SELBY v. Stewart Title et al., Cross-Defendant and Appellant.

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Court of Appeal, Fifth District, California.

Tim SELBY, Plaintiff, Cross-Defendant and Respondent, v. Dennis BURTCH et al., Defendants, Cross-Complainants, Appellants and Respondents, Stewart Title et al., Cross-Defendant and Appellant.


Decided: June 30, 1987

Robin H. Fairbairn, Paso Robles, for plaintiff, cross-defendant and respondent. William A. Anderson, Bakersfield, for defendants, cross-complainants, appellants and respondents. Dewey, Ballantine, Bushby, Palmer & Wood, John F. Kimberling, Richard J. Burdge, Jr., Patricia Duncan, Los Angeles, for cross-defendant and appellant.



Michael M. Carballo executed a straight note, dated April 2, 1982, for $35,000 to plaintiff and respondent Tim S. Selby.   The note was payable 18 months after date.   Typed at the bottom of the note is the following:  “This note is secured by second trust deed, dated 13 May 1982 executed by Michael M. Carballo to Tim S. Selby on property described as 4112 La Mirada Dr., Bakersfield, California.”   Entered into evidence was a deed of trust and assignment of rents (trust deed) dated May 13, 1982, covering:  “Lot 14, Tract 3334, in the City of Bakersfield, County of Kern, State of California, as per map recorded November 28, 1969, in Book 18, Pages 148 and 149 of Maps, in the office of the County Recorder of said County.” 1  Lot 14 has the 4112 La Mirada Drive address.   Carballo was the trustor, and Selby the beneficiary of the trust deed.

On May 12, 1982, Carballo as buyer and Mario Martinez and Diane Martinez, husband and wife as sellers, opened escrow number 100097–J at Stewart Title, cross-defendant and appellant, for the purpose of selling said lot and improvements to Carballo.   However, in the escrow instructions the lot was described as lot 44, instead of 14.   The subdivision contained only 41 lots;  there was no lot 44.   On May 20, 1982, the instructions were amended by a separate document, correctly designating the lot number as lot 14.

On July 20, 1982, Carballo executed a promissory note, payable September 20, 1982, to Dennis and Linda Burtch, defendants, cross-complainants and appellants herein, for $23,463.98.   On the same day, Stewart Title prepared a trust deed to secure the July 20 note.   It was executed by Carballo as trustor and designated Stewart Title as trustee and the Burtches as beneficiaries.   It reflected it was a third trust deed.   The trust deed lot description incorporated the initial error in the Martinez escrow and misdescribed the hypothecated property as:  “Lot 44 of Tract 3334, in the City of Bakersfield, County of Kern, State of California, as per Map recorded November 28, 1969 in Book 18, Page[s] 148 and 149 of Maps, in the Office of the County Recorder of said County.”

These July 20 documents were placed in a new escrow numbered 100611–J opened at Stewart Title on July 21, 1982, by Carballo and the Burtches.   This escrow, number 100611–J, instructed Stewart Title:  “TO TRANSFER LOAN FUNDS DEPOSITED INTO THIS ESCROW TO ESCROW NO. 100097–J [the May 12 escrow] FOR USE IN ACCORDANCE WITH BORROWERS INSTRUCTIONS THEREIN.”   Carballo, of course, was the borrower in escrow No. 100611–J and the buyer in escrow No. 100097–J.   The July 21 escrow instructions also contained an exculpatory clause relieving Stewart Title of liability for accuracy in performing its duties as an escrow company.

On July 21, 1982, Carballo consummated his purchase of the La Mirada property from Mario and Diane Martinez.   The closing escrow statement of the Martinezes dated July 23, 1982, reflects he paid $133,500 for the property, taking subject to two encumbrances totaling over $86,000.   The escrow statement of Carballo was not put in evidence or even offered.   On July 22, 1982, a grant deed was recorded;  the Martinezes granting to Michael M. Carballo “Lot 14 of Tract 3334, in the City of Bakersfield, County of Kern, State of California, as per Map recorded November 28, 1969 in Book 18, Pages 148 and 149 of Maps, in the Office of the County Recorder of said County.”

