A California appellate court recently heard a slander of title case in which a man who had been the victim of identity theft sued the title insurer who had issued a title policy to the lender who had granted the fraudulent loan.
The case is Teodoro Sanchez v. Lawyers Title Insurance Co. et al. (Second District Court of Appeal of California, No. B262291).
Teodoro Sanchez’ identity was fraudulently used by Gilberto Lopez to take out a $75,000 loan in November 2008. Antalejeff Inc., the lender, recorded a deed of trust to secure the loan. Sanchez received a mortgage statement from Capital Benefit Mortgage later in the month. Because Sanchez spoke only Spanish, his adult son inquired about the loan after Sanchez received the mortgage statement and informed Capital Benefit Mortgage and Antalejeff that Sanchez had not obtained the loan.
Antelejeff’s president, Jonathan Evans, called its title insurer, Lawyers Title Insurance Co. to inform the insurer about the fraudulent loan. Lawyers Title informed Evans that Antalejeff would have to foreclose on the property or Sanchez would have to file a lawsuit before policy benefits could be received.
Sanchez’ counsel negotiated with Capital Benefit Mortgage to resolve the disputed loan. He and his son went to the police in January 2009 to report the fraudulent loan and made no payments on it. Sanchez received a notice in April 2009 that the loan was in default and the property was going into foreclosure.
Antalejeff hired S.B.S. Trust Deed Network to conduct the foreclosure sale. S.B.S. Trust required the deed of trust be rerecorded to include the legal description of the property. Ronald Fernando, a senior title officer at Lawyers Title, rerecorded the deed in July 2009. The rerecorded deed included a legal description and a false notary acknowledgement form, which was signed by notary Dorothea Adamson. The acknowledgment certified that Sanchez appeared before her and acknowledged signing the deed of trust, which he never did.
Sanchez filed an initial suit on Nov. 20, 2009. He sued Lawyers Title, Antalejeff, Capital Benefit Mortgage, S.B.S. Trust and Gilberto Lopez for fraud and deceit, unfair business practices, violation of the California Consumer Legal Remedies Act, bad faith denial of insurance claim, intentional infliction of emotional distress, cancellation of deed of trust, and quiet title. He sought damages and an order enjoining the foreclosure proceedings.
The day after he served the parties with the suit, Dec. 8, 2009, the property was purchased by Enduravest I LLC. S.B.S. wrote a letter to Sanchez on Dec. 21, 2009, informing him he could submit a claim for the cash surplus after the loan obligation, costs and expenses were paid. He submitted a claim in June and cashed the check he received as a result. Enduravest served Sanchez with notices to vacate, but Sanchez paid rent to remain in the property.
The prior litigation continued, with Enduravest filing a cross-complaint against Antalejeff, Capital Benefit Mortgage and S.B.S. Trust for negligence, alleging that they failed to warn about potential fraud and forgery of the deed of trust.
Lawyers Title moved for summary judgment and the trial court granted the motion on May 24, 2011. Sanchez then dismissed the prior action against all remaining defendants.
Sanchez filed the current suit on May 20, 2011 against Lawyers Title, alleging claims for slander of title, unfair business practices and intentional infliction of emotional distress. A first amended complaint was filed Sept. 13, 2011, leaving just the slander of title claim. The claim alleged that Lawyers Title maliciously rerecorded the forged deed in order to receive a separate title insurance policy.
Meanwhile, on Aug. 9, 2011, Enduravest, Antalejeff, Capital Benefit Mortgage and S.B.S. Trust settled the cross-action. Lawyers Title, on behalf of Antalejeff, agreed to pay Enduravest the sum it had paid at the foreclosure sale, and Enduravest agreed to dismiss the cross-action with prejudice. Enduravest executed a deed quitclaiming the property to Antalejeff.
Lawyers Title entered into another agreement with Antalejeff and Capital Benefit Mortgage on Sept. 20, 2011, agreeing that Antalejeff was a conduit for Lawyers Title to obtain the property in exchange for the settlement payment. Antalejeff executed a quitclaim deed in favor of Lawyers Title. Lawyers Title then executed a deed quitclaiming the property to Sanchez on Sept. 10, 2011. None of these deeds were recorded.
Counsel for Lawyers Title emailed Sanchez’ counsel and the deputy district attorney who prosecuted the Lopez criminal case to explain the settlement and the parties’ attempt to vest title back in Sanchez. The deputy district attorney informed Lawyers Title that recording the deed could be a criminal offense unless the deed quitclaimed the property from Enduravest to Sanchez. Enduravest refused to execute such a deed because its counsel believed the district attorney was going to bring charges against it for its actions. Lawyers Title held the deeds as part of the settlement.
