Gallagher v. Union Bank
Filed 7/13/12 Gallagher v. Union Bank 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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115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
ELLEN GALLAGHER,
Plaintiff and Respondent,
v.
UNION BANK, N.A.,
Defendant and Appellant.
D058896, D059838
(Super. Ct.
No. 37-2010-00087129-CU-OR-CTL)
APPEALS
from a judgment and postjudgment order of the Superior
Court of
County, Jay Bloom and Steven R. Denton, Judges. Reversed.
In this
consolidated action, Union Bank, N.A. (Union Bank) appeals from a
Ellen Gallagher on the lawsuit that she filed against Union Bank after it took
steps to foreclose on her home. At issue
is whether Union Bank has a valid security interest in Gallagher's home based
on a deed of trust it obtained as a result of a home equity line of credit it
extended to a prior owner, but which was not reconveyed in connection with a
previous sale. The trial court granted
summary judgment in favor of Gallagher, determining that a payoff demand
statement that Union Bank issued in connection with the previous sale served to
extinguish Union Bank's security interest.
We conclude
that Gallagher did not establish in her summary judgment that Union Bank lacks
a valid security interest in Gallagher's home, and accordingly we reverse the
judgment. We also consider and reject
Union Bank's argument that the trial court abused its discretion by granting
Gallagher's motion to quash relating to certain business record subpoenas
served by Union Bank on third parties.
Moreover, based on our reversal of the judgment, we also reverse the
trial court's postjudgment order awarding attorney fees to Gallagher.
I
FACTUAL
AND PROCEDURAL BACKGROUND
David K.
Maltin obtained four loans from Union Bank, three of which were secured by
deeds of trust on a home in La Jolla (the Home).
Union Bank
made the first loan in May 2001, apparently in connection with Maltin's
purchase or refinancing of the Home.
Specifically, Maltin borrowed $658,125 from Union Bank secured by a
recorded first deed of trust on the Home (the First Deed of Trust). Union Bank was the beneficiary of the deed of
trust, and UnionBanCal Mortgage Corporation (UnionBanCal) was the trustee.
Union
Bank's second loan to Maltin was in July 2001.
The loan consisted of a $150,000 home equity line of credit from Union
Bank, secured by a recorded deed of trust on the Home (the Second Deed of
Trust).
Union Bank
made a third loan to Maltin in April 2002.
That loan consisted of a home equity line of credit from Union Bank in
the amount of $250,000. It was secured
by a recorded deed of trust on the Home (the Third Deed of Trust), and as with
the two previous deeds of trust, Union Bank was the beneficiary and UnionBanCal
was the trustee.
Union
Bank's fourth loan to Maltin was a small business line of credit, secured
through the filing of a UCC-1 financing statement rather than by a security
interest in the Home (the Business Line of Credit). The record does not indicate the date on
which Maltin obtained the Business Line of Credit or contain any documentation
for that loan.
In late
2003, Maltin entered into an agreement to sell the Home to June E. Komar (the
Maltin/Komar transaction). By that time,
the Second Deed of Trust had been reconveyed and no outstanding balance existed
on the Business Line of Credit. It
appears to have been the parties' intention in the Maltin/Komar transaction to
have UnionBanCal reconvey its security interest in the Home so that Komar could
obtain title to the Home free and clear of any preexisting deeds of trust. Specifically, Komar borrowed $1,000,000 to
finance the purchase of the Home, and the escrow instructions from Komar's
lender stated that it required title insurance insuring that it had obtained a
first and superior deed of trust on the Home.
Chicago
Title Company (Chicago Title) acted as title insurer for the Maltin/Komar
transaction, and The Heritage Escrow Company (Heritage) acted as the escrow
company.
As
explained in deposition testimony by an employee of Chicago Title, the initial
task of a title company assigned to a real estate sale transaction is to
prepare a preliminary title report reflecting the open or unpaid deeds of trust
on the real property. In this case, a
preliminary title report prepared by Chicago Title identified the First Deed of
Trust and the Third Deed of Trust as encumbering the Home. The loan numbers for the obligations secured
by the First Deed of Trust and the Third Deed of Trust were set forth on the
recorded deeds of trust.