Recorded one minute later, though 165 pages later, was the Burtch trust deed with the incorrect lot number.   Both the deed and the trust deed were recorded at the request of Stewart Title.

On August 18, 1982, the Selby trust deed was recorded.   The following year, on June 22, 1983, the Burtch trust deed was corrected and rerecorded, reflecting the hypothecated property as “Lot 14 of Tract 3334,” not “Lot 44.”

Carballo failed to pay.   At the behest of the Burtches, Stewart Title, as trustee, sold the property to the Burtches on July 26, 1984, at a trustee's sale.

On October 12, 1984, Selby filed a complaint for declaratory relief, naming as defendants the Burtches.   He requested a declaration as to the respective priorities of the trust deeds.   The Burtches answered and filed a cross-complaint to quiet title against Selby.   They also named Stewart Title as cross-defendant, alleging negligence of Stewart and entitlement to attorney's fees.

After briefing by the parties, the trial court heard witnesses in the afternoon of December 13, 1985.   There was a dearth of oral testimony, neither Selby nor Carballo testifying.

The trial court granted relief to Selby against the Burtches and, on the cross-complaint, to the Burtches against Stewart Title.   Stewart Title belatedly requested a statement of decision which the trial court denied so we have no information as to the reasons for the court's decision.   Judgment was entered on February 4, 1986.2

Stewart Title filed a motion to have the court modify or vacate the judgment.   After briefing and a hearing the motion was denied.   Stewart Title and the Burtches filed timely notices of appeal.

We are asked to reverse the judgment of the trial court and find the Burtch trust deed senior, either because its purchase money status gave it unconditional priority or because the July 22 recording operated to void Selby's interest.   Stewart Title also asks that, as to the cross-complaint, we find the exculpatory clause valid or, failing that, find the Burtches were comparatively negligent as a matter of law.



We note at the outset, respondent Selby does not claim he has a purchase money trust deed.   He did not argue in the trial court and does not now argue he lent the money to Carballo to purchase the Martinez property.   Instead, his sole contention on appeal is that his lien is prior to that of the Burtches because recording the faulty Burtch trust deed did not give constructive notice of the Burtch interest.   We agree with this contention.

Civil Code section 2897,3 in harmony with common law, provides:  “Other things being equal, different liens upon the same property have priority according to the time of their creation, excepting cases of bottomry and respondentia.” 4  Under this basic rule of establishing priorities, the Selby trust deed would appear senior to the Burtch trust deed.

Section 2898 provides:  “A mortgage or deed of trust given for the price of real property, at the time of its conveyance, has priority over all other liens created against the purchaser, subject to the operation of the recording laws.”

Appellants claim section 2898 gave priority to the Burtch trust deed, contending “a purchase-money lien, whether or not recorded, is senior to other non-purchase-money liens.”   Stewart Title argues “it is beyond dispute that the Burtches' deed of trust is purchase-money.”   After Stewart Title recites what it believes are the relevant facts, it then concludes:  “Although there is no Statement of Decision, the court could have [accorded Selby's lien priority] only by finding Selby's lien was also purchase-money.   However, there is no evidence, much less the requisite substantial evidence, to support that result.”   We agree the Selby lien did not have priority as a purchase money lien over what was clearly a purchase money trust deed given to the Burtches.   But that determination alone does not resolve the matter before us.

 Appellants argue that because the Burtches had the only purchase money trust deed they are senior to Selby.   They contend this senior status is absolute, independent of the recording laws.5  To sustain this position we would have to hold the closing clause of section 2898, “subject to the operation of the recording laws,” is simply a meaningless appendage.   We do not so hold.  (Atchley v. City of Fresno (1984) 151 Cal.App.3d 635, 648, 199 Cal.Rptr. 72.)

