Not stated v. Chicago Title Insurance Company

(Stanley Mosk Courthouse: Dept. 734) August 26, 2026 DEPARTMENT 734 LAW AND MOTION RULINGS

following tentative ruling is issued pursuant to Rule of Court 3.1308 at 1:56 PM on August 25, 2026. Rule of Court 3.1308(a)(1) provides that a "tentative ruling will become the ruling of the court if the court has not directed oral argument by its tentative ruling and notice of intent to appear has not been given." The Court does not desire oral argument on the motion addressed herein. Notice of intent to appear is REQUIRED pursuant to California Rule of Court 3.1308(a)(1). No later than 4:00 p.m. on DATE \@ "MMMM d, yyyy" August 25, 2026, the moving and opposing parties must provide notice to ALL OTHER PARTIES and the staff of Department 734 whether the party intends to (1) appear and argue the motion, or (2) submit to the tentative ruling.

Notice to Department 734 should be sent by email to [email protected], with opposing parties copied on the email. The high volume of telephone calls to Department 734 may delay the Court's receipt of notice, so telephonic notice to 213-830-0776 should be reserved for situations where parties are unable to give notice by email. Plaintiff alleges that Defendant title insurers issued a title insurance policy that omitted a senior lien, placing Plaintiff's lien in a third rather than second priority position.

Plaintiff alleges that Defendants breached an agreement to pay the shortfall between the proceeds of a foreclosure sale and the amount needed to fully payoff Plaintiff's loan. Defendant Chicago Title Insurance Company demurs to the First Amended Complaint and moves to strike portions thereof. TENTATIVE RULING Defendant Chicago Title Insurance Company's demurrer to the First Amended Complaint is OVERRULED as to the first and second causes of action and SUSTAINED without leave to amend as to the third and fourth causes of action.

Defendant's motion to strike is MOOT as to Paragraph 69 (Third Cause of Action for Promissory Fraud) 1AC p. 13, lines 24-26, and Paragraph 80 (Fourth Cause of Action for Bad Faith Denial of Insurance Benefits) 1AC p. 15, lines 9-10. The motion to strike is DENIED as to page 15, line 16, reading as follows: "For punitive damages." Defendant is to answer the remaining allegations of the First Amended Complaint within 10 days. ANALYSIS Demurrer Meet and Confer

The form Declaration of Edward W. Racek reflects that Defendant's counsel satisfied the meet and confer requirement set forth in Civ. Proc. Code, Sec. 430.41.

Discussion

The Court has reviewed the moving, opposing and reply briefs filed by the parties, but only addresses the points which the Court deems to be material to the disposition of this motion. Defendant Chicago Title Insurance Company demurs to the First Amended Complaint as follows: 1. First Cause of Action (Breach of Contract). Defendant's arguments are as follows: This Court already held in its March 24, 2026 Order that "Defendant fulfilled its obligations under the terms of the Policy by paying off the undisclosed second lien, thereby removing it in the order of priority before Plaintiffs' Lien. (Order at p. 11.)

Plaintiffs' $127,404 "shortfall" in the repayment of the Loan was not caused by any covered matter under the Policy. Chicago Title fully paid off the Second Senior Lien, restoring Plaintiffs' lien to its insured second-priority position. Instead, Plaintiffs' "shortfall" was caused by the $3.5 million Senior Lien that was expressly excepted from coverage under the Policy, not by the Second Senior Lien that Chicago Title paid off. The 1AC does not and cannot allege that Chicago Title issued a "written endorsement" modifying the Policy.

Instead, Plaintiffs now attach as Exhibit 2 an email from Mr. Shiffermiller dated April 15, 2025, which states: "As we discussed this afternoon, the Company has no objection to the closing of the transaction consistent with the estimated settlement statement. When the transaction closes, the Company will evaluate and pay the loss, if any, the Insured incurs pursuant to the terms and conditions of the Policy." (FAC, Exh. 2.) This email is plainly not a "written endorsement issued by the Company" within the meaning of Condition 13(b).

Moreover, nothing in the email purports to amend or modify the Policy. To the contrary, the email expressly references payment only "pursuant to the terms and conditions of the Policy," i.e., under the existing Policy, not under any modification thereof. The phrase "evaluate and pay the loss" is a conditional statement confirming that any payment is contingent upon the outcome of an evaluation under the Policy's existing terms. The remaining exhibits attached to the FAC (Exhibits 3-7) are equally unavailing.

These emails show only that Chicago Title participated in negotiations, reviewed proposed agreements between Plaintiffs and the Borrower, and stated it had "no objection" to certain documents. At no point do any of these communications contain a promise by Chicago Title to pay off the $127,404 shortfall, let alone a "written endorsement" amending the Policy. Reviewing and monitoring a transaction in the course of handling an insurance claim is standard claims-handling practice, not an independent promise to guarantee full repayment of the underlying loan.

If Plaintiffs wanted additional coverage beyond what the policy provided, they needed to buy an endorsement. If Plaintiffs believed Chicago Title was agreeing to pay $127,404 more

than it owed, they would have presumably confirmed these very specific terms in a written agreement. Rather, they want the Court to rely on innuendo and self-serving speculation, while ignoring the words of the policy and emails. Because facts appearing in exhibits attached to the complaint are given precedence over contrary allegations, the 1AC's conclusory characterization of these communications as confirmation of an "agreement to pay the shortfall" cannot survive demurrer when the documents themselves contain no such agreement.

The 1AC now extensively invokes estoppel, alleging that "Chicago is estopped from relying on Policy Condition 7(b)(i), 9(a), and 13." (1AC P.P. 41-42, 47-48, 54-55.) But Plaintiffs cannot use the doctrine of estoppel to expand the Policy's coverage beyond the protection afforded. The 1AC attempts to create an insurance obligation, through payment of the shortfall, that does not exist under the Policy. Furthermore, the 1AC's new estoppel theories premised on Conditions 7(b)(ii) and 9(c) do not salvage the claim. (1AC P. 41.)

