PRENTICE v. NORTH AMERICAN TITLE GUARANTY CORPORATION ALAMEDA DIVISION

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District Court of Appeal, First District, Division 3, California.

John J. PRENTICE and Nellie J. Prentice, his wife, Plaintiffs and Respondents, v. NORTH AMERICAN TITLE GUARANTY CORPORATION, ALAMEDA DIVISION, Defendant and Appellant.

Civ. 20475.

Decided: January 30, 1963

Sidney L. Weinstock, and Harold J. Chase for Weinstock, Anderson, Maloney & Chase, San Francisco, for appellant. John R. Forde, Jr., Walnut Creek, for respondents.

This appeal challenges the propriety of a judgment for attorney's fees awarded against the defendant North American Title Guaranty Corporation, Alameda Division. No other issue is involved.

John J. Prentice and Nellie J. Prentice, hereafter called plaintiffs, agreed to sell their land to Robert J. Horton and Mary R. Horton. Plaintiffs agreed to accept the Hortons' deed of trust for most of the purchase price, and to subordinate their interest to any loan the Hortons might obtain for the purpose of constructing an apartment house on the land. The Hortons obtained a loan from the defendant Neal, and gave their note in the amount of the loan secured by a first deed of trust on plaintiffs' property. The defendant North American Title Guaranty Corporation acted as escrow holder and closed the transaction pursuant to written instructions from the parties. Upon completion of the sale, defendants Horton had title to the land, subject to a first deed of trust in favor of defendant Neal, and a second deed of trust in favor of plaintiffs for the balance due on the purchase price. Defendants Horton did not use the proceeds of the loan from Neal to construct an apartment house but appear to have devoted the money to other purposes. The Hortons filed a petition in bankruptcy and pleaded their bankruptcy as a defense to plaintiffs' cause of action.

Plaintiffs' complaint contained various counts against defendants Horton and Neal, and the court granted relief against these defendants by its decree quieting plaintiffs' title against their claims. Plaintiffs' complaint against North American Title Guaranty Corporation was based purely on the ground of negligence. The trial court found that North American Title Guaranty Corporation had been negligent in closing the sale, and awarded plaintiffs as damages the amount of attorney's fees incurred by plaintiffs in the prosecution of the counts in the complaint against defendants Horton and Neal.

As a general rule attorney's fees are to be paid by the party employing the attorney, in the absence of some special agreement, a statutory provision, or exceptional circumstances. (Code Civ.Proc. § 1021; Estate of Reade, 31 Cal.2d 669, 671, 191 P.2d 745; Reid v. Valley Restaurants, Inc., 48 Cal.2d 606, 610, 311 P.2d 473.) The general rule is applicable whether the recovery of attorney's fees is sought as an item of costs, damages, or otherwise. (Viner v. Untrecht, 26 Cal.2d 261, 272, 158 P.2d 3.) Numerous statutes, scattered throughout the codes, provide for the allowance of attorney's fees in special cases to which the statutes relate. Moreover, some statutes, while they do not make specific provision for attorney's fees, have been construed to support such an allowance. (See, for example, Probate Code § 788; Code Civ.Proc. § 529 and § 539; Estate of Williamson, 150 Cal.App.2d 334, 341, 310 P.2d 77.)

In the case of intentional torts involving malice, attorney's fees have been allowed. (See, for example, Nelson v. Kellogg, 162 Cal. 621, 123 P. 1115, false imprisonment; Stevens v. Chisholm, 179 Cal. 557, 178 P. 128, malicious prosecution.) Here, however, plaintiffs do not rest their claim on any agreement, statute or intentional wrong. Plaintiffs' claim is that because North American Title Guaranty Corporation's negligence caused plaintiffs to litigate with co-defendants Horton and Neal, plaintiffs are entitled to their attorney's fees as an item of special damages incurred in pressing their cause of action against those defendants. In allowing attorney's fees the court relied on Montgomery v. Bank of America, 85 Cal.App.2d 559, 193 P.2d 475, and Contra Costa County Title Co. v. Waloff, 184 Cal.App.2d 59, 7 Cal.Rptr. 358. In Montgomery v. Bank of America the escrow holder, acting without authority, altered a deed and the owner brought suit to quiet title. The court held the altered deed void and stated that the escrow holder's liability was ‘limited to the costs and expenses that may be incurred by plaintiffs in recovering their title.’ It is apparent, however, that no judgment for attorney's fees was allowed in that case because the appeal was from a judgment in favor of the defendant escrow holder, and judgment was affirmed. In Contra Costa County Title Co. v. Waloff, supra, attorney's fees were allowed, but that case belongs to the class of intentional tort cases because that action involved slander of title, and the defendant there acted in bad faith and with malice.

