing Protection Letter that Alliance had provided to Countrywide prior to the close of escrow of the 2006 Countrywide loan to the Cruzes. Countrywide demanded that First American pay $580,921.74, as the "amount of its loss caused by Alliance's negligence and breach of Countrywide's written escrow instructions pursuant to the Closing Protection Letter." First American declined to pay that demand. D. The Countrywide Cross-Complaint
On March 20, 2009, Countrywide filed a cross-complaint against First American in the Romulo Cruz quiet title action. Countrywide alleged causes of action for breach of contract and breach of the covenant of good faith and fair dealing, and it sought both compensatory and punitive damages. Four days later, Cruz's complaint was dismissed.
In December 2009, First American filed a motion for summary judgment. Countrywide opposed the motion and filed its own motion for summary adjudication, seeking to establish that First American had a duty to fully indemnify Countrywide under both the Lender's policy and the Closing Protection Letter.
On August 18, 2010, a hearing on the motions was conducted before the Honorable Marshall Whitley. On August 23, 2010, the court filed an order granting First American's motion for summary judgment and denying Countrywide's motion for summary adjudication. The court found that "[a]s a matter of law, First American has no duty to further indemnify Countrywide under the Lender's Policy or the Closing Protection Letter due to Countrywide's failure to give timely notice of its claim, resulting in prejudice to First American. Thus, Countrywide's claims for breach of contract fail. Because no additional amounts are due, Countrywide's bad faith claims fail, as does Countrywide's claim of right to recover punitive damages."
On September 8, 2010, judgment was entered in favor of First American. This timely appeal followed.
III. DISCUSSION
A. Standard of Review and Issues Presented
"On appeal after a motion for summary judgment has been granted, we review the record de novo, considering all the evidence set forth in the moving and opposition papers except that to which objections have been made and sustained. [Citation.] Under California's traditional rules, we determine with respect to each cause of action whether the defendant seeking summary judgment has conclusively negated a necessary element of the plaintiff's case, or has demonstrated that under no hypothesis is there a material issue of fact that requires the process of trial, such that the defendant is entitled to judgment as a matter of law. [Citations.]" (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334-335.)
In the present case, Countrywide contends that the judgment must be reversed because: (1) Countrywide did not breach the notice provision in the Lender's policy; (2) Countrywide's notice was timely under the terms of the Closing Protection Letter; and (3) First American was not prejudiced by any late notice. We will separately address these three issues. B. Countrywide Breached its Notice Obligation
Although Countrywide demands the benefits of our summary judgment standard of review, and sometimes refers to triable issues of fact, it also requests that this court direct the trial court to grant Countrywide's motion for summary adjudication. We summarily deny this obviously improper request.
As reflected in our factual summary, the Lender's policy imposed an obligation on Countrywide to provide First American with prompt written notice "in case knowledge shall come to an insured hereunder of any claim of title or interest which is adverse to the title to the estate or interest of the lien of the insured mortgage, as insured, and which might cause loss or damage for which the Company may be liable by virtue of this policy."
Undisputed facts establish that Countrywide breached this prompt notice provision. Countrywide received the March 2008 Notice of Default and the June 2008 Notice of Trustee's Sale before the foreclosure sale that extinguished Countrywide's junior lien. The notices provided the date that the Bank of America deed of trust was recorded, which was earlier than the date Countrywide's deed of trust was recorded. By receiving these notices, Countrywide had "knowledge" of an adverse claim that "might cause" loss or damage under the Lender's Policy. Therefore, Countrywide was required to "notify the Company promptly in writing" of Bank of America's deed of trust. Despite that obligation, Countrywide did not provide First American with notice of anything until after the sale was conducted (i.e., July 2008) and Countrywide's lien was extinguished.
On appeal, Countrywide concedes that it acquired knowledge of Bank of America's claim when it received the notices of default and sale. Countrywide contends, however, that it did not acquire knowledge that Bank of America's claim "was adverse or might cause an insured loss" within the meaning of the policy when it received those notices because it did not realize that the Bank of America deed of trust had priority over its own deed of trust.
