Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, Ralph W. Dau, Judge. Affirmed.
Law Office of Gary Brown and Gary S. Brown, for Plaintiff and Appellant.
Anderson, McPharlin & Conners LLP, Jesse S. Hernandez and Joseph H. Catmull, for Defendant and Respondent, First American Title Company.
Raymond G. Fortner, Jr., County Counsel, Richard Girgado, Deputy County Counsel, for Defendants and Respondents County of Los Angeles and Vivian Handley.
MANELLA, J.
Appellant American Land Investments, LLC (ALI) brought suit against the City of Palmdale (Palmdale), Betsy St. John, Palmdale’s Director of Finance, Palmdale T&C Partners, LLC, and respondents County of Los Angeles (the County), Vivian Handley, Supervisor of the Tax Sale Unit for the County, and First American Title Company (FATCO) seeking refund of the amounts deposited toward purchase of two parcels at a tax sale conducted by the County, along with other damages. The trial court sustained demurrers to ALI’s first amended complaint (FAC). We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Allegations of the Complaint/FAC and Demurrers
The complaint alleged that ALI had purchased two parcels of real property located within Palmdale’s boundaries at a tax sale held by the County on February 14, and 15, 2005. According to the complaint, the “official terms and conditions” of the tax sale were published in a book or booklet which contained statements “warning prospective buyers to undertake their own investigation.” On February 10, ALI contacted FATCO, with whom it allegedly had “a pre-existing business relationship . . . wherein ALI was encouraged to informally use the services of [FATCO] to investigate the condition of title of property.” FATCO “explained to ALI that securing a formal report would take some time, but that it was willing to provide some preliminary information by telephone based upon accessible records available for property profiles.” ALI specifically inquired about the existence of 1915 Bond Act assessments, and FATCO informed ALI that “nothing showed in the public record about them.”
Palmdale T&C Partners was alleged to be the former owner of the parcels. It was named “only because it is a party necessary to the complete resolution of all claims and is not otherwise claimed to have engaged in any of the conduct alleged against the other defendants.”
Encumbrances for assessments under the 1915 Bond Act, formally known as the “Improvement Bond Act of 1915” (Sts. & Hy. Code, § 8500, et seq.), are not cleared from title by a tax sale. (Rev. & Tax. Code, § 3712, sub. (f); Quelimane Co., Inc. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 40, fn. 5.)
ALI contacted FATCO again on February 14. This time FATCO faxed documents showing “there were . . . two special assessments of record pertaining to the 1915 Bond Act,” totaling $218,000. ALI allegedly relied on this information in bidding that same day on the two parcels, offering $1,510,000 for one and $1,417,000 for the other. ALI’s bids were accepted and, as required by statute, it paid the County two ten percent deposits. (See Rev. & Tax. Code, § 3693.1.)
After paying the deposits, ALI learned that prior to the sale, St. John had prepared and delivered to Handley a letter dated January 12, 2005. The letter was addressed to “Interested Bidder” and stated that there were delinquent assessments under the 1915 Bond Act on the parcels that would not be eliminated by the County’s tax sale. Enclosures “intended to be delivered with the letter” showed that the parcels were burdened by assessment liens totaling approximately $8 million. The complaint alleged that the letter and its enclosures were “intended to be delivered to all interested bidders inquiring about the subject Lots,” but after a debate with Palmdale personnel, “legal counsel for [the County] Tax Collector” decided not to show the letter to prospective bidders “because it would scare them off so that the subject properties would receive no bids.” After learning about the letter and the additional assessment liens, ALI requested rescission of the sale and refund of its deposit, but was refused.
The letter was prepared for the signature of St. John but was unsigned.
ALI allegedly obtained this information on February 17 from Danny R. Roberts, the Assistant Executive Director of Community Redevelopment Agency for Palmdale.
Based on these factual allegations, the complaint purported to assert causes of action for intentional and negligent deceit against the two governmental entities and their employees. In connection with these claims, the complaint alleged that “[n]either [Palmdale] nor [the County] revealed the full extent of the assessments burdening the Lots. . . .” The governmental entities were also named in claims for declaratory relief and estoppel, and the County alone was named in a claim seeking rescission. The claim for estoppel asserted that Palmdale and the County should be estopped from collecting the undisclosed 1915 Bond Act assessments because they failed to disclose them to ALI. The rescission claim asserted that ALI entered into the contract to purchase the parcels as the result of a mistake of fact and enforcement would be unconscionable. The claim for declaratory relief asked the court to determine that ALI owned the parcels “free of the undisclosed assessment liens” and “to otherwise determine the rights and responsibilities as between [ALI, Palmdale and the County].”
The sole claim asserted against FATCO was for negligence. It stated that “[FATCO] owed a duty of care to [ALI] to provide accurate information that could be relied upon to make business decisions” and “[FATCO] breached [its] duty of care by not providing accurate information . . . .”
Palmdale and St. John demurred on the ground they were immune from liability under the following Government Code provisions: section 815.2, subdivision (b), section 818.8, section 820.2, section 822.2, and section 860.2. They further contended that ALI was on constructive notice of the existence of all recorded liens, including all liens resulting from 1915 Bond Act assessments. The court sustained the demurrer as to the causes of action naming Palmdale and St. John, giving ALI leave to amend.
Broadly speaking, section 815.2, subdivision (b) precludes liability for a public entity where the employee who committed the act or omission is immune; section 818.8 precludes liability for a public entity where the injury is caused by an employee’s misrepresentation; section 820.2 precludes liability for a public entity or its employee for injury resulting from the exercise of discretion; section 822.2 precludes liability for a public entity’s employee for misrepresentations unless the employee “is guilty of actual fraud, corruption or actual malice”; and section 860.2 precludes liability for a public entity and its employee for instituting an action for or “incidental to” collecting a tax or interpreting or applying any law relating to a tax.
