QUELIMANE COMPANY, INC., et al., Plaintiffs and Appellants, v. STEWART TITLE GUARANTY CO. et al., Defendants and Respondents.
This case present a question of whether, by statute or public policy, title insurance companies are required to issue policies even in situations where they are unwilling to accept the risk. As explained, we find no basis for compelling title insurers to issue policies against their better judgment.1
A. PROCEDURAL HISTORY
Quelimane Co., Inc.; Mannix Investments, Inc.; Western Land Capital Co.; Port Kendall, Inc.; and Western Land Bank, Inc. (appellants) filed a complaint against respondent First American Title Insurance Co., among others.2 As to respondent, the complaint alleged causes of action in interference with contractual relations, violation of Business and Professions Code section 17200, slander of title, and negligence.
Appellants opposed demurrer filed by respondents, and they filed a first amended complaint (FAC) two days before the hearing date on the demurrer. The factual allegations in the complaint and FAC are nearly identical, except that the slander of title cause of action in the FAC is not alleged against respondent.3 Subsequently, respondent filed a special demurrer to the FAC.
Respondent's demurrer was sustained without leave to amend, and judgment was entered.
1. Standard of Review
In reviewing the sufficiency of the complaint, we accept as true all properly pleaded allegations stated in the complaint. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1125, 270 Cal.Rptr. 1, 791 P.2d 587.) We examine the factual allegations to determine whether they state a cause of action on any available legal theory. (Ellenberger v. Espinosa (1994) 30 Cal.App.4th 943, 947, 36 Cal.Rptr.2d 360.) If there is any possibility that the pleading can be cured by an amendment, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.)
2. The FAC Allegations against Respondent
a. Allegations of Interference with Contractual Relations with Three Buyers
Appellant Western Land Bank entered into a contract to sell the Rahmans real property that had been purchased at a tax sale more than one year earlier. Prior to the contract, Placer Title Company issued a preliminary report indicating that the property was unencumbered and without claims of ownership by anyone other than the seller. Nevertheless, respondent and the other title companies named in the FAC refused to issue title insurance to the Rahmans.4 Because the Rahmans were unable to secure title insurance, they sought to rescinded the contract.
Respondent and the other title companies intentionally refused to issue a policy to SAR, another buyer of properties previously purchased by appellant Western Land Bank at a tax sale. Because SAR was unable to obtain title insurance, SAR sought to rescind the purchase contract.
Robert Constant also agreed to buy property that Western Land Bank had purchased at an auction. Respondent issued a commitment for title insurance on the condition that a quiet title action be brought. The buyer then failed to complete the sale.
Respondent and the other title insurers refused to issue title insurance on parcels purchased by tax sale, in which the title was deemed free and clear by operation of law one year after the tax sale. Respondent and the others knew that the ability to obtain title insurance is an important part of real estate transactions in California, have jointly and individually undertaken marketing and advertising programs stressing the need for title insurance, and represented to the public that they would insure any real estate that had good title. They conspired to refuse to issue title insurance for land obtained in a tax sale.
b. Allegations of Breach of Business and Professional CodeSection 17200
Based on the facts alleged in the first cause of action, respondent and others, the only providers of real estate title insurance in the El Dorado County area, conspired to redline all property acquired by tax sale and refused to issue title insurance for such property. As a result of their refusal, land purchased by tax sale, including the property in which appellants have an interest, is greatly reduced in value and unnecessarily difficult to market. Through marketing programs and advertising, respondent and others convinced the public that title insurance is necessary, and represented that respondent and others would insure real estate having good title. Respondent's actions alleged in the complaint constitute unfair business practice prohibited by Business and Professions Code section 17200.
c. Allegations of Negligence
The facts alleged in the first cause of action establish that respondent and the other title insurers owed a duty to the public, including appellants, to issue insurance on any parcel of land, including reporting the legal status of the title, without discrimination. Respondent breached that duty by failing to insure any parcel of land purchased by tax sale regardless of the merits of the chain of title.
3. Appellants Cannot State Any Cause of Action Against Respondent
a. Intentional Interference with Contractual Relations
To plead intentional interference with contractual relations, plaintiffs must allege (1) a valid contract between the plaintiff and a third party, (2) defendant's knowledge of the contract, (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship, (4) actual breach or disruption of the relationship, and (5) resulting damage. (Pacific Gas & Electric Co. v. Bear Stearns & Co., supra, 50 Cal.3d at p. 1126, 270 Cal.Rptr. 1, 791 P.2d 587.) Recently, the Supreme Court modified the third element of the tort by holding that the plaintiff must plead (and prove) “that the defendant not only knowingly interfered with the plaintiff's expectancy, but engaged in conduct that was wrongful by some legal measure other than the fact of interference itself.” (Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 393, 45 Cal.Rptr.2d 436, 902 P.2d 740.)