Condition 7(b)(ii) permits Chicago Title "[t]o pay or otherwise settle with the Insured Claimants the loss or damage provided for under this policy." The only loss provided for under the policy is the loss of lien priority, which Chicago Title cured by paying off and removing the Second Senior Lien. That provision does not transform the policy into a guarantee of full loan repayment. Similarly, Condition 9(c) merely provides that Chicago Title "is not liable for loss or damage to the Insured for liability voluntarily assumed by the Insured in settling any claim or suit without the prior written consent of the Company."

The clause is a limitation on the insurer's liability, not an affirmative undertaking to pay a shortfall. Moreover, Plaintiffs' new allegation that Chicago Title's payoff "was roughly only $700,000.00" and therefore "did not represent a full exhaustion of the Amount of Insurance" (1AC P. 40) is immaterial. Whether the payoff was approximately $700,000 or $1,250,000, it is undisputed that Chicago Title removed the Second Senior Lien and thereby restored Plaintiffs' DOT to its insured second-priority position, the precise risk the Policy insured.

Under Condition 9(a), the removal of "the alleged defect, lien, encumbrance, adverse claim, or other matter" constitutes full performance accomplished "by any method," without regard to the amount paid. Nowhere does the Policy condition full performance on exhaustion of the Amount of Insurance. Indeed, title insurance scholar Bush Nielsen states: "The insurer is never obligated to pay policy limits, since the insurer always has at least one other option provided by the policy, which is payment to the insured of the value of the property." (B.

Nielsen, Title and Escrow Claims Guide Sec. 3.5 Payment of Policy Limits, 2016 WL 6637038.) The statute of frauds bars enforcement of "[a] special promise to answer for the debt, default, or miscarriage of another" absent a writing. (Cal. Civ. Code Sec. 1624(a)(2).) Plaintiffs attempt to satisfy this requirement by attaching Exhibits 2-7, but these writings do not satisfy the Court's directive because they contain no promise to pay the shortfall. The email Plaintiffs rely upon, Exhibit 2, speaks only of evaluating and paying losses "pursuant to the terms and conditions of the Policy," which required nothing more than what Chicago Title already did: restore Plaintiffs to their insured position. (1AC, Exh. 2.)

To the extent Plaintiffs contend that Chicago Title promised to ensure full repayment of the Borrower's debt, such a suretyship promise would be required to be in writing. (Cal. Civ. Code Sec. 2793.) Mr. Shiffermiller's email,

which expressly references the "terms and conditions of the Policy" and includes the conditional language "if any," does not satisfy this requirement. Plaintiff's arguments in response are: Plaintiffs do not ask this Court to import an excluded risk into the four corners of the Policy. Antonopoulos and Komorsky both address a narrow and different situation: an insured trying to use the insurer's post-loss conduct to expand the risks the policy covers. (Antonopoulos, supra, 63 Cal.App.5 th at p. 591.)

Plaintiffs' theory is different in kind. First, Chicago Title elected a covered option under the policy and then failed to perform having induced Plaintiffs to rely on that election. More importantly, Chicago Title's Vice President made an independent, extra Policy promise--to personally evaluate and pay Plaintiffs' anticipated loss from consenting to a discounted short sale--in order to induce conduct the Policy itself did not obligate Plaintiffs to undertake: the voluntary release of their fully secured $3,350,000 deed of trust and the forfeiture of their foreclosure remedy. (1AC P.P. 15-18, 25, 40.)

Estoppel is invoked here not to conjure coverage for an excluded risk, but to prevent Chicago Title from using policy conditions that govern the mechanics of claims handling to erase a separate promise its own authorized agent made in order to obtain Plaintiffs' cooperation with a transaction that benefited Chicago Title and not Plaintiffs. That is a permissible use of estoppel entirely apart from the "coverage by estoppel" line of cases Chicago Title relies upon. (See, e.g., Nielsen Contracting, Inc. v.

Applied Underwriters, Inc. (2018) 22 Cal.App.5 th 1096, 1117 [an "endorsement" to a policy "may alter or vary any term or condition of the policy"].) The 1AC pleads every element of both doctrines. Chicago Title knew the facts-- Shiffermiller is alleged to have known both the existence of the Error and that "the anticipated shortfall was over $800,000.00," at the time the promise was made. (1AC P. 15.) Chicago Title intended Plaintiffs to rely--Shiffermiller made the representation "with the expectation that it would be shared with Plaintiffs" as lienholders, knowing their consent was required to close. (1AC P.P. 15, 62.)

Chicago Title did not intend to perform. (1AC P.63.) Plaintiffs were ignorant of its undisclosed intent not to perform. (1AC P. 63.) And should the Court find that further amendment is necessary, Plaintiff can attach additional communications produced by Chicago Title in discovery that exhibit the furtive manner in which Shiffermiller selectively communicated his intent to pay off the Second Senior Lien only internally and never advised Plaintiffs until it was too late for them to change their position.

Notably, Chicago Title argues the emails in the 1AC "show only that Chicago Title participated in negotiations, reviewed proposed agreements between Plaintiffs and the Borrower, and stated it had 'no objection' to certain documents." (Dem., p. 16.) Absent from Chicago Title's demurrer is any plausible explanation as to why Chicago Title would even be involved in any of these activities between the Plaintiffs and the borrower if it had not represented it would pay the shortfall. There is no basis for Chicago Title's manufactured excuse that "[r]eviewing and monitoring a transaction in the course of handling an insurance claim is standard claims-handling practice, not an independent promise to guarantee full repayment of the underlying loan." (Ibid.)

Finally, Plaintiffs relied to their detriment on Shiffermiller's representations during the negotiations: "But for Chicago's representation ... Plaintiffs would not have consented to the sale of the Property, would not have consented to release their DOT, and would not have suffered any loss because Plaintiffs' lien would remain fully secured by the Property and they would retain the right to pursue nonjudicial foreclosure." (1AC P. 16; see also P.P. 25, 37-39.) There is no plausible reason why Plaintiffs would ever have considered accepting a shortfall of over $800,000.00 in lieu of pursuing foreclosure on the fully secured lien, absent Chicago Title's representation it would cover the shortfall.

