NORTH AMERICAN TITLE COMPANY, INC., Plaintiff and Appellant, v. EGYA NUBAR GUGASYAN et al., Defendants and Respondents.
B303753
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION TWO
Filed 12/29/21
CERTIFIED FOR PARTIAL PUBLICATION*
(Los Angeles County Super. Ct. No. BC660525)
* This opinion is published as to all but parts I.B.3., II., and III. of the Discussion.
Steyer Lowenthal Boodrookas Alvarez & Smith, Jeffrey H. Lowenthal, Carlos A. Alvarez, and Jill K. Cohoe for Plaintiff and Appellant.
Freeman Mathis & Gary, Frances M. O‘Meara, Stephen M. Caine, and Holly M. Teel for Defendants and Respondents Egya Nubar Gugasyan and Jack Aintablian.
Law Offices of John L. Fallat, John L. Fallat, and Timothy J. Tomlin for Defendant and Respondent Western Surety Company.
******
The job of a notary is to verify that the person executing a document is, in fact, the person who is supposed to be executing that document. If the notary is “neglect[ful]” in this job, the notary is civilly liable for damages. (
would issue (and thus does not require a
FACTS AND PROCEDURAL BACKGROUND
I. Facts
Noble Investments LLC owns property on North Elm Street in Beverly Hills, California. The company‘s president is Mark Gabay (Gabay).
In January 2017 and again in February 2017, someone pretending to be Gabay applied for two loans totaling nearly $4 million, each loan to be secured by deeds of trust against the Elm Street property. For each loan, the person lined up Finance for Americans Corp. (Finance) as the broker, Lone Oak Fund, LLC as the lender, and North American Title Company, Inc. (North American) as the escrow holder.
From its list of preapproved notaries, North American called Jack Aintablian (Aintablian), doing business as “Jack the Notary,” to notarize the two deeds of trust.
On January 16, 2017, and then on February 17, 2017, Aintablian tasked one of his contractors, Egya Nubar Gugasyan (Gugasyan), with acting as notary for the two deeds of trust.
Gugasyan‘s surety, whose job it was to insure against any errors by the notary, was Western Surety Company (Western). During each appointment, a person purporting to be Gabay appeared and provided Gugasyan a California driver‘s license (No. B8141711) as proof of his identity. Gugasyan‘s “custom and practice” “[a]t all relevant times herein” was to (1) compare the photograph of the person on the license with the person before him, (2) compare the signatures on the license, on the deed of trust signed in his presence, and in the notary journal Gugasyan had the person sign, (3) compare the names on the license and on the deed of trust, (4) review the texture and color of the license to make sure it was authentic, and (5) decline to notarize the deed of trust if any of the prior four steps revealed something unsatisfactory. After undertaking these steps and seeing nothing untoward, Gugasyan recorded in his notary journal
Gabay had “personally appeared” in front of him and “proved to [him] on the basis of satisfactory evidence to be the person[] whose name[] is[] subscribed to the within instrument and acknowledged that he[] executed the same in his[] authorized capacity[], and that by his[] signature[] on the instrument the person[], or the entity upon behalf of which the person acted, executed the instrument.”
Once the two deeds of trust were executed, North American disbursed $3,891,935.35 into a bank account held at JPMorgan
Chase Bank (Chase) and a $40,000 broker‘s fee to a bank account for Finance at Wells Fargo Bank, N.A. (Wells Fargo).
As it turns out, the person executing the two deeds of trust was not Gabay and the California driver‘s license presented to Gugasyan was fake (because the DMV had assigned that license number to someone else).
II. Procedural Background
A. Initial pleadings
On May 9, 2017, North American sued Wells Fargo, Chase, and Finance. The same day, North American sought and obtained a temporary restraining order prohibiting Wells Fargo and Chase from transferring the funds in the disbursement accounts. Unfortunately, by this time, only the $40,000 broker‘s fee remained in the Wells Fargo account; the $3,891,935.35 in the Chase account had been transferred to other bank accounts in Dubai.