As a next
step toward ensuring that Komar obtained title to the Home free and clear of
any preexisting deeds of trust, Heritage sent letters to Union Bank requesting
that it issue payoff demand statements for the deeds of trust secured by the
Home. Heritage's letters to Union Bank
were sent pursuant to the procedure described in Civil Code section 2943. That statute describes a method for obtaining
payoff demand statements from the beneficiary of a deed of trust as to the
amount needed to pay off a secured obligation.
Under the statute, an "entitled person," including an escrow
holder such as Heritage, may make a written demand for a "payoff demand
statement" from a beneficiary of a deed of trust (in this case Union Bank)
"for the purpose of establishing the amount necessary to pay the
obligation in full." (Civ. Code,
§ 2943, subds. (a)(4) & (5), (d)(1).) At the close of escrow, the amounts set forth
in the payoff demand statements are disbursed to the beneficiary, and the
trustee on the deed of trust records a reconveyance. (See Civ. Code, § 2941, subd. (b).)
Using this
procedure, Heritage sent two letters to Union Bank on December 8, 2003,
informing Union Bank that it was handling an escrow "which calls for
payment in full of the Trust Deed you currently hold on the property being
conveyed." The "property being
conveyed" was identified in the letters as the Home, based on its address
and legal property description. The
letters requested that Union Bank send a "demand" to Heritage and
send a "signed Request for Full Reconveyance," the "Original
Note" and the "Trust Deed" to Chicago Title. Both letters identified Maltin as the
borrower, provided Matlin's social security number, and referred to an attachment
that they described as a "Borrower's Authorization."
The difference
between the two letters (other than that they were sent to different fax
numbers at Union Bank) was the number listed as "Your Loan No." One of the letters identified the loan number
for the loan secured by the First Deed of Trust. The second letter, however, referenced the
loan number associated with the Business Line of Credit, although that loan was
not secured by a deed of trust on the Home.
The source
of the loan numbers that Heritage provided to Union Bank appears to be
information supplied by Maltin when he filled out a form titled "Seller's
Loan Information" for Heritage setting forth information on his existing
loans. In filling out the form, Maltin
provided the correct loan number for the First Deed of Trust in the space
indicated on the form for "1st Trust Deed," but on the portion of the
form for the "2nd Trust Deed" Maltin provided the loan number for the
Business Line of Credit instead of the Third Deed of Trust.
The record
contains two documents sent by Union Bank in response to Heritage's two
letters.
First, on
December 11, 2003, Union Bank sent Chicago Title a document that it titled
"Beneficiary's Demand." That
document identified the loan number for the First Deed of Trust, the property
address for the Home, the interest rate information, and the principal and
interest balance along with the reconveyance fee, for a total payoff amount of
$410,691.57. Based on its contents, the
document was apparently intended to comply with Heritage's request for a payoff
demand statement for the loan secured by the First Deed of Trust (the First
Deed of Trust payoff demand statement).
The First Deed of Trust payoff demand statement provided that Union Bank
"will instruct the trustee to record a full reconveyance unless contrary
written instructions are received by [Union Bank] at the time of
payoff." Also, implying that other
documents, such as a request for reconveyance, may have been enclosed, the
First Deed of Trust payoff demand statement provided: "In accordance with your request to
prepay the above loan, you are authorized to use said documents provided you
can pay us the sum of $410,691.57 plus any additional interest due."
stated, "Reconveyance will be forwarded upon receipt of payoff to County
for recording."
Second, on
December 11, 2003, Union Bank sent a document to Heritage titled
"Beneficiary's Demand," which identified the loan number for the
Business Line of Credit. That document
set forth the address of the Home as the "Collateral Address,"
indicated that the loan was "a variable rate loan/line of credit,"
listed a zero balance for the principal and interest amounts, and indicated
that a combined reconveyance fee and demand fee of $81 would be required for
the payoff of the loan (the $81 payoff demand statement). The $81 payoff demand statement also
indicated that Union Bank "will instruct the Trustee to record a full
reconveyance unless contrary written instructions are received by Union Bank at
the time of payoff."
name="_ftnref3" title="">[3]
The Maltin/Komar
transaction closed at the end of December 2003, and a grant deed was recorded
in favor of Komar on December 30, 2003.