Countrywide contends that the distinction that it draws between knowledge of a claim and knowledge that a claim is adverse is dictated by language in the Lender's policy which defines "knowledge" as "actual knowledge, not constructive knowledge or notice which may be imputed to an insured by reason of the public records as defined in this policy or any other records which impart constructive notice of matters affecting the land." Incorporating this definition into its argument, Countrywide concludes that it did not have actual knowledge that the Bank of America deed of trust was an adverse claim that might cause it a loss until after the foreclosure sale was completed and the Countrywide deed of trust was extinguished because, prior to that time, Countrywide believed (albeit erroneously) that its lien was in the first position and that Bank of America's junior lien posed no threat.
We are not persuaded by Countrywide's strained and self-serving interpretation of the policy language. As the trial court observed, the policy definition of knowledge "makes reference to constructive knowledge in terms of public records." Here, Countrywide is not being charged with constructive knowledge. Rather, the undisputed evidence establishes that Countrywide directly received notice that Bank of America had and was asserting a claim against the Cruzes' property which was adverse to Countrywide's "interest . . . and which might cause loss or damage for which [First American] may be liable by virtue of this policy." When it received that notice, prior to the foreclosure sale, Countrywide had a duty under the policy to provide First American with prompt written notice of the adverse claim. No language in the Lender's policy supports Countrywide's novel and dangerous notion that it could avoid its obligation to provide prompt notice simply by refusing to read the notices or otherwise ignoring the facts that were presented to it.
Countrywide directs our attention to two cases which allegedly illustrate the legal distinction "between actual knowledge of a claim, which alone does not trigger the insured's obligation to notify the title insurer, and actual knowledge that the claim is adverse, which does." (Bourland v. Title Ins. Co. of Minnesota (1982) 4 Ark.App. 68, 72-73 (Bourland) and Lee v. Fidelity National Title Ins. Co. (2010) 188 Cal.App.4th 583 (Lee).)
Bourland, supra, 4 Ark.App. 68, involved a provision in a title insurance policy excluding insurance coverage for defects "created, suffered, assumed or agreed to by the insured claimant." (Id. at p. 71.) During summary judgment proceedings, the insured admitted that she knew about a prior deed when she obtained the title insurance but maintained that she had been told that the deed was not valid and had not been recorded. Applying Arkansas law, the Bourland court found there was a triable issue of fact as to whether the insured had " 'agreed to' or suffered the defect within the meaning of the exclusion . . . ." (Id. at p. 74.)
In Lee, supra, 188 Cal.App.4th 583, plaintiffs made a claim under their title insurance policy after discovering they did not own one of two parcels of land they thought they owned. One issue on appeal from a summary judgment was whether the defendant had proved its statute of limitations defense. The trial court found that the claim accrued in 1993, when plaintiffs became aware that someone else was building on the subject property. The Lee court reversed, based on plaintiffs' evidence that the documentation of the relevant property line was ambiguous and its precise location was unknown in 1993; plaintiffs reasonably assumed that the construction was occurring on the neighbor's property; the neighbor did not assert ownership of the subject property until 2006; and plaintiffs had paid taxes and otherwise treated that property as their own until 2006. (Id. at p. 600.)
There are many obvious distinctions between these cases and the situation presented to us here. For our purposes, the dispositive point is that, in both Bourland and Lee, the objective circumstances surrounding the discovery of the title defect were sufficiently ambiguous to create a triable issue of fact. Here, undisputed evidence establishes that Countrywide possessed the facts that established the adverse claim and that it made the conscious decision to ignore those facts. Under these circumstances, there is no triable issue of fact as to whether Countrywide breached the prompt notice provision in the Lender's policy. It clearly did.
In its reply brief, Countrywide resists the inference that it ignored the content of the default notices by making two new arguments. First, Countrywide contends that it actually "reviewed the foreclosure notices, weighed what they revealed against its own records regarding its deed of trust, and concluded its deed of trust had priority." Tellingly, Countrywide does not cite any evidence to support this bold new contention. Nor do we find any. Indeed, the evidence summarized herein supports First American's contention that "Countrywide's decision to do nothing in the face of Bank of America's foreclosure was actually based on Countrywide's practice of relying on its title insurer to suffer the loss."