Assuming the Burtch trust deed was a purchase money trust deed, and the earlier Selby trust deed was not, in order to attain priority the Burtch trust deed still had to be duly recorded before the Selby trust deed was recorded.   (See Powell v. Goldsmith (1984) 152 Cal.App.3d 746, 749–750, 199 Cal.Rptr. 554.)   We note Selby's trust deed related to the specific property in question and was not merely a judgment lien against Carballo.  (Cf. Walley v. P.M.C. Inv. Co. (1968) 262 Cal.App.2d 218, 220, 68 Cal.Rptr. 711;  Mercantile Collection Bureau v. Roach (1961) 195 Cal.App.2d 355, 358–359, 15 Cal.Rptr. 710.)

Both appellants also argue the Burtches' recordation of their trust deed on July 22, 1982, gave it priority over Selby's trust deed, recorded on August 18, 1982.  (§§ 1213, 1214.)   As the trial court found the Selby trust deed senior, by implication it found the July recordation of the trust deed with the misdescription of the property failed to cut off Selby's then unrecorded interest which was later perfected by being recorded in August of 1982.

Section 1214 provides in relevant part:  “Every conveyance of real property ․ is void as against any subsequent ․ mortgagee of the same property, ․ in good faith and for a valuable consideration, whose conveyance is first duly recorded․”

In most case law dealing with defective descriptions, it is the first party who records the instrument with the defective description, and the question on appeal is whether the second party had actual or constructive notice of the first party's interest.   Thus the parties on appeal cast their arguments in terms of whether the Burtches' recorded trust deed was sufficient to give constructive notice to Selby of the Burtches' interest.   If so, the Burtch lien was “first duly recorded” and should be senior to Selby's interest.   Thus the question on appeal is whether the defective description in the Burtches' trust deed sufficed to give constructive notice.

 If we could treat the question of constructive notice as one of fact, the evidence below was sufficient to sustain the trial court's implied finding that the misdescription here was insufficient to impart constructive notice.   If, however, it is a question of law whether recordation of an instrument with a misdescription imparts constructive notice, then recourse to case law must be had.   We believe the question here to be one of law.  (See Southern Pac. Co. v. City & County of San Francisco (1964) 62 Cal.2d 50, 56–57, 41 Cal.Rptr. 79, 396 P.2d 383.)   The five cases discussed by the parties exhaust the most relevant California case law.

In Davis v. Ward (1895) 109 Cal. 186, 41 P. 1010 the lender recorded a mortgage with a defective description, giving the wrong range number.   The court found subsequent purchasers for value were without constructive notice of the mortgage holding the “mortgage was constructive notice only of ‘the contents thereof.’  (Civ.Code secs. 1213, 1214.)   It was not constructive notice of any mistake.”  (Id. at p. 189, 41 P. 1010.)   Here the security instrument, like that in Davis v. Ward, on its face appeared regular and seemingly described another piece of property.

The cases of Duryea v. Boucher (1885) 67 Cal. 141, 7 P. 421 and McLean v. Ladewig (1934) 2 Cal.App.2d 21, 37 P.2d 502, cited by appellants, clearly are distinguishable.   Although each recorded instrument contained an erroneous description, the documents also described properly the location of the property.  “As soon as there is an adequate and sufficient description, with convenient certainty, of what is intended to pass by the particular instrument, an erroneous addition will not vitiate it.”  (Duryea v. Boucher, supra, 67 Cal. at p. 143, 7 P. 421.)   Moreover, both cases dealt with mining claims, and as such are to be liberally construed.  (McLean v. Ladewig, supra, 2 Cal.App.2d at p. 27, 37 P.2d 502.)   There is no such constructional preference applicable to the interest here.