In connection with the closing of the Maltin/Komar transaction, Chicago
Title prepared an escrow receipt and disbursement authorization form showing
payments to Union Bank of approximately $410,000 for the First Deed of Trust
and an additional amount of $81 corresponding to the amount set forth in the
$81 payoff demand statement. Chicago Title
issued title insurance to Komar insuring free and clear title to the Home.
On January
22, 2004, UnionBanCal recorded a full reconveyance of the First Deed of
Trust.
Around the
same time, on January 20, 2004, Union Bank issued a check to Maltin in the
amount of $81. The notation on the check
states "Purchaser: Overpymt [
for the Business Line of Credit. As
described in a declaration by a Union Bank employee, "In January 2004,
Union Bank discovered that since there was no deed of trust securing the [Business
Line of Credit,] its request for fees associated with the anticipated
reconveyance . . . was
unnecessary . . . ,"
and Union Bank "[a]ccordingly . . . issued a check in the
sum of $81 to Mr. Maltin to reimburse him for those fees previously received
by Union Bank in connection with [the $81 payoff demand statement]."
A little
over a year later, in February 2005, Gallagher entered into a purchase
agreement to buy the Home from Komar.
First American Title Insurance Company, acting through its agent
California Title Company (hereafter "First American") was Gallagher's
title insurer for the transaction. Prior
to the closing of the transaction, First American prepared a preliminary title
report, which identified the Third Deed of Trust as an existing security
interest on the Home in the amount of $250,000.
The preliminary title report stated, "Although we find no recorded
reconveyance of record, we believe the obligation secured by said deed of trust
may have been satisfied. We are
attempting to obtain a letter of indemnity from another title company. However, no assurance is hereby made as to
the same." Gallagher signed an
acknowledgement of having received the preliminary title report.
On a form
titled "Request for Information or Letter of Indemnity," First
American sent an inquiry to Chicago Title on January 31, 2005, noting that it
had found no indication of a reconveyance of the Third Deed of Trust in
connection with the Matlin/Komar transaction, for which Chicago Title had acted
as the title insurer. On February 2005,
Chicago Title responded by returning the form to First American stamped with
the statement: "By this stamp,
Chicago Title does hereby indemnify you against loss by reason of your issuing
a policy or policies of title insurance on land described in the Deed(s) of
Trust contained in your request without exception to said Deed(s) of
Trust."
The sale of
the Home closed in due course, and Gallagher took title.
After he
sold the Home to Komar in December 2003, Maltin continued to draw down on the
home equity line of credit secured by the Third Deed of Trust. In December 2008, Maltin became delinquent on
his payments to Union Bank and, in February 2009 Union Bank blocked the line of
credit due to the delinquency. During
its collection efforts, Union Bank realized that the Home had been sold, and in
July 2009 it sent a letter to Gallagher stating that it would foreclose on the
Home if she did not pay the amount of $253,047.76 within 30 days. The letter explained that because the loan
secured by the Third Deed of Trust was "not assumable" and the Home
had been transferred, it was demanding payment in full of the loan
balance. In November 2009, Union Bank
recorded a notice of default and election to sell the Home based on a default
on the loan secured by the Third Deed of Trust.
To protect
the Home from foreclosure, Gallagher filed the instant lawsuit against Union
Bank, asserting causes of action for (1) quiet title; (2) declaratory
relief; and (3) slander of title, and also seeking preliminary and
permanent injunctive relief. The trial
court granted preliminary injunctive relief preventing the foreclosure and
ordering that the notice of default be removed.
After
litigation of a discovery dispute that we will discuss in detail later in this
opinion, Gallagher filed a motion for summary judgment. Gallagher contended (1) that Union
Bank's security interest in the Home was extinguished by operation of Civil
Code section 2943 due to its provision of the $81 payoff demand statement;
(2) or, in the alternative, that Union Bank was equitably estopped from
claiming a security interest in the Home.
The trial
court granted summary judgment in favor of Gallagher, ruling that Union Bank's
provision of the $81 payoff demand statement served to extinguish its security
interest in the Home under the Third Deed of Trust. The trial court ordered Union Bank to
reconvey the Third Deed of Trust and entered judgment in favor of Gallagher.