The County and Handley answered the complaint. FATCO demurred to the sole claim asserted against it -- the third cause of action for negligence -- on the ground that a party requesting a preliminary report from a title insurer could not rely on that report to state a claim for negligence against the insurer. Before FATCO’s demurrer could be heard, the court sustained the demurrer of Palmdale and St. John and ALI filed an amended complaint.
ALI filed a first amended complaint (FAC) that was essentially the same as the original complaint, but inserted into the two causes of action for deceit against the governmental entities and their employees the allegation that “[i]n doing the acts charged the employees of the [g]overnment[al] entity defendants did not engage in the exercise of discretion duly vested in them.”
FATCO and the governmental entities and their employees demurred to the FAC. As before, Palmdale and St. John contended that governmental immunity and constructive notice provided a complete defense. The County and Handley raised similar contentions in their separate demurrer. FATCO contended that it could not be liable for negligence because “a title insurer owes no duty to disclose recorded liens or other clouds on title” and is potentially liable only to those who purchase a title policy. FATCO contended that the complaint and FAC established that ALI’s request was informal, and that the information provided was cursory and based on accessible records available for property profiles.
To support constructive notice, these defendants asked the court to take judicial notice of the following documents recorded in the County Recorder’s Office: (1) notices of intent to remove delinquent assessment installments from the tax roll recorded June 3, 1997, July 23, 1997, April 8, 1998, May 10, 2002, April 29, 2003, March 29, 2004, and September 13, 2005, and (2) an order modifying and amending a judgment and order of sale recorded May 5, 1998. Each notice of intent contained a list of properties that had incurred unpaid assessments for a specific tax year. For example, the notice of intent recorded June 3, 1997, listed properties with delinquencies for the tax year 1996/1997. The parcels on which ALI bid, listed by parcel number, could be found on a list attached to each notice of intent included in the request for judicial notice. The order recorded May 5, 1998 showed entry of judgment for unpaid taxes on the subject parcels for the tax years 1991/1992 through installment one of 1997/1998 and that the taxes due exceeded $600,000. The request was granted.
In its opposition to the demurrers of the County and Handley, ALI conceded that the County could not be sued directly for a misrepresentation made by its employee and offered to dismiss the deceit claims against the County. In its opposition to FATCO’s demurrer, ALI contended liability for negligent performance of a title search was proper based on Jarchow v. Transamerica Title Ins. Co. (1975) 48 Cal.App.3d 917 (Jarchow), overruled in part in Soto v. Royal Globe Ins. Corp. 184 Cal.App.3d 420. ALI did not request an opportunity to amend the claim directed at FATCO. ALI requested further amendment only with respect to the County, to state a claim for breach of contract based on the theory that the contract to purchase the parcels was induced by misrepresentation.
B. Court’s Rulings
The trial court sustained the three demurrers without leave to amend. With respect to the claims for deceit against the individual employees, the court concluded that ALI had not pled facts sufficient to support those causes of action. St. John could not be held liable for injury caused by her alleged misrepresentations or concealment of the assessments absent “specific facts establishing oppression, fraud or malice” under Government Code section 822.2. Similarly, the court found there were no facts alleged to support that “Handley made a decision to refuse presentation of the letter or possessed a duty to disclose the letter to [ALI,]” and there were no specific facts asserted to suggest oppression, fraud or malice. In addition, “[ALI] offer[ed] no facts to show justifiable reliance [on] such concealment as constructive notice was provided in the form of publically recorded documents entitled ‘Notice of Intent to Remove Delinquent Assessment Installments from the Tax Roll.’”
The court rejected the contention that the governmental entities or their employees were engaged in “discretionary activity” within the meaning of section 820.2. Its found that neither St. John’s nor Handley’s alleged failure to show the January letter to potential bidders involved “a type of basic policy decision for which Section 820.2 would apply.” Moreover, “any attempt to demonstrate that [their] actions were a product of a considered decision” could not “be adjudicated at the demurrer stage.”
Concerning estoppel, the court found that the action did not present the “‘unusual case’” necessary to support estoppel, “given that [ALI] had constructive notice of the assessments and would have learned of them based on a diligent search of the public records” despite the allegation that St. John or Handley had actual knowledge and failed to warn the public. The court sustained the County’s demurrer to the cause of action for rescission on the ground that no common law remedies are permitted for defects in tax sale proceedings.
Turning to FATCO, the court concluded that the governing statutes precluded liability where a title insurer negligently performs a title search and fails to discover or reflect in the preliminary report an impediment to title. As ALI had not purchased title insurance from FATCO, it had no basis for asserting a claim against FATCO.
After the court entered a judgment of dismissal based on its orders sustaining the demurrers without leave to amend, ALI appealed.
DISCUSSION
A. Standard of Review
On appeal from a judgment of dismissal entered after a general demurrer is sustained, our review is de novo. (Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 515.) “The rules by which the sufficiency of a complaint is tested against a general demurrer are well settled. We . . . treat the demurrer as admitting all material facts property pleaded, [and] also ‘give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.]’” (Quelimane Co., Inc. v. Stewart Title Guaranty Co., supra, 19 Cal.4th at p. 38, quoting Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “[W]e will not assume the truth of contentions, deductions, or conclusions of fact or law [citation], and we may disregard any allegations that are contrary to the law or to a fact of which judicial notice may be taken. [Citation.]” (Ellenberger v. Espinosa (1994) 30 Cal.App.4th 943, 947.)
