(Solano County Super. Ct. No. FCS030000) Trial Judge: Honorable David Edwin Power
The opinion of the court was delivered by: Marchiano, P.J.
CERTIFIED FOR PUBLICATION
This case concerns coverage under a title insurance policy issued by defendant Fidelity National Title Insurance Company to plaintiffs Karen and Terry Lee. Plaintiffs purchased property along Steamboat Slough in Solano County that was identified by two tax assessor parcel numbers. Defendant issued a preliminary report that referred repeatedly to both assessor parcels, and included a legal description of the property to be insured. The legal description, which matched the one in plaintiffs' grant deed, was incorporated into the title insurance policy. Parcel number references were not incorporated into the terms of the policy, but the policy attached a map depicting the two parcels, which could have caused plaintiffs to believe they had purchased and insured both parcels. This expectation of coverage would not have been dispelled by a reading of the metes and bounds legal description, which required professional training to decipher and was ambiguous to a layperson. When plaintiffs later discovered they did not, in fact, own one of the assessor parcels and made a claim under the policy, defendant stood behind the legal description in the policy and denied coverage. The trial court granted summary judgment to defendant on plaintiffs' breach of contract and related claims.
This court addressed a similar situation 50 years ago in Lagomarsino v. San Jose etc. Title Ins. Co. (1960) 178 Cal.App.2d 455, 465, when a title insurer attempted to avoid liability based on an ambiguous legal description of the property covered by the policy, and we concluded that "[t]he ambiguity should be resolved in favor of the insured." We observed that "[t]he function of the title company is to 'give the insured the protection which he reasonably had a right to expect' [citation]" (id. at p. 464), and reasoned that " '[t]he risk of a proper description was assumed by the company, and it should bear the responsibility for the mistake' " (id. at p. 465).
We reach the same conclusion for the same reasons here, and reverse the summary judgment for defendant.
Plaintiffs own a parcel of land on Ryer Island in Walnut Grove identified as Solano County Assessor's Parcel Number (APN) 042-230-090 (hereafter APN 9), which, according to a letter and map prepared in 2007 by a surveyor they hired, is bordered on the east by a slough, and on the south by land owned by Raymond and Joann Walker. Plaintiffs acquired APN 9 in 1990; the legal description of the property in their grant deed is set forth below.*fn1
When plaintiffs bought APN 9 in 1990, they thought they had also purchased APN 042-230-220 (APN 22). The sellers' agent told plaintiffs' agent, John Perez, that the property for sale was APN 9 and APN 22, and the purchase contract identified the property at different points as "APN 42-23-9, 22," and "APN 42 23 9-22."
Plaintiffs obtained a July 2, 1990, preliminary report from defendant stating that defendant was "prepared to issue, or cause to be issued, as of the date hereof, a Policy or Policies of Title Insurance describing the land and the estate or interest therein hereinafter set forth . . . ." The report identified the "Property Address" as "APN: 42-230-09 & 42-230-22," and included a page setting forth the legal description in footnote one, ante. Unpaid taxes on APN 9 and 22 were listed among the exceptions to coverage, and typewritten notes after the list of exceptions included additional tax information for both APN's. The report also included a Solano County Assessor's map of the area with arrows pointing to APN's 9 and 22. A disclaimer stamped onto the map stated: "This is a Diagram for Location purposes only. And it is not a part of the policy or report to which it is attached."
The preliminary report listed an address for defendant in Fairfield and bore the escrow number 81694; Perez prepared a notice to defendant dated July 11, 1990, asking that a new escrow be opened for the sale, identifying the property address as "APN 42 - 23 - 9 & 22," and indicating that payment for title insurance would be split between the buyer and seller. Defendant could not locate the file for the escrow, but Perez kept some of the escrow records. A document on letterhead of "Fidelity National Title Insurance Company," i.e., defendant, dated September 10, 1990, for escrow number 901910, entitled "Buyer's Escrow Instructions (Continued) . . . Estimated Closing Statement," listed a charge to be split between buyer and seller for an "Owner's Title Policy" for the property.
The grant deed to plaintiffs was recorded on September 25, 1990. The deed stated that a transfer tax had been paid for "Tax Parcel No. 42-230-09 & 22," and used the legal description quoted in footnote 1, ante, to describe the property conveyed. A September 25, 1990, escrow statement to plaintiffs on letterhead of "Fidelity National Title" in Sacramento for escrow number 901910 identified the address of the property conveyed as "42-230-09 AND 22, CA" and showed that they were charged $326 for their half of the cost of the title policy.