In a
postjudgment order, the trial court awarded attorney fees to Gallagher as the
prevailing party pursuant to Civil Code section 1717, subdivision (a).
Union Bank
filed separate notices of appeal from the judgment and from the order awarding
attorney fees. We have consolidated
those appeals, and we address them together in this opinion.
II
DISCUSSION
A. The Trial Court Erred
in Granting Summary Judgment in Favor of Gallagher
1.
Judgment
Code
of Civil Procedure section 437c, subdivision (c) provides that summary judgment
or summary adjudication is to be granted when there is no triable issue of
material fact and the moving party is entitled to judgment as a matter of
law. A plaintiff moving for summary
judgment "bears the burden of persuasion that 'each element of' the 'cause
of action' in question has been 'proved,' and hence that 'there is no defense'
thereto." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) On summary judgment, when a plaintiff has met
its initial burden of showing that each element has been proved, the burden
shifts to the defendant "to show that a triable issue of one or more
material facts exists as to that cause of action or a defense
thereto." (Code Civ. Proc., § 437c,
subd. (p)(1).)
We review
summary judgment rulings de novo. (Certain
Underwriters at Lloyd's of London v. Superior Court (2001) 24 Cal.4th 945,
972.) "In practical effect, we
assume the role of a trial court and apply the same rules and standards which
govern a trial court's determination of a motion
for summary judgment." (Lenane
v. Continental Maritime of San Diego, Inc. (1998) 61 Cal.App.4th 1073,
1079.) "[W]e are not bound by the
trial court's stated reasons for its ruling on the motion; we review only the
trial court's ruling and not its rationale." (Gafcon, Inc. v. Ponsor & Associates
(2002) 98 Cal.App.4th 1388, 1402.)
2. The
$81 Payoff Demand Statement Did Not Extinguish the Third Deed of Trust Pursuant
to Civil Code Section 2943
We first
consider Gallagher's argument that pursuant to Civil Code section 2943, Union
Bank's provision of the $81 payoff demand statement served to extinguish the
security interest in the Home created by the Third Deed of Trust.
We begin
our analysis by examining the relevant statutory provisions. As we have explained, Civil Code section 2943
sets forth a method by which an escrow holder, trustor or other "entitled
person" may obtain a payoff demand statement setting forth the amount
required to be paid as of that date to fully satisfy all obligations secured by
a deed of trust. (§ 2943,
subds. (a)(4) & (5), (c)(1).)
The statute also provides a method for obtaining a "beneficiary
statement" from the beneficiary of a deed of trust setting forth
information about the secured obligation, such as the unpaid balance, amount of
periodic payments, payment of taxes and the amount of hazard insurance. (§ 2943, subds. (a)(2),
(b)(1).) Pursuant to section 2943,
subdivision (d)(1), "[a] beneficiary statement [or] payoff demand
statement . . . may be relied upon by the entitled person
. . . in accordance with its terms, including with respect to the
payoff demand statement . . . reliance for the purpose of
establishing the amount necessary to pay the obligation in full." The statute further provides that upon the
close of escrow, transfer of title, or recordation of a lien, "any sums
that were due and for any reason not included in the statement . . .
shall continue to be recoverable by the beneficiary as an unsecured obligation
of the obligor pursuant to the terms of the note and existing provisions of
law." (§ 2943,
subd. (d)(3).)
Based on
these statutory provisions, case law holds that "a beneficiary may look
only to the obligor for any due but unpaid sums in the payoff of a secured loan
where the underpayment was the result of the beneficiary's error in preparing
the payoff demand statement." (
Golden Pacific Bank (1993) 20 Cal.App.4th 1305, 1313.) " 'If the beneficiary makes an error in the
Statement, any amounts which may be due which are not included in the Statement
are not secured by the deed of trust or mortgage after the entitled person has
changed his position in reliance on the Statement . . . .' " (Cathay
Bank v. Fidelity Nat. Title Ins. Co. (1996) 46 Cal.App.4th 266, 271.) This is because Civil Code section 2943 is
"intended to ' " 'shift the responsibility
for calculating the amount to satisfy the loan from the borrowers [trustor or
mortgagor] to [the] creditor [mortgagee or beneficiary].' " ' "
(Ibid.) Thus, for instance, in Cathay Bank, a bank sent a payoff demand statement that understated
by approximately $60,000 the balance of the secured loan that was the subject
of the escrow company's request. (
based on section 2943, the balance of the loan not set forth by the bank in its
payoff demand statement was no longer a secured obligation. (Id.
at p. 271.)