In testing the sufficiency of the complaint, “‘[w]e are not limited to plaintiffs’ theory of recovery . . ., but instead must determine if the factual allegations of the complaint are adequate to state a cause of action under any legal theory.’” (Quelimane Co., Inc. v. Stewart Title Guaranty Co., supra, 19 Cal.4th at p. 38, quoting Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 103, italics omitted.) “If a complaint does not state a cause of action, but there is a reasonable possibility that the defect can be cured by amendment, leave to amend must be granted.” (Quelimane, supra, at p. 39.) The burden to show what additional facts could be pled to cure existing defects in the complaint falls upon the plaintiff. (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 890.) “To meet this burden, a plaintiff must submit a proposed amended complaint or, on appeal, enumerate the facts and demonstrate how those facts establish a cause of action.” (Ibid.)
If a proper ground for sustaining the demurrer exists, “this court will . . . affirm the demurrer[] even if the trial court relied on an improper ground, whether or not the defendants asserted the proper ground in the trial court. [Citation.]” (Cantu v. Resolution Trust Corp., supra, 4 Cal.App.4th at p. 880, fn. 10.)
B. FATCO Liability
In its opening brief, ALI contends FATCO’s demurrer should not have been sustained because FATCO owed a duty of care under the facts alleged in the complaint and FAC, citing, as it did below, Jarchow, supra, 48 Cal.App.3d 917. FATCO retreats from the contentions advanced in the trial court that the liability of a title insurer must always derive from issuance of a title policy and that California law absolutely precludes an action for negligence against a title insurer who searches for, but fails to discover, an impediment to title. On appeal, FATCO concedes that a title insurer may be liable for representations it makes when acting as an abstractor of title. It contends, however, that as ALI purchased neither title insurance nor an abstract of title, FATCO cannot be liable for encumbrances not found in the informal and cursory search conducted. In its reply brief, ALI contends for the first time that FATCO was arguably acting as an abstractor of title under the facts pled.
Before we address the parties’ specific contentions, we summarize the statutory provisions and authorities governing title insurers on which FATCO and the trial court relied to support the absence of a duty of care. This court explained in Siegel v. Fidelity Nat. Title Ins. Co. (1996) 46 Cal.App.4th 1181 (Siegel) that title insurance “‘was developed in California as a substitute for the use of abstracts of title.’” (Id. p. 1191, quoting 3 Miller & Starr, Cal. Real Estate [(2d ed. 1989)], Title Insurance, § 7:141, pp. 251-252, fns. omitted.) Although both title insurance and abstracts of title provide protection for those who need assurance of good title, there are significant differences between the two. An abstract of title “‘is a representation that the title [to a particular parcel of real property] is in the condition described.’” (Siegel, at p. 1191) A title insurance policy, on the other hand, is not a promise that that title is in any particular condition or that undiscovered encumbrances do not exist; it promises only that “‘the insurer will pay any loss or damage suffered by the insured from any omitted defect not excluded [in the policy].’” (Ibid.; accord, Quelimane, supra, 19 Cal.4th at p. 41 [“The [title insurance] policy does not guarantee the state of the title. Instead, it agrees to indemnify the insured for losses incurred as a result of defects in or encumbrances on the title.”]; Fidelity National Title Ins. Co. v. Miller (1989) 215 Cal.App.3d 1163, 1175, quoting Cal. Title Insurance Practice (Cont. Ed. Bar Supp. 1988) § 3.19, p. 37) [“‘A preliminary report is not an abstract of title. It only reflects the terms under which the insurer is willing to issue a policy of title insurance. The terms and conditions under which the policy of insurance may be issued may or may not reflect the true condition of record title. The insurer may choose to ignore or omit a possible exception to title based on an underwriting decision.’”] Lawrence v. Chicago Title Ins. Co. v. Miller (1987) 192 Cal.App.3d 70, 74-75 [“Title insurance is a contract for indemnity under which the insurer is obligated to indemnify the insured against losses sustained in the event that a specific contingency, e.g., the discovery of a lien or encumbrance affecting title occurs. [Citations.] . . . The policy . . . does not constitute a representation that the contingency insured against will not occur. [Citations.]”].)
Insurance Code section 12340 et seq. codified this distinction and gave it legal effect. Section 12340.11 specifically provides that preliminary reports, also known as “‘commitment[s]’” or “‘binder[s],’” “are not abstracts of title” and that “the rights, duties or responsibilities applicable to the preparation and issuance of an abstract of title” are not applicable to the issuance of any such report. (Ins. Code § 12340.11.) Instead, preliminary reports are “offers to issue a title policy subject to the stated exceptions set forth in the reports and such other matter as may be incorporated by reference therein.” (Ibid.) Such reports “constitute a statement of the terms and conditions upon which the issuer is willing to issue its title policy, if such offer is accepted.” (Ibid.) In contrast, an “abstract of title” is “a written representation, provided pursuant to a contract, whether written or oral, intended to be relied upon by the person who has contracted for the receipt of such representation, listing all recorded conveyances, instruments or documents which, under the laws of this state, impart constructive notice with respect to the chain of title to the real property described therein.” (Ins. Code § 12340.10.)
