PAUL HAMILTON et al.

, Plaintiffs and Appellants,

v.
LEHMAN BROTHERS BANK et al., Defendants and Respondents.

No. G041296.

Court of Appeals of California, Fourth District, Division Three.

Filed June 15, 2010.

John M. Pitkin & Associates and John M. Pitkin for Plaintiffs and Appellants.

Severson & Werson, Suzanne M. Hankins, Jarlath M. Curran II, Jan T. Chilton and Mark
D. Lonergan for Defendants and Respondents Lehman Brothers Bank, Wells Fargo
Bank, and Mortgage Electronic Registration Systems, Inc.

Wright, Finlay & Zak and Jonathan M. Zak for Defendants and Respondents First
American Title Insurance Co., First American Title Company, and First American
Loanstar Mortgage Services.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

OPINION

SILLS, P. J.

Signature Alliance Corporation and its sole shareholders, Michelle and Paul Hamilton
(sometimes collectively referred to as Signature), filed an action against Wells Fargo
Bank dba America's Servicing Company (ASC), Mortgage Electronic Registration
Services, Inc., and Lehman Brothers Bank (sometimes collectively referred to as Wells
Fargo); and First American Title Company (FATCO), First American Title Insurance
Company (FATICO), and First American Loanstar Mortgagee Services (Loanstar)
(sometimes collectively referred to as the First American Defendants). Signature appeals
from the judgment against it after demurrers to the third amended complaint were
sustained without leave to amend. We affirm.
FACTS

In 2005, Debbie L. Floyd (Floyd) owned property in Palm Springs (the Property) which
was encumbered by a first trust deed of $499,999, held by BNC Mortgage (later
transferred to Wells Fargo), and a second trust deed of $50,000. . Floyd stopped making
payments on both loans, and in April 2005, she hired Elizabeth Glass (Glass), a licensed
real estate broker, to sell the Property. The Property did not sell. The holder of the second
trust deed recorded a notice of default on August 2, 2005, and Loanstar Mortgage
Services recorded a notice of default on the first trust deed on August 3.

Signature is wholly owned by Michelle and Paul Hamilton, husband and wife. On
October 20, 2005, Signature acquired fee title to the Property at the trustee's sale on the
second deed of trust. It faxed notice of the purchase to Glass on October 23 and notified
her it intended to rekey the locks. The next day, Wells Fargo's employee, Michael Tucci,
told Glass that Signature had "only `bought the Second' on the property, had no title to it,
and Ms. Floyd was its sole owner." Tucci also told Glass that Wells Fargo "no longer
agreed to a workout on the FIRST and Ms. Floyd must sell the property to pay it off or
[Wells Fargo] would foreclose on it, affecting her credit. . . ." Another Wells Fargo
employee sent Glass a title search prepared by First American Title Insurance Co. and
dated August 5, 2005, showing Floyd as the owner of the Property.

Signature changed the locks on the Property on October 24. When Signature returned to
the Property on October 25, however, the locks had been changed again, preventing them
from entering. Based on subsequent statements by Floyd, Signature alleged that Wells
Fargo intentionally trespassed on the Property and changed the locks.

On October 30, a third party offered to buy the Property. Wells Fargo urged Glass to sell
it so Floyd could pay off the first trust deed. The sale fell through, however, apparently
because Signature recorded its trustee's deed on November 3. The next day, Loanstar sent
Signature a notice stating that the loan secured by the first trust deed must be brought
current or paid off, or the previously scheduled trustee's sale would go forward on
November 28.

Floyd vacated the Property in response to a three-day notice to quit that Signature served
on her on November 3. On November 9, Paul Hamilton entered the house to begin
remodeling the kitchen. Floyd came into the house, screaming at Hamilton that "he `only
bought the Second,' that she was the owner, and demand[ing] he leave the property
forever." When he refused to leave, Floyd called the police. The police arrived and called
Loanstar and Glass. A Loanstar employee told the officer the Property was still in Floyd's
name, as did Glass. Glass called FATCO and asked for all recorded information on the
Property. FATCO "transmitted obsolete documents dating back to 2003, falsely
purporting to show Ms. Floyd was the owner." Glass relayed this information to the
officer, who then handcuffed Hamilton and transported him to jail on charges of
malicious mischief and battery.