Chicago Title is not alleged to be a passive claims-payer that simply exercised a contractual option. According to the 1AC, Chicago Title's own claims counsel affirmatively picked up the telephone, told Plaintiffs' agent that Chicago Title would "pay the loss" Plaintiffs would suffer from a discounted payoff after the short sale, and then spent the next several days directing the precise terms on which the short sale would close--including insisting that the payoff letter reserve "all rights to recover the full amount of the debt" from the Borrower, so that Chicago Title, not Plaintiffs, would benefit from any later recovery. (1AC P.P. 15-23, Exh. 4.)

Only after Plaintiffs had irrevocably released their DOT and the sale had closed did Chicago Title reverse course and assert that it had promised nothing beyond the Policy's bare indemnity terms-- indeed, that it had not even "been involved in those negotiations" that its own claims counsel had led for days by email. (1AC P.P. 33-36.) Equitable estoppel bars a party from asserting the statute of frauds, where enforcing it "would result in an unjust and unconscionable loss to the other party, ... amounting in effect to a fraud upon them." (Mason, supra, 10 Cal.App.2d at p. 698.)

Few situations fit that description better than an insurer's own claims counsel orally promising to cover a lienholder's anticipated loss, in exchange for the lienholder surrendering a multi-million dollar secured position and its foreclosure remedy and then relying on the informality of its own promise--an informality of its own choosing--to avoid the very obligation that induced the surrender. Nor can Chicago Title profit from the fact that hedged the language in its confirming email rather than stating the oral promise in full.

Insurers, like any sophisticated drafter, are charged with the consequences of the words they choose. (Civ. Code, Sec. 1654; AIU Ins. Co., supra, 51 Cal.3d at p. 822.) Here, the 1AC alleges that Shiffermiller's April 15, 2025, email was sent as written confirmation of an oral promise that Chicago Title knew Plaintiffs would and did rely upon to release a multi-million dollar lien--not as a preliminary or exploratory communication. (1AC P.P. 15, 62.) A sophisticated insurer's claims counsel does not need to spell out every term of a settlement in a single sentence for that settlement to be enforceable; the surrounding correspondence in Exhibits 3 through 7, in which Shiffermiller actively negotiated the terms of the payoff and reserved rights benefiting Chicago Title alone, is itself evidence that Chicago Title understood it was assuming an obligation beyond the four corners of the Policy. (1AC P.P. 19-23, Exhs. 3-7.)

Whether the parties' course of dealing amounted to a binding independent promise, an implied endorsement, or a basis for estoppel is a factual question for the trier of fact, not a basis to sustain a demurrer. The 1AC identifies

Roger Shiffermiller, Chicago Title's Vice President and Senior Claims Counsel, and Peter Filler, an Executive Vice President, as the individuals with authority to speak for Chicago Title regarding the Error. (1AC P. 13.) It alleges that Shiffermiller made the oral promise "on April 15, 2025" to Ron Sentchuk of Plaintiffs' agent, Logan Investments, "on the telephone," expressly "with the expectation that it would be shared with Plaintiffs." (1AC P. 15.) And it attaches, as Exhibit 2, Shiffermiller's written confirmation sent that same afternoon, albeit couched to mislead.

The 1AC alleges that Chicago Title "designated Shiffermiller, a Vice President thereof, as their authorized representative and agent to negotiate and determine a resolution with Plaintiffs." (1AC P. 60, emphasis added.) That was the purpose for Shiffermiller's presence and approval of the terms of the negotiation for the short sale. These allegations supply exactly what the Order required: who made the representation, that person's authority to speak for the corporation, to whom they spoke, what they said, and when. (See Lazar, supra, 12 Cal.4 th at 645.)

Exhibit 2 is Shiffermiller's April 15, 2025, email confirming that "the Company has no objection to the closing of the transaction consistent with the estimated settlement statement" Chicago Title approved and that "the Company will evaluate and pay the loss, if any, the Insured incurs pursuant to the terms and conditions of the Policy." (1AC, Exh. 2.) That email establishes Chicago Title's knowledge of the loss. Shiffermiller's subtle caveat of "pursuant to the terms and conditions of the Policy" indicates its intent not to abide by the promise he made.

Exhibits 3 through 7 are the emails that followed over the next three days, in which Shiffermiller, on Chicago Title's behalf, reviewed and approved every term of the parties' payoff agreement--directing that the payoff letter include "a reservation of all rights to recover the full amount of the debt" (1AC, Exh. 4), confirming the revised agreement was "acceptable to the Company" (ibid.), requesting updated settlement figures (Id., Exh. 5), and twice more confirming that "[t]he Company has no objection to either document." (Id., Exh. 7.)

Counsel for Plaintiffs specifically noted the reason Chicago Title's review was sought was to confirm whether from its perspective "anything in this agreement (the releases) will affect coverage to insure the unpaid balance of the loan after the transaction closes . . ." (Id. Ex. 3.) Shiffermiller responded: "This is acceptable to the Company." (Id. Ex. 4.) Read together--as they must be at the pleading stage--these writings are, at minimum, a confirmation of the promise or at least a course of dealing sufficient to place the existence and content of Chicago Title's promise squarely at issue for the trier of fact, not for resolution on demurrer.

When evaluated in conjunction with the allegations regarding the oral representation, they confirm Chicago Title's agreement and representation that it intended to pay any shortfall. Chicago Title's Demurrer isolates and rests upon a single phrase from Exhibit 2-- "pursuant to the terms and conditions of the Policy"--and insists it forecloses any independent agreement as a matter of law. That reading ignores that Shiffermiller, Chicago Title's own claims counsel, chose the words "evaluate and pay the loss, if any," in a communication he sent with the expectation it would be relayed to Plaintiffs as assurance sufficient to let a multi-million-dollar sale close. (1AC P. 15.)