Prior to the enactment of section 12340 et seq., courts had held that a title insurer who prepared a preliminary report owed the same duty as an abstractor of title to “‘report all matters . . . which are readily discoverable from those public records ordinarily examined when a reasonably diligent title search is made’” and “‘list all matters of public record regarding the subject property in its preliminary report.’” (Jarchow, supra, 48 Cal.App.3d at pp. 938-939; see, e.g., White v. Western Title Ins. Co. (1985) 40 Cal.3d 870, 883; Wilkinson v. Rives (1981) 116 Cal.App.3d 641, 650.) Siegel and other cases made clear that the Insurance Code provisions at issue reversed that line of authority. (See, e.g., Siegel, supra, 46 Cal.App.4th at p. 1191 [“In enacting Insurance Code sections 12340.10 and 12340.11, the Legislature recognized that no reliance should ever be placed on a preliminary report or policy of title insurance to show the condition of title.”]; Herbert A. Crocker & Co. v. Transamerica Title Ins. Co. (1994) 27 Cal.App.4th 1722, 1727, fn. 6 [“The law is now clear that a preliminary report is not an abstract of title, and therefore does not carry rights, duties, or responsibilities associated with the preparation and issuance of such a document . . . For this reason an action for negligence will no longer lie against a title insurance company on the basis of its representations in the preliminary report.”]; Southland Title Corp. v. Superior Court (1991) 231 Cal.App.3d 530, 536 [“A preliminary report . . . is merely the inducement to purchase a title policy. It will no longer be treated or considered to have the legal consequence of an abstract of title.”].)
Although the provisions of Insurance Code section 12340 et seq. limit title insurers’ liability for negligent title searches undertaken for the purpose of providing its customer a preliminary report and title policy, they also make clear that failure to discover an impediment to title can give rise to negligence liability if the searcher had agreed to act as an abstractor of title. Insurance Code section 12340.10 recognizes that any entity performing a title search may agree to provide an abstract of title, a written document “intended to be relied upon by the person who has contracted for receipt of such representation, listing all recorded conveyances, instruments or documents which, under the laws of this state, impart constructive notice with respect to the chain of title to the real property described therein.” In Siegel, we cited section 12340.10 for the proposition that “the fact that a title insurer generally owes no duty to undertake a thorough search of the records or to disclose impediments to title does not mean that it would not be liable if it contracted to provide such a service. . . . ‘[A] person who contracts for the written representation known as an “abstract of title” will receive all of the rights associated with that written representation. . . . If negligently prepared, the abstractor obviously would be exposed to all liability which normally flows from the consequences of professional negligence.’” (46 Cal.App.4th at p. 1194, quoting Southland Title Corp. v. Superior Court, supra, 231 Cal.App.3d at p. 536.)
If FATCO agreed to provide an abstract of title here, it could be liable for a negligent search of the title records that failed to discover recorded encumbrances such as the 1915 Bond Act assessments. However, the facts as pled do not support such liability. According to the complaint and FAC, when ALI requested FATCO undertake a last-minute investigation of title records applicable to the parcels, FATCO “explained to ALI that securing a formal report would take some time, but that it was willing to provide some preliminary information by telephone based upon accessible records available for property profiles.” The complaint and FAC also stated that the only written documents received from FATCO were documents showing two 1915 Bond Act assessments. There were no allegations that the parties entered into “a contract, whether written or oral,” under which FATCO provided or agreed to provide “a written representation . . . listing all recorded conveyances, instruments or documents which, under the laws of this state, impart constructive notice with respect to the chain of title to the real property described therein” -- the two essential elements of an abstract of title as defined by Insurance Code section 12340.10.
Although ALI belatedly attempts to rely on Insurance Code section 12340.10, it has not suggested any additional facts that could be added to its pleading to support that FATCO agreed to provide an abstract of title. Instead, ALI contends in its reply brief that under the facts set forth in the complaint and FAC, FATCO was “arguably” acting as an abstractor of title “when it agreed to hastily review public records to inform ALI whether 1915 Bond Act liens existed” and that the documents provided by FATCO were tantamount to “an abstract limited to the specific liens [ALI] cared about.” Were we free to construct a judicial definition of “abstract of title,” ALI might hope to persuade us that the limited information provided warranted imposition of abstractor liability under the Jarchow line of cases. However, by enacting the Insurance Code provisions at issue, the Legislature has exercised its power to modify or abrogate rules of common law by eliminating rights that might otherwise have existed. (See Modern Barber Col. v. Cal. Emp. Stab. Com. (1948) 31 Cal.2d 720, 726; Ferreira v. Barham (1964) 230 Cal.App.2d 128, 130.) The statutory definition of “abstract of title” found in Insurance Code section 12940.10, forecloses imposition of abstractor liability on the informal, limited information ALI sought and obtained here. The trial court correctly sustained FATCO’s demurrer without leave to amend.
C. Liability of the County and Handley
The County and Handley contend with respect to all five of ALI’s claims (estoppel, rescission, declaratory relief, intentional and negligent deceit) that ALI’s remedies are limited to those found in the Revenue and Taxation Code for defective or improper tax sales. In addition, they contend they are immune from liability for misrepresentation and any other tortious acts related to the sale under the immunity provisions of Government Code sections 818.8 and 822.2 (immunity for misrepresentations), section 860.2 (immunity for matters relating to the collection of tax), and sections 815.2, subdivision (b) and 820.2 (immunity for discretionary acts). We agree that ALI’s claims as a whole are untenable because they are not based on Revenue and Taxation Code remedies available to purchasers at a tax sale. In addition, we agree that the claims for deceit and misrepresentation were subject to immunity under Government Code sections 818.8 and 822.2. We, therefore, do not address the other defenses raised.