In June 2017, North American filed a first amended complaint that added Aintablian, Gugasyan, and Western as additional defendants. Against Aintablian and Gugasyan (collectively, the notaries), and as pertinent here, North American alleged claims for (1) declaratory relief, based on “[a]n actual controversy . . . between North American and [the person who impersonated Gabay] . . . that North American is entitled to the return of the Stolen Funds,” (2) negligent misrepresentation, based on the representations in Gugasyan‘s acknowledgment that the person appearing before him was, in fact, Gabay, (3) negligence, based on Gugasyan‘s negligence in verifying the identity of the person purporting to be Gabay, and (4) negligence
per se, based on the
B. Demurrer and second amended complaint
The notaries demurred, and also moved to strike the allegations seeking recovery of attorney fees and punitive damages. Following briefing and a hearing, the trial court overruled the demurrer with respect to the negligence and negligence per se claims, but sustained the demurrer without leave to amend with respect to the declaratory relief and negligent misrepresentation claims. The court also struck the attorney fees and punitive damages allegations. The court ruled that “no new parties and no new causes of action [are] to be pled without a court order.”
In October 2017, North American filed a second amended complaint realleging the same claims for negligence and negligence per se against the notaries.
C. Motion for summary judgment
The notaries moved for summary judgment on North American‘s claims for negligence and negligence per se on the ground that (1) they were not negligent as a matter of law because they complied with the safe harbor requirements of
hearing, the trial court granted the motion. Specifically, the court ruled the notaries had met “their burden to show there was ‘satisfactory evidence’ provided” to verify Gabay‘s identity; that this burden triggered
D. Dismissal order and appeal
Although the summary judgment motion only formally dealt with the notaries, the trial court‘s minute order “dismissed” the “entire case” “[w]ith [p]rejudice.” Although by this time North American had dismissed Wells
North American filed a motion to set aside the dismissal of the entire action, but while that motion was pending filed a notice of appeal specifically challenging the scope of the dismissal as well as the summary judgment ruling. Seeing that the pending appeal covered the scope of the dismissal, the trial court took North American‘s motion off calendar for lack of jurisdiction.
DISCUSSION
North American argues that the trial court erred in (1) granting summary judgment for the notaries on its negligence and negligence per se claims, (2) sustaining the demurrer to its declaratory relief and negligent misrepresentation claims against
the notaries without leave to amend, and (3) dismissing Western and Finance from the lawsuit.4
I. Summary Judgment Ruling
A. Pertinent law
1. Summary judgment, generally
Summary judgment is appropriately granted “where all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (Hartford Casualty Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277, 286 (Hartford Casualty), quoting
papers except that to which objections were made and sustained.” [Citation.] We liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Hartford Casualty, at p. 286.)
2. Law governing notaries public
By statute, a notary public may be civilly liable for damages for his “neglect.” (
acknowledgment is not the individual he or she claims to be” and, as pertinent here, and (2) the notary is “present[ed]” with and “[r]easonabl[y] reli[es]” upon a “driver‘s license issued by the [California] Department of Motor Vehicles” that is “current or has been issued within five years.” (
B. Analysis
North American argues that the trial court erred in granting summary judgment for two broad reasons: (1) the court made several errors in interpreting the meaning and effect of
interpreted the “safe harbor,” there are numerous other reasons that preclude the entry of summary judgment.
1. Interpreting section 1185‘s “safe harbor”
North American urges that the trial court erred in construing what is required to fit into
a. Does section 1185 require that the driver‘s license presented be issued by the DMV?
A notary‘s acknowledgement of a document falls within
government[] or . . . agency.” (
Second, the construction urged by North American would lead to absurd results, which we are to avoid in interpreting statutes. (Lucent Technologies, Inc. v. Board of Equalization (2015) 241 Cal.App.4th 19, 34; John v. Superior Court (2016) 63 Cal.4th 91, 96.) If, as North American suggests,
the notary‘s conduct in being reasonably duped is the same—in these two scenarios, why should his liability for damages turn on such distinctions? (Department of Alcohol, supra, 118 Cal.App.4th at pp. 1444-1445 [making similar observations].) Further, North American‘s construction of the safe
North American responds with two further arguments. First, it contends that its construction is dictated by the plain text of
that compliance with
b. Can section 1185‘s safe harbor be altered by expert testimony regarding industry custom?
