Filed 12/19/14 Old Republic Nat. Title Co. v. Thomas CA4/1




                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     FOURTH APPELLATE DISTRICT

                                                DIVISION THREE


OLD REPUBLIC NATIONAL TITLE
INSURANCE COMPANY,
                                                                       G049346
     Plaintiff and Appellant,
                                                                       (Super. Ct. No. 30-2012-00585122)
         v.
                                                                       OPINION
RITA P. THOMAS,

     Defendant and Respondent.



                   Appeal from a judgment of the Superior Court of Orange County, Richard
W. Luesebrink, Judge. (Retired judge of the Orange Super. Ct. assigned by the Chief
Justice pursuant to art. VI, § 6 of the Cal. Const.) Affirmed.
                   Law Offices of Mary Jean Pedneau, Mary Jean Pedneau, William R. Larr
and Susan S. Vignale for Plaintiff and Appellant.
                   Rita P. Thomas, in pro. per. for Defendant and Respondent.
                                    INTRODUCTION
              Old Republic National Title Insurance Company appeals from a judgment
in favor of Rita Thomas, a notary public. Thomas notarized trust deeds for five pieces of
real estate for which Old Republic had provided title insurance. The signatures on the
deeds of trust turned out to be forgeries, and Old Republic had to pay out on the title
insurance policies. It sought to recover this money from Thomas, alleging she had
negligently notarized the signatures. After a three-day bench trial, the court rendered
judgment in Thomas’ favor.
              By statute, Old Republic had the burden of proof of Thomas’ alleged
negligence. The trial court found Old Republic failed to carry this burden, because it did
not present sufficient evidence to overcome the statutory presumption Thomas had acted
in accordance with provisions of law. We cannot fault its logic or reweigh the evidence,
so we affirm the judgment.
                                          FACTS
              The basic facts are, for the most part, undisputed. Old Republic issued title
insurance policies for five deeds of trust on five pieces of real estate. The deeds of trust
had to be notarized, and Thomas notarized all five in November 2011. The signatures on
the deeds of trust and on the notarizations were forged. The California driver’s license
the signer presented to Thomas as proof of identity was a fake. The forger disappeared
with the proceeds of the real estate sales, and Old Republic had to pay the lending banks
on the five policies. It sought to recover from Thomas for these payouts, maintaining she
had not fulfilled her duty to obtain proper identification before she notarized the trust
deeds.
              The matter was tried to the court over three days. Old Republic argued
Thomas breached her duty by accepting a fake driver’s license as valid proof of identity.
Old Republic’s witness on this topic was a lawyer who testified about ways by which to
ascertain the genuineness of a driver’s license. Thomas, representing herself, called as

                                              2
her expert Dennis Ryan, the author of a study guide for people who wish to become
notaries or who are applying for recommissioning. Ryan testified that Thomas had
handled the notarization process properly, according to the standard of care for California
notaries.
               The court issued a statement of decision, finding that Old Republic failed to
meet its burden of proof that Thomas had breached her duty in her capacity as a notary
public when she notarized the signatures on the five deeds of trust. The court found Ryan
a “persuasive” witness and credited Ryan’s testimony that Thomas had handled the
matter as any competent California notary public would have. It noted the failure of Old
Republic’s proof on this issue. The court entered judgment in Thomas’ favor.
                                        DISCUSSION
               On appeal, Old Republic identifies two issues. First, it argues that Thomas
is, in effect, strictly liable for accepting the forger’s driver’s license, because the statute
limits licenses eligible to be satisfactory evidence of identity to those issued by the
California Department of Motor Vehicles. The license presented to her was a fake, not
issued by the DMV, so it did not qualify as satisfactory evidence. Thomas therefore did
not comply with the statute, and she should be held liable for negligence. Second, the
license itself presented two anomalies: the expiration date and the licensee’s birth date
did not match, and the signature on the license did not match the signature on the trust
deeds. Either or both should have alerted Thomas that the license was a fake, and she
should not have accepted it as proof of identity.
               Old Republic further asserts that the standard of review is de novo, because
we are interpreting the meaning of “satisfactory evidence” in a statute, a pure question of
law. The trial court went astray when it relied on Ryan’s testimony regarding the
standard of care for notaries public, because the standard is spelled out in the statute
itself.



