Dollinger Deanza Associates v. Chicago Title Insurance
131 Cal. Rptr. 3d 596
Cal. Ct. App.2011Background
- Dollinger purchased seven-parcel property in Cupertino in 2004 and obtained a Chicago Title ALTA policy stating seven parcels; the Schedule A described seven parcels.
- A 1984 City of Cupertino notice of merger purportedly merged parcels 1–7 into a single parcel, but the merger was not included in the title report.
- Pacific Peninsula Group agreed to buy parcel 7 in 2007 for $3M, but withdrew in 2008 after learning of the merger notice.
- Dollinger tendered a claim in 2008; Chicago Title initially denied under the wrong policy, then accepted under the policy actually issued, and later again denied on coverage grounds.
- Dollinger sued for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief; the trial court granted summary judgment for Chicago Title, ruling the notice of merger did not affect title or trigger unmarketability coverage.
- On appeal, the court affirming held that the policy did not cover the claim, because the merger notice does not affect title and unmarketability coverage is limited to matters affecting title.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the policy cover unmarketability from a merger notice? | Dollinger: merger notice affects title, triggering unmarketability coverage. | Chicago Title: merger does not affect title; not within unmarketability. | No; merger does not affect title and is not within unmarketability. |
| Is Chicago Title estopped/waived from denying coverage due to postclaim conduct? | Dollinger: insurer accepted claim and delayed; reliance estops denial. | Chicago Title: no detrimental reliance; no waiver/estoppel in first-party policy. | No; estoppel/waiver not available against first-party title insurer; no detriment proven. |
| Can breach of implied covenant of good faith and fair dealing stand without coverage? | If coverage exists, implied covenant breaches may follow. | No coverage, so no implied covenant breach. | No; without coverage, implied covenant claim fails. |
| Is declaratory relief appropriate given the alleged lack of merit? | Declaratory relief to resolve rights under policy. | Declaratory relief appropriate when merits lack; no live dispute. | Yes; court properly granted declaratory relief to declare coverage dispute. |
Key Cases Cited
- Hocking v. Title Ins. & Trust Co., 37 Cal.2d 644 (1951) (distinction between marketable title and market value; title may be marketable despite impairment of value)
- Lick Mill Creek Apartments v. Chicago Title Ins. Co., 231 Cal.App.3d 1654 (1991) (marketability of title vs. marketability of land; off-record conditions not covered)
- Mellinger v. Ticor Title Ins. Co. of California, 93 Cal.App.4th 691 (2001) (encroachment may affect title, potentially within coverage)
- Elysian Investment Group v. Stewart Title Guaranty Co., 105 Cal.App.4th 315 (2002) (off-record defects may be covered by ALTA; policy scope)
- van’t Rood v. County of Santa Clara, 113 Cal.App.4th 549 (2003) (Subdivision Map Act merger framework and notice requirements)
- Morehart v. County of Santa Barbara, 7 Cal.4th 725 (1994) (Subdivision Map Act merger purposes; regulatory impact on sale/financing)
- Ameron Internat. Corp. v. Insurance Co. of State of Pennsylvania, 50 Cal.4th 1370 (2010) (ambiguous contract language construed against insurer; standard for insurance interpretations)
- Quelimane Co. v. Stewart Title Guaranty Co., 19 Cal.4th 26 (1998) (title insurance concept: insurer indemnifies against title defects, not all property issues)