In opposing summary judgment, North American submitted a declaration from an expert opining that Gugasyan was negligent in verifying the identity of the person purporting to be Gabay because (1) industry custom requires a notary to get “clear thumbprints,” but the thumbprints Gugasyan obtained appeared to be smudged in the copies of Gugasyan‘s notary journal, (2) industry custom requires a notary to have “a separate line item entry in the notary journal,” but Gugasyan used a single line for “two documents,” and
To begin, glaringly absent from the declaration of North American‘s expert is any opinion that the license or other circumstances regarding the notarization of the deeds of trust should have rung any alarm bells for Gugasyan; therefore, the
industry customs the expert raises are not relevant to the requirements triggering
What is more, we reject the notion that a party can, by expert testimony, redefine a statutory safe harbor fashioned by our Legislature. In
must be done for a notary to qualify for its safe harbor. For the reasons noted above, expert testimony cannot add to those statutory prerequisites without destroying
c. Is section 1185‘s safe
North American suggests that a notary‘s negligence must be inferred—and that this negligence overrides the safe harbor—from the simple fact that the notary did not detect a fraudulently presented driver‘s license.
We reject this argument for two reasons. First, it is inconsistent with
bottom, a request to apply the doctrine of res ipsa loquitur. The doctrine of res ipsa loquitur erects a presumption of negligence, but it only applies when “(1) the event must be of a kind which ordinarily does not occur in the absence of someone‘s negligence; (2) it must be caused by an agency or instrumentality within the exclusive control of the defendant; [and] (3) it must not have been due to any voluntary action or contribution on the part of the plaintiff.” (Howe v. Seven Forty Two Co., Inc. (2010) 189 Cal.App.4th 1155, 1161.) The doctrine is inapplicable here because fake IDs fool careful people all the time; that is in part why the
2. Applying section 1185‘s safe harbor
Properly construed, the safe harbor in
notary book; and to refuse to notarize a document if there were any irregularities. Because Gugasyan notarized the deeds of trust and recorded the driver‘s license information provided on both occasions in his notary journal, Gugasyan‘s declaration establishes that he was presented with and reasonably relied upon a license purporting to be issued by the DMV and that he had no other evidence at the time that would give him pause. North American provided no contrary evidence. Indeed, as noted above, even its expert did not speak to the reasonableness of Gugasyan‘s examination of the license; instead, the expert said Gugasyan should have done more to make it easier to catch the imposter after the fraud was discovered (such as taking a clearer thumbprint, having additional signature lines, and making a copy of the license). As such, the undisputed evidence raises no triable issue of fact on whether Gugasyan complied with
3. North American‘s arguments
North American resists this conclusion with a plethora of arguments that we have wrangled into four pens.
First, North American raises several evidentiary objections. North American contends that Gugasyan‘s declaration is entitled to no weight because (1) he did not specifically declare that he followed his usual custom as to the two notarizations at issue here, and previously stated in a deposition that he could not remember the two specific notarizations in this case; (2) he did not specifically declare that a driver‘s license had been presented to him; (3) he did not provide proof that the person appearing before him executed the two deeds of trust in his capacity as a representative of Noble Investments LLC; and (4) the trial court has the discretion, under
subdivision (e), not to credit the declaration of the sole witness to an event.