                                                3
                                                 1
                  Civil Code section 1185 governs the duties of a notary public when
recording transfers. The statute provides, in pertinent part: “(a) The acknowledgment of
an instrument shall not be taken unless the officer taking it has satisfactory evidence that
the person making the acknowledgment is the individual who is described in and who
executed the instrument. [¶] (b) For purposes of this section, ‘satisfactory evidence’
means the absence of information, evidence, or other circumstances that would lead a
reasonable person to believe that the person making the acknowledgment is not the
individual he or she claims to be and any one of the following: [¶] . . . [¶] (3)
Reasonable reliance on the presentation to the officer of any one of the following, if the
document is current or has been issued within five years: [¶] (A) An identification card
or driver’s license issued by the Department of Motor Vehicles.” (Id., § 1185, subds. (a),
              2
(b)(3)(A).)
                  “Satisfactory evidence” in this context has two components. First, there
must be an absence of evidence for believing the person signing is an imposter (a
negative component), and, second, the person must produce one of the approved identity
documents – in this case a California driver’s license (an affirmative component). Old
Republic did not put on any evidence as to the first component. It tacitly conceded it had
no evidence that anything about the imposter himself would have rung any alarm bells.
Instead, it concentrated on the driver’s license. Old Republic contended Thomas was
negligent in accepting the fake license as proof of identity.
                  Section 1185 has two more subdivisions bearing on this case. They are
subdivision (c): “An officer who has taken an acknowledgment pursuant to this section
shall be presumed to have operated in accordance with the provisions of law.” and
subdivision (d): “A party who files an action for damages based on the failure of the


        1
                 All further statutory references are to the Civil Code unless otherwise indicated.
        2
                 The other acceptable identity document under this subdivision is a “passport issued by the
Department of State of the United States.” (§ 1185, subd. (b)(3)(B).)


                                                         4
officer to establish the proper identity of the person making the acknowledgment shall
                                                                                                                 3
have the burden of proof in establishing the negligence or misconduct of the officer.”
                  A notary public can be liable for negligence for failing to follow the
statutory mandates for ascertaining the identity of the signing party if the failure results in
a loss to an entity entitled to rely on the authenticity of the signature. (McComber v.
Wells (1999) 72 Cal.App.4th 512, 519-520; Evid. Code, § 669, subd. (a).) The issue
before us, however, is somewhat different. It is how to determine whether the notary has
been negligent.
                  Section 1185 requires that a notary have satisfactory evidence of identity.
Satisfactory evidence, in turn, is of two kinds. There is the hard-and-fast evidence of
identity documents – either the notary demanded to see them and entered the relevant
information in the sequential journal (see Gov. Code, § 8206, subd. (a)(1)(E)), or he did
not. If a notary did not call for one of the documents described in section 1185,
subdivision (b)(3) or (b)(4), the notary failed to comply with the statute, if these were the
bases of identification. The same would be true if the notary failed to have the person
sign the notary’s sequential journal or provide a thumbprint for a real estate transaction.
(See Gov. Code, § 8206, subds. (a)(2)(C), (G).) Failures of these kinds that caused injury
to someone relying on an authentic signature would create a presumption of negligence
per se. (See Evid. Code, § 669, subd. (a).)
                  “Satisfactory evidence” has, another aspect, however, one not so cut-and-
dried. There must be nothing to alert a “reasonable person” that the signer is not who he
claims to be, and the notary may “reasonably” rely on driver’s license or a passport. (See



         3
                   Notaries public are also subject to the provisions of Government Code sections 8200 et seq. For
example, Government Code section 8206 mandates the keeping of a sequential journal and specifies its contents.
Government Code section 8207 spells out the requirements for the use and custody of a notary’s seal. The chapter
also deals with their appointment, resignation, and removal from office. Government Code section 8214 provides:
“For the official misconduct or neglect of a notary public, the notary public and the sureties on the notary public’s
official bond are liable in a civil action to the persons injured thereby for all the damages sustained.”


                                                          5
§ 1185, subd. (b)(3).) How is a trier of fact to tell whether a notary has relied
“reasonably”?
              The statute uses the “reasonable person” standard to measure the negative
component of a notary’s duty to identify a signer. (§ 1185, subd. (b).) The “reasonable
person” standard implies the perceptions of an ordinarily prudent person in like
circumstances. (Rowland v. Christian (1968) 69 Cal.2d 108, 112, superseded by statute
on other grounds in Mastro v. Petrick (2001) 93 Cal.App.4th 83, 88, fn. 1; Warner v.
Santa Catalina Island Co. (1955) 44 Cal.2d 310, 317.) It does not imply any specialized
training or duty. Whether a notary has acted as a reasonable person in concluding that
nothing triggered any question about a signer’s identity will usually be a question of fact,
one a trier of fact can resolve without recourse to expert testimony. (Truman v. Vargas
(1969) 275 Cal.App.2d 976, 982 [expert testimony not required for fact within general
knowledge of laymen].)
              This component of “satisfactory evidence” was not developed at trial. Old
Republic did not claim, and presented no evidence to the effect, that any information,
circumstance, or evidence would have led a reasonable person to question the signer’s
identity. Old Republic concentrated instead on the driver’s license.
              The second component of satisfactory evidence, reasonable reliance on an
identity document, differs from the first. An ordinary person would seldom, if ever, have
occasion to rely on or inspect driver’s licenses or passports at all, let alone inspect them
for evidence of forgery. An ordinary person is also not a notary, with statutorily
prescribed duties and responsibilities, who must complete a course of study and pass an
examination in order to be certified. (See Gov. Code, § 8201, subds. (a)(3), (4).) The