Countrywide's second, related argument is that even if it did know that Bank of America recorded its deed of trust first, that knowledge did not give rise to an obligation to notify First American of an adverse interest. Countrywide reasons that the fact that Bank of America recorded its lien first did not conclusively establish its legal priority because a "later-recorded lien may acquire legal priority through a subordination agreement or by other means." This theory might merit attention if there was any evidence of a subordination agreement or some other reason for Countrywide's failure to provide First American with notice of the adverse claim. Instead, the undisputed evidence establishes that Countrywide ignored the content and import of the foreclosure notices. C. The Closing Protection Letter
As noted in our factual summary, the Closing Protection Letter that Countrywide obtained prior to the closing of its 2006 loan to the Cruzes contains the following provision: "Claims shall be made promptly to the Company . . . . When the failure to give prompt notice shall prejudice the Company, then liability of the Company hereunder shall be reduced to the extent of such prejudice."
Countrywide contends that it gave timely notice of its claim of loss pursuant to this notice provision in the Closing Protection Letter. It reasons that this provision is fundamentally different from the prompt notice provision in the Lender's policy in that it does not impose any obligation on Countrywide to share its knowledge of a claim or interest that is potentially adverse to Countrywide's interest in the Cruzes' property. Rather, Countrywide interprets the notice language in the Closing Protection Letter as requiring only that Countrywide provide prompt notice of its own claim after it has suffered an "actual loss," and it maintains that this duty did not arise in the present case until after the Countrywide deed of trust was eliminated at the foreclosure sale.
Countrywide fails to cite any authority to support the legal premise of this argument, i.e., that the Closing Protection Letter constitutes an independent basis for imposing contractual liability on First American for the loss at issue in this case. Assuming, for purposes of argument, that the Closing Protection Letter is an independently enforceable agreement, Countrywide concedes that the two agreements must be "construed together." (Citing Versaci v. Superior Court (2005) 127 Cal.App.4th 805, 814.) However, Countrywide then proceeds to ignore the relevant provisions in these two documents.
The Closing Protection Letter states "this letter shall not affect the protection afforded by a title insurance commitment or policy of the Company." The Lender's policy contains a provision titled "LIABILITY LIMITED TO THIS POLICY: POLICY ENTIRE CONTRACT," which provides: "(a) This policy together with all endorsements, if any, attached hereto by the Company is the entire policy and contract between the insured and the Company. In interpreting any provision of this policy, this policy shall be construed as a whole. [¶] (b) Any claim for loss or damage, whether or not based on negligence, and which arises out of the status of the lien of the insured mortgage or of the title to the estate or interest covered hereby or by any action asserting such claim, shall be restricted to this policy." (Italics added.)
When we construe these two provisions together, they establish that insurance coverage for losses relating to the status of Countrywide's lien is governed by the provisions of the Lender's policy. In an effort to avoid this fact, Countrywide attempts to articulate a distinct claim under the Closing Protection letter for a loss allegedly arising out of Alliance's failure to comply with Countrywide's written closing instructions by disbursing funds to the Cruzes notwithstanding that the Countrywide deed of trust was not a first position lien as expressly contemplated. By this argument, Countrywide simply repackages the same loss for which it sought recovery under the Lender's policy, i.e., a loss arising from the fact that Countrywide's deed of trust was a junior lien. In other words, as a substantive matter, Countrywide suffered only one loss and that loss arose out of the status of Countrywide's lien.
Countrywide complains that it is unreasonable to construe provisions in these agreements as nullifying "the added protection that First American charged for and provided in the closing protection letter." However, we need not and expressly do not decide whether the Closing Protection Letter afforded some additional protection. Rather, we conclude that the scope of coverage for this particular claim is governed by the terms of the Lender's policy because it is a "claim for loss . . . which arises out of the status of the lien of the insured mortgage . . . ." Therefore, regardless whether Countrywide made its claim under the Lender's policy, the Closing Protection Letter, or both, it was required to provide First American with prompt notice of the Bank of America deed of trust when it was served with the notices of default and sale and thereby acquired actual knowledge of the adverse interest. There is no dispute that Countrywide failed to provide that notice.