1. Remedies Available to Tax Sale Purchaser
Sales of real property for failure to pay taxes and assessments due are governed by section 3351 et seq. of the Revenue and Taxation Code. Generally, after a property becomes “tax defaulted,” the owner has five years to redeem the property by paying the delinquent taxes and assessments. (See Rev. & Tax. Code § 3691; Craland, Inc. v. State of California (1989) 214 Cal.App.3d 1400, 1403-1404 (Craland).) Three statutes provide remedies to tax sale purchasers where the purchaser seeks rescission or reimbursement. Section 3728 states that where a court holds a tax deed “void,” it shall order the former owner to reimburse the purchaser the amount of taxes and assessments that the owner would have had to pay to redeem the property “had the purported tax sale not been held.” Section 3729 provides that in the same situation -- where a court holds a tax deed “void” -- “the purchaser at tax sale is entitled to a refund from the county of the amount paid as the purchase price in excess of the amount for which he or she has been reimbursed for taxes, penalties, and costs.” Section 3731 provides that “[w]hen a tax deed to a purchaser of property sold by the tax collector pursuant to this part is recorded and it is determined that the property should not have been sold, the sale may be rescinded by the board of supervisors with the written consent of the county legal adviser and the purchaser of the property,” as long as the property had not been transferred or conveyed to a bona fide purchaser for value or become subject to a bona fide encumbrance for value. In that situation, “the purchaser is entitled to a refund of the amount paid as the purchase price . . . .”
a. Exclusivity of Statutory Remedies
The first issue raised is whether, as the County and Handley contend and the trial court found, the statutory remedies are exclusive. This issue was debated in three relatively recent cases: Craland, supra, 214 Cal.App.3d 1400, Van Petten v. County of San Diego (1995) 38 Cal.App.4th 43 (Van Petten) and Schultz v. County of Contra Costa (1984) 157 Cal.App.3d 242 (Schultz). The court in Schultz concluded that additional remedies were available; the courts in Craland and Van Petten held that the statutory remedies were exclusive and precluded assertion of the types of claims asserted by ALI here. For the reasons that follow, we conclude that the holdings in Craland and Van Petten were correct.
The purchase of real property at a tax sale has always been a highly risky undertaking. The entity responsible for assessing taxes and conducting the sale might have made any number of errors in the run-up to the sale. (See, e.g., Routh v. Quinn (1942) 20 Cal.2d 488 [amount of the tax wrongly calculated]; Bell v. County of Los Angeles (1928) 90 Cal.App. 602 [property sold belonged to tax-exempt entity]; Brooks v. County of Tulare (1897) 117 Cal. 465 [same]; Conley v. Hawley (1934) 2 Cal.2d 23 [property sold twice by different taxing entities]; Holland v. Hotchkiss (1912) 162 Cal. 366 [state failed to give required statutory notice to property owner]; Johnson v. Taylor (1907) 150 Cal. 201 [same].)
Originally, where an error resulted in the sale being declared void, the tax sale purchaser, though innocent of wrongdoing and unlikely to have any knowledge of the entity’s mistakes, lost both the property and the sums paid, with no hope of reimbursement. (Loomis v. County of Los Angeles (1881) 59 Cal. 456; Brooks v. County of Tulare, supra, 117 Cal. at p. 468.) In Loomis v. County of Los Angeles, one of the earliest reported cases in this area, the county’s assessment was found to be “fatally defective” after a tax sale, and the purchaser “took no title to the lands attempted to be sold.” (59 Cal. at p. 456.) However, when the purchaser brought an action against the county to recover the amount paid, the court held: “There is no rule of law authorizing the [purchaser] to recover.” (Id. at p. 457.) Loomis was followed in Brooks v. County of Tulare, where the county mistakenly sold at a tax sale land owned by the United States and not subject to taxation or tax lien. The court reasoned that the purchaser’s decision to bid on the property was a “voluntary” one; therefore, “he cannot now maintain an action to recover back the money paid.” (Brooks, supra, at p. 468.)
For some time, the only relief afforded a purchaser of property at a tax sale later deemed void was granted when the original owner brought an action against the purchaser to reclaim or quiet title based on the sale being illegal and the title transferred void. In that situation, “the court required the owner of the property to pay the taxes legally assessed against the property [and paid by the purchaser to the selling entity at the time of sale] as a condition precedent to declaring the sale void and clearing the owner’s title.” (Coleman v. County of Los Angeles (1919) 180 Cal. 714, 717.) The reimbursement was not available if the purchaser had initiated the suit: “‘Where the purchaser under a sale which is not effective to pass title proceeds against the owner, the latter may stand upon his strict legal rights, and defend his title without tendering payment of any tax.’” (Id. at pp. 717-718, quoting Moyer v. Wilson (1913) 166 Cal. 261, 264.)
In Moyer, the purchaser of property at a tax sale brought an action to quiet title. The court found that the defendant was the true owner of the property because the county had not complied with statutory procedures for the collection of delinquent taxes, and further held that the purchaser was not entitled to reimbursement for the taxes paid.