Two other cases, cited by appellants, are more problematic.   In Leonard v. Osburn (1915) 169 Cal. 157, 159, 146 P. 530, the deed recorded first described the property as “lot 10, block 2, ․ subdivision No. 6, ․ on the map ․ made by N.E. Beckwith․”  Beckwith had made a map of the area, but it did not show subdivision 6.   The correct map was one prepared by Perry, and the second deed recorded described the interest properly.   The court found that “had the plaintiff's predecessor before purchasing the lot examined the record of the deed of defendant's predecessor, including the map therein referred to, she would undoubtedly have been put upon inquiry, and could not have failed to discover the true facts.”  (Id. at p. 161, 146 P. 530.)

Similarly, in Rogers v. McCartney (1906) 3 Cal.App. 34, 35, 84 P. 215, the court found an earlier deed describing the property as “ ‘lot No. 5, in block 42, at Garvanza, according to a map recorded in book No. 9, pages 45 and 46, Miscellaneous Records,” as sufficient to give constructive notice, when the proper map was to be found in “book 15, page 54.”   While noting the record failed to sustain a finding the plaintiff was a purchaser for value without actual notice, the court went on to conclude assuming this was so, the deed with the misdescription should have put plaintiff or her grantors upon inquiry.  (Id. at p. 36, 84 P. 215.)

Both Leonard and Rogers seem to suggest a subsequent purchaser is required to look at the maps referred to in the description.   Any would-be purchaser here who looked at the map would find no Lot 44 existed;  thus he would be put on inquiry notice to find out the true state of affairs—i.e., that the Burtches' trust deed encumbered Lot 14.

However, Leonard and Rogers are distinguished properly from this case.   In both cases the misdescription went to the map itself;  the deeds purported to cover the same lot and block but located them on different maps.   While it may happen that the same piece of property is depicted on more than one map, the same piece of property will not carry different lot numbers in the same tract, on the same map. Thus, the subsequent purchasers in Leonard and Rogers would have to check the maps to see if the same piece of property was being described in the different maps; this is not the case here.   The misdescription here would not necessarily prompt a further search of the maps, the interests as described clearly covering ostensibly different pieces of property.  (Davis v. Ward, supra, 109 Cal. at p. 189, 41 P. 1010.)

 We, therefore, hold that the recorded Burtch trust deed on “Lot 44” would not give constructive notice of the existence of a prior lien on lot 14.   The trial court's judgment on the complaint was correct.



Stewart Title also appeals from the trial court's finding of its liability on the cross-complaint by the Burtches.   It makes three arguments:  first, as the Burtches' deed attained priority by virtue of its purchase money status and prior recording, they suffered no injury and Stewart Title thus was not liable (we have found against Stewart Title on this issue already);  second, the exculpatory clause in the Burtch-Carballo escrow instructions relieved Stewart Title of any liability;  and third, the trial court erred as a matter of law in not finding the Burtches comparatively negligent.

Since the Selby trust deed retains priority, the negligent misdescription of the property in the trust deed resulting in the defective recording of the Burtches' trust deed caused their loss of priority.

As the trial court found Stewart Title liable, it must, of necessity, also have found the exculpatory clause ineffectual to shield Stewart Title from its negligent preparation of the Burtches' trust deed.

The exculpatory clause, typed on the one page escrow instruction, reads:

“At our request and without liability of any kind on your part you are asked to draw and record as an accommodation to us the documents called for in this escrow.   We understand there will be no title insurance issued and that said instructions were typed in accordance with our specific instructions and your company shall not be held liable and/or responsible for the accuracy or validity of same.”

The instructions were signed by both Carballo and the Burtches.   Stewart Title characterizes this clause as appearing in “every escrow that did not have title insurance, but such a limitation of liability clause did not appear where the customer requested and paid for title insurance.”   There was “no exception” to Stewart Title's policy to include the clause in every document that did not have title insurance.

Mr. Burtch testified below he was never asked whether he wanted to purchase title insurance for the Carballo-Burtch escrow, but admitted that his secretary had handled much of the transaction.   He did not read the escrow instructions before he signed them.

The escrow officer who handled the transaction did not specifically recall offering title insurance.   However, she did testify a note in the file indicating “no title insurance” “indicates that I asked the question.”   She testified title insurance would have been available at a cost of a little over $100.

