FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

EQUITY INCOME PARTNERS, LP, an 

Arizona Limited Partnership; 

GALILEO CAPITAL PARTNERS 

LIMITED, a Cayman Islands 

Exempted Company,

Plaintiffs-Appellants,

v.

CHICAGO TITLE INSURANCE 

COMPANY, a Delaware 

Corporation,

Defendant-Appellee.

No. 14-15388

D.C. No.

2:11-cv-01614-

SMM

ORDER 

CERTIFYING 

QUESTIONS TO 

THE ARIZONA 

SUPREME 

COURT

Filed July 12, 2016

Before: Andrew J. Kleinfeld, Johnnie B. Rawlinson,

and Andrew D. Hurwitz, Circuit Judges.

Order
2 EQUITY INCOME PARTNERS V. CHICAGO TITLE

SUMMARY*

Certification to Arizona Supreme Court

The panel certified the following questions of law to the 

Arizona Supreme Court pursuant to Ariz. Rev. Stat. § 12-

1862:

1. When a lender purchases property by 

full-credit bid at a trustee’s sale, does 

Section 9 [of the standard form lender’s 

title insurance policies] apply, or does 

Section 2 apply?

2. Is a full-credit bid at a trustee’s sale a 

“payment” or “payment[] made” under 

sections 2 or 9 of the policies?

3. To what extent does a full-credit bid at a 

trustee’s sale either (a) terminate 

coverage under section 2(a)(i) of the 

policies, or (b) reduce coverage under 

Section 2 and any possible liability under 

section 7?

 

 * This summary constitutes no part of the opinion of the court. It has 

been prepared by court staff for the convenience of the reader.
EQUITY INCOME PARTNERS V. CHICAGO TITLE 3

ORDER

The issue for decision in this diversity case is whether a 

lender’s full-credit bid at an Arizona trustee’s sale 

constitutes payment under a lender’s title insurance policy. 

Arizona law is dispositive, but unsettled. We therefore 

request the Arizona Supreme Court to interpret, under 

Arizona law, the provisions of a standard form lender’s title 

insurance policy. See Ariz. Rev. Stat. §§ 12-1861 to -1867; 

Ariz. Sup. Ct. R. 27.

I. Factual and Procedural Background

We summarize the material facts and procedural history 

as they relate to the questions to be certified.

In May 2006, Scott Mead and Keith Vertes 

(“Borrowers”), obtained two $1.2 million loans from Equity 

Income Partners Limited Partnership (“Equity”) to purchase 

two adjacent parcels (the “Properties”) in Maricopa County, 

Arizona. LER 6, 174–83, 343, 351; IER 19–30.1 The loans 

were each secured by deeds of trust.2 LER 187, 198. At the 

time, the Properties were collectively appraised as worth 

over $3,000,000. IER 54–77. Borrowers purchased owner’s 

title insurance from Transnation Title Insurance Company; 

LER 14, 169; Lenders purchased an American Land Title 

Association Loan Policy (10-17-92) with ALTA 

 

 1 The Lenders’ excerpts of record are denominated “LER __” and the 

Insurer’s excerpts of record are denominated “IER __.”

 2 The deeds of trust were each recorded with an assignment of 

beneficial interest of an undivided eighty percent interest to Galileo 

Capital Partners, Ltd. IER 19–29, 32–53, 79, 91. We refer to Equity and 

Galileo collectively as “Lenders.”
4 EQUITY INCOME PARTNERS V. CHICAGO TITLE

Endorsement – Form 1 Coverage from Ticor Title Insurance 

Company.3 IER 371–85. Ticor’s successor-in-interest is 

Chicago Title Insurance Company (“Insurer”). IER 267.

In September 2006, Borrowers learned that they did not 

have legal access to the Properties, and so informed 

Transnation. LER 170, 287–88. Transnation sued Maricopa 

County, the owner of the surrounding land, in an attempt to 

establish access. IER 353.

In January 2007, Lenders submitted a claim to Insurer. 

LER 310. In February 2007, Insurer denied the claim, 

stating that Lenders had not provided evidence of “any 

actual loss.” LER 311–12.

Borrowers failed to make payments on the loans. IER 

134. In March 2007, Lenders noticed trustees’ sales for the 

Properties. See Ariz. Rev. Stat. § 33-808; see also IER 501–

06. Shortly before the scheduled sales, Borrowers asked 

Transnation to make the loan payments. IER 248–49. With 

Lenders’ agreement, Transnation began making interestonly monthly payments “until the access issue is resolved.”4 

IER 134–35.

In March 2010, the Superior Court found in favor of 

Maricopa County in Transnation’s suit seeking access to the 

Properties. IER 265. Transnation stopped making payments 

 

 3 The parties agree this is a standard form lender’s insurance policy; no 

endorsements or exceptions are at issue.