In 1913, the Legislature provided an additional measure of relief to thwarted purchasers by enacting statutes (the precursors to sections 3728 and 3729 of the Revenue and Taxation Code) which applied when a tax sale was declared void in any action, and permitted the purchaser to recover from the owner, “the full amount of taxes, penalties and costs paid out and expended by him” and to recover from the selling entity, “refund of the amount paid into the county treasury as the purchase price of such property in excess of the amount for which he may have been reimbursed [by the owner] for taxes, penalties, and costs.” (Stats. 1913, ch. 299, § 7, p. 562; see Coleman v. County of Los Angeles, supra, 180 Cal. 714, 717.) There followed, however, no similar expansion of common law remedies. In Routh v. Quinn, supra, 20 Cal.2d 488 (Routh), the California Supreme Court addressed whether additional non-statutory remedies should be available to purchasers and answered that question in the negative. Routh presented the question whether “a tax assessor, his deputy and bondsman are liable to a purchaser of personal property at a delinquent tax sale for damages suffered by him due to the invalidity of the sale alleged to have resulted from negligence on the part of the assessor and his deputy in the computation of the tax payable.” (20 Cal.2d at p. 489.) The purchaser’s claim “relie[d] on the general proposition that a public officer is liable to respond in damages to one specially injured by his neglect to perform or negligent performance of an official ministerial duty to the extent of such special injury.” (Id at p. 490.) The court concluded that the individuals sued could not be liable, based on “[t]he fundamental principle” that “in tax sales the doctrine of caveat emptor applies in all its vigor” and “[a] purchaser of property at a tax sale takes the risk of any defect in the proceedings in the taxation process. No warranty of the validity or regularity of the proceedings exists.” (Ibid.) Although the rule of no recovery from the governmental entity conducting the sale was relaxed by enactment of the precursor to section 3279, “that statute must be strictly complied with and permits only the recovery there authorized.” (Routh v. Quinn, supra, at p. 491.) Because there was “no statute authorizing recovery against the tax assessor,” the claims asserted in Routh failed: “As [the purchaser] is not entitled to any assurance of the regularity of the tax proceedings, he is not entitled to insist that due care be exercised by the assessor or the county.” (Id. at pp. 491-492.)
The Supreme Court addressed a similar issue in People v. Chambers (1951) 37 Cal.2d 552 (Chambers), where the county wrongly assessed taxes on a property deeded to the state, leading to an improper and invalid tax sale. Thirteen years after the tax sale, the state sued the tax sale purchaser to quiet title. The trial court granted the decree, but made it conditional on the state’s payment to the purchaser of “the amount he paid for the property at the tax sale . . . and [an additional amount to compensate] for taxes subsequently levied on the property by San Diego County.” (Id. at p. 561.) Based on the “settled rule[s]” that “[w]here a statute provides for recovery, that remedy is exclusive” and “in the absence of statute, a purchaser from the state or public agency at a tax sale cannot recover from the seller the purchase price paid or the taxes subsequently assessed even though the taxes were illegally assessed or levied, the property was not subject to taxation or the tax deed was void,” the Supreme Court reversed that portion of the judgment. (Ibid.)
Against this backdrop, the court in Schultz, supra, 157 Cal.App.3d 242, in a split decision, announced a different course. The purchaser there was a carpenter who planned to build a residence for himself on a lot purchased at a tax sale. After the sale, he learned that the lot was unbuildable and worth less than half what he had paid. He sought rescission based on a failure of consideration and mistake. The court concluded that rescission was available because “the language of [the remedy provisions of the Revenue and Taxation Code] does not indicate that the remedies therein are the exclusive means for a purchaser to recover.” (157 Cal.App.3d at p. 247.) The court refused to follow the holdings of cases such as Routh and Chambers because those cases “consider[ed] distinguishable fact situations” and applied “stringent responsibilities of an antiquated era.” (Id. at p. 246.)
The court likewise rejected the reasoning of out-of-state authorities such as Anderson v. King County (1939) 200 Wash. 354 [93 P.2d 284]: “[W]here a statute provides for the reimbursement of purchasers at invalid tax sales[,] there can be no recovery under circumstances not within the terms of the statute.” (200 Wash at p. 361, citing Parrott v. Abernathy (1931) 58 S.D. 603 [237 N.W. 900] and Wellcome Co. v. Marshall County (1928) 174 Minn. 431 [219 N.W. 545].)
Within a few years, Division One of this District emphatically rejected the Schultz holding. (Craland, supra, 214 Cal.App.3d 1400.) The property at issue there was “‘underlain by a large landslide.’” (Id. at p. 1402.) Information concerning the property’s geological status was contained in a review prepared before the sale by the engineering geology section of the county engineer design division, but was not known to the purchaser. (Ibid.) Having brought suit against the state and county, the purchaser asserted that the defendants “breached their contractual ‘duty, as knowing sellers, to disclose . . . the landslides . . . prior to [the purchase]’” and that “defendants owed the same duty as to ordinary sellers of real property to disclose all known, hidden defects.” (Id. at pp. 1404-1405.) The court “refuse[d] to place the burden of searching [public] records on the State and County.” (Id. at p. 1408.) Based on “[t]he overwhelming body of decisional law governing tax sales,” the court “disagree[d] with Schultz” and held that “neither the State nor the County owes a nonstatutory duty of care with respect to the purchaser.” (Id. at pp. 1405, 1407.) Instead, “purchasers at a tax sale are limited to statutory remedies.” (Id. at pp. 1407-1408.)
A few years later, the court in Van Petten, supra, 38 Cal.App.4th 43, reached the same conclusion. The purchaser there had been given a brochure listing the assessed value of the parcels available for bid. At the auction, he was told that the assessed values “reflected ‘a recent appraisal of the current values.’” (Id. at p. 44.) He later learned that the value of property he had purchased had been overstated by a factor of 10. (Id. at p. 45.) He sued the county for restitution and rescission under a number of theories, including mistake, intentional and negligent misrepresentation, and breach of contract. (Ibid.) The court followed the “well-settled rule of Chambers and Craland that purchasers of property at a tax sale are limited to statutory remedies” and expressly rejected Schultz’s holding to the contrary. (Id. at p. 51.) Under the applicable statutes, the court concluded, “a purchaser at a tax sale is entitled to a refund of purchase money paid only where the court determines the tax deed is void ([Rev. & Tax. Code] § 3729) or the property ‘should not have been sold’ (§ 3731). There is no statutory remedy of rescission or refund based on . . . misrepresentation and breach of contract . . . .” (Van Petten, supra, 38 Cal.App.4that p. 51.)
