Court Opinion

ID: 2740407
Source: CourtListenerOpinion
Date Created: 2014-10-07 20:03:04.960236+00
Date Added: 2024-06-11T10:04:11.856106
License: Public Domain

Filed 10/7/14 RNT Holdings v. United General Title Ins. Co. CA2/4
               NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
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           IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                   SECOND APPELLATE DISTRICT

                                                DIVISION FOUR

RNT HOLDINGS, LLC,                                                   B250089
                                                                     (Los Angeles County
                Plaintiff and Appellant,                             Super. Ct. No. BC470486)

v.

UNITED GENERAL TITLE
INSURANCE COMPANY,

              Defendant and Respondent.

         APPEAL from a judgment of the Superior Court of Los Angeles County,
Michael M. Johnson, Judge. Affirmed.
         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)).

                                            2
      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

1       Our summary of the facts disregards certain items of evidence offered by RNT that
the trial court excluded in ruling on United’s motion for summary judgment. Under the
summary judgment statute, we examine the evidence submitted in connection with the
summary judgment motion, with the exception of evidence to which objections have been
appropriately sustained. (Mamou v. Trendwest Resorts, Inc. (2008) 165 Cal. App. 4th 686,
711; Code Civ. Proc., § 437c, subd. (c).) Here, United asserted numerous evidentiary
objections to RNT’s showing, which the trial court sustained in their entirety. Although
RNT does not challenge those rulings on appeal, its opening brief relies on the evidence.
Because RNT’s failure to contest the rulings forfeits any contention of error regarding
them, we exclude the pertinent evidence from our discussion.

                                            3
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.

                                             4
       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 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.”

                                             5
      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

2       As RNT does not challenge the propriety of judgment on the pleadings regarding
its other claims, RNT has forfeited all contentions of error regarding those claims.
(Horowitz v. Noble (1978) 79 Cal. App. 3d 120, 138-139; 9 Witkin, Cal. Procedure (5th ed.
2008) Appeal, § 701, pp. 769-771.)

                                          6
       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.) We review the trial court’s ruling on United’s
motion for summary judgment de novo. (Lunardi v. Great-West Life Assurance
Co. (1995) 37 Cal. App. 4th 807, 819.)
       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.)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

3      To the extent our inquiry requires us to interpret the terms of the policy, we apply
established rules of contract interpretation. (E.M.M.I. Inc. v. Zurich American Ins. Co.
(2004) 32 Cal. 4th 465, 470.) Under these rules, ‘“the mutual intention of the parties at
the time the contract is formed governs interpretation. [Citation.] Such intent is to be
inferred, if possible, solely from the written provisions of the contract. [Citation.] The
“clear and explicit” meaning of these provisions, interpreted in their “ordinary and
popular sense,” unless “used by the parties in a technical sense or a special meaning is
given to them by usage” [citation], controls judicial interpretation. [Citation.]’
[Citations.] A policy provision will be considered ambiguous when it is capable of two or
more constructions, both of which are reasonable. [Citation.]” (Waller v. Truck Ins.
Exchange, Inc. (1995) 11 Cal. 4th 1, 18-19.)

                                            7
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 purchase of the property
closed. Second, RNT maintains that because Tregub as trustee held title to the
property when the 2008 RNT trust deed was recorded, RNT’s lien never
encumbered the property.
        We reject RNT’s contentions, which misidentify the title defect (if any)
created by the transactions from June 17 to 23, 2008. As explained below, the
2008 RNT trust deed imposed a valid lien on the property, and both of RNT’s
theories regarding the nature of the defect fail. Rather, the only potential title
defect (if any) was that a third party who obtained the property as a bona fide
purchaser for value might take the property free of RNT’s lien.4

4      We recognize that the trial court, in granting summary judgment, did not identify
the precise nature of the title defect or determine whether the 2008 RNT trust deed
imposed a valid lien on the property. However, we may affirm the summary judgment on
a theory not relied upon by the trial court, provided that the parties have had an adequate
opportunity to address that theory. (Byars v. SCME Mortgage Bankers, Inc. (2003) 109
Cal. App. 4th 1134, 1147; Bains v. Moores (2009) 172 Cal. App. 4th 445, 471, fn. 39; Code
Civ. Proc., 437c, subd. (m)(2).)
       That requirement is satisfied here. Before the trial court and in its respondent’s
brief on appeal, United has argued that the 2008 RNT trust deed imposed a valid lien on
the property, and that the defect (if any) concerned only future bona fide purchasers for
value. United first raised that theory in its reply to RNT’s opposition to the motion for
summary judgment, and United’s brief on appeal also asserts it. We therefore conclude
(Fn. continued on next page.)