                                              6
“reasonable person” standard is thus of no help in deciding whether a notary has behaved
                                                                                        4
reasonably in accepting a license or a passport as proof of identity.
                  In most cases, the only way a trier of fact can tell whether a notary has
reasonably relied on an identity document is to learn, from an expert, how notaries
generally behave, i.e., a standard of care. This standard may well differ from, for
example, a doorman at a nightclub, who is presumably trained to spot fake IDs, or the
TSA employee at the airport who lets passengers into a boarding area. The point is that
neither a judge nor a jury as trier of fact is naturally equipped to decide whether a notary
in his or her professional capacity has reasonably relied on a document that appears to be
                                                                                   5
genuine. Most of the time, expert testimony will be necessary. (See Miller v. Los
Angeles County Flood Control Dist. (1973) 8 Cal.3d 689, 701-702 [if matter not within
common knowledge of laymen, expert testimony necessary to establish prima facie
case].)
                  Old Republic first argues that expert testimony is unnecessary to establish
liability. In fact, it argues that the trial court erred by admitting and relying on such
testimony. Thomas could not “reasonably rely” on the driver’s license the forger
presented to her because the statute specifies “an identification card or driver’s license
issued by the Department of Motor Vehicles (italics added)” as an identification
document. The driver’s license presented to Thomas was a forged one, so it was not

          4
                   In Flowers v. Torrance Memorial Hospital Medical Center (1994) 8 Cal.4th 992 (Flowers), our
Supreme Court held that ordinary negligence and professional negligence are not two different theories of liability,
but rather the same theory with different circumstances affecting the standard of care. (Id. at pp. 997-998.) A
professional person must act with the ordinary care of a member of that profession; he or she does not have a
heightened duty of care. (Id. at p. 998.)
                   In this case, section 1185 explicitly states that the standard for the first, negative, component of
satisfactory evidence is that of a “reasonable person,” not a reasonable notary. In the absence of this specification
for reasonable reliance on an identity document, the affirmative component, and given the general tenor of the
legislative history (discussed below), we conclude that the standard should be the reasonable notary, i.e., the
professional negligence standard, the ordinary care exercised by someone in that profession. (See Flowers, supra, 8
Cal.4th at p. 997 [distinction between ordinary and professional negligence relevant to statutory construction].)
          5
                   Of course, if the fakery would be obvious even to an ordinary person, a plaintiff does not need an
expert. (See Flowers, supra, 8 Cal.4th at p. 1001 [“common knowledge” exception to requirement for expert
testimony].)


                                                           7
“issued by the Department of Motor Vehicles,” and therefore did not meet the statutory
                 6
requirement. No need for an expert; the license was not issued by the DMV, and nothing
else is needed.
                     Although not conclusive, the evidence indicated that the driver’s license
                                                                                                                       7
was, at least at some point, issued by the DMV; it was, however, issued to someone else.
It was not a photocopy of a driver’s license, or a license issued by some agency other
than the DMV, or the driver’s license equivalent of Monopoly money. As discussed
below, section 1185 does not make notaries the absolute guarantors of a document’s
genuineness. Instead, the statute allows a notary to reasonably rely on authentic-
appearing identification. Old Republic did not make a prima facie case that something
about the overall appearance of the license should have alerted Thomas to the forgery and
that Thomas therefore violated the statute by accepting it.
                     Old Republic’s second position is that even if reasonable reliance comes
into play, Thomas was still liable, because the forgery is patent. The birth date and the
expiration date did not match, and the signature on the license did not match the signature
in Thomas’ sequential journal. These were such obvious departures from the norm that
Thomas should have seen them as indicators of forgery.
                     Thomas’ expert testified that notaries are not equipped or trained to spot
fake licenses other than the obvious ones that anyone could spot, such as a cut-and-paste
job. He also explained that signatures alter over time (in this case about five years) and