Gallagher
contends that the $81 payoff demand statement was a payoff demand statement for
the loan secured by the Third Deed of Trust, and that accordingly, upon close
of escrow, Civil Code section 2943 operated to extinguish Union Bank's security
interest created by the Third Deed of Trust.
We disagree. As we will explain,
Gallagher has not submitted evidence in connection with her summary judgment
motion that is sufficient to establish that Union Bank provided a payoff demand
statement for the loan secured by the Third Deed of Trust.
The content
of the $81 payment demand statement is inconsistent with that document being a
payoff demand statement for the loan secured by the Third Deed of Trust. Significantly, the $81 payoff demand
statement does not identify the loan number for the loan secured by the Third
Deed of Trust. On the contrary,
consistent with the information provided in Heritage's letter, the $81 payoff
demand statement identifies the Business Line of Credit. According to uncontradicted evidence
submitted by Union Bank, the standard in the industry is for a lender to
research the specific loan that has been identified when a request for a payoff
demand statement is made, not to determine all of the secured loans that
encumber the property. Deposition
testimony from a Chicago Title employee implicitly acknowledges the importance
of the loan numbers in payoff demand statements, explaining that title officers
typically check payoff demands to make sure that the loan numbers correspond to
those on the preliminary title report.
To support
the contention that the $81 payoff demand statement concerned the Third Deed of
Trust, not the Business Line of Credit, Gallagher points to certain language in
the $81 payoff demand statement that is consistent with interpreting the
document as referring to the reconveyance of a deed of trust. Specifically, the $81 payoff demand statement
refers to a "reconveyance fee" and states that Union Bank "will
instruct the Trustee to record a full reconveyance unless contrary written
instructions are received by Union Bank at the time of payoff." Gallagher also points out that the $81 payoff
demand was sent in response to Heritage's letter that stated it was handling an
escrow "which calls for payment in full of the Trust Deed you currently
hold on the property being conveyed."
In our view, these facts are not sufficient to establish that the $81
payoff demand concerns the Third Deed of Trust, as the $81 payoff demand
statement plainly identifies the loan number for the Business Line of Credit as
the obligation to which it pertains, and does not mention the loan number for
the Third Deed of Trust.
In light of
the facts in the record, we conclude that Gallagher has not met her burden on
summary judgment to establish that the $81 payoff demand constitutes a payoff
demand statement for the loan secured by the Third Deed of Trust. Put simply, although Heritage may have
statement for the loan secured by the Third Deed of Trust, it did not do so
because it supplied the wrong loan number, i.e., the loan number for the
Business Line of Credit. Following the
industry standard of researching the specific loan identified by the escrow
company, Union Bank responded in the $81 payoff demand statement with information
about the loan associated with the loan number supplied by Heritage. At no point did Union Bank refer to the loan
secured by the Third Deed of Trust.
Therefore, the $81 payoff demand statement was not a payoff demand
statement for the loan secured by the Third Deed of Trust.
Without further
citation to authority, Gallagher relies on Civil Code section 2943, subdivision
(a)(2)(G) to argue that even though Heritage provided the loan number for the
Business Line of Credit in its request for a payoff demand statement,
Heritage's request effectively asked Union Bank to also respond with payoff
information for the loan secured by the Third Deed of Trust. The subdivision of section 2943 on which
Gallagher relies states that a beneficiary statement should set forth
"[t]he nature, and if known, the amount of any additional charges, costs,
or expenses paid or incurred by the beneficiary which have become a lien on the
real property involved."
(§ 2943, subd. (a)(2)(G).)
