Opinion
G051131
03-28-2017
ROBERT SWEETING, Plaintiff and Appellant, v. CHICAGO TITLE COMPANY et al., Defendants and Respondents.
Robert Sweeting, in pro. per., for Plaintiff and Appellant. Fidelity National Law Group, Jacky P. Wang and Sheri M. Kanesaka, for Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2008-00104237) OPINION Appeal from a judgment of the Superior Court of Orange County, Robert D. Monarch, Judge. (Retired judge of the Orange Super.Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Affirmed. Robert Sweeting, in pro. per., for Plaintiff and Appellant. Fidelity National Law Group, Jacky P. Wang and Sheri M. Kanesaka, for Defendants and Respondents.
* * *
This is the fourth time we have seen this case. Plaintiff and appellant Robert Sweeting lost residential property in Huntington Beach to foreclosure in 2008 as a result of what he claims was a fraudulent refinance. In prior litigation, Sweeting endeavored to show that a number of defendants defrauded or otherwise wronged him in the refinance of his residence. Most of his avenues of relief have already been closed, via adverse trial court rulings and appeals that have been resolved against him due to either affirmance or dismissal.
Sweeting v. Fremont Reorganizing Corporation (Jan. 10, 2012, G043356) [nonpub. opn.]; Sweeting v. Island Source II, LLC, et al. (Dec. 22, 2011, G043924) [nonpub. opn.], and Sweeting v. Fremont Reorganizing Corp. et al. (May 20, 2010, G043281) [appeal dismissed].
This time, the purported wrongdoers are defendants and respondents Chicago Title Company (CTC) and Chicago Title Insurance Company (CTIC) (collectively defendants). The operative complaint alleges CTIC was paid approximately $1600 for title insurance relating to this transaction, while CTC received approximately $195 for "subescrow services."
The issue before us now is whether the trial court erred in sustaining without leave to amend a demurrer to Sweeting's fourth amended complaint. Sweeting has not shown the complaint alleges facts sufficient to establish every element of any of his claims, nor has he demonstrated that further amendment will cure these deficiencies. We therefore conclude the court did not err by sustaining the demurrer, and we affirm.
I
FACTS AND PROCEDURAL HISTORY
Sweeting's brief includes a lengthy history of the entire loan transaction, and many facts pertinent to the other defendants, but not relevant to the ones before us. We focus our statement of facts and procedural history only on the parts of the case that are relevant to CTC and CTIC.
The operative complaint alleged that in March 2006, Sweeting was referred to defendant Jason Kishaba for the purpose of refinancing his property in Huntington Beach. At the time, Kishaba allegedly worked for a company called M&M and Associates Mortgage Brokers. Kishaba allegedly promised Sweeting he would finance the property at an annual percentage rate of 7.5 percent, with a one-half point broker fee, a one-year prepayment penalty, and $105,000 cash out. Beginning in June, Sweeting alleged, Kishaba began promising him the refinance would be complete "that week" but kept coming up with excuses as to why the loan did not close. Based on these representations, but not, allegedly, explicit instructions from anyone, Sweeting stopped making mortgage payments.
In November 2006, Kishaba began working for named defendant International Mortgage, Inc. The complaint alleged that there were three separate loan document signings at which Sweeting observed problems with the documents, including a lack of consistency with the promised oral terms. Sweeting claimed he eventually signed the documents due to financial distress, with the final set of documents representing a combination of the ones he had signed on the three occasions. Sweeting received approximately $25,000 in cash at closing. The loan was ultimately made by defendant Fremont Investment and Loan (Fremont) who eventually sold the loan to either GMAC Mortgage, LLC (GMAC), or another entity. Sweeting believed he was to make payments to GMAC. Sweeting "waited to begin making the payments" to GMAC until he received a coupon booklet.