If that language is ambiguous as to whether it incorporated the parties' independent oral understanding, the ambiguity is Chicago Title's to bear, not Plaintiffs'. (Civ. Code, Sec. 1654; AIU Ins. Co., supra, 51 Cal.3d at p. 822.) At minimum, the meaning of Exhibit 2, in light of the oral promise it was sent to confirm, and in light of Chicago Title's subsequent conduct

in Exhibits 3 through 7, is a factual dispute the Court cannot resolve on demurrer. Court's Analysis of Arguments: Plaintiffs allege that they were induced to agree to a short sale: 76. Defendants' conduct was more than mere negligence and constituted bad faith. Defendants made representations to Plaintiffs for the purpose of inducing them to agree to the short sale, knowing that Plaintiffs would rely on those representations to their detriment and with the expectation that Defendants would pay the shortfall.

Normally, the Court would view the situation as Plaintiff seeking to be placed in a better position than if it had actually been the holder of the second, rather than the third lien. That is, under the title insurance policy, Plaintiff would only be entitled to be placed in second position by virtue of the title insurance company removing the undisclosed lien by paying off the underlying loan, or purchasing Plaintiff's loan. However, because the instant situation arises as part of a short sale, rather than being a straight title insurance claim, Plaintiff's theory that it was induced to agree to the short sale because Chicago Title would pay the shortfall is plausible.

When a borrower defaults on a loan secured by real property, the lender can use one of three procedures to recover the debt. . . . [*673] ... Third, the lender can recover money from the defaulting borrower by facilitating a short sale. In a short sale, the lender agrees to release its lien on the borrower's property so that the borrower can sell the property to a third party. In exchange, the borrower agrees to give the lender all of the proceeds from the sale. Both parties know that the sale proceeds will fall short of the total amount that the borrower owes.

The Assembly Committee on Judiciary has observed that short sales "save banks millions in foreclosure costs" and can help homeowners "feel like they took responsibility for the obligation to pay [their creditors] back." (Citations omitted.) (Coker v. JPMorgan Chase Bank, N.A. (2016) 62 Cal. 4 th 667, 672-73 [bold emphasis added].) In its analysis of the proposed amendment (Sen. Bill No. 458 (2011-2012 Reg. Sess.)), the Assembly [*1395] Committee on Judiciary recited with approval the following comment by one of the bill's proponents: " '[Senate Bill No.] 458 ... adds additional protections against post-short sale deficiency liability to junior note holders (seconds) when those lenders approve a short sale.

It is important to note that the short sale process remains voluntary on every participant's part--only lenders that actually agree to the sale will be affected, and sellers that cannot put together an acceptable sale may still go to foreclosure and even bankruptcy.' " (Assem. Com. On Judiciary, Analysis of Sen. Bill No. 458 (2011-2012 Reg. Sess.) as amended May 16, 2011, pp. 2-3.) (Bank of America, N.A. v. Roberts (2013) 217 Cal. App. 4th 1386, 1394-95 [bold emphasis added].) In the 1AC,

Plaintiffs allege as follows: 45. Plaintiffs entered into a valid written contract with Chicago Title, whereby Chicago Title agreed to insure Plaintiffs' Loan to Borrower by issuing the Policy in the amount of $3,350,000.00, excepting the Senior Loan that appeared on the Policy, in exchange for Plaintiffs' payment of a premium in the amount of $2,750.00.

46. When Defendants issued the Policy to Plaintiffs, they failed to identify the second lien for $1,250,000.00 that was also secured by the Property and that was in a senior position to the Loan.

47. After Plaintiffs brought the Error to Chicago Title's attention, Chicago Title agreed both orally and in writing to pay Plaintiffs any Shortfall from the sale of the Property. This oral representation occurred on April 15, 2025, by Roger Shiffermiller to Plaintiffs' agent Ron Sentchuk of loan servicer Logan Mortgage, with the expectation that the representation would be shared with Plaintiffs as lienholders. Chicago Title's promise and agreement was also contained in Roger Shiffermiller's email attached hereto as Exhibit 1. Chicago Title's agreement, and basis for the application of estoppel against Chicago Title's reliance on any other provision of the Policy to disclaim liability, is further confirmed by its conduct of approving, and demanding that Plaintiffs submit for approval, any sales agreement between Plaintiffs and the Borrower.

48. Defendants breached the terms of the Policy, as modified and extended by Chicago Title's written and oral agreement to allow Plaintiffs to consent to the sale of the Property at an amount that was insufficient to payoff the Loan and release their DOT, in exchange for Chicago Title promising to cover the shortfall from that transaction. Defendants are estopped from claiming that they performed under the Policy based on their fraudulent conduct in promising Plaintiffs that they would cover any shortfall after the transaction, as described herein.

49. Chicago Title's conduct was a substantial factor in causing Plaintiffs' harm, and but for Chicago Title's conduct and breach alleged herein, Plaintiffs would not have been damaged and would have maintained their security interest in the Property.

50. Plaintiffs have been damaged in at least the amount of $127,404.00. (1AC, P.P. 45 - 50 [bold emphasis added].) Notably, the Policy, attached as Exhibit 1 to the 1AC, provides that Covered Risks include the following: 10. The lack of priority of the lien of the Insured Mortgage upon the Title over any other lien or encumbrance on the Title as security for the following components of the Indebtedness: a. the amount of the principal disbursed as of the Date of Policy; b. the interest on the obligation secured by the Insured Mortgage; c. the reasonable expense of foreclosure;

d. amounts advanced for insurance premiums by the Insured before the acquisition of the estate or interest in the Title, and e. the following amounts advanced by the Insured before the acquisition of the estate or interest in the Title to protect the priority of the lien of the Insured Mortgage: i. real estate taxes and assessments imposed by a governmental taxing authority; and ii, regular, periodic assessments by a property owners' association, (Bold emphasis added.) Moreover, the CONDITIONS provide at P. 7 as follows: 7.

