Case Name: Amazing Packaging Supplies Pension Plan v. Commonwealth Land Title Insurance Company, et al.
Case No.: 1-11-CV-210883

Currently before the Court are the following motions: (1) cross-defendants Commonwealth Land Title Company (“Commonwealth Title”) and Fidelity National Title Company’s (“Fidelity Title”) motion to strike amendments to defendant/cross-complainant Eugene Yamamoto’s (“Yamamoto”) cross-complaint; (2) Commonwealth Title and Fidelity Title’s motion for entry of judgment; and (3) Yamamoto’s demurrer to the second amended cross-complaint (“SACC”) filed by cross-complainant Commonwealth Land Title Insurance Co. (“Commonwealth Insurance”).

In the underlying complaint, plaintiff American Packaging Supplies Pension Plan (“Plaintiff”) alleges that on July 1, 2002, it made a second mortgage loan in the amount of $85,000 to Michael Sporleder (“Sporleder”), secured by a second deed of trust upon his real property. (See Compl., ¶ 6.) Three years later, Plaintiff made a third mortgage loan to Sporleder in the amount of $30,000, secured by a third deed of trust on the same property. (See Compl., ¶ 7.) Acting as the escrow agent for the third mortgage transaction, Commonwealth Insurance mistakenly reconveyed the $85,000 second mortgage even though it had yet to be paid off. (See Compl., ¶ 8.) After discovering the mistake, Commonwealth Insurance promised to make Plaintiff whole. (See Compl.,   ¶ 10.) In this regard, it hired Yamamoto, an attorney, to assist Plaintiff in the recovery of the reconveyed second mortgage. (See Compl., ¶ 12.) While Yamamoto represented Plaintiff’s interests, Commonwealth Insurance paid Yamamoto’s fees. (See Compl.,   ¶ 12.) In 2009, Commonwealth Insurance was purchased by Fidelity National Financial, Inc. (“Fidelity Financial”), who refused to honor Commonwealth Insurance’s promise to make Plaintiff whole. (See Compl., ¶ 16.) A year later, on August 30, 2010, Sporleder sold the real property at issue, but paid off only a portion of the second mortgage note. (See Compl., ¶ 17.) Shortly thereafter, Yamamoto withdrew as Plaintiff’s attorney without taking any further steps to protect Plaintiff’s interests. (See Compl., ¶ 18.) In its complaint, Plaintiff asserts causes of action against Commonwealth Insurance and its employees, Fidelity Financial, and Yamamoto for: (1) breach of oral contract; (2) common counts; (3) breach of fiduciary obligations; (4) breach of fiduciary obligations; (5) negligent misrepresentation; (6) fraud; (7) express indemnity; and (8) implied indemnity.

In Yamamoto’s cross-complaint, Yamamoto alleges that he was retained by Commonwealth Title to represent Plaintiff for the purpose of reinstating the second deed of trust and performed legal services until Plaintiff entered into a settlement agreement with the trustor of the deed of trust. (See Yamamoto Cross-Compl., ¶¶ 6, 8.) Yamamoto further alleges that while Commonwealth Title, Fidelity Title, and Plaintiff agreed to pay all his legal fees, he is still owed more than $15,000 for services rendered. (See Yamamoto’s Cross-Compl., ¶ 21.) In his cross-complaint, Yamamoto asserts causes of action against Commonwealth Title, Fidelity Title, and Plaintiff for: (1) equitable indemnity; (2) contribution; (3) breach of contract; (4) common counts; and (5) quantum meruit.

In Commonwealth Insurance’s second amended cross-complaint (“SACC”), Commonwealth Insurance alleges that Commonwealth Title retained Yamamoto to represent Plaintiff with respect to the mistaken reconveyance of Plaintiff’s deed of trust. (SACC, ¶ 9.) As such, Commonwealth Insurance did not have an attorney-client relationship with Yamamoto regarding Plaintiff’s underlying action. (See SACC, ¶ 9.) On February 25, 2013, Commonwealth Insurance paid Plaintiff the sum of $98,500 in exchange for the dismissal of Plaintiff’s complaint against Commonwealth Insurance and Fidelity Financial. (See SACC, ¶ 10.) Commonwealth Insurance alleges that the damages sustained by Plaintiff were caused entirely or partly by Yamamoto’s conduct. (See SACC, ¶ 10.) In the operative SACC, Commonwealth Insurance asserts three causes of action against Yamamoto for: (1) equitable indemnity; (2) contribution; and (3) declaratory relief.

