Rideau v. Stewart Title of
Filed 9/12/13 Rideau v. Stewart Title of California CA4/1
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
COURT
OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION
ONE
STATE
OF CALIFORNIA
EARL B. RIDEAU et al.,
Plaintiffs and Appellants,
v.
STEWART TITLE OF CALIFORNIA,
INC.,
Defendant and Respondent.
D061497
(Super. Ct.
No.
37-2010-00096274-CU-BC-CTL)
APPEAL from
a judgment of the Superior Court
of
County, Jay Bloom, Judge.
Reversed; judgment directed.
Dennis R.
Delahanty, a Prof. Corp. and Dennis R. Delahanty for Plaintiffs and Appellants.
Best Best &
Krieger LLP, Robert J. Hanna, Kira L. Klatchko and Shannon M. Erickson for
Defendant and Respondent.
I.
INTRODUCTION
Earl B.
Rideau and Marina Rideau (the Rideaus) entered into an agreement with a
developer, BGJB de Mexico, S. de R.L. de C.V. (BGJB), to purchase a condominium
in a building to be constructed in
purchase price with an escrow company, defendant Stewart Title of California
(Stewart Title). The escrow instructions
provide in relevant part:
"ESCROW HOLDER is authorized and instructed to
release funds as instructed by SELLER . . . without further authorization from
BUYERS; said funds to be disbursed by California Fund Control to pay direct
costs, commissions and construction costs only.
California Fund Control and SELLER have in place, an agreement where
California Fund Control inspects the project site and authorizes payment of
construction costs to contractor, sub-contractors and suppliers according to a
pre-approved voucher control system."
Stewart
Title released the Rideaus' deposit, together with the deposits of other
purchasers, to entities other than California Fund Control, including to
BGJB. BGJB failed to construct the
condominium building, and neither Stewart Title nor BGJB returned the Rideaus'
deposit.
The Rideaus
brought this action against Stewart Title.
Among other claims, the Rideaus brought causes of action for breach of
contract and negligence in which they alleged that Stewart Title had breached
the escrow instructions by releasing their deposited funds to entities other
than California Fund Control. The trial
court held a bench trial, interpreted the escrow instructions, and concluded
that, "[Stewart Title] had no obligation to send funds to [California Fund
Control]." The court entered a
judgment in favor of Stewart Title on all of the Rideaus' claims.
On appeal,
the Rideaus claim that the trial court misinterpreted the escrow instructions
and erred in failing to find that Stewart Title breached the escrow
instructions by releasing their funds to entities other than California Fund
Control. With respect to their
negligence claim, the Rideaus argue that Stewart Title breached its duty
"to comply with the [Escrow Instructions]. . . ."
We conclude
that the most reasonable interpretation of the escrow instructions is that they
implicitly required Stewart Title to release the Rideaus' funds only to
California Fund Control. In light of
this interpretation, we conclude that Stewart Title breached the escrow
instructions by releasing the Rideaus' funds to entities other than California
Fund Control and that the Rideaus were entitled to judgment in their favor on
their breach of contract claim. However,
we conclude that the Rideaus cannot prevail on their tort claim for negligence
based on Stewart Title's breach of contractual duties. We reverse the judgment and direct the trial
court to enter a new judgment in favor of the Rideaus on their breach of
contract claim and in favor of Stewart Title on the Rideaus' remaining causes
of action.
II.
FACTUAL AND
PROCEDURAL BACKGROUND
A.
In March
2011, the Rideaus filed a first amended complaint
against Stewart Title and GJL, S. de R.L. de C.V., a Mexican corporation (GJL).
alleged that on or about May 2, 2007, they entered into a written agreement
(Purchase Agreement) with BGJB, a Mexican corporation, for the purchase of a
condominium in a building to be constructed, called "The Falls" (the
Project). The Project was to be built in
the city of Playas de Rosarito, Mexico.
The Rideaus
alleged that they entered into this agreement based upon the assurances of
Shane Delmer, a salesperson for the Project.
According to the Rideaus, Delmer told them that their deposits for the
purchase of the condominium would be held in an escrow account with Stewart
Title, in the United States. The Rideaus
further alleged that "Stewart Title would distribute the funds to a fund
control company [that] would periodically inspect the project and release the
funds on an 'as work is done' basis utilizing a pre-approved voucher system . .
