Demurrer to Complaint (Judge Danny Y. Chou)



Defendant Realogy Holding Corp.’s (Realogy) Demurrer to Plaintiff’s Complaint is SUSTAINED WITH LEAVE TO AMEND.

Defendant Cornerstone Title Company’s (Cornerstone) Demurrer to Plaintiff’s Complaint is OVERRULED.

1.       Realogy’s Demurrer

Based solely on allegations that Realogy “is the controlling company for” Cornerstone (Compl., ¶ 3) and that Defendants were the “alter egos of their co-defendants” and “were joint venturers with, or co-partners with, . . . their co-defendants” (id., ¶ 11), Plaintiff contends that he has sufficiently pled the first cause of action for negligence and the third cause of action for tort of another against Realogy (see Pl. Opp., at p. 9). But these allegations are “egregious examples of generic boilerplate” that the California Supreme Court has criticized. (Moore v. Regents of University of Cal. (1990) 51 Cal.2d 120, 134, fn. 12.) As such, these allegations are not sufficient to establish that Realogy is the alter ego of Cornerstone or that Realogy is a joint venture with or co- partner of Cornerstone. (See Simmons v. Ware (2013) 213 Cal.App.4th 1035, 1048-1049.) Realogy’s demurrer to the first and third causes of action is therefore sustained with leave to amend.

2.       Cornerstone’s Demurrer

Cornerstone contends that Plaintiff has failed to allege facts sufficient to establish that it owed a duty of care to Plaintiff or that its breach of that duty caused any damages to Plaintiff. Plaintiff counters that he has sufficiently pled a duty of care and damages under Biakanja v. Irving (1958) 49 Cal.2d 647 (Biankanja) and Seeley v. Seymour (1987) 190 Cal.App.3d 844 (Seeley). The Court agrees with Plaintiff.

“Where a special relationship exists between the parties, a plaintiff may recover for loss of expected economic advantage through the negligent performance of a contract although the parties were not in contractual privity.” (J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 804, citing Biakanja.) In determining whether a plaintiff may recover in the absence of contractual privity, the Court applies the criteria set forth in Biakanja, supra, 49 Cal.2d at page 650. “Those criteria 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 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.” (J’Aire, at p. 804.)

Applying these criteria to the facts as pled, the Court finds that Plaintiff has adequately pled that Cornerstone owed a duty to Plaintiff and that Plaintiff suffered damages as a result of Cornerstone’s breach of that duty. First, there can be no doubt that the transaction was intended to affect Plaintiff. As alleged, Cornerstone completed escrow on the sale of Plaintiff’s property and recorded a deed transferring Plaintiff’s property to the buyer based on forged deed. (Compl., ¶¶ 14-16, 20.) Second, the harm to Plaintiff was foreseeable. As alleged, Cornerstone had serious doubts that the seller actually owned the property. (See id., ¶ 18.) Despite this, Cornerstone failed to locate relevant documents and failed to follow standard procedures that would have uncovered that the seller did not, in fact, hold title to the property and therefore lacked the authority to sell it. (See id., ¶¶ 18-19.) As a

result, Plaintiff’s property was improperly sold to a third party. Third, there is little doubt that Plaintiff did in fact suffer injury because he was forced to sue to regain his property. Fourth, the closeness of the connection between the act and harm suffered by Plaintiff is clear. By allowing the sale to proceed based on the forged deed and by recording a deed transferring the property to the buyers, Cornerstone’s acts caused Plaintiff to lose his property. (See id., ¶¶ 19-20.) Fifth, Cornerstone’s conduct is deserving of moral blame. As alleged, Cornerstone ignored red flags about the seller and failed to follow standard procedures that would have uncovered the seller’s fraud. (See id., ¶¶ 18-19.) Indeed, this is presumably the very purpose behind title services during a property sale. Finally, imposing liability will serve the public interest. As the Court of Appeal in Seeley, supra, 190 Cal.App.3d at page 892, explained, “[t]itle companies participate in the vast majority of real estate transactions in this state. As institutions charged with the public trust, it is important that they be held accountable when their negligent acts result in economic harm to individual property interests.”

The cases cited by Cornerstone are distinguishable. Neither Alereza v. Chicago Title Co. (2016) 6 Cal.App.5th 551 nor Summit Financial Holdings, Ltd. v. Continental Lawyers Title Co. (2002) 27 Cal.4th 705 involve title services. Moreover, in both Alereza and Summit, the escrow company was not aware of any information that would have led it to believe that the transaction would adversely affect the plaintiff. (See Alereza, at p. 560 [holding that the defendant could not have been aware of Plaintiff’s damages at the time of the transaction because “[a]t the close of escrow, [the plaintiff] has no personal liability for any . . . losses”]; Summit, at 711 [holding that “there is not evidence [that the defendant] was aware of any collusion or fraud in the fund disbursement that would have adversely affected any party to the escrow”].) By contrast, Plaintiff alleges that Cornerstone was aware of serious issues with the deed that purportedly transferred the property from Plaintiff to the seller at the time it closed escrow and recorded the deed transferring the property to the buyer. (See Compl, ¶¶ 18-20.)

Accordingly, Plaintiff has sufficiently pled a cause of action for negligence against Cornerstone. And because

Plaintiff has stated that Cornerstone’s negligence required that he hire counsel to prosecute an action against the buyer in order to recover his property, he has also stated a cause of action for tort of another. Accordingly,

Cornerstone’s demurrer is overruled.