Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Sonoma County Super. Ct. No. SCV-236327
OPINION
Jones, P.J.
Plaintiff and appellant Eric Armitage, in propria persona, appeals a summary judgment in favor of defendant and respondent First American Title Insurance Company (First American) in Armitage’s action for breach of a title insurance policy. He principally contends there are triable issues of material fact regarding First American’s obligation under the policy to defend him in an easement dispute with his neighbors and to provide coverage for defects on his title by two purportedly recorded easements.
BACKGROUND
June 1977 Sale of 2783 Guerneville Road
On June 7, 1977, Andrejs and Vilma Arajs granted to James Allen and his relative, Bettye Allen, as joint tenants, a parcel of property identified in the deed as “A.P Nos. 34-101-38 and 39.” The assessor’s map attached to the instant complaint contains no designation of a parcel “39.” According to Armitage’s deposition testimony and not apparently disputed by First American or the Allens, the parcel that was the subject of the June 7, 1977 conveyance is designated on this assessor’s map as numbers “71” and “38” and is presently commonly known as 2783 Guerneville Road. For convenience, we shall refer to the parcel as 2783 Guerneville Road.
January 5, 1978 Recorded Contract of Sale of 2777 Guerneville Road
On June 8, 1977, the Arajses and James Allen and Bettye Allen executed a contract of sale, whereby the Arajses agreed to sell the Allens another parcel of property, identified in the contract as parcel 034-101-40-2, for $70,000. Again, according to Armitage’s deposition testimony and not disputed by First American or the Allens, this parcel is designated on the assessor’s map attached to the instant complaint as number “40” and is presently commonly known as 2777 Guerneville Road. For convenience, we shall refer to this parcel as 2777 Guerneville Road. This parcel is adjacent to 2783 Guerneville Road.
The contract of sale refers this parcel as “2783” Guerneville Road, but all the parties to the present easement dispute identify the parcel as 2777 Guerneville Road.
Under the terms of the contract, the Allens would pay $5,000 to the Arajses through escrow in the Sonoma County Abstract Bureau on January 5, 1978. They would pay the $65,000 balance of the purchase price via an interest-bearing promissory note payable to the Arajses in monthly installments, commencing January 5, 1978. The contract provided that the Allens were entitled to “take possession of said premises upon the signing of this contract of sale but in fact already [are] in possession of said premises.”
Paragraph 11 of the contract states: “It is understood and agreed that should Purchaser [i.e., Allen] not perform, for any reason, under this contract of sale[,] that Seller [i.e., Arajs] shall retain an easement for road purposes, ingress and egress, over parcel 34-101-39 [i.e., 2783 Guerneville Road] previously purchased from Seller by Purchaser.”
On January 5, 1978, the contract of sale was recorded with the official records of Sonoma County.
1978, 1982 Changes in Ownership of 2783 Guerneville Road
In April 1978, Bettye Allen quitclaimed “A.P. Nos. 3-101-38 and 39” to James Allen. On November 23, 1982, James Allen granted to himself and his wife, Lynda, as joint tenants, “A.P. Nos. 34-101-38 and 39” and “A.P. No. 34-101-31.” Not only, as noted, does the assessor’s map attached to the instant complaint not designate any parcel as “39,” it does not designate any parcel as “31.” Nothing in the appellate record or briefing explains why parcels “31” and “39” do not appear on the present assessor’s map. However, there is no apparent dispute among the parties that the property that was conveyed in these 1978 and 1982 deeds is shown as parcels “70” and “38” on the assessor’s map and is commonly known today as 2783 Guerneville Road.
February 9, 1984 Sale of 2783 Guerneville Road
On February 9, 1984, a grant deed was recorded by which the Allens conveyed legal title of 2783 Guerneville Road to Kyoto Koi and Garden Center, Inc. (Kyoto Koi).
The grant deed describes the property as “A.P. No. 34-101-31, 38 & 39.”
February 9, 1984 Corporation Grant Deed of Easement
Also on February 9, 1984, a corporation grant deed was recorded as document 84008559, whereby Kyoto Koi granted the Arajses, who were still the legal owners of 2777 Guerneville Road, a nonexclusive easement for ingress and egress appurtenant to the “Grantee[’s]” property over and across the existing gravel road that traversed Kyoto Koi’s property, i.e., 2783 Guerneville Road. By the same deed, Kyoto Koi agreed to convey to “Grantee” an easement for ingress and egress along “a new roadway (now proposed)” over and across a strip of land along the easterly boundary and the northeast portion of Kyoto Koi’s property at such time as Kyoto Koi “has completed construction of said new roadway. This provision is a covenant running with the lands of [Kyoto Koi], binding its successors and assigns.”