                                             8
       We begin with RNT’s first theory, namely, that the 2008 RNT trust deed
attached no valid lien to the property because Bergstein executed that deed before
his purchase of the property closed. When a creditor executes a trust deed or
mortgage to secure a loan before acquiring title to the relevant property, the trust
deed or mortgage ordinarily attaches a lien to the property as soon as the creditor
obtains that title.5 (Barberi v. Rothchild (1936) 7 Cal. 2d 537, 535-536; Perego v.
Seltzer (1968) 260 Cal. App. 2d 825, 829; Civ. Code, §§ 1106, 2930.) As explained
in Perego, “it is well settled that a trust deed creates a valid lien on real property to
secure a debt for which it is executed, even though the trustor has no title to the
property at the time of the execution of the instrument, provided he subsequently
acquires title thereto during the life of the deed of trust. Title to real property
acquired after it is mortgaged is deemed to be covered by the lien on the theory
that the mortgagor is estopped from denying title under such circumstances.” (260
Cal.App.2d at p. 829.) Accordingly, the 2008 RNT trust deed imposed a valid lien
on the property when Bergstein acquired title to it.
       RNT’s second theory also fails. Recordation of a trust deed is not usually
required for the validity of a trust deed, but merely affects its potential efficacy
regarding subsequent bona fide purchasers for value. (Wells Fargo Bank v. PAL
Investments, Inc. (1979) 96 Cal. App. 3d 431, 438; Boye v. Boerner (1940) 38
Cal. App. 2d 567, 569-570; Civ. Code, § 1217.) The main purpose of the recording
laws is “to protect those who honestly believe they are acquiring a good title, and

that the theory is properly available to us as a ground for affirming summary judgment.
(See Byars v. SCME Mortgage Bankers, Inc., supra, 109 Cal.App.4th at p. 1147; Bains v.
Moores, supra, 172 Cal.App.4th at p. 471, fn. 39.)
5      Generally, “in California there is little practical difference between mortgages and
deeds of trust.” (Domarad v. Fisher & Burke, Inc. (1969) 270 Cal. App. 2d 543, 553.)

                                             9
who invest some substantial sum in reliance on that belief.” (Beach v.
Faust (1935) 2 Cal. 2d 290, 292-293.) Generally, to be a bona fide purchaser for
value, the buyer must (1) purchase the property in good faith for value, and (2)
have no knowledge or notice -- actual or constructive -- of the asserted rights of
another. (Melendrez v. D & I Investment, Inc. (2005) 127 Cal. App. 4th 1238,
1251; Gates Rubber Co. v. Ulman (1989) 214 Cal. App. 3d 356, 364.) Ordinarily, a
buyer satisfying those elements “takes the property free of such unknown rights.
[Citations.]” (Hochstein v. Romero (1990) 219 Cal. App. 3d 447, 451.)
      In view of these principles, the events following Bergstein’s acquisition of
title to the property, up to and including the recording of the 2008 RNT trust deed,
did not invalidate the lien imposed on the property by that deed. It is undisputed
that on June 17, 2008, Tregub contacted Orange Coast in her capacity as RNT’s
manager and forwarded the 2008 RNT trust deed to Orange Coast. For that
reason, Tregub was aware of the 2008 RNT trust deed when Bergstein executed
the Tregub grant deed, that is, the grant deed conveying title to the property to
Tregub as trustee of Bergstein’s trust. Tregub’s knowledge of the 2008 RNT trust
deed precluded her from being a bona fide purchaser for value when she acquired
title as the trustee of Bergstein’s trust. Accordingly, as trustee, Tregub took title
subject to RNT’s lien.
      Furthermore, the events culminating in the recording of the 2008 RNT trust
deed created only a limited potential title defect. The belated recording of the
2008 RNT trust deed was irrelevant to whether the property remained subject to
RNT’s lien after Tregub acquired title to it, in view of her pre-existing knowledge
of the 2008 RNT trust deed. Rather, the events leading up to the recording of the
2008 RNT trust deed had implications only for third parties unaware of those
events. Because the Tregub grant deed was recorded on June 20, 2008, three days

