Filed 9/19/16 Shah v. Fidelity Nat. Title Ins. Co. CA6
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.


              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                      SIXTH APPELLATE DISTRICT

JAY C. SHAH,                                                        H038521
                                                                    (Santa Clara County
         Plaintiff and Appellant,                                   Super. Ct. No. 1-11-CV-203571)

         v.

FIDELITY NATIONAL TITLE
INSURANCE COMPANY,

         Defendant and Respondent.



         The allegations in this case illustrate the very purpose of title insurance. Plaintiff
Jay C. Shah filed a claim with defendant Fidelity National Title Insurance Company after
discovering that the purported fee simple interest he purchased and for which he obtained
title insurance was actually a life estate. Defendant denied plaintiff’s claim, contending
that the policy had terminated when plaintiff transferred his entire interest in the property
through multiple conveyances, all occurring after the life tenant died.
         Plaintiff appeals from a judgment entered after the trial court sustained
defendant’s demurrer without leave to amend. Plaintiff argues that the trial court erred
when it determined he failed to state causes of action for breach of contract and breach of
the covenant of good faith and fair dealing arising from defendant’s refusal to pay
plaintiff’s claim. For the reasons stated here, we will reverse the judgment.
             I.       FACTUAL AND PROCEDURAL BACKGROUND
       This factual summary is based on plaintiff’s first amended complaint (Complaint)
as well as recorded conveyances for the subject property.1
A.     ORIGINAL GRANT DEED AND TITLE INSURANCE POLICY (1995)
       In December 1995, Mary R. Silva transferred her interest in certain grazing
property via grant deed to “Jay C. Shah, Living Trust Dated June 8, 1993.”2 Plaintiff
believed he was obtaining fee simple title to the property and paid $350,000, which,
according to the Complaint, represented the fair market value for fee simple title.
Unbeknownst to plaintiff, Silva held only a life estate in the property; her children held
the remainder interest.
       To insure his purchase, plaintiff obtained a title insurance policy from defendant.
Much of the original insurance policy was lost or destroyed, but Schedules A and B of
the original policy were located in defendant’s records. For the missing portions of the
policy, the parties agree that the general terms were taken from the California Land Title
Association Standard Policy – 1990 Form (CLTA 1990 Form).
       Section 1(a) of the CLTA 1990 Form’s Conditions and Stipulations defines
“insured” as “the insured named in Schedule A, and, subject to any rights or defenses the
Company would have had against the named insured, those who succeed to the interest of
the named insured by operation of law as distinguished from purchase including, but not
limited to, heirs, distributees, devisees, survivors, personal representatives, next of kin, or
corporate or fiduciary successors.” Schedule A lists “Jay C. Shah, Living Trust Dated
June 8, 1993” as both the insured party and the party to whom “[t]itle to the estate or