. ."
The Rideaus
claimed that a few days after entering in the Purchase Agreement, they
delivered Sale Escrow Instructions (Escrow Instructions), together with an
initial deposit of $5,000, to Stewart Title.
According to the Rideaus, they read and reviewed the Escrow Instructions
and concluded that the instructions were consistent with Delmer's
representations concerning the manner by which their deposits would be
released. The Rideaus alleged that on or
about June 13, 2007, they wired $234,700—the balance of their required deposit
toward the purchase of the condominium, to Stewart Title.
The Rideaus further alleged that,
"Although [BGJB] failed to enter into an agreement with California Fund
Control, defendant Stewart Title failed to request and obtain further
instructions from [the Rideaus] and [BGJB] as to the disposition of the
deposited funds and instead released the deposited funds to [BGJB] or its
principals." The Rideaus also
claimed that BGJB failed to commence construction of the Project and that BGJB
would be unable to commence construction in the foreseeable future due to a
lack of funding.
In a
negligence cause of action, the Rideaus alleged that Stewart Title negligently
failed to: (1) determine whether BGJB had entered into an agreement with
California Fund Control; (2) to inform the Rideaus regarding the lack of a fund
control agreement; (3) to release the deposited funds only to California Fund
Control; and (4) to request further instructions from BGJB and the Rideaus
concerning the release of the deposited funds if release of the funds to
California Fund Control was not possible.
The Rideaus further alleged:
"Plaintiffs were damaged in that they would not
have deposited the funds into escrow or would have demanded the immediate
return of the funds to them had they known no agreement for the disbursement of
the funds by California Fund Control had been consummated; the deposited funds
were not paid over by Stewart Title to California Fund Control or a similar
company that would ensure that the deposited funds were used to pay 'direct
costs, commissions and construction costs only' as provided for in
the . . . Escrow Instructions; and the Condominium would [
deposited funds will not be applied to the sale price of the Condominium."
The Rideaus
alleged that Stewart Title had refused to return their deposits and that they
had suffered damages in the amount of $239,700 as a result of Stewart Title's
negligence.
In a breach
of contract cause of action, the Rideaus incorporated by reference their
previous allegations and contended that Stewart Title had failed to perform its
obligations as set forth in the Escrow Instructions. The Rideaus alleged that Stewart Title's
breach of the Escrow Instructions had damaged them in the amount of $239,700—the
amount of their deposits.
name="_ftnref2" title="">[2]
B. The
court trial
After the parties waived their right
to a jury trial, the trial court held a bench trial on the Rideaus' first
amended complaint.
1. The
Rideaus' evidence
Section
IV of the Escrow Instructions provides:
"RELEASE OF
FUNDS: From BUYERS['] deposit in
escrow, ESCROW HOLDER is authorized and instructed to release funds as
instructed by SELLER, upon receipt of this signed instruction from all
principals and clearance of BUYERS['] funds, without further authorization from
BUYERS; said funds to be disbursed by California Fund Control to pay direct
costs, commissions and construction costs only.
California Fund Control and SELLER have in place, an agreement where
California Fund Control inspects the project site and authorizes payment of
construction costs to contractor, sub-contractors and suppliers according to a
pre-approved voucher control system. The undersigned BUYERS and SELLER hereby
acknowledge that they are aware that Stewart Title, its officers and employees
make no warranty or representation of any kind or nature, either express or
implied, as to the ownership or condition of title to the property described in
this escrow, nor as to the conditions of this escrow will have been complied
with nor will any document be filed for recording in connection therewith. We,
the undersigned, hereby hold Stewart Title harmless from any loss or damage
which may be sustained by reason of the above disbursement instruction, and for
the failure of any of the conditions of this escrow, and for the recovery of
said money so released, and agree to defend you against any claims whatsoever
arising from [sic] and [
costs incident thereto." (Emphasis in original.)
The Rideaus
presented evidence that they deposited $239,700 with Stewart Title pursuant to
the Escrow Instructions, that Stewart Title distributed the Rideaus' funds to
entities other than California Fund Control, and that Stewart Title had not
returned the Rideaus' deposits.
Earl Rideau
also testified concerning his interpretation of the Escrow Instructions, as
follows:
"[I]t was my understanding that the seller . . .
according to the [E]scrow [I]nstructions would instruct the escrow company to
release funds. And then those funds were
to be released to California Fund Control.
