RNT Holdings, LLC v. United Gen. Title Ins. Co.

• Decision Date: 07 October 2014
• Docket Number: B250089
• Citation: 230 Cal.App.4th 1289,179 Cal.Rptr.3d 175
• Court: California Court of Appeals Court of Appeals
• Parties: RNT HOLDINGS, LLC, Plaintiff and Appellant, v. UNITED GENERAL TITLE INSURANCE COMPANY, Defendant and Respondent.

230 Cal.App.4th 1289

179 Cal.Rptr.3d 175

RNT HOLDINGS, LLC, Plaintiff and Appellant,

v.UNITED GENERAL TITLE INSURANCE COMPANY, Defendant and Respondent.

B250089

Court of Appeal, Second District, Division 4, California.

Filed October 7, 2014

APPEAL from a judgment of the Superior Court of Los Angeles County, Michael M. Johnson, Judge. Affirmed. (Super. Ct. No. BC470486)

Law Offices of W. Gary Kurtz and W. Gary Kurtz, Westlake Village, for Plaintiff and Appellant.

Early Sullivan Wright Gizer & Mcrae, Los Angeles, Eric P. Early, William A. Wright, Christopher I. Ritter and Kevin S. Sinclair for Defendant and Respondent.

MANELLA, J.

In the underlying action, appellant RNT Holdings, LLC (RNT) asserted claims for breach of insurance contract, bad faith, and unfair business practices against respondent United General Title Insurance Company (United). The trial court granted summary judgment and judgment on the pleadings regarding those claims. On appeal, RNT challenges only the grant of summary judgment on its claim for breach of insurance contract, contending the trial court erroneously determined that the claim failed in light of the terms of RNT's policy. We affirm.

RELEVANT FACTUAL AND PROCEDURAL BACKGROUND

A. Lender's Title Policy

The key issues before us concern the lender's title insurance policy that United issued to RNT in 2008 (the policy). Pertinent here are two provisions, namely, an exclusion and a condition of coverage. The policy stated “The following matters are expressly excluded from coverage of this policy....: 3. Defects, liens, encumbrances, adverse claims, or other matters [¶] (a) created, suffered, assumed, or agreed to by [RNT] ...” (exclusion 3(a)). In the portion of the policy entitled “Conditions of Coverage,” the policy also provided in section 10(b) that absent exceptional circumstances, “[t]he voluntary satisfaction or release of the Insured Mortgage shall terminate all liability of [United] ....” (condition 10(b)).

B. Events Preceding Underlying Action¹

The following facts are not in dispute: In June 2008, David Bergstein bought a house in Hidden Hills from Richard and Helen Ziff for $5.9 million (the property). Bergstein sought loans to finance the purchase from two sources, Surfside Funding Corporation (Surfside) and Ronald N. Tutor. Bergstein arranged for a $3.5 million loan from Surfside to be secured by a first deed of trust; the balance of the purchase funds were to be provided by Tutor or one of his business entities. To facilitate the transaction involving Tutor, on June 11, 2008, attorney Susan Tregub formed RNT and acted as its manager. Although Bergstein preferred that his personal trust hold the title to the property, Surfside required him to hold the property as an individual. During the pertinent period in June 2008, Tregub was also the trustee of Bergstein's personal trust.

On June 17, 2008, the day before Bergstein's purchase of the property closed, Bergstein executed a $3.5 million promissory note and deed of trust in favor of RNT (2008 RNT trust deed) with the intention that the latter would encumber the property, albeit in second position, subordinate to the Surfside deed of trust. On behalf of RNT, Tregub contacted Orange Coast Title Company (Orange Coast) to obtain a lender's title policy, and sent the 2008 RNT trust deed to Orange Coast. Tregub did not advise Orange Coast that Bergstein intended to transfer his title to the property to his trust.

On June 18, 2008, Bergstein's purchase of the property closed, and at 8:00 a.m. that morning, a grant deed was recorded transferring the property from the Ziffs to Bergstein. On the same day, Bergstein executed a separate grant deed transferring the property from himself to Tregub, as trustee of Bergstein's trust (Tregub grant deed). Tregub prepared that grant deed.

On June 20, 2008, the Tregub grant deed was recorded. On the same day, Tregub wrote to Orange Coast in her capacity as “authorized signatory” for RNT, stating: “This will acknowledge that I understand that you will be filing the [2008 RNT trust deed] with the Los Angeles County Recorder[']s office and that [it] will be behind the [Surfside trust deed]....” Tregub did not mention the Tregub grant deed. Three days later, on June 23, Orange Coast recorded the 2008 RNT trust deed and arranged for United to issue the underlying policy.

In September 2010, Kia Jam acquired Tutor's interest in RNT. In December 2010, RNT made a second loan of $4 million to Bergstein for the purpose of paying off the Surfside loan. In arranging the loan, which was secured by a deed of trust on the property (2010 RNT trust deed), RNT discovered that the Tregub grant deed had been recorded prior to the 2008 RNT trust deed.