The FAC alleges that respondent intentionally refused to issue title insurance to the Rahmans and SAR as part of a conspiracy. “Standing alone, a conspiracy does no harm and engenders no tort liability. It must be activated by the commission of an actual tort.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 511, 28 Cal.Rptr.2d 475, 869 P.2d 454; Chicago Title Ins. Co. v. Great Western Financial Corp. (1968) 69 Cal.2d 305, 316, 70 Cal.Rptr. 849, 444 P.2d 481 [“[A] conspiracy, in and of itself, however atrocious, does not give rise to a cause of action unless a civil wrong has been committed resulting in damage.”].) It follows that for appellants' intentional interference with contractual relations allegation to be legally sufficient under the Della Penna formulation or as a conspiracy allegation, respondent's refusal to issue title insurance to the Rahmans and SAR, standing on its own, must have been wrongful. To determine whether respondent's alleged refusal was wrongful, we turn to a review of the law involving title insurance.
Title insurance is the “insuring, guaranteeing or indemnifying owners of real or personal property or the holders of liens or encumbrances thereon or others interested therein against loss or damage suffered by reason of: (a) Liens or encumbrances on, or defects in the title to said property; (b) Invalidity or unenforceability of any liens or encumbrances thereon; or (c) Incorrectness of searches relating to the title to real or personal property.” (Ins. Code, § 12340.1.) 5 Section 12401, part of Article 5.5, entitled “Rate Filing and Regulation,” states, “The purpose of this article is to promote the public welfare by regulating rates for the business of title insurance as herein provided to the end that they shall not be excessive, inadequate or unfairly discriminatory. It is the express intent of this article to permit and encourage competition between persons or entities engaged in the business of title insurance on a sound financial basis, and nothing in this article is intended to give the commissioner power to fix and determine a rate level by classification or otherwise.”
Two leading California authorities appear to contradict each other on the question of rate regulation. Miller & Starr states that title insurance companies are regulated by the California Insurance Commissioner, but the contents of the title insurance policy are in practice neither specified nor regulated. (3 Miller & Starr, Cal. Real Estate 2d (1989) (hereinafter Miller & Starr) § 7:2, citing Overholtzer v. Northern Counties Title Ins. Co. (1953) 116 Cal.App.2d 113, 122, 253 P.2d 116 [“Title insurance is practically an unregulated business. No state control is exercised over the terms of the policies or over rates. The companies frame the policies.”].) According to Witkin, rates are regulated. (4 Witkin, Summary of Cal. Law (9th ed. 1987) Real Property, § 215, p. 420.) In a sense, both authorities are correct. Pursuant to section 12401, rates are regulated to the extent that the Legislature seeks to protect the public from rates that are excessive, inadequate or unfairly discriminatory. Those terms are defined in section 12401.3. Title insurers must file with the Insurance Commissioner “its schedules of rates, all regularly issued forms of title policies to which such rates apply, and every modification therefore which it proposes to use in this state․” (§ 12401.1.) Within the section 12401 limits, however, the title companies are free to set their own rates.
Rate regulation is not at issue in this case, but the extent of regulation by the commissioner bears on the question that is before us: Is the denial of title insurance wrongful in some way? Beyond the regulations cited above, our research has not disclosed any statute or policy regulating title insurers such that they would be prohibited from denying a policy. We are aware that “[t]itle insurance is now so well established in California that it is virtually impossible to transfer land or obtain realty loans without a policy. [Citations.]” (4 Witkin, Summary of Cal. Law, Real Property, § 214, p. 420. See also, Miller & Starr, § 7:1, pp. 5–6 [“[A] buyer or lender generally will not accept a title or make a loan without appropriate insurance coverage regardless of the condition of the legal title.” (Fn. omitted.) ].) Nevertheless, “[a] title insurer has the right to determine the terms, conditions or limitations of any policy it issues, and it can refuse to issue a policy or it may issue the policy subject to whatever conditions and exceptions it wishes. [Fn. omitted.]” (Miller & Starr, § 7:10, p. 21; emphasis added. See 43 Am.Jur.2d, Insurance, §§ 199, 204 [Insurance companies are not compelled to accept every application, and an insurance company may reject an application for any reason or arbitrarily.]; and Greene v. Safeco Ins. Co. (1983) 140 Cal.App.3d 535, 538, 189 Cal.Rptr. 616 (review den.) [insurer may refuse to renew “for any reason whatsoever, or for no reason at all. ” (Emphasis in original.) ].) We hold that the denial of title insurance is not a wrongful act. Therefore, appellants cannot assert a legally sufficient cause of action for intentional interference with contractual relations. Alleging that respondent was part of a conspiracy does not overcome the legal insufficiency of the underlying facts. That does not end our analysis of this cause of action, however.