California Fund Control was the only one mentioned in the escrow
instructions who actually disburses funds. There's no mention . . . of the
funds being disbursed by the escrow company to the seller or else the fund
control is a moot point. [¶] You're not going to get the developer to give
the money back to the fund control so that they could in turn give the money
back to the developer. That's
irrational. That's illogical. So I took it at face value."
The Rideaus
also offered in evidence Delmer's affidavit.
"During 2007, I was employed as an onsite
salesperson for [the Project]. . . . [¶] Typically, during the sales process
with a buyer I would explain how purchases would be conducted. . . . I would
specifically point out that the transaction would require that funds be placed
into escrow with Stewart Title Company.
I would then explain that there would be a voucher system through
California Fund Control to pay for the construction of the project and related
costs of the project. I would explain
these procedures to make the potential buyers feel more comfortable in
purchasing real estate in a foreign country."
The Rideaus
offered in evidence the Purchase Agreement between the Rideaus and BGJB, which
provides in relevant part:
"All deposits shall be made payable to Stewart
Title. The deposits shall be withheld
and released by Stewart Title in accordance with the terms of the Escrow
Contract.
"Also, the parties agree that the release of the
payment of the PRICE by Stewart Title shall be made in accordance with the
Construction Supervision and Resource Management Contract entered into by (in
process) and [BGJB], through which said company will instruct Stewart Title to
release the PRICE that the BUYERS progressively pays under this Contract and
the progress of the construction of the Unit."
The Rideaus
also presented the expert testimony of Judy Lydick, an escrow officer and
consultant to escrow companies. Lydick
offered her opinion concerning what the Escrow Instructions required of an
escrow officer in order for the officer to comply with the standard of care in
the escrow industry. Lydick testified in
part:
"The escrow instructions are created in a format
that an escrow officer really has to choose which portion of those escrow
instructions they're going to abide by.
[¶] If I were to receive this
. . . instruction, the first thing I would do, [is]
cease . . . sending out the money until it was clear as to whether the money is
to be released to anyone the seller delegated for the money to go to or whether
the money's going to the California Fund Control."
Lydick also
stated that, in her opinion, the Escrow Instructions were
"misleading" if the parties intended to permit Stewart Title to
release the deposited funds to BGJB.
The Rideaus
also presented the expert testimony of Jeff Katzer, a real estate broker and
former chief executive officer of a bank that specialized in construction
lending, who testified concerning the use of voucher and fund control systems
in the construction finance industry.
Katzer testified in relevant part as follows:
"One of the primary components to a construction
loan which is tantamount [sic]
project is that [the] lender enters into a fund control . . . within their own
bank, if they have the facilities to have that system in place, or [they] will
contract with [a] third party independent fund control company. That company then will evaluate from the cost
breakdown and create stages of disbursements.
Those stages of disbursements will be funded under a voucher system or
completion of those stages by elements of, say, foundation, grading,
electrical, things of that nature.
"Once those agreements are in place and the voucher
system is in place, the lender then will, upon request of the developer for
specific funds to meet a specific line item, those funds will then be released
to the fund control. Fund control will
inspect the property. Determine that
they've met the line item component, where the money went to that contractor or
subcontractor [sic] or material
provider. And, in fact, lien releases
were in place. Without that happening,
the moneys can go sideways. Developers
can get ahead of the project. [The]
project may not be finished on time or sufficient funds remaining in the loan
account to complete the project."
2. The
defense
Stewart
Title presented the expert testimony of Donna Grosso, an escrow officer and
manager of an escrow company. Grosso
testified concerning whether Stewart Title had met the standard of care for
performing escrow services. Grosso
stated that she interpreted the Escrow Instructions as permitting Stewart Title
to release the buyers' funds upon the seller's instruction, without further
limitation. Grosso further testified
that language pertaining to California Fund Control in the Escrow Instructions
was "a thing between the buyer and the seller."
C.
The trial
court issued a statement of decision in which it found for Stewart Title on all
of the Rideaus' causes of action. With
respect to the Rideaus' breach of contract cause of action, the trial court
noted that the Rideaus claimed that Stewart Title had breached the Escrow
Instructions in numerous ways, including "failing to release the [Rideaus]
funds to California Fund Control."
