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First Afg Financial Corporation v. Security Union Title Insurance Company

December 8, 2010

FIRST AFG FINANCIAL CORPORATION, PLAINTIFF AND RESPONDENT,
v.
SECURITY UNION TITLE INSURANCE COMPANY, DEFENDANT AND APPELLANT.



Appeal from a judgment of the Superior Court of Orange County, Sheila Fell, Judge. Reversed. (Super. Ct. No. 07CC05856)

The opinion of the court was delivered by: O'leary, Acting P. J.

First AFG Financial v. Security Union Title Ins.

CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

OPINION

Security Union Title Insurance Company (Security Union) appeals from a judgment after a court trial on First AFG Financial Corporation's (First AFG) negligence and breach of contract causes of action. Security Union argues the trial court erroneously determined a contract existed, there was negligence, the statute of limitations had not run, the amount of damages, and prejudgment interest was appropriate.

After oral argument, we invited the parties to submit supplemental briefing as to the applicability of Summit Financial Holdings, LTD. v. Continental Lawyers Title Co. (2002) 27 Cal.4th 705 (Summit), to this appeal.*fn1 We agree Security Union was not a party to the contract, and it did not owe a duty of care to First AFG. We need not address its other contentions, and we reverse the judgment.

FACTS

Before we provide a detailed explanation of the facts, an overview is helpful. Borrower's two parcels of real property secured three loans with the first lender. When borrower wanted to repay one of the loans, she obtained the first lender's approval to repay the loan by the first lender releasing its security interest on one of the parcels for all three notes. This permitted borrower to obtain a new loan from a second lender against that parcel, allowing the second lender a first security interest on the parcel. Borrower used the second lender's loan to repay the first lender for the one loan. The first lender intended to retain a security interest on the second parcel for the two remaining loans. As we explain below, that is not what happened, and we must address the issue of whether the title and sub-escrow company is liable to the first lender.

In December 2002, First AFG made three secured loans to Lorece Wright evidenced by three deeds of trust totaling $1,230,000 and secured by two parcels of real property located at 12500 and 12516 Long Beach Boulevard in the City of Lynwood. All three deeds of trust described the property in question as "12500 & 12516 Long Beach Blvd."

The three deeds of trust were recorded on December 27, 2002, in Los Angeles County in the following amounts: (1) Instrument No. 02-3191308 in the amount of $450,000; (2) Instrument No. 02-3191309 in the amount of $580,000; and (3) Instrument No. 02-3191310 in the amount of $200,000.

In July 2003, Wright arranged with First AFG to pay the $200,000 note by refinancing the parcel located at 12516 Long Beach Boulevard. First AFG initiated refinancing of 12516 Long Beach Boulevard. First AFG selected Long Beach Mortgage Company (Long Beach Mortgage) as the lender, and Security Union for title and sub-escrow services. Priority Escrow (Priority Escrow) provided escrow services. Long Beach Mortgage appraised the property, and First AFG performed an internal appraisal. Security Union prepared and forwarded to First AFG a preliminary title insurance policy and deed of trust for 12516 Long Beach Boulevard.

Priority Escrow prepared three "Amendment to Instructions" for

12516 Long Beach Boulevard dated October 7, 2003. There was an "Amendment to Instructions" for each of the deeds of trust identified by the above instrument numbers. The "Amendment to Instructions" authorized and instructed the escrow holder to prepare a "Substitution of Trustee and Full Reconveyance substituting in the Beneficiary for the original Trustee" on each of the deeds of trust. Wright and a First AFG representative signed the "Amendment to Instructions."

Priority Escrow prepared three "Substitution of Trustee and Full Reconveyance," one for each of the deeds of trust again identified by instrument numbers. A representative from First AFG signed each of the "Substitution of Trustee and Full Reconveyance."

On October 23, 2003, and again on November 14, 2003, First AFG sent a "Payoff Demand" letter to Priority Escrow explaining its liens were to be removed only on the 12516 Long Beach ...


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