Jarchow v. Transamerica Title Insurance Company

Melvin Jarchow and a building contractor and their wives (collectively, the purchasers) (plaintiffs) purchased a three-acre parcel in Placentia, California. The purchasers engaged Transamerica Title Insurance Company (Transamerica) (defendant) to conduct a title search and to furnish a preliminary report. During Transamerica’s research, it discovered a 1960 easement granted to Pete and Annie Perez (the Perez easement) and a 1958 easement granted to Frank and Kate Hill (the Hill easement). However, the preliminary report only included the Hill easement. The transaction closed, and Transamerica issued a title policy, which did not exclude the Hill easement or make any reference to the Perez easement. A few days later, Pete and Annie Perez (defendants) asserted their easement rights against the purchasers. The purchasers contacted Transamerica, and Transamerica took the position it had no duty to defend the purchasers because the Perez easement was excluded from the policy, which was factually incorrect. The purchasers then filed an action to quiet title against the Perezes and sought damages and attorney’s fees against Transamerica. The purchasers later filed a supplemental complaint asserting a number of tort claims against Transamerica, including emotional distress, seeking to recover general and punitive damages. Transamerica asserted that California law did not allow an award for emotional distress in a negligence action unless the distress was directly related to a physical injury. At trial, the purchasers testified that engaging in over two years of litigation had caused significant emotional harm, including chronic worry, lack of sleep, anxiety, and financial stress. At trial, the jury found that Transamerica’s negligent omission of the Perez easement legally caused some of the purchasers’ emotional distress. Transamerica filed an appeal.