       1
         At defendant’s request, the trial court took judicial notice of these recorded
documents. We likewise take judicial notice of the recorded documents. (Evid. Code,
§ 459, subd. (a)(1).)
       2
         Many of the title descriptions are listed in all capital letters. While we retain the
exact text of the titles, for stylistic reasons we change the capitalization of the
descriptions.
                                               2
interest in land is vested … .” It further states that the type of interest or estate insured is
a fee simple interest.
       Regarding continuation of insurance, section 2(b) of the Conditions and
Stipulations, entitled “After Conveyance of Title by an Insured,” states in relevant part:
“The coverage of this policy shall continue in force as of [December 29, 1995] in favor of
an insured only so long as the insured retains an estate or interest in the land, or holds an
indebtedness secured by a purchase money mortgage given by a purchaser from the
insured, or only so long as the insured shall have liability by reason of covenants of
warranty made by the insured in any transfer or conveyance of the estate or interest.”
B.     SUBSEQUENT DEEDS (1998–2009)
       In July 1998, plaintiff transferred the property by grant deed from “Jay C. Shah, a
single man and as trustee of the Jay C. Shah Revocable Living Trust Dated June 8, 1993,
who acquired title as ‘Jay C. Shah, Living Trust Dated June 8, 1993’ ” to “Jay C. Shah,
Trustee of the Jay C. Shah Revocable Living Trust Dated June 8, 1993.”
       Silva died in May 2002, meaning that title to the property plaintiff thought he held
actually passed to Silva’s children by operation of law.
       From June 2002 through 2009, over a dozen conveyances were recorded for the
property involving plaintiff (in various capacities), his parents, and his wife. Specifically,
in June 2002, plaintiff, as trustee of his living trust, transferred the property via grant
deed to his parents, “Chandrakant K. Shah and Mrudula C. Shah, as Trustees of the Shah
1978 Revocable Trust, dated January 22, 1978.” The Complaint alleges that this transfer
was an equitable mortgage. (Citing Civ. Code, § 2924, subd. (a).) From 2002 to 2006,
recorded deeds suggest the property changed hands between plaintiff as trustee of his
living trust, his parents as trustees of their living trust, and his parents as husband and
wife. In November 2006 plaintiff signed a grant deed conveying the property from “Jay
C. Shah, a married man as his sole and separate property” to his parents as trustees of
their trust. Between December 2006 and May 2007, a series of grant deeds were
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recorded by plaintiff’s parents as trustees of their trust as well as by plaintiff’s wife as the
spouse of plaintiff consistently conveying the property to “Jay C. Shah, a married man as
his sole and separate property.”
       In September 2007, plaintiff borrowed $350,000 against the property from
Conquest Investments, LLC, secured by a deed of trust (Conquest deed of trust) recorded
with the Santa Clara County Recorder. After plaintiff failed to make payments on the
Conquest deed of trust, a notice of default and notice of trustee’s sale were recorded and
a trustee’s sale was set for February 3, 2009.
C.     ATTEMPT TO REFINANCE AND DISCOVERY OF TITLE PROBLEM
       To prevent the trustee’s sale, plaintiff attempted to refinance the deed of trust with
a loan broker. In January 2009, the broker’s title insurance company informed plaintiff
that he did not actually possess fee title to the property. The title officer discovered that
Mary Silva acquired her interest via a decree of distribution in 1959 but that her interest
only extended “for and during the term of her natural life and upon her death then to the
issue of her body … .” Thus, when plaintiff purchased the property via grant deed from
Silva in 1995, he acquired only a life estate for the term of Silva’s life, also known as a
life estate pur autre vie.3 When Silva died in 2002, plaintiff’s estate in the property was
extinguished. Plaintiff alleges he was unable to refinance the Conquest deed of trust
because of the cloud on title, which led to the trustee’s sale. Bob and Jody Schwartz, as
husband and wife, made the high bid at the February 2009 trustee’s sale and recorded a
trustee’s deed, which conveyed plaintiff’s interest in the property to the Schwartzes.
       Although plaintiff discovered the cloud on his title in January 2009, before the
trustee’s sale, he did not contact defendant seeking coverage under his title insurance
policy until March 2009. Defendant denied plaintiff’s claim in September 2009,
asserting that plaintiff’s numerous recorded conveyances between himself and his family
       3
         Meaning “[f]or or during a period measured by another’s life.” (Black’s Law
Dict. (10th ed. 2014) p. 1429, col. 2.)
                                               4
had terminated the policy. Defendant relied on section 2(b) of the policy, “After
Conveyance of Title by an Insured,” to deny the claim.
       While plaintiff attempted to convince defendant to accept his claim, he
simultaneously attempted to regain title to the property by filing a quiet title action and
negotiating with Silva’s heirs; the Schwartzes; and interested parties from the Conquest
deed of trust. Plaintiff obtained quitclaim deeds from Silva’s heirs at some point in 2009.
In March 2010, plaintiff negotiated a settlement whereby he financed payment of the
Conquest deed of trust debt, obtained a rescission of the Schwartzes’ trustee’s deed, and
received quitclaim deeds from all defendants to the quiet title action, giving him fee
simple title to the property.
D.     TRIAL COURT PROCEEDINGS
       Plaintiff filed his original complaint in June 2011, which was met by a demurrer.
Before a hearing could be held on the demurrer, plaintiff filed an amended complaint,
alleging that by denying his claim for coverage, defendant breached both the title
insurance policy and the contract’s implied covenant of good faith and fair dealing.
Regarding defendant’s claim that plaintiff’s conveyances terminated the title insurance
policy, plaintiff specifically alleged that the conveyances were equitable mortgages that
did not pass title but rather served as liens on the property.
       Defendant renewed its demurrer based on a failure to state facts sufficient to
constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).) After a hearing, the
court sustained the demurrer without leave to amend. The trial court assumed for
purposes of the demurrer that the conveyances to plaintiff’s parents were equitable
mortgages but decided that when the parents conveyed their interests back to plaintiff in
his individual capacity he was no longer covered by the title insurance policy, which only
covered plaintiff as trustee of his living trust. The court also noted that one conveyance
was between plaintiff in his individual capacity and his parents as trustees, demonstrating


