16-CIV-02858 VICKY CHON HARRIS vs. SASHI P. SMITH, et al.

VICKY CHON HARRIS DENNIS ZELL

SASHI SMITH SIMON OFFORD

first american title l. bryant jaquez

TERRACE ASSOCIATES MARK C. CARLSON

FIRST AMERICAN TITLE COMPANY’S HEARING ON DEMURRER TO THE FIRST AMENDED CROSS-COMPLAINT OF TERRACE ASSOCIATES, INC.

TENTATIVE RULING:

Cross-Defendant FIRST AMERICAN TITLE COMPANY’s Demurrer to the First Amended Cross-Complaint filed by TERRACE ASSOCIATES, INC. and AL RUSSELL is OVERRULED as to the First cause of action for indemnity and Second cause of action for contribution. The Court finds that these causes of action are sufficiently stated.

Under the doctrine of equitable indemnity, “a concurrent tortfeasor enjoys a common law right to obtain partial indemnification from other concurrent tortfeasors on a comparative fault basis.” American Motorcycle Association v. Superior Court (1978) 20 Cal.3d 578. California courts have required the party seeking equitable indemnity to demonstrate that the proposed indemnitor would be liable as a tortfeasor to the underlying plaintiff. GEM Developers v. Hallcraft Homes of San Diego, Inc. (1989) 213 Cal.App.3d 419, 429.

Similarly, equitable contribution is the right to recover from a co-obligor who shares liability with the party seeking contribution. Fireman’s Fund Insurance Company v. Maryland Casualty Company (1998) 65 Cal.App.4th 1279, 1292. The right to contribution depends upon the existence of an obligation owed to an injured party. Id. at 1293.

Here, Terrace seeks equitable indemnity and contribution against First American based on First American’s role as the title and escrow company in the transaction between the Smiths and Elevation Homes. Further, it is alleged that First American specifically agreed to search the public records for Plaintiff’s threatened lis pendens as an accommodation during escrow proceedings, which gave rise to an additional duty upon which First American can be held liable. (FACC ¶¶ 17, 18.)

First American argues generally that a title insurer does not have an affirmative duty to disclose liens or other clouds affecting title, unless it is providing an abstract of title. Further, in its role as the escrow holder, First American argues that its duties are limited to the faithful performance of escrow instructions. While this may be the general rule, Terrace alleges that First American assumed the additional duty of searching the public records for this lis pendens as an accommodation during escrow, and that First American was actually aware that a lis pendens was being threatened by Plaintiff. Given the facts of this case, First American’s general argument is not well taken.

First American cites to the Banville v. Schmidt case for the proposition that a broker cannot obtain indemnity against the title company when the broker’s conduct was not done in reliance on any information provided by the title company. However, this not the case here. Terrace alleges that it was specifically relying upon First American to search the public records and to provide timely notice of Plaintiff’s lis pendens prior to the close of escrow, which would have circumvented the damages being claimed by Plaintiff and Elevation Homes in this action.

However, the demurrer is SUSTAINED WITHOUT LEAVE TO AMEND as to the Third cause of action for declaratory relief, which Terrace concedes is “dependent on and wholly derivative” of its first two causes of action. “The declaratory relief statute should not be used for the purpose of anticipating and determining an issue which can be determined in the main action. The object of the statute is to afford a new form of relief where needed and not to furnish a litigant with a second cause of action for the determination of identical issues.” California Ins. Guarantee Assn. v. Superior Court (1991) 231 Cal.App.3d 1618, 1623-24.

Cross-Defendant shall file a responsive pleading on or before February 2, 2018.