Due to what Sweeting claims were misapplications of payments from the refinance, GMAC eventually recorded a notice of default. The property was foreclosed upon in September 2008. Title was transferred from GMAC to an entity called TCIF REO GCM California, LLC, then to Island Source II, LLC, then to Falkenstein Credit Shelter Trust "C" and finally to Donald A. Duncan, who currently holds the title.
The initial complaint, filed on March 20, 2008, alleged causes of action against Kishaba, GMAC, and other involved individuals and companies for negligence, misrepresentation, fraud, conspiracy to commit fraud, cancellation of written instrument, injunctive relief, breach of fiduciary duty, quiet title, breach of contract, violation of Business & Professions Code section 17200, bad faith, violation of federal truth in lending laws, and conversion. Sweeting was represented by counsel at this point.
Four days later, Sweeting, through counsel, filed a first amended complaint against the same defendants for the same causes of action. CTC and CTIC were not named as defendants.
In September 2009, some 18 months later, Sweeting filed a Doe amendment naming CTC as a defendant. CTC then filed a demurrer to each cause of action in the first amended complaint. The trial court sustained the demurrer "with one final leave to amend within 10 days."
By December 2009, Sweeting was representing himself. He filed a second amended complaint on December 15 alleging 15 causes of action. While CTC and CTIC were not included in the caption, "Chicago Title" was identified as a defendant in the complaint. Among other things, Sweeting alleged that Chicago Title "had a duty to deliver the proceeds of the subject Note secured by Deed of Trust to Plaintiff," which required "the Note/loan proceeds be delivered to a licensed escrow company."
In February 2014, the trial court initially granted a motion for judgment on the pleadings by CTC. It subsequently granted Sweeting's motion for reconsideration, however, stating that Sweeting was given leave to amend to allege facts "supporting a conclusion that CTC received funds ultimately due to Sweeting, to plead specific facts of how CTC is liable as a 'subescrow,' and facts establishing that CTC had a duty to deliver proceeds to a valid licensed escrow company/agent or not to transfer funds to an unlicensed escrow company."
Sweeting filed a third amended complaint, which alleged CTC "agreed to act as a subescrow agent" and "held funds owned by Plaintiff for the benefit of Plaintiff." He also asserted the terms of the contract under which CTC held his funds contained an illegal clause because it required the transfer of money to International Mortgage, an unlicensed escrow company. Sweeting further alleged CTC had a fiduciary duty to deliver the proceeds of the refinance to him, which required delivery to a licensed escrow company, and breached that duty by failing to obtain evidence that International Mortgage was licensed. "Chicago Title" was listed as a defendant in causes of action for breach of fiduciary duty and common counts.
In response, CTC filed a demurrer and motion to strike. Ultimately, after various steps we need not set forth in detail here, Sweeting was given the opportunity to file a fourth amended complaint. The court advised him to be specific about whether he was naming CTC or CTIC with respect to the alleged activities.
The fourth amended complaint (the complaint) was filed on July 29, 2014. CTC was named in Sweeting's first and third causes of action for negligence, the second cause of action for breach of contract, the fourth cause of action for breach of fiduciary duty, and the fifth cause of action for common counts. CTIC was named in the first cause of action for negligence. We shall discuss the specific allegations of these causes of action in more detail below.
CTC and CTIC each filed a demurrer and motion to strike the complaint. Defendants argued the complaint failed to state facts sufficient to state a cause of action or was uncertain. After briefing and a hearing, the court sustained the demurrers without further leave to amend. Judgment was subsequently entered and Sweeting now appeals.
II
DISCUSSION
Standard of Review
"In our de novo review of an order sustaining a demurrer, we assume the truth of all facts properly pleaded in the complaint or reasonably inferred from the pleading, but not mere contentions, deductions, or conclusions of law. [Citation.] We then determine if those facts are sufficient, as a matter of law, to state a cause of action under any legal theory. [Citation.]" (Intengan v. BAC Home Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1052.) "In order to prevail on appeal from an order sustaining a demurrer, the appellant must affirmatively demonstrate error. Specifically, the appellant must show that the facts pleaded are sufficient to establish every element of a cause of action and overcome all legal grounds on which the trial court sustained the demurrer. [Citation.] We will affirm the ruling if there is any ground on which the demurrer could have been properly sustained." (Ibid.)
