Luce v. State Title Agency, Inc.

950 P.2d 159, 190 Ariz. 500, 258 Ariz. Adv. Rep. 3, 1997 Ariz. App. LEXIS 218
CourtCourt of Appeals of Arizona
DecidedDecember 11, 1997
DocketNo. 1 CA-CV 96-0327
StatusPublished
Cited by7 cases

This text of 950 P.2d 159 (Luce v. State Title Agency, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Luce v. State Title Agency, Inc., 950 P.2d 159, 190 Ariz. 500, 258 Ariz. Adv. Rep. 3, 1997 Ariz. App. LEXIS 218 (Ark. Ct. App. 1997).

Opinions

OPINION

NOYES, Judge.

David and Joyce Luce (“Appellants”) appeal the trial court’s grant of summary judgment to State Title Agency, Inc. (“State Title”). Appellants claim that State Title owed them a duty of reasonable care and skill when it gratuitously recorded a deed of trust for a third party. The trial court found that State Title had no duty to Appellants. We affirm.

I.

In January 1988 Appellants entered into a partnership (“the Partnership”) with Daniel O’Connor and a company that he wholly owned. O’Connor and his company were general partners and Appellants were limited partners. In return for seventy percent interest in the Partnership, Appellants transferred to it some real property (“the Property”) located in Mohave County.

As necessary to discuss here, the Partnership Agreement provided that the general partners had exclusive control over the business of the Partnership, and they had the right to dispose of Partnership property or any interest in it, subject to applicable rights of the limited partners. The rights of the limited partners in this regard were to approve or disapprove “any sale, exchange, refinance or pledge of substantially all of the assets of the Partnership.”

The Property that Appellants transferred to the Partnership amounted to “substantially all of the assets of the Partnership” and was therefore not to be disposed of without approval of Appellants. In April 1991, however, without seeking Appellants’ approval, O’Connor executed a deed of trust that conveyed the Property to Continental Conveyance Corporation as trustee for the benefit of Pacific Court Holdings. The deed of trust secured a note, also executed by O’Connor, which obligated the Partnership to repay Pacific Court Holdings for a loan in the principal amount of $204,545.00. The record eontains no evidence that Pacific Court Holdings ever loaned any money to the Partnership.

In June 1991 Pacific Court Holdings and Continental Conveyance Corporation sent a letter to State Title requesting that it open an order for a lender’s title policy to insure Pacific Court’s lien on the Property. The letter also requested that State Title record the deed of trust, which had been prepared and executed in California. In response, State Title prepared a preliminary title report, provided a lender’s policy of title insurance through Fidelity National Title Insurance Company, and gratuitously recorded the deed of trust.

State Title had neither contract with nor contact with Appellants, but its answering brief acknowledges that it “reviewed the Partnership Agreement while processing an order for a lender’s policy of title insurance to Pacific Court.” We thus infer that State Title knew all provisions of the Partnership Agreement.

On October 13, 1993, after discovering what O’Connor had done to the Property, Appellants filed a Complaint to Quiet Title which, as amended and as relevant to this appeal, charged State Title with negligence, breach of contract, and breach of a fiduciary duty. State Title filed a motion for summary judgment, and the trial court granted it, reasoning as follows:

It appears that State Title recorded existing documents (Deed of Trust) as a courtesy to Continental Conveyance. No escrow existed for this transaction and State Title acted solely on behalf of the lender. There was no obligation to Plaintiff.
IT IS, THEREFORE, ORDERED granting summary judgment as to State Title.

Appellants timely appealed from this summary judgment, and we have jurisdiction pursuant to Arizona Revised Statutes Annotated (“A.R.S.”) section 12-2101(B) (1994).

H.

The issue is whether State Title had a duty to Appellants based on either State Title’s [502]*502review of the Partnership Agreement or its gratuitous recording of the deed of trust.

A tort plaintiff must prove that defendant owed a duty to plaintiff, that defendant breached the duty, that the breach caused injury to. plaintiff, and that the injury resulted in actual damages. Ferguson v. Cash, Sullivan & Cross Ins. Agency, Inc., 171 Ariz. 381, 384, 831 P.2d 380, 383 (App.1991) (citing Donnelly Constr. Co. v. Oberg/Hunt/Gilleland, 139 Ariz. 184, 187, 677 P.2d 1292, 1295 (1984)). If no duty exists, defendant “is not liable even though he may have acted negligently in light of the foreseeable risks.” Markowitz v. Arizona Parks Bd., 146 Ariz. 352, 356, 706 P.2d 364, 368 (1985).

Whether a duty exists is a question of law for the court. Id. at 354, 706 P.2d at 366. Concluding that State Title owed “no obligation” to Appellants, the trial court granted summary judgment to State Title. In reviewing a grant of summary judgment, this court “views the evidence in the light most favorable to the party opposing the motion and all favorable inferences fairly arising from the evidence must be given to the opposing party.” Ancell v. Union Station Assocs., 166 Ariz. 457, 459, 803 P.2d 450, 452 (App.1990) (citations omitted).

A. Duty as a Professional

Appellants argue that State Title, as a professional, had a duty to protect them from foreseeable harm and that it breached this duty by negligently recording the deed of trust. Generally, a title company’s duties are to those with whom it has a contractual relationship. See Engler v. Sainer, 4 Ariz. App. 86, 88, 417 P.2d 720, 722 (1966); see also Phoenix Title & Trust Co. v. Continental Oil Co., 43 Ariz. 219, 228, 29 P.2d 1065, 1068 (1934) (holding that “[an] abstractor ... is not liable to persons who may be misled to their damage by reason of his negligence, unless there is some privity of contract between them”). Generally, the scope of duty is limited by the terms of the contract. See Malta v. Phoenix Title & Trust Co., 76 Ariz. 116, 120, 259 P.2d 554, 557 (1953).

The duties of title companies have, to a limited extent, been extended beyond the terms of their contracts. Berry v. McLeod, 124 Ariz. 346, 352, 604 P.2d 610, 616 (1979) (imposing a duty to disclose to parties to the escrow when a title company has knowledge that a fraud is being committed); Burkons v. Ticor Title Ins. Co. of Cal., 168 Ariz. 345, 352-53, 813 P.2d 710, 717-18 (1991) (imposing a duty to disclose when circumstances would lead a reasonable escrow agent to perceive fraud, as well as a duty to be cognizant not only of the escrow instructions but also of the documents placed in escrow and to seek clarification of any ambiguity from the principals). See also Tibor Nagy, Jr., Note, Escrowees’ Duty to Disclose Fraud: An Expansion of the Limited Agency Doctrine, 22 Ariz. L.Rev. 1146 (1980).

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Bluebook (online)
950 P.2d 159, 190 Ariz. 500, 258 Ariz. Adv. Rep. 3, 1997 Ariz. App. LEXIS 218, Counsel Stack Legal Research, https://law.counselstack.com/opinion/luce-v-state-title-agency-inc-arizctapp-1997.