Opinion
B158787.
7-8-2003
ARTHUR PAUL JONES et al., Plaintiffs and Appellants, v. FIRST AMERICAN CORPORATION et al., Defendants and Respondents.
Law Offices of John F. Anderson, John F. Anderson for Plaintiffs and Appellants. Cunningham & Treadwell, James H. Treadwell, Christopher L. Moriarty for Defendants and Respondents.
Appellants Arthur and Rosalie Jones sued respondent First American Title Company of Los Angeles (First American Title) for recording of a forged trust deed, based upon the imputed knowledge of a title officer who was aware of problems with the execution of the trust deed prior to recordation (i.e., an expired notary and backdated signatures) and who should have requested signature verifications. The situation arose in 1995 when the Joneses adult son and his companions conspired to forge loan application documents and used the Joneses residence in West Covina as security for a loan, initially without the Joneses knowledge or consent. In prior litigation against the escrow company, the loan company and others (but not First American Title), the Joneses were found to have ratified the loan procured by the misconduct of their son and his companions.
First American Title, as well as the numerous other respondents, are under the corporate umbrella of respondent First American Corporation. Respondents are collectively referred to hereinafter as First American Title.
The present appeal comes after the title companys successful demurrer to causes of action for negligence and slander of title. We affirm, as the causes of action are barred by the statute of limitations. It is thus unnecessary to address First American Titles other defenses of the lack of any duty owed to the Joneses because they were not the insured under the policy, collateral estoppel by the prior judgment, and the lack of any untrue publication by the title company.
FACTUAL AND PROCEDURAL SUMMARY
On December 26, 2001, the Joneses filed their complaint in the present action for negligence and slander of title. As alleged in the complaint, in April of 1995, the Joneses son and several of his companions conspired to obtain a loan secured by a trust deed on the Joneses property without their knowledge. The Joneses son and his companions successfully obtained a loan by forging applications, employment records, and a promissory note. On May 2, 1995, Michelle Kramer, the escrow officer, forwarded the trust deed (purportedly executed and notarized that day) to Greg Wells, the title officer for First American Title. The purported notary was Mark Osmond, whose notary seal indicated that his commission would expire in 1998.
The complaint alleged four causes of action: negligence, gross negligence (which, however, is not cognizable as a cause of action separate and distinct from negligence; see Continental Ins. Co. v. American Protection Industries (1987) 197 Cal. App. 3d 322, 330, 242 Cal. Rptr. 784), slander of title based on gross negligence, and slander of title based upon actual knowledge of fraud.
First American Title reviewed the trust deed, as a condition precedent to insuring a recorded document. On May 3 or 4, 1995, First American Title brought to Kramers attention the fact that the notary seal was smudged. Kramer did not offer to get the appropriate declaration that the seal was the correct seal of the notary in question, but rather requested return of the trust deed. Thereafter, Kramer returned the trust deed to the title officer, but she returned it with her own notary acknowledgment attached. She backdated her notary acknowledgement to May 2, 1995, falsely asserting that the Joneses had personally appeared before her on May 2, 1995, to sign the deed.
Upon receiving the trust deed for the second time, Greg Wells or someone at First American Title acting at his direction checked the original notary commission of Mark Osmond and determined that it had expired in 1993. The number "3" in the 1993 date had been altered to look like an "8," thereby giving the impression that the notary commission had not expired. After a conversation between Kramer and Wells on May 9, 1995 (the date of the close of escrow), First American Title recorded the trust deed on that date without further questioning the validity of the deed or contacting the Joneses.
On October 23, 1997, the Joneses sued the escrow company, the loan company, the Joneses son and his companions, and others — but did not sue the title company; i.e., First American Title herein. That prior suit was unsuccessful at trial and on appeal (Jones v. Royal Thrift and Loan Company (Sep. 21, 2001, B142843) [nonpub. opn.], hereinafter, Royal Thrift ) because the Joneses were found to have ratified the loan.
