N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C U IT SEC UR ITY SER

VIC E FEDER

AL C R EDIT UNION, Plaintiff - Appe lla nt,
v. FIR ST AM ER IC AN TITLE INSUR ANC E C OM PANY, a C a l ifornia c orporation, De fe nda

nt - Appe lle e , a nd R INDLESB AC H FAM ILY, LLC , a Uta h Lim ite d Lia

bility C om

pa ny , De fe nda

nt. No. 12-55389 D.C . No. 2:10-c v-04824-SJOVB K
M EM O R ANDUM *

Appe a l from

the Unite d

Stat e s Distric t C ourt for the C e ntra l Distric t of C a lifornia S. Jam e s Ote ro, Distric t Judge , Pre siding Argue d and Subm i tte d

Oc tobe r 7, 2014 Pa sa de n a , C a l ifornia 

# FIL ED
OCT 28 2014 M OLLY C. DW Y ER, CLERK U

. S

. CO URT O F APPEALS

* This disposition is not a ppropria te for public a tion a

nd is not pre c e de nt e xc e pt a s provide d

by 9th C ir. R . 36-3.B e fore : HAW KINS an d GR AB ER , C irc uit Judge s , a

n d SEDW IC K, ** Distric t Judge
. C a lifornia ’ s Subdivide d Lands Ac t re quire s se lle rs of la nd subdivide d into five or m ore lots to obta

in a fina l public re port (“ FPR ” ) from the C a lifornia De pa rtm e nt of R e a l Esta

te (“ DR E” ) be fore se lling a ny of the subdivide d lots. C a l. B us. & Prof. C ode §§ 11000, 11010, 11018.2. R indle sba c h Fam ily , LLC , owne d unim prove d re a l prope rty in R i ve rside , C a lifornia , whic h wa s subje c t to the FPR
re quire m e nt be c a

use it c onsiste d of thirte e n subdivide d lots. Gilger Hom e s, LLC , optione d the prope rty

from R indle sba c h a

nd pursue d a

n FPR using First Am e ric an Title Insura

nc e C om pa ny a s its “ single re sponsiblepa rty ” for c om

m unic a tions with DR E. In tha

t role , First Am e ric an subm itte d Gilge r’ s a pplic a tion to DR

E. Howe ve r, Gilge r a

ba ndone d the proje c t, a

n d R indle sba c h sold twe lve of the lots to individua l buy e rs de spite the fa c t tha t no FPR ha d be e n issue d. Ne w Horiz ons C om

m unity C re dit Union fina

nc e d the purc ha se of e a c h of the t we lve lots. For e a c h loa

n, Ne w Horiz ons purc ha se d a n Am e ric an La

nd Title Assoc iat ion (“ A LTA” ) le nde r’ s title insura nc e polic y

from First Am e ric an. The s e polic ie s insure d

Ne w Horiz ons a

nd a ny suc c e e ding owne r of the inde bte dne ss. The polic e s c ove re d, a

m ong othe r things, losse s re late d to unm arke ta bility of title
.

** The Honora

b le John W . Se dwic k, Distric t Judge for the U.S. Distric t C ourt for the Distric t of Ala ska , sitting by de signa tion. 2Afte r Ne w Horiz ons wa s pla c e d in liquida t ion, Se c urity

Se rvic e Fe de ra l C re dit Union a c q

uire d its a sse ts, inc luding thetwe lve subdivision loa ns a nd re late d ALTA polic ie s. All of theloa ns we re in de fa

ult a t the tim e . Se c urity

Se rvic e the re a fte r obta i ne d title to the twe lve lots through fore c losure
. Se c urity Se rvic e subm itte d a

c la im to First Am e ric an unde r e a c h ALTA polic y , a lle ging tha

t the l a c k of a

n FPR re nde re d title unm arke ta

ble . First Am e ric an de nie d

c ove ra ge . Se c urity

Se rvic e the n

file d suit. Its se c ond a

m e nde d
c om pla i nt a lle ge d

se ve n c a use s of a c tion. Thedistric t c o urt gra nte d First Am e ric an sum

m a ry judgm e nt on a ll c la i m s. Se c urity Se rvic e a ppe a le d. W e
re vie w de nov o . Tourge man v . C ollins Fin. Se

rv s., Inc
. , 755 F.3d 1109, 1118 (9th C ir. 2014). The title insura

nc e polic ie s insure a ga inst losse s due to unm arke ta bility of title . “ M arke ta

ble title ” m e ans “ ‘ title whic h a re a sona ble purc ha se r, we ll inform e d
a s to the fa c ts a

nd the ir le ga l be arings, willing a nd a n x ious to pe rform

his c o ntra c t, would, in the e xe rc ise o f tha t prude nc e whic h busine s s m e n ordina rily bring to be ar
on suc h tra

nsa c tions, bewilling a

nd ought to a c c e p t.’ ” Me llinge r v . Tic or Title Ins. C o. of C al. , 113 C a l. R

ptr. 2d 357, 360 (C a l. C t. App. 2001) (quoting Hoc k i ng v . Title Ins. & Trust C

o . , 234 P.2d 625, 628 (C a l. 1951)). To de te rm ine whe the r a prope rty ’ s title is m arke ta b le , “ the que stion is whe the r a re a sona ble purc ha s e r, 3knowing tha t a third pa rty m ight c l a im

an inte re s t in the prope rty , would
ne ve rthe le ss proc e e d

with the tra

nsa c tion.” Id . at 361. Se c urity Se rvic e c onc e de s tha

t it holds uncha lle nge d title to the lots, but
m a inta ins tha

t titleto e a c h of the lots is not “ sa l e a ble ” without a

n FPR , a nd the re fore is unm a

rke t a ble . The la c k of a

n FPR and the ne e d to c om

p ly with the SLA be fore se lling thelots individua lly are m a tte rs a ffe c ting them arke ta bility of the p rope rty , not the m arke ta bility of the title
. Se e Hoc k

ing , 234 P.2d a

t 629; N ishiy ama v . Safe c o Title Ins. C o. , 149 C a l. R

ptr. 355, 358–59 (C a l. App. De p’ t Supe r. C t. 1978); D ollinge r De Anza Assoc

s. v . C hi. Title Ins. C o. , 131 C a l . R

ptr. 3d 596, 598 (C a l. C t. App. 2011). The distric t c ourt c orre c tly aw arde d sum

m a ry judgm e nt to First Am e ric an on the c ontra c t c la im s. It is e vide nt to us, a

nd Se c urity

Se rvic e c onc e de d at ora l argum e nt, tha t Se c urity Se rvic e ’ s tort c l a im s de pe nd on the e xiste nc e of unm arke ta ble title . Title be ing m arke ta

b l e , the distric t

c ourt’ s a ward of sum

m ary judgm e nt on those

c la im s
wa s a lso c orre c t. AFFIR M ED.

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