Alternatively, even if Countrywide could articulate a valid distinct claim under the Closing Protection Letter, we would find that undisputed evidence establishes it failed to comply with its notice obligations under that Letter. As noted above, Countrywide's theory is that it was not required to provide notice of its claim until it suffered an "actual loss," which did not occur until the foreclosure sale wiped out its lien. Although Countrywide puts quotes around the phrase "actual loss," that term does not appear in the notice provision of the Closing Protection Letter. Rather, as noted above, the notice provision requires prompt notice of a "claim." A claim under a title insurance policy begins to accrue upon " ' "discovery of the loss that may be incurred if the title is not as represented" . . .' in the policy. [Citation.]" (Lee, supra, 188 Cal.App.4th at p. 600.)
Countrywide fails to provide any authority for its contrary contention that an insured's obligation to provide prompt notice of a title insurance claim does not arise until after it suffers an "actual loss." In particular, Countrywide mistakenly relies on Moe v. Transamerica Title Ins. Co. (1971) 21 Cal.App.3d 289, 302 (Moe). Moe was an appeal from a judgment finding a title company liable for breach of a title insurance policy and conspiracy to commit fraud. Again we put aside the easily distinguishable facts and focus on the notice issue in that case. The notice provision in the Moe policy required plaintiffs "to 'promptly notify' appellants of their loss and to give written notice within 60 days after the loss or damage was determined." (Id. at p. 301, emphasis added.) Under those circumstances, the court found that plaintiffs' "actual loss" did not occur until after the property was sold free and clear of plaintiffs' lien and that the plaintiffs acted promptly by filing their claim a few weeks after the sale occurred. (Id. at p. 301.) The notice provision in this case is not analogous to the provision at issue in Moe because it requires notice of a "claim," not of a "loss," and it does not contain any language postponing the insured's obligation to provide that notice until after actual damage occurred. D. Prejudice
Countrywide's final contention is that First American was not prejudiced by any late notice. "It is settled that breach of a notice clause by an insured may not be asserted by an insurer unless the insurer was substantially prejudiced thereby; that prejudice is not presumed as a matter of law from such breach; and that the insurer has the burden of proving actual prejudice and not just a mere possibility of prejudice." (Moe, supra, 21 Cal.App.3d at p. 302.)
In the present case, undisputed evidence establishes that First American was prejudiced by Countrywide's breach of the prompt notice provision because, had it been provided with prior notice of the foreclosure sale, it could have preserved the $520,000 Countrywide deed of trust by paying Bank of America $21,400.01 and avoiding the foreclosure altogether. "Since foreclosure of a senior lien will erase the security interest of a junior lien [citation], at the threat of foreclosure a junior lienor is entitled, even without express contractual authority, to reinstate the loan by making a payment sufficient to cure the default [citation], or to pay off the senior lien and become subrogated to the rights of the senior lienholder as against the owner of the property. [Citations.]" (Pacific Trust Co. TTEE v. Fidelity Fed. Sav. & Loan Assn. (1986) 184 Cal.App.3d 817, 825; see also Civ. Code, § 2904 ["One who has a lien inferior to another, upon the same property, has a right: [¶] 1. To redeem the property in the same manner as its owner might, from the superior lien; and, [¶] 2. To be subrogated to all the benefits of the superior lien, when necessary for the protection of his interests, upon satisfying the claim secured thereby."].)
Countrywide did not provide notice of Bank of America's adverse interest until after the Cruz property was sold in foreclosure. This delayed notice, as the trial court found, "resulted in the loss of the opportunity for First American to pay off the relatively small, Bank of America lien. Such delayed notice constituted the type of prejudice to First American set forth in Paragraph 3 of the Conditions and Stipulations of the Lender's Policy that limited First American's liability to Countrywide to the amount of the Bank of America lien."
Countrywide contends that First American did not suffer actual prejudice as a result of the delayed notice from Countrywide because First American already knew about the Bank of America deed of trust before the Notices of Default and Sale were sent to Countrywide. To support this theory in the trial court, Countrywide filed the declaration of Yvonne Wheeler, a trustee's sale unit manager for Cal-Western Reconveyance Corporation (Cal-Western), the trustee for the Bank of America deed of trust.