On November 14, Signature paid $28,900 to Wells Fargo to bring the loan secured by the
first trust deed current. It paid an additional $6,000 on the loan arrearages on February
14, 2006. In the meantime, Signature obtained a default judgment against Floyd in an
unlawful detainer action it had filed in December 2005; a writ of possession issued and
was served on Floyd on January 19, 2006.

On March 14, Wells Fargo demanded that Floyd "`take the necessary steps in order to
record the appropriate documentation transferring title back into [her] name' and unless
she did so, they would make claims against her . . . ." In June 2006, Signature paid the
balance of the loan secured by the first deed of trust. Wells Fargo recorded the full
reconveyance in August and sent it to Floyd, telling her that Signature had paid off the
first for her benefit, she was the true owner, and she should record her title. On August
21, 2006, Floyd recorded a quitclaim deed to the Property from herself to herself and her
husband. Subsequently, she sent a threatening and abusive letter to the Hamiltons, which
caused them to fear for their safety. In February 2007, Floyd was ordered to reconvey
title to the Hamiltons and enjoined from interfering with their title to the Property and
harassing them.

The third amended complaint purported to allege causes of action against all defendants
for slander of title, trespass, invasion of privacy, duress or economic coercion, negligent
misrepresentation, negligent undertaking, and declaratory relief. The defendants
demurred. The trial court overruled the demurrers to the cause of action for declaratory
relief and to the cause of action for trespass as to Wells Fargo only, based on changing
the locks. It sustained the remaining demurrers without leave to amend. The plaintiffs
dismissed the remaining allegations with prejudice so as to allow appellate review and
filed this appeal. (Ashland Chemical Co. v. Provence (1982) 129 Cal.App.3d 790, 793.)
DISCUSSION

"When reviewing a successful demurrer, we accept as true all well-pleaded allegations,

however odd or resistant to proof." (Smith v. Commonwealth Land Title Ins. Co. (1986)
177 Cal.App.3d 625, 627.) The appellate court independently reviews the complaint for a
viable cause of action. (Burns v. Neiman Marcus Group, Inc. (2009) 173 Cal.App.4th
479, 486.)

SLANDER OF TITLE

A cause of action for slander of title must plead "publication, falsity, absence of
privilege, and disparagement of another's land which is relied upon by a third party and
which results in a pecuniary loss." (Appel v. Burman (1984) 159 Cal.App.3d 1209, 1214.)
The applicable privileges are codified in Civil Code section 47: A publication is
privileged if made "[i]n a communication, without malice, to a person interested therein,
(1) by one who is also interested, or (2) by one who stands in such a relation to the
person interested as to afford a reasonable ground for supposing the motive for the
communication to be innocent, or (3) who is requested by the person interested to give
the information. . . ." (Civ. Code, § 47, subd. (c).) A plaintiff must plead and prove that
the defendant intends for the publication to cause harm or should recognize it is likely to
do so, and that the defendant "`knows that the statement is false or acts in reckless
disregard of its truth or falsity.'" (5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts,
§ 641, p. 946.) Pecuniary loss — i.e., "the pecuniary loss that results directly and
immediately from the effect of the conduct of third persons, including impairment of
vendibility or value caused by disparagement" — is a necessary element of the tort. (Id.
at § 646, p. 953.)

Signature contends Wells Fargo published false communications disparaging its title on
October 24, 2005. Wells Fargo told Glass that Signature had only bought the second deed
of trust, Floyd still owned the Property, and Glass should sell the Property and pay off
the first trust deed or Wells Fargo would foreclose, negatively affecting Floyd's credit.
Wells Fargo transmitted an out-of-date title policy to Glass showing Floyd as the owner
of the Property. And Wells Fargo told Floyd her "workout" of the first trust deed had
failed because "the secondary lien holder" would not agree. Signature also contends
Wells Fargo disparaged its title on August 8, 2006, when Wells Fargo sent the full
reconveyance of the first deed of trust to Floyd after the Hamiltons had paid off the loan
in full, told Floyd the house was still hers, and encouraged her to record her title to the
Property.