With respect to the Rideaus' contention that Stewart Title was required
to release their funds only to California Fund Control, the trial court stated:
"[I]t is claimed the funds should have been
released to [California Fund Control].
However, without any mechanism for such funding, it is unclear to the
court how this should have been done. In
addition, as noted above,[
name="_ftnref4" title="">[4]]
the [Escrow Instructions] did not require [Stewart Title] to release funds to
[California Fund Control]. It said the
funds were to be disbursed by California Fund Control."
With
respect to the Rideaus' breach of contract claim, the trial court stated the
following:
"Also, if the [Escrow Instructions are] read with
consideration of the language as well as the custom and practice in the
industry as indicated by the defense expert, there is no breach of the [Escrow
Instructions]. The first part of Section
IV [of the Escrow Instructions] indicates the escrow holder is authorized and
instructed to release funds as instructed by seller upon receipt of the signed
[Escrow Instructions] from all principals and clearance of buyers' funds
without further authorization from the buyers.
This clause clearly required the escrow company to release the funds
upon order of the seller without any instruction from the buyer. The next clause indicating said funds are to
be disbursed by [California Fund Control] does not relate to the escrow
company. It states the funds are to be
distributed by California Fund Control[.]
"According to the uncontradicted testimony of the
defense expert, this clause deals with the obligations between the buyer,
seller, and creditors. It has nothing to
do with the escrow company."
In addition
to finding in favor of Stewart Title on the Rideaus' breach of contract cause
of action, the trial court found in favor of Stewart Title on the Rideaus'
causes of action for negligence, breach of fiduciary duty, and fraud. The court also found that the Rideaus were
not entitled to prevail on their breach of contract claim premised on the GJL
Agreement.
D.
A few weeks
after issuing its statement of decision, the trial court entered judgment in
favor of Stewart Title. The Rideaus
timely appealed from the judgment.
III.
DISCUSSION
A. Stewart Title breached
the Escrow Instructions by releasing the Rideaus' funds to
entities other than
California Fund Control
The Rideaus
claim that the trial court erred in failing to find that Stewart Title breached
the Escrow Instructions by releasing their funds to entities other than
California Fund Control. Resolution of
the Rideaus' claim requires that we interpret the Escrow Instructions.
1.
We must first determine the appropriate
standard of review to apply in interpreting the Escrow Instructions. In People
v. Paredes (2008) 160 Cal.App.4th 496, 507, this court discussed the
applicable law governing this determination:
" '[T]he "interpretation of a contract is
subject to de novo review where the interpretation does not turn on the
credibility of extrinsic evidence." '
[Citations.] 'In contrast,
"[i]f the parol evidence is in conflict, requiring the resolution of
credibility issues, we would be guided by the substantial evidence test. [Citation.]" [Citation.]' " (Id.
at p. 507.)
>
In this
case, both parties contend that this court should apply the de novo standard of
review on appeal.
title="">[5] We agree that, as Stewart Title states in its
brief, the trial court's "conclusions, as expressed in the Statement of
Decision, were based on the plain language of the [Escrow] Instructions,"
and that the de novo standard of review therefore applies on appeal.
We acknowledge that the trial court stated that the
testimony of Grosso, concerning the "custom and practice in the
industry," supported the court's interpretation of the Escrow
Instructions. However, our review of the
record reveals that Grosso's testimony was not based on extrinsic evidence of
the custom and practice in the escrow industry that might be "admissible
to interpret the written words" of the Escrow Instructions. (Hayter
Trucking, Inc. v. Shell Western E&P, Inc. (1993) 18 Cal.App.4th 1,
20.) Rather, Grosso's opinion was based
on her own interpretation of the Escrow Instructions. Grosso stated that her opinion was based on
her "read[ing] . . . of the escrow instructions," and a review of her
testimony makes clear that such testimony was based on an examination of the language
of the Escrow Instructions. (See e.g.,
"[w]e had a paragraph here that say's we're authorized and instructed to
release funds as instructed by seller"; "[i]t says 'From buyers'
deposit in escrow, escrow holder is authorized and instructed to release funds
as instructed by the seller"; "if the seller instructed us to
disburse to California Fund Control, we would do so. But all the instructions state here [is] it
comes from the seller"; "[y]ou have a semicolon after 'buyers' which
starts a new thought process.")