         6
                    Old Republic’s driver’s license witness treated the trial court to an array of gadgets, such as a bar
code scanner and an ultraviolet flashlight, that could be used to determine the authenticity of a California driver’s
license. She did not, however, testify that notaries must or should use these devices to render their reliance
“reasonable,” or that notaries routinely employed them on driver’s licenses.
          7
                   The evidence about the fake license was quite muddled. The actual license used by the forger was
obviously not available as a trial exhibit. The only evidence of the forger’s license was a very poor photocopy from
a loan file (not Thomas’ files).
                   The evidence suggested the forger somehow acquired either a genuine driver’s license or a
photocopy of a genuine license belonging to someone with a similar name, altered the license to fit himself, and had
a phony driver’s license created. The owner of the license told Old Republic’s witness that the actual license had
never been out of his possession except when it was copied in connection with a loan application. Thomas testified
that the license presented to her was a plastic card, an ordinary license like hers, not a photocopy.


                                                           8
the critical question for a notary is whether the signature on the notarized documents
matches the signature in the notary’s book.
                  The trial court found that Old Republic failed to present sufficient evidence
– sufficient to overcome the presumption of compliance with the statute – that a notary
should be reasonably expected to notice the discrepancy between the birth and expiration
                                                               8
dates and recognize it as an indicator of forgery. Old Republic also failed to present
evidence on what constitutes reasonable reliance by notaries on driver’s license
signatures. The sufficiency of the evidence is for the trial court to determine. (Great
American Ins. Co. v. National Health Services, Inc. (1976) 62 Cal.App.3d 785, 794.)
                  Old Republic relies on Transamerica Title Ins. Co. v. Green (1970) 11
Cal.App.3d 693 (Transamerica) for its contention that a violation of section 1185 is
negligence per se. The code section, however, was very different in 1970, when
                                                                   9
Transamerica was decided, from what it is today. Under the former statute, a notary
public had to “personally know” the signing party (or get an oath from a credible
witness). “Personally know” did not mean just seeing someone around or meeting them
several times. (See Anderson v. Aronsohn (1919) 181 Cal. 294, 297). It was also not
enough for the notary’s former law partner to introduce the signers as his clients.
(Transamerica, supra, 11 Cal.App.3d at pp. 699-702.) “The breach of statutory duty is

         8
                   Old Republic’s witness referred to a handbook designed to assist notaries in checking
identifications put out by the National Notary Association. This handbook is not an official California publication,
and Old Republic presented no evidence regarding the breadth of its use by notaries. California notaries are
examined on California law “as set forth in the booklet of the laws of California relating to notaries public
distributed by the Secretary of State.” (Gov. Code, § 8201, subd. (a)(4).) Thomas tried to get this booklet admitted
into evidence, but the court on its own objection refused to admit it.
                   Old Republic’s witness also testified that she checked with the DMV about driver’s licenses
expiring on the licensee’s birthday, apparently for the purpose of testifying at trial, but once again, evidence
regarding the reasonableness of requiring such an investigation of a notary was lacking.
          9
                   In 1970, section 1185 provided in its entirety: “The acknowledgement of an instrument must not
be taken, unless the officer taking it knows or has satisfactory evidence, on the oath or affirmation of a credible
witness, that the person making the acknowledgement is the individual who is described in and who executed the
instrument; or, if executed by a corporation, that the person making such acknowledgement is the president or
secretary of such corporation, or other person who executed it on its behalf.” (Stats. 1905, ch. 445, p. 603.) The
subsections defining “satisfactory evidence” and permitting reasonable reliance on a driver’s license or other such
documents were added in 1982.


                                                          9
negligence per se, not overcome by the claims that [the notary] acted reasonably in
relying on [his former partner’s] introduction.” (Id. at p. 702.)
              It is just this element of reasonableness that the 1982 amendments
introduced into the requirement of “satisfactory evidence.” The Legislature swung into
action immediately after the Second Appellate District held in Allstate Savings & Loan
Assn. v. Lotito (1981) 116 Cal.App.3d 998 (Lotito), that a notary could not rely on a
driver’s license or similar document as proof of identity and be in compliance with
section 1185. (Id. at p. 1004.) The legislative history of the 1982 amendments
repeatedly refers to Lotito as the impetus for, as the legal affairs department of the
governor’s office put it, “liberaliz[ing] the information a notary may rely upon in
acknowledging an instrument.” (Cal. Governor’s Office, Enrolled Bill Rep. on Assem.
Bill No. 2353 (1981-1982 Reg. Sess.) May 3, 1982, p. 1.)
              When the Department of Motor Vehicles weighed in, in favor of the
amendments, it observed, “As California driver’s licenses and identification cards are
widely accepted for identification purposes, it is appropriate to permit their use to identify
persons acknowledging instruments. [¶] The benefit of this measure, with respect to
facilitating the acknowledgement of instruments, should outweigh the minimal potential
for risk associated with relying on paper documents as evidence of identity.” (Cal. Dept.
of Motor Vehicles, Enrolled Bill Rep. on Assem. Bill No. 2353 (1981-1982 Reg. Sess.)
May 12, 1982, p. 1.) One of the bill’s sponsors, California Escrow Association, which
had collaborated with California Association of Realtors, California Bankers Association,
California Land Title Association, and the California Savings and Loan League on the
bill, urged then (and now) Governor Brown to sign the bill, stating “The measure
contains a ‘prudent person’ standard which permits the notary to reasonably rely upon a
submitted document, unless the document would put a notary exercising reasonable
diligence on notice that the submitted document was fraudulent or altered.” (Ralph F.