This paragraph is followed by the typed sentence: “FOR ADDITIONAL PROVISIONS see exhibit ‘A’ attached hereto and made a part hereof.” This typed sentence is followed by the handwritten notation “AP#34-101-39,” which impliedly refers to an assessor’s parcel. No exhibit A is attached to the copy of the corporation grant deed contained in the appellate record. In the absence of any exhibit A, it is unclear whether the handwritten notation and exhibit A are synonymous, and, if so, whether exhibit A is a written description or a map of the specified parcel.
The corporation grant deed further stated that, by acceptance of Kyoto Koi’s grant of the ingress and egress easement, “Grantee herein agrees to Quitclaim the easement herein granted at such time as Grantee is conveyed an easement for ingress and egress along a new roadway (now proposed) over and across a strip of land along the easterly boundary and the northeast portion of the lands of [Kyoto Koi] herein referred to. This provision shall be a covenant running with the lands of the Grantee, binding their heirs, successors and assigns.” The Arajses signed the corporation grant deed as “owner[s].” The Allens signed it as “purchaser[s]” under the January 5, 1978 recorded contract of sale.
August 13, 1985 Grant Deed re: 2777 Guerneville Road
On August 13, 1985, the Arajses executed a grant deed to the Allens. The deed states: “The purpose of this deed is to convey all right, title, and interest held by the grantee pursuant to the terms of the Contract of SALE recorded January 5, 1978,” i.e., the sale of 2777 Guerneville Road from the Arajses to the Allens.
1985-1992 Ownership of 2783 Guerneville Road
By deed recorded November 18, 1985, Kyoto Koi quitclaimed its interest in “A.P. Nos. 34-101-38 and 39” and “A.P. No. 34-101-31,” i.e., 2783 Guerneville Road, to Paul Pattengale.
On April 11, 1991, Bar-K, Inc., became trustee and beneficiary of “A.P. No.:34-101-38 & 39 [and] 31,” i.e., 2783 Guerneville Road, pursuant to a recorded deed of trust between Pattengale and Bar-K. By trustee deed filed January 7, 1992, the same property was granted to Bar-K, following Pattengale’s foreclosure on the deed of trust.
1992 Sale of 2783 Guerneville Road to Armitage
By corporation grant deed filed August 28, 1992, Bar-K granted “A.P. No.: 34-101-31, 38, 39,” i.e., 2783 Guerneville Road, to Armitage for valuable consideration.
Title Insurance Policy for 2783 Guerneville Road
In conjunction with Armitage’s purchase of 2783 Guerneville Road, First American issued him a title insurance policy on August 28, 1992. Subject to itemized exclusions and exceptions shown below, the policy insured against loss or damage sustained by Armitage due to, inter alia, any defect in or lien or encumbrance on the title to 2783 Guerneville Road. It also obligated First American to pay the costs, attorney fees, and expenses incurred in defense of the title, as insured, to the extent provided in the policy’s conditions and stipulations. The policy required Armitage to notify it promptly of any third party litigation against Armitage that asserted a claim adverse to his title, and provided that First American would defend him against such claim, but only as to the causes of action alleging a defect, lien or encumbrance or other matter insured against by the policy. It likewise required Armitage to notify it if he learned of any claim of title or interest adverse to the title to his estate, as insured, which might cause loss or damage for which First American might be liable by virtue of the policy. The policy provided that First American had the right, at its own cost, to institute and prosecute any action or proceeding or do any other act which, in its opinion, was necessary to establish title to the estate, as insured, or to prevent or reduce loss or damage to Armitage.
Schedule B of the policy states:
“This policy does not insure against loss or damage (and the Company will not pay costs, attorneys’ fees or expenses) which arise by reason of:
[]
2. Any facts, rights, interests, or claims which are not shown by the public records but which could be ascertained by an inspection of said land or by making inquiry of persons in possession thereof.
3. Easements, claims of easement or encumbrances which are not shown by the public records.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. EASEMENT over the herein described property, as granted
To: ANDREJS ARAJS AND VILMA ARAJS
Recorded: February 9, 1984
Document No.: 84008559 Official Records of Sonoma County, California.
