When the lender issued a loan to purchase certain property in California, it was aware of assessments by the Rosamond Community Services District (RCSD) 1993-1, but ordered that all taxes be paid. The assessments were not and the RCSD eventually notified the lender of the assessments and its desire to take action to collect on them. The lender sought coverage from the title insurer, which denied coverage. The lender then filed suit against the title insurer.
The case is Rehabbers Financial Inc. v. Chicago Title Insurance Co. (Fifth District Court of Appeal of California, No. F0081045).
The properties at issue, the Roland and Patterson properties, were two vacant lots within the RCSD. The RCSD on Oct. 19, 1992, recorded a notice of assessment with the Kern County Recorder to secure repayment of assessments on the properties within the RCSD. From December 1995 until 2008, the RCSD assessments on the Roland and Patterson properties were not paid with the property taxes and the RCSD recorded multiple notices of removal against the Patterson property.
In 2007, the Guzmans sought a loan from Rehabbers Financial Inc., doing business as Aztec Financial, to purchase the Roland and Patterson properties for development. Chicago Title Company (CTC) issued preliminary reports on the properties, excluding from coverage assessments of the RCSD. They further stated failure to pay these taxes prior to the delinquency date could result in the assessment being removed from the county tax roll and subjected to accelerated judicial bond foreclosure.
Aztec initially rejected these exclusions, but eventually issued revised recording instructions to CTC on March 29, 2007, instructing it to record the deeds of trust insured by title policies that included the exclusions. It further stated all liens must be paid off and all taxes must be paid. Aztec provided CTC with the funds to pay off the current taxes due but did not provide funds for CTC to pay toward the delinquent RCSD assessments. This was because Aztec was unaware the RCSD assessment liens clouded title to the properties. CTC recorded the Roland and Patterson deeds of trust subject to the higher-priority RCSD assessments issued in 1992.
The RCSD initiated judicial foreclosure on the Roland property in October 2007, for unpaid RCSD assessments RCSD assessment liens. Aztec filed a claim with Chicago Title Insurance Co. (CTIC) to defend against the liens, which CTIC denied due to the RCSD assessment policy exclusion.
On Feb. 13, 2008, the RCSD faxed Aztec a notice of intent to remove delinquent assessment installments from the tax roll, notifying the recipient to take notice that RCSD ordered and is responsible for filing and prosecuting judicial foreclosure actions on behalf of bondholders against each parcel of real property described by the assessor’s parcel number. On Oct. 17, 2008, Aztec filed a cross-complaint in the Roland action against CTIC for refusing to defend Aztec against the RCSD foreclosure action. CTIC denied any liability and in September 2009, Aztec and CTIC settled the Roland suit.
On Oct. 1, 2009, Aztec received an email from RCSD’s counsel showing the Patterson assessments as unpaid. It forwarded the email to CTIC, which denied there was coverage under the policy for any loss arising from RCSD tax assessment liens.
Aztec filed suit against CTIC on Sept. 28, 2010, alleging that CTIC denied Aztec coverage in response to Aztec’s demand letter. It amended its complaint to contradict its original complaint, alleging that CTIC failed to respond to Aztec’s claim or subsequent demand letter and continued to refuse to pay benefits under the policy.
Nearly nine years later, CTIC requested summary judgment. The trial court agreed with CTIC that Aztec’s claim regarding the RCSD assessments was not covered by the policy. It also held that because Aztec received the RCSD notice of intent to remove delinquent assessment installments from the tax roll, Aztec’s claim was barred by the statute of limitations. Aztec appealed.
The appellate court affirmed the lower court’s decision, noting first that the statute of limitations bars Aztec’s claims.
“Here, Aztec received the RCSD notice on Feb. 13, 2008,” the court stated. “The RCSD notice unequivocally and unambiguously stated that the properties listed therein were subject to delinquent RCSD assessments and would therefore be judicially foreclosed upon. Furthermore, Aztec knew the Roland and Patterson properties were on that list because Marie Garcia, Aztec’s employee, wrote Aztec’s internal loan number next to the Patterson property. Therefore, the RCSD notice contained sufficient information to establish that, as with the Roland property then subject to litigation for the same issue, delinquent RCSD assessments clouded title to the Patterson property.
“Aztec fails to provide any facts disputing its receipt of the RCSD notice,” the court continued. “Aztec also fails to establish how receipt of all facts necessary to establish its claim against CTIC is not discovery for purposes of section 339. Because the RCSD notice contained all facts necessary for Aztec’s claim, we find that the statute of limitations began to run on Feb. 13, 2008, and this lawsuit, filed Sept. 28, 2010, is barred by the two-year statute of limitations under section 339.”
It also held the statute of limitations was not tolled. Aztec argued CTIC rejected the claim and the statute of limitations was tolled so that Aztec’s lawsuit was timely filled. The court disagreed, finding CTIC undisputedly rejected Aztec’s claim on Oct. 9, 2009. Therefore, the statute of limitations was insufficiently tolled, and Aztec’s lawsuit is time-barred.
“Here, Aztec submitted a claim to CTIC for the delinquent Patterson RCSD assessments on Oct. 1, 2009,” the court stated. “Aztec’s original complaint stated that CTIC responded to Aztec’s October 2009 letter denying that there is any coverage under the policy for any loss arising from the RCSD tax assessment liens. Carrell Hoffman further admitted in her deposition that CTIC denied Aztec coverage on Oct. 9, 2009, in response to Aztec’s Oct. 1, 2009 claim.
“Nevertheless, Aztec attempted to dispute both admissions,” the court continued. “First, Aztec amended its original complaint to claim that CTIC has failed to respond to Aztec’s claim or subsequent demand letter and continues to refuse to pay benefits under the policy. Second, Hoffman’s later declaration contradicts her prior deposition testimony, claiming Aztec was unaware of any formal denial by CTIC. Neither tactic creates a triable issue of material fact.”