Scarborough
Filed 9/5/12 Scarborough v.
Kellar CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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opinion has not been certified for publication or ordered published for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.
IN THE COURT OF
APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE
DISTRICT
DIVISION SIX
DALE SCARBOROUGH et al.,
Plaintiffs and
Appellants,
v.
MARILYN KELLAR et al.,
Defendants and
Respondents.
2d Civil No.
B238315
(Super. Ct. No.
56-2010-00365307-CU-BC-VTA)
(Ventura
County)
First American Title
Insurance Company's assignees, Dale Scarborough and Janet Scarborough, appeal
the judgment entered after an order granting judgment on the pleadings in this
action to recover attorney's fees pursuant to an
FACTUAL AND PROCEDURAL BACKGROUND
The
Purchase and the Escrow Provisions
Dale and Janet
Scarborough bought a residential property from Marilyn Kellar and John R.
Morter, as trustees of the Morter Trust dated August 1, 1994. First American acted as the escrow
holder.
The escrow instructions
provided that the buyer and seller would indemnify and hold the escrow holder
harmless if it filed an action in interpleader based on conflicting claims or
demands. The last sentence of paragraph
12 provides, "If an action is brought involving this escrow and/or this
Escrow Holder, the parties agree to indemnify and hold the Escrow Holder
harmless against liabilities, damages and costs incurred by Escrow Holder
(including reasonable attorney's fees and costs) except to the extent that such
liabilities, damages and costs were caused by the gross negligence or willful
misconduct of Escrow Holder."
Escrow closed without any conflicting instructions or demands on the
escrow holder.
Scarborough
I
About two years after
the sale, a dispute arose between the Scarboroughs and Marilyn Kellar regarding
the Scarboroughs' plans to subdivide their property. Kellar and her husband lived on an adjoining
parcel.
The Scarboroughs sued
Kellar, Morter, a civil engineer, and a surveyor for
that they had misrepresented the size of the property at the time of the
sale. (Scarborough v. Kellar (Super. Ct. Ventura County, 2007, No. CIV
231562 (Scarborough I).) It is now undisputed that a lot line
adjustment, recorded about a month before the property was offered for sale,
erroneously described the property as .85 acres although it is actually .56
acres. The error was corrected several
months after the sale with another recorded lot line adjustment.
In Scarborough I, the Kellars filed a cross-complaint against First
American. They alleged that First
American "altered" a grant deed to change the grantor from "the
Morter Trust" to "Marilyn Kellar," and then "induced
Marilyn Kellar and John Morter to execute this deed without disclosing or
explaining the purpose and legal effect."
The effect of the deed, the Kellars alleged, was to "give the
Scarboroughs an argument that the Kellar Trust had granted them a roadway
easement over a 60-foot wide strip" of the Kellar's parcel. The Kellars described First American in their
cross-complaint as the "escrow."
From this, they argued, First American breached the fiduciary duty it
owed them
The Scarborough I court granted First American summary judgment on
Kellar's cross-complaint. The court
found that the deeds in question were not false, there was no evidence that
First American failed to comply with escrow instructions, and there was no evidence
that First American knowingly participated in a scheme to defraud the
Kellars. The court further found,
"There was no provision in the purchase agreement, escrow instructions, or
amendments thereto, providing that [First American] was to document the
Transaction to prevent subdivision; nor did any principal to the escrow - or
the Kellars - otherwise instruct [First American] to document the Transaction
in that manner."
The
Present Action for Contractual Indemnity and Constructive Trust
After prevailing on the
cross-complaint, First American assigned to the Scarboroughs its rights (if
any) to recover attorneys' fees from Morter and Keller under paragraph 12 of
the escrow provisions. The Scarboroughs
brought the present action to recover fees against Kellar and Morter, both
individually and as trustees, based on causes of action for (1) contractual
indemnification and (2) constructive trust.
In the cause of action for contractual indemnification, they allege that
Kellar's cross-complaint was an action "over the sale and
escrow." In the constructive trust
cause of action, they allege that Kellar and Morter wrongfully took
distributions from the trust, with knowledge of First American's contractual
indemnity claim against it.