[]Grants Easement for ingress and egress.
Said instrument provides that Grantor herein agrees to convey to Grantee herein as easement for (ingress and egress along a new roadway (now proposed) over and across a strip of land along the Easterly boundary and the Northeast portion of the lands of the Grantor) hereinabove referred to at such time as Grantor has completed construction of said new roadway.
In the opinion of this Company said easement is not definitely locatable by this Company from information available in the public records.”
Armitage’s March 4, 2003 Tender to First American
On March 4, 2003, Armitage sent a letter to First American stating he had discovered a “cloud on title to [his] property not of record,” and tendered any potential proceedings or litigation to First American either to remove the cloud on title or for damages resulting therefrom. He asserted that the Allens claimed “some sort of non-record easement” across his property; that the February 9, 1984 corporation grant deed easement for ingress and egress over an existing gravel driveway on 2783 Guerneville Road was extinguished by the 1984-1985 construction of a building over the gravel driveway; and that the agreement in that February 9, 1984 easement to convey to “Grantee” an easement for ingress and egress along a proposed roadway over 2783 Guerneville Road after “Grantor” completed construction of the new roadway was breached because “Grantor” never conveyed such an easement, and a covenant is unenforceable against a later purchaser after the covenant has been breached.
First American’s Denial
On April 15, 2003, First American responded that Armitage’s title insurance policy did not extend to the circumstances of his claim because “off-record” matters are generally excepted from coverage, and the February 9, 1984 easement was specifically excepted from coverage. It therefore denied his claim.
Complaint
On February 28, 2005, Armitage filed the instant action. The first three causes of action were against the Allens for injunctive relief, trespass, and quiet title (easement).
The cause of action for injunctive relief alleged, inter alia: The facts giving rise to Armitage’s claims for relief and damages stemmed from the recorded deeds and transfers of parcel one, i.e., 2783 Guerneville Road, and parcel two, i.e., 2777 Guerneville Road. The 1978 recorded contract of sale by which the Arajses sold 2777 Guerneville Road to the Allens provided that the Arajses would retain a road easement for ingress and egress over 2783 Guerneville Road if the Allens failed to perform under the contract. James Allen appeared to be attempting to avoid merger of the two parcels by avoiding taking legal title to both parcels at the same time, and in this process, creating an easement that burdened 2783 Guerneville Road “to the benefit of owner of the “‘Naked Title’” to [2777 Guerneville Road] (Arajs), perhaps not knowing that legal title transferred” to the Allens at the time of the contract of sale, and “possibly at the same time satisfying concern on the part of the Arajs[es] that if payments were not made on the ‘contract of sale’ for [2777 Guerneville Road] and [the Arajses] repossessed and regained legal title, [the Arajses] would in such an event, have access to” 2777 Guerneville Road over 2783 Guerneville Road. When James Allen executed a grant deed to 2783 Guerneville Road to his wife in November 1982, he acknowledged that he had legal title to both parcels, but in 1982 “a conditional future interest as far as the ‘naked title’ to [2777 Guerneville Road] still existed until all the payments on the ‘contract of sale’ were paid off.”
The cause of action for quiet title incorporated the above allegations and further alleged: an actual controversy exists between Armitage and the Allens. Armitage contended no easement exists over 2783 Guerneville Road because the merger of title in James Allen prior to 1982 merged any easements into the single legal owner (Allen) of both parcels at that time, and Allen was obligated to make new easements if he later sold one parcel. He sought a judicial determination of his rights and duties, and a declaration as to whether there was any sort of valid easement over his property appurtenant to the Allens’ property.