                                          10
before the 2008 RNT trust deed was recorded, a future buyer of the property might
have been able to show that he or she had taken title free of the lien imposed by
the 2008 RNT trust deed due to insufficient notice of that lien.
      In an effort to support the existence of the defect alleged in the SAC, RNT
directs our attention to a treatise stating that the party securing a loan with a trust
deed “must own the interest to be encumbered.” (1 Bernhardt, California
Mortgages, Deeds of Trust, and Foreclosure Litigation (Cont.Ed.Bar 4th ed. 2012)
Basics of Real Property Secured Transactions, § 1:39, p. 35.) However,
immediately following that statement, the treatise observes: “The ownership
requirement is qualified by the doctrine of after-acquired title. Thus, a mortgage is
valid even when the mortgagor does not acquire title to the security until a later
time.” (Ibid.) In addition, the treatise states that “a lien is . . . valid between the
immediate parties to it even if it is not recorded.” (2 Bernhardt, California
Mortgages, Deeds of Trust, and Foreclosure Litigation (Cont.Ed.Bar 4th ed. 2014)
Multiple Security, Obligations, and Parties, § 9:44, p. 9-41.) The treatise thus
supports our conclusions. In sum, the 2008 RNT trust deed imposed a valid lien
on the property, and the sole potential title defect (if any) relating to that trust deed
concerned future sales of the property to bona fide purchasers for value.

      C. Summary Judgment on the Basis of Condition 10(b)
      We turn to whether RNT’s claim for breach of insurance contract failed in
light of condition 10(b), which states that a voluntary release of RNT’s
“mortgage” would terminate United’s liability under the policy. In granting
summary judgment, the trial court concluded that RNT’s 2011 reconveyance
regarding the 2008 RNT trust deed operated to “relieve[] [United] of its duties.”
For the reasons discussed below, we agree.

                                           11
                    1. Condition 10(b)
      Condition 10(b) states: “10. REDUCTION OF INSURANCE;
REDUCTION OR TERMINATION OF LIABILITY [¶]. . . [¶] (b) The voluntary
satisfaction or release of the Insured Mortgage shall terminate all liability of
[United] except as provided in Section 2 of these Conditions.” (Italics added.)
The latter section provides: “2. CONTINUATION OF INSURANCE[:] The
coverage of this policy shall continue in force . . . in favor of [RNT] . . . , but only
so long as [RNT] retains an estate or interest in the Land, or holds an obligation
secured by a purchase money Mortgage given by a purchaser . . . . This policy
shall not continue in force in favor of any purchaser from [RNT] . . . of either (i)
an estate or interest in the Land, or (ii) an obligation secured by a purchase money
Mortgage given to [RNT]” (condition 2). (Italics added.)
      As no California court has interpreted these provisions in circumstances
resembling those before us, we find guidance from two out-of-state decisions. In
First Midwest Bank, N.A. v. Stewart Title Guar. Co. (2005) 355 Ill.App.3d 546,
548-549 [823 N.E.2d 168, 171-172] (First Midwest Bank), the title insurer issued
a policy to a lender regarding a loan that financed a purchase of property. In
obtaining the loan, the borrowers executed a mortgage imposing a lien on the
property. (Ibid.) The policy contained provisions materially similar to those
stated above. (823 N.E.2d. at p. 174.) Later, the borrowers obtained two
additional loans from the lender secured by the property. (Id. at pp. 171-172.)
The terms of those loans obliged the borrowers to use the proceeds to pay off the
original loan. (Ibid.) After the borrower did so, the lender executed a full release
of the borrowers’ original mortgage. (Ibid.) Later, the lender initiated an action
for declaratory relief, seeking a declaration that the insurer’s policy -- which was
applicable only to the original loan -- provided coverage for a restrictive covenant

