Case Number: BC484058 Hearing Date: May 01, 2014 Dept: 34

Moving Party: Defendant and cross-complainant North American Title Insurance Company (“NATIC”)

Resp. Party: Plaintiffs Roland Covey and Equity Trust Company Custodian FBO Robert Renko IRA (“plaintiffs”); Defendants and cross-defendants Rennis R. Wilkerson Jr. and Wilkerson Appraisal Service (“Wilkerson”)

Wilkerson’s request to continue the instant motion is GRANTED.

PRELIMINARY COMMENTS:

NATIC is correct that plaintiffs can no longer assert their seventeenth or nineteenth causes of action because the Court previously sustained NATIC’s demurrer to these claims without leave to amend. Plaintiffs’ inclusion of these causes of action in their FAC was improper. Therefore, only the fifteenth, sixteenth, and eighteenth causes of action are asserted against NATIC.

BACKGROUND:

Plaintiffs commenced this action on 5/3/12 against several defendants, alleging 19 causes of action. Plaintiffs claim defendants Union Home Loan, Inc., and defendants Daniel, Stephen, and Gary Goldfield brokered a purported loan in the amount of $795,000, which was funded by plaintiff to a purported borrower. (FAC ¶ 1.) The loan was to be secured by a valid and enforceable Deed of Trust recorded against a real property. (Ibid.) Defendant and cross-complainant NATIC was plaintiffs’ title insurer for the loan. (Ibid.) Plaintiffs allege that the defendants are liable for the principle sum of $795,000 because the loan was made to an imposter borrower and plaintiffs did not receive a valid and enforceable first priority Deed of Trust against the property. (Ibid.)

Plaintiffs allege that an investigation conducted by NATIC disclosed that the broker defendants had actual knowledge of evidence of fraud by the purported borrower. (FAC ¶ 4.) Plaintiffs further allege that NATIC knew or should have known that the broker defendants were acting in a capacity adverse to plaintiff with respect to the loan and therefore would be unlikely to communicate their knowledge of the suspicious loan to plaintiffs. (Id., ¶ 11.) Plaintiffs allege that, before the Deed of Trust was recorded, NATIC knew or should have known that the Deed would not be valid and enforceable because of a forged signature. (Id., ¶ 62.) The broker defendants failed to disclose to NATIC a credit report, and this has allowed NATIC to claim in bad faith that plaintiffs have no coverage under a Loan Policy of Title Insurance. (Id., ¶¶ 46, 61.)

Plaintiffs claim that a purpose of the complaint is to obtain a judgment against NATIC for breach of the Loan Policy of Title Insurance and for breach of the duty of good faith and fair dealing. (Id., ¶ 12.) Plaintiffs allege the Policy insured plaintiffs for loss or damages caused by a defect or invalidity on the Title caused by fraud or forgery. (Id., ¶ 72.) Plaintiffs submitted a proof of claim to NATIC after the broker defendants received a forgery report. (Id., ¶¶ 74-75.) Plaintiffs claim that NATIC was required to accept or deny the proof of claim within 40 calendar days, but NATIC has failed to do so. (Id., ¶ 75.)

On 6/4/12, NATIC filed a cross-complaint against plaintiffs, Wilkerson, and other cross-defendants alleging causes of action for: (1) declaratory relief; (2) rescission; and (3) declaratory relief of entitlement to indemnity. After the Court sustained demurrers to the cross-complaint, NATIC filed a first amended cross-complaint (“FACC”) alleging the same three causes of action. The FACC alleges that Wilkerson performed an appraisal of the subject property and prepared an appraisal report which contained material errors. (FACC ¶ 14.) NATIC has filed a second amended cross-complaint.

On 7/26/12, the Court sustained NATIC’s demurrer to the seventeenth and nineteenth causes of action in plaintiffs’ complaint, without leave to amend.

On 8/14/13, the Court denied plaintiffs’ motion for leave to amend, without prejudice.

On 12/6/13, the Court granted plaintiffs’ motion for leave to file a first amended complaint (“FAC”). The FAC adds causes of action (20 and 21) for negligence and negligent misrepresentation against Wilkerson. Plaintiffs allege that Wilkerson had a duty to prepare a true and accurate appraisal report of the property, but that Wilkerson failed to inspect the interior of the house and included photographs that did not depict the interior of the house. (See FAC ¶¶ 10, 48.)

ANALYSIS:

NATIC moves for summary judgment, or in the alternative summary adjudication of the following issues: (1) the insurance claim giving rise to this action is excluded from coverage under the Policy, thus precluding the fifteenth cause of action for breach of insurance contract; (2) the sixteenth cause of action for breach of the duty of good faith and fair dealing fails because there was no breach of the insurance contract and NATIC did not act unreasonably in responding to plaintiffs’ claim; (3) the eighteenth cause of action for rescission of the escrow agreement fails because there was no escrow contract between plaintiffs and NATIC; (4) NATIC is not estopped to assert a defense to plaintiffs’ claim by virtue of a prior, canceled order relating to a proposed loan that was never consummated because the facts show that there was nothing suspicious about the prior order and NATIC was not put on notice of any attempted fraud that should have been disclosed to plaintiff; and (5) NATIC is entitled to summary adjudication of its cross-claim against plaintiffs for rescission of the title policy because in procuring the Policy plaintiffs concealed material information relevant to the covered risk, and NATIC would not have issued the policy had this information been disclosed.