The fourth cause of action against First American for breach of the title insurance policy contract incorporated the allegations from the previous causes of action. It further alleged: The express terms of the title insurance policy insured him against any losses or damage he sustained by reason of any defect or unmarketability of the title to 2783 Guerneville Road. “The occurrence of the above described defect of a previously recorded easement not excepted in the policy of coverage is covered by” the policy’s provision “which states that [First American] insures against loss or damage due to any defect in or on the title, subject to listed exclusions.” Armitage “discovered the facts giving rise to the losses, as described below, by reason of the above described facts, on or about March 4, 2003. [¶] On March 4, 2003, [Armitage] notified [First American] in writing of the loss as required by” the policy. On April 15, 2003, First American responded that “easements or agreements not of record were not covered, and that easements of record had been listed and excepted from the policy. The policy “did not except the contingent future interest easement recorded in the above-mentioned 1978 ‘contract of sale,’ and at the time of the filing of this action . . . there remains a legal question of whether [the Allens] succeeded to this easement, and [First American] has not quieted or perfected [Armitage’s] title to [2783 Guerneville Road] so as to eliminate this cloud on title. [¶] As a proximate cause of this defect and uncertainty, [the Allens] have overburdened [Armitage’s property as described in the first cause of action], causing [him specified monetary damages.] [¶] [First American] breached its implied covenant of good faith and fair dealing with its wrongful refusal to quiet title when notified of potential defect in the state of the title. [First American] has intentionally and maliciously denied coverage, stating no coverage is provided for all excepted matters of record listed in its exclusions, and for all matters not of record. So what else could there be? The easement described above stated in the contract of sale, and recorded, was not so excepted.”
As to First American, Armitage prayed for damages of $537,000, the title insurance policy maximum, plus punitive damages.
Cross-Complaint
The Allens’ verified cross-complaint against Armitage contained causes of action for quiet title to an easement, declaratory relief, and permanent injunction for interference with easement. They alleged: They are the owners of 2777 Guerneville Road, the dominant tenement. Armitage is owner of 2783 Guerneville Road, the servient tenement. Pursuant to the February 9, 1984 corporation grant deed of an easement from Kyoto Koi, then owner of the servient tenement, to the Arajses, then legal title owners of the dominant tenement, the Arajses agreed to quitclaim their rights to the gravel road easement over the servient tenement when Kyoto Koi conveyed an easement for ingress and egress along a “new road” to the dominant tenement. The Arajses signed the corporate grant deed as legal owners of the dominant tenement, and the Allens signed it as equitable title holders of the dominant tenement, “held by the Allens as Purchasers under a contract of sale recorded on January 5, 1978. . . .” On or about the end of 1984, Kyoto Koi completed the “new roadway” on the servient tenement. Under their claim of right provided in the February 9, 1984 corporation grant deed, the Arajses and the Allens began using the new roadway easement as the sole means of ingress and egress to the dominant tenement, and the Allens have been doing so continuously since the end of 1984 as their sole means of ingress and egress with all means of conveyance to the dominant tenement.
The Allens sought quiet title against all claims of Armitage to the extent that Armitage claimed that the Allens did not hold the new easement appurtenant to the dominant tenement, or that the new road easement was inferior to any claim of right, title, estate, lien and/or interest in the described property, and a declaration that they are the holders of an easement appurtenant to their real property, commonly denominated the “new roadway easement.”
Motion for Summary Judgment
First American moved for summary judgment on Armitage’s cause of action for breach of contract on the ground the easement claims that were the subject of his complaint were not covered matters in his title insurance policy. Alternatively, it moved for summary adjudication of Armitage’s claim for punitive damages that derived from his claim of breach of the covenant of good faith and fair dealing by refusing to quiet title when he notified First American of a potential defect in the title. The latter motion was similarly based on the ground that the policy did not cover the easement claims that were the subject of Armitage’s complaint, plus the ground that it acted reasonably and with proper cause when it denied his March 4, 2005 tender.
First American argued that the policy specifically excluded from coverage any damages arising from the recorded February 9,1984 corporation grant deed easement or from unrecorded easements, such as easements by necessity. It construed Armitage’s cause of action for breach of contract as alleging that First American failed to disclose “‘a previously recorded easement not excepted in the policy of coverage,’ based on the [recorded] 1978 contract of sale,” and argued that it had no duty to disclose this contract of sale, nor did the Allens claim any easement rights thereunder. Finally, it argued that even if it was not entitled to summary judgment, it was entitled to summary adjudication of Armitage’s “bad faith” and punitive damage claims because it acted reasonably in denying Armitage policy benefits based on his March 4, 2003 tender.
First American supported its motion with the above-described recorded conveyances, title insurance policy, Armitage’s March 4, 2003 tender and its April 15, 2003 response, and the Allens’ verified cross-complaint.
Opposition
Armitage opposed the motion on the grounds the recorded 1978 contract of sale contained an easement over 2783 Guerneville Road; this easement was never removed or expunged from the record; this easement is “a focal point in the Allens’ overburdening of any access right they may have over” Armitage’s property; this easement constituted a cloud on his title; and under the terms of the title insurance policy as to recorded easements other than the recorded February 9, 1984 corporation grant deed easement, First American was obligated to insure him for expenses incurred in defending his title and to take affirmative action to remove this cloud from his title.
