Hayward Property, LLC v. Commonwealth Land Title Insurance Company

Background

Hayward Property, LLC brought claims for breach of contract and negligence against Commonwealth Land Title Insurance Company. The dispute concerned a title-insurance policy issued in 2002 for property in Hayward, California. Hayward Property alleged that the policy insured title to all of assessor’s parcel numbers 43 and 44 and that Commonwealth breached the policy by failing to defend and indemnify it after XPO Freight Logistics, Inc. claimed ownership of a substantial portion of parcel 43 and all of parcel 44.

The Alameda County Superior Court ultimately determined that XPO held title to the disputed property. The federal court also considered evidence that, in April 2003, the Alameda County Assessor’s Office notified Hayward Property of problems with the recorded deed and stated that a corrected deed with the proper legal description was needed. A correction deed was later prepared but was never recorded.

Breach-of-contract claim

The parties filed cross-motions for summary judgment, which is a ruling entered when the evidence shows no genuine dispute over a material fact and one party is entitled to judgment as a matter of law. Commonwealth argued that Hayward Property’s contract claim was untimely and that the policy did not cover the disputed property. The court ruled on the timeliness issue and did not reach whether the policy covered the assessor’s parcels.

Applying California’s two-year limitation period for an action based on a title-insurance policy, the court held that Hayward Property’s claim accrued when it learned of the loss that could result if its title was not as represented—not when XPO later asserted an adverse claim. The court found that Hayward Property learned of the alleged title defect in 2003 through the assessor’s letter and the unrecorded correction deed. Because Hayward Property took no action until 2016 and filed this action in 2017, the court held that the breach-of-contract claim was untimely.

Negligence claim

Hayward Property alleged that Commonwealth owed duties as its title agent and closing or escrow agent. The court found that Hayward Property conceded Commonwealth did not serve in those capacities. The court therefore held that the negligence claim, as pleaded in the operative complaint, failed because its central allegation—that Commonwealth owed those duties—was false. The court also held that the negligence claim was untimely for the same reasons as the contract claim. In addition, the court noted that, under the cited California authority, a negligence claim generally does not lie against a title insurer for failing to identify a title defect when the insurer acted only as a title insurer, absent a separate contract for an abstract of title; the court stated that Hayward Property had not alleged such a contract.

Disposition

Judge Aundra Brown Armstrong granted Commonwealth Land Title Insurance Company’s motion for summary judgment and denied Hayward Property, LLC’s motion for partial summary judgment. The court ordered judgment in favor of Commonwealth, directed the clerk to close the file, and directed the clerk to terminate pending matters.