California Court of Appeals, Second District, Fourth Division
APPEAL from a judgment of the Superior Court of Los Angeles County, No. BC470486 Michael M. Johnson, Judge.
[Copyrighted Material Omitted]
Law Offices of W. Gary Kurtz and W. Gary Kurtz for Plaintiff and Appellant.
Early Sullivan Wright Gizer & Mcrae, Eric P. Early, William A. Wright, Christopher I. Ritter and Kevin S. Sinclair for Defendant and Respondent.
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 Action
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 was 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 interest acquired 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 ...