A California appellate court recently determined whether a title insurer or an escrow agent owes a duty of care to the spouse of a purchaser of real estate when the spouse and the purchaser expressly agreed the purchaser would procure the property in the purchaser’s name alone.
The case is Ticor Title Company of California, et al., v. Yan Minkovitch (Second District Court of Appeal of California, No. B312634).
In 2013, Yan and his then wife Lina Minkovitch engaged the services of Ticor Title of California and Lawyers Title Insurance Co. to provide them with title insurance and escrow services in connection with the purchase of property in Tarzana Calif. Because Yan Minkovitch had a credit history that jeopardized the couple’s ability to jointly obtain financing, the couple decided Lina Minkovitch would purchase the property in her name alone.
Prior to closing, Ticor and Lawyers Title asked Yan Minkovitch to execute a real property quitclaim deed in favor of Lina Minkovitch. The final escrow instructions, however, did not specifically demand the execution of the quitclaim deed.
Yan Minkovitch told the couples [ML2] that he held a community property interest in the property and the property was being taken in Lina Minkovitch’s name alone to facilitate the transaction. Ticor and Lawyers Title continued to demand Yan Minkovitch execute a quitclaim deed. They ultimately had him sign an interspousal transfer grant deed.
In April 2016, Lina Minkovitch opened escrow with Ticor to sell the property while the couple was in the midst of divorce proceedings. Ticor received competing claims for the property sale proceeds that remained after the close of escrow. Ticor filed a complaint in interpleader naming Yan Minkovitch, Lina Minkovitch and the Internal Revenue Service as parties with an interest in the funds.
In August 2019, Yan Minkovitch filed a cross-complaint against Ticor in the case. Ticor demurred and the trial court granted leave to amend. Yan Minkovitch filed a first amended cross-complaint in March 2020, alleging causes of action against Ticor and Lawyers Title. It asserts causes of action for negligence, breach of fiduciary duty and interference with prospective economic advantage. Yan Minchovitch specifically alleges he lost the ability to make a community property claim on the property claim on the property sale proceeds in the divorce proceeding because Ticor and Lawyers Title required he sign the interspousal transfer deed. He alleges he was a customer of Ticor and Lawyers Title and paid for their services.
Ticor and Lawyers TItle demurred to the first amended cross-complaint, which the trial court sustained. In determining whether a duty could exist by virtue of the relationship of the parties, the court applied the factors identified in Biakanja v. Irving. It ultimately determined that neither Ticor or Lawyers Title owed a duty to Yan Minkovitch. Minkovitch appealed.
The appellate court affirmed the lower court’s decision.
“Yan’s appeal of the trial court’s ruling challenges only the court’s analysis of the Biakanja factors to conclude cross-defendants owed him no duty. The trial court reached that conclusion only in connection with the negligence claim. We therefore confine our analysis to that claim and that issue, and we hold the trial court correctly concluded Ticor and Lawyers Title did not owe Yan a duty of care. The transactions between Lina, Ticor, and Lawyers Title were aimed at facilitating Lina’s purchase of the property. They were not meant to affect Yan. Though his injury might have been foreseeable to some degree, it was the result of Yan and Lina’s independent decision that Lina would purchase the property in her name only so the transaction could go forward. Ticor’s business decision to require Yan to sign the grant deed in order for it to issue title insurance was well within its rights, and Lawyers Title was merely executing the escrow instructions by helping Ticor obtain the signed deed. There is no moral blame attributable to cross-defendants’ actions and there is no need to impose a duty to prevent future harm.”
In making its determination, it also considered the Biankaja factors: the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, any moral blame attached to the defendant’s conduct and the policy of preventing future harm. It found these factors do not support finding either cross-defendant owed a duty of care to Yan Minkovitch.
In looking at the extent to which the transaction was intended to affect Yan Minkovitch, it found the matter to be straightforward.
“The end and aim of the transaction between Lina Minkovitch and Ticor was to protect the buyer, Lina Minkovitch, and the end aim of the escrow instructions was the completion of the sale of the property from the seller to the buyer, Lina Minkovitch,” the court stated.
“The next Biakanja factors concern injury and foreseeability,” the court continued. “Yan’s allegation that he was harmed by the loss of his community property interest in the home is sufficient to establish harm at the demurrer stage. And his injury was, in a certain sense, foreseeable: he signed an interspousal transfer deed granting the property to Lina, and the function of the deed was to transfer any interest Yan might have arguably had in the property to Lina. That the injury may have been foreseeable (at least insofar as Yan could acquire an interest in the property while married and a divorce between Lina and Yan could be foreseen) does not by itself mean Lawyers Title or Ticor had a duty to avoid the harm.
“The more probative factor, in our view, is the relation between Ticor and Lawyers Title’s conduct and the injury suffered,” the court stated. “Ticor required Yan to sign the interspousal transfer deed in order to issue a title insurance policy as a result of Yan and Lina’s decision that Lina would purchase the property in her name alone. As Yan alleged, it did so in the interest of its own risk management, and perhaps to protect the lender. Ticor was well within its rights to impose such a requirement. Title insurers ‘may opt to limit their potential liability by declining certain risks without violating any statutory or common law obligation.’ Further, ‘insurer[s] do[ ] not have a duty to do business with or issue a policy of insurance to any applicant for insurance.’”
Lastly, the court looked at the moral blameworthiness of the conduct and the policy of preventing future harm.
“Yan contends the steps Ticor chose to reduce its liability for facilitating the purchase and sale transaction, and Lawyers Title’s execution of the transaction as directed, are morally blameworthy because Ticor could have limited its liability in some other manner,” the court stated. “As we have already explained, that Ticor might have attempted to reduce its liability in some other fashion does not render the steps it took morally blameworthy. Lawyers Title also committed no morally blameworthy act by complying with the escrow instructions."