Sanchez filed a third complaint in July 2012 against Lawyers Title, Fernando, Antalejeff and Evans. The new case was consolidated with this case. The causes of action in the second amended compliant, which are at issue on appeal are: “the first cause of action for slander of title against Fernando; the 13th cause of action for cancellation of cloud on title against Antalejeff and Evans; the 14th cause of action for slander of title against Lawyers title, Antalejeff and Evans; the 15th cause of action for identity theft (Civ. Code, § 1798.93) against Antalejeff and Evans; the 16th cause of action for identity theft against Lawyers title; and the 19th cause of action for cancellation of cloud on title against Lawyers title. With the exception of the slander of title cause of action against Fernando, all of these causes of actions are based on allegations regarding Antalejeff’s and Lawyers title’s execution of quitclaim deeds to the property as part of the settlement agreement described above. The slander of title cause of action against Fernando is based on allegations regarding his actions in obtaining and using the false, pre-signed notary acknowledgements to rerecord the forged deed of trust against Sanchez’s property.”
In June 2013, Lawyers Title, Antalejeff Capital Benefit Mortgage, S.B.S. Trust and Enduravest stipulated to clear title by disclaiming any right to the title and agreed to cancel any deeds they had on the property. Sanchez refused to join the stipulation, but the judge signed an order based on the stipulation on July 15, 2013, declaring the defendants had no right to the property and cancelling the deeds.
Sanchez settled with Enduravest for $68,000 and received $30,000 from the notary’s insurance carriers.
In February 2014, Lawyers Title moved for summary judgment, arguing that the slander of title cause of action was barred by collateral estoppel and Sanchez could not establish the damages element of the cause of action. Antalejeff and Evans also filed a motion for summary judgment, as did Fernado. The trial court granted each of the summary judgment motions and Sanchez appealed.
The appellate court affirmed the trial court’s decision, first turning to Sanchez’ cause of action for slander of title based on rerecording the forged deed with false notary acknowledgments. The court noted that there was no additional damages to Sanchez’ title because of the rerecording of the forged deed of trust because the original forged deed of trust had already been recorded.
“The only pecuniary loss that could have resulted from the rerecording of the deed of trust would have been if the rerecording made foreclosure possible,” the court stated. “It did not—a fact Sanchez conceded in his slander of title cause of action against Lawyers Title in the first amended complaint in case No. BC461969, in alleging: ‘Lawyers Title elected to record an amended deed and Exhibit A in order to have the TSG [Trustee Sale Guarantee] issued; this recording was a separate act undertaken by Lawyers Title in order to receive the TSG and not necessary to the foreclosure process.’ (Italics Added.) In connection with their summary judgment motions, Lawyers Title and Fernando submitted a declaration from Mitchell Willet, the president of S.B.S. Trust, agreeing with Sanchez that, “At the time of the foreclosure, there was no legal requirement that a Trustee’s Sale Guarantee be obtained in order for the foreclosure to proceed.” Although S.B.S. Trust requested the rerecording, Antalejeff (the lender) had the authority to decide whether or not to foreclose. Evans, president of Antalejeff, explained in his declaration in support of the summary judgment motions that Antalejeff could have (and would have) foreclosed on the property with the original deed of trust (which contained the correct address of the property but no legal description attachment).
“The slander of title cause of action against Lawyers Title in the first amended complaint in case No. BC461969 and the slander of title cause of action against Fernando in the second amended complaint in case No. BC488560 fail as a matter of law because defendants met their burden of showing Sanchez cannot establish an element of the cause of action (pecuniary loss), and Sanchez has not shown a triable issue of material fact exists,” the court stated.
The court noted that all of the causes of action in the second amended complaint were based on the deed Lawyers Title and Antalejeff executed as part of the settlement of Enduravest’s cross-complaint in the prior action. It noted that the publications at issue in Sanchez’ other cause of action for slander of title against Lawyers Title, Antalejeff and Evans fall under litigation privilege.
“Lawyers Title and Antalejeff executed the deeds at issue as part of a settlement of Enduravest’s cross-action that was placed on the court record in the prior action,” the court stated. “The deeds were drafted to achieve the objects of the settlement—to take title from Enduravest and return it to Sanchez. When Sanchez refused to approve the settlement, the deeds were rendered meaningless to Lawyers Title and Antalejeff, and they took no further action—i.e., they did not record the deeds.”
In regard to the cancellation of cloud on title claims, the court noted, “Any apprehension that the deeds executed as part of the settlement might cause injury to Sanchez was unreasonable as a matter of law. Defendants placed the settlement on the court record and were in consultation with both Sanchez and the deputy district attorney prosecuting Lopez’s criminal case. The deeds—which were held pending approval by Sanchez and the deputy district attorney, not recorded—did not cloud Sanchez’s title.”