                                           12
on the property that the lender discovered only after the execution of the release.
(Id. at pp. 172-173.)
      In affirming summary judgment in favor of the insurer on the lender’s
complaint, the appellate court determined that condition 10(b) terminates an
insurer’s liability when the loan is paid off or the related mortgage is released,
unless (as stated in condition 2) the property is conveyed to a third party in such a
manner that the lender retains an interest in it. (First Midwest Bank, supra, 823
N.E.2d at pp. 176-177.) Noting that the pertinent property had not been conveyed
to a third party, the appellate court concluded that prior to the discovery of the
defect, the insurer’s liability terminated for two independent reasons: the loan had
been paid in full, and the lender had released the mortgage and all its interests.
(Id. at pp. 176-177.)
      In Morrison v. Wells Fargo Bank, N.A. (M.D. Pa. 2010) 711 F. Supp. 2d 369,
374, a man and his wife executed a mortgage that purported to impose a lien on
property owned by the plaintiff, whose name was identical to that of the man who
signed the mortgage. In connection with the mortgage, an insurer issued a
lender’s title policy, which contained a coverage condition similar to condition
10(b). (Morrison, at pp. 375, 388-389.) After the plaintiff initiated a tort action
against the lender, the lender commenced a cross-action against the insurer. (Id. at
pp. 388-389.) Later, while the plaintiff’s action was pending, the mortgage was
paid in full, and the insurer declined to provide any further defense to the lender in
the plaintiff’s action. (Id. at pp. 375-376.) The lender then amended its complaint
to assert claims for breach of insurance contract and bad faith predicated on that
denial. (Ibid.) Relying on the policy’s coverage condition, the trial court granted
summary judgment in the insurer’s favor on those claims, concluding that the

                                          13
insurer’s obligations ended when the mortgage was paid in full. (Id. at pp. 386-
390.)

                     2. Analysis
        In assessing the trial court’s grant of summary judgment, we look first at the
allegations in the SAC, which frame the issues pertinent to a motion for summary
judgment. (Bostrom v. County of San Bernardino (1995) 35 Cal. App. 4th 1654,
1662.) According to the SAC, the pertinent title defect was that the 2008 RNT
trust deed failed to encumber the property, rendering Bergstein’s 2008 promissory
note to RNT unsecured. 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.”
        The claim for breach of insurance contract, as alleged in the SAC, fails in
light of the undisputed facts and condition 10(b). To begin, as explained above
(see pt. B., ante), prior to May 2011, when Bergstein’s trust sold its interest in the
property to Sever-North, the defect alleged in the SAC did not exist: the 2008
RNT trust deed, in fact, attached a valid lien to the property. Nor did any such
defect emerge during the May 2011 transactions due to Sever-North’s purchase of
the property. Sever-North did not take title to the property free of the lien imposed
by the 2008 RNT trust deed, as it cannot be regarded as a bona fide purchaser for
value. The principals involved in the transaction, including Bergstein and Jam,
were aware of the 2008 RNT trust deed, and Bergstein’s trust was the sole
shareholder in Sever-North. Indeed, in asserting that the May 2011 transactions
were intended to “make clear” that the 2008 trust deed did not impose a valid lien
on the property, RNT acknowledges that the transactions were founded on an
awareness of that trust deed.

                                          14
       Furthermore, the May 2011 transactions ended United’s liability for any title
defect, in view of condition 10(b.) In May 2011, RNT executed a reconveyance
regarding the 2008 RNT trust deed, stating that “all sums secured by [that deed]
have been fully paid,” and releasing “all the estate, title and interest acquired and
now held by [RNT] in [that deed].” Because the reconveyance fully released
RNT’s interest in the property, it terminated United’s obligations pursuant to
condition 10(b).
       Relying on the principle that exclusions in an insurance policy are ordinarily
construed narrowly, RNT contends that the reconveyance did not terminate
United’s liability, arguing that condition 10(b) cannot be interpreted “to include
the release of non-existing liens.” However, as explained above, the record
establishes that the 2008 RNT trust deed imposed a valid lien on the property prior
to the reconveyance. Summary judgment on RNT’s claim for breach of insurance
contract was thus properly granted on the basis of condition 10(b). 6