On appeal, appellants contend that Speegle v. Board of Fire Underwriters (1946) 29 Cal.2d 34, 172 P.2d 867 (called into doubt by statute as stated in Manufacturers Life Ins. Co. v. Superior Court (1995) 10 Cal.4th 257, 279, 41 Cal.Rptr.2d 220, 895 P.2d 56) permits a cause of action for intentional interference with contractual relations where the defendant's objective is to stifle competition by enforcing a scheme to restrain trade. In Speegle, an insurance agent contracted with 14 insurance companies, all of which were members of the Board of Fire Underwriters of the Pacific (the board.) The board accused the agent of violating his contracts with the member companies by contracting with non-board companies. When the agent refused to cease to represent non-board members, all the contracts with the board members terminated. The Supreme Court noted that employers were entitled to organize for the purpose of furthering their common interests and they could bring pressure on their members to terminate contracts that did not include certain terms and conditions. However, the board could not do so if their activities were for an unlawful purpose, i.e., to stifle competition by enforcing a scheme to restrain trade. “The answer to the question whether [the board is] liable for interference with plaintiff's contractual relations therefore depends on whether plaintiff has stated a good cause of action against defendants for injury to his business by activities in restraint of trade.” (Id., at p. 41, 172 P.2d 867.) Speegle went on to analyze the complaint to determine whether it stated a cause of action under statutory (Bus. & Prof. Code, § 16720) 6 or common law rules against restraint of trade. (29 Cal.2d at pp. 42–46, 172 P.2d 867.)
Appellants argue that here, as in Speegle, the FAC alleges a restraint of trade cause of action by contending that respondent and other title insurance companies have conspired to refuse to provide title insurance for property purchased at a tax sale. The Speegle case does not avail appellants, however, because of subsequent statutory changes.
Section 12414.26 provides, “No act done, action taken, or agreement made pursuant to the authority conferred by Article 5.5 (commencing with Section 12401) or Article 5.7 (commencing with Section 12402) of this chapter shall constitute a violation of or grounds for prosecution or civil proceedings under any other law of this state heretofore or hereafter enacted which does not specifically refer to insurance.” Section 12401, as noted earlier, regulates title insurance rates so that they are not excessive, inadequate or unfairly discriminatory. Section 12401 also states, “It is the express intent of this article to permit and encourage competition between persons or entities engaged in the business of title insurance on a sound financial basis․” In addition, section 12414.29 states that “except as provided in this chapter, no other law relating to insurance and no other provisions in this code heretofore or hereafter enacted shall apply to or be construed as supplementing or modifying the provisions of such articles unless such other law or other provision expressly so provides and specifically refers to the sections of such articles which it intends to supplement or modify. The provisions of this chapter and regulations adopted pursuant thereto shall constitute the exclusive regulation of the conduct of escrow and title transactions by entities engaged in the business of title insurance as defined in section 12340.3, notwithstanding any local regulation or ordinance.”
These statutes, taken together, limit appellants' remedies to those found in the Insurance Code. Therefore, violations of competition among title insurers, such as restraint of trade, cannot be prosecuted under any other statutes. As noted by our Supreme Court, the Legislature exempted title insurance from other laws. (See Manufacturers Life Ins. Co. v. Superior Court, supra, 10 Cal.4th at p. 267, 41 Cal.Rptr.2d 220, 895 P.2d 56.) The exemption displaces existing rights and remedies for unlawful business practices in the title insurance industry, including the Cartwright Act. (See ibid.)