Even assuming that Grosso's testimony was admissible for
the purpose of interpreting the Escrow Instructions (but see
69 Cal.App.4th 1155, 1180 ["[e]xpert opinion on the legal interpretation
of contracts has . . . been found to be
inadmissible"]), it is clear that a proper interpretation of the Escrow
Instructions does not turn on the credibility of Grosso's testimony. Thus, we conclude that the parties are
correct that the de novo standard of review applies. (See People
v. Paredes, supra, 160
Cal.App.4th at p. 507.)
2. Governing
law
a.
The duties of an escrow holder
In Summit Financial Holdings, Ltd. v. Continental Lawyers Title Co.
(2002) 27 Cal.4th 705 (Summit), the
Supreme Court described the duties of an escrow holder as follows:
" 'An escrow involves the deposit of documents
and/or money with a third party to be delivered on the occurrence of some
condition.' [Citations.] An escrow holder is an agent and fiduciary of
the parties to the escrow.
[Citations.] The agency created
by the escrow is limited—limited to the obligation of the escrow holder to
carry out the instructions of each of the parties to the escrow. [Citations.]
If the escrow holder fails to carry out
instruction it has contracted to perform, the injured party has a cause of
action for breach of contract.
[Citation.]" (
"An
escrow holder has an implied obligation to do all of the things normally done
by an escrow agent which were not expressly excluded by the escrow
instructions. [Citation.] Upon the escrow holder's breach of an
instruction that it has contracted to perform or of an implied promise arising
out of the agreement with either party, the injured party acquires a cause of
action for breach of contract. ([Citation];
Claussen v. First American Title Guaranty Co. (1986) 186 Cal.App.3d 429,
435 [(Claussen)].) As noted in Claussen, supra, at page 436, '. . .
some escrow instructions may be implicit in the express instructions
given. (Gordon v. D & G Escrow
Corp. (1975) 48 Cal.App.3d 616, 621-623 [(Gordon)]—escrow instructions implicitly required proceeds of sale
to be paid to both sellers.) In the
event of a conflict or apparent error in instructions, the escrow holder is
obliged to take corrective steps before obeying questionable instructions. [Citations.]' " (Kirk
Corp. v. First American Title Co. (1990) 220 Cal.App.3d 785, 807.)
b.
Principles of contract interpretation
"Escrow
instructions are interpreted under the rules applicable to
contracts." (Claussen, supra, 186
Cal.App.3d at p. 437.)
The general principles of contract
interpretation are well established:
" '
"The fundamental rules of contract interpretation are based on the premise
that the interpretation of a contract must give effect to the 'mutual
intention' of the parties. 'Under
statutory rules of contract interpretation, the mutual intention of the parties
at the time the contract is formed governs interpretation. [Citation.]
Such intent is to be inferred, if possible, solely from the written
provisions of the contract.
[Citation.] The "clear and
explicit" meaning of these provisions, interpreted in their "ordinary
and popular sense," unless "used by the parties in a technical sense
or a special meaning is given to them by usage" [citation], controls
judicial interpretation. [Citation.]' . . ." [Citation.]'
[Citation.]" (Minich v.
Allstate Ins. Co. (2011) 193 Cal.App.4th 477, 485.)
In
addition, and of particular relevance to this case, is the following statutory
rule of contract interpretation:
"The whole of a contract is to be taken together,
so as to give effect to every part, if reasonably practicable, each clause
helping to interpret the other."
(Civ. Code, § 1641.)
This
principle is embodied in case law in numerous formulations, all of which guide
our interpretation of the Escrow Instructions.
(See e.g., Jones v. Jacobson (2011)
195 Cal.App.4th 1, 18 ["We must view the language of a contract as a
whole, avoiding a piecemeal, strict construction approach"];
188 Cal.App.4th 69, 82 [" '[t]he character of a contract is not to be
determined by isolating any single clause or group of clauses' "];
Cases (2011) 201 Cal.App.4th 758, 799 ["[E]ven if one provision
of a contract is clear and explicit, it does not follow
that that portion alone must govern its interpretation;
the whole of the contract must be taken together so as
to give effect to every part"]; Advanced Network, Inc. v. Peerless Ins.