A. Requests for Judicial Notice

In support of their motions to strike and for entry of final judgment, Commonwealth Title and Fidelity Financial ask the Court to take judicial notice of a number of documents filed in this action. The request for judicial notice is GRANTED. (See Evid. Code, § 452, subd. (d) [courts may take judicial notice of court records].)

In support of the demurrer, opposition to the motion to strike, and opposition to the motion for entry of final judgment, Yamamoto asks the Court to take judicial notice of a number of documents filed in this action and several “Amendment to Complaint” forms from the San Mateo, Marin, Sacramento, Santa Cruz, and Alameda County Superior Court websites. The request for judicial notice is GRANTED. (See Evid. Code, § 452, subd. (d); Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 753 [courts may take judicial notice of document posted on government agency websites].)

In opposition to Yamamoto’s demurrer, Commonwealth Insurance asks the Court to take judicial notice of a number of documents filed in this action and corporate records from the California Secretary of State’s website. The request for judicial notice is GRANTED. (See Evid. Code, § 452, subd. (d) [courts may take judicial notice of court records]; Friends of Shingle Springs Interchange, Inc. v. County of El Dorado (2011) 200 Cal.App.4th 1470, 1484 [courts may take judicial notice of documents reflecting the official acts of the executive department of a state].)

B. Commonwealth Title and Fidelity Title’s Motion to Strike

Commonwealth Title and Fidelity Title move to strike the amendment to Yamamoto’s cross-complaint, which substituted Commonwealth Title for Doe 21 and Fidelity Title for Doe 22. (See Code Civ. Proc., § 436 [court may strike all or part of pleading not drawn or filed in conformity with laws of state, a court rule or order of court].) They persuasively argue that a Doe amendment can only be made “within the time prescribed in [Code of Civil Procedure] section 472, or, otherwise, by leave of court under [Code of Civil Procedure] section 473.” (Gutierrez v. Super. Ct. (Ojai Valley Inn) (1966) 243 Cal.App.2d 710, 723, superseded by statute on other grounds as stated in Rosas v. Super. Ct. (Mercury Casualty Co.) (1994) 25 Cal.App.4th 671, 674.) Yamamoto filed the Doe amendments approximately two years after Plaintiff, Commonwealth Insurance, and Fidelity Financial filed their answers to the cross-complaint. Thus, the Doe amendments may not be made as a matter of right. (See Code Civ. Proc., § 472; Asia Investment Co. v. Borowski (1982) 133 Cal.App.3d 832, 840 [once answer filed, plaintiff or cross-complainant’s right to amend as a matter of course no longer available].) In addition, Yamamoto did not seek the leave of Court to amend pursuant to Code of Civil Procedure section 473. Accordingly, the motion to strike is GRANTED WITH 10 DAYS’ LEAVE TO AMEND to allow Yamamoto to seek leave to amend the cross-complaint by way of noticed motion. (See Loser v. E.R. Bacon Co. (1962) 201 Cal.App.3d 387, 390 [court may grant motion to strike without prejudice “to file another amended complaint after proper notice and permission of the court…”].)

C. Commonwealth Title and Fidelity Title’s Motion for Entry of Final Judgment

Commonwealth Title and Fidelity Title move for entry of judgment in their favor on the ground that Yamamoto did not file an amended cross-complaint after the Court granted a motion for judgment on the pleadings on November 21, 2013. (See Code Civ. Proc., § 438, subd. (h)(4)(A).)

In opposition, Yamamoto persuasively argues that the Court’s November 21, 2013 order was in excess of its jurisdiction because the action was stayed. In this regard, on July 11, 2013, Plaintiff filed a notice of stay of the proceedings pending arbitration. Pursuant to Business and Professions Code section 6201, subdivision (c), “[u]pon filing and service of the request for arbitration, the action or proceeding shall be automatically stayed until the award of the arbitrators is issued or the arbitration is otherwise terminated.” The stay may be vacated, after a hearing duly noticed by any party or the court, if and to the extent the court finds that the matter is not appropriate for arbitration. (See Bus. & Prof. Code, § 6201, subd. (c).) Here, the Court expressly denied a motion to lift the stay on September 12, 2013 and the arbitration award was not issued until July 23, 2014. The order granting the motion for judgment on the pleadings on November 21, 2013 was issued while the stay was still in effect. Accordingly, the order is in excess of the Court’s jurisdiction and cannot serve as a basis for the entry of judgment. (See Titan/Value Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 487 [after initiation of stay, no judicial act authorized other than those expressly provided by statute].) Accordingly, the motion for entry of final judgment is DENIED without prejudice to the refiling of the underlying motion for judgment on the pleadings.

