Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County, No. 30-2009-00332861, David R. Chaffee, Judge.
David D. Kim & Associates, David D. Kim, Ellen S. Kornblum and Mark M. Higuchi for Plaintiff and Appellant.
Garrett & Tully, Ryan C. Squire and Anna Didak for Defendant and Respondent.
OPINION
FYBEL, J.
Introduction
First American Title Insurance Company (Title Insurance Company) issued a title insurance policy covering property sold by Won Shil Park, on which Park took back a second deed of trust. The deed, however, named the wrong persons as trustors. By the time the deed was reformed, Park was unable to sell her interest in the property at a trustee’s sale. Park sued Title Insurance Company for negligence, breach of fiduciary duty, and fraud; she alleged Title Insurance Company failed to timely discover the error in the deed, and then concealed the error from her. Title Insurance Company’s demurrer was sustained.
Park then sued Title Insurance Company for breach of contract for failing to pay her claim under the title insurance policy. Title Insurance Company demurred to this complaint on the grounds it was barred by the doctrine of res judicata, and was barred by the applicable statute of limitations. The trial court sustained the demurrer; we reverse the judgment.
We conclude that the same primary right was not at issue in the two different cases, so res judicata does not bar the second claim. Additionally, because Title Insurance Company did not formally deny Park’s claim for policy benefits, the statute of limitations did not begin to run, and her complaint was timely filed.
Statement of Facts and Procedural History
Park sold a piece of real property on March 30, 2006, for $7.3 million. She took back a second deed of trust in the amount of $2.45 million. First American Title Company was the escrow holder for the transaction (Escrow Company). Title Insurance Company issued a title insurance policy to Park to cover loss or damages incurred by Park “by reason of... [¶]... [¶]... [t]he invalidity or unenforceability of the lien... upon the title.”
The second deed of trust named the wrong persons as trustors; specifically, the deed listed the individual members of the corporation that took title to the property, rather than the corporation itself. Escrow Company advised Park of the defect in December 2006. A stipulated judgment reforming the deed of trust was entered on April 13, 2007. In the meantime, however, a scheduled trustee’s sale had been cancelled. When a rescheduled trustee’s sale was finally held on April 11, 2008, the commercial real estate market had collapsed, forcing Park to make a credit bid for the property. She also paid all arrearages and other expenses on the first deed of trust to avoid a trustee’s sale.
On February 13, 2009, Park sued Title Insurance Company and Escrow Company for negligence, fraud, and breach of fiduciary duty (the negligence case). Park alleged Title Insurance Company breached its fiduciary duty as the title insurer by failing to discover the second deed of trust was executed by the wrong parties as trustors, and fraudulently concealing from Park the error in the deed of trust. Title Insurance Company’s demurrer to the complaint was sustained without leave to amend. The negligence case proceeded against Escrow Company.
On November 17, 2009, Park submitted a signed proof of damages to Title Insurance Company. The proof of damages made a claim for the policy limits of $2.45 million, based on actual damages of $4,494,964.27.
On December 30, 2009, Park filed a complaint against Title Insurance Company for breach of contract, bad faith, and intentional and negligent infliction of emotional distress (the breach of contract case). Based on a notice of related case filed by Park, the trial court determined the breach of contract case was related to the negligence case, and reassigned the breach of contract case to the same judge hearing the negligence case.
On appeal, Park does not address the causes of action for infliction of emotional distress. We presume Park has abandoned those causes of action, and we will not refer to them in our analysis.
Title Insurance Company filed a demurrer to the breach of contract case, arguing the case was barred (1) by the doctrine of res judicata and the rule against splitting causes of action, and (2) by the applicable statute of limitations. After briefing and a hearing, the trial court sustained the demurrer without leave to amend, ruling solely on the doctrine of res judicata.