Each of these challenges to Gugasyan‘s declaration lacks merit. Contrary to what North American suggests, Gugasyan did declare that he followed his usual custom and practice. His declaration set forth his “custom and practice” “[a]t all times relevant herein.” It is hard to think of a time more “relevant herein” than the times he notarized the two deeds of trust underlying this lawsuit. (Accord,
the deeds was not the real Gabay. And while a trial court has discretion to deny summary judgment “if the only proof of a material fact offered in support of the summary judgment is a[] . . . declaration made by an individual who was the sole witness to that fact” (
As its final evidentiary challenge, North American faults the notaries for not producing Gugasyan‘s original notary journal, suggesting that its absence is somehow nefarious. North American conveniently neglects to mention the reason why the original has yet to be disclosed—namely, because the FBI seized it as part of an investigation into the fraud. The absence of the original journal is of no consequence under the secondary evidence rule in any event. That rule allows a trial court to rely upon a copy of a writing unless “[a] genuine dispute exists concerning material terms of the writing and justice requires the exclusion” or “[a]dmission of the” copy “would be unfair.” (
Second, North American asserts that there are other triable issues of fact that preclude summary judgment. It articulates two. To begin, North American posits that there is a dispute over whether, in Gugasyan‘s notary journal, he recorded the last digit of the driver‘s license presented to him with respect to the second deed of trust as a “1” or a “0“—North American reads Gugasyan‘s handwriting as being a “0,” while Gugasyan says it was a “1.” North American urges that this dispute is material because, if the last digit is a “0,” then the person pretending to be Gabay would have presented driver‘s licenses with two different numbers, which should have put Gugasyan on notice that something was amiss. From our examination of the notary journal, it is not clear that what North American sees as a “0” is anything more than a sloppily drawn “1.” So there may be no dispute at all. Further, we do not believe that any such evidentiary dispute is sufficient to overcome the presumption in
repeat customer and thus should have reviewed the driver‘s license information in his journal to investigate whether the licenses presented were the same (and hence more likely to be legitimate). Further, North American argues that there are triable issues regarding proximate causation. Because we have concluded that summary judgment is appropriate based on
Third, North American argues that the trial court erred in granting summary judgment for Aintablian. We reject this argument. It is undisputed that Aintablian‘s sole role was as Gugasyan‘s superior, and that any liability he had was solely vicarious. (See generally Perez v. Van Groningen & Sons (1986) 41 Cal.3d 962, 967 [discussing vicarious liability for an employee‘s torts].) Because we have concluded that Gugasyan is not liable, it follows that Aintablian is also not liable. What is more, Aintablian moved for summary judgment along with Gugasyan. On these facts, it makes no sense to grant summary judgment for Gugasyan but not Aintablian.
Fourth, North American argues that the trial court erred in ruling on the summary judgment motion without granting a continuance so that North American could obtain further proof that the license presented to Gugasyan was not issued by the DMV. There was no error.
discretion in declining to continue the summary judgment hearing because further discovery to establish that the license presented to Gugasyan was not issued by the DMV was not “essential” because that fact was undisputed and already established by other evidence.
II. Demurrer Ruling
North American argues that the trial court erred in (1) not granting leave to amend its complaint after sustaining a demurrer to its claims for declaratory relief and negligent misrepresentation, and (2) striking its prayer for attorney fees on a “tort of another” theory. Because North American does not meaningfully challenge the trial court‘s ruling that its declaratory relief and negligent misrepresentation claims were deficient as pled, our task on appeal is limited to asking whether the court abused its discretion in denying leave to amend because there is a “reasonable possibility that the defect can be cured by amendment.” (Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1100.) A plaintiff may articulate a valid amendment even for the first time on appeal but bears the burden of articulating the “specifi[c] way” that the operative complaint can be amended to state a claim. (Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 971; CAMSI IV v. Hunter Technology Corp. (1991) 230 Cal.App.3d 1525, 1542.) A possible amendment is not valid if it is foreclosed as a matter of law. (California Department of Tax & Fee Administration v. Superior Court (2020) 48 Cal.App.5th 922, 938.)
The trial court did not abuse its discretion in denying leave to amend North American‘s claims against the notaries for declaratory relief or for negligent misrepresentation.