 4 At Borrowers’ request, Lenders extended the due date on the loans 

from November 2007 to July 2011. IER 508–22, 136–147; LER 291–

302. The trustee’s sale was likewise postponed. LER 289–302; see Ariz. 

Rev. Stat. § 33-810.
EQUITY INCOME PARTNERS V. CHICAGO TITLE 5

on the loans in August 2010, and Borrowers made no further 

payments.5 IER 267–68. On January 18, 2011, Lenders 

purchased the Properties at two trustees’ sales through fullcredit bids totaling over $2.6 million.6 See Ariz. Rev. Stat. 

§§ 33-810(A), 33-811 (providing for credit bids); see also 

IER 536–37; LER 315, 324.

In October 2010, Lenders submitted a claim to Insurer 

for the $1.2 million amount of each loan. LER 305–09. In 

July 2011, Lenders filed this suit in Maricopa County 

Superior Court; Insurer removed to the United States District 

Court for the District of Arizona. LER 320–30, 355–65.

In August 2011, Insurer obtained an appraisal of the 

Properties which set the diminution of value of the parcels 

caused by the lack of ingress/egress at $343,000 as of the 

foreclosure sale date. LER 127–29. Insurer issued Lenders 

a check for that amount and stated that it considered the 

matter concluded. LER 122–25, 128, 132.

In September 2012, the district court ruled that Lenders 

“suffered loss at the time they made the loans in reliance 

upon the Policies,” in 2006. LER 37–41.

Insurer then obtained appraisals for the diminution of 

value of the Properties because of the lack of ingress or 

egress as of the loan date, May 16, 2006; that diminution of 

value was collectively appraised at $1,346,000. IER 743–

49.

 5 By then, Lenders had been paid over $1.4 million in interest. IER 

267–68.

 6 The bids were for $1,310,315.84 and $1,310,409.34. IER 536–40.
6 EQUITY INCOME PARTNERS V. CHICAGO TITLE

On January 31, 2013, Insurer filed a motion for partial 

summary judgment, arguing, inter alia, that Lenders’ fullcredit bids should be “treated as actual payments of the 

principal of the indebtedness . . . thus reducing the amount 

of title insurance.” IER 333–34. On February 1, 2013, 

Lenders filed a second motion for partial summary 

judgment, arguing that the loss amount was $1,003,000 – the 

result of subtracting the $343,000 payment Insurer had 

already made from the $1,346,000 diminution of value as of 

May 16, 2006 in Insurer’s second appraisal. IER 714–20, 

744, 748, 824.

On December 11, 2013, the district court granted 

Insurer’s motion, ruling that Lenders’ “credit bids 

constituted payments on the ‘principal of the indebtedness,’ 

thereby ‘reducing the amount of insurance pro tanto.’” 

Memorandum of Decision and Order, Equity Income 

Partners, L.P. v. Chi. Title Ins. Co., No. 2:11-cv-1614-SMM 

(D. Ariz. Dec. 11, 2013) (“Decision and Order”), ECF No. 

123 at 11 (alteration omitted) (quoting policy § 9(b)); see 

also LER 16. Discussing a prior decision from the District 

of Arizona, the district court said that “the Arizona Supreme 

Court’s decision in Nussbaumer [v. Superior Court ex rel. 

McGuire, 489 P.2d 843, 845–46 (Ariz. 1971)] necessarily 

assumes full-credit bids extinguish the debtor’s obligation to 

lender.” Decision and Order at 12 (citing M & I Bank, FSB 

v. Coughlin, 805 F. Supp. 2d 858, 867–68 (D. Ariz. 2011)); 

see also LER 17. Assuming it was “unambiguous” that the 

amount of insurance under the policies was limited to “the 

satisfaction of the underlying mortgage,” the court held that 

by submitting full-credit bids, Lenders’ “payments to 

themselves” reduced the amount of insurance to nothing, 

because they had extinguished “the security interest and 
EQUITY INCOME PARTNERS V. CHICAGO TITLE 7

borrower’s debt.” Decision and Order at 13; see also LER 

18.7

At the parties’ request, the court entered final judgment 

“with respect to the entire breach of contract claim” and 

stayed further proceedings. Order, Equity Income, No. 2:11-

cv-1614-SMM, ECF No. 127 at 4; see also IER 1195. 

Lenders timely appealed the district court’s grant of partial 

summary judgment to Insurer to the Ninth Circuit. LER 420.