The court’s minute order reads, in relevant part, as follows: “Plaintiff brings this action against Defendant after its demurrer in the original first action was sustained without leave to amend. Plaintiff alleges different Cause[s] of Action[] and asserts they are based on a different theory of liability, however, Plaintiff admits in the motion to consolidate that this action involves the same transaction and occurrence and issues of fact. Defendant asserts that this new action is barred by res judicata because Plaintiff is splitting the Causes of Action[] all arising from the same primary right. [¶] Plaintiff asserts her new lawsuit is based upon Defendant[’s] failure to respond to Plaintiff within 30 days of her submission for damages under the policy and demand for payment on 1117-09. This occurred after Defendant[’s] demurrer was sustained without leave to amend thereby establishing that Defendant owed her no duty of care and that no claims could be stated against Defendant. [¶] The alleged damages all arise from the initial confusion that occurred with the naming of the borrowers on the 2nd deed of trust. Plaintiff is seeking recovery under the insurance policy written for the 2nd deed of trust. Plaintiff was already advised that she had no claim against [Title Insurance Company]; her subsequent demand under the policy on 11-17-09 was futile and does not give rise to an independent claim or a new or different primary right. [¶] The only contract Def[endant] could have breached was the insurance policy written on the 2nd deed of trust. Had Plaintiff brought these Cause[s] of A[c]tion[] at the time of the original complaint they also would have been denied on the basis that no breach of [Title Insurance Company]’s duties occurred. [¶] Plaintiff[’s] claim of Defendant[’s] subsequent refusal to honor her demand and respond and/or pay-out is a specious contention given that the error was corrected and the deed was reformed. There was no basis for Plaintiff to make a claim.”
Judgment in favor of Title Insurance Company was entered on March 10, 2010. Park timely appealed.
Discussion
I.
Standard of Review
We review de novo an order sustaining a demurrer without leave to amend. (Bardin v. DaimlerChrysler Corp. (2006) 136 Cal.App.4th 1255, 1264.) “‘“We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.” [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.]’” (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)
II.
Res Judicata
Application of the doctrine of res judicata to bar a case or claim requires proof that “‘“(1) A claim or issue raised in the present action is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding. [Citations.]”’ [Citation.]” (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797.) We consider in this case only the element of identity of claims or issues.
A dismissal entered after a demurrer is sustained on substantive grounds is a final judgment on the merits. (Service Employees International Union v. Hollywood Park, Inc. (1983) 149 Cal.App.3d 745, 755-756.) However, “‘the res judicata effect of a judgment of dismissal... after the sustaining of a demurrer is of limited scope’ since if ‘“new or additional facts are alleged that cure the defects in the original pleading, it is settled that the former judgment is not a bar to the subsequent action whether or not plaintiff had an opportunity to amend his complaint.”’ [Citation.]” (Id. at p. 756.) Park does not argue that there was a not a final judgment on the merits in the negligence case.
To determine whether the negligence case and the breach of contract case involve identical claims or issues, we apply the primary rights theory. “[F]or purposes of applying the doctrine of res judicata, the phrase ‘cause of action’ has a more precise meaning: The cause of action is the right to obtain redress for a harm suffered, regardless of the specific remedy sought or the legal theory (common law or statutory) advanced. [Citation.]... ‘[T]he “cause of action” is based upon the harm suffered, as opposed to the particular theory asserted by the litigant. [Citation.] Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief. “Hence a judgment for the defendant is a bar to a subsequent action by the plaintiff based on the same injury to the same right, even though he presents a different legal ground for relief.” [Citations.]’ Thus, under the primary rights theory, the determinative factor is the harm suffered. When two actions involving the same parties seek compensation for the same harm, they generally involve the same primary right. [Citation.]” (Boeken v. Philip Morris USA, Inc., supra, 48 Cal.4th at p. 798.)
“‘As far as its content is concerned, the primary right is simply the plaintiff’s right to be free from the particular injury suffered.... It must therefore be distinguished from the legal theory on which liability for that injury is premised: “Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief.”... The primary right must also be distinguished from the remedy sought: “The violation of one primary right constitutes a single cause of action, though it may entitle the injured party to many forms of relief, and the relief is not to be confounded with the cause of action, one not being determinative of the other.”’ [Citations.]” (Villacres v. ABM Industries Inc. (2010) 189 Cal.App.4th 562, 577.)
Park argues that the claims asserted in the breach of contract case involve the violation of a different primary right than the claims asserted against Title Insurance Company in the negligence case. Park contends that the causes of action in the breach of contract case “are based upon [Title Insurance Company]’s denial of compensation to [Park] under the Policy following her submission of the November 17, 2009 proof of damages (occurring long after the Superior Court’s previous sustaining of the demurrer to [Park]’s tort claims in a related action) and are therefore claims based exclusively on [Park]’s contractual right to contract damages.... The previously dismissed claims, by contrast, were all based in tort.” To argue only that one case involves causes of action based in tort, while the other involves causes of action based in contract is too simplistic, for the violation of a single primary right may be remedied in multiple ways. (Villacres v. ABM Industries Inc., supra, 189 Cal.App.4th at p. 577.)