North American‘s claim of error for the declaratory relief claim fails for one, and possibly two, reasons. First, and as a threshold matter, North American‘s proposed amendment to this claim may face a procedural bar. North American argues that it can amend its declaratory relief claim to allege that the notaries did not adhere to the terms of the contract Aintablian originally signed with North American, which obligates Aintablian to indemnify North American and to assign to North American all rights to the insurance policy he carries for any errors or omissions. North American first presented this proposed amendment after learning of the trial court‘s inclination to grant summary judgment. The law is well settled that a trial court does not abuse its discretion in denying a request for leave to amend made for the first time at the hearing on summary judgment. (580 Folsom Assocs. v. Prometheus Development Co. (1990) 223 Cal.App.3d 1, 18; Shugart v. Regents of University of California (2011) 199 Cal.App.4th 499, 508; Leibert v. Transworld Systems, Inc. (1995) 32 Cal.App.4th 1693, 1699.) North American‘s argument that the court abused its discretion because that late request was preceded by a successful demurrer is ostensibly an end run around the rule that requires amendments to be made in a more timely fashion. Second, and in any event, North American‘s proposed claim fails as a matter of law. The claim fails against Gugasyan because he is not a party to the Aintablian-North American contract. More to the point, the claim fails against both defendants because their duty to indemnify and the insurance company‘s potential coverage only matters if the notaries engaged in some underlying negligence; as we have concluded above, North American failed to overcome the conclusion dictated by the safe harbor that they did not.
North American‘s claim of error as to the negligent misrepresentation claim also fails for two reasons. First, North American abstractly states that it can “provide more details” regarding (1) the misrepresentations Gugasyan made in his acknowledgment that the person appearing before him was Gabay, and (2) the misrepresentations Aintablian made in applying to be on North American‘s list of approved notaries. This vague promise of a desire to “add more details” without specifying what they are falls short of what a plaintiffs burden is to articulate the “specific ways” its complaint can be amended. Second, these claims fail as a matter of law. Negligent misrepresentation requires underlying negligence in making a representation (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166), and we have concluded that the safe harbor insulates Gugasyan from negligence liability as a matter of law. The absence of any negligence by Gugasyan also means that any misrepresentation by Aintablian in applying to become a notary in the first place has no causal connection to the damages North American suffered here.
Because we have concluded that North American states no claims against the notaries, we have no occasion to decide whether they may seek attorney fees under the “tort of another” doctrine for such claims.
III. Dismissal of Other Defendants
North American lastly asserts that the trial court erred in ordering the dismissal of the entire case once summary judgment was granted in favor of the notaries because North American still had claims pending against Western and Finance. Because the court did this without affording North American notice and an opportunity to be heard, North American continues, the court
violated its right to due process. (In re Marriage of Stracyznski (2010) 189 Cal.App.4th 531, 538.) Because this is a constitutional claim, our review is de novo. (Conservatorship of John L. (2010) 48 Cal.4th 131, 142 [due process challenge].)
A. Western
The trial court did not err in dismissing Western. Western was the surety for Gugasyan. As such, Western‘s liability to North American rises or falls on whether North American has a claim against Gugasyan. (Cates Construction, Inc. v. Talbot Partners, Inc. (1999) 21 Cal.4th 28, 38 [“In the absence of default, the surety has no obligation“]; Breckenridge v. Mason (1967) 256 Cal.App.2d 121, 130 [“when on an official bond and primary obligation is barred or in any legal way extinguished, the surety is relieved“]; Hungate v. Indemnity Ins. Co. of North America (1933) 129 Cal.App.133, 135 [a notary‘s “bond is executed for the purpose of protecting those who may suffer by his dishonesty and the bondsman is liable for damages resulting from the fraudulent acts of the notary committed in the performance of his duties“].) Because North American vigorously litigated the question of whether it had a claim against Gugasyan and does not articulate a way in which Western can otherwise be liable, North American had ample notice and opportunity to be heard regarding Western‘s liability. As a result, the court‘s dismissal of Western was legally appropriate and complied with due process.
B. Finance
The trial court erred in dismissing Finance. Finance‘s liability for brokering the loan by the imposter is separate and distinct from the notaries’ liability. What is more, the court previously struck Finance‘s filings and entered a default against Finance, meaning that Finance is ostensibly liable to North
American. Dismissing Finance was improper, and we reverse the dismissal order as to Finance.
DISPOSITION
The order dismissing North American‘s claims against Finance is reversed and remanded for further proceedings. The order dismissing North American‘s claims against Aintablian, Gugasyan, and Western is affirmed. Aintablian, Gugasyan, and Western are entitled to their costs on appeal.
CERTIFIED FOR PUBLICATION.
HOFFSTADT, J.
We concur:
ASHMANN-GERST, Acting P. J.
CHAVEZ, J.