The California Supreme Court in Tunkl v. Regents of University of California (1963) 60 Cal.2d 92, 32 Cal.Rptr. 33, 383 P.2d 441 clarified the law regarding the validity of exculpatory clauses which seek to relieve one party of liability for its own negligence.   The court held an exculpatory clause in a contract which affects the public interest cannot stand.  (Id. at p. 98, 32 Cal.Rptr. 33, 383 P.2d 441)

“In placing particular contracts within or without the category of those affected with a public interest, the courts have revealed a rough outline of that type of transaction in which exculpatory provisions will be held invalid.   Thus the attempted but invalid exemption involves a transaction which exhibits some or all of the following characteristics.   It concerns a business of a type generally thought suitable for public regulation. The party seeking exculpation is engaged in performing a service of great importance to the public, which is often a matter of practical necessity for some members of the public.   The party holds himself out as willing to perform this service for any member of the public who seeks it, or at least for any member coming within certain established standards.   As a result of the essential nature of the service, in the economic setting of the transaction, the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks his services.   In exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence.   Finally, as a result of the transaction, the person or property of the purchaser is placed under the control of the seller, subject to the risk of carelessness by the seller or his agents.”  (Id. at pp. 98–101, 32 Cal.Rptr. 33, 383 P.2d 441, fns. omitted.)

In Akin v. Business Title Corp. (1968) 264 Cal.App.2d 153, 70 Cal.Rptr. 287 the court held an exculpatory clause in a standardized escrow agreement invalid, finding all the criteria relevant to the Tunkl analysis present.   Stewart Title seeks to distinguish Akin claiming the clause here was not standardized, it appeared only in agreements where the parties declined to purchase title insurance, which was available at an additional charge.   Thus, Stewart Title's claim is that the clause here fails to meet all the criteria of the Tunkl case, Tunkl requiring again “[i]n exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence.”   (Tunkl v. Regents of University of California, supra, 60 Cal.2d at pp. 100–101, 32 Cal.Rptr. 33, 383 P.2d 441.)

First, it should be noted that to be held invalid, under Tunkl, the agreement “need only fulfill some of the characteristics above outlined․”  (Id. at p. 101, 32 Cal.Rptr. 33, 383 P.2d 441.)

Second, it appears Stewart Title's attempted distinction of Akin fails.   Although the clause here was typed, rather than preprinted, it was standardized in that it appeared in every escrow agreement where title insurance was not purchased—“no exceptions.”   Further, while the clause would not appear in agreements where title insurance was purchased, it does not appear that there was any other method for the parties to obtain protection against Stewart Title's negligence in its performance of its duties as escrow agent.

Does the availability of title insurance to the escrow parties constitute “provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence”?   We think not.

The responsibilities of Stewart Title as title insurer are distinct from those of escrow agent.  (See Fin.Code, § 17000 et seq.;  Ins.Code, § 12340 et seq.;   Seeley v. Seymour (1987) 190 Cal.App.3d 844, 860, 237 Cal.Rptr. 282;  see also Jarchow v. Transamerica Title Ins. Co. (1975) 48 Cal.App.3d 917, 938–939, 122 Cal.Rptr. 470; The negligent drawing of the trust deed was wholly unrelated to the normal incidents and benefits associated with the purchase of title insurance.   Here we are only dealing with a careless insertion of a lot number by an escrow agent in the preparation of documents.   It does not appear reasonable to require an escrow client to purchase title insurance in order to ensure that the corporation perform its duties as escrow agent without negligence to the injury of its client.

Indeed, in some cases, the escrow arrangement could involve property not “insurable” by the title company.   In such a case, under Stewart Title's established practice, the parties to the escrow could not obtain protection against Stewart Title's negligence.   Further, escrow companies would be treated differently than escrow/title companies.   The former, constrained by Akin, could not limit their liability, while the latter could, unless the public agreed to purchase and pay for a wholly distinct service offered by the latter company.