Facts supporting ratification included the following: on May 10, 1995, an insurance agent told the Joneses that he was taking pictures of their home for an insurance policy to be issued in connection with a loan; the Joneses filed a police report on that date and implicated the escrow agent by name; on May 11, 1995, the Joneses learned that their son and several others were involved in obtaining a loan against their house; on May 11 the Joneses also went to the escrow company and agreed to and signed escrow instructions which provided that the terms and conditions of the escrow were to remain as written; and several months later the Joneses advised the police department that no further action was necessary. Over a period of two years, the Joneses told the police that no investigation was necessary. One of their sons companions involved in the fraud made loan payments, but ultimately the payments were delinquent and the Joneses received a default notice.
In the prior Royal Thrift litigation, First American Title paid the legal fees of the loan company in defending the action and became aware of all the events that had occurred. The Joneses thus allege in their present complaint "fraudulent conduct in that [First American Title] concealed a material fact from the [Joneses], to wit the knowledge of [First American Title] that prior to recording the forged deed of trust the agents of [First American Title] knew or should have known that the deed was forged, and had a duty of inquiry of the [Joneses] to verify their signatures and the validity of supporting documents, and notwithstanding these facts recorded the trust deed knowing that it would cause injury to the [Joneses] for the purpose of insuring the purported lien of the forged trust deed and earning an insurance premium."
The Joneses further allege in their complaint that they had no knowledge until after January 1, 2000, (1) that Wells and agents of First American Title knew or should have known that the notary seal affixed to the trust deed had an altered date, and (2) that agents of First American Title knew or should have known that the notary acknowledgement of Kramer attached to the trust deed was backdated.
The copy of the complaint in the joint appendix on appeal uses the date January 1, 2000, with the last "0" in the year changed in ink from a typed "1" in "2001" to an apparently corrected "0", reflecting the year 2000. The Joneses response to the demurrer refers to the year "2000," but in one instance refers to the year "2001." First American Titles reply to the Joneses response to the demurer refers to the year "2000." We also note that the complaint does not specify what exactly occurred after January 1, 2000, which enlightened the Joneses as to the details of First American Titles involvement.
First American Title demurred to the present complaint on several grounds. They urged: (1) that the negligence and slander of title causes of action were barred by the statute of limitations; (2) that any negligence claim fails because the loan company was the only named insured on the title policy, and First American Title owed no duty to the Joneses; (3) that the Joneses are collaterally estopped from asserting a negligence cause of action because the trial and appellate courts in the Royal Thrift action found that because of the Joneses ratification of the loan, a valid trust deed lien existed and the trust deed was valid as of the date of its recording; and (4) that the slander of title action fails because the Joneses cannot establish publication of any matter that was untrue because the trust deed was determined to be valid.
The trial court sustained First American Titles demurrer to the complaint, without leave to amend, on all the grounds raised in the demurrer. In sustaining the demurrer, the trial court took judicial notice of the pertinent trial court file and the appellate decision in the Royal Thrift action. The trial court remarked as follows: "[The Joneses] first became aware of the fraudulent activity on May 11th of 1995. We have both the trial court through Judge Oki and the appellate court determining that the recorded deed was in fact a valid deed because the [Joneses] ratified that deed and [the Joneses] . . . should have originally sued the First American Corporation [i.e., First American Title herein]. [P] I dont think the Joneses were diligent. I think they should have ascertained in 1995 that First American recorded the deed and may have had some exposure here. [The Joneses] argument on the issue of equitable estoppel is without merit primarily because the Joneses knew of the fraud back in 95 and the absence of diligence — I dont care what statute of limitations you use — two or three years, bottom line [is the] statute ran years before this case in front of me was filed and on the issue of duty the only insured under the policy [of] title insurance was Royal Thrift. There was no duty owed to [the Joneses.]"