OPTIONS TO PAY OR OTHERWISE SETTLE CLAIMS; TERMINATION OF LIABILITY In case of a claim under this policy, the Company has the following additional options: a. To Pay or Tender Payment of the Amount of Insurance or to Purchase the Indebtedness i. To pay or tender payment of the Amount of Insurance [1] under this policy. In addition, the Company will pay any costs, attorneys' fees, and expenses incurred by the Insured Claimant that were authorized by the Company up to the time of payment or tender of payment and that the Company is obligated to pay; or ii.

To purchase the Indebtedness for the amount of the Indebtedness on the date of purchase. In addition, the Company will pay any costs, attorneys' fees, and expenses incurred by the Insured Claimant that were authorized by the Company up to the time of purchase and that the Company is obligated to pay. If the Company purchases the Indebtedness, the Insured must transfer, assign, and convey to the Company the Indebtedness and the Insured Mortgage, together with any collateral security. Upon the exercise by the Company of either option provided for in Condition 7.a., the Company's liability and obligations to the Insured under this policy terminate, including any obligation to defend, prosecute, or continue any litigation. b.

To Pay or Otherwise Settle with Parties other than the Insured or with the Insured Claimant i. To pay or otherwise settle with parties other than the Insured for or in the name of the Insured Claimant. In addition, the Company will pay any costs, attorneys' fees, and expenses incurred by the Insured Claimant that were authorized by the Company up to the time of payment and that the Company is obligated to pay; or ii. To pay or otherwise settle with the Insured Claimant the loss or damage provided for under this policy.

In addition, the Company will pay any costs, attorneys' fees, and expenses incurred by the Insured Claimant that were authorized by the Company up to the time of payment and that the Company is obligated to pay.

Upon the exercise by the Company of either option provided for in Condition 7.b., the Company's liability and obligations to the Insured under this policy for the claimed loss or damage terminate, including any obligation to defend, prosecute, or continue any litigation. The above language of P. 7 of the Policy does not specify, and is not limited to, paying off senior liens which were not disclosed on the title report. Indeed, paying the "Amount of Insurance" is broad enough to include paying off a shortfall after a negotiated short sale. "[I]n cases of ambiguity, basic coverage provisions are construed broadly in favor of affording protection." (Minkler, supra, 49 Cal.4 th at p. 322; see also MacKinnon v.

Truck Ins. Exchange, supra, 31 Cal.4 th at p. 655 [where there are multiple plausible interpretations of a policy, a court must find coverage if there is a "'reasonable interpretation under which recovery would be permitted'"].) Here, there is a reasonable interpretation under which recovery would be permitted, and thus Farmers is not entitled to summary adjudication of its bad faith claim. (11640 Woodbridge Condominium Homeowners' Assn. v. Farmers Ins. Exchange (2025) 110 Cal.App.5 th 211, 232.)

In this regard, Plaintiffs have included e-mail correspondence as exhibits. Exhibit 2 is an April 15, 2025 e-mail from Roger Shiffermiller [2] to Andrew Mase [3] and Ron Sentchuk [4]: Andrew and Ron, As we discussed this afternoon, the Company has no objection to the closing of the transaction consistent with the estimated settlement statement. When that transaction closes, the Company will evaluate and pay the loss, if any, the Insured incurs pursuant to the terms and conditions of the Policy.

Thanks, Roger Roger L. Shiffermiller Vice President Senior Claims Counsel Fidelity National Financial (1AC, Exh. 2 [bold emphasis and underlining added].) Here, if the Company intended only to pay off the senior second lien and leave Plaintiffs to their own devices, then there would be no "loss" to pay. A reasonable interpretation of Shiffermiller's statement that the Company would evaluate and pay "the loss," if any, is a reference to a shortfall after the loan proceeds were applied to pay off senior liens.

In light of Plaintiffs releasing their lien, this is the reasonable

interpretation attributed by Plaintiffs and it must be accepted as true on demurrer [5] .

15. On April 15, 2025, Ron Sentchuk from Logan Investments, on behalf of Plaintiffs, spoke with Shiffermiller on the telephone. Shiffermiller stated to Mr. Sentchuk, with the expectation that it would be shared with Plaintiffs, that Plaintiffs could enter into an agreement with the Borrower to accept a partial payoff of the Loan-- the funds for which would be generated from a sale of the Property, which needed the consent from Plaintiffs to proceed and close--and to release the DOT from title to the Property, as Chicago Title promised it would "pay the loss," Plaintiffs suffered from not receiving a full payoff.

Attached hereto as Exhibit 2 is a true and correct copy of Mr. Shiffermiller's email wherein Chicago Title confirms its agreement to pay the shortfall loss caused by Plaintiffs' consent to let the sale of the Property close. Indeed, at that time, the anticipated shortfall was over $800,000.00, with Chicago Title agreeing to pay that amount to Plaintiffs post-closing of the transaction. Even with Chicago Title's later undisclosed payoff of the undisclosed second lien, Chicago Title still induced a loss to Plaintiffs by procuring their consent to let the transaction close.

16. But for Chicago's representation made orally to Ron Sentchuk on April 15, 2025, that Chicago would cover any loss/shortfall, and Roger Shiffermiller's confirming correspondence attached hereto as Exhibit 2, Plaintiffs would not have consented to the sale of the Property, would not have consented to release their DOT, and would not have suffered any loss because Plaintiffs' lien would remain fully secured by the Property and they would retain the right to pursue nonjudicial foreclosure.

17. In other words, Mr. Shiffermiller represented that Plaintiffs could accept and consent to the sale of the Property at a sales price that would be insufficient to fully pay off the Plaintiffs' Loan, and that Chicago Title make up the difference to ensure that Plaintiffs received a full payoff on the Loan. (1AC, P.P. 15 - 17 [bold emphasis added].) The Court finds that Plaintiffs have sufficiently pled a breach of contract based on the policy language as written in P. 7 of the CONDITIONS. As such, the statute of frauds and estoppel are not an issue. The demurrer to the first cause of action is OVERRULED.