In April 2011, RNT made a claim to United under the policy, asserting the existence of a title defect. Later, in May 2011, Bergstein's trust sold its interest in the property to Sever–North, Inc. (Sever–North), the sole shareholder of which is Bergstein's trust. Sever–North refinanced the loans from RNT, and executed a promissory note for $4.6 million and a trust deed in favor of KJMI Holdings, Inc. (KJMI), which was also owned by Jam.

During that transaction, Jam authorized RNT's manager, Ray Reyes, to execute two reconveyances with respect to the 2008 and 2010 RNT trust deeds. The reconveyance regarding the 2008 RNT trust deed stated that as “all sums secured by [that deed] have been fully paid,” RNT reconveyed “all the estate, title and interestacquired and now held by [RNT] in [that deed].” Before the trial court and on appeal, RNT has maintained that the purpose of the reconveyance regarding the 2008 RNT trust deed “was merely to make clear that [the 2008 RNT trust deed] did not encumber the [p]roperty. In reality, [that deed] had never encumbered the property and this paper trail was necessary to give a comfort level to a new lender.”

C. Underlying Action

In September 2011, RNT commenced the underlying action against United. RNT's second amended complaint (SAC), filed April 16, 2012, asserted a single claim against United for breach of an insurance contract. The SAC alleged the existence of the following title defect: “[O]n June 23, 2008, at the time of the issuance of [the policy], the insured property described in the policy was in fact and unbeknownst to [RNT] owned by ... Tregub, as [t]rustee of [Bergstein's personal trust].... [¶] ... Effectively, the policy ... was to insure that [the 2008 RNT trust deed] against the property would be in second position; however, it was not. Accordingly, what was supposed to be an insured secured promissory note against the property was in reality an unsecured promissory note.” The SAC further alleged that United failed to act on RNT's claim regarding the defect, and that the property had been sold to a third party “without [RNT's] $3,500,000.00 promissory note being paid off.”

In January 2013, United filed a cross-complaint against RNT for rescission of the insurance policy and declaratory relief, and also sought summary judgment on the second amended complaint, arguing that the claim for breach of insurance contract failed in light of exclusion 3(a) and condition 10(b). United contended that Tregub's conduct on behalf of RNT and Bergstein's personal trust created the purported title defect, and that RNT terminated the policy's coverage in 2011 by voluntarily releasing its interests under the 2008 RNT trust deed. While United's summary judgment motion was pending, RNT filed a cross-complaint against United, asserting claims for bad faith and unfair business practices (Bus. & Prof. Code, § 17200 et seq.).

On April 12, 2013, the trial court granted United's motion for summary judgment. Following that ruling, United requested judgment on the pleadings regarding RNT's cross-complaint, which the trial court also granted. After the trial court entered judgments in favor of United and against RNT on RNT's second amended complaint and cross-complaint, United dismissed its cross-complaint.

DISCUSSION

RNT contends the trial court erred in granting summary judgment on its claim for breach of insurance contract. For the reasons explained below, we disagree.²

A. Standard of Review

Generally, “[s]ummary judgment is proper if there is no triable issue of material fact and the moving party is entitled to summary judgment as a matter of law. (Code Civ. Proc., § 437c.)” (National Auto. & Cas. Ins. Co. v. Underwood (1992) 9 Cal.App.4th 31, 36, 11 Cal.Rptr.2d 316.) We review the trial court's ruling on United'smotion for summary judgment de novo. (Lunardi v. Great–West Life Assurance Co. (1995) 37 Cal.App.4th 807, 819, 44 Cal.Rptr.2d 56.)

As we explain below (see pts. B—D., post ), there are no material factual disputes, and the key issues concern the proper interpretation of the pertinent policy. Because there is no cognizable extrinsic evidence bearing on the meaning of the policy, its interpretation is a matter of law for our independent determination. (National Auto. & Cas. Ins. Co. v. Underwood, supra, 9 Cal.App.4th at p. 36, 11 Cal.Rptr.2d 316.) ³

B. Nature of Purported Title Defect

At the outset, we examine the nature of the title defect, if any, established by the undisputed facts. The SAC alleges that because Bergstein transferred his title to Tregub as trustee of his trust before June 23, 2008—that is, when the 2008 RNT trust deed was recorded—the property never secured RNT's 2008 loan to Bergstein. On appeal, RNT expands on that allegation, contending that the title defect “consists of the fact that the lien of the [2008 RNT trust deed] did not attach to [the property] because [Bergstein] did not hold title at the time the lien was executed and subsequently recorded.” (Italics added.) RNT thus offers two distinct theories regarding the purported defect. First, RNT suggests that the 2008 RNT trust deed attached no valid lien to the property because Bergstein executed that trust deed on June 17, 2008, the day before his...