73 Cal.App.5th 380
Cal. Ct. App.2021Background
- Two nearly $4 million loans were fraudulently obtained in Jan–Feb 2017 against Noble Investments’ Beverly Hills property by an imposter claiming to be president Mark Gabay.
- The imposter presented a California driver’s license (later determined to be fake) to notary Egya Nubar Gugasyan, who notarized two deeds of trust; North American Title disbursed about $3.89 million (most later moved abroad).
- Gugasyan followed his stated notary practices (compare photo/signature, examine license texture/color, record license info and thumbprint in his notary journal); his principal, Jack Aintablian, was vicariously liable; Western Surety issued Gugasyan’s bond.
- North American sued the notaries, their surety, and others alleging negligence, negligence per se, negligent misrepresentation, and declaratory relief; trial court sustained demurrer to some claims and later granted summary judgment for the notaries based on Civil Code § 1185 safe harbor, then dismissed the entire action.
- On appeal the Court of Appeal affirmed summary judgment for the notaries and the dismissal of the surety, but reversed the dismissal as to Finance (loan broker) and remanded as to Finance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1185 requires the license actually be issued by DMV (not merely reasonably appear issued) | North American: safe harbor applies only if license was genuinely DMV-issued; otherwise notary should verify with DMV | Notaries: safe harbor protects reliance on a license that reasonably appears to be DMV-issued; no DMV verification required | Held: Safe harbor covers licenses that reasonably appear DMV-issued; notaries need not confirm issuance with DMV |
| Whether industry custom (expert testimony) can expand § 1185 safe harbor requirements | North American: expert shows notary deviated from custom (clear thumbprints, journal format, follow escrow requests) so safe harbor shouldn't apply | Notaries: statutory safe harbor sets fixed requirements; expert evidence cannot add to or rewrite statute | Held: Expert testimony cannot enlarge statutory safe harbor; compliance with § 1185 controls |
| Whether being duped by an imposter (fake ID) automatically negates § 1185 safe harbor (res ipsa inference) | North American: the fact of fraud implies negligence sufficient to defeat safe harbor | Notaries: safe harbor asks whether a reasonable person would be fooled; mere discovery of fraud does not create strict liability | Held: Safe harbor is not negated simply because an imposter fooled the notary; res ipsa/unfounded presumption of negligence rejected |
| Whether dismissal of other defendants (Western surety; Finance broker) was proper | North American: dismissing entire case deprived it of due process as claims against Western and Finance remained | Notaries/Trial court: Western’s liability depends on principal notary; Finance had default/struck filings | Held: Dismissal of Western affirmed (no independent liability); dismissal of Finance reversed and remanded (liability separate from notaries) |
Key Cases Cited
- Joost v. Craig, 131 Cal. 504 (notary complying with statute not liable)
- Anderson v. Aronsohn, 181 Cal. 294 (historic formulation of notary duties)
- Transamerica Title Ins. Co. v. Green, 11 Cal.App.3d 693 (notary liability where statute not followed)
- Department of Alcohol Beverage Control v. Alcoholic Beverage Control Appeals Bd., 118 Cal.App.4th 1429 (seller’s reliance on credible fake IDs can fall within statutory safe harbor)
- Hartford Casualty Ins. Co. v. Swift Distribution, Inc., 59 Cal.4th 277 (summary judgment standard)
- Cates Construction, Inc. v. Talbot Partners, Inc., 21 Cal.4th 28 (surety liability depends on primary obligor)