Wells Fargo concedes these communications were false. But it argues the statements
were qualifiedly privileged because Wells Fargo was the servicer of the loan secured by
the first trust deed and Glass was the broker for Floyd, the borrower; thus, Wells Fargo,
Glass and Floyd were all persons interested in the subject matter of the communication.
Accordingly, Wells Fargo claims, Signature was required to plead the statements were
made with malice, which it failed to do. We disagree. Signature alleged: "The said
slanders of title were false, either knowingly or made without regard to the truth, and
occurred under such circumstances as would lead a reasonable person to foresee that the
conduct of Ms. Floyd and/or others would reasonably be determined thereby. Further,
defendants either knew or should have known the statements were false or acted in
conscious or reckless disregard of their truth or falsity." While a conclusory allegation of
malice is insufficient, "pleading that defendants published the article with knowledge of
its falsity does adequately allege actual malice." (Boyich v. Howell (1963) 221
Cal.App.2d 801, 803.)

Signature contends the First American defendants slandered its title to the Property on
November 9, 2005 when Loanstar told the police that title was held in the name of Floyd,
despite Signature's deed which had been recorded on November 3. Then, when requested
by Glass to send her all recorded documents on the Property, FATCO sent old documents
showing Floyd as the owner.

The First American defendants are correct that Loanstar's communication to the police
was absolutely privileged under Civil Code section 47, subdivision (b) as a
communication made in an official proceeding. "Underlying the privilege is the policy of
encouraging freedom of communication between citizens and public authorities charged
with investigating wrongdoing." (Forro Precision v. International Business Machines
(9th Cir. 1982) 673 F.2d 1045, 1055.) The privilege is unaffected by the presence of
malice. (Ibid.)

As to the statement by FATCO, the First American defendants contend even if these
statements were false, Signature has not pleaded that FATCO knew the statement was
false or that it acted with malice. Not so. Signature alleged Loanstar and FATCO had
actual or constructive knowledge of its deed to the property which had been recorded six
days before. The First American defendants claim "it is a practical impossibility" that
they knew about the deed because "the lag time between the recordation of a deed and its
appearance in the title index can often take weeks." While the First American defendants
may be able to prove their lack of knowledge at trial, Signature's pleading of constructive
notice is sufficient against a demurrer. And as discussed ante, Signature made sufficient
allegations of malice against all the defendants.

All defendants contend Signature's cause of action fails against them because it has failed
to allege pecuniary loss. We agree.

Signature alleged the slanders of title resulted in pecuniary loss consisting of funds in the
amount of $513,212.12 that it obtained to pay off the loan secured by the first deed of
trust on the Property and approximately $300,000 "to purchase, carry, repair, and
remodel the [P]roperty." Neither of these sums were spent because of any slander of title.
When Signature purchased the Property at the trustee's sale on the second deed of trust, it
took title to the property subject to the loan secured by the first deed of trust. Wells Fargo
had the right to attempt to collect the amount of the loan, and when Signature paid it off,
it received unencumbered title to the Property. Likewise, the money Signature spent to
purchase and improve the property was not the result of a false statement about its title.
And Signature's general allegations of "further special damages in an amount to be
shown at trial" are not sufficient. Special damages for slander of title must be pleaded in
detail and with certainty. (5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 934, p.
349.)

TRESPASS

Signature alleged trespass against all defendants based on the rekeying of the locks on
the Property on October 25, 2005[1] and Floyd's trespass on November 9, which the
defendants "aided and abetted, jointly participated in, encouraged, wrongfully induced,
colluded in and/or conspired with[] Ms. Floyd to perform the above trespasses." The
defendants correctly contend that Signature has not alleged any facts on which to base
their vicarious liability for Floyd's trespass.

"[W]hile aiding and abetting may not require a defendant to agree to join the wrongful
conduct, it necessarily requires a defendant to reach a conscious decision to participate in
tortious activity for the purpose of assisting another in performing a wrongful act."
(Howard v. Superior Court (1992) 2 Cal.App.4th 745, 749.) In other words, the
defendant must know the other is committing a wrongful act and help him do so. (Casey
v. U.S. Bank Nat. Assn. (2005) 127 Cal.App.4th 1138, 1144.) There are no allegations to
support the theory that any of the defendants knew Floyd was going to trespass on the
Property or that they assisted her in gaining entry. Furthermore, there are no allegations
to support Signature's contention that the defendants ratified Floyd's conduct.

