Opinion
2d Civil No. B227432
01-09-2012
VINCENT McCOWAN, Plaintiff, Cross-defendant and Appellant, v. EMC MORTGAGE et al., Defendants, Cross-complainants and Respondents.
Lowthorp, Richards, McMillan, Miller & Templeman and Jeffrey D. Johnsen for Appellant. Shulman Bunn LLP, Stephanie J. Shulman and Richard A. Bunn for Respondents EMC Mortgage and Old Republic Title Company.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. CIV231744) (Ventura County)
Vincent McCowan appeals from a judgment of the trial court quieting title to a condominium in respondent EMC Mortgage (EMC). McCowan also appeals from that portion of the judgment denying his claim for negligence against respondent Old Republic Title Company (Old Republic). We affirm.
Facts and Procedural History
On June 24, 2003, McCowan entered into the first of two contracts with Steven L. Handler (Handler) to purchase a condominium on Swanfield Court in Thousand Oaks (the Swanfield property). The Swanfield property was encumbered by three deeds of trust held by Wells Fargo Home Mortgage in the face amounts of $876,000, $124,000, and $100,000 respectively, for a total of $1.1 million. The contract between McCowan and Handler stated: "Buyer to take title in the name of Vincent McCowan in the form of a land contract." McCowan agreed to assume all the mortgages and pay homeowners association fees and property taxes, beginning August 1, 2003, and to make the mortgage payments to Handler by the 10th of each month. The contract also states: "If buyer is 45 days late, then seller has the right to sell the property and buyer must vacate the property within 30 days." McCowan also agreed to pay $5,000 on July 19, 2003, and an additional $2,000 on August 15, 2003. Handler agreed to pay escrow costs and recording fees.
Under a "land contract," also known as an "installment land contract," the buyer agrees to make payments over time and the seller agrees to convey legal title to the buyer at some future date. (See Tucker v. Lassen Sav. & Loan Assn. (1974) 12 Cal.3d 629, 637 [the seller conveys "his equitable interest in the property"].)
McCowan moved into the Swanfield property, but did not make the payments required under the contract. Instead of evicting McCowan, Handler entered into a second contract with him on September 8, 2004. The contract states: "Vincent McCowan is buying the townhome from Steve Handler for the complete payoff of all loans from Wells Fargo's first, second, and third, including any delinquent fees, attorney fees and late charges. Buyer is to pay all property taxes and all homeowner fees, both delinquent and present. Buyer is to pay all costs related to the townhome including all inspections, warranties, all escrow fees, including title fees and closing cost. Buyer will hold seller harmless of any and all claims on the townhome past or present. Buyer is buying home as is with no warranties or repair fees. Buyer will pay any attorney or legal fees associated with the townhome or Sherwood Country Club. Buyer is to pay seller $10,000 upon the close of escrow or sixty days from today's date, whichever comes first. Buyer will be responsible to pay any commission related to the contract. Buyer will abide by all Sherwood Country Club and homeowner associations rules and regulations. Buyer will be responsible for any legal fees from all parties, including banks, tax collectors, homeowners, Sherwood and insurance. This contract supersedes all other contracts. [¶] Buyer is paying an additional $15,000. $5,000 cash now and $10,000 at the close of escrow only because seller is demanding this additional amount to close escrow."
On January 12, 2004, Loanstar Mortgage Services was substituted as trustee in place of Wells Fargo in the first trust deed.
Handler signed a grant deed on that date in his individual capacity, even though the title to the Swanfield property, as shown in a recorded document, was held by the Steven L. Handler Inter-Vivos Trust. On its face, the grant deed states that the grant was subject to property taxes, sewer assessments, and the three existing deeds of trust.
On September 10, 2004, McCowan recorded the grant deed without fulfilling the express conditions set forth on the face of the grant deed and the September 8 contract, including failing to pay off the trust deeds. Handler did not authorize the recording and did not intend to transfer title until the existing loans were paid off and the other conditions were satisfied.
In October 2004, McCowan was incarcerated for securities fraud. At the time of his incarceration, McCowan had not arranged financing for the Swanfield property. McCowan left his affairs in the hands of his brother, Lonnie McCowan.
McCowan's credit was not sufficient to obtain a loan to pay off the existing encumbrances on the Swanfield property or prevent foreclosure. From his prison cell, McCowan asked his girlfriend, Desiree Szabo, to use her good credit to obtain financing and hold title to the Swanfield property with him as tenants in common. Szabo arranged to borrow $1.3 million from EMC's predecessor-in-interest, Homewide Lending Corporation (Homewide). Szabo became disenchanted with McCowan, and the transaction was structured as a sale by Handler's trust to Szabo as sole owner. Old Republic issued title insurance to Szabo as the buyer and Homewide as the lender.