The trial court granted
Kellar and Mortar's motion for judgment
on the pleadings after taking judicial notice of the pleadings in
"intended scope is defining the rights and obligations of the parties in
the event that conflicting demands or claims arise concerning the escrow," and that the claims against First
American in Scarborough I "related
to the issue of title and an improper description of the property. There was no allegation that the escrow
itself was mismanaged."
The Scarboroughs moved
for reconsideration. They requested
leave to amend to include allegations that Kellar relied on First American's
status as escrow in her discovery responses to support her claims against it. The court denied the motion for
reconsideration.
DISCUSSION
The standard for
granting a motion for judgment on the pleadings is essentially the same as that
applicable to a general demurrer. The
trial court must determine whether, based on the pleadings and matters that may
be judicially noticed, it appears that a party is entitled to judgment as a
determination. (Smiley v. Citibank (1995) 11 Cal.4th 138, 146.) We accept as true properly pleaded
allegations of fact, but not contentions, deductions, or conclusions of fact or
law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 .)
Contractual
Indemnity
The trial court interpreted
the escrow indemnity provision without resort to extrinsic evidence. We therefore exercise our independent
judgment concerning its interpretation.
(Campbell v. Scripps (2000) 78
Cal.App.4th 1328, 1336.)
The intent of the
parties to the escrow instructions is controlling. (Civ. Code, § 1639; Francis v. Eisenmayer (1959) 171 Cal.App.2d 221, 227.) First American prepared the printed form of
escrow provisions. We therefore construe
any ambiguities against First American.
(Civ. Code, § 1654; Campbell
v. Scripps, supra, 78 Cal.App.4th at p. 1338.) Our goal is to give effect to the mutual
intent of the parties as it existed at the time of contracting. (Civ. Code, § 1636.)
Paragraph 12 provides in
full: "12. Conflicting Instructions
& Disputes [¶] If Escrow Holder becomes aware of any conflicting
demands or claims concerning this escrow, Escrow Holder shall have the right to
discontinue all further acts on Escrow Holder's part until the conflict is
resolved to Escrow Holder's satisfaction.
Escrow Holder has the right at its option to file an action in
interpleader requiring the parties to litigate their claims/rights. If such an action is filed, the parties
jointly and severally agree (a) to pay Escrow Holder's cancellation charges,
costs (including the funds held fees) and reasonable attorney's fees, and (b)
that Escrow Holder is fully released and discharged from all further
obligations under the escrow.
escrow and/or Escrow Holder, the parties agree to indemnify and hold the Escrow
Holder harmless against liabilities, damages and costs incurred by Escrow
Holder (including reasonable attorney's fees and costs) except to the extent
that such liabilities, damages and costs were caused by the gross negligence or
willful misconduct of Escrow Holder."
(Italics added.)
The Scarboroughs contend
that the last sentence authorizes recovery here because Kellar's
cross-complaint was "an action . . . brought involving
this escrow and/or Escrow Holder."
To read this sentence in isolation would allow first American to recover
fees in any action, between any parties, arising from any transaction or
occurrence whatsoever, because any action to which First American is a party
"involve[s] this . . . Escrow Holder." The interpretation is not reasonable. "However broad may be the terms of a
contract, it extends only to those things concerning which it appears that the
parties intended to contract."
(Civ. Code, § 1648.)
We must interpret the
parts of paragraph 12 as a whole, in relation to the entire escrow
instructions, to determine the mutual intent of the parties. (Francis
v. Eisenmayer, supra, 171 Cal.App.2d at p. 227; Campbell v. Scripps Bank, supra, 78 Cal.App.4th at p. 1337.) In Francis
and in Campbell, the courts found
that similar escrow provisions, although facially broad, only allowed for
recovery of fees in (1) actions that arise out of conflicting demands on the
escrow holder, (2) an escrow holder's action for breach of the terms of escrow,
or (3) an escrow holder's action in interpleader because these were the only
things about which it appeared the parties intended to contract. (Francis,
at p. 226; Campbell, at p.
1337.)
In Francis, a bank that served as the escrow holder incurred fees
defending a buyer's action for misrepresentation. The buyers alleged that a bank employee told
them if they purchased through escrow, they would be protected from defects in
title. The escrow holder was not
entitled to recover its defense fees, although the indemnity provision allowed
for recovery of fees incurred "in connection with or arising out of this
escrow."
title="">[1] (Francis
v. Campbell, supra, 171 Cal.App.2d at p. 224.)