According to Wheeler's declaration, in the spring of 2008, Cal-Western obtained a Trustee's Sale Guarantee (TSG) from First American for use in conducting the foreclosure sale of the Cruz property on behalf of Bank of America. Wheeler stated that the TSG was purchased in order to ensure that the trustee sent the required foreclosure notices to the "persons entitled to receive them under [the] Civil Code . . . ." A copy of the TSG that was issued in connection with the Cruz foreclosure proceeding was attached as an exhibit to the Wheeler declaration. The TSG identifies the Countrywide deed of trust as a junior lien.
Countrywide reasons that, since First American prepared the TSG that was used to generate the notices for the Bank of America foreclosure on the Cruzes' property, First American necessarily had notice of that proceeding before Countrywide did. Countrywide ignores the fact that the TSG does not identify First American as the provider of title insurance for the Countrywide deed of trust. Furthermore, First American presented evidence that "it is not First American's policy, practice, or procedure to determine which title company, if any, insures every junior loan that appears on a TSG." According to Luis Yeager, the Executive Vice President and Chief Operating Officer of First American's National Default Title Services segment, such an inquiry would be irrelevant because the sole purpose of a TSG is to "identify the parties with an interest in the property being foreclosed and who are entitled to receive statutory notice of the trustee's sale." Indeed, Yeager explained that making such a determination is not always possible and is, in any event impractical, in light of the function of the TSG and the number of such policies that First American issues.
In 2008, First American issued more than 200,000 TSG's in the western United States alone.
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We hold that the evidence presented during the summary judgment proceeding does not create a triable issue of fact on the issue of prejudice. Although the TSG identifies the Countrywide lien, it does not identify the insurer of that lien. Accordingly, First American did not receive the notices of the foreclosure that Countrywide received. Furthermore, Countrywide's contention that First American acquired knowledge of Bank of America's adverse claim while "preparing the TSG for Cal-Western" is inconsistent with the undisputed evidence which establishes that (1) the sole function of the TSG is to facilitate notice to affected lienholders (e.g., Countrywide in this instance); and (2) determining whether affected liens are insured and the identity of the insurers of said liens is not part of the process of preparing a TSG.
Invoking the doctrine of imputed knowledge, Countrywide maintains that, once First American generated the TSG, it possessed all the facts that "it would have learned had Countrywide immediately sent it a copy of the notice of default." It reasons that, as of the date the TSG was issued, some employee of First American had knowledge of the fact that the Countrywide deed of trust was a junior lien and, by that time, some other employee of First American already knew that First American had insured the Countrywide deed of trust as being in the first position.
In essence, Countrywide attempts to excuse its own inaction by arguing that First American could have discovered the facts for itself if agents employed in different departments of that corporation had shared facts about transactions that First American had no reason to suspect were in any way related. This proposed application of the doctrine of imputed knowledge strikes us a patently unreasonable. (Cf. Security First National Bank of Lost Angeles v. Taylor (1954) 123 Cal.App.2d 380, 387 ["It would be an unreasonable burden on trade and commerce to require a bank and each of its branches in a sprawling empire of banks to know the innumerable facts daily communicated to each branch by its numerous patrons."].) Absent any legal authority, we decline to apply the doctrine of imputed knowledge in this way.
Countrywide cites Dietlin v. General American Life Insurance Co. (1935) 4 Cal.2d 336 (Dietlin) for the proposition that "one department or division of First American is charged with knowledge of policies issued by its other departments or divisions." In Dietlin, the plaintiff was injured at work and was totally disabled for a period of time during which he had disability coverage under an accident policy and two life policies, all issued to him by the defendant insurance company. Defendant made some payment under the accident policy but disputed the period of total disability claimed by the plaintiff and also whether plaintiff was disabled at all under the terms of the life policies. The first trial, which resulted in a judgment for the plaintiff, was reversed on appeal. (Id. at p. 339.)
At the commencement of the second Dietlin trial, defendant was permitted to amend its answer to plaintiff's complaint to deny a previously admitted allegation that plaintiff had given due notice and proof of its injuries as required by the policies. (4 Cal.2d at p. 339.) The second trial resulted in a judgment for the defendant on the life policy claims based on the court's finding that plaintiff " ' "did not within sixty days before the commencement of this action or at any other time or at all give due or any notice of proof of injury . . ." ' " under the life policies. (Id. at p. 348.) On appeal from the second judgment, the court of appeal found that, although defendant had waived the condition requiring proof of the disability, "nevertheless it was indispensable that plaintiff furnish such proof during the continued existence of the total disability in order to fix the time when payments under the policies first became due." (Id. at pp. 349-350.)
