18-CIV-02069 NORMAN BOUTON, ET AL. VS. SANDY MCNABB, ET AL.

NORMAN BOUTON SANDY MCNABB
ROBERT H. STALEY ELIZABETH A. SKANE

DEFENDANTS SANDY MCNABB AND MCGLASHAN & SARRAIL, PROFESSIONAL CORPORATION (“DEFENDANTS”) WILL MOVE THIS COURT FOR SUMMARY JUDGMENT, OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION TENTATIVE RULING:

Defendants Sandy McNabb and McGlashan & Sarrail, PC’s Motion for Summary Judgment, or Alternatively, Summary Adjudication, is DENIED. Code Civ. Proc. § 437c. As explained below, the Court cannot resolve these disputed issues as a matter of law.

First, the record contains sufficient evidence of negligence to withstand summary judgment/adjudication. The underlying facts appear largely undisputed. Defendants represented Plaintiffs/sellers in two 2012 real estate transactions, the first of which fell through. In the first transaction (involving potential buyer McLaughlin), Defendants received and reviewed a preliminary title report that disclosed a 1963 light and air easement on the property. See Bouton Decl., ¶¶3-4, Ex. A, B. Later in 2012, Old Republic issued a different preliminary title report that did not disclose the 1963 easement. Despite this omission, Defendants advised Plaintiffs, their clients, to sign documentation under oath incorrectly representing there were no liens, encumbrances, etc. on the property other than those set forth in the Old Republic title report. That incorrect statement in documents Plaintiffs signed under oath ultimately led to Old Republic suing Plaintiffs for fraud, among other claims. This evidence raises a triable issue as to whether Defendants’ actions fell below the standard of care by asking their clients to sign documents they (arguably) knew or should have known contained a false statement, which later led to Plaintiffs being sued by Old Republic. See UMFs 25-40 and evidence cited therein.

The evidence also creates a triable issue as to causation. Defendants contend Plaintiffs had constructive knowledge of the 1963 recorded easement, and thus Plaintiffs’ own actions (their own misrepresentation) caused the Old Republic lawsuit. Even if Plaintiffs bear some fault/responsibility for instigating the Old Republic suit, that fact does not necessarily negate causation. Plaintiffs argue they signed the escrow documents because Defendants advised them to do so, and that Plaintiffs were relying on their lawyers’ experience and expertise in insuring the documents’ accuracy. See UMFs 31-39. Arguably, Defendants knew or should have known the documents they asked Plaintiffs to sign contained a false statement, which led to Plaintiffs being sued and incurring attorney’s fees to defend the claim. This evidence creates a factual dispute regarding causation.

Contrary to Defendants’ contention, the fact that the Old Republic lawsuit (S.F. Superior Court Case No. CGC-15-548906) settled favorably to Plaintiffs (it settled for a waiver of costs and fees) does not mean Defendants’ alleged negligence caused no actual injury. See Sindell v. Gibson, Dunn & Crutcher (1997) 54 Cal.App.4th 1457, 1466-71 (where an attorney’s negligence results in the client being sued by a third party, and where the client incurs attorney’s fees to defend itself against the third-party claim, the client’s expenditure of attorney’s fees can constitute actual injury/damage caused by the attorney’s negligence, regardless of whether the client ultimately prevails in the third-party lawsuit). Here, as in Sindell, the outcome of the Old Republic lawsuit merely determined the amount of Plaintiffs’ alleged damage, not whether Plaintiffs were damaged. See also Prentice v. North Amer. Title Guar. Corp. (1963) 59 Cal.2d 618, 620-21 (discussing the “tort of another” basis of liability). This case is not analogous to ITT Small Bus. Finance Corp. v. Niles (1994) 9 Cal.4th 245, cited by Defendants, where the outcome of the underlying third-party litigation directly determined the issue of whether the attorneys were negligent. Here, the fact that Old Republic dismissed its case against Plaintiffs for a waiver of cost and fees does not disprove the malpractice claim; it does not mean Plaintiffs never made a misrepresentation.

Similarly, the Court cannot resolve Defendants’ “unclean hands” defense on summary judgment. See Blain v. Doctor’s Co. (1990) 222 Cal.App.3d 1048, 1060 (discussing, generally, the equitable defense of unclean hands). There is no clear evidence here of any wrongdoing/misconduct by Plaintiffs or their predecessors that would justify an Order barring their malpractice claim on equitable grounds. Defendants argue Plaintiffs had constructive knowledge of the 1963 easement when they signed the escrow documents containing the false statement, and thus should be barred from pursuing a malpractice claim. There is no compelling evidence that Plaintiffs knew that any document(s) they signed contained an incorrect statement(s). See UMFs 36,-37, 39. The Blain v. Doctor’s Co. case, cited by Defendants, is not analogous. There, Plaintiff intentionally lied/perjured himself during a deposition, supposedly at his counsel’s suggestion, and later sued the attorney for malpractice. Here, in contrast, there is no evidence of intentional wrongdoing by Plaintiffs that would justify application of the unclean hands doctrine.

Further, as noted in the Opposition papers, the moving papers do not address Plaintiffs’ Third Cause of Action for breach of fiduciary duty, and thus the Court cannot adjudicate that claim as a matter of law.

Defendants’ 1-28-19 Request for Judicial Notice (RJN) of the Complaints attached as Exhibits A, H, I to the 1-28-19 Index of Exhibits is GRANTED. Evid. Code 452(d). The RJN of the recorded Grant Deeds attached as Exhibits J and K is also GRANTED. Evid. Code 452(c). As to the recorded Grant Deeds, judicial notice is taken of their contents and the fact of their recording, but not of the truth of any statements or allegations therein.

If the tentative ruling is uncontested, it shall become the order of the Court, pursuant to Rule 3.1308(a)(1), adopted by Local Rule 3.10, effective immediately, and no formal order pursuant to Rule 3.1312 or any other notice is required as the tentative ruling affords sufficient notice to the parties.