NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SECURITY SERVICE FEDERAL

CREDIT UNION,

 Plaintiff - Appellant,

 v.

FIRST AMERICAN TITLE INSURANCE

COMPANY, a California corporation,

 Defendant - Appellee,

 and 

RINDLESBACH FAMILY, LLC, a Utah

Limited Liability Company,

 Defendant.

No. 12-55389

D.C. No. 2:10-cv-04824-SJOVBK

MEMORANDUM*

Appeal from the United States District Court

for the Central District of California

S. James Otero, District Judge, Presiding

Argued and Submitted October 7, 2014

Pasadena, California

FILED

OCT 28 2014

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

 * This disposition is not appropriate for publication and is not precedent

except as provided by 9th Cir. R. 36-3.
Before: HAWKINS and GRABER, Circuit Judges, and SEDWICK,** District

Judge.

 

California’s Subdivided Lands Act requires sellers of land subdivided into

five or more lots to obtain a final public report (“FPR”) from the California

Department of Real Estate (“DRE”) before selling any of the subdivided lots. Cal.

Bus. & Prof. Code §§ 11000, 11010, 11018.2. Rindlesbach Family, LLC, owned

unimproved real property in Riverside, California, which was subject to the FPR

requirement because it consisted of thirteen subdivided lots. Gilger Homes, LLC,

optioned the property from Rindlesbach and pursued an FPR using First American

Title Insurance Company as its “single responsible party” for communications with

DRE. In that role, First American submitted Gilger’s application to DRE.

However, Gilger abandoned the project, and Rindlesbach sold twelve of the lots to

individual buyers despite the fact that no FPR had been issued.

New Horizons Community Credit Union financed the purchase of each of

the twelve lots. For each loan, New Horizons purchased an American Land Title

Association (“ALTA”) lender’s title insurance policy from First American. These

policies insured New Horizons and any succeeding owner of the indebtedness. 

The polices covered, among other things, losses related to unmarketability of title.

 ** The Honorable John W. Sedwick, District Judge for the U.S. District

Court for the District of Alaska, sitting by designation.

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After New Horizons was placed in liquidation, Security Service Federal

Credit Union acquired its assets, including the twelve subdivision loans and related

ALTA policies. All of the loans were in default at the time. Security Service

thereafter obtained title to the twelve lots through foreclosure. 

Security Service submitted a claim to First American under each ALTA

policy, alleging that the lack of an FPR rendered title unmarketable. First

American denied coverage. Security Service then filed suit. Its second amended

complaint alleged seven causes of action. The district court granted First

American summary judgment on all claims. Security Service appealed. We

review de novo. Tourgeman v. Collins Fin. Servs., Inc., 755 F.3d 1109, 1118 (9th

Cir. 2014). 

The title insurance policies insure against losses due to unmarketability of

title. “Marketable title” means “‘title which a reasonable purchaser, well informed

as to the facts and their legal bearings, willing and anxious to perform his contract,

would, in the exercise of that prudence which business men ordinarily bring to bear

on such transactions, be willing and ought to accept.’” Mellinger v. Ticor Title Ins.

Co. of Cal., 113 Cal. Rptr. 2d 357, 360 (Cal. Ct. App. 2001) (quoting Hocking v.

Title Ins. & Trust Co., 234 P.2d 625, 628 (Cal. 1951)). To determine whether a

property’s title is marketable, “the question is whether a reasonable purchaser,

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knowing that a third party might claim an interest in the property, would

nevertheless proceed with the transaction.” Id. at 361. 

Security Service concedes that it holds unchallenged title to the lots, but

maintains that title to each of the lots is not “saleable” without an FPR, and

therefore is unmarketable. The lack of an FPR and the need to comply with the

SLA before selling the lots individually are matters affecting the marketability of

the property, not the marketability of the title. See Hocking, 234 P.2d at 629;

Nishiyama v. Safeco Title Ins. Co., 149 Cal. Rptr. 355, 358–59 (Cal. App. Dep’t

Super. Ct. 1978); Dollinger DeAnza Assocs. v. Chi. Title Ins. Co., 131 Cal. Rptr. 3d

596, 598 (Cal. Ct. App. 2011). The district court correctly awarded summary

judgment to First American on the contract claims.

It is evident to us, and Security Service conceded at oral argument, that

Security Service’s tort claims depend on the existence of unmarketable title. Title

being marketable, the district court’s award of summary judgment on those claims

was also correct.

AFFIRMED.

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