Armitage was referring to paragraph 11 in the recorded 1978 contract of sale by which Allen, as purchaser of 2777 Guerneville Road, agreed that if he should not perform under the contract, Arajs, as seller, would retain an easement for ingress and egress over 2783 Guerneville Road, already owned by Allen.
Armitage supported his opposition with the same documents used by First American to support its motion. He also supported it with his declaration, in which he declared:
He read the title insurance policy cover sheet when he purchased the policy and understood generally that the policy covered defects in title, “some off-record, some perhaps on record, and some that were perhaps interrelated.” He did not read the policy itself. He understood the policy to be an extended coverage policy which required First American to inspect the property and assume certain off-record risks. When he wrote to First American on March 4, 2003, he understood that it owed him a fiduciary duty “to be concerned about defects to the title” of the property he purchased. He was surprised to learn that First American would exclude coverage for all defects of title off-record and all defects of title it had listed on record on an extended coverage policy. He was surprised to learn that First American would deny coverage by arguing that the easement in the recorded 1978 contract of sale “just doesn’t matter.” A building was built in the middle of the gravel road easement described in the 1984 corporation grant deed, extinguishing this easement for any practical use for access. His predecessor in interest, Kyoto Koi, “never granted the Allens [another] easement, and no easement of record exists for their access, although there is an easement or record in the 1978 contract of sale [] which was not excepted” by the title insurance policy.
Order
The trial court granted First American’s motion because (1) it had no duty of defense or indemnity to Armitage with regard to his easement dispute with the Allens because unrecorded matters are not insured under the title insurance policy, and loss or damage from the 1984 corporation grant deed was expressly excepted from coverage, and (2) First American had no duty to disclose the 1978 contract of sale. Because First American had no duty to defend, Armitage’s claims of bad faith and for punitive damage also failed.
The court denied Armitage’s ex parte application for an order shortening time to file a motion for reconsideration of the order granting summary judgment.
DISCUSSION
I. Summary Judgment
Armitage contends there are triable issues of fact as to whether First American was obligated to insure him against the defects of title, which, he asserts, were created by the 1978 contract of sale between the Arajses and the Allens and the 1985 grant deed from the Arajses conveying 2777 Guerneville Road to the Allens. Therefore, he argues, First American had a duty to take affirmative action to remove the cloud on title and to defend him in the Allens’ cross-complaint, which incorporates these deeds by reference.
A. Standard of Review
Summary judgment is properly granted if all the papers submitted show there is no triable issue as to any material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) In reviewing a motion for summary judgment, the appellate court applies the same three-step process required of the trial court. First, the court identifies the issues framed by the pleadings, as it is these allegations to which a motion by the defendant must respond by establishing a complete defense or otherwise showing there is no factual basis for relief on any theory reasonably contemplated by the plaintiff’s pleading. Second, the court determines whether the moving party’s showing has established facts that negate the plaintiff’s claim and justify judgment for the defendant. Third, the court determines whether the plaintiff has demonstrated the existence of a triable, material factual issue. (Scolinos v. Kolts (1995) 37 Cal.App.4th 635, 638-639.)
B. Exceptions to Policy Coverage
Armitage’s cause of action against First American for breach of the title insurance policy is not a model of clarity. We construe it to allege that (1) under the terms of the policy, First American was obligated to indemnify him for any damage resulting from any defects in his title to 2783 Guerneville Road other than those specifically excepted by the policy; (2) the “contingent future interest easement” over 2783 Guerneville Road granted by the Arajses to the Allens in the recorded 1978 contract of sale whereby the Arajses sold 2777 Guerneville Road to the Allens constitutes a defect in his title that was not specifically excepted from coverage; (3) Armitage has suffered damages as a result of this defect in his title by the Allens’ “overburdening” of 2783 Guerneville Road; (4) First American has not quieted or perfected his title to 2783 Guerneville Road by eliminating this defect, or cloud, on his title; and (5) First American breached the covenant of good faith and fair dealing implicit in the title insurance contract when it refused to quiet title after Armitage notified it of the potential defect in the title in his letter of March 4, 2003.