The rule for which plaintiffs contend does find support in many jurisdictions. (See 25 C.J.S. Damages § 50, p. 534; 15 Am.Jur. 552; 61 A.L.R. 161; 45 A.L.R.2d 1186.) The statements made in the authorities referred to, together with supporting citations, do not express our rule, however. On the facts of the case before us we see no reason to depart from the general rule. Although plaintiffs were successful in their suit to quiet title against the defendants Horton and Neal, they could not recover attorney's fees against those defendants. (Brown v. Butts, 94 Cal.App.2d 747, 211 P.2d 366; Woodward v. Bruner, 104 Cal.App.2d 83, 230 P.2d 861.) The defendant North American Title Guaranty Corporation acted as the agent of defendants Horton and Neal, and followed their directions, and it would be manifestly unfair to award damages against the agent where such damages could not be awarded against the principals who directed the acts of the agent. Since plaintiffs' claim to attorney's fees finds no support in any statute, agreement of the parties or special circumstances, the general rule is applicable and the judgment must be reversed.

Moreover, the pleadings contain no allegation that attorney's fees had been or would be incurred in the clearing of title. There is a prayer for such fees, in an unspecified amount, but it is apparent that plaintiffs at no time distinguished between the fees for clearing title and those attributable to the action against defendants who do not claim title. While we do not have a reporter's transcript, the memorandum opinion of the trial judge makes clear that the evidence as to counsel fees equally fails to make this distinction. In these respects our cose is distinguishable from Contra Costa County Title Co. v. Waloff, supra, 184 Cal.App.2d 59, 7 Cal.Rptr. 358. Even assuming desirability of extending the present rule, it is difficult to support the court's segregation of fees where the attorney himself does not distinguish among the several services for which he charges.

Judgment reversed, with directions to enter judgment for defendant-appellant.

I dissent. It is true that attorney's fees are not ordinarily allowable against a defendant, whether they are called costs or expenses, but there is a well recognized exception to the rule, which is stated in Restatement of Torts, section 914: ‘A person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney fees and other expenditures thereby suffered or incurred.’ The rule appears in 15 American Jurisprudence, section 144, page 552, and in 25 C.J.S. Damages § 50c, page 534.

The distinction is that, although fees are not allowed for legal services in the lawsuit between plaintiff and defendant (unless expressly provided for by statute, contract or special exception other than the one herein stated), they are allowable against the defendant where he has wrongfully made it necessary for plaintiff to compensate or to sue a third person. An analogy may be found, I think, to the fees of physicians. In the ordinary personal injury case the successful plaintiff may recover fees of physicians necessarily incurred in the treatment resulting from his injury, but he may not recover fees of physicians for their services in preparing for the litigation. The physicians' fees for treatment, like the attorney's fees in the third party action, are of the very essence of plaintiff's damages; the physician's preparation fees, like attorney's fees in the current litigation, as distinguished from the third party lawsuit, partake of the nature of costs or of auxiliary charges in the current lawsuit.

Usually, the attorney's fees have been made necessary by a prior action, but there seems to be no reason why recovery of such fees should be denied simply because the two causes, one against the third party and the other against the party whose breach of duty made the action against the third party necessary, are tried in the same court at the same time. (Contra Costa County Title Co. v. Waloff, 184 Cal.App.2d 59, 67, 68, 7 Cal.Rptr. 358.) By the fact that judgment quieting title was obtained by plaintiffs against defendants Horton and Neal, defendant escrow holder incurred no other liability for damages than that of costs and attorney's fees. There would seem to be an advantage, or at the very least no disadvantage, to defendant escrow holder in the fact that the causes, although separate, were tried concurrently. It appears from the trial judge's memorandum of decision and findings that the court awarded fees for quieting plaintiffs' title and did not award fees in the fourth cause of action, which was for damages against appellant only. Although the reporter's transcript is not included in the record, it appears from the clerk's transcript that the plaintiffs produced evidence described as ‘Cost Breakdown of Attorney's Fees.’

Apparently there is no case in this state which adjudges an award of attorney's fees where they have been made necessary in a lawsuit against a third party by the negligence of the defendant, as distinguished from the defendant's intentional tort, but there is no case directly against such an award. The Civil Code allows damages for detriment proximately caused by the breach of an obligation not arising from contract (Civ.Code, § 3333), and although section 1021 of the Code of Civil Procedure leaves attorney's fees to the agreement of the parties, this does not expressly affect fees incurred in an action against someone else, and I believe the Civil Code section is not limited in such a case as this. In this case, the duty originated from a contract, but it was allowable for plaintiffs to sue for negligence in the performance. (Eads v. Marks, 39 Cal.2d 807, 249 P.2d 257.) To deprive plaintiffs of the fees makes them bear an expense which was caused by appellant, and lets appellant go free of the damages, and the only damages, which its negligence caused. It is conceivable that the award of fees arising from ‘third party’ or ‘collateral’ or ‘principal’ cases (they are variously called in the texts) should be limited to cases of the general class of this one, where the original case involves ownership of or title to property which has been affected by defendant's negligence. We need not, however, solve problems which are not before us.

It does not seem to me that it is unfair to award attorney's fees against the title company, even though such fees are not assessable against the defendants Horton and Neal. The judgment awarding such fees was made not because the title company, agent for Horton and Neal, followed the wrongful instructions of those defendants, but because it breached its duty to its other principals, plaintiffs and respondents. Appellant's contention that attorney's fees were not properly pleaded is not completely devoid of merit, because the pleading was deficient; nevertheless, the issue was thoroughly tried and understood by counsel and by the court.

I would affirm.

SALSMAN, Justice.

DRAPER, P. J., concurs.