DISCUSSION
I. Standard of review
A demurrer tests whether the complaint asserts facts sufficient to state a cause of action. An appellate court gives the complaint "a reasonable interpretation, reading it as a whole and its parts in their context." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal. Rptr. 718, 703 P.2d 58.) We assume on appeal the truth of all properly pled facts and facts of which judicial notice may be taken, but we will not assume the truth of mere contentions, deductions or conclusions of fact or law alleged in the complaint. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125, 271 Cal. Rptr. 146, 793 P.2d 479.) The trial courts sustaining of a demurrer without leave to amend is reviewed for abuse of discretion, and we must affirm the judgment of dismissal if it is correct on any theory. (Hendy v. Losse (1991) 54 Cal.3d 723, 742, 819 P.2d 1.)
II. The statute of limitations
The first two causes of action in the complaint for negligence and gross negligence are governed Code of Civil Procedure section 339, subdivision 1, which by its terms pertains to "an action founded upon . . . [an] abstract or guaranty of title of real property, or by a policy of title insurance" and bars an action after two years of the date of "the discovery of the loss or damage suffered by the aggrieved party." The third and fourth causes of action are for slander of title, which is governed by Code of Civil Procedure section 338 , subdivision (g), which bars actions after three years from the date the plaintiff could reasonably be expected to discover the facts supporting the alleged slander. (See Arthur v. Davis (1981) 126 Cal. App. 3d 684, 692, 178 Cal. Rptr. 920.)
"The limitations period begins when the plaintiff suspects, or should suspect, that [the plaintiff] has been wronged." (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1114, 245 Cal. Rptr. 658, 751 P.2d 923.) "If [plaintiff] became aware of facts which would make a reasonably prudent person suspicious [plaintiff has] a duty to investigate further, and [plaintiff is] charged with knowledge of matters which would have been revealed by such an investigation." (Miller v. Bechtel Corp. (1983) 33 Cal.3d 868, 875, 191 Cal. Rptr. 619, 663 P.2d 177.)
In the present case, the complaint was filed on December 26, 2001. As the trial court noted, the Joneses had knowledge of or should have discovered any alleged negligence by First American Title as far back as May of 1995. Specifically, on May 11, 1995, Arthur Jones signed escrow instructions purporting to modify the prior escrow instructions by having him acknowledge that loan proceeds had been issued in his name in the form of a cashiers check for the refinance of his home. He also signed the notary journal of the escrow officer (Kramer) and signed a photocopy of the cashiers check. On May 15, 1995, the sons accomplice signed a promissory note indicating that he would pay the amount of the loan to the Joneses, and the Joneses told the police that "it was a family matter that had been resolved." Thereafter, the complaint in the Royal Thrift action was filed on October 23, 1997, more than four years before the complaint was filed in the present action.
Apart from the Joneses knowledge and participation in the above events of May 1995, their filing of the Royal Thrift action in 1997 evidences their awareness of sufficient facts regarding any alleged negligence by First American Title in connection with the recording of the trust deed. Indeed, two of the causes of action in that prior lawsuit alleged negligence by the loan company and the escrow company, noting knowledge of forged signatures and irregularities in failing to identify the parties purporting to own the real estate. It is thus apparent that the Joneses must have known that the deed of trust was forged at least since October 23, 1997, when the Royal Thrift action was filed, if not earlier on May 11, 1995, when they signed modified escrow instructions with full knowledge of the fraud perpetrated on them. The Joneses therefore long ago had information about circumstances that would put a reasonable person on inquiry regarding any negligence by First American Title. (See Jolly v. Eli Lilly & Co., supra, 44 Cal.3d at pp. 1110-1111.)
The Joneses assert in their complaint in the present case that they were unaware until "after January 1, 2000," that First American Titles agents knew or should have known of the expired notary seal and the backdated notary acknowledgement. Nonetheless, First American Titles involvement was known to the Joneses as soon as they saw the deed of trust, which they attached to the their complaint in the Royal Thrift action. On the face of that deed of trust, in the upper left hand corner, was a notation to "FATCOLA," the undisputed common acronym for First American Title Company of Los Angeles.