 Following Tunkl and Akin, the exculpatory clause was invalid and the trial court properly held Stewart Title liable for its negligent misdescription of the property.6

Finally, if liability on its part is found, Stewart Title claims the trial court erroneously failed to find comparative negligence on the part of the Burtches.   Stewart Title claims the Burtches were negligent as they failed to purchase title insurance.

The existence and degree of negligence is a question of fact.   On review, we will not upset an apportionment of comparative negligence if supported by substantial evidence.  (Metzger v. Barnes (1977) 74 Cal.App.3d 6, 9–10, 141 Cal.Rptr. 257.)

 Stewart Title points to the “uncontradicted” testimony of Virginia Gordon, an escrow officer for 17 years currently working for Stewart Title, that it was unreasonable to have an escrow without title insurance as conclusive of the Burtches' fault. To call this testimony self-serving, both in light of Stewart Title's business and the posture of the case, is an understatement. Furthermore, it seems an absurd proposition to say one party's fault should be reduced because the other party failed to purchase insurance from the first party against the first party's negligence.   Moreover, the trial court also had before it evidence which suggested that no one had, at least in any memorable detail, explained to the Burtches the need for title insurance, especially that purchasing the title insurance was the only way to guard against Stewart Title's negligence in drawing up the escrow instruments.

The correct legal description was known by Stewart Title and unknown by the Burtches.   Stewart Title failed to describe properly the property in the Burtch-Carballo escrow instructions, and perpetuated the error in preparing the trust deed.   The error precluded the Burtches from voiding the earlier interest of Selby, to their injury. For this error due to negligence, Stewart Title is liable to the Burtches.

The judgment is affirmed as modified. Plaintiff-respondent Selby shall have his costs on appeal;  the Burtches shall have their costs only insofar as such costs were incurred as respondents.



1.   We have to question many things with regard to the Selby note and trust deed.   Obviously, the recitation in his note that it is secured by a second trust deed “․ dated 13 May 1982․” was placed there after the straight promissory note was made on April 2, 1982.   There is no indication by the initials of Carballo, or otherwise, that Carballo adopted that apparent addition to the note.   The Selby trust deed dated May 13 and recorded August 18, in its preprinted portion, states it secures a “․ promissory note of even date herewith ․” when in fact there is no such promissory note.   That trust deed shows it was not acknowledged before a notary public until August 13, 1982.In spite of these obvious matters calling for explanations, neither Selby nor Carballo testified in the trial court.   No other testimony explained the peculiar and irregular aspects of the Selby note and trust deed.   However, neither the Burtches nor Stewart Title offered any evidence which challenged the validity of the instruments.   On appeal, we therefore presume the correctness of the recitations on the Selby instruments.

2.   The judgment reflects:  “The Note, secured by a Deed of Trust held by Tim Selby on Lot 13, Tract 3334 is valid and prior․”  As an appellate court we have the power to correct the judgment to accurately reflect the property involved.  (Code Civ.Proc., § 906.)   The judgment is modified to read:  “on Lot 14, ․”

3.   All statutory references are to the Civil Code unless otherwise indicated.

4.   Bottomry and respondentia are specialized types of maritime security interests in a ship and its cargo respectively inapplicable here.

5.   At oral argument Stewart Title conceded that perhaps a purchase money lien would have to be recorded within “a reasonable time” in order to retain priority but could offer no principled criteria for determining what is reasonable in light of the strong state policy against secret liens and charges.  (See Caito v. United California Bank (1978) 20 Cal.3d 694, 702, 144 Cal.Rptr. 751, 576 P.2d 466.)

6.   Had, as the clause recites, the escrow instructions truly been “typed in accordance with our [clients'] specific instructions” then a question of causation would be raised.   However, here, the evidence establishes that Stewart Title was solely responsible for the negligent transcription of the wrong lot number.

PETTITT, Associate Justice.* FN* Assigned by the Chairperson of the Judicial Council.

FRANSON, Acting P.J., and WOOLPERT, J., concur.

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