The Supreme Court reversed, holding that, under "the circumstances," the plaintiff's failure to furnish proof of disability under the life policies was "not fatal to his right to recover on these policies." (Dietlin, supra, 4 Cal.2d at p. 350.) Those circumstances included that plaintiff had expressly discussed his claims under the life policies with the defendant's claims adjuster, and that the adjuster told him he would be paid under those polices. Furthermore, the plaintiff had made a written demand for payment under the life policies during the relevant time period. (Id. at p. 351.) The Dietlin court found that the effectiveness of this timely oral and written notice was not lessened by the fact that the claims adjuster was employed in the accident division as opposed to the life policy division of the defendant insurer. As the court explained, "the important fact is that defendant received timely written and oral notice of plaintiff's disability which must be held sufficient to charge defendant on all policies running in favor of the insured." (Id. at p. 350.) Furthermore, and in any event, the court found, the defendant had "waived the defense of want of proof." (Id. at p. 351.)
We took the time to summarize the unique facts of Dietlin, including in particular the facts that gave rise to a waiver, because they speak for themselves in terms of distinguishing that case from the present situation. In light of these significant factual distinctions, Countrywide simply cannot extract a legal rule from Dietlin that will assist it here. Dietlin holds that when an insured gives proper notice under one policy, the insurance company is "chargeable with knowledge of all policies issued by it to the insured." (Dietlin, supra, 4 Cal.2d at p. 351.) That case does not hold or intimate that an insured can escape the consequences of its own failure to comply with a prompt notice provision by finding some alternative circuitous path by which the insurer could have acquired the information that the insured was duty-bound to provide.
Countrywide contends that actual notice of the Bank of America foreclosure can and should be imputed to First American because it had a "duty of communication among corporate departments." Again, though, the one case Countrywide cites is inapposite. (People v. Olson (1982) 137 Cal.App.3d 137 (Olson).) In Olson, a realty company was charged with false advertising in violation of section 17500 of the Business and Professions Code (section 17500.) The trial court granted a directed verdict for the defendant, finding that the employees responsible for the ad reasonably relied on a computer printout which contained inaccurate information. In reversing the judgment, the Olson court highlighted evidence that the employees responsible for the ad did not make any effort to verify its accuracy notwithstanding their acknowledgement that the ad included data for tract home sales that were subject to a misleading listing practice employed by the company. Furthermore, the court reasoned, the circumstances of the case demonstrated "the need for an attempt to verify the computer printout, the light burden such an attempt would create and the probable success of an investigation." (Id. at p. 139.) Finally, the court found, interpreting section 17500 to include a duty of inquiry and of communication among corporate departments was consistent with the "well-established rule imputing knowledge of corporate officials to the corporation itself . . . ." (Id. at p.140.)
Olson involved a fundamentally different factual scenario since the facts demonstrated both the need to attempt to verify certain data and the ease with which its accuracy could be confirmed or denied. More importantly, the legal issue in Olson was whether the defendant should have known certain facts by exercising reasonable care as required by section 17500. (Olson, supra, 137 Cal.App.3d at pp. 139-140.) In that distinct context, the court imputed knowledge to the corporation in order to evaluate the corporation's own conduct under section 17500. Here, by contrast, Countrywide attempts to avoid the consequences of its breach of the prompt notice provision of the Lender's policy by using the doctrine of imputed knowledge to deprive First American of the benefit of its contractual rights under the prompt notice provision of the Lender's policy. As the trial court found, Countrywide has failed to provide any authority to support this legal theory.
To summarize, Countrywide has failed to identify a triable issue of fact precluding summary judgment in this case. The undisputed evidence establishes that Countrywide breached its contractual obligation to provide First American with prompt notice of an adverse claim and that First American was prejudiced by that breach.
IV. DISPOSITION
The judgment is affirmed.
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Haerle, Acting P.J.
We concur:
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Lambden, J.
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Richman, J.