Gallagher's argument fails because the statutory language she cites
applies only to beneficiary statements, not to payoff demand statements. Section 2943 makes a clear distinction
between beneficiary statements and payoff demand statements. (§ 2943, subd. (a)(2) &
(5).) Heritage's letter was a request
for a payoff demand statement, as it explained that the escrow called for
"payment in full" of the obligation it identified by loan number and
requested that Union Bank send a "demand" for use by Heritage and
Chicago Title. Indeed, if there was any
ambiguity as to whether Heritage's letter was requesting a payoff demand
statement or a beneficiary statement, the statute provides that in the event of
an ambiguity in the type of statement requested, "the beneficiary shall
treat the request as a request for a payoff demand statement." (Civ. Code, § 2943,
subd. (e)(1).) Further, Union
Bank's response was a payoff demand statement — not a beneficiary statement —
as it twice referred to a "payoff" and was entitled "Beneficiary's
Demand." (Italics added.)
Because
Gallagher has not established that the $81 payoff demand related to the loan
secured by the Third Deed of Trust, she did not prevail in her summary judgment
motion by establishing that Civil Code section 2943 operates to extinguish
Union Bank's security interest under the Third Deed of Trust. Although section 2943,
subdivision (d)(3) states that "any sums that were due and for any
reason not included in the statement" become an unsecured obligation, that
provision, by its own terms, applies only when there is a payoff demand statement
relating to the obligation and deed of trust at issue, and there is a mistake
in the amount needed to pay off the
obligation. That is not the case here
because the $81 payoff demand statement did not reference the loan secured by
the Third Deed of Trust, and thus did not make a mistake about the amount
needed to pay off that secured loan.
3. Gallagher
Did Not Establish That Union Bank Is Equitably Estopped from Claiming a
Security Interest Under the Third Deed of Trust
In the
alternative, Gallagher argues that even if we determine that Civil Code section
2943 did not operate to extinguish Union Bank's security interest under the
Third Deed of Trust, Union Bank should be equitably estopped from claiming that
it still has a security interest.
" 'The doctrine of
equitable estoppel is founded on concepts of equity and fair dealing. It provides that a person may not deny the
existence of a state of facts if he intentionally led another to believe a
particular circumstance to be true and to rely upon such belief to his
detriment.' " (City of Goleta v. Superior Court
(2006) 40 Cal.4th 270, 279 (Goleta).) "A valid claim for equitable estoppel
requires: (a) a representation or
concealment of material facts; (b) made with knowledge, actual or virtual,
of the facts; (c) to a party ignorant, actually and permissibly, of the
truth; (d) with the intention, actual or virtual, that the ignorant party
act on it; and (e) that party was induced to act on
it. . . . There can be no
estoppel if one of these elements is missing." (Simmons
v. Ghaderi (2008) 44 Cal.4th 570, 584, citation omitted (
Gallagher's
briefing does not clearly identify the material fact that Union Bank
purportedly misrepresented or concealed.
However, the logical extension of Gallagher's argument is that Union
Bank misrepresented or concealed the fact that the $81 payoff demand statement
related to the Business Line of Credit instead of to the obligation secured by
the Third Deed of Trust. Gallagher's
equitable estoppel argument fails because the evidence does not establish that
Union Bank misrepresented or concealed the facts as to that issue. As we have explained, the $81 payoff demand
statement does not identify the obligation secured by the Third Deed of Trust,
but instead it references the loan number for the Business Line of Credit, as
did Heritage's request. Therefore, the
$81 payoff demand statement does not constitute a misrepresentation or
concealment as to the fact that the $81 payoff demand statement covers the
Business Line of Credit rather than the obligation secured by the Third Deed of
Trust.
Another
problem with Gallagher's attempt to rely on the doctrine of equitable estoppel
in her lawsuit against Union Bank is that she has submitted no evidence that
any representation was made to her by
Union Bank, or that she relied on any such representation. Any representations made by Union Bank were
to Chicago Title and Heritage, not to Gallagher, but they are not parties to
this lawsuit.
Further,
even if Gallagher could establish equitable estoppel based on Union Bank's
representations to Chicago Title and Heritage, Gallagher must prove that Union
Bank intentionally led those parties
to believe that the $81 payoff demand statement related to the obligation
secured by the Third Deed of Trust. (Goleta, supra, 40 Cal.4th at
p. 279; Simmons,
Gallagher has not submitted evidence in connection with her summary
judgment motion to compel a finding in her favor on that issue. Indeed, to the contrary, the evidence
submitted by Union Bank supports a finding that Union Bank intended to
communicate information about the Business Line of Credit based on its standard
practice of referring to the loan number provided in the escrow company's
request.