       D. Summary Judgment on the Basis of Exclusion 3(a)
       The trial court also determined that RNT’s breach of insurance contract
claim failed due to exclusion 3(a), which precludes coverage for “[d]efects, liens,
encumbrances, adverse claims, or other matters [¶] (a) created, suffered, assumed,
or agreed to by [RNT].” In so concluding, the court relied primarily on Safeco

6       We note that summary judgment would have been proper even had the purported
defect alleged in the SAC existed, that is, even had no valid lien attached to the property
due to the transactions in June 2008. As explained in First Midwest Bank, a full release
of the insured’s interests in the pertinent property, by itself, terminates the insurer’s
liability. (First Midwest Bank, supra, 823 N.E.2d at pp. 176-177.) Here, RNT executed
such a release after it discovered the purported defect alleged in the SAC. Accordingly,
RNT’s conduct terminated United’s liability regarding that purported defect.

                                             15
Title Ins. Co. v. Moskopoulos (1981) 116 Cal. App. 3d 658 (Safeco Title). We
discern no error in the court’s ruling.
      In Safeco Title, a real estate broker learned that a residential property was
subject to a foreclosure sale, and decided to buy it before the sale occurred.
(Safeco Title, supra, 116 Cal.App.3d at p. 662.) When the broker and the property
owners fell into a dispute regarding the terms of the escrow, the broker filed an
action against the owners, recorded a lis pendens, and informed them he would
take further legal action if they tried to sell the property to someone else. (Ibid.)
After negotiations, the parties entered into a settlement of the broker’s action.
(Id. at p. 663.) Under the settlement, the owners sold the property to the broker,
who dismissed his action against them. (Ibid.) After the sale of the property
closed, the owners initiated a tort action against the broker predicated on his pre-
sale conduct. (Ibid.) The broker tendered the defense of that action to his title
insurer, which declined to provide a defense. (Ibid.) When the broker sought
declaratory relief against the insurer, the trial court issued a declaratory judgment
that the insurer had no duty to provide a defense. (Id. at p. 661.)
      The appellate court affirmed, holding that the owners’ action fell outside the
policy’s insuring clauses, as that action did not relate to the broker’s title to the
property, but to the manner in which he bought it. (Safeco Title, supra, 116
Cal.App.3d at p. 665.) The appellate court further determined that even if the
owners’ action had fallen within the insuring clauses, coverage for it would be
barred under exclusion 3(a). (Safeco Title, at pp. 666-667.) The court reasoned
that in exclusion 3(a), the term “created” means “‘conscious[] deliberate
causation.’” (Safeco Title, at p. 667.) Because the broker’s conduct prior to the
close of the sale was “‘intentional and deliberate and not inadvertent or

                                           16
mistaken,’” the court concluded that exclusion 3(a) precluded coverage for the
owners’ action. (Safeco Title, supra, at p. 667.)
      The rationale in Safeco Title is applicable here. As explained above (see
pts. B. & C., ante), because the transactions involving Tregub in June 2008 did not
result in the defect alleged in the SAC, RNT’s claim for breach of insurance
contract fails. Nonetheless, even if those transactions had resulted in the alleged
defect, exclusion 3(a) would bar coverage for it, as Tregub’s conduct was
“‘intentional and deliberate and not inadvertent or mistaken.’” (Safeco Title,
supra, 116 Cal.App.3d at p. 667.)
      The record establishes that throughout the June 2008 transactions, Tregub
acted on behalf of RNT, Bergstein’s trust, and Bergstein himself. Indeed,
Bergstein testified in his deposition that Tregub then represented Bergstein, Tutor,
and their “common entities,” and that she “handl[ed] everything.” Furthermore,
her conduct carried out Bergstein’s acknowledged desire to secure financing for
his purchase of the property from RNT and the transfer of the property’s title to his
trust. Every action Tregub engaged in was thus intentional and deliberate. That
she may not had intended to bring about a defect through her conduct, or may not
have known that any defect might occur, is immaterial to the application of
exclusion 3(a), as there was no suggestion in Safeco Title that the broker intended
his pre-sale conduct to provoke the owners’ tort action against him, or knew that
the action would occur.
      Hansen v. Western Title Ins. Co. (1963) 220 Cal. App. 2d 531, upon which
RNT relies, is distinguishable. There, some developers obtained the right to
develop real property under a contract prepared by a title insurer, which also
provided a title insurance policy to the developers. (Id. at pp. 533- 535.) After the
developers failed to buy the property, a party with an interest in the development