When 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; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff. [Citation.]" (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; see Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010.)
Request for Judicial Notice
Defendants request we take judicial notice of a series of documents relating to the bankruptcy of fellow defendant GMAC. Sweeting filed no objection. Accordingly, the request is granted pursuant to Evidence Code sections 452 and 459.
Breach of Contract
To establish liability for breach of contract, the plaintiff must establish the well-known elements of the existence of the contract, plaintiff's performance, defendant's breach, and damages. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.)
Sweeting alleged that based on the escrow instructions that were part of the loan package, he "agreed" to use CTC as a subescrow agent. CTC, he also claimed, entered into a written agreement with Fremont and Sweeting to act as a subescrow agent, incorporating the escrow instructions. He alleged CTIC was paid approximately $1600 for title insurance and CTC $195 for subescrow services.
Sweeting also alleged when CTIC "enters into a contract for Title Insurance, it and/or its sister company, [CTC], may act as subescrow agent. As the subescrow agent, [CTC] received the proceeds of Plaintiff's home refinance loan, paid off the old loan, and forwarded the balance of the loan to International Mortgage . . . to complete the terms of the escrow. [CTC], as a subescrow agent, held funds owned by Plaintiff for the benefit of Plaintiff."
Sweeting further alleged the terms of the contract under which CTC obtained his funds contained an illegal clause, because it required the transfer of money to the International Mortgage, which he asserts was unlicensed, in violation of various statutes. International Mortgage then, according to Sweeting, "stole a substantial portion of the proceeds of the Note, received unlawful commissions and failed to transfer to Fremont the first month's payment . . . ." Thus, according to Sweeting, CTC and CTIC breached their contracts with him.
As to the existence of the contract, Sweeting alleged there was a contract between himself, Fremont and CTC. "If the action is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference. [Citation.]" (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) The contract is not attached to the complaint, and its terms are certainly not set forth verbatim. We cannot tell if the allegations regarding the escrow instructions are the contract he is referring to, or if there is another purported agreement. He only selectively quotes from the escrow instructions. Accordingly, this cause of action is defective on its face.
The complaint states that Sweeting "requested" a copy of the contract, but never received it. This does not help his cause. It only suggests that he is alleging a breach of contract based on language he did not have before him when he drafted the complaint.
Even if we were to assume that a contract existed, the cause of action is based primarily on the notion that as a subescrow, CTC was responsible for the alleged wrongdoing of International Mortgage. There is no basis in the law for this argument, however.
It is worth taking a moment to explore the role of an escrow and subescrow because it is relevant to all of Sweeting's causes of action. In Summit Financial Holdings, Ltd. v. Continental Lawyers Title Co. (2002) 27 Cal.4th 705 (Summit), the California Supreme Court explained this role at some length. In that case, a man named Furnish refinanced his mortgage. Continental Lawyers Title Company provided escrow services. Pursuant to the escrow instructions, Continental issued a check to Talbert Financial Services, which had held the Note secured by that property. Talbert, however, had since assigned its rights to the Note to Summit. Summit sued Continental for negligence, contending that the check should have been issued to Summit, not to Talbert. (Summit, supra, 27 Cal.4th at p. 708.) The court stated the issue before it as follows: "The question presented by this case is whether an escrow holder owes a duty of care to a nonparty to the escrow based on an assignment to that nonparty by another nonparty to the escrow. We answer this question in the negative." (Id. at pp. 707-708.)
Sweeting argues Summit is factually distinguishable because that case presented the question of whether the escrow holder owed a duty of care to a nonparty based on an assignment. While the facts differ, the court's general statements about the duties of an escrow certainly do apply here.