In sum,
Gallagher has not established that Civil Code section 2943 or principles of
equitable estoppel apply to extinguish Union Bank's security interest in the
Home under the Third Deed of Trust.
Accordingly, the trial court erred in granting Gallagher's motion for
summary judgment.
title="">[5]
B.
Attorney Fees
Union Bank
has also appealed from the trial court's postjudgment order awarding attorney
fees to Gallagher in the amount of $169,408.27.
The award was made pursuant to Civil Code section 1717,
subdivision (a) because Gallagher was the prevailing party in the
litigation and therefore entitled to recover fees under a reciprocal application
of the attorney fee provision in the Third Deed of Trust.
Union Bank
bases its appeal of the attorney fee award on a legal argument that we need not
reach here because we have reversed the judgment upon which the postjudgment
award of attorney fees is based. In the
absence of an underlying judgment, the attorney fee award must necessarily be
reversed. (Allen v. Smith (2002) 94 Cal.App.4th 1270, 1284.)
C.
in Granting Gallagher's Motion to Quash
Finally, we
consider Union Bank's challenge to the trial court's ruling on a motion to
quash relating to subpoenas for the production of business records that it
served on Chicago Title, California Title Company and First American.
Each of the
subpoenas called for the production of "[a]ll documents which constitute,
evidence, refer or relate to the agreement of Chicago Title to indemnify
California Title Company in connection with the sale of [the Home]."
Gallagher
filed a motion to quash the subpoenas
to the extent they called for the production of "documents relating to
Chicago Title's indemnity obligations subsequent to Union Bank instituting
foreclosure proceedings against Ms. Gallagher." The motion to quash specified that
"[t]he communications at issue here are emails and written correspondence
among counsel for First American/Ms. Gallagher, and Chicago
Title." Further, Gallagher's reply
memorandum emphasized the "[t]he only documents withheld were emails and
letters between attorneys for Ms. Gallagher and Chicago Title discussing
the legal issues relating to Union Bank's lien and other legal
analysis." Accordingly, as
Gallagher explained, "the motion to quash relates solely to the emails and
letters between counsel for Ms. Gallagher and Chicago Title discussing the
legal analysis and defense strategy for dealing with Union Bank's asserted
lien." Citing the "common
interest doctrine" (see OXY
Resources California, LLC v. Superior Court (2004) 115 Cal.App.4th 874,
887-891 (OXY Resources)), the motion
to quash argued that those communications were protected from disclosure.
In a
declaration in support of the motion to quash, counsel for Gallagher stated
that on behalf of Gallagher and First American, he had tendered Union Bank's
claim to Chicago Title and demanded that Chicago Title fulfill its indemnity
obligations to defend Gallagher's title against Union Bank's claim to a
security interest. He explained that he
had numerous communications with Chicago Title and its counsel relating to
Gallagher's defense of her title and Chicago Title's obligation to defend
indemnify First American and Gallagher.
He stated that "[m]any of these communications involved defense or
litigation strategy, including attorney work-product" and concerned the
best way to defend Gallagher's title against Union Bank's claim.
Counsel for
Chicago Title also filed a declaration.
He stated that he had engaged in communications with counsel for
Gallagher relating to the legal analysis of the issues concerning Union Bank's
claim to a security interest in the Home and Chicago Title's indemnity and
defense obligations. He explained that
Chicago Title had agreed to defend and indemnify First American and Gallagher
with respect to Union Bank's claims, and that the communications were necessary
to facilitate Gallagher's defense against Union Bank's attempt to foreclose.
Union Bank
opposed the motion to quash, arguing that the requirements of the common
interest doctrine were not satisfied or that, at a minimum, the trial court should
conduct an in camera review of the documents to determine whether they should
be produced.
The trial
court granted the motion to quash. It
stated, "Communications between Chicago Title's indemnitees, their counsel
and [Gallagher's] counsel regarding Chicago Title's indemnity obligations and
legal issues relating to Union Bank's lien on [Gallagher's] property after
Union Bank filed its Notice of Default on November 10, 2009 need not be
produced. The attorney client privilege
has not been waived. Plaintiff and these
entities share a common goal of defending [Gallagher's] title."