INVASION OF PRIVACY

Signature alleged Hamilton had a reasonable expectation of privacy under both the
common law and the California Constitution, which was invaded by the defendants.
Signature alleged the defendants invaded Hamilton's privacy by aiding and abetting,
encouraging, or instigating Floyd's entry into the kitchen on the Property and her verbal
and physical assault on Paul Hamilton. This cause of action fails for the same reasons as
the cause of action for trespass. Signature has not alleged that any of the defendants knew
Floyd was going to enter the Property or assisted her in doing so.

DURESS

Signature alleged the defendants (presumably Wells Fargo) "used the purported power of
sale . . . and their authority under the FIRST as economic, legal and financial leverage to
force payment of the false claims, requiring Mr. and Mrs. HAMILTON to impair and use
their own credit to do so, and damaging them personally." But Signature only alleges that
Wells Fargo demanded it pay off the first trust deed, which it was legally entitled to do.
Duress is actionable only if the compulsion arises from an unlawful, wrongful or
unjustified act. "The assertion of a claim known to be false or a bad faith threat to breach
a contract or to withhold a payment may constitute a wrongful act for purposes of the
economic duress doctrine. (Rich & Whillock, Inc. v. Ashton Development, Inc. (1984)
157 Cal.App.3d 1154, 1159.) Because Signature took title to the Property subject to the
first trust deed, it cannot base economic duress on paying the loan.

NEGLIGENT MISREPRESENTATION

Signature alleged the defendants negligently misrepresented material facts to Floyd by

telling her she still owned the Property, which caused physical harm and loss of freedom
to Paul Hamilton, impairment of the Hamilton's credit, and emotional distress to them.
The defendants correctly point out that Signature does not allege it relied on the
defendants' misrepresentations, and it cannot recover for misrepresentations made to
Floyd. "Under California law, negligent misrepresentation has the following elements:
"(1) The defendant must have made a representation as to a past or existing material fact,
(2) which was untrue, (3) which, regardless of the defendant's actual belief, was made
without any reasonable grounds for believing it was true, and (4) which was made with
the intent to induce the plaintiff to rely upon it; (5) the plaintiff justifiably relied on the
statement, and (6) plaintiff sustained damages. [Citations.]" (Tenet Healthsystem Desert,
Inc. v. Fortis Insurance Co. (C.D. Cal. 2007) 520 F.Supp.2d 1184, 1195.)

Signature also alleges Wells Fargo made misrepresentations directly to it by threatening

foreclosure if it did not pay the first deed of trust loan. As discussed above, however,
Wells Fargo was entitled to demand payment of its loan or foreclose. Thus, the
statements were true, not misrepresentations.

NEGLIGENT UNDERTAKING

Signature contends it has stated a cause of action against the defendants for a negligent
undertaking. The complaint alleges the defendants assumed a duty of care to provide true
information about the Property's title to Floyd and Signature. It further alleges that
defendants' negligent misrepresentations to Floyd about the status of her title foreseeably
created a risk of physical harm and loss of freedom to Paul Hamilton and emotional
distress and impairment of credit to both Hamiltons.

The negligent undertaking doctrine is set forth in the Restatement Second of Torts,
section 324A: "One who undertakes, gratuitously or for consideration, to render services
to another which he should recognize as necessary for the protection of a third person or
his things, is subject to liability to the third person for physical harm resulting from his
failure to exercise reasonable care to protect his undertaking, if [¶] (a) his failure to
exercise reasonable care increases the risk of such harm, or [¶] (b) he has undertaken to
perform a duty owed by the other to the third person, or [¶] (c) the harm is suffered
because of reliance of the other or the third person upon the undertaking."

The complaint does not allege facts upon which one could conclude that the defendants'
undertaking — providing accurate title information to Floyd — was broad enough to
encompass a duty to protect the Hamiltons from physical harm. (See Artiglio v. Corning
Inc. (1998) 18 Cal.4th 604, 617-618; Dekens v. Underwriters Laboratories, Inc. (2003)
107 Cal.App.4th 1177, 1182-1185.) The trial court correctly sustained the demurrer to
the cause of action for negligent undertaking.

DISPOSITION

The judgment is affirmed. Respondents are entitled to costs of appeal.

WE CONCUR.

BEDSWORTH, J.

ARONSON, J.

[1] The trial court overruled Wells Fargo's demurrer to the cause of action for trespass based on the
rekeying of the locks, and Signature voluntarily dismissed the claim with prejudice. Accordingly, it does
not challenge the trial court's ruling on appeal.