The court held: "'An escrow involves the deposit of documents and/or money with a third party to be delivered on the occurrence of some condition.' [Citation.] An escrow holder is an agent and fiduciary of the parties to the escrow. [Citations.] The agency created by the escrow is limited - limited to the obligation of the escrow holder to carry out the instructions of each of the parties to the escrow. [Citations.] If the escrow holder fails to carry out an instruction it has contracted to perform, the injured party has a cause of action for breach of contract. [Citation.]" (Summit, supra, 27 Cal.4th at p. 711.)
"In delimiting the scope of an escrow holder's fiduciary duties, then, we start from the principle that '[a]n escrow holder must comply strictly with the instructions of the parties. [Citations.]' [Citation.] On the other hand, an escrow holder 'has no general duty to police the affairs of its depositors'; rather, an escrow holder's obligations are 'limited to faithful compliance with [the depositors'] instructions.' [Citations.] Absent clear evidence of fraud, an escrow holder's obligations are limited to compliance with [the depositors'] instructions. [Citations.]" (Summit, supra, 27 Cal.4th at p. 711; see Markowitz v. Fidelity Nat. Title Co. (2006) 142 Cal.App.4th 508, 526.)
The duties of a subescrow, which, according to the complaint, was CTC's role here, may be even more limited than those of an escrow. If subescrow is engaged only to perform certain, specific tasks, it does not become a fiduciary, and is not required to review documents or ensure instructions are carried out. (Siegel v. Fidelity Nat. Title Ins. Co. (1996) 46 Cal.App.4th 1181, 1194 (Siegel).)
Again, the subescrow agreement is not attached to the complaint or set forth verbatim, or even in part. It is not enough, as Sweeting suggests, for the trial court or this court to invent terms because "title insurance policies are standard documents, as are the terms of a subescrow agreement." We will not impute terms where none exist in the record.
Again, Sweeting claims he "was never in possession" of the subescrow contract. Again, this does not help his argument.
In any event, based on the language of Sweeting's complaint, CTC was acting only as subescrow agent. International Mortgage, not CTC, was the escrow company for this transaction. Therefore, CTC did not, as Sweeting asserts, have any responsibility other than to comply with the escrow instructions. The complaint does not allege that CTC failed to comply with the subescrow instructions, whatever they were; rather, the allegations suggest that CTC was responsible for policing International Mortgage's licensing and subsequent behavior. As to the allegation of an "illegal" clause, we cannot even take that seriously without a copy of the purported contract - an excellent demonstration of why the rule requiring attachment of the contract (or setting forth its terms verbatim) exists.
Sweeting has failed to establish the existence of a contract between himself and CTC, or to set forth its terms. Even if we were to assume a contract existed, he has failed to plead facts sufficient to show a breach of that contract as a matter of law.
Negligence
"The elements of a cause of action for negligence are duty, breach, causation, and damages." (Melton v. Boustred (2010) 183 Cal.App.4th 521, 529.)
Sweeting pleaded two separate causes of action for negligence. The first is against CTC and CTIC, and alleged that both defendants had a duty to review the documents which formed the basis of Fremont's lien and insure the title was clear. Sweeting alleged that had defendants properly reviewed the documents, they would have discovered the documents were a "forgery in that they were made up of documents with signatures from multiple attempts at executing a loan package and that necessary documents contained forged signatures." He further alleged Insurance Code section 12389.6 required defendants to prevent the misappropriation of funds "'deposited in the underwritten title company's escrow or subescrow account.'"
All further statutory references are to the Insurance Code.