                                               5
that plaintiff’s living trust had previously conveyed away its interest in the property,
thereby terminating the title insurance.
                                 II.       DISCUSSION
       The viability of both causes of action turns on whether the title insurance policy
terminated before plaintiff submitted his claim to defendant in March 2009.
A.     STANDARD OF REVIEW
       Defendant demurred to the Complaint on the ground that “[t]he pleading does not
state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10,
subd. (e).) We review a judgment of dismissal based on a sustained demurrer de novo.
(Doan v. State Farm General Ins. Co. (2011) 195 Cal.App.4th 1082, 1091 (Doan).) We
will reverse the judgment of dismissal if the allegations of the complaint state a cause of
action “under any legal theory.” (Ibid.)
       We assume the truth of all facts alleged in the complaint unless those facts are
contradicted by judicially noticeable materials. (Stoney Creek Orchards v. State of
California (1970) 12 Cal.App.3d 903, 906 (Stoney Creek); SC Manufactured Homes, Inc.
v. Liebert (2008) 162 Cal.App.4th 68, 82.) But we do not consider conclusory factual or
legal allegations contained in the Complaint (B & P Development Corp. v. City of
Saratoga (1986) 185 Cal.App.3d 949, 953 (B & P Development Corp.)); and facts not
alleged in the Complaint are presumed not to exist. (Melikian v. Truck Ins. Exchange
(1955) 133 Cal.App.2d 113, 115.) Litigants may allege inconsistent theories but not
inconsistent facts (Gentry v. eBay, Inc. (2002) 99 Cal.App.4th 816, 827–828), and
“[s]pecific factual allegations modify and limit inconsistent general statements.” (B & P
Development Corp., supra, at p. 953.)
B.     ANALYSIS
       The name of the insured on the title insurance policy is “Jay C. Shah, Living Trust
Dated June 8, 1993.” A trust is not a legal entity in California and legal title to trust
property is held by the trustee. (Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486,
                                               6
522.) Because the trust itself could not be the insured, the policy covered either plaintiff
in his individual capacity or plaintiff in his capacity as trustee of his revocable living
trust. Based on the 1998 deed in which plaintiff transferred title from “Jay C. Shah,
Living Trust dated June 8, 1993” to “Jay C. Shah, Trustee of the Jay C. Shah Revocable
Living Trust Dated June 8, 1993,” it appears plaintiff intended to hold the insurance
policy as trustee of his living trust. Defendant does not contend that plaintiff’s 1998 deed
was inconsistent with the mutual intent of the parties in insuring “Jay C. Shah, Living
Trust Dated June 8, 1993.” Thus, we will assume for purposes of this opinion that
plaintiff held the title insurance policy as the trustee of his living trust.
       Section 2(b) of the title insurance policy, on which defendant relied to deny
coverage, is entitled “After Conveyance of Title by an Insured.” The section provides
that plaintiff’s coverage continues “so long as the insured retains an estate or interest in
the land ... .” Plaintiff’s interest in the property was a life estate measured by the life of
the grantor, Mary Silva, who died in May 2002. At that point, plaintiff lost his estate or
interest in the property by operation of law. (Zanelli v. McGrath (2008)
166 Cal.App.4th 615, 631 [“A life estate terminates upon death by operation of law.”].)
       Given that plaintiff’s loss of an estate or interest in the property occurred by
operation of law upon Silva’s death, rather than by plaintiff’s conveyance of title, we
asked the parties for supplemental briefing on the following issues: whether any deed
after Silva’s death conveyed title; whether there was any basis other than section 2(b)
to terminate the policy if the deeds after Silva’s death did not convey title; whether
terminating insurance due to a defect in the original title insured by the policy would
violate the objectively reasonable expectations of the insured; and whether terminating
insurance due to a defect in the original title insured by the policy would violate the
insurance contract’s implied covenant of good faith and fair dealing.
       Arguing that plaintiff “retained an interest in the property that did not expire when
the life tenant died,” defendant describes ways in which plaintiff could have obtained the
                                                7
fee title he thought he had purchased, including by obtaining a conveyance of the
remainder interest from Silva’s children during her life or by quieting title to the property
based on adverse possession under color of title (Civ. Code, § 1007; Code Civ. Proc.,
§ 325, subd. (b)). In reviewing a demurrer sustained without leave to amend, we are
bound by the allegations of the complaint. (Doan, supra, 195 Cal.App.4th at p. 1091.)
As far as can be determined from the Complaint, no such method of obtaining fee title
was ever utilized before plaintiff submitted his claim.
         We acknowledge the possibility that plaintiff had obtained a marketable estate or
interest in the property (through adverse possession or other means) sufficient to have
terminated the insurance policy by conveyance after Silva’s death but before he filed his
claim in 2009. But that question would require factual development in the trial court.
Defendant appears to acknowledge the inadequacy of the record in its supplemental brief,
which repeatedly refers to the need to “obtain evidence and expert testimony” to address
the issues raised in our request for further briefing. On the limited record at this early
stage in the proceedings, and assuming the truth of all allegations in the Complaint
(Stoney Creek, supra, 12 Cal.App.3d at p. 906), we cannot conclude as a matter of law
that coverage under plaintiff’s title insurance policy terminated before he submitted his
claim.
                                III.       DISPOSITION
         The judgment is reversed and the matter is remanded with instructions to enter a
new order overruling defendant’s demurrer to plaintiff’s first amended complaint.
Plaintiff is entitled to his costs on appeal.




                                                8
                               ____________________________________
                               Grover, J.




WE CONCUR:




____________________________
Premo, Acting P.J.




____________________________
Mihara, J.