II. Policy Language

The Insurer’s policy “insures . . . against loss or damage, 

not exceeding the Amount of Insurance . . . sustained or 

incurred by the insured by reason of . . . [u]nmarketability of 

the title; [or] [l]ack of a right of access to and from the 

land.”8 IER 371. Section 9 of the policy states: 

9. Reduction of Insurance; Reduction or 

Termination of Liability

(a) All payments under this policy, except 

payments made for costs, attorneys’ fees 

and expenses, shall reduce the amount of 

the insurance pro tanto. However, any 

payments made prior to the acquisition of 

 

 7 See Decision and Order at 13 (citing A.R.S. §§ 33-801(5), 33-814(D); 

M & I Bank, FSB v. Coughlin, 805 F. Supp. 2d 858, 865–68 (D. Ariz. 

2011); ING Bank, FSB v. Mata, 2:09-cv-748-GMS, 2009 WL 4672797, 

at *4–6 (D. Ariz. Dec. 3, 2009); 333 W. Thomas Med. Bldg. Enters. v. 

Soetantyo, 976 F. Supp. 1298, 1301 (D. Ariz. 1995); and Nussbaumer v. 

Superior Court ex rel. McGuire, 489 P.2d 843, 845–46 (Ariz. 1971)).

 8 There are two title insurance policies, one for each parcel, with 

identical terms. IER 363–85.
8 EQUITY INCOME PARTNERS V. CHICAGO TITLE

title to the estate or interest as provided in 

Section 2(a) of these Conditions and 

Stipulations shall not reduce pro tanto the 

amount of the insurance afforded under 

this policy except to the extent that the 

payments reduce the amount of the 

indebtedness secured by the insured 

mortgage.

(b) Payment in part by any person of the 

principal of the indebtedness, or any other 

obligation secured by the insured 

mortgage, or any voluntary partial 

satisfaction or release of the insured 

mortgage, to the extent of the payment, 

satisfaction or release, shall reduce the 

amount of insurance pro tanto. The 

amount of insurance may thereafter be 

increased by accruing interest and 

advances made to protect the lien of the 

insured mortgage and secured thereby, 

with interest thereon, provided in no 

event shall the amount of insurance be 

greater than the Amount of Insurance 

stated in Schedule A.

(c) Payment in full by any person or the 

voluntary satisfaction or release of the 

insured mortgage shall terminate all 

liability of the Company except as 

provided in Section 2(a) of these 

Conditions and Stipulations.

IER 374. In turn, section 2, titled “Continuation of 

Insurance,” provides:
EQUITY INCOME PARTNERS V. CHICAGO TITLE 9

(a) After Acquisition of Title. The coverage 

of this policy shall continue in force as of 

Date of Policy in favor of (i) an insured who 

acquires all or any part of the estate or interest 

in the land by foreclosure, trustee’s sale, 

conveyance in lieu of foreclosure, or other 

legal manner which discharges the lien of the 

insured mortgage; [or] (ii) a transferee of the 

estate or interest so acquired from an insured 

corporation, provided the transferee is the 

parent or wholly-owned subsidiary of the 

insured corporation, and their corporate 

successors by operation of law and not by 

purchase, subject to any rights or defenses the 

Company may have against any predecessor 

insureds. . . .

. . . .

(c) Amount of Insurance. The amount of 

insurance after the acquisition or after the 

conveyance shall in neither event exceed the 

least of: (i) the Amount of Insurance stated 

in Schedule A; [or] (ii) the amount of the 

principal of the indebtedness secured by the 

insured mortgage as of Date of Policy, 

interest thereon, expenses of foreclosure, 

amounts advanced pursuant to the insured 

mortgage to assure compliance with laws or 

to protect the lien of the insured mortgage 

prior to the time of acquisition of the estate or 

interest in the land and secured thereby and 

reasonable amounts expended to prevent 

deterioration of improvements, but reduced 

by the amount of all payments made . . . .
10 EQUITY INCOME PARTNERS V. CHICAGO TITLE

IER 372–73. Other potentially relevant policy provisions 

are sections 7 and 10. Section 7 provides:

7. Determination and Extent of Liability

This policy is a contract of indemnity against 

actual monetary loss or damage sustained or 

incurred by the insured claimant who has 

suffered loss or damage by reason of matters 

insured against by this policy and only to the 

extent herein described.

(a) The liability of the Company under this 

policy shall not exceed the least of: (i) the 

Amount of Insurance stated in Schedule A, 

or, if applicable, the amount of insurance as 

defined in Section 2(c) of these Conditions 

and Stipulations; (ii) the amount of the 

unpaid principal indebtedness secured by the 

insured mortgage as limited or provided 

under Section 8 of these Conditions and 

Stipulations or as reduced under Section 9 of 

these Conditions and Stipulations, at the time 

the loss or damage insured against by this 

policy occurs, together with interest thereon; 

or (iii) the difference between the value of the 

insured estate or interest as insured and the 

value of the insured estate or interest subject 

to the defect, lien or encumbrance insured 

against by this policy.