"Appellate
review of discovery rulings is governed by the abuse of discretion
standard. . . . 'The
trial court's determination will be set aside only when it has been demonstrated
that there was "no legal justification" for the order granting or
denying the discovery in question.' " (
Union Bank
argues that the trial court abused it discretion because it misapplied the
common interest doctrine. Under that
doctrine, "parties who possess common legal interests may share
without losing the protection afforded by the privilege. This principle operates as an exception to
the general rule that a privilege is waived upon voluntary disclosure of the
privileged information to a third party . . . ." (OXY
Resources, supra, 115 Cal.App.4th
at pp. 887-888.) "[T]he party
seeking to invoke the doctrine must first establish that the communicated information
would otherwise be protected from disclosure by a claim of privilege" such
as the attorney client privilege or attorney work product doctrine. (Id.
at p. 890.) Second, " '[f]or the common
interest doctrine to attach, most courts seem to insist that the two parties
have in common an interest in securing legal advice related to the same
matter — and that the communications be made to advance their shared
on that common matter.' " (Id.
at p. 891.)
Union Bank argues
that the trial court improperly applied the common interest doctrine in two
respects: (1) the trial court
purportedly failed to acknowledge that the documents at issue must first be
determined to be covered by an applicable privilege, and (2) even if the
documents were covered by an applicable privilege, Chicago Title and First
American/Gallagher did not satisfy the requirement for application of the
common interest doctrine. As we will
explain, neither contention has merit.
First,
according to our review of the record, the trial court properly understood that
the common interest doctrine does not create a privilege but instead functions
to prevent waiver of an already existing privilege. As the trial court stated, because the
parties involved in the communications share a common goal of defending
Gallagher's title, the applicable privilege "has not been
waived." Further, the record
supports a determination that the documents at issue were protected by the
attorney work product doctrine. Specifically,
the subject documents qualified as attorney work product because, as described
by counsels' declarations and in Gallagher's briefing of the motion, they
discussed defense and litigation strategy and the legal issues surrounding
Chicago Title's indemnity and defense obligations. (See Code Civ. Proc., § 2018.030
[protection against production of "[a] writing that reflects an attorney's
impressions, conclusions, opinions, or legal research or theories"].) The trial court was within its discretion to
rely on the description of those documents provided by counsel rather than
conducting an in camera review.
Second, we
reject Union Bank's contention Chicago Title and First American/Gallagher did
not satisfy the requirement that they " 'have in common an interest in securing legal
advice related to the same matter — and that the communications be made to
advance their shared interest in securing legal advice on that common matter.' " (OXY
Resources, supra, 115 Cal.App.4th
at p. 891.) Specifically, Union Bank
points to certain statements made by Gallagher's counsel during the early
stages of the litigation, before Chicago Title agreed to defend and indemnify
First American and Gallagher, which suggested that Chicago Title was not in
agreement with Gallagher and First American as to whether it had an obligation
to indemnify them. Union Bank argues
that "[t]here was plainly no 'common interest' at that point." Union Bank overlooks the fact that even
during the time period when Chicago Title had not yet agreed to indemnify
Gallagher and First American, it already had a common interest in defeating
Union Bank's claim to have a security interest in the Home under the Third Deed
of Trust because it was potentially responsible for that indemnification,
We accordingly
conclude that the trial court did not abuse its discretion by granting
Gallagher's motion to quash.
DISPOSITION
We reverse (1) the trial court's order granting
summary judgment to Gallagher, and (2) the postjudgment order awarding
attorney fees to Gallagher. We affirm
the trial court's order granting Gallagher's motion to quash the subpoenas
served by Union Bank.
IRION, J.
WE CONCUR:
NARES,
Acting P. J.
HALLER,
J.
name="_ftn1" title="">[1]
The parties dispute whether the
"Borrower's Authorization" that the letters from Heritage identify as
an attachment is the same document as the "Seller's Loan Information"
form that appears in the record.
letters to Union Bank requested that Union Bank respond to both Heritage and Chicago
Title, enclosing different documentation to each party. The record does not contain a response from
Union Bank to Heritage concerning a
payoff demand for the First Deed of Trust.