Title insurance insures losses suffered by reason of liens or encumbrances on property or incorrectness of searches relating to the title. (Ins. Code, §§ 104, 12340.1; Radian Guaranty, Inc. v. Garamendi (2005) 127 Cal.App.4th 1280, 1285.) A title policy indemnifies for conditions that exist on the date of the policy. (Ibid.) Its function is “to protect against the possibility that liens and other items not found in the search or disclosed in the preliminary report exist. The records pertaining to real property are complex and encumbrances may be missed by even the most thorough search. Title insurance is an acknowledgment that errors may have been made.” (Siegel v. Fidelity Nat. Title Ins. Co. (1996) 46 Cal.App.4th 1181, 1191.) “‘[T]itle insurance is a contract for indemnity under which the insurer is obligated to indemnify the insured against losses sustained in the event that a specific contingency, e.g., the discovery of a lien or encumbrance affecting title, occurs. [Citations.]’” (Cale v. Transamerica Title Insurance (1990) 225 Cal.App.3d 422, 425-426.) The indemnifiable loss to the insured is the lost equity in the property. (Radian Guaranty, Inc. v. Garamendi, supra, 127 Cal.App.4th at p. 1289.)
As with any contract for insurance, title insurance policies “are to be interpreted according to the plain meaning which a layman, not an attorney or insurance expert, would ordinarily attach to the words. [Citation.]” (Manneck v. Lawyers Title Ins. Corp. (1994) 28 Cal.App.4th 1294, 1301.) While exclusions on coverage are construed strictly against the insurer, they are given literal effect when unambiguous. (Ibid.; Westoil Terminals Co., Inc. v. Industrial Indemnity Co. (2003) 110 Cal.App.4th 139, 146.) An insurer may move for summary judgment on the grounds no potential for liability exists and, by extension, no duty to defend, where the evidence establishes there is no coverage as a matter of law. (Legarra v. Federated Mutual Ins. Co. (1995) 35 Cal.App.4th 1472, 1479.)
The policy at issue here expressly exempted from coverage any loss arising from the recorded February 9, 1984 corporation grant deed easement and any easements or claims of easement not shown by public records. Armitage’s cause of action for breach of contract alleges he notified First American in writing on March 4, 2003 of his “losses” from the Allens’ misuse of his property. In that March 4, 2003 letter he tendered “any potential proceedings or litigation” to First American; his tender was specifically and solely based on the “cloud on title” that he asserted was created either by the February 9, 1984 recorded easement or “some sort of temporary easement by necessity.” By its showing that the policy plainly did not cover losses resulting from the recorded February 9, 1984 easement or from unrecorded easements such as the alleged “temporary easement by necessity,” First American established a complete defense to Armitage’s allegation that First American breached the insurance contract’s covenant of good faith and fair dealing by refusing “to quiet title when notified of potential defect in the state of the title.”
As we understand it, Armitage’s contention on appeal is that the recorded 1978 contract of sale of 2777 Guerneville Road from the Arajses to the Allens contains an easement from the Allens to the Arajses; the recorded 1985 grant deed is also a recorded easement because it conveyed to the Allens all right, title and interest the Arajses held in 2777 Guerneville Road pursuant to the recorded 1978 contract of sale; a recorded easement constitutes a defect on title; the Allens refer to the 1978 contract of sale in their cross-complaint and therefore “base[d] their easement claims” in their cross-complaint in part on a recorded document not exempted from coverage by the title insurance policy; and there are triable issues regarding whether the title insurance policy obligated First American to defend and quiet Armitage’s title as against the nonexempted 1978 and 1985 recorded easements.
An insurer has a duty to make a reasonable investigation of the possible bases that might support its insured’s claim. (Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 819; American Internat. Bank v. Fidelity & Deposit Co. (1996) 49 Cal.App.4th 1558, 1571.) The key question in determining duty is: what facts are known to the insurer to suggest potential liability under the policy? If there are no facts to suggest such liability, the insurer has no duty to investigate further. (49 Cal.App.4th at p. 1571.) The insurer’s duty to determine whether there is a potential for coverage is determined on the basis of the facts known when the claim was made. (See Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295 (Montrose).)