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project sued them. (Id. at p. 534.) The developers tendered the defense of the
action to the title insurer, which refused to provide a defense. (Ibid.) When the
developers sued the insurer, the trial court determined that the developers had not
created the claim against them, for purposes of exclusion 3(a). (Hansen v.
Western Title Ins. Co., supra, at p. 536.) The appellate court affirmed that ruling,
concluding that the claim against the developers was rooted in the contract
prepared by the insurer, which was poorly drafted and ambiguous, and which the
developers had signed through “inadvertence.” (Id. at pp. 535-536.) The court
narrowly confined its holding, stating: “[W]e limit our ruling to a case in which
the insured did not intentionally produce the claim and in which the insurer itself
had opportunity to know of the defect.” (Id. at p. 536, italics added.) Here, in
contrast, the documents involved in the June 2008 transactions were not
misunderstood by the participants, and United was unaware of the transactions
that purportedly created a defect.
      RNT also directs our attention to two out-of-state decisions, Ariz. Title Ins.
& Trust Co. v. Smith (1974) 21 Ariz.App. 371 [519 P.2d 860] and Sims v. Sperry
(Colo.App. 1992) 835 P.2d 565 (Sims). In Ariz. Title, the City of Tucson imposed
a special assessment on an apartment complex, which was not fully paid. (519
P.2d at pp. 860-861.) Two years later, when an investor bought it, the title insurer
failed to list the assessment as an excluded defect in the title policy. (Ibid.) The
appellate court rejected the insurer’s contention that the assessment fell outside the
policy’s coverage due to exclusion 3(a), observing that the investor had not
created the assessment. (Arizona Title, supra, at p. 863.) As explained above, that
is not the case here.
      In Sims, an investor signed a settlement agreement to resolve disputes with a
real estate agent, apparently unaware that the trust deeds he received through the

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agreement had been obtained through fraud by the agent. (Sims, supra, 835 P.2d
at pp. 566-567, 570.) When the owners of the interests underlying the trust deeds
sued the investor, he tendered the defense of the action to his title insurer, which
declined to provide a defense on the basis of exclusion 3(a). (Sims, supra, at
pp. 569-570.) In rejecting that contention, the appellate court declined to follow
Safeco Title, reasoning that exclusion 3(a) is ambiguous, and that Colorado law
required it to adopt the interpretation most favorable to the insured, namely, “that
the insured must have intended the defect to occur.” (Sims, supra, at p. 570.)
      Sims is distinguishable, as there is no evidence that Bergstein or Tregub
lacked the rights to the property essential to the June 2008 transactions. In
addition, the rationale in Sims is inapplicable. Under California law, when an
exclusion is ambiguous, the ambiguity is resolved in the insured’s favor, albeit in
the manner “consistent with the insured’s reasonable expectations.” (E.M.M.I.
Inc. v. Zurich American Ins. Co., supra, 32 Cal.4th at pp. 470, 473.) Only if an
inquiry into those expectations does not resolve the ambiguity does a court adopt
the interpretation least favorable to the insurer as “‘“‘the party who caused the
uncertainty to exist.’”’” (See id. at pp. 470-471, quoting Safeco Ins. Co. v. Robert
S. (2001) 26 Cal. 4th 758, 763.) In our view, Safeco Title reflects the correct
determination regarding an insured’s reasonable expectations under the exclusion.
In sum, summary judgment on RNT’s claim for breach of insurance contract was
properly granted on the basis of exclusion 3(a).

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                               DISPOSITION
     The judgment is affirmed. United is awarded its costs on appeal.
     NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                           MANELLA, J.

We concur:

EPSTEIN, P.J.

COLLINS, J.

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