Although the Supreme Court has not weighed in on this point since Chambers, in Quelimane Co., Inc. v. Stewart Title Guaranty Co., supra, 19 Cal.4th 26, it discussed challenges to tax deeds and cited Van Petten, Craland, and Chambers with apparent approval. (Id. at pp. 40-41.) More recently, in L&B Real Estate v. Housing Authority of the County of Los Angeles (2007) 149 Cal.App.4th 950, another case involving exempt property mistakenly sold, the purchaser sought a ruling requiring reimbursement of the purchase price before judgment was entered quieting title in the owner. Following Van Petten, Division Eight of this District held that the purchaser’s “sole remedy” was return of the purchase price under Revenue and Taxation Code section 3729, “which provides for proceedings where [the purchaser] can seek and obtain a refund from the County.” (149 Cal.App.4th at p. 959.)
In our view, the decisions of our Supreme Court in Routh and Chambers that a tax sale purchaser’s exclusive remedies are those provided by the statutes constitute binding precedent. Moreover, even were we free to consider the subject anew, we would not be persuaded that the holding in Schultz represents the correct path. As the dissent in Schultz observed: “The policies behind the caveat emptor rule in tax sales justify its application . . . Each bidder at a tax sale has his or her own undisclosed plans, foreseeable or unforeseeable, for use or development of the property. . . . It is a minimal burden on bidders to require them to obtain information about the property from public agencies before they bid. If [the purchaser there] had consulted the City of El Cerrito Building Department before he bid at the tax sale, he would have discovered, as he did by making such an inquiry one week later, that the property was unbuildable. [¶]. . . Should such a successful bidder at a tax sale be able to rescind the sale due to his unilateral mistake and his own failure to investigate? I think not.” (Schultz, supra, 157 Cal.App.3d at pp. 251-252, dis. opn. of King, J.)
Here, ALI had ample opportunity to uncover the assessments it now claims rendered the parcels worthless. It could have requested and paid for a formal search of title records. It could have made inquiries of Palmdale officials as it did a few days after the sale. The fact that the County and Handley were specifically aware of the information concerning the assessments, having been informed by Palmdale and St. John, has no legal significance. Neither negligence on the part of the entity (Routh) nor concealment of a known fact (Craland) can avoid the rule that has been followed for nearly a century: “[P]urchasers at a tax sale are limited to statutory remedies.” (Craland, 214 Cal.App.3d at pp. 1407-1408.) We therefore turn to whether any of the statutory remedies applies here.
b. Availability of Statutory Remedy
Sections 3728, 3729, and 3731 provide for reimbursement of a tax sale purchaser only where the deed is declared “void” or “it is determined that the property should not have been sold.” Although ALI did not address these provisions in its brief, we examine them in accordance with our obligation to “determine if the factual allegations of the complaint are adequate to state a cause of action under any legal theory.’” (Quelimane, supra, 19 Cal.4th at p. 38, quoting Barquis v. Merchants Collection Assn., supra, 7 Cal.3d at p. 103, italics omitted.)
The present situation is not analogous to those in which courts have declared a deed resulting from a tax sale “void” or determined that the property “should not have been sold” and ordered it returned to the original owner. Our review of the authorities in this area reveals that courts have found tax deeds void or that the property should not have been sold only where mistakes on the part of the taxing authority resulted in unfair dispossession of the property’s true owner. (See, e.g., Chambers, supra, 37 Cal.2d at p. 555 [declaring void tax deed resulting from tax improperly assessed on property owned by tax exempt governmental entity]; Johnson v. Taylor, supra, 150 Cal. at pp. 202-203 [where state failed to comply with statute requiring notice to owner of right to redemption, tax deed held void]; L&B Real Estate v. Housing Authority of the County of Los Angeles, supra, 149 Cal.App.4th at p. 958 [when tax exempt property mistakenly sold at tax sale, tax deed was “void from the inception”]; Nevada Irr. Dist. v. Keystone Copper Corp. (1964) 224 Cal.App.2d 523, 530 [tax deed that included subsurface rights deemed void where no tax assessed or due on those rights]; Nutting v. Herman Timber Co. (1963) 214 Cal.App.2d 650, 656 [where county mistakenly assessed same parcel twice, and owners paid all taxes legally due, sale based on nonpayment of improperly assessed taxes deemed void].) There is no allegation in the complaint or FAC that the County failed to comply with statutory procedures and notice requirements or lacked the right to convey the property at the tax sale. The fact that the property was purchased for a price that may have exceeded its fair market value does not render the sale improper or the deed that would have resulted void. Accordingly, none of the statutory remedies assists ALI here.
2. Governmental Immunity
Although we believe the authorities discussed above dispose of the entirety of ALI’s claims against the County and Handley, claims for deceit, fraud or misrepresentation against a governmental entity or its employees are also subject to the immunities set forth in Government Code sections 818.8 and 822.2. Section 818.8 provides: “[A] public entity is not liable for an injury caused by misrepresentation by an employee of the public entity, whether or not such misrepresentation be negligent or intentional.” Section 822.2 provides: “A public employee acting in the scope of his employment is not liable for an injury caused by his misrepresentation, whether or not such misrepresentation be negligent or intentional, unless he is guilty of actual fraud, corruption or actual malice.”
