Youssef vs. BCKG Beach Properties, LLC

Defendants to give notice.

3 Youssef vs. BCKG Beach TENTATIVE RULING: Properties, LLC Demurrer

Defendant Chicago Title Insurance Company demurs to the Second Amended Complaint (SAC) of Plaintiff Adel I. Youssef. For the following reasons, the demurrer is OVERRULED.

Standard on Demurrer

In ruling on a demurrer, a court must accept as true all allegations of fact contained in the complaint. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) A demurrer challenges only the legal sufficiency of the affected pleading, not the truth of the factual allegations in the pleading or the pleader’s ability to prove those allegations. (Cundiff v. GTE Cal., Inc. (2002) 101 Cal.App.4th 1395, 1404-1405.) Questions of fact cannot be decided on demurrer. (Berryman v. Merit Prop. Mgmt., Inc. (2007) 152 Cal.App.4th 1544, 1556.) A demurrer tests only the sufficiency of the complaint; a court will not consider facts that have not been alleged in the complaint unless they may be reasonably inferred from the matters alleged or are proper subjects of judicial notice. (Hall v. Great W. Bank (1991) 231 Cal.App.3d 713, 718 n.7.)

Although courts should take a liberal view of inartfully drawn complaints (see Code Civ. Proc., § 452), it remains essential that a complaint set forth the actionable facts relied upon with sufficient precision to inform the defendant of what plaintiff is complaining, and what remedies are being sought. (Leek v. Cooper (2011) 194 Cal.App.4th 399, 413.) Bare conclusions of law devoid of any facts are insufficient to withstand demurrer. (Schmid v. City and County of San Francisco (2021) 60 Cal.App.5th 470, 481; see Code Civ. Proc., § 425.10(a).)

Fourth Cause of Action (Negligence)

The SAC pleads a single cause of action against Defendant Chicago Title. The fourth cause of action alleges Chicago Title breached its obligations as recording agent by failing to timely record a Deed of Trust securing a debt owed to Plaintiff Youssef. (SAC ¶¶ 19, 21, 78, 93.)

The elements of a negligence claim are: (1) a duty on the part of defendant toward plaintiff; (2) defendant’s breach of that duty; and (3) harm to plaintiff caused by the breach. (Kesner v. Superior Court (2016) 1 Cal.5th 1132, 1142.) Absent duty, there is no liability, no matter how easily the injury might have been prevented. (J.L. v. Children's Institute, Inc. (2009) 177 Cal.App.4th 388, 396.)

The court sustained with leave to amend Defendant Chicago Title’s demurrer to the FAC, ruling that the FAC alleged no breach of duty as trustee, title insurer, or escrow agent.

The SAC bases the negligence claim on Chicago Title’s role as recording agent. The SAC alleges that on 10/21/2024, Defendant Quality Escrow engaged Defendant Chicago Title to act as recording agent for all documents, which included the Deed of Trust executed by Defendant BCKG (the “Youssef DOT”). (SAC ¶ 19.) Defendant Chicago Title undertook to record the closing documents as part of the escrow closing process. (SAC ¶ 79.) The SAC alleges Chicago Title breached its duty as the recording agent to exercise ordinary care by failing to timely and sufficiently record the Youssef DOT (see SAC ¶¶ 77-78), by delaying the recordation of the Youssef DOT, and recording the Grant Deed to subsequent purchaser Defendant PCH prior to recording the Youssef DOT. (See SAC ¶¶ 21, 25(c).)

Specifically, the SAC alleges Defendant Chicago Title recorded the Grant Deed on 10/22/2024 but did not record the DOT until 30 days later, on 11/21/2024. (SAC ¶¶ 19, 21.)

Where a plaintiff alleges tort claims against a contracting party and the claims arise from the parties’ underlying contract, such claims are generally barred by the economic loss rule. (See Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 923-824, citing among others Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 991 [holding lender did not have a duty to treat loan modification applications with due care].)