Moreover, appellants would not be able to seek damages under the common law of restraint of trade. The California Supreme Court stated in State of California ex rel. Van de Kamp v. Texaco, Inc. (1988) 46 Cal.3d 1147, 1167, 252 Cal.Rptr. 221, 762 P.2d 385, that “the Cartwright Act (like most states' antitrust statutes) departed from the common law in a significant way. ‘Illegality’ under the common law meant only that an agreement was void and unenforceable [citation], or subject to ‘prosecution by the state by quo warranto․’ [Citations.] Under the Cartwright Act, however, an ‘illegal’ agreement is subject to, inter alia, civil damage awards and criminal punishment.”
We conclude that the trial court did not err in sustaining the demurrer as to the intentional interference with contractual relations cause of action.7
b. Business and Professions Code Section 17200
“As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code.” (Bus. & Prof. Code, § 17200.)
Because Business and Professions Code section 17200 “does not specifically refer to insurance” (§ 12414.26) and does not specifically refer to provisions of the Insurance Code which it is meant to supplement or modify (§ 12414.29) actions against title insurers for unfair business practices cannot be brought pursuant to it. Therefore, sustaining respondent's demurrer to the Business and Professions Code section 17200 cause of action was not error.
To state a negligence cause of action, the plaintiff must allege that the defendant had a legal duty of care toward the plaintiff. (Pultz v. Holgerson (1986) 184 Cal.App.3d 1110, 1116–1117, 229 Cal.Rptr. 531.) The FAC alleges that respondent had a duty to issue title insurance on any parcel of land. We have already concluded that respondent had no such duty. Appellants' reliance on the Revenue and Taxation Code sections 3725 8 and 3726 9 , which create a one-year statute of limitations for challenges to tax deeded property, does not require that we reach a different conclusion. Even if appellants' tax deed is superior to any claims that may be instituted against it, that does not create a duty on the part of respondent to issue a policy of title insurance against the parcel.
On appeal, appellants contend that respondent's duty lies in the “public policy against restraint of trade that has long been recognized at common law.” (A.B.C. Distrib. Co. v. Distillers Distr. Corp. (1957) 154 Cal.App.2d 175, 188, 316 P.2d 71.) However, as previously discussed, our Supreme Court stated in State of California ex rel. Van de Kamp v. Texaco, Inc., supra, 46 Cal.3d at page 1167, 252 Cal.Rptr. 221, 762 P.2d 385 that common law causes of action for restraint of trade did not entitle the plaintiff to monetary damages. Therefore, even if we were to find a duty to appellants, they would be unable to recover in civil damages for its breach.
The judgments are affirmed.
1. This case involves two consolidated matters, and two judgments are before us on appeal. The publishable portion of this opinion involves only respondent First American Title Insurance Co. Therefore, the facts and law related to the challenge to the judgment in favor of Naina and Fathima Rahman will be discussed in Part II of this opinion, which is not certified for publication. (Cal. Rules of Court, rule 976.1(a).)
2. The other defendants in the action were Stewart Title Guaranty Co., Placer Title Co. and the Rahmans. First American Title is the only responding party on appeal.
3. For this reason, we will not analyze appellants' contention that the FAC alleges conspiracy for slander of title against respondent.
4. The FAC alleges that other title companies, but not respondent, refused to issue the policy even though their title was deemed free and clear by operation of law, because more than one year had passed since the tax sale, and in spite of the fact that each company had previously issued a written report declaring its readiness to issue title insurance on the property.
5. All further statutory references are to the Insurance Code unless otherwise stated.
6. Business and Professions Code section 16720, a provision of the Cartwright Act, makes it unlawful to use a combination of capital, skill or acts by two or more persons to create or carry out restrictions in trade or commerce, among other things.
7. Because we do not resolve this contention on the ground that there was no underlying contract, we need not discuss appellants' contention that they should be permitted to amend to state a cause of action for interference with prospective economic advantage.
8. “A proceeding based on alleged invalidity or irregularity of any proceedings instituted under this chapter can only be commenced within one year after the date of execution of the tax collector's deed. [¶] Sections 351 to 358, inclusive, of the Code of Civil Procedure do not apply to the time within which a proceeding may be brought under this section.” (Rev. & Tax. Code, § 3725.)
9. “A defense based on the alleged invalidity or irregularity of any proceeding instituted under this chapter can be maintained only in a proceeding commenced within one year after the date of execution of the tax collector's deed.” (Rev. & Tax. Code, § 3726.)
FOOTNOTE. See footnote 1, ante.
NOTT, Associate Justice.
FUKUTO, Acting P.J., and ZEBROWSKI, J., concur.