Sweeting specifically pleaded that International Mortgage was the escrow company for this transaction, and the documents attached to the complaint support these allegations. Facts appearing in attached exhibits are given precedence over inconsistent allegations in the complaint. (Holland v. Morse Diesel Internat., Inc. (2001) 86 Cal.App.4th 1443, 1447.) With respect to CTC, later alleged in the complaint as subescrow, it had no duty to detect forgeries or prevent misappropriation by Sweeting's selected escrow company. As noted in our discussion of the breach of contract claim, a subescrow's duties are very limited. (Siegel, supra, 46 Cal.App.4th at p. 1194.) Sweeting alleged that CTC "had a duty to plaintiff to review the relevant document which formed the basis of Fremont's lien on the title to ensure and insure that title was clear of defects" and thereby discover the purported "forgery."
"Duty 'is an essential element' of the tort of negligence. [Citation.] Duty 'may be imposed by law, be assumed by the defendant, or exist by virtue of a special relationship.' [Citation.] The existence of a legal duty '"'depends upon the foreseeability of the risk and a weighing of policy considerations for and against imposition of liability.'"' [Citation.]" (Melton v. Boustred, supra, 183 Cal.App.4th at pp. 529-530.)
Sweeting failed to allege facts supporting that CTC had a duty to do anything than fulfill its limited alleged role as subescrow, which required it to follow the escrow instructions, whatever they were. With regard to CTIC, it, too, had only the duties ascribed to it as the title insurer it is alleged to be. Sweeting alleged that duty to be to ensure the title was "clear of defects." There is no allegation of a problem with the title. Neither defendant had the duty to act as document detective or to validate the signatures on the loan documents.
Sweeting cites to various Web sites, including Wikipedia, as support of his factual and legal arguments. We ignore such arguments, as Web sites are not legal authorities, and we ignore facts not included in the record or subject to judicial notice. Sweeting has filed no request for judicial notice. --------
Sweeting alleged section 12389, et. seq., supports the imposition of such a duty, without stating the specific statute on which he relies. He cites section 12389.6 to support the contention that CTC and CTIC had a duty "'to prevent the misappropriation, disappearance, or wrongful use of funds deposited in the underwritten title company's escrow or subescrow account'" but fails to allege how CTC or CTIC violated the statute. Section 12389.6 requires the title company to maintain a bond or insurance policy to cover such losses; to review disbursements of escrow funds; to maintain account review processes and oversight and internal control guidelines; and to have written procedures approved by the insurance commissioner for the protection and control of escrow funds. Sweeting fails to even suggest CTC or CTIC violated any of these provisions, with the possible exception of the provision requiring review of disbursements.
That provision states, in full: "Disbursements of escrow funds shall be reviewed and approved by an employee of the title insurer. Title insurer employees who review and approve disbursements of escrow funds shall be physically located at the place of business of the underwritten title company and shall be on the title insurer's payroll. Before review and approval of any disbursement, the employee shall sign an affidavit to be filed with and on a form approved by the commissioner. The affiant shall attest that the affiant has read, is familiar with, and agrees to comply with the title insurer's approval procedures for disbursements." (§12389.6, subd. (a)(2).)
Section 12389.6, subdivision (a)(2), does not require the employee to verify signatures, search out forgeries, to check the licensing of escrow companies, or discover any of the other wrongs Sweeting has alleged. This provision does not form the basis for the imposition of a duty beyond its specific provisions. This initial cause of action for negligence simply failed to allege facts establishing a relevant duty on the part of either CTC or CTIC, or a breach of their actual duties as subescrow or title insurer.
The next negligence cause of action is against CTC only. This largely duplicated the breach of contract allegations, asserting CTC breached its duty of care by wiring funds to International Mortgage, due to its alleged lack of a license. As a result, Sweeting claimed, he received only a small portion of the anticipated cash out, which he planned to use for his business. As a result, Sweeting pleaded that CTC is responsible for the failure of his business and the loss of his home.
As the trial court noted, "other than alleging that [CTC] was the sub-escrow agent, Plaintiff does not allege the scope of [CTC's] responsibilities as implicating any duty not to transfer funds as called for by the terms of the escrow. While Plaintiff alleges [CTC] to have paid off the old loan with the new loan proceeds, he also alleges [CTC] to have forwarded the remaining funds to International . . . 'to complete the terms of the escrow.' [Citation.]" This is correct. As stated above, CTC's limited responsibilities are defined by the terms of the escrow instructions. There are no allegations in the complaint that CTC's defined duties as subescrow included paying other creditors or paying a commission to the mortgage broker. These duties, to the extent they existed, were International Mortgage's, not CTC's.