These immunities do not affect the liability of public entities and employees “based on contract or the right to obtain relief other than money or damages against a public entity or public employee.” (Gov. Code § 814; see City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 740-741; Craland, supra, 214 Cal.App.3d at p. 1405.) ALI did not assert a claim for breach of contract in the complaint or FAC, but sought leave to amend to state such a claim based on the theory that it was induced to enter into a contract to purchase the property as the result of misrepresentation. Such claims are not barred by governmental immunity under Government Code section 818.8. (Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 293-294 [although claim for misrepresentation was barred by section 818.8, plaintiff contractor retained cause of action in contract based on failure of governmental entity to impart its knowledge of difficulties to be encountered in project, rendering contractor unable to perform according to the contract provisions]; Arthur L. Sachs, Inc. v. City of Oceanside (1984) 151 Cal.App.3d 315, 322-323 [action by seller for rescission of contract for sale of property based on entity’s misrepresentations concerning appraised value of property not barred by section 818.8].) Here, however, ALI does not allege that the County agreed to terms not part of the ordinary statutory procedures governing tax sales. To permit assertion of a breach of contract claim under these circumstances would violate the rule that “purchasers at a tax sale are limited to statutory remedies.” (Craland, supra, 214 Cal.App.3d at pp. 1407-1408; see Rev. & Tax. Code §§ 3728, 3729, 3731.)
Whether ALI is attempting to revive its claims for deceit against the County is unclear. In its opposition below, it conceded that the County could not be sued for a misrepresentation made by its employee and offered to dismiss the County from the deceit claims. In its brief on appeal, it states that governmental entities are immune from “direct” responsibility for deceit and cites Government Code section 815.2 for the proposition that “[a] public entity is liable for injury proximately caused by an act or omission of an employee of the public entity within the scope of his employment if the act or omission would, apart from this section, have given rise to a cause of action against that employee or his personal representative.” If ALI is suggesting that section 815.2 supersedes section 818.8 and renders a governmental entity indirectly or vicariously liable for deceit or misrepresentation engaged in by an employee in the scope of his or her employment, it is mistaken. “[T]he immunity provisions to section 818.8 . . . prevail over the general statement of liability in section 815.2. . . . A public employee may be liable for actual fraud, but the public entity is wholly immune.” (Harshbarger v. City of Colton (1988) 197 Cal.App.3d 1335, 1340; accord, Burden v. County of Santa Clara (2000) 81 Cal.App.4th 244, 253; Masters v. San Bernardino County Employees Retirement Assn. (1995) 32 Cal.App.4th 30, 43.)
Handley’s liability for the alleged deceit turns on the interpretation of “actual fraud, corruption or actual malice,” the exception to the immunity of government employees set forth in Government Code section 822.2. ALI contends that to come within the exception, the complaint need only allege ordinary fraud as defined by Civil Code section 1572. As explained in Schonfeld v. City of Vallejo (1975) 50 Cal.App.3d 401, disapproved in part on other grounds in Morehart v. County of Santa Barbara (1994) 7 Cal.4th 725, adoption of that interpretation of section 822.2 would render it “unintelligible”: “[T]he statute would read, in essence: ‘A public employee is not liable for his intentional or negligent misrepresentation unless he is guilty of intentional or negligent misrepresentation.’ Such an interpretation would render the entire statute meaningless . . . .” (Id. at p. 409.) The court in Schonfeld held, instead, that “the immunity afforded by Government Code section 822.2 applies unless, in addition to the essentials of common law deceit, a public employee is motivated by corruption or actual malice, i.e., a conscious intent to deceive, vex, annoy or harm the injured party in his business.” (Schonfeld v. City of Vallejo, at p. 410; accord, Masters v. San Bernardino County Employees Retirement Assn., supra, 32 Cal.App.4th at p. 42.) No facts were pled in the complaint or FAC to support that Handley was motivated by corruption or conscious intent to deceive, vex, annoy or harm ALI.
Moreover, even were this case governed by the rules relating to ordinary deceit, ALI’s claim against Handley would fail. ALI alleges no affirmative misrepresentation. The deceit claims are based entirely on concealment or failure to disclose. There are four circumstances in which nondisclosure may constitute actionable fraud: “(1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant make partial representations but also suppresses some material facts.” (Heliotis v. Schuman (1986) 181 Cal.App.3d 646, 651; accord, OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 851; LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336.) “Each of the . . . circumstances in which nondisclosure may be actionable presupposes the existence of some . . . relationship between the plaintiff and defendant in which a duty to disclose can arise.” (LiMandri v. Judkins, at pp. 333-337.) “Where, as here, there is no fiduciary relationship, the duty to disclose generally presupposes a relationship grounded in ‘some sort of transaction between the parties. [Citations.] Thus, a duty to disclose may arise from the relationship between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement. [Citation.]’” (OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp., supra, 157 Cal.App.4th at p. 859, quoting LiMandri v. Judkins, supra, 52 Cal.App.4th at p. 337, fn. omitted.) However, a party such as Handley who is merely in an agency or employment relationship with one of the transacting parties owes no such duty. (Heliotis v. Schuman, supra, 181 Cal.App.3d at pp. 650-651 [attorney for seller who made no affirmative representation and who “did not attempt to persuade [the plaintiff] to purchase the property, and made no effort to interfere with whatever investigation [the plaintiff] chose to make,” not liable to plaintiff for undisclosed defects].) None of the circumstances necessary to assert a nondisclosure claim were alleged and ALI has suggested no additional facts it could plead which would support a claim for deceit based on nondisclosure.
In its reply brief, ALI asserts for the first time that the County generally distributes to registered bidders information concerning federal tax liens. These facts were not alleged below and would not, standing alone, create a duty where none otherwise existed.
DISPOSITION
The judgment is affirmed.
We concur: EPSTEIN, P. J., SUZUKAWA, J.