                                             10
Simoni, Cal. Escrow Assn., letter to Governor Edmund G. Brown, Jr. (1981-1982 Reg.
Sess.) May 6, 1982.)
              Nowhere in the legislative history is there a suggestion that the new
amendments would require a notary to absolutely guarantee the genuineness of an
identity document, no matter how clever the forgery. Instead, “reasonableness” and
“prudence” were the standards by which the notary’s conduct was to be measured.
              Once the issue is whether someone acted reasonably, we are nearly always
in the realm of fact, and we review for substantial evidence. (See Guido v. Koopman
(1991) 1 Cal.App.4th 837, 843; Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th
1226, 1239; Estate of Gump (1991) 1 Cal.App.4th 582, 595 [whether standard of care met
reviewed for substantial evidence]; Firestone Tire & Rubber Co. v. County of Monterey
(1990) 223 Cal.App.3d 382, 390.) And Old Republic, as the entity complaining that
Thomas acted negligently in ascertaining the signer’s identity, had the burden of proof.
(See § 1185, subd. (d).)
              We should also point out that one of the risks against which persons
involved in real estate transactions purchase title insurance is the risk that title documents
may be forged. (Wutzke v. Bill Reid Painting Serv. (1984) 151 Cal.App.3d 36, 44, fn. 5;
Coast Mut. Building-Loan Assn. v. Security Title Ins. & Guarantee Co. (1936) 14
Cal.App.2d 225, 230-231; Ins. Code, §§ 104, 12340.1.) Title insurance companies
collect premiums to assume these risks (Lagomarsino v. San Jose Abstract & Title Ins.
Co. (1960) 178 Cal.App.2d 455, 464), and the amount of the premium is, presumably,
commensurate with the risk assumed. (Southland Title Corp. v. Superior Court (1991)
231 Cal.App.3d 530, 538.) One of the accepted methods of allocating costs between or
among different insurers is apportionment based on the amount of the premiums paid to
each carrier. (Centennial Ins. Co. v. United States Fire Ins. Co. (2001) 88 Cal.App.4th
105, 113.)



                                             11
                 In this case, Old Republic charged premiums of $500 to purchase insurance
                                                                                       10
in amounts between $76,000 and $85,000 for all but one of the titles.                       By contrast, a
notary may not charge more than 10 dollars to notarize a deed of trust. (Gov. Code, §
8211, subd. (a).) This is another indication that notaries are not absolute guarantors of a
document’s genuineness regardless of its appearance. We think the amendment’s
sponsor got it right: a notary can rely on a document “unless the document would put a
notary exercising reasonable diligence on notice that the submitted document was
fraudulent or altered.”
                 Other than the details of the signature and the discrepancy between the birth
date and the expiration date, Old Republic presented no evidence of any aspect of the
license that should have put Thomas acting as a reasonable notary on notice that the
license was fraudulent or altered. The court held that the existence of these two details
was not enough to negate reasonable reliance. Substantial evidence supported this
determination.
                 We emphasize what the trial court decided and what we here affirm. The
court did not hold that Thomas acted properly when she accepted the forged license. It
held that Old Republic failed to prove she had acted improperly. This was Old
Republic’s burden, and it did not carry its burden. Under these circumstances, the court
had to find in Thomas’ favor.




        10
                 For one of the policies, Old Republic charged $400 for insurance in the amount of $118,688 on a
mortgage of $94,950.


                                                       12
                                  DISPOSITION
            The judgment is affirmed. Respondent is to recover her costs on appeal.




                                              BEDSWORTH, ACTING P. J.

WE CONCUR:



MOORE, J.



THOMPSON, J.




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