2. Second Cause of Action (Breach of the Implied Covenant of Good Faith and Fair Dealing). Defendant argues: Because Chicago Title fully performed its Policy obligations by paying off the Second Senior Lien, no benefits are due and there can be no breach of the covenant as a matter of law. Moreover, Chicago Title exercised its express right under Condition 7(b)(i) to pay off the Second Senior Lien. This act is specifically authorized by the Policy and cannot constitute bad faith. Furthermore, the 2AC attempts to reframe the claim as one based on Chicago Title "inducing" Plaintiffs to consent to the short sale. However, the exhibits attached to the 1AC show that

the Borrower, not Chicago Title, proposed the sale of the Property. Plaintiffs' own agents initiated the negotiations, asked Chicago Title for input, and sought its approval. (1AC, Exhs. 3-7.) Nothing in these communications demonstrates that Chicago Title "induced" Plaintiffs to do anything, let alone that it unreasonably withheld policy benefits. Indeed, the emails at most show that Chicago Title did not stand in the way of what the Plaintiffs chose to do. Therefore, because no policy benefits are due, the implied-covenant claim fails as a matter of law.

Plaintiff argues: Because the 1AC now pleads an independent, extra-Policy promise--confirmed in writing and supported by its own consideration (Plaintiffs' release of their deed of trust and foreclosure rights)--benefits are alleged to be "due" regardless of how the breach-of-contract analysis is ultimately resolved. The implied covenant, moreover, attaches not only to the Policy's express indemnity terms but to the entirety of the parties' relationship, including obligations Chicago Title assumed through its own conduct and oral and written representations while administering Plaintiffs' claim. (Brehm v. 21 st Century Ins.

Co., supra, 166 Cal.App.4 th at 1235-1236.) Finally, the policy does allow for Chicago Title's election to pay the policy proceeds, which it essentially elected to do by ensuring the short sale occurred and agreeing to pay the shortfall resulting therefrom. Unlike the original Complaint, the 1AC now also alleges specific, unreasonable conduct: Chicago Title's own agent directed and approved the precise terms of a transaction he knew would leave Plaintiffs with an uncompensated shortfall, secured a reservation of rights benefiting Chicago Title alone, and then, once the transaction closed and could not be undone, asserted for the first time that Chicago Title had "no further obligation" and had never even been "involved in those negotiations" its own claims counsel had led. (1AC P.P. 19-23, 33-34.)

Whether that conduct was unreasonable or without proper cause is a factual question that cannot be resolved on demurrer. Court's Analysis: Given the ruling above re: the first cause of action, the 1AC sufficiently pleads that policy benefits are due under the policy and that Defendant has unreasonably withheld policy benefits. "An insurer breaches the implied covenant of good faith and fair dealing when it unreasonably withholds policy benefits. (Citation omitted.) (Hibbs v. Allstate Ins. Co. (2011) 193 Cal.App.4 th 809, 820.)

As such, the demurrer to the second cause of action is OVERRULED.

3. Third Cause of Action (Promissory Fraud). Defendant argues in support of the demurrer as follows: While the 2AC now adds some additional specificity as to who, when, and to whom, alleging that on April 15, 2025, Mr. Shiffermiller spoke to Ron Sentchuk by telephone, it

critically fails to cure the other deficiencies identified by this Court. First, the 2AC still fails to allege what was actually said. Plaintiffs characterize the representation as a promise that Chicago Title would "pay the loss" and cover any "shortfall." (1AC P.P. 15, 17.) But the only writing confirming this alleged oral representation, Exhibit 2 of the 1AC, does not say what Plaintiffs claim it says. The email states Chicago Title will "[e]valuate and pay the loss, if any, the Insured incurs pursuant to the terms and conditions of the Policy."

This is a conditional statement referencing the Policy's existing terms, not an unconditional promise to pay the shortfall. In fact, the 1AC alleges that at the time of the April 15, 2025 communication "the anticipated shortfall was over $800,000.00" (1AC P. 15), underscoring that the email could not have constituted a definite promise to pay a then-unknown and unquantified sum. The exhibits thus contradict, rather than support, the allegation of a promise to pay. Second, the 1AC's allegation of contemporaneous intent not to perform remains wholly conclusory.

Paragraph 63 of the 1AC states: "Plaintiffs are informed and believed that Chicago Title never had any intention of performing as promised as evidenced by their motivation to conceal their payment to payoff the offending nondisclosed senior lien outside of escrow and without any notice to Plaintiffs." But paying off the Second Senior Lien outside of escrow was actually how Chicago Title performed its obligations under the Policy. This was not "concealment," rather, it was Chicago Title's fulfillment of its contractual duties under Condition 7(b)(i) of the Policy.

Furthermore, the mere allegation that a promise was made and not fulfilled is not sufficient to prove fraud. Third, this Court's Order specifically noted that fraud damages in cases not involving acquisition of property are limited to "out-of-pocket losses." Plaintiffs' claimed $127,404 in damages is a "shortfall", the difference between what they received from the sale and what they were owed on the Loan. This is a benefit-of-the-bargain measure, not an out-of-pocket loss. Plaintiffs received sale proceeds; they simply did not receive the full amount of their loan.

The 1AC does not allege what Plaintiffs' out-of pocket losses were, that is, what they actually expended in reliance on the alleged misrepresentation that they would not have otherwise expended. This deficiency remains uncured. Lastly, the 1AC fails to allege causation or justifiable reliance. Here, the Borrower had already defaulted on the Loan before any alleged promise was made. Plaintiffs' lien was already in third position due to the undisclosed Second Senior Lien. While Plaintiffs allege they would have pursued nonjudicial foreclosure rather than consenting to the sale, they do not allege that foreclosure would have yielded full repayment of their Loan, particularly given the $3.5 million Senior Lien and other debts ahead of them.