(b) In the event the Insured has acquired the 

estate or interest in the manner described in 

Section 2(a) of these Conditions and 

Stipulations or has conveyed the title, then 
EQUITY INCOME PARTNERS V. CHICAGO TITLE 11

the liability of the Company shall continue as 

set forth in Section 7(a) of these Conditions 

and Stipulations.

IER 373. Section 10 provides:

10. Liability Noncumulative

If the insured acquires title to the estate or 

interest in satisfaction of the indebtedness 

secured by the insured mortgage, or any part 

thereof, it is expressly understood that the 

amount of insurance under this policy shall 

be reduced by any amount the Company may 

pay under any policy insuring a mortgage to 

which exception is taken in Schedule B 

[listing 2006 tax liens, water rights, items on 

a boundary survey, etc., see IER 378] or to 

which the Insured has agreed, assumed, or 

taken subject, or which is hereafter executed 

by an insured and which is a charge or lien on 

the estate or interest described or referred to 

in Schedule A [listing Borrower’s mortgage], 

and the amount so paid shall be deemed a 

payment under this policy.

IER 374.

III. Parties’ Arguments

Lenders argue that the district court erred because 

(1) section 9 of the policy does not define “payment” and, 

because the policies were drafted by Insurer, the word must 

be interpreted in Lenders’ favor because their full-credit bid 

did not involve the payment of any money, and (2) the 

court’s holding “is in direct conflict with the provisions of 
12 EQUITY INCOME PARTNERS V. CHICAGO TITLE

Section 10 of the Policies” which make “clear that even if 

the insured releases its insured mortgage in exchange for title 

to the secured property, coverage under the policy is not

extinguished; it is simply subject to being reduced by any 

payments the insurer may make on other excepted 

mortgages or prior, superior liens.”

Insurer, on the other hand, argues that the district court 

“correctly concluded that by acquiring the Property by full 

credit bids, Equity effectively paid to itself the outstanding 

balance of the debt, as well as interest and the costs of 

foreclosure, in exchange for title to the property.” Because 

Lenders were paid in full, Insurer argues, “Equity’s fullcredit bids at the trustee’s sale reduced Equity’s 

compensable damages under the title insurance policies to 

zero.”

IV. Certified Questions and Further Proceedings

Based on the foregoing, we respectfully certify the 

following questions to the Arizona Supreme Court pursuant 

to Ariz. Rev. Stat. § 12-1862:

1. When a lender purchases property by 

full-credit bid at a trustee’s sale, does Section 

9 apply, or does Section 2 apply?

2. Is a full-credit bid at a trustee’s sale a 

“payment” or “payment[] made” under 

sections 2 or 9 of the policies?

3. To what extent does a full-credit bid at a 

trustee’s sale either (a) terminate coverage 

under section 2(a)(i) of the policies, or 

(b) reduce coverage under Section 2 and any 

possible liability under section 7?
EQUITY INCOME PARTNERS V. CHICAGO TITLE 13

Our framing of the questions is not intended to restrict the 

Arizona Supreme Court’s consideration of these issues and 

the Court should reformulate the questions presented as it 

sees fit. Amaker v. King Cty., 540 F.3d 1012, 1019 (9th Cir. 

2008).

The Clerk of Court is hereby ordered to transmit 

forthwith to the Arizona Supreme Court, under official seal 

of the United States Court of Appeals for the Ninth Circuit, 

the original and six copies of this order; at the request of the 

Clerk of the Arizona Supreme Court, the Clerk of Court shall 

transmit copies of such portions of the record as the Arizona 

Supreme Court deems necessary to a determination of the 

certified questions.

Further proceedings in the Ninth Circuit are stayed 

pending the Court’s decision on whether it will accept 

review, and if so, receipt of the answer to the certified 

questions. The case is withdrawn from submission until 

further order. The panel will resume control and jurisdiction 

over the case and the certified questions either when the 

Court answers the certified questions or declines to answer 

the questions. The parties shall file a joint report informing 

this court of the Arizona Supreme Court’s decision to 

decline to answer, or, of its answers to the certified 

questions.

V. Counsel of Record

Counsel of record for Plaintiffs-Appellants are as 

follows:

Dennis I. Wilenchik

Tyler Quinn Swensen

Wilenchik & Bartness PC

2810 North Third Street, Suite 103
14 EQUITY INCOME PARTNERS V. CHICAGO TITLE

Phoenix, Arizona 85004

Phone number (602) 606-2810

Counsel of record for Defendants-Appellees are as 

follows:

Daniel E. Fredenberg

Fredenberg Beams

4747 N. 7th Street, Suite 402

Phoenix, Arizona 85014

Phone number (602) 595-9299

Patrick J. Davis

Nathaniel B. Rose

Fidelity National Law Group

2355 E. Camelback Road, Suite 900

Phoenix, Arizona 85016

Phone number (602) 889-8150

It is so ORDERED.

Johnnie B. Rawlinson

United States Circuit Judge, Presiding