On November 30, 2004, Handler signed a grant deed to Szabo in his capacity as trustee of his Trust. Upon close of escrow, Szabo paid Handler $10,000 as required by the September 8 contract. According to Szabo and Handler, the transaction was structured with McCowan's direction and consent.
The closing statement reflects a closing date of December 23, 2004; a purchase price of $1.3 million; and payoffs to Lonestar of $918,474.57 and Wells Fargo of $224,040.20. Reconveyances of the three deeds of trust encumbering the property were duly recorded. The two loans by Homewide in the amounts of $780,000 and $520,000 were evidenced by two trust deeds. Subsequently, Homewide assigned the loans to EMC. Although McCowan assured Szabo that he would make sure the loans were paid, no payments have ever been made.
McCowan filed a quiet title action against EMC and an action for negligence against Old Republic. Szabo was also named as a defendant in the complaint. EMC filed a cross-complaint against McCowan for quiet title, equitable lien and declaratory relief. Subsequent to the action being filed, Szabo settled with McCowan and quitclaimed her interest to him.
After a two-day bench trial, the court issued a statement of decision finding that McCowan did not have title to the Swanfield property, the grant deed between Handler and Szabo passed title to the property to Szabo, and no part of the mortgages held by EMC had been paid. The court concluded that EMC was entitled to a judgment of quiet title in its favor and against McCowan, decreeing that it is the holder of two valid and enforceable deeds of trust. As to Old Republic, the court held there was insufficient evidence to show that it was negligent or that McCowan had sustained damages, and that, as a matter of law, a title company cannot be held liable to third parties for negligent issuance of a title policy. Judgment was entered accordingly.
On appeal, McCowan asserts that the trial court erred in quieting title in EMC because the grant deed between himself and Handler was a valid, recorded document transferring title to McCowan. Therefore, the subsequent grant deed between Handler and Szabo was void. As to Old Republic, McCowan asserts that it was negligent in issuing title insurance to Szabo with knowledge of the pre-existing grant deed between McCowan and Handler.
DISCUSSION
Standard of Review and Burden of Proof
A plaintiff in a quiet title action can only recover on the strength of his own title and not upon the weakness of the defendant's title. (Hayes v. Mitchell (1960) 184 Cal.App.2d 301, 303.) Where, as here, a plaintiff relies on paper title alone he has the burden of showing good title. (Ibid.) If a plaintiff fails to prove legal title, judgment denying him relief is proper. (Ernie v. Trinity Lutheran Church (1959) 51 Cal.2d 702, 707.)
When extrinsic evidence is properly admitted to interpret a deed, the trial court's finding must be sustained on appeal if there is substantial evidence, either direct or indirect, contradicted or uncontradicted, which supports that finding. (Baker v. Ramirez (1987) 190 Cal.App.3d 1123, 1133.)
The Grant Deed Between Handler and McCowan Did Not Pass Title
A deed is a written instrument that conveys or transfers the title to real property. (Brusseau v. Hill (1927) 201 Cal. 225, 228.) As an executed contract, a deed is subject to the rules of interpretation applicable to contracts in general. (Civ. Code, §§ 1040, 1066.) To be effective, an instrument conveying real property must be in writing, name a grantor and a grantee, and be subscribed by the grantor, or the grantor's agent. (Civ. Code, § 1091; Code Civ. Proc., § 1971.) The deed must also be delivered to and accepted by the grantee. (Civ. Code, § 1054.) It is not necessary that a deed be recorded to transfer title; title is transferred by a duly executed and delivered unrecorded deed. (Warnock v. Harlow (1892) 96 Cal. 298, 305.)
"'A deed does not transfer title to the grantee until it has been legally delivered.' [Citations.] 'Delivery is a question of intent.' [Citation.] 'A valid delivery of a deed depends upon whether the grantor intended that it should be presently operative, and a manual transfer is not conclusive evidence of such intention.' [Citation.] Although physical delivery of a deed raises an inference that the grantor intended to immediately transfer title, that inference may be overcome by evidence showing a contrary intent. [Citation.] The trier of fact must determine intent by reviewing all of the surrounding circumstances of the transaction. [Citation.] 'Where there is substantial evidence, or where an inference or presumption may be drawn from the evidence to sustain the court's finding of delivery or nondelivery, the finding will not be disturbed on appeal.' [Citation.]" (Luna v. Brownell (2010) 185 Cal.App.4th 668, 673.) Intent may be determined by the grantor's own words or acts at or near the time the deed was executed, or by acts and declarations before and after the physical transfer of the documents. (City of Manhattan Beach v. Superior Court (1996) 13 Cal.4th 232, 246-248.) The grantor can testify at trial on the issue of whether he did or did not intend to deliver the instrument when it was executed. (Coffey v. Cooper (1960) 185 Cal.App.2d 464, 468.)