The 1AC thus fails to plead that Plaintiffs' damages were actually caused by their reliance on the alleged promise rather than by preexisting market conditions and the Borrower's default. Plaintiff argues in response: In direct response to the Order sustaining the demurrer, the 1AC newly alleges and/or clarifies:

· The identity and authority of Chicago Title's claims personnel: Peter Filler, "an Executive Vice President and a managing agent of Chicago Title," and Roger Shiffermiller, "a Vice President and a managing agent of Chicago Title," whom Chicago Title "designated ... as their authorized representative and agent to negotiate and determine a resolution with Plaintiffs," who Plaintiffs should be allowed to depose. (1AC P.P. 13, 60.) · The exact date, means, and content of the oral promise: on "April 15, 2025," Shiffermiller told Ron Sentchuk of Plaintiffs' loan servicer, Logan Investments, "on the telephone," that Chicago Title would "pay the loss" Plaintiffs would suffer from a reduced payoff, "with the expectation that it would be shared with Plaintiffs." (Id.

P. 15.) · Six documentary exhibits consisting of the April 15, 2025, confirming email and five further email exchanges from April 17-18, 2025, in which Shiffermiller reviewed, negotiated, and expressly approved the specific terms of the parties' payoff agreement. (Id. P.P. 15, 19-23, Exs. 2-7.) · A basis for Chicago Title's contemporaneous intent not to perform, tied to its undisclosed decision to pay off the Second Senior Lien "outside of escrow and without any notice to Plaintiffs" while continuing to negotiate the shortfall payment. (Id.

P. 63.) · Specific, itemized allegations of estoppel directed at each Policy provision Chicago Title invokes--Conditions 7(b)(i), 9(a), and 13--explaining why Chicago Title's own conduct precludes it from relying on those provisions to disclaim its independent promise. (Id. P.P. 40-43.) The 1AC alleges that, in reliance on Chicago Title's promise, Plaintiffs released a fully secured $3,350,000 deed of trust and forfeited their right to pursue nonjudicial foreclosure against the Property--a right that, absent Chicago Title's inducement, they would have exercised to recover the full amount owed. (1AC P.P. 16, 25, 38-39.)

The surrender of a specific, secured legal remedy in reliance on a fraudulent promise is a quintessential out-of-pocket expenditure incurred in reliance on the fraud, not a claim for the benefit Plaintiffs merely hoped the bargain would produce. Whether Plaintiffs' foreclosure remedy would have yielded a recovery equal to, greater than, or less than the $127,404 shortfall is, at most, a disputed question going to the amount of damages. Court's Analysis The elements of a cause of action for a false promise constituting fraud or deceit are: "(1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent at the time of making the promise; (3) the promise was made with intent to deceive or with intent to induce the party to whom it was made to enter into the transaction; (4) the promise was relied on by the party to whom it was made; (5) the party making the promise did not perform; (6) the party to whom the promise was made was injured." (Regus v.

Schartkoff (1957) 156 Cal.App.2d 382, 389.) As stated in Service By Medallion v. Clorox Co. (1996) 44 Cal.App.4 th 1807, 1816: "An action for promissory fraud may lie where a defendant fraudulently induces the plaintiff to enter into a contract." (Lazar v. Superior Court (1996) 12 Cal. 4 th 631, 638 [49 Cal. Rptr. 2d 377, 909

P.2d 981].) The action is one of deceit, which requires proof that the defendant made a misrepresentation of fact or a promise without any intention of performing it. (Civ. Code, Sec. 1710.) A complaint for fraud must allege the following elements: (1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages. (Croeni v. Goldstein (1994) 21 Cal. Cal. App. 4 th 754, 758 [26 Cal. Rptr. 2d 412].)

Every element must be specifically pleaded. (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal. Cal. App. 4 th 153, 157 [2 Cal. Rptr. 2d 861].) "The mere failure to carry out a promise is not a tort, and it is therefore essential, in pleading fraud consisting of a false promise, to allege the elements of fraud." (Maynes v. Angeles Mesa Land Co. (1938) 10 Cal.2d 587, 589.) The 1AC alleges: 61. As set forth herein, Chicago Title, through its managing agent Shiffermiller, made a promise to Plaintiffs to approve Borrower's proposed sale of the Property which was in an amount insufficient to pay off Plaintiffs' lien in full, whereby Chicago Title promised to pay Plaintiffs the shortfall of funds, if Plaintiffs agreed to reconvey their DOT securing the Loan without releasing Borrower from the underlying debt obligation.

62. This oral representation occurred on April 15, 2025, by Roger Shiffermiller to Plaintiffs' agent Ron Sentchuk of loan servicer Logan Mortgage, via telephone, with the expectation that the representation would be shared with Plaintiffs as lienholders. Chicago Title's written promise and agreement was also contained in Roger Shiffermiller's email attached hereto as Exhibit 2.

63. Plaintiffs are informed and believe that Chicago Title never had any intention of performing as promised as evidenced by their motivation to conceal their payment to payoff the offending nondisclosed senior lien outside of escrow and without any notice to Plaintiffs, in addition to never disclaiming their promise or agreement to pay Plaintiffs the shortfall after the transaction closed.

64. Chicago Title at all times prior to the sale intended to induce and deceive Plaintiffs into agreeing to the sale proposed by the Borrower and receiving an amount insufficient to pay off the Loan, based on their promise to pay Plaintiffs the any remaining sums due under the Loan as shortfall, but in actuality, Chicago Title had no intention of paying any amount to Plaintiffs.

65. Plaintiffs reasonably relied on Chicago Title's representations by consenting to the sale proposed by the Borrower and releasing the DOT, with the full reasonable expectation (confirmed by Chicago Title) that Plaintiffs would be compensated by Chicago Title after the transaction for the shortfall.

66. Defendants failed to comply with their promise to pay Plaintiffs the shortfall that arose from the sale, and which Defendants knew would arise from the sale.

67. This was a substantial factor in causing Plaintiffs' damages.

68. Plaintiffs

have been damaged in at least the amount of $127,404.00. (1AC, P.P. 61 - 68 [bold emphasis added].) This $127,404.00 sum is alleged earlier to be the shortfall after sale proceeds were applied: 28. On May 15, 2025, Borrower sold the Property for $7,500,000.00. The proceeds from the sale, after the Senior Lien and other agreed-upon debts were paid, and the balance that was provided to Plaintiffs, left a shortfall of $127,404.00. (1AC, P. 28.) This is quintessential benefit-of-the-bargain damages which, as discussed above re: the first cause of action, are covered under the policy language.