In Campbell v. Scripps, supra, 78 Cal.App.4th 1328, the escrow holder
could not recover fees incurred to defend against a buyer's action to enforce
escrow instructions, although the escrow indemnity provision allowed for
recovery of fees incurred "which arise, result or relate to this
escrow."
title="">[2] (Id. at
pp. 1336-1337.) The Campbell court emphasized the need to read the provision as whole
in light of the entire instrument, and the need to construe any ambiguity
against the drafting party. It
concluded, "paragraph 12, read as a whole and in context, is simply an
indemnification clause that does not put the principles to the escrow on notice
that it is an attorney fees clause providing for an award of fees to a
prevailing party in litigation to enforce the escrow instructions." (Id. at
p. 1337.)
The Scarboroughs point
out that neither the provision in Francis
nor the provision in Campbell contained
the concluding phrase, "except to the extent that such liabilities,
damages and costs were caused by the gross negligence or willful misconduct of
Escrow Holder." They contend that
this phrase implies a right to recover fees incurred in any tort action against
the escrow holder, so long as it does not involve gross negligence or willful
misconduct. But the terms of a writing
will not be extended by implication, in the absence of parol evidence
explaining an ambiguity. (
827.) Paragraph 12, read as a whole in
the context of the instrument, did not put Kellar or Morter on notice of an
obligation to pay the escrow holder's attorney's fees in litigation unrelated
to conflicting demands on the escrow.
Construing any ambiguities against the escrow holder, as we must, we
decline to extend the indemnity provision beyond the "things concerning
which it appears that the parties intended to contract." (Civ. Code, § 1648.)
Amendment
The trial court did not
abuse its discretion when it denied leave to amend. The defect would not have been cured by
additional allegations that Kellar relied on First American's status as a
fiduciary to support her claim against First American.
Individual
Liability and Constructive Trust
The Scarboroughs' claim
that Kellar and Morter are individually liable under paragraph 12, and the
claim for constructive trust falls with our determination that Kellar's
cross-complaint against First American in Scarborough
I does not come within the scope of paragraph 12.
DISPOSITION
The judgment appealed
from is affirmed. Respondents shall
recover their costs on appeal.
NOT TO BE PUBLISHED.
GILBERT,
P.J.
We concur:
YEGAN, J.
PERREN, J.
Henry
J. Walsh, Judge
Superior
Court County of Ventura
______________________________
Law Offices of Malcolm
R. Tator, and Malcolm Tator, for Plaintiffs and Appellants.
Ferguson Case Orr
Paterson, Robert B. England, Leslie A. McAdam, for Defendants and Respondents.
escrow receive or become aware of any conflicting demands or claims with
respect to this escrow or the rights of any of the parties hereto or any money
or property deposited herein or affected hereby, you shall have the right to
discontinue any or all further acts on your part until such conflict is
resolved to your satisfaction, and you shall have the further right to commence
or defend any action or proceedings for the determination of such conflict. The
parties hereto jointly and severally agree to pay all costs, damages, judgments
and expenses including reasonable attorneys' fees suffered or incurred by you
escrow, including, but without limiting the generality of the foregoing, a
suit in interpleader brought by you."
(Francis v. Eisenmayer, supra,
171 Cal.App.2d at p. 224, italics added.)
name="_ftn2" title="">[2] The escrow instructions in
"All notices, demands and instructions must be in writing. If conflicting demands are made or notice
served on you or any dispute or controversy arises between the Principals or
with any third person relating to this escrow, you shall have the absolute
right, at your election, to withhold and stop all further proceedings in this
escrow without liability and without determining the merits of the demands,
notices, or litigation; or sue in interpleader; or both. The Principals, jointly and severally, hereby
promise and agree to pay promptly on demand as well as to indemnify you and
hold you harmless against and in respect of any and all litigation and
interpleader costs, claims, losses, damages, recoveries, judgments, and
expenses, including, without limitation, reasonable
attorneys fees that you may incur or suffer, which arise, result from or relate
to this escrow." (
Cal.App.4th at p. 1336, italics added.)
