Nacimiento Water Company, Inc. v. International Fidelity Insurance Co. et al

Filing 99

ORDER GRANTING CROSS-DEFENDANT OAK SHORES SPE, LLCS MOTION FOR SUMMARY JUDGMENT 78 by Judge Dean D. Pregerson. (lc) Modified on 3/19/2015 (lc).

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NO JS-6

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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NACIMIENTO WATER COMPANY,
INC.,

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Plaintiff,
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v.
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INTERNATIONAL FIDELITY
INSURANCE CO. A New Jersey
Corporation,

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Defendants.
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___________________________

) Case No. CV 13-07959 DDP (MRWx)
)
)
) ORDER GRANTING CROSS-DEFENDANT OAK
) SHORES SPE, LLC’S MOTION FOR
) SUMMARY JUDGMENT
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)
) [Dkt. 78]
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) [TERM:OAK SHORES II SPE,LLC(ROEl)]
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)

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Presently before the court is Cross-Defendant Oak Shores SPE,

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LLC (“Oak Shores”)’s Motion for Summary Judgment.

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considered the submissions of the parties and heard oral argument,

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the court grants the motion and adopts the following order.

Having

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I.

Background

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In 2003, Jonatkim Enterprises, the developer of a residential
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subdivision in San Luis Obispo County, entered into a contract with
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Plaintiff Nacimiento Water Company (“the Water Company”).

Under

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the contract (the “Water Contract”), the Water Company agreed to
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provide water service to the residential lots in exchange for

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payment of $5,000 per lot, to be paid within four years of the

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recordation of the subdivision’s final tract map.

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also required the issuance of a $500,000 performance bond, which

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was issued by Cross-Complainant International Fidelity Insurance

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Company (“IFIC”) on the developer’s behalf.

The contract

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Developer Jonatkim made a partial payment to the Water

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Company, but then transferred its interest in the subdivision to

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John and Carol King (“the Kings”).

The Kings also assumed

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Jonatkim’s obligations under the Water Contract, and obtained a

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surety bond from IFIC similar to that originally issued to

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Jonatkim.

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connected to the bond and agreed to assign to IFIC, in the event of

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a breach, all of their rights under the Water Contract.

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financed their purchase of the subdivision with a loan from Oak

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Shores’ predecessor in interest.

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Kings’ promissory note was amended several times, with the Kings

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ultimately borrowing over $15 million from Oak Shores’ predecessor.

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Oak Shores’ predecessor also entered into a subordination

The Kings also agreed to indemnify IFIC for any losses

The Kings

The Deed of Trust securing the

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agreement with the Kings, which stated that the Deed of Trust was

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subordinate to “those certain water supply facilities, utilities

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and water apparatus, easements and water rights to be conveyed” to

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the Water Company under the Water Contract.

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for Judicial Notice, Exhibit M.)

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the assignment under these terms.1

(Oak Shores’ Request

The Water Company consented to
(Id.)

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The subordination agreement specified that the rights to be
conveyed to the Water Company were set forth in Sections 3.01,
3.02, 3.03. 4.03, 4.04. 4.05, 4.06, and 4.07 of the Water Contract.
(continued...)
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The Kings later defaulted on their loan.

The mortgage lender

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eventually foreclosed on the subdivision, which Oak Shores then

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obtained via a Trustee’s Sale.2

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In 2010, the Water Company notified IFIC that Jonatkim and its

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successors had defaulted on the Water Contract.

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therefore demanded $305,000 pursuant to the IFIC performance bond.

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IFIC did not pay the Water Company, which then filed the instant

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suit to recover under the bond.3

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The Water Company

IFIC filed a counterclaim and cross claim against the Water

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Company, Jonatkim, the Kings, and Oak Shores.

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Amended Counterclaim and Crossclaim alleges a single claim against

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Oak Shores for declaratory relief.

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if it makes the bond payment to the Water Company, it shall be

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subrogated to the Water Company’s rights to require Oak Shores to

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pay $5,000 per subdivision lot, and that that sum should be paid to

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IFIC as reimbursement, rather than to the Water Company.

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Amended Counterclaim ¶ 54.)

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judgment.

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II.

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IFIC’s Second

Essentially, IFIC alleges that

(Second

Oak Shores now moves for summary

Legal Standard
Summary judgment is appropriate where the pleadings,

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depositions, answers to interrogatories, and admissions on file,

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together with the affidavits, if any, show “that there is no

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genuine dispute as to any material fact and the movant is entitled

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(...continued)

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Oak Shores did not acquire the property until December 2013,
after the filing of the Water Company’s Complaint and IFIC’s CrossClaim.
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IFIC alleges that the amount at issue is $310,000.
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to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A party

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seeking summary judgment bears the initial burden of informing the

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court of the basis for its motion and of identifying those portions

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of the pleadings and discovery responses that demonstrate the

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absence of a genuine issue of material fact. See Celotex Corp. v.

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Catrett, 477 U.S. 317, 323 (1986). All reasonable inferences from

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the evidence must be drawn in favor of the nonmoving party. See

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Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 242 (1986). If the

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moving party does not bear the burden of proof at trial, it is

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entitled to summary judgment if it can demonstrate that “there is

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an absence of evidence to support the nonmoving party’s case.”

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Celotex, 477 U.S. at 323.