The Joneses knew since May of 1995 that their signatures had been forged. They were apparently ignorant only of the details of the forgery process involving the notary problems. They were fully aware of the fact of the forgery.
To discover details about the forgery process, the Joneses could have easily investigated First American Titles recordation of the trust deed. Indeed, during the Royal Thrift action, they obtained during discovery (apparently, in November of 1998) a copy of the escrow file and the relevant notary journal. The Joneses may have later realized the significance of the information, but they were aware long before two years of filing the compliant of facts which would make a reasonably prudent person suspicious and trigger a duty to investigate further. Since the Joneses did not file their complaint in the present action until December 26, 2001, which was long after both the May 1995 events and the 1998 Royal Thrift deposition, the two-year statute of limitations (Code Civ. Proc., § 339, subd. 1) bars their causes of action for negligence.
As to the causes of action for slander of title, the Joneses had knowledge of the recording of the alleged slanderous deed of trust as early as May of 1995. In any event, the Joneses knew of the deed of trust on October 23, 1997, the date they filed their complaint in the Royal Thrift action, attaching a copy of the trust deed to that prior lawsuit. Since the complaint in the present case was filed on December 26, 2001, more than four years later, the three— year statute of limitations (Code Civ. Proc., § 338, subd. (g)) bars the slander of title causes of action.
Moreover, there is no merit to the Joneses assertion that the statute of limitations should be equitably tolled. Pursuant to the doctrine of equitable tolling, a plaintiff may be relieved of the bar of a limitations statute when it initially pursues other legal remedies, and there is "timely notice, and lack of prejudice, to the defendant, and reasonable and good faith conduct on the part of the plaintiff" (Addison v. State of California (1978) 21 Cal.3d 313, 319, 146 Cal. Rptr. 224, 578 P.2d 941) in forgoing another remedy now otherwise barred by the statute of limitations. However, as indicated by the nature of all the cases discussed in Addison, equitable tolling generally "should not apply where the first proceeding did not involve the defendant sued in the second proceeding." (Apple Valley Unified School Dist. v. Vavrinek, Trine, Day & Co. (2002) 98 Cal.App.4th 934, 956.)
The Joneses rely principally on Stalberg v. Western Title Ins. Co. (1994) 27 Cal.App.4th 925, which, although it involved equitable tolling and two different cases against different defendants, is nonetheless distinguishable. The present situation is unlike Stalberg, where the plaintiffs, who were the insureds, informed the "defendant [title insurer] of their awareness of its culpability in [the] matter, and, upon completion of the quiet title action, plaintiffs promptly filed an action against defendant for slander of title." (Id. at p. 933, italics added.) Here, in contrast, the Joneses offer no legitimate reason for the failure after May of 1995 to investigate more diligently the involvement of First American Title in recording the trust deed. Even using the Joneses date of January 1, 2000, as the date after which they finally had actual knowledge of the details of First American Titles involvement in the flawed notary process, they waited two years until December 26, 2001, to file the [* 17] complaint in the present action. And they waited almost two years from the trial court judgment in the Royal Thrift action to file the complaint. Such delay defeats the Joneses claim of equitable tolling.
The Joneses, who did not name First American Title in the Royal Thrift action, offer no legitimate reason for the delay in filing the present action. We acknowledge the observation of the trial court in the Royal Thrift action that, "It is undisputed that the signatures of the [Joneses] on the loan documents are forged, and that they had no knowledge of the transaction prior to the close of escrow [on May 9, 1995.]" Nonetheless, the Joneses lack of diligence and their ratification of the forged loan are apparently what caused their damages, not respondents recordation of what was deemed in the May 3, 2000, judgment in the prior litigation to be "a valid existing first trust deed lien" as a result of ratification.
Accordingly, the trial court properly sustained First American Titles demurrer without leave to amend.
DISPOSITION
The judgment is affirmed.
We concur: DOI TODD, J., and ASHMANN-GERST, J.