Wilkerson requests that the Court continue or deny this motion pursuant to Code of Civil Procedure section 437c(h). If a party opposing the summary judgment motion shows by declaration that evidence essential to the opposition “may exist but cannot, for reasons stated, then be presented, the court shall deny the motion, or order continuance to permit . . . discovery.” (Code Civ. Proc., § 437c(h).) Such a continuance is “ ‘virtually mandated’ where the nonmoving party makes the requisite showing. The party need not show that essential evidence does exist, but only that it may exist.” (Weil & Brown, Civ. Proc. Before Trial (The Rutter Group 2013) ¶ 10:207 [italics in original].) The accompanying declaration must show: (1) facts showing that the evidence may exist and why it is essential to the opposing motion; (2) specific reasons why the evidence cannot be presented; (3) an estimate of time needed to obtain the evidence; and (4) specific steps intended to be used to obtain the evidence. (Weil & Brown, ¶ 10:207.15 [citing CCP § 437c(h)].)

Wilkerson argues that it must be determined whether the information purportedly known by plaintiffs and their broker agent was material to the issuance of the title policy such that it would fall under the exclusions in the policy, and that central to the materiality issue is NATIC’s underwriting process, policies, and procedures which were to be followed in issuing the policy. Wilkerson shows that the evidence may exist because an employee of NATIC, Tiffany Ramirez, testified at her deposition that information as to underwriting policies or procedures could be addressed by someone from NATIC’s underwriting department or other NATIC employees. (See WUF 6-8.) Ramirez and Del Paine have testified that there may be documents related to the underwriting policies that have not been produced. (See WUF 17, 20.) Wilkerson’s counsel, Kirk C. Pearson, declares that the evidence as to the underwriting polices is essential because the materiality of the information is directly relevant to the underwriting process, policies and procedures. (Pearson Decl., ¶ 16.) Pearson declares that there is no way to address what is material without this evidence. (Ibid.) This is particularly true since NATIC does not have an underwriting manual or written procedures for title officers to follow before issuing title insurance. (WUF 21.) As to why the evidence cannot be presented, Pearson declares that Wilkerson has attempted to obtain depositions and documents, but that NATIC has failed to fully cooperate. (See id., ¶¶ 7, 9-11, 13-14.) Wilkerson appears to have been attempting to obtain this information since at least September 2012. (See id., ¶ 9, Exh. G.)

The Court notes, however, that Pearson fails to provide an estimate of time needed to obtain the evidence, or any steps intended to be used to obtain the evidence.

Where a declaration in support of a request for a continuance under section 437c(h) is deficient, a court may, in its discretion, nonetheless determine whether there is good cause for a continuance. (See Weil & Brown, ¶ 10:208.) “The court’s discretion, however, must be exercised liberally in favor of granting a continuance: ‘The interests at stake are too high to sanction the denial of a continuance without good reason.’ [Citation.]” (Ibid.) The factors to be considered are the length of time the case has been pending, the length of time the requesting party has had to oppose the motion, the proximity of the trial date or discovery cutoff, whether the party could have made the continuance earlier, prior continuances for this purpose, whether the evidence sought is “essential” to the issues. (Id., ¶ 10:208.1.)

This action has been pending for two day shy of two years. Wilkerson has had approximately three months to oppose the motion. Trial is set for 1/20/15 – over eight months from the scheduled hearing date for this motion. Because the depositions of NATIC employees who suggested that the underwriting policies and procedures would need to be addressed by other employees were not completed until March and April 2014, it appears that the continuance request could not have been made much earlier. (See WUF 4-5, 8-9, 16-17, 20-21.) The evidence sought could be essential to the issues because NATIC’s primary argument in its motion is that plaintiffs’ claims are excluded from the policy because plaintiffs failed to disclose information as to possible fraud, and because NATIC would not have issued the policy had this information been disclosed. The evidence as to NATIC’s underwriting policies and procedures may well be relevant to determine whether such information would have been material to NATIC’s decision to issue the insurance policy. Moreover, plaintiffs’ opposition raises several arguments as to NATIC’s underwriting practices. (See, e.g., Pl. Opp., pp. 8-11.) Any evidence as to such practices could assist in the consideration of such arguments.

As stated above, the Court’s discretion should be exercised liberally in favor of granting a continuance. (See, e.g., Frazee v. Seely (2002) 95 Cal.App.4th 627, 634.)

The Court GRANTS Wilkerson’s request to continue the instant motion.

The court request that the parties meet and confer prior to the May 1st hearing in order to advise the court how long of a continuance is necessary for Wilkerson to obtain the necessary discovery and when this motion for summary judgment should be re-calendared.