Any allegations to the contrary would be inconsistent with both exhibits to the instant complaint and statements in Sweeting's verified previous complaints, which alleged International Mortgage was the mortgage broker and had a written escrow agreement with him. Again, Sweeting has failed to establish a duty on the part of CTC to do anything other than follow the unspecified instructions it received as subescrow.
Breach of Fiduciary Duty
The next cause of action is for breach of fiduciary duty as to CTC. Sweeting alleged CTC breached its duty to him by failing to learn that International Mortgage was not licensed before delivering funds to them.
"'The elements of a cause of action for breach of fiduciary duty are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach.' [Citation.]" (Gutierrez v. Girardi (2011) 194 Cal.App.4th 925, 932.)
Sweeting repeatedly alleged that CTC acted as subescrow. Sweeting failed, however, to allege the scope of CTC's duties as subescrow. If a subescrow is engaged only to perform specific tasks, it does not become a fiduciary. (Siegel, supra, 46 Cal.App.4th at p. 1194.) Sweeting has pleaded no facts here supporting the contention that CTC's relationship with him rose to the level of fiduciary.
Even if he had, there are no facts supporting the breach of a duty. As discussed above, CTC had no independent duty to investigate the licensure of the escrow company Sweeting chose to do business with. Nor did he allege any duty not to transfer funds as called for by the escrow instructions. Accordingly, this cause of action, too, must fail.
Common Counts
In his cause of action for common counts against CTC and other defendants, Sweeting incorporated the complaint's previous allegations but added nothing new. He then alleged that CTC is indebted to him for $773,500.
"A common count is not a specific cause of action, however; rather, it is a simplified form of pleading normally used to aver the existence of various forms of monetary indebtedness, including that arising from an alleged duty to make restitution under an assumpsit theory. [Citations.] When a common count is used as an alternative way of seeking the same recovery demanded in a specific cause of action, and is based on the same facts, the common count is demurrable if the cause of action is demurrable. [Citations.]" (McBride v. Boughton (2004) 123 Cal.App.4th 379, 394-395.)
Because all of the other causes of action were properly subject to a demurrer, the demurrer as to Sweeting's common count allegations was correctly sustained.
Leave to Amend
In a one-paragraph argument, Sweeting argues he should be given leave to amend because his complaint is "mis-organized and that he may have failed to fully plead his cause of action for breach of contract." He claims that because these defendants "did not even appear" until the second amended complaint, and no cause of action was pleaded against CTIC until the instant complaint because he "did not understand that it was a separate entity from [CTC]" he should be permitted another opportunity to amend.
Sweeting fails to explain how he failed to fully plead a breach of contract cause of action or how that can be cured by another round of pleading. His claim that these defendants "did not even appear" until the second amended complaint suggests that they popped into existence out of thin air. They did not; they have been here the whole time. Nor is it anyone's failing except his that he did not understand the legal relationships between the entities involved. Again, he does not explain how a sixth opportunity to plead a valid cause of action would cure this complaint's deficiencies. Accordingly, he has failed to demonstrate there is a reasonable possibility the defects in his complaint can be cured by amendment. (Blank v. Kirwan, supra, 39 Cal.3d at p. 318.) Sustaining the demurrer without leave to amend was therefore proper.
Due to our conclusion that the demurrer was properly sustained without further leave to amend, we need not address defendants' alternative theories as to why judgment in their favor was appropriate.
III
DISPOSITION
The judgment is affirmed. Defendants are entitled to their costs on appeal.
MOORE, J. WE CONCUR: O'LEARY, P. J. BEDSWORTH, J.