Title Insurance Company counters that both the negligence case and the breach of contract case alleged the same primary right—the right to have a valid and enforceable trust deed that would have allowed Park to foreclose on the property in February 2007. Title Insurance Company raises three arguments in support of its position.
First, Title Insurance Company argues Park’s claim in the breach of contract case is not a claim for the denial of policy benefits, but rather a claim based on the unenforceability and invalidity of the deed. It is true that the complaint in the breach of contract case alleges the invalidity and unenforceability of the deed of trust as the source of Park’s underlying injury, but it is Title Insurance Company’s failure to pay the claim made under the title insurance policy that is the basis for Park’s causes of action in the breach of contract case.
Second, Title Insurance Company argues it does not matter that Park sought relief for the denial of policy benefits in the breach of contract case, as the theory of relief is irrelevant in a res judicata analysis. “[R]es judicata bars claims that could have beenraised in the first proceeding regardless of whether or not they were raised [citation].” (Noble v. Draper (2008) 160 Cal.App.4th 1, 11.) Title Insurance Company is correct that it is “the right to obtain redress for a harm suffered, ” not “the specific remedy sought or the legal theory... advanced, ” that determines whether the same violation of a primary right is asserted in the two different actions for res judicata purposes. (Boeken v. Philip Morris USA, Inc., supra, 48 Cal.4th at p. 798.) Title Insurance Company does not argue, however, that Park could have raised the claim for denial of policy benefits in the negligence case. Park’s allegation that her claim for policy benefits had not been denied as of December 30, 2009 would demonstrate the claim could not have been raised in the negligence case filed in February 2009.
Third, Title Insurance Company contends Park did allege a right to policy benefits in the negligence case, although she did not expressly seek to recover money pursuant to the policy. Title Insurance Company’s argument appears to be based on the reference to it as the “insurer under the Policy of Title Insurance” in three different places in the negligence case complaint. But those allegations clearly reference Title Insurance Company’s acts and omissions at the time the title insurance policy was issued.
“[Title Insurance Company] breached its duty to Plaintiff and failed to exercise reasonable care, skill, and prudence in carrying out its responsibilities as the insurer under the Policy of Title Insurance by failing to discover, at the time the Policy of Title Insurance was issued, that the Deed of Trust was executed by the LaBungs as trustors in their individual capacities, despite the LaBungs not holding title to the Property subject to the Deed of Trust.” (Italics added.)
Having reviewed the record de novo, we conclude the breach of contract case does not seek relief based on the same injury to the same right as was sought in the negligence case, and the trial court erred in determining the breach of contract case was barred by the doctrine of res judicata. Park’s claim against Title Insurance Company in the negligence case was based on what Title Insurance Company did or failed to do at the time the title insurance policy was issued, and at the time the deed of trust was executed. The breach of contract case was based on Title Insurance Company’s failure to pay the proceeds of the title insurance policy after a claim was made by the policyholder—Park.
Park’s motion to consolidate the two cases is not determinative. If a motion to consolidate would subject the moving party to the bar of res judicata or collateral estoppel, the purpose of consolidation to promote judicial economy would be defeated. “[T]he significant factor [in determining whether the doctrine of res judicata applies] is the harm suffered; that the same facts are involved in both suits is not conclusive.” (Agarwal v. Johnson (1979) 25 Cal.3d 932, 954, disapproved on another ground in White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 574, fn. 4.)
III.
Statute of Limitations
A two-year statute of limitations applies to “an action founded upon a contract, obligation or liability, evidenced by a certificate, or abstract or guaranty of title of real property, or by a policy of title insurance; provided, that the cause of action upon a contract, obligation or liability evidenced by a certificate, or abstract or guaranty of title of real property or policy of title insurance shall not be deemed to have accrued until the discovery of the loss or damage suffered by the aggrieved party thereunder.” (Code Civ. Proc., § 339, subd. 1.)
“The statute of limitations on a breach of contract action begins to run when the breach occurs. In an action to recover policy benefits, the statute starts to run upon the insurer’s unconditional denial of the insured’s claim.” (Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2010) ¶ 12:1143, p. 12D 10 (rev. #1, 2008).) Similarly, the statute of limitations on a bad faith claim “accrues whenever the insurer unreasonably withholds policy benefits due the insured by formally denying the claim.” (Id., ¶ 12:1147, p. 12D 11.)