As such, these damages are not recoverable under a fraud theory: Gray holds that a defrauded party may recoup his out-of-pocket losses and expenditures in reliance on the fraud, but he may not recover benefit-of-the-bargain damages (i.e., damages placing him in the economic position he would have occupied had the representation been true), at least where the recovery is not premised on a specific property actually acquired by the defrauded party. (Kenly v. Ukegawa (1993) 16 Cal.App.4 th 49, 54 [bold emphasis and underlining added].)

The demurrer to the third cause of action is SUSTAINED without leave to amend.

4. Fourth Cause of Action (Bad Faith Denial of Insurance Benefits). Defendant argues; The Fourth Cause of Action for bad faith denial of insurance benefits is essentially duplicative of the Second Cause of Action for breach of the implied covenant of good faith and fair dealing, and fails for the same reasons. In addition, the Fourth Cause of Action's invocation of California Insurance Code section 790.03 does not salvage the claim, because the statute does not create a private right of action. (Moradi-Shalal v.

Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, 304.) Plaintiff argues: For the same reasons the 1AC adequately alleges that policy benefits remain due (see Section 5, supra), it likewise states a claim for bad faith denial of insurance benefits. Chicago Title's argument that this claim duplicates the second cause of action goes, at most, to the proper remedy or to consolidation of overlapping theories at a later stage-- not to the sufficiency of the pleading. Moreover, Chicago Title only paid off the $1,250,000 senior lien after directing negotiation of a short sale agreement based upon its promise to pay Plaintiffs' shortfall and

secretly paid off the lien at the last minute when the sale closed and Plaintiffs were locked into the position Chicago Title had lured them. (Dem., p. 10.) Court's Analysis The fourth cause of action alleges that "Defendants' conduct violated California Insurance Code section 790.03." (1AC, P. 75.) "[Insurance Code section 790.03] does not create a private right of action. (Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, 292, 294, 304 [250 Cal. Rptr. 116, 758 P.2d 58].)" (Planet Bingo, LLC v.

Burlington Ins. Co. (2021) 62 Cal. App. 5 th 44, 55 n.4.) Moreover, as a cause of action for bad faith denial of insurance benefits, this cause of action is duplicative of the second cause of action. A demurrer may be sustained to a cause of action which merely duplicates another cause of action, and "adds nothing to the complaint by way of fact or theory." (Award Metals v. Superior Court (1991) 228 Cal.App.3d 1128, 1135.) The demurrer to the fourth cause of action is SUSTAINED without leave to amend.

Motion To Strike Meet and Confer The form Declaration of Edward W. Racek reflects that Defendant's counsel satisfied the meet and confer requirement set forth in Civ. Proc. Code, Sec. 435.5.

Discussion

The Court has reviewed the moving, opposing and reply briefs filed by the parties, but only addresses the points which the Court deems to be material to the disposition of this motion. Defendant Chicago Title Insurance Company moves to strike the following portions of the First Amended Complaint as follows: 1. Paragraph 69 (Third Cause of Action for Promissory Fraud) 1AC p. 13, lines 24-26, reading as follows: "Defendants' use a classic 'bait and switch' tactic to avoid payment to Plaintiffs under the Policy constituted malice and oppression and Plaintiffs are also entitled to an award of punitive damages." MOOT by virtue of the ruling on the demurrer to the third cause of action.

2. Paragraph 80 (Fourth Cause of Action for Bad Faith Denial of Insurance Benefits) 1AC p. 15, lines 9-10, reading as follows: "Defendants' conduct was malicious, fraudulent, and oppressive, further entitling Plaintiffs to punitive damages pursuant to California Civil Code section 3294." MOOT by virtue of the ruling on the demurrer to the third cause of action.

3. That portion of the prayer seeking punitive damages, which appear on page 15, line 16, reading as follows: "For punitive damages."

Evidence that an insurer has violated its duty of good faith and fair dealing does not thereby establish that it has acted with the requisite malice, oppression or fraud to justify an award of punitive damages. (Citations omitted.) In order to establish that an insurer's conduct has gone sufficiently beyond mere bad faith to warrant a punitive award, it must be shown by clear and convincing evidence that the insurer has acted maliciously, oppressively or fraudulently. (Mock v. Michigan Millers Mutual Ins.

Co. (1992) 4 Cal.App.4 th 306, 328.) Here, Plaintiffs have sufficiently alleged that Defendant Chicago Title engaged in a bait and switch tactic to persuade Plaintiffs to agree to the short sale and release their lien in the belief that Defendant would pay the shortfall from the sale, then refusing to pay the shortfall. (1AC, P.P. 37 - 39.) This is sufficient to allege that Defendant acted with malice, oppression or fraud as those terms are defined in Civil Code Sec. 3294(c): (1)"Malice" means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others. (2)"Oppression" means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights. (3)"Fraud [6] " means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury. (Civ.

Code Sec. 3294(c)(1) - (3).) The motion to strike the prayer for punitive damages at page 15, line 16, is DENIED. Defendant is to answer the remaining allegations of the First Amended Complaint within 10 days.

b. "Amount of Insurance": The Amount of Insurance stated in Schedule A, as may be increased by Condition 8.c.; decreased by Condition 10; or increased or decreased by endorsements to this policy. (CONDITIONS, P. 1.b.) Schedule A sets forth the applicable Amount of Insurance of the policy at $3,350,000.00. (See Complaint, Exh. 1.)

Shiffermiller is alleged to be a Vice President and managing agent of Chicago Title. (1AC, P. 13.) [3] Mase is counsel of record for Plaintiff in this action. [4] Sentchuk is alleged to be CEO of Logan Investments, Inc., which acted as Plaintiffs' loan servicer. (1AC, P. 14.) [5] " The sole issue raised by a general demurrer is whether