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Once the moving party meets its burden, the burden shifts to

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the nonmoving party opposing the motion, who must “set forth

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specific facts showing that there is a genuine issue for trial.”

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Anderson, 477 U.S. at 256. Summary judgment is warranted if a party

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“fails to make a showing sufficient to establish the existence of

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an element essential to that party’s case, and on which that party

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will bear the burden of proof at trial.” Celotex, 477 U.S. at 322.

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A genuine issue exists if “the evidence is such that a reasonable

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jury could return a verdict for the nonmoving party,” and material

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facts are those “that might affect the outcome of the suit under

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the governing law.” Anderson, 477 U.S. at 248. There is no genuine

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issue of fact “[w]here the record taken as a whole could not lead a

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rational trier of fact to find for the nonmoving party.” Matsushita

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Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

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It is not the court's task “to scour the record in search of a

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genuine issue of triable fact.” Keenan v. Allan, 91 F.3d 1275, 1278
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(9th Cir.1996). Counsel has an obligation to lay out their support

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clearly. Carmen v. San Francisco Sch. Dist., 237 F.3d 1026, 1031

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(9th Cir.2001). The court “need not examine the entire file for

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evidence establishing a genuine issue of fact, where the evidence

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is not set forth in the opposition papers with adequate references

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so that it could conveniently be found.” Id.

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III. Discussion

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IFIC’s position regarding its declaratory judgment claim
against Oak Shores is somewhat unclear.

IFIC does not dispute that

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Oak Shores is not a party to the Water Contract.

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2:4-5.)

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all subdivision owners, presumably including Oak Shores.

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3:1.)

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enforce the Water Contract against Oak Shores, but rather “is

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seeking a declaration that when Oak Shores and/or any other

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property owners apply for and obtain water from [the Water Company]

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under the Water [] Contract, and IFIC has paid [the Water Company]

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the per-lot fee associated with same, Oak Shores and the other

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property owners must pay IFIC as the rightful and equitable

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subrogee of [the Water Company].”

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is predicated on the assumption, supported by some evidence, that

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Oak Shores will at some point obtain water service from the Water

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Company.

(Opposition at

Nevertheless, IFIC asserts that the Water Contract binds
(Opp. at

That assertion notwithstanding, IFIC is not seeking to

(Id. at 3:16-19.)

IFIC’s claim

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As an initial matter, though not addressed at length by the

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parties’ memoranda, this court is not certain that a justiciable

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controversy exists between IFIC and Oak Shores.

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issue advisory opinions or entangle itself in abstract

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disagreements.

This court may not

See Thomas v. Anchorage Equal Rights Comm’n, 220
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F.3d 1134, 1138 (9th Cir. 2000).

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adjudication if it rests upon contingent future events that may not

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occur as anticipated, or indeed may not occur at all.”

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and Guaranty Insurance Co. v. Centex Homes, No. 14-CV-826-LJO, 2014

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WL 5823048 at *4 (E.D. Cal. Nov. 10, 2014) (quoting Texas v. United

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Statesu, 523 U.S. 296, 300 (1998)(internal quotations and citations

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omitted)).

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“A claim is not ripe for

Fidelity

Here, IFIC’s position is that if it pays the Water Company out
of the IFIC performance bond, and if Oak Shores then comes to some

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independent agreement with the Water Company and if Oak Shores then

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pays the Water Company for water hookups, then IFIC should be

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entitled to those payments “in order to avoid an unfair and

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inequitable double payment to [the Water Company].”

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3-4.)

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negotiations with the Water Company, there is currently no contract

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between Oak Shores and the Water Company, and no guarantee that

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development of the subdivision will proceed or that Oak Shores will

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ever pay the Water Company anything.

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agreement is eventually reached and infrastructure payments to the

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Water Company are contemplated or made, and presuming that IFIC

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actually pays the remainder of the bond funds to the Water Company

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prior to that point, IFIC may well have an equitable subrogation or

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indemnification claim against the Water Company and/or Oak Shores.

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See generally Chubb Custom Ins. Co. v. Space Sys./Loral, Inc., 710

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F.3d 946, 957 (9th Cir. 2013).

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on numerous unrealized contingencies, however, declaratory judgment

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would not be appropriate at this stage.

(Opp. at 18:

While Oak Shores does not dispute that it is engaged in

In the event that an

Because such a claim would depend

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Furthermore, even if this dispute were ripe for adjudication,

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it is unclear to the court how IFIC could recover against Oak

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Shores at present.

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Oak Shores is not a party to the Water Contract.

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IFIC is subrogated to the Water Company’s rights under the Water

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Contract, it cannot (and apparently does not) seek to enforce the

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Water Contract against Oak Shores.

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important limit to the right of subrogation is that it is a purely

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derivative right – meaning that the subrogee succeeds to rights no

As discussed above, IFIC does not dispute that
Thus, even if

See Chubb, 710 F.3d at 957 (“An

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greater than those of the subrogor.”); See also Fireman’s Fund Ins.

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Co. v. Maryland Casualty Co., 65 Cal.App.4th 1279, 1290-1293

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(1998).

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IV.

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Conclusion
For the reasons stated above, Oak Shores’ Motion for Summary

Judgment is GRANTED.

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IT IS SO ORDERED.

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Dated: March 19, 2015

HON. DEAN D. PREGERSON
United States District Judge

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