In the State of California there cannot be a conditional delivery of a deed to a grantee. Civil Code section 1056 provides: "'A grant cannot be delivered to the grantee conditionally. Delivery to him, or to his agent as such, is necessarily absolute, and the instrument takes effect thereupon, discharged of any condition on which delivery was made.' [¶] When conditions are expressed concurrently with the manual delivery of a deed, the grant is either absolute or void. The determination of whether the manual delivery was valid or ineffectual turns upon the question of the grantor's intent." (Ivancovich v. Sullivan (1957) 149 Cal.App.2d 160, 164.)
Substantial evidence supports the trial court's finding that there was no legal delivery of the grant deed to McCowan. Handler did not intend to deliver title to the Swanfield property until certain conditions were fulfilled. Both the September 8 contract and the face of the grant deed contain conditions precedent. (See, e.g., Rubin v. Fuchs (1969) 1 Cal.3d 50, 54 ["'Subject to' is generally construed to impose a condition precedent"].) Handler testified that he had no intention of passing title to McCowan until the existing loans had been paid off and the other conditions were met. Undisputed evidence was presented that McCowan had not satisfied the conditions precedent imposed by the contract and grant deed at the time he recorded the deed. The deed between McCowan and Handler did not pass title to McCowan because McCowan failed to perform the conditions precedent stated in the contract and grant deed; therefore, no legal delivery of the deed occurred.
For the foregoing reasons, EMC is entitled to a judgment of quiet title in its favor against McCowan as the holder of two valid and enforceable deeds of trust.
The trial court found that the grant deed was defective for the further reason that Handler, and not Handler's trust, held title to the property. Because certain provisions of a trust may be construed to authorize the trust beneficiary to convey title and the Handler trust agreement is not in the record, we decline to consider the issue.
A Title Company Cannot be Held Liable to Third Parties
For Negligent Issuance of a Title Policy
McCowan's claim against Old Republic for negligence also is without merit. Title insurance "does not guarantee the state of the title. Instead, it agrees to indemnify the insured for losses incurred as a result of defects in or encumbrances on the title." (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 41.) In other words, the title insurer "'. . . does not represent expressly or impliedly that the title is as set forth in the policy; it merely agrees that, and the insured only expects that, the insurer will pay for any losses resulting from, or [the insurer] will cause the removal of, a cloud on the insured's title within the policy provisions.' [Citation.]" (Lawrence v. Chicago Title Ins. Co. (1987) 192 Cal.App.3d 70, 75.) "'A title policy is not a summary of the public records and the insurer is not supplying information; to the contrary [the insurer] is giving a contract of indemnity. . . .' [Citation.]" (Ibid.)
A title company cannot be held liable to third parties for negligent issuance of a title policy. (Stagen v. Stewart-West Coast Title Co. (1983) 149 Cal.App.3d 114, 119.) One who is only an incidental beneficiary of the policy of title insurance issued to the buyer has no grounds for recovery on the contract against the title insurer. (Ibid.) Here, Szabo was the insured under the title policy. By issuing it, Old Republic only agreed to indemnify Szabo for damages. McCowan was not a party to the policy and did not rely or act upon it; therefore, he has no cause of action against the title company for negligence. (Lawrence v. Chicago Title Ins. Co., supra, 192 Cal.App.3d at p. 77.) Seeley v. Seymour (1987) 190 Cal.App.3d 844, relied on by McCowan, is inapposite because it did not involve title insurance or an escrow to which McCowan was a party. (See Vournas v. Fidelity Nat. Title Ins. Co. (1999) 73 Cal.App.4th 668, 676 [distinguishing Seeley].)
The judgment is affirmed. Respondents shall recover costs on appeal.
NOT TO BE PUBLISHED.
PERREN, J.
We concur:
GILBERT, P.J.
YEGAN, J.
Frederick Bysshe, Judge
(Assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.)
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Superior Court County of Ventura
Lowthorp, Richards, McMillan, Miller & Templeman and Jeffrey D. Johnsen for Appellant.
Shulman Bunn LLP, Stephanie J. Shulman and Richard A. Bunn for Respondents EMC Mortgage and Old Republic Title Company.