A title company, however, is held to the standard of care for professionals within their area of expertise and may be liable for economic loss caused by their negligence. (See, e.g., Seeley v. Seymour (1987) 190 Cal.App.3d 844, 860.) More generally, a defendant may be held liable for economic harm inflicted upon a third party with whom the defendant has no direct dealing, if the balance of factors warrants the imposition of a duty to the third party. (Seeley v. Seymore, supra, 190 Cal.App.3d at p. 860 [citing others].) “Those factors are: ‘(1) the extent to which the transaction was intended to affect the plaintiff; (2) the foreseeability of harm to the plaintiff; (3) the degree of certainty that the plaintiff suffered injury;

(4) the closeness of the connection between the defendant’s conduct and the injury suffered; (5) the moral blame attached to the defendant’s conduct; and (6) the policy of preventing future harm.’ [Citation.]” (Seeley v. Seymore, supra, 190 Cal.App.3d at pp. 860- 861.)

In Seeley v. Seymore, the court concluded the title insurance company owed the plaintiff-lessor a duty of care, where the title company had recorded a void memorandum of lease. The court considered that: (1) the title company’s recording of a purported memorandum of lease was substantially intended to affect the plaintiff-lessor, as that was the primary purpose; (2) there was a strong element of foreseeability that the lessor would suffer economic harm as a result of that recording; (3) the plaintiff did, in fact, suffer injury, as the recorded memorandum clouded title and compelled the lessor to incur attorney’s fees to try to expunge the memorandum from the record; (4) the “closeness of the connection” between act and harm suffered is self-evident; and (5) while not morally repugnant, the title insurance company’s conduct was deserving of moral blame because it violated its contract with the County Recorder and standard title company practices, which gave the document an aura of presumptive validity; and (6) title companies as institutions are charged with the public trust, so it is important they be held accountable when their negligent acts result in economic harm to individual property interests. (Id. at pp. 861-862.)

Here, the economic loss rule does not bar this claim, as the SAC alleges facts showing an independent duty to Plaintiff-Seller, a party with which Defendant Chicago has no contractual privity.

Like the situation in Seeley v. Seymore, the alleged facts here support imposing a duty of care by Defendant Chicago Title to Plaintiff Youssef. Specifically, the SAC alleges facts showing: (1) the deed of trust was intended to affect Plaintiff as lender; (2) there was significant foreseeability that Plaintiff-lender would suffer economic harm as a result of the delayed recording in a “first in time, first in right” system; (3) Plaintiff alleges he suffered injury, given the intervening recordation of a later-created lien that gained priority over Plaintiff’s; (4) the “closeness of the connection” between Defendant Chicago’s delayed recordation and the alleged harm suffered is self-evident; (5) while not morally repugnant, Chicago Title’s conduct was deserving of some amount of moral blame, as considerable delays in recording instruments can affect the integrity of the “first in time, first in right” system; and (6) holding recording agents accountable when their negligent acts result in economic harm

to individual property interests supports the integrity of the larger system.

The SAC alleges facts to show breach of that duty of care (see SAC ¶¶ 19, 21) and damages therefrom (SAC ¶ 94).

To the extent Defendant argues that the SAC does not adequately allege specific facts, the court finds that level of specificity is not required at this stage. A plaintiff need only plead such facts as are necessary “to acquaint a defendant with the nature, source and extent of his claims.” (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550; Prue v. Brady Co./San Diego, Inc. (2015) 242 Cal.App.4th 1367, 1376 [“a complaint is adequate so long as it apprises the defendant of the factual basis for the claim”].) On demurrer, the court “assume[s] the truth of all properly pleaded facts, as well as all facts that may be implied or reasonably inferred from those expressly alleged . . . .” (Sonoma Luxury Resort LLC v. California Regional Water Quality Control Bd. (2023) 96 Cal.App.5th 935, 940.)

Special Demurer for Uncertainty

“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal. App. 4th 612, 616.) A demurrer for uncertainty will be sustained only where the complaint is so poorly pled that a defendant cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

Defendant argues that Plaintiff appears to seek to name Chicago Title Company, not Defendant Chicago Title Insurance Company. Defendant’s argument relies on facts outside the four corners of the pleading to argue there are two separate entities with similar names. Demurrer is not the proper vehicle to address this issue. The court encourages the parties to consider and resolve any issue of erroneously sued parties without further motion practice.

No later than 30 days after service of the notice of ruling, Defendant Chicago Title shall file and serve an answer or other responsive pleading to the Complaint. (Cal. Rules Ct., Rule 3.1320(g).)

Defendant to give notice.