Plaintiffs cannot recall whether they received a copy of the title insurance policy; such policies are generally delivered after the close of escrow. Defendant converted its record of plaintiffs' policy into an electronic format, and the record was stored on computer by defendant's affiliate, Fidelity National Title Group Record Centers (FNTGRC). Defendant retained only those policy terms that were unique to the individual transaction because the other policy terms could be ascertained from the record of standard polices approved at particular times by the Department of Insurance. Personnel of FNTG Sacramento Title Group, another affiliate of defendant, retrieved copies of plaintiffs' title policy from FNTGRC in 2006 and 2007.
In support of the motion for summary judgment, defendant filed a copy of a sample title policy jacket from Chicago Title Insurance Company (Chicago Title), a "sister or related" company of defendant, with the terms of the 1988 form California Land Title Association standard coverage policy that would have been issued to plaintiffs. Defendant also lodged the pages of the policy that were specific to plaintiffs' transaction, which consisted of: (1) a Schedule A, with basic information about the policy such as the date, the file number (81694, the original Fairfield escrow number), and the amount of liability; (2) a Schedule B, listing exceptions from coverage; (3) an Exhibit A with the legal description of the property quoted in footnote 1, ante; and (4) the assessor's map that was included in the preliminary report with arrows each pointing to APN's 9 and 22, and the disclaimer that the map was not a part of the policy, but was for location purposes. Apart from the map, the policy made no reference to APN 9 or 22. The land covered by the policy was identified by the legal description in Exhibit A.
The Walkers bought their property, identified as APN 42-230-210 (APN 21) and located to the south of plaintiffs' property, in 1992. Plaintiffs were unsure of the exact location of APN 22, but they believed, based on discussions with Perez and the local building department around the time they bought their land, that APN 22 extended south for some distance beyond their border with the Walkers, in between the Walkers' property and the slough to the east. Plaintiffs thought, in other words, that the Walkers' parcel APN 21was at least partially landlocked.
Plaintiffs received a November 1992 notice from the U.S. Army Corps of Engineers that the Walkers intended to construct a boat dock in the slough, and the Walkers placed pilings in the slough near the southern border of their property in 1993. Plaintiffs assumed that the U.S. Army Corps of Engineers "would not allow [the Walkers] to build on anything that was our property," and thus that the Walkers must have owned the land bordering the slough at the southernmost tip of their property.
From the time they acquired their property until 2006, plaintiffs paid property taxes on APN 22, as well as APN 9; from at least 1999 on, they were assessed fees on both APN's by Reclamation District 501 for maintenance of levees along the slough. In connection with refinancing of their property, plaintiffs conveyed title in 2002 from themselves as trustees of a family trust to themselves as joint tenants, and then back again in 2005 to themselves as trustees. The legal descriptions of the property in these grant deeds included references to APN's 9 and 22 after the language in footnote 1, ante. This same legal description, with the references to both APN's, appeared in a 2002 preliminary report issued by Chicago Title in connection with the refinancing.
Plaintiffs did not think it was necessary to investigate the precise location of APN 22 until they decided to sell their property in 2006. Plaintiffs told their realtor, Kate Bould, when they listed the property that they owned APN 9 and APN 22, and Bould obtained a June 2, 2006, preliminary report from Chicago Title that appeared to confirm plaintiffs' belief. The report stated that plaintiffs owned the land referred to in "Exhibit 'A,' " which included a reference to "APN: 042-230-090, 042-230-022," as well as the legal description in footnote 1, ante.
Plaintiffs took the title policy map with the arrows pointing to APN's 9 and 22 to the Solano County Assessor (the Assessor), and discovered that the Walkers' pilings encroached on APN 22. Plaintiffs hired attorney Franklin Watson, who sent a letter to Mr. Walker on August 16, 2006, asserting that plaintiffs owned APN 22 and, based on plat maps obtained from the Assessor, that APN 22 ran along the edge of the slough for the entire length of the Walkers' property. As a result, Watson told Walker, "your Lot 21 has no water frontage," and the pilings placed in the slough were trespassing on plaintiffs' land.
On October 16, 2006, Watson faxed defendant a letter saying he had learned that the Assessor had changed its records with respect to APN 22, and now showed the Walkers, rather than plaintiffs, as the owners. Watson stated that plaintiffs had purchased APN 22 in 1990 and obtained title insurance from defendant for the purchase, and demanded that defendant "obtain clear title in favor of my clients."
On October 23, 2006, the Assessor sent a letter to plaintiffs and the Walkers advising that taxes on APN 22 had been erroneously assessed to plaintiffs, and would thereafter be assessed to the Walkers. The Assessor stated that the error dated back to 1978, when title to plaintiffs' land was conveyed to plaintiffs' sellers. Going back through the chain of title, the Assessor concluded that title to APN 22 had been held by the Walkers' sellers, not plaintiffs' sellers, and was conveyed to the Walkers when they bought their property. According to ...