D. Yamamoto’s Demurrer to the SACC

Yamamoto demurs to the first, second, and third causes of action in Commonwealth Insurance’s SACC for equitable indemnity, contribution and declaratory relief on the ground that they fail to allege facts sufficient to constitute a cause of action. (See Code Civ. Proc., § 430.10, subd. (e).)

As to the first and second causes of action for equitable indemnity and contribution, Yamamoto contends that Commonwealth Insurance lacks standing to seek indemnity or contribution. He reasons that Commonwealth Insurance must allege an attorney-client relationship between the parties to bring these claims. As a general rule, joint and several liability in the context of equitable indemnity and contribution is expansive, applying “to acts that are concurrent or successive, joint or several, as long as they create a detriment caused by several actors.” (BFGC Architects Planners, Inc. v. Forcum/Mackey Construction, Inc. (2004) 119 Cal.App.4th 848, 852; see also Jaffe v. Huxley Architecture (1988) 200 Cal.App.3d 1188, 1192 [“There seems no logical reason why the application of this doctrine should turn on the relationship of the tortfeasors to each other. What is important is the relationship of the tortfeasors to the plaintiff and the interrelated nature of the harm done.”].) Here, Plaintiff alleges that it was harmed both by Commonwealth Insurance’s mistaken reconveyance of the second deed of trust (see Compl., ¶ 34) and Yamamoto’s failure to reinstate the second deed of trust (see Compl., ¶¶ 12, 17, 18, 39.) As Commonwealth Insurance is alleged to be responsible for the same injuries that Yamamoto is accused of causing, Commonwealth Insurance does not lack standing to seek indemnity or contribution.

Next, Yamamoto argues that a non-client, such as Commonwealth Insurance, may not seek indemnity or contribution from an attorney based on an attorney’s purported malpractice. Indemnity claims by nonclients against attorneys generally have been disallowed when they are based on the attorney’s breach of duty to his or her client. (See Leko v. Cornerstone Bldg. Inspection Service (2001) 86 Cal.App.4th 1109, 1117-1118; see also Gentry Construction Co. v. Super. Ct. (R.H. Liquidating, Inc.) (1989) 212 Cal.App.3d 177, 181-182 [stating that courts have created exceptions to the general rule of comparative indemnity “only where, because of the particular factual context, fairness did not require that any part of the loss be shifted from a defendant to a third party, or where such loss shifting would interfere in a special relationship between the plaintiff and the third party.”].) Nevertheless, in Musser v. Provencher (2002) 28 Cal.4th 274, 284-285, the California Supreme Court explained that the attorney exception to the general rule of comparative indemnity will apply only if the indemnification claim compromises an attorney’s duty of loyalty to his client or the confidentiality of attorney-client communications. Here, Commonwealth Insurance’s indemnification and contribution claims do not implicate either of these policy considerations. Plaintiff has already sued Yamamoto for his conduct in failing to reinstate the deed of trust and Commonwealth Insurance’s claims are premised on the same conduct. Thus, it is unclear how Commonwealth’s claims could create further interference with the attorney-client relationship. Moreover, given Plaintiff’s claims against Yamamoto, Yamamoto may disclose privileged client communications to the extent necessary to defend against the action. (See McDermott, Will & Emery v. Super. Ct. (James) 83 Cal.App.4th 378, 383-384.) Permitting the indemnification and contribution claims to proceed will not further compromise the confidentiality of attorney-client communications.

In light of the foregoing, Yamamoto fails to demonstrate that public policy considerations preclude claims for equitable indemnity and contribution under the circumstances of this action. Accordingly, the demurrer to the first and second causes of action in the SACC is OVERRULED.

As to the third cause of action, Yamamoto contends that this cause of action is subject to demurrer because it is derivative of the indemnity and contribution claims. (See Ball v. FleetBoston Financial Corp. (2008) 164 Cal.App.4th 794, 800 [demurrer properly sustained as to claims for declaratory relief “wholly derivative” of unsupported claim].) While Commonwealth Insurance’s declaratory relief claim is derivative of its other two causes of action, the demurrer to those claims are overruled. The demurrer to the third cause of action is likewise OVERRULED.

The Court will prepare the order.