Co. (2010) 190 Cal.App.4th 1054, 1063 (Advanced Network) [" 'We
must give significance to every word of a
possible . . .' "]); Hayden v.
Robertson Stephens, Inc. (2007) 150 Cal.App.4th 360, 367 [" 'A
construction rendering some words surplusage is to be avoided' "].)
3. The
Escrow Instructions implicitly required Stewart Title to release the
Rideaus'
funds only to California Fund Control
a.
The Escrow Instructions
The
Escrow Instructions provide in relevant part:
"RELEASE OF
FUNDS: From BUYERS['] deposit in
escrow, ESCROW HOLDER is authorized and instructed to release funds as
instructed by SELLER, upon receipt of this signed instruction from all
principals and clearance of BUYERS['] funds without further authorization from
BUYERS; said funds to be disbursed by California Fund Control to pay direct
costs, commissions and construction costs only.
California Fund Control and SELLER have in place, an agreement where
California Fund Control inspects the project site and authorizes payment of
construction costs to contractor, sub-contractors and suppliers according to a
pre-approved voucher control system."
b.
Escrow Instructions is that
implicitly require that, upon instruction from seller, the escrow
release the buyers' funds to California Fund Control for
by California Fund Control
The signed
Escrow Instructions clearly and unambiguously permitted Stewart Title to
release the Rideaus' funds upon an instruction from BGJB and clearance of the
Rideaus' funds. Further, reading the
instruction as a whole, as we must (Civ. Code, § 1641), the Escrow
Instructions implicitly authorized Stewart Title to release the Rideaus' funds
to only one entity—California Fund Control.
To begin
with, in the same sentence in which the Escrow Instructions authorize Stewart
Title to release the Rideaus' funds, the instructions state that "said
funds" would be disbursed by California Fund Control. California Fund Control could not
having received those funds. Further, the disbursement clause of the
sentence pertaining to California Fund Control is separated from the remainder
of the sentence pertaining to Stewart Title's release of the funds by only a
semicolon. A semicolon is used to
separate parts of a sentence that "are too closely connected to be made
into separate sentences." (Bryan A.
Garner, A Dictionary of Modern Legal Usage (2d Ed. 1995) p. 717.) By using a semicolon and the phrase
"said funds," the text and grammar of the Escrow Instructions
indicate that Stewart Title was authorized, upon BGJB's instruction, to release
the Rideaus' funds to California Fund
Control.
The
structure of the Escrow Instructions supports this interpretation. The references to California Fund Control
appear in Section IV of the Escrow Instructions, entitled "RELEASE OF
FUNDS"—the portion of the instructions that expressly imposes duties on
Stewart Title. Further, Stewart Title's
contention that it was authorized to "release funds as instructed by
BGJB" without any limitation, would render the bulk of this section
surplusage because if Stewart Title were authorized to release the funds to
instruction, there would be no reason to include any of the language in the Release of Funds section pertaining to
California Fund Control.
An interpretation rendering such a
large portion of the Release of Funds section of the Escrow Instructions
surplusage should be avoided. (See
of National City (2001) 87 Cal.App.4th 1274, 1279 ["An interpretation
which renders part of the instrument to be surplusage should be
avoided"].) Rather, we should interpret
that portion of the Escrow Instructions authorizing Stewart Title to
"release funds as instructed by SELLER," in light of the remainder of
the sentence, which provides, "said funds to be disbursed by California
Fund Control. . . ." (See
Cases, supra, 201 Cal.App.4th at
p. 799.)
Further,
"In determining the meaning of a written instrument, we are permitted to
consider not only its language, but also ' "the circumstances under which
[it] was made and the matter to which it relates." ' " (See PV
Little Italy, LLC v. MetroWork Condominium Assn. (2012) 210
Cal.App.4th 132, 152.) Our
interpretation of the Escrow Instructions fully comports with the purpose for
which the principals to an escrow agreement would use a fund control
agent. A fund control agent is used to
ensure that funds intended for the construction of real property are actually
and properly used by the owner-builder to construct that property. (See e.g., Summit, supra, 27 Cal.4th
at p. 713 ["a lender agreed to fund an
owner-builder's construction of homes, and to ensure that the loan funds would
actually be used to pay the construction costs, the lender deposited the
The Escrow Instructions expressly provided
that the fund control agent (California Fund Control) would "inspect[] the
project site and authorize[] payment of construction costs to contractor,
sub-contractors and suppliers according to a pre-approved voucher control
system." In order for a fund
control agent to perform this function, it is essential that the fund control
agent receive the funds that it is to
disburse for the payment of construction costs.
The Rideaus' interpretation of the Escrow Instructions is fully
consistent with this purpose: upon instruction from BGJB, the escrow holder was authorized and instructed to release the
Rideaus' funds to California Fund Control for disbursement by California Fund
Control to pay direct costs, commissions and construction costs.
In
contrast, Stewart Title's interpretation of the Escrow Instructions to the
effect that, upon BGJB's instruction, it was authorized to release the funds to
any entity that BGJB
selected—including BGJB itself—is completely inconsistent with the purpose of
having a funds control agent disburse
the funds. We can think of no reason,
and neither the trial court nor Stewart Title has offered any, as to why
principals to an escrow agreement who intended to use a fund control agent to
disburse funds for a construction project, would intend to permit the escrow
holder to release funds directly to
entities other than the fund control
agent. As noted above, the entire raison
d'être of a fund control agent is to act as an intermediary between those
funding a construction project and those building the project. To put it simply, a fund control agent cannot disburse a project's funds if the
funds instead.
Stewart
Title's contention that references in the Escrow Instructions pertaining to
California Fund Control implicates only BGJB's
duty to the Rideaus not only fails to make practical sense, it is also in
conflict with the fact that this language appears in the Escrow Instructions, which describe and control
deposited into escrow.
name="_ftnref6" title="">[6]
Contrary to
Stewart Title's contention, its interpretation finds no support in the Purchase
Agreement. As noted previously, the
Purchase Agreement provides in relevant part:
"[T]he parties agree that the release of the
payment of the PRICE by Stewart Title shall be made in accordance with the
Construction Supervision and Resource Management Contract entered into by (in
process) and [BGJB], through which said company will instruct Stewart Title to
release the PRICE that the BUYERS progressively pays under this Contract and
the progress of the construction of the Unit."
We reject
Stewart Title's suggestion that this provision "unequivocally stated that
BGJB would instruct Stewart Title to release funds." To begin with, the reference to "said
company" in the provision is ambiguous, and may reasonably be read to
refer to the company with which BGJB would enter into a Construction
Supervision and Resource Management Contract, rather than to BGJB itself. In any event, even if "said company"
is interpreted as referring to BGJB, the provision is fully consistent with our
interpretation of the Escrow Instructions that Stewart Title was authorized,
upon BGJB's instruction, to release the Rideaus' funds to California Fund Control.
Moreover, the provision expressly states that "the release of the
payment of the PRICE by Stewart Title shall be made in accordance with the Construction Supervision and Resource
Management Contract." (Italics
added.) It is undisputed that BGJB never
entered into a Construction Supervision and Resource Management Contract (i.e.
a fund control agreement). It is thus
clear that Stewart Title did not release
the Rideaus' deposits "in accordance with" a fund control
agreement. This provision of the
Purchase Agreement therefore does not support Stewart Title's contention that
it complied with the Escrow Instructions.
3. Stewart
Title breached the Escrow Instructions
It is undisputed that Stewart Title released the Rideaus'
funds in the amount of $239,700 to entities other than California Fund Control.
Instructions provided above, the release of the Rideaus' funds to entities
other than California Fund Control constituted a breach of the instructions.
Accordingly,
we conclude that the trial court erred, as a matter of law, in entering
judgment in favor of Stewart Title on the Rideaus' breach of contract cause of
action.
B. The judgment may not be
affirmed on the basis of the exculpatory provisions in the
Escrow Instructions
Stewart Title contends that the
judgment may be affirmed based on the following provisions in the Escrow
Instructions:
"The undersigned BUYERS and SELLER hereby
acknowledge that they are aware that Stewart Title, its officers and employees
make no warranty or representation of any kind or nature, either express or
implied, as to the ownership or condition of title to the property described in
this escrow, nor as to the conditions of this escrow will have been complied
with nor will any document be filed for recording in connection therewith. We,
the undersigned, hereby hold Stewart Title harmless from any loss or damage
which may be sustained by reason of the above disbursement instruction, and for
the failure of any of the conditions of this escrow, and for the recovery of
said money so released, and agree to defend you against any claims whatsoever
arising from [sic] and [
costs incident thereto." (Emphasis in original.)
Stewart Title argues that it contended
in the trial court that these provisions "stated that Stewart Title would
be held harmless from any losses caused by distributing funds
that "the Rideaus agreed that Stewart Title would not be held liable for
any 'loss or damage' for disbursing monies in
accord with the [Escrow] Instructions." (Italics added.) Stewart Title also contends, "The
hold-harmless clause did not absolve Stewart Title from wrongdoing or
negligence. Instead, the clause
protected Stewart Title for complying
with the [Escrow] Instructions. . . ."
(Italics added.)
We
concluded in parts III.A.2 and III.A.3, that Stewart Title breached the Escrow Instructions in the manner by which it released
the Rideaus' funds. In light of Stewart
Title's acknowledgement that the exculpatory provisions in the Escrow
Instructions do not "absolve Stewart Title from wrongdoing," and
apply, if at all, only in the event that Stewart "compl[ied] with the [Escrow] Instructions," and released funds
"in accord with the [Escrow]
Instructions" (italics added), the judgment may not be affirmed on the
basis of these provisions.
name="_ftnref8" title="">[8]
C.
the judgment on their negligence cause
of action
trial court erred in ruling in Stewart Title's favor on their negligence cause
of action. In support of this
contention, the Rideaus argue that Stewart Title breached its duty "to comply
with the [Escrow Instructions] . . . ."
This argument fails because a plaintiff may not prevail on a tort cause
of action for negligence based on the defendant's breach of contractual duties,
in the absence of an independent violation of tort law. (Money
Store Investment Corp. v. Southern California Bank (2002) 98 Cal.App.4th 722, 731 (Money Store).) As the
"In essence, the Money Store alleges the [escrow
holder] breached a duty to it by failing to perform as specified in the Money
Store's instructions.
has rejected the transmutation of contract actions into tort actions "in
favor of a general rule precluding tort recovery for noninsurance contract
breach, at least in the absence of violation of 'an independent duty arising
from principles of tort law' [citation] other than the bad faith denial of the
existence of, or liability under, the breached contract." [Citation.]'
[Citation.] As alleged, the Money
Store's cause of action for negligence would be subject to summary adjudication
because it does not state a negligence cause of action apart from its contract
cause of action." (
In a
separate one-sentence section of their brief, the Rideaus also contend that
they are entitled to reversal of judgment on their negligence cause of action
because Stewart Title "fail[ed] to disclose its on-going relationship with
[BGJB], the fact that [BGJB]] was its client, that it met with [BGJB] on
several occasions, yet never once spoke to the Rideaus." The Rideaus fail to present any legal
argument or authority in support of this contention. Accordingly, we deem the contention
forfeited. (See, e.g., People ex rel.
Reisig v. Acuna (2010) 182 Cal.App.4th 866, 879 [" 'An appellate brief
"should contain a legal argument with citation of authorities on the
points made. If none is furnished on a
particular point, the court may treat it as [forfeited], and pass it without
consideration.' [Citation.]" [Citation.]' "].)
IV.
DISPOSITION
The
judgment is reversed and the matter is remanded to the trial court. On remand, the trial court shall enter a new
judgment in favor of the Rideaus on their breach of contract cause of action
and in favor of Stewart Title on the remaining causes of action in the first
amended complaint, in a manner consistent with this opinion. The trial court may also conduct any further
ancillary proceedings that it deems necessary in order to enter the
judgment. The Rideaus are entitled to
costs on appeal.
AARON, J.
WE CONCUR:
McCONNELL, P. J.
O'ROURKE, J.
name="_ftn1" title="">[1] GJL is not a party to this appeal.
name="_ftn2" title="">[2] Although not at issue in this appeal,
the Rideaus also brought causes of action for fraud (third cause of action) and
breach of fiduciary duty (fourth cause of action) against Stewart Title, and a third
party beneficiary breach of contract claim against Stewart Title and GJL (fifth
cause of action) based on an alleged agreement between GJL and Stewart Title
(the GJL Agreement). The Rideaus alleged
that in the GJL Agreement, "Stewart Title agreed to pay . . . 50% of the
[Rideaus'] deposited funds to GJL, and GJL agreed to pay [the Rideaus] the
total amount of the deposited funds . . . ."