“[T]he statute of limitations period on a title insurance policy is equitably tolled while the insurer determines whether to honor or reject a timely filed insurance claim under that policy.” (Forman v. Chicago Title Ins. Co. (1995) 32 Cal.App.4th 998, 999 1000.)
Park’s complaint in the breach of contract case alleges Park submitted a written claim to Title Insurance Company on February 26, 2007 for the full amount under the title insurance policy. The complaint does not allege Park’s claim was ever denied, and Title Insurance Company did not offer any judicially noticeable facts to establish when the claim was denied. Park stated in her opposition to the demurrer, and reiterated in her opening appellate brief, that Title Insurance Company unconditionally denied Park’s claim on January 14, 2010, after the complaint was filed; the record does not contain any actual evidence supporting this statement.
Title Insurance Company argues Park suffered her loss between February and April 2007, and the statute of limitations therefore barred her complaint filed in December 2009. As explained ante in analyzing the res judicata doctrine, Park’s loss, which she seeks to recover in the breach of contract case, is the failure of Title Insurance Company to pay the amount Park claims she is due under the title insurance policy. That loss arose after Park made her claim on the policy, not during the period where the note and deed of trust were being amended to reflect the correct buyers.
Title Insurance Company cites Karl v. Commonwealth Land Title Ins. Co. (1993) 20 Cal.App.4th 972, 983-984, in which the court held: “Since the insured lender suffers loss only if the note is not repaid, the discovery of an insured-against lien does not trigger recognition of loss. Further, even though the lender’s note is in default, an anticipated loss cannot be measured until completion of foreclosure because only then is there certainty the lender will not be paid in full. Consequently, it is clear that in the typical case the earliest a loss can be claimed on a lender’s policy is at the time of completion of foreclosure.” (Fns. omitted.) This case supports Park, rather than Title Insurance Company. The trustee’s sale for the property was held in April 2008, and the complaint in the breach of contract case was filed within two years of the trustee’s sale.
IV.
Request for Judicial Notice
Title Insurance Company asks this court to take judicial notice of (1) relevant pages from Park’s deposition in the negligence case; (2) a letter from Park’s counsel to Title Insurance Company, which was attached as an exhibit to Park’s deposition transcript; and (3) a commercial guaranty signed by Park, which was also attached as an exhibit to her deposition. These are not matters of which the court may take judicial notice in considering an appeal from a demurrer sustained by the trial court. “This is not summary judgment or trial; it is demurrer. Our task is to treat the well-pleaded allegations of the complaint as true and determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] ‘The hearing on demurrer may not be turned into a contested evidentiary hearing through the guise of having the court take judicial notice of affidavits, declarations, depositions, and other such material which was filed on behalf of the adverse party and which purports to contradict the allegations and contentions of the plaintiff.’ [Citations.]” (Johnson v. Honeywell Internat. Inc. (2009) 179 Cal.App.4th 549, 559 560.) We deny Title Insurance Company’s request for judicial notice.
Disposition
The judgment is reversed. Appellant to recover costs on appeal.
WE CONCUR: BEDSWORTH, ACTING P. J., IKOLA, J.
Both parties to the breach of contract case were parties to the negligence case, so the privity element is met.
“As insurer under the Policy of Title Insurance issued March 30, 2006, [Title Insurance Company] owed Plaintiff a fiduciary duty to make full disclosure of material facts with respect to its performance of services as insurer. [¶]... [Title Insurance Company] had knowledge, subsequent to the closing in March 2006 but prior to December 2006, that the Note and Deed of Trust had been executed by the LaBungs in their individual capacities, rather than on behalf of the record owner of the Property NPRI, yet failed to reveal and concealed this fact until December 2006.” (Italics added.)
“As insurer under the Policy of Title Insurance issued March 30, 2006, [Title Insurance Company] owed Plaintiff a fiduciary duty that consisted of a duty of loyalty, a duty to make full disclosures, and a duty to exercise the highest degree of care and trust in performing its services. [¶]... [Title Insurance Company] breached its fiduciary duty owed to Plaintiff by failing to discover, at the time the Policy of Title Insurance was issued, that the Deed of Trust was executed by the LaBungs as trustors in their individual capacities, despite the LaBungs not holding title to the Property subject to the Deed of Trust, the very thing being insured.” (Italics added.)