As previously discussed, Armitage’s March 4, 2003 letter to First American asserted the existence of a cloud on his title “not of record” based on the Allens’ “non-record” easement, and he tendered any potential proceedings or litigation to First American to remove “this” cloud. The letter continued that a review of the Sonoma County records showed a grant of easement in “Document No. 84008559,” i.e., the February 9, 1984 corporation grant deed easement. The letter then asserted that this easement was extinguished and/or unenforceable. Although the letter implied that Armitage himself undertook the review of the county records, the letter contained no reference to any other recorded interest, not specifically excepted from coverage, pertinent to his or the Allens’ property. In light of the letter’s content, and the fact there was not yet any litigation pending to raise specific questions of coverage or defense, First American’s reasonable investigation at the time would encompass a review of Armitage’s policy and any documents to which the policy referred. First American’s response denying Armitage’s claim makes clear that it reviewed his policy and the February 8, 1984 corporation grant easement. It concluded its response by urging Armitage to inform it promptly of any information omitted from its analysis that might alter its conclusion. The appellate record contains no indication that Armitage submitted additional information regarding other recorded easements or challenged First American’s analysis. In short, the facts known to First American when Armitage presented his claim in March 2003 did not suggest any coverage under the policy.
To the extent Armitage is now arguing that the Allens’ February 2005 cross-complaint against him for quiet title raised a duty of defense because it referred to the 1978 contract of sale, he presented no evidence that he requested First American to defend him in the cross-complaint, as is required by the policy. The duty to defend a third party claim arises on tender of defense and continues until the underlying lawsuit is concluded or until it is shown that there is no potential for coverage. (Montrose, supra, 6 Cal.4th at p. 295.) The corollary is that the duty does not arise before a tender. Of course, Armitage’s March 4, 2003 tender letter preceded the filing of his complaint and the Allens’ cross-complaint by nearly two years.
Moreover, Armitage’s assertion that a duty to defend arose because the Allens’ cross-complaint refers to the 1978 contract of sale is strained. The test for whether an insurer has a duty to defend is whether the underlying action for which a defense is sought potentially seeks relief within the policy terms. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1,19.) The Allens based their action to quiet title to an easement specifically on the February 9, 1984 corporate grant deed of an easement from Kyoto Koi to the Arajses, which easement was specifically excluded from coverage. The Allens’ reference in the cross-complaint to the 1978 contract of sale served the function of showing why they had standing to seek quiet title under the February 1984 corporate grant deed easement, even though the Arajses were the named grantees to that easement. As the Allens noted in their cross-complaint, they also executed the 1984 corporate grant deed easement as the equitable title owners, pursuant to their status as “[p]urchasers under a contract of sale recorded on January 5, 1978 . . . .” The cross-complaint cannot reasonably be read as an assertion by the Allens that they claimed a right of easement over Armitage’s property under the 1978 contract of sale or any of its provisions.
Finally, even assuming First American, which was not served with the cross-complaint, (1) was aware of the reference in the Allens’ cross-complaint to the 1978 contract of sale, and (2) its knowledge of this reference created a duty to investigate the 1978 contract of sale as a possible basis for liability under Armitage’s title insurance policy, the investigation would show that the contract of sale did not give rise to a potential for liability. Under the 1978 contract of sale, the Allens, as purchasers of 2777 Guerneville Road, and the Arajses, as sellers, agreed that if the Allens did not perform under the contract of sale, the Arajses would retain an ingress and egress easement over 2783 Guerneville Road, which had previously been purchased by the Allens from the Arajses. The contract cannot reasonably be read as granting an easement over 2783 Guerneville Road to the then-owners of 2777 Guerneville Road and their successors in interest, effective January 5, 1978, and thereafter binding on the grantor’s successors. It merely provided that in the event this specific purchaser, i.e., the Allens, failed to satisfy their obligations under the contract, e.g., installment and property tax payments, insurance, property maintenance, etc., the specific seller, i.e., the Arajses, would then have an ingress and egress easement. As Armitage himself observed, the clear purpose of this easement provision in the contract of sale was to provide a contingency that would allow the Arajses access to 2777 Guerneville Road should they repossess it due to the Allens’ foreclosure. The corollary to the provision was that if the Allens performed fully under the contract of sale, the Arajses would have no need for access to 2777 Guerneville Road. The recorded grant deed of August 23, 1985, whereby the Arajses conveyed to the Allens all right, title, and interest the Arajses held in 2777 Guerneville Road pursuant to the 1978 contract of sale, is a manifestation that the Allens fully performed. The Arajses’ future right to an easement over 2783 Guerneville Road was contingent on the Allens’ not performing; that right dissolved upon the Allens’ full performance. Consequently, nothing about the recorded January 5, 1978 contract of sale or the recorded August 23, 1985 grant deed would suggest a potential for liability under Armitage’s title insurance policy in April 2005 when the Allens’ cross-complaint was filed.
II. Motion for Reconsideration
Armitage contends the court erred in refusing his motion for reconsideration.
The order granting First American’s motion for summary judgment was filed July 18, 2006, the same day as the hearing thereon.
On July 19, 2006, Armitage sent a letter to the judge who heard the motion (Judge Owen) objecting to the form of the order. His letter stated that he was submitting therewith “for filing by clerk of court original motions for reconsideration under [Code of Civil Procedure section 1008], and motion for rehearing for inadvertence, mistake and medical emergency under [Code of Civil Procedure section 473], and respectively request that you review some of the points and authorities which show the standard that courts apply to factual determinations of extended coverage title policies.” He also stated that “duplicate originals” had been sent to the clerk of court for filing, “to be heard on your law and motion calendar as your schedule may allow.”
His accompanying declaration stated that he was not present at the July 18 hearing because he had inadvertently calendared the hearing for July 26; he was further prevented from discovering his calendaring mistake by a dental emergency that incapacitated him from July 14 to July 17; and First American’s reply to his opposition to its motion for summary judgment was untimely served.
On July 20, Armitage served his motion for reconsideration on First American.
On July 25, a deputy court clerk gave Armitage a written notice at the clerk’s counter stating that his motion for reconsideration was being returned because a jury trial was scheduled for August 18, 2006, and pursuant to “local rule CCP 437(c),” a motion to reconsider a summary judgment was required to be set at least 30 days prior to trial. The notice stated he was required to submit an ex parte order with “this action.”
The August 8 trial was presumably on the first three causes of action against the Allens in Armitage’s complaint and on the Allens’ cross-complaint.
On July 26 Armitage filed an “ex parte application” for an order shortening time to file his motions for reconsideration and to set aside the order for summary judgment, so that these motions could be heard on August 1, 2006.
Judge Owen denied the ex parte application because the “declaration [was] insufficient for relief.”
The appellate court reviews the trial court’s ruling on an application for ex parte relief for abuse of discretion. (See Lent v. H.C. Morris Co. (1938) 25 Cal.App.2d 305, 308.) California Rules of Court, rules 3.1200-3.1207 (formerly rule 379 et seq.) govern ex parte applications. The application must contain, inter alia, an affirmative factual showing “in a declaration containing competent testimony based on personal knowledge of irreparable harm, immediate danger, or any other statutory basis for granting relief ex parte.” (Rule 3.1202(c).” It must also be accompanied by a declaration regarding notice stating that the applicant, within the applicable time under rule 3.1203, informed the opposing party where and when the application would be made. (Rule 3.1204(b)(1).) Rule 3.1203(a) requires the applicant to notify all parties no later than 10:00 a.m. the court day before the ex parte appearance, absent a showing of exceptional circumstances that justify a shorter time for notice.
Armitage’s application contained no declaration in compliance with rule 3.1203(c). His “ex parte application” was accompanied by a document captioned “ex parte motion for order shortening time.” The document stated that “[a] recorded ‘wild deed’ has been discovered and requested judicial notice of, which I believe will persuade Judge Owen to change his ruling on a summary judgment allowing the insuring title company which indemnifies plaintiff by contract, out of the suit on this insurance contract. This is definitely a covered defect of title in the insurance contract. Plaintiff was not available on the date of the original hearing, July 18th, as stated in his moving papers, to present these facts to the court.” This document was signed by Armitage, but not under penalty of perjury. Moreover, it does not contain the requisite factual showing of irreparable harm or immediate danger if relief is not granted, or a statutory basis for relief. Under these circumstances, the court did not abuse its discretion in denying Armitage’s application for an order shortening time.
The proof of service of the ex parte application on First American contains a declaration under penalty of perjury, but it was made the person serving the documents, not by Armitage, and declares only that the server faxed the documents on July 25 at 10:00 a.m.
III. Miscellaneous Trial Court Actions
Armitage contends the trial court’s August 31, 2005 order concerning publication of the notice of the quiet title cross-complaint, its refusal on or about August 18, 2006 to permit his filing of a peremptory challenge to Judge Owen and its September 19, 2006 grant of a preliminary injunction against him constituted prejudicial error. These rulings concerned the Allens only and did not apply to First American. Because the Allens are not parties to this appeal, the propriety of these rulings is not before us.
DISPOSITION